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GENERAL INFORMATION AND OTHER FINANCIAL DATA | 9 Months Ended
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Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
GENERAL INFORMATION AND OTHER FINANCIAL DATA | GENERAL INFORMATION AND OTHER FINANCIAL DATA PRINCIPLES OF CONSOLIDATION Sempra Effective May 12, 2023, our company changed its legal name from Sempra Energy to Sempra. Sempra’s Condensed Consolidated Financial Statements include the accounts of Sempra, a California-based holding company, and its consolidated entities. We have four separate reportable segments, which we discuss in Note 11. All references in these Notes to our reportable segments are not intended to refer to any legal entity with the same or similar name. SDG&E SDG&E’s common stock is wholly owned by Enova Corporation, which is a wholly owned subsidiary of Sempra. SoCalGas SoCalGas’ common stock is wholly owned by Pacific Enterprises, which is a wholly owned subsidiary of Sempra. BASIS OF PRESENTATION This is a combined report of Sempra, SDG&E and SoCalGas. We provide separate information for SDG&E and SoCalGas as required. We have eliminated intercompany accounts and transactions within Sempra’s consolidated financial statements. We have prepared our Condensed Consolidated Financial Statements in conformity with U.S. GAAP and in accordance with the interim period reporting requirements of Form 10-Q and applicable rules of the SEC. The financial statements reflect all adjustments that are necessary for a fair presentation of the results for the interim periods. These adjustments are only of a normal, recurring nature. Results of operations for interim periods are not necessarily indicative of results for the entire year or for any other period. We evaluated events and transactions that occurred after September 30, 2023 through the date the financial statements were issued and, in the opinion of management, the accompanying statements reflect all adjustments necessary for a fair presentation. All December 31, 2022 balance sheet information in the Condensed Consolidated Financial Statements has been derived from our audited 2022 Consolidated Financial Statements in the Annual Report. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the interim period reporting provisions of U.S. GAAP and the SEC. We describe our significant accounting policies in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report and the impact of the adoption of new accounting standards on those policies in Note 2 below. We follow the same accounting policies for interim period reporting purposes. The information contained in this report should be read in conjunction with the Annual Report. Regulated Operations SDG&E, SoCalGas and Sempra Infrastructure’s natural gas distribution utility, Ecogas, prepare their financial statements in accordance with the provisions of U.S. GAAP governing rate-regulated operations. We discuss revenue recognition and the effects of regulation at our utilities in Notes 3 and 4 below and in Notes 1, 3 and 4 of the Notes to Consolidated Financial Statements in the Annual Report. Our Sempra Texas Utilities segment is comprised of our equity method investments in holding companies that own interests in regulated electric transmission and distribution utilities in Texas. Certain business activities at Sempra Infrastructure are regulated by the CRE and the FERC and meet the regulatory accounting requirements of U.S. GAAP. Pipeline projects currently under construction that meet the regulatory accounting requirements of U.S. GAAP record the impact of AFUDC related to equity. We discuss AFUDC below and in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report. CASH, CASH EQUIVALENTS AND RESTRICTED CASH Cash equivalents are highly liquid investments with original maturities of three months or less at the date of purchase. Restricted cash includes: ▪for Sempra Infrastructure, funds held as collateral in lieu of a customer’s letters of credit associated with its LNG storage and regasification agreement; funds denominated in U.S. dollars and Mexican pesos to pay for rights-of-way and other costs pursuant to trust agreements related to pipeline projects; and certain funds at Port Arthur LNG for which withdrawals and usage are dictated by its debt agreements ▪for Parent and other, funds held in a delisting trust for the purpose of purchasing the remaining publicly owned IEnova shares The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on Sempra’s Condensed Consolidated Balance Sheets to the sum of such amounts reported on Sempra’s Condensed Consolidated Statements of Cash Flows.
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(Dollars in millions)
| September 30, 2023 | December 31, 2022
Cash and cash equivalents | $ | 1,149 |  | $ | 370 |
Restricted cash, current | 238 |  | 40 |
Restricted cash, noncurrent | 104 |  | 52 |
Total cash, cash equivalents and restricted cash on the Condensed Consolidated Statements of Cash Flows | $ | 1,491 |  | $ | 462 |
CREDIT LOSSES We are exposed to credit losses from financial assets measured at amortized cost, including trade and other accounts receivable, amounts due from unconsolidated affiliates, our net investment in sales-type leases and a note receivable. We are also exposed to credit losses from off-balance sheet arrangements through Sempra’s guarantee related to Cameron LNG JV’s SDSRA, which we discuss in Note 5. We regularly monitor and evaluate credit losses and record allowances for expected credit losses, if necessary, for trade and other accounts receivable using a combination of factors, including past-due status based on contractual terms, trends in write-offs, the age of the receivables and customer payment patterns, historical and industry trends, counterparty creditworthiness, economic conditions and specific events, such as bankruptcies, pandemics and other factors. We write off financial assets measured at amortized cost in the period in which we determine they are not recoverable. We record recoveries of amounts previously written off when it is known that they will be recovered. In the first quarter of 2022, SDG&E and SoCalGas received $63 million and $79 million, respectively, on behalf of their customers from the California Department of Community Services and Development under the 2021 California Arrearage Payment Program and applied the amounts directly to eligible customer accounts to reduce past due balances. In June 2022, AB 205 was approved establishing, among other things, the 2022 California Arrearage Payment Program. In December 2022, SDG&E and SoCalGas received funding of $51 million and $59 million, respectively, related to this program and, in January 2023, applied the amounts directly to eligible customer accounts to reduce past due balances. As a result of the impact and duration of suspending collections processes during the COVID-19 pandemic, the implementation of programs such as the Arrearage Management Plan, and higher winter season customer billings, certain SDG&E and SoCalGas customers exhibit slower payment and higher levels of nonpayment than has been the case historically. This in turn has resulted in an increase in provisions for expected credit losses in the nine months ended September 30, 2023 for both companies, even as collections processes resume and past due payments potentially begin increasing. SDG&E and SoCalGas have regulatory mechanisms to recover credit losses and thus record changes in the allowances for credit losses related to Accounts Receivable – Trade that are probable of recovery in regulatory accounts. We discuss regulatory accounts in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report and herein. Changes in allowances for credit losses for trade receivables and other receivables are as follows:
CHANGES IN ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions) |
| 2023 | 2022
Sempra: |  |
Allowances for credit losses at January 1 | $ | 181 |  | $ | 136 |
Provisions for expected credit losses | 374 |  | 111 |
Write-offs | (74) |  | (57) |
Allowances for credit losses at September 30 | $ | 481 |  | $ | 190 |
SDG&E: |  |
Allowances for credit losses at January 1 | $ | 78 |  | $ | 66 |
Provisions for expected credit losses | 96 |  | 51 |
Write-offs | (34) |  | (30) |
Allowances for credit losses at September 30 | $ | 140 |  | $ | 87 |
SoCalGas: |  |
Allowances for credit losses at January 1 | $ | 98 |  | $ | 69 |
Provisions for expected credit losses | 276 |  | 58 |
Write-offs | (40) |  | (27) |
Allowances for credit losses at September 30 | $ | 334 |  | $ | 100 |
Allowances for credit losses related to trade receivables and other receivables are included in the Condensed Consolidated Balance Sheets as follows:
ALLOWANCES FOR CREDIT LOSSES |
(Dollars in millions) |
| September 30, | December 31,
| 2023 | 2022
Sempra: |  |
Accounts receivable – trade, net | $ | 432 |  | $ | 140 |
Accounts receivable – other, net | 48 |  | 40 |
Other long-term assets | 1 |  | 1 |
Total allowances for credit losses | $ | 481 |  | $ | 181 |
SDG&E: |  |
Accounts receivable – trade, net | $ | 113 |  | $ | 52 |
Accounts receivable – other, net | 26 |  | 25 |
Other long-term assets | 1 |  | 1 |
Total allowances for credit losses | $ | 140 |  | $ | 78 |
SoCalGas: |  |
Accounts receivable – trade, net | $ | 312 |  | $ | 83 |
Accounts receivable – other, net | 22 |  | 15 |
Total allowances for credit losses | $ | 334 |  | $ | 98 |
As we discuss below in “Note Receivable,” we have an interest-bearing promissory note due from KKR Pinnacle. On a quarterly basis, we evaluate credit losses and record allowances for expected credit losses on this note receivable, including compounded interest and unamortized transaction costs, based on published default rate studies, the maturity date of the instrument and an internally developed credit rating. At September 30, 2023 and December 31, 2022, $6 million and $7 million, respectively, of expected credit losses are included in Other Long-Term Assets on Sempra’s Condensed Consolidated Balance Sheets. As we discuss in Note 5, Sempra provided a guarantee for the benefit of Cameron LNG JV related to amounts withdrawn by Sempra Infrastructure from the SDSRA. On a quarterly basis, we evaluate credit losses and record liabilities for expected credit losses on this off-balance sheet arrangement based on external credit ratings, published default rate studies and the maturity date of the arrangement. At both September 30, 2023 and December 31, 2022, $6 million of expected credit losses are included in Deferred Credits and Other on Sempra’s Condensed Consolidated Balance Sheets. INVENTORIES The components of inventories are as follows:
INVENTORY BALANCES
(Dollars in millions)
| Sempra |  | SDG&E |  | SoCalGas
| September 30, 2023 |  | December 31, 2022 |  | September 30, 2023 |  | December 31, 2022 |  | September 30, 2023 |  | December 31, 2022
Natural gas | $ | 160 |  |  | $ | 106 |  |  | $ | 1 |  |  | $ | 1 |  |  | $ | 144 |  |  | $ | 74 |
LNG | 9 |  |  | 62 |  |  | — |  |  | — |  |  | — |  |  | — |
Materials and supplies | 282 |  |  | 235 |  |  | 146 |  |  | 133 |  |  | 116 |  |  | 85 |
Total | $ | 451 |  |  | $ | 403 |  |  | $ | 147 |  |  | $ | 134 |  |  | $ | 260 |  |  | $ | 159 |
NOTE RECEIVABLE In November 2021, Sempra loaned $300 million to KKR Pinnacle in exchange for an interest-bearing promissory note that is due in full no later than October 2029 and bears compound interest at 5% per annum, which may be paid quarterly or added to the outstanding principal at the election of KKR Pinnacle. At September 30, 2023 and December 31, 2022, Other Long-Term Assets includes $328 million and $316 million, respectively, of outstanding principal, compounded interest and unamortized transaction costs, net of allowance for credit losses, on Sempra’s Condensed Consolidated Balance Sheets. WILDFIRE FUND In July 2019, the Wildfire Legislation was signed into law to address certain issues related to catastrophic wildfires in the State of California and their impact on electric IOUs. We discuss the Wildfire Legislation further in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report. In October 2023, the OEIS approved SDG&E’s 2023 Wildfire Mitigation Plan, which is effective until the OEIS approves a new plan. SDG&E submitted its request to the OEIS for its annual wildfire safety certification in September 2023. OEIS has until December 2023 to issue the certification or provide written notice explaining why additional time is needed. SDG&E’s existing certification remains valid until this pending request is resolved. CAPITALIZED FINANCING COSTS Capitalized financing costs include capitalized interest costs and AFUDC related to both debt and equity financing of construction projects. We capitalize interest costs incurred to finance capital projects and interest at equity method investments that have not commenced planned principal operations. The table below summarizes capitalized financing costs, comprised of AFUDC and capitalized interest.
CAPITALIZED FINANCING COSTS
(Dollars in millions)
| Three months ended September 30, |  | Nine months ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Sempra | $ | 128 |  |  | $ | 65 |  |  | $ | 311 |  |  | $ | 182 |
SDG&E | 28 |  |  | 30 |  |  | 90 |  |  | 84 |
SoCalGas | 20 |  |  | 19 |  |  | 55 |  |  | 54 |
PROPERTY, PLANT AND EQUIPMENT Sempra Infrastructure’s Sonora natural gas pipeline consists of two segments, the Sasabe-Puerto Libertad-Guaymas segment and the Guaymas-El Oro segment. Each segment has its own service agreement with the CFE. Following the start of commercial operations of the Guaymas-El Oro segment, Sempra Infrastructure reported damage to the pipeline in the Yaqui territory that has made that section inoperable since August 2017. Discussions with the CFE regarding the future of the pipeline are ongoing and the parties are working on restarting service on the pipeline, including the potential re-routing of a portion of the pipeline. If the parties do not agree on a definitive arrangement to re-route a portion of the pipeline or the parties do not agree on a new service start date, Sempra Infrastructure retains the right to terminate the contract and seek to recover its reasonable and documented costs and lost profits. At September 30, 2023, Sempra Infrastructure had $411 million in PP&E, net, related to the Guaymas-El Oro segment of the Sonora pipeline. VARIABLE INTEREST ENTITIES We consolidate a VIE if we are the primary beneficiary of the VIE. Our determination of whether we are the primary beneficiary is based on qualitative and quantitative analyses, which assess: ▪the purpose and design of the VIE; ▪the nature of the VIE’s risks and the risks we absorb; ▪the power to direct activities that most significantly impact the economic performance of the VIE; and ▪the obligation to absorb losses or the right to receive benefits that could be significant to the VIE. We will continue to evaluate our VIEs for any changes that may impact our determination of whether an entity is a VIE and if we are the primary beneficiary. SDG&E SDG&E’s power procurement is subject to reliability requirements that may require SDG&E to enter into various PPAs that include variable interests. SDG&E evaluates the respective entities to determine if variable interests exist and, based on the qualitative and quantitative analyses described above, if SDG&E, and indirectly Sempra, is the primary beneficiary. SDG&E has agreements under which it purchases power generated by facilities for which it supplies all of the natural gas to fuel the power plant (i.e., tolling agreements). SDG&E’s obligation to absorb natural gas costs may be a significant variable interest. In addition, SDG&E has the power to direct the dispatch of electricity generated by these facilities. Based on our analysis, the ability to direct the dispatch of electricity may have the most significant impact on the economic performance of the entity owning the generating facility because of the associated exposure to the cost of natural gas, which fuels the plants, and the value of electricity produced. To the extent that SDG&E (1) is obligated to purchase and provide fuel to operate the facility, (2) has the power to direct the dispatch, and (3) purchases all of the output from the facility for a substantial portion of the facility’s useful life, SDG&E may be the primary beneficiary of the entity owning the generating facility. SDG&E determines if it is the primary beneficiary in these cases based on a qualitative approach in which it considers the operational characteristics of the facility, including its expected power generation output relative to its capacity to generate and the financial structure of the entity, among other factors. If SDG&E determines that it is the primary beneficiary, SDG&E and Sempra consolidate the entity that owns the facility as a VIE. In addition to tolling agreements, other variable interests involve various elements of fuel and power costs, and other components of cash flows expected to be paid to or received by our counterparties. In most of these cases, the expectation of variability is not substantial, and SDG&E generally does not have the power to direct activities, including the operation and maintenance activities of the generating facility, that most significantly impact the economic performance of the other VIEs. If our ongoing evaluation of these VIEs were to conclude that SDG&E becomes the primary beneficiary and consolidation by SDG&E becomes necessary, the effects could be significant to the financial position and liquidity of SDG&E and Sempra. SDG&E determined that none of its PPAs and tolling agreements resulted in SDG&E being the primary beneficiary of a VIE at September 30, 2023 and December 31, 2022. PPAs and tolling agreements that relate to SDG&E’s involvement with VIEs are primarily accounted for as finance leases. The carrying amounts of the assets and liabilities under these contracts are included in PP&E, net, and finance lease liabilities with balances of $1,174 million and $1,194 million at September 30, 2023 and December 31, 2022, respectively. SDG&E recovers costs incurred on PPAs, tolling agreements and other variable interests through CPUC-approved long-term power procurement plans. SDG&E has no residual interest in the respective entities and has not provided or guaranteed any debt or equity support, liquidity arrangements, performance guarantees or other commitments associated with these contracts other than the purchase commitments described in Note 16 of the Notes to Consolidated Financial Statements in the Annual Report. As a result, SDG&E’s potential exposure to loss from its variable interest in these VIEs is not significant. Sempra Texas Utilities Oncor Holdings is a VIE. Sempra is not the primary beneficiary of this VIE because of the structural and operational ring-fencing and governance measures in place that prevent us from having the power to direct the significant activities of Oncor Holdings. As a result, we do not consolidate Oncor Holdings and instead account for our ownership interest as an equity method investment. See Note 6 of the Notes to Consolidated Financial Statements in the Annual Report for additional information about our equity method investment in Oncor Holdings and restrictions on our ability to influence its activities. Our maximum exposure to loss, which fluctuates over time, from our interest in Oncor Holdings does not exceed the carrying value of our investment, which was $14,148 million and $13,665 million at September 30, 2023 and December 31, 2022, respectively. Sempra Infrastructure Cameron LNG JV Cameron LNG JV is a VIE principally due to contractual provisions that transfer certain risks to customers. Sempra is not the primary beneficiary of this VIE because we do not have the power to direct the most significant activities of Cameron LNG JV, including LNG production and operation and maintenance activities at the liquefaction facility. Therefore, we account for our investment in Cameron LNG JV under the equity method. The carrying value of our investment, including amounts recognized in AOCI related to interest-rate cash flow hedges at Cameron LNG JV, was $989 million at September 30, 2023 and $886 million at December 31, 2022. Our maximum exposure to loss, which fluctuates over time, includes the carrying value of our investment and our obligation under the SDSRA, which we discuss in Note 5. CFIN As we discuss in Note 5, in July 2020, Sempra entered into a Support Agreement for the benefit of CFIN, which is a VIE. Sempra is not the primary beneficiary of this VIE because we do not have the power to direct the most significant activities of CFIN, including modification, prepayment, and refinance decisions related to the financing arrangement with external lenders and Cameron LNG JV’s four project owners as well as the ability to determine and enforce remedies in the event of default. The conditional obligations of the Support Agreement represent a variable interest that we measure at fair value on a recurring basis (see Note 8). Sempra’s maximum exposure to loss under the terms of the Support Agreement is $979 million. ECA LNG Phase 1 ECA LNG Phase 1 is a VIE because its total equity at risk is not sufficient to finance its activities without additional subordinated financial support. We expect that ECA LNG Phase 1 will require future capital contributions or other financial support to finance the construction of the facility. Sempra is the primary beneficiary of this VIE because we have the power to direct the activities related to the construction and future operation and maintenance of the liquefaction facility. As a result, we consolidate ECA LNG Phase 1. Sempra consolidated $1,430 million and $1,099 million of assets at September 30, 2023 and December 31, 2022, respectively, consisting primarily of PP&E, net, attributable to ECA LNG Phase 1 that could be used only to settle obligations of this VIE and that are not available to settle obligations of Sempra, and $924 million and $685 million of liabilities at September 30, 2023 and December 31, 2022, respectively, consisting primarily of long-term debt, accounts payable and short-term debt attributable to ECA LNG Phase 1 for which creditors do not have recourse to the general credit of Sempra. Additionally, as we discuss in Note 6, IEnova and TotalEnergies SE have provided guarantees for 83.4% and 16.6%, respectively, of the loan facility supporting construction of the liquefaction facility. Port Arthur LNG Port Arthur LNG is a VIE because its total equity at risk is not sufficient to finance its activities without additional subordinated financial support. We expect that Port Arthur LNG will require future capital contributions or other financial support to finance the construction of the PA LNG Phase 1 project. Sempra is the primary beneficiary of this VIE because we have the power to direct the activities related to the construction and future operation and maintenance of the liquefaction facility. As a result, we consolidate Port Arthur LNG. Sempra consolidated $3,830 million of assets at September 30, 2023 consisting primarily of PP&E, net, other long-term assets and restricted cash attributable to Port Arthur LNG that could be used only to settle obligations of this VIE and that are not available to settle obligations of Sempra, and $788 million of liabilities at September 30, 2023 consisting primarily of accounts payable and long-term debt attributable to Port Arthur LNG for which creditors do not have recourse to the general credit of Sempra. PENSION AND PBOP Net Periodic Benefit Cost The following tables provide the components of net periodic benefit cost. The components of net periodic benefit cost, other than the service cost component, are included in the Other Income (Expense), Net, table below.
NET PERIODIC BENEFIT COST – SEMPRA
(Dollars in millions)
| Pension |  | PBOP
| Three months ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Service cost | $ | 25 |  |  | $ | 27 |  |  | $ | 3 |  |  | $ | 4 |
Interest cost | 39 |  |  | 29 |  |  | 9 |  |  | 7 |
Expected return on assets | (42) |  |  | (46) |  |  | (17) |  |  | (16) |
Amortization of: |  |  |  |  |  |  |
Prior service cost (credit) | 2 |  |  | 3 |  |  | (1) |  |  | (1) |
Actuarial loss (gain) | 3 |  |  | 8 |  |  | (5) |  |  | (4) |
Net periodic benefit cost (credit) | 27 |  |  | 21 |  |  | (11) |  |  | (10) |
Regulatory adjustments | 30 |  |  | 87 |  |  | 10 |  |  | 10 |
Total expense (income) recognized | $ | 57 |  |  | $ | 108 |  |  | $ | (1) |  |  | $ | — |
| Nine months ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Service cost | $ | 82 |  |  | $ | 110 |  |  | $ | 10 |  |  | $ | 17 |
Interest cost | 118 |  |  | 88 |  |  | 28 |  |  | 21 |
Expected return on assets | (127) |  |  | (137) |  |  | (52) |  |  | (48) |
Amortization of: |  |  |  |  |  |  |
Prior service cost (credit) | 4 |  |  | 8 |  |  | (2) |  |  | (2) |
Actuarial loss (gain) | 7 |  |  | 19 |  |  | (17) |  |  | (11) |
Net periodic benefit cost (credit) | 84 |  |  | 88 |  |  | (33) |  |  | (23) |
Regulatory adjustments | 88 |  |  | 84 |  |  | 32 |  |  | 23 |
Total expense (income) recognized | $ | 172 |  |  | $ | 172 |  |  | $ | (1) |  |  | $ | — |
NET PERIODIC BENEFIT COST – SDG&E
(Dollars in millions)
| Pension |  | PBOP
| Three months ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Service cost | $ | 8 |  |  | $ | 8 |  |  | $ | 1 |  |  | $ | 1 |
Interest cost | 10 |  |  | 7 |  |  | 2 |  |  | 1 |
Expected return on assets | (9) |  |  | (13) |  |  | (2) |  |  | (2) |
Amortization of: |  |  |  |  |  |  |
Actuarial loss (gain) | 2 |  |  | — |  |  | — |  |  | (1) |
Net periodic benefit cost (credit) | 11 |  |  | 2 |  |  | 1 |  |  | (1) |
Regulatory adjustments | 3 |  |  | 24 |  |  | (1) |  |  | 1 |
Total expense recognized | $ | 14 |  |  | $ | 26 |  |  | $ | — |  |  | $ | — |
| Nine months ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Service cost | $ | 24 |  |  | $ | 28 |  |  | $ | 2 |  |  | $ | 4 |
Interest cost | 30 |  |  | 20 |  |  | 6 |  |  | 4 |
Expected return on assets | (29) |  |  | (35) |  |  | (6) |  |  | (7) |
Amortization of: |  |  |  |  |  |  |
Actuarial loss (gain) | 4 |  |  | 1 |  |  | (1) |  |  | (2) |
Net periodic benefit cost (credit) | 29 |  |  | 14 |  |  | 1 |  |  | (1) |
Regulatory adjustments | 11 |  |  | 26 |  |  | (1) |  |  | 1 |
Total expense recognized | $ | 40 |  |  | $ | 40 |  |  | $ | — |  |  | $ | — |
NET PERIODIC BENEFIT COST – SOCALGAS
(Dollars in millions)
| Pension |  | PBOP
| Three months ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Service cost | $ | 15 |  |  | $ | 16 |  |  | $ | 2 |  |  | $ | 3 |
Interest cost | 24 |  |  | 20 |  |  | 7 |  |  | 5 |
Expected return on assets | (29) |  |  | (30) |  |  | (14) |  |  | (13) |
Amortization of: |  |  |  |  |  |  |
Prior service cost (credit) | 1 |  |  | 2 |  |  | (1) |  |  | (1) |
Actuarial loss (gain) | 1 |  |  | 6 |  |  | (5) |  |  | (3) |
Net periodic benefit cost (credit) | 12 |  |  | 14 |  |  | (11) |  |  | (9) |
Regulatory adjustments | 27 |  |  | 63 |  |  | 11 |  |  | 9 |
Total expense recognized | $ | 39 |  |  | $ | 77 |  |  | $ | — |  |  | $ | — |
| Nine months ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Service cost | $ | 49 |  |  | $ | 72 |  |  | $ | 7 |  |  | $ | 13 |
Interest cost | 75 |  |  | 61 |  |  | 21 |  |  | 16 |
Expected return on assets | (89) |  |  | (94) |  |  | (44) |  |  | (40) |
Amortization of: |  |  |  |  |  |  |
Prior service cost (credit) | 3 |  |  | 6 |  |  | (2) |  |  | (2) |
Actuarial loss (gain) | 1 |  |  | 14 |  |  | (15) |  |  | (9) |
Net periodic benefit cost (credit) | 39 |  |  | 59 |  |  | (33) |  |  | (22) |
Regulatory adjustments | 77 |  |  | 58 |  |  | 33 |  |  | 22 |
Total expense recognized | $ | 116 |  |  | $ | 117 |  |  | $ | — |  |  | $ | — |
DEDICATED ASSETS IN SUPPORT OF CERTAIN BENEFITS PLANS In support of its Supplemental Executive Retirement, Cash Balance Restoration and Deferred Compensation Plans, Sempra maintains dedicated assets, including a Rabbi Trust and investments in life insurance contracts, which totaled $513 million and $505 million at September 30, 2023 and December 31, 2022, respectively. COMPREHENSIVE INCOME The following tables present the changes in AOCI by component and amounts reclassified out of AOCI to net income, after amounts attributable to NCI.
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1)
(Dollars in millions)
| Foreign currency translation adjustments |  | Financial instruments |  | Pension and PBOP |  | Total AOCI
| Three months ended September 30, 2023 and 2022
Sempra: |  |  |  |  |  |  |
Balance at June 30, 2023 | $ | (38) |  |  | $ | 14 |  |  | $ | (97) |  |  | $ | (121) |
OCI before reclassifications | (5) |  |  | 116 |  |  | — |  |  | 111 |
Amounts reclassified from AOCI(2) | — |  |  | (51) |  |  | 1 |  |  | (50) |
Net OCI(2) | (5) |  |  | 65 |  |  | 1 |  |  | 61 |
Balance at September 30, 2023 | $ | (43) |  |  | $ | 79 |  |  | $ | (96) |  |  | $ | (60) |
Balance at June 30, 2022 | $ | (65) |  |  | $ | (30) |  |  | $ | (72) |  |  | $ | (167) |
OCI before reclassifications | — |  |  | 40 |  |  | — |  |  | 40 |
Amounts reclassified from AOCI | — |  |  | 5 |  |  | 2 |  |  | 7 |
Net OCI | — |  |  | 45 |  |  | 2 |  |  | 47 |
Balance at September 30, 2022 | $ | (65) |  |  | $ | 15 |  |  | $ | (70) |  |  | $ | (120) |
SDG&E: |  |  |  |  |  |  |
Balance at June 30, 2023 and September 30, 2023 |  |  |  |  | $ | (7) |  |  | $ | (7) |
Balance at June 30, 2022 |  |  |  |  | $ | (10) |  |  | $ | (10) |
Amounts reclassified from AOCI |  |  |  |  | 1 |  |  | 1 |
Net OCI |  |  |  |  | 1 |  |  | 1 |
Balance at September 30, 2022 |  |  |  |  | $ | (9) |  |  | $ | (9) |
SoCalGas: |  |  |  |  |  |  |
Balance at June 30, 2023 and September 30, 2023 |  |  | $ | (11) |  |  | $ | (11) |  |  | $ | (22) |
Balance at June 30, 2022 |  |  | $ | (12) |  |  | $ | (17) |  |  | $ | (29) |
Amounts reclassified from AOCI |  |  | — |  |  | 1 |  |  | 1 |
Net OCI |  |  | — |  |  | 1 |  |  | 1 |
Balance at September 30, 2022 |  |  | $ | (12) |  |  | $ | (16) |  |  | $ | (28) |
(1) All amounts are net of income tax, if subject to tax, and after NCI. (2) Total AOCI includes ($46) of financial instruments associated with sale of NCI to KKR Denali, which we discuss below in “Other Noncontrolling Interests – Sempra Infrastructure.” This transaction did not impact the Condensed Consolidated Statement of Comprehensive Income (Loss).
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1) (CONTINUED)
(Dollars in millions)
| Foreign currency translation adjustments |  | Financial instruments |  | Pension and PBOP |  | Total AOCI
| Nine months ended September 30, 2023 and 2022
Sempra: |  |  |  |  |  |  |
Balance at December 31, 2022 | $ | (59) |  |  | $ | 10 |  |  | $ | (86) |  |  | $ | (135) |
OCI before reclassifications | 16 |  |  | 129 |  |  | (13) |  |  | 132 |
Amounts reclassified from AOCI(2) | — |  |  | (60) |  |  | 3 |  |  | (57) |
Net OCI(2) | 16 |  |  | 69 |  |  | (10) |  |  | 75 |
Balance at September 30, 2023 | $ | (43) |  |  | $ | 79 |  |  | $ | (96) |  |  | $ | (60) |
Balance at December 31, 2021 | $ | (79) |  |  | $ | (156) |  |  | $ | (83) |  |  | $ | (318) |
OCI before reclassifications | 4 |  |  | 151 |  |  | 7 |  |  | 162 |
Amounts reclassified from AOCI(3) | 10 |  |  | 20 |  |  | 6 |  |  | 36 |
Net OCI(3) | 14 |  |  | 171 |  |  | 13 |  |  | 198 |
Balance at September 30, 2022 | $ | (65) |  |  | $ | 15 |  |  | $ | (70) |  |  | $ | (120) |
SDG&E: |  |  |  |  |  |  |
Balance at December 31, 2022 and September 30, 2023 |  |  |  |  | $ | (7) |  |  | $ | (7) |
Balance at December 31, 2021 |  |  |  |  | $ | (10) |  |  | $ | (10) |
Amounts reclassified from AOCI |  |  |  |  | 1 |  |  | 1 |
Net OCI |  |  |  |  | 1 |  |  | 1 |
Balance at September 30, 2022 |  |  |  |  | $ | (9) |  |  | $ | (9) |
SoCalGas: |  |  |  |  |  |  |
Balance at December 31, 2022 |  |  | $ | (12) |  |  | $ | (12) |  |  | $ | (24) |
Amounts reclassified from AOCI |  |  | 1 |  |  | 1 |  |  | 2 |
Net OCI |  |  | 1 |  |  | 1 |  |  | 2 |
Balance at September 30, 2023 |  |  | $ | (11) |  |  | $ | (11) |  |  | $ | (22) |
Balance at December 31, 2021 |  |  | $ | (13) |  |  | $ | (18) |  |  | $ | (31) |
Amounts reclassified from AOCI |  |  | 1 |  |  | 2 |  |  | 3 |
Net OCI |  |  | 1 |  |  | 2 |  |  | 3 |
Balance at September 30, 2022 |  |  | $ | (12) |  |  | $ | (16) |  |  | $ | (28) |
(1) All amounts are net of income tax, if subject to tax, and after NCI. (2) Total AOCI includes ($46) of financial instruments associated with sale of NCI to KKR Denali, which we discuss below in “Other Noncontrolling Interests – Sempra Infrastructure.” This transaction did not impact the Condensed Consolidated Statement of Comprehensive Income (Loss). (3) Total AOCI includes $9 of foreign currency translation adjustments associated with sale of NCI to ADIA, which we discuss below in “Other Noncontrolling Interests – Sempra Infrastructure.” This transaction did not impact the Condensed Consolidated Statement of Comprehensive Income (Loss).
RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
Details about AOCI | Amounts reclassified from AOCI |  | Affected line item on Condensed Consolidated Statements of Operations
| Three months ended September 30, |  |
| 2023 |  | 2022 |  |
Sempra: |  |  |  |  |
Financial instruments: |  |  |  |  |
Interest rate instruments | $ | 1 |  |  | $ | 2 |  |  | Interest Expense
Interest rate instruments | (12) |  |  | 1 |  |  | Equity Earnings(1)
Foreign exchange instruments | (1) |  |  | — |  |  | Other Income (Expense), Net
Foreign exchange instruments | (1) |  |  | — |  |  | Equity Earnings
Interest rate and foreign exchange instruments | — |  |  | 3 |  |  | Other Income (Expense), Net
Total, before income tax | (13) |  |  | 6 |  |  |
| 2 |  |  | (2) |  |  | Income Tax Benefit (Expense)
Total, net of income tax | (11) |  |  | 4 |  |  |
| 6 |  |  | 1 |  |  | Earnings Attributable to Noncontrolling Interests
Total, net of income tax and after NCI | $ | (5) |  |  | $ | 5 |  |  |
Pension and PBOP(2): |  |  |  |  |
Amortization of actuarial loss | $ | 1 |  |  | $ | 2 |  |  | Other Income (Expense), Net
Amortization of prior service cost | 1 |  |  | 1 |  |  | Other Income (Expense), Net
Total, before income tax | 2 |  |  | 3 |  |  |
| (1) |  |  | (1) |  |  | Income Tax Benefit (Expense)
Total, net of income tax | $ | 1 |  |  | $ | 2 |  |  |
Total reclassifications for the period, net of income tax and after NCI | $ | (4) |  |  | $ | 7 |  |  |
SDG&E: |  |  |  |  |
Pension and PBOP(2): |  |  |  |  |
Amortization of actuarial loss | $ | — |  |  | $ | 1 |  |  | Other Income, Net
Total reclassifications for the period, net of income tax | $ | — |  |  | $ | 1 |  |  |
SoCalGas: |  |  |  |  |
Pension and PBOP(2): |  |  |  |  |
Amortization of prior service cost | $ | — |  |  | $ | 1 |  |  | Other Expense, Net
Total reclassifications for the period, net of income tax | $ | — |  |  | $ | 1 |  |  |
(1) Equity earnings at our foreign equity method investees are recognized after tax. (2) Amounts are included in the computation of net periodic benefit cost (see “Net Periodic Benefit Cost” above).
RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (CONTINUED)
(Dollars in millions)
Details about AOCI | Amounts reclassified from AOCI |  | Affected line item on Condensed Consolidated Statements of Operations
| Nine months ended September 30, |  |
| 2023 |  | 2022 |  |
Sempra: |  |  |  |  |
Foreign currency translation adjustments | $ | — |  |  | $ | 1 |  |  | Operation and Maintenance
Financial instruments: |  |  |  |  |
Interest rate instruments | $ | 1 |  |  | $ | 1 |  |  | Interest Expense
Interest rate instruments | (33) |  |  | 28 |  |  | Equity Earnings(1)
Foreign exchange instruments | — |  |  | (2) |  |  | Revenues: Energy-Related Businesses
| 1 |  |  | 1 |  |  | Other Income (Expense), Net
Foreign exchange instruments | 1 |  |  | (1) |  |  | Equity Earnings(1)
Interest rate and foreign exchange instruments | (1) |  |  | (1) |  |  | Interest Expense
| (6) |  |  | (3) |  |  | Other Income (Expense), Net
Total, before income tax | (37) |  |  | 23 |  |  |
| 5 |  |  | (7) |  |  | Income Tax Benefit (Expense)
Total, net of income tax | (32) |  |  | 16 |  |  |
| 18 |  |  | 4 |  |  | Earnings Attributable to Noncontrolling Interests
Total, net of income tax and after NCI | $ | (14) |  |  | $ | 20 |  |  |
Pension and PBOP(2): |  |  |  |  |
Amortization of actuarial loss | $ | 2 |  |  | $ | 6 |  |  | Other Income (Expense), Net
Amortization of prior service cost | 2 |  |  | 3 |  |  | Other Income (Expense), Net
Total, before income tax | 4 |  |  | 9 |  |  |
| (1) |  |  | (3) |  |  | Income Tax Benefit (Expense)
Total, net of income tax | $ | 3 |  |  | $ | 6 |  |  |
Total reclassifications for the period, net of income tax and after NCI | $ | (11) |  |  | $ | 27 |  |  |
SDG&E: |  |  |  |  |
Pension and PBOP(2): |  |  |  |  |
Amortization of actuarial loss | $ | — |  |  | $ | 1 |  |  | Other Income, Net
Total reclassifications for the period, net of income tax | $ | — |  |  | $ | 1 |  |  |
SoCalGas: |  |  |  |  |
Financial instruments: |  |  |  |  |
Interest rate instruments | $ | 1 |  |  | $ | 1 |  |  | Interest Expense
Pension and PBOP(2): |  |  |  |  |
Amortization of actuarial loss | $ | — |  |  | $ | 1 |  |  | Other Expense, Net
Amortization of prior service cost | 1 |  |  | 1 |  |  | Other Expense, Net
Total, net of income tax | $ | 1 |  |  | $ | 2 |  |  |
Total reclassifications for the period, net of income tax | $ | 2 |  |  | $ | 3 |  |  |
(1) Equity earnings at our foreign equity method investees are recognized after tax. (2) Amounts are included in the computation of net periodic benefit cost (see “Net Periodic Benefit Cost” above). SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTERESTS Sempra Common Stock On May 12, 2023, Sempra’s shareholders approved an amendment to Sempra’s Articles of Incorporation to increase the number of authorized shares of Sempra’s common stock from 750,000,000 to 1,125,000,000. Sempra Common Stock Split in the Form of a Stock Dividend On August 2, 2023, Sempra’s board of directors declared a two-for-one split of Sempra’s common stock in the form of a 100% stock dividend for shareholders of record at the close of business on August 14, 2023. Each such shareholder of record received one additional share of Sempra common stock for every then-held share of Sempra common stock, which was distributed after the close of trading on August 21, 2023. Sempra’s common stock began trading on a post-split basis effective August 22, 2023. Sempra’s common stock continues to have no par value with 1,125,000,000 authorized shares. All shares and per share information related to issued and outstanding common stock and outstanding equity awards with respect to common stock have been retroactively adjusted to reflect the stock split and are presented on a post-split basis herein. Sempra Common Stock Repurchases In the nine months ended September 30, 2023 and 2022, we repurchased 411,447 shares for $32 million and 404,806 shares for $28 million, respectively, of our common stock from long-term incentive plan participants to satisfy minimum statutory tax withholding requirements in connection with the vesting of RSUs and exercise of stock options. On January 11, 2022, we entered into an ASR program under which we prepaid $200 million to repurchase shares of our common stock in a share forward transaction. A total of 2,945,512 shares were purchased under this program at an average price of $67.90 per share. The total number of shares purchased was determined by dividing the $200 million purchase price by the arithmetic average of the volume-weighted average trading prices of shares of our common stock during the valuation period of January 12, 2022 through February 11, 2022, minus a fixed discount. The ASR program was completed on February 11, 2022. On April 6, 2022, we entered into an ASR program under which we prepaid $250 million to repurchase shares of our common stock in a share forward transaction. A total of 2,943,914 shares were purchased under this program at an average price of $84.92 per share. The total number of shares purchased was determined by dividing the $250 million purchase price by the arithmetic average of the volume-weighted average trading prices of shares of our common stock during the valuation period of April 7, 2022 through April 25, 2022, minus a fixed discount. The ASR program was completed on April 25, 2022. Other Noncontrolling Interests The following table provides information about NCI held by others in subsidiaries or entities consolidated by us and recorded in Other Noncontrolling Interests in Total Equity on Sempra’s Condensed Consolidated Balance Sheets.
OTHER NONCONTROLLING INTERESTS
(Dollars in millions)
| Percent ownership held by noncontrolling interests |  |  | Equity held by noncontrolling interests
| September 30, 2023 |  |  | December 31, 2022 |  |  | September 30, 2023 |  | December 31, 2022
Sempra Infrastructure: |  |  |  |  |  |  |  |  |
SI Partners | 30.0 |  | % |  | 30.0 |  | % |  | $ | 4,011 |  |  | $ | 2,060 |
SI Partners subsidiaries(1) | 0.1 - 42.0 |  |  | 0.1 - 16.6 |  |  | 989 |  |  | 61 |
Total Sempra |  |  |  |  |  |  | $ | 5,000 |  |  | $ | 2,121 |
(1) SI Partners has subsidiaries with NCI held by others. Percentage range reflects the highest and lowest ownership percentages among these subsidiaries. Sempra Infrastructure Sale of NCI to KKR Denali. In September 2023, an indirect subsidiary of SI Partners completed the sale of an indirect 42% NCI in the PA LNG Phase 1 project to KKR Denali for aggregate cash consideration of approximately $984 million, including its pro rata equity share of development costs incurred prior to the closing that exceeded $439 million, subject to customary post-closing adjustments. As a result of this sale, we recorded a $1.1 billion increase in equity held by NCI and a decrease in Sempra’s shareholders’ equity of $56 million, including $11 million in transaction costs and net of a $22 million tax benefit. At the closing of the sale of NCI to KKR Denali, the associated limited liability company agreement was amended and restated to include KKR Denali as a member of such company and to set forth certain governance and other agreements with respect to the funding of the PA LNG Phase 1 project. Pursuant to the limited liability company agreement, (i) the indirect subsidiary of SI Partners (a) is the managing member; (b) exclusively holds the right to make decisions with respect to certain expansions, such as the potential PA LNG Phase 2 project; (c) has certain rights to preferential distributions from specified revenues and expansion true-up payments; and (d) through a parent entity that is a subsidiary of Sempra, bears a disproportionately higher allocation of certain capital contribution commitments in certain budgetary overrun scenarios, and (ii) KKR Denali has certain investor protection voting rights. The indirect subsidiary of SI Partners and KKR Denali have also made capital contribution commitments to fund their respective equity share of the equity funding amount of anticipated development costs of the PA LNG Phase 1 project, except in those certain budget overrun scenarios discussed above. Upon closing the sale of NCI to KKR Denali, Sempra holds an indirect interest in the PA LNG Phase 1 project of 19.6%. Sale of NCI to ConocoPhillips Affiliate. In March 2023, an indirect subsidiary of SI Partners completed the sale of an indirect 30% NCI in the PA LNG Phase 1 project to an affiliate of ConocoPhillips for aggregate cash consideration of $254 million, subject to customary post-closing adjustments. As a result of this sale, we recorded a $234 million increase in equity held by NCI and an increase in Sempra’s shareholders’ equity of $12 million, net of $3 million in transaction costs and $5 million in tax expense. At the closing of the sale of NCI to the ConocoPhillips affiliate, the associated limited liability company agreement was amended and restated to include the ConocoPhillips affiliate as a member of such company and to set forth certain governance and other agreements with respect to the funding of the PA LNG Phase 1 project. Pursuant to the limited liability company agreement, such company will generally be managed by a board of managers, initially constituting three representatives appointed by the indirect subsidiary of SI Partners and two representatives appointed by the ConocoPhillips affiliate. The indirect subsidiary of SI Partners and the ConocoPhillips affiliate have made certain customary capital contribution commitments to fund their respective pro rata equity share of the total anticipated capital calls for the equity portion of the anticipated development costs of the PA LNG Phase 1 project. In addition, both SI Partners and ConocoPhillips provided guarantees relating to their respective affiliate’s commitment to make its pro rata equity share of capital contributions to fund 110% of the development budget of the PA LNG Phase 1 project, in an aggregate amount of up to $9.0 billion. SI Partners’ guarantee covers 70% of this amount plus enforcement costs of its guarantee. Sale of NCI to ADIA. In June 2022, Sempra and ADIA consummated the transaction contemplated under a purchase and sale agreement dated December 21, 2021 (the ADIA Purchase Agreement). Pursuant to the ADIA Purchase Agreement, ADIA acquired Class A Units representing a 10% NCI in SI Partners for a purchase price of $1.7 billion. Following the closing of the transaction, Sempra, KKR Pinnacle and ADIA directly or indirectly own 70%, 20%, and 10%, respectively, of the outstanding Class A Units of SI Partners, which excludes the non-voting Sole Risk Interests held only by Sempra. As a result of this sale to ADIA, we recorded a $709 million increase in equity held by NCI and an increase in Sempra’s shareholders’ equity of $710 million, net of $12 million in transaction costs and $300 million in tax impacts. Transaction costs include $10 million paid to ADIA for reimbursement of certain expenses that ADIA incurred in connection with closing the transaction. Contributions from NCI. In October 2021, KKR Pinnacle acquired a 20% NCI in SI Partners. Under the limited partnership agreement that governs our and KKR Pinnacle’s respective rights and obligations in respect of our and their ownership interests in SI Partners, KKR Pinnacle was entitled to a $200 million credit from Sempra to be applied to capital calls once an LNG project reached a positive final investment decision and met certain projected internal rates of return. In the three months and nine months ended September 30, 2023, KKR Pinnacle used $14 million and $200 million, respectively, of this credit to fund its share of contributions to SI Partners. As a result, we recorded a $200 million increase in equity held by NCI and a decrease in Sempra’s shareholders’ equity of $145 million, net of a tax benefit. SEMPRA EARNINGS PER COMMON SHARE Basic EPS is calculated by dividing earnings attributable to common shares by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.
EARNINGS PER COMMON SHARE COMPUTATIONS |  |  |  |  |  |  |
(Dollars in millions, except per share amounts; shares in thousands) |  |  |  |  |  |  |
| Three months ended September 30, |  | Nine months ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Numerator: |  |  |  |  |  |  |
Earnings attributable to common shares | $ | 721 |  |  | $ | 485 |  |  | $ | 2,293 |  |  | $ | 1,656 |
Denominator: |  |  |  |  |  |  |
Weighted-average common shares outstanding for basic EPS(1) | 630,036 |  |  | 629,447 |  |  | 629,963 |  |  | 630,603 |
Dilutive effect of stock options and RSUs(2) | 2,288 |  |  | 2,728 |  |  | 2,268 |  |  | 2,311 |
Weighted-average common shares outstanding for diluted EPS | 632,324 |  |  | 632,175 |  |  | 632,231 |  |  | 632,914 |
EPS: |  |  |  |  |  |  |
Basic | $ | 1.14 |  |  | $ | 0.77 |  |  | $ | 3.64 |  |  | $ | 2.63 |
Diluted | $ | 1.14 |  |  | $ | 0.77 |  |  | $ | 3.63 |  |  | $ | 2.62 |
(1) Includes 716 and 803 fully vested RSUs held in our Deferred Compensation Plan for the three months ended September 30, 2023 and 2022, respectively, and 716 and 805 of such RSUs for the nine months ended September 30, 2023 and 2022, respectively. These fully vested RSUs are included in weighted-average common shares outstanding for basic EPS because there are no conditions under which the corresponding shares will not be issued. (2) Due to market fluctuations of both Sempra common stock and the comparative indices used to determine the vesting percentage of our total shareholder return performance-based RSUs, which we discuss in Note 10 of the Notes to Consolidated Financial Statements in the Annual Report, dilutive RSUs may vary widely from period-to-period. The potentially dilutive impact from stock options and RSUs is calculated under the treasury stock method. Under this method, proceeds based on the exercise price and unearned compensation are assumed to be used to repurchase shares on the open market at the average market price for the period, reducing the number of potential new shares to be issued and sometimes causing an antidilutive effect. The computation of diluted EPS for the three months and nine months ended September 30, 2023 excludes 624,242 and 470,804 potentially dilutive shares, respectively, and the computation of diluted EPS for the three months and nine months ended September 30, 2022 excludes no potentially dilutive shares and 230,752 potentially dilutive shares, respectively, because to include them would be antidilutive for the period. However, these shares could potentially dilute basic EPS in the future. Pursuant to Sempra’s share-based compensation plans, the Compensation and Talent Development Committee of Sempra’s board of directors granted 326,574 nonqualified stock options, 661,620 performance-based RSUs and 272,729 service-based RSUs in the nine months ended September 30, 2023, primarily in January. We discuss share-based compensation plans and related awards and the terms and conditions of Sempra’s equity securities further in Notes 10, 13 and 14 of the Notes to Consolidated Financial Statements in the Annual Report. TRANSACTIONS WITH AFFILIATES We summarize amounts due from and to unconsolidated affiliates at Sempra, SDG&E and SoCalGas in the following table.
AMOUNTS DUE FROM (TO) UNCONSOLIDATED AFFILIATES
(Dollars in millions)
| September 30, 2023 |  | December 31, 2022
Sempra: |  |  |
Tax sharing arrangement with Oncor Holdings | $ | 34 |  |  | $ | 41 |
Various affiliates | 8 |  |  | 13 |
Total due from unconsolidated affiliates – current | $ | 42 |  |  | $ | 54 |
Sempra Infrastructure(1): |  |  |
TAG Pipelines Norte, S. de R.L. de C.V. – 5.5% Note due January 9, 2024 | $ | (5) |  |  | $ | — |
Total due to unconsolidated affiliates – current | $ | (5) |  |  | $ | — |
Sempra Infrastructure(1): |  |  |
TAG Pipelines Norte, S. de R.L. de C.V.: |  |  |
5.5% Note due January 9, 2024 | $ | — |  |  | $ | (40) |
5.5% Note due January 14, 2025 | (24) |  |  | (23) |
5.5% Note due July 16, 2025 | (22) |  |  | (21) |
5.5% Note due January 14, 2026 | (20) |  |  | (19) |
5.5% Note due July 14, 2026 | (11) |  |  | (11) |
5.5% Note due January 19, 2027 | (14) |  |  | — |
5.5% Note due July 21, 2027 | (17) |  |  | — |
TAG – 5.74% Note due December 17, 2029 | (195) |  |  | (187) |
Total due to unconsolidated affiliates – noncurrent | $ | (303) |  |  | $ | (301) |
SDG&E: |  |  |
SoCalGas | $ | 8 |  |  | $ | — |
Total due from unconsolidated affiliates – current | $ | 8 |  |  | $ | — |
Sempra | $ | (38) |  |  | $ | (49) |
SoCalGas | — |  |  | (72) |
Various affiliates | (11) |  |  | (14) |
Total due to unconsolidated affiliates – current | $ | (49) |  |  | $ | (135) |
Income taxes due (to) from Sempra(2) | $ | (43) |  |  | $ | 10 |
SoCalGas: |  |  |
SDG&E | $ | — |  |  | $ | 72 |
Various affiliates | 1 |  |  | 5 |
Total due from unconsolidated affiliates – current | $ | 1 |  |  | $ | 77 |
Sempra | $ | (30) |  |  | $ | (36) |
SDG&E | (8) |  |  | — |
Total due to unconsolidated affiliates – current | $ | (38) |  |  | $ | (36) |
Income taxes due to Sempra(2) | $ | (6) |  |  | $ | (16) |
(1) U.S. dollar-denominated loans at fixed interest rates. Amounts include principal balances plus accumulated interest outstanding. (2) SDG&E and SoCalGas are included in the consolidated income tax return of Sempra, and their respective income tax expense is computed as an amount equal to that which would result from each company having always filed a separate return. Amounts include current and noncurrent income taxes due to/from Sempra. The following table summarizes income statement information from unconsolidated affiliates.
INCOME STATEMENT IMPACT FROM UNCONSOLIDATED AFFILIATES
(Dollars in millions)
| Three months ended September 30, |  | Nine months ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Sempra: |  |  |  |  |  |  |
Revenues | $ | 10 |  |  | $ | 10 |  |  | $ | 34 |  |  | $ | 32 |
Interest income | — |  |  | 2 |  |  | — |  |  | 16 |
Interest expense | 3 |  |  | 4 |  |  | 11 |  |  | 12 |
SDG&E: |  |  |  |  |  |  |
Revenues | $ | 5 |  |  | $ | 4 |  |  | $ | 15 |  |  | $ | 12 |
Cost of sales | 25 |  |  | 17 |  |  | 82 |  |  | 67 |
SoCalGas: |  |  |  |  |  |  |
Revenues | $ | 29 |  |  | $ | 24 |  |  | $ | 91 |  |  | $ | 73 |
Cost of sales(1) | 2 |  |  | (1) |  |  | 37 |  |  | (5) |
(1) Includes net commodity costs from natural gas transactions with unconsolidated affiliates. Guarantees Sempra provided guarantees related to Cameron LNG JV’s SDSRA and CFIN’s Support Agreement, which remain outstanding. We discuss these guarantees in Note 5 below and in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report. OTHER INCOME (EXPENSE), NET Other Income (Expense), Net, consists of the following:
OTHER INCOME (EXPENSE), NET |  |  |  |  |  |  |
(Dollars in millions) |  |  |  |  |  |  |
| Three months ended September 30, |  | Nine months ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Sempra: |  |  |  |  |  |  |
Allowance for equity funds used during construction | $ | 35 |  |  | $ | 35 |  |  | $ | 105 |  |  | $ | 104 |
Investment losses, net(1) | (19) |  |  | (13) |  |  | (2) |  |  | (60) |
Gains (losses) on interest rate and foreign exchange instruments, net | 1 |  |  | (3) |  |  | 5 |  |  | 2 |
Foreign currency transaction (losses) gains, net(2) | (3) |  |  | 4 |  |  | 1 |  |  | (18) |
Non-service components of net periodic benefit cost | (28) |  |  | (77) |  |  | (79) |  |  | (45) |
Interest on regulatory balancing accounts, net | 19 |  |  | 7 |  |  | 56 |  |  | 12 |
Sundry, net | (2) |  |  | 7 |  |  | (11) |  |  | 2 |
Total | $ | 3 |  |  | $ | (40) |  |  | $ | 75 |  |  | $ | (3) |
SDG&E: |  |  |  |  |  |  |
Allowance for equity funds used during construction | $ | 21 |  |  | $ | 22 |  |  | $ | 67 |  |  | $ | 64 |
Non-service components of net periodic benefit cost | (5) |  |  | (17) |  |  | (14) |  |  | (8) |
Interest on regulatory balancing accounts, net | 10 |  |  | 5 |  |  | 31 |  |  | 9 |
Sundry, net | (1) |  |  | 2 |  |  | (9) |  |  | 3 |
Total | $ | 25 |  |  | $ | 12 |  |  | $ | 75 |  |  | $ | 68 |
SoCalGas: |  |  |  |  |  |  |
Allowance for equity funds used during construction | $ | 14 |  |  | $ | 14 |  |  | $ | 38 |  |  | $ | 40 |
Non-service components of net periodic benefit cost | (22) |  |  | (58) |  |  | (60) |  |  | (32) |
Interest on regulatory balancing accounts, net | 9 |  |  | 2 |  |  | 25 |  |  | 3 |
Sundry, net | (3) |  |  | (1) |  |  | (12) |  |  | (16) |
Total | $ | (2) |  |  | $ | (43) |  |  | $ | (9) |  |  | $ | (5) |
(1) Represents net investment losses on dedicated assets in support of our executive retirement and deferred compensation plans. These amounts are offset by corresponding changes in compensation expense related to the plans, recorded in O&M on the Condensed Consolidated Statements of Operations. (2) Includes losses of $11 in the nine months ended September 30, 2022 from translation to U.S. dollars of a Mexican peso-denominated loan to IMG, which are offset by corresponding amounts included in Equity Earnings on the Condensed Consolidated Statement of Operations. INCOME TAXES We provide our calculations of ETRs in the following table.
INCOME TAX (BENEFIT) EXPENSE AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
| Three months ended September 30, |  | Nine months ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Sempra: |  |  |  |  |  |  |
Income tax (benefit) expense | $ | (52) |  |  | $ | 21 |  |  | $ | 499 |  |  | $ | 435 |
Income before income taxes and equity earnings | $ | 323 |  |  | $ | 165 |  |  | $ | 2,175 |  |  | $ | 1,194 |
Equity earnings, before income tax(1) | 133 |  |  | 134 |  |  | 418 |  |  | 436 |
Pretax income | $ | 456 |  |  | $ | 299 |  |  | $ | 2,593 |  |  | $ | 1,630 |
Effective income tax rate | (11) | % |  | 7 | % |  | 19 | % |  | 27 | %
SDG&E: |  |  |  |  |  |  |
Income tax (benefit) expense | $ | (15) |  |  | $ | 35 |  |  | $ | (4) |  |  | $ | 141 |
Income before income taxes | $ | 259 |  |  | $ | 306 |  |  | $ | 712 |  |  | $ | 822 |
Effective income tax rate | (6) | % |  | 11 | % |  | (1) | % |  | 17 | %
SoCalGas: |  |  |  |  |  |  |
Income tax (benefit) expense | $ | (5) |  |  | $ | (28) |  |  | $ | 68 |  |  | $ | 75 |
Income (loss) before income taxes | $ | 11 |  |  | $ | (110) |  |  | $ | 600 |  |  | $ | 415 |
Effective income tax rate | (45) | % |  | 25 | % |  | 11 | % |  | 18 | %
(1) We discuss how we recognize equity earnings in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report. Sempra, SDG&E and SoCalGas record income taxes for interim periods utilizing a forecasted ETR anticipated for the full year. Unusual and infrequent items and items that cannot be reliably estimated are recorded in the interim period in which they occur, which can result in variability in the ETR. For SDG&E and SoCalGas, the CPUC requires flow-through rate-making treatment for the current income tax benefit or expense arising from certain property-related and other temporary differences between the treatment for financial reporting and income tax, which will reverse over time. Under the regulatory accounting treatment required for these flow-through temporary differences, deferred income tax assets and liabilities are not recorded to deferred income tax expense, but rather to a regulatory asset or liability, which impacts the ETR. As a result, changes in the relative size of these items compared to pretax income, from period to period, can cause variations in the ETR. The following items are subject to flow-through treatment: ▪repairs expenditures related to a certain portion of utility plant fixed assets ▪the equity portion of AFUDC, which is non-taxable ▪a portion of the cost of removal of utility plant assets ▪utility self-developed software expenditures ▪depreciation on a certain portion of utility plant assets ▪state income taxes AFUDC related to equity recorded for regulated construction projects at Sempra Infrastructure has similar flow-through treatment. Under the IRA, beginning in 2023, the scope of projects eligible for investment tax credits was expanded to include standalone energy storage projects. The IRA also provided an election that prospectively permits investment tax credits related to standalone energy storage projects to be returned to utility customers over a period that is shorter than the life of the applicable asset. Under this election, SDG&E recorded a regulatory liability to offset these investment tax credits, which reduced SDG&E’s and Sempra’s ETR in 2023. In April 2023, the IRS issued Revenue Procedure 2023-15, which provides a safe harbor method of accounting for gas repairs expenditures. As a result of this Revenue Procedure, SoCalGas updated its assessment of prior years’ unrecognized income tax benefits and, in the nine months ended September 30, 2023, recorded an income tax benefit of $43 million for previously unrecognized income tax benefits pertaining to gas repairs expenditures. SoCalGas recorded an associated regulatory liability for the portion that will benefit customers in the future. We are assessing the potential future impacts of this Revenue Procedure.In the nine months ended September 30, 2022, we recognized income tax expense of $120 million for a deferred income tax liability related to outside basis differences in our foreign subsidiaries that we had previously considered to be indefinitely reinvested.

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