SoCalGas Parent Sempra Sees 37% Net Income Drop Amid Higher Taxes

TL;DR

**Sempra's net income cratered 37% due to massive tax hit and rising interest costs, signaling tougher times ahead for this utility giant.**

AI Summary

SOUTHERN CALIFORNIA GAS CO (SoCalGas) reported a significant decline in net income for the nine months ended September 30, 2025, falling to $1,588 million from $2,511 million in the prior year, a 36.8% decrease. This was primarily driven by a substantial income tax expense of $711 million in 2025, a stark contrast to the $63 million income tax benefit in 2024. Total revenues for Sempra, the parent company, increased to $9,953 million from $9,427 million, a 5.6% rise, with natural gas revenues up 8.3% to $5,195 million and electric revenues up 2.5% to $3,350 million. Operating expenses also rose, with operation and maintenance increasing to $3,931 million from $3,871 million, and interest expense climbing to $1,195 million from $944 million. Basic EPS for Sempra decreased to $2.21 from $3.40, reflecting the lower net income and an increase in weighted-average common shares outstanding to 652,538 thousand from 633,342 thousand. The company is navigating risks related to California wildfires, regulatory decisions by the CPUC, and the impact of climate policies on natural gas reliance.

Why It Matters

This significant drop in net income for Sempra, the parent of SoCalGas, directly impacts investor returns, as evidenced by the lower EPS. The substantial increase in income tax expense and interest expense could signal a tightening financial environment, potentially affecting future capital allocation for infrastructure projects or shareholder distributions. For customers and employees, regulatory decisions, particularly those from the CPUC regarding wildfire liability and climate policies, will shape the company's operational focus and potentially influence rates. In a competitive context, the shift away from natural gas due to climate policies poses a long-term strategic challenge for SoCalGas, requiring adaptation to maintain relevance and profitability in the evolving energy market.

Risk Assessment

Risk Level: high — The risk level is high due to the significant 36.8% decrease in net income from $2,511 million in 2024 to $1,588 million in 2025, largely driven by a $711 million income tax expense compared to a $63 million benefit. Additionally, the filing explicitly lists 'California wildfires, including potential liability for damages regardless of fault' and 'changes, due to evolving economic, political and other factors, to laws and regulations, including those related to tax and the energy industry' as primary risk factors, indicating substantial external pressures.

Analyst Insight

Investors should scrutinize Sempra's upcoming regulatory filings for details on how the company plans to mitigate rising tax and interest expenses, and how it will address wildfire liabilities and climate policy impacts. Consider re-evaluating long-term growth projections given the significant net income decline and increased operational risks. Monitor CPUC decisions closely for their potential effect on SoCalGas's rate recovery and future profitability.

Financial Highlights

revenue

$9,953M

net Income

$1,588M

eps

$2.21

revenue Growth

+5.6%

Revenue Breakdown

Key Numbers

• $1,588M — Net Income (9 months 2025) (36.8% decrease from $2,511M in 2024)
• $711M — Income Tax Expense (9 months 2025) (Shift from $63M benefit in 2024, significantly impacting net income)
• $9,953M — Total Revenues (9 months 2025) (5.6% increase from $9,427M in 2024)
• $5,195M — Natural Gas Revenues (9 months 2025) (8.3% increase from $4,798M in 2024)
• $1,195M — Interest Expense (9 months 2025) (Increased from $944M in 2024, contributing to lower net income)
• $2.21 — Basic EPS (9 months 2025) (Decreased from $3.40 in 2024)
• 652,538K — Weighted-Average Common Shares Outstanding (9 months 2025) (Increased from 633,342K in 2024, diluting EPS)

Key Players & Entities

• SOUTHERN CALIFORNIA GAS CO (company) — Registrant in 10-Q filing
• Sempra (company) — Parent company of SoCalGas
• San Diego Gas & Electric Company (company) — Registrant in 10-Q filing
• CPUC (regulator) — California Public Utilities Commission
• SEC (regulator) — U.S. Securities and Exchange Commission
• $1,588 million (dollar_amount) — Net income for nine months ended September 30, 2025
• $2,511 million (dollar_amount) — Net income for nine months ended September 30, 2024
• $711 million (dollar_amount) — Income tax expense for nine months ended September 30, 2025
• $63 million (dollar_amount) — Income tax benefit for nine months ended September 30, 2024
• $1,195 million (dollar_amount) — Interest expense for nine months ended September 30, 2025

FAQ

Risk Factors

• California Wildfires [high — legal]: The company faces significant risks and potential liabilities associated with California wildfires, including claims for damages and costs related to fire suppression and infrastructure repair. These events can lead to substantial financial impacts and reputational damage.
• CPUC Regulatory Decisions [high — regulatory]: Decisions made by the California Public Utilities Commission (CPUC) can materially affect the company's operations, rates, and financial performance. Adverse regulatory outcomes could impact earnings and investment plans.
• Climate Policies and Natural Gas Reliance [medium — market]: Increasingly stringent climate policies and a societal shift away from fossil fuels pose a risk to the long-term demand for natural gas. The company must adapt its business model to evolving energy landscapes and potential regulatory mandates.
• Interest Expense Increases [medium — financial]: Interest expense has risen to $1,195 million for the nine months ended September 30, 2025, up from $944 million in the prior year. This increase puts pressure on net income and overall profitability.
• Significant Income Tax Expense [high — financial]: A substantial income tax expense of $711 million was recorded for the nine months ended September 30, 2025, a dramatic shift from a $63 million income tax benefit in the prior year. This is a primary driver of the net income decline.

Industry Context

Southern California Gas Co. operates within the highly regulated utility sector, primarily focused on natural gas distribution. The industry is characterized by significant capital investment requirements, long-term infrastructure planning, and substantial regulatory oversight from bodies like the CPUC. Trends include the increasing integration of renewable energy sources, evolving climate policies, and the ongoing debate around the future role of natural gas in the energy mix.

Regulatory Implications

The company is heavily influenced by decisions from the California Public Utilities Commission (CPUC), which sets rates and approves operational plans. Regulatory uncertainty and potential changes in policy regarding natural gas usage and environmental standards represent significant risks that can impact financial performance and strategic direction.

What Investors Should Do

1. Monitor CPUC proceedings and decisions closely.
2. Analyze the impact of the tax expense shift on future earnings.
3. Assess the company's strategy for adapting to climate policies.
4. Evaluate the trend in interest expense.

Glossary

Basic EPS

Earnings Per Share calculated using the weighted-average number of common shares outstanding during a period, without considering the dilutive effect of potential common shares. (Indicates the profitability of the company on a per-share basis for common shareholders, showing a decrease to $2.21 from $3.40.)

Weighted-average common shares outstanding

The average number of a company's common shares that have been issued and are held by shareholders over a specific period. (Used in EPS calculations; an increase to 652,538 thousand from 633,342 thousand dilutes EPS.)

Income tax expense (benefit)

The amount of tax expense or benefit a company recognizes on its income statement for a given period. (A significant swing from a $63 million benefit in 2024 to a $711 million expense in 2025 heavily impacted net income.)

Equity earnings

The portion of a company's net income that is attributable to its common shareholders. (While equity earnings were $1,190 million for the nine months of 2025, the overall net income was impacted by other factors.)

Year-Over-Year Comparison

For the nine months ended September 30, 2025, Sempra reported total revenues of $9,953 million, a 5.6% increase from $9,427 million in the prior year, driven by growth in natural gas and electric revenues. However, net income saw a substantial 36.8% decline to $1,588 million from $2,511 million, primarily due to a significant shift to a $711 million income tax expense from a $63 million benefit. Interest expense also rose to $1,195 million from $944 million, further pressuring profitability. Basic EPS decreased to $2.21 from $3.40, exacerbated by an increase in weighted-average common shares outstanding.

Key Financial Figures

• $25 — 75% Junior Subordinated Notes Due 2079, $25 par value SREA New York Stock Exchange

Filing Documents

• sre-20250930.htm (10-Q) — 5574KB
• sempra-93025xex101.htm (EX-10.1) — 10KB
• sempra-93025xex102.htm (EX-10.2) — 9KB
• sempra-93025xex311.htm (EX-31.1) — 9KB
• sempra-93025xex312.htm (EX-31.2) — 9KB
• sempra-93025xex313.htm (EX-31.3) — 9KB
• sempra-93025xex314.htm (EX-31.4) — 9KB
• sempra-93025xex315.htm (EX-31.5) — 9KB
• sempra-93025xex316.htm (EX-31.6) — 9KB
• sempra-93025xex321.htm (EX-32.1) — 5KB
• sempra-93025xex322.htm (EX-32.2) — 5KB
• sempra-93025xex323.htm (EX-32.3) — 5KB
• sempra-93025xex324.htm (EX-32.4) — 5KB
• sempra-93025xex325.htm (EX-32.5) — 5KB
• sempra-93025xex326.htm (EX-32.6) — 5KB
• socalgasa.jpg (GRAPHIC) — 103KB
• sre-20250930_g1.jpg (GRAPHIC) — 79KB
• sre-20250930_g2.jpg (GRAPHIC) — 105KB
• sre-20250930_g3.jpg (GRAPHIC) — 103KB
• sre-20250930_g4.jpg (GRAPHIC) — 57KB
• sre-20250930_g5.jpg (GRAPHIC) — 30KB
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• sre-20250930_g8.jpg (GRAPHIC) — 30KB
• sre-20250930_g9.jpg (GRAPHIC) — 31KB
• 0001032208-25-000065.txt ( ) — 30529KB
• sre-20250930.xsd (EX-101.SCH) — 165KB
• sre-20250930_cal.xml (EX-101.CAL) — 199KB
• sre-20250930_def.xml (EX-101.DEF) — 1289KB
• sre-20250930_lab.xml (EX-101.LAB) — 1530KB
• sre-20250930_pre.xml (EX-101.PRE) — 1482KB
• sre-20250930_htm.xml (XML) — 6409KB

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements 9 Notes to Condensed Consolidated Financial Statements Note 1. General Information and Other Financial Data 29 Note 2. New Accounting Standards 48 Note 3. Revenues 49 Note 4. Regulatory Matters 53 Note 5. Sempra – Investments in Unconsolidated Entities 56 Note 6 . Sempra – Potential Divestitures 58 Note 7 . Debt and Credit Facilities 61 Note 8 . Derivative Financial Instruments 64 Note 9 . Fair Value Measurements 71 Note 10. Sempra – Contingently Redeemable Noncontrolling Interest 78 Note 11. Sempra – Equity and Earnings Per Common Share 79 Note 12. San Onofre Nuclear Generating Station 82 Note 13. Commitments, Contingencies and Guarantees 84 Note 14. Segment Information 89

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 96 Overview 96 Results of Operations by Registrant 97 Capital Resources and Liquidity 117 Critical Accounting Estimates 134 New Accounting Standards 134

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 134

Controls and Procedures

Item 4. Controls and Procedures 136

– OTHER INFORMATION

PART II – OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 137

Risk Factors

Item 1A. Risk Factors 137

Other Information

Item 5. Other Information 139

Exhibits

Item 6. Exhibits 140

Signatures

Signatures 142 This combined Form 10-Q is separately filed by Sempra, San Diego Gas & Electric Company and Southern California Gas Company. Information contained herein relating to any one of these individual Registrants is filed by such entity on its own behalf. Each such Registrant makes statements herein only as to itself and its consolidated entities and makes no statement whatsoever as to any other entity. You should read this report in its entirety as it pertains to each respective Registrant. No one section of the report deals with all aspects of the subject matter. A separate Part I – Item 1 is provided for each Registrant, except for the Notes to Condensed Consolidated Financial Statements, which are combined for all the Registrants. All Items other than Part I – Item 1 are combined for the three Registrants. None of the website references in this report are active hyperlinks, and the information contained on or that can be accessed through any such website is not and shall not be deemed to be part of or incorporated by reference in this report or any other document that we file with or furnish to the SEC. 3 Table of Contents The following terms and abbreviations appearing in this report have the meanings indicated below. GLOSSARY AB California Assembly Bill ADIA Black Silverback ZC 2022 LP (assignee of Black River B 2017 Inc.), a wholly owned affiliate of Abu Dhabi Investment Authority AFUDC allowance for funds used during construction amparo an extraordinary constitutional appeal governed by Articles 103 and 107 of the Mexican Constitution and filed in Mexican federal court Annual Report Annual Report on Form 10-K for the year ended December 31, 2024 AOCI accumulated other comprehensive income (loss) ARO asset retirement obligation ASC Accounting Standards Codification ASEA Agencia de Seguridad, Energa y Ambiente (Mexico's National Agency for Safety, Energy, and Environment) ASU Accounting Standards Update ATM at-the-market equity

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS SEMPRA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in millions, except per share amounts; shares in thousands) Three months ended September 30, Nine months ended September 30, 2025 2024 2025 2024 (unaudited) REVENUES Utilities: Natural gas $ 1,363 $ 1,195 $ 5,195 $ 4,798 Electric 1,260 1,069 3,350 3,269 Energy-related businesses 528 512 1,408 1,360 Total revenues 3,151 2,776 9,953 9,427 EXPENSES AND OTHER INCOME Utilities: Cost of natural gas ( 210 ) ( 99 ) ( 886 ) ( 790 ) Cost of electric fuel and purchased power ( 122 ) 18 ( 265 ) ( 227 ) Energy-related businesses cost of sales ( 117 ) ( 134 ) ( 321 ) ( 297 ) Operation and maintenance ( 1,349 ) ( 1,326 ) ( 3,931 ) ( 3,871 ) Depreciation and amortization ( 662 ) ( 614 ) ( 1,955 ) ( 1,811 ) Franchise fees and other taxes ( 194 ) ( 175 ) ( 555 ) ( 515 ) Other income, net 49 65 199 194 Interest income 17 17 65 47 Interest expense ( 403 ) ( 328 ) ( 1,195 ) ( 944 ) Income before income taxes and equity earnings 160 200 1,109 1,213 Income tax (expense) benefit ( 482 ) 105 ( 711 ) 63 Equity earnings 472 454 1,190 1,235 Net income 150 759 1,588 2,511 Earnings attributable to noncontrolling interests ( 55 ) ( 110 ) ( 103 ) ( 325 ) Preferred deemed dividends ( 11 ) — ( 11 ) — Preferred dividends ( 7 ) ( 11 ) ( 29 ) ( 33 ) Preferred dividends of subsidiary — — ( 1 ) ( 1 ) Earnings attributable to common shares $ 77 $ 638 $ 1,444 $ 2,152 Basic EPS: Earnings $ 0.12 $ 1.01 $ 2.21 $ 3.40 Weighted-average common shares outstanding 652,948 633,752 652,538 633,342 Diluted EPS: Earnings $ 0.12 $ 1.00 $ 2.21 $ 3.38 Weighted-average common shares outstanding 654,009 638,061 653,420 636,566 See Notes to Condensed Consolidated Financial Statements. 9 Table of Contents SEMPRA CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Dollars in millions) Sempra shareholders' equity Pretax amount Income tax (expense) benefit Net-of-tax

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