SoCal Gas is a wholly owned subsidiary of Sempra Energy (Sempra). The ratings on Sempra Energy and its wholly owned utility subsidiaries SDG&E and SoCal Gas reflect the consolidated profile of the utilities and the unregulated ventures, which include energy trading, LNG terminals, merchant generation, and energy-related investments in Mexico and South America. Regulation in California, which, among other things, mandates that the utilities maintain a 48% equity layer, provides sufficient insulation to separate modestly the corporate credit ratings of the utilities from those of the parent and unregulated subsidiaries. Overall, while the utilities are an important, stabilizing influence on Sempra's credit quality, we see Sempra's overall business risk as being driven by its large energy trading operation and its
