<PAGE>
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[_] Preliminary Information Statement [_] Confidential, for Use of the
Commission Only (as permitted
by Rule 14c-5(d)(2))
[X] Definitive Information Statement
San Diego Gas & Electric Company
- --------------------------------------------------------------------------------
(Name of Registrant As Specified In Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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(3) Per unit price or other underlying value of transaction computed
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
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Notes:
<PAGE>
SAN DIEGO GAS & ELECTRIC COMPANY
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
----------------
The Annual Meeting of Shareholders of San Diego Gas & Electric Company will
be held on May 11, 2000 at 10:15 a.m. at the offices of Sempra Energy, 101 Ash
Street, San Diego, California, for the following purposes:
(1) To elect directors for the ensuing year.
(2) To transact any other business that may properly come before the
meeting.
Shareholders of record at the close of business on March 22, 2000 are
entitled to notice of and to vote at the Annual Meeting.
The Annual Meeting is a business-only meeting. It will not include any
presentations by management.
ONLY SHAREHOLDERS OF SDG&E ARE ENTITLED TO ATTEND THE ANNUAL MEETING.
SHAREHOLDERS WHO OWN SHARES REGISTERED IN THEIR NAMES WILL BE ADMITTED TO THE
MEETING UPON VERIFICATION OF RECORD SHARE OWNERSHIP. SHAREHOLDERS WHO OWN
SHARES THROUGH BANKS, BROKERAGE FIRMS, NOMINEES OR OTHER ACCOUNT CUSTODIANS
MUST PRESENT PROOF OF BENEFICIAL SHARE OWNERSHIP (SUCH AS A BROKERAGE ACCOUNT
STATEMENT) TO BE ADMITTED.
By Order of the Board of Directors
San Diego, California
March 22, 2000
<PAGE>
SAN DIEGO GAS & ELECTRIC COMPANY
----------------
INFORMATION STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
----------------
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
San Diego Gas & Electric Company ("SDG&E" or the "Company") is providing
this Information Statement in connection with its Annual Meeting of
Shareholders to be held on May 11, 2000. It is being mailed to shareholders
commencing April 5, 2000.
SAN DIEGO GAS & ELECTRIC COMPANY
SDG&E is a direct subsidiary of Enova Corporation and an indirect
subsidiary of Sempra Energy. It is a public utility supplying electricity and
natural gas in San Diego and southern Orange counties in California.
SDG&E became an indirect subsidiary of Sempra Energy upon the June 26, 1998
completion of a business combination of Enova Corporation (the direct parent
corporation of SDG&E) and Pacific Enterprises (the direct parent corporation
of Southern California Gas Company). In the combination, Enova Corporation and
Pacific Enterprises became separate subsidiaries of Sempra Energy, a newly
formed holding company, and Enova Corporation Common Stock and Pacific
Enterprises Common Stock were converted into Sempra Energy Common Stock.
Shares of SDG&E and Southern California Gas Company were unaffected by the
business combination and remain outstanding.
SDG&E's principal executive offices are located at 8330 Century Park Court,
San Diego, California. Its telephone number is (858) 654-6429.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors has fixed March 22, 2000 as the record date for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting. At that date, the outstanding shares consisted of 116,583,358 shares
of Common Stock (all of which is owned by Enova Corporation), 1,373,770 shares
of Cumulative Preferred Stock and 3,040,000 shares of Preference Stock.
In electing directors, each share of Cumulative Preferred Stock is entitled
to two votes and each share of Common Stock is entitled to one vote for each
of the thirteen director positions but cumulative voting is not permitted.
Shares of Preference Stock do not vote in the election of directors. The
shares owned by Enova Corporation represent over 98% of the votes entitled to
be cast in electing directors.
GOVERNANCE OF THE COMPANY
BOARD OF DIRECTORS
The business and affairs of SDG&E are managed under the direction of the
Board of Directors in accordance with the California General Corporation Law
as implemented by the Company's Articles of Incorporation and By-laws. Members
of the board are kept informed through various reports routinely sent to them
as well as by operating and financial presentations made at board and
committee meetings by officers and others.
<PAGE>
Shareholders who wish to suggest qualified candidates for consideration by
the Corporate Governance Committee as directors of the Company should write
to: Corporate Secretary, San Diego Gas & Electric Company, 8330 Century Park
Court, San Diego, California, 92123, stating in detail the qualifications of
the suggested candidates.
During 1999, the Board of Directors held ten meetings. The standing
committees listed below assisted the board in carrying out its duties.
COMMITTEES OF THE BOARD
<TABLE>
<CAPTION>
AUDIT COMPENSATION CORPORATE GOVERNANCE EXECUTIVE FINANCE PUBLIC POLICY
----- ---------------------- --------------------- ---------------------- ----------------------- ------------------
<S> <C> <C> <C> <C> <C>
Richard A. Richard J. Stegemeier, Hyla H. Bertea, Warren I. Mitchell, Daniel W. Derbes, Herbert L. Carter,
Collato, Chair Chair Chair Chair Chair
Chair
Ann L. Burr Hyla H. Bertea Ann L. Burr Herbert L. Carter Richard A. Collato William D. Jones
Wilford D. Ignacio E. Lozano, Jr. Daniel W. Derbes Ignacio E. Lozano, Jr. Wilford D. Godbold, Jr. Ralph R. Ocampo
Godbold, Jr.
Robert H. Ralph R. Ocampo Robert H. Goldsmith Thomas C. Stickel William D. Jones William G. Ouchi
Goldsmith
William G. Ouchi Thomas C. Stickel Richard J. Stegemeier Diana L. Walker
Diana L. Walker
</TABLE>
Audit Committee
The Audit Committee met five times in 1999. Its duties and responsibilities
include:
. Providing oversight of the financial reporting process and management's
responsibility for the integrity, accuracy and objectivity of financial
reports and accounting and financial reporting practices.
. Recommending to the board the selection of independent auditors.
Compensation Committee
The Compensation Committee met five times in 1999. Its duties and
responsibilities include:
. Establishing overall strategy with respect to compensation for directors
and senior officers.
. Evaluating the performance of the Chairman and the President for
compensation purposes.
. Reviewing and approving individual salary adjustments and awards under
incentive plans for senior officers.
. Overseeing the executive succession plans.
Corporate Governance Committee
The Corporate Governance Committee met three times in 1999. Its duties and
responsibilities include:
. Reviewing and recommending nominees for election as directors.
. Assessing the performance of the Board of Directors.
. Developing guidelines for board composition.
. Reviewing and considering issues relating to corporate governance.
Executive Committee
The Executive Committee did not meet in 1999. The committee meets on call
during the intervals between board meetings and, subject to the limitations
imposed by law, has all the authority of the board.
2
<PAGE>
Finance Committee
The Finance Committee met two times in 1999. Its duties and
responsibilities include:
. Reviewing long term and short term financial requirements and financing
plans.
. Reviewing trading operations, financial guarantees and derivatives
positions and exposure.
. Reviewing pension plan investment results and insurance coverages.
Public Policy Committee
The Public Policy Committee met three times in 1999. Its duties and
responsibilities include:
. Reviewing public policy issues affecting SDG&E, including ethnic, social
and political trends.
. Reviewing employment and contracting policies, consumer issues and
community relations.
. Reviewing charitable and political contributions and programs.
DIRECTORS' COMPENSATION
All of the directors of SDG&E are also directors or officers of Sempra
Energy. They are not separately compensated for services as directors of the
Company.
Directors of Sempra Energy who are not also employees receive the following
retainer and fees for services as directors of Sempra Energy and its
subsidiaries:
<TABLE>
<S> <C>
Annual retainer................................................... $26,000
Attendance fee for each Board meeting............................. $ 1,000
Attendance fee for each Committee meeting......................... $ 1,000
Additional meeting fee for each Committee meeting chaired......... $ 1,000
</TABLE>
Directors may elect to receive their annual fees in Sempra Energy Common
Stock instead of cash or to defer their annual fees into an interest-bearing
account, a phantom investment fund or a phantom share account in which the
fees are deemed invested in Sempra Energy Common Stock.
Each non-employee director of Sempra Energy is granted upon becoming a
director a ten-year option to purchase 15,000 shares of Sempra Energy Common.
Each non-employee director is also granted an additional ten-year option to
purchase 5,000 shares at each annual meeting of Sempra Energy (other than the
annual meeting that coincides with or first follows the director's election to
the board) following which the director continues to serve as a non-employee
director. Each option is granted at an option exercise price equal to the fair
market value of the option shares at the date the option is granted and
becomes fully exercisable commencing with the first annual meeting of Sempra
Energy following the date of the grant or the director's earlier death,
disability, retirement or involuntary termination of board service other than
for cause.
Non-employee directors of Sempra Energy who were directors of Enova
Corporation and Pacific Enterprises at the time of the business combination of
the two companies (currently all of the non-employee directors) continue to
accrue retirement benefits (subject to certain maximum years of service
credit) for service as non-employee directors of Sempra Energy. Benefits
commence upon the later of retirement as a director or attaining age 65 and
continue for a maximum period equal to the director's combined years of
service as a director of Sempra Energy and Enova Corporation or Pacific
Enterprises. The annual benefit is the sum of Sempra Energy's then current
annual retainer and ten times the then current board meeting fee.
3
<PAGE>
SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
All of the outstanding SDG&E Common Stock is owned by Enova Corporation and
none of the Company's directors or officers owns any SDG&E Cumulative
Preferred or Preference Stock.
The following table sets forth the number of shares of Sempra Energy Common
Stock beneficially owned by each director, by each of the five most highly
compensated executive officers of SDG&E and by all directors and executive
officers of the Company as a group, as of February 15, 2000. These shares, in
the aggregate, represent less than one percent of Sempra Energy's outstanding
shares.
SEMPRA ENERGY COMMON STOCK
<TABLE>
<CAPTION>
SHARES
SUBJECT TO
BENEFICIAL EXERCISABLE PHANTOM
HOLDINGS OPTIONS(A) SHARES(B) TOTAL
---------- ----------- --------- -------
<S> <C> <C> <C> <C>
Hyla H. Bertea....................... 9,630 20,000 -0- 29,630
Ann L Burr........................... 2,200 20,000 -0- 22,200
Herbert L. Carter.................... 1,551 20,000 -0- 21,551
Richard A. Collato................... 4,222 20,000 -0- 24,222
Gary D. Cotton....................... 35,134 11,040 9,793 55,967
Steven D. Davis...................... 4,442 8,252 7,798 20,492
Daniel W. Derbes..................... 5,828 20,000 -0- 25,828
Pamela J. Fair....................... 9,747 64,601 544 74,892
Wilford D. Godbold, Jr............... 3,006 20,000 -0- 23,006
Robert H. Goldsmith (C).............. 2,659 20,000 -0- 22,659
Edwin A. Guiles...................... 22,942 21,730 18,804 63,476
William D. Jones..................... 2,174 20,000 -0- 22,174
Ignacio E. Lozano, Jr (C)............ 2,352 20,000 -0- 22,352
Warren I. Mitchell................... 22,565 145,446 36,991 205,002
Ralph R. Ocampo...................... 14,621 20,000 -0- 34,621
William G. Ouchi..................... 10,000 20,000 -0- 30,000
Richard J. Stegemeier................ 1,503 20,000 -0- 21,503
Thomas C. Stickel.................... 2,037 20,000 -0- 22,037
Diana L. Walker...................... 936 20,000 -0- 20,936
Directors and Executive Officers as a
group (19 persons).................. 157,549 531,069 73,930 762,548
</TABLE>
- --------
(A) Shares which may be acquired through the exercise of stock options that
are exercisable on or before May 15, 2000.
(B) Represents deferred compensation deemed invested in shares of Sempra
Energy Common Stock. These phantom shares cannot be voted or transferred
but track the performance of Sempra Energy Common Stock.
(C) Messrs. Goldsmith and Lozano will retire as directors before the Annual
Meeting and the authorized number of directors will be reduced to reflect
their retirements.
Share ownership guidelines have been established for directors and officers
to further strengthen the link between performance and compensation. For non-
employee directors the guideline is ownership of a number of shares having a
market value equal to four times the annual retainer. For officers, the
guidelines are:
<TABLE>
<CAPTION>
SEMPRA ENERGY
SDG&E EXECUTIVE LEVEL SHARE OWNERSHIP GUIDELINES
--------------------- --------------------------
<S> <C>
Chairman........................................ 3 x Base Salary
President....................................... 2 x Base Salary
Vice Presidents................................. 1 x Base Salary
</TABLE>
4
<PAGE>
In setting the guidelines the board considered then current share ownership
levels and the desirability of encouraging further share ownership. The
officer guidelines were established in 1998 and the director guidelines in
2000. They are expected to be met or exceeded within five years from adoption.
For purposes of the guidelines, shares owned include phantom shares into which
compensation is deferred and the vested portion of certain in-the-money stock
options as well as shares owned directly or through benefit plans.
5
<PAGE>
ELECTION OF DIRECTORS
SDG&E's Board of Directors will consist of thirteen directors upon giving
effect to the retirement of two directors who will retire prior to the Annual
Meeting of Shareholders and a corresponding reduction in the authorized number
of directors. At the Annual Meeting, thirteen directors (comprising the entire
authorized number of directors) will be elected to hold office until the next
Annual Meeting and until their successors have been elected and qualified. The
thirteen director candidates receiving the greatest number of votes will be
elected as directors.
Warren I. Mitchell has announced that he will retire on July 1, 2000. The
board anticipates that it will at that time reduce the authorized number of
directors to twelve.
The names of the Board of Directors' thirteen nominees for election as
directors and biographical information regarding each nominee are set forth
below. Each nominee is currently a director of SDG&E and also of Southern
California Gas Company. Each nominee (other than Mr. Mitchell) is also a
director of Enova Corporation and Sempra Energy. Unless otherwise noted, each
nominee has held the position set forth beneath his or her name or various
positions with the same or predecessor organizations for at least the last
five years.
HYLA H. BERTEA, 59, has been a director since 1998. She is a
realtor with Prudential California, a real estate sales company.
She is a trustee of Lewis & Clark College, a director of Orange
County Community Foundation, and a former commissioner of the
California Horse Racing Board. For a number of years she has been
involved in leadership positions with various other cultural,
educational and health organizations in the Orange County and Los
Angeles areas. Mrs. Bertea was a co-commissioner of gymnastics and
a member of the executive staff for the 1984 Olympics.
[Photo of Hyla Berta]
ANN L. BURR, 53, has been a director since 1993. She is an
Executive Vice President of Time Warner Cable. She is the former
President of Time Warner Communications in Rochester, New York and
Time Warner Cable in San Diego. Ms. Burr is a trustee of the
Rochester Institute of Technology. She served as Chair of the
Board of Directors of the California Cable Television Association
and chaired its Telecommunications Policy Committee. She is a
former Chair of the Greater San Diego Chamber of Commerce Board of
Directors and the founder and former Chair of the Chamber's
Business Roundtable for Education and the San Diego Communications
Council.
[Photo of Ann Burr]
HERBERT L. CARTER, DPA, 66, has been a director since 1998. He has
served as President of California State University, Dominguez
Hills, and Executive Vice Chancellor Emeritus and Trustee
Professor of Public Administration of the California State
University System. He was President and Chief Executive Officer of
United Way of Greater Los Angeles from 1992 until 1995, and
Executive Vice Chancellor of the California State University
System from 1987 until 1992. Dr. Carter is a director of Golden
State Mutual Insurance Company, and has served as a member of the
Board of Councilors of the School of Public Administration,
University of Southern California and the Board of Regents of
Loyola Marymount University.
[Photo of Herbert Carter]
RICHARD A. COLLATO, 56, has been a director since 1993. He is
President and Chief Executive Officer of the YMCA of San Diego
County. He is a former director of Y-Mutual Ltd., a reinsurance
company, and The Bank of San Diego. Mr. Collato is a former
trustee of Springfield College, and currently is a trustee of the
YMCA Retirement Fund and Bauce Foundation, and a director of
Project Design Consultants.
[Photo of Richard Collato]
6
<PAGE>
DANIEL W. DERBES, 69, has been a director since 1983. He is
President of Signal Ventures. From 1985 until 1988, he was
President of Allied-Signal International Inc. and Executive Vice
President of Allied-Signal Inc., a multi-national advanced
technologies company. Mr. Derbes is a director of WD-40 Company
and a trustee of the University of San Diego.
[Photo of Daniel Derbes]
WILFORD D. GODBOLD, JR., 61, has been a director since 1998. He is
the retired President and Chief Executive Officer of ZERO
Corporation, an international manufacturer primarily of enclosures
and thermal management equipment for the electronics market. He is
a director of K2, Inc. Mr. Godbold is a trustee of the Wellness
Community, a member of the Council on California Competitiveness,
a past President of the Board of Trustees of Marlborough School
and a past Chairman of the Board of the California Chamber of
Commerce and The Employer Group.
[Photo of Wilford Godbold]
WILLIAM D. JONES, 44, has been a director since 1994. He is the
President and Chief Executive Officer and a director of CityLink
Investment Corporation. From 1989 to 1993, he served as General
Manager/Senior Asset Manager and Investment Manager with certain
real estate subsidiaries of The Prudential. Prior to joining The
Prudential, he served as a San Diego Council member from 1982 to
1987. Mr. Jones is a director of the Federal Reserve Bank of San
Francisco, Los Angeles Branch, and a trustee of the University of
San Diego. He is a former director of The Price Real Estate
Investment Trust.
[Photo of William Jones]
WARREN I. MITCHELL, 62, has been a director since 1998. He is
Chairman of SDG&E, Chairman of the Board and President of Southern
California Gas Company and Group President--Regulated Business
Operations of Sempra Energy. He is a director of the United Way of
Greater Los Angeles, Gas Research Institute and Chairman, director
and trustee of the Institute of Gas Technology.
[Photo of Warren Mitchell]
RALPH R. OCAMPO, M.D., F.A.C.S., 68, has been a director since
1983. He is a practicing surgeon, Governor of the American College
of Surgeons, past President of the California Medical Association
and a Clinical Professor of Surgery at the University of
California, San Diego.
[Photo of Ralph Ocampo]
WILLIAM G. OUCHI, PH.D., 56, has been a director since 1998. He is
a Vice Dean and Faculty Director of Executive Education Programs
and Sanford and Betty Sigoloff Professor in Corporate Renewal in
the Anderson Graduate School of Management at UCLA. Dr. Ouchi is a
director of Allegheny Technologies, FirstFed Financial Corp., and
Water-Pik Technologies. He is a trustee of Williams College and a
director of KCET Public Service Television.
[Photo of William Ouchi]
RICHARD J. STEGEMEIER, 71, has been a director since 1998. He is
Chairman Emeritus of the Board of Unocal Corporation. He is a
director of Foundation Health Systems, Inc., Halliburton Company,
Montgomery Watson, Inc., and Northrop Grumman Corporation.
[Photo of Richard J. Stegemeier]
7
<PAGE>
THOMAS C. STICKEL, 50, has been a director since 1994. He is the
Chairman, Chief Executive Officer and founder of University
Ventures Network. He is the founder of Americana Partners Capital
Group, Inc. He previously was the Chairman, Chief Executive
Officer and President of TCS Enterprises, Inc. and the Bank of
Southern California, both of which he founded. Mr. Stickel is
Chairman of the Board of Onyx Acceptance Corporation, a director
of Blue Shield of California and Del Mar Thoroughbred Club and
Vice Chairman of the California Chamber of Commerce.
[Photo of Thomas C. Stickel
DIANA L. WALKER, 58, has been a director since 1998. Mrs. Walker
is a partner and General Counsel of the law firm of O'Melveny &
Myers LLP. She is a former director of United Way of Greater Los
Angeles, and Emeritus Governor and former Chair of the Board of
Governors of the Institute for Corporate Counsel, a former trustee
of Marlborough School and a member of various professional
organizations. O'Melveny & Myers LLP provides legal services to
Sempra Energy and its subsidiaries.
[Photo of Diana L. Walker]
8
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
SDG&E became an indirect subsidiary of Sempra Energy in connection with a
business combination of Enova Corporation (the direct parent of SDG&E) and
Pacific Enterprises (the direct parent of Southern California Gas Company)
that was completed on June 26, 1998.
The Boards of Directors of SDG&E, the Gas Company and Sempra Energy each
maintain a Compensation Committee comprised of independent directors. The
directors comprising the three committees are identical and the committees
typically meet in joint session.
The Compensation Committees have the responsibility for establishing
compensation principles and strategies, as well as designing a compensation
program for executive officers. Their responsibilities also include
administering a base salary program, executive annual and long term incentive
plans, and executive benefit and perquisite programs.
During 1999, the Compensation Committees conducted a review of the
executive compensation programs and policies of Sempra Energy and its
subsidiaries that were originally developed in 1998 in connection with the
business combination of Enova Corporation and Pacific Enterprises. The
committees sought the assistance of nationally recognized compensation and
benefit consultants to assist with the review of executive compensation
principles and practices designed to assist the companies in realizing the key
objective of creating superior shareholder value in a rapidly changing and
increasingly competitive business environment. Also, the committees, with the
assistance of a nationally recognized compensation consulting firm, reviewed
board compensation during 1999.
COMPENSATION PRINCIPLES AND STRATEGIES
In developing compensation principles and strategies, the Compensation
Committees considered the current and prospective business environment for
Sempra Energy and its subsidiaries and took into account numerous factors,
including:
. The rapidly changing and increasingly competitive environment in which
Sempra Energy and its subsidiaries operate.
. The need to retain experienced executives of outstanding ability and to
motivate them to achieve superior performance.
. The need to attract executive talent from broader markets as the utility
and energy industries continue to rapidly evolve.
. The need to strongly link executive compensation to both annual and long
term corporate, business unit and individual performance.
. The need to strongly align the interests of executives with those of
shareholders.
As a result of this review, the Compensation Committees approved the
continuation of the compensation program developed in 1998 and designed to
meet these objectives and encourage executives to achieve superior shareholder
returns. The program includes the following elements.
. An emphasis on "pay-for-performance" with a substantial portion of total
compensation reflecting corporate, business unit and individual
performance.
. An emphasis on stock incentives closely aligning the interests of
executives with those of shareholders.
9
<PAGE>
. An emphasis on total compensation with base salaries generally targeted
at or near median general industry levels for comparable sized companies
and with the annual cash and long term equity incentives providing
opportunities to earn total compensation at significantly higher levels
for superior corporate, business unit and individual performance.
. An appropriate balance of short term and long term compensation to
retain talented executives, reward effective long term strategic results
and encourage share ownership.
. An emphasis on placing at risk, through equity and other performance-
based incentives, a greater portion of an executive's total compensation
as levels of responsibility increase.
The Compensation Committees also considered provisions of the Internal
Revenue Code limiting to $1 million the annual amount of compensation that
does not qualify as "qualified performance-based compensation" that publicly
held corporations may deduct for federal income tax purposes as compensation
expense for each of certain executive officers. The committees consider tax
deductibility to be an important factor but only one factor to be considered
in evaluating any executive officer compensation program. Accordingly, the
committees intend to design programs that will maximize federal income tax
deductions for compensation expense to the extent that doing so is consistent
with the compensation principles and strategies of Sempra Energy and its
subsidiaries. The committees believe, however, that there are circumstances in
which the interests of its shareholders may be best served by providing
compensation that is not fully tax deductible, and may exercise discretion to
provide compensation (including incentive awards under the Sempra Energy Long
Term Incentive Plan) that will not qualify as a tax deductible compensation
expense.
COMPENSATION PROGRAM
The primary components of the compensation program of Sempra Energy and its
subsidiaries are base salaries, annual cash incentive opportunities and long
term equity and equity-based incentive opportunities.
Base Salaries
Base salaries for executives are reviewed annually and, in general, are
targeted at the median of salaries for general industry companies of similar
size to Sempra Energy. This strategy, along with annual and long term
incentive opportunities at general industry levels, is intended to allow
Sempra Energy and its subsidiaries to retain and attract top quality executive
talent. However, the committees will continue to monitor this strategy as the
markets for executive talent change. In determining base salary adjustments,
the committees will also take into account such factors as individual
performance, executive responsibilities, market characteristics and other
factors.
Survey data for assessing base salaries are based upon companies in the
Fortune 1000 and size-adjusted based upon Sempra Energy's revenues using
regression analysis. This group is broader than the peer group used for
assessing performance for long-term incentive plan purposes. The Compensation
Committees believe that the most direct competitors of Sempra Energy and its
subsidiaries for executive talent will not be limited to companies in this
peer group and the Fortune 1000 appropriately reflects a broader group with
which Sempra Energy and its subsidiaries compete to retain and attract highly
skilled and talented executives.
Annual base salaries for executive officers of Sempra Energy and its
subsidiaries have been set at the approximate mid-point of these salary data.
For 1999, a base salary of $475,000 was established for Mr. Mitchell and
$300,000 for Edwin A. Guiles, President of SDG&E.
Annual Incentives
Annual cash bonus performance-based incentive opportunities are provided to
executive officers through the Sempra Energy Executive Incentive Plan. This
plan permits the payment of bonuses based upon the attainment of objective
financial performance goals. Bonus opportunities vary with the individual
officer's position and
10
<PAGE>
prospective contribution to the attainment of these goals and no bonuses are
paid unless a threshold performance level is attained for the related
performance period. Bonus opportunities increase for performance above the
threshold level. Performance at targeted levels is intended to compensate
executive officers with bonuses at the mid-point for bonuses for comparable
levels of responsibility at Fortune 1000 companies.
For 1999, award levels were based on attainment of earnings per share goals
with target award levels of 70% of base salary for Mr. Mitchell, 50% of base
salary for Mr. Guiles and 45% of base salary for Vice Presidents, with maximum
award levels ranging from 140% to 90%. Performance for the year was at 150% of
targeted performance and resulted in cash bonuses of $498,750 for Mr. Mitchell
and $243,750 for Mr. Guiles with corresponding lesser amounts to other
executive officers.
Long Term Incentives
Long term incentive opportunities are provided by equity and equity-based
awards under Sempra Energy's 1998 Long Term Incentive Plan. The plan permits a
wide variety of equity and equity-based incentive awards to respond to changes
in the market conditions and compensation practices. The committees expect,
however, that most awards under the plan will be in the form of non-qualified
stock options and, to a lesser and declining extent, restricted stock.
During 1999, Sempra Energy granted to executives and other employees of
Sempra Energy and its subsidiaries non-qualified stock options to purchase
Sempra Energy Common Stock. These option grants to executive officers of SDG&E
are described in this Proxy Statement under the caption "Executive
Compensation--Stock Options and Stock Appreciation Rights."
During 1999, Sempra Energy also awarded grants of performance-based
restricted shares under the 1998 Long Term Incentive Plan to executives of
Sempra Energy and its subsidiaries. These awards and related total shareholder
return vesting standards are discussed in this Proxy Statement under the
caption "Executive Compensation--Restricted Stock Grants."
SHARE OWNERSHIP GUIDELINES
The Compensation Committees believe that a commitment to increased share
ownership by executives of Sempra Energy and its subsidiaries is an important
element in aligning the interests of executives with those of shareholders.
This belief has influenced the design of compensation plans and, in addition,
stock ownership guidelines have been established to further strengthen the
link between corporate performance and compensation. These guidelines are
summarized under the caption "Share Ownership of Directors and Executive
Officers."
COMPENSATION COMMITTEE
Richard J. Stegemeier, Chairman
Hyla H. Bertea
Ignacio E. Lozano, Jr.
Ralph R. Ocampo
Thomas C. Stickel
March 7, 2000
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<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND OTHER COMPENSATION
The table below summarizes, for the periods indicated, the compensation
paid or accrued by Sempra Energy and its predecessors and subsidiaries to each
of the executive officers of SDG&E named in the table.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------
ANNUAL AWARDS PAYOUTS
COMPENSATION ------------------ -------
----------------- SECURITIES LTIP ALL OTHER
NAME AND PRINCIPAL UNDERLYING PAYOUTS COMPENSATION
POSITION YEAR SALARY BONUS OPTIONS / SARS (#) (A) (B) (C)
- ------------------ ---- -------- -------- ------------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Warren I. Mitchell...... 1999 $474,769 $498,750 128,700 $ -0- $ 61,368
Chairman 1998 $437,409 $506,230 140,296 $ -0- $816,659
1997 $337,947 $280,000 40,602 $ -0- $ 27,446
Edwin A. Guiles......... 1999 $304,731 $243,750 54,400 $46,273 $ 46,931
President 1998 $284,539 $278,525 32,520 $74,388 $438,727
1997 $225,212 $152,000 -0- $77,600 $ 34,971
Gary D. Cotton.......... 1999 $221,325 $164,764 27,300 $45,567 $ 30,452
Senior Vice President 1998 $209,754 $163,986 16,860 $75,326 $258,059
1997 $201,785 $114,000 -0- $82,559 $ 29,224
Pamela J. Fair (D)...... 1999 $199,027 $149,612 22,900 $ -0- $ 27,264
Vice President 1998 $175,064 $127,559 26,374 $ -0- $150,938
Steven D. Davis (D)..... 1999 $172,962 $130,209 20,000 $ -0- $ 27,011
Vice President 1998 $152,176 $116,218 13,008 $ -0- $188,145
</TABLE>
- --------
(A) Long term incentive plan payouts represent the fair market value of
shares of restricted stock for which forfeiture and transfer restrictions
terminated during the year based upon satisfaction of long term
performance goals. Restricted stock awarded in 1999 under the Sempra
Energy Long Term Incentive Plan is reported below under the caption
"Restricted Stock Grants."
(B) The aggregate holdings/value of restricted stock held on December 31,
1999 by the individuals listed in the table are: 13,256 shares/$230,389
for Mr. Mitchell; 7,917 shares/$137,597 for Mr. Guiles; 5,146
shares/$89,437 for Mr. Cotton; 2,304 shares/$40,044 for Ms. Fair; and
2,124 shares/$36,915 for Mr. Davis. Regular quarterly dividends are paid
on restricted stock held by these individuals.
(C) All other compensation includes amounts paid as (i) interest on deferred
compensation above 120% of the applicable federal rate, (ii) life
insurance premiums, (iii) financial and estate planning services,
(iv) contributions to defined benefit plans and related supplemental
plans, and (v) car allowances. The respective amounts paid in 1998 were
$4,523, $7,109, $13,126, $29,610 and $7,000 for Mr. Mitchell; $143,
$9,914, $11,876, $17,498, and $7,500 for Mr. Guiles; $960, $13,934,
$1,138, $7,420, and $7,000 for Mr. Cotton; $880, $1,211, $8,375, $9,798,
and $7,000 for Ms. Fair; and $41, $798, $10,500, $8,672, and $7,000 for
Mr. Davis.
Amounts for 1998 also include incentive/retention bonuses under agreements
entered into in 1997 in connection with the business combination of Enova
Corporation and Pacific Enterprises. Under her agreement, Ms. Fair was paid
an incentive/bonus of $136,300. Under the other agreements, deferral
accounts were established for Messrs. Mitchell, Guiles, Cotton and Davis
upon the completion of the business combination and credited with
incentive/retention bonus amounts of $782,000, $405,000, $228,000
12
<PAGE>
and $176,000, respectively, which were deemed invested in shares (together
with reinvestment of dividend equivalents) of Sempra Energy Common Stock.
Each of these four executives will become entitled to his
incentive/retention bonus upon continued employment with Sempra Energy or
its subsidiaries through June 26, 2000 and will be paid in cash an amount
equal to the then fair market value of the shares then credited to his
account.
(D) Ms. Fair and Mr. Davis became executive officers of SDG&E in 1998. Amounts
for 1998 include compensation for Ms. Fair as an executive officer of
Southern California Gas Company and Mr. Davis as a non-officer employee of
SDG&E.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table contains information concerning the grant of stock
options during 1999 to the executive officers of SDG&E named in the Summary
Compensation Table. All options are to purchase Sempra Energy Common Stock,
were granted at an exercise price of 100% of the fair market value of the
option shares on the date of the grant and are for a ten-year term subject to
earlier expiration following termination of employment.
OPTION / SAR GRANTS IN 1999
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SHARES OPTIONS / SARS
UNDERLYING GRANTED TO
OPTIONS / SARS EMPLOYEES EXERCISE EXPIRATION GRANT DATE
NAME GRANTED (#) IN 1999 PRICE ($/SH) DATE PRESENT VALUE
- ---- -------------- -------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Warren I. Mitchell...... 36,700(A) 2.53% $ 21.00 5/4/09 $265,708
92,000(B) 4.79% $ 21.00 5/4/09 $265,880
Edwin A. Guiles......... 15,500(A) 1.07% $ 21.00 5/4/09 $112,220
38,900(B) 2.02% $ 21.00 5/4/09 $112,421
Gary D. Cotton.......... 7,800(A) 0.54% $ 21.00 5/4/09 $ 56,472
19,500(B) 1.01% $ 21.00 5/4/09 $ 56,355
Pamela J. Fair.......... 6,500(A) 0.45% $ 21.00 5/4/09 $ 47,060
16,400(B) 0.85% $ 21.00 5/4/09 $ 47,396
Steven D. Davis......... 5,700(A) 0.39% $ 21.00 5/4/09 $ 41,268
14,300(B) 0.74% $ 21.00 5/4/09 $ 41,327
</TABLE>
- --------
(A) Exercisable in cumulative installments of one-fourth of the shares
initially subject to the option on each of the first four anniversaries
of the grant date. Granted with performance-based dividend equivalents on
unexercised shares for the four-year period ending December 31, 2003. No
dividend equivalents will be paid unless Sempra Energy meets annual or
four-year threshold performance goals based on total return to
shareholders ranking within a peer group of companies or the Standard &
Poor's 500 and the percentage of dividends paid as dividend equivalents
(to a maximum of all dividends that would have been paid on the shares
for the four-year period) will depend upon the extent to which the
threshold goals are exceeded.
(B) Exercisable in cumulative annual installments of one-fourth of the shares
initially subject to the option on each of the first four anniversaries
of the grant date. Granted without dividend equivalents.
Sempra Energy used a modified Black-Scholes option pricing model to develop
the theoretical values set forth under the "Grant Date Present Value" column,
but the executive will realize value from the stock options only to the extent
that the price of Sempra Energy Common Stock on the exercise date exceeds the
price of the stock on the grant date. Consequently, there is no assurance the
value realized by an executive will be at or near the theoretical value, and
these amounts should not be used to predict stock performance.
Grant date present values were based on an option value of $2.89 and, for
options granted with dividend equivalents, a dividend equivalent value of
$4.35. These use the following assumptions: share volatility--17.9%; dividend
yield--5.49%; risk-free rate of return--5.66%; and outstanding term--10 years.
13
<PAGE>
The following table contains information with respect to the executive
officers of SDG&E named in the Summary Compensation Table concerning the
exercise of options and stock appreciation rights during 1999 and unexercised
options and stock appreciation rights held on December 31, 1999.
OPTION / SAR EXERCISES AND HOLDINGS
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS / SARS AT THE-MONEY OPTIONS / SARS
YEAR END (#)(A) AT YEAR END ($)(A)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Warren I. Mitchell...... 31,579 $160,349 92,970 242,944 $ -0- $-0-
Edwin A. Guiles......... -0- $ -0- 8,130 790 $ -0- $-0-
Gary D. Cotton.......... -0- $ -0- 4,215 39,945 $ -0- $-0-
Pamela J. Fair.......... -0- $ -0- 31,595 45,048 $9,436 $-0-
Steven D. Davis......... -0- $ -0- 3,252 29,756 $ -0- $-0-
</TABLE>
- --------
(A) The exercise price of outstanding options ranges from $12.80 to $31.00.
RESTRICTED STOCK GRANTS
The following table contains information concerning restricted shares of
Sempra Energy Common Stock granted during 1999 to the executive officers of
SDG&E named in the Summary Compensation Table.
RESTRICTED STOCK GRANTS IN 1999
<TABLE>
<CAPTION>
ESTIMATED FUTURE
PAYOUTS UNDER
NON-STOCK
NUMBER OF PERFORMANCE PERIOD PRICE-BASED
NAME RESTRICTED SHARES UNTIL PAYOUT PLANS (A)
- ---- ----------------- ------------------- ----------------
<S> <C> <C> <C>
Warren I. Mitchell....... 5,800 Four Annual Periods $132,472
Edwin A. Guiles.......... 2,500 Four Annual Periods $ 57,100
Gary D. Cotton........... 1,200 Four Annual Periods $ 27,408
Pamela J. Fair........... 1,000 Four Annual Periods $ 22,840
Steven D. Davis.......... 1,000 Four Annual Periods $ 22,840
</TABLE>
- --------
(A) The payout amount represents the fair market value on the May 4, 1999
grant date of the restricted shares that will become vested upon the
achievement of all performance goals. The actual payout (if any) will
depend upon the achievement of performance goals and upon the then fair
market value of Sempra Energy Common Stock.
Restricted shares are subject to forfeiture and transfer restrictions that
terminate upon the satisfaction of long term objective corporate performance
criteria. During the performance period, the executive receives dividends on
the restricted shares and is entitled to vote them but the shares cannot be
sold or otherwise transferred. If the performance criteria are not satisfied
or the executive's employment is terminated during the performance period, the
shares are forfeited to Sempra Energy and canceled.
The forfeiture and transfer restrictions on one-quarter of the shares
initially subject to each of these awards will terminate at the end of years
2000, 2001, 2002 and 2003 if the executive is then employed by Sempra Energy
or its subsidiaries and Sempra Energy has achieved a total return to
shareholders for the year that places it among the top 25% of a peer group
comprised of Sempra Energy and other energy and energy services companies. If
these annual performance criteria are not met, the forfeiture and transfer
restrictions on all or a portion of the shares remaining subject to these
restrictions may be terminated based upon the satisfaction of cumulative
shareholder return performance criteria for the four years ending December 31,
2003.
14
<PAGE>
The restrictions on all remaining shares will terminate at the end of the
year 2003 if the executive is then employed by Sempra Energy or its
subsidiaries and Sempra Energy has achieved a four-year cumulative total
return to shareholders that either places it among the top 50% of the peer
group companies or equals or exceeds the four-year cumulative return of the
companies then comprising the Standard & Poor's 500 Corporate Stock Price
Index. If neither of these performance criteria is satisfied, the restrictions
may be terminated as to a portion of the shares if Sempra Energy's four-year
cumulative total shareholder return is among the top 70% of the peer group.
Restrictions will terminate as to 80% of the shares for performance among the
top 55% of the peer group with the percentage of shares as to which the
restrictions may terminate declining ratably to 20% for performance among the
top 70% of the peer group. Any restricted shares for which forfeiture and
transfer restrictions are not terminated by or as of the end of year 2003 will
be forfeited to Sempra Energy and canceled.
PENSION PLANS
The following table shows the estimated single life annual pension annuity
benefit provided to the executive officers of SDG&E named in the Summary
Compensation Table under the Sempra Energy Supplemental Executive Retirement
Plan (combined with benefits payable under the other pension plans of SDG&E
and its affiliates in which the officers also participate) based on the
specified compensation levels and years of credited service and retirement at
age 65.
PENSION PLAN TABLE
($000'S)
<TABLE>
<CAPTION>
YEARS OF SERVICE
PENSION PLAN ------------------------------------------------------------------------------
COMPENSATION 5 10 20 30 40
------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$ 200 $ 40 $ 80 $120 $125 $130
$ 400 $ 80 $160 $240 $250 $260
$ 600 $120 $240 $360 $375 $390
$ 800 $160 $320 $480 $500 $520
$1,000 $200 $400 $600 $625 $650
</TABLE>
Pension benefits are based on average salary for the highest two years of
service and the average of the three highest annual bonuses during the last
ten years of service. Years of service includes service with subsidiaries and
number 41 years for Mr. Mitchell, 27 years for Mr. Guiles, 24 years for Mr.
Cotton, 15 years for Ms. Fair and 19 years for Mr. Davis.
Messrs. Guiles and Cotton are each entitled to pension benefits at the
greater of that provided by Sempra Energy's pension plans or that to which he
would have been entitled under the Enova Corporation pension plans (including
a supplemental pension plan) had those plans remained in effect. Under the
Enova Corporation plans and retirement after attaining age 62, each would be
entitled to a monthly pension benefit of 60% of his final pay. Final pay is
defined as the monthly base pay rate in effect during the month immediately
preceding retirement, plus one-twelfth of the average of the highest three
years' gross bonus awards. The plans provide for reduced pension benefits for
retirement between the ages of 55 and 62, and surviving spouse and disability
benefits equal to 50% and 100%, respectively, of pension benefits.
EMPLOYMENT AND EMPLOYMENT-RELATED AGREEMENTS
Employment Agreements
In connection with the business combination of Pacific Enterprises and
Enova Corporation, Sempra Energy entered into an employment agreement with
Warren I. Mitchell. Mr. Mitchell's agreement provides for an initial
employment term of five years (subject to earlier mandatory retirement at age
65) which commenced on the June 26, 1998 completion of the business
combination of Pacific Enterprises and Enova Corporation. The term of the
agreement is automatically extended by one year on June 26, 2002 and on each
June 26 thereafter unless he or Sempra Energy elects not to extend the term.
15
<PAGE>
The agreement provides that Mr. Mitchell will serve as the President and
principal executive officer of the businesses of Sempra Energy that are
economically regulated by the California Public Utilities Commission. For
these services, he will receive an annual base salary of not less than
$440,000 and will be entitled to participate in (i) annual incentive
compensation plans and long term compensation plans and awards providing him
with an annual bonus opportunity at least equal (in terms of target, maximum
and minimum awards, expressed as a percentage of annual base salary) to his
opportunities in effect at Pacific Enterprises prior to the completion of the
business combination and (ii) all retirement and welfare benefit plans
applicable to employees or senior executives of Sempra Energy.
The agreement also provides that if Sempra Energy terminates Mr. Mitchell's
employment (other than for cause, death or disability) or Mr. Mitchell
terminates his employment for good reason, he will be entitled to receive an
amount equal to (i) the sum of his annual base salary and annual incentive
compensation (equal to the greater of his target bonus for the year of
termination or the average of the three years' highest gross bonus awards in
the five years preceding termination) multiplied by two, provided that in the
event of termination following a change in control such multiplier will be
three; (ii) a pro rata portion of the target amount payable under any annual
incentive compensation awards for the year or, if greater, the average of the
three years' highest gross bonus awards paid to him in the five years
preceding the year of termination; and (iii) an additional retirement benefit
equal to the present value of the benefits to which he would be entitled under
Sempra Energy's defined benefit pension and retirement plans if he continued
working for an additional two years and had increased his age by two years as
of termination (in each case three years in the event of a termination
following a change of control), but not beyond mandatory retirement age of 65.
The agreement also provides for immediate vesting and exercisability of all
equity-based long term incentive compensation awards; pro rata payment of cash
based long term incentive awards at target performance; continued
participation in welfare benefit plans for three years; payment of
compensation previously deferred; and financial planning and outplacement
services. The agreement also provides for a gross-up payment to offset the
effects of any excise taxes imposed on Mr. Mitchell under Section 4999 of the
Internal Revenue code.
Good reason is defined in the employment agreements to include an adverse
change in Mr. Mitchell's title, authority, duties, responsibilities or
reporting lines; a reduction in his base salary or aggregate annualized
compensation and benefit opportunities; the relocation of his principal place
of employment; and a substantial increase in his business travel obligations.
A change in control is defined to include the acquisition by one person or
group of 20% or more of the voting power of Sempra Energy's shares; the
election of a new majority of the board of Sempra Energy comprised of
individuals who are not recommended for election by two-thirds of the current
directors or successors to the current directors who were so recommended for
election; certain mergers, consolidations or sales of assets that result in
the shareholders of Sempra Energy owning less than 60% of the voting power of
Sempra Energy or of the surviving entity or its parent; and shareholder
approval of the liquidation or dissolution of Sempra Energy.
Mr. Mitchell has announced that he will retire on July 1, 2000. Upon his
retirement he will receive a cash payment of approximately $1.8 million,
reflective of amounts he would be entitled to under his employment agreement.
In addition, the forfeiture and transfer restrictions on his shares of
restricted stock will immediately terminate and his stock options will become
immediately and fully exercisable.
Severance Agreements
Sempra Energy has entered into a severance agreement with each of SDG&E's
executive officers, other than Mr. Mitchell for whom severance arrangements
are contained in his employment agreement summarized above. The severance
agreements provide for the payment of benefits in the event Sempra Energy and
its subsidiaries terminate the executive's employment (other than for cause,
death or disability) or the executive terminates his or her employment for
good reason.
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<PAGE>
The benefits payable under the severance agreements include (i) a lump sum
cash payment equal to the executive's annual base salary and average annual
bonus for the two years prior to termination multiplied, in certain cases
depending upon the officer's position, by as much as 150%; (ii) continuation
of health benefits for a period of two years; and (iii) financial planning and
outplacement services. In addition, if the termination occurs within two years
after a change in control of Sempra Energy, (i) the lump sum cash payment
multiple is increased to as much as two; (ii) all equity-based incentive
awards immediately vest and become exercisable or payable and all restrictions
on such awards immediately lapse; (iii) all deferred compensation is paid out
in a lump sum; (iv) a lump sum cash payment is made equal to the present value
of the executive's benefits under the Supplemental Executive Retirement Plan
calculated as if the executive had attained age 62 (or, if the executive is
older than 62, based on the executive's actual age) and applying certain early
retirement factors; and (v) continued life, disability, accident and health
insurance for two years. The agreements also provide for a gross up payment to
offset the effects of any excise tax imposed on the executive under Section
4999 of the Internal Revenue Code.
Good reason is defined in the severance agreements to include the
assignment to the executive of duties materially inconsistent with those
appropriate for an executive of Sempra Energy and its subsidiaries, a material
reduction in the executive's overall standing and responsibilities within
Sempra Energy and its subsidiaries and a material reduction in the executive's
annualized compensation and benefit opportunities other than across-the-board
reductions affecting all similarly situated executives of comparable rank. In
addition, following a change in control of Sempra Energy, good reason also
includes an adverse change in the executive's title, authority, duties,
responsibilities or reporting lines, a 10% or greater reduction in the
executive's annualized compensation and benefit opportunities, relocation of
the executive's principal place of employment by more than 30 miles or a
substantial increase in business travel obligations. A change in control is
defined in the same manner as in Mr. Mitchell's employment agreement
summarized above.
INDEPENDENT AUDITORS
Representatives of Deloitte & Touche LLP, independent auditors for SDG&E,
are expected to be present at the Annual Meeting. They will have the
opportunity to make a statement if they desire to do so and to respond to
appropriate questions from shareholders.
ANNUAL REPORTS
SDG&E's Annual Report to the Securities and Exchange Commission on Form 10-
K is being mailed to shareholders together with this Information Statement.
----------------
17
