10-KPeriod: FY2001

SEMPRA Annual Report, Year Ended Dec 31, 2001

Filed March 19, 2002For Securities:SRESREA

Summary

Sempra Energy's 2001 10-K report highlights a year of significant operational activity and adaptation, particularly in light of California's volatile energy market. The company navigated challenges related to electric industry restructuring, including the impact of high wholesale electricity prices and the subsequent legislative interventions such as the California Department of Water Resources (DWR) purchasing power. Sempra's core utility operations, primarily through Southern California Gas Company (SoCalGas) and San Diego Gas & Electric (SDG&E), remained central, with substantial natural gas distribution and transportation services provided to millions of customers. Beyond regulated utilities, Sempra Energy actively pursued growth in energy trading and international infrastructure development. Sempra Energy Trading (SET) showed strong performance with increasing net income, driven by market volatility. Sempra Energy International (SEI) advanced key projects like the North Baja Pipeline and an LNG receiving facility in Mexico. Sempra Energy Resources (SER) entered a significant long-term power supply agreement with the DWR, although this agreement faced scrutiny regarding its pricing. Despite these diverse activities, the company faced environmental remediation costs and ongoing regulatory oversight across its various segments.

Key Highlights

  • 1The company's utility subsidiaries, SoCalGas and SDG&E, serve a combined 5.9 million natural gas customer meters, with a significant portion of their revenue derived from core residential and small commercial customers.
  • 2Sempra Energy Trading (SET) reported a substantial increase in net income for 2001 ($196 million) compared to prior years, driven by energy market volatility and increased trading volumes.
  • 3In response to the California energy crisis, the California Department of Water Resources (DWR) purchased net short positions for SDG&E's customers, and SDG&E entered into a significant power supply agreement with the DWR, though contract renegotiation discussions were ongoing.
  • 4Sempra Energy International (SEI) made progress on major infrastructure projects, including the North Baja Pipeline (expected completion summer 2002) and plans for an LNG receiving facility in Mexico (scheduled for late 2005).
  • 5Sempra Energy Resources (SER) is developing several new power plants, including Termoelectrica de Mexicali, Mesquite Power Plant, and Elk Hills Power Project, with significant investments and projected completion dates in 2003.
  • 6The company incurred environmental remediation liabilities, with estimated remaining investigation and remediation costs of $57 million as of December 31, 2001, of which 90% was authorized for recovery through rates.
  • 7Total assets grew to $15.16 billion in 2001, with operating revenues reaching $8.03 billion, indicating substantial scale of operations despite the complexities of the energy market.

Frequently Asked Questions

Sempra Energy's utility operations were significantly impacted by California's energy crisis. High wholesale electricity prices led to higher customer bills. In response, the California legislature intervened, with the Department of Water Resources (DWR) purchasing power for SDG&E's customers. Sempra Energy also entered into a power supply agreement with the DWR, though discussions regarding renegotiation of contract rates were ongoing.

Sempra Energy Trading (SET) demonstrated strong performance in 2001, with net income increasing to $196 million. This growth was attributed to high volatility in energy markets during the first half of the year and an increase in trading volumes, partially offset by reduced profitability in Europe.

Sempra Energy operates through several key segments: regulated utilities (SoCalGas and SDG&E) which distribute natural gas and electricity; Sempra Energy Trading (SET) which markets energy commodities; Sempra Energy International (SEI) which develops energy infrastructure abroad; and Sempra Energy Resources (SER) which develops power plants. The regulated utilities form the core business, while trading and international development represent growth areas.

Sempra Energy faces environmental liabilities primarily related to the cleanup of former manufactured-gas plant sites and other historical waste disposal sites. As of December 31, 2001, the company estimated remaining investigation and remediation liabilities at $57 million, with 90% authorized for recovery through rates via the Hazardous Waste Collaborative mechanism.