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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 2000
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OR
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period from
to
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SEMPRA ENERGY
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(Exact name of registrant as specified in its charter)
CALIFORNIA 1-14201 33-0732627
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(State of incorporation (Commission (I.R.S. Employer
or organization) File Number) Identification No.)
101 ASH STREET, SAN DIEGO, CALIFORNIA 92101
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (619)696-2000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
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Common Stock, Without Par Value New York and Pacific
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark whether the registrant (1) has 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 and
(2) has been subject to such filing requirements for the past 90
days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ ]
Exhibit Index on page 34. Glossary on page 41.
Aggregate market value of the voting stock held by non-affiliates
of the registrant as of February 28, 2001 was $4.5 billion.
Registrant's common stock outstanding as of February 28, 2001 was
204,977,870 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the 2000 Annual Report to Shareholders are incorporated
by reference into Parts I, II, and IV.
Portions of the Proxy Statement prepared for the May 2001 annual
meeting of shareholders are incorporated by reference into Part
III.
TABLE OF CONTENTS
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . 4
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . .24
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . .24
Item 4. Submission of Matters to a Vote of Security Holders. .24
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . .25
Item 6. Selected Financial Data. . . . . . . . . . . . . . . .26
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . .26
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk . . . . . . . . . . . . . . . . .26
Item 8. Financial Statements and Supplementary Data. . . . . .26
Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . .26
PART III
Item 10. Directors and Executive Officers of the Registrant . .27
Item 11. Executive Compensation . . . . . . . . . . . . . . . .28
Item 12. Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . .28
Item 13. Certain Relationships and Related Transactions . . . .28
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . .28
Independent Auditors' Consent and Report on Schedule. . . . . .30
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . .33
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . .34
Glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . .41
2
This Annual Report contains statements that are not historical fact
and constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, including
statements regarding San Diego Gas & Electric Company's ability to
finance undercollected costs on reasonable terms and retain its
financial strength, estimates of future accumulated undercollected
costs, and plans to obtain future financing. The words "estimates,"
"believes," "expects," "anticipates," "plans," "intends," "may,"
"would" and "should" or similar expressions, or discussions of
strategy or of plans are intended to identify forward-looking
statements. Forward-looking statements are not guarantees of
performance. They involve risks, uncertainties and assumptions.
Future results may differ materially from those expressed in these
forward-looking statements.
Forward-looking statements are necessarily based upon various
assumptions involving judgments with respect to the future and other
risks, including, among others, local, regional, national and
international economic, competitive, political, legislative and
regulatory conditions; actions by the California Public Utilities
Commission, the California Legislature, the California Department of
Water Resources and the Federal Energy Regulatory Commission; the
financial condition of other investor-owned utilities; inflation
rates and interest rates; energy markets, including the timing and
extent of changes in commodity prices; weather conditions; business,
regulatory and legal decisions; the pace of deregulation of retail
natural gas and electricity delivery; the timing and success of
business-development efforts; and other uncertainties, all of which
are difficult to predict and many of which are beyond the control of
the Company. Readers are cautioned not to rely unduly on any forward-
looking statements and are urged to review and consider carefully the
risks, uncertainties and other factors which affect the Company's
business described in this Annual Report and other reports filed by
the Company from time to time with the Securities and Exchange
Commission.
3
PART I
ITEM 1. BUSINESS
Description of Business
A description of Sempra Energy and its subsidiaries (the Company) is
given in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" of the 2000 Annual Report to Shareholders,
which is incorporated by reference.
GOVERNMENT REGULATION
The most significant government regulation affecting Sempra Energy is
that affecting its utility subsidiaries, which is discussed below.
Other subsidiaries are also subject to governmental regulation.
Local Regulation
Southern California Gas Company (SoCalGas) has gas franchises with
the 238 legal jurisdictions in its service territory. These
franchises allow SoCalGas to locate facilities for the transmission
and distribution of natural gas in the streets and other public
places. Some franchises have fixed terms, such as that for the city
of Los Angeles, which expires in 2012. Most of the franchises do not
have fixed terms and continue indefinitely. The range of expiration
dates for the franchises with definite terms is 2003 to 2048.
San Diego Gas and Electric (SDG&E) has electric franchises with the
three counties and the 25 cities and gas franchises with two counties
and the 25 cities in its service territory. These franchises allow
SDG&E to locate facilities for the transmission and distribution of
electricity and/or natural gas in the streets and other public
places. The franchises do not have fixed terms, except for the
electric and natural gas franchises with the cities of Chula Vista
(2003), Encinitas (2012), San Diego (2021) and Coronado (2028); and
the natural gas franchises with the city of Escondido (2036) and the
county of San Diego (2030).
California Utility Regulation
The State of California Legislature, from time to time, passes laws
that regulate SDG&E's and SoCalGas' operations. For example, in 1996
the legislature passed an electric industry deregulation bill, then
in 2000 and 2001 passed additional bills aimed at addressing problems
in the deregulated electric industry. In addition, the legislature
enacted a law in 1999 addressing natural gas industry restructuring.
The California Public Utilities Commission (CPUC) regulates SDG&E's
and SoCalGas' rates and conditions of service, sales of securities,
rate of return, rates of depreciation, uniform systems of accounts,
examination of records, and long-term resource procurement. The CPUC
also conducts various reviews of utility performance and conducts
investigations into various matters, such as deregulation,
competition and the environment, to determine its future policies.
4
The California Energy Commission (CEC) has discretion over electric-
demand forecasts for the state and for specific service territories.
Based upon these forecasts, the CEC determines the need for
additional energy sources and for conservation programs. The CEC
sponsors alternative-energy research and development projects,
promotes energy conservation programs and maintains a state-wide plan
of action in case of energy shortages. In addition, the CEC certifies
power-plant sites and related facilities within California.
United States Utility Regulation
The Federal Energy Regulatory Commission (FERC) regulates the
interstate sale and transportation of natural gas, the transmission
and wholesale sales of electricity in interstate commerce,
transmission access, the uniform systems of accounts, rates of
depreciation and electric rates involving sales for resale.
The Nuclear Regulatory Commission (NRC) oversees the licensing,
construction and operation of nuclear facilities. NRC regulations
require extensive review of the safety, radiological and
environmental aspects of these facilities. Periodically, the NRC
requires that newly developed data and techniques be used to re-
analyze the design of a nuclear power plant and, as a result,
requires plant modifications as a condition of continued operation in
some cases.
International Utility Regulation
The Company's consolidated and unconsolidated affiliates have
locations in Argentina, Canada, Chile, Mexico, Peru and Uruguay.
These operations are subject to the local, federal and other
regulations of the countries in which they are located.
Other Regulation
As a trading company, Sempra Energy Trading is regulated as to its
operations and its financial position. Other subsidiaries are also
subject to varying amounts of regulation.
Licenses and Permits
SoCalGas and SDG&E obtain a number of permits, authorizations and
licenses in connection with the transmission and distribution of
natural gas. They require periodic renewal, which results in
continuing regulation by the granting agency. In addition, SDG&E
obtains a number of permits, authorizations and licenses in
connection with the transmission and distribution of electricity. The
Company's unregulated affiliates are also required to obtain permits,
authorizations and licenses in the normal course of business.
Other regulatory matters are described in Note 14 of the 2000 Annual
Report to Shareholders which is incorporated by reference.
SOURCES OF REVENUE
Industry segment information is contained in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and in
Note 15 of the notes to Consolidated Financial Statements of the 2000
Annual Report to Shareholders, which is incorporated by reference.
5
NATURAL GAS OPERATIONS
The Company purchases, sells, distributes, stores and transports
natural gas. SoCalGas owns and operates a natural gas distribution,
transmission and storage system that supplies natural gas to its
customers (including transport to electric generating plants)
throughout a 23,000-square-mile service territory from central
California to the Mexican border. SDG&E purchases and distributes
natural gas to 760,000 end-use customers throughout the western
portion of San Diego county. SDG&E also transports gas to over 1,000
customers who procure their gas from other sources. On a smaller
scale, Sempra Energy International (SEI) operates natural gas
distribution systems in Mexico through 60 percent, 95 percent and 100
percent ownership of DGN-Mexicali, DGN-Chihuahua and DGN-La Laguna
Durango, respectively. These North American operations are included
in the following discussion of the Company's natural gas operations.
SEI also has interests in natural gas operations in South America
which are not consolidated and, therefore, are not included in these
discussions. Additional information on international operations is
provided in "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
In December 1999, Sempra Atlantic Gas (SAG), a subsidiary of SEI, was
awarded a 25-year franchise by the provincial government of Nova
Scotia to build and operate a natural gas distribution system in Nova
Scotia. SAG has invested $23 million and plans to invest $700 million
to $800 million over the next seven years to build the system, which
will make natural gas available to 78 percent of the 350,000
households in Nova Scotia. Construction of the system began in the
fourth quarter of 2000, with delivery of natural gas expected to
begin in the second quarter of 2001.
Supplies of Natural Gas
The Company buys natural gas under several short-term and long-term
contracts. Short-term purchases are from various Southwest U.S. and
Canadian suppliers and are primarily based on monthly spot-market
prices. SoCalGas and SDG&E transport gas under long-term firm
pipeline capacity agreements that provide for annual reservation
charges. SoCalGas and SDG&E recover such fixed charges in rates.
SoCalGas has firm pipeline capacity contracts with pipeline companies
that expire at various dates through 2006. SDG&E has long-term
capacity contracts with interstate pipelines which expire at various
dates between 2007 and 2023.
Most of the natural gas purchased and delivered by the Company is
produced outside of California. These supplies are delivered to the
Company's intrastate transmission system by interstate pipeline
companies, primarily El Paso Natural Gas Company and Transwestern
Natural Gas Company. These interstate companies provide
transportation services for supplies purchased from other sources by
the Company or its transportation customers. The rates that
interstate pipeline companies may charge for natural gas and
transportation services are regulated by the FERC.
6
The following table shows the sources of natural gas deliveries from
1996 through 2000.
Year Ended December 31
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2000 1999 1998 1997 1996
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Purchases in billions of cubic feet
Spot market 401 390 388 330 323
Long-term contracts 17 76 104 100 108
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Total Purchases 418 466 492 430 431
Customer-owned and
exchange receipts 699 574 521 514 422
Storage withdrawal
(injection) - net 40 (6) (28) (3) 42
Company use and
unaccounted for (26) (16) (23) (11) (11)
------- ------- ------- ------- -------
Net Deliveries 1,131 1,018 962 930 884
======= ======= ======= ======= =======
Purchases in millions of dollars
Commodity costs $1,469 $1,084 $1,092 $1,160 $ 879
Fixed charges* 143 147 174 250 276
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Total Purchases $1,612 $1,231 $1,266 $1,410 $1,155
======= ======= ======= ======= =======
Average Commodity Cost of Purchases
(Dollars per thousand cubic feet) $ 3.51 $ 2.33 $ 2.22 $ 2.69 $ 2.04
======= ======= ======= ======= =======
* Fixed charges primarily include pipeline demand charges, take or pay settlement costs,
and other direct-billed amounts allocated over the quantities delivered by the
interstate pipelines serving SoCalGas and SDG&E.
Market-sensitive natural gas supplies (supplies purchased on the
spot market as well as under longer-term contracts, ranging from
one month to ten years, based on spot prices) accounted for 96
percent of total natural gas volumes purchased by the Company
during 2000, as compared with 91 percent and 79 percent during 1999
and 1998, respectively. Supply/demand imbalances have increased the
price of natural gas in California even more than in the rest of
the country because of California's dependence on natural gas fired
electric generation due to air-quality considerations. The average
price of natural gas at the California/Arizona (CA/AZ) border was
$6.25/mmbtu in 2000, compared with $2.33/mmbtu in 1999. On December
11, 2000, the average spot cash gas price at the CA/AZ border
reached a record high of $56.91/mmbtu.
During 2000, the Company delivered 1,131 bcf of natural gas through
its system. Approximately 65 percent of these deliveries were
customer-owned natural gas for which the Company provided
transportation services. The remaining natural gas deliveries were
purchased by the Company and resold to customers. The Company
estimates that sufficient natural gas supplies will be available to
meet the requirements of its customers for the next several years.
7
Customers
For regulatory purposes, customers are separated into core and
noncore customers. Core customers are primarily residential and
small commercial and industrial customers, without alternative fuel
capability. Noncore customers consist primarily of utility electric
generation (UEG), wholesale, large commercial, industrial and off-
system (outside the Company's normal service territory) customers.
Of the 5.8 million customer meters in the Company's service
territory, only 1,600 serve the noncore market.
Most core customers purchase natural gas directly from the Company.
Core customers are permitted to aggregate their natural gas
requirement and, up to a limit of 10 percent of the Company's core
market, to purchase natural gas directly from brokers or producers.
The Company continues to be obligated to purchase reliable supplies
of natural gas to serve the requirements of its core customers.
SoCalGas and SDG&E recently filed an application with the CPUC to
combine the two companies' core procurement portfolios.
Noncore customers have the option of purchasing natural gas either
from the Company or from other sources, such as brokers or
producers, for delivery through the Company's transmission and
distribution system. The only natural gas supplies that the Company
may offer for sale to noncore customers are the same supplies that
it purchases for its core customers. Most noncore customers procure
their own natural gas supply.
In 2000, for SoCalGas, 87 percent of the CPUC-authorized natural
gas margin was allocated to the core customers, with 13 percent
allocated to the noncore customers. In 2000, for SDG&E, 89 percent
of the CPUC-authorized natural gas margin was allocated to the core
customers, with 11 percent allocated to the noncore customers.
Although revenues from transportation throughput is less than for
natural gas sales, the Company generally earns the same margin
whether the Company buys the gas and sells it to the customer or
transports natural gas already owned by the customer.
The Company also provides natural gas storage services for noncore
and off-system customers on a bid and negotiated contract basis.
The storage service program provides opportunities for customers to
store natural gas on an "as available" basis, usually during the
summer to reduce winter purchases when natural gas costs are
generally higher. As of December 31, 2000, the Company was storing
approximately 2 bcf of customer-owned gas.
Demand for Natural Gas
Natural gas is a principal energy source for residential,
commercial, industrial and UEG customers. Natural gas competes with
electricity for residential and commercial cooking, water heating,
space heating and clothes drying, and with other fuels for large
industrial, commercial and UEG uses. Growth in the natural-gas
markets is largely dependent upon the health and expansion of the
southern California economy. The California utilities added
approximately 82,000 and 101,000 new customer meters in 2000 and
1999, respectively, representing growth rates of 1.4 percent and
1.5 percent, respectively. The Company expects its growth rate for
2001 to be at the 2000 level.
8
During 2000, 99 percent of residential energy customers in
SoCalGas' service area used natural gas for water heating, 96
percent for space heating, 76 percent for cooking and 55 percent
for clothes drying. In SDG&E's service area, 91 percent of
residential energy customers used natural gas for water heating, 73
percent for space heating, 52 percent for cooking and 35 percent
for clothes drying.
Demand for natural gas by noncore customers is very sensitive to
the price of competing fuels. Although the number of noncore
customers in 2000 was only 1,600, they accounted for approximately
11 percent of the authorized natural gas revenues and 65 percent
of total natural gas volumes. External factors such as weather,
the price of electricity, electric deregulation, the use of
hydroelectric power, competing pipelines and general economic
conditions can result in significant shifts in demand and market
price. The demand for natural gas by large UEG customers is also
greatly affected by the price and availability of electric power
generated in other areas. The increase in UEG demand in 2000 was
due to higher demand for electricity and increased use of natural
gas for electric generation, a colder 2000 - 2001 winter and
population growth in California. Natural gas demand in 1999 for
UEG customer use increased primarily due to higher electric energy
usage in the summer, as a result of warmer weather.
Effective March 31, 1998, electric industry restructuring gave
California consumers the option of selecting their electric energy
provider from a variety of local and out-of-state producers. As a
result, natural gas demand for electric generation within southern
California competes with electric power generated throughout the
western United States. Although electric industry restructuring has
no direct impact on the Company's natural gas operations, future
volumes of natural gas transported for UEG customers may be
adversely affected to the extent that regulatory changes divert
electricity production from the Company's service area.
Other
Additional information concerning customer demand and other aspects
of natural gas operations is provided under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and in Notes 13 and 14 of the notes to Consolidated
Financial Statements of the 2000 Annual Report to Shareholders,
which is incorporated by reference.
ELECTRIC OPERATIONS
Resource Planning
In 1996, California enacted legislation restructuring California's
investor-owned electric utility industry. The legislation and
related decisions of the CPUC were intended to stimulate
competition and reduce rates. Beginning on March 31, 1998,
customers were given the opportunity to choose to continue to
purchase their electricity from the local utility under regulated
tariffs, to enter into contracts with other energy service
9
providers (direct access) or to buy their power from the California
Power Exchange (PX) that served as a wholesale power pool allowing
all energy producers to participate competitively. However, a
number of factors, including supply/demand imbalances, resulted in
abnormally high wholesale electric prices beginning in mid-2000. In
response to these high commodity prices, the California legislature
has adopted or is proposing to adopt legislation intended to
stabilize the California electric utility industry and reduce
wholesale electric commodity prices.
Additional information concerning electric-industry restructuring
is provided in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and in Notes 13 and 14 of the
notes to Consolidated Financial Statements of the 2000 Annual
Report to Shareholders, which is incorporated by reference.
Electric Resources
In connection with California's electric-industry restructuring,
beginning March 31, 1998, the California investor-owned utilities
(IOUs) were obligated to bid their power supply, including owned
generation and purchased-power contracts, into the PX. The IOUs
also were obligated to purchase from the PX the power that they
sell. As discussed in Note 14 of the notes to Consolidated
Financial Statements, due to current conditions in the California
electric utility industry, the PX suspended its trading operations
on January 31, 2001. SDG&E has been granted authority by the CPUC
to purchase up to 1,900 megawatts of power through bilateral
contracts. Also, the California legislature recently passed a bill
authorizing the Department of Water Resources (DWR) to enter into
long-term contracts to purchase the portion of power used by SDG&E
customers that is not provided by SDG&E's existing supply. An
Independent System Operator (ISO) schedules power transactions and
access to the transmission system. In 1999, SDG&E completed
divestiture of its owned generation other than nuclear. Based on
generating plants in service and purchased-power contracts
currently in place, at February 28, 2001, the megawatts (mW) of
electric power available to SDG&E are as follows:
Source mW
--------------------------------------------------
Nuclear generating plants 430*
Long-term contracts with other utilities 186
Contracts with others 593
-----
Total 1,209
=====
* Net of plants' internal usage
Natural Gas/Oil Generating Plants: In connection with electric-
industry restructuring, in December 1998, SDG&E entered into
agreements for the sale of its South Bay and Encina power plants
and 17 combustion turbines. During the quarter ended June 30, 1999,
these sales were completed for total net proceeds of $466 million.
The South Bay Power Plant sale to the San Diego Unified Port
District for $110 million was completed on April 23, 1999. Duke
South Bay, a subsidiary of Duke Energy Power Services, will manage
the plant for the Port District. The sale of the Encina Power Plant
and 17 combustion-turbine generators to Dynegy Inc. and NRG Energy
Inc. for $356 million was completed on May 21, 1999. SDG&E is
operating and maintaining both facilities for the new owners for
two years.
10
San Onofre Nuclear Generating Station (SONGS): SDG&E owns 20
percent of the three nuclear units at SONGS (located south of San
Clemente, California). The cities of Riverside and Anaheim own a
total of 5 percent of Units 2 and 3. Southern California Edison
(Edison) owns the remaining interests and operates the units.
Unit 1 was removed from service in November 1992 when the CPUC
issued a decision to permanently shut down the unit. At that time
SDG&E began the recovery of its remaining capital investment, with
full recovery completed in April 1996. The unit's spent nuclear
fuel has been removed from the reactor and is stored on-site. In
March 1993, the NRC issued a Possession-Only License for Unit 1,
and the unit was placed in a long-term storage condition in May
1994. In June 1999, the CPUC granted authority to begin
decommissioning Unit 1. Decommissioning work is now in progress.
Units 2 and 3 began commercial operation in August 1983 and April
1984, respectively. SDG&E's share of the capacity is 214 mw of Unit
2 and 216 mw of Unit 3.
During 2000, SDG&E spent $4 million on capital additions and
modifications of Units 2 and 3, and expects to spend $7 million in
2001.
SDG&E deposits funds in an external trust to provide for the
decommissioning of all three units.
Additional information concerning the SONGS units, nuclear
decommissioning and industry restructuring (including SDG&E's
divestiture of its electric generation assets) is provided below
and in "Environmental Matters" and "Electric Properties" herein,
and in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and in Notes 6, 13 and 14 of the notes
to Consolidated Financial Statements of the 2000 Annual Report to
Shareholders, which is incorporated by reference.
11
Purchased Power: The following table lists contracts with SDG&E's
various suppliers.
Expiration Megawatt
Supplier Date Commitment Source
- -------------------------------------------------------------------
Long-Term Contracts with Other Utilities:
Portland General
Electric (PGE) December 2013 86 Coal
Public Service
Company of
New Mexico (PNM) April 2001 100 System Supply
-----
Total 186
=====
Other Contracts:
QFs --
Applied Energy December 2019 102 Cogeneration
Yuma Cogeneration June 2024 50 Cogeneration
Goal Line Limited
Partnership December 2025 50 Cogeneration
Other QFs (73) Various 16 Cogeneration
------
218
Others --
Avista Supply December 2001 150 System Supply
PacifiCorp December 2001 100 System Supply
Others December 2003 125 System Supply
------
Total 593
======
Under the contracts with PGE and PNM, SDG&E pays a capacity charge
plus a charge based on the amount of energy received. Charges under
these contracts are based on the selling utility's costs, including
a return on and depreciation of the utility's rate base (or lease
payments in cases where the utility does not own the property),
fuel expenses, operating and maintenance expenses, transmission
expenses, administrative and general expenses, and state and local
taxes. Costs under the contracts with Qualifying Facilities are
based on SDG&E's avoided cost. Charges under the remaining
contracts are for firm energy only and are based on the amount of
energy received. The prices under these contracts are at the market
value at the time the contracts were negotiated.
12
Additional information concerning SDG&E's purchased-power contracts
is provided below, and in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 13 of the
notes to Consolidated Financial Statements of the 2000 Annual
Report to Shareholders, which is incorporated by reference.
Power Pools
SDG&E is a participant in the Western Systems Power Pool (WSPP),
which includes an electric-power and transmission-rate agreement
with utilities and power agencies located throughout the United
States and Canada. More than 200 investor-owned and municipal
utilities, state and federal power agencies, energy brokers, and
power marketers share power and information in order to increase
efficiency and competition in the bulk power market. Participants
are able to make power transactions on standardized terms that have
been pre-approved by FERC.
Transmission Arrangements
Pacific Intertie (Intertie): The Intertie, consisting of AC and DC
transmission lines, connects the Northwest with SDG&E, Pacific Gas
& Electric (PG&E), Edison and others under an agreement that
expires in July 2007. SDG&E's share of the Intertie is 266 mW.
Southwest Powerlink: SDG&E's 500-kilovolt Southwest Powerlink
transmission line, which is shared with Arizona Public Service
Company and Imperial Irrigation District, extends from Palo Verde,
Arizona to San Diego. SDG&E's share of the line is 970 mW, although
it can be less, depending on specific system conditions.
Mexico Interconnection: Mexico's Baja California Norte system is
connected to SDG&E's system via two 230-kilovolt interconnections
with firm capability of 408 mW.
Due to electric-industry restructuring (see "Transmission Access"
below), the operating rights of SDG&E on these lines have been
transferred to the ISO.
Transmission Access
As a result of the enactment of the National Energy Policy Act of
1992, the FERC has established rules to implement the Act's
transmission-access provisions. These rules specify FERC-required
procedures for others' requests for transmission service. In
October 1997, the FERC approved the California IOUs' transfer of
control of their transmission facilities to the ISO. On March 31,
1998, operation and control of the transmission lines was
transferred to the ISO. Additional information regarding the ISO
and transmission access is provided below and in "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" of the 2000 Annual Report to Shareholders, which is
incorporated by reference.
13
Fuel and Purchased-Power Costs
The following table shows the percentage of each electric-fuel
source used by SDG&E and compares the costs of the fuels with each
other and with the total cost of purchased power:
Percent of kWh Cents per kWh
- -------------------------------------------------------------------
2000 1999 1998 2000 1999 1998
----- ----- ----- ---- ---- ----
Natural gas * -- 6.5% 17.3% -- 3.0 3.0
Nuclear fuel 14.9 12.6 11.5 0.5 0.5 0.6
----- ----- -----
Total generation 14.9 19.1 28.8
Purchased power
and ISO/PX 85.1 80.9 71.2 9.7 3.7 3.5
----- ----- -----
Total 100.0% 100.0% 100.0%
====== ====== ======
* As described previously, SDG&E sold its South Bay and Encina
power plants and 17 combustion turbines during the quarter ended
June 30, 1999.
The cost of purchased power includes capacity costs as well as the
costs of fuel. The cost of natural gas includes transportation
costs. The costs of natural gas and nuclear fuel do not include
SDG&E's capacity costs. While fuel costs are significantly less for
nuclear units than for other units, capacity costs are higher.
Electric Fuel Supply
Natural Gas: Information concerning natural gas is provided in
"Natural Gas Operations" herein.
Nuclear Fuel: The nuclear-fuel cycle includes services performed by
others under contract through 2003, including mining and milling of
uranium concentrate, conversion of uranium concentrate to uranium
hexafluoride, enrichment services, and fabrication of fuel
assemblies.
Spent fuel from Units 2 and 3 is being stored on site, where
storage capacity will be adequate at least through 2005. If
necessary, modifications in fuel storage technology can be
implemented to provide on-site storage capacity for operation
through 2022, the expiration date of the NRC operating license.
Pursuant to the Nuclear Waste Policy Act of 1982, SDG&E entered
into a contract with the U.S. Department of Energy (DOE) for spent-
fuel disposal. Under the agreement, the DOE is responsible for the
ultimate disposal of spent fuel. SDG&E pays a disposal fee of $0.99
per megawatt-hour of net nuclear generation, or approximately $3
million per year. The DOE projects it will not begin accepting
spent fuel until 2010.
To the extent not currently provided by contract, the availability
and the cost of the various components of the nuclear-fuel cycle
for SDG&E's nuclear facilities cannot be estimated at this time.
14
Additional information concerning nuclear-fuel costs is provided in
Note 13 of the notes to Consolidated Financial Statements of the
2000 Annual Report to Shareholders, which is incorporated by
reference.
INTERNATIONAL OPERATIONS
Sempra Energy International (SEI) develops, operates and invests in
energy infrastructure projects, including natural gas distribution
systems and power generation facilities, outside of the United
States. SEI has interests in natural gas and/or electric
generation, transmission and distribution projects in Argentina,
Canada, Chile, Mexico, Peru and Uruguay, and is pursuing other
projects in Latin America.
In October 2000, SEI expanded its presence in the southern portion
of South America by increasing its existing investment in two
Argentinean natural gas utility holding companies (Sodigas Pampeana
S.A. and Sodigas Sur S.A.) SEI increased its investment from 21.5
percent to 43 percent by purchasing additional interests for $147
million. In June 1999, the company contributed capital to the
Argentinean companies to retire $32 million of debt. The
distribution companies serve 1.3 million customers in central and
southern Argentina, respectively, and have a combined throughput of
650 million cubic feet per day.
In June 2000, SEI, PG&E Corporation and Proxima Gas S.A de C.V
announced a joint agreement to construct a $230 million, 215-mile
natural gas pipeline that will extend from Arizona to Rosarito,
Baja California. The pipeline, which will have the capacity to
transport 500 million cubic feet of natural gas per day, will
connect SEI's current natural gas assets in Mexicali and Rosarito.
Construction of the pipeline is anticipated to begin in early 2002.
Agreements have been signed for more than half of the capacity on
the pipeline, with natural gas expected to begin flowing by
September 2002.
In June 1999, SEI and Public Service Enterprise Group (PSEG)
announced the completion of the joint purchase of 90 percent of
Chilquinta Energia S.A. (Energia). In January 2000, SEI and PSEG
purchased an additional 9.75 percent of Energia, increasing their
joint and equal holdings to 99.98 percent. In September 1999, SEI
and PSEG completed their acquisition of 47.5 percent of the
outstanding shares of Luz del Sur S.A.A., a Peruvian Electric
Company. This acquisition, combined with the 37 percent already
owned through Energia, increased the companies' total joint and
equal ownership to 84.5 percent of Luz del Sur S.A.A.
SEI owns 60 percent of Distribuidora de Gas Natural de Mexicali, S.
de R.L. de C.V. (DGN-Mexicali), a Mexican company that holds the
first license awarded to a private company to build a natural gas
distribution system in Mexico. On August 20, 1997, DGN-Mexicali
began to deliver natural gas to customers in Mexicali, Baja
California. It will invest up to $25 million to provide service to
25,000 customers during the first five years of operation, of which
$18 million has been invested as of December 31, 2000.
15
SEI owns 95 percent of Distribuidora de Gas Natural de Chihuahua,
S. de R.L. de C.V. (DGN-Chihuahua), which distributes natural gas
to the city of Chihuahua, Mexico and surrounding areas. On July 9,
1997, it acquired ownership of a 16-mile transmission pipeline
serving 20 industrial customers. SEI will invest nearly $50 million
to provide service to 50,000 customers in the first five years of
operation, of which $38 million has been invested as of December
31, 2000.
In December 1999, Sempra Atlantic Gas (SAG), a subsidiary of SEI,
was awarded a 25-year franchise by the provincial government of
Nova Scotia to build and operate a natural gas distribution system
in Nova Scotia. Construction began in the fourth quarter of 2000,
with service to customers expected to begin in the second quarter
of 2001. SAG plans to invest $700 to $800 million over the next
seven years in building a system that will make gas available to 78
percent of the 350,000 households in Nova Scotia.
In May 1999, SEI was awarded a 30-year license to build and operate
a natural gas distribution system in the La Laguna-Durango zone in
north-central Mexico. The La Laguna-Durango region has a population
of 1.1 million and is home to a number of energy-intensive
industries. SEI's subsidiary, DGN De La Laguna Durango, has
invested $18 million through 2000 and will have invested over $40
million to serve an estimated 50,000 customers by the fifth year of
operation.
In August 1998, SEI was awarded a 10-year agreement by the Mexican
Federal Electric Commission to provide a complete energy-supply
package for a power plant in Rosarito, Baja California. The
contract includes provisions for delivery of up to 300 million
cubic feet per day of natural gas, the related transportation
services in the U.S., and construction of a 23-mile pipeline from
the U.S.-Mexico border to the plant. Construction of the pipeline
was completed in mid-2000 at a cost of $38 million, and SEI began
flowing gas to the power plant in July 2000. The pipeline will also
serve as a link for a natural gas distribution system in Tijuana,
Baja California, between San Diego and Rosarito.
In May 1998, PE was awarded a concession by the government of
Uruguay to build separate natural gas and propane distribution
systems to serve most of the country, excluding Montevideo. The
consortium began providing natural gas service in mid-2000. The
$160-million project will serve an estimated 250,000 customers by
2005.
In February 2001, SEI announced plans to construct a $350 million,
600-megawatt power plant near Mexicali, Mexico. Fuel for the
natural gas fired plant will be supplied through the Arizona to
Rosarito pipeline discussed above. Construction of the project,
named Termoelectrica de Mexicali, is expected to begin in mid-2001,
with completion anticipated by mid-2003.
Net income for international operations in 2000 was $33 million
compared to net income of $2 million and a net loss of $4 million
for 1999 and 1998, respectively. The Company's international
business unit includes the results of the investments, joint
ventures and projects outside of the United States, as well as the
results of similar, smaller operations in the eastern United
States.
16
Additional information on international operations is provided in
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and in Note 3 of the notes to Consolidated
Financial Statements of the 2000 Annual Report to Shareholders,
which is incorporated by reference.
SEMPRA ENERGY TRADING (SET)
SET, a leading natural gas and power marketing firm headquartered
in Stamford, Connecticut, was acquired on December 31, 1997. In
July 1998, SET purchased a wholesale trading and commercial
marketing subsidiary of Consolidated Natural Gas for $36 million to
expand its operation in the eastern United States. In addition to
its domestic operations, SET has operations in Canada, Europe, and
Asia.
SET derives a substantial portion of its revenue from market making
and trading activities, as a principal, in natural gas, petroleum
and electricity. It quotes bid and offer prices to end users and
other market makers. It also earns trading profits as a dealer by
structuring and executing transactions that permit its
counterparties to manage their risk profiles. In addition, SET
takes positions in energy markets based on the expectation of
future market conditions.
In April 2000, SET invested $4 million in Utility.com, the world's
first Internet utility company. Utility.com is currently registered
to provide electricity in 10 states. The company provides long-
distance telephone service in 41 states, DSL service to major
metropolitan areas in 29 states and Internet access to customers
throughout the continental United States.
For the year ended December 31, 2000, SET recorded operating
revenues of $795 million and net income of $155 million, compared
to operating revenues of $450 million and net income of $19 million
in 1999.
Additional information on SET is provided in "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and in Notes 3, 10 and 15 of the notes to Consolidated
Financial Statements of the 2000 Annual Report to Shareholders,
which is incorporated by reference.
SEMPRA ENERGY RESOURCES (SER)
SER develops power plants for the competitive market, as well as
owning natural gas storage, production and transportation
facilities. SER is planning to develop 5,000-10,000 megawatts of
generation within the next decade in the Southwest, the Northeast,
the Gulf States and the Midwest. SER is a 50-percent partner in El
Dorado Energy, a 500-megawatt power plant located near Las Vegas,
Nevada, which began commercial operation in 2000.
17
In December 2000, SER obtained approval from the California Energy
Commission to construct the Elk Hills Power Project, a $360
million, 550-megawatt power plant near Bakersfield, California.
Construction of the power plant, which is being developed jointly
with Occidental Energy Ventures Corporation, is scheduled to begin
in the second quarter of 2001. The power plant, which is expected
to be operational in 2002, will generate energy for approximately
350,000 households.
Also in December 2000, SER obtained approval from Arizona's
Maricopa County for construction of a $630 million, 1200-megawatt
power plant. Mesquite Power will be located 40 miles west of
Phoenix, Arizona, and will produce energy for up to 700,000 homes.
It is anticipated that construction on the plant will begin in the
second quarter of 2001, with completion expected during 2003.
SER recorded net income of $33 million, $5 million and $8 million
in 2000, 1999 and 1998, respectively.
Additional information is provided in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and in
Note 3 of the notes to Consolidated Financial Statements of the
2000 Annual Report to Shareholders, which is incorporated by
reference.
RATES AND REGULATION--CALIFORNIA UTILITIES
The Company's principal subsidiaries, SoCalGas and SDG&E, are
regulated by the CPUC. The CPUC consists of five commissioners
appointed by the Governor of California for staggered six-year
terms. It is the responsibility of the CPUC to determine that
utilities operate within the best interests of their customers. The
regulatory structure is complex and has a substantial impact on the
profitability of the Company. Both the electric and natural gas
industries are currently undergoing transitions to competition and
are being impacted by abnormally high commodity prices resulting
from supply/demand imbalances.
Electric Industry Restructuring
A flawed electric-industry restructuring plan, electricity
supply/demand imbalances and legislative and regulatory responses
significantly impact the Company's operations. Additional
information on electric-industry restructuring is provided in
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and in Note 14 of the notes to Consolidated
Financial Statements of the 2000 Annual Report to Shareholders,
which is incorporated by reference.
Natural Gas Industry Restructuring
The natural gas industry experienced an initial phase of
restructuring during the 1980s by deregulating natural gas sales to
noncore customers. The CPUC is currently assessing the current
market and regulatory framework for California's natural gas
industry. Supply/demand imbalances are affecting the price of
natural gas in California more than in the rest of the country
because of California's dependence on natural gas fired electric
generation due to air-quality considerations. Additional
information on natural gas industry restructuring is provided in
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and in Note 14 of the notes to Consolidated
Financial Statements of the 2000 Annual Report to Shareholders,
which is incorporated by reference.
18
Balancing Accounts
In general, earnings fluctuations from changes in the costs of
natural gas and consumption levels for the majority of natural gas
are eliminated through balancing accounts authorized by the CPUC.
As a result of California's electric restructuring law,
overcollections recorded in the electric balancing accounts were
applied to transition cost recovery, and fluctuations in certain
costs and consumption levels can now affect earnings from electric
operations. Additional information on balancing accounts is
provided in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and in Note 2 of the notes to
Consolidated Financial Statements of the 2000 Annual Report to
Shareholders, which is incorporated by reference.
Performance-Based Regulation (PBR)
In recent years, the CPUC has directed utilities to use PBR. To
promote efficient operations and improved productivity and to move
away from reasonableness reviews and disallowances, PBR has
replaced the general rate case and certain other regulatory
proceedings for both SoCalGas and SDG&E. Additional information on
PBR is provided in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and in Note 14 of
the notes to Consolidated Financial Statements of the 2000 Annual
Report to Shareholders, which is incorporated by reference.
Biennial Cost Allocation Proceeding (BCAP)
Rates to recover the changes in the cost of natural gas
transportation services are determined in the BCAP. The BCAP
adjusts rates to reflect variances in customer demand from
estimates previously used in establishing customer natural gas
transportation rates. The mechanism substantially eliminates the
effect on income of variances in market demand and natural gas
transportation costs and, for SoCalGas, is subject to the
limitations of the Gas Cost Incentive Mechanism (GCIM) described
below. The BCAP will continue under PBR. Additional information on
the BCAP is provided in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and in Note 14 of
the notes to Consolidated Financial Statements of the 2000 Annual
Report to Shareholders, which is incorporated by reference.
Gas Cost Incentive Mechanism (GCIM)
The GCIM is a process SoCalGas uses to evaluate its natural gas
purchases, substantially replacing the previous process of
reasonableness reviews. Additional information on the GCIM is
provided in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and in Note 14 of the notes to
Consolidated Financial Statements of the 2000 Annual Report to
Shareholders, which is incorporated by reference.
19
Cost of Capital
Under PBR, annual Cost of Capital proceedings have been replaced by
an automatic adjustment mechanism if changes in certain indices
exceed established tolerances. Additional information on the
utilities' cost of capital is provided in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and
in Note 14 of the notes to Consolidated Financial Statements of the
2000 Annual Report to Shareholders, which is incorporated by
reference.
ENVIRONMENTAL MATTERS
Discussions about environmental issues affecting the Company are
included in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of the 2000 Annual Report to
Shareholders, which is incorporated by reference. The following
additional information should be read in conjunction with those
discussions.
Hazardous Substances
In 1994, the CPUC approved the Hazardous Waste Collaborative
Memorandum account, a mechanism that allows SoCalGas, SDG&E and
other utilities to recover in rates the costs associated with the
cleanup of sites contaminated with hazardous waste. In general,
utilities are allowed to recover 90 percent of their cleanup costs
and any related costs of litigation. In early 1998, the CPUC
modified this mechanism to exclude these costs related to electric
generation activities. These costs are now eligible for inclusion
in the competition transition cost recovery process. The effect of
this decision is that SDG&E's costs of compliance with
environmental regulations may not be fully recoverable if they
exceed the estimates included in the transaction costs (see
"Electric Resources" above).
During the early 1900s, SDG&E, SoCalGas and their predecessors
manufactured gas from coal or oil. The manufacturing sites often
have become contaminated with the hazardous residual by-products of
the process. SDG&E has identified three former manufactured-gas
plant sites. All three sites have been remediated and closure
letters received for two sites. At December 31, 2000 estimated
remaining remediation liability on these sites is less than
$300,000. In addition, SoCalGas has identified 42 former
manufactured-gas plant sites at which it (together with other users
as to 21 of these sites) may have cleanup obligations. As of
December 31, 2000, 18 of these sites have been remediated, of which
14 have received certification from the California Environmental
Protection Agency. Preliminary investigations, at a minimum, have
been completed on 40 of the sites. At December 31, 2000, SoCalGas'
estimated remaining investigation and remediation liability for all
of these sites is $57.6 million.
Cleanup of SDG&E's Station B, a steam and electric generating
facility operated in San Diego between 1911 and 1993, was completed
during 1999. Activities included removal of asbestos and lead-based
paint and the removal or cleanup of other substances. The sale of
the facility was completed in December 1999.
20
SDG&E sold the South Bay and Encina power plants and 17 combustion
turbines in 1999. SDG&E conducted a thorough environmental
assessment of the power plants and combustion turbine sites.
Pursuant to the sale agreements, SDG&E and the buyers have
apportioned responsibility for remediation obligations for
contamination existing on these sites. Estimated costs to perform
the necessary remediation at all sites are approximately $10
million. Together with other appropriate costs, these costs were
offset against the sales price for the facilities and the remaining
net proceeds were offset against SDG&E's other transition costs.
Remediation of the plants commenced in early 2001; completion is
expected in mid-2001.
SDG&E and SoCalGas lawfully disposed of wastes at permitted
facilities owned and operated by other entities. Operations at
these facilities may result in actual or threatened risks to the
environment or public health. Under California law, businesses that
arrange for legal disposal of wastes at a permitted facility from
which wastes are later released, or threaten to be released, can be
held financially responsible for corrective actions at the
facility.
The Company and other subsidiaries have been named as potentially
responsible parties (PRPs) for two landfill sites and six
industrial waste disposal sites, from which releases have occurred
as described below.
Remedial actions and negotiations with other PRPs and the United
States Environmental Protection Agency (EPA) have been in progress
since 1986 and 1993 for the two landfill sites. The Company's share
of costs to remediate these sites is estimated to be $3.7 million,
of which $410,000 was incurred during 2000.
In the early 1990s, the Company was notified of hazards at two
industrial waste treatment facilities in the California communities
of Fresno and Carson, where the Company had disposed of wastes.
During 2000, the Company settled with the other PRPs at these sites
for $425,000 and has no additional liability.
The Company and 10 other entities have been named PRPs by the
Department of Toxic Substance Control (DTSC) as liable for any
required corrective action regarding contamination at an industrial
waste disposal site in Pico Rivera, California. DTSC has taken this
action because SDG&E and others sold used transformers to the
site's owner. SDG&E and the other PRPs have entered into a cost-
sharing agreement to provide funding for the implementation of a
consent order between DTSC and the site owner for the development
of a cleanup plan. SDG&E's interim share under the agreement is
10.1 percent, subject to adjustment based on ultimate
responsibility allocations. The total estimate for all PRPs is $3
million to $9 million for the development of the cleanup plan and
the actual cleanup.
In December 1999, SoCalGas was notified that it is a PRP at a waste
treatment facility in Bakersfield, California. SoCalGas is working
with other PRPs in order to remove from the site certain liquid
wastes that threaten to be released. It is too early to determine
the existence or extent of any prior releases or the Company's
potential total liability.
21
In March 2000, SoCalGas was notified it is a PRP at a former
mercury recycling facility in Brisbane, California. Total potential
liability is estimated at less than $10,000. Also in March 2000,
SoCalGas was sued in Federal District Court as a PRP in a waste oil
disposal site in Los Angeles. Plaintiffs alleged that SoCalGas had
transported various petroleum wastes to the site in the 1950s for
recycling. SoCalGas settled with plaintiffs in December 2000 for
$200,000.
At December 31, 2000, the Company's estimated remaining
investigation and remediation liability related to hazardous waste
sites, including the manufactured gas sites, was $59 million, of
which 90 percent is authorized to be recovered through the
Hazardous Waste Collaborative mechanism. This estimated cost
excludes remediation cost associated with the sale of the electric-
generation plants and the 17 combustion turbines. The Company
believes that any costs not ultimately recovered through rates,
insurance or other means, will not have a material adverse effect
on the Company's consolidated results of operations or financial
position.
Estimated liabilities for environmental remediation are recorded
when amounts are probable and estimable. Amounts authorized to be
recovered in rates under the Hazardous Waste Collaborative
mechanism are recorded as a regulatory asset.
Electric and Magnetic Fields (EMFs)
Although scientists continue to research the possibility that
exposure to EMFs causes adverse health effects, science has not
demonstrated a cause-and-effect relationship between adverse health
effects and exposure to the type of EMFs emitted by power lines and
other electrical facilities. Some laboratory studies suggest that
such exposure creates biological effects, but those effects have
not been shown to be harmful. The studies that have most concerned
the public are epidemiological studies, some of which have reported
a weak correlation between childhood leukemia and the proximity of
homes to certain power lines and equipment. Other epidemiological
studies found no correlation between estimated exposure and any
disease. Scientists cannot explain why some studies using estimates
of past exposure report correlations between estimated EMF levels
and disease, while others do not.
To respond to public concerns, the CPUC has directed California
utilities to adopt a low-cost EMF-reduction policy that requires
reasonable design changes to achieve noticeable reduction of EMF
levels that are anticipated from new projects. However, consistent
with the major scientific reviews of the available research
literature, the CPUC has indicated that no health risk has been
identified.
Air and Water Quality
California's air quality standards are more restrictive than
federal standards. However, as a result of the sale of the
Company's fossil-fuel power plants and combustion turbines, the
Company's primary air-quality issue, compliance with these
standards has less significance to the Company's operation.
22
The transmission and distribution of natural gas require the
operation of compressor stations, which are subject to increasingly
stringent air-quality standards. Costs to comply with these
standards are recovered in rates.
In connection with the issuance of operating permits, SDG&E and the
other owners of SONGS reached agreement with the California Coastal
Commission to mitigate the environmental damage to the marine
environment attributed to the cooling-water discharge from SONGS
Units 2 and 3. This mitigation program includes an enhanced fish-
protection system, a 150-acre artificial reef and restoration of
150 acres of coastal wetlands. In addition, the owners must deposit
$3.6 million with the state for the enhancement of fish hatchery
programs and pay for monitoring and oversight of the mitigation
projects. SDG&E's share of the cost is estimated to be $27.4
million. The pricing structure contained in the CPUC's decision
regarding accelerated recovery of SONGS Units 2 and 3 (described in
"Electric Resources" above) is expected to accommodate these added
mitigation costs.
OTHER MATTERS
Research, Development and Demonstration (RD&D)
The SoCalGas RD&D portfolio is focused in five major areas:
operations, utilization systems, power generation, public interest
and transportation. Each of these activities provides benefits to
customers and society by providing more cost-effective, efficient
natural gas equipment with lower emissions, increased safety, and
reduced environmental mitigation and other operating costs. The
CPUC has authorized SoCalGas to recover its operating costs
associated with RD&D. SoCalGas' annual RD&D costs have averaged
$7.9 million over the past three years.
For 2000, the CPUC authorized SDG&E to fund $1.2 million and $4.2
million for its gas and electric RD&D programs, respectively, which
includes $3.9 million to the CEC for its PIER (Public Interest
Energy Research) program. SDG&E co-funded several of these projects
with the CEC. Annual RD&D costs have averaged $4.5 million over the
past three years.
Employees of Registrant
As of December 31, 2000 the Company had 11,232 employees, compared
to 11,248 at December 31, 1999.
Wages
SoCalGas and SDG&E employ over 9,000 persons. Field, technical and
most clerical employees at SoCalGas are represented by the Utility
Workers' Union of America or the International Chemical Workers'
Council. The collective bargaining agreement on wages, hours and
working conditions remains in effect through March 31, 2002.
Certain employees at SDG&E are represented by the Local 465
International Brotherhood of Electrical Workers under two labor
agreements. The current generation contract runs through May 25,
2001. The transmission and distribution contract runs through
August 31, 2001.
23
ITEM 2. PROPERTIES
Electric Properties
The Company's generating capacity is described in "Electric
Resources" herein.
The Company's electric transmission and distribution facilities
include substations, and overhead and underground lines.
Periodically, various areas of the service territory require
expansion to handle customer growth.
Natural Gas Properties
At December 31, 2000, the Company owned approximately 3,017 miles
of transmission and storage pipeline, 52,218 miles of distribution
pipeline and 50,406 miles of service piping. It also owned 12
transmission compressor stations and 6 underground storage
reservoirs (with a combined working capacity of 117.8 Bcf).
Other Properties
The 21-story corporate headquarters building at 101 Ash Street, San
Diego is occupied pursuant to a capital lease with an original term
through 2005. The lease has four separate five-year renewal
options.
SoCalGas has a 15-percent limited partnership interest in a 52-
story office building in downtown Los Angeles. SoCalGas leases
approximately half of the building through 2011. The lease has six
separate five-year renewal options.
SDG&E occupies an office complex at Century Park Court in San Diego
pursuant to an operating lease ending in 2007. The lease can be
renewed for two five-year periods.
The Company owns or leases other offices, operating and maintenance
centers, shops, service facilities and equipment necessary in the
conduct of business.
ITEM 3. LEGAL PROCEEDINGS
Except for the matters referred to in the financial statements
incorporated by reference in Item 8 or referred to elsewhere in
this Annual Report, neither Sempra Energy nor its subsidiaries are
party to, nor is their property the subject of, any material
pending legal proceedings other than routine litigation incidental
to their businesses.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
24
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Common stock of Sempra Energy is traded on the New York and Pacific
stock exchanges. At January 31, 2001, there were approximately
75,000 holders of record of the Company's common stock. The
quarterly common stock information, required by Item 5 is included
in the schedule of Quarterly Financial Data of the 2000 Annual
Report to Shareholders, which is incorporated by reference.
Dividend Restrictions
CPUC regulation of the utilities' capital structure limits to $924
million the portion of the Company's December 31, 2000 retained
earnings that is available for dividends. Additional information is
provided in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of the 2000 Annual Report to
Shareholders, which is incorporated by reference.
25
ITEM 6. SELECTED FINANCIAL DATA
At December 31, or for the years then ended
------------------------------------------------
(Dollars in millions) 2000 1999 1998 1997 1996
-------- ------- ------- ------- -------
Income Statement Data:
Revenues and other income $ 7,143 $ 5,410 $ 4,996 $ 5,108 $ 4,520
Income before interest and
income taxes $ 985 $ 802 $ 629 $ 927 $ 927
Net income $ 429 $ 394 $ 294 $ 432 $ 427
Balance Sheet Data:
Total assets $15,612 $11,124 $10,456 $10,756 $ 9,762
Long-term debt $ 3,268 $ 2,902 $ 2,795 $ 3,175 $ 2,704
Short-term debt (a) $ 936 $ 337 $ 373 $ 624 $ 481
Shareholders' equity $ 2,494 $ 2,986 $ 2,913 $ 2,959 $ 2,930
Per Common Share Data:
Net income
Basic $ 2.06 $ 1.66 $ 1.24 $ 1.83 $ 1.77
Diluted $ 2.06 $ 1.66 $ 1.24 $ 1.82 $ 1.77
Dividends declared $ 1.00 $ 1.56 $ 1.56 $ 1.27 $ 1.24
Book value $ 12.35 $ 12.58 $ 12.29 $ 12.56 $ 12.21
(a) Includes long-term debt due within one year.
This data should be read in conjunction with the Consolidated Financial Statements
and the notes to Consolidated Financial Statements contained in the 2000 Annual
Report to Shareholders, which is incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required by Item 7 is incorporated by reference
from pages 22 through 37 of the 2000 Annual Report to Shareholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by Item 7A is incorporated by reference
from pages 35 through 37 of the 2000 Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 is incorporated by reference
from pages 40 through 78 of the 2000 Annual Report to Shareholders.
Item 14(a)1 includes a listing of financial statements included in
the 2000 Annual Report to Shareholders.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
26
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required on Identification of Directors is
incorporated by reference from "Election of Directors" in the Proxy
Statement prepared for the May 2001 annual meeting of shareholders.
The information required on the Company's executive officers is
provided below.
EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age* Position
- ---------------------------------------------------------------------
Stephen L. Baum 59 Chairman of the Board, Chief Executive
Officer and President
Donald E. Felsinger 53 Group President, Sempra Energy Global
Enterprises
Edwin A. Guiles 51 Group President, Regulated
Business Units
John R. Light 59 Executive Vice President and
General Counsel
Neal E. Schmale 54 Executive Vice President and
Chief Financial Officer
Darcel L. Hulse 53 Senior Vice President
Frederick E. John 54 Senior Vice President, External
Affairs
Margot A. Kyd 47 Senior Vice President, Chief
Administrative and Environmental
Officer
G. Joyce Rowland 46 Senior Vice President, Human
Resources and Chief Ethics Officer
Frank H. Ault 56 Vice President and Controller
* As of December 31, 2000.
Each Executive Officer has been an officer of the Company or one of its
subsidiaries for more than five years, with the exception of Mssrs.
Hulse, Light and Schmale. Prior to joining the Company in 1999, Mr.
Hulse was President of Unocal Asia-Pacific Ventures. Prior to joining
the Company in 1998, Mr. Light was a partner in the law firm of Latham &
Watkins. Prior to joining the Company in 1997, Mr. Schmale was Chief
Financial Officer of Unocal Corporation.
27
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference
from "Election of Directors" and "Executive Compensation" in the
Proxy Statement prepared for the May 2001 annual meeting of
shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by Item 12 is incorporated by reference
from "Election of Directors" in the Proxy Statement prepared for
the May 2001 annual meeting of shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial statements
Page in
Annual Report*
Statement of Management Responsibility for
Consolidated Financial Statements. . . . . . . . . . . 39
Independent Auditors' Report . . . . . . . . . . . . . . 40
Statements of Consolidated Income for the years
ended December 31, 2000, 1999 and 1998 . . . . . . . . 41
Consolidated Balance Sheets at December 31,
2000 and 1999. . . . . . . . . . . . . . . . . . . . . 42
Statements of Consolidated Cash Flows for the
years ended December 31, 2000, 1999 and 1998 . . . . . 44
Statements of Consolidated Changes in
Shareholders' Equity for the years ended
December 31, 2000, 1999 and 1998 . . . . . . . . . . . 46
Notes to Consolidated Financial Statements . . . . . . . 47
*Incorporated by reference from the indicated pages of the 2000
Annual Report to Shareholders.
28
2. Financial statement schedules
The following documents may be found in this report at the
indicated page numbers.
Independent Auditors' Consent and
Report on Schedule. . . . . . . . . . . . . . . . . . 30
Schedule I--Condensed Financial Information of Parent. . 31
Any other schedules for which provision is made in Regulation S-X
are not required under the instructions contained therein or are
inapplicable.
3. Exhibits
See Exhibit Index on page 34 of this report.
(b) Reports on Form 8-K
The following reports on Form 8-K were filed after September 30,
2000:
Current Report on Form 8-K filed October 27, 2000, filing as an
exhibit the Company's press release of October 26, 2000 giving
the financial results for the three-month period ended
September 30, 2000.
Current Report on Form 8-K filed December 5, 2000, announcing
distribution of a Preliminary Prospectus Supplement related to the
offering of $300 million of notes by Sempra Energy.
Current Report on Form 8-K filed December 13, 2000, announcing the
execution of an underwriting agreement for the issuance of $300
million of notes by Sempra Energy.
Current Report on Form 8-K filed January 24, 2001, announcing
SDG&E's application to the CPUC for authority to implement an
electric rate surcharge, which would increase the rates it may
charge its electric customers.
Current Report on Form 8-K filed January 30, 2001, filing as an
exhibit the Company's press release of January 25, 2001 giving the
financial results for the year ended December 31, 2000.
Current Report on Form 8-K filed February 16, 2001, reporting a
discussion of recent developments affecting SDG&E contained in
supplemental information distributed in connection with the
remarketing from short term to long term of certain unsecured,
variable-rate SDG&E bonds.
29
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
To the Board of Directors and Shareholders of Sempra Energy:
We consent to the incorporation by reference in Registration
Statement Numbers 333-51309, 333-52192 and 333-77843 on Form S-3
and Registration Statement Numbers 333-56161, 333-50806 and 333-
49732 on Form S-8 of Sempra Energy of our report dated January 26,
2001 (February 27, 2001 as to Notes 3,4,5 and 14), incorporated by
reference in this Annual Report on Form 10-K of Sempra Energy for
the year ended December 31, 2000.
Our audits of the financial statements referred to in our
aforementioned report also included the financial statement
schedule of Sempra Energy listed in Item 14. This financial
statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on
our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the
information set forth therein.
/S/ DELOITTE & TOUCHE LLP
San Diego, California
March 9, 2001
30
Schedule I -- CONDENSED FINANCIAL INFORMATION OF PARENT
SEMPRA ENERGY
Condensed Statement of Income
(Dollars in millions, except per share amounts)
For the year ended December 31 2000 1999 1998
-------- -------- --------
Other income $ 52 $ 37 $ --
Interest expense (152) (40) (1)
Operating expenses and income tax benefits (19) (10) (9)
-------- -------- --------
Loss before subsidiary earnings (119) (13) (10)
Subsidiary earnings 548 407 304
-------- -------- --------
Net income $ 429 $ 394 $ 294
======== ======== ========
Average common shares outstanding (basic) 208,155 237,245 236,423
-------- -------- --------
Average common shares outstanding (diluted) 208,345 237,553 237,124
-------- -------- --------
Net income per common share (basic) $ 2.06 $ 1.66 $ 1.24
-------- -------- --------
Net income per common share (diluted) $ 2.06 $ 1.66 $ 1.24
======== ======== ========
Condensed Balance Sheet
(Dollars in millions)
Balance at December 31 2000 1999
-------- --------
Assets:
Cash and cash equivalents $ 63 $ --
Due from affiliates 656 774
Other current assets 3 11
-------- --------
Total current assets 722 785
Investments in subsidiaries 4,220 3,828
Other assets 308 167
-------- --------
Total Assets $ 5,250 $ 4,780
======== ========
Liabilities and Shareholders' Equity:
Dividends payable $ 50 $ 94
Due to affiliates 1,056 881
Other current liabilities 514 191
-------- --------
Total current liabilities 1,620 1,166
Long-term debt 1,006 138
Loan payable to SDG&E -- 422
Other long-term liabilities 130 68
Common equity 2,494 2,986
-------- --------
Total Liabilities and Shareholders' Equity $ 5,250 $ 4,780
======== =======
31
SEMPRA ENERGY
Condensed Statement of Cash Flows
(Dollars in millions)
For the year ended December 31 2000 1999 1998
-------- -------- --------
Cash flows from operating activities $ 74 $ 64 $ 71
-------- -------- --------
Common stock dividends (244) (368) (94)
Repurchase of common stock (725) -- --
Sale of common stock 12 3 4
Issuances of long-term debt 1,000 -- --
Payment on long-term debt (1) -- --
Loans from (payments to) affiliates - net (220) 695 --
-------- -------- --------
Cash provided by (used in) financing activities (178) 330 (90)
-------- -------- --------
Dividends received from subsidiaries 250 100 130
Expenditures for property, plant and equipment (58) (86) (44)
Increase in investments and other assets (25) (475) --
-------- -------- --------
Cash provided by (used in) investing activities 167 (461) 86
-------- -------- --------
Net cash flow 63 (67) 67
Cash and cash equivalents,
beginning of year -- 67 --
-------- -------- --------
Cash and cash equivalents, end of year $ 63 $ -- $ 67
======== ======== ========
Supplemental Disclosure of Cash Flow Information:
Property dividends received from subsidiaries $ 5 $ 2 $ 56
======= ======= =======
32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, hereunto duly authorized.
SEMPRA ENERGY
By: /s/ Stephen L. Baum
Stephen L. Baum
Chairman, Chief Executive Officer
and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report is signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Name/Title Signature Date
Principal Executive Officer:
Stephen L. Baum
Chairman, Chief Executive Officer
and President /s/ Stephen L. Baum March 6, 2001
Principal Financial Officer:
Neal E. Schmale
Executive Vice President,
Chief Financial Officer /s/ Neal E. Schmale March 6, 2001
Principal Accounting Officer:
Frank H. Ault
Vice President and Controller /s/ Frank H. Ault March 6, 2001
Directors:
Stephen L. Baum, Chairman /s/ Stephen L. Baum March 6, 2001
Hyla H. Bertea, Director /s/ Hyla H. Bertea March 6, 2001
Ann L. Burr, Director /s/ Ann L. Burr March 6, 2001
Herbert L. Carter, Director /s/ Herbert L. Carter March 6, 2001
Richard A. Collato, Director /s/ Richard A. Collato March 6, 2001
Daniel W. Derbes, Director /s/ Daniel W. Derbes March 6, 2001
Wilford D. Godbold, Jr., Director /s/ Wilford D. Godbold, Jr. March 6, 2001
William D. Jones, Director /s/ William D. Jones March 6, 2001
Ralph R. Ocampo, Director /s/ Ralph R. Ocampo March 6, 2001
William G. Ouchi, Director /s/ William G. Ouchi March 6, 2001
Richard J. Stegemeier, Director /s/ Richard J. Stegemeier March 6, 2001
Thomas C. Stickel, Director /s/ Thomas C. Stickel March 6, 2001
Diana L. Walker, Director /s/ Diana L. Walker March 6, 2001
33
EXHIBIT INDEX
The Forms 8, 8-B/A, 8-K, S-4, 10-K and 10-Q referred to herein were filed
under Commission File Number 1-40 (Pacific Enterprises), Commission File
Number 1-3779 (San Diego Gas & Electric), Commission File Number 1-1402
(Southern California Gas Company), Commission File Number 1-11439 (Enova
Corporation) and/or Commission File Number 333-30761 (SDG&E Funding LLC).
3.a The following exhibits relate to Sempra Energy and its subsidiaries
Exhibit 1 -- Underwriting Agreements
Enova Corporation and San Diego Gas & Electric Company (SDG&E)
- --------------------------------------------------------------
1.01 Underwriting Agreement dated December 4, 1997 (Incorporated by
reference from Form 8-K filed by SDG&E Funding LLC on
December 23, 1997 (Exhibit 1.1)).
Exhibit 3 -- Bylaws and Articles of Incorporation
Bylaws
Sempra Energy
- -------------
3.01 Amended and Restated Bylaws of Sempra Energy effective May 26, 1998
(Incorporated by reference from the Registration Statement on Form
S-8 Sempra Energy Registration No. 333-56161 dated June 5, 1998
(Exhibit 3.2)).
Articles of Incorporation
Sempra Energy
- -------------
3.02 Amended and Restated Articles of Incorporation of Sempra Energy
(Incorporated by reference to the Registration Statement on Form S-3
File No. 333-51309 dated April 29, 1998, Exhibit 3.1).
Exhibit 4 -- Instruments Defining the Rights of Security Holders,
Including Indentures
The Company agrees to furnish a copy of each such instrument to the
Commission upon request.
Enova Corporation and San Diego Gas & Electric Company (SDG&E)
- --------------------------------------------------------------
4.01 Mortgage and Deed of Trust dated July 1, 1940. (Incorporated
by reference from SDG&E Registration No. 2-49810, Exhibit 2A.)
4.02 Second Supplemental Indenture dated as of March 1, 1948.
(Incorporated by reference from SDG&E Registration No. 2-49810,
Exhibit 2C.)
4.03 Ninth Supplemental Indenture dated as of August 1, 1968.
(Incorporated by reference from SDG&E Registration No. 2-68420,
Exhibit 2D.)
34
4.04 Tenth Supplemental Indenture dated as of December 1, 1968.
(Incorporated by reference from SDG&E Registration No. 2-36042,
Exhibit 2K.)
4.05 Sixteenth Supplemental Indenture dated August 28, 1975.
(Incorporated by reference from SDG&E Registration No. 2-68420,
Exhibit 2E.)
4.06 Thirtieth Supplemental Indenture dated September 28, 1983.
(Incorporated by reference from SDG&E Registration No. 33-34017,
Exhibit 4.3.)
Pacific Enterprises/Southern California Gas
- -------------------------------------------
4.07 First Mortgage Indenture of Southern California Gas Company to
American Trust Company dated as of October 1, 1940 (Registration
Statement No. 2-4504 filed by Southern California Gas Company on
September 16, 1940; Exhibit B-4).
4.08 Supplemental Indenture of Southern California Gas Company to American
Trust Company dated as of July 1, 1947 (Registration Statement No. 2-
7072 filed by Southern California Gas Company on March 15, 1947;
Exhibit B-5).
4.09 Supplemental Indenture of Southern California Gas Company to American
Trust Company dated as of August 1, 1955 (Registration Statement No.
2-11997 filed by Pacific Lighting Corporation on October 26, 1955;
Exhibit 4.07).
4.10 Supplemental Indenture of Southern California Gas Company to American
Trust Company dated as of June 1, 1956 (Registration Statement No.
2-12456 filed by Southern California Gas Company on April 23, 1956;
Exhibit 2.08).
4.11 Supplemental Indenture of Southern California Gas Company to Wells
Fargo Bank, National Association dated as of August 1, 1972
(Registration Statement No. 2-59832 filed by Southern California Gas
Company on September 6, 1977; Exhibit 2.19).
4.12 Supplemental Indenture of Southern California Gas Company to Wells
Fargo Bank, National Association dated as of May 1, 1976 (Registration
Statement No. 2-56034 filed by Southern California Gas Company on
April 14, 1976; Exhibit 2.20).
4.13 Supplemental Indenture of Southern California Gas Company to Wells
Fargo Bank, National Association dated as of September 15, 1981
(Pacific Enterprises 1981 Form 10-K; Exhibit 4.25).
4.14 Supplemental Indenture of Southern California Gas Company to
Manufacturers Hanover Trust Company of California, successor to Wells
Fargo Bank, National Association, and Crocker National Bank as
Successor Trustee dated as of May 18, 1984 (Southern California Gas
Company 1984 Form 10-K; Exhibit 4.29).
35
4.15 Supplemental Indenture of Southern California Gas Company to Bankers
Trust Company of California, N.A., successor to Wells Fargo Bank,
National Association dated as of January 15, 1988
(Pacific Enterprises 1987 Form 10-K; Exhibit 4.11).
4.16 Supplemental Indenture of Southern California Gas Company to First
Trust of California, National Association, successor to Bankers Trust
Company of California, N.A. dated as of August 15, 1992 (Registration
Statement No. 33-50826 filed by Southern California Gas Company on
August 13, 1992; Exhibit 4.37).
Exhibit 10 -- Material Contracts (Previously filed exhibits are
incorporated by reference from Forms 8-K, S-4, 10-K or
10-Q as referenced below).
Sempra Energy
- -------------
10.01 Amendment to Employment Agreement, effective December 1, 1998.
(Employment agreement, dated as of October 12, 1996 between
Mineral Energy Company and Stephen L. Baum (Enova 8-K filed
October 15, 1996, Exhibit 10.2))
10.02 Amendment to Employment Agreement effective December 1, 1998.
(Employment contract dated as of October 12, 1996 between
Mineral Energy Company and Richard D. Farman (Enova 8-K filed
October 15, 1996, Exhibit 10.3))
10.03 Amendment to Employment Agreement effective December 1, 1998.
(Employment contract, dated as of October 12, 1996 between
Mineral Energy Company and Donald E. Felsinger (Enova 8-K filed
October 15, 1996, Exhibit 10.4))
10.04 Amendment to Employment Agreement effective December 1, 1998.
(Employment contract, dated as of October 12, 1996 between
Mineral Energy Company and Warren I. Mitchell (Enova 8-K filed
October 15, 1996, Exhibit 10.5))
Enova Corporation and San Diego Gas & Electric Company (SDG&E)
- --------------------------------------------------------------
10.05 Transition Property Purchase and Sale Agreement dated December
16, 1997 (Incorporated by reference from Form 8-K filed by SDG&E
Funding LLC on December 23, 1997 (Exhibit 10.1)).
10.06 Transition Property Servicing Agreement dated December 16, 1997
(Incorporated by reference from Form 8-K filed by SDG&E Funding
LLC on December 23, 1997 (Exhibit 10.2)).
Compensation
Sempra Energy
- -------------
10.07 Sempra Energy Deferred Compensation and Excess Savings Plan
effective January 1, 2000.
10.08 Sempra Energy Supplemental Executive Retirement Plan as amended
and restated effective July 1, 1998 (1998 Form 10-K Exhibit 10.09).
36
10.09 Sempra Energy Deferred Compensation Agreement for Directors
effective June 1, 1998 (1998 Form 10-K Exhibit 10.10).
10.10 Sempra Energy Executive Incentive Plan effective June 1, 1998
1998 Form 10-K Exhibit 10.11).
10.11 Sempra Energy Executive Deferred Compensation Agreement
effective June 1, 1998 (1998 Form 10-K Exhibit 10.12).
10.12 Sempra Energy Retirement Plan for Directors effective June 1, 1998
(1998 Form 10-K Exhibit 10.13).
10.13 Sempra Energy 1998 Long Term Incentive Plan (Incorporated by reference
from the Registration Statement on Form S-8 Sempra Energy Registration
No. 333-56161 dated June 5, 1998 (Exhibit 4.1)).
10.14 Sempra Energy 1998 Non-Employee Directors' Stock Plan (Incorporated by
reference from the Registration Statement on Form S-8 Sempra Energy
Registration No. 333-56161 dated June 5, 1998 (Exhibit 4.2)).
San Diego Gas & Electric (SDG&E)
- --------------------------------
10.15 Supplemental Executive Retirement Plan restated as of
July 1, 1994 (1994 SDG&E Form 10-K Exhibit 10.14).
Pacific Enterprises/Southern California Gas Company
- ---------------------------------------------------
10.16 Pacific Enterprises Employee Stock Ownership Plan and Trust Agreement
as amended effective October 1, 1992 (Pacific Enterprises 1992
Form 10-K Exhibit 10.18).
Financing
Enova Corporation and San Diego Gas & Electric (SDG&E)
- ------------------------------------------------------
10.17 Loan agreement with the City of Chula Vista in connection
with the issuance of $25 million of Industrial Development
Bonds, dated as of October 1, 1997 (Enova 1997 Form 10-K
Exhibit 10.34).
10.18 Loan agreement with the City of Chula Vista in connection
with the issuance of $38.9 million of Industrial Development
Bonds, dated as of August 1, 1996 (Enova 1996 Form 10-K
Exhibit 10.31).
10.19 Loan agreement with the City of Chula Vista in connection
with the issuance of $60 million of Industrial Development
Bonds, dated as of November 1, 1996 (Enova 1996 Form 10-K
Exhibit 10.32).
10.20 Loan agreement with City of San Diego in connection with
the issuance of $57.7 million of Industrial Development
Bonds, dated as of June 1, 1995 (June 30, 1995 SDG&E
Form 10-Q Exhibit 10.3).
37
10.21 Loan agreement with the City of San Diego in connection with
the issuance of $92.9 million of Industrial Development
Bonds 1993 Series C dated as of July 1, 1993 (June 30, 1993
SDG&E Form 10-Q Exhibit 10.2).
10.22 Loan agreement with the City of San Diego in connection with
the issuance of $70.8 million of Industrial Development Bonds
1993 Series A dated as of April 1, 1993 (March 31, 1993 SDG&E
Form 10-Q Exhibit 10.3).
10.23 Loan agreement with the City of San Diego in connection with
the issuance of $118.6 million of Industrial Development
Bonds dated as of September 1, 1992 (Sept. 30, 1992 SDG&E
Form 10-Q Exhibit 10.1).
10.24 Loan agreement with the City of Chula Vista in connection
with the issuance of $250 million of Industrial Development
Bonds, dated as of December 1, 1992 (1992 SDG&E Form 10-K
Exhibit 10.5).
10.25 Loan agreement with the California Pollution Control Financing
Authority in connection with the issuance of $129.82 million
of Pollution Control Bonds, dated as of June 1, 1996
(Enova 1996 Form 10-K Exhibit 10.41).
10.26 Loan agreement with the California Pollution Control
Financing Authority in connection with the issuance of $60
million of Pollution Control Bonds dated as of June 1, 1993
(June 30, 1993 SDG&E Form 10-Q Exhibit 10.1).
10.27 Loan agreement with the California Pollution Control Financing
Authority, dated as of December 1, 1991, in connection with
the issuance of $14.4 million of Pollution Control Bonds
(1991 SDG&E Form 10-K Exhibit 10.11).
Natural Gas Transportation
Enova Corporation and San Diego Gas & Electric (SDG&E)
- ------------------------------------------------------
10.28 Amendment to Firm Transportation Service Agreement, dated
December 2, 1996, between Pacific Gas and Electric Company
and San Diego Gas & Electric Company (1997 Enova Corporation
Form 10-K Exhibit 10.58).
10.29 Firm Transportation Service Agreement, dated December 31,
1991 between Pacific Gas and Electric Company and San Diego
Gas & Electric Company (1991 SDG&E Form 10-K Exhibit 10.7).
10.30 Firm Transportation Service Agreement, dated October 13, 1994
between Pacific Gas Transmission Company and San Diego Gas
& Electric Company (1997 Enova Corporation Form 10-K Exhibit
10.60).
38
Nuclear
Enova Corporation and San Diego Gas & Electric (SDG&E)
- ------------------------------------------------------
10.31 Uranium enrichment services contract between the U.S.
Department of Energy (DOE assigned its rights to the U.S.
Enrichment Corporation, a U.S. government-owned corporation,
on July 1, 1993) and Southern California Edison Company, as
agent for SDG&E and others; Contract DE-SC05-84UEO7541,
dated November 5, 1984, effective June 1, 1984, as amended
(1991 SDG&E Form 10-K Exhibit 10.9).
10.32 Fuel Lease dated as of September 8, 1983 between SONGS Fuel
Company, as Lessor and San Diego Gas & Electric Company, as
Lessee, and Amendment No. 1 to Fuel Lease, dated September
14, 1984 and Amendment No. 2 to Fuel Lease, dated March 2,
1987 (1992 SDG&E Form 10-K Exhibit 10.11).
10.33 Nuclear Facilities Qualified CPUC Decommissioning Master
Trust Agreement for San Onofre Nuclear Generating Station,
approved November 25, 1987 (1992 SDG&E Form 10-K Exhibit 10.7).
10.34 Amendment No. 1 to the Qualified CPUC Decommissioning Master
Trust Agreement dated September 22, 1994 (see Exhibit 10.33
herein)(1994 SDG&E Form 10-K Exhibit 10.56).
10.35 Second Amendment to the San Diego Gas & Electric Company
Nuclear Facilities Qualified CPUC Decommissioning Master
Trust Agreement for San Onofre Nuclear Generating Station
(see Exhibit 10.33 herein)(1994 SDG&E Form 10-K Exhibit 10.57).
10.36 Third Amendment to the San Diego Gas & Electric Company
Nuclear Facilities Qualified CPUC Decommissioning Master
Trust Agreement for San Onofre Nuclear Generating Station
(see Exhibit 10.33 herein)(1996 SDG&E Form 10-K Exhibit 10.59).
10.37 Fourth Amendment to the San Diego Gas & Electric Company
Nuclear Facilities Qualified CPUC Decommissioning Master
Trust Agreement for San Onofre Nuclear Generating Station
(see Exhibit 10.33 herein)(1996 SDG&E Form 10-K Exhibit 10.60).
10.38 Fifth Amendment to the San Diego Gas & Electric Company
Nuclear Facilities Qualified CPUC Decommissioning Master
Trust Agreement for San Onofre Nuclear Generation Station
(see Exhibit 10.33 herein)(1999 SDG&E Form 10-K Exhibit 10.26).
10.39 Sixth Amendment to the San Diego Gas & Electric Company
Nuclear Facilities Qualified CPUC Decommissioning Master
Trust Agreement for San Onofre Nuclear Generating Station
(see Exhibit 10.33 herein)(1999 SDG&E Form 10-K Exhibit 10.27).
10.40 Nuclear Facilities Non-Qualified CPUC Decommissioning Master
Trust Agreement for San Onofre Nuclear Generating Station,
approved November 25, 1987 (1992 SDG&E Form 10-K Exhibit 10.8).
39
10.41 First Amendment to the San Diego Gas & Electric Company
Nuclear Facilities Non-Qualified CPUC Decommissioning Master
Trust Agreement for San Onofre Nuclear Generating Station
(see Exhibit 10.40 herein)(1996 Form 10-K Exhibit 10.62).
10.42 Second Amendment to the San Diego Gas & Electric Company
Nuclear Facilities Non-Qualified CPUC Decommissioning Master
Trust Agreement for San Onofre Nuclear Generating Station
(see Exhibit 10.40 herein)(1996 Form 10-K Exhibit 10.63).
10.43 Third Amendment to the San Diego Gas & Electric Company
Nuclear Facilities Non-Qualified CPUC Decommissioning Master
Trust Agreement for San Onofre Nuclear Generating Station
(see Exhibit 10.40 herein)(1999 SDG&E Form 10-K Exhibit 10.31).
10.44 Fourth Amendment to the San Diego Gas & Electric Company
Nuclear Facilities Non-Qualified CPUC Decommissioning Master
Trust Agreement for San Onofre Nuclear Generating Station
(see Exhibit 10.40 herein)(1999 SDG&E Form 10-K Exhibit 10.32).
10.45 Second Amended San Onofre Agreement among Southern
California Edison Company, SDG&E, the City of Anaheim and
the City of Riverside, dated February 26, 1987 (1990 SDG&E
Form 10-K Exhibit 10.6).
10.46 U. S. Department of Energy contract for disposal of spent
nuclear fuel and/or high-level radioactive waste, entered
into between the DOE and Southern California Edison Company,
as agent for SDG&E and others; Contract DE-CR01-83NE44418,
dated June 10, 1983 (1988 SDG&E Form 10-K Exhibit 10N).
Exhibit 12 -- Statement re: Computation Of Ratios
12.01 Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends for the years ended December
31, 2000, 1999, 1998, 1997, and 1996.
Exhibit 13 -- Annual Report to Security Holders
13.01 Sempra Energy 1999 Annual Report to Shareholders. (Such report,
except for the portions thereof which are expressly incorporated by
reference in this Annual Report, is furnished for the information
of the Securities and Exchange Commission and is not to be deemed
"filed" as part of this Annual Report).
Exhibit 21 -- Subsidiaries
21.01 Schedule of Significant Subsidiaries at December 31, 2000.
Exhibit 23 -- Independent Auditors' Consent, page 30.
40
GLOSSARY
AB 1 A California Assembly bill authorizing
the California Department of Water Resources
to purchase energy for California consumers.
AB 265 California Assembly Bill imposing a 6.5
cent/kWh electric commodity rate ceiling.
AB 1890 California Assembly Bill - California's
electric restructuring law.
AB 1421 A California Assembly bill requiring that
natural gas utilities provide bundled basic
gas service to certain customers.
BCAP Biennial Cost Allocation Proceeding
Bcf One Billion Cubic Feet (of natural gas)
CA/AZ California/Arizona
CEC California Energy Commission
CPUC California Public Utilities Commission
DOE Department of Energy
DGN Distribuidora de Gas Natural
DTSC Department of Toxic Substances Control
DWR California Department of Water Resources
Edison Southern California Edison Company
EMF Electric and Magnetic Fields
Energia Chilquinta Energia S.A.
Enova Enova Corporation
EPA Environmental Protection Agency
ESOP Employee Stock Ownership Plan
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
GCIM Gas Cost Incentive Mechanism
Global Sempra Energy Global Enterprises
Intertie Pacific Intertie
41
IOUs Investor-Owned Utilities
ISO Independent System Operator
KN KN Energy, Inc.
kWh Kilowatt Hour
mmbtu Million British Thermal Units (of natural gas)
mW Megawatt
NRC Nuclear Regulatory Commission
OTC Over-the-Counter
PBR Performance-Based Ratemaking/Regulation
PD Proposed Decision
PE Pacific Enterprises
PG&E Pacific Gas and Electric Company
PGE Portland General Electric Company
PNM Public Service Company of New Mexico
PRP Potentially Responsible Party
PSEG Public Service Enterprise Group
PX Power Exchange
ROE Return on Equity
ROR Rate of Return
SAB Staff Accounting Bulletin (SEC)
SAG Sempra Atlantic Gas
SDG&E San Diego Gas & Electric Company
SEC Securities and Exchange Commission
SEF Sempra Energy Financial
SEI Sempra Energy International
SER Sempra Energy Resources
SES Sempra Energy Solutions
SET Sempra Energy Trading
SoCalGas Southern California Gas Company
42
SONGS San Onofre Nuclear Generating Station
Southwest Powerlink A transmission line connecting San Diego to
Phoenix and intermediate points
UEG Utility Electric Generation
VaR Value at Risk
WSPP Western Systems Power Pool
43