Edgar Filing: PACIFIC ENTERPRISES INC

Sempra Energy, SDG&E, PE/SoCalGas 06/30/2010 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

June 30, 2010

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File No.

Exact Name of Registrants as Specified in their Charters, Address and Telephone Number

States of Incorporation

I.R.S. Employer
Identification Nos.

Former name, former address and former fiscal year, if changed since last report

1-14201

SEMPRA ENERGY

California

33-0732627

No change

101 Ash Street

San Diego, California 92101

(619)696-2034

1-3779

SAN DIEGO GAS & ELECTRIC COMPANY

California

95-1184800

No change

8326 Century Park Court

San Diego, California 92123

(619)696-2000

1-40

PACIFIC ENTERPRISES

California

94-0743670

No change

101 Ash Street

San Diego, California 92101

(619)696-2020

1-1402

SOUTHERN CALIFORNIA GAS COMPANY

California

95-1240705

No change

555 West Fifth Street

Los Angeles, California 90013

(213)244-1200

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

Yes

Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files).

Sempra Energy

Yes

San Diego Gas & Electric Company

Yes

Pacific Enterprises

Yes

Southern California Gas Company

Yes

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large
accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Sempra Energy

[ X ]

[ ]

San Diego Gas & Electric Company

[ ]

[ X ]

[ ]

Pacific Enterprises

[ ]

[ X ]

[ ]

Southern California Gas Company

[ ]

[ X ]

[ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Sempra Energy

Yes

San Diego Gas & Electric Company

Yes

Pacific Enterprises

Yes

Southern California Gas Company

Yes

Indicate the number of shares outstanding of each of the issuers' classes of common stock, as of the latest practicable date.

Common stock outstanding on July 30, 2010:

Sempra Energy

247,855,454 shares

San Diego Gas & Electric Company

Wholly owned by Enova Corporation, which is wholly owned by Sempra Energy

Pacific Enterprises

Wholly owned by Sempra Energy

Southern California Gas Company

Wholly owned by Pacific Enterprises, which is wholly owned by Sempra Energy

SEMPRA ENERGY FORM 10-Q TABLE OF CONTENTS
		Page
Information Regarding Forward-Looking Statements		4

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	70
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	96
Item 4.	Controls and Procedures	97

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	98
Item 1A.	Risk Factors	98
Item 6.	Exhibits	99

Signatures		102

This combined Form 10-Q is separately filed by Sempra Energy, San Diego Gas & Electric Company, Pacific Enterprises and Southern California Gas Company. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company provides information only as to itself and its consolidated entities and not as to any other company.

You should read this report in its entirety as it pertains to each respective reporting company. No one section of the report deals with all aspects of the subject matter. Separate Part I - Item 1 sections are provided for each reporting company, except for the Notes to Condensed Consolidated Financial Statements. The Notes to Condensed Consolidated Financial Statements for all of the reporting companies are combined. All Items other than Part I – Item 1 are combined for the reporting companies.

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

We make statements in this report that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are necessarily based upon assumptions with respect to the future, involve risks and uncertainties, and are not guarantees of performance. These forward-looking statements represent our estimates and assumptions only as of the date of this report.

In this report, when we use words such as "believes," "expects," "anticipates," "plans," "estimates," "projects," "contemplates," "intends," "depends," "should," "could," "would," "may," "potential," "target," "goals," or similar expressions, or when we discuss our strategy, plans or intentions, we are making forward-looking statements.

Factors, among others, that could cause our actual results and future actions to differ materially from those described in forward-looking statements include

§local, regional, national and international economic, competitive, political, legislative and regulatory conditions and developments;

§actions by the California Public Utilities Commission, the California State Legislature, the California Department of Water Resources, the Federal Energy Regulatory Commission, the Federal Reserve Board, and other regulatory and governmental bodies in the United States and other countries in which we operate;

§capital markets conditions and inflation, interest and exchange rates;

§energy and trading markets, including the timing and extent of changes and volatility in commodity prices;

§the availability of electric power, natural gas and liquefied natural gas;

§weather conditions and conservation efforts;

§war and terrorist attacks;

§business, regulatory, environmental and legal decisions and requirements;

§the status of deregulation of retail natural gas and electricity delivery;

§the timing and success of business development efforts;

§the resolution of litigation; and

§other uncertainties, all of which are difficult to predict and many of which are beyond our control.

We caution you not to rely unduly on any forward-looking statements. You should review and consider carefully the risks, uncertainties and other factors that affect our business as described in this report and other reports that we file with the Securities and Exchange Commission.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)
	Three months ended June 30,				Six months ended June 30,
	2010		2009		2010		2009
	(unaudited)
REVENUES
Sempra Utilities	$	1,512	$	1,316	$	3,424	$	2,958
Sempra Global and parent		496		373		1,118		839
Total revenues		2,008		1,689		4,542		3,797
EXPENSES AND OTHER INCOME
Sempra Utilities:
Cost of natural gas		(359)		(249)		(1,117)		(789)
Cost of electric fuel and purchased power		(129)		(129)		(277)		(300)
Sempra Global and parent:
Cost of natural gas, electric fuel and purchased power		(257)		(187)		(595)		(455)
Other cost of sales		(20)		(16)		(45)		(33)
Litigation expense		1		(4)		(167)		3
Other operation and maintenance		(616)		(582)		(1,192)		(1,105)
Depreciation and amortization		(215)		(189)		(425)		(372)
Franchise fees and other taxes		(77)		(69)		(167)		(151)
Write-off of long-lived assets		-		(132)		-		(132)
Equity earnings (losses):
RBS Sempra Commodities LLP		(16)		126		(9)		279
Other		8		2		16		9
Other income, net		8		70		16		73
Interest income		4		5		8		11
Interest expense		(103)		(79)		(212)		(161)
Income before income taxes and equity earnings
of certain unconsolidated subsidiaries		237		256		376		674
Income tax expense		(59)		(90)		(117)		(199)
Equity earnings, net of income tax		27		23		46		39
Net income		205		189		305		514
Losses attributable to noncontrolling interests		20		12		28		5
Preferred dividends of subsidiaries		(3)		(3)		(5)		(5)
Earnings	$	222	$	198	$	328	$	514

Basic earnings per common share	$	0.90	$	0.82	$	1.33	$	2.12
Weighted-average number of shares outstanding, basic (thousands)		246,784		242,718		246,435		242,245

Diluted earnings per common share	$	0.89	$	0.80	$	1.31	$	2.09
Weighted-average number of shares outstanding, diluted (thousands)		249,727		247,090		249,835		246,039
Dividends declared per share of common stock	$	0.39	$	0.39	$	0.78	$	0.78
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	June 30,		December 31,
	2010		2009
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	188	$	110
Restricted cash		3		35
Trade accounts receivable		687		971
Other accounts and notes receivable		131		159
Due from unconsolidated affiliates		32		41
Income taxes receivable		196		221
Deferred income taxes		-		10
Inventories		151		197
Regulatory assets		82		54
Fixed-price contracts and other derivatives		77		77
Insurance receivable related to wildfire litigation (Note 10)		150		273
Other		176		147
Total current assets		1,873		2,295

Investments and other assets:
Restricted cash		27		-
Regulatory assets arising from fixed-price contracts and other derivatives		243		241
Regulatory assets arising from pension and other postretirement
benefit obligations		967		959
Other regulatory assets		836		603
Nuclear decommissioning trusts		675		678
Investment in RBS Sempra Commodities LLP		1,956		2,172
Other investments		2,451		2,151
Goodwill and other intangible assets		538		524
Sundry		596		608
Total investments and other assets		8,289		7,936

Property, plant and equipment:
Property, plant and equipment		25,873		25,034
Less accumulated depreciation and amortization		(6,949)		(6,753)
Property, plant and equipment, net ($528 at June 30, 2010 related to VIE)		18,924		18,281
Total assets	$	29,086	$	28,512
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	June 30,		December 31,
	2010		2009
	(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	923	$	618
Accounts payable - trade		524		522
Accounts payable - other		125		171
Due to unconsolidated affiliates		12		29
Deferred income taxes		2		-
Dividends and interest payable		181		190
Accrued compensation and benefits		220		264
Regulatory balancing accounts, net		525		382
Current portion of long-term debt		307		573
Fixed-price contracts and other derivatives		99		95
Customer deposits		138		145
Reserve for wildfire litigation (Note 10)		241		270
Other		754		629
Total current liabilities		4,051		3,888
Long-term debt ($360 at June 30, 2010 related to VIE)		7,562		7,460

Deferred credits and other liabilities:
Due to unconsolidated affiliate		-		2
Customer advances for construction		147		146
Pension and other postretirement benefit obligations, net of plan assets		1,242		1,252
Deferred income taxes		1,466		1,318
Deferred investment tax credits		53		54
Regulatory liabilities arising from removal obligations		2,588		2,557
Asset retirement obligations		1,319		1,277
Other regulatory liabilities		156		181
Fixed-price contracts and other derivatives		326		312
Deferred credits and other		687		735
Total deferred credits and other liabilities		7,984		7,834
Contingently redeemable preferred stock of subsidiary		79		79

Commitments and contingencies (Note 10)

Equity:
Preferred stock (50 million shares authorized; none issued)		-		-
Common stock (750 million shares authorized; 248 million and 247 million shares
outstanding at June 30, 2010 and December 31, 2009, respectively; no par value)		2,493		2,418
Retained earnings		7,106		6,971
Deferred compensation		(10)		(13)
Accumulated other comprehensive income (loss)		(399)		(369)
Total Sempra Energy shareholders' equity		9,190		9,007
Preferred stock of subsidiaries		100		100
Other noncontrolling interests		120		144
Total equity		9,410		9,251
Total liabilities and equity	$	29,086	$	28,512
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
	Six months ended June 30,
	2010		2009
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	305	$	514
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization		425		372
Deferred income taxes and investment tax credits		96		90
Equity earnings		(53)		(327)
Write-off of long-lived assets		-		132
Fixed-price contracts and other derivatives		14		(38)
Other		(6)		48
Net change in other working capital components		294		364
Distributions from RBS Sempra Commodities LLP		198		375
Changes in other assets		53		21
Changes in other liabilities		(19)		(26)
Net cash provided by operating activities		1,307		1,525

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment		(839)		(938)
Proceeds from sale of assets		-		179
Expenditures for investments and acquisition of businesses, net of cash acquired		(370)		(217)
Distributions from investments		36		9
Purchases of nuclear decommissioning and other trust assets		(159)		(99)
Proceeds from sales by nuclear decommissioning and other trusts		159		93
Other		6		(14)
Net cash used in investing activities		(1,167)		(987)

CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid		(172)		(170)
Preferred dividends paid by subsidiaries		(5)		(5)
Issuances of common stock		22		28
Repurchases of common stock		(2)		-
Increase (decrease) in short-term debt, net		534		(612)
Issuances of debt (maturities greater than 90 days)		270		1,108
Payments on debt (maturities greater than 90 days)		(710)		(311)
Purchase of noncontrolling interest		-		(94)
Other		1		5
Net cash used in financing activities		(62)		(51)

Increase in cash and cash equivalents		78		487
Cash and cash equivalents, January 1		110		331
Cash and cash equivalents, June 30	$	188	$	818
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
	Six months ended June 30,
	2010		2009
	(unaudited)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	212	$	141
Income tax payments, net of refunds		5		36

SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES
Acquisition of business:
Assets acquired	$	303	$	-
Cash paid, net of cash acquired		(285)		-
Additional consideration accrued		(7)		-
Liabilities assumed	$	11	$	-

Increase in capital lease obligations for investments in property, plant and
equipment	$	183	$	-
Dividends declared but not paid		99		98
See Notes to Condensed Consolidated Financial Statements.

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)
	Three months ended June 30,				Six months ended June 30,
	2010		2009		2010		2009
	(unaudited)
Operating revenues
Electric	$	589	$	535	$	1,152	$	1,088
Natural gas		103		96		282		275
Total operating revenues		692		631		1,434		1,363
Operating expenses
Cost of electric fuel and purchased power		129		129		277		300
Cost of natural gas		44		37		133		124
Operation and maintenance		237		232		469		413
Depreciation and amortization		95		81		187		158
Franchise fees and other taxes		41		39		84		80
Total operating expenses		546		518		1,150		1,075
Operating income		146		113		284		288
Other income (expense), net		(16)		27		(16)		44
Interest expense		(31)		(21)		(62)		(46)
Income before income taxes		99		119		206		286
Income tax expense		(44)		(28)		(75)		(88)
Net income		55		91		131		198
Losses (earnings) attributable to noncontrolling interests		21		(20)		29		(27)
Earnings		76		71		160		171
Preferred dividend requirements		(1)		(1)		(2)		(2)
Earnings attributable to common shares	$	75	$	70	$	158	$	169
See Notes to Condensed Consolidated Financial Statements.

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	June 30,		December 31,
	2010		2009
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	28	$	13
Restricted cash		3		8
Accounts receivable - trade		225		229
Accounts receivable - other		57		85
Due from unconsolidated affiliates		12		8
Income taxes receivable		58		59
Deferred income taxes		36		41
Inventories		62		61
Regulatory assets arising from fixed-price contracts and other derivatives		62		30
Other regulatory assets		4		4
Fixed-price contracts and other derivatives		29		40
Insurance receivable related to wildfire litigation (Note 10)		150		273
Other		20		35
Total current assets		746		886

Other assets:
Due from unconsolidated affiliate		1		2
Deferred taxes recoverable in rates		458		415
Regulatory assets arising from fixed-price contracts and other derivatives		243		241
Regulatory assets arising from pension and other postretirement
benefit obligations		338		342
Other regulatory assets		243		53
Nuclear decommissioning trusts		675		678
Sundry		41		43
Total other assets		1,999		1,774

Property, plant and equipment:
Property, plant and equipment		10,614		10,156
Less accumulated depreciation and amortization		(2,632)		(2,587)
Property, plant and equipment, net ($528 at June 30, 2010 related to VIE)		7,982		7,569
Total assets	$	10,727	$	10,229
See Notes to Condensed Consolidated Financial Statements.

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	June 30,		December 31,
	2010		2009
	(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	63	$	33
Accounts payable		197		249
Due to unconsolidated affiliate		16		-
Regulatory balancing accounts, net		188		159
Customer deposits		57		56
Fixed-price contracts and other derivatives		50		51
Accrued compensation and benefits		80		104
Current portion of long-term debt		22		45
Reserve for wildfire litigation (Note 10)		241		270
Other		128		157
Total current liabilities		1,042		1,124
Long-term debt ($360 at June 30, 2010 related to VIE)		2,984		2,623

Deferred credits and other liabilities:
Customer advances for construction		22		23
Pension and other postretirement benefit obligations, net of plan assets		360		370
Deferred income taxes		834		774
Deferred investment tax credits		26		26
Regulatory liabilities arising from removal obligations		1,337		1,330
Asset retirement obligations		605		585
Fixed-price contracts and other derivatives		275		265
Deferred credits and other		144		145
Total deferred credits and other liabilities		3,603		3,518
Contingently redeemable preferred stock		79		79

Commitments and contingencies (Note 10)

Equity:
Common stock (255 million shares authorized; 117 million shares outstanding;
no par value)		1,138		1,138
Retained earnings		1,769		1,611
Accumulated other comprehensive income (loss)		(9)		(10)
Total SDG&E shareholders' equity		2,898		2,739
Noncontrolling interest		121		146
Total equity		3,019		2,885
Total liabilities and equity	$	10,727	$	10,229
See Notes to Condensed Consolidated Financial Statements.

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
	Six months ended June 30,
	2010		2009
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	131	$	198
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization		187		158
Deferred income taxes and investment tax credits		23		15
Fixed-price contracts and other derivatives		28		(34)
Other		(14)		(9)
Net change in other working capital components		(133)		30
Changes in other assets		9		13
Changes in other liabilities		(10)		(23)
Net cash provided by operating activities		221		348

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment		(522)		(443)
Expenditures for short-term investments		-		(152)
Proceeds from sale of short-term investments		-		176
Purchases of nuclear decommissioning trust assets		(155)		(95)
Proceeds from sales by nuclear decommissioning trusts		150		93
Decrease in loans to affiliates, net		14		33
Net decrease in restricted cash		5		-
Other		(1)		1
Net cash used in investing activities		(509)		(387)

CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid		-		(150)
Preferred dividends paid		(2)		(2)
Issuances of long-term debt		250		358
Payments on long-term debt		(5)		-
Increase in short-term debt, net		63		-
Other		(3)		1
Net cash provided by financing activities		303		207

Increase in cash and cash equivalents		15		168
Cash and cash equivalents, January 1		13		19
Cash and cash equivalents, June 30	$	28	$	187

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	58	$	50
Income tax payments, net of refunds		49		86

SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES
Increase in capital lease obligations for investments in property, plant and
equipment	$	183	$	-
Dividends declared but not paid		1		1
See Notes to Condensed Consolidated Financial Statements.

PACIFIC ENTERPRISES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)
	Three months ended June 30,				Six months ended June 30,
	2010		2009		2010		2009
	(unaudited)

Operating revenues	$	834	$	694	$	2,016	$	1,614
Operating expenses
Cost of natural gas		318		214		992		669
Operation and maintenance		294		266		555		517
Depreciation		77		75		152		147
Franchise fees and other taxes		28		24		65		56
Total operating expenses		717		579		1,764		1,389
Operating income		117		115		252		225
Other income, net		2		4		6		5
Interest income		1		2		1		3
Interest expense		(16)		(18)		(33)		(35)
Income before income taxes		104		103		226		198
Income tax expense		(33)		(40)		(90)		(76)
Net income		71		63		136		122
Preferred dividends of subsidiary		(1)		(1)		(1)		(1)
Earnings		70		62		135		121
Preferred dividend requirements		(1)		(1)		(2)		(2)
Earnings attributable to common shares	$	69	$	61	$	133	$	119
See Notes to Condensed Consolidated Financial Statements.

PACIFIC ENTERPRISES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	June 30,		December 31,
	2010		2009
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	101	$	49
Accounts receivable - trade		344		567
Accounts receivable - other		37		44
Due from unconsolidated affiliates		264		12
Income taxes receivable		7		36
Inventories		44		93
Other regulatory assets		8		9
Other		41		39
Total current assets		846		849

Other assets:
Due from unconsolidated affiliate		504		513
Regulatory assets arising from pension and other postretirement
benefit obligations		621		617
Other regulatory assets		132		131
Sundry		38		40
Total other assets		1,295		1,301

Property, plant and equipment:
Property, plant and equipment		9,445		9,299
Less accumulated depreciation and amortization		(3,682)		(3,615)
Property, plant and equipment, net		5,763		5,684
Total assets	$	7,904	$	7,834
See Notes to Condensed Consolidated Financial Statements.

PACIFIC ENTERPRISES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	June 30,		December 31,
	2010		2009
	(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable - trade	$	160	$	207
Accounts payable - other		62		120
Due to unconsolidated affiliates		95		87
Deferred income taxes		4		5
Regulatory balancing accounts, net		337		223
Customer deposits		80		87
Accrued compensation and benefits		88		86
Current portion of long-term debt		264		11
Other		151		162
Total current liabilities		1,241		988
Long-term debt		1,022		1,283
Deferred credits and other liabilities:
Customer advances for construction		125		123
Pension and other postretirement benefit obligations, net of plan assets		649		644
Deferred income taxes		311		273
Deferred investment tax credits		26		28
Regulatory liabilities arising from removal obligations		1,240		1,227
Asset retirement obligations		681		662
Deferred taxes refundable in rates		154		175
Deferred credits and other		193		203
Total deferred credits and other liabilities		3,379		3,335

Commitments and contingencies (Note 10)

Equity:
Preferred stock		80		80
Common stock (600 million shares authorized; 84 million shares outstanding;
no par value)		1,462		1,462
Retained earnings		724		691
Accumulated other comprehensive income (loss)		(24)		(25)
Total Pacific Enterprises shareholders' equity		2,242		2,208
Preferred stock of subsidiary		20		20
Total equity		2,262		2,228
Total liabilities and equity	$	7,904	$	7,834
See Notes to Condensed Consolidated Financial Statements.

PACIFIC ENTERPRISES AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
	Six months ended June 30,
	2010		2009
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	136	$	122
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation		152		147
Deferred income taxes and investment tax credits		14		20
Other		(2)		4
Net change in other working capital components		316		266
Changes in other assets		4		7
Changes in other liabilities		(10)		(9)
Net cash provided by operating activities		610		557

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment		(216)		(227)
Decrease (increase) in loans to affiliates, net		(239)		5
Net cash used in investing activities		(455)		(222)

CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid		(100)		-
Preferred dividends paid		(2)		(2)
Preferred dividends paid by subsidiary		(1)		(1)
Net cash used in financing activities		(103)		(3)

Increase in cash and cash equivalents		52		332
Cash and cash equivalents, January 1		49		206
Cash and cash equivalents, June 30	$	101	$	538

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	29	$	30
Income tax payments, net of refunds		44		29

SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES
Dividends declared but not paid	$	1	$	1
See Notes to Condensed Consolidated Financial Statements.

SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)
	Three months ended June 30,				Six months ended June 30,
	2010		2009		2010		2009
	(unaudited)

Operating revenues	$	834	$	694	$	2,016	$	1,614
Operating expenses
Cost of natural gas		318		214		992		669
Operation and maintenance		293		265		555		516
Depreciation		77		75		152		147
Franchise fees and other taxes		28		24		65		56
Total operating expenses		716		578		1,764		1,388
Operating income		118		116		252		226
Other income, net		2		4		6		5
Interest income		-		1		-		2
Interest expense		(16)		(18)		(33)		(35)
Income before income taxes		104		103		225		198
Income tax expense		(34)		(37)		(90)		(73)
Net income		70		66		135		125
Preferred dividend requirements		(1)		(1)		(1)		(1)
Earnings attributable to common shares	$	69	$	65	$	134	$	124
See Notes to Condensed Consolidated Financial Statements.

SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	June 30,		December 31,
	2010		2009
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	101	$	49
Accounts receivable - trade		344		567
Accounts receivable - other		37		44
Due from unconsolidated affiliate		260		6
Income taxes receivable		2		35
Inventories		44		93
Other regulatory assets		8		9
Other		39		40
Total current assets		835