SEMPRA (SRE)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

This combined MD&A includes the operational and financial results of the following three Registrants:

▪Sempra is a holding company whose principal businesses are regulated utilities in California and Texas. Our businesses invest in and operate electric and gas utilities and other energy infrastructure that provide energy services to customers.

▪SDG&E is a regulated public utility that provides electric service to San Diego and southern Orange counties and natural gas service to San Diego County.

▪SoCalGas is a regulated public natural gas distribution utility, serving customers throughout most of Southern California and part of central California.

This combined MD&A should be read in conjunction with the Condensed Consolidated Financial Statements and the Notes thereto in this report, and the Consolidated Financial Statements and the Notes thereto, “Part I – Item 1A. Risk Factors” and “Part II – Item 7. MD&A” in the Annual Report.

Sempra has the following three reportable segments, which reflect how the CODM oversees operational and financial performance:

▪Sempra California

▪Sempra Texas Utilities

▪Sempra Infrastructure

SDG&E and SoCalGas each have one reportable segment.

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RESULTS OF OPERATIONS BY REGISTRANT

Throughout this MD&A, our references to earnings represent earnings attributable to common shares. Variance amounts presented are the after-tax earnings impact (based on applicable statutory tax rates unless otherwise noted) and after NCI but before foreign currency and inflation effects, where applicable.

We discuss herein Sempra’s results of operations and significant changes in earnings, revenues and costs by segment, as well as Parent and other, in the three months (Q2) and six months (YTD) ended June 30, 2026 compared to the same period in 2025. We also discuss herein the impact of foreign currency and inflation rates on Sempra’s results of operations.

RESULTS OF OPERATIONS

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Sempra California

Sempra California’s earnings are comprised of SDG&E and SoCalGas. Because changes in SDG&E’s and SoCalGas’ cost of natural gas and/or electricity are recovered in rates, changes in these costs are offset in the changes in revenues and therefore do not impact earnings, other than potential impacts related to the GCIM for SoCalGas that we describe below. In addition to the changes in cost or market prices, natural gas or electric revenues recorded during a period are impacted by the difference between customer billings and recorded or CPUC-authorized amounts. These differences are required to be balanced over time, resulting in over- and undercollected regulatory balancing accounts. We discuss balancing accounts and their effects further in Note 4 of the Notes to Condensed Consolidated Financial Statements in this report and in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.

In the three months ended June 30, 2026 compared to the same period in 2025, the increase in earnings of $38 million (15%) was primarily due to:

▪$29 million higher income tax benefits primarily from flow-through items

▪$25 million charge in 2025 from disallowed regulatory recovery of COVID-19 costs

▪$21 million higher CPUC base operating margin, net of operating expenses

▪$13 million higher electric transmission margin, including favorable impact from the retroactive application of the June 2026 FERC-approved TO6 settlement

Offset by:

▪$20 million higher net interest expense

▪$10 million lower AFUDC equity

▪$10 million regulatory award approved by the CPUC in 2025

In the six months ended June 30, 2026 compared to the same period in 2025, the increase in earnings of $34 million (3%) was primarily due to:

▪$59 million higher CPUC base operating margin, net of operating expenses, including $43 million recognition of regulatory revenue reflecting returns on approved WMP capital projects resulting from the 2024 GRC Track 2 FD

▪$25 million charge in 2025 from disallowed regulatory recovery of COVID-19 costs

▪$17 million higher electric transmission margin, including favorable impact from the retroactive application of the June 2026 FERC-approved TO6 settlement

Offset by:

▪$34 million higher net interest expense

▪$15 million lower AFUDC equity

▪$5 million lower income tax benefits primarily from flow-through items

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Sempra Texas Utilities

In the three months ended June 30, 2026 compared to the same period in 2025, the increase in earnings of $138 million was due to higher equity earnings from Oncor Holdings driven by:

▪overall higher revenues primarily attributable to:

◦the surcharge resulting from the comprehensive base rate review, reflecting the difference between newly approved rates and previously effective rates for the period from January 1, 2026 to June 1, 2026

◦increase due to the UTM and SRP

◦new base rates implemented in June 2026

◦rate updates to reflect increases in invested capital

◦customer growth

Offset by:

▪higher depreciation expense and interest expense associated with increases in invested capital

▪higher O&M

In the six months ended June 30, 2026 compared to the same period in 2025, the increase in earnings of $163 million (46%) was due to higher equity earnings from Oncor Holdings driven by:

▪overall higher revenues primarily attributable to:

◦increase due to the UTM and SRP

◦the surcharge resulting from the comprehensive base rate review, reflecting the difference between newly approved rates and previously effective rates for the period from January 1, 2026 to June 1, 2026

◦new base rates implemented in June 2026

◦rate updates to reflect increases in invested capital

◦customer growth

Offset by:

◦lower customer consumption primarily attributable to weather

Offset by:

▪higher depreciation expense and interest expense associated with increases in invested capital

▪higher O&M

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Sempra Infrastructure

In the three months ended June 30, 2026 compared to the same period in 2025, the increase in earnings of $158 million was primarily due to:

▪$46 million from $20 million income tax benefit in 2026 compared to $26 million income tax expense in 2025 as a result of classifying SI Partners and Ecogas as held for sale, comprised of the following:

◦$21 million income tax benefit in 2026 to adjust deferred income tax liabilities primarily related to outside basis differences in our investment in SI Partners

◦$25 million from $1 million income tax expense in 2026 compared to $26 million income tax expense in 2025 related to a Mexican deferred income tax liability on our outside basis difference in Ecogas

▪$37 million lower depreciation expense as a result of classifying SI Partners and Ecogas as held for sale in September 2025 and June 2025, respectively

▪$34 million from asset and supply optimization driven by higher unrealized gains on commodity derivatives due to changes in natural gas prices and optimization of transport and storage contracts

▪$27 million favorable impact from foreign currency and inflation effects on our monetary positions in Mexico and associated undesignated derivatives, comprised of a $71 million unfavorable impact in 2026 compared to a $98 million unfavorable impact in 2025

▪$10 million lower O&M from changes in provisions for expected credit losses

▪$7 million higher net interest income

Offset by:

▪$26 million higher income tax expense primarily from other outside basis differences and changes in tax allocations between Sempra Infrastructure and Parent and other

▪$11 million lower revenues driven by a contract modification in December 2024 on an LNG storage and regasification agreement that ended in December 2025

In the six months ended June 30, 2026 compared to the same period in 2025, the increase in earnings of $274 million was primarily due to:

▪$92 million from asset and supply optimization driven by higher unrealized gains on commodity derivatives due to changes in natural gas prices and optimization of transport and storage contracts

▪$81 million from $55 million income tax benefit in 2026 compared to $26 million income tax expense in 2025 as a result of classifying SI Partners and Ecogas as held for sale, comprised of the following:

◦$54 million income tax benefit in 2026 to adjust deferred income tax liabilities primarily related to outside basis differences in our investment in SI Partners

◦$27 million from $1 million income tax benefit in 2026 compared to $26 million income tax expense in 2025 related to a Mexican deferred income tax liability on our outside basis difference in Ecogas

▪$73 million lower depreciation expense as a result of classifying SI Partners and Ecogas as held for sale in September 2025 and June 2025, respectively

▪$39 million favorable impact from foreign currency and inflation effects on our monetary positions in Mexico and associated undesignated derivatives, comprised of a $52 million unfavorable impact in 2026 compared to a $91 million unfavorable impact in 2025

▪$19 million lower net interest expense

Offset by:

▪$31 million from income tax expense in 2026 compared to income tax benefit in 2025 primarily from other outside basis differences and changes in tax allocations between Sempra Infrastructure and Parent and other

▪$24 million lower revenues driven by a contract modification in December 2024 on an LNG storage and regasification agreement that ended in December 2025

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Parent and Other

In the three months ended June 30, 2026 compared to the same period in 2025, the decrease in losses of $1 million (1%) was primarily due to:

▪$11 million preferred dividends in 2025 prior to the redemption of series C preferred stock in October 2025

▪$9 million higher income tax benefits primarily from changes in tax allocations between Sempra Infrastructure and Parent and other

Offset by:

▪$19 million higher net interest expense

In the six months ended June 30, 2026 compared to the same period in 2025, the increase in losses of $5 million (3%) was primarily due to:

▪$36 million higher net interest expense

▪$11 million lower net investment gains on dedicated assets in support of our employee nonqualified benefit plan and deferred compensation plan

Offset by:

▪$22 million preferred dividends in 2025 prior to the redemption of series C preferred stock in October 2025

▪$17 million higher income tax benefits primarily from changes in tax allocations between Sempra Infrastructure and Parent and other

SIGNIFICANT CHANGES IN REVENUES AND COSTS

The regulatory framework permits SDG&E and SoCalGas to recover certain program expenditures and other costs authorized by the CPUC (referred to as “refundable programs”), which may be subj

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

This combined MD&A includes the operational and financial results of the following three Registrants:

▪Sempra is a holding company whose principal businesses are regulated utilities in California and Texas. Our businesses invest in and operate electric and gas utilities and other energy infrastructure that provide energy services to customers.

▪SDG&E is a regulated public utility that provides electric service to San Diego and southern Orange counties and natural gas service to San Diego County.

▪SoCalGas is a regulated public natural gas distribution utility, serving customers throughout most of Southern California and part of central California.

Sempra has the following three reportable segments which reflect how the CODM oversees operational and financial performance:

▪Sempra California

▪Sempra Texas Utilities

▪Sempra Infrastructure

SDG&E and SoCalGas each have one reportable segment.

Below are significant events, including major project updates, that affected our business in 2025 and may continue to affect our future results:

▪The 2025 Wildfire Legislation was signed into law and established, among other things, an $18 billion Continuation Account that would provide additional liquidity to reimburse catastrophic wildfire-related claims incurred by large California electric IOUs if the Wildfire Fund is depleted, and a multi-stakeholder task force, coordinated by the Wildfire Fund’s administrator, to prepare and submit to the California legislature and Governor of California on or before April 1, 2026, a report that evaluates and sets forth recommendations on new models to complement or replace the Wildfire Fund

▪The CPUC issued an FD for SDG&E’s and SoCalGas’ cost of capital for 2026 through 2028

▪The CPUC issued an FD in SDG&E’s 2024 GRC Track 2 request that authorizes partial recovery of SDG&E’s WMP costs

▪Oncor filed its 2025 comprehensive base rate review and expects to receive a final order from the PUCT in the first half of 2026

▪In June 2025, Texas House Bill 5247, which established the UTM, was signed into law and became effective

▪In September 2025, we entered into an agreement to sell 45% of our equity interest in SI Partners to the KKR Partners for an aggregate base purchase price of approximately $9.99 billion, subject to adjustments, and expect the sale to close in the second or third quarter of 2026, subject to closing conditions

▪In December 2025, we entered into an agreement to sell Ecogas for 9.0 billion Mexican pesos (approximately $500 million U.S. dollar-equivalent at December 31, 2025), subject to adjustments, and expect the sale to close in the second or third quarter of 2026, subject to closing conditions

▪We sold a 49.9% equity interest in the PA LNG Phase 2 project to Blackstone

▪SI Partners reached a positive FID on the PA LNG Phase 2 project and issued a full notice-to-proceed under Bechtel’s fixed-price EPC contract

▪We invested $12.6 billion in capital expenditures and investments

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RESULTS OF OPERATIONS BY REGISTRANT

Throughout this MD&A, our references to earnings represent earnings attributable to common shares. Variance amounts presented are the after-tax earnings impact (based on applicable statutory tax rates unless otherwise noted) and after NCI but before foreign currency and inflation effects, where applicable.

We discuss herein Sempra’s results of operations and significant changes in earnings, revenues and costs by segment, as well as Parent and other, for the year ended December 31, 2025 compared to the year ended December 31, 2024. For a discussion of our results of operations and significant changes in earnings, revenues and costs for the year ended December 31, 2024 compared to the year ended December 31, 2023, refer to “Part II – Item 7. MD&A – Results of Operations” in our 2024 annual report on Form 10-K filed with the SEC on February 25, 2025. We also discuss herein the impact of foreign currency and inflation rates on Sempra’s results of operations.

RESULTS OF OPERATIONS

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Sempra California

Sempra California’s earnings are comprised of SDG&E and SoCalGas. Because changes in SDG&E’s and SoCalGas’ cost of natural gas and/or electricity are recovered in rates, changes in these costs are offset in the changes in revenues and therefore do not impact earnings, other than potential impacts related to the GCIM for SoCalGas that we describe below. In addition to the changes in cost or market prices, natural gas or electric revenues recorded during a period are impacted by the difference between customer billings and recorded or CPUC-authorized amounts. These differences are required to be balanced over time, resulting in over- and undercollected regulatory balancing accounts. We discuss balancing accounts and their effects further in Note 4 of the Notes to Consolidated Financial Statements.

In 2025 compared to 2024, the decrease in earnings of $418 million (23%) was primarily due to:

▪$432 million charge in 2025 from regulatory disallowances related to 2019 through 2024 associated with the 2024 GRC Track 2 FD, which we discuss in Note 4 of the Notes to Consolidated Financial Statements

▪$159 million lower income tax benefits primarily from flow-through items, including gas repairs tax benefits, offset by impacts from the election to accelerate self-developed software deductions and the resolution of prior year income tax items

▪$63 million higher net interest expense

▪$25 million charge in 2025 from disallowed regulatory recovery of COVID-19 costs

Offset by:

▪$148 million higher CPUC base operating margin, net of operating expenses including higher depreciation, $44 million lower authorized cost of capital and a $32 million charge from regulatory disallowances associated with the 2024 GRC Track 2 FD related to 2025

▪$89 million charge in 2024 for amounts relating to the FERC order finding that the TO5 adder refund provision has been triggered, requiring SDG&E to refund customers the California ISO adder retroactively from June 1, 2019

▪$15 million impairment in 2024 from disallowed capital costs in the 2024 GRC FD

Sempra Texas Utilities

In 2025 compared to 2024, the increase in earnings of $80 million (10%) was primarily due to higher equity earnings from Oncor Holdings driven by:

▪overall higher revenues primarily attributable to:

◦the establishment of the UTM

◦rate updates to reflect increases in invested capital

◦customer growth

◦higher annual energy efficiency program performance bonus

Offset by:

▪higher interest expense and depreciation expense associated with increases in invested capital

▪higher O&M

Sempra Infrastructure

In 2025 compared to 2024, losses were $160 million compared to earnings of $911 million primarily due to:

▪$703 million income tax expense in 2025 as a result of management’s decision to classify SI Partners and Ecogas as held for sale, comprised of the following:

◦$693 million income tax expense to adjust deferred income tax liabilities primarily related to outside basis differences in our investment in SI Partners

◦$10 million income tax expense due to the recognition of a deferred tax liability on our outside basis difference in Ecogas

▪$445 million unfavorable impact from foreign currency and inflation effects on our monetary positions in Mexico, comprised of a $181 million unfavorable impact in 2025 compared to a $264 million favorable impact in 2024

▪$43 million lower income tax benefit primarily from outside basis differences and the remeasurement of certain deferred income taxes

▪$30 million unfavorable impact in interest expense from unrealized gains in 2024 on interest rate swaps related to the PA LNG Phase 1 project

▪$27 million unfavorable impact related to a customer’s early termination of firm transportation agreements, including interest expense

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▪$21 million from TdM driven by lower volumes and lower power prices and unrealized losses in 2025 compared to unrealized gains in 2024 on commodity derivatives due to changes in power prices

Offset by:

▪$52 million from asset and supply optimization driven by higher optimization of transport and storage contracts, higher LNG diversion fees and lower unrealized losses on commodity derivatives due to changes in natural gas prices

▪$38 million lower O&M in 2025 primarily from lower provisions for expected credit losses

▪$37 million lower depreciation expense as a result of management's decision to classify SI Partners and Ecogas as held for sale

▪$31 million higher revenues driven by satisfaction of performance obligations related to customer payments received in advance from a contract modification in December 2024 on an LNG storage and regasification agreement that ended in December 2025

▪$13 million higher net interest income primarily from a change in the fair value of the Support Agreement

Parent and Other

In 2025 compared to 2024, the decrease in losses of $388 million was primarily due to:

▪$252 million from $78 million income tax expense in 2025 compared to $330 million income tax expense in 2024 from changes to a valuation allowance against foreign tax credits that were carried forward from the implementation of the TCJA

▪$191 million net income tax benefit in 2025 from changes to a valuation allowance against certain tax credit carryforwards offset by changes in state income tax apportionment as a result of management’s decision to classify SI Partners as held for sale

▪$22 million income tax benefit in 2025 from the impacts of the OBBBA

▪$19 million higher net investment gains on dedicated assets in support of our employee nonqualified benefit plan and deferred compensation plan

▪$15 million lower preferred dividends

Offset by:

▪$92 million higher net interest expense

▪$16 million equity earnings in 2024 related to our investment in RBS Sempra Commodities LLP from the substantial dissolution of the partnership

▪$11 million preferred deemed dividends related to the redemption of series C preferred stock in 2025

SIGNIFICANT CHANGES IN REVENUES AND COSTS

The regulatory framework permits SDG&E and SoCalGas to recover certain program expenditures and other costs authorized by the CPUC (referred to as “refundable programs”), which may be subject to reviews for reasonableness.

Utilities: Natural Gas Revenues and Cost of Natural Gas

Our utilities revenues include natural gas revenues at Sempra California and Sempra Infrastructure, which includes Ecogas. Intercompany revenues are eliminated in Sempra’s Consolidated Statements of Operations.

SDG&E and SoCalGas operate under a regulatory framework that permits the cost of natural gas purchased for core customers to be passed through to customers in rates substantially as incurred and without markup. The GCIM provides fo

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