Southern California Gas Co.

The negative outlook on Southern California Gas Co. is consistent with our negative outlook on its parent Sempra Energy. The negative outlook on Sempra reflects the company's minimal financial cushion relative to our downgrade threshold and its potential strategic initiatives to expand its liquefied natural gas (LNG) business. Such an expansion would likely increase its business risk and weaken its financial measures during construction. We could lower our ratings on SoCalGas over the next year if we lower our ratings on Sempra. This could occur in the next 12-18 months if Sempra's consolidated financial measures do not improve as expected and its funds from operations (FFO) to debt remains consistently below 15% in 2021 and beyond. We could also lower

...The COVID-19 pandemic has had a limited effect on Southern California Gas Co. (SoCalGas). Given the company's mostly residential customer base (about 95% of its over six million customers), its exposure to the large sales declines in the commercial and industrial sectors has been more limited than those of many of its peers, which suggests that any further slowdown in economic activity related to the pandemic would have limited effect on the utility's revenue and cash flow. In addition, SoCalGas received a constructive order from the CPUC that allows it to track, and subsequently request the recovery of, incremental costs associated with suspending disconnections and any bad debt expenses related to the COVID-19 pandemic in a future regulatory filing. In February 2021, the CPUC extended the moratorium on service disconnections through June 30, 2021, from April 16, 2021. We expect the company to work constructively with its regulators in California to mitigate any potential negative cash...

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