SDG&E FUNDING LLC A DE LIMITED LIABILITY CO - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

(Mark One)

[..X..] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
March 31, 2003
For the quarterly period ended...........................
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 No. 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

Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Sections 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 whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes...... No...X...

PART I

Item 1. Financial Statements.

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

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

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

Note to Financial Statements
- -----------------------------

Basis of Presentation

This Quarterly Report on Form 10-Q includes the financial statements
of SDG&E Funding LLC, 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. Information in this quarterly
report is unaudited and should be read in conjunction with SDG&E
Funding LLC's Financial Statements and Notes to Financial Statements
included in its 2002 Annual Report on Form 10-K.

SDG&E Funding LLC believes that the accompanying statements reflect
all adjustments that are necessary to present a fair statement of the
financial position and results of operations for the interim periods.
All material adjustments are of a normal, recurring nature unless
otherwise disclosed in this Quarterly Report on Form 10-Q. Results of
operations for interim periods are not necessarily indicative of
results to be expected for a full year.

SDG&E Funding LLC was organized for the limited purposes of issuing
Notes and holding and servicing Transition Property. Notes are SDG&E
Funding LLC Notes, Series 1997-1, Class A-1 through Class A-7
(presented in the financial statements as Long-Term Debt), secured by
the Transition Property and other, limited collateral. Transition
Property is the right to be paid a specified amount (presented in the
financial statements as Transition Property) from nonbypassable
charges, frequently referred to as FTA Charges, levied on residential
electric customers and small commercial electric customers of SDG&E.
The nonbypassable charges were authorized by the California Public
Utilities Commission (CPUC) pursuant to the electric industry
restructuring mandated by California Assembly Bill 1890, as amended by
California Senate Bill 477.

Since SDG&E Funding LLC is a single-member, limited-liability company,
its federal income tax effects and its State of California franchise
tax effects accrue to SDG&E.

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.

The following analysis of the financial condition and results of
operations of SDG&E Funding LLC (the Note Issuer) is in an abbreviated
format pursuant to Instruction H of Form 10-Q. Such analysis should be
read in conjunction with the Financial Statements and Note to
Financial Statements included in Item 1 above and the Financial
Statements and Notes to Financial Statements included in the Note
Issuer's Annual Report on Form 10-K for the year ended December 31,
2002.

The Note Issuer is limited by its organizational documents to engaging
in the activities of owning certain property created pursuant to the
California Public Utilities Code (the Transition Property) and issuing
SDG&E Funding LLC Notes, Series 1997-1, Class A-1 through Class A-7
(the Notes) secured by the Transition Property and other limited
collateral, and related activities. 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 the Notes in
a public offering.

Operating statement effects are limited primarily to income generated
from the Transition Property, interest expense on the Notes and
incidental investment interest income. 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.

Collections of $25,452,000 resulted in a net overcollection for the
three months ended March 31, 2003, of $2,817,000 after deducting
scheduled principal and interest payments of $22,321,000, payments of
$232,000 for servicing fees and other expenses, and $82,000 retained to
fund the Overcollateralization Account established under the Notes'
indenture. Collections of $27,141,000 resulted in a net overcollection
for the three months ended March 31, 2002, of $246,000 after deducting
scheduled principal and interest payments of $23,346,000, payments of
$273,000 for servicing fees and other expenses, $1,398,000 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 (see below).

During 2001, a net undercollection arose because of decreases in
customer consumption in response to the California energy crisis. Any
such undercollections are deducted from the previous surplus
collections, the Overcollateralization Sub-Account established under
the Notes' indenture and the Capital Sub-Account, in that order. 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 4. CONTROLS 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 II
OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 5. Other Information.

Attached, with respect to the Note Issuer and the Trust, as Exhibit
99.1 is the Quarterly Servicer's Certificate for the quarter ended
March 31, 2003, delivered pursuant to the Note Indenture. It includes
information relating to the collections of the nonbypassable charges
(the FTA Charges) payable by residential electric customers and small
commercial electric customers.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

99.1 Quarterly Servicer's Certificate dated March 18, 2003.

99.2 Statements of Registrant's Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Sec. 1350, as created by
Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on 8-K:

None.

SIGNATURES

Pursuant to the requirement 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

Date: May 13, 2003 By: /s/ James P. Trent
-----------------------------
James P. Trent
Chief Financial Officer and
Chief Accounting Officer

CERTIFICATES

I, Charles A. McMonagle, certify that:

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

2. Based on my knowledge, this Quarterly 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 Quarterly Report;

3. Based on my knowledge, the financial statements and other financial
information included in this Quarterly 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 Quarterly 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
Quarterly 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 Quarterly Report (the "Evaluation Date"); and

c) presented in this Quarterly 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 Quarterly 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.

May 13, 2003 /s/Charles A. McMonagle
Charles A. McMonagle
Chief Executive Officer

I, James P. Trent, certify that:

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

2. Based on my knowledge, this Quarterly 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 Quarterly Report;

3. Based on my knowledge, the financial statements and other financial
information included in this Quarterly 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 Quarterly 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
Quarterly 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 Quarterly Report (the "Evaluation Date"); and

c) presented in this Quarterly 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 Quarterly 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.

May 13, 2003 /s/James P. Trent
James P. Trent
Chief Financial Officer