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Supply chain impacts

Sempra Energy’s largest supply chain impacts are from the natural gas and electricity we procure.

Our core business is delivering energy to the 32 million consumers served by our seven* utilities.

Our subsidiaries purchase the majority of the electricity they deliver to their utility customers from suppliers: In 2015, SDG&E purchased nearly 70 percent; Chilquinta Energía purchased 100 percent and Luz del Sur purchased 100 percent. Information on how this purchased power was generated is in the pie charts below. (Supplier selection and monitoring is described in Our Business; Supplier diversity is described in Our Stakeholders.)

*On April 24, 2016, Sempra U.S. Gas & Power agreed to sell Mobile Gas and Willmut Gas, subject to customary regulatory approvals.

Our subsidiaries purchase natural gas through short- or long-term contracts that specify the source of the gas. They also purchase natural gas from supply aggregation points, exchanges and electronic bulletin boards where natural gas is pooled and the source of the gas is not specified. Given the complexity of the natural gas supply chain, Sempra Energy advocates for a consistent set of standards for all natural gas producers.

Responsible natural gas production

Hydraulic fracturing is the process of using pressurized fluid to fracture rock formations and extract natural gas or oil. Technological advances have expanded the use of hydraulic fracturing in recent years.

Hydraulic fracturing is not a significant part of Sempra Energy operations: Our subsidiaries focus primarily on the storage, transportation and distribution of natural gas. However, in the coming years other companies that extract natural gas using hydraulic fracturing will very likely supply us with natural gas that will be liquefied by our LNG export business.

At Sempra Energy, we support reasonable rules and regulations to ensure all natural gas producers are operating to an appropriate standard — one that protects consumers, the environment, the energy industry and our nation’s access to this abundant supply of domestic energy. You can read our hydraulic fracturing position statement here.

Our Responsible Natural Gas Production Working Group is a group of company experts evaluating how Sempra Energy and its subsidiaries can minimize the impact of natural gas extraction. We are evaluating existing industry partnerships, voluntary standards and other initiatives to determine how this can inform our practices and purchasing policies.

In addition to electricity and natural gas suppliers, thousands of other companies provide goods and services to Sempra Energy. Our subsidiaries need pipelines and cable to deliver natural gas and electricity; steel and wood for electric towers and poles; meters to measure customer usage; and office supplies and equipment to run and manage their businesses. Our subsidiaries rely on third parties — from tree trimmers and construction workers to security personnel, contract employees and professional service firms — to help them build, manage and maintain energy infrastructure, facilities and offices.

What impact do our suppliers have on the environment where they do business? And how can we encourage these companies to minimize this impact?

At our California utilities, prospective suppliers bidding on requests for proposals (RFPs) over a specific dollar amount are required to answer sustainability-related questions, and their responses are factored into the decision-making process. In 2014, we analyzed the supply chain of our two California utilities and our corporate headquarters. We learned which areas – and which suppliers – in these supply chains contribute the most to greenhouse gas emissions, water and waste impacts. Following this analysis, our California utilities updated the sustainability-related questions in RFPs.

SDG&E switches to vegetable oil for distribution transformers

Greening our supply chain includes making improvements to the products we purchase.

Beginning in 2016, SDG&E will change the dielectric coolant used in their distribution transformers from petroleum-based mineral oil to a natural ester fluid derived from renewable plant-based vegetable oils. This new coolant has a higher ignition resistance than traditional mineral oils, thus making it a great choice for use in fire-prone backcountry areas. By more effectively cooling the transformers, SDG&E should see increases in life expectancy, thereby reducing costs associated with asset replacement. The product has been designated as biodegradable by the EPA, and, through the National Institute of Standards of Technology’s BEES 4.0 lifecycle analysis, has been shown to produce 56 times fewer carbon dioxide emissions than mineral oil, making it essentially carbon neutral.