SRE Company Profile

Global is a holding company for most of the subsidiaries of Sempra Energy that are not subject to California utility regulation.

Global's principal subsidiaries provide the following energy-related products and services:

Sempra Commodities is a wholesale trader of physical and financial energy products, including natural gas, power, crude oil and other commodities, and a trader and wholesaler of metals, serving a broad range of customers;

Sempra Generation acquires, develops and operates power plants for the competitive market;

California Utility Operations

To understand the operations and financial results of the California Utilities, it is important to understand the ratemaking procedures to which they are subject.

The California Utilities are subject to various regulatory bodies and rules at the national, state and local levels. The primary California body is the CPUC which regulates utility rates and operations. The primary national bodies are the Federal Energy Regulatory Commission (FERC) and the Nuclear Regulatory Commission (NRC). The FERC regulates interstate transportation of natural gas and electricity and various related matters. The NRC regulates nuclear generating plants. Local regulators and municipalities govern the placement of utility assets, including natural gas pipelines and electric lines. Other business units are also subject to regulation including, as the case may be, the FERC, various state commissions, local bodies, and various similar bodies in countries other than the United States.

Customers

For regulatory purposes, customers are separated into core and noncore customers. Core customers are primarily residential and small commercial and industrial customers without alternative fuel capability. Noncore customers consist primarily of electric generation (EG), wholesale, large commercial, industrial and enhanced oil recovery customers.

The electric generation and wholesale power sales industries have become highly competitive. As more plants are built and competitive pressures increase, the wholesale pricing of electricity becomes more volatile.
Without the benefit of long-term power sales agreements, such as the 10- year power sales agreement between SER and the DWR, Sempra Energy's sales will be subject to increased price volatility, and it may be unable to sell the power generated by SER's facilities or operate those facilities profitably.