SEMPRA ENERGY
U-1/A, 1998-10-30
GAS & OTHER SERVICES COMBINED
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                             (As filed October 30, 1998)
                                                           File No. 70-9333

                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C.  20549
               ________________________________________________________

                                      FORM U-1/A

                                   Amendment No. 1
                                          to
                           JOINT APPLICATION OR DECLARATION
                 UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
              _________________________________________________________

          Sempra Energy                 Frontier Pacific, Inc.
          101 Ash Street                555 West Fifth Street, Suite 2900
          San Diego, California 92101   Los Angeles, California
                                        90013-1001

                    (Names of companies filing this statement and
                      addresses of principal executive offices)
                _____________________________________________________

                                         None

                   (Name of top registered holding company parent)
                ______________________________________________________

          Richard D. Farman             Stephen L. Baum
          President and Chief           President and Chief
          Executive Officer             Executive Officer
          Pacific Enterprises           Enova Corporation
          555 West Fifth Street,        101 Ash Street
          Suite 2900                    San Diego, California 92101
          Los Angeles, California
          90013-1001

                     (Names and addresses of agents for service)

              The Commission is requested to send copies of all notices,
                     orders and communications in connection with
                         this Application or Declaration to:

          Donald C. Liddell, Esq.       Richard M. Farmer, Esq.
          David L. Huard, Esq.          Andrew F. MacDonald, Esq.
          Pacific Enterprises           William C. Weeden
          633 West Fifth Street,        Thelen Reid & Priest LLP
          Suite 5200                    40 West 57th Street
          Los Angeles, California       New York, New York 10019
          90071


     <PAGE>


               The Application or Declaration heretofore filed in this
          proceeding is hereby amended and restated in its entirety to read
          as follows:

          ITEM 1.   DESCRIPTION OF PROPOSED TRANSACTION.
                    -----------------------------------

               1.1. Introduction and Description of Applicants' Business.
                    ----------------------------------------------------

               Sempra Energy ("Sempra") is an exempt holding company
          pursuant to Section 3(a)(1) of the Public Utility Holding Company
          Act of 1935, as amended (the "Act").  Sempra owns all of the
          common stock of Pacific Enterprises ("Pacific") and Enova
          Corporation ("Enova"), which are also exempt holding companies
          pursuant to Section 3(a)(1) of the Act.1/  Through a subsidiary,
          Frontier Pacific, Inc. ("Frontier Pacific"),2/ Sempra is
          proposing to acquire up to 90.1% of the membership interests of
          Frontier Energy LLC ("Frontier"), a North Carolina limited
          liability company formed to construct and operate a small gas
          distribution system in North Carolina.  The remaining membership
          interests in Frontier would be acquired by Frontier Utilities of
          North Carolina, Inc. ("Frontier Utilities"), a North Carolina
          corporation and an indirect, majority-owned subsidiary of ARB,
          Inc., a closely-held California corporation.3/ 

          ---------------

          1/  See Sempra Energy, 67 SEC Docket 994 (June 26, 1998). 
          Pacific (formerly Pacific Lighting Corporation) is exempt by
          order issued pursuant to Section 3(a)(1).  See Pacific Lighting
          Corporation, 1 S.E.C. 275 (1936).  Enova claims an exemption
          under Section 3(a)(1) pursuant to Rule 2.  See File No. 69-393. 

          2/  All of the issued and outstanding common stock of Frontier
          Pacific is currently held by Sempra Energy, LLC, a California
          limited liability company whose membership interests are, in
          turn, held directly by Pacific and Enova.  Prior to the date of
          the Commission's order in this proceeding, the stock of Frontier
          Pacific will be transferred to Sempra.

          3/  ARB, Inc. is not now a "holding company" or an "affiliate" of
          any "holding company" or "public-utility company," as those terms
          are defined under Section 2 of the Act.


     <PAGE>


               Pacific's predominant subsidiary, Southern California Gas
          Company ("SoCalGas"), purchases, transports and distributes
          natural gas in southern California.  At December 31, 1997,
          Pacific reported consolidated total assets of $4.977 billion, of
          which approximately $3.154 billion consisted of net gas plant. 
          For the year ended December 31, 1997, Pacific reported $2.738
          billion in operating revenues (including revenues from
          transportation-only customers) and $184 million in net income.

               Enova's principal subsidiary, San Diego Gas & Electric
          Company ("SDG&E"), provides electric and natural gas service in
          San Diego and surrounding areas.  At December 31, 1997, Enova
          reported consolidated total assets of $5.2 billion, of which
          approximately $2.49 billion consisted of net electric plant and
          $449 million consisted of net gas plant.  For the year ended
          December 31, 1997, Enova reported operating revenues of $2.2
          billion (81.6% from electricity sales and 18.4% from gas sales
          (including revenues from transportation-only customers)), and
          $252 million in net income. 

               Sempra's non-utility subsidiaries include Sempra Energy
          Utility Ventures ("Sempra Ventures"), which is currently managing
          the development and construction of the Frontier gas system and
          other "green field" local gas distribution systems in the United
          States and Canada, and Sempra Energy Trading Corp. ("Sempra
          Trading"), which is engaged in marketing and trading physical and
          financial energy products, including natural gas, power and oil. 
          Sempra Trading is the successor to AIG Trading Corporation, which
          was acquired by Pacific and Enova in December 1997.  In August
          1998, Sempra Trading completed its acquisition of CNG Energy
          Services Corp., the wholesale gas marketing and trading arm of


                                      2
     <PAGE>


          Consolidated Natural Gas Company, as a result of which Sempra
          Trading is now among the ten largest gas marketers and traders in
          the United States.

               SoCalGas and SDG&E derive substantially all of their gas
          requirements from sources outside of California.  Approximately
          58% of their combined system gas requirements are met from
          production in the Permian Basin, which is located in west Texas,
          and the San Juan Basin, which is located primarily in New Mexico
          and Colorado in the "Four Corners" area.  Most of the gas
          produced in these supply basins is delivered to California by El
          Paso Natural Gas Company ("El Paso") and Transwestern Pipeline
          Company ("Transwestern") under long-term transportation
          agreements. SoCalGas and SDG&E purchase their gas under a variety
          of long-term, short-term and daily contracts from producers in
          the two supply basins, as well as from gas marketers and brokers,
          including Sempra Trading.  Sempra Trading also purchases most of
          the gas it sells in southern California from production in the
          Permian and San Juan Basins.

               1.2  Description of Frontier and Its Properties.
                    ------------------------------------------

               By order issued January 30, 1996, Frontier Utilities was
          granted a final certificate of public convenience and necessity
          (the "Certificate Order") from the North Carolina Utilities
          Commission ("NCUC") to construct, test, market, own and operate a
          new natural gas distribution system in a four-county area in
          northwestern North Carolina comprised of Surrey, Watauga, Wilkes 
          and Yadkin Counties (the "Four-County Area").4/   Subsequently,

          ---------------

          4/  In the Matter of Application of Frontier Utilities of North
          Carolina, Inc. for Certificate of Public Convenience and
          Necessity, NCUC Docket No. G-38, January 30, 1996 (Order Granting
          Final Certificate), 166 PUR 4th 565.  The order was affirmed on
          appeal by the Supreme Court of North Carolina on a challenge by
          Piedmont Natural Gas Company, Inc., whose competing proposal the
          NCUC had rejected.  State of North Carolina v. Piedmont Natural
          Gas Company, Inc., 488 S.E. 2d 591 (N.C. Sup. Crt. 1997).


                                      3
     <PAGE>

 
          by order dated August 16, 1996,5/ the NCUC added Ashe and
          Allegheny Counties, which are located in the same region, to
          Frontier Utilities' certificated territory, and by order dated
          March 27, 1997,6/ granted Frontier Utilities a certificate of
          convenience and necessity to construct and operate a gas
          distribution system in Warren County, which is to the east of the
          Four-County Area.  By further order dated March 9, 1998 (the
          "Financing Order"), the NCUC approved various proposals by
          Frontier Utilities and Frontier relating to financing of
          construction of a gas system in the Four-County Area and Warren
          County, including the participation of Frontier Pacific as an
          equity investor in Frontier, and the transfer by Frontier
          Utilities to Frontier of the certificates to serve the Four-
          County Area, as well as Ashe, Allegheny and Warren Counties.7/ 
          Copies of Frontier Utilities' application to the NCUC and the
          Financing Order are attached hereto as Exhibits D-1 and D-2,
          respectively.

               Frontier commenced construction in the Four-County Area
          during the second quarter of 1998.  Construction in Warren County
          will commence at a later date, subject to receipt of further NCUC
          approvals.  When complete, the Four-County Area system will
          consist of approximately 140 miles of transmission mains,
          including a 40-mile lateral tap off the interstate pipeline


          ----------------

          5/  In the Matter of Commission Proceeding to Implement G.S. 62-
          36A(b1), NCUC Docket No. G-100, Sub. 69 (August 16, 1996).  This
          was a generic proceeding in which the NCUC implemented a new law
          that required that the NCUC grant certificates to provide gas
          service to all unfranchised areas in North Carolina or, in the
          absence of any applications for such certificates, that the NCUC
          assign to the incumbent utilities in the state franchises
          covering all such uncertificated areas.  Because of their
          proximity to the Four-County Area, the franchises for Ashe and
          Allegheny Counties were assigned to Frontier Utilities.

          6/  In the Matter of Frontier Utilities of North Carolina, Inc.
          for Certificate of Public Convenience and Necessity, NCUC Docket
          No. G-38, Sub. 1, March 27, 1997 (Order Awarding Certificate and
          Approving Rates).

          7/  Order Approving Final Financing Plan, Transfer of
          Certificates, and Security Bond and Preliminarily Approving Debt
          Financing, NCUC Docket Nos. G-38, Sub 3 and G-40 (March 9, 1998). 
          Although Frontier has indicated that it intends to build out a
          system in Ashe and Allegheny Counties at such time as it becomes
          feasible to do so, the financing plan approved by the NCUC does
          not include the system to be built in those counties.  


                                      4
     <PAGE>


          facilities of Transcontinental Gas Pipe Line Corp. ("Transco"),
          and at least 320 miles of distribution mains.  Initially,
          Frontier will purchase all of its gas requirements from Sempra
          Trading pursuant to the terms of an agreement, dated September
          17, 1998, from production in the San Juan and Permian Basins. 
          Although Frontier will have the right to purchase gas from other
          suppliers in the future, it is anticipated that it will continue
          to derive at least 50% of its supplies from these two supply
          basins.  Gas will be delivered to Frontier by Transco under a
          long-term transportation contract.  Frontier is projecting that,
          by the end of the fifth year following commencement of
          construction, it will serve 13,250 residential, 1,054 small
          commercial, 300 poultry farm, and 55 large commercial and
          industrial customers.  (Exhibit D-1, p. 10).  As a public utility
          under North Carolina law, Frontier will be subject to regulation
          by the NCUC as to rates, service, securities issuances and other
          matters.

               The Certificate Order contains various findings and
          conclusions as to technical issues, the financial feasibility of
          the Four-County Area system, and the public interest to be
          served.  Two of the central issues in the proceeding concerned
          the optimum size of the Four-County Area system and the
          likelihood that customers would convert from propane and heating
          oil to natural gas.  These issues were critical in the NCUC's
          evaluation of Frontier Utilities' proposal, which assumed that
          the proposed system could support traditional financing, and of
          the competing proposal made by Piedmont Natural Gas Company, Inc.
          ("Piedmont"), an existing franchised gas utility company in North
          Carolina, which was made contingent upon the availability of 
          "expansion funds" provided for under North Carolina law.8/   With
          regard to the financial feasibility of Frontier Utilities'
          proposed system in the Four-County Area, the NCUC considered a

          ----------------

          8/  See N.C. Gen. Stat. Section 62-158 (Michie, 1997).


                                      5
     <PAGE>


          detailed market study prepared by an independent consultant
          (Heath and Associates) which evaluated the potential customers
          and loads in the Four-Country Area and the likelihood of
          converting these customers to gas at the rates and rate designs
          proposed by Frontier Utilities.  During the hearings, witnesses
          for Heath and Associates and Frontier Utilities were cross-
          examined at length concerning the data used and assumptions made
          in the Heath and Associates study and an earlier study prepared
          by Frontier Utilities.  Despite certain discrepancies between the
          Health and Associates study and Frontier Utilities' initial study
          as to likely number of customers, the configuration of the 
          system, conversion rates and other matters,9/ the NCUC concluded
          that "the market study performed by Heath and Associates provides
          a fair and unbiased assessment of the potential customers and
          loads resulting from an extensive rural distribution system in
          the Four-County area at the rates that Frontier proposed to
          offer."  (Certificate Order, p. 19).

               1.3  Description of Frontier's Ownership Structure and
                    -------------------------------------------------
          Management Plan.
          ---------------

               It is contemplated that Frontier Pacific and Frontier
          Utilities will each acquire 50% of the membership interests of
          Frontier, and that the economic interests of the members will
          equal their membership interests.10/  Under the Financing Order,
          the NCUC authorized the equity investments by the members of
          Frontier, including cash and in-kind contributions of pipeline

          ----------------

          9/  Heath and Associates forecast that the gas system would have
          8,553 customers in year 10 and sales of 4 million dekatherms per
          year.  Certificate Order, p. 13.  Frontier Utilities offered
          testimony showing that it would be economically feasible to serve
          an additional 5000 customers outside of the areas included in the
          Heath and Associates analysis.

          10/  An organizational chart showing the ownership structure of
          Frontier and its members is set forth at page 5 of Frontier
          Utilities' Application for Approval of Financing Plan (Exhibit D-
          1 hereto).


                                      6
     <PAGE>

  
          and other property, totaling approximately $12 million.  In
          addition, the NCUC has given its preliminary approval for $40
          million in debt financing by Frontier.

               Under Frontier's Operating Agreement (attached hereto as
          Exhibit A-2), the economic interest of a member is defined as
          that member's interest in the profits and losses of Frontier and
          right to receive distributions from Frontier.  The membership
          interest of a member means that member's economic interest, plus
          the right to participate in management of Frontier, including the
          right to vote.  The Operating Agreement specifically contemplates
          that Frontier Pacific and Frontier Utilities may adjust or change
          their respective economic and membership interests whenever
          necessary in order, for example, to limit the percentage of
          overall voting rights held by a member.  Pacific and Enova are
          seeking approval herein to acquire, indirectly through Frontier
          Pacific, up to 90.1% of the membership interests of Frontier,
          representing 90.1% of the voting interests in Frontier.  This
          will enable Frontier Utilities, should it choose to do so, to
          maintain its percentage interest in Frontier's voting securities
          at below 10%.

               It is anticipated that the day-to-day operations of Frontier
          will be under the control of its General Manager, who will be
          located at Frontier's corporate headquarters in Elkin, North
          Carolina.  The General Manager will report to the President of
          Frontier, who will be located in San Diego, California.  It is
          also anticipated that Frontier will be staffed by a combination
          of current employees of the members of Frontier and their
          respective affiliates and new hires from the local area in North
          Carolina.

               As previously indicated, Sempra Ventures is overseeing the
          development and construction of the Frontier system.  On an
          ongoing basis, Sempra Ventures and other subsidiaries of Sempra
          will provide Frontier with a variety of administrative and


                                      7
     <PAGE>

  
          management services.  Specifically, it is anticipated that
          SoCalGas and SDG&E will provide services to Frontier in such
          areas as payroll, tax, insurance, accounting, human resources
          (compensation and benefits plan administration), regulatory
          support, procurement/materials and quality assurance programs,
          technical and design engineering, training and legal services.11/ 
          Additional corporate support services, including finance and
          general administrative support, will be provided to Frontier by
          Sempra and Sempra Ventures.  A fuller description of the kinds of
          support services that Sempra Ventures, SoCalGas and SDG&E intend
          to provide to Frontier is contained in Exhibit I hereto. 

               Thus, with the assistance and support of Sempra Ventures,
          SoCalGas and SDG&E, Frontier will be able to enter the natural
          gas business with an experienced management team in place.  In
          accordance with one or more service agreements, services provided
          by Sempra Ventures and other utility and non-utility affiliates
          of Sempra will be directly assigned, distributed or allocated to
          Frontier by activity, project, program, work order or other
          appropriate basis.   Employees of the members and their
          affiliates will record transactions utilizing the data capture
          and accounting systems of Frontier.  Such agreements are required
          to be filed with the NCUC.

               Under the September 17, 1998 agreement between Frontier and
          Sempra Trading, Sempra Trading has agreed to supply Frontier's
          full requirements of gas.  The agreement sets forth price and
          quantity terms, including a projection of Frontier's supply needs
          through 2000, and provides that gas supplied by Sempra Trading

          ---------------- 

          11/  Although there are some limitations on the types of
          affiliate services that SoCalGas and SDG&E may provide to
          Frontier under California's rules governing affiliate
          transactions (see Item 3.3, below), SoCalGas and SDG&E would not
          be barred from providing any of the services indicated. 


                                      8
     <PAGE>


          must be contractually sourced in the Permian and San Juan supply
          basins for delivery at the Frontier/Transco interconnection in
          Owen County, North Carolina.         

               Sempra Ventures, in conjunction with Sempra Trading and
          Frontier's General Manager in North Carolina, will coordinate the
          purchase, scheduling and delivery of natural gas, transportation
          capacity and related financial risk management products.  Such
          coordination will involve the development of annual and monthly
          gas acquisition plans for Frontier.  In this connection, the
          General Manager will have access to the information available
          from electronic bulletin boards monitored by Sempra Trading12/
          and will be able to communicate directly as necessary with
          personnel of Sempra Ventures and Sempra Trading on a day-to-day
          basis to schedule gas purchases and delivery based on anticipated
          projections of customer growth on the Frontier system, weather
          conditions, and market price volatility.  Frontier's General
          Manager and Sempra Trading will meet prior to the commencement of
          each month to review options for supply purchases (i.e., long-
          term supply contracts or daily or "spot" market purchases).  Such
          options will be evaluated in order to obtain the lowest cost of
          gas for Frontier.  

               In addition, Sempra Trading will assist Frontier in making
          nominations on the Transco system and other pipelines in
          accordance with approved schedules with a view to minimizing any
          penalties for over-utilization or under-utilization of the
          Transco pipeline system.  Frontier will provide gas supply
          receipt information to Sempra Trading, which Sempra Trading will
          use to compare against the confirmed nominations received from

          ----------------

          12/  All interstate pipelines and many intrastate pipelines are
          required to post information on capacity availability and related
          services on electronic bulletin boards.  Other market makers
          (e.g., brokers) may also post information on electronic bulletin
          boards as an aid to matching buyers and sellers.  In some cases,
          there is a subscription fee charged for access to electronic
          bulletin boards.  


                                      9
     <PAGE>


          Transco.  Sempra Trading may also purchase from SoCalGas released
          capacity on the El Paso and Transwestern pipelines in
          transactions that are posted on electronic bulletin boards in
          accordance with FERC rules governing sales of released capacity. 
          Such released capacity may be used to transport gas flowing
          either westward to California or eastward to Frontier's system.   

               The purchase, nomination, confirmation, transportation and
          dispatch of gas for ultimate consumption is a seven-day-a-week,
          24-hour per day operation.  Under Gas Industry Standards Board
          ("GISB") protocols adopted by FERC and implemented through 
          pipeline tariffs,13/ most decisions and actions are based on a
          two-day nominations schedule in which the first day is referred
          to as the "nominations day" ("Nom Day") and the second day the
          "flow day" ("Flow Day").  Under this nominations process, in
          addition to monthly planning for base-load gas purchases, the
          General Manager of Frontier will advise Sempra Trading prior to
          10:00 a.m. Eastern Time each day (the Nom Day) of Frontier's
                                  ---- 
          requirements for the following day (the Flow Day).  Sempra 
          Trading will then determine what gas supply is available to meet
          Frontier's requirements from the various supply basins which it
          regularly monitors through its contacts with producers throughout
          the United States and Canada.  Sempra Trading will arrange to
          purchase gas from producers from the common supply basins that
          are accessible by Frontier and Sempra's other utility
          subsidiaries, principally the San Juan and Permian basins, and
          various hubs and market centers in the south and southwest.

          ----------------

          13/  See Standards for Business Practices of Interstate Natural
          Gas Pipelines, FERC Order No. 587, 61 Fed. Reg. 39,053 (July 26,
          1996); order denying rehearing, FERC Order No. 587-A, 61 Fed.
          Reg. 55,208 (October 25, 1996).  The GISB standards govern
          nominations, allocations, balancing, measurement, invoicing,
          capacity release, and mechanisms for electronic communications
          between pipelines and their customers.  Like other interstate
          pipelines, Transco has implemented these protocols through its
          tariff sheets.  See Transcontinental Pipe Line Corporation, 78
          F.E.R.C. P 61,210 (March 3, 1997) and 79 F.E.R.C. P 61,172 (May 5,
          1997).


                                      10
     <PAGE>  


               As available supply and available transportation capacity
          are matched, there are several intra-day nomination and
          confirmation opportunities which must be managed by Sempra
          Trading to make the most economical supply of gas available to
          Frontier and to address situations where supply or capacity
          imbalances may have occurred.  This intra-day nomination process
          typically provides a gas utility company with opportunities to
          redirect gas supply or capacity or renegotiate the terms of
          contracts during the Nom Day, as well as to make spot market
          purchases.  The second day (the Flow Day) also provides
          opportunities for nomination of additional supplies if required
          by Frontier or for sales of gas to others if Frontier's demand
          slackens.  This intra-day balancing process will be made possible
          through Frontier's access to Sempra Trading's large portfolio of
          supplies and customers.  

               The nominations and intra-day balancing functions of a gas
          company requires the availability of personnel 24 hours per day
          who can manage contacts with producers and each of the pipelines
          required to complete the transportation route, as well as with
          various intermediaries (e.g., hub operators) who can accommodate
          the exchange of gas from one supply basin to another or the
          storage of gas for future use.  Maintenance of the necessary
          contacts and the coordination of these activities requires a
          significant staff.  For a utility the size of SoCalGas or SDG&E, 
          this staff could number 50 or more people.  Even a small utility,
          such as Frontier, would require a staff of between five to eight
          full-time employees in its gas supply department.  Through its
          arrangements with Sempra Trading, Frontier will have access to
          personnel who will perform these functions and, therefore, will
          not need to incur the significant costs that would otherwise be
          associated with building an in-house gas management capability.


                                      11
     <PAGE>


          ITEM 2.   FEES, COMMISSIONS AND EXPENSES. 
                    ------------------------------

               The fees, commissions and expenses to be paid or incurred,
          directly or indirectly, in connection with the Transaction,
          inclusive of legal fees and expenses, are estimated at not more
          than $100,000.


          ITEM 3.   APPLICABLE STATUTORY PROVISIONS.
                    -------------------------------

               3.1  General Overview of Applicable Statutory
                    ----------------------------------------
          Provisions.
          ----------

               Because Sempra is an exempt holding company, it will require
          approval of the SEC under Sections 9(a)(2) and 10 of the Act to
          acquire, directly or indirectly, 5% or more of the voting
          securities of Frontier, which will become a "gas-utility company"
          within the meaning of Section 2(a)(4) of the Act on or after the
          date on which it commences making residential and small
          commercial sales of gas.  Further, following the acquisition of
          10% or more of Frontier's voting securities, and the commencement
          by Frontier of residential and small commercial sales, Frontier
          will become a gas-utility subsidiary company of Sempra and
          Frontier Pacific.  However, because Sempra will not derive "any
          material part of its income" from Frontier, and will remain
          "predominantly" a California holding company, its "intrastate"
          exemption under Section 3(a)(1) of the Act will not be
          affected.14/   Frontier Pacific, which will be reincorporated in
          North Carolina, does not own, directly or indirectly, 5% or more
          of the voting securities of any other public-utility company. 

          ---------------

          14/  Under the Operating Agreement, Frontier Pacific will have a
          50% economic interest in Frontier.  Based on current projections,
          the proportionate share of Frontier's income attributable to
          Sempra is expected to account for far less than 1% of the
          consolidated income of Sempra on a pro forma basis.


                                      12
     <PAGE>
 

               The relevant standards for approval of an application under
          Section 10 are set forth in subsections (b), (c) and (f) thereof.

               Section 10(b) provides that, if the requirements of Section 

          10(f) are satisfied, the Commission shall approve an acquisition
          under Section 9(a) unless the Commission finds that:

                    (1)  such acquisition will tend towards interlocking
               relations or the concentration of control of public-utility
               companies, of a kind or to an extent detrimental to the
               public interest or the interest of investors or consumers;

                    (2)  in case of the acquisition of securities or
               utility assets, the consideration, including all fees,
               commissions, and other remuneration, to whomsoever paid, to
               be given, directly or indirectly, in connection with such
               acquisition is not reasonable or does not bear a fair
               relation to the sums invested in or the earning capacity of
               the utility assets to be acquired or the utility assets
               underlying the securities to be acquired; or

                    (3)  such acquisition will unduly complicate the
               capital structure of the holding company system of the
               applicant or will be detrimental to the public interest or
               the interest of investors or consumers or the proper
               functioning of such holding company system.

               Section 10(f) provides that the Commission:

               shall not approve any acquisition . . . unless it appears to
               the satisfaction of the Commission that such State laws as
               may apply in respect of such acquisition have been complied
               with, except where the Commission finds that compliance with
               such  State laws would be detrimental to the carrying out of
               the provisions of section 11.

               Finally, Section 10(c) of the Act provides that,
          notwithstanding the provisions of Section 10(b), the Commission
          shall not approve:

                    (1)  an acquisition of securities or utility assets, or
               of any other interest, which is unlawful under the
               provisions of Section 8 or is detrimental to the carrying
               out of the provisions of Section 11; or

                    (2)  the acquisition of securities or utility assets of
               a public-utility or holding company unless the Commission
               finds that such acquisition will serve the public interest
               by tending towards the economical and the efficient
               development of an integrated public-utility system.


                                      13
     <PAGE>


          An "integrated public-utility system" is defined in Section
          2(a)(29)(B), as applied to a gas utility system, to mean:

               . . .  a system consisting of one or more gas utility
               companies which are so located and related that substantial
               economies may be effectuated by being operated as a single
               coordinated system confined in its operations to a single
               area or region, in one or more States, not so large as to
               impair (considering the state of the art and the area or
               region affected) the advantages of localized management,
               efficient operation, and the effectiveness of regulation:
               Provided, That gas utility companies deriving natural gas
               from a common source of supply may be deemed to be included
               in a single area or region. 

               For the reasons set forth below, Sempra believes that the
          requirements of Section 10(f) have been met; that its indirect
          acquisition of Frontier's voting securities will satisfy the
          integration standards under Sections 10(c) and 2(a)(29)(B); and
          that there is no basis for the Commission to make any of the
          negative findings enumerated in Section 10(b).  As a preliminary
          matter to the discussion that follows concerning the integration
          standards of the Act, as applied to this transaction, however,
          Sempra believes that it is important to understand the current
          "state of the art" in the natural gas industry and to review the
          dramatic changes that have occurred in the gas industry since
          1935, and especially in the past decade. 

               3.2  Historical Perspective on the "State of the Art" in the
                    -------------------------------------------------------
          Natural Gas Industry in the United States.
          -----------------------------------------

               Although natural gas has been used as a fuel for thousands
          of years, the growth of the natural gas industry in the United
          States can be traced in large part to the development of pipeline
          systems through which large volumes of natural gas could be
          transported from the wellhead (i.e., the gas producing areas) to
          distant markets.15/  In the early days of the U.S. natural gas

          ---------------

          15/  A more detailed history and analysis may be found in
          "Regulation of the Natural Gas Industry," Ed. by American Gas
          Association (Matthew Bender, 1997), Volume 1.


                                      14
     <PAGE>


          industry (1870-1930), natural gas was seldom transported more
          than 50 to 75 miles.  In some areas, gas produced as an incident
          to oil drilling operations was simply burned, or "flared," in the
          oil fields, rather than being piped to nearby cities or towns. 
          Eventually, efforts were made to find commercial uses for this
          "waste" gas, but the technological difficulties and cost of
          transporting gas long distances were limiting factors.  Thus, in
          most communities where gas service was available, the source of
          supply was from locally manufactured gas or from a nearby oil
          field. The first iron pipeline was reportedly built in 1872 to
          transport "waste" gas to Titusville, Pennsylvania, from nearby
          oil fields, where it was used chiefly for street lighting and
          some industrial applications. The first long distance, high
          pressure, gas pipeline, consisting of  two parallel 8-inch 
          wrought iron lines approximately 120 miles in length, was 
          constructed in 1891 by Indiana Natural Gas and Oil Company.  

               A.   Developments in the 1920s and 1930s.  As indicated,
                    -----------------------------------
          prior to the 1930s, natural gas service to cities and towns was
          quite often provided from only one local source or field.  In
          many cases, little was known about the extent of gas reserves in
          a producing area, which tended to limit the willingness of
          investors to commit the large amounts of capital required to
          build pipelines to distant markets.  By the 1920s, however,
          technological advances had been made in the manufacture of large
          diameter pipeline which could withstand high pressures.  This
          made it technologically and economically feasible to construct
          long-distance gas pipelines which could move gas from the
          developing oil fields in Texas, Oklahoma and other Southwestern
          states to the population centers in the Midwest and eastern U.S. 
          This was the first significant change in the "state of the art"
          in the gas industry.


                                      15
     <PAGE>


               In the 1930s, the first of what we now know of as the
          modern-day, long distance, pipelines were constructed to
          transport the "casinghead" gas that was being produced in the
          developing Texas oil fields to Midwest markets.16/   By 1934,
          utilizing improved pipeline and compression technologies, some
          150,000 miles of high-pressure transmission lines were in place.  
          Nevertheless, in 1935, when the Act was passed, the natural gas
          pipeline industry consisted of only two long interstate lines
          extending to the upper Midwest.  For the most part, the pipeline
          industry in the U.S. still consisted of relatively short lines
          used to transport gas from local producing areas directly to
          nearby markets.  Natural gas was generally unavailable in the
          more populous areas on the East Coast and in the Northeast, where
          local distribution gas companies, or "LDCs," continued to
          distribute low-Btu gas produced from coal.

               For the most part, the interstate pipelines remained free
          from federal regulation until 1938, when the Natural Gas Act 
          ("NGA") was passed.17/  Under the NGA, the Federal Power
          Commission ("FPC") was given broad authority to regulate
          interstate pipelines under a public utility model.  This
          included, importantly, certificate authority over construction of
          pipelines and authority to set "just and reasonable" rates for
          sales of gas for resale (i.e., wholesale rates).  For almost 50
          years following passage of the NGA, there were few if any changes
          in the basic structure of the natural gas industry or the
          framework of federal regulation.  The Federal Energy Regulatory
          Commission ("FERC"), the successor to the FPC, has characterized

          ---------------

          16/  In 1931, Natural Gas Pipeline Company of America ("NGPL")
          completed a 24-inch line more than one thousand miles long
          running from the producing areas in Texas to Chicago, and in
          1936, Panhandle Eastern Pipeline Company completed a thousand
          mile pipeline that terminated in Detroit.

          17/  52 Stat. 821-833 (1938), 15 USC Sections 717-717W, as amended.
          In 1906, Congress had amended the Interstate Commerce Act to
          specifically exclude pipelines for the transportation of natural
          gas from the jurisdiction of the Interstate Commerce Commission. 
          30 Stat. 584  (1906).   H.R. 5423, the original House bill
          introduced in 1935 which contained the Public Utility Holding
          Company Act and amendments to the Federal Power Act, also
          included, as Title III, provisions which would have subjected the
          interstate gas pipelines to federal regulation as common
          carriers.  During the hearings on H.R. 5423, however, Title III
          was widely criticized as being unworkable, and was not reported
          out of committee.


                                      16
     <PAGE>


          the structure of the natural gas industry regulated under the NGA
          during this period as "simple:" 

               The producers would sell their natural gas in the production
               area to the interstate pipeline at Commission-determined
               just and reasonable rates.  The pipelines would transport
                                           -----------------------------
               their purchased gas and their own production to the city
               --------------------------------------------------------
               gate for sale to local distribution companies (LDCs) at
               -------------------------------------------------------
               Commission-determined just and reasonable rates which
               -----------------------------------------------------
               recovered both the pipelines' cost of gas and cost of
               -----------------------------------------------------
               transmission.  In addition, the pipelines would sell gas to
               ------------
               end users in non-jurisdictional sales with an appropriate
               allocation of costs to the non-jurisdictional services. 
               Producer sales to LDCs or end users in the production area,
               with the pipeline providing only the transportation, were
               rare.  The central features of the NGA-regulated natural gas
               industry were Commission-determined just and reasonable
               prices and interstate pipeline sales of gas for resale to
               LDCs at the city gate at those prices in transactions that
               combined or bundled into one package the pipelines' gas
               supply and transmission costs. (Emphasis added.)  
               (Footnotes omitted.)18/

               The "source of supply" of natural gas at the time the Act
          was passed and for most of the next 50 years must be understood
          in the context of the relationship that existed between the
          pipelines and LDCs: the pipelines were in almost all instances
          the exclusive suppliers to the LDCs, which had little opportunity
          to contract with producers or other sellers.  This was the "state
          of the art" in the gas industry.

               B.   Developments After World War II.  Although significant
                    -------------------------------
          changes in the regulation of the industry were still many years
          away, the natural gas pipeline industry underwent rapid expansion
          in the decades after 1938, and especially following World War II,
          when the steel pipe manufacturing capacity in the U.S., which had
          been diverted to the war effort, was again available for pipeline
          fabrication.  Also in this period, significant new gas
          discoveries were developed, particularly in West Texas and along
          the onshore and offshore Gulf Coast areas.  Significantly, it was
          not until after World War II that the market for natural gas
                    -----         

          ---------------

          18/  See FERC Order No. 636, FERC Stats. & Regs. P30,939,
          "Pipeline Service Obligations and Revisions to Regulations
          Governing Self-Implementing Transportation; and Regulation of
          Natural Gas Pipelines After Partial Wellhead Decontrol," 57 Fed.
          Red. 13,267 at 13,270 (April 16, 1992), aff'd in part, United
          Distribution Cos. v. FERC, 88 F.3d 1105 (D.C. Cir. 1996).


                                      17
     <PAGE>


          developed to the point at which it could support gas exploration
          and production on a stand-alone basis, separate and apart from
          the economies associated with oil production.

               When World War II ended, the consumption of natural gas was
          still concentrated within the six principal gas-producing states
          of Texas, Louisiana, California, Oklahoma, West Virginia and
          Kansas, which, in 1945, produced 87% and consumed 68% of all the
          natural gas marketed in the United States.19/   In the populous
          Mid-Atlantic Region, including North Carolina, where there was
          little or no indigenous supplies, natural gas was either not
          available or at most mixed with manufactured gas to upgrade its
          Btu content.

               Proven reserves of natural gas in the U.S. totaled about 148
          trillion cubic feet (TCF) at the end of 1945 and total annual
          marketed production was only about four TCF, of which more than 
          half was produced in the four Gulf States.  Thus, there were vast
          reserves, mostly in the Southwest, available to support the
          expansion of the interstate pipeline system.  The primary
          limiting factor was the lack of the pipeline capacity needed to
          reach distant markets.   


               In 1947, Texas Eastern Transmission Corporation purchased
          and converted to gas the "War Emergency" "Big Inch" and "Little
          Big Inch" lines that were built during the war to transport oil. 
          During the same period, other companies secured the necessary gas
          reserves and built large diameter pipelines to waiting markets,
          while many of those already in existence extended their systems. 
          It was during this period in which the El Paso and Transwestern
          pipelines were built to transport gas from west Texas to the

          ----------------

          19/  See "Regulation of the Natural Gas Industry", supra n. 15,
          at Section 3.02.  Louisiana, Texas, Oklahoma and New Mexico still
          account for approximately three-quarters of all domestic
          production.  See Energy Information Administration, Natural Gas
          Annual - 1996, DOE/EIA-0131(96) (Washington, D.C., September
          1997), p. 9.  


                                      18
     <PAGE>

 
          rapidly growing California market, and in which Transco built a
          pipeline running from the Gulf Coast along the Eastern Seaboard
          to New York City.  

               By 1966, natural gas service was available in all of the 48
          contiguous States and the District of Columbia.  The gas industry
          was no longer a local business.  The primary forces behind this
          development were the surplus of reserves in the Southwest, the
          low prices for such gas, the subsequent discovery and development
          of additional reserves in the Southwest and elsewhere, and the
          price advantage that natural gas enjoyed over other competing
          fuels, such as heating oil and propane, in most uses.  Some of
          the price advantage that natural gas enjoyed over other fuels was
          inherent in the efficiency of transporting gas in high pressure
          pipelines with low associated labor costs.  

               As the LDCs converted from manufactured gas to natural gas,
          they in effect exited the supply side of the business in favor of
          becoming customers of the interstate pipelines.  The pipelines
          transported their own gas and gas produced by others, which the
          pipelines purchased at the well-head, and re-sold such gas to
          LDCs at the city-gate and to large industrial customers.  This
          development, particularly in the heavily populated areas along
          the Eastern Seaboard, created a large and significant purchaser
          group that had a vital interest in keeping the city gate price
          for gas at levels where retail prices were competitive with other
          fuels.  For LDCs that had historically sold natural gas obtained
          from local sources, such as in the Appalachian Mountain producing
          basins and adjacent areas, the growth in demand after World War
          II quickly outstripped the availability of local supplies.  These
          LDCs were among the first to seek gas from the more plentiful
          producing areas in the Southwest.  


                                      19
     <PAGE>


               The 25-year period following World War II is sometimes
          referred to as the "Golden Age of Growth" in the natural gas
          industry.  As indicated, during this period, there was a rapid
          expansion of the interstate pipelines systems from the Southwest
          and other producing areas in the West to Midwest and Eastern
          markets.  Also, it was during this period that the FPC extended
          its jurisdiction and the comprehensiveness of its regulation in
          the gas industry, including asserting jurisdiction over gas
          production.20/  The FPC also developed comprehensive regulations
          for the certification of pipeline construction and operation
          pursuant to Section 7(c) of the NGA, as well as for rates and
          terms and conditions of services provided by interstate
          pipelines.

               C.   The 1970s - An Industry in Transition.  In the 1970s,
                    -------------------------------------
          the natural gas industry was suddenly faced with the prospect of
          massive gas shortages, as gas demand in some markets
          significantly outstripped available production.  During this
          period, the availability of natural gas to the interstate market
          was so significantly restricted that the principal issue
          presented to the FPC concerned the curtailment of deliveries by
          the interstate pipelines.  In a sense, the "state of the art"
          became how to deal with the massive curtailments that threatened
          the very survival of the industry.  The shortages, however, were
          not due to the unavailability of gas in the ground.  Rather, at
          the artificially constrained well-head price established by the
          FPC, many producers were simply unwilling to produce gas for sale
          into the interstate market and to make the capital investment
          needed to develop new reserves.  In response to the gas shortages
          of the 1970s, Congress, in 1978, enacted a group of statutes
          jointly referred to as the Natural Energy Acts.  Among these acts

          --------------

          20/  See Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672
          (1954).


                                      20
     <PAGE>


          was the Natural Gas Policy Act of 1978 ("NGPA").21/    The NGPA
          set in motion the process for gradual de-control of well-head
          price regulation by the FERC.  That process was completed in
          1989, when Congress passed the Natural Gas Wellhead Decontrol
          Act,22/ which eliminated all well-head price and non-price
          controls. 

               Of particular importance to the current "state of the art,"
          the NGPA also included provisions (Sections 311 and 312)
          authorizing certain sales and transportation in intra- and
          interstate commerce, which, as implemented through FERC
          regulations, has effectively merged the intra- and interstate
          transportation markets into a single "seamless" grid without
          unnecessary jurisdiction or restrictions.

               This began an extremely rapid change in the "state of the
          art" which culminated in a revolutionary change in the previous 
          paradigm: the "common source of supply" for LDCs was no longer
          purchasing gas from the pipeline at the city-gate at "just and
          reasonable" rates established by the FERC.  LDCs and other
          purchasers could now contract directly with producers.  The
          pipelines were becoming nothing more than transporters of gas
          owned by others.

               D.   The 1980s - the Move Towards Competition.  The
                    ----------------------------------------
          implementation of Sections 311 and 312 of the NGPA began a move
          to a more market-driven transportation sector for the natural gas
          industry.  Building upon the market-responsive goals of Section
          311, the FERC issued a series of orders, beginning with Order No.
          436 in 1985 23/ and culminating in Order No. 636 in 1992, that

          ---------------

          21/  92 Stat. 3350 (1978); 15 USC Section 3301, et. seq.

          22/  103 Stat. 157 (1989).

          23/  FERC Stats. & Regs. P 30,665, "Regulation of Natural Gas
          Pipelines After Partial Wellhead Decontrol," 50 Fed. Reg. 42,408
          (October 18, 1985).


                                      21
     <PAGE>


          mandated "open access" transportation.  This shift in regulatory
          policy sought to encourage competition within the natural gas
          industry.  Under revised regulations, most recently promulgated
          in Order No. 636, many gas transactions that once required prior
          approval from the FERC now can begin as soon as the pipeline and
          shipper reach agreement.  Transportation of natural gas in
          interstate commerce still requires FERC authorization, but that
          authorization usually takes the form of "blanket" certificate
          approvals under the terms and conditions established in Order No.
          636.24/

               With the issuance of Order No. 636, the FERC completed the
          process of transforming the supply end of the natural gas
          industry into a fully competitive industry.  The FERC's stated
          policy goal was to promote competition among all natural gas
          suppliers, including interstate pipelines to the extent that they
          still act in a gas sales (or  merchant) capacity.  The FERC's
          primary objectives were two-fold:  to enhance competition in the
          natural gas industry and to maintain an adequate and reliable
          supply.  

               Under Order No. 636, pipelines were required to "unbundle,"
          or separate, their merchant function from their transportation
          function.  The order requires that this unbundling take place at
          an upstream point, near the production area.  Pipelines are now
          obligated to provide all transportation service on a basis that

          ----------------

          24/  Under the FERC's regulations, there are two distinct types
          of self-implementing transportation service.  The first is
          commonly referred to as "Section 311 Transportation."  Under this
          authority, interstate pipelines are authorized to commence
          transportation service on behalf of any intrastate pipeline or
          any LDC without any specific prior approval.  The second type of
          self-implementing transportation is referred to as a Section 7
          "blanket" certificate service. " Blanket" certificates are issued
          under Section 7 of the NGA and are available to interstate
          pipelines and end-users.  Regulations governing both sets of
          transportation are included in Part 284 of the FERC's regulations
          (18 CFR Part 284).  The FERC's regulations define "transportation" 
          to include both storage and exchanges of natural gas.


                                      22
     <PAGE>


          is equal in quality for all gas supplies, whether purchased from 
          the pipeline or from another gas supplier.25/  To assure
          comparability in the quality of service, pipelines are required
          to provide a variety of essential, or ancillary, transportation
          services, such as storage, on a non-discriminatory basis, and to
          implement capacity release programs so that firm shippers can
          release their firm capacity on a short or long term basis.26/

               In the six years since Order No. 636, the contracting
          practices of LDCs and other purchasers have also changed
          dramatically.  Prior to Order No. 636, LDCs generally purchased
          most of their gas under long-term, fixed-price, contracts.  
          Although there was less price volatility under these contracts,
          the benefits of increased competition were lost.  Since Order No.
          636, active short-term markets have developed.  Today, most LDCs
          depend on short-term supply contracts, including daily and
          sometimes intra-daily contracts with marketers and brokers
          arranged at market centers, for a significant percentage of their
          overall gas supply.  Even the average length of long-term
          contracts has shortened considerably.  Similarly, LDCs'

          ---------------

          25/  Although Order No. 436, issued in 1985, provided for open-
          access, non-discriminatory, transportation service to enable LDCs
          and others to purchase gas directly from producers at the
          wellhead, the FERC subsequently concluded that firm
          transportation made available by the pipelines to LDCs and others 
          was "inferior in quality to the firm transportation embedded
          within the pipelines' bundled, city-gate, firm sales service," in
          that there was no obligation on the pipelines' part to provide
          transportation-only customers with other essential services and
          facilities, such as storage, on a non-discriminatory basis. 
          Order No. 636, 57 Fed. Reg. at 13,272.  In Order No. 636, FERC
          mandated various changes in the terms and conditions that must be
          offered by an open-access pipeline in order to assure that all
          gas purchasers would receive comparable transportation service.  

          26/  Traditionally, LDCs and other shippers were required to
          reserve, on a long-term basis, enough "firm" capacity on the
          supplying pipeline to meet their maximum requirements.  Pipeline
          capacity utilization was inefficient because there was no
          mechanism in place to allow for the shifting of reserved "firm"
          capacity from one pipeline customer to another at times when it
          was in excess of current needs.   The capacity release mechanism
          contemplated by Order No. 636 was intended to correct this
          situation.  It allows an LDC or other shipper (the "primary
          shipper") to permanently or temporarily release and sell some or
          all of its reserved "firm" capacity, which the pipeline must then
          offer to others.  Conversely, it provides a prospective purchaser
          (the "replacement shipper") with access to "firm" capacity that
          would otherwise not be available to it.  Although the primary
          shipper remains liable on its contract with the pipeline, it is
          entitled to a credit to the extent released capacity is resold to
          a replacement shipper.  See Order No. 636, 57 Fed. Reg. at 13,284
          - 13,286.   


                                      23
     <PAGE>


          contracting practices for transportation capacity have changed
          dramatically.  Today, most LDCs do not hold firm, long-term,
          capacity for their total gas needs.  They have the option to 
          obtain short-term capacity in the capacity release market, or 
          to obtain capacity indirectly by purchasing gas that is bundled 
          with transportation from marketers and other aggregators.27/ 

               E.   The Development of Market Centers, Hubs and Pooling
                    ---------------------------------------------------
          Areas.  Another important feature of Order No. 636 was FERC's
          -----
          pronouncement that it would not allow actions that would inhibit
          the natural development of market centers, hubs, and pooling
          areas.28/   In a study issued by the FERC's Office of Economic
          Policy in 1991,29/ which was cited in Order No. 636, the staff of
          the FERC had reported on the growing importance of market centers
          and recommended that there was a need to foster their
          development.  The FERC staff believed that market centers were
          necessary to facilitate market-driven transactions between buyers
          and sellers while at the same time making unnecessary the

          ---------------

          27/  It is estimated that, based on full utilization of released
          capacity by replacement shippers, 36% of all gas delivered to
          consumers in the U.S. could have moved under short-term
          arrangements obtained in the capacity release market.  See Energy
          Information Administration, "Deliverability on the Interstate
          Natural Gas Pipeline System," DOE/EIA-0618(98) (Washington, D.C.,
          May 1998), pp. 83 - 85.  For a general background discussion of
          the developments of short-term gas supply and transportation
          markets, see "Regulation of Short-term Natural Gas Transportation
          Services," FERC Notice of Proposed Rulemaking, 63 Fed. Reg.
          42,982 (July 29, 1998).

          28/  Market centers, hubs and pooling areas all serve a similar
          purpose, namely, to facilitate transactions between gas buyers
          and sellers through information exchanges, physical exchanges of
          gas, providing transportation related services (e.g., storage,
          parking), the aggregation of supplies by all merchants, etc. 
          Market centers may or may not be associated with any physical
          facilities, but are situated so as to be easily accessed from
          many parts of the country.  They can be used to arrange storage
          or transportation or other ancillary services.  Hubs, in
          contrast, operate as the physical transfer points where several
          different pipelines are interconnected.  At a hub, gas can be
          physically rerouted from one pipeline to another.  Pooling areas,
          most often located in production areas, facilitate the
          aggregation of supplies from many producers.  Title to gas
          frequently passes from the producers to the shippers (i.e., LDCs
          or other purchasers) in the pooling areas.

          29/  "Importance of Market Centers,"  Office of Economic Policy,
          FERC (Washington, DC), August 21, 1991.


                                      24
     <PAGE>


          construction of additional high-cost facilities.  In the view of
          the FERC staff, the organization of market centers would (i) help
          to eliminate the traditional receipt point inflexibility of the
          interstate pipelines by allowing shippers (i.e., buyers and
          sellers) to receive and deliver gas at any point on the pipeline
          where the receipt and delivery of gas is possible, (ii) provide
          better responses to supply disruption, (iii) eliminate
          difficulties in reselling long-term contracted gas, and (iv)
          foster the development of market intermediaries (brokers and
          traders), such as exist in other commodities markets, who would
          facilitate transactions among buyers and sellers in the market. 
          Thus, the development, evolution and operation of market centers
          and hubs is at the very heart of the current, and radically
          different, "state of the art."  

               Of particular interest, the FERC staff identified several
          natural market centers and hubs which will be instrumental in the
          coordination of gas supply between SoCalGas and Frontier.  These
          include (i) the Blanco, New Mexico, market center near the
          San Juan Basin; (ii) the Waha Hubs, near Midland, Texas, formed
          at the point where the Transwestern and El Paso pipelines
          interconnect with NGPL and numerous intrastate pipelines;
          (iii) the Katy Hub, in east Texas; and (iv) the Henry Hub,
          located in southern Louisiana.30/   At these market centers and
          hubs, gas can be bought, sold, exchanged for gas at another
          location, or stored.  Services are provided by independent
          brokers at such points to arrange deals, and producers or owners

          ---------------

          30/  The FERC staff noted that the Waha hub is located at a point
          that is within 70 miles of 2.74 Bcf per day of deliverable gas
          production and nearly 1 Bcf per day of peak storage
          deliverability.  The staff noted that, at the Katy Hub alone, 23
          pipelines (including Transco) are interconnected within a radius
          of 70 miles of over 12 Bcf per day of deliverable gas production,
          and that there is nearly 17 Bcf per day of working storage
          capacity at the hub.  Finally, at the Henry Hub in South
          Louisiana, the staff noted that a total of 28 pipelines
          interconnect within 50 miles of more than 19 Bcf per day of
          deliverable gas production.  See also "North American Gas Market
          Centers 1994," produced by Hart's Gas Transactions Report.


                                      25
     <PAGE>


          of gas at these centers often have significant marketing staffs
          to maximize the value and liquidity of the commodity.  

               Pooling areas facilitate the transfer of title to gas at
          both production and market points.  Transco, El Paso, and
          Transwestern all operate pooling areas on their systems.  In
          addition to the operation of pooling areas by interstate
          pipelines, several marketing companies provide services by which
          interested buyers and sellers can exchange gas at such pooling
          points for a fee.  At some market centers, hub services, such as
          parking, loaning, wheeling, and, in some instances, title 
          transfer, are also available.31/

               Why are market centers, hubs and pooling areas so vital to
          the current "state of the art?"  The importance of these creative
          market mechanisms is clear.  A producer in one producing basin
          may, through such mechanisms, sell gas to a buyer several
          pipeline systems away without the payment of additional
          transportation costs, thus making gas produced in one basin more
          competitive with gas produced in a geographically closer locale. 
          This represents a significant change from the days throughout
          most of the last 50 years when LDCs typically bought all of their
          gas at the city-gate from the interconnecting pipeline.  As an
          example, low cost San Juan Basin gas, combined with its tax
          incentives and creative transactional mechanisms, can be priced
          cheaper to a market in North Carolina than gas produced in the
          Gulf Coast or the Alabama Black Warrior Basin, which are both

          ---------------

          31/  "Parking" is essentially a short-term interruptible storage
          service.  "Loaning" is a service by which a party with gas will
          provide the gas to another party with a specific date for the
          return of such gas at either that location or another location
          under mutually agreeable terms and conditions (in effect, the
          inverse of parking).  "Wheeling" is the provision of
          transportation by a hub operator from one system to another
          system.  Finally, title transfer services allow parties to
          exchange title to gas that is already within a pipeline system
          for gas that is at a different point on the same pipeline system
          or for gas that is on another pipeline system.  No physical
          movement occurs.


                                      26
     <PAGE>


          physically closer to North Carolina.  Such creative arrangements,
          however, are dependent upon the existence of significant physical
          interconnections and market centers between the production area
          and ultimate delivery point.  While these conditions may not
          currently exist throughout all of the contiguous 48 States, they
          do exist throughout the southern tier of States, both west and
          east, all of which depend for a large percentage of their total
          gas supplies upon production in the Southwest producing basins.

               F.   The Development of "High Deliverability" Storage.
                    ------------------------------------------------
          Another important development in the gas industry is in storage
          technology and the development of a market for "un-bundled"
          storage services.  The ability to store gas has always been
          critical to the economic and efficient operation of a gas system 
          because of the seasonal nature of demand, particularly by
          residential customers.  Most "seasonal" storage is in depleted
          oil and gas fields, such as exist in the Appalachian region.  In
          the last five years, however, there has been significant new
          development of so-called "high deliverability," or salt-dome,
          storage caverns, which in some cases are owned and operated
          independent of the pipelines.  The importance of "high
          deliverability" storage is not so much in the absolute volume of
          the working storage capacity that they represent, but rather in
          their operational characteristics, which allow for rapid
          injection and withdrawals of gas ("cycling").  This provides LDCs
          with considerably more flexibility in responding to changes in
          demand without the need to maintain high inventory levels and
          enables LDCs to take advantage of price volatility.32/

          ---------------

          32/  See Energy Information Administration, Natural Gas 1996:
          Issues and Trends, DOE/EIA-0560(96) (Washington, D.C., December
          1996), p. 15; Energy Information Administration, Natural Gas
          Annual - 1996, DOE/EIA-0131(96) (Washington, D.C., September
          1997), p. 21.


                                      27
     <PAGE>


               G.   New Pipeline Construction.    The nation's interstate
                    -------------------------
          pipeline system, which experienced such dramatic growth in the
          decades immediately following World War II, continues to expand
          at a significant rate, in terms of both long-haul capacity and
          interregional interconnections.  Between 1990 and the end of
          1997, capacity additions on the long-haul pipeline systems (viz.
          the pipelines running from the production areas to end markets)
          totaled 12.4 billion cubic feet (Bcf) per day, an increase of
          about 17%, while interregional capacity additions totaled 11.4
          Bcf per day, or about 15%, in the same period.  More than 40
          projects were completed in 1997 alone.33/  Several new expansion
          projects have been announced to alleviate capacity constraints in
          those few areas of the country where they still exist.  Moreover,
          as previously described, market centers and storage capacity are
          becoming increasingly integrated into the pipeline network.  In
          summing up the current state of the nation's pipeline delivery
          system, taking into account completion by the end of the year
          2000 of projects that will expand transportation capacity from
          the Rocky Mountain, New Mexico, and West Texas producing areas to
          Midwest and Northeast markets, the Department of Energy has
          observed that "the interstate natural gas pipeline network will
                         ------------------------------------------------
          come closer to being a national grid where production from almost
          -----------------------------------------------------------------
          any part of the country can find a route to customers in almost
          ---------------------------------------------------------------
          any area." (Emphasis added).34/
          --------

               3.3  The Standards for Approval under Section 10(c).
                    ----------------------------------------------

               A.   Section 10(c)(1).  Section 10(c)(1) provides that the
                    ----------------
          Commission may not approve an acquisition that "is unlawful under
          the provisions of Section 8 or is detrimental to the carrying out

          ----------------

          33/  See Energy Information Agency, "Deliverability on the
          Interstate Natural Gas Pipeline System," DOE/EIA-0618(98)
          (Washington, D.C., May 1998), pp. 32 -34.

          34/  Id. at p. 34.


                                      28
     <PAGE>


          of the provisions of Section 11."  In this case, the transaction
          will not be unlawful under Section 8, as it will not lead to
          common ownership of gas and electric properties serving the same
          area in North Carolina.  Nor will approval of the transaction be
          detrimental to the carrying out of the provisions of Section 11,
          which provides, in subsection (b)(1) thereof, that every
          registered holding company and its subsidiaries shall limit their
          operations "to a single integrated public-utility system . . . ." 
          Section 11(b)(1) permits a registered holding company to own one
          or more additional integrated public-utility systems only if the
          requirements of Section 11(b)(1)(A) - (C) (the "ABC clauses") are
          satisfied.  By its terms, however, Section 11(b)(1) applies only
          to registered holding companies and therefore does not preclude
          the acquisition and ownership of a combination gas and electric
          system by an exempt holding company, such as Sempra, whose
          ownership of both gas and electric operations in California is
          permitted and subject to "affirmative state regulation."  See WPL
          Holdings, Inc., 40 SEC Docket 491 at 497 (February 26, 1988),
          aff'd in part and rev'd in part sub nom., Wisconsin's
          Environmental Decade v. SEC, 882 F.2d 523 (D.C. Cir. 1989),
          reaffirmed, 49 SEC Docket 1255 (September 18, 1991); Dominion
          Resources, Inc., 40 SEC Docket 847 (April 5, 1988).  Accordingly,
          as long as the acquisition of Frontier by Sempra would have the
          integrating tendencies required by Section 10(c)(2), discussed
          below, it is of no consequence that other existing properties of
          Sempra (e.g., San Diego's electric system) would not form a part
          of the same integrated system as Frontier's gas properties.

               The Commission has also previously held that a holding
          company may acquire utility assets that will not, when combined
          with its existing utility assets, make up an integrated system or
          comply fully with the ABC clauses, provided that there is de


                                      29
     <PAGE>


          facto integration of contiguous utility properties and the
          holding company is exempt from registration under Section 3(a) of
          the Act following the acquisition.35/  In this case, Sempra is
          requesting an order exempting it from the registration
          requirements under the Act pursuant to Section 3(a)(1).  Further,
          there is and will continue to be following the transaction de
          facto integration of Sempra's gas and electric utility properties
          in southern California.

               B.   Section 10(c)(2).  Under Section 10(c)(2), the
                    ----------------
          Commission must affirmatively find that the indirect acquisition
          of the voting securities of Frontier by Sempra "will serve the
          public interest by tending towards the economical and the
          efficient development of an integrated public-utility system 
          . . ., " which, as applied to a gas system, is defined in Section
          2(a)(29)(B).  The indirect acquisition of Frontier by Sempra will
          satisfy the integration standards of Sections 10(c)(2) and
          2(a)(29)(B) for all of the following reasons:

                .   The indirect investment by Sempra in Frontier, and its
                    ongoing involvement with Frontier's operations, will be
                    instrumental to the development of a gas utility system
                    in an area in which natural gas service is not now
                    available. 

                .   Frontier, SoCalGas and SDG&E will share a "common
                    source of supply" (the San Juan and Permian Basins) and
                    will be operated as a "single coordinated system."  

                .   Frontier will achieve "substantial economies" in gas
                    supply through the increased buying power that it will
                    attain by being part of the larger Sempra system;
                    Frontier and its customers will also benefit by gaining
                    access to expertise and resources available in the
                    Sempra system in such areas as procurement/materials
                    management; finance and accounting; and gas system
                    engineering and construction management.

                .   Taking into account the current "state of the art": the
                    area or region served by Sempra's subsidiaries in
                    California and Frontier will not be "so large as to
                    impair . . . the advantages of localized management,
                    efficient operation, and the effectiveness of

          ---------------

          35/  See Sempra Energy, 67 SEC Docket  994 at 998 (June 26,
          1998), citing  BL Holding Corp., 67 SEC Docket 404 at 408 (May
          15, 1998); TUC Holding Co., et al., 65 SEC Docket 301 at 305-306
          (August 1, 1997); and Gaz Metropolitain, Inc., 58 SEC Docket 190
          at 192 (November 23, 1994).


                                      30
     <PAGE>

                    regulation."  To the contrary, the day-to-day
                    operations of Frontier will be under the direction of
                    its General Manager.  The management of Frontier will
                    be independent of, but coordinated with (in order to
                    promote efficient operation), Sempra's other 
                    subsidiaries, and will be subject to effective local
                    regulation by the NCUC.  This project enjoys the strong
                    support of the NCUC.

                .   Because of Frontier's size, Sempra will continue to
                    qualify for exemption under Section 3(a)(1) as an
                    "intrastate" holding company even after indirectly
                    acquiring Frontier's voting securities.  Under these
                    circumstances, and because the acquisition of Frontier
                    will have the integrating features required by Sections
                    10(c)(2) and 2(a)(29)(B), the Commission should approve
                    the transaction. 

               1.   Given the Existence of a Common Source of Supply and
                    ----------------------------------------------------
                    Changes in the State of the Art in the Gas Industry,
                    ----------------------------------------------------
                    the Commission Should Find that Sempra's Existing
                    -------------------------------------------------
                    Subsidiaries and Frontier Together Will Constitute an
                    -----------------------------------------------------
                    Integrated Gas System.
                    ---------------------

                    Although the retail gas service areas of Frontier in
          North Carolina and of SoCalGas and SDG&E in California are
          separated by a substantial distance and are located in non-
          contiguous States, such factors, by themselves, are not
          determinative.  On the contrary, it is clear that Section
          2(a)(29)(B), which defines an "integrated" gas-utility system,
          does not require that the States comprising the "single area or
          region" even adjoin each other.  In MCN Corporation, 62 SEC
          Docket 2379 (September 17, 1996), for example, the Commission
          approved an acquisition of an interest in a gas-utility company
          in Missouri by an exempt gas-utility holding company whose
          service area is located more than 500 miles distant in Michigan,
          a non-adjoining State.  Moreover, Section 2(a)(29)(B)
          specifically contemplates that "gas utility companies deriving
          natural gas from a common source of supply may be deemed to be
                                                     -------------------
          included in a single area or region." (Emphasis added).  Thus,
          -----------------------------------
          the Commission was given broad discretion to interpret the
          "single area or region" standard in a flexible manner that should
          take into account the tremendous changes that have occurred since


                                      31
     <PAGE>


          1935 in the production and transportation of natural gas. 
          Likewise, in considering whether an "area or region" is so large
          as to impair "the advantages of localized management, efficient
          operation, and the effectiveness of regulation . . .," the
          Commission is called upon to consider the "state of the art" in
          the industry.  

               Because of the dramatic changes in the "state of the art" in
          the gas industry that have taken place in recent years, the
          distance between two LDCs has become much less relevant,
          particularly when compared to the days when LDCs depended for
          their supplies upon essentially local sources or upon the same
          interconnecting pipeline, in its merchant capacity.  Thus, based
          on all of the facts and circumstances of this case, as more fully
          developed below, the Commission should conclude that the gas
          utility operations of SoCalGas and SDG&E in southern California
          and those of Frontier in western North Carolina together will be
          "confined to a single area or region in one or more States," and
          that such area or region will not be "so large as to impair the
          advantages of localized management, efficient operation and the
          effectiveness of regulation."  It is important to underscore that
          such a conclusion is consistent with the literal terms of Section
          2(a)(29)(B).  

               Moreover, in order to make the findings required by Sections
          10(c)(2) and 2(a)(29)(B), as applied to the specific facts of
          this case, the Commission need not address or decide the broader
          question of whether an integrated gas market now exists
          throughout all of the 48 contiguous States or even whether every
          LDC that purchases its gas from the same supply basin could be
          part of one integrated gas system.

               Common Source of Supply:  Historically, in determining
          whether two gas companies share a "common source of supply," the
          Commission has attached greatest importance to whether the gas


                                      32
     <PAGE>


          supply of the two companies is derived from the same gas
          producing areas (or basins), recognizing that the most
          significant economies and efficiencies that two entities can
          achieve is through the coordination and management of gas supply. 
          The Commission has also considered whether the two entities
          receive gas deliveries from a common pipeline.  However, the
          Commission has properly found an integrated gas system to exist
          where two entities take delivery from different pipelines which
          originate in the same gas producing area and/or interconnect at
          various points along the transportation route.  See MCN
          Corporation, supra, 62 SEC Docket at 2383-2384; American Natural
          Gas Company, et al., 43 S.E.C. 203 at 205-207 n. 5 (1966);
          Central Power Company, et al., 8 S.E.C. 425 at 431 (1941).  These
          decisions, and especially MCN Corporation, reflect the fact that
          an LDC's gas supply is no longer purchased at the city-gate from
          the interconnecting pipeline.  The key factor to be considered by
          the Commission, given the current "state of the art," is the
          "common source of supply." 

               As indicated, SoCalGas and SDG&E currently derive
          approximately 58% of their combined gas requirements from the
          Permian and San Juan Basins.  Initially, Frontier's full
          requirements will be met by Sempra Trading from production in the
          same two supply basins.  Long term, it is expected that Frontier
          will purchase at least 50% of its gas supplies from these basins. 
          Further, although SoCalGas and SDG&E and Frontier will take
          delivery from different interstate pipelines (Transco in the case
          of Frontier and El Paso and Transwestern in the case of SoCalGas
          and SDG&E), those pipelines all transport gas that originates in
          the Permian and San Juan Basins.  The "common source of supply"


                                      33
     <PAGE>


          is therefore in the Permian and San Juan Basins.  In one case,
          the method of transportation is Transco, and, in the other case,
          El Paso and Transwestern.

               The El Paso and Transwestern pipelines transport gas out of
          the Permian and San Juan Basins for ultimate consumption in both
          California and eastern U.S. markets.36/  Transco's interstate
          pipeline does not itself extend into either such basin.  However,
          it intersects at various points in Texas with intrastate
          pipelines (including the Oasis, Valero-TECO and Valero-Lone Star
          pipelines), which transport gas from those basins to the Transco
          system.  San Juan and Permian Basin gas also moves through the
          Henry Hub, on the Louisiana Gulf Coast, as well as the Katy Hub
          in Texas, where Transco and other pipelines transport it to Mid-
          Atlantic and East Coast markets.   (See Exhibit E - Map of Gas
          Pipelines and Producing Areas).  Accordingly, there is
          substantial evidence that SoCalGas, SDG&E and Frontier will share
          a "common source of supply," roughly equidistant from each of
          them.

               It should be recognized that the concept of a "common source
          of supply" has a very different meaning today than it did in
          1935.  In 1935 and for most of the 50 years that followed, LDCs
          generally purchased natural gas at the city-gate directly from
          the interstate pipeline that served them at FERC (and earlier
          FPC) approved wholesale rates that reflected both the cost of the
          commodity and the related cost of transportation.  Hence, two

          ---------------

          36/  In recent years, although production in the San Juan area
          has increased significantly, the demand for both San Juan and
          Permian Basin gas at the California border has declined due, in
          part, to the increased availability in California of cheaper gas
          from western Canada and the Rocky Mountain region.  However, the
          decline in demand for Permian and San Juan Basin gas in the
          California market, which has led to significant capacity "turn-
          backs" on the El Paso and Transwestern systems, has been largely
          offset by growing demand elsewhere, primarily in eastern U.S.
          markets.  To meet this demand, El Paso and Transwestern have both
          sought and received certificate authority from the FERC under
          Section 7 of the NGA for expansions in the San Juan area that now
          provide much better access from the eastern ends of their
          respective systems to various market centers and hubs in Texas,
          from which gas can be shipped to eastern U.S. markets.  See El
          Paso Natural Gas Company, 70 FERC P 61,295 (1995); Transwestern
          Pipeline Company, 75 FERC P 61,107 (1996).


                                      34
     <PAGE>


          LDCs serving non-contiguous areas could in most instances
          demonstrate that they shared a "common source of supply" only if
          they purchased their gas from the same pipeline, in its capacity
          as both gas merchant and transporter.  LDCs did not, and in most
          instances could not, purchase their gas in upstream markets and
          arrange separately with the pipeline for transportation.  The
          "single area or region" served was therefore defined in terms of
          the pipeline delivery points (i.e., the city-gate), where the
          LDCs purchased their gas, rather than in terms of the upstream
          gas production areas or pipeline receipt points.

               In contrast, today, most LDCs do not purchase their gas
          supply from the pipeline serving them.  Instead, LDCs, and many
          industrial customers as well, purchase gas directly from
          producers (or independent marketers or other middlemen), and
          contract separately for transportation on the pipeline that
          serves them, as well as on other upstream pipelines that
          transport gas out of the producing basins.37/  Although
          transportation costs and pipeline capacity constraints are
          economic factors which may limit an LDC's ability to contract for
          gas produced in any particular supply basin, the legal
          impediments no longer exist, and LDCs, no matter where they are
          located, are entitled to non-discriminatory transportation
          service.  The transportation arrangements entered into by two
          different LDCs are unimportant for purposes of determining
          whether or not they share a "common source of supply," inasmuch
          as the pipelines that serve them are no longer the suppliers in
          any event.  The relevant inquiry should instead be whether the
          two LDCs purchase substantial quantities of gas produced in the
          same supply basins, and whether that gas is "deliverable" (i.e.,

          ---------------

          37/  By 1995, the Department of Energy could report that
          interstate pipeline gas sales were "virtually non-existent," and
          that transportation (as opposed to sales) accounted for 74% of
          all deliveries to industrial customers by local companies (LDCs
          and intrastate pipelines).  See Energy Information
          Administration, Natural Gas 1996: Issues and Trends, DOE/EIA-
          0560(96) (Washington, D.C., December 1996), p. 17.     


                                      35
     <PAGE>


          whether there is sufficient transportation capacity available in
          the marketplace to assure delivery on an economic and reliable
          basis).38/

               State of the Art in the Gas Industry:  As previously
          described,  the natural gas industry has undergone fundamental
          changes, with the pronounced trend in the past decade towards
          increased competition in gas supply and the development of a
          seamless natural gas delivery system throughout most of the
          United States.39/  This trend is the direct result of several
          developments, including, most importantly, de-control of gas
          prices at the well-head; the "un-bundling" of the commodity and
          transportation functions of interstate pipelines;  the
          construction of significant new pipeline capacity, which has
          eliminated transportation bottlenecks in most parts of the
          country; the emergence of gas brokers and marketers and
          development of an efficient gas futures market, which now enable
          LDCs and other large gas purchasers to manage price volatility
          and secure gas supplies without regard to its physical source;
          and increased inter-basin competition for sales to the market,
          due in part to the effects of imports into the U.S. of low-cost
          Canadian gas.40/  It is important to stress that the paradigm for


          ---------------

          38/  "Deliverability" may be defined in terms of the physical
          capacity of the U.S. natural gas pipeline network, as well as of
          the contractual structure governing the transportation of gas on
          that system, which is largely the product of Order No. 636.  See
          Energy Information Administration, "Deliverability on the
          Interstate Natural Gas Pipeline System," DOE/EIA-0618(98)
          (Washington, D.C., May 1998), p. 79.

          39/  As previously indicated, although there is substantial
          evidence that a fully integrated natural gas market now exists
          throughout most of the United States, that is not a question that
          this Commission would need to address in order to make the
          findings required by Sections 10(c)(2) and 2(a)(29)(B), as
          applied to the specific facts of this case.      

          40/  Canadian production, as a percentage of total U.S.
          consumption, increased in each of the ten years prior to 1996. 
          In 1995, net imports of gas (mostly from Canada) accounted for
          13% of all U.S. consumption.  The western region of the U.S.
          received by far the largest share (41%) of all Canadian imports. 
          See Energy Information Administration, Natural Gas Monthly,
          DOE/EIA-0130(96/10) (Washington, D.C., November 1996).   


                                      36
     <PAGE>


          the gas industry today is fundamentally and irreversibly
          different than earlier this century.

               The Commission has already taken notice of these and other
          regulatory and technological changes that have reshaped the
          natural gas industry.  See "The Regulation of Public-Utility
          Holding Companies," Report of the Division of Investment
          Management (June 1995), pp. 29 - 31.  In light of such changes,
          the Division of Investment Management has recommended that the
          Commission continue to interpret the "single area or region"
          requirement of Section 2(a)(29) flexibly to take into account
          technological advances, and that the focus of the SEC's inquiry
          under Section 10(c)(2) should be on whether a proposed
          acquisition would promote the economic and efficient development
          of a utility system and on whether the resulting system would be
          subject to effective regulation.  Id. at 72 -74.

               As discussed above, the traditional source of supply for
          both California and the Mid-Atlantic states is in the producing
          basins in the Southwest.  The primary producing basins in the 
          Southwest that can be accessed by both the Mid-Atlantic region
          and California include the  Permian and San Juan Basins.  Today,
          because LDCs in most States (including California and North
          Carolina) can purchase gas in these Southwest producing basins
          (or purchase gas pegged to production in those areas) from a
          producer or marketer at the city-gate off of the interstate
          pipeline system, there is significant competition for markets
          between producers in the San Juan and Permian Basins and
          producers in other U.S. and Canadian basins.  For the California
          market, for example, gas produced in western Canada and the
          Overthrust producing areas in the Rocky Mountain region now
          provides stiff competition for the Southwest basin supplies.  
          This basin-to-basin competition and the development of additional


                                      37
     <PAGE>


          interstate pipeline capacity through the construction of the Kern
          River pipeline and the expansion of Pacific Gas Transmission
          Company and Northwest Pipeline Corporation from Canada have, in
          fact, caused 2 Bcf/day of excess pipeline capacity to the
          California market.

               The competition for the California market by other producing
          basins and pipelines was directly responsible for significant
          "turn-backs" on the El Paso and Transwestern systems in the mid-
          1990s.41/  It was in response to this competition and the need to
          find new customers for the "turned-back" capacity that El Paso
          and Transwestern have both expanded their systems out of the San
          Juan Basin in order to move gas to eastern markets, such that,
          today, there are periods when the net flow of gas out of the San
          Juan Basin is to the east rather than to the west.  These actions
          were also driven by certain operational characteristics of San
          Juan Basin production which require producers to maintain high
          production levels without regard to demand in the California 
          market.42/   Further, El Paso and Transwestern have incentives to
          discount transportation for gas transported to new markets in the


          ---------------

          41/  Under Order No. 636, the "restructuring rule," the "firm"
          sales contracts between a pipeline and its customers were 
          converted into the rights to receive "firm" transportation.  As
          these "firm" transportation contracts expire, however, some LDCs
          will elect to reduce or release that "firm" capacity that they
          previously reserved.  Such capacity "turn-backs" have led to the
          situation in some parts of the country where available "firm"
          pipeline capacity exceeds customer commitments.  Unless a
          pipeline can remarket "turned-back" capacity, it faces a
          potential loss of revenues.  Following the adoption of Order No.
          636, two of the largest capacity "turn-backs" were on the El Paso
          and Transwestern systems.  As indicated, those companies
          responded to this situation by altering the utilization of
          existing pipeline capacity to move gas out of the Southwest
          producing areas to eastern markets, where such gas would be
          competitive with other available supplies.  For a more detailed
          of discussion of the impact of pipeline capacity releases and the
          industry's response, see Energy Information Administration,
          Natural Gas 1996: Issues and Trends, DOE/EIA-0560(96)
          (Washington, D.C., December 1996), ch. 2.

          42/  San Juan Basin gas is produced from coal seam formations. 
          The technology used to produce gas from coal seam formations
          requires maintaining a steady state of production.  The
          significant tax benefits granted to coal seam gas is an
          additional incentive for maintaining high production levels.


                                      38
     <PAGE>


          east, thus limiting delivery costs.  As a result, San Juan Basin
          gas can be priced at a rate below its competitors in most other
          basins even with additional delivery costs.

               The Attorney General of the State of California addressed
          the integrated pipeline market from an economic perspective in
          its Opinion on Competitive Effects of Proposed Merger between
          Pacific Enterprises and Enova Corporation, submitted to the
          California Public Utilities Commission ("CPUC") on November 20,
          1997.43/  The Attorney General  used a correlation and
          co-integration analysis to determine that FERC actions have
          created a network of transmission suppliers connecting purchasers
          at the wholesale level with middlemen and well operators at the
          production level.  The Attorney General concluded that, from an
          economic perspective, markets are integrated where the price of
          supplies remain closely linked (taking into account
          transportation and other transaction costs) and that there is
          "direct" evidence that prices at delivery points within the four
          basin area (including the Permian and San Juan Basins) remain
          co-integrated within arbitrage bounds on a nearly national grid
          basis.

               Due to the restructured natural gas transportation market,
          gas can be moved from the San Juan and Permian Basins to both
          California and North Carolina physically as well as contractually
          in a variety of ways.  As discussed above, both Transwestern and
          El Paso access the Permian and San Juan Basins and have
          traditionally moved their gas west to California.  SoCalGas is
          the largest holder of capacity on both of those systems and
          purchases a significant portion of its supply portfolio from
          those two basins.  However, as indicated, natural gas from the

          ---------------

          43/  The Attorney General's Opinion has been filed as Exhibit D-9
          in File No. 70-9033. 


                                      39
     <PAGE>

 
          San Juan and Permian Basins also moves east and north to serve
          Midwest and Mid-Atlantic markets.

               Both El Paso and Transwestern interconnect at numerous
          points in West Texas with major intrastate Texas pipelines
          including the Valero, Oasis, and other pipelines.  Through these
          intrastate pipelines, gas is physically transported to the
          eastern half of the State of Texas where the intrastate pipelines
          connect with, among others, Transco.  Thus, gas can and does
          physically flow from the Southwest producing basins which provide
          the principal supply of gas to SoCalGas and to the developing
          North Carolina market represented by Frontier.44/

               While physical delivery is possible from the common supply
          basins to both SoCalGas and Frontier, more flexible and efficient
          transactions are available utilizing marketing tools created by
          the FERC in Order No. 636.  As previously indicated, one of the
          more important outgrowths of FERC Order No. 636 has been the
          development of market centers, hubs and pooling points, which
          allows LDCs operating in a much larger area or region of the
          country to realize the operating economies and efficiencies from
          coordinated gas supply that were once thought to be achievable
          only by contiguous or nearly contiguous gas companies supplied by
          the same interstate pipelines.  In fact, the opportunities to
          achieve operating economies may be even greater where the two
          companies seeking to combine have significantly different load
          profiles (e.g., non-coincident seasonal peaks, substantially
          different customer mix, different projected growth patterns,
          etc.).

          ---------------

          44/  Further, El Paso and Transwestern interconnect with NGPL,
          the first major interstate pipeline company constructed in the
          United States, in west Texas through NGPL's major western
          trunkline.  NGPL also accesses Gulf Coast reserves through its
          eastern trunkline which is connected by a major crossover through
          Oklahoma and north Texas to its western trunkline.  On its
          eastern trunkline, NGPL interconnects at two points with Transco.


                                      40
     <PAGE>


               2.   Coordinated Operation of Gas Properties.
                    ---------------------------------------

                    As described in Item 1.3, above, Frontier initially
          will purchase all of its gas requirements from Sempra Trading
          from gas sourced in the Permian and San Juan Basins.  Sempra
          Trading will also manage Frontier's gas transportation and
          storage arrangements.  In this regard, it is important to note
          that Sempra Trading holds capacity on the Transco system and is
          among the largest purchasers of hub services (i.e., parking,
          loaning and wheeling) from SoCalGas.  Hence, through Sempra
          Trading, Frontier will have access to a complete portfolio of gas
          supply, transportation, storage and related services.  In
          addition, Sempra Ventures, SoCalGas and SDG&E plan to provide
          various other types of administrative, technical and operating
          services to Frontier.  These arrangements are indistinguishable
          from those that the Commission considered in MCN Corporation.

               Sempra Trading also sells significant volumes of gas to
          SoCalGas and SDG&E and to their respective transportation-only 
          customers,45/ most of which it purchases in the San Juan and
          Permian Basins.  Since January 1, 1997, Sempra Trading (and its
          predecessor, AIG Trading Corp.) has sold approximately 22 million
          MMBtu of gas directly to SoCalGas, and several times that amount
          to transportation-only customers of SoCalGas.  Although this
          accounts for only a small percentage of the total through-put on
          the SoCalGas system (930 Bcf in 1997), it represents, by
          comparison, several times the estimated volumes of gas that will
          be required by Frontier when its system is fully developed.  In
          the future, Sempra Trading will be able to achieve substantial
          economies by coordinating gas purchases in the two supply basins

          ---------------

          45/  In 1997, 65% of all gas delivered on the SoCalGas system was
          customer-owned.  SoCalGas only provides the transportation
          service for these customers.  Sempra Trading, which is based in
          San Diego, has aggressively pursued this market segment.  


                                      41
     <PAGE>


          to meet the combined requirements of its three public utility
          affiliates, as well as of its other customers.  Further, SoCalGas
          and SDG&E will continue to purchase significant volumes of gas
          from Sempra Trading to the extent that Sempra Trading is able to
          supply such gas at the lowest price then available to SoCalGas
          and SDG&E in the marketplace.

               In MCN Corporation, it was indicated that CoEnergy Trading
          Company, MCN Corporation's gas marketing subsidiary, which
          already provided a portion of the gas requirements of the smaller
          of MCN Corporation's two gas utility subsidiaries in Michigan,
          also intended to supply a portion of the needs of the new
          partnership being formed in Missouri at such time as the gas
          purchasing needs of the partnership became significant enough for
          economic efficiencies to arise by having CoEnergy Trading Company
          buy gas on its behalf.46/  The Commission held in MCN Corporation
          that these arrangements were sufficient to satisfy the "single
          coordinated system" requirement of Section 2(a)(29)(B).47/  In
          the present case, Sempra Trading initially will supply Frontier's
          full requirements from gas sourced in the San Juan and Permian
          Basins at delivered prices which include transportation cost,
          transaction costs and balancing services required to meet all
          daily, monthly, and seasonal load swings.  Although Frontier
          (like the new partnership in MCN Corporation) will always be able
          to purchase gas from unaffiliated suppliers in the future, it is
          anticipated that, because Sempra Trading purchases significant
          quantities of gas in the Permian and San Juan Basins for sale to
          existing customers in both California and the mid-Atlantic

          ---------------

          46/  See MCN Corporation, 62 SEC Docket at 2382, n. 6

          47/  Id. at 2384.


                                      42
     <PAGE>

 
          region, including SoCalGas and SDG&E, and holds capacity on the
          Transco system, it will be able to achieve substantial economies
          by combining the needs of Frontier with those of SoCalGas and
          SDG&E and their respective transportation-only customers that 
          Sempra Trading now serves.

               Finally, the operations of Sempra's three public utility
          subsidiaries will be coordinated through joint planning and the
          free exchange of ideas and information that customarily takes
          place in any corporate family.  In particular, it is expected
          that Frontier personnel will have ready access to personnel of
          SoCalGas and SDG&E through routine daily communications, joint
          management meetings, system-wide training programs and the like. 
          While the frequency and importance of such intra-system contacts
          are difficult to estimate, it is nevertheless predictable that,
          over time, Frontier will become fully integrated into the
          corporate culture created by Sempra.

               3.   Frontier will Realize Significant Economies and
                    -----------------------------------------------
                    Efficiencies from its Affiliation with the Much Larger
                    ------------------------------------------------------
                    Sempra System.
                    -------------

                    Section 10(c)(2) requires that the Commission find that
          a proposed acquisition will produce economies and efficiencies. 
          Although some of the anticipated economies and efficiencies will
          be fully realized in the longer term, they are properly
          considered in determining whether the standards of Section
          10(c)(2) are met.  See American Electric Power Co., 46 SEC 1299,
          1320-21 (1978).  Further, although some potential benefits cannot
          be precisely estimated, they too are entitled to consideration. 
          As the Commission has stated, "[s]pecific dollar forecasts of
          future savings are not necessarily required; a demonstrated
          potential for economies will suffice even when these are not
          precisely quantifiable."  Centerior Energy Corp., 35 SEC Docket
          769 at 775 (April 29, 1986).  Finally, there is no requirement in
          Section 10(c)(2) that the specific dollar estimates of future


                                      43
     <PAGE>

 
          savings be large in relation to the gross revenues of the
          companies involved.  See American Natural Gas Company, supra, 43
          S.E.C. at 206-207.

               In this case, there can be little doubt that significant
          benefits will be realized by Frontier as a result of becoming a
          part of the much larger Sempra system, particularly in the areas
          of gas supply, increased purchasing power, and the ability to
          utilize the expertise and resources available from Sempra's other
          subsidiaries.  Exhibit I hereto outlines specific areas in which
          the affiliation of Frontier with Sempra is likely to produce
          substantial economies and efficiencies over time, and dollar
          estimates of such savings.  Sempra has estimated that Frontier
          will realize total start-up cost savings of $1.8 million due to
          its integration into the Sempra system and ongoing annual
          operating cost savings of at least $300,000 per year.  On a
          yearly basis, Sempra estimates that Frontier will save
          approximately 19% on its operating costs due to the affiliation. 
          The total estimated savings are quite significant relative to the
          size of the transaction.  Projected annual operating savings
          appear to be greater than those in the SEC's  MCN Corporation
          decision, which involved an investment in a gas system of roughly
          comparable size to the Frontier system.

               It should be emphasized that the savings that will be
          realized by Frontier will not be at the expense of California
          utility customers of SoCalGas and SDG&E.  In this connection, the
          CPUC recently adopted affiliate transaction rules that permit
          corporate support services provided both to a California utility
          and to its affiliates, including affiliates outside California. 
          See Opinion Adopting Standards of Conduct Governing Relationships
          Between Utilities and Their Affiliates, CPUC Decision No. 97-12-
          088, 1997 Cal. PUC LEXIS 1139 (December 16, 1997).  For example,
          the CPUC rule permits such shared services as: payroll, taxes,


                                      44
     <PAGE>


          shareholder services, insurance, financial reporting, financial
          planning and analysis, corporate accounting, corporate security,
          human resources (compensation, benefits, employment policies),
          employee records, regulatory affairs, lobbying, legal, and
          pension management.  Decision No. 97-12-088, App. A, mimeo, p.
          11.  All of the services described on Exhibit I are permitted
          under the CPUC's rules.  To ensure that the use of shared
          services does not result in cross-subsidization, the CPUC
          specifically required that "[a]ny shared support shall be priced,
          reported and conducted in accordance with the Separation and
          Information Standards set forth herein, as well as other
          applicable Commission Pricing and Reporting requirements." Id. 
          In the same decision, the CPUC adopted extensive accounting rules
          to prevent cross-subsidization. Id. at 14.

               In addition to the specific estimates of savings that are
          provided above, Frontier will also avoid the cost of hiring the
          five to eight gas buyers/capacity specialists who would be needed
          if Frontier were to internalize the gas procurement function
          rather than contract with Sempra Trading for its full
          requirements and related services (i.e., scheduling nominations
          and balancing services).  The cost of hiring five trained
          specialists, plus a secretary, including all payroll overheads,
          would conservatively aggregate at least $750,000 per year. 
          Although there is obviously an offsetting cost associated with
          outsourcing the gas procurement function to Sempra Trading, it is
          believed that Frontier will achieve a significant net benefit
          from the arrangements contemplated.

               4.   The System Formed by the Affiliation of Sempra and
                    --------------------------------------------------
                    Frontier will not be So Large as to Impair the
                    ----------------------------------------------
                    Advantages of Localized Management, Efficient
                    ---------------------------------------------
                    Operation, and the Effectiveness of Regulation.
                    ----------------------------------------------


                                      45
     <PAGE>


               The resulting integrated gas system to be formed by adding
          Frontier's gas system to the substantially larger SoCalGas and
          SDG&E systems will not be "so large as to impair (considering the
          state of the art and the area or region affected) the advantages
          of localized management, efficient operation, and the
          effectiveness of regulation."  As in MCN Corporation, this case
          involves the development and financing of a small, start-up, gas
          distribution system designed to serve a predominantly rural
          population.  As described in greater detail in Item 1.3, the day-
          to-day operations of Frontier will be under the direct
          supervision of its General Manager.  Its operations, however,
          will be coordinated with those of SoCalGas and SDG&E in order to
          provide operating efficiencies and savings.  Local regulation is
          and will continue to be effective.  In fact, every aspect of
          Frontier's development and financing has been or will be
          specifically considered by the NCUC, beginning with the NCUC's
          selection of Frontier's proposal for the new gas system over a
          competing proposal submitted by an existing North Carolina gas
          company.   While Sempra will bring to the table much needed
          skills and expertise in the areas of construction and gas supply
          management, pipeline technology and maintenance, procurement,
          operating expertise, and marketing, among others, Frontier will
          maintain its separate corporate identity and local presence and
          have its own management and work force.


               5.   The Indirect Acquisition of Frontier's Voting
                    ---------------------------------------------
                    Securities Will Have No Effect on Sempra's Current
                    --------------------------------------------------
                    Exemption under Section 3(a)(1).
                    -------------------------------

               Frontier will be a small utility compared to SoCalGas and
          SDG&E and will account for only a de minimis amount of Sempra's
          income.  (see fn. 14, above).   The acquisition and ownership of


                                      46
     <PAGE>


          its voting securities by Sempra will therefore have no impact on
          the continuing entitlement of Sempra to its exemptions under
          Section 3(a)(1) of the Act.  Given that there is substantial
          evidence that the acquisition will have integrating features
          (e.g., common source of supply, local management, realization of
          substantial economies and efficiencies through coordinated
          operation, strong local support and effective local regulation)
          and that exempt holding companies, like Sempra, are not subject
          to the strict integration standards of Section 11(b)(1), the
          Commission should have little reason to interpret the integration
          standards of Section 10(c)(2) and Section 2(a)(29)(B), as applied
          to this transaction, in a narrow or restrictive manner.  In other
          recent cases involving acquisitions by exempt holding companies,
          such as Gaz Metropolitan, Inc., et al., TUC Holding, et al., and
          MCN Corporation, the Commission has exhibited a willingness to
          interpret the integration standards of Section 10(c)(2) flexibly,
          focusing instead on the demonstrated benefits of the transaction
          from the perspectives of both investors and consumers.  It should
          do the same here.

               3.4  Section 10(b).
                    -------------

               Section 10(b) provides that, if the requirements of Section
          10(f) are met, then the Commission shall approve a proposed
          acquisition unless it finds that the transaction would have any
          one of several enumerated adverse effects.  In this case, there
          is no basis for the Commission to make any adverse findings under
          Section 10(b).

               A.   Section 10(b)(1).  Section 10(b)(1) was intended to
                    ----------------
          avoid "an excess of concentration and bigness" in the utility
          industry at the expense of competition while preserving the
          "opportunities for economies of scale, the elimination of
          duplicative facilities and activities, the sharing of production
          capacity and reserves and generally more efficient operations"


                                      47
     <PAGE>


          afforded by certain acquisitions.  See American Electric Power
          Co., Inc., 46 S.E.C. 1299, 1309 (1978).  The transaction proposed
          herein will not add meaningfully to the size of Sempra, which is
          much larger than Frontier and will derive only a de minimis part
          of its income from Frontier's operations.  The approximately
          15,000 residential, industrial and commercial customers that
          Frontier projects having at the end of its fifth year of
          operation represents about one-quarter of 1% of the approximately
          6 million retail and industrial gas customers (including
          transportation-only customers) that SoCalGas and SDG&E now serve
          in California.  On the other hand, the transaction will benefit
          Frontier's customers and create a modestly larger and more
          diverse asset and customer base, which will create opportunities
          for operating efficiencies.

               Further, although the transaction proposed herein will
          result in creating a link between SoCalGas and SDG&E, on the one
          hand, and Frontier, on the other, it will not lead to the type of
          concentration of control over utilities, unrelated to operating
          efficiencies, that Section 10(b)(1) was intended to prevent.48/  
          In fact, far from limiting or restricting competition, the
          transaction proposed herein is the outgrowth of proceedings in
          North Carolina in which the NCUC carefully evaluated competing
          proposals to construct and operate a gas system in the Four-
          County Area. Finally, although the management interlocks that
          will be created are necessary and desirable in order to integrate
          Frontier fully into the Sempra system, Frontier will have its own
          local management team and work force.

          ---------------

          48/  See Section 1(b)(4) of the Act (finding that the public
          interest and interests of consumers and investors are adversely
          affected "when the growth and extension of holding companies
          bears no relation to economy of management and operation or the
          integration and coordination of related operating properties . .
          . ."). 


                                      48
     <PAGE>


               B.   Section 10(b)(2).  The Commission may not approve the
                    ----------------
          proposed transaction if it determines pursuant to Section
          10(b)(2) that the consideration (including fees and expenses of
          the transaction) to be paid, indirectly, by Sempra in connection
          with the transaction is not reasonable or does not bear a fair
          relation to investment in and earning capacity of the utility
          assets underlying the securities being acquired.  In this case,
          the equity investments by Frontier Pacific and Frontier Utilities
          in Frontier, a newly-formed entity with no preexisting business,
          have been expressly approved by the NCUC, which has also
          conducted extensive hearings on the overall economic feasibility
          of Frontier at the rates and rate design proposed by Frontier. 
          The amounts to be invested were the result of direct, arms'-
          length, negotiations between private investors, and no fees to
          outside investment bankers will be paid.  

               C.   Section 10(b)(3).  Section 10(b)(3) requires the
                    ----------------
          Commission to determine whether the transaction will unduly
          complicate the capital structure of Sempra or will be detrimental
          to the public interest, the interest of investors or consumers or
          the proper functioning of the Sempra holding company system.  The
          intent of these requirements is to assure the financial soundness
          of the holding company system, with particular regard to the
          proper balance of debt and equity.

               The transaction proposed herein will have a virtually
          undetectable impact on the capitalization and earnings of Sempra,
          and will not introduce any complexity into Sempra's capital
          structure.  With regard to the latter, the debt and other
          obligations incurred or to be incurred by Frontier will not be
          recourse, directly or indirectly, to either SoCalGas or SDG&E.


                                      49
     <PAGE>


               Moreover, as set forth more fully in the discussion of the
          standards of Section 10(c)(2), supra, and elsewhere in this
          Application or Declaration, the transaction will create
          opportunities for Frontier to achieve substantial savings,
          chiefly in the areas of coordinated gas supply and economies
          associated with greater buying power and the availability of
          managerial and technical expertise that will be needed by
          Frontier.  The transaction will therefore be in the public
          interest and the interest of investors and consumers, and will
          not be detrimental to the proper functioning of the resulting
          holding company system.

               3.5  Section 10(f).
                    -------------

               Frontier has obtained the required NCUC approvals for the
          equity investment by Frontier Pacific.  The requirements of
          Section 10(f) have therefore been satisfied. 


          ITEM 4.   REGULATORY APPROVALS.
                    --------------------

               The construction and financing of Frontier's gas
          distribution system is subject to the jurisdiction of the NCUC,
          which has issued various approvals referred to in Item 1.  No
          other State or Federal commission has jurisdiction over any
          aspect of the transaction. 


          ITEM 5.   PROCEDURE.
                    ---------

               The Commission has published a notice under Rule 23 with
          respect to the filing of this Application or Declaration, and no
          hearing has been requested.  Sempra and Frontier Pacific request
          that the Commission's Order be issued as soon as practicable, and
          that there should not be a 30-day waiting period between issuance
          of the Commission's order and the date on which the order is to
          become effective.  Sempra and Frontier Pacific hereby waive a


                                      50
     <PAGE>

 
          recommended decision by a hearing officer or any other
          responsible officer of the Commission and consent that the
          Division of Investment Management may assist in the preparation
          of the Commission's decision and/or order, unless the Division
          opposes the Transaction.

          ITEM 6.   EXHIBITS AND FINANCIAL STATEMENTS.
                    ---------------------------------
                    (Previously filed, except as noted).

               A   -     EXHIBITS.
                         --------

                    A-1  Articles of Organization of Frontier Energy LLC.

                    A-2  Operating Agreement of Frontier Energy LLC.

                    D-1  Application of Frontier Utilities of North
                         Carolina and Frontier Energy LLC for Approval of
                         Final Financing Plan, to Transfer Certificates,
                         and for Approval of Waiver of Security Bond (NCUC
                         Docket Nos. G-38, Sub. 3 and G-40).  

                    D-2  Order of the NCUC in Docket Nos. 38, Sub. 3, and
                         G-40, dated March 9, 1998.   

                    E    Map of natural gas service areas of SoCalGas,
                         SDG&E and Frontier, common supply basins, major
                         interstate pipelines and market centers and hubs. 
                         (Paper format filing).

                    F-1  Opinion of counsel to Sempra Energy.  (Filed
                         herewith).

                    F-2  Opinion of special North Carolina counsel to
                         Sempra Energy.  (Filed herewith).

                    H    Proposed form of Federal Register notice. 

                    I    Description of Economies and Efficiencies and
                         Estimated Dollar Savings.

               B.   FINANCIAL STATEMENTS.
                    --------------------

                    FS-1:     Pacific Enterprises Consolidated Balance
                              Sheet as of March 31, 1998 (incorporated by
                              reference to the Quarterly Report on Form 


                                      51
     <PAGE>


                              10-Q of Pacific Enterprises for the fiscal
                              quarter ended March 31, 1998, in File No. 1-
                              0040).

                    FS-2:     Enova Corporation Consolidated Balance Sheet
                              as of March 31, 1998 (incorporated by
                              reference to the Quarterly Report on Form 10-
                              Q of Enova Corporation for the fiscal quarter
                              ended March 31, 1998, in File No. 1-11439).

                    FS-3:     Pacific Enterprises Consolidated Statement of
                              Income for the quarter ended March 31, 1998
                              (incorporated by reference to the Quarterly
                              Report on Form 10-Q of Pacific Enterprises
                              for the fiscal quarter ended March 31, 1998,
                              in File No. 1-0040).

                    FS-4:     Enova Corporation Consolidated Statement of
                              Income for the quarter ended March 31, 1998
                              (incorporated by reference to the Quarterly
                              Report on Form 10-Q of Enova Corporation for
                              the fiscal quarter ended March 31, 1998, in
                              File No. 1-11439).


          ITEM 7.   INFORMATION AS TO ENVIRONMENTAL EFFECTS.
                    ---------------------------------------

               The transaction does not involve a "major federal action"
          nor will it "significantly affect the quality of the human
          environment" as those terms are used in section 102(2)(C) of the
          National Environmental Policy Act.  The transaction that is the
          subject of this Application or Declaration will not result in
          changes in the operation of the Applicants or their respective
          subsidiaries that will have an impact on the environment.  The
          Applicants are not aware of any federal agency that has prepared
          or is preparing an environmental impact statement with respect to
          the transaction.


                                      52  
     <PAGE>


                                      SIGNATURE

               Pursuant to the requirements of the Public Utility Holding
          Company Act of 1935, as amended, the undersigned companies have
          duly caused this statement filed herein to be signed on their
          behalf by the undersigned thereunto duly authorized.



                                        SEMPRA ENERGY 

                                        By:  /s/ Warren I. Mitchell
                                             -----------------------
                                        Name:     Warren I. Mitchell
                                        Title:    Group President -
                                                  Regulated Business Units


                                        FRONTIER PACIFIC, INC.

                                        By:  /s/ Eric B. Nelson
                                             ------------------
                                        Name:     Eric B. Nelson
                                        Title:    President

          Date:     October 30, 1998



                                      53
     <PAGE>


                                 EXHIBIT INDEX


           Exhibit                      Description
           -------                      -----------

             F-1           Opinion of counsel to Sempra Energy.

             F-2           Opinion of special North Carolina counsel to
                           Sempra Energy. 


                                                                    Exhibit F-1


                                         October 30, 1998



Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C.  20549

         Re:      Sempra Energy, et al.
                  Application on Form U-1
                  SEC File No. 70-9333

Dear Ladies and Gentlemen:

         On behalf of Sempra Energy and Frontier Pacific, Inc. (jointly, the
"Applicants"), I have examined the Application on Form U-1, dated July 17, 1998,
under the Pubic Utility Holding Company Act of 1935 (the "Act"), filed by the
Applicants with the Securities and Exchange Commission (the "Commission") and
docketed by the Commission in SEC File No. 70-9333, as amended by Amendment No.
1, dated October 30, 1998, of which this opinion is to be a part. The
Application, as so amended, is hereinafter referred to as the "Application."
Capitalized terms not defined herein have the meanings set forth in the
Application.

         As set forth in the Application, the Applicants propose to acquire
directly or indirectly up to 90.1% of the membership interests of Frontier
Energy LLC ("Frontier"), which will become a "gas utility company" within the
meaning of the Act (the "Proposed Transaction").

         I am an attorney licensed in the State of California and am counsel for
the Applicants. I am familiar with the issuance of securities by Sempra Energy
and its associate companies. I have examined copies, signed, certified or
otherwise proven to my satisfaction, of the Application. In addition, I have
examined such other instruments, agreements and documents and made such other
investigation as I have deemed necessary as a basis for this opinion.

         For the purposes of the opinions expressed below, I have assumed
(except, and to the extent set forth in my opinions below, as to the Applicants)
that all of the documents referred to in this opinion letter will have been duly
authorized, executed and delivered by, and will constitute legal, valid, binding
and enforceable obligations of, all of the parties to such documents, that all
such signatories to such documents will have been duly authorized, that all such
parties are duly organized


<PAGE>


Page 2

and validly existing and will have the power and authority (corporate,
partnership or other) to execute, deliver and perform such documents and that
such authorization, execution and delivery by each such party will not, and such
performance will not, breach or constitute a violation of any law of any
jurisdiction. Based upon the foregoing, I am of the opinion, insofar as the laws
of California are concerned that:

         (a)   all California laws applicable to the Proposed Transaction
will have been complied with.

         (b)   Sempra Energy is a corporation validly organized and duly
existing under the laws of the State of California.

         (c)   The Applicants will legally acquire the membership interests
of Frontier being acquired.

         (d)   Consummation of the Proposed Transaction will not violate
the legal rights of the holders of any securities issued by the Applicants or
any associate company thereof.

         The opinion expressed above are subject to the following assumptions or
conditions:

         (a)   The Commission shall have duly entered an appropriate order
or orders granting and permitting the Application to become effective with
respect to the Proposed Transaction.

         (b)   The Proposed Transaction shall be effected in accordance
with required approvals, authorizations, consents, certificates and orders of
any state or federal commission or regulatory authority with respect to the
Proposed Transaction and all such required approvals, authorizations, consents,
certificates and orders shall have been obtained and remain in full force and
effect.

         I hereby consent to the filing of this opinion as an exhibit to the
Application and in any proceedings before the Commission that may be held in
connection therewith.

                                            Sincerely

                                            /s/ Donald C. Liddell
                                      
                                            Donald C. Liddell

DCL/mrr




                                                                  EXHIBIT F-2
{Kilpatrick Stockton LLP letterhead}



October 30, 1998

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC  20549

         RE:      SEMPRA ENERGY, ET AL.
                  APPLICATION ON FORM U-1
                  SEC FILE NO. 70-9333

Dear Ladies and Gentlemen:

         On behalf of Sempra Energy and the Applicant Frontier Pacific, Inc.
(jointly, the "Applicants"), we have examined the Application on From U-1, dated
July 17, 1998, under the Public Utility Holding Company Act of 1935 (the "Act"),
filed by the Applicants with the Securities and Exchange Commission (the
"Commission") and docketed by the Commission in SEC file No. 70-9333, as amended
by Amendment dated October30, 1998, of which this opinion is to be a part. The
Application, as so amended, is hereinafter referred to as the "Application".
Capitalized terms not defined herein have the meanings set forth in the
Application.

         As set forth in the Application, the Applicants propose to acquire up
to 90.1% of the membership interest of Frontier Energy, LLC ("Frontier") which
will become a "gas utility company" within the meaning of the Act (the "Proposed
Transaction").

         The attorneys signing this letter on behalf of Kilpatrick Stockton LLP
are attorneys licensed in the State of North Carolina and are counsel for the
Applicants regarding state regulatory matters. We have examined copies, signed,
certified or otherwise proven to my satisfaction, of the Application. In
addition, we have examined such other instruments, agreements and documents and
made such other investigation related to North Carolina state approvals,
certificates, and licenses as we have deemed necessary as a basis for this
opinion. We have also relied upon representations and statements of officials
and agents of Sempra Energy and Frontier Utilities of North Carolina, Inc.
regarding the Proposed Transaction that is the subject of the Application.

         For the purposes of the opinions expressed below, we have assumed
(1)(a) that all of the documents referred to in this opinion letter will have
been duly authorized, executed and delivered by, and (b) will constitute legal,
valid, binding and enforceable obligations of all of the parties to such

<PAGE>

Securities and Exchange Commission
October 30, 1998
Page 2



documents, (2) that all such signatories to such documents will have been duly
authorized, (3) that all such parties are duly organized and validly existing
and will have the power and authority (corporate, partnership or other) to
execute, deliver and perform such documents, and (4)(a) that such authorization,
execution and delivery by each such party will not, and (b) that such
performance pursuant to such documents will not, breach or constitute a
violation of any laws of any jurisdiction. Based upon the foregoing, we are of
the opinion, insofar as the laws of North Carolina are concerned, that:

         (a)   All North Carolina laws applicable to the Proposed
Transaction will have been complied with.

         (b) Frontier Energy, LLC and Frontier Pacific, Inc. are validly
organized and duly existing.

         (c)   The Applicants will legally acquire the membership interests
being acquired.

         (d)   Consummation of the Proposed Transaction will not violate
the legal rights of the holders of any securities issued by the Applicants or
any associate company thereof, to the extent any such rights are subject to
North Carolina law.

         The opinions expressed above are subject to the following assumptions
or conditions:

         a.    The Commission shall have duly entered an appropriate order
or orders granting and permitting the Application to become effective with
respect to the Proposed Transaction.

         b.    The Proposed Transaction shall be effected in accordance
with required approvals, authorizations, consents, certificates and orders of
any state or federal commission or regulatory authority with respect to the
Proposed Transaction and all such required approvals, authorizations, consents,
certificates and orders shall have been obtained and remain in full force and
effect.

         c.    No act or event other than as described herein shall have
occurred subsequent to the date hereof which could change the opinion expressed
above.


<PAGE>

Securities and Exchange Commission
October 30, 1998
Page 3



         In addition, we express no opinion regarding the effectiveness or
enforceability of any particular terms, commitments, warrantees, guarantees, or
other provisions of the underlying contracts, understandings, agreements, or
other documents between or among the parties to the Proposed Transaction that
may be separate or severable from the specific right and authority to acquire
the membership interest that are the subject of the Application and that are the
sole subject of this opinion letter. Further, this opinion herein is qualified
by and is subject to, and we render no opinion with respect to, the limitations
and exceptions to the enforceability of contracts and obligations generally,
including without limitation: (a) the effect of bankruptcy, insolvency,
reorganization, arrangement, moratorium, fraudulent transfer or conveyance,
preference, equitable subordination (whether arising under State laws or the
U.S. Bankruptcy Code), bulk sales or bulk transfer laws and other similar laws
relating to or affecting the rights of creditors generally; (b) the effect of
general principles of equity and similar principles, including, without
limitation concepts of materiality, reasonableness, unconscionability, good
faith and fair dealing and the possible unavailability of specific performance,
injunctive relief or other equitable remedies, regardless of whether considered
in a proceeding in equity or at law, and the effect of public policy; (c) the
enforceability of the indemnification and contribution provisions of the
Agreement and any ancillary agreements, (d) compliance or noncompliance with
antifraud provisions of applicable state and federal statutes, rules and
regulations concerning the issuance and sale of securities; and (f) the effect
of North Carolina, federal or other laws relating to usury or permissible rates
of interest or other charges for loans, forebearances or the use of money.

         Our opinion is limited to the laws of the State of North Carolina and
we express no opinion with respect to the laws of any other state or
jurisdiction, including, but not limited to, federal securities, tax, trade
regulation, or antitrust laws or regulations, or to any local laws or
ordinances. By rendering our opinion, we do not undertake to advise you of any
changes in the law that may occur after the date hereof. These opinions have
been prepared at your request and they are intended solely for your use in
connection with the Proposed Transaction that is the subject of the Application
and may not be relied upon by any other party or entity.


<PAGE>

Securities and Exchange Commission
October 30, 1998
Page 4



         We hereby consent to the filing of this opinion as an exhibit to the
Application and in any proceedings before the Commission that may be held in
connection therewith.

                                                    Very truly yours,

                                                    KILPATRICK STOCKTON LLP

                                                    /s/ Kilpatrick Stockton LLP
                                                         by M. Gray Styers, Jr.

MGSjr/tlf








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