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

FORM 10-Q

(Mark One)

[X]

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

For the quarterly period ended

September 30, 2010

[ ]

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

For the transition period from

Commission File No.

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

States of Incorporation

I.R.S. Employer
Identification Nos.

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

1-14201

SEMPRA ENERGY

California

33-0732627

No change

101 Ash Street

San Diego, California 92101

(619)696-2034

1-3779

SAN DIEGO GAS & ELECTRIC COMPANY

California

95-1184800

No change

8326 Century Park Court

San Diego, California 92123

(619)696-2000

1-40

PACIFIC ENTERPRISES

California

94-0743670

No change

101 Ash Street

San Diego, California 92101

(619)696-2020

1-1402

SOUTHERN CALIFORNIA GAS COMPANY

California

95-1240705

No change

555 West Fifth Street

Los Angeles, California 90013

(213)244-1200

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

Yes

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

Sempra Energy

Yes

San Diego Gas & Electric Company

Yes

Pacific Enterprises

Yes

Southern California Gas Company

Yes

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

Large
accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Sempra Energy

[ X ]

[ ]

San Diego Gas & Electric Company

[ ]

[ X ]

[ ]

Pacific Enterprises

[ ]

[ X ]

[ ]

Southern California Gas Company

[ ]

[ X ]

[ ]

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

Sempra Energy

Yes

San Diego Gas & Electric Company

Yes

Pacific Enterprises

Yes

Southern California Gas Company

Yes

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

Common stock outstanding on November 5, 2010:

Sempra Energy

240,054,962 shares

San Diego Gas & Electric Company

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

Pacific Enterprises

Wholly owned by Sempra Energy

Southern California Gas Company

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

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

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	73
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	99
Item 4.	Controls and Procedures	100

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	101
Item 1A.	Risk Factors	101
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	102
Item 6.	Exhibits	103

Signatures		105

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

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

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

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

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

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

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

§weather conditions and conservation efforts;

§war and terrorist attacks;

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

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

§the timing and success of business development efforts;

§the resolution of litigation; and

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

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

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SEMPRA ENERGY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)
	Three months ended				Nine months ended
	September 30,				September 30,
	2010		2009		2010		2009
	(unaudited)
REVENUES
Sempra Utilities	$	1,575	$	1,424	$	4,999	$	4,382
Sempra Global and parent		541		429		1,659		1,268
Total revenues		2,116		1,853		6,658		5,650
EXPENSES AND OTHER INCOME
Sempra Utilities:
Cost of natural gas		(285)		(208)		(1,402)		(997)
Cost of electric fuel and purchased power		(203)		(208)		(480)		(508)
Sempra Global and parent:
Cost of natural gas, electric fuel and purchased power		(292)		(220)		(887)		(675)
Other cost of sales		(23)		(19)		(68)		(52)
Litigation expense		(17)		(3)		(184)		-
Other operation and maintenance		(590)		(568)		(1,782)		(1,673)
Depreciation and amortization		(218)		(196)		(643)		(568)
Franchise fees and other taxes		(76)		(77)		(243)		(228)
Write-off of long-lived assets		-		-		-		(132)
Equity earnings (losses):
RBS Sempra Commodities LLP		(281)		105		(290)		384
Other		8		18		24		27
Other income, net		66		24		82		97
Interest income		5		5		13		16
Interest expense		(111)		(96)		(323)		(257)
Income before income taxes and equity earnings
of certain unconsolidated subsidiaries		99		410		475		1,084
Income tax benefit (expense)		32		(128)		(85)		(327)
Equity earnings (losses), net of income tax		(4)		20		42		59
Net income		127		302		432		816
Losses attributable to noncontrolling interests		6		17		34		22
Preferred dividends of subsidiaries		(2)		(2)		(7)		(7)
Earnings	$	131	$	317	$	459	$	831

Basic earnings per common share	$	0.53	$	1.30	$	1.86	$	3.42
Weighted-average number of shares outstanding, basic (thousands)		246,668		243,925		246,513		242,806

Diluted earnings per common share	$	0.53	$	1.27	$	1.84	$	3.37
Weighted-average number of shares outstanding, diluted (thousands)		249,811		248,461		249,773		246,875
Dividends declared per share of common stock	$	0.39	$	0.39	$	1.17	$	1.17
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2010		2009
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	547	$	110
Restricted cash		4		35
Trade accounts receivable		632		971
Other accounts and notes receivable		144		159
Due from unconsolidated affiliate		30		41
Income taxes receivable		312		221
Deferred income taxes		-		10
Inventories		296		197
Regulatory assets		97		54
Fixed-price contracts and other derivatives		84		77
Insurance receivable related to wildfire litigation (Note 10)		150		273
Other		199		147
Total current assets		2,495		2,295

Investments and other assets:
Restricted cash		27		-
Regulatory assets arising from fixed-price contracts and other derivatives		241		241
Regulatory assets arising from pension and other postretirement
benefit obligations		950		959
Other regulatory assets		973		603
Nuclear decommissioning trusts		737		678
Investment in RBS Sempra Commodities LLP		825		2,172
Other investments		2,317		2,151
Goodwill and other intangible assets		542		524
Sundry		621		608
Total investments and other assets		7,233		7,936

Property, plant and equipment:
Property, plant and equipment		26,286		25,034
Less accumulated depreciation and amortization		(7,065)		(6,753)
Property, plant and equipment, net ($523 at September 30, 2010 related to VIE)		19,221		18,281
Total assets	$	28,949	$	28,512
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2010		2009
	(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	574	$	618
Accounts payable - trade		572		522
Accounts payable - other		130		171
Due to unconsolidated affiliates		12		29
Deferred income taxes		16		-
Dividends and interest payable		232		190
Accrued compensation and benefits		247		264
Regulatory balancing accounts, net		242		382
Current portion of long-term debt		313		573
Fixed-price contracts and other derivatives		107		95
Customer deposits		133		145
Reserve for wildfire litigation (Note 10)		344		270
Other		855		629
Total current liabilities		3,777		3,888
Long-term debt ($357 at September 30, 2010 related to VIE)		8,032		7,460

Deferred credits and other liabilities:
Due to unconsolidated affiliate		-		2
Customer advances for construction		147		146
Pension and other postretirement benefit obligations, net of plan assets		1,225		1,252
Deferred income taxes		1,516		1,318
Deferred investment tax credits		52		54
Regulatory liabilities arising from removal obligations		2,635		2,557
Asset retirement obligations		1,327		1,277
Other regulatory liabilities		144		181
Fixed-price contracts and other derivatives		336		312
Deferred credits and other		672		735
Total deferred credits and other liabilities		8,054		7,834
Contingently redeemable preferred stock of subsidiary		79		79

Commitments and contingencies (Note 10)

Equity:
Preferred stock (50 million shares authorized; none issued)		-		-
Common stock (750 million shares authorized; 242 million and 247 million shares
outstanding at September 30, 2010 and December 31, 2009, respectively; no par
value)		2,012		2,418
Retained earnings		7,143		6,971
Deferred compensation		(9)		(13)
Accumulated other comprehensive income (loss)		(344)		(369)
Total Sempra Energy shareholders' equity		8,802		9,007
Preferred stock of subsidiaries		100		100
Other noncontrolling interests		105		144
Total equity		9,007		9,251
Total liabilities and equity	$	28,949	$	28,512
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
	Nine months ended September 30,
	2010		2009
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	432	$	816
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization		643		568
Deferred income taxes and investment tax credits		133		181
Equity losses (earnings)		224		(470)
Write-off of long-lived assets		-		132
Fixed-price contracts and other derivatives		19		(27)
Other		(24)		42
Net change in other working capital components		(77)		220
Distributions from RBS Sempra Commodities LLP		198		407
Changes in other assets		76		81
Changes in other liabilities		(22)		(66)
Net cash provided by operating activities		1,602		1,884

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment		(1,354)		(1,371)
Proceeds from sale of assets		-		179
Expenditures for investments and acquisition of businesses, net of cash acquired		(385)		(762)
Distributions from RBS Sempra Commodities LLP		849		-
Distributions from other investments		259		16
Purchases of nuclear decommissioning and other trust assets		(261)		(167)
Proceeds from sales by nuclear decommissioning and other trusts		261		155
Other		(2)		(20)
Net cash used in investing activities		(633)		(1,970)

CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid		(269)		(255)
Preferred dividends paid by subsidiaries		(7)		(7)
Issuances of common stock		29		52
Repurchases of common stock		(502)		-
Increase (decrease) in short-term debt, net		184		(52)
Issuances of debt (maturities greater than 90 days)		771		1,181
Payments on debt (maturities greater than 90 days)		(727)		(325)
Purchase of noncontrolling interest		-		(94)
Other		(11)		11
Net cash (used in) provided by financing activities		(532)		511

Increase in cash and cash equivalents		437		425
Cash and cash equivalents, January 1		110		331
Cash and cash equivalents, September 30	$	547	$	756
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
	Nine months ended September 30,
	2010		2009
	(unaudited)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	264	$	201
Income tax payments, net of refunds		32		98

SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES
Acquisition of business:
Assets acquired	$	303	$	-
Cash paid, net of cash acquired		(292)		-
Liabilities assumed	$	11	$	-

Increase in capital lease obligations for investments in property, plant and
equipment	$	183	$	2
Dividends declared but not paid		97		99
See Notes to Condensed Consolidated Financial Statements.

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)
	Three months ended				Nine months ended
	September 30,				September 30,
	2010		2009		2010		2009
	(unaudited)
Operating revenues
Electric	$	718	$	695	$	1,870	$	1,783
Natural gas		93		78		375		353
Total operating revenues		811		773		2,245		2,136
Operating expenses
Cost of electric fuel and purchased power		203		208		480		508
Cost of natural gas		37		30		170		154
Operation and maintenance		235		236		704		649
Depreciation and amortization		96		81		283		239
Franchise fees and other taxes		42		46		126		126
Total operating expenses		613		601		1,763		1,676
Operating income		198		172		482		460
Other income (expense), net		(2)		1		(18)		45
Interest income		-		1		-		1
Interest expense		(37)		(29)		(99)		(75)
Income before income taxes		159		145		365		431
Income tax expense		(56)		(53)		(131)		(141)
Net income		103		92		234		290
Losses (earnings) attributable to noncontrolling interests		5		18		34		(9)
Earnings		108		110		268		281
Preferred dividend requirements		(2)		(2)		(4)		(4)
Earnings attributable to common shares	$	106	$	108	$	264	$	277
See Notes to Condensed Consolidated Financial Statements.

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2010		2009
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	332	$	13
Restricted cash		4		8
Accounts receivable - trade		216		229
Accounts receivable - other		33		85
Due from unconsolidated affiliates		4		8
Income taxes receivable		114		59
Deferred income taxes		36		41
Inventories		67		61
Regulatory assets arising from fixed-price contracts and other derivatives		73		30
Other regulatory assets		4		4
Fixed-price contracts and other derivatives		29		40
Insurance receivable related to wildfire litigation (Note 10)		150		273
Other		61		35
Total current assets		1,123		886

Other assets:
Due from unconsolidated affiliate		-		2
Deferred taxes recoverable in rates		474		415
Regulatory assets arising from fixed-price contracts and other derivatives		241		241
Regulatory assets arising from pension and other postretirement
benefit obligations		331		342
Regulatory assets arising from wildfire litigation costs		311		-
Other regulatory assets		72		53
Nuclear decommissioning trusts		737		678
Sundry		50		43
Total other assets		2,216		1,774

Property, plant and equipment:
Property, plant and equipment		10,816		10,156
Less accumulated depreciation and amortization		(2,659)		(2,587)
Property, plant and equipment, net ($523 at September 30, 2010 related to VIE)		8,157		7,569
Total assets	$	11,496	$	10,229
See Notes to Condensed Consolidated Financial Statements.

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2010		2009
	(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	-	$	33
Accounts payable		229		249
Due to unconsolidated affiliate		21		-
Accrued compensation and benefits		93		104
Regulatory balancing accounts, net		79		159
Current portion of long-term debt		22		45
Fixed-price contracts and other derivatives		50		51
Customer deposits		53		56
Reserve for wildfire litigation (Note 10)		344		270
Other		172		157
Total current liabilities		1,063		1,124
Long-term debt ($357 at September 30, 2010 related to VIE)		3,473		2,623

Deferred credits and other liabilities:
Customer advances for construction		21		23
Pension and other postretirement benefit obligations, net of plan assets		354		370
Deferred income taxes		953		774
Deferred investment tax credits		26		26
Regulatory liabilities arising from removal obligations		1,376		1,330
Asset retirement obligations		601		585
Fixed-price contracts and other derivatives		278		265
Deferred credits and other		161		145
Total deferred credits and other liabilities		3,770		3,518
Contingently redeemable preferred stock		79		79

Commitments and contingencies (Note 10)

Equity:
Common stock (255 million shares authorized; 117 million shares outstanding;
no par value)		1,138		1,138
Retained earnings		1,875		1,611
Accumulated other comprehensive income (loss)		(9)		(10)
Total SDG&E shareholders' equity		3,004		2,739
Noncontrolling interest		107		146
Total equity		3,111		2,885
Total liabilities and equity	$	11,496	$	10,229
See Notes to Condensed Consolidated Financial Statements.

SAN DIEGO GAS & ELECTRIC COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
	Nine months ended
	September 30,
	2010		2009
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	234	$	290
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization		283		239
Deferred income taxes and investment tax credits		125		35
Fixed-price contracts and other derivatives		42		(28)
Other		(24)		(14)
Net change in other working capital components		(247)		115
Changes in other assets		15		20
Changes in other liabilities		(12)		(38)
Net cash provided by operating activities		416		619

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment		(822)		(633)
Expenditures for short-term investments		-		(152)
Proceeds from sale of short-term investments		-		176
Purchases of nuclear decommissioning trust assets		(256)		(161)
Proceeds from sales by nuclear decommissioning trusts		248		155
Decrease in loans to affiliates, net		13		33
Net decrease in restricted cash		4		-
Other		-		2
Net cash used in investing activities		(813)		(580)

CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid		-		(150)
Capital contribution received by Otay Mesa VIE		-		4
Capital distribution made by Otay Mesa VIE		(10)		-
Preferred dividends paid		(4)		(4)
Issuances of long-term debt		744		386
Payments on long-term debt		(7)		-
Other		(7)		(3)
Net cash provided by financing activities		716		233

Increase in cash and cash equivalents		319		272
Cash and cash equivalents, January 1		13		19
Cash and cash equivalents, September 30	$	332	$	291

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	67	$	51
Income tax payments, net of refunds		61		144

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

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

Operating revenues	$	776	$	662	$	2,792	$	2,276
Operating expenses
Cost of natural gas		252		180		1,244		849
Operation and maintenance		283		249		838		766
Depreciation		78		73		230		220
Franchise fees and other taxes		27		25		92		81
Total operating expenses		640		527		2,404		1,916
Operating income		136		135		388		360
Other income (expense), net		2		(4)		8		1
Interest income		-		-		1		3
Interest expense		(17)		(17)		(50)		(52)
Income before income taxes		121		114		347		312
Income tax expense		(42)		(41)		(132)		(117)
Net income		79		73		215		195
Preferred dividends of subsidiary		-		-		(1)		(1)
Earnings		79		73		214		194
Preferred dividend requirements		(1)		(1)		(3)		(3)
Earnings attributable to common shares	$	78	$	72	$	211	$	191
See Notes to Condensed Consolidated Financial Statements.

PACIFIC ENTERPRISES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2010		2009
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	72	$	49
Accounts receivable - trade		302		567
Accounts receivable - other		57		44
Due from unconsolidated affiliates		118		12
Income taxes receivable		23		36
Inventories		181		93
Other regulatory assets		10		9
Other		35		39
Total current assets		798		849

Other assets:
Due from unconsolidated affiliate		504		513
Regulatory assets arising from pension and other postretirement
benefit obligations		614		617
Other regulatory assets		114		131
Sundry		38		40
Total other assets		1,270		1,301

Property, plant and equipment:
Property, plant and equipment		9,558		9,299
Less accumulated depreciation and amortization		(3,735)		(3,615)
Property, plant and equipment, net		5,823		5,684
Total assets	$	7,891	$	7,834
See Notes to Condensed Consolidated Financial Statements.

PACIFIC ENTERPRISES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2010		2009
	(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable - trade	$	167	$	207
Accounts payable - other		77		120
Due to unconsolidated affiliates		87		87
Deferred income taxes		3		5
Accrued compensation and benefits		89		86
Regulatory balancing accounts, net		163		223
Current portion of long-term debt		260		11
Customer deposits		77		87
Other		193		162
Total current liabilities		1,116		988
Long-term debt		1,021		1,283
Deferred credits and other liabilities:
Customer advances for construction		125		123
Pension and other postretirement benefit obligations, net of plan assets		643		644
Deferred income taxes		373		273
Deferred investment tax credits		26		28
Regulatory liabilities arising from removal obligations		1,247		1,227
Asset retirement obligations		690		662
Deferred taxes refundable in rates		144		175
Deferred credits and other		165		203
Total deferred credits and other liabilities		3,413		3,335

Commitments and contingencies (Note 10)

Equity:
Preferred stock		80		80
Common stock (600 million shares authorized; 84 million shares outstanding;
no par value)		1,462		1,462
Retained earnings		802		691
Accumulated other comprehensive income (loss)		(23)		(25)
Total Pacific Enterprises shareholders' equity		2,321		2,208
Preferred stock of subsidiary		20		20
Total equity		2,341		2,228
Total liabilities and equity	$	7,891	$	7,834
See Notes to Condensed Consolidated Financial Statements.

PACIFIC ENTERPRISES AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
	Nine months ended September 30,
	2010		2009
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	215	$	195
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation		230		220
Deferred income taxes and investment tax credits		63		24
Other		2		2
Net change in other working capital components		56		129
Changes in other assets		6		8
Changes in other liabilities		(10)		(33)
Net cash provided by operating activities		562		545

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment		(337)		(336)
(Increase) decrease in loans to affiliates, net		(97)		8
Other		(1)		(1)
Net cash used in investing activities		(435)		(329)

CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid		(100)		-
Preferred dividends paid		(3)		(3)
Preferred dividends paid by subsidiary		(1)		(1)
Net cash used in financing activities		(104)		(4)

Increase in cash and cash equivalents		23		212
Cash and cash equivalents, January 1		49		206
Cash and cash equivalents, September 30	$	72	$	418

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	38	$	40
Income tax payments, net of refunds		63		54

SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES
Increase in capital lease obligations for investments in property, plant and
equipment	$	-	$	2
Dividends declared but not paid		1		1
See Notes to Condensed Consolidated Financial Statements.

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

Operating revenues	$	776	$	662	$	2,792	$	2,276
Operating expenses
Cost of natural gas		252		180		1,244		849
Operation and maintenance		285		252		840		768
Depreciation		78		73		230		220
Franchise fees and other taxes		27		25		92		81
Total operating expenses		642		530		2,406		1,918
Operating income		134		132		386		358
Other income (expense), net		2		(1)		8		4
Interest income		1		1		1		3
Interest expense		(17)		(16)		(50)		(51)
Income before income taxes		120		116		345		314
Income tax expense		(42)		(42)		(132)		(115)
Net income		78		74		213		199
Preferred dividend requirements		-		-		(1)		(1)
Earnings attributable to common shares	$	78	$	74	$	212	$	198
See Notes to Condensed Consolidated Financial Statements.

SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2010		2009
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	72	$	49
Accounts receivable - trade		302		567
Accounts receivable - other		55		44
Due from unconsolidated affiliate		118		6
Income taxes receivable		19		35
Inventories		181		93
Other regulatory assets		10		9
Other		34		40
Total current assets		791		843

Other assets:
Regulatory assets arising from pension and other postretirement
benefit obligations		614		617
Other regulatory assets		114		131
Sundry		10		14
Total other assets		738		762

Property, plant and equipment:
Property, plant and equipment		9,556		9,297
Less accumulated depreciation and amortization		(3,735)		(3,615)
Property, plant and equipment, net		5,821		5,682
Total assets	$	7,350	$	7,287
See Notes to Condensed Consolidated Financial Statements.

SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	September 30,		December 31,
	2010		2009
	(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade	$	167	$	207
Accounts payable - other		77		120
Due to unconsolidated affiliate		3		3
Deferred income taxes		5		6
Accrued compensation and benefits		89		86
Regulatory balancing accounts, net		163		223
Current portion of long-term debt		260		11
Customer deposits		77		87
Other		191		158
Total current liabilities		1,032		901
Long-term debt		1,021		1,283
Deferred credits and other liabilities:
Customer advances for construction		125		123
Pension and other postretirement benefit obligations, net of plan assets		643		644
Deferred income taxes		379		280
Deferred investment tax credits		26		28
Regulatory liabilities arising from removal obligations		1,247		1,227
Asset retirement obligations		690		662
Deferred taxes refundable in rates		144		175
Deferred credits and other		163		198
Total deferred credits and other liabilities		3,417		3,337

Commitments and contingencies (Note 10)

Shareholders' equity:
Preferred stock		22		22
Common stock (100 million shares authorized; 91 million shares outstanding;
no par value)		866		866
Retained earnings		1,015		903
Accumulated other comprehensive income (loss)		(23)		(25)
Total shareholders' equity		1,880		1,766
Total liabilities and shareholders' equity	$	7,350	$	7,287
See Notes to Condensed Consolidated Financial Statements.

SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
	Nine months ended September 30,
	2010		2009
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	213	$	199
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation		230		220
Deferred income taxes and investment tax credits		62		22
Other		2		6
Net change in other working capital components		62		125
Changes in other assets		6		4
Changes in other liabilities		(6)		(27)
Net cash provided by operating activities		569		549

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment		(337)		(336)
Increase in loans to affiliates, net		(108)		-
Net cash used in investing activities		(445)		(336)

CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid		(100)		-
Preferred dividends paid		(1)		(1)
Net cash used in financing activities		(101)		(1)

Increase in cash and cash equivalents		23		212
Cash and cash equivalents, January 1		49		206
Cash and cash equivalents, September 30	$	72	$	418

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	37	$	40
Income tax payments, net of refunds		63		54

SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES
Increase in capital lease obligations for investments in property, plant and
equipment	$	-	$	2
See Notes to Condensed Consolidated Financial Statements.

SEMPRA ENERGY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. GENERAL

PRINCIPLES OF CONSOLIDATION

Sempra Energy

Sempra Energy's Condensed Consolidated Financial Statements include the accounts of Sempra Energy, a California-based Fortune 500 holding company, and its consolidated subsidiaries and a variable interest entity (VIE). Sempra Energy’s principal subsidiaries are

§San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas), which we collectively refer to as the Sempra Utilities; and

§Sempra Global, which is the holding company for Sempra Commodities, Sempra Generation, Sempra Pipelines & Storage, and Sempra LNG.

Sempra Energy uses the equity method to account for investments in affiliated companies over which we have the ability to exercise significant influence, but not control. We discuss our investments in unconsolidated subsidiaries in Note 4 below and Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.

SDG&E

SDG&E's Condensed Consolidated Financial Statements include its accounts and the accounts of a variable interest entity of which SDG&E is the primary beneficiary, as we discuss in Note 5 under "Variable Interest Entities." SDG&E’s common stock is wholly owned by Enova Corporation, which is a wholly owned subsidiary of Sempra Energy.

Pacific Enterprises and SoCalGas

The Condensed Consolidated Financial Statements of Pacific Enterprises include the accounts of Pacific Enterprises (PE) and its subsidiary, SoCalGas. Sempra Energy owns all of PE’s common stock and PE owns all of SoCalGas’ common stock. SoCalGas’ Condensed Consolidated Financial Statements include its subsidiaries, which comprise less than one percent of its consolidated financial position and results of operations.

PE's operations consist solely of those of SoCalGas and additional items (e.g., cash, intercompany accounts and equity) attributable to serving as a holding company for SoCalGas.

BASIS OF PRESENTATION

This is a combined report of Sempra Energy, SDG&E, PE and SoCalGas. We provide separate information for SDG&E, PE and SoCalGas as required. In the Notes to Condensed Consolidated Financial Statements (except in Note 11), when only information for SoCalGas is provided, it is the same for PE. References in this report to "we," "our" and "Sempra Energy Consolidated" are to Sempra Energy and its consolidated entities, unless otherwise indicated by the context. We have eliminated intercompany accounts and transactions within the consolidated financial statements of each reporting entity.

We have prepared the Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (GAAP) and in accordance with the interim-period-reporting requirements of Form 10-Q. Results of operations for interim periods are not necessarily indicative of results for the entire year. We evaluated events and transactions that occurred after September 30, 2010 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. These adjustments are only of a normal, recurring nature.

You should read the information in this Quarterly Report in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2009 (the Annual Report), and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010, which are combined reports for Sempra Energy, SDG&E, PE and SoCalGas.

Our significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report. We follow the same accounting policies for interim reporting purposes, except for the adoption of new accounting standards as we discuss in Note 2.

The Sempra Utilities and Sempra Pipelines & Storage's Mobile Gas Service Corporation and Ecogas Mexico, S de RL de CV prepare their financial statements in accordance with GAAP provisions governing regulated operations, as we discuss in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

Orange Grove Energy L.P.

SDG&E has a 25-year tolling agreement to purchase power generated by Orange Grove Energy L.P. (Orange Grove) at its 99-megawatt (MW) generating facility located in San Diego County, California. Under a tolling agreement, SDG&E purchases power generated by facilities for which it supplies all of the natural gas to fuel the power plant. In the third quarter of 2009, Sempra Energy and SDG&E determined that Orange Grove was a VIE and that SDG&E was the primary beneficiary of the VIE based on the criteria in GAAP as written at that time and applicable through December 31, 2009. Sempra Energy and SDG&E therefore consolidated Orange Grove beginning in the third quarter of 2009 through December 31, 2009.

In the first quarter of 2010, Accounting Standards Update (ASU) 2009-17, “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” (ASU 2009-17), which we discuss in Note 2 below, became effective. Applying the guidance in ASU 2009-17, because of SDG&E’s obligation to absorb the natural gas costs for the fuel to operate the facility, along with the power to direct the dispatch, Sempra Energy and SDG&E continued to consolidate Orange Grove in the first quarter of 2010.

In the second quarter, Sempra Energy and SDG&E reevaluated the provisions of ASU 2009-17 as they apply to Orange Grove. Sempra Energy and SDG&E determined that because the Orange Grove facility is a peaker plant, it operates infrequently to meet peak power needs. We believe that the owners of Orange Grove retain the most significant economic power through their control over operations and maintenance of the plant, which impacts the capacity payments under the agreement that are expected to have the greatest effect on the overall economic performance of the entity. Accordingly, SDG&E does not have the right to direct activities that most significantly impact the economic performance of Orange Grove, and Sempra Energy and SDG&E should not consolidate Orange Grove, but instead should record the agreement as a capital lease. The effect of this change has no effect on Sempra Energy’s or SDG&E’s earnings and is not material to their previously issued financial statements.

Presentation of Restricted Cash

In Sempra Energy’s previously issued financial statements, we presented all restricted cash as a current asset on the balance sheet. At both September 30, 2010 and December 31, 2009, $27 million of restricted cash represents funds held in trust for construction financing of certain natural gas storage facilities of Sempra Pipelines & Storage. Because this restricted cash will be expended for construction of long-lived assets, we have concluded that these amounts should be presented as a noncurrent asset. At September 30, 2010, this restricted cash is presented as Restricted Cash under Investments and Other Assets on the Condensed Consolidated Balance Sheet. We believe that the effect of presentation of restricted cash is not material to the previously issued balance sheets and have not corrected the classification of the restricted cash amount at December 31, 2009. The presentation of restricted cash on the balance sheet has no impact on earnings or cash flows for any period presented.

NOTE 2. NEW ACCOUNTING STANDARDS

We describe below recent pronouncements that have had or may have a significant effect on our financial statements. We do not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to our financial condition, results of operations, or disclosures.

SEMPRA ENERGY, SDG&E, PE AND SOCALGAS

ASU 2009-17, "Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities" (ASU 2009-17): ASU 2009-17 amends Financial Accounting Standards Board (FASB) Interpretation No. 46(R), Consolidation of Variable Interest Entities – an interpretation of ARB No. 51 (FIN 46(R)), which provides consolidation guidance related to variable interest entities.

ASU 2009-17 amends FASB Accounting Standards Codification (ASC) Topic 810, Consolidation, and requires

§a qualitative approach for identifying the primary beneficiary of a variable interest entity based on 1) the power to direct activities that most significantly impact the economic performance of the entity, and 2) the obligation to absorb losses or right to receive benefits that could be significant to the entity;

§ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity; and

§separate disclosure by the primary beneficiary on the face of the balance sheet to identify 1) assets that can only be used to settle obligations of the variable interest entity, and 2) liabilities for which creditors do not have recourse to the primary beneficiary.

We adopted ASU 2009-17 on January 1, 2010 and it did not have a material effect on earnings, nor on presentation on the interim Condensed Consolidated Balance Sheets for Sempra Energy and SDG&E. We provide the required additional disclosure in Note 5. ASU 2009-17 did not impact PE’s nor SoCalGas’ condensed consolidated financial statements.

ASU 2010-06, "Improving Disclosures About Fair Value Measurements" (ASU 2010-06): ASU 2010-06 amends ASC Topic 820, Fair Value Measurements and Disclosures, and requires the following additional fair value measurement disclosures:

§transfers into and out of Levels 1 and 2

§segregation of classes of assets and liabilities measured at fair value

§valuation techniques and inputs used for Level 2 and Level 3 instruments

§detailed activity for Level 3 instruments, including separate presentation of purchases, sales, issuances and settlements

We adopted ASU 2010-06on January 1, 2010, and we provide the additional disclosure in Note 8.

NOTE 3. RECENT INVESTMENT ACTIVITY

SEMPRA PIPELINES & STORAGE

Acquisition of Mexican Pipeline and Natural Gas Infrastructure

On April 30, 2010, Sempra Pipelines & Storage completed an acquisition resulting in the purchase of the Mexican pipeline and natural gas infrastructure assets of El Paso Corporation for $307 million ($292 million, net of cash acquired).

The acquisition consists of El Paso Corporation’s wholly owned natural gas pipeline and compression assets in the Mexican border state of Sonora and its 50-percent interest in a joint venture with PEMEX, the Mexican state-owned oil company. The joint venture operates two natural gas pipelines and a propane system in northern Mexico. The acquisition expands our scale and geographic footprint in a strong growth region in Mexico. The pipeline assets are backed substantially by long-term contracts with a history of consistent revenue streams, allowing us to expand our natural gas infrastructure business in northern Mexico.

The following table summarizes the consideration paid in the acquisition and the recognized amounts of the assets acquired and liabilities assumed at April 30, 2010:

(Dollars in millions)
Cash consideration (fair value of total consideration)		$	307
Recognized amounts of identifiable assets acquired and liabilities assumed:
	Cash		15
	Accounts receivable		4
	Investment in equity method investee		256
	Property, plant & equipment		25
	Other liabilities		(11)
Total identifiable net assets			289
Goodwill(1)		$	18

Acquisition-related costs (included in Other Operation and Maintenance expense in
	the Condensed Consolidated Statements of Operations for the nine months
	ended September 30, 2010)	$	1
(1)	The goodwill, which represents the residual of the consideration paid over the identifiable net assets, is assigned to the Sempra Pipelines & Storage segment and is attributed to the strategic value of the transaction. None of the goodwill recorded is deductible in Mexico for income tax purposes.

Included in our Condensed Consolidated Statements of Operations are revenues and earnings of $4 million and $12 million, respectively, for the period May 1, 2010 to September 30, 2010 related to the assets acquired from El Paso Corporation, including revenues and earnings of $3 million and $7 million, respectively, for the three months ended September 30, 2010. Proforma impacts on revenues and earnings for Sempra Energy had the acquisition occurred on January 1, 2009 were immaterial.

Natural Gas Storage Projects

Sempra Pipelines & Storage’s Sempra Midstream owned 60 percent of Mississippi Hub, LLC (Mississippi Hub) through December 31, 2008 and on January 16, 2009, purchased the remaining 40-percent ownership interest for $94 million in cash.

NOTE 4. INVESTMENTS IN UNCONSOLIDATED ENTITIES

SEMPRA ENERGY AND SDG&E

Available-for-Sale Securities

In June 2009, SDG&E remarketed $176 million of its industrial development bonds at a fixed rate of 5.875 percent, maturing in 2034. Prior to SDG&E's remarketing, SDG&E purchased $152 million of the bonds from Sempra Energy. We discuss these bonds further in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

SEMPRA COMMODITIES

RBS Sempra Commodities LLP (RBS Sempra Commodities) is a limited liability partnership formed in the United Kingdom to own and operate the commodities-marketing businesses previously operated through wholly owned subsidiaries of Sempra Energy. We account for our investment in RBS Sempra Commodities under the equity method, and report our share of partnership earnings in the Sempra Commodities segment.

Excluding the impairment charge discussed below, for the three months and nine months ended September 30, 2010, we recorded pretax equity earnings of $24 million and $15 million, respectively, from RBS Sempra Commodities. Pretax equity earnings from RBS Sempra Commodities were $105 million and $384 million for the three months and nine months ended September 30, 2009, respectively. The partnership income that is distributable to us on an annual basis is computed on the partnership's basis of accounting, International Financial Reporting Standards (IFRS), as adopted by the European Union. For the three months and nine months ended September 30, 2010, our share of distributable income, on an IFRS basis, was $22 million and $53 million, respectively. In the three months and nine months ended September 30, 2009, our share of distributable income, on an IFRS basis, was $60 million and $276 million, respectively. In the second quarter of 2010, we received the remaining distribution of 2009 partnership income of $198 million. In the first nine months of 2009, we received cash distributions from the partnership of $407 million. We discuss the equity method investment in RBS Sempra Commodities further in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.

In November 2009, our partner in the joint venture, The Royal Bank of Scotland (RBS), announced its intention to divest its interest in RBS Sempra Commodities in connection with a directive from the European Commission to dispose of certain assets. In February 2010, Sempra Energy, RBS and the partnership entered into an agreement with J.P. Morgan Ventures Energy Corporation (J.P. Morgan Ventures), a unit of J.P. Morgan Chase & Co. (JP Morgan), for J.P. Morgan Ventures to purchase the global metals and oil businesses and the European natural gas and power business from the joint venture. This transaction was completed on July 1, 2010, and we received the majority of the proceeds in early July 2010 and the remainder in September 2010. The purchase price was $1.6 billion, and our share of the proceeds was approximately $1 billion, including distributions of 2009 partnership income attributable to the businesses sold, which were $134 million of the $198 million in distributions we received in April 2010.

This sale to J.P. Morgan Ventures did not include RBS Sempra Commodities' North American power and natural gas trading businesses and its retail energy solutions business. In September 2010, Noble Group Ltd. (Noble Group) agreed to acquire the U.S. retail commodity marketing business of the RBS Sempra Commodities joint venture for $318 million in cash, plus assumption of all debt, and the transaction closed on November 1, 2010. In October 2010, J.P. Morgan Ventures agreed to purchase, subject to regulatory approval, most of the remaining assets of RBS Sempra Commodities for approximately $220 million. The assets to be sold include the joint venture’s wholesale natural gas and power trading agreements, as well as over-the-counter and exchange-traded transactions, with counterparties across North America. The counterparties include natural gas producers, pipeline and storage providers, power plants, regasification facilities, utilities and municipal customers. The sale is expected to close before year-end and will complete the divestiture of the remaining principal assets of RBS Sempra Commodities.

We expect our share of the proceeds from the sales of all of the partnership businesses and related cash distributions to total $1.8 billion to $1.9 billion. This includes approximately $1.3 billion expected from the announced transactions, plus $500 million to $600 million consisting primarily of cash and accounts receivable, as well as net margin that is expected to be collected as customers are transferred to JP Morgan. The transfer of all accounts to JP Morgan will be done as soon as possible following closing, but is expected to continue into 2011.

Projected cash distributions from RBS Sempra Commodities are net of expected transition costs and are not expected to fully recover the goodwill included in the carrying value of our investment in the partnership. Accordingly, we recorded a pretax non-cash charge of $305 million ($139 million after-tax) for the three months and nine months ended September 30, 2010 to reduce our investment in RBS Sempra Commodities. This charge is included in Equity Earnings (Losses) from RBS Sempra Commodities LLP on the Condensed Consolidated Statements of Operations. The fair value of our investment in RBS Sempra Commodities was significantly impacted by unobservable inputs (i.e., Level 3 inputs) as defined by the accounting guidance for fair value measurements, which we discuss below in Note 8. The inputs included estimated future cash distributions expected from the partnership, excluding the impact of costs anticipated for transactions that have not closed as of September 30, 2010. The investment balance of $825 million at September 30, 2010 reflects our portion of the partnership’s earnings, distributions received from the partnership and the non-cash charge to bring the investment to fair value.

The following table shows summarized financial information for RBS Sempra Commodities (on a GAAP basis):

	Three months ended September 30,				Nine months ended September 30,
(Dollars in millions)	2010		2009		2010		2009
Gross revenues and fee income	$	72	$	291	$	466	$	1,167
Gross profit		74		268		446		1,096
Income (loss) from continuing operations		(7)		115		(20)		504
Partnership net income (loss)		(7)		115		(20)		504

We provide information regarding the Sempra Commodities segment in Note 11.

SEMPRA PIPELINES & STORAGE

In the first quarter 2010, Sempra Pipelines & Storage contributed $65 million to Rockies Express, a joint venture to own and operate the Rockies Express Pipeline, to complete the construction phase of the project. Sempra Pipelines & Storage contributed $315 million and $527 million in the three months and nine months ended September 30, 2009, respectively. We discuss this investment in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.

Sempra Pipelines & Storage owns 43 percent of two Argentine natural gas utility holding companies, Sodigas Pampeana and Sodigas Sur. The Argentine economic decline and government responses (including Argentina’s unilateral, retroactive abrogation of utility agreements early in 2002) continue to adversely affect the operations of these Argentine utilities. In 2002, Sempra Pipelines & Storage initiated arbitration proceedings at the International Center for the Settlement of Investment Disputes (ICSID) under the 1994 Bilateral Investment Treaty between the United States and Argentina for recovery of the diminution of the value of its investments that has resulted from Argentine governmental actions. In September 2007, the tribunal awarded us compensation of $172 million, which included interest up to the award date. In January 2008, Argentina filed an action at the ICSID seeking to annul the award. In June 2010, the Annulment Committee granted Argentina’s petition for annulment of the award. This action did not impact our earnings, as we did not record the original award pending assurance of collectability. On November 3, 2010, Sempra Pipelines & Storage resubmitted arbitration proceedings against Argentina before the ICSID on the same and similar grounds as the 2002 filing.

In a separate but related proceeding related to our political risk insurance policy, we negotiated a $48 million settlement that was collected in September 2010. The proceeds from the settlement are reported in Other Income, Net, on the Condensed Consolidated Statements of Operations for the three months and nine months ended September 30, 2010.

We continue to actively pursue the sale of our investments in the two Argentine companies. In September 2010, we concluded that, although the ICSID claim had been annulled as discussed above, rate increases sought in Argentina would continue to be delayed. We believe this continued uncertainty has impacted the fair value of our net investment in the two Argentine companies, and recorded a non-cash impairment charge of $24 million, which is reported in Equity Earnings (Losses), Net of Income Tax, on the Condensed Consolidated Statements of Operations for the three months and nine months ended September 30, 2010. The Sodigas Pampeana and Sodigas Sur fair value was significantly impacted by unobservable inputs (i.e., Level 3 inputs) as defined by the accounting guidance for fair value measurements, which we discuss below in Note 8. The inputs included discount rates and estimated future cash flows. Such cash flows considered the value of those businesses with positive cash flows, the value of the non-operating assets, and the probability-weighted value of anticipated rate increases, considering both the timing and magnitude of such increases.

SEMPRA GENERATION

Sempra Generation and BP Wind Energy currently hold 50-percent ownership interests in Fowler Ridge II Wind Farm LLC (Fowler Ridge), a joint venture which operates a 200-MW wind farm project located in Benton County, Indiana. As of December 2009, Sempra Generation had invested $235 million in the joint venture. In August 2010, Sempra Generation received a $180 million return of capital from Fowler Ridge. We discuss this further in Note 6 below and provide additional information in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.

NOTE 5. OTHER FINANCIAL DATA

VARIABLE INTEREST ENTITIES

We consolidate a VIE if we are the primary beneficiary of the VIE’s activities. Our determination of whether we are the primary beneficiary is based upon 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 right to receive benefits that could be significant to the VIE.

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 upon our analysis, the ability to direct the dispatch of electricity may have the most significant impacts 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 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 we determine that SDG&E is the primary beneficiary, Sempra Energy and SDG&E consolidate the entity that owns the facility as a VIE, as we discuss below.

Otay Mesa VIE

SDG&E has a 10-year agreement to purchase power generated at the Otay Mesa Energy Center (OMEC), a 605-MW generating facility that began commercial operations in October 2009. In addition to tolling, the agreement provides SDG&E with the option to purchase the power plant at the end of the contract term in 2019, or upon earlier termination of the purchased-power agreement, at a predetermined price subject to adjustments based on performance of the facility. If SDG&E does not exercise its option, under certain circumstances, it may be required to purchase the power plant at a predetermined price.

The facility owner, Otay Mesa Energy Center LLC (OMEC LLC), is a VIE (Otay Mesa VIE), of which SDG&E is the primary beneficiary. SDG&E has no OMEC LLC voting rights and does not operate OMEC. In addition to the risks absorbed under the tolling agreement, SDG&E absorbs separately through the put option a significant portion of the risk that the value of Otay Mesa VIE could decline. Sempra Energy and SDG&E have consolidated Otay Mesa VIE since the second quarter of 2007, and have continued to consolidate it through the third quarter of 2010. Otay Mesa VIE's equity of $107 million at September 30, 2010 and $146 million at December 31, 2009 is included on the Condensed Consolidated Balance Sheets in Other Noncontrolling Interests for Sempra Energy and in Noncontrolling Interest for SDG&E.

OMEC LLC has a loan outstanding of $367 million at September 30, 2010, the proceeds of which were used for the construction of OMEC. The loan is with third party lenders and is secured by OMEC's property, plant and equipment. SDG&E is not a party to the loan agreement and does not have any additional implicit or explicit financial responsibility to OMEC LLC. The loan fully matures in April 2019 and bears interest at rates varying with market rates. In addition, OMEC LLC has entered into interest rate swap agreements to moderate its exposure to interest rate changes. We provide additional information concerning the interest rate swaps in Note 7.

Other Variable Interest Entities

SDG&E's power procurement is subject to reliability requirements that may require SDG&E to enter into various power purchase arrangements which include variable interests. SDG&E evaluates these contracts to determine if variable interests exist and, based on the qualitative and quantitative analyses described above, if SDG&E, and thereby Sempra Energy, is the primary beneficiary. SDG&E has determined that no contracts other than that relating to Otay Mesa VIE mentioned above result in SDG&E being the primary beneficiary. In addition to the tolling agreements described above, other variable interests involve various elements of fuel and power costs, including certain construction costs, tax credits, and other components of cash flow 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 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 are not expected to significantly affect the financial position, results of operations, or liquidity of SDG&E. SDG&E is not exposed to losses or gains as a result of these other VIEs, because all such variability would be recovered in rates.

Sempra Energy’s other business units also enter into arrangements which could include variable interests. We evaluate these contracts based upon the qualitative and quantitative analyses described above. We have determined that these contracts are not variable interests in a VIE and therefore are not subject to the requirements of ASU 2009-17.

PENSION AND OTHER POSTRETIREMENT BENEFITS

Net Periodic Benefit Cost

The following three tables provide the components of net periodic benefit cost:

NET PERIODIC BENEFIT COST -- SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
	Pension Benefits				Other Postretirement Benefits
	Three months ended September 30,				Three months ended September 30,
	2010		2009		2010		2009
Service cost	$	20	$	17	$	5	$	7
Interest cost		41		42		14		14
Expected return on assets		(36)		(34)		(12)		(11)
Amortization of:
Prior service cost		1		1		-		-
Actuarial loss		8		6		2		1
Regulatory adjustment		5		(14)		1		1
Total net periodic benefit cost	$	39	$	18	$	10	$	12
	Nine months ended September 30,				Nine months ended September 30,
	2010		2009		2010		2009
Service cost	$	62	$	56	$	20	$	21
Interest cost		125		127		43		43
Expected return on assets		(108)		(104)		(35)		(35)
Amortization of:
Prior service cost (credit)		3		3		(1)		(1)
Actuarial loss		23		18		6		3
Regulatory adjustment		(14)		(53)		5		5
Total net periodic benefit cost	$	91	$	47	$	38	$	36

NET PERIODIC BENEFIT COST -- SDG&E
(Dollars in millions)
	Pension Benefits				Other Postretirement Benefits
	Three months ended September 30,				Three months ended September 30,
	2010		2009		2010		2009
Service cost	$	7	$	5	$	2	$	2
Interest cost		12		12		2		3
Expected return on assets		(11)		(8)		(2)		(1)
Amortization of:
Prior service cost		-		-		1		1
Actuarial loss		3		4		-		-
Regulatory adjustment		3		(2)		-		-
Total net periodic benefit cost	$	14	$	11	$	3	$	5
	Nine months ended September 30,				Nine months ended September 30,
	2010		2009		2010		2009
Service cost	$	21	$	17	$	5	$	5
Interest cost		36		36		7		7
Expected return on assets		(32)		(24)		(5)		(3)
Amortization of:
Prior service cost		1		1

PACIFIC ENTERPRISES INC 10-Q