SDG&E FUNDING LLC A DE LIMITED LIABILITY CO - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
I(1)(a) AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE
REDUCED DISCLOSURE FORMAT.

(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, 2002.

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
___________ TO _____________

COMMISSION FILE NUMBER 333-30761

CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
SPECIAL PURPOSE TRUST SDG&E-1
(Issuer of the Certificates)

SDG&E FUNDING LLC
(Exact name of registrant as specified in its Certificate of Formation)

DELAWARE 95-1184800
- -----------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

101 ASH STREET, ROOM 111,
SAN DIEGO, CALIFORNIA 92101
- -----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (619) 696-2328

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:

California Infrastructure and Economic Development Bank Special Purpose
Trust SDG&E-1 Rate Reduction Certificates, Series 1997-1: Class A-1
5.97% Certificates; Class A-2 6.04% Certificates; Class A-3 6.07%
Certificates; Class A-4 6.15% Certificates; Class A-5 6.19%
Certificates; Class A-6 6.31% Certificates; Class A-7 6.37% Certificates
(maturing serially from 1998 to 2007, and underlying SDG&E Funding LLC
Notes of the same respective classes)
- -----------------------------------------------------------------------
(Title of Class)

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 (or for such shorter period
that the registrant was required to file such reports), 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. [X]

The aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant as of February 28, 2002 was $0.

DOCUMENTS INCORPORATED BY REFERENCE

Not applicable.

PART I

ITEM 1. BUSINESS

GENERAL

SDG&E Funding LLC (the "Note Issuer") is a special-purpose,
single-member limited liability company organized under the laws of the
State of Delaware. San Diego Gas & Electric Company ("SDG&E"), as the
sole member of the Note Issuer, owns all of the equity securities of
the Note Issuer. The Note Issuer was organized in July 1997 for the
limited purposes of holding and servicing the Transition Property (as
described below) and issuing notes secured by the Transition Property
and other limited collateral and related activities, and is restricted
by its organizational documents from engaging in other activities. The
Note Issuer's organizational documents require it to operate in a
manner such that it should not be consolidated in the bankruptcy estate
of SDG&E in the event SDG&E becomes subject to such a proceeding.

The only material business conducted by the Note Issuer has
been the acquisition of Transition Property and the issuance on
December 16, 1997 of $658,000,000 in principal amount of the SDG&E
Funding LLC Notes, Series 1997-1, Class A-1 through Class A-7 (the
"Notes"), with scheduled maturities ranging from one year to ten years
and final maturities ranging from three to twelve years. The specific
interest rate and maturity of each class of Notes is specified in Note
C of the Notes to Financial Statements herein. The Notes were issued
pursuant to an Indenture between the Note Issuer and Bankers Trust
Company of California, N.A., as trustee (the "Indenture"). The Note
Issuer sold the Notes to the California Infrastructure and Economic
Development Bank Special Purpose Trust SDG&E-1, a Delaware business
trust (the "Trust"), which issued certificates corresponding to each
class of Notes (the "Certificates") in a public offering.

The Note Issuer has no employees. It has entered into a
servicing agreement (the "Servicing Agreement") with SDG&E, pursuant to
which SDG&E is required to service the Transition Property on behalf of
the Note Issuer. In addition, the Note Issuer has entered into an
Administrative Services Agreement with SDG&E pursuant to which SDG&E
performs administrative and operational duties for the Note Issuer.

TRANSITION PROPERTY

The California Public Utilities Code (the "PU Code") provides
for the creation of "Transition Property." A financing order dated
September 3, 1997 (the "Financing Order") issued by the California
Public Utilities Commission (the "CPUC"), together with the related
Issuance Advice Letter, establishes, among other things, separate non-
bypassable charges (the "FTA Charges") payable by residential electric
customers and small commercial electric customers in an aggregate
amount sufficient to repay in full the Certificates, fund the
Overcollateralization Subaccount established under the Indenture and
pay all related costs and fees. Under the PU Code and the Financing
Order, the owner of the Transition Property is entitled to collect FTA
Charges until such owner has received amounts sufficient to retire all
outstanding series of Certificates and cover related fees and expenses
and the Overcollateralization Amount described in the Financing Order.
The Transition Property is a property right under California law that
includes, without limitation, ownership of the FTA Charges and any
adjustments thereto as described in the next paragraph.

In order to enhance the likelihood that actual collections
with respect to the Transition Property are neither more nor less than
the amount necessary to amortize the Notes in accordance with their
expected amortization schedules, pay all related fees and expenses, and
fund certain accounts established pursuant to the Indenture as
required, the Servicing Agreement requires SDG&E, as the servicer of
the Transition Property (in such capacity, the "Servicer"), to seek,
and the Financing Order and the PU Code require the CPUC to approve,
periodic adjustments to the FTA Charges. Such adjustments will be based
on actual collections with respect thereto and updated assumptions by
the Servicer as to future usage of electricity by specified customers,
future expenses relating to the Transition Property, the Notes and the
Certificates, and the rate of delinquencies and write-offs. The FTA
Charges will be adjusted at least annually if there is a material
shortfall or overage in collections.

THE TRUST

The Trust was organized in November 1997 solely for the
purpose of purchasing the Notes and issuing the Certificates. It will
not conduct any other material business activities.

ITEM 2. PROPERTIES

The Note Issuer and the Trust have no tangible properties.
The primary assets of the Note Issuer and the Trust are the Transition
Property and the Notes, respectively, as described above in Item 1.
Collections related to the Transition Property and the related payments
on the Notes in 2002, 2001 and 2000 are shown on the Statements of Cash
Flows included in this Annual Report.

ITEM 3. LEGAL PROCEEDINGS
None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Omitted with respect to the Note Issuer pursuant to
Instruction I of Form 10-K.

No matters were submitted for a vote or consent of holders of
Certificates in 2002.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

(a) There is no established public trading market for the Note
Issuer's equity securities. All of the Note Issuer's equity is owned by
SDG&E. On August 11, 1997, SDG&E transferred $400,000 to the Note
Issuer as an initial capital contribution, and SDG&E made capital
contributions to the Note Issuer aggregating to $3,290,000. The sale of
such membership interest was exempt from registration under the
Securities Act of 1933, as amended, pursuant to Section 4(2) thereof.
The Note Issuer has made no other sales of unregistered securities.

The Indenture prohibits the Note Issuer from making any
distributions to the sole member from the amounts allocated to the Note
Issuer unless no default has occurred and is continuing thereunder and
the book value of the remaining equity of the Note Issuer, after giving
effect to such distribution, is equal to at least 0.5% of the original
principal amount of all series of Notes which then remains outstanding.
As of December 31, 2002, the original principal amount of all series of
Notes which then remained outstanding was $329,000,000. As of December
31, 2002, the Note Issuer has not made any distributions to SDG&E. The
Note Issuer intends to make distributions to the sole member from time
to time in the future as permitted by the Indenture.

The registered owner for each class of the Certificates is
Cede & Co., as nominee of The Depository Trust Company ("DTC"). DTC has
informed the Note Issuer that as of March 5, 2003, there were
approximately 44 beneficial holders of Certificates.

(b) The Note Issuer's Amendment No. 4 to the Registration
Statement No. 333-30761 on Form S-3, as filed with the Securities and
Exchange Commission (the "Commission") on November 21, 1997 for the
sale of the Notes and the Certificates was declared effective by the
Commission on November 24, 1997. The Certificates were offered for sale
beginning on December 4, 1997. Certificates in the aggregate amount of
$658,000,000 were sold on December 16, 1997. In connection with the
offering of the Certificates, Morgan Stanley, Inc. and Lehman Brothers
Inc. acted as the managing underwriters. The Trust purchased the Notes
from the Note Issuer on December 16, 1997, pursuant to a private sale
in the aggregate amount of $658,000,000. Notes and Certificates in the
aggregate principal amount of $800,000,000 were authorized and
$658,000,000 have been offered and sold to date. All of the Notes
offered in the sale were purchased. The amount of each class of Notes
and Certificates registered and the respective sale prices, which
exclude the original issue discount, are as follows:

The net offering proceeds to the Trust were $654,728,789: the
$657,854,287 net sale price less $3,125,498 of underwriting discount and
commission. The Trust used all of the net proceeds from the sale of
Certificates to purchase the Notes from the Note Issuer. The net
offering proceeds to the Note Issuer were used to purchase the
Transition Property. Compensation paid to the independent director of
the Note Issuer was $3,800. Other than the payment to the independent
director, no additional net offering proceeds were used to pay, either
directly or indirectly, any director, officer or affiliate of the Note
Issuer.

ITEM 6. SELECTED FINANCIAL DATA

Omitted pursuant to Instruction I ("Omission of Information by
Certain Wholly Owned Subsidiaries") of Form 10-K.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following analysis of the Note Issuer's results of
operations is in an abbreviated format pursuant to Instruction I of Form
10-K.

As discussed above under "Item 1. Business", the Note Issuer
was established in July 1997 for limited purposes. As discussed above
under Item 5 (Market for Registrant's Common Equity and Related
Stockholder Matters), on December 16, 1997, the Note Issuer issued Notes
in order to purchase Transition Property. The Note Issuer is restricted
by its organizational documents from engaging in activities other than
those described in Item 1.

The Note Issuer expects to use collections with respect to the
Transition Property to make scheduled principal and interest payments on
the Notes. Interest income earned on the Transition Property is expected
to offset (1) interest expense on the Notes, (2) amortization of debt-
issuance expenses and the discount on the Notes, and (3) the fees
charged by SDG&E for servicing the Transition Property and providing
administrative services to the Note Issuer. (These agreements are
discussed in greater detail in Note D to the Financial Statements
attached hereto.)

Collections of $104,556,000 resulted in a net overcollection
for 2002 of $10,878,000 after deducting scheduled principal and interest
payments of $89,124,000, payments of $1,031,000 for servicing fees and
other expenses, $1,645,000 retained to fund the Overcollateralization
Account established under the Notes' indenture and $1,878,000 retained
to fund the Capital Sub-Account that had been depleted during 2001 due
to undercollections (described below). Collections of $89,864,000
resulted in a net undercollection for 2001 of $4,663,000 after deducting
scheduled principal and interest payments of $93,168,000, payments of
$1,195,000 for servicing fees and other expenses, and $164,000 retained
to fund the Overcollateralization Account established under the Notes'
indenture.

The $4,663,000 undercollection in 2001 resulted in
restricted cash being below its required balance at December 31, 2001,
as described in Note B of the notes to the financial statements. The
2001 undercollection arose because of decreases in customer
consumption in response to the California energy crisis. The
undercollection was deducted from the previous surplus collections,
the Overcollateralization Sub-Account established under the Notes'
indenture and the Capital Sub-Account, in that order. On July 2, 2001,
SDG&E filed an application with the CPUC requesting a nonroutine
increase in FTA charges for the remainder of 2001. The CPUC approved
the increase in August 2001, effective October 1, 2001. In December
2001 SDG&E reforecasted future consumption patterns and a new FTA rate
was set for January 1, 2002 and beyond. The FTA Charges are adjusted
at least annually if there is a material shortfall or overage in
collections. Management believes that it is reasonable to expect
future collections of FTA Charges to be sufficient to make scheduled
payments on the Notes and pay related expenses on a timely basis.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to the Note Issuer or the Trust.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and related financial information
required to be filed hereunder are indexed on page 11 of this Annual
Report.

Since the Trust is a pass-through entity with no assets other
than the Notes, financial statements for the Trust are not included.

Exhibit 99.1 contains financial information regarding
collections of FTA Charges by the Servicer for the fourth quarter of
2002.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

Not applicable with respect to the Note Issuer or the Trust.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Omitted pursuant to Instruction I of Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

Omitted pursuant to Instruction I of Form 10-K.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Omitted pursuant to Instruction I of Form 10-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Omitted with respect to the Note Issuer pursuant to
Instruction I of Form 10-K.

Not applicable to the Trust.

ITEM 14. CONTROL AND PROCEDURES

The company has designed and maintains disclosure controls and
procedures to ensure that information required to be disclosed in the
company's reports under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange
Commission and is accumulated and communicated to the company's
management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating these controls and
procedures, management recognizes that any system of controls and
procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired objectives and
necessarily applies judgment in evaluating the cost-benefit
relationship of other possible controls and procedures.

Under the supervision and with the participation of management,
including the Chief Executive Officer and the Chief Financial
Officer, the company within 90 days prior to the date of this report
has evaluated the effectiveness of the design and operation of the
company's disclosure controls and procedures. Based on that
evaluation, the company's Chief Executive Officer and Chief Financial
Officer have concluded that the controls and procedures are
effective.

There have been no significant changes in the company's internal
controls or in other factors that could significantly affect the
internal controls subsequent to the date the company completed its
evaluation.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K

(a) The following documents are filed as part of this report:

1. Financial Statements.

The following financial statements of the Note Issuer and
report of independent auditors are included in Item 8:

Independent Auditors' Report
Statements of Operations and Changes in Member's Equity
Balance Sheets
Statements of Cash Flows
Notes to Financial Statements

2. Financial Statement Schedules.

None.

3. Exhibits.

The following exhibits are filed as a part of this report:

Exhibit Description
------- -----------

3.1 Certificate of Formation. (1)
3.2 Limited Liability Company Agreement. (1)
3.3 Amended and Restated Limited Liability Company Agreement. (1)
4.1 Note Indenture. (2)
4.2 Amended and Restated Declaration and Agreement of Trust. (1)
4.3 Series Supplement. (2)
4.4 Form of Note. (1)
4.5 First Supplemental Trust Agreement. (2)
4.6 Form of Rate Reduction Certificate. (2)
10.1 Transition Property Purchase and Sale Agreement. (2)
10.2 Transition Property Servicing Agreement. (2)
10.3 Note Purchase Agreement. (2)
10.4 Fee and Indemnity Agreement. (2)
23.1 Independent Auditors' Consent, page 19.
99.1 Quarterly Servicer's Certificate, dated December 19, 2002.
____________________________
(1) Incorporated by reference to the same-titled exhibit to the
Note Issuer and Trust's Registration Statement on Form S-3,
as amended, File No. 333-30761.

(2) Incorporated by reference to the same-titled exhibit to the
Note Issuer and Trust's Current Report on Form 8-K filed with
the Commission on December 23, 1997.

(b) Reports on Form 8-K.

There were no reports on Form 8-K filed after September 30, 2002.

FINANCIAL STATEMENT INDEX

Independent Auditors' Report.............................. 12

Statements of Operations and Changes In Member's Equity... 13

Balance Sheets............................................ 14

Statements of Cash Flows.................................. 15

Notes to Financial Statements............................. 16

Independent Auditors' Consent............................. 19

Certifications............................................ 21

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of SDG&E Funding LLC:

We have audited the accompanying balance sheets of SDG&E Funding
LLC as of December 31, 2002 and 2001, and the related statements of
operations and changes in member's equity and cash flows for each of
the three years in the period ended December 31, 2002. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all
material respects, the financial position of SDG&E Funding LLC as of
December 31, 2002 and 2001, and the results of its operations and its
cash flows for each of the three years in the period ended December
31, 2002 in conformity with accounting principles generally accepted
in the United States of America.

/s/ DELOITTE & TOUCHE LLP

San Diego, California
February 14, 2003

SDG&E FUNDING LLC
STATEMENTS OF OPERATIONS AND CHANGES IN MEMBER'S EQUITY
(In thousands of dollars)

SDG&E FUNDING LLC
BALANCE SHEETS
(In thousands of dollars)

SDG&E FUNDING LLC
STATEMENTS OF CASH FLOWS
(In thousands of dollars)

NOTES TO FINANCIAL STATEMENTS

A. Nature of Operations

The financial statements include the accounts of SDG&E Funding LLC
(SDG&E Funding or "the company"), a Delaware special-purpose limited-
liability company, whose sole member is San Diego Gas & Electric
Company (SDG&E), a provider of electric and natural gas services.
SDG&E is a wholly owned subsidiary of Sempra Energy. SDG&E Funding was
formed on July 1, 1997, in order to effect the issuance of notes (the
Underlying Notes) intended to support a 10-percent electric-rate
reduction. This reduction is provided to SDG&E's residential and small
commercial customers in connection with the electric industry
restructuring mandated by California Assembly Bill 1890.

SDG&E Funding was organized for the limited purposes of issuing the
Underlying Notes and purchasing Transition Property. Transition
Property is the right to be paid a specified amount from a non-
bypassable charge levied on residential and small commercial
customers. The non-bypassable charge has been authorized by the
California Public Utility Commission (CPUC) pursuant to electric
restructuring legislation.

SDG&E Funding is restricted by its organizational documents from
engaging in any other activities. In addition, SDG&E Funding's
organizational documents require it to operate in such a manner that
it should not be consolidated in the bankruptcy estate of SDG&E in the
event that SDG&E becomes subject to such a proceeding.

SDG&E Funding is legally separate from SDG&E. The assets of SDG&E
Funding are not available to creditors of SDG&E or Sempra Energy.
SDG&E Funding will cease to exist upon the maturation or retirement of
the Underlying Notes.

B. Summary of Accounting Policies

Collateral Deposit

SDG&E Funding is required to maintain $3.2 million on deposit as
collateral to be used to make scheduled payments on the Underlying
Notes and to pay other expenses of SDG&E Funding in the event that
future collections of the non-bypassable charge provide insufficient
funds to make such payments. At December 31, 2001, the balance of this
deposit had decreased to $1,312,000 due to the California energy
crisis which resulted in collections of the non-bypassable charge
being below anticipated levels and required a portion of the
collateral deposit to be used. The balance was returned to the
required level during 2002 by adjusting the FTA rate. On the balance
sheet this deposit is included in "restricted funds," which also
includes the three accounts referred to in the next paragraph, whose
use is also restricted to covering deficiencies between current
collections and required payments.

Overcollections/Undercollections from SDG&E Customers

The 2001 undercollection of FTA Charges resulting from the California
energy crisis mentioned above necessitated the use of previous surplus
collections in the Reserve Sub-Account, the Overcollateralization Sub-
Account established under the Notes' indenture and the Capital Sub-
Account, in that order, to make required payments. After adjusting the
FTA rate, overcollections of the FTA Charges have occurred in 2002,
enabling the company to replenish the Capital Sub-Account and the
Overcollateralization Sub-Account and to accumulate additional surplus
collections in the Reserve Sub-Account for future use as necessary. The
overcollection will be applied to scheduled payments of the Underlying
Notes during 2003.

Unamortized Debt Issuance Expense

The expenses associated with the issuance of the Underlying Notes have
been capitalized and are being amortized over the life of the
Underlying Notes.

Income Taxes

SDG&E Funding is a single-member limited-liability company.
Accordingly, all federal income tax effects and all material State of
California franchise tax effects of SDG&E Funding's activities accrue
to SDG&E.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses during a reporting period. Actual
results could differ from these estimates.

C. Long-Term Debt

In December 1997, SDG&E Funding issued $658 million of the Underlying
Notes to the California Infrastructure and Economic Development Bank
Special Purpose Trust (the Trust). The Trust, in turn, issued pass-
through certificates known as "rate-reduction bonds" with an original
principal amount equal to the original principal amount of the
Underlying Notes. SDG&E Funding used the proceeds from the Underlying
Notes to purchase the Transition Property from SDG&E.

The Underlying Notes are secured solely by the Transition Property and
other assets of SDG&E Funding. Scheduled maturities and interest rates
for the Underlying Notes at December 31 are as follows:

Scheduled
Maturity Interest
Class Date Rate 2002 2001
- ---------------------------------------------------------------------
(Dollars in thousands)
A-4 March 25, 2002 6.15% $ -- $ 17,142
A-5 September 25, 2003 6.19% 47,880 96,538
A-6 September 25, 2006 6.31% 197,584 197,584
A-7 December 26, 2007 6.37% 83,536 83,536
----------- ----------
329,000 394,800
Less current portion (65,800) (65,800)
----------- -----------
Long-term debt $263,200 $329,000
=========== ===========

The carrying amounts and fair values of the Underlying Notes are $329
million and $357 million, respectively, at December 31, 2002, and $395
million and $411 million, respectively, at December 31, 2001. The fair
values of the Underlying Notes are based on quoted market prices.

The source of repayment is the non-bypassable charge authorized by the
CPUC. This non-bypassable charge is collected by SDG&E, as Servicer,
from its residential and small commercial customers. Collections of
the non-bypassable charge are deposited on a monthly basis by SDG&E
with SDG&E Funding in an account maintained by the Trustee (Bankers
Trust Company). Each quarter such monies are used to make principal
and interest payments on the Underlying Notes. The debt service
requirements include an overcollateralization amount that is retained
for the benefit of the holders of the Underlying Notes. Any amounts
not required for debt service are returned to SDG&E Funding.

D. Significant Agreements and Related Party Transactions

Under a Transition Property Servicing Agreement, SDG&E, the Servicer,
is required to manage and administer the Transition Property of SDG&E
Funding and to collect the non-bypassable charge from electric
customers on behalf of SDG&E Funding. SDG&E Funding pays a servicing
fee each quarter equal to 0.25% of the outstanding principal amount of
the Underlying Notes. The Servicer is also entitled to receive as
compensation any interest earnings on non-bypassable charge
collections prior to remittance to the Trust and any late payment
charges collected from SDG&E's customers.

The Trust was created for the limited purposes of purchasing the
Underlying Notes from SDG&E Funding, issuing the rate-reduction bonds,
and applying the proceeds from the Underlying Notes to the payment of
the rate-reduction bonds. Under a Fee and Indemnity Agreement, SDG&E
Funding is responsible for paying all fees and expenses incurred by
the Certificate Trustee (Bankers Trust Company) and the Delaware
Trustee (Bankers Trust Delaware).

E. Quarterly Financial Data (Unaudited)
Quarter ended
-----------------------------------------------
Dollars in millions March 31 June 30 September 30 December 31
- ----------------------------------------------------------------------
2002
Income $ 6,352 $ 6,032 $ 5,863 $ 5,673

Expenses 6,352 6,032 5,863 5,673
-----------------------------------------------
Net income $ 0 $ 0 $ 0 $ 0
===============================================

2001
Income $ 7,360 $ 7,027 $ 6,885 $ 6,699

Expenses 7,360 7,027 6,885 6,699
-----------------------------------------------
Net income $ 0 $ 0 $ 0 $ 0
===============================================

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statement
Number 333-30761 of SDG&E Funding LLC on Form S-3 of our report dated
February 14, 2003, appearing in this Annual Report on Form 10-K of SDG&E
Funding LLC for the year ended December 31, 2002.

/S/ DELOITTE & TOUCHE LLP

San Diego, California
March 24, 2003

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, thereunto duly authorized.

SDG&E Funding LLC,
as Registrant

By: /s/Charles A. McMonagle
------------------------------
Name: Charles A. McMonagle
Title: President and Chief
Executive Officer

Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.

Signature Title Date
- ---------- ----- ----

/s/Charles A. McMonagle President, Chief Executive March 24, 2003
- ------------------------- Officer and Director
Charles A. McMonagle

/s/James P. Trent Chief Financial Officer, March 24, 2003
- ------------------------ Chief Accounting Officer
James P. Trent and Director

/s/Donald J. Puglisi Director March 12, 2003
- ------------------------
Donald J. Puglisi

CERTIFICATIONS

I, Charles A. McMonagle, certify that:

1. I have reviewed this Annual Report on Form 10-K of SDG&E Funding LLC;

2. Based on my knowledge, this Annual Report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this Annual Report;

3. Based on my knowledge, the financial statements and other financial
information included in this Annual Report fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this Annual Report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made know to us by others within
those entities, particularly during the period in which this
Annual Report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this Annual Report (the "Evaluation Date");
and

c) presented in this Annual Report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in
this Annual Report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

March 24, 2003 /s/Charles A. McMonagle
_______________________
Charles A. McMonagle
Chief Executive Officer

I, James P. Trent, certify that:

1. I have reviewed this Annual Report on Form 10-K of SDG&E Funding LLC;

2. Based on my knowledge, this Annual Report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this Annual Report;

3. Based on my knowledge, the financial statements and other financial
information included in this Annual Report fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this Annual Report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
Annual Report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this Annual Report (the "Evaluation Date");
and

c) presented in this Annual Report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in
this Annual Report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

March 24, 2003 /s/James P. Trent
________________________
James P. Trent
Chief Financial Officer

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