The ratings of Southern California Gas Co. (SoCal Gas; A+/Stable/A-1) reflect the consolidated credit quality of Sempra Energy (Sempra; A-/Stable/A-2), its wholly-owned utility subsidiaries San Diego Gas&Electric Co. (SDG&E) and SoCal Gas, and the substantially increased scope of Sempra Energy's unregulated ventures, including energy trading, merchant generation, and investments in Mexico and South America. Unregulated operations are core businesses of Sempra, and are expected to contribute an average of 50% to Sempra Energy's earnings by 2004. Regulation in California, which, among other things, mandates that the utilities maintain a 48% equity layer, provides sufficient insulation to separate the corporate credit ratings of the utilities from those of the parent and unregulated subsidiaries. SoCal Gas has a very strong
