UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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(Mark One) | |
☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended June 30, |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from to |
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Commission |
| Exact Name of Registrant | | State or Other Jurisdiction of |
| IRS Employer |
1-9936 | | EDISON INTERNATIONAL | | California | | 95-4137452 |
1-2313 | | SOUTHERN CALIFORNIA EDISON COMPANY | | California | | 95-1240335 |
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EDISON INTERNATIONAL | SOUTHERN CALIFORNIA EDISON COMPANY |
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2244 Walnut Grove Avenue | 2244 Walnut Grove Avenue |
(P.O. Box 976) | (P.O. Box 800) |
Rosemead, California 91770 | Rosemead, California 91770 |
(Address of principal executive offices) | (Address of principal executive offices) |
(626) 302-2222 | (626) 302-1212 |
(Registrant's telephone number, including area code) | (Registrant's telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
Edison International:
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, no par value | EIX | NYSE LLC |
Southern California Edison Company: None.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Edison International | Yes ☑ No ☐ | Southern California Edison Company | Yes ☑ No ☐ |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| | | |
Edison International | Yes ☑ No ☐ | Southern California Edison Company | Yes ☑ No ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-12 of the Exchange Act.
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Edison International |
| Large Accelerated Filer |
| Accelerated Filer |
| Non-accelerated Filer |
| Smaller Reporting Company |
| Emerging growth company |
| | ☑ | | ☐ | | ☐ | | ☐ | | ☐ |
Southern California Edison Company | | Large Accelerated Filer | | Accelerated Filer | | Non-accelerated Filer | | Smaller Reporting Company | | Emerging growth company |
| | ☐ | | ☐ | | ☑ | | ☐ | | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Edison International | ☐ | Southern California Edison Company | ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| | | |
Edison International | Yes ☐ No ☑ | Southern California Edison Company | Yes☐ No ☑ |
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
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Common Stock outstanding as of July | |
Edison International |
|
Southern California Edison Company | 434,888,104 Shares |
TABLE OF CONTENTS
| | SEC Form 10-Q |
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iv | | |
1 | | |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 4 | |
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ii
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This is a combined Form 10-Q is separately filed by Edison International and Southern California Edison Company.SCE. Information contained hereinin this document relating to an individual companySCE is filed by such company onEdison International and separately by SCE. SCE makes no representation as to information relating to Edison International or its own behalf.subsidiaries, except as it may relate to SCE and its subsidiaries.
iii
GLOSSARY
The following terms and abbreviations appearing in the text of this report have the meanings indicated below.
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2017/2018 Wildfire/Mudslide Events |
| the Thomas Fire, the Koenigstein Fire, the Montecito Mudslides and the Woolsey Fire, collectively |
| | Edison International's and SCE's combined Annual Report on Form 10-K for the year ended December 31, |
2022 MD&A | | Edison International's and SCE's MD&A for the calendar year 2022, which was included in the 2022 Form 10‑K |
AB 1054 | | California Assembly Bill 1054, executed by the governor of California on July 12, 2019 |
AB 1054 Excluded Capital Expenditures |
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AB 1054 Liability Cap | | a cap on the aggregate requirement to reimburse the Wildfire Insurance Fund over a trailing three calendar year period which applies if certain conditions are met and is equal to 20% of the equity portion of the utility's transmission and distribution rate base, excluding general plant and intangibles, in the year of the applicable prudency determination |
ARO(s) | | asset retirement obligation(s) |
BRRBA |
| Base Revenue Requirement Balancing Account |
CAISO |
| California Independent System Operator |
Capital Structure Compliance Period | | January 1, |
CAPP | | California Arrearage Payment Program |
CCAs |
| community choice aggregators which are cities, counties, and certain other public agencies with the authority to generate and/or purchase electricity for their local residents and businesses |
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CDP | | Coastal Development Permit |
CEMA | | Catastrophic Event Memorandum |
COVID-19 | | Coronavirus disease 2019 |
CPUC | | California Public Utilities Commission |
CSRP | | Customer Service Re-platform, a SCE project to implement a new customer service system |
ECS | | SCE commercial telecommunications services operated under the name of Edison Carrier Solutions |
Edison Energy |
| Edison Energy, LLC, an indirect wholly-owned subsidiary of Edison International, |
Edison International Proxy Statement | | Proxy Statement filed with the SEC in connection with Edison International's Annual Meeting of Shareholders held on April 27, 2023 |
EIS | | Edison Insurance Services, Inc., a wholly-owned subsidiary of Edison International |
Electric Service Provider |
| an entity that |
ERRA |
| Energy Resource Recovery Account |
Fast curve settings | | protective settings, used to mitigate the risk of wildfires, that enable quicker relays than under traditional settings |
FERC |
| Federal Energy Regulatory Commission |
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Fitch | | Fitch Ratings, Inc. |
GAAP | | generally accepted accounting principles in the United States |
GHG | | greenhouse gas |
GRC | | general rate case |
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Koenigstein Fire | | a wind-driven fire that originated near Koenigstein Road in the City of Santa Paula in Ventura County, California, on December 4, 2017 |
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iv
MD&A | | Management's Discussion and Analysis of Financial Condition and Results of Operations |
iv
Montecito Mudslides | | the debris flows and flooding in Montecito, Santa Barbara County, California, that occurred in January 2018 |
Moody's | | Moody's Investors Service, Inc. |
MW | | Megawatt(s) |
NDCTP | | Nuclear Decommissioning Cost Triennial Proceeding, a CPUC proceeding to review decommissioning costs |
NERC | | North American Electric Reliability Corporation |
NRC | | United States Nuclear Regulatory Commission |
NSGBA | | New System Generation Balancing Account |
OEIS | | Office of Energy Infrastructure Safety of the California Natural Resources Agency |
PABA | | Portfolio Allocation Balancing Account |
Palo Verde | | nuclear electric generating facility located near Phoenix, Arizona in which SCE holds a 15.8% ownership interest |
PBOP(s) | | postretirement benefits other than pension(s) |
PG&E | | Pacific Gas & Electric Company |
Post-2018 Wildfires | | Collectively, all the wildfires that originated in Southern California after 2018 where SCE's equipment may be alleged to be associated with the fire's ignition |
PSPS | | Public Safety Power Shutoff(s) |
ROE | | return on common equity |
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S&P | | Standard & Poor's Financial Services LLC |
San Onofre | | retired nuclear generating facility located in south San Clemente, California in which SCE holds a 78.21% ownership interest |
SCE | | Southern California Edison Company, a wholly-owned subsidiary of Edison International |
SCE Recovery Funding LLC | | a bankruptcy remote, wholly owned special purpose subsidiary, consolidated by SCE |
SDG&E | | San Diego Gas & Electric |
SEC | | U.S. Securities and Exchange Commission |
SED | | Safety and Enforcement Division of the CPUC |
SED Agreement | |
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Thomas Fire | | a wind-driven fire that originated in the Anlauf Canyon area of Ventura County, California, on December 4, 2017 |
TKM | | collectively, the Thomas Fire, the Koenigstein Fire and the Montecito Mudslides |
TKM Subrogation Plaintiffs | | the plaintiffs party to the TKM Subrogation Settlement, representing all the insurance subrogation plaintiffs in the TKM litigation at the time of the settlement |
TKM Subrogation Settlement | | a settlement entered into by Edison International and SCE in September 2020 in the TKM litigation to which the TKM Subrogation Plaintiffs are party |
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Track 3 | | Track 3 of the 2021 GRC addressed the reasonableness of wildfire mitigation costs incurred in 2020 that were incremental to amounts authorized in the 2018 GRC |
Track 4 | | Track 4 of the 2021 GRC will address SCE's revenue requirement for 2024 |
WEMA | | Wildfire Expense Memorandum Account |
WMP | | a wildfire mitigation plan required to be filed under AB 1054 to describe a utility's plans to construct, operate, and maintain electrical lines and equipment that will help minimize the risk of catastrophic wildfires caused by such electrical lines and equipment |
Wildfire Insurance Fund | | the insurance fund established under AB 1054 |
Woolsey Fire | | a wind-driven fire that originated in Ventura County in November 2018 |
Woolsey Subrogation Plaintiffs | | the plaintiffs party to the Woolsey Subrogation Settlement, representing all the insurance subrogation plaintiffs in the Woolsey Fire litigation at the time of the settlement |
Woolsey Subrogation Settlement | | a settlement entered into by Edison International and SCE in January 2021 in the Woolsey litigation to which the Woolsey Subrogation Plaintiffs are party |
v
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect Edison International's and SCE's current expectations and projections about future events based on Edison International's and SCE's knowledge of present facts and circumstances and assumptions about future events and include any statements that do not directly relate to a historical or current fact. Other information distributed by Edison International and SCE that is incorporated in this report, or that refers to or incorporates this report, may also contain forward-looking statements. In this report and elsewhere, the words "expects," "believes," "anticipates," "estimates," "projects," "intends," "plans," "probable," "may," "will," "could," "would," "should," and variations of such words and similar expressions, or discussions of strategy or plans, are intended to identify forward-looking statements. Such statements necessarily involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Some of the risks, uncertainties and other important factors that could cause results to differ from those currently expected, or that otherwise could impact Edison International and SCE, include, but are not limited to the:
| ● | ability of SCE to recover its costs through regulated rates, including uninsured wildfire-related and debris flow-related costs, costs incurred to mitigate the risk of utility equipment causing future wildfires, costs incurred as a result of the COVID-19 pandemic, and increased |
| ● | ability of SCE to implement its WMP and capital program; |
| ● | risks of regulatory or legislative restrictions that would limit SCE's ability to implement operational measures to mitigate wildfire risk, including PSPS and fast curve settings, when conditions warrant or would otherwise limit SCE's operational |
| ● | risks associated with SCE implementing PSPS, including regulatory fines and penalties, claims for damages and reputational harm; |
| ● | ability of SCE to maintain a valid safety |
| ● | extreme weather-related incidents (including events caused, or exacerbated, by climate change, such as wildfires, debris flows, flooding, droughts, high wind events and extreme heat events) and other natural disasters (such as earthquakes), which could cause, among other things, public safety issues, property damage, rotating outages and other operational issues (such as |
| ● | risk that AB 1054 does not effectively mitigate the significant exposure faced by California investor-owned utilities related to liability for damages arising from catastrophic wildfires where utility facilities are alleged to be a substantial cause, including the longevity of the Wildfire Insurance Fund and the CPUC's interpretation of and actions under AB 1054, including its interpretation of the prudency standard |
| ● | ability of Edison International and SCE to effectively attract, manage, develop and retain a skilled workforce, including its contract workers; |
| ● | decisions and other actions by the CPUC, OEIS, the FERC, the NRC and other governmental authorities, including decisions and actions related to nationwide or statewide crisis, determinations of authorized rates of return or return on equity, |
1
| ● | cost and availability of labor, equipment and materials, including as a result of supply chain |
| ● | ability of Edison International or SCE to borrow funds and access bank and capital markets on reasonable terms; |
1
| ● | risks associated with the decommissioning of San Onofre, including those related to worker and public safety, public opposition, permitting, governmental approvals, on-site storage of spent nuclear fuel and other radioactive material, delays, contractual disputes, contractor performance, and cost overruns; |
| ● | ability of Edison International and SCE to obtain sufficient insurance at a reasonable cost or to maintain its customer funded self-insurance program, and to recover the costs of such insurance or, in the event liabilities exceed insured amounts, the ability to recover uninsured losses (including amounts paid for self-insured retention and co-insurance) from customers or other parties; |
| ● | pandemics, such as COVID-19, and other events that cause regional, statewide, national or global disruption, which could impact, among other things, Edison International's and SCE's business, operations, cash flows, liquidity and/or financial results and cause Edison International and SCE to incur unanticipated costs; |
| ● | physical security of Edison International's and SCE's critical assets and personnel and the cybersecurity of Edison International's and SCE's critical information technology systems for grid control, and business, employee and customer data; |
| ● | risks associated with cost allocation resulting in higher rates for utility bundled service customers because of possible customer bypass or departure for other electricity providers such as CCAs and Electric Service Providers; |
| ● | risks inherent in SCE's capital investment program, including those related to project site identification, public opposition, environmental mitigation, construction, permitting, contractor performance, availability of labor, equipment and materials, weather, changes in the CAISO's transmission plans, and governmental approvals; |
| ● | risks associated with the operation of electrical facilities, including worker and public safety issues, the risk of utility assets causing or contributing to wildfires, failure, availability, efficiency, and output of equipment and facilities, and availability and cost of spare parts; |
| ● | actions by credit rating agencies to downgrade Edison International or SCE's credit ratings or to place those ratings on negative watch or negative outlook; |
| ● | changes in tax laws and regulations, at both the state and federal levels, or changes in the application of those laws, that could affect recorded deferred tax assets and liabilities, |
| ● | changes in future taxable income, or changes in tax law, that would limit Edison International's and SCE's realization of expected net operating loss and tax credit carryover benefits prior to expiration; |
| ● | changes in the fair value of investments and other assets; |
| ● | changes in interest rates and potential adjustments to SCE's ROE based on changes in Moody's utility bond rate index; |
| ● | changes in rates of inflation |
| ● | governmental, statutory, regulatory, or administrative changes or initiatives affecting the electricity industry, including the market structure rules applicable to each market adopted by the NERC, CAISO, Western Electricity Coordinating Council, and similar regulatory bodies in adjoining regions, and changes in the United States' and California's environmental priorities that lessen the importance |
| ● | availability and creditworthiness of counterparties and the resulting effects on liquidity in the power and fuel markets and/or the ability of counterparties to pay amounts owed in excess of collateral provided in support of their obligations; |
2
| ● | potential for penalties or disallowance for non-compliance with applicable laws and regulations, including fines, penalties and disallowances related to wildfires where SCE's equipment is alleged to be associated with ignition; and |
2
| ● | cost of fuel for generating facilities and related transportation, which could be impacted by, among other things, disruption of natural gas storage facilities, to the extent not recovered through regulated rate cost escalation provisions or balancing accounts. |
Additional information about risks and uncertainties, including more detail about the factors described in this report, is contained throughout this report and in the 20212022 Form 10-K, including the "Risk Factors" section. Readers are urged to read this entire report, including information incorporated by reference, as well as the 20212022 Form 10-K, and carefully consider the risks, uncertainties, and other factors that affect Edison International's and SCE's businesses. Forward-looking statements speak only as of the date they are made and neither Edison International nor SCE are obligated to publicly update or revise forward-looking statements. Readers should review future reports filed by Edison International and SCE with the SEC. Edison International and SCE post or provide direct links to (i) certain SCE and other parties' regulatory filings and documents with the CPUC and the FERC and certain agency rulings and notices in open proceedings in a section titled "SCE Regulatory Highlights," (ii) certain documents and information related to Southern California wildfires which may be of interest to investors in a section titled "Southern California Wildfires," and (iii) presentations, documents and information that may be of interest to investors in a section titled "Presentations and Updates" at www.edisoninvestor.com in order to publicly disseminate such information. The reports, presentations, documents and information contained on, or connected to, the Edison investor website are not deemed part of, and are not incorporated by reference into, this report.
The MD&A for the six months ended June 30, 20222023 discusses material changes in the consolidated financial condition, results of operations and other developments of Edison International and SCE since December 31, 20212022 and as compared to the six months ended June 30, 2021.2022. This discussion presumes that the reader has read or has access to Edison International's and SCE'sthe 2022 MD&A for the calendar year 2021 (the "2021 MD&A"), which was included in the 2021 Form 10-K.&A.
Except when otherwise stated, references to each of Edison International or SCE mean each such company with its subsidiaries on a consolidated basis. References to "Edison International Parent and Other" mean Edison International Parent and its subsidiaries other than SCE and its subsidiaries and "Edison International Parent" mean Edison International on a stand-alone basis, not consolidated with its subsidiaries. Unless otherwise described, all the information contained in this report relates to both filers.
3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MANAGEMENT OVERVIEW
Highlights of Operating Results
Edison International is the ultimate parent holding company of SCE and Edison Energy. SCE is an investor-owned public utility primarily engaged in the business of supplying and delivering electricity to an approximately 50,000 square mile area of southern California. Edison Energy is engaged in the competitive business ofa global energy advisory firm providing integrated decarbonizationsustainability and energy solutions to commercial, institutionalindustrial and industrialinstitutional customers. Edison Energy's business activities are currently not material to report as a separate business segment.
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| | Three months ended | | | | | Six months ended | | | | ||||||||
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(in millions) |
| 2022 |
| 2021 |
| Change |
| 2022 |
| 2021 |
| Change | ||||||
Net income (loss) attributable to Edison International |
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SCE | | $ | 302 | | $ | 359 | | $ | (57) | | $ | 449 | | $ | 655 | | $ | (206) |
Edison International Parent and Other | |
| (61) | |
| (41) | |
| (20) | |
| (124) | |
| (78) | |
| (46) |
Edison International | |
| 241 | |
| 318 | |
| (77) | |
| 325 | |
| 577 | |
| (252) |
Less: Non-core items | |
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SCE | |
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2017/2018 Wildfire/Mudslide Events claims and expenses, net of recoveries | | | (6) | | | (6) | | | — | | | (291) | | | (10) | | | (281) |
Wildfire Insurance Fund expense | |
| (38) | |
| (39) | |
| 1 | |
| (76) | |
| (77) | |
| 1 |
CSRP impairment | | | (34) | | | — | | | (34) | | | (34) | | | — | | | (34) |
Employment litigation matter, net of recoveries | | | (16) | | | — | | | (16) | | | (16) | | | — | | | (16) |
GRC track 3 impairment | | | (12) | | | — | | | (12) | | | (12) | | | — | | | (12) |
Organizational realignment charge | | | (10) | | | — | | | (10) | | | (10) | | | — | | | (10) |
Sale of San Onofre nuclear fuel | | | — | | | 7 | | | (7) | | | — | | | 7 | | | (7) |
Total non-core items | |
| (116) | |
| (38) | |
| (78) | |
| (439) | |
| (80) | |
| (359) |
Core earnings (losses) | |
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SCE | |
| 418 | |
| 397 | |
| 21 | |
| 888 | |
| 735 | |
| 153 |
Edison International Parent and Other | |
| (61) | |
| (41) | |
| (20) | |
| (124) | |
| (78) | |
| (46) |
Edison International | | $ | 357 | | $ | 356 | | $ | 1 | | $ | 764 | | $ | 657 | | $ | 107 |
Edison International's earnings are prepared in accordance with GAAP. Management uses core earnings (losses) internally for financial planning and for analysis of performance. Core earnings (losses) are also used when communicating with investors and analysts regarding Edison International's earnings results to facilitate comparisons of the company's performance from period to period. Core earnings (losses) are a non-GAAP financial measure and may not be comparable to those of other companies. Core earnings (losses) are defined as earnings attributable to Edison International shareholders less non-core items. Non-core items include income or loss from discontinued operations and income or loss from significant discrete items that management does not consider representative of ongoing earnings, such as write downs, asset impairments and other income and expense related to changes in law, outcomes in tax, regulatory or legal proceedings, and exit activities, including sale of certain assets and other activities that are no longer continuing.
Edison International's second quarter 2022 earnings decreased $77 million from the second quarter of 2021, resulting from a decrease in SCE's earnings of $57 million and an increase in Edison International Parent and Other's losses of $20 million. SCE's lower net income consisted of $78 million of higher non-core losses and $21 million of higher core earnings. Edison International's earnings for the six months ended June 30, 2022 decreased $252 million from the six months ended June 30, 2021, resulting from a decrease in SCE's earnings of $206 million and an increase in Edison International Parent and Other's
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(in millions) |
| 2023 |
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Net income (loss) attributable to Edison International |
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SCE | | $ | 420 | | $ | 302 | | $ | 118 | | $ | 790 | | $ | 449 | | $ | 341 |
Edison International Parent and Other | |
| (66) | |
| (61) | |
| (5) | |
| (126) | |
| (124) | |
| (2) |
Edison International | |
| 354 | |
| 241 | |
| 113 | | | 664 | | | 325 | | | 339 |
Less: Non-core items | |
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SCE | |
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Wildfire Insurance Fund expense | |
| (53) | | | (53) | |
| — | |
| (105) | | | (106) | |
| 1 |
2017/2018 Wildfire/Mudslide Events claims and expenses, net of recoveries | | | (12) | | | (8) | | | (4) | | | (102) | | | (404) | | | 302 |
2021 NDCTP probable disallowance | | | — | | | — | | | — | | | (30) | | | — | | | (30) |
Customer cancellations of certain ECS data services | | | (17) | | | — | | | (17) | | | (17) | | | — | | | (17) |
Employment litigation matter, net of recoveries | | | 10 | | | (23) | | | 33 | | | 10 | | | (23) | | | 33 |
Impairments | | | — | | | (64) | | | 64 | | | — | | | (64) | | | 64 |
Organizational realignment charge | | | — | | | (14) | | | 14 | | | — | | | (14) | | | 14 |
Income tax benefits1 | | | 21 | | | 46 | | | (25) | | | 69 | | | 172 | | | (103) |
Edison International Parent and Other | |
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Customer revenues for EIS insurance contract | | | 22 | | | — | | | 22 | | | 44 | | | — | | | 44 |
Income tax expense1 | | | (5) | | | — | | | (5) | | | (9) | | | — | | | (9) |
Total non-core items | |
| (34) | |
| (116) | |
| 82 | | | (140) | | | (439) | | | 299 |
Core earnings (losses) | |
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SCE | |
| 471 | |
| 418 | |
| 53 | |
| 965 | |
| 888 | |
| 77 |
Edison International Parent and Other | |
| (83) | |
| (61) | |
| (22) | |
| (161) | |
| (124) | |
| (37) |
Edison International | | $ | 388 | | $ | 357 | | $ | 31 | | $ | 804 | | $ | 764 | | $ | 40 |
| 1 | SCE and Edison International Parent and Other non-core items are tax-effected at an estimated statutory rate of approximately 28%; customer revenues for EIS insurance contract are tax-effected at an estimated statutory rate of approximately 20%. |
4
lossesEdison International's second quarter 2023 earnings increased $113 million from the second quarter of $462022, resulting from an increase in SCE's earnings of $118 million and an increase in Edison International Parent and Other's loss of $5 million. SCE's lower earningshigher net income consisted of $359$65 million of higherlower losses in non-core lossesitems and $153$53 million of higher core earnings. Edison International Parent and Other's increased loss was due to $17 million of higher earnings in non-core items and $22 million of higher core losses. Edison International's earnings for the six months ended June 30, 2023 increased $339 million from the six months ended June 30, 2022, resulting from an increase in SCE's earnings of $341 million and an increase in Edison International Parent and Other's loss of $2 million. SCE's higher net income consisted of $264 million of lower losses in non-core items and $77 million of higher core earnings. Edison International Parent and Other's higher losses consisted of $35 million of higher earnings in non-core items and $37 million of higher core losses.
The increase in SCE's core earnings for the three and six months ended June 30, 20222023 from the same periodsperiod in 20212022 was primarily due to revenue from the adoption ofescalation mechanism set forth in the 2021 GRC final decision in the third quarter of 2021,and higher interest income on balancing account undercollections, partially offset by higher operation and maintenance expenses. The year-to-date variance was also due to higher interest expense from increased borrowings.expense.
The increase in Edison International Parent and Other's core losses for the three months and six months ended June 30, 20222023 was primarily due to higher preferred dividends and unrealized losses on investment in 2022 compared to unrealized gains in 2021.interest expense.
Consolidated non-core items for the six months ended June 30, 20222023 and 20212022 primarily included:
| ● | Charges of $105 million ($76 million after-tax) recorded in 2023 and $106 million ($76 million after-tax) recorded in 2022 from the amortization of SCE's contribution to the Wildfire Insurance Fund. See "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies" in the 2022 Form 10-K for further information. |
| ● | Charges of $102 million ($73 million after-tax) recorded in 2023 and $404 million ($291 million after-tax) recorded in 2022 |
| ● |
| ● | A |
| ● | Insurance recovery of $10 million ($7 million after-tax) recorded in 2023 and a charge of $23 million ($16 million after-tax), net of estimated insurance recoveries, recorded in 2022. Both are related to settlement of an employment litigation matter. SCE and Edison International settled the matter following an atypical jury award. |
| ● | Impairment charges of $64 million ($46 million after-tax) recorded in 2022 including $47 million ($34 million after-tax) related to SCE's CSRP settlement agreement and $17 million ($12 million after-tax) related to historical capital expenditures disallowed in |
| ● | A charge of $14 million ($10 million after-tax) recorded in 2022 related to organizational realignment services. |
| ● |
See "Results of Operations" for discussion of SCE's and Edison International Parent and Other's results of operations.
Cost of Capital Applications
As discussed in the 2021 Form 10-K, in August 2021, SCE filed an application with the CPUC for authority to establish its authorized cost of capital for utility operations for 2022 and to reset the related annual cost of capital mechanism that can adjust the authorized cost of capital between SCE's cost of capital proceedings based on changes in Moody's utility bond rate index (see "Business—SCE—Overview of Ratemaking Process" in the 2021 Form 10-K for further information on the adjustment mechanism). In December 2021, the CPUC set an initial phase for the proceeding to determine whether extraordinary circumstances warrant a departure from the cost of capital mechanism for 2022 and, if so, whether the CPUC should leave the cost of capital components at pre-2022 levels for the year 2022 or open a second phase to consider alternative proposals. The outcome of the proceeding is uncertain. In the absence of a decision SCE is currently recording revenue using the pre-2022 cost of capital, subject to refund. If the CPUC ultimately finds that the cost of capital mechanism
5
adjustment should have been implemented effective January 1, 2022, revenue recorded in the first six months of 2022 would be reduced by approximately $85 million.2025 General Rate Case
On April 20, 2022, SCE filed its 2025 GRC application with the CPUC in May 2023, for authority to establish its authorized costthe four-year period of capital for utility operations for a three-year term beginning in 2023 and to reset the related annual cost of capital adjustment mechanism.2025 – 2028. In its application, SCE seeksis requesting that the CPUC authorize SCE's test year 2025 revenue requirement of $10.3 billion. This represents a return on common equity (ROE) of 10.53% (compared to its last authorized ROE of 10.30%), a cost of long-term debt of 4.27%, and a cost of preferred equity of 5.72%. SCE also seeks to maintain its current authorized capital structure, after CPUC-allowed exclusions, of 52% common equity, 43% long-term debt, and 5% preferred equity. Based on$1.9 billion, or 23% increase over the capital structure and cost factors discussed above, SCE's weighted average return on rate base would be 7.60% for 2023. Additionally2024 revenue requirement that SCE has proposed that memorandum and balancing accounts requiredrequested in Track 4, after downward adjustments of $235 million resulting from subsequent decisions after the initial Track 4 filing, including the 2023 to be amortized over periods of greater than twelve months should accrue carrying charges at SCE's weighted average2025 cost of capital rather than commercial paper interest rates, which are only applicabledecision and adoption of SCE's expanded customer-funded self-insurance for wildfire-related claims.
SCE's 2025 GRC request also includes proposed revenue requirement increases of approximately $600 million, $700 million and $700 million in 2026, 2027 and 2028, respectively.
SCE's 2025 GRC highlights its focus on safely providing electric service to short-term borrowing. If approved, based onits customers that is reliable, resilient, and ready for their needs today and the clean energy transition directed by California policy. The critical drivers of SCE's 20212025 GRC includingrequest include returning to historical levels of infrastructure replacement work necessary for system reliability as wildfire mitigation investments stabilize, investments in reliability and capacity upgrades to ready the post-test year ratemaking mechanism, this application would increasegrid for increased electrification to meet customer needs and California's electrification and de-carbonization goals, and investments in programs aimed at protecting the safety of the public, customers and SCE's revenue requirements forworkforce.
For details of 2023 by approximately $13 million compared to the cost of– 2028 capital currently in rates. In July 2022, the CPUC set a schedule for the 2023 cost of capital proceeding that would result in a proposed decision in the fourth quarter of 2022.program forecast and range case, see "—Capital Program."
Capital Program
Total capital expenditures (including accruals) were $2.6 billion and $2.3 billion for the first six months ended June 30, 20222023 and 2021, respectively.2022.
SCE'sBased on the 2025 GRC application, SCE forecasts a $43.5 billion total capital expenditure forecast reflects plannedprogram for 2023 through 2028, which includes CPUC-jurisdictional GRC capital expenditures, CPUC non-GRC capital spending, including amountsand FERC capital spending. If all capital expenditures requested in SCE'sSCE’s 2025 GRC track 4 filing, WCCPwere approved by the CPUC, SCE forecasts total weighted-average rate base incorporating CPUC- and other programs outlined in SCE's WMP that are above amounts authorized in the 2021 GRC, CPUC-approved utility owned storageFERC-jurisdictional capital expenditures and planned FERC capital expenditures. See "Liquidity and Capital Resources—SCE—Regulatory Proceedings" for more informationincreasing to $60.9 billion by 2028, a five-year compound annual growth rate of approximately 8% starting from 2023.
Based on the GRC track 4 filing.
Potentialmanagement judgment of potential capital spending variability associated with future regulatory requests based on management judgment,informed by historical precedent of previously authorized amounts, potential for permitting delays and other operational considerations, is reflected ina range case has been prepared reflecting reductions to CPUC-jurisdictional GRC capital expenditures, CPUC non-GRC capital spending and FERC capital spending. Based on the range case, below. The completion of projects, the timing ofSCE forecasts a $37.8 billion total capital program for 2023 through 2028. This implies total weighted-average rate base incorporating CPUC- and FERC-jurisdictional capital expenditures and the associated cost recovery may be affectedincreasing to
$55.2 billion by permitting requirements and delays, construction schedules, availability of labor, equipment and materials, financing, legal and regulatory approvals and developments, community requests or protests, weather and other unforeseen conditions.2028.
SCE's 20222023 – 20242028 forecast for major capital expenditures is set forth in the table below:
| | | | | | | | | | | | | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | ||||||||||||
| | | | | | | | | | | Total | | | | | | | | | | | | | | | | | | | | Total | ||
(in billions) |
| 2022 |
| 2023 |
| 2024 |
| 2022 – 2024 |
| 2023 |
| 2024 |
| 2025 |
| 2026 |
| 2027 |
| 2028 |
| 2023 – 2028 | |||||||||||
Traditional capital expenditures |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Distribution1 | | $ | 4.5 | | $ | 3.7 | | $ | 3.9 | | $ | 12.1 | |||||||||||||||||||||
Distribution | | $ | 4.2 | | $ | 4.1 | | $ | 5.2 | | $ | 5.7 | | $ | 5.6 | | $ | 5.6 | | $ | 30.4 | ||||||||||||
Transmission | |
| 0.5 | | | 0.6 | | | 0.5 | |
| 1.6 | |
| 0.5 | | | 0.6 | | | 0.8 | |
| 0.7 | |
| 0.8 | |
| 0.6 | |
| 4.0 |
Generation | |
| 0.1 | | | 0.2 | | | 0.2 | |
| 0.5 | |
| 0.2 | | | 0.2 | | | 0.2 | |
| 0.2 | |
| 0.2 | |
| 0.1 | |
| 1.1 |
Subtotal | |
| 5.1 | |
| 4.5 | |
| 4.6 | |
| 14.2 | | | 4.9 | |
| 4.9 | |
| 6.2 | |
| 6.6 | |
| 6.6 | |
| 6.3 | |
| 35.5 |
Wildfire mitigation-related capital expenditures | |
| 1.1 | |
| 1.1 | |
| 1.1 | |
| 3.3 | | | 1.1 | | | 1.3 | |
| 1.3 | |
| 1.4 | |
| 1.5 | |
| 1.4 | |
| 8.0 |
Total capital expenditures | | $ | 6.2 | | $ | 5.6 | | $ | 5.7 | | $ | 17.5 | | $ | 6.0 | | $ | 6.2 | | $ | 7.5 | | $ | 8.0 | | $ | 8.1 | | $ | 7.7 | | $ | 43.5 |
Total capital expenditures using range case discussed above | | $ | 6.0 | | $ | 5.2 | | $ | 5.2 | | $ | 16.4 | | $ | 5.7 | | $ | 5.7 | | $ | 6.6 | | $ | 6.7 | | $ | 6.7 | | $ | 6.4 | | $ | 37.8 |
6
In addition to the amounts presented in the table above, SCE expects to make additional CPUC capital expenditures,investments, the recovery of which will be subject to future regulatory approval. This includes expenditures from the 2025 GRC and non-GRC programs including an enterprise resource planning software implementation and an advanced metering infrastructure program. In addition, in May 2023, CAISO released its 2022 – 2023 Transmission Plan based on the Building Electrification Program. These capitalCPUC's projections that it needs to add more than 40 gigawatts of new resources by 2032. As the incumbent transmission owner for a portion of these transmission projects, SCE expects to construct projects representing at least $2.3 billion of expenditures, and expected FERC capital expenditures, excluded from the table above, are expected tomost of which will be in a range of approximately $5.2 billion to $6.8 billion between 2024 and 2025.incurred beyond 2028.
6
Reflected below is SCE's weighted average annual rate base for 2023 – 2028 incorporating CPUC- and FERC- jurisdictional capital expenditures.
| | | | | | | | | | | | | | | | | | |
(in billions) |
| 2023 |
| 2024 |
| 2025 |
| 2026 |
| 2027 |
| 2028 | ||||||
Rate base for expected capital expenditures | | $ | 41.9 | | $ | 44.3 | | $ | 49.7 | | $ | 53.3 | | $ | 57.0 | | $ | 60.9 |
Rate base for expected capital expenditures using range case discussed above | | $ | 41.6 | | $ | 43.5 | | $ | 48.0 | | $ | 50.3 | | $ | 52.6 | | $ | 55.2 |
For further information regarding the capital program, see "Liquidity and Capital Resources—SCE—Capital Investment Plan" below and "Management Overview—Capital Program" in the 2022 – 2024 incorporating authorizedMD&A.
Customer-Funded Self-Insurance
In May 2023, the CPUC approved a joint petition for modification of the 2021 GRC decision filed by SCE, The Utility Reform Network and the Public Advocates Office, allowing SCE to expand its use of self-insurance. The self-insurance program will be funded through CPUC-jurisdictional expenditures including utility owned storage, planned FERC capital expenditures,rates with $150 million collected for the second half of 2023 and, planned non-GRC projects or programs.
| | | | | | | | | |
(in billions) |
| 2022 |
| 2023 |
| 2024 | |||
Rate base for expected capital expenditures | | $ | 38.7 | | $ | 42.1 | | $ | 44.5 |
Rate base for expected capital expenditures using range case discussed above | | $ | 38.5 | | $ | 41.5 | | $ | 43.6 |
Including programs outlined in SCE's WMPthe absence of wildfire-related claims, $300 million collected for 2024. These modifications result in a reduction to current revenue requirements of $80 million in 2023 and, subject to future costadjustment, $160 million in 2024. If losses are accrued for wildfire-related claims, the petition for modification contains an adjustment mechanism that will increase rates in subsequent years as needed, to allow for full recovery proceedings, rate base associated with wildfire restoration capital expendituresof the amounts accrued, subject to future CEMA applications, and planned expenditures from the 2025 GRC, SCE's weighted average annual rate base could be up to $44.8 billiona shareholder contribution of 2.5% of any self-insurance costs ultimately paid exceeding $500 million in 2024 and is expected to be between $46.6 billion and $49.4 billion in 2025.
Utility Owned Storage Projects
In October 2021, SCE contracted with Ameresco, Inc. ("Ameresco") for the construction of utility owned energy storage projects at three sites in SCE's service territory with an aggregate capacity of 537.5 MW and an in-service date of August 1, 2022.
In April 2022, SCE received a force majeure event notice from Ameresco in which Ameresco asserted that both manufacturing delays related to COVID-19 shut-downs in China and new shipping restrictions imposed by Chinese governmental authorities were then impacting the supply of batteries from China necessary for timely completion of the projects. SCE is continuing to evaluate the force majeure event notice. If there is a valid force majeure event under the contracts with Ameresco, subject to certain conditions, the project schedules and any related triggers of liquidated damages may be extended and the contract prices may be increased to account for the impact of the force majeure event.
Supply chain issues, permitting delays and engineering issues are impacting the projects, and the most recent project schedules provided by Ameresco show delays to the projects' anticipated in-service dates. Ameresco has advised SCE that it currently expects between 200 MW and 300 MW of capacity could be in-service in September 2022 and the remaining capacity will likely be in-service by the end of 2022.
SCE is entitled to liquidated damages under the terms of the contracts if, subject to any relief provided under the contracts, including any relief for a valid force majeure event, Ameresco does not achieve an in-service date of August 1, 2022. Once triggered, liquidated damages accrue daily for up to 60 daysyear, up to a maximum annual contribution of $89 million in aggregate for all three projects.
Subject to reductions for any liquidated damages SCE is paid, SCE currently expects these storage projects to result in $1.0 billion of capital expenditures. In December 2021, the CPUC approved recovery of these expenditures and establishment of a balancing account for the associated revenue requirement, which have been reflected in rates beginning$12.5 million. If adopted in the first quarter2025 GRC, this self-insurance framework would continue, supporting a self-insurance fund of 2022. Authorized revenue requirementsup to
$1.0 billion. Depending upon losses over time, customers will be included inbenefit further from SCE's wildfire self-insurance program as a result of not having to fund the annual ERRA review proceeding and can only be disallowed upon a finding thatrecurring costs of SCE failed to prudently administer the contracts.purchasing commercial wildfire insurance coverage.
Southern California Wildfires and Mudslides
2017/2018 Wildfire/Mudslide Events
As discussed in the 20212022 Form 10-K, multiple lawsuits and investigations related to the 2017/2018 Wildfire/Mudslide Events have been initiated against SCE and Edison International. As of June 30, 2022, in addition toSCE has previously settled claims under the Local Public Entity Settlement, the TKM Subrogation Settlement, and the Woolsey Subrogation Settlement and the SED Agreement. In addition, SCE hadhas also entered into settlements with approximately 8,00010,000 individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation. In addition, while SCE and the SED executed the SED Agreement in October 2021, SCE's obligations under the SED Agreement will only commence after CPUC approvallitigation as of the SED Agreement is final and non-appealable.June 30, 2023.
7
Through June 30, 2022, Edison International and2023, SCE have recorded total pre-tax chargeshas accrued estimated losses of $7.9$8.8 billion, expected recoveries from insurance of $2.0 billion, all of which have been collected, and expected recoveries through FERC electric rates of $326$382 million, $339 million of which has been collected, related to the 2017/2018 Wildfire/Mudslide Events. The after-tax net charges to earnings recorded through June 30, 20222023 have been $4.0$4.7 billion.
As of June 30, 2022,2023, SCE had paid $6.9$8.1 billion under executed settlements and had $86$130 million to be paid under executed settlements, including $65 million to be paid under the SED Agreement, related to the 2017/2018 Wildfire/Mudslide Events. As of the same date, SCE had recovered $2.0 billion through insurance and approximately $192 million through FERC-jurisdictional electric rates.
After giving effect to all payment obligations under settlements entered into through June 30, 2022,2023, Edison International's and SCE's best estimate of expected losses for remaining alleged and potential claims related to the 2017/2018
7
Wildfire/Mudslide Events and for the SED Agreement was $0.9 billion. As of the same date, Edison International and SCE had assets for expected recoveries through FERC electric rates of $134 million on their consolidated balance sheets and had exhausted expected insurance recoveries related to the 2017/2018 Wildfire/Mudslide Events.$572 million. Edison International and SCE may incur a material loss in excess of amounts accrued in connection with the remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events.
SCE will seek CPUC-jurisdictional rate recovery of prudently-incurred actual losses and related costs realized in connection with the 2017/2018 Wildfire/Mudslide Events in excess of available insurance and FERC-jurisdictional recoveries, other than for any obligations under the SED Agreement. Based on Edison International's and SCE's current best estimate of expected losses for the 2017/2018 Wildfire/Mudslide Events, SCE currently expects to seek CPUC-jurisdictional rate recovery of over $5approximately $6 billion of uninsured claims by filing multiple future applications with the CPUC,CPUC. SCE targets the third quarter of 2023 for the first of whichsuch cost recovery applications, and expects to request recovery of approximately $2 billion of uninsured claims in that filing related to TKM. In its applications, SCE anticipates filing in 2023. Thesewill also seek associated costs, including legal fees, financing costs and restoration costs. SCE's plans with respect to these filings may be delayed or modified. For example, the filings may be delayed if litigation proceedings related to the 2017/2018 Wildfire/Mudslide Events do not progress as anticipated. SCE believes that, in light ofBecause the CPUC's decision in a cost recovery proceeding involving SDG&E arising from several 2007 wildfires in SDG&E's service area is the only directly comparable precedent available, SCE believes that there is substantial uncertainty regarding how the CPUC will interpret and apply its prudency standard to an investor-owned utility in wildfire cost-recovery proceedings for fires ignited prior to the adoption of AB 1054 on July 12, 2019. Accordingly, while the CPUC has not made a determination regarding SCE's prudency relative to any of the 2017/2018 Wildfire/Mudslide Events, SCE is unable to conclude, at this time, that uninsured CPUC-jurisdictional wildfire-related costs related to the 2017/2018 Wildfire/Mudslide Events are probable of recovery through electric rates.
PSPS
As discussed in the 2020 10-K, SCE uses PSPS to proactively de-energize power lines as a last resort to mitigate the risk of catastrophic wildfires during extreme weather events. The CPUC may assess penalties on SCE if it finds that SCE has not executed PSPS in compliance with applicable rules and regulations. In June 2022, the SED issued an Administrative Enforcement Order against SCE proposing penalties of $10 million for noncompliance with customer notification requirements related to PSPS events in 2020. In July 2022, SCE filed a request for a hearing to challenge the penalty, at which time the requirement to pay the penalty was stayed pending the hearing and rehearing process. SCE has made and continues to make significant investments and progress in improving its PSPS protocols, including through increased automation of customer notifications.
Wildfire Mitigation Plan
As discussed in the 2021 Form 10-K, SCE most recently submitted updates to its 2020-2022 WMP in February 2022 to, among other things, report on implementation of its plan, describe new and ongoing wildfire mitigation activities and report on its progress on remedying issues identified in an action statement issued by the OEIS in August 2021. In July 2022, the OEIS approved SCE's 2022 updates to its 2020 –2022 WMP.
For further information see "Business—on Southern California Wildfires" and Mudslides, see "Risk Factors," "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—Initial and annual contributions to the wildfire insurance fund established pursuant to California Assembly Bill 1054"1054," "Business—Southern California Wildfires" in the 20212022 Form 10-K and "Notes to Consolidated Financial
8
Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides" in this report.
RESULTS OF OPERATIONS
SCE
SCE's results of operations are derived mainly through two sources:
| ● | Earning activities – representing revenue authorized by the CPUC and the FERC, which is intended to provide SCE with a reasonable opportunity to recover its costs and earn a return on its net investment in generation, transmission and distribution assets. The annual revenue requirements are comprised of authorized operation and maintenance costs, depreciation, taxes and a return consistent with the capital structure. Also, included in earnings activities are revenue or penalties related to incentive mechanisms, other operating revenue, and regulatory charges or disallowances. |
| ● | Cost-recovery activities – representing CPUC- and FERC- authorized balancing accounts, which allow for recovery of specific project or program costs, subject to reasonableness review or compliance with upfront standards, as well as non-bypassable rates collected for SCE Recovery Funding LLC. Cost-recovery activities include rates which provide recovery, subject to reasonableness review of, among other things, fuel costs, purchased power costs, public purpose related-program costs (including energy efficiency and demand-side management programs), certain operation and maintenance expenses (including vegetation management and wildfire insurance), and repayment of bonds and financing costs of SCE Recovery Funding LLC. SCE earns no return on these activities. |
The following table is a summary of SCE's results of operations for the periods indicated.
98
Three months ended June 30, 20222023 versus June 30, 20212022
| | | | | | | | | | | | | | | | | | | | |
|
| Three months ended June 30, 2022 | | | Three months ended June 30, 2021 | | ||||||||||||||
| | | | | Cost- | | | | | | | | | Cost- | | | | | ||
| | Earning | | Recovery | | Total | | | Earning | | Recovery | | Total | | ||||||
(in millions) |
| Activities |
| Activities |
| Consolidated |
|
| Activities |
| Activities |
| Consolidated | | ||||||
Operating revenue | | $ | 2,164 | | $ | 1,832 | | $ | 3,996 | | | $ | 1,830 | | $ | 1,476 | | $ | 3,306 | |
Purchased power and fuel | | | — | | | 1,304 | |
| 1,304 | | | | — | | | 1,283 | |
| 1,283 | |
Operation and maintenance | | | 790 | | | 549 | |
| 1,339 | | | | 512 | | | 223 | |
| 735 | |
Wildfire-related claims, net of insurance recoveries | | | 2 | | | — | |
| 2 | | | | — | | | — | |
| — | |
Wildfire Insurance Fund expense | | | 53 | | | — | |
| 53 | | | | 54 | | | — | |
| 54 | |
Depreciation and amortization | | | 596 | | | 4 | |
| 600 | | | | 532 | | | 1 | |
| 533 | |
Property and other taxes | | | 117 | | | 2 | |
| 119 | | | | 117 | | | — | |
| 117 | |
Impairment, net of other operating income | | | 64 | | | — | |
| 64 | | | | (11) | | | — | |
| (11) | |
Total operating expenses | |
| 1,622 | |
| 1,859 | | | 3,481 | | |
| 1,204 | |
| 1,507 | | | 2,711 | |
Operating income (loss) | |
| 542 | |
| (27) | | | 515 | | |
| 626 | |
| (31) | | | 595 | |
Interest expense | |
| (227) | | | (7) | | | (234) | | |
| (196) | |
| (2) | | | (198) | |
Other income | |
| 34 | | | 34 | | | 68 | | |
| 31 | |
| 33 | | | 64 | |
Income before taxes | |
| 349 | |
| — | | | 349 | | |
| 461 | |
| — | | | 461 | |
Income tax expense | |
| 22 | | | — | | | 22 | | |
| 76 | |
| — | | | 76 | |
Net income | |
| 327 | |
| — | | | 327 | | |
| 385 | |
| — | | | 385 | |
Less: Preference stock dividend requirements | |
| 25 | | | — | | | 25 | | |
| 26 | |
| — | | | 26 | |
Net income available for common stock | | $ | 302 | | $ | — | | $ | 302 | | | $ | 359 | | $ | — | | $ | 359 | |
Net income available for common stock | | | | | | | | $ | 302 | | | | | | | | | $ | 359 | |
Less: Non-core expense | |
|
| |
|
| |
| (116) | | |
|
| |
|
| |
| (38) | |
Core earnings1 | | |
| |
|
| | $ | 418 | | |
|
| |
|
| | $ | 397 | |
| | | | | | | | | | | | | | | | | | | | |
|
| Three months ended June 30, 2023 | | | Three months ended June 30, 2022 | | ||||||||||||||
| | | | | Cost- | | | | | | | | | Cost- | | | | | ||
| | Earning | | Recovery | | Total | | | Earning | | Recovery | | Total | | ||||||
(in millions) |
| Activities |
| Activities |
| Consolidated |
|
| Activities |
| Activities |
| Consolidated | | ||||||
Operating revenue | | $ | 2,167 | | $ | 1,782 | | $ | 3,949 | | | $ | 2,164 | | $ | 1,832 | | $ | 3,996 | |
Purchased power and fuel | | | — | | | 1,147 | |
| 1,147 | | | | — | | | 1,304 | |
| 1,304 | |
Operation and maintenance | | | 606 | | | 629 | |
| 1,235 | | | | 790 | | | 549 | |
| 1,339 | |
Wildfire-related claims, net of insurance recoveries | | | — | | | — | |
| — | | | | 2 | | | — | |
| 2 | |
Wildfire Insurance Fund expense | | | 53 | | | — | |
| 53 | | | | 53 | | | — | |
| 53 | |
Depreciation and amortization | | | 638 | | | 10 | |
| 648 | | | | 596 | | | 4 | |
| 600 | |
Property and other taxes | | | 135 | | | 13 | |
| 148 | | | | 117 | | | 2 | |
| 119 | |
Impairment, net of other operating income | | | — | | | — | |
| — | | | | 64 | | | — | |
| 64 | |
Total operating expenses | |
| 1,432 | |
| 1,799 | | | 3,231 | | |
| 1,622 | |
| 1,859 | | | 3,481 | |
Operating income (loss) | |
| 735 | |
| (17) | | | 718 | | |
| 542 | |
| (27) | | | 515 | |
Interest expense | |
| (320) | | | (8) | | | (328) | | |
| (227) | |
| (7) | | | (234) | |
Other income | |
| 102 | | | 25 | | | 127 | | |
| 34 | |
| 34 | | | 68 | |
Income before income taxes | |
| 517 | |
| — | | | 517 | | |
| 349 | |
| — | | | 349 | |
Income tax expense | |
| 68 | | | — | | | 68 | | |
| 22 | |
| — | | | 22 | |
Net income | |
| 449 | |
| — | | | 449 | | |
| 327 | |
| — | | | 327 | |
Less: Preference stock dividend requirements | |
| 29 | | | — | | | 29 | | |
| 25 | |
| — | | | 25 | |
Net income available for common stock | | $ | 420 | | $ | — | | $ | 420 | | | $ | 302 | | $ | — | | $ | 302 | |
Earning Activities
Earning activities were primarily affected by the following:
| ● | Higher operating revenue of |
| ● | An increase of CPUC-related revenue of |
| ● |
| ● | An increase of CPUC-related revenue |
| ● | An increase of FERC-related revenue and other operating revenue of $23 million primarily due to |
| ● | A decrease of |
| ● | Lower operation and maintenance expenses of $184 million primarily |
| ● | In 2022, SCE recognized $163 million subject to balancing account |
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| ● |
| ● | A charge of $17 million related to customer cancellations of certain ECS data services in 2023. See "Notes to Consolidated Financial Statements—Note |
| ● | A charge of $14 million related to organizational realignment |
| ● | Higher depreciation and amortization expense of |
| ● | Higher |
| ● | Higher interest expense of $93 million primarily due to increased borrowing and higher interest rates on long-term debt, short-term debt and balancing account overcollections. |
| ● | SCE recognized an impairment charge of $17 million related to the CPUC decision in |
| ● | Higher |
| ● | See "Income Taxes" below for the explanation of |
Cost-Recovery Activities
Operating revenue and the corresponding operating expenses in cost-recovery activities were primarily affected by the following:
| ● | Lower purchased power and fuel costs of $157 million, primarily due to lower power and gas prices and lower purchased power volume, partially offset by losses on gas and power hedging activities. |
| ● | Higher operation and maintenance costs of $80 million primarily due to: |
| ● | In May 2023, SCE recognized $205 million of previously deferred WEMA costs related to incremental wildfire insurance premiums that provided coverage for the last six months of 2020. For more information, see "Liquidity and Capital Resources—SCE—Regulatory Proceeding." |
| ● | In 2022, SCE recognized $125 million of previously deferred wildfire mitigation expenses upon approval of Track 3. |
| ● | Higher property and other taxes of $11 million from additional AB 1054 Excluded Capital Expenditures financed through securitization in April 2023. |
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Six months ended June 30, 2023 versus June 30, 2022
| | | | | | | | | | | | | | | | | | | | |
|
| Six months ended June 30, 2023 | | | Six months ended June 30, 2022 | | ||||||||||||||
| | | | | Cost- | | | | | | | | | Cost- | | | | | ||
| | Earning | | Recovery | | Total | | | Earning | | Recovery | | Total | | ||||||
(in millions) |
| Activities |
| Activities |
| Consolidated |
|
| Activities |
| Activities |
| Consolidated | | ||||||
Operating revenue | | $ | 4,400 | | $ | 3,499 | | $ | 7,899 | | | $ | 4,431 | | $ | 3,526 | | $ | 7,957 | |
Purchased power and fuel | |
| — | | | 2,465 | |
| 2,465 | | | | — | | | 2,341 | |
| 2,341 | |
Operation and maintenance | |
| 1,276 | | | 1,040 | |
| 2,316 | | | | 1,580 | | | 1,225 | |
| 2,805 | |
Wildfire-related claims, net of insurance recoveries | |
| 96 | | | — | |
| 96 | | | | 427 | | | — | |
| 427 | |
Wildfire Insurance Fund expense | |
| 105 | | | — | |
| 105 | | | | 106 | | | — | |
| 106 | |
Depreciation and amortization | |
| 1,287 | | | 17 | |
| 1,304 | | | | 1,175 | | | 8 | |
| 1,183 | |
Property and other taxes | |
| 272 | | | 15 | |
| 287 | | | | 233 | | | 10 | |
| 243 | |
Impairment, net of other operating income | |
| — | | | — | |
| — | | | | 62 | | | — | |
| 62 | |
Total operating expenses | |
| 3,036 | |
| 3,537 | | | 6,573 | | |
| 3,583 | |
| 3,584 | | | 7,167 | |
Operating income (loss) | |
| 1,364 | |
| (38) | | | 1,326 | | |
| 848 | |
| (58) | | | 790 | |
Interest expense | |
| (615) | | | (13) | | | (628) | | |
| (437) | | | (10) | | | (447) | |
Other income | |
| 196 | | | 51 | | | 247 | | |
| 71 | | | 68 | | | 139 | |
Income before income taxes | |
| 945 | |
| — | | | 945 | | |
| 482 | |
| — | | | 482 | |
Income tax expense (benefit) | |
| 97 | | | — | | | 97 | | |
| (18) | | | — | | | (18) | |
Net income | |
| 848 | |
| — | | | 848 | | |
| 500 | |
| — | | | 500 | |
Less: Preference stock dividend requirements | |
| 58 | | | — | | | 58 | | |
| 51 | | | — | | | 51 | |
Net income available for common stock | | $ | 790 | | $ | — | | $ | 790 | | | $ | 449 | | $ | — | | $ | 449 | |
Earning Activities
Earning activities were primarily affected by the following:
| ● | Lower operating revenue of $31 million primarily due to the following: |
| ● | A decrease of CPUC-related revenue of $352 million due to lower wildfire-related expenses that had been authorized for recovery during 2022 through Track 2 and Track 3. |
| ● | An increase of CPUC-related revenue of $203 million due to the escalation mechanism set forth in the 2021 GRC decision. |
| ● | An increase of CPUC-related revenue of $89 million related to CSRP revenue requirements approved in 2022 and 2023. |
| ● | An increase of FERC-related revenue of $12 million primarily due to higher rate base and higher FERC-eligible operating expenses. |
| ● | An increase of other operating revenue of $17 million primarily due to higher late payment charges and increased application fees paid by customers. |
| ● | Lower operation and maintenance expenses of $304 million primarily due to the following: |
| ● | In 2022, SCE recognized $404 million of previously deferred wildfire-related expenses upon approval of Track 2 and Track 3, compared to $84 million previously deferred expenses recognized in 2023 primarily related to Track 3 and CSRP approvals. The wildfire and CSRP-related expenses were offset in revenue. |
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| ● | In 2022, SCE recognized a charge of $23 million related to settlement of an employment litigation matter, net of estimated insurance recoveries. In 2023, an additional insurance recovery of $10 million was recognized related to the matter. |
| ● | In 2023, SCE recognized a probable disallowance of $30 million related to the 2021 NDCTP. See "Liquidity and Capital Resources—SCE—Decommissioning of San Onofre" for more information. |
| ● | A charge of $17 million related to customer cancellations of certain ECS data services in 2023. See "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies" for further information. |
| ● | A charge of $14 million related to organizational realignment services in 2022. |
| ● | Wildfire-related claim charges were $90 million and $416 million in 2023 and 2022, respectively, related to the 2017/2018 Wildfire/Mudslide Events. Also included in the charges are $6 million and $11 million recorded in 2023 and 2022, respectively, for self-insured retention expenses related to the Post-2018 Wildfires. See "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides." |
| ● | Higher depreciation and amortization expense of $112 million primarily due to recognition of previously deferred CSRP-related expenses and increased plant balances in 2023. |
| ● | Higher property and other taxes of $39 million primarily due to higher property assessed value in 2023. |
| ● | Lower impairment and other operating income of $62 million primarily due to impairments of $17 million related to the CPUC decision in Track 3 and $47 million related to a settlement agreement between SCE and TURN in the CSRP proceeding during 2022, with no comparable charges during 2023. |
| ● | Higher interest expense of $178 million primarily due to increased long-term borrowing, higher interest rates on long-term debt, short-term debt and balancing account overcollections. |
| ● | Higher other income of $125 million primarily due to a higher interest rate applied to balancing account undercollections. |
| ● | See "Income Taxes" below for the explanation of the $115 million increase in income tax expenses. |
Cost-Recovery Activities
Operating revenue and the corresponding operating expenses in cost-recovery activities were primarily affected by the following:
| ● | Higher purchased power and fuel costs of |
| ● |
| ● |
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Six months ended June 30, 2022 versus June 30, 2021
| | | | | | | | | | | | | | | | | | | | |
|
| Six months ended June 30, 2022 | | | Six months ended June 30, 2021 | | ||||||||||||||
| | | | | Cost- | | | | | | | | | Cost- | | | | | ||
| | Earning | | Recovery | | Total | | | Earning | | Recovery | | Total | | ||||||
(in millions) |
| Activities |
| Activities |
| Consolidated |
|
| Activities |
| Activities |
| Consolidated | | ||||||
Operating revenue | | $ | 4,431 | | $ | 3,526 | | $ | 7,957 | | | $ | 3,597 | | $ | 2,662 | | $ | 6,259 | |
Purchased power and fuel | |
| — | | | 2,341 | |
| 2,341 | | | | — | | | 2,296 | |
| 2,296 | |
Operation and maintenance | |
| 1,580 | | | 1,225 | |
| 2,805 | | | | 1,130 | | | 429 | |
| 1,559 | |
Wildfire-related claims, net of insurance recoveries | |
| 427 | | | — | |
| 427 | | | | 3 | | | — | |
| 3 | |
Wildfire Insurance Fund expense | |
| 106 | | | — | |
| 106 | | | | 107 | | | — | |
| 107 | |
Depreciation and amortization | |
| 1,175 | | | 8 | |
| 1,183 | | | | 1,056 | | | 1 | |
| 1,057 | |
Property and other taxes | |
| 233 | | | 10 | |
| 243 | | | | 241 | | | 1 | |
| 242 | |
Impairment, net of other operating income | |
| 62 | | | — | |
| 62 | | | | (11) | | | — | |
| (11) | |
Total operating expenses | |
| 3,583 | |
| 3,584 | | | 7,167 | | |
| 2,526 | |
| 2,727 | | | 5,253 | |
Operating income | |
| 848 | |
| (58) | | | 790 | | |
| 1,071 | |
| (65) | | | 1,006 | |
Interest expense | |
| (437) | | | (10) | | | (447) | | |
| (380) | | | (2) | | | (382) | |
Other income | |
| 71 | | | 68 | | | 139 | | |
| 69 | | | 67 | | | 136 | |
Income before taxes | |
| 482 | |
| — | | | 482 | | |
| 760 | |
| — | | | 760 | |
Income tax (benefit) expense | |
| (18) | | | — | | | (18) | | |
| 52 | | | — | | | 52 | |
Net income | |
| 500 | |
| — | | | 500 | | |
| 708 | |
| — | | | 708 | |
Less: Preference stock dividend requirements | |
| 51 | | | — | | | 51 | | |
| 53 | | | — | | | 53 | |
Net income available for common stock | | $ | 449 | | $ | — | | $ | 449 | | | $ | 655 | | $ | — | | $ | 655 | |
Net income available for common stock | | | | | | | | $ | 449 | | | | | | | | | $ | 655 | |
Less: Non-core expense | |
|
| |
|
| |
| (439) | | |
|
| |
|
| |
| (80) | |
Core earnings1 | | |
| |
|
| | $ | 888 | | |
|
| |
|
| | $ | 735 | |
Earnings Activities
Earning activities were primarily affected by the following:
| ● |
| ● | In May 2023, SCE |
12
| ● |
13
Cost-Recovery Activities
Operating revenue and the corresponding operating expenses in cost-recovery activities were primarily affected by the following:
Supplemental Operating Revenue Information
SCE's retail billed and unbilled revenue (excluding wholesale sales) was $3.6 billion and $3.0 billion for the three months ended June 30, 2022 and 2021, respectively, and $7.2 billion and $5.7 billion for the six months ended June 30, 2022 and 2021, respectively.
The increase for the three months and six months ended June 30, 2022 compared to the same period in 2021 is primarily due to the authorization to recover costs related to wildfire-related expenses that had been deferred prior to 2021 in the GRC track 2 and track 3 decisions, higher CPUC authorized revenue, additional expenses subject to cost recovery as part of the 2021 GRC implementation through various balancing accounts and higher FERC revenue due to expected recoveries for the FERC portion of wildfire-related claims. See "—Earnings Activities" and "—Cost-Recovery Activities" for further details.
As a result of the CPUC-authorized decoupling mechanism, SCE earningsrevenues are not affected by changes in volume of retail electricity sales.
Income Taxes
SCE'sThe increase in income tax expense decreased by $54of $46 million and $70$115 million for the three and six months ended June 30, 20222023, respectively, compared to the same periodsperiod in 2021.2022 was primarily driven by the increase in pre-tax income. The decreaseeffective tax rates were 13.2% and 6.3% for the three months ended June 30, 2022 was primarily due to lower pre-tax income. The decrease for six months ended June 30, 2022 was primarily due to lower pre-tax income partially offset by lower flow-through tax benefits.
SCE's effective tax rates were 6.3%2023 and 16.5% for the three months ended June 30, 2022, and 2021, respectively. The effective tax rates were 10.3% and (3.7)% and 6.8% for the six months ended June 30, 2023, and 2022, and 2021, respectively. SCE'sSCE’s effective tax rate is below the federal statutory rate of 21% for 2023 and 2022 primarily due to the CPUC'sCPUC’s flow-through ratemaking treatment for the current tax benefit arising from certain property-related and other temporary differences, which reverse over time. The accounting treatment for these temporary differences results in recording regulatory assets and liabilities for amounts that would otherwise be recorded to deferred income tax expense.
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See "Notes to Consolidated Financial Statements—Note 8. Income Taxes" for a reconciliation of the federal statutory rate to the effective income tax rates.
Edison International Parent and Other
Results of operations for Edison International Parent and Other include amounts from other subsidiaries that are not reportable as segments, as well as intercompany eliminations.
Loss from Operations
The following table summarizes the results of Edison International Parent and Other:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, | | | Three months ended June 30, | | Six months ended June 30, | | ||||||||||||||||
(in millions) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | |
| 2023 |
| 2022 |
| 2023 |
| 2022 | | ||||||||
Edison Energy Group and subsidiaries | | $ | (1) | | $ | (2) | | $ | (6) | | $ | (5) | | |||||||||||||
Edison Energy Group, Inc. (a subsidiary of Edison International) and subsidiaries | | $ | (5) | | $ | (1) | | $ | (7) | | $ | (6) | | |||||||||||||
Corporate expenses and other subsidiaries | |
| (34) | |
| (22) | |
| (66) | |
| (52) | | |
| (35) | |
| (34) | |
| (67) | |
| (66) | |
Edison International Parent and Other net loss | | $ | (35) | | $ | (24) | | $ | (72) | | $ | (57) | | | $ | (40) | | $ | (35) | | $ | (74) | | $ | (72) | |
Preferred stock dividend requirement | | | 26 | | | 17 | | | 52 | | | 21 | | | | 26 | | | 26 | | | 52 | | | 52 | |
Edison International Parent and Other net loss attributable to common stock | | $ | (61) | | $ | (41) | | $ | (124) | | $ | (78) | | | $ | (66) | | $ | (61) | | $ | (126) | | $ | (124) | |
The net loss attributable to common stock from operations of Edison International Parent and Other increased $20$5 million for the three months ended June 30, 20222023, and increased $46$2 million for the six months ended June 30, 20222023 compared to the same periods in 20212022, primarily due to higher preferred dividendinterest expense, as a result of Edison International's preferred equity issuances in 2021partially offset by customer revenues for an EIS insurance contract. See "Notes to Consolidated Financial Statements—Note 12. Commitments and unrealized losses on investments in 2022 comparedContingencies" and "Notes to unrealized gains in 2021.Consolidated Financial Statements—Note 17. Related Party Transactions."
LIQUIDITY AND CAPITAL RESOURCES
SCE
SCE's ability to operate its business, fund capital expenditures, and implement its business strategy is dependent upon its cash flowflows and access to the bank and capital markets. SCE's overall cash flows fluctuate based on, among other things, its ability to recover its costs in a timely manner from its customers through regulated rates, changes in commodity prices and volumes,
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collateral requirements, interest obligations, dividend payments to and equity contributions from Edison International, obligations to preference shareholders, and the outcome of tax, regulatory and legal matters. For information on the California law requirements on the declaration of dividends, see "Liquidity and Capital Resources—SCE—SCE Dividends" in the 2022 Form 10-K.
In the next 12 months, SCE expects to fund its cash requirements through operating cash flows, capital market and bank financings refinancing of existing debt, and equity contributions from Edison International Parent, as needed. SCE also has availability under its credit facility to fund cash requirements. SCE expects to issue bonds to finance or refinance eligible sustainable projects. For further information about eligible sustainable projects, see "Liquidity and Capital Resources—SCE" in the 2021 MD&A. SCE also expects to issue additional debt for general corporate purposes, and to finance paymentsand refinance debt issued for future resolutionspayment of claims and expenses related to the 2017/2018 Wildfire/Mudslide Events.
SCE has invested all $1.6 billion of the required AB 1054 Excluded Capital Expenditures. SCE issued securitized bonds in the amounts of $338 million, $533 million and $775 million in February 2021, and $533 million in February 2022 and April 2023, respectively, to finance a portion of these expenditures. SCE expects to securitize the remaining AB 1054 Excluded Capital Expendituresexpenditures and related financing costs from amounts approved as reasonable in track 1 and track 3 of the 2021 GRC proceeding. For further information, see "—Regulatory Proceedings—Wildfire Related Regulatory Proceedings."costs. SCE used the proceeds of the February 2022April 2023 securitized bonds to partially repay a $1.2 billion term loan due in May 2022. In May 2022, SCE extended the due date of the term loan to May 2023. SCE expects to repay the remaining balance of $730 million prior to the due date with the proceeds of future securitized bonds.its maturity in May 2023. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."
15
TableIn the first quarter of Contents2023, Moody's upgraded SCE's credit rating from Baa2 to Baa1 and revised SCE's rating outlook from positive to stable. In April 2023, Fitch upgraded SCE's credit rating from BBB- to BBB and revised SCE's rating outlook from positive to stable. The following tables summarizes SCE’s current long-term issuer credit ratings and outlook from the major credit rating agencies:
| | | | | | |
| Moody's | Fitch | S&P | |||
Credit Rating | Baa1 | BBB | BBB | |||
Outlook | Stable | Stable | Stable |
SCE's credit ratings may be affected if, among other things, regulators fail to successfully implement AB 1054 in a consistent and credit supportive manner or the Wildfire Insurance Fund is depleted by claims from catastrophic wildfires. Credit rating downgrades increase the cost and may impact the availability of short-term and long-term borrowings, including commercial paper, credit facilities, bond financings or other borrowings. In addition, some of SCE's power procurement contracts would require SCE to pay related liabilities or post additional collateral if SCE's credit rating were to fall below investment grade. Incremental collateral requirements for power procurement contracts and environmental remediation obligations would result from a potential downgrade of SCE's credit rating to below investment grade. For further details, see "—Margin and Collateral Deposits."
The cost of capital adjustment mechanism set by the CPUC could impact SCE's results of operations and cash flows. The cost of capital adjustment mechanism's benchmark beginning January 1, 2023 is 4.37%, which is the average Moody's Baa utility bond yield for the 12-month period from October 1, 2021 through September 30, 2022. If the difference between the benchmark and the average of the same index for the 12-month period from October 1, 2022 to September 30, 2023 exceeds 100-basis points, SCE's CPUC-authorized ROE will be adjusted for 2024 by half the amount of the difference (up or down). The average Moody's Baa utility bond yield between October 1, 2022 and July 19, 2023 was 5.72%. The spot rate for Moody's Baa utility bond was 5.61% on July 19, 2023. An average Moody's Baa utility bond yield of 4.05% or higher from July 20, 2023 through September 30, 2023 would trigger the mechanism to adjust upward. For further information see "Business—SCE— Overview of Ratemaking Process" in the 2022 Form 10-K.
Available Liquidity
At June 30, 2022,2023, SCE had cash on hand of $66 million.
At June 30, 2022, SCE had$68 million and approximately $3.1$2.4 billion available underto borrow on its $3.4 billion revolving credit facility. In May 2022, SCE extended itsThe credit facility throughis available for borrowing needs until May 2026, pursuant to an option to extend,2027 and may extend its credit facility for one additional year with the lenders' approval. The aggregate maximum principal amount under the SCE revolving credit facility may be increased up to $4.0 billion, provided that additional lender commitments are obtained. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements." At June 30, 2022, SCE had $102 million outstanding commercial paper, net of discount, at a weighted-average interest rate of 1.98%.
SCE may finance balancing account undercollections and working capital requirements to support operations and capital expenditures with commercial paper, its credit facilities or other borrowings, subject to availability in the bank and capital
14
markets. As necessary, SCE will utilize its available liquidity, capital market financings, other borrowings or parent company contributions to SCE equity in order to meet its obligations as they become due, including costs related to the 2017/2018 Wildfire/Mudslide Events. For further information, see "Management Overview—Southern California Wildfires and Mudslides."
Debt Covenant
SCE's credit facilities and term loan require a debt to total capitalization ratio as defined in the applicable agreements of less than or equal to 0.65 to 1. At June 30, 2022,2023, SCE's debt to total capitalization ratio was 0.550.57 to 1.
At June 30, 2022,2023, SCE was in compliance with all financial covenants that affect access to capital.
Regulatory Proceedings
Wildfire Related Regulatory Proceedings
2021 General Rate Case In response to the increase in wildfire activity, and faster progression of and increased damage from wildfires across SCE's service territory and throughout California, SCE has incurred wildfire mitigation, wildfire insurance and wildfire and drought restoration related spending at levels significantly exceeding amounts authorized in SCE's GRCs.
Wildfire MitigationExpense Memorandum Account Balances
SCE tracks insurance premium costs related to wildfire liability insurance policies as well as other wildfire-related costs that are above authorized levels in its WEMA. In March 2021, SCE made its 2021 GRC track 3 filing with the CPUC. In its filing, SCE requested reasonableness review of approximately $1.2 billion of wildfire mitigation costs incurred prior to 2021, consisting of $476 million of incremental operation and maintenance expenses, and $679 million of incremental capital expenditures.
In June 2022,May 2023, the CPUC issued a decision that authorized SCE to recover $385$207 million of costs recorded in WEMA. The costs are primarily related to incremental operationwildfire insurance premium expenses and maintenance expense and approved $465associated costs for wildfire liability insurance policies that provide coverage for the last six months of 2020. The decision denied approximately $7 million of incremental capital expenditures as reasonable. SCE did not obtain a determination of reasonableness for an additional $179 million of capital expenditures, associated with construction in progress and installation of current limiting fuses, portions ofwildfire liability insurance coverage previously allocated to San Onofre, which were defective. SCE has the opportunity to support its request for these costs with additional information in future applications.
SCE expects to seekbe eligible for recovery of $45 million, subject to a $10 million deductible, for vegetation management-related operations and maintenance expenses not approved in this proceeding through other regulatory mechanisms.
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The decision did not find reasonable certain capital expenditures related to vegetation management software purchased by SCE. As a result offrom the decision, in June 2022,nuclear decommissioning trusts or from SCE recorded a $17 million impairment of utility property, plant and equipment.
The decision resultedcustomers in a revenue requirement of approximately $400 million including a $15 million 2020 revenue requirement for capital expenditures previously found reasonable by the CPUC. The approved revenue requirements are required to be amortized over a 36-month period. SCE expects to seekfuture cost recovery of the approved capital expenditures in a separate financing order application, along with additional wildfire mitigation capital expenditures approved as reasonable in the 2021 GRC.proceeding.
2020 Emergency Wildfire Restoration
Multiple wildfires occurred during 2020 which caused damage within SCE's service territory and to SCE's Big Creek hydroelectric facility.CSRP
In March 2022, SCE filed a CEMA application requesting recovery of $207 million of operation and maintenance expenses incremental to authorized revenue requirements and $312 million of capital expenditures incremental to amounts authorized in the 2021 GRC primarily related to these restoration efforts. SCE has not yet filed for recovery of generation restoration costs, as repairs to hydroelectric generation facilities are not complete.
2021 General Rate Case Track 4
In May 2022, SCE made its 2021 GRC track 4 filing with2023, the CPUC requesting a revenue requirement of $8.6 billion for 2024. This represents an increase of $972 million compared toapproved SCE's estimated revenue requirement of $7.7 billion for the 2023 attrition year. A significant component of the track 4 revenue requirement request relates to projects previously authorized by the CPUC, including those which were completed and put into service since the 2021 GRC final decision. The other primary drivers of the increase are inflation and SCE's 2024 vegetation management and wildfire mitigation spending forecasts. The schedule adopted by the CPUC for the 2021 GRC track 4 filing calls for a proposed decision in the fourth quarter of 2023.
CSRP
In June 2022, SCE and TURN filed a joint motion for approval of a settlement agreement for SCE's CSRP proceeding filed in July 2021 for expenditures incurred through April 2021. The settlement agreement seeks the CPUC's approval to recover $436 million in capital expenditures and $33 million in operation and maintenance expenses. If approved the settlement agreement would result in a revenue requirement of $388 million through December 2024, the beginning of the 2025 GRC. CPUC approval of the settlement agreement would result in SCE permanently foregoing cost recovery for $47 million of capital expenditures, which SCE recorded as an impairment of property, plant and equipment in June 2022.
In May 2022, SCE filed a second CSRP application with the CPUC requesting recovery ofto recover approximately $59 million of capital expenditures and $28 million of operation and maintenance expenses incurred from May 2021 to December 2021.2021, resulting in a revenue requirement of $65 million. The decision also approved SCE also proposedseeking review and cost recovery forof additional post-implementation CSRP costs incurred from January 2022 through December 2024 in theits 2025 GRC filing.
ERRA Proceeding
In January 2023, as a result of undercollections in ERRA and PABA at the end of 2022 due to higher gas and power prices, SCE filed an expedited ERRA trigger application with the CPUC. In April 2023, the CPUC approved the trigger application, and SCE subsequently filed an advice letter to implement an increased revenue requirement of $454 million over 12 months beginning June 1, 2023. See "Business—SCE—Overview of Ratemaking Process" in 2022 Form 10-K for further information regarding the ERRA trigger mechanism.
20232024 FERC Formula Rate Annual Update
In June 2022,2023, SCE provided its preliminary 20232024 annual transmission revenue requirement update to interested parties. The update reflects a $96$286 million decrease in SCE's transmission revenue requirement of $1.3$1.1 billion, or 6.8%20% lower than amounts included in the 20222023 annual rates. The decrease is primarily due to lower undercollectionsreturning an overcollection based on actual 20212022 costs lower administrative and general expenses related to the timing of inclusion of wildfire-related claims recovery in transmission revenue requirements and lower transmission operation and maintenance expenses related to vegetation management and inspections and maintenance included in transmission revenue requirements.wildfire-related claims. SCE expects to file its 20232024 annual update with the FERC by December 1, 2023 with the proposed rates effective January 1, 2024.
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the FERC by December 1, 2022 with the proposed rates effective January 1, 2023.
2022 California Arrearage Payment Program ("CAPP 2022")
In June 2022, California's state assembly passed legislation to authorize, fund and implement the CAPP 2022, which is expected to reduce customer arrearages for certain residential customers of California's investor owned utilities (“IOUs”) by up to $1.0 billion. The CAPP 2022 funds have not yet been allocated between the IOUs, SCE received approximately 30% of funding allocated to the IOUs under the initial California Arrearage Payment Program, approved in 2021. To the extent SCE's uncollectibles expenses are offset by the CAPP 2022, recovery will not be sought through other mechanisms.
Capital Investment Plan
RiversideMajor Transmission Reliabilityand Utility Owned Storage Projects
Alberhill System Project
The Alberhill System Project consists of constructing a new 500 kV substation, two 500 kV transmission lines to connect the proposed substation to the existing Serrano-Valley 500 kV transmission line, telecommunication equipment and subtransmission lines in western Riverside Transmission Reliability Project isCounty. In June 2023, SCE filed an amended application for a jointcertificate of public convenience and necessity ("CPCN") with technical design modifications and engineering refinements to the proposed project between SCEthat decreases project costs and Riverside Public Utilities ("RPU"),reduces GHG emissions. Accordingly, the municipal utility department of the City of Riverside. While RPU will be responsible for constructing some of the project's facilities within Riverside, SCE's portiondirect expenditures of the project consists of constructing upgradesare estimated to its system, including a new 230 kV substation; certain interconnectionbe reduced from $486 million to $472 million. See "Liquidity and telecommunication facilities and transmission linesCapital Resources—SCE—Capital Investment Plan" in the cities of Riverside, Jurupa Valley and Norco and in portions of unincorporated Riverside County.
In May 2022 the Riverside City Council voted to review and advise on alternatives to the CPUC approved project, which could include other technologies or undergrounding. SCE has suspended all major activities on the project until SCE obtains more clarity on whether Riverside intends to proceed with the project as licensed or pursue an alternative approach. SCE is currently assessing the impacts any potential revisions may have on the total direct expenditures and the scheduled in-service dateForm 10-K for the project. No change has currently been reflected in the capital expenditures table above.further information.
Mesa SubstationEldorado-Lugo-Mohave Upgrade Project
The Mesa Substationtotal costs for the Eldorado-Lugo-Mohave Upgrade Project consists of replacing the existing 220 kV Mesa Substation with a new 500/220 kV substation. The Mesa Substation Project will address reliability concerns by providing additional transmission import capability, allowing greater flexibilityare expected to exceed amounts currently approved in the sitingCPCN granted by the CPUC due to delays in regulatory approvals, contractor performance issues, COVID-19 and the availability of new generation,CAISO outage windows. In May 2023, SCE filed a Petition for Modification of the decision that approved the project to increase the maximum reasonable and reducingprudent cost for the total amount of new generationproject, which increased the direct expenditures from $247 million to $319 million. SCE expects the project to be in service in 2023. Additional work is also required to meet local reliability needsmitigate the impact of the project on nearby gas lines and a further Petition for Modification is expected to be filed once the scope and cost of this work is known. See "Liquidity and Capital Resources—SCE—Capital Investment Plan" in the Western Los Angeles Basin area. The 500 kV substation went into service in the second quarter of 2022.
SCE Dividends2022 Form 10-K for further information.
Utility Owned Storage
As discussed in the 20212022 Form 10-K, in October 2021, SCE contracted with Ameresco, Inc. ("Ameresco") for the construction of utility owned energy storage projects at three sites in SCE's service territory with an aggregate capacity of 537.5 MW.
In April 2023, Ameresco discovered damage to some of the equipment at one of the projects which makes up 225 MW of the 537.5 MW aggregate capacity. SCE has received a notice of potential force majeure event from Ameresco noting that Ameresco is performing further analyses on the cause of the damage and asserting that rainstorms at the project site may have caused or contributed to the damage. This project will not be in-service to meet summer peak reliability needs.
Ameresco has advised SCE that it currently expects the 112.5 MW project to be in-service in August 2023 and the 200 MW project to be in-service in September 2023.
Decommissioning of San Onofre
As discussed in the 2022 Form 10-K, in February 2022, SCE filed its application in the 2021 NDCTP with the CPUC regulates SCE's capital structure which limitsrequesting reasonableness review of approximately $570 million (SCE share in 2022 dollars) of recorded San Onofre Units 2 and 3 decommissioning costs incurred during the dividends it may payperiod 2018 to its shareholders. The CPUC issued2020. In May 2023, SCE entered into a decision on SCE's application to the CPUC for waiver of compliance with its equity ratio requirement, that allows SCE to exclude, until May 7, 2022, from its equity ratio calculations (i) net charges accrued in connectionsettlement with the 2017/2018 Wildfire/Mudslide Events and (ii) debt issued forrelevant intervenors under which, subject to CPUC approval, SCE agreed to a disallowance in the purpose2021 NDCTP of paying claimsapproximately $30 million. SCE has accrued approximately $30 million related to the 2017/2018 Wildfire/Mudslide Events up to an amount equal to the net charges accrued in connection with the 2017/2018 Wildfire/Mudslide Events. In April 2022, SCE filed an application to extend the waiver of compliance with its equity ratio requirement and the permitted exclusion. Under the CPUC's rules, SCE is not deemed to be in violation of the equity ratio requirement while the waiver application is pending resolution.2021 NDCTP.
Margin and Collateral Deposits
Certain derivative instruments, power and energy procurement contracts and other contractual arrangements contain collateral requirements. In addition, certain environmental remediation obligations require financial assurance that may be in the form of collateral postings. Future collateral requirements may differ from the requirements at June 30, 20222023, due to the
16
addition of incremental power and energy procurement contracts with collateral requirements, if any, the impact of changes
18
in wholesale power and natural gas prices on SCE's contractual obligations, and the impact of SCE's credit ratings falling below investment grade.
The table below provides the amount of collateral posted by SCE to its counterparties as well as the potential collateral that would have been required as of June 30, 2022,2023, if SCE's credit rating had been downgraded to below investment grade as of that date. The table below also provides the potential collateral that could be required due to adverse changes in wholesale power and natural gas prices over the remaining lives of existing power and energy procurementfuel derivative contracts.
In addition to amounts shown in the table, power and fuel contract counterparties may also institute new collateral requirements, applicable to future transactions to allow SCE to continue trading in power and fuel contracts at the time of a downgrade or upon significant increases in market prices. Furthermore, SCE may also be required to post up to $50 million in collateral in connection with its environmental remediation obligations, within 120 days of the end of the fiscal year in which thea downgrade occurs.
| | | | | | |
(in millions) |
| | |
| | |
Collateral posted as of June 30, 20221 | | $ | 198 | |||
Collateral posted as of June 30, 20231 | | $ | 274 | |||
Incremental collateral requirements for purchased power and fuel contracts resulting from a potential downgrade of SCE's credit rating to below investment grade2 | |
| 96 | |
| 44 |
Incremental collateral requirements for purchased power and fuel contracts resulting from adverse market price movement3 | |
| 80 | |||
Incremental collateral requirements for SCE's financial hedging activities resulting from adverse market price movement3 | |
| 80 | |||
Posted and potential collateral requirements | | $ | 374 | | $ | 398 |
1 | Net collateral provided to counterparties and other brokers consisted of |
2 | Represents potential collateral requirements for accounts payable and |
3 | Incremental collateral requirements were based on potential changes in SCE's forward positions as of June 30, |
Edison International Parent and Other
In the next 12 months, Edison International expects to fund its net cash requirements through cash on hand, dividends from SCE, and capital market and bank financings. Edison International may finance its ongoing cash requirements, including dividends, working capital requirements, payment of obligations, and capital investments, including capital contributions to subsidiaries, with short-term or other financings, subject to availability in the bank and capital markets.
At June 30, 2022,2023, Edison International Parent and Other had cash on hand of $56 million.
At June 30, 2022 Edison International Parent had $3$127 million outstanding commercial paper, net of discount, at a weighted- average interest rate of 2.10% supported by theand $1.1 billion available to borrow on its $1.5 billion revolving credit facility. In May 2022, Edison International Parent extended itsThe credit facility throughis available for borrowing needs until May 2026, pursuant to an option to extend,2027 and may extend its credit facility for one additional year with the lenders' approval. The aggregate maximum principal amount under the Edison International Parent revolving credit facility may be increased up to $2.0 billion, provided that additional lender commitments are obtained.
Edison International plans to issue securities containing $300 million to $400 million of equity content as viewed by rating agencies in 2022, to support SCE's capital investment needs and SCE maintaining the common equity component of its capital structure, after CPUC allowed exclusions, at 52% on a weighted average basis over the Capital Structure Compliance Period. In April 2022, Edison International Parent borrowed $600 million under a term loan agreement due in April 2023.
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The term loan provides Edison International with the flexibility to defer its planned issuance to 2023, depending on market conditions. For further information, see "Liquidity and Capital Resources—SCE—SCE Dividends" in the 2021 MD&A and "Notes"Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."
In March 2023, Edison International Parent issued $500 million of junior subordinated notes, due in 2053, which provide approximately $250 million of equity content as viewed by rating agencies. Edison International expects to raise any additional equity this year through its internal programs, which are estimated to generate approximately $100 million. The total expected equity content is consistent with the $300 million to $400 million of equity content identified in Edison International's 2023 financing plan.
Edison International Parent and Other's liquidity and its ability to pay operating expenses and pay dividends to preferred and common shareholders are dependent on access to the bank and capital markets, dividends from SCE, realization of tax benefits and its ability to meet California law requirements for the declaration of dividends. Prior to declaring dividends, Edison International's Board of Directors evaluates available information to ensure that the California law requirements for the declarations are met. For information on the California
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law requirements on the declaration of dividends, see "Liquidity and Capital Resources—SCE—SCE Dividends" in the 2021 MD&A.2022 Form 10-K.
Edison International's ability to declare and pay common dividends may be restricted under the terms of its Series A and Series B Preferred Stock. For further information, see "Notes to Consolidated Financial Statements—Note 14. Equity" in the 2022 Form 10-K. Edison International intends to maintain its target payout ratio of 45% – 55% of SCE's core earnings, subject to the factors identified above.
Edison International's ability to declare and pay common dividends may be restricted under the terms of the Series A and Series B Preferred Stock. For further information see "Notes to Consolidated Financial Statements—Note 14. Equity" in the 2021 Form 10-K.
Edison International Parent's credit facility requires a consolidated debt to total capitalization ratio as defined in the applicable agreements of less than or equal to 0.70 to 1. At June 30, 2022,2023, Edison International's consolidated debt to total capitalization ratio was 0.620.63 to 1.
At June 30, 2022,2023, Edison International Parent was in compliance with all financial covenants that affect access to capital.
In the first quarter of 2023, Moody's upgraded Edison International's credit rating from Baa3 to Baa2 and revised Edison International's rating outlook from positive to stable. In April 2023, Fitch upgraded Edison International's credit rating from BBB- to BBB and revised Edison International's rating outlook from positive to stable. The following table summarizes Edison International Parent's current long-term issuer credit ratings and outlook from the major credit rating agencies:
| | | | | | |
| Moody's | Fitch | S&P | |||
Credit Rating | Baa2 | BBB | BBB | |||
Outlook | Stable | Stable | Stable |
Edison International Parent's credit ratings may be affected if, among other things, regulators fail to successfully implement AB 1054 in a consistent and credit supportive manner or the Wildfire Insurance Fund is depleted by claims from catastrophic wildfires. Credit rating downgrades increase the cost and may impact the availability of short-term and long-term borrowings, including commercial paper, credit facilities, note financings or other borrowings.
Net Operating Loss and Tax Credit Carryforwards
Edison International consolidates for federalIncome Taxes
Inflation Reduction Act of 2022
On August 16, 2022, the IRA was signed into law. The law imposes a 15% corporate alternative minimum tax ("CAMT") on adjusted financial statement income tax purposes, but not for financial accounting purposes,("AFSI") of corporations with average AFSI exceeding $1.0 billion over a group of wind projects referred to as Capistrano Wind. A salespecified 3-year period. The CAMT was effective beginning January 1, 2023. Based on the current interpretation of the wind projects is expectedlaw and historical financial data, Edison International estimates that it will exceed the $1.0 billion threshold and be subject to CAMT on its consolidated Federal tax returns beginning in 2025. SCE also expects to be consummatedsubject to CAMT on its stand-alone Federal return beginning in 2025.
The law also includes significant extensions, expansions, and enhancements of numerous energy-related investment tax credits, as well as creating new credits applicable to electricity production which may apply to SCE's capital expenditures. Under the third quarterIRA, SCE expects to generate investment tax credits related to its utility owned storage projects, which will accrue to the benefit of 2022 following regulatory approval. The sale and cancellation of debt is expected to utilize approximately $115 million of tax attributes previously generated by the Capistrano entities. Remaining tax attributes not utilized in 2022 will be available for the Edison International consolidated group to utilize in the future. When the remaining Capistrano tax attributes are used in the future by Edison International, payments will be made to those entities under a tax allocation agreement.its customers.
Historical Cash Flows
SCE
| | | | | | |
| | Six months ended June 30, | ||||
(in millions) |
| 2022 |
| 2021 | ||
Net cash provided by (used in) operating activities | | $ | 1,317 | | $ | (1,283) |
Net cash provided by financing activities | |
| 1,096 | |
| 3,689 |
Net cash used in investing activities | |
| (2,626) | |
| (2,411) |
Net decrease in cash, cash equivalents and restricted cash | | $ | (213) | | $ | (5) |
2018
Historical Cash Flows
SCE
| | | | | | | |
| | Six months ended June 30, | | ||||
(in millions) |
| 2023 |
| 2022 | | ||
Net cash provided by operating activities | | $ | 862 | | $ | 1,317 | |
Net cash provided by financing activities | |
| 1,090 | |
| 1,096 | |
Net cash used in investing activities | |
| (2,650) | |
| (2,626) | |
Net decrease in cash and cash equivalents | | $ | (698) | | $ | (213) | |
Net Cash Provided by (Used in) Operating Activities
The following table summarizes major categories of net cash provided byfor operating activities as provided in more detail in SCE's consolidated statements of cash flows for the six months ended June 30, 20222023 and 2021.2022.
| | | | | | | | | | | | | | | | | | | | |
| | Six months ended June 30, | | Change in cash flows | | | Six months ended June 30, | | Change in cash flows | | ||||||||||
(in millions) |
| 2022 |
| 2021 |
| 2022/2021 |
|
| 2023 |
| 2022 |
| 2023/2022 |
| ||||||
Net income |
| $ | 500 |
| $ | 708 |
| |
| |
| $ | 848 |
| $ | 500 |
| |
| |
Non-cash items1 | |
| 1,326 | |
| 1,189 |
| |
| | |
| 1,503 | |
| 1,326 |
| |
| |
Subtotal | |
| 1,826 | | | 1,897 |
| $ | (71) | | |
| 2,351 | | | 1,826 |
| $ | 525 | |
Changes in cash flow resulting from working capital2 | |
| (136) | |
| (309) |
| | 173 | | |
| (703) | |
| (136) |
| | (567) | |
Regulatory assets and liabilities | |
| 372 | |
| (574) |
| | 946 | | |
| (366) | |
| 372 |
| | (738) | |
Wildfire related claims3 | | | (609) | | | (2,852) | | | 2,243 | | | | (428) | | | (609) | | | 181 | |
Other noncurrent assets and liabilities4 | |
| (136) | |
| 555 |
| | (691) | | |
| 8 | |
| (136) |
| | 144 | |
Net cash provided by (used in) operating activities | | $ | 1,317 | | $ | (1,283) | | $ | 2,600 | | ||||||||||
Net cash provided by operating activities | | $ | 862 | | $ | 1,317 | | $ | (455) | | ||||||||||
| 1 | Non-cash items include depreciation and amortization, allowance for equity during construction, impairment and other income, deferred income taxes, Wildfire Insurance Fund amortization expenses and other. |
| 2 | Changes in working capital items include receivables, accrued unbilled revenue, inventory, amortization of prepaid expenses, |
| 3 |
| 4 | Includes |
Net cash provided by (used in) operating activities was impacted by the following:
Net income and non-cash items decreasedincreased in 20222023 by $71$525 million primarily due to higher charges for wildfire-related claims, net of insurance recoveries, and higher interest expenserevenue from increased borrowings, partially offset by higher earnings due to the adoption ofescalation mechanism set forth in the 2021 GRC final decision and higher interest income on balancing account undercollections, partially offset by higher interest expense.
The net changes in the third quarter of 2021.
Net cash outflow forresulting from working capital was $136were outflows of $703 million and $309$136 million during the six months ended June 30, 2023 and 2022, respectively. The net cash outflow for 2023 was primarily related to decreases in payables of $527 million mainly from payments of power purchase payables and a decrease in gas prices from December 2022, and 2021, respectively. Neta $237 million cash outflowsoutflow for margin and collateral deposits due to the decrease in the market value of power and gas derivatives in 2023. The net cash outflow for 2022 and 2021 werewas primarily due to a net increasesincrease in unbilled revenue and customer receivables of $400 million, and $523 million, respectively. The 2022 increase in receivables is lower mainly due to $185 million of CAPP funds received in January 2022. Both years' outflows were partially offset by an increase in payables.
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Net cash (used in) provided by (used in) regulatory assets and liabilities, including changes in net undercollections recorded in balancing accounts, was $372$(366) million and $(574)$372 million during the six months ended June 30, 20222023 and 2021,2022, respectively. SCE has a number of balancing and memorandum accounts, which impact cash flows based on differences between timing of collection of amounts through rates and accrual expenditures. Cash flows were primarily impacted by the following:
2023
| ● | Net undercollections of BRRBA increased by $458 million primarily due to lower sales volume in 2023 and inclusion in BRRBA of expense previously deferred in WEMA that was authorized for collection in customer rates starting June 2023, partially offset by recovery of prior year undercollections from various tracks of the 2021 GRC. |
| ● | Decreased overcollections of $108 million for GHG revenue mainly related to climate credits provided to customers, partially offset by GHG revenue related to GHG auction revenue received. |
| ● | Net undercollections for ERRA, PABA and NSGBA decreased by $167 million primarily due to recovery of prior PABA and NSGBA undercollections and current year overcollections due to lower energy prices, partially offset by current year undercollections due to lower than forecast sales volume. |
| ● | Undercollections of wildfire related memorandum and balancing accounts decreased by $126 million primarily due to approval to recover expense previously deferred in WEMA, which was transferred to BRRBA for recovery as mentioned above, partially offset by additional wildfire risk mitigation and restoration costs incurred. |
2022
| ● | Net undercollections of BRRBA increased by $679 million primarily due to $401 million of expense authorized under |
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| ● | Undercollections decreased by $701 million related to wildfire risk mitigation memorandum and balancing accounts as a result of approval to recover costs in |
| ● | Net undercollections for ERRA, PABA and |
| ● | Increased overcollections of $274 million for the public purpose and energy efficiency programs as a result of lower program spending due to timing. |
| ● | Increase in overcollections of $139 million for excess California Department of Water Resources ("DWR") bond and power charges to be refunded to customers over a 12-month period beginning in June 2022. |
| ● | Decreased overcollections of $51 million for GHG revenue related to climate credits provided to customers and various transfers, partially offset by GHG auction revenue received. |
| ● | Undercollections of $55 million related to uncollectible expenses from residential customers. |
| ● | Undercollections of $52 million in the CSRP memorandum account related to CSRP post implementation costs. |
2021
Cash flows (used in) provided by other noncurrent assets and liabilities were primarily related to an increase in wildfire insurance receivables of $139 million in 2022 and recoveries of $708 million in 2021. Cash flow for other noncurrent assets and liabilities also includes payments of decommissioning costs ($73 million in 2022 and $128 million in 2021, respectively), partially offset by SCE's net earnings (losses) from nuclear decommissioning trust investments ($25 million in 2022 and $(15) million in 2021, respectively). See "Nuclear Decommissioning Activities" below for further discussion.
2220
Net Cash Provided by Financing Activities
The following table summarizes cash provided by financing activities for the six months ended June 30, 20222023 and 2021.2022. Issuances of debt are discussed in "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."
| | | | | | | |
| | Six months ended June 30, | | ||||
(in millions) | | 2022 |
| 2021 | | ||
Issuances of long-term debt, including premium/discount and net of issuance costs | | $ | 2,949 | | $ | 3,952 | |
Long-term debt repaid or repurchased |
| | (372) |
| | (991) | |
Short-term debt (repaid) borrowed, net |
| | (993) |
| | 751 | |
Commercial paper repaid, net of borrowing | | | (499) | | | (551) | |
Capital contributions from Edison International Parent |
| | 700 |
| | 1,225 | |
Payment of common stock dividends to Edison International |
| | (650) |
| | (650) | |
Payment of preference stock dividends |
| | (57) |
| | (53) | |
Other |
| | 18 |
| | 6 | |
Net cash provided by financing activities | | $ | 1,096 | | $ | 3,689 | |
| | | | | | | |
| | | Six months ended June 30, | | |||
(in millions) | | 2023 |
| 2022 | | ||
Issuances of long-term debt, including premium/discount and net of issuance costs | | $ | 3,044 | | $ | 2,949 | |
Long-term debt repaid or repurchased |
| | (1,066) |
| | (372) | |
Short-term debt borrowed |
| | 320 |
| | — | |
Short-term debt repaid | | | (730) | | | (993) | |
Commercial paper borrowing (repayment), net | | | 262 | | | (499) | |
Capital contributions from Edison International Parent | | | — | | | 700 | |
Payment of common stock dividends to Edison International |
| | (700) |
| | (650) | |
Payment of preference stock dividends |
| | (58) |
| | (57) | |
Other |
| | 18 |
| | 18 | |
Net cash provided by financing activities | | $ | 1,090 | | $ | 1,096 | |
Net Cash Used in Investing Activities
Cash flows used in investing activities are primarily due to total capital expenditures related to transmission and distribution investments ($2.7 billion and $2.6of $2.7 billion for theboth six months ended June 30, 20222023 and 2021, respectively).2022. In addition, SCE had a net redemption of nuclear decommissioning trust investments of $65
$60 million and $127$65 million during the six months ended June 30, 20222023 and 2021,2022, respectively. See "Nuclear Decommissioning Activities" below for further discussion.
Nuclear Decommissioning Activities
SCE's consolidated statements of cash flows include nuclear decommissioning activities, which are reflected in the following line items:
| | | | | | | | | | | | | |
|
| Six months ended June 30, |
| Six months ended June 30, | | ||||||||
(in millions) |
| 2022 |
| 2021 |
| 2023 |
| 2022 | | ||||
Net cash used in operating activities: | | | | | | | | | | | | | |
Net earnings (losses) from nuclear decommissioning trust investments | | $ | 25 | | $ | (15) | |||||||
Net earnings from nuclear decommissioning trust investments | | $ | 49 | | $ | 25 | | ||||||
SCE's decommissioning costs |
| | (73) |
| | (128) |
| | (116) |
| | (73) |
|
Net cash provided by investing activities: |
| | |
| | |
| | |
| | |
|
Proceeds from sale of investments | | | 2,106 | | | 2,542 | | | 1,967 | | | 2,106 | |
Purchases of investments |
| | (2,041) |
| | (2,415) |
| | (1,907) |
| | (2,041) |
|
Net cash impact | | $ | 17 | | $ | (16) | |||||||
Net cash (outflow) inflow | | $ | (7) | | $ | 17 | | ||||||
Net cash used in operating activities relates to interest and dividends less administrative expenses, taxes and SCE's decommissioning costs. Investing activities represent the purchase and sale of investments within the nuclear decommissioning trusts, including the reinvestment of earnings from nuclear decommissioning trust investments. The net cash impact reflects timing of decommissioning payments ($73116 million and $128$73 million in 20222023 and 2021,2022, respectively) and reimbursements to SCE from the nuclear decommissioning trust ($90109 million and $112$90 million in 20222023 and 2021,2022 respectively).
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Edison International Parent and Other
The table below sets forth condensed historical cash flow from operations for Edison International Parent and Other, including intercompany eliminations.
| | | | | | | | | | | | | |
| | Six months ended June 30, | | Six months ended June 30, | | ||||||||
(in millions) |
| 2022 |
| 2021 |
| 2023 |
| 2022 | | ||||
Net cash used in operating activities | | $ | (79) | | $ | (91) | | $ | (150) | | $ | (79) | |
Net cash provided by financing activities |
| | 23 |
| | 93 |
| | 129 |
| | 23 |
|
Net cash used in investing activities |
| | (2) |
| | (1) |
| | — |
| | (2) |
|
Net (decrease) increase in cash and cash equivalents | | $ | (58) | | $ | 1 | |||||||
Net decrease in cash, cash equivalents and restricted cash | | $ | (21) | | $ | (58) | | ||||||
Net Cash Used in Operating Activities
Net cash used in operating activities was impacted by the following:
$150 million and $79 million cash outflows from operating activities in 2023 and 2022, respectively, primarily due to payments relating to interest and operating costs. The 2022 amount is partially offset by $18 million income tax refund received from the California Franchise Tax Board.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was as follows:
| | | | | | |
| | Six months ended June 30, | ||||
(in millions) |
| 2022 |
| 2021 | ||
Dividends paid to Edison International common shareholders | | $ | (524) | | $ | (494) |
Dividends paid to Edison International preferred shareholders | | | (46) | | | — |
Dividends received from SCE |
| | 650 |
| | 650 |
Capital contributions to SCE |
| | (700) |
| | (1,225) |
Issuance of preferred stock, net of issuance costs | | | — | | | 1,235 |
Issuance of term loan |
| | 600 |
| | — |
Commercial paper financing, net |
| | 2 |
| | (105) |
Other |
| | 41 |
| | 32 |
Net cash provided by financing activities | | $ | 23 | | $ | 93 |
| | | | | | | |
| | Six months ended June 30, | | ||||
(in millions) |
| 2023 |
| 2022 | | ||
Dividends paid to Edison International common shareholders | | $ | (555) | | $ | (524) | |
Dividends paid to Edison International preferred shareholders | | | (52) | | | (46) | |
Dividends received from SCE |
| | 700 |
| | 650 |
|
Capital contributions to SCE |
| | — |
| | (700) |
|
Long-term debt issuance, net of discount and issuance costs |
| | 1,089 |
| | — |
|
Long-term debt repayments |
| | (400) |
| | — |
|
Issuance of short-term debt |
| | 355 |
| | 600 |
|
Repayments of term loans |
| | (1,000) |
| | — |
|
Commercial paper financing, net |
| | (64) |
| | 2 |
|
Other |
| | 56 |
| | 41 |
|
Net cash provided by financing activities | | $ | 129 | | $ | 23 | |
Contingencies
Edison International's and SCE's contingencies are discussed in "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies."
MARKET RISK EXPOSURES
Edison International's and SCE's primary market risks are described in the 20212022 Form 10-K.10-K, and there have been no material changes for the six months ended June 30, 2023. For further discussion of market risk exposures, including commodity price risk credit risk, and interest ratecredit risk, see "Notes to Consolidated Financial Statements—Note 4. Fair Value Measurements" and "—Note 6. Derivative Instruments."
Commodity Price Risk
SCE records derivative instruments on its consolidated balance sheets as either assets or liabilities measured at fair value unless otherwise exempted from derivative treatment as normal purchases or sales. The fair value of outstanding derivative instruments used to mitigate exposure to commodity price risk was reflected as a net asset of $32 million and $44 million on SCE's consolidated balance sheets at June 30, 2022 and December 31, 2021, respectively. For further discussion of fair value
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measurements and the fair value hierarchy, see "Notes to Consolidated Financial Statements—Note 4. Fair Value Measurements" and "— Note 6. Derivative Instruments."
Credit Risk
Credit risk exposure from counterparties for power and gas trading activities is measured as the sum of net accounts receivable (accounts receivable less accounts payable) and the current fair value of net derivative assets (derivative assets less derivative liabilities) reflected on the consolidated balance sheets. SCE enters into master agreements which typically provide for a right of set-off. Accordingly, SCE's credit risk exposure from counterparties is based on a net exposure under these arrangements. SCE manages the credit risk on the portfolio of counterparties based on credit ratings and other publicly disclosed information, such as financial statements, regulatory filings and press releases, to guide it in the process of setting credit levels, risk limits and contractual arrangements, including master netting agreements. Based on SCE's policies and risk exposures related to credit, SCE does not anticipate a material adverse effect on their financial statements as a result of counterparty nonperformance. At June 30, 2022, SCE's power and gas trading counterparty credit risk exposure was $32 million, all of which is associated with entities that have an investment grade rating of A or higher. SCE assigns a credit rating to counterparties based on the lowest of a counterparty's S&P, Moody's, and Fitch's rating.
For more information related to credit risks, see "Notes to Consolidated Financial Statements—Note 6. Derivative Instruments."
CRITICAL ACCOUNTING ESTIMATES AND POLICIES
For a discussion of Edison International's and SCE's critical accounting policies, see "Critical Accounting Estimates and Policies" in the 20212022 MD&A.
22
NEW ACCOUNTING GUIDANCE
NewThere have been no material changes in recently issued or adopted accounting guidance is discussedstandards from those disclosed in "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—New Accounting Guidance."Guidance" in the 2022 Form 10-K.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information responding to this section is included in the MD&A under the heading "Market Risk Exposures" and is incorporated herein by reference.
2523
FINANCIAL STATEMENTS
Consolidated Statements of Income | Edison International |
| | | | | | | | | | | | |
| | Three months ended | | Six months ended | ||||||||
| | June 30, | | June 30, | ||||||||
(in millions, except per-share amounts, unaudited) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Total operating revenue | | $ | 4,008 | | $ | 3,315 | | $ | 7,976 | | $ | 6,275 |
Purchased power and fuel | |
| 1,304 | |
| 1,283 | |
| 2,341 | |
| 2,296 |
Operation and maintenance | |
| 1,361 | |
| 754 | |
| 2,848 | |
| 1,595 |
Wildfire-related claims, net of insurance recoveries | |
| 2 | |
| — | |
| 427 | |
| 3 |
Wildfire Insurance Fund expense | |
| 53 | |
| 54 | |
| 106 | |
| 107 |
Depreciation and amortization | |
| 601 | |
| 533 | |
| 1,184 | |
| 1,058 |
Property and other taxes | |
| 120 | |
| 117 | |
| 246 | |
| 243 |
Impairment, net of other operating income | |
| 63 | |
| (11) | |
| 61 | |
| (11) |
Total operating expenses | |
| 3,504 | |
| 2,730 | |
| 7,213 | |
| 5,291 |
Operating income | |
| 504 | |
| 585 | |
| 763 | |
| 984 |
Interest expense | |
| (271) | |
| (232) | |
| (517) | |
| (449) |
Other income | |
| 66 | |
| 76 | |
| 134 | |
| 148 |
Income before income taxes | |
| 299 | |
| 429 | |
| 380 | |
| 683 |
Income tax expense (benefit) | |
| 7 | |
| 68 | |
| (48) | |
| 32 |
Net income | |
| 292 | |
| 361 | |
| 428 | |
| 651 |
Preference stock dividend requirements of SCE | |
| 25 | |
| 26 | |
| 51 | |
| 53 |
Preferred stock dividend requirement of Edison International | | | 26 | | | 17 | | | 52 | | | 21 |
Net income attributable to Edison International common shareholders | | $ | 241 | | $ | 318 | | $ | 325 | | $ | 577 |
Basic earnings per share: | |
|
| |
|
| |
|
| |
|
|
Weighted average shares of common stock outstanding | |
| 381 | |
| 380 | |
| 381 | |
| 379 |
Basic earnings per common share attributable to Edison International common shareholders | | $ | 0.63 | | $ | 0.84 | | $ | 0.85 | | $ | 1.52 |
Diluted earnings per share: | |
|
| |
|
| |
|
| |
|
|
Weighted average shares of common stock outstanding, including effect of dilutive securities | |
| 383 | |
| 380 | |
| 382 | |
| 380 |
Diluted earnings per common share attributable to Edison International common shareholders | | $ | 0.63 | | $ | 0.84 | | $ | 0.85 | | $ | 1.52 |
| | | | | | | | | | | | |
| | Three months ended | | Six months ended | ||||||||
| | June 30, | | June 30, | ||||||||
(in millions, except per-share amounts, unaudited) |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
Operating revenue | | $ | 3,964 | | $ | 4,008 | | $ | 7,930 | | $ | 7,976 |
Purchased power and fuel | |
| 1,147 | |
| 1,304 | |
| 2,465 | |
| 2,341 |
Operation and maintenance | |
| 1,241 | |
| 1,361 | |
| 2,325 | |
| 2,848 |
Wildfire-related claims, net of insurance recoveries | |
| — | |
| 2 | |
| 96 | |
| 427 |
Wildfire Insurance Fund expense | |
| 53 | |
| 53 | |
| 105 | |
| 106 |
Depreciation and amortization | |
| 650 | |
| 601 | |
| 1,306 | |
| 1,184 |
Property and other taxes | |
| 149 | |
| 120 | |
| 289 | |
| 246 |
Impairment, net of other operating income | |
| — | |
| 63 | |
| — | |
| 61 |
Total operating expenses | |
| 3,240 | |
| 3,504 | |
| 6,586 | |
| 7,213 |
Operating income | |
| 724 | |
| 504 | |
| 1,344 | |
| 763 |
Interest expense | |
| (392) | |
| (271) | |
| (753) | |
| (517) |
Other income | |
| 128 | |
| 66 | |
| 247 | |
| 134 |
Income before income taxes | |
| 460 | |
| 299 | |
| 838 | |
| 380 |
Income tax expense (benefit) | |
| 51 | |
| 7 | |
| 64 | |
| (48) |
Net income | |
| 409 | |
| 292 | |
| 774 | |
| 428 |
Less: Preference stock dividend requirements of SCE | |
| 29 | |
| 25 | |
| 58 | |
| 51 |
Less: Preferred stock dividend requirement of Edison International | | | 26 | | | 26 | | | 52 | | | 52 |
Net income attributable to Edison International common shareholders | | $ | 354 | | $ | 241 | | $ | 664 | | $ | 325 |
Basic earnings per share: | |
|
| |
|
| |
|
| |
|
|
Weighted average shares of common stock outstanding | |
| 383 | |
| 381 | |
| 383 | |
| 381 |
Basic earnings per common share attributable to Edison International common shareholders | | $ | 0.92 | | $ | 0.63 | | $ | 1.73 | | $ | 0.85 |
Diluted earnings per share: | |
|
| |
|
| |
|
| |
|
|
Weighted average shares of common stock outstanding, including effect of dilutive securities | |
| 385 | |
| 383 | |
| 385 | |
| 382 |
Diluted earnings per common share attributable to Edison International common shareholders | | $ | 0.92 | | $ | 0.63 | | $ | 1.73 | | $ | 0.85 |
The accompanying notes are an integral part of these consolidated financial statements.
2624
| |
Consolidated Statements of Comprehensive Income | Edison International |
| | | | | | | | | | | | |
| | | Three months ended | | Six months ended | |||||||
| | June 30, | | June 30, | ||||||||
(in millions, unaudited) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Net income | | $ | 292 | | $ | 361 | | $ | 428 | | $ | 651 |
Other comprehensive income, net of tax: | |
|
| |
|
| |
|
| |
|
|
Pension and postretirement benefits other than pensions | |
| 4 | |
| 2 | |
| 6 | |
| 4 |
Other comprehensive income, net of tax | |
| 4 | |
| 2 | |
| 6 | |
| 4 |
Comprehensive income | |
| 296 | |
| 363 | |
| 434 | |
| 655 |
Less: Comprehensive income attributable to noncontrolling interests | |
| 25 | |
| 26 | |
| 51 | |
| 53 |
Comprehensive income attributable to Edison International | | $ | 271 | | $ | 337 | | $ | 383 | | $ | 602 |
| | | | | | | | | | | | | |
| | | Three months ended | | Six months ended | | |||||||
| | June 30, | | June 30, | | ||||||||
(in millions, unaudited) |
| 2023 |
| 2022 |
| 2023 |
| 2022 | | ||||
Net income | | $ | 409 | | $ | 292 | | $ | 774 | | $ | 428 | |
Other comprehensive income, net of tax: | |
|
| |
|
| |
|
| |
|
| |
Pension and postretirement benefits other than pensions | |
| 1 | |
| 4 | |
| 1 | |
| 6 | |
Foreign currency translation adjustments | | | — | | | — | | | 2 | | | — | |
Other comprehensive income, net of tax | |
| 1 | |
| 4 | |
| 3 | |
| 6 | |
Comprehensive income | |
| 410 | |
| 296 | |
| 777 | |
| 434 | |
Less: Comprehensive income attributable to noncontrolling interests | |
| 29 | |
| 25 | |
| 58 | |
| 51 | |
Comprehensive income attributable to Edison International | | $ | 381 | | $ | 271 | | $ | 719 | | $ | 383 | |
The accompanying notes are an integral part of these consolidated financial statements.
2725
| |
Consolidated Balance Sheets | Edison International |
| | | | | | | | | | | | |
| | June 30, | | December 31, | | June 30, | | December 31, | ||||
(in millions, unaudited) |
| 2022 |
| 2021 |
| 2023 |
| 2022 | ||||
ASSETS |
| |
|
| |
|
| |
|
| |
|
Cash and cash equivalents | | $ | 122 | | $ | 390 | | $ | 195 | | $ | 914 |
Receivables, less allowances of $347 and $193 for uncollectible accounts at respective dates | |
| 1,547 | |
| 1,398 | ||||||
Receivables, less allowances of $335 and $347 for uncollectible accounts at respective dates | |
| 1,717 | |
| 1,695 | ||||||
Accrued unbilled revenue | |
| 1,096 | |
| 794 | |
| 756 | |
| 641 |
Inventory | |
| 438 | |
| 420 | |
| 511 | |
| 474 |
Prepaid expenses | |
| 50 | |
| 258 | |
| 88 | |
| 248 |
Regulatory assets | |
| 2,030 | |
| 1,778 | |
| 3,656 | |
| 2,497 |
Wildfire Insurance Fund contributions | |
| 204 | |
| 204 | |
| 204 | |
| 204 |
Other current assets | |
| 166 | |
| 249 | |
| 289 | |
| 397 |
Total current assets | |
| 5,653 | |
| 5,491 | |
| 7,416 | |
| 7,070 |
Nuclear decommissioning trusts | |
| 4,039 | |
| 4,870 | |
| 4,126 | |
| 3,948 |
Marketable securities | | | 6 | | | 12 | ||||||
Other investments | |
| 52 | |
| 39 | |
| 72 | |
| 55 |
Total investments | |
| 4,097 | |
| 4,921 | |
| 4,198 | |
| 4,003 |
Utility property, plant and equipment, less accumulated depreciation and amortization of $11,926 and $11,407 at respective dates | |
| 51,485 | |
| 50,497 | ||||||
Nonutility property, plant and equipment, less accumulated depreciation of $106 and $98 at respective dates | |
| 210 | |
| 203 | ||||||
Utility property, plant and equipment, less accumulated depreciation and amortization of $12,662 and $12,260 at respective dates | |
| 54,123 | |
| 53,274 | ||||||
Nonutility property, plant and equipment, less accumulated depreciation of $111 and $106 at respective dates | |
| 203 | |
| 212 | ||||||
Total property, plant and equipment | |
| 51,695 | |
| 50,700 | |
| 54,326 | |
| 53,486 |
Receivables, less allowances of $34 and $116 for uncollectible accounts at respective dates | | | 21 | | | 122 | ||||||
Regulatory assets (include $845 and $325 related to Variable Interest Entities "VIEs" at respective dates) | |
| 7,854 | |
| 7,660 | ||||||
Regulatory assets (include $1,585 and $834 related to Variable Interest Entities "VIEs" at respective dates) | |
| 8,621 | |
| 8,181 | ||||||
Wildfire Insurance Fund contributions | |
| 2,258 | |
| 2,359 | |
| 2,053 | |
| 2,155 |
Operating lease right-of-use assets | |
| 1,751 | |
| 1,932 | |
| 1,231 | |
| 1,442 |
Long-term insurance receivables | | | 214 | | | 75 | | | 458 | | | 465 |
Other long-term assets | |
| 1,502 | |
| 1,485 | |
| 1,248 | |
| 1,239 |
Total long-term assets | |
| 13,600 | |
| 13,633 | |
| 13,611 | |
| 13,482 |
Total assets | | $ | 75,045 | | $ | 74,745 | | $ | 79,551 | | $ | 78,041 |
The accompanying notes are an integral part of these consolidated financial statements.
2826
| |
Consolidated Balance Sheets | Edison International |
| | | | | | | | | | | | |
| | June 30, | | December 31, | | June 30, | | December 31, | ||||
(in millions, except share amounts, unaudited) |
| 2022 |
| 2021 |
| 2023 |
| 2022 | ||||
LIABILITIES AND EQUITY |
| |
|
| |
|
| |
|
| |
|
Short-term debt | | $ | 1,985 | | $ | 2,354 | | $ | 1,161 | | $ | 2,015 |
Current portion of long-term debt | |
| 2,175 | |
| 1,077 | |
| 2,889 | |
| 2,614 |
Accounts payable | |
| 2,080 | |
| 2,002 | |
| 1,790 | |
| 2,359 |
Wildfire-related claims | | | 86 | | | 131 | | | 71 | | | 121 |
Customer deposits | |
| 165 | |
| 193 | |
| 173 | |
| 167 |
Regulatory liabilities | |
| 523 | |
| 603 | |
| 797 | |
| 964 |
Current portion of operating lease liabilities | |
| 607 | |
| 582 | |
| 315 | |
| 506 |
Other current liabilities | |
| 1,641 | |
| 1,667 | |
| 1,631 | |
| 1,601 |
Total current liabilities | |
| 9,262 | |
| 8,609 | |
| 8,827 | |
| 10,347 |
Long-term debt (include $823 and $314 related to VIEs at respective dates) | |
| 25,143 | |
| 24,170 | ||||||
Long-term debt (include $1,539 and $809 related to VIEs at respective dates) | |
| 29,430 | |
| 27,025 | ||||||
Deferred income taxes and credits | |
| 5,889 | |
| 5,740 | |
| 6,429 | |
| 6,149 |
Pensions and benefits | |
| 471 | |
| 496 | |
| 409 | |
| 422 |
Asset retirement obligations | |
| 2,837 | |
| 2,772 | |
| 2,709 | |
| 2,754 |
Regulatory liabilities | |
| 8,376 | |
| 8,981 | |
| 8,735 | |
| 8,211 |
Operating lease liabilities | |
| 1,144 | |
| 1,350 | |
| 916 | |
| 936 |
Wildfire-related claims | |
| 1,169 | |
| 1,733 | |
| 1,309 | |
| 1,687 |
Other deferred credits and other long-term liabilities | |
| 3,079 | |
| 3,105 | |
| 3,093 | |
| 2,988 |
Total deferred credits and other liabilities | |
| 22,965 | |
| 24,177 | |
| 23,600 | |
| 23,147 |
Total liabilities | |
| 57,370 | |
| 56,956 | |
| 61,857 | |
| 60,519 |
Commitments and contingencies (Note 12) | |
|
| |
|
| |
|
| |
|
|
Preferred stock (50,000,000 shares authorized; 1,250,000 shares of Series A and 750,000 shares of Series B issued and outstanding at respective dates) | | | 1,977 | | | 1,977 | | | 1,978 | | | 1,978 |
Common stock, 0 par value (800,000,000 shares authorized; 381,397,456 and 380,378,145 shares issued and outstanding at respective dates) | |
| 6,129 | |
| 6,071 | ||||||
Common stock, no par value (800,000,000 shares authorized; 383,248,837 and 382,208,498 shares issued and outstanding at respective dates) | |
| 6,270 | |
| 6,200 | ||||||
Accumulated other comprehensive loss | |
| (48) | |
| (54) | |
| (8) | |
| (11) |
Retained earnings | |
| 7,716 | |
| 7,894 | |
| 7,553 | |
| 7,454 |
Total Edison International's shareholders' equity | |
| 15,774 | |
| 15,888 | |
| 15,793 | |
| 15,621 |
Noncontrolling interests – preference stock of SCE | |
| 1,901 | |
| 1,901 | |
| 1,901 | |
| 1,901 |
Total equity | |
| 17,675 | |
| 17,789 | |
| 17,694 | |
| 17,522 |
Total liabilities and equity | | $ | 75,045 | | $ | 74,745 | | $ | 79,551 | | $ | 78,041 |
The accompanying notes are an integral part of these consolidated financial statements.
2927
| |
Consolidated Statements of Cash Flows | Edison International |
| | | | | | | | | | | | |
| | Six months ended June 30, | | Six months ended June 30, | ||||||||
(in millions, unaudited) |
| 2022 |
| 2021 |
| 2023 |
| 2022 | ||||
Cash flows from operating activities: |
| |
|
| |
|
| |
|
| |
|
Net income | | $ | 428 | | $ | 651 | | $ | 774 | | $ | 428 |
Adjustments to reconcile to net cash provided by operating activities: | |
| | |
|
| |
| | |
| |
Depreciation and amortization | |
| 1,216 | |
| 1,090 | |
| 1,371 | |
| 1,216 |
Allowance for equity during construction | |
| (61) | |
| (60) | |
| (75) | |
| (61) |
Impairment and other expense (income) | |
| 64 | |
| (11) | ||||||
Impairment | |
| — | |
| 64 | ||||||
Deferred income taxes | |
| (48) | |
| 30 | |
| 63 | |
| (48) |
Wildfire Insurance Fund amortization expense | |
| 106 | |
| 107 | |
| 105 | |
| 106 |
Other | |
| 40 | |
| 11 | |
| 30 | |
| 40 |
Nuclear decommissioning trusts | |
| (65) | |
| (127) | |
| (60) | |
| (65) |
Changes in operating assets and liabilities: | |
| | |
|
| |
| | |
| |
Receivables | |
| (81) | |
| (293) | |
| (46) | |
| (81) |
Inventory | |
| (19) | |
| (3) | |
| (44) | |
| (19) |
Accounts payable | |
| 143 | |
| 128 | |
| (415) | |
| 143 |
Tax receivables and payables | |
| 58 | |
| 91 | |
| (7) | |
| 58 |
Other current assets and liabilities | |
| (229) | |
| (244) | |
| (100) | |
| (207) |
Derivative assets and liabilities, net | | | (151) | | | (22) | ||||||
Regulatory assets and liabilities, net | |
| 372 | |
| (574) | |
| (366) | |
| 372 |
Wildfire-related insurance receivable | |
| (139) | |
| 708 | |
| 6 | |
| (139) |
Wildfire-related claims | |
| (609) | |
| (2,852) | |
| (428) | |
| (609) |
Other noncurrent assets and liabilities | |
| 62 | |
| (26) | |
| 55 | |
| 62 |
Net cash provided by (used in) operating activities | |
| 1,238 | |
| (1,374) | ||||||
Net cash provided by operating activities | |
| 712 | |
| 1,238 | ||||||
Cash flows from financing activities: | |
|
| |
|
| |
|
| |
|
|
Long-term debt issued, plus premium and net of discount and issuance costs of $34 and $36 for the respective periods | |
| 2,949 | |
| 3,953 | ||||||
Long-term debt issued, net of discount and issuance costs of $43 and $34 for the respective periods | |
| 4,133 | |
| 2,949 | ||||||
Long-term debt repaid | |
| (372) | |
| (991) | |
| (1,466) | |
| (372) |
Short-term debt issued | |
| 600 | |
| 2,106 | |
| 675 | |
| 600 |
Short-term debt repaid | |
| (993) | |
| (1,355) | |
| (1,730) | |
| (993) |
Common stock issued | |
| 6 | |
| 25 | |
| 13 | |
| 6 |
Preferred stock issued, net | |
| — | |
| 1,235 | ||||||
Commercial paper repayments, net of borrowing | |
| (497) | |
| (656) | ||||||
Commercial paper borrowing (repayments), net | |
| 198 | |
| (497) | ||||||
Dividends and distribution to noncontrolling interests | |
| (57) | |
| (53) | |
| (58) | |
| (57) |
Common stock dividends paid | |
| (524) | |
| (494) | |
| (555) | |
| (524) |
Preferred stock dividends paid | | | (46) | | | — | | | (52) | | | (46) |
Other | |
| 53 | |
| 12 | |
| 61 | |
| 53 |
Net cash provided by financing activities | |
| 1,119 | |
| 3,782 | |
| 1,219 | |
| 1,119 |
Cash flows from investing activities: | |
|
| |
|
| |
|
| |
|
|
Capital expenditures | |
| (2,708) | |
| (2,593) | |
| (2,711) | |
| (2,708) |
Proceeds from sale of nuclear decommissioning trust investments | |
| 2,106 | |
| 2,542 | |
| 1,967 | |
| 2,106 |
Purchases of nuclear decommissioning trust investments | |
| (2,041) | |
| (2,415) | |
| (1,907) | |
| (2,041) |
Other | |
| 15 | |
| 54 | |
| 1 | |
| 15 |
Net cash used in investing activities | |
| (2,628) | |
| (2,412) | |
| (2,650) | |
| (2,628) |
Net decrease in cash, cash equivalents and restricted cash | |
| (271) | |
| (4) | |
| (719) | |
| (271) |
Cash, cash equivalents and restricted cash at beginning of period | |
| 394 | |
| 89 | |
| 917 | |
| 394 |
Cash, cash equivalents and restricted cash at end of period | | $ | 123 | | $ | 85 | | $ | 198 | | $ | 123 |
��
The accompanying notes are an integral part of these consolidated financial statements.
3028
| |
Consolidated Statements of Income | Southern California Edison Company |
| | | | | | | | | | | | |
| | Three months ended | | Six months ended | ||||||||
| | June 30, | | June 30, | ||||||||
(in millions, unaudited) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Operating revenue | | $ | 3,996 | | $ | 3,306 | | $ | 7,957 | | $ | 6,259 |
Purchased power and fuel | |
| 1,304 | |
| 1,283 | |
| 2,341 | |
| 2,296 |
Operation and maintenance | |
| 1,339 | |
| 735 | |
| 2,805 | |
| 1,559 |
Wildfire-related claims, net of insurance recoveries | |
| 2 | |
| — | |
| 427 | |
| 3 |
Wildfire Insurance Fund expense | |
| 53 | |
| 54 | |
| 106 | |
| 107 |
Depreciation and amortization | |
| 600 | |
| 533 | |
| 1,183 | |
| 1,057 |
Property and other taxes | |
| 119 | |
| 117 | |
| 243 | |
| 242 |
Impairment, net of other operating income | |
| 64 | |
| (11) | |
| 62 | |
| (11) |
Total operating expenses | |
| 3,481 | |
| 2,711 | |
| 7,167 | |
| 5,253 |
Operating income | |
| 515 | |
| 595 | |
| 790 | |
| 1,006 |
Interest expense | |
| (234) | |
| (198) | |
| (447) | |
| (382) |
Other income | |
| 68 | |
| 64 | |
| 139 | |
| 136 |
Income before taxes | |
| 349 | |
| 461 | |
| 482 | |
| 760 |
Income tax expense (benefit) | |
| 22 | |
| 76 | |
| (18) | |
| 52 |
Net income | |
| 327 | |
| 385 | |
| 500 | |
| 708 |
Less: Preference stock dividend requirements | |
| 25 | |
| 26 | |
| 51 | |
| 53 |
Net income available for common stock | | $ | 302 | | $ | 359 | | $ | 449 | | $ | 655 |
| | | | | | | | | | | | | |
| | Three months ended | | Six months ended | | ||||||||
| | June 30, | | June 30, | | ||||||||
(in millions, unaudited) |
| 2023 |
| 2022 |
| 2023 |
| 2022 |
| ||||
Operating revenue | | $ | 3,949 | | $ | 3,996 | | $ | 7,899 | | $ | 7,957 | |
Purchased power and fuel | |
| 1,147 | |
| 1,304 | |
| 2,465 | |
| 2,341 | |
Operation and maintenance | |
| 1,235 | |
| 1,339 | |
| 2,316 | |
| 2,805 | |
Wildfire-related claims, net of insurance recoveries | |
| — | |
| 2 | |
| 96 | |
| 427 | |
Wildfire Insurance Fund expense | |
| 53 | |
| 53 | |
| 105 | |
| 106 | |
Depreciation and amortization | |
| 648 | |
| 600 | |
| 1,304 | |
| 1,183 | |
Property and other taxes | |
| 148 | |
| 119 | |
| 287 | |
| 243 | |
Impairment, net of other operating income | |
| — | |
| 64 | |
| — | |
| 62 | |
Total operating expenses | |
| 3,231 | |
| 3,481 | |
| 6,573 | |
| 7,167 | |
Operating income | |
| 718 | |
| 515 | |
| 1,326 | |
| 790 | |
Interest expense | |
| (328) | |
| (234) | |
| (628) | |
| (447) | |
Other income | |
| 127 | |
| 68 | |
| 247 | |
| 139 | |
Income before income taxes | |
| 517 | |
| 349 | |
| 945 | |
| 482 | |
Income tax expense (benefit) | |
| 68 | |
| 22 | |
| 97 | |
| (18) | |
Net income | |
| 449 | |
| 327 | |
| 848 | |
| 500 | |
Less: Preference stock dividend requirements | |
| 29 | |
| 25 | |
| 58 | |
| 51 | |
Net income available for common stock | | $ | 420 | | $ | 302 | | $ | 790 | | $ | 449 | |
| |
Consolidated Statements of Comprehensive Income | Southern California Edison Company |
| | | | | | | | | | | | |
| | | Three months ended | | Six months ended | |||||||
| | June 30, | | June 30, | ||||||||
(in millions, unaudited) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Net income | | $ | 327 | | $ | 385 | | $ | 500 | | $ | 708 |
Other comprehensive income, net of tax: | |
|
| |
|
| |
|
| |
|
|
Pension and postretirement benefits other than pensions | |
| 3 | |
| 1 | |
| 4 | |
| 3 |
Other comprehensive income, net of tax | |
| 3 | |
| 1 | |
| 4 | |
| 3 |
Comprehensive income | | $ | 330 | | $ | 386 | | $ | 504 | | $ | 711 |
| | | | | | | | | | | | | |
| | | Three months ended | | Six months ended | | |||||||
| | June 30, | | June 30, | | ||||||||
(in millions, unaudited) |
| 2023 |
| 2022 |
| 2023 |
| 2022 | | ||||
Net income | | $ | 449 | | $ | 327 | | $ | 848 | | $ | 500 | |
Other comprehensive income, net of tax: | |
|
| |
|
| |
|
| |
|
| |
Pension and postretirement benefits other than pensions | |
| — | |
| 3 | |
| — | |
| 4 | |
Other comprehensive income, net of tax | |
| — | |
| 3 | |
| — | |
| 4 | |
Comprehensive income | | $ | 449 | | $ | 330 | | $ | 848 | | $ | 504 | |
The accompanying notes are an integral part of these consolidated financial statements.
3129
Consolidated Balance Sheets | Southern California Edison Company |
| | | | | | | | | | | | |
| | June 30, | | December 31, | | June 30, | | December 31, | ||||
(in millions, unaudited) |
| 2022 |
| 2021 |
| 2023 |
| 2022 | ||||
ASSETS |
| |
|
| |
|
| |
|
| |
|
Cash and cash equivalents | | $ | 66 | | $ | 279 | | $ | 68 | | $ | 766 |
Receivables, less allowances of $347 and $193 for uncollectible accounts at respective dates | |
| 1,538 | |
| 1,393 | ||||||
Receivables, less allowances of $335 and $347 for uncollectible accounts at respective dates | |
| 1,694 | |
| 1,675 | ||||||
Accrued unbilled revenue | |
| 1,096 | |
| 794 | |
| 756 | |
| 638 |
Inventory | |
| 438 | |
| 420 | |
| 511 | |
| 474 |
Prepaid expenses | |
| 50 | |
| 257 | |
| 87 | |
| 292 |
Regulatory assets | |
| 2,030 | |
| 1,778 | |
| 3,656 | |
| 2,497 |
Wildfire Insurance Fund contributions | |
| 204 | |
| 204 | |
| 204 | |
| 204 |
Other current assets | |
| 156 | |
| 222 | |
| 276 | |
| 384 |
Total current assets | |
| 5,578 | |
| 5,347 | |
| 7,252 | |
| 6,930 |
Nuclear decommissioning trusts | |
| 4,039 | |
| 4,870 | |
| 4,126 | |
| 3,948 |
Other investments | |
| 47 | |
| 34 | |
| 56 | |
| 36 |
Total investments | |
| 4,086 | |
| 4,904 | |
| 4,182 | |
| 3,984 |
Utility property, plant and equipment, less accumulated depreciation and amortization of $11,926 and $11,407 at respective dates | |
| 51,485 | |
| 50,497 | ||||||
Nonutility property, plant and equipment, less accumulated depreciation of $95 and $88 at respective dates | |
| 204 | |
| 196 | ||||||
Utility property, plant and equipment, less accumulated depreciation and amortization of $12,662 and $12,260 at respective dates | |
| 54,123 | |
| 53,274 | ||||||
Nonutility property, plant and equipment, less accumulated depreciation of $97 and $94 at respective dates | |
| 198 | |
| 206 | ||||||
Total property, plant and equipment | |
| 51,689 | |
| 50,693 | |
| 54,321 | |
| 53,480 |
Receivables, less allowances of $34 and $116 for uncollectible accounts at respective dates | | | 21 | | | 122 | ||||||
Regulatory assets (include $845 and $325 related to VIEs at respective dates) | |
| 7,854 | |
| 7,660 | ||||||
Regulatory assets (include $1,585 and $834 related to VIEs at respective dates) | |
| 8,621 | |
| 8,181 | ||||||
Wildfire Insurance Fund contributions | |
| 2,258 | |
| 2,359 | |
| 2,053 | |
| 2,155 |
Operating lease right-of-use assets | |
| 1,745 | |
| 1,925 | |
| 1,222 | |
| 1,433 |
Long-term insurance receivables | | | 95 | | | 75 | | | 133 | | | 139 |
Long-term insurance receivables due from affiliate | |
| 119 | |
| — | |
| 334 | |
| 334 |
Other long-term assets | |
| 1,469 | |
| 1,453 | |
| 1,175 | |
| 1,171 |
Total long-term assets | |
| 13,561 | |
| 13,594 | |
| 13,538 | |
| 13,413 |
Total assets | | $ | 74,914 | | $ | 74,538 | | $ | 79,293 | | $ | 77,807 |
The accompanying notes are an integral part of these consolidated financial statements.
3230
Consolidated Balance Sheets | Southern California Edison Company |
| | | | | | | | | | | | |
| | June 30, | | December 31, | | June 30, | | December 31, | ||||
(in millions, except share amounts, unaudited) |
| 2022 |
| 2021 |
| 2023 |
| 2022 | ||||
LIABILITIES AND EQUITY |
| |
|
| |
|
| |
|
| |
|
Short-term debt | | $ | 1,382 | | $ | 2,354 | | $ | 781 | | $ | 925 |
Current portion of long-term debt | |
| 1,075 | |
| 377 | |
| 2,889 | |
| 2,214 |
Accounts payable | |
| 2,078 | |
| 1,999 | |
| 1,780 | |
| 2,351 |
Wildfire-related claims | | | 86 | | | 131 | | | 71 | | | 121 |
Customer deposits | |
| 165 | |
| 193 | |
| 173 | |
| 167 |
Regulatory liabilities | |
| 523 | |
| 603 | |
| 797 | |
| 964 |
Current portion of operating lease liabilities | |
| 606 | |
| 582 | |
| 313 | |
| 505 |
Other current liabilities | |
| 1,633 | |
| 1,631 | |
| 1,611 | |
| 1,578 |
Total current liabilities | |
| 7,548 | |
| 7,870 | |
| 8,415 | |
| 8,825 |
Long-term debt (include $823 and $314 related to VIEs at respective dates) | |
| 23,103 | |
| 21,733 | ||||||
Long-term debt (include $1,539 and $809 related to VIEs at respective dates) | |
| 25,358 | |
| 24,044 | ||||||
Deferred income taxes and credits | |
| 7,366 | |
| 7,181 | |
| 7,859 | |
| 7,545 |
Pensions and benefits | |
| 110 | |
| 111 | |
| 102 | |
| 105 |
Asset retirement obligations | |
| 2,837 | |
| 2,772 | |
| 2,709 | |
| 2,754 |
Regulatory liabilities | |
| 8,376 | |
| 8,981 | |
| 8,735 | |
| 8,211 |
Operating lease liabilities | |
| 1,139 | |
| 1,343 | |
| 909 | |
| 928 |
Wildfire-related claims | |
| 1,169 | |
| 1,733 | |
| 1,309 | |
| 1,687 |
Other deferred credits and other long-term liabilities | |
| 2,929 | |
| 2,979 | |
| 3,016 | |
| 2,919 |
Total deferred credits and other liabilities | |
| 23,926 | |
| 25,100 | |
| 24,639 | |
| 24,149 |
Total liabilities | |
| 54,577 | |
| 54,703 | |
| 58,412 | |
| 57,018 |
Commitments and contingencies (Note 12) | |
|
| |
|
| |
|
| |
|
|
Preference stock | |
| 1,945 | |
| 1,945 | |
| 1,945 | |
| 1,945 |
Common stock, 0 par value (560,000,000 shares authorized; 434,888,104 shares issued and outstanding at respective dates) | |
| 2,168 | |
| 2,168 | ||||||
Common stock, no par value (560,000,000 shares authorized; 434,888,104 shares issued and outstanding at respective dates) | |
| 2,168 | |
| 2,168 | ||||||
Additional paid-in capital | |
| 7,732 | |
| 7,033 | |
| 8,442 | |
| 8,441 |
Accumulated other comprehensive loss | |
| (28) | |
| (32) | |
| (8) | |
| (8) |
Retained earnings | |
| 8,520 | |
| 8,721 | |
| 8,334 | |
| 8,243 |
Total equity | |
| 20,337 | |
| 19,835 | |
| 20,881 | |
| 20,789 |
Total liabilities and equity | | $ | 74,914 | | $ | 74,538 | | $ | 79,293 | | $ | 77,807 |
The accompanying notes are an integral part of these consolidated financial statements.
3331
Consolidated Statements of Cash Flows | Southern California Edison Company |
| | | | | | |
| | Six months ended June 30, | ||||
(in millions, unaudited) |
| 2022 |
| 2021 | ||
Cash flows from operating activities: |
| |
|
| |
|
Net income | | $ | 500 | | $ | 708 |
Adjustments to reconcile to net cash provided by operating activities: | |
| | |
| |
Depreciation and amortization | |
| 1,211 | |
| 1,086 |
Allowance for equity during construction | |
| (61) | |
| (60) |
Impairment and other expense (income) | |
| 64 | |
| (11) |
Deferred income taxes | |
| (19) | |
| 51 |
Wildfire Insurance Fund amortization expense | |
| 106 | |
| 107 |
Other | |
| 25 | |
| 16 |
Nuclear decommissioning trusts | |
| (65) | |
| (127) |
Changes in operating assets and liabilities: | |
| | |
| |
Receivables | |
| (78) | |
| (288) |
Inventory | |
| (19) | |
| (3) |
Accounts payable | |
| 145 | |
| 127 |
Tax receivables and payables | |
| 40 | |
| 91 |
Other current assets and liabilities | |
| (224) | |
| (236) |
Regulatory assets and liabilities, net | |
| 372 | |
| (574) |
Wildfire-related insurance receivable | |
| (139) | |
| 708 |
Wildfire-related claims | |
| (609) | |
| (2,852) |
Other noncurrent assets and liabilities | |
| 68 | |
| (26) |
Net cash provided by (used in) operating activities | |
| 1,317 | |
| (1,283) |
Cash flows from financing activities: | |
|
| |
|
|
Long-term debt issued, plus premium and net of discount and issuance costs of $34 and $36 for the respective periods | |
| 2,949 | |
| 3,952 |
Long-term debt repaid | | | (372) | | | (991) |
Short-term debt borrowed | |
| — | |
| 2,106 |
Short-term debt repaid | |
| (993) | |
| (1,355) |
Capital contributions from Edison International Parent | |
| 700 | |
| 1,225 |
Commercial paper repayments, net of borrowing | |
| (499) | |
| (551) |
Dividends paid | |
| (707) | |
| (703) |
Other | |
| 18 | |
| 6 |
Net cash provided by financing activities | |
| 1,096 | |
| 3,689 |
Cash flows from investing activities: | |
|
| |
|
|
Capital expenditures | |
| (2,708) | |
| (2,591) |
Proceeds from sale of nuclear decommissioning trust investments | |
| 2,106 | |
| 2,542 |
Purchases of nuclear decommissioning trust investments | |
| (2,041) | |
| (2,415) |
Other | |
| 17 | |
| 53 |
Net cash used in investing activities | |
| (2,626) | |
| (2,411) |
Net decrease in cash, cash equivalents and restricted cash | |
| (213) | |
| (5) |
Cash, cash equivalents and restricted cash at beginning of period | |
| 280 | |
| 56 |
Cash, cash equivalents and restricted cash at end of period | | $ | 67 | | $ | 51 |
| | | | | | |
| | Six months ended June 30, | ||||
(in millions, unaudited) |
| 2023 |
| 2022 | ||
Cash flows from operating activities: |
| |
|
| |
|
Net income | | $ | 848 | | $ | 500 |
Adjustments to reconcile to net cash provided by operating activities: | |
| | |
| |
Depreciation and amortization | |
| 1,360 | |
| 1,211 |
Allowance for equity during construction | |
| (75) | |
| (61) |
Impairment | |
| — | |
| 64 |
Deferred income taxes | |
| 96 | |
| (19) |
Wildfire Insurance Fund amortization expense | |
| 105 | |
| 106 |
Other | |
| 17 | |
| 25 |
Nuclear decommissioning trusts | |
| (60) | |
| (65) |
Changes in operating assets and liabilities: | |
| | |
| |
Receivables | |
| (39) | |
| (78) |
Inventory | |
| (44) | |
| (19) |
Accounts payable | |
| (415) | |
| 145 |
Tax receivables and payables | |
| (6) | |
| 40 |
Other current assets and liabilities | |
| (48) | |
| (202) |
Derivative assets and liabilities, net | | | (151) | | | (22) |
Regulatory assets and liabilities, net | |
| (366) | |
| 372 |
Wildfire-related insurance receivable | |
| 6 | |
| (139) |
Wildfire-related claims | |
| (428) | |
| (609) |
Other noncurrent assets and liabilities | |
| 62 | |
| 68 |
Net cash provided by operating activities | |
| 862 | |
| 1,317 |
Cash flows from financing activities: | |
|
| |
|
|
Long-term debt issued, net of discount and issuance costs of $31 and $34 for the respective periods | |
| 3,044 | |
| 2,949 |
Long-term debt repaid | | | (1,066) | | | (372) |
Short-term debt borrowed | |
| 320 | |
| — |
Short-term debt repaid | |
| (730) | |
| (993) |
Capital contributions from Edison International Parent | |
| — | |
| 700 |
Commercial paper borrowing (repayment), net | |
| 262 | |
| (499) |
Common stock dividends paid | | | (700) | | | (650) |
Preference stock dividends paid | |
| (58) | |
| (57) |
Other | |
| 18 | |
| 18 |
Net cash provided by financing activities | |
| 1,090 | |
| 1,096 |
Cash flows from investing activities: | |
|
| |
|
|
Capital expenditures | |
| (2,710) | |
| (2,708) |
Proceeds from sale of nuclear decommissioning trust investments | |
| 1,967 | |
| 2,106 |
Purchases of nuclear decommissioning trust investments | |
| (1,907) | |
| (2,041) |
Other | |
| — | |
| 17 |
Net cash used in investing activities | |
| (2,650) | |
| (2,626) |
Net decrease in cash and cash equivalents | |
| (698) | |
| (213) |
Cash and cash equivalents at beginning of period | |
| 766 | |
| 280 |
Cash and cash equivalents at end of period | | $ | 68 | | $ | 67 |
The accompanying notes are an integral part of these consolidated financial statements.
3432
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1.Summary of Significant Accounting Policies
Organization and Basis of Presentation
Edison International is the ultimate parent holding company of Southern California Edison Company ("SCE") and Edison Energy, LLC ("Edison Energy Group"Energy"). SCE is an investor-owned public utility primarily engaged in the business of supplying and delivering electricity to an approximately 50,000 square mile area of Southern California. Edison Energy Group is an indirect wholly-owned subsidiary of Edison International and a holding company for Edison Energy, LLC ("Edison Energy") which is engaged in the competitive business ofglobal energy advisory firm providing integrated decarbonizationsustainability and energy solutions to commercial, institutionalindustrial and industrialinstitutional customers. Edison Energy's business activities are currently not material to report as a separate business segment. These combined notes to the consolidated financial statements apply to both Edison International and SCE unless otherwise described. Edison International's consolidated financial statements include the accounts of Edison International, SCE, and other wholly owned and controlled subsidiaries. References to Edison International refer to the consolidated group of Edison International and its subsidiaries. References to "Edison International Parent and Other" refer to Edison International Parent and its competitive subsidiaries and "Edison International Parent" refer to Edison International on a stand-alone basis, not consolidated with its subsidiaries. SCE's consolidated financial statements include the accounts of SCE, its wholly owned and controlled subsidiaries and a variable interest entity, SCE Recovery Funding LLC., of which SCE is the primary beneficiary, SCE Recovery Funding LLC.beneficiary. All intercompany transactions have been eliminated from the consolidated financial statements.
Edison International's and SCE's significant accounting policies were described in the "Notes to Consolidated Financial Statements" included in Edison International's and SCE's combined Annual Report on Form 10-K for the year ended December 31, 20212022 (the "2021"2022 Form 10-K"). This quarterly report should be read in conjunction with the financial statements and notes included in the 20212022 Form 10-K.
In the opinion of management, all adjustments, consisting only of adjustments of a normal recurring nature, have been made that are necessary to fairly state the consolidated financial position, results of operations, and cash flows in accordance with accounting principles generally accepted in the United States ("GAAP") for the periods covered by this quarterly report on Form 10-Q. The results of operations for the three- and six-monthinterim periods ended June 30, 2022presented are not necessarily indicative of the operating results for the full year.
The December 31, 20212022 financial statement data was derived from the audited financial statements, but does not include all disclosures required by GAAP.GAAP for complete annual financial statements. Certain prior period amounts have been conformed to the current period's presentation, including the separate presentation of common stock and preference stock dividends in SCE's consolidated statements of cash flows.
Cash, Cash Equivalents and Restricted Cash
Cash equivalents consist of investments in money market funds. Generally, the carrying value of cash equivalents equals the fair value, as these investments have original maturities of three months or less. The cash equivalents were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
|
| Edison International | | SCE |
| Edison International | | SCE | ||||||||||||||||
| | June 30, | | December 31, | | June 30, | | December 31, | | June 30, | | December 31, | | June 30, | | December 31, | ||||||||
(in millions) |
| 2022 |
| 2021 | | 2022 |
| 2021 |
| 2023 |
| 2022 | | 2023 |
| 2022 | ||||||||
Money market funds | | $ | 53 | | $ | 329 | | $ | 4 | | $ | 230 | | $ | 123 | | $ | 784 | | $ | 5 | | $ | 647 |
Cash is temporarily invested until required for check clearing. Checks issued, but not yet paid by the financial institution, are reclassified from cash to accounts payable at the end of each reporting period.
3533
The following table sets forth the cash, cash equivalents and restricted cash included in the consolidated statements of cash flows:
| | | | | | | | | | | | |
| | June 30, |
| December 31, | | June 30, |
| December 31, | ||||
(in millions) |
| 2022 |
| 2021 |
| 2023 |
| 2022 | ||||
Edison International: | |
| | |
| | |
| | |
| |
Cash and cash equivalents | | $ | 122 | | $ | 390 | | $ | 195 | | $ | 914 |
Short-term restricted cash1 | |
| 1 | |
| 4 | |
| 3 | |
| 3 |
Total cash, cash equivalents and restricted cash | | $ | 123 | | $ | 394 | | $ | 198 | | $ | 917 |
SCE: | |
| | |
|
| ||||||
Cash and cash equivalents | | $ | 66 | | $ | 279 | ||||||
Short-term restricted cash1 | |
| 1 | |
| 1 | ||||||
Total cash, cash equivalents and restricted cash | | $ | 67 | | $ | 280 | ||||||
| 1 | Reflected in "Other current assets" on Edison International's |
Allowance for Uncollectible Accounts
The allowance for uncollectible accounts is recorded based on SCE's estimate of expected credit losses and adjusted over the life of the receivables as needed. Since the customer base of SCE is concentrated in Southern California and exposes SCE to a homogeneous set of economic conditions, the allowance is measured on a collective basis on the historical amounts written-off, assessment of customer collectibility and current economic trends, including unemployment rates and any likelihood of recession for the region. At June 30, 2022, this included the estimated impacts of the COVID-19 pandemic.
The following table sets forth the changes in allowance for uncollectible accounts for SCE:
| | | | | | | | | | | | | | | | | | |
| | Three months ended | | Three months ended | ||||||||||||||
| | June 30, 2022 | | June 30, 2021 | ||||||||||||||
(in millions) | | Customers | | | All others | | | Total | | Customers | | | All others | | | Total | ||
Beginning balance |
| $ | 337 |
| $ | 16 | | $ | 353 | | $ | 210 |
| $ | 16 | | $ | 226 |
Plus: current period provision for uncollectible accounts | | | | | | | | | | | | | | | | | | |
Included in operation and maintenance expenses in earning activities1 | |
| 20 | |
| 2 | |
| 22 | |
| 12 | |
| 3 | |
| 15 |
Included in operation and maintenance expenses in cost-recovery activities2 | | | 17 | | | — | | | 17 | | | 28 | | | — | | | 28 |
Deferred to regulatory memorandum accounts | |
| — | |
| — | |
| — | |
| 4 | |
| — | |
| 4 |
Less: write-offs, net of recoveries | |
| 10 | | | 1 | |
| 11 | |
| — | |
| 3 | |
| 3 |
Ending balance |
| $ | 364 |
| $ | 17 | | $ | 381 | ³ | $ | 254 |
| $ | 16 | | $ | 270 |
36
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
| | Six months ended | | Six months ended | | Three months ended | | | Three months ended | ||||||||||||||||||||||||||||
| | | June 30, 2022 | | June 30, 2021 | | June 30, 2023 | | | June 30, 2022 | |||||||||||||||||||||||||||
(in millions) | | Customers | | | All others | | | Total | | Customers | | | All others | | | Total | | Customers | | All others | | Total | | | Customers | | All others | | Total | ||||||||
Beginning balance |
| $ | 293 |
| $ | 16 | | $ | 309 | ³ | $ | 175 |
| $ | 13 | | $ | 188 | | $ | 326 |
| $ | 18 | | $ | 344 | | | $ | 337 |
| $ | 16 | | $ | 353 |
Plus: current period provision for uncollectible accounts | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
Included in operation and maintenance expenses in earning activities1 | |
| 33 | |
| 9 | |
| 42 | |
| 18 | |
| 7 | |
| 25 | |||||||||||||||||||
Included in operation and maintenance expenses in cost-recovery activities2 | | | 55 | | | — | | | 55 | | | 60 | | | — | | | 60 | |||||||||||||||||||
Deferred to regulatory memorandum accounts | |
| 3 | |
| — | |
| 3 | |
| 6 | |
| — | |
| 6 | |||||||||||||||||||
Less: write-offs, net of recoveries | |
| 20 | |
| 8 | |
| 28 | |
| 5 | |
| 4 | |
| 9 | |||||||||||||||||||
Current period provision for uncollectible accounts2 | | | 20 | | 1 | | 21 | | | | 37 | | 2 | | 39 | ||||||||||||||||||||||
Write-offs, net of recoveries | |
| (20) | | (2) | |
| (22) | | |
| (10) | |
| (1) | |
| (11) | |||||||||||||||||||
Ending balance |
| $ | 364 |
| $ | 17 | | $ | 381 | ³ | $ | 254 |
| $ | 16 | | $ | 270 | | $ | 326 |
| $ | 17 | | $ | 343 | 1 | | $ | 364 |
| $ | 17 | | $ | 381 |
| | | | | | | | | | | | | | | | | | ||||||||||||||||||||
| | Six months ended | | | Six months ended | ||||||||||||||||||||||||||||||||
| | June 30, 2023 | | | June 30, 2022 | ||||||||||||||||||||||||||||||||
(in millions) | | Customers | | All others | | Total | | | Customers | | All others | | Total | ||||||||||||||||||||||||
Beginning balance | | $ | 334 |
| $ | 20 | | $ | 354 | 1 | | $ | 293 |
| $ | 16 | | $ | 309 | ||||||||||||||||||
Current period provision for uncollectible accounts3 | | | 40 | | 1 | | 41 | | | | 91 | | 9 | | 100 | ||||||||||||||||||||||
Write-offs, net of recoveries | |
| (48) | | (4) | |
| (52) | | | | (20) | | (8) | | | (28) | ||||||||||||||||||||
Ending balance | | $ | 326 |
| $ | 17 | | $ | 343 | 1 | | $ | 364 |
| $ | 17 | | $ | 381 | ||||||||||||||||||
| 1 |
| Approximately |
| 2 | This includes $13 million and $17 million of incremental costs, for the three months ended June 30, 2023 and 2022, respectively, which were probable of recovery from customers and recorded as regulatory assets. |
| 3 | This includes $27 million and $58 million of incremental costs, for the six months ended June 30, 2023 and 2022, respectively, which were probable of recovery from customers and recorded as regulatory assets. |
Earnings Per Share
Edison International computes earnings per common share ("EPS") using the two-class method, which is an earnings allocation formula that determines EPS for each class of common stock and participating security. Edison International's participating securities are stock-based compensation awards, payable in common shares, which earn dividend equivalents on an equal basis with common shares once the awards are vested. See Note 13 for further information.
34
EPS attributable to Edison International common shareholders was computed as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
|
| Three months ended June 30, |
| Six months ended June 30, | |
| Three months ended June 30, |
| Six months ended June 30, | ||||||||||||||||
(in millions, except per-share amounts) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||||
Basic earnings per share: | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income attributable to common shareholders | | $ | 241 | | $ | 318 | | $ | 325 | | $ | 577 | | | $ | 354 | | $ | 241 | | $ | 664 | | $ | 325 |
Net income available to common shareholders | | $ | 241 | | $ | 318 | | $ | 325 | | $ | 577 | | | $ | 354 | | $ | 241 | | $ | 664 | | $ | 325 |
Weighted average common shares outstanding | |
| 381 | |
| 380 | |
| 381 | | | 379 | | |
| 383 | |
| 381 | |
| 383 | | | 381 |
Basic earnings per share | | $ | 0.63 | | $ | 0.84 | | $ | 0.85 | | $ | 1.52 | | | $ | 0.92 | | $ | 0.63 | | $ | 1.73 | | $ | 0.85 |
Diluted earnings per share: | |
| | | | | |
| | | | | | |
| | | | | |
| | | | |
Net income attributable to common shareholders | | $ | 241 | | $ | 318 | | $ | 325 | | $ | 577 | | | $ | 354 | | $ | 241 | | $ | 664 | | $ | 325 |
Net income available to common shareholders | | $ | 241 | | $ | 318 | | $ | 325 | | $ | 577 | | | $ | 354 | | $ | 241 | | $ | 664 | | $ | 325 |
Income impact of assumed conversions | |
| — | |
| — | |
| 1 | | | — | |||||||||||||
Net income available to common shareholders and assumed conversions | | $ | 241 | | $ | 318 | | $ | 325 | | $ | 577 | | | $ | 354 | | $ | 241 | | $ | 665 | | $ | 325 |
Weighted average common shares outstanding | |
| 381 | |
| 380 | |
| 381 | | | 379 | | |
| 383 | |
| 381 | |
| 383 | | | 381 |
Incremental shares from assumed conversions | |
| 2 | |
| — | |
| 1 | | | 1 | | |
| 2 | |
| 2 | |
| 2 | | | 1 |
Adjusted weighted average shares – diluted | |
| 383 | |
| 380 | |
| 382 | | | 380 | | |
| 385 | |
| 383 | |
| 385 | | | 382 |
Diluted earnings per share | | $ | 0.63 | | $ | 0.84 | | $ | 0.85 | | $ | 1.52 | | | $ | 0.92 | | $ | 0.63 | | $ | 1.73 | | $ | 0.85 |
In addition to the participating securities discussed above, Edison International also may award stock options, which are payable in common shares and are included in the diluted earnings per share calculation. Stock option awards to purchase 3,990,2702,046,312 and 11,327,3743,990,270 shares of common stock for the three months ended June 30, 20222023 and 2021,2022, respectively, and 5,261,9143,230,213 and 11,369,7255,261,914 shares of common stock for the six months ended June 30, 20222023 and 2021,2022, respectively were outstanding, but were not included in the computation of diluted earnings per share because the effect would have been antidilutive.
37
Revenue Recognition
Revenue is recognized by Edison International and SCE when a performance obligation to transfer control of the promised goods is satisfied or when services are rendered to customers. This typically occurs when electricity is delivered to customers, which includes amounts for services rendered but unbilled at the end of a reporting period.
Regulatory Proceedings
Cost of Capital
In August 2021, SCE filed an application with the CPUC for authority to establish its authorized cost of capital for utility operations for 2022 and to reset the related annual cost of capital mechanism that can adjust the authorized cost of capital between SCE's cost of capital proceedings based on changes in Moody's utility bond rate index. In the absence of a decision SCE is continuing to recognize revenue based on its pre-2022 cost of capital, subject to refund. If the CPUC ultimately finds that the cost of capital mechanism adjustment should have been implemented effective January 1, 2022, revenue recorded in the first six months of 2022 would be reduced by approximately $85 million.
FERC 20222023 Formula Rate Update
In November 2021,2022, SCE filed its 20222023 annual update with the FERC with the proposed rates effective January 1, 2022,2023, subject to settlement procedures and refund. SCE requested an increase in SCE's transmission revenue requirement of $326 million or 30% higher than amounts included in the 2021 annual rates. Pending resolution of the FERC formula rate proceedings, SCE recognized revenue in the first six months of 20222023 based on the FERC 20222023 annual update rate, subject to refund.
ImpairmentEdison Carrier Solutions
SCE operates commercial telecommunications service under the name of Long-Lived Assets
In June 2022,Edison Carrier Solutions ("ECS"), leveraging the CPUC issued a decision in track 3temporarily available capacity of SCE's 2021 GRC proceeding.telecommunications network. As technology evolves, management is implementing strategic shifts in ECS services, including potential disposition of assets and ceasing to offer certain wire data services. ECS has notified affected customers of its intent to discontinue certain services over time and gave customers the option to discontinue those services. As a result of customer cancellations in the decision, SCEquarter ended June 30, 2023, materials and supplies inventory supporting data services are expected to be sold instead of placed into service and have been written-down to net realizable value, resulting in a charge of $13 million. Labor and other costs of $4 million previously recorded a $17 million impairmentas construction work in progress for projects no longer probable of utility property, plant and equipment which was disallowed bycompletion were also charged to expense in the CPUC, primarily related to the costs associated with vegetation management software purchased by SCE.
In June 2022, SCE and The Utility Reform Network filed a joint motion for CPUC approval of a settlement agreement for SCE's Customer Service Re-platform ("CSRP") proceeding filed in July 2021 for expenditures incurred through April 2021. As a result of the settlement agreement, SCE recorded a $47 million impairment of property, plant and equipment.
New Accounting Guidance
Accounting Guidance Adopted
In November 2021, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update to require business entities that account for transactions with a government by analogizing to a grant or contribution accounting model to make certain annual disclosures. Edison International and SCE have adopted this standard on January 1, 2022 using the prospective adoption approach. The adoption of this standard did not have a material impact on Edison International's and SCE's annual disclosure.period.
3835
Note 2.Consolidated Statements of Changes in Equity
The following table provides Edison International's changes in equity for the three and six months ended June 30, 2022:2023:
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | Noncontrolling | | | | |
| | Equity Attributable to Edison International Shareholders | | Interests | | | | ||||||||||||||
| | | | | | | | Accumulated | | | | | | | | | | | | ||
| | | | | | | | Other | | | | | | | | | | | | ||
| | Preferred | | Common | | Comprehensive | | Retained | | | | | Preference | | Total | ||||||
(in millions, except per share amounts) |
| Stock | | Stock |
| Loss |
| Earnings |
| Subtotal |
| Stock |
| Equity | |||||||
Balance at December 31, 2021 | | $ | 1,977 | | $ | 6,071 | | $ | (54) | | $ | 7,894 | | $ | 15,888 | | $ | 1,901 | | $ | 17,789 |
Net income | | | — | |
| — | |
| — | |
| 110 | |
| 110 | |
| 26 | |
| 136 |
Other comprehensive income | | | — | |
| — | |
| 2 | |
| — | |
| 2 | |
| — | |
| 2 |
Common stock issued, net of issuance cost | | | — | |
| 12 | |
| — | |
| — | |
| 12 | |
| — | |
| 12 |
Common stock dividends declared ($0.7000 per share) | | | — | |
| — | |
| — | |
| (267) | |
| (267) | |
| — | |
| (267) |
Preferred stock dividend declared ($26.875 per share for Series A and $17.08333 per share for Series B) | | | — | | | — | | | — | | | (21) | | | (21) | | | — | | | (21) |
Dividends to noncontrolling interests ($11.160 - $35.937 per share for preference stock) | | | — | |
| — | |
| — | |
| — | |
| — | |
| (26) | |
| (26) |
Noncash stock-based compensation | | | — | |
| 7 | |
| — | |
| — | |
| 7 | |
| — | |
| 7 |
Balance at March 31, 2022 | | $ | 1,977 | | $ | 6,090 | | $ | (52) | | $ | 7,716 | | $ | 15,731 | | $ | 1,901 | | $ | 17,632 |
Net income | | | — | |
| — | |
| — | |
| 267 | |
| 267 | |
| 25 | |
| 292 |
Other comprehensive income | | | — | |
| — | |
| 4 | |
| — | |
| 4 | |
| — | |
| 4 |
Common stock issued, net of issuance cost | | | — | |
| 27 | |
| — | |
| — | |
| 27 | |
| — | |
| 27 |
Common stock dividends declared ($0.7000 per share) | | | — | |
| — | |
| — | |
| (267) | |
| (267) | |
| — | |
| (267) |
Dividends to noncontrolling interests ($14.017 - $35.937 per share for preference stock) | | | — | |
| — | |
| — | |
| — | |
| — | |
| (25) | |
| (25) |
Noncash stock-based compensation | | | — | |
| 12 | |
| — | |
| — | |
| 12 | |
| — | |
| 12 |
Balance at June 30, 2022 | | $ | 1,977 | | $ | 6,129 | | $ | (48) | | $ | 7,716 | | $ | 15,774 | | $ | 1,901 | | $ | 17,675 |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | Noncontrolling | | | | |
| | Equity Attributable to Edison International Shareholders | | Interests | | | | ||||||||||||||
| | | | | | | | Accumulated | | | | | | | | | | | | ||
| | | | | | | | Other | | | | | | | | | | | | ||
| | Preferred | | Common | | Comprehensive | | Retained | | | | | Preference | | Total | ||||||
(in millions, except per share amounts) |
| Stock | | Stock |
| Loss |
| Earnings |
| Subtotal |
| Stock |
| Equity | |||||||
Balance at December 31, 2022 | | $ | 1,978 | | $ | 6,200 | | $ | (11) | | $ | 7,454 | | $ | 15,621 | | $ | 1,901 | | $ | 17,522 |
Net income | | | — | |
| — | |
| — | |
| 336 | |
| 336 | |
| 29 | |
| 365 |
Other comprehensive income | | | — | |
| — | |
| 2 | |
| — | |
| 2 | |
| — | |
| 2 |
Common stock issued, net of issuance cost | | | — | |
| 15 | |
| — | |
| — | |
| 15 | |
| — | |
| 15 |
Common stock dividends declared ($0.7375 per share) | | | — | |
| — | |
| — | |
| (282) | |
| (282) | |
| — | |
| (282) |
Preferred stock dividend declared ($26.875 per share for Series A and $25.00 per share for Series B) | | | — | | | — | | | — | | | (52) | | | (52) | | | — | | | (52) |
Dividends to noncontrolling interests ($22.281 - $35.937 per share for preference stock) | | | — | |
| — | |
| — | |
| — | |
| — | |
| (29) | |
| (29) |
Noncash stock-based compensation | | | — | |
| 8 | |
| — | |
| — | |
| 8 | |
| — | |
| 8 |
Balance at March 31, 2023 | | $ | 1,978 | | $ | 6,223 | | $ | (9) | | $ | 7,456 | | $ | 15,648 | | $ | 1,901 | | $ | 17,549 |
Net income | | | — | |
| — | |
| — | |
| 380 | |
| 380 | |
| 29 | |
| 409 |
Other comprehensive income | | | — | |
| — | |
| 1 | |
| — | |
| 1 | |
| — | |
| 1 |
Common stock issued, net of issuance cost | | | — | |
| 35 | |
| — | |
| — | |
| 35 | |
| — | |
| 35 |
Common stock dividends declared ($0.7375 per share) | | | — | |
| — | |
| — | |
| (283) | |
| (283) | |
| — | |
| (283) |
Dividends to noncontrolling interests ($24.273 - $35.937 per share for preference stock) | | | — | |
| — | |
| — | |
| — | |
| — | |
| (29) | |
| (29) |
Noncash stock-based compensation | | | — | |
| 12 | |
| — | |
| — | |
| 12 | |
| — | |
| 12 |
Balance at June 30, 2023 | | $ | 1,978 | | $ | 6,270 | | $ | (8) | | $ | 7,553 | | $ | 15,793 | | $ | 1,901 | | $ | 17,694 |
3936
The following table provides Edison International's changes in equity for the three and six months ended June 30, 2022:
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | Noncontrolling | | | | |
| | Equity Attributable to Edison International Shareholders | | Interests | | | | ||||||||||||||
| | | | | | | | Accumulated | | | | | | | | | | | | ||
| | | | | | | | Other | | | | | | | | | | | | ||
| | Preferred | | Common | | Comprehensive | | Retained | | | | | Preference | | Total | ||||||
(in millions, except per share amounts) |
| Stock | | Stock |
| Loss |
| Earnings |
| Subtotal |
| Stock |
| Equity | |||||||
Balance at December 31, 2021 | | $ | 1,977 | | $ | 6,071 | | $ | (54) | | $ | 7,894 | | $ | 15,888 | | $ | 1,901 | | $ | 17,789 |
Net income | |
| — | |
| — | |
| — | |
| 110 | |
| 110 | |
| 26 | |
| 136 |
Other comprehensive income | |
| — | |
| — | |
| 2 | |
| — | |
| 2 | |
| — | |
| 2 |
Common stock issued, net of issuance cost | | | — | | | 12 | | | — | | | — | | | 12 | | | — | | | 12 |
Common stock dividends declared ($0.7000 per share) | |
| — | |
| — | |
| — | |
| (267) | |
| (267) | |
| — | |
| (267) |
Preferred stock dividend declared ($26.875 per share for Series A and $17.08333 per share for Series B) | | | — | | | — | | | — | | | (21) | | | (21) | | | — | | | (21) |
Dividends to noncontrolling interests ($11.160 - $35.937 per share for preference stock) | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (26) | |
| (26) |
Noncash stock-based compensation | |
| — | |
| 7 | |
| — | |
| — | |
| 7 | |
| — | |
| 7 |
Balance at March 31, 2022 | | $ | 1,977 | | $ | 6,090 | | $ | (52) | | $ | 7,716 | | $ | 15,731 | | $ | 1,901 | | $ | 17,632 |
Net income | |
| — | |
| — | |
| — | |
| 267 | |
| 267 | |
| 25 | |
| 292 |
Other comprehensive income | |
| — | |
| — | |
| 4 | |
| — | |
| 4 | |
| — | |
| 4 |
Common stock issued, net of issuance cost | | | — | | | 27 | | | — | | | — | | | 27 | | | — | | | 27 |
Common stock dividends declared ($0.7000 per share) | |
| — | |
| — | |
| — | |
| (267) | |
| (267) | |
| — | |
| (267) |
Dividends to noncontrolling interests ($14.017 - $35.937 per share for preference stock) | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (25) | |
| (25) |
Noncash stock-based compensation | |
| — | |
| 12 | |
| — | |
| — | |
| 12 | |
| — | |
| 12 |
Balance at June 30, 2022 | | $ | 1,977 | | $ | 6,129 | | $ | (48) | | $ | 7,716 | | $ | 15,774 | | $ | 1,901 | | $ | 17,675 |
37
The following table provides Edison International's changes in equity for the three and six months ended June 30, 2021:
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | Noncontrolling | | | | |
| | Equity Attributable to Edison International Shareholders | | Interests | | | | ||||||||||||||
| | | | | | | | Accumulated | | | | | | | | | | | | ||
| | | | | | | | Other | | | | | | | | | | | | ||
| | Preferred | | Common | | Comprehensive | | Retained | | | | | Preference | | Total | ||||||
(in millions, except per share amounts) |
| Stock | | Stock |
| Loss |
| Earnings |
| Subtotal |
| Stock |
| Equity | |||||||
Balance at December 31, 2020 | | $ | — | | $ | 5,962 | | $ | (69) | | $ | 8,155 | | $ | 14,048 | | $ | 1,901 | | $ | 15,949 |
Net income | |
| — | |
| — | |
| — | |
| 263 | |
| 263 | |
| 27 | |
| 290 |
Other comprehensive income | |
| — | |
| — | |
| 2 | |
| — | |
| 2 | |
| — | |
| 2 |
Common stock issued, net of issuance cost | | | — | | | 21 | | | — | | | — | | | 21 | | | — | | | 21 |
Preferred stock issued, net of issuance cost | | | 1,237 | | | — | | | — | | | — | | | 1,237 | | | — | | | 1,237 |
Common stock dividends declared ($0.6625 per share) | |
| — | |
| — | |
| — | |
| (251) | |
| (251) | |
| — | |
| (251) |
Preferred stock dividend accrued ($3.434 per share) | | | — | | | — | | | — | | | (4) | | | (4) | | | — | | | (4) |
Dividends to noncontrolling interests ($15.625 - $35.936 per share for preference stock) | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (27) | |
| (27) |
Noncash stock-based compensation | |
| — | |
| 6 | |
| — | |
| — | |
| 6 | |
| — | |
| 6 |
Balance at March 31, 2021 | | $ | 1,237 | | $ | 5,989 | | $ | (67) | | $ | 8,163 | | $ | 15,322 | | $ | 1,901 | | $ | 17,223 |
Net income | |
| — | |
| — | |
| — | |
| 335 | |
| 335 | |
| 26 | |
| 361 |
Other comprehensive income | |
| — | |
| — | |
| 2 | |
| — | |
| 2 | |
| — | |
| 2 |
Common stock issued, net of issuance cost | | | — | | | 14 | | | — | | | — | | | 14 | | | — | | | 14 |
Preferred stock issuance cost | | | (2) | | | — | | | — | | | — | | | (2) | | | — | | | (2) |
Common stock dividends declared ($0.6625 per share) | |
| — | |
| — | |
| — | |
| (252) | |
| (252) | |
| — | |
| (252) |
Preferred stock dividend accrued ($13.2882 per share) | | | — | | | — | | | — | | | (17) | | | (17) | | | — | | | (17) |
Dividends to noncontrolling interests ($15.625 - $35.936 per share for preference stock) | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (26) | |
| (26) |
Noncash stock-based compensation | |
| — | |
| 10 | |
| — | |
| — | |
| 10 | |
| — | |
| 10 |
Balance at June 30, 2021 | | $ | 1,235 | | $ | 6,013 | | $ | (65) | | $ | 8,229 | | $ | 15,412 | | $ | 1,901 | | $ | 17,313 |
40
The following table provides SCE's changes in equity for the three and six months ended June 30, 2022:2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated | | | | | | | | | | | | | | | | Accumulated | | | | | | | ||||
| | | | | | | Additional | | Other | | | | | | | | | | | | | Additional | | Other | | | | | | | ||||||
| | Preference | | Common | | Paid-in | | Comprehensive | | Retained | | Total | | Preference | | Common | | Paid-in | | Comprehensive | | Retained | | Total | ||||||||||||
(in millions, except per share amounts) |
| Stock |
| Stock |
| Capital |
| Loss |
| Earnings |
| Equity |
| Stock |
| Stock |
| Capital |
| Loss |
| Earnings |
| Equity | ||||||||||||
Balance at December 31, 2021 | | $ | 1,945 | | $ | 2,168 | | $ | 7,033 | | $ | (32) | | $ | 8,721 | | $ | 19,835 | ||||||||||||||||||
Balance at December 31, 2022 | | $ | 1,945 | | $ | 2,168 | | $ | 8,441 | | $ | (8) | | $ | 8,243 | | $ | 20,789 | ||||||||||||||||||
Net income | |
| — | |
| — | |
| — | |
| — | |
| 173 | |
| 173 | |
| — | |
| — | |
| — | |
| — | |
| 399 | |
| 399 |
Other comprehensive income | |
| — | |
| — | |
| — | |
| 1 | |
| — | |
| 1 | ||||||||||||||||||
Dividends declared on common stock ($0.7473 per share) | |
| — | |
| — | |
| — | |
| — | |
| (325) | |
| (325) | ||||||||||||||||||
Dividends on preference stock ($11.160 - $35.937 per share) | |
| — | |
| — | |
| — | |
| — | |
| (26) | |
| (26) | ||||||||||||||||||
Dividends declared on common stock ($0.8048 per share) | |
| — | |
| — | |
| — | |
| — | |
| (350) | |
| (350) | ||||||||||||||||||
Dividends on preference stock ($22.281 - $35.937 per share) | |
| — | |
| — | |
| — | |
| — | |
| (29) | |
| (29) | ||||||||||||||||||
Stock-based compensation | |
| — | |
| — | |
| (9) | |
| — | |
| — | |
| (9) | |
| — | |
| — | |
| (8) | |
| — | |
| — | |
| (8) |
Noncash stock-based compensation | |
| — | |
| — | |
| 4 | |
| — | |
| (1) | |
| 3 | |
| — | |
| — | |
| 5 | |
| — | |
| 1 | |
| 6 |
Balance at March 31, 2022 | | $ | 1,945 | | $ | 2,168 | | $ | 7,028 | | $ | (31) | | $ | 8,542 | | $ | 19,652 | ||||||||||||||||||
Balance at March 31, 2023 | | $ | 1,945 | | $ | 2,168 | | $ | 8,438 | | $ | (8) | | $ | 8,264 | | $ | 20,807 | ||||||||||||||||||
Net income | |
| — | |
| — | |
| — | |
| — | |
| 327 | |
| 327 | |
| — | |
| — | |
| — | |
| — | |
| 449 | |
| 449 |
Other comprehensive income | |
| — | |
| — | |
| — | |
| 3 | |
| — | |
| 3 | ||||||||||||||||||
Capital contribution from Edison International Parent | |
| — | |
| — | |
| 700 | |
| — | |
| — | |
| 700 | ||||||||||||||||||
Dividends declared on common stock ($0.7473 per share) | |
| — | |
| — | |
| — | |
| — | |
| (325) | |
| (325) | ||||||||||||||||||
Dividends declared on preference stock ($14.017 - $35.937 per share) | |
| — | |
| — | |
| — | |
| — | |
| (25) | |
| (25) | ||||||||||||||||||
Dividends declared on common stock ($0.8048 per share) | |
| — | |
| — | |
| — | |
| — | |
| (350) | |
| (350) | ||||||||||||||||||
Dividends declared on preference stock ($24.273 - $35.937 per share) | |
| — | |
| — | |
| — | |
| — | |
| (29) | |
| (29) | ||||||||||||||||||
Stock-based compensation | | | — | | | — | | | (1) | | | — | | | — | | | (1) | | | — | | | — | | | (3) | | | — | | | — | | | (3) |
Noncash stock-based compensation | |
| — | |
| — | |
| 5 | |
| — | |
| 1 | |
| 6 | |
| — | |
| — | |
| 7 | |
| — | |
| — | |
| 7 |
Balance at June 30, 2022 | | $ | 1,945 | | $ | 2,168 | | $ | 7,732 | | $ | (28) | | $ | 8,520 | | $ | 20,337 | ||||||||||||||||||
Balance at June 30, 2023 | | $ | 1,945 | | $ | 2,168 | | $ | 8,442 | | $ | (8) | | $ | 8,334 | | $ | 20,881 | ||||||||||||||||||
The following table provides SCE's changes in equity for the three and six months ended June 30, 2022:
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated | | | | | | | ||
| | | | | | | Additional | | Other | | | | | | | |||
| | Preference | | Common | | Paid-in | | Comprehensive | | Retained | | Total | ||||||
(in millions, except per share amounts) |
| Stock |
| Stock |
| Capital |
| Loss |
| Earnings |
| Equity | ||||||
Balance at December 31, 2021 | | $ | 1,945 | | $ | 2,168 | | $ | 7,033 | | $ | (32) | | $ | 8,721 | | $ | 19,835 |
Net income | |
| — | |
| — | |
| — | |
| — | |
| 173 | |
| 173 |
Other comprehensive income | |
| — | |
| — | |
| — | |
| 1 | |
| — | |
| 1 |
Dividends declared on common stock ($0.7473 per share) | |
| — | |
| — | |
| — | |
| — | |
| (325) | |
| (325) |
Dividends declared on preference stock ($11.160 - $35.937 per share) | |
| — | |
| — | |
| — | |
| — | |
| (26) | |
| (26) |
Stock-based compensation | |
| — | |
| — | |
| (9) | |
| — | |
| — | |
| (9) |
Noncash stock-based compensation | |
| — | |
| — | |
| 4 | |
| — | |
| (1) | |
| 3 |
Balance at March 31, 2022 | | $ | 1,945 | | $ | 2,168 | | $ | 7,028 | | $ | (31) | | $ | 8,542 | | $ | 19,652 |
Net income | |
| — | |
| — | |
| — | |
| — | |
| 327 | |
| 327 |
Other comprehensive income | |
| — | |
| — | |
| — | |
| 3 | |
| — | |
| 3 |
Capital contribution from Edison International Parent | |
| — | |
| — | |
| 700 | |
| — | |
| — | |
| 700 |
Dividends declared on common stock ($0.7473 per share) | | | — | | | — | | | — | | | — | | | (325) | | | (325) |
Dividends declared on preferred and preference stock ($14.017 - $35.937 per share for preference stock) | |
| — | |
| — | |
| — | |
| — | |
| (25) | |
| (25) |
Stock-based compensation | |
| — | |
| — | |
| (1) | |
| — | |
| — | |
| (1) |
Noncash stock-based compensation | |
| — | |
| — | |
| 5 | |
| — | |
| 1 | |
| 6 |
Balance at June 30, 2022 | | $ | 1,945 | | $ | 2,168 | | $ | 7,732 | | $ | (28) | | $ | 8,520 | | $ | 20,337 |
4138
The following table provides SCE's changes in equity for the three and six months ended June 30, 2021:
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated | | | | | | | ||
| | | | | | | Additional | | Other | | | | | | | |||
| | Preference | | Common | | Paid-in | | Comprehensive | | Retained | | Total | ||||||
(in millions, except per share amounts) |
| Stock |
| Stock |
| Capital |
| Loss |
| Earnings |
| Equity | ||||||
Balance at December 31, 2020 | | $ | 1,945 | | $ | 2,168 | | $ | 5,387 | | $ | (41) | | $ | 9,191 | | $ | 18,650 |
Net income | |
| — | |
| — | |
| — | |
| — | |
| 323 | |
| 323 |
Other comprehensive income | |
| — | |
| — | |
| — | |
| 2 | |
| — | |
| 2 |
Capital contribution from Edison International Parent | | | — | | | — | | | 900 | | | — | | | — | | | 900 |
Dividends declared on common stock ($0.7473 per share) | |
| — | |
| — | |
| — | |
| — | |
| (325) | |
| (325) |
Dividends declared on preference stock (15.625 - $35.936 per share) | |
| — | |
| — | |
| — | |
| — | |
| (27) | |
| (27) |
Stock-based compensation | |
| — | |
| — | |
| (4) | |
| — | |
| — | |
| (4) |
Noncash stock-based compensation | |
| — | |
| — | |
| 3 | |
| — | |
| — | |
| 3 |
Balance at March 31, 2021 | | $ | 1,945 | | $ | 2,168 | | $ | 6,286 | | $ | (39) | | $ | 9,162 | | $ | 19,522 |
Net income | |
| — | |
| — | |
| — | |
| — | |
| 385 | |
| 385 |
Other comprehensive income | |
| — | |
| — | |
| — | |
| 1 | |
| — | |
| 1 |
Capital contribution from Edison International Parent | |
| — | |
| — | |
| 325 | |
| — | |
| — | |
| 325 |
Dividends declared on common stock ($0.7473 per share) | | | — | | | — | | | — | | | — | | | (325) | | | (325) |
Dividends declared on preferred and preference stock ($15.625 - $35.936 per share for preference stock) | |
| — | |
| — | |
| — | |
| — | |
| (26) | |
| (26) |
Noncash stock-based compensation | |
| — | |
| — | |
| 5 | |
| — | |
| — | |
| 5 |
Balance at June 30, 2021 | | $ | 1,945 | | $ | 2,168 | | $ | 6,616 | | $ | (38) | | $ | 9,196 | | $ | 19,887 |
Note 3.Variable Interest Entities
A VIE is defined as a legal entity that meets one of two conditions: (1) the equity owners do not have sufficient equity at risk, or (2) the holders of the equity investment at risk, as a group, lack any of the following three characteristics: decision-making rights, the obligation to absorb losses or the right to receive the expected residual returns of the entity. The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most significantly impact the entity's economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. The primary beneficiary is required to consolidate the VIE. Commercial and operating activities are generally the factors that most significantly impact the economic performance of such VIEs. Commercial and operating activities include construction, operation and maintenance, fuel procurement, plant dispatch and compliance with regulatory and contractual requirements.
Variable Interest in VIEs that are Consolidated
California Assembly Bill 1054 ("AB 1054"), executed on July 12, 2019, requires SCE to exclude from the equity portion of SCE's rate base approximately $1.6 billion in wildfire risk mitigation capital expenditures ("AB 1054 Excluded Capital Expenditures"). SCE Recovery Funding LLC is a bankruptcy remote, wholly owned special purpose subsidiary, consolidated by SCE. SCE Recovery Funding LLC is a VIE and SCE is the primary beneficiary. SCE Recovery Funding LLC was formed in 2021 for the purpose of issuing and servicing securitized bonds related to SCE's AB 1054 Excluded Capital Expenditures.
In February 2022 and 2021, SCE Recovery Funding LLC has issued $533 million and $338 milliona total of $1.6 billion of securitized bonds, respectively, andof which $775 million was issued in April 2023. The proceeds were used the proceeds to acquire SCE's right, title and interest in and to non-bypassable rates and other charges to be collected from certain existing and future customers in SCE's service territory ("Recovery Property"), associated with the AB 1054 Excluded
42
Capital Expenditures, ("Recovery Property"), until the bonds are paid in full, and all financing costs have been recovered. The securitized bonds are secured by the Recovery Property and cash collections from the non-bypassable rates and other charges are the sole source of funds to satisfy the debt obligation. The bondholders have no recourse to SCE. For further details, see Note 5.
The following table summarizes the impact of SCE Recovery Funding LLC on SCE's and Edison International's consolidated balance sheets.
| | | | | | | | | | |
| | June 30, | | | December 31, | | June 30, | | | December 31, |
(in millions) | | 2022 | | | 2021 | | 2023 | | | 2022 |
Other current assets | $ | 23 | | $ | 19 | $ | 38 | | $ | 45 |
Regulatory assets: Non-current | | 845 | | | 325 | |||||
Regulatory liabilities: Current | | (8) | | | (14) | |||||
Current portion of long-term debt | | (32) | | | (14) | |||||
Regulatory assets: non-current | | 1,585 | | | 834 | |||||
Regulatory liabilities: current | | 10 | | | 33 | |||||
Current portion of long-term debt1 | | 54 | | | 29 | |||||
Other current liabilities | | (1) | | | (1) | | 11 | | | 4 |
Long-term debt1 |
| (823) | | | (314) |
| 1,539 | | | 809 |
| 1 | The bondholders have no recourse to SCE. The long-term debt balance is net of unamortized debt issuance costs. |
Variable Interest in VIEs that are not Consolidated
Power Purchase Agreements
SCE has PPAs that are classified as variable interests in VIEs, including agreements through which SCE provides the natural gas to fuel the plants, fixed price contracts for renewable energy, and resource adequacy agreements that, upon the seller's election, include the purchase of energy at fixed prices. SCE has concluded that it is not the primary beneficiary of these VIEs since it does not control the commercial and operating activities of these entities. Since payments for capacity are the primary source of income, the most significant economic activity for these VIEs is the operation and maintenance of the power plants.
39
As of the balance sheet date, the carrying amount of assets and liabilities included in SCE's consolidated balance sheet that relate to involvement with VIEs that are not consolidated, result from amounts due under the PPAs. Under these contracts, SCE recovers the costs incurred through demonstration of compliance with its CPUC-approved long-term power procurement plans. SCE has no residual interest in the entities and has not provided or guaranteed any debt or equity support, liquidity arrangements, performance guarantees, or other commitments associated with these contracts other than the purchase commitments described in Note 12 of the 20212022 Form 10-K. As a result, there is no significant potential exposure to loss to SCE from its variable interest in these VIEs. The aggregate contracted capacity dedicated to SCE from these VIE projects was 3,3663,368 MW and 3,8893,366 MW at June 30, 2023 and 2022, and 2021, respectively, and therespectively. The amounts that SCE paid to these projects were $126$129 million and $153$126 million for the three months ended June 30, 20222023 and 2021,2022, respectively, and $207$285 million and $312$207 million for the six months ended June 30, 20222023 and 2021,2022, respectively. These amounts are recoverable in customer rates, subject to reasonableness review.
Unconsolidated Trusts of SCE
SCE Trust II, Trust III, Trust IV, Trust V, and Trust VI were formed in 2013, 2014, 2015, 2016, and 2017, respectively, for the exclusive purpose of issuing the 5.10%, 5.75%, 5.375%, 5.45%, and 5.00% trust preference securities, respectively ("trust securities"). The trusts are VIEs. SCE has concluded that it is not the primary beneficiary of these VIEs as it does not have the obligation to absorb the expected losses or the right to receive the expected residual returns of the trusts. SCE Trust II, Trust III, Trust IV, Trust V and Trust VI issued to the public trust securities in the face amounts of $400 million, $275 million, $325 million, $300 million, and $475 million (cumulative, liquidation amounts of $25 per share), respectively, and $10,000 of common stock each to SCE. The trusts invested the proceeds of these trust securities in Series G, Series H,
43
Series J, Series K, and Series L Preference Stock issued by SCE in the principal amounts of $400 million, $275 million, $325 million, $300 million, and $475 million (cumulative, $2,500 per share liquidation values), respectively, which have substantially the same payment terms as the respective trust securities.
The Series G, Series H, Series J, Series K, and Series L Preference Stock and the corresponding trust securities do not have a maturity date. Upon any redemption of any shares of the Series G, Series H, Series J, Series K, or Series L Preference Stock, a corresponding dollar amount of trust securities will be redeemed by the applicable trust. The applicable trust will make distributions at the same rate and on the same dates on the applicable series of trust securities, if and when the SCE board of directors declares and makes dividend payments on the related Preference Stock. The applicable trust will use any dividends it receives on the related Preference Stock to make its corresponding distributions on the applicable series of trust securities. If SCE does not make a dividend payment to any of these trusts, SCE would be prohibited from paying dividends on its common stock. SCE has fully and unconditionally guaranteed the payment of the trust securities and trust distributions, if and when SCE pays dividends on the related Preference Stock.
The Trust II, Trust III, Trust IV, Trust V and Trust VI balance sheets as of June 30, 20222023 and December 31, 20212022 consisted of investments of $220 million, $275 million, $325 million, $300 million, and $475 million in the Series G, Series H, Series J, Series K and Series L Preference Stock, respectively, $220 million, $275 million, $325 million, $300 million, and $475 million of trust securities, respectively, and $10,000 each of common stock.
The following table provides a summary of the trusts' income statements:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Three months ended June 30, | ||||||||||||||||||||||||||
(in millions) |
| Trust II |
| Trust III |
| Trust IV |
| Trust V |
| Trust VI |
| Trust II |
| Trust III |
| Trust IV |
| Trust V |
| Trust VI | ||||||||||
2023 | | | | | | | | | | | | | |
| | |||||||||||||||
Dividend income | | $ | 3 | | $ | 4 | | $ | 5 | | $ | 4 | | $ | 6 | |||||||||||||||
Dividend distributions | |
| 3 | | | 4 | | | 5 | | | 4 | | | 6 | |||||||||||||||
2022 | | | | | | | | | | | | | |
| | |
|
| |
|
| |
| | |
|
| |
|
|
Dividend income | | $ | 3 | | $ | 4 | | $ | 5 | | $ | 4 | | $ | 6 | | $ | 3 | | $ | 4 | | $ | 5 | | $ | 4 | | $ | 6 |
Dividend distributions | |
| 3 | |
| 4 | |
| 5 | |
| 4 | |
| 6 | |
| 3 | | | 4 | | | 5 | | | 4 | | | 6 |
2021 | |
|
| |
|
| |
| | |
|
| |
|
| |||||||||||||||
Dividend income | | $ | 5 | | $ | 4 | | $ | 5 | | $ | 4 | | $ | 6 | |||||||||||||||
Dividend distributions | |
| 5 | |
| 4 | |
| 5 | |
| 4 | |
| 6 | |||||||||||||||
| | | | | | | | | | | | | | | | |||||||||||||||
40
| | Six months ended June 30, | |||||||||||||
(in millions) |
| Trust II |
| Trust III |
| Trust IV |
| Trust V |
| Trust VI | |||||
2023 | | | | | | | | | | | | | |
| |
Dividend income | | $ | 6 | | $ | 8 | | $ | 9 | | $ | 8 | | $ | 12 |
Dividend distributions | |
| 6 | | | 8 | | | 9 | | | 8 | | | 12 |
2022 | |
|
| |
|
| |
| | |
|
| |
|
|
Dividend income | | $ | 6 | | $ | 8 | | $ | 9 | | $ | 8 | | $ | 12 |
Dividend distributions | |
| 6 | | | 8 | | | 9 | | | 8 | | | 12 |
| | | | | | | | | | | | | | | |
| | Six months ended June 30, | |||||||||||||
(in millions) |
| Trust II |
| Trust III |
| Trust IV |
| Trust V |
| Trust VI | |||||
2022 | | | | | | | | | | | | | |
| |
Dividend income | | $ | 6 | | $ | 8 | | $ | 9 | | $ | 8 | | $ | 12 |
Dividend distributions | |
| 6 | |
| 8 | |
| 9 | |
| 8 | |
| 12 |
2021 | |
|
| |
|
| |
|
| |
|
| |
|
|
Dividend income | | $ | 10 | | $ | 8 | | $ | 9 | | $ | 8 | | $ | 12 |
Dividend distributions | |
| 10 | |
| 8 | |
| 9 | |
| 8 | |
| 12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 4.Fair Value Measurements
Recurring Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (referred to as an "exit price"). Fair value of an asset or liability considers assumptions that market participants would use in pricing the asset or liability, including assumptions about nonperformance risk. As of June 30, 20222023 and December 31, 2021,2022, nonperformance risk was not material for Edison International and SCE.
Assets and liabilities are categorized into a three-level fair value hierarchy based on valuation inputs used to determine fair value.
44
Level 1 – The fair value of Edison International's and SCE's Level 1 assets and liabilities is determined using unadjusted quoted prices in active markets that are available at the measurement date for identical assets and liabilities. This level includes exchange-traded equity securities, U.S. treasury securities, mutual funds, and money market funds.
Level 2 – Edison International's and SCE's Level 2 assets and liabilities include fixed income securities, primarily consisting of U.S. government and agency bonds, municipal bonds and corporate bonds, and over-the-counter derivatives. The fair value of fixed income securities is determined using a market approach by obtaining quoted prices for similar assets and liabilities in active markets and inputs that are observable, either directly or indirectly, for substantially the full term of the instrument.
The fair value of SCE's over-the-counter derivative contracts is determined using an income approach. SCE uses standard pricing models to determine the net present value of estimated future cash flows. Inputs to the pricing models include forward published or posted clearing prices from an exchange (Intercontinental Exchange) for similar instruments and discount rates. A primary price source that best represents trade activity for each market is used to develop observable forward market prices in determining the fair value of these positions. Broker quotes, prices from exchanges, or comparison to executed trades are used to validate and corroborate the primary price source. These price quotations reflect mid-market prices (average of bid and ask) and are obtained from sources believed to provide the most liquid market for the commodity.
Level 3 – The fair value of SCE's Level 3 assets and liabilities is determined using the income approach through various models and techniques that require significant unobservable inputs. This level includes derivative contracts that trade infrequently such as congestion revenue rights ("CRRs"). Edison International Parent and Other does not have any Level 3 assets and liabilities.
Assumptions are made in order to value derivative contracts in which observable inputs are not available. In circumstances where fair value cannot be verified with observable market transactions, it is possible that a different valuation model could produce a materially different estimate of fair value. Modeling methodologies, inputs, and techniques are reviewed and assessed as markets continue to develop and more pricing information becomes available, and the fair value is adjusted when it is concluded that a change in inputs or techniques would result in a new valuation that better reflects the fair value of those derivative contracts. See Note 6 for a discussion of derivative instruments.
SCE
The following table sets forth assets and liabilities of SCE that were accounted for at fair value by level within the fair value hierarchy:
| | | | | | | | | | | | | | | |
|
| June 30, 2022 | |||||||||||||
| | | | | | | | | | | Netting | | | | |
| | | | | | | | | | | and | | |
| |
(in millions) |
| Level 1 |
| Level 2 |
| Level 3 |
| Collateral1 |
| Total | |||||
Assets at fair value | | | | | | | | | | | | | | | |
Derivative contracts | | $ | 0 | | $ | 26 | | $ | 37 | | $ | (31) | | $ | 32 |
Money market funds and other | |
| 4 | | | 22 | |
| 0 | |
| — |
| | 26 |
Nuclear decommissioning trusts: | |
| | |
| | |
|
| |
|
|
| | |
Stocks2 | |
| 1,548 | |
| 0 | |
| 0 | |
| — |
| | 1,548 |
Fixed Income3 | |
| 942 | |
| 1,339 | |
| 0 | |
| — |
| | 2,281 |
Short-term investments, primarily cash equivalents | |
| 167 | |
| 80 | |
| 0 | |
| — |
| | 247 |
Subtotal of nuclear decommissioning trusts4 | |
| 2,657 | |
| 1,419 | |
| 0 | |
| — |
| | 4,076 |
Total assets | |
| 2,661 | |
| 1,467 | |
| 37 | |
| (31) |
| | 4,134 |
Liabilities at fair value | |
|
| |
|
| |
|
| |
|
|
| |
|
Derivative contracts | |
| 0 | |
| 64 | |
| 5 | |
| (69) |
| | 0 |
Total liabilities | |
| 0 | |
| 64 | |
| 5 | |
| (69) |
| | 0 |
Net assets | | $ | 2,661 | | $ | 1,403 | | $ | 32 | | $ | 38 | | $ | 4,134 |
4541
SCE
The following table sets forth assets and liabilities of SCE that were accounted for at fair value by level within the fair value hierarchy:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| December 31, 2021 |
| June 30, 2023 | ||||||||||||||||||||||||||
| | | | | | | | | | | Netting | | | | | | | | | | | | | | Netting | | | | ||
| | | | | | | | | | | and | | |
| | | | | | | | | | | and | | |
| ||
(in millions) |
| Level 1 |
| Level 2 |
| Level 3 |
| Collateral1 |
| | Total |
| Level 1 |
| Level 2 |
| Level 3 |
| Collateral1 |
| Total | |||||||||
Assets at fair value | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative contracts | | $ | — | | $ | 26 | | $ | 49 | | $ | (31) | | $ | 44 | | $ | — | | $ | 11 | | $ | 13 | | $ | (11) | | $ | 13 |
Money market funds and other | |
| 230 | |
| 23 | |
| — | |
| — | |
| 253 | |
| 5 | | | 22 | | | — | | | — |
| | 27 |
Nuclear decommissioning trusts: | |
|
| |
|
| |
|
| |
|
| |
|
| |
| | | | | | | | | | |
| | |
Stocks2 | |
| 1,972 | |
| — | |
| — | |
| — | |
| 1,972 | |
| 1,632 | | | — | | | — | | | — |
| | 1,632 |
Fixed Income3 | |
| 1,083 | |
| 1,607 | |
| — | |
| — | |
| 2,690 | |
| 936 | | | 1,404 | | | — | | | — |
| | 2,340 |
Short-term investments, primarily cash equivalents | |
| 102 | |
| 125 | |
| — | |
| — | |
| 227 | |
| 219 | | | 31 | | | — | | | — |
| | 250 |
Subtotal of nuclear decommissioning trusts4 | |
| 3,157 | |
| 1,732 | |
| — | |
| — | |
| 4,889 | |
| 2,787 | |
| 1,435 | |
| — | |
| — |
| | 4,222 |
Total assets | |
| 3,387 | |
| 1,781 | |
| 49 | |
| (31) | |
| 5,186 | |
| 2,792 | |
| 1,468 | |
| 13 | |
| (11) |
| | 4,262 |
Liabilities at fair value | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
| |
|
Derivative contracts | |
| — | |
| 42 | |
| 5 | |
| (47) | |
| — | |
| — | | | 62 | | | 1 | | | (63) |
| | — |
Total liabilities | |
| — | |
| 42 | |
| 5 | |
| (47) | |
| — | |
| — | |
| 62 | |
| 1 | |
| (63) |
| | — |
Net assets | | $ | 3,387 | | $ | 1,739 | | $ | 44 | | $ | 16 | | $ | 5,186 | | $ | 2,792 | | $ | 1,406 | | $ | 12 | | $ | 52 | | $ | 4,262 |
| | | | | | | | | | | | | | | |
|
| December 31, 2022 | |||||||||||||
| | | | | | | | | | | Netting | | | | |
| | | | | | | | | | | and | | |
| |
(in millions) |
| Level 1 |
| Level 2 |
| Level 3 |
| Collateral1 |
| | Total | ||||
Assets at fair value | | | | | | | | | | | | | | | |
Derivative contracts | | $ | — | | $ | 392 | | $ | 67 | | $ | (218) | | $ | 241 |
Money market funds and other | |
| 647 | |
| 22 | |
| — | |
| — | |
| 669 |
Nuclear decommissioning trusts: | |
|
| |
|
| |
|
| |
|
| |
|
|
Stocks2 | |
| 1,610 | |
| — | |
| — | |
| — | |
| 1,610 |
Fixed Income3 | |
| 941 | |
| 1,281 | |
| — | |
| — | |
| 2,222 |
Short-term investments, primarily cash equivalents | |
| 137 | |
| 64 | |
| — | |
| — | |
| 201 |
Subtotal of nuclear decommissioning trusts4 | |
| 2,688 | |
| 1,345 | |
| — | |
| — | |
| 4,033 |
Total assets | |
| 3,335 | |
| 1,759 | |
| 67 | |
| (218) | |
| 4,943 |
Liabilities at fair value | |
|
| |
|
| |
|
| |
|
| |
|
|
Derivative contracts | |
| — | |
| 116 | |
| 4 | |
| (119) | |
| 1 |
Total liabilities | |
| — | |
| 116 | |
| 4 | |
| (119) | |
| 1 |
Net assets | | $ | 3,335 | | $ | 1,643 | | $ | 63 | | $ | (99) | | $ | 4,942 |
| 1 | Represents the netting of assets and liabilities under master netting agreements and cash collateral. |
| 2 | Approximately |
| 3 | Includes corporate bonds, which were diversified by the inclusion of collateralized mortgage obligations and other asset backed securities, of |
| 4 | Excludes net payables of |
SCE Fair Value of Level 3
The following table sets forth a summary of changes in SCE's fair value of Level 3 net derivative assets and liabilities:
| | | | | | | | | | | | |
|
| Three months ended |
| Six months ended | ||||||||
| | June 30, | | June 30, | ||||||||
(in millions) | | 2022 | | 2021 | | 2022 | | 2021 | ||||
Fair value of net assets at beginning of period | | $ | 39 | | $ | 91 | | $ | 44 | | $ | 108 |
Sales | | | (6) | | | (1) | | | (6) | | | (1) |
Settlements | |
| (26) | |
| (2) | |
| (29) | |
| (16) |
Total realized/unrealized gain (losses) 1,2 | |
| 25 | |
| (21) | |
| 23 | |
| (24) |
Fair value of net assets at end of period | | $ | 32 | | $ | 67 | | $ | 32 | | $ | 67 |
4642
SCE Fair Value of Level 3
The following table sets forth a summary of changes in SCE's fair value of Level 3 net derivative assets and liabilities:
| | | | | | | | | | | | | |
| | | Three months ended | | | Six months ended | | ||||||
| | June 30, | | June 30, | | ||||||||
(in millions) | | 2023 | | 2022 | | 2023 | | 2022 | | ||||
Fair value of net assets at beginning of period | | $ | 47 | | $ | 39 | | $ | 63 | | $ | 44 | |
Sales | | | (1) | | | (6) | | | (1) | | | (6) | |
Settlements | |
| (12) | |
| (26) | |
| (24) | |
| (29) | |
Total realized/unrealized (losses)/gains1 | |
| (22) | |
| 25 | |
| (26) | |
| 23 | |
Fair value of net assets at end of period | | $ | 12 | | $ | 32 | | $ | 12 | | $ | 32 | |
| 1 | Due to regulatory mechanisms, SCE's realized and unrealized gains and losses are recorded as regulatory assets and liabilities. |
There were no material transfers into or out of Level 3 during 2023 and 2022.
The following table sets forth SCE's valuation techniques and significant unobservable inputs used to determine fair value for significant Level 3 assets and liabilities:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| Fair Value | | | | Significant | | | | Weighted |
| Fair Value | | | | Significant | | | | Weighted | ||||||||||
| | (in millions) | | Valuation | | Unobservable | | Range | | Average | | (in millions) | | Valuation | | Unobservable | | Range | | Average | ||||||||||
|
| Assets |
| Liabilities |
| Technique |
| Input |
| (per MWh) |
| (per MWh) |
| Assets |
| Liabilities |
| Technique |
| Input |
| (per MWh) |
| (per MWh) | ||||||
Congestion revenue rights | |
| | |
| | |
| |
| |
| |
| | |
| | |
| | |
| |
| |
| |
| |
June 30, 2022 | | $ | 37 | | $ | 5 |
| Auction prices |
| CAISO CRR auction prices |
| $(18.87) - $306.31 | | $ | 1.48 | |||||||||||||||
December 31, 2021 | |
| 49 | |
| 5 |
| Auction prices |
| CAISO CRR auction prices |
| $(18.87) - $43.03 | | | 1.46 | |||||||||||||||
June 30, 2023 | | $ | 13 | | $ | 1 |
| Auction prices |
| CAISO CRR auction prices |
| $(7.54) - $47.91 | | $ | 0.56 | |||||||||||||||
December 31, 2022 | |
| 67 | |
| 4 |
| Auction prices |
| CAISO CRR auction prices |
| (7.91) - 3,856.67 | | | 1.64 | |||||||||||||||
Level 3 Fair Value Uncertainty
For CRRs, increases or decreases in CAISO auction prices would result in higher or lower fair value, respectively.
Nuclear Decommissioning Trusts
SCE's nuclear decommissioning trust investments include equity securities, U.S. treasury securities, and other fixed income securities. Equity and treasury securities are classified as Level 1 as fair value is determined by observable market prices in active or highly liquid and transparent markets. The remaining fixed income securities are classified as Level 2. There are no securities classified as Level 3 in the nuclear decommissioning trusts.
Edison International Parent and Other
Edison International Parent and Other assets measured at fair value and classified as Level 1 consisted of $6equity investments of $1 million and $12$5 million in equity investments as of June 30, 2022 and December 31, 2021, respectively and money market funds of $49$118 million and $99$137 million at June 30, 20222023 and December 31, 2021, respectively,2022, respectively. Assets measured at fair value and classified as Level 2 consisted of short-term investments of $6$2 million at both June 30, 20222023 and December 31, 2021.2022. There are no securities classified as Level 3 for Edison International Parent and Other.
43
Fair Value of Debt Recorded at Carrying Value
The carrying value and fair value of Edison International's and SCE's long-term debt (including the current portion of long-term debt) are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
|
| June 30, 2022 |
| December 31, 2021 |
| June 30, 2023 |
| December 31, 2022 | ||||||||||||||||
| | Carrying | | Fair | | Carrying | | Fair | | Carrying | | Fair | | Carrying | | Fair | ||||||||
(in millions) |
| Value1 |
| Value2 |
| Value1 |
| Value2 |
| Value1 |
| Value2 |
| Value1 |
| Value2 | ||||||||
Edison International | | $ | 27,318 | | $ | 24,917 | | $ | 25,247 | | $ | 27,718 | | $ | 32,319 | | $ | 29,670 | | $ | 29,639 | | $ | 26,824 |
SCE | |
| 24,178 | |
| 21,810 | |
| 22,110 | |
| 24,375 | |
| 28,247 | |
| 25,618 | |
| 26,258 | |
| 23,469 |
| 1 | Carrying value is net of debt issuance costs. |
| 2 | The fair value of |
Note 5.Debt and Credit Agreements
Long-Term Debt
In January 2022,the first quarter of 2023, SCE issued $500$750 million of 2.75%5.30% first and refunding mortgage bonds due in 2032 and $7002028. The proceeds were used to fund the payment of wildfire claims above the amount of expected insurance proceeds. SCE also issued $450 million of 3.45%5.70% first and refunding mortgage bonds due in 2052.2053. The proceeds were used to finance or refinance eligible sustainable projects.repay commercial paper borrowings and for general corporate purposes.
In the first quarter of 2023, Edison International Parent issued $500 million of 8.125% junior subordinated notes due in 2053. The interest rate resets every five years at a rate equal to the five-year U.S. Treasury rate plus a spread of 3.864%. The proceeds were used to repay commercial paper borrowings and for general corporate purposes.
In the second quarter of 2023, SCE issued $400 million of 4.90% first and refunding mortgage bonds due in 2026. The proceeds were used to fund the payment of wildfire claims above the amount of expected insurance proceeds. SCE also issued $700 million of 5.875% first and refunding mortgage bonds due in 2053. The proceeds were used to repay commercial paper borrowings and for general corporate purposes.
In the second quarter of 2023, Edison International Parent issued $600 million of 5.25% senior notes due in 2028. The proceeds were used to repay commercial paper borrowings and for general corporate purposes.
Senior Secured Recovery Bonds
In April 2023, SCE Recovery Funding LLC issued $775 million of Senior Secured Recovery Bonds, Series 2023-A, in two tranches and used the proceeds to acquire SCE's right, title and interest in and to the Recovery Property. The two tranches of Senior Secured Recovery Bonds consisted of $425 million, 4.697% with final maturity in 2042 bonds and $350 million, 5.112% with final maturity in 2049 bonds. For further details, see Note 3. SCE used the proceeds it received from the sale of Recovery Property to pay down the entire $730 million outstanding amount of a term loan due in May 2023.
4744
In May 2022, SCE issued $300 million of 4.20% first and refunding mortgage bonds due in 2025, $600 million of 4.70% first and refunding mortgage bonds due in 2027 and $350 million of 5.45% first and refunding mortgage bonds due in 2052. The proceeds were used to fund the payment of wildfire claims above the amount of insurance proceeds and to repay commercial paper borrowings.
Senior Secured Recovery Bonds
In the first quarter of 2022, SCE Recovery Funding LLC issued $533 million of Senior Secured Recovery Bonds, Series 2022-A, in three tranches ("Recovery Bonds") and used the proceeds to acquire Recovery Property. The three tranches of Recovery Bonds consisted of $100 million, 1.98% with final maturity in 2030; $305 million, 2.94% with final maturity in 2044; and $128 million, 3.24% with final maturity in 2048. The Recovery Bonds are payable only from and secured by the Recovery Property. SCE Recovery Funding LLC is consolidated by SCE for financial reporting purposes, however, the Recovery Bonds do not constitute a debt or other legal obligation of, or interest in, SCE or any of its affiliates, except for SCE Recovery Funding LLC. SCE used the proceeds it received from the sale of Recovery Property to reimburse itself for previously incurred AB 1054 Excluded Capital Expenditures, including the retirement of related debt and financing costs. For further details, see Note 3.
Credit Agreements and Short-Term Debt
The following table summarizes the status of the credit facilities at June 30, 2022:2023:
| | | | | | | | | | | | | | | | | | |
(in millions, except for rates) | ||||||||||||||||||
Execution | | Termination | | Secured Overnight Financing Rate ("SOFR") | | | | | | Outstanding | | Outstanding | | Amount | ||||
date | | date | | plus (bps) | | Use of proceeds |
| Commitment |
| borrowings |
| letters of credit |
| available | ||||
Edison International Parent | ||||||||||||||||||
May 2022 | | May 2026 | | 128 | | Support commercial paper borrowings and general corporate purposes1, 3 | | $ | 1,500 | | $ | 3 | | $ | — | | $ | 1,497 |
Total Edison International Parent: | $ | 1,500 | | $ | 3 | | $ | — | | $ | 1,497 | |||||||
SCE | ||||||||||||||||||
May 2022 | | May 2026 | | 108 | | Support commercial paper borrowings and general corporate purposes2, 3 | | $ | 3,350 | | $ | 102 | | $ | 161 | | $ | 3,087 |
Total SCE: | $ | 3,350 | | $ | 102 | | $ | 161 | | $ | 3,087 | |||||||
Total Edison International: | $ | 4,850 | | $ | 105 | | $ | 161 | | $ | 4,584 | |||||||
| | | | | | | | | | | | | | | | |
(in millions, except for rates) | ||||||||||||||||
Borrower | | Termination Date | | Secured Overnight Financing Rate ("SOFR") plus (bps) |
| Commitment |
| Outstanding borrowings |
| Outstanding letters of credit |
| Amount available | ||||
Edison International Parent1, 3 | | May 2027 | | 128 | | $ | 1,500 | | $ | 387 | | $ | — | | $ | 1,113 |
SCE2, 3 | | May 2027 | | 108 | | | 3,350 | | | 785 | | | 122 | | | 2,443 |
Total Edison International | $ | 4,850 | | $ | 1,172 | | $ | 122 | | $ | 3,556 | |||||
| 1 | At June 30, |
| 2 | At June 30, |
| 3 | In May |
48
Term loan and other short-term debt
In April 2022, Edison International Parent borrowed $600 million under a term loan agreement due in April 2023 that bears interest at either an adjusted term SOFR plus 0.70% or a base rate with no applicable margin. Edison International used the proceeds for general corporate purposes.I se
In May 2022, SCE amended its green term loan agreement to extend the maturity date from May 2022 to May 2023 and updated the interest rate from LIBOR plus 0.60% to SOFR plus 0.55%. As of June 30, 2022, the outstanding balance on the term loan is $730 million.
Note 6.Derivative Instruments
Derivative financial instruments are used to manage exposure to commodity price risk. These risks are managed in part by entering into forward commodity transactions, including options, swaps and futures. To mitigate credit risk from counterparties in the event of nonperformance, master netting agreements are used whenever possible, and counterparties may be required to pledge collateral depending on the creditworthiness of each counterparty and the risk associated with the transaction.
Commodity Price Risk
Commodity price risk represents the potential impact that can be caused by a change in the market value of a particular commodity. SCE's electricity price exposure arises from energy purchased from and sold to wholesale markets as a result of differences between SCE's load requirements and the amount of energy delivered from its generating facilities and PPAs. SCE's natural gas price exposure arises from natural gas purchased for the Mountainview power plantplants, Peaker plants and peaker plants, Qualifying Facilities contracts where pricing is based on a monthly natural gas index and PPAs in which SCE has agreed to provide the natural gas needed for generation, referred to as tolling arrangements.
Credit and Default Risk
Credit and default risk represent the potential impact that can be caused if a counterparty were to default on its contractual obligations and SCE would be exposed to spot markets for buying replacement power and natural gas or selling excess power.power and natural gas. In addition, SCE would be exposed to the risk of non-payment of accounts receivable, primarily related to the sales of excess power and natural gas and realized gains on derivative instruments.
Certain power and gas contracts contain master netting agreements or similar agreements, which generally allow counterparties subject to the agreement to offset amounts when certain criteria are met, such as in the event of default. The objective of netting is to reduce credit exposure. Additionally, to reduce SCE's risk exposures, counterparties may be required to pledge collateral depending on the creditworthiness of each counterparty and the risk associated with the transaction.
Certain power and gas contracts contain a provision that requires SCE to maintain an investment grade rating from the major credit rating agencies that have credit ratings for SCE, referred to as a credit-risk-related contingent feature. If SCE's credit rating were to fall below investment grade, SCE may be required to post additional collateral to cover derivative liabilities and the related outstanding payables. The net fair value of all derivative liabilities with these credit-risk-related contingent features were less than $1 million as of June 30, 2022 and December 31, 2021, for which SCE posted 0 collateral to its counterparties for its derivative liabilities and related outstanding payables for both periods. If the credit-risk-related contingent features underlying these agreements were triggered on June 30, 2022, SCE would be required to post $3 million of collateral, most of which is related to outstanding payables.
4945
rating were to fall below investment grade, SCE may be required to post additional collateral to cover derivative liabilities and the related outstanding payables. The net fair value of all derivative liabilities with these credit-risk-related contingent features was less than $1 million as of June 30, 2023 and December 31, 2022, for which SCE posted no collateral and collateral of $24 million for its outstanding payables as of June 30, 2023 and December 31, 2022, respectively. If the credit-risk-related contingent features underlying these agreements were triggered on June 30, 2023, SCE would not be required to post any additional collateral.
Fair Value of Derivative Instruments
SCE presents its derivative assets and liabilities on a net basis on its consolidated balance sheets when subject to master netting agreements or similar agreements. Derivative positions are also offset against margin and cash collateral deposits. In addition, SCE has provided collateral in the form of letters of credit. Collateral requirements can vary depending upon the level of unsecured credit extended by counterparties, changes in market prices relative to contractual commitments and other factors. See Note 4 for a discussion of fair value of derivative instruments. The following table summarizes the gross and net fair values of SCE's commodity derivative instruments:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2022 | | | | | June 30, 2023 | |||||||||||||||||||||||
| | Derivative Assets | | Derivative Liabilities | | | | | Derivative Assets | | Derivative Liabilities | | | | ||||||||||||||||
(in millions) |
| Short-Term1 |
| Long-Term2 |
| Subtotal |
| Short-Term |
| Long-Term |
| Subtotal |
| Net Assets |
| Short-Term1 |
| Short-Term |
| Net Assets | ||||||||||
Commodity derivative contracts |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Gross amounts recognized | | $ | 59 | | $ | 4 | | $ | 63 | | $ | 68 | | $ | 1 | | $ | 69 | | $ | (6) | | $ | 24 | | $ | 63 | | $ | (39) |
Gross amounts offset in the consolidated balance sheets | |
| (30) | |
| (1) | |
| (31) | |
| (30) | |
| (1) | |
| (31) | |
| 0 | |
| (11) | | | (11) | |
| — |
Cash collateral posted and accrued3 | |
| 0 | |
| 0 | |
| 0 | |
| (38) | |
| 0 | |
| (38) | |
| 38 | |||||||||
Cash collateral posted | |
| — | |
| (52) | |
| 52 | |||||||||||||||||||||
Net amounts presented in the consolidated balance sheets | | $ | 29 | | $ | 3 | | $ | 32 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 32 | | $ | 13 | | $ | — | | $ | 13 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2021 | | | | | December 31, 2022 | |||||||||||||||||||||||
| | Derivative Assets | | Derivative Liabilities | | | | | Derivative Assets | | Derivative Liabilities | | | | ||||||||||||||||
(in millions) |
| Short-Term1 |
| Long-Term2 |
| Subtotal |
| Short-Term |
| Long-Term |
| Subtotal |
| Net Assets |
| Short-Term1 |
| Short-Term2 |
| Net Assets | ||||||||||
Commodity derivative contracts |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Gross amounts recognized | | $ | 70 | | $ | 6 | | $ | 76 | | $ | 46 | | $ | 2 | | $ | 48 | | $ | 28 | | $ | 459 | | $ | 120 | | $ | 339 |
Gross amounts offset in the consolidated balance sheets | |
| (30) | |
| (2) | |
| (32) | |
| (30) | |
| (2) | |
| (32) | |
| 0 | |
| (119) | |
| (119) | |
| — |
Cash collateral posted3 | |
| 0 | |
| 0 | |
| 0 | |
| (16) | |
| 0 | |
| (16) | |
| 16 | |||||||||
Cash collateral received | |
| (99) | |
| — | |
| (99) | |||||||||||||||||||||
Net amounts presented in the consolidated balance sheets | | $ | 40 | | $ | 4 | | $ | 44 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 44 | | $ | 241 | | $ | 1 | | $ | 240 |
| 1 | Included in "Other current assets" on |
| 2 | Included in "Other |
At June 30, 2023, SCE posted cash collateral and accrued the right to reclaim cash collateral totaled $161 million, of which $52 million was offset against derivative liabilities and $109 million was reflected in "Other current assets" on SCE's consolidated balance sheets.
Financial Statement Impact of Derivative Instruments
SCE recognizes realized gains and losses on derivative instruments as purchased power expense and expects that such gains or losses will be part of the purchased power costs recovered from customers. As a result, realized gains and losses do not affect earnings, but may temporarily affect cash flows. Due to the expected future recovery from customers, unrealized gains and losses are recorded as regulatory assets and liabilities and therefore, also do not affect earnings. The remaining effects of derivative activities and related regulatory offsets are reported in cash flows from operating activities in theSCE’s consolidated statements of cash flows.
5046
The following table summarizes the componentsgains/(losses) of SCE's economic hedging activity:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended June 30, | | Six months ended June 30, | | | Three months ended June 30, | | Six months ended June 30, | ||||||||||||||
(in millions) |
| | 2022 | | | 2021 |
| 2022 | | 2021 |
| | 2023 | | | 2022 |
| 2023 | | 2022 | ||||
Realized gains | | $ | 129 | | $ | 15 | | $ | 110 | | $ | 127 | ||||||||||||
Unrealized (losses) gains | |
| (88) | |
| 16 | |
| (35) | |
| 10 | ||||||||||||
Realized | | $ | (7) | | $ | 129 | | $ | 109 | | $ | 110 | ||||||||||||
Unrealized | |
| (114) | |
| (88) | |
| (378) | |
| (35) | ||||||||||||
Notional Volumes of Derivative Instruments
The following table summarizes the notional volumes of derivatives used for SCE's economic hedging activities:
| | | | | | | | | | | | |
| | Unit of | | Economic Hedges | | Unit of | | Economic Hedges | ||||
Commodity |
| Measure |
| June 30, 2022 |
| December 31, 2021 |
| Measure |
| June 30, 2023 |
| December 31, 2022 |
Electricity options, swaps and forwards |
| GWh |
| 756 |
| 1,869 |
| Gigawatt hours |
| 2,364 |
| 1,022 |
Natural gas options, swaps and forwards |
| Bcf |
| 52 |
| 58 |
| Billion cubic feet |
| 45 |
| 42 |
Congestion revenue rights |
| GWh |
| 24,301 |
| 33,216 |
| Gigawatt hours |
| 24,290 |
| 44,028 |
Note 7.Revenue
SCE's revenue is disaggregated by two revenue sources:
| ● | Earning activities – representing revenue authorized by the CPUC and FERC, which is intended to provide SCE with a reasonable opportunity to recover its costs and earn a return on its net investment in generation, transmission and distribution assets. The annual revenue requirements are comprised of authorized operation and maintenance costs, depreciation, taxes and a return consistent with the capital structure. Also, included in earnings activities are revenue or penalties related to incentive mechanisms, other operating revenue, and regulatory charges or disallowances. |
| ● | Cost-recovery activities – representing CPUC- and FERC- authorized balancing accounts, which allow for recovery of specific project or program costs, subject to a reasonableness review or compliance with upfront standards, as well as non-bypassable rates collected for SCE Recovery Funding LLC. Cost-recovery activities include rates which provide recovery, subject to a reasonableness review of, among other things, fuel costs, purchased power costs, public purpose related-program costs (including energy efficiency and demand-side management programs), certain operation and maintenance expenses and repayment of bonds and financing costs of SCE Recovery Funding LLC. SCE earns no return on these activities. |
The following table is a summary of SCE's revenue:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, 2022 | | Three months ended June 30, 2021 | | Three months ended June 30, 2023 | | Three months ended June 30, 2022 | ||||||||||||||||||||||||||||
| | | | | Cost- | | | | | | Cost- | | | | | | | Cost- | | | | | | Cost- | | | ||||||||||
| | Earning | | Recovery | | Total | | Earning | | Recovery | | Total | | Earning | | Recovery | | Total | | Earning | | Recovery | | Total | ||||||||||||
(in millions) |
| Activities |
| Activities | | Consolidated |
| Activities |
| Activities |
| Consolidated |
| Activities |
| Activities | | Consolidated |
| Activities |
| Activities |
| Consolidated | ||||||||||||
Revenue from contracts with customers1,2 | | $ | 1,978 | | $ | 2,022 | | $ | 4,000 | | $ | 1,703 |
| $ | 1,423 |
| $ | 3,126 | | $ | 2,043 | | $ | 1,546 | | $ | 3,589 | | $ | 1,978 |
| $ | 2,022 |
| $ | 4,000 |
Alternative revenue programs and other operating revenue3 | |
| 186 | |
| (190) | |
| (4) | |
| 127 |
| | 53 |
| | 180 | |
| 124 | |
| 236 | |
| 360 | |
| 186 |
| | (190) |
| | (4) |
Total operating revenue | | $ | 2,164 | | $ | 1,832 | | $ | 3,996 | | $ | 1,830 | | $ | 1,476 | | $ | 3,306 | | $ | 2,167 | | $ | 1,782 | | $ | 3,949 | | $ | 2,164 | | $ | 1,832 | | $ | 3,996 |
5147
| | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended June 30, 2022 | | Six months ended June 30, 2021 | | | Six months ended June 30, 2023 | | Six months ended June 30, 2022 | | ||||||||||||||||||||||||||||
| | | | | Cost- | | | | | | Cost- | | | | | | | | Cost- | | | | | | Cost- | | | | ||||||||||
| | Earning | | Recovery | | Total | | Earning | | Recovery | | Total | | | Earning | | Recovery | | Total | | Earning | | Recovery | | Total | | ||||||||||||
(in millions) |
| Activities |
| Activities | | Consolidated |
| Activities |
| Activities |
| Consolidated |
|
| Activities |
| Activities | | Consolidated |
| Activities |
| Activities |
| Consolidated |
| ||||||||||||
Revenues from contracts with customers1,2 | | $ | 3,963 | | $ | 3,397 | | $ | 7,360 | | $ | 3,407 |
| $ | 2,618 |
| $ | 6,025 | | | $ | 4,119 | | $ | 3,206 | | $ | 7,325 | | $ | 3,963 |
| $ | 3,397 |
| $ | 7,360 | |
Alternative revenue programs and other operating revenue3 | |
| 468 | |
| 129 | |
| 597 | |
| 190 |
| | 44 |
| | 234 | | |
| 281 | |
| 293 | |
| 574 | |
| 468 |
| | 129 |
| | 597 | |
Total operating revenue | | $ | 4,431 | | $ | 3,526 | | $ | 7,957 | | $ | 3,597 | | $ | 2,662 | | $ | 6,259 | | | $ | 4,400 | | $ | 3,499 | | $ | 7,899 | | $ | 4,431 | | $ | 3,526 | | $ | 7,957 | |
| 1 |
| 2 | At June 30, |
| 3 | Includes differences between amounts billed and authorized levels for both the CPUC and FERC. |
Deferred Revenue
In July 2021, Morongo Transmission LLC ("Morongo") paidAs of June 30, 2023, SCE $400has deferred revenue of $374 million forrelated to sale of the use of a portiontransfer capability of the West of Devers transmission line, transfer capability for a period of 30 years. SCE recognized the entire proceeds as deferred revenue and will amortize deferred revenue from the use of the transfer capability over the 30-year term on a straight-line basis resulting in revenue of $13 million per year. As of June 30, 2022, the deferred revenue is $387 million, of which $13 million and $374$361 million are included in "Other current liabilities" and "Other deferred credits and other long-term liabilities," respectively, on SCE's consolidated balance sheets. For the three months and six months ended JuneThe deferred revenue is amortized straight-line over a period of 30 2022, SCE has recognized revenue of $4 million and $7 million, respectively.years starting 2021.
Note 8.Income Taxes
Effective Tax Rate
The table below provides a reconciliation of income tax expense computed at the federal statutory income tax rate to the income tax provision:
52
| | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, | | ||||||||
(in millions) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | | ||||
Edison International: | | | | | | | | | | | | | |
Income from operations before income taxes | | $ | 299 | | $ | 429 | | $ | 380 | | $ | 683 | |
Provision for income tax at federal statutory rate of 21% | |
| 63 | |
| 90 | |
| 80 | |
| 143 | |
Increase (decrease) in income tax from: | |
|
| |
|
| |
|
| |
|
| |
State tax, net of federal benefit | |
| (4) | |
| 18 | |
| (21) | |
| 11 | |
Property-related | |
| (48) | |
| (43) | |
| (93) | |
| (126) | |
Corporate-owned life insurance cash surrender value | | | (1) | | | (3) | | | (4) | | | (5) | |
Other | |
| (3) | |
| 6 | |
| (10) | |
| 9 | |
Total income tax expense (benefit) | | $ | 7 | | $ | 68 | | $ | (48) | | $ | 32 | |
Effective tax rate | |
| 2.3 | % |
| 15.9 | % |
| (12.6) | % |
| 4.7 | % |
SCE: | | | | | | | | | | | | | |
Income from operations before income taxes | | $ | 349 | | $ | 461 | | $ | 482 | | $ | 760 | |
Provision for income tax at federal statutory rate of 21% | |
| 73 | |
| 97 | |
| 101 | |
| 160 | |
Increase (decrease) in income tax from: | |
|
| |
|
| |
|
| |
|
| |
State tax, net of federal benefit | |
| — | |
| 19 | |
| (13) | |
| 15 | |
Property-related | |
| (48) | |
| (43) | |
| (93) | |
| (126) | |
Corporate-owned life insurance cash surrender value | | | (1) | | | (3) | | | (4) | | | (5) | |
Other | |
| (2) | |
| 6 | |
| (9) | |
| 8 | |
Total income tax expense (benefit) | | $ | 22 | | $ | 76 | | $ | (18) | | $ | 52 | |
Effective tax rate | |
| 6.3 | % |
| 16.5 | % |
| (3.7) | % |
| 6.8 | % |
Note 8.Income Taxes
Effective Tax Rate
The table below provides a reconciliation of income tax expense computed at the federal statutory income tax rate to the income tax provision:
| | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, | | ||||||||
(in millions) |
| 2023 |
| 2022 |
| 2023 |
| 2022 | | ||||
Edison International: | | | | | | | | | | | | | |
Income from operations before income taxes | | $ | 460 | | $ | 299 | | $ | 838 | | $ | 380 | |
Provision for income tax at federal statutory rate of 21% | |
| 97 | |
| 63 | |
| 176 | |
| 80 | |
Increase (decrease) in income tax from: | |
|
| |
|
| |
|
| |
|
| |
State tax, net of federal benefit | |
| 1 | |
| (4) | |
| — | |
| (21) | |
Property-related | |
| (47) | |
| (48) | |
| (105) | |
| (93) | |
Other | |
| — | |
| (4) | |
| (7) | |
| (14) | |
Total income tax expense (benefit) | | $ | 51 | | $ | 7 | | $ | 64 | | $ | (48) | |
Effective tax rate | |
| 11.1 | % |
| 2.3 | % |
| 7.6 | % |
| (12.6) | % |
SCE: | | | | | | | | | | | | | |
Income from operations before income taxes | | $ | 517 | | $ | 349 | | $ | 945 | | $ | 482 | |
Provision for income tax at federal statutory rate of 21% | |
| 109 | |
| 73 | |
| 198 | |
| 101 | |
Increase (decrease) in income tax from: | |
|
| |
|
| |
|
| |
|
| |
State tax, net of federal benefit | |
| 8 | |
| — | |
| 11 | |
| (13) | |
Property-related | |
| (47) | |
| (48) | |
| (105) | |
| (93) | |
Other | |
| (2) | |
| (3) | |
| (7) | |
| (13) | |
Total income tax expense (benefit) | | $ | 68 | | $ | 22 | | $ | 97 | | $ | (18) | |
Effective tax rate | |
| 13.2 | % |
| 6.3 | % |
| 10.3 | % |
| (3.7) | % |
48
The CPUC requires flow-through ratemaking treatment for the current tax benefit arising from certain property-related and other temporary differences which reverse over time. Flow-through items reduce current authorized revenue requirements in SCE's rate cases and result in a regulatory asset for recovery of deferred income taxes in future periods. The difference between the authorized amounts as determined in SCE's rate cases, adjusted for balancing and memorandum account activities, and the recorded flow-through items also result in increases or decreases in regulatory assets with a corresponding impact on the effective tax rate to the extent that recorded deferred amounts are expected to be recovered in future rates. For further information, see Note 11.
Tax Disputes
In 2020, Edison International recorded favorable tax positions in connection with the Edison Mission Energy bankruptcy that were fully reserved. Based on information identified during the second quarter of 2023, the Company wrote off the total claim and related reserve in the amount of approximately $268 million.
Tax years that remain open for examination by the IRS and the California Franchise Tax Board ("FTB") are 20162019 – 20212022 and 2013 – 2021,2022, respectively.
53
Note 9.Compensation and Benefit Plans
Pension Plans
Net periodic pension expense components are:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Six months ended | | Three months ended | | Six months ended | ||||||||||||||||
| | June 30, | | June 30, | | June 30, | | June 30, | ||||||||||||||||
(in millions) |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||||
Edison International: | | | | | | | | | | | | | | | | | | | | | | | | |
Service cost | | $ | 30 | | $ | 34 | | $ | 60 | | $ | 68 | | $ | 25 | | $ | 30 | | $ | 50 | | $ | 60 |
Non-service cost (benefit) | |
| | |
| | |
|
| |
|
| |
| | |
| | |
|
| |
|
|
Interest cost | |
| 27 | |
| 26 | |
| 54 | |
| 52 | |
| 45 | |
| 27 | |
| 90 | |
| 54 |
Expected return on plan assets | |
| (57) | |
| (56) | |
| (114) | |
| (112) | |
| (54) | |
| (57) | |
| (108) | |
| (114) |
Settlement costs1 | |
| 3 | |
| — | |
| 3 | |
| — | ||||||||||||
Amortization of net loss2 | |
| 1 | |
| 3 | |
| 2 | |
| 6 | ||||||||||||
Settlement costs | |
| — | |
| 3 | |
| — | |
| 3 | ||||||||||||
Amortization of net loss1 | |
| 1 | |
| 1 | |
| 2 | |
| 2 | ||||||||||||
Regulatory adjustment | |
| 2 | |
| 4 | |
| 4 | |
| 8 | |
| (12) | |
| 2 | |
| (24) | |
| 4 |
Total non-service benefit3 | | $ | (24) | | $ | (23) | | $ | (51) | | $ | (46) | ||||||||||||
Total expense recognized | | $ | 6 | | $ | 11 | | $ | 9 | | $ | 22 | ||||||||||||
Total non-service benefit2 | | $ | (20) | | $ | (24) | | $ | (40) | | $ | (51) | ||||||||||||
Total expense | | $ | 5 | | $ | 6 | | $ | 10 | | $ | 9 | ||||||||||||
SCE: | | | | | | | | | | | | | | | | | | | | | | | | |
Service cost | | $ | 29 | | $ | 33 | | $ | 58 | | $ | 66 | | $ | 24 | | $ | 29 | | $ | 48 | | $ | 58 |
Non-service cost (benefit) | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Interest cost | |
| 25 | |
| 24 | |
| 50 | |
| 48 | |
| 42 | |
| 25 | |
| 84 | |
| 50 |
Expected return on plan assets | |
| (54) | |
| (53) | |
| (108) | |
| (106) | |
| (51) | |
| (54) | |
| (102) | |
| (108) |
Settlement costs1 | |
| 3 | |
| — | |
| 3 | |
| — | ||||||||||||
Amortization of net loss2 | |
| 1 | |
| 2 | |
| 2 | |
| 4 | ||||||||||||
Settlement costs | |
| — | |
| 3 | |
| — | |
| 3 | ||||||||||||
Amortization of net loss1 | |
| — | |
| 1 | |
| — | |
| 2 | ||||||||||||
Regulatory adjustment | |
| 2 | |
| 4 | |
| 4 | |
| 8 | |
| (12) | |
| 2 | |
| (24) | |
| 4 |
Total non-service benefit3 | | $ | (23) | | $ | (23) | | $ | (49) | | $ | (46) | ||||||||||||
Total expense recognized | | $ | 6 | | $ | 10 | | $ | 9 | | $ | 20 | ||||||||||||
Total non-service benefit2 | | $ | (21) | | $ | (23) | | $ | (42) | | $ | (49) | ||||||||||||
Total expense | | $ | 3 | | $ | 6 | | $ | 6 | | $ | 9 | ||||||||||||
| 1 |
| Included in "Other |
5449
Postretirement Benefits Other Than Pensions ("PBOP")
Net periodic PBOP expense components for Edison International and SCE are:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Six months ended | | Three months ended | | Six months ended | ||||||||||||||||
| | June 30, | | June 30, | | June 30, | | June 30, | ||||||||||||||||
(in millions) |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||||
Service cost | | $ | 8 | | $ | 10 | | $ | 16 | | $ | 20 | | $ | 5 | | $ | 8 | | $ | 10 | | $ | 16 |
Non-service cost (benefit) | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Interest cost | |
| 14 | |
| 14 | |
| 28 | |
| 28 | |
| 18 | |
| 14 | |
| 36 | |
| 28 |
Expected return on plan assets | |
| (24) | |
| (27) | |
| (48) | |
| (54) | |
| (27) | |
| (24) | |
| (54) | |
| (48) |
Amortization of net gain | |
| (12) | |
| (8) | |
| (24) | |
| (16) | |
| (12) | |
| (12) | |
| (24) | |
| (24) |
Regulatory adjustment | |
| 14 | |
| 11 | |
| 28 | |
| 22 | |
| 16 | |
| 14 | |
| 32 | |
| 28 |
Total non-service benefit1 | | $ | (8) | | $ | (10) | | $ | (16) | | $ | (20) | | $ | (5) | | $ | (8) | | $ | (10) | | $ | (16) |
Total expense | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — |
| 1 | Included in "Other income" on Edison International's and SCE's consolidated statements of income. |
Note 10. Investments
Nuclear Decommissioning Trusts
Future decommissioning costs related to SCE's nuclear assets are expected to be funded from independent decommissioning trusts.
The following table sets forth amortized cost and fair value of the trust investments (see Note 4 for a discussion of fair value of the trust investments):
| | | | | | | | | | | | | | | |
| | | | Amortized Cost | | Fair Value | | ||||||||
| | Longest | | June 30, | | December 31, | | June 30, | | December 31, | | ||||
(in millions) |
| Maturity Dates |
| 2022 |
| 2021 |
| 2022 |
| 2021 | | ||||
Stocks |
| — |
| | * |
| | * | | $ | 1,548 | | $ | 1,972 | |
Municipal bonds |
| 2058 |
| $ | 843 |
| $ | 875 | |
| 905 | |
| 1,033 | |
Government and agency securities |
| 2067 |
| | 933 |
| | 1,095 | |
| 986 | |
| 1,212 |
|
Corporate bonds |
| 2070 |
| | 371 |
| | 386 | |
| 390 | |
| 446 |
|
Short-term investments and receivables/payables1 |
| One-year |
| | 200 |
| | 199 | |
| 210 | |
| 207 |
|
Total |
|
| | $ | 2,347 | | $ | 2,555 | | $ | 4,039 | | $ | 4,870 |
|
| | | | | | | | | | | | | | |
| | | | Amortized Costs | | Fair Values | ||||||||
| | Longest | | June 30, | | December 31, | | June 30, | | December 31, | ||||
(in millions) |
| Maturity Dates |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
Municipal bonds |
| 2061 |
| $ | 617 |
| $ | 672 | | $ | 704 | | $ | 754 |
Government and agency securities |
| 2073 |
| | 1,151 |
| | 1,025 | |
| 1,222 | |
| 1,091 |
Corporate bonds |
| 2070 |
| | 386 |
| | 351 | |
| 414 | |
| 377 |
Short-term investments and receivables/payables1 |
| One-year |
| | 146 |
| | 110 | |
| 154 | |
| 116 |
Total debt securities and other | | | | $ | 2,300 | | $ | 2,158 | | | 2,494 | | | 2,338 |
Equity securities |
| | | | | | | | | | 1,632 | | | 1,610 |
Total |
|
| | | | | | | | $ | 4,126 | | $ | 3,948 |
| 1 | Short-term investments |
Trust fund earnings (based on specific identification) increase the trust fund balance and the asset retirement obligation ("ARO") regulatory liability. Unrealized holding gains, net of losses, were $1.5 billion and $2.1$1.6 billion at both June 30, 20222023 and December 31, 2021, respectively.2022.
Trust assets are used to pay income taxes arising from trust investing activity. Deferred tax liabilities related to net unrealized gains were $316$352 million and $517$321 million at June 30, 20222023 and December 31, 2021,2022, respectively. Accordingly, the fair value of trust assets available to pay future decommissioning costs, net of deferred income taxes, totaled $3.7$3.8 billion and $4.4$3.6 billion at June 30, 20222023 and December 31, 2021,2022, respectively.
5550
The following table summarizes the gains and losses for the trust investments:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, | | Three months ended June 30, | | Six months ended June 30, | ||||||||||||||||
(in millions) |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||||
Gross realized gains | | $ | 74 | | $ | 140 | | $ | 89 | | $ | 251 | | $ | 124 | | $ | 74 | | $ | 195 | | $ | 89 |
Gross realized losses | |
| 45 | |
| 4 | |
| 61 | |
| 16 | |
| (8) | |
| (45) | |
| (31) | |
| (61) |
Net unrealized (losses) gains for equity securities | |
| (332) | |
| 16 | |
| (432) | |
| 34 | ||||||||||||
Net unrealized (losses)/gains for equity securities | |
| (11) | |
| (332) | |
| 64 | |
| (432) | ||||||||||||
Due to regulatory mechanisms, changes in assets of the trusts from income or loss items have no impact on operating revenue ordo not materially affect earnings.
Edison International'sInternational Parent and Other's Investments
Edison International holdsParent and Other hold strategic investments in companies focused on developing electric technologies and services.services, included as "Other investments" on Edison International's consolidated balance sheets. As of June 30, 20222023 and December 31, 2021,2022, these investments consist of $6$1 million and $12$5 million of marketable securities, respectively, and $3$12 million of equity investments without readily determinable fair values forat both periods (included as "Other investments" on Edison International's consolidated balance sheets). Thedates. For further information of fair value and unrealized loss for equity investments held is $3 million and $5 million for the three months and six months ended June 30, 2022, respectively,gains/(losses) of marketable securities, which are recorded asin "Other income" on Edison International'sInternationals' consolidated statementstatements of income. The unrealized gain for equity investments held was $12 million for both three months and six months ended June 30, 2021. For further information,income, see Note 4 and Note 15.15, respectively. The equity investments without readily determinable fair values balances included cumulative upward adjustments of $9 million at both June 30, 2023 and December 31, 2022. The cumulative upward adjustments resulted primarily from values determined by additional capital infusions.
Note 11. Regulatory Assets and Liabilities
Regulatory Assets
SCE's regulatory assets included on theits consolidated balance sheets are:
| | | | | | |
| | June 30, | | December 31, | ||
(in millions) |
| 2022 |
| 2021 | ||
Current: |
| |
|
| |
|
Regulatory balancing and memorandum accounts | | $ | 1,824 | | $ | 1,591 |
Power contracts | |
| 180 | |
| 168 |
Other | |
| 26 | |
| 19 |
Total current | |
| 2,030 | |
| 1,778 |
Long-term: | |
|
| |
|
|
Deferred income taxes, net of liabilities | |
| 4,947 | |
| 4,770 |
Power contracts | |
| 23 | |
| 71 |
Unamortized investments, net of accumulated amortization | |
| 113 | |
| 114 |
Unamortized loss on reacquired debt | |
| 115 | |
| 121 |
Regulatory balancing and memorandum accounts | |
| 1,421 | |
| 1,897 |
Environmental remediation | |
| 244 | |
| 242 |
Recovery assets1 | | | 845 | | | 325 |
Other | |
| 146 | |
| 120 |
Total long-term | |
| 7,854 | |
| 7,660 |
Total regulatory assets | | $ | 9,884 | | $ | 9,438 |
56
Regulatory Liabilities
SCE's regulatory liabilities included on the consolidated balance sheets are:
| | | | | | |
| | June 30, | | December 31, | ||
(in millions) |
| 2023 |
| 2022 | ||
Current: |
| |
|
| |
|
Regulatory balancing and memorandum accounts | | $ | 3,574 | | $ | 2,400 |
Power contracts | |
| 23 | |
| 71 |
Energy derivatives | | | 39 | | | — |
Other | |
| 20 | |
| 26 |
Total current | |
| 3,656 | |
| 2,497 |
Long-term: | |
|
| |
|
|
Deferred income taxes, net of liabilities | |
| 5,366 | |
| 5,178 |
Unamortized investments, net of accumulated amortization | |
| 110 | |
| 113 |
Unamortized loss on reacquired debt | |
| 103 | |
| 109 |
Regulatory balancing and memorandum accounts | |
| 1,107 | |
| 1,589 |
Environmental remediation | |
| 234 | |
| 241 |
Recovery assets | | | 1,585 | | | 834 |
Other | |
| 116 | |
| 117 |
Total long-term | |
| 8,621 | |
| 8,181 |
Total regulatory assets | | $ | 12,277 | | $ | 10,678 |
| | | | | | |
| | June 30, | | December 31, | ||
(in millions) |
| 2022 |
| 2021 | ||
Current: |
| |
|
| |
|
Regulatory balancing and memorandum accounts | | $ | 506 | | $ | 553 |
Energy derivatives | |
| — | |
| 25 |
Other | |
| 17 | |
| 25 |
Total current | |
| 523 | |
| 603 |
Long-term: | |
|
| |
|
|
Costs of removal | |
| 2,678 | |
| 2,552 |
Re-measurement of deferred taxes | |
| 2,288 | |
| 2,315 |
Recoveries in excess of ARO liabilities1 | |
| 1,275 | |
| 2,155 |
Regulatory balancing and memorandum accounts | |
| 822 | |
| 648 |
Pension and other postretirement benefits | |
| 1,289 | |
| 1,281 |
Other | |
| 24 | |
| 30 |
Total long-term | |
| 8,376 | |
| 8,981 |
Total regulatory liabilities | | $ | 8,899 | | $ | 9,584 |
5751
Regulatory Liabilities
SCE's regulatory liabilities included on its consolidated balance sheets are:
| | | | | | |
| | June 30, | | December 31, | ||
(in millions) |
| 2023 |
| 2022 | ||
Current: |
| |
|
| |
|
Regulatory balancing and memorandum accounts | | $ | 779 | | $ | 584 |
Energy derivatives | |
| — | |
| 338 |
Other | |
| 18 | |
| 42 |
Total current | |
| 797 | |
| 964 |
Long-term: | |
|
| |
|
|
Costs of removal | |
| 2,705 | |
| 2,589 |
Re-measurement of deferred taxes | |
| 2,224 | |
| 2,250 |
Recoveries in excess of ARO liabilities | |
| 1,444 | |
| 1,231 |
Regulatory balancing and memorandum accounts | |
| 1,353 | |
| 1,116 |
Pension and other postretirement benefits | |
| 992 | |
| 1,007 |
Other | |
| 17 | |
| 18 |
Total long-term | |
| 8,735 | |
| 8,211 |
Total regulatory liabilities | | $ | 9,532 | | $ | 9,175 |
Net Regulatory Balancing and Memorandum Accounts
The following table summarizes the significant components of regulatory balancing and memorandum accounts included in the above tables of regulatory assets and liabilities:
| | | | | | |
| | June 30, | | December 31, | ||
(in millions) |
| 2022 |
| 2021 | ||
Asset (liability) |
| |
|
| |
|
Energy resource recovery account | | $ | (21) | | $ | 759 |
Portfolio allocation balancing account | |
| 609 | |
| (183) |
New system generation balancing account | |
| (31) | |
| 73 |
Public purpose programs and energy efficiency programs | |
| (1,340) | |
| (1,066) |
Base revenue requirement balancing account | |
| 1,528 | |
| 849 |
GRC wildfire mitigation balancing accounts1 | | | 125 | | | 12 |
Residential uncollectibles balancing account | | | 55 | | | — |
Greenhouse gas auction revenue and low carbon fuel standard revenue | |
| (247) | |
| (298) |
FERC balancing accounts | |
| (4) | |
| 55 |
Wildfire and drought restoration accounts2 | |
| 308 | |
| 299 |
Wildfire-related memorandum accounts3 | | | 633 | | | 1,456 |
COVID-19-related memorandum accounts | | | 96 | | | 94 |
Customer service re-platform memorandum account4 | | | 180 | | | 128 |
Tax accounting memorandum account and pole loading balancing account | | | 158 | | | 171 |
Excess bond and power charge balancing account5 | | | (139) | | | — |
Other | |
| 7 | |
| (62) |
Asset | | $ | 1,917 | | $ | 2,287 |
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| | | | | | |
| | June 30, | | December 31, | ||
(in millions) |
| 2023 |
| 2022 | ||
Asset (liability) |
| |
|
| |
|
Energy resource recovery account | | $ | (471) | | $ | 1,580 |
Portfolio allocation balancing account | |
| 1,613 | |
| (73) |
New system generation balancing account | |
| 135 | |
| (63) |
Public purpose programs and energy efficiency programs | |
| (1,900) | |
| (1,577) |
Base revenue requirement balancing account | |
| 1,566 | |
| 1,108 |
GRC wildfire mitigation balancing accounts | | | 192 | | | 67 |
Residential uncollectibles balancing account | | | 28 | | | — |
Greenhouse gas auction revenue and low carbon fuel standard revenue | |
| (181) | |
| (289) |
FERC balancing accounts | |
| (114) | |
| (123) |
Wildfire and drought restoration accounts | |
| 383 | |
| 352 |
Wildfire-related memorandum accounts | | | 886 | | | 1,168 |
COVID-19-related memorandum accounts | | | 69 | | | 67 |
Customer service re-platform memorandum account | | | 70 | | | 64 |
Tax accounting memorandum account and pole loading balancing account | | | 192 | | | 90 |
Excess bond and power charge balancing account | | | 9 | | | (56) |
Other | |
| 72 | |
| (26) |
Asset | | $ | 2,549 | | $ | 2,289 |
Note 12. Commitments and Contingencies
Indemnities
Edison International and SCE have various financial and performance guarantees and indemnity agreements which are issued in the normal course of business.
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Edison International and SCE have agreed to provide indemnifications through contracts entered into in the normal course of business. These are primarily indemnifications against adverse litigation outcomes in connection with underwriting agreements, indemnities for specified environmental liabilities and income taxes with respect to assets sold or other contractual arrangements. Edison International's and SCE's obligations under these agreements may or may not be limited in terms of time and/or amount, and in some instances Edison International and SCE may have recourse against third parties. Edison International and SCE have not recorded a liability related to these indemnities. The overall maximum amount of the obligations under these indemnifications cannot be reasonably estimated.
Contingencies
In addition to the matters disclosed in these Notes, Edison International and SCE are involved in other legal, tax, and regulatory proceedings before various courts and governmental agencies regarding matters arising in the ordinary course of business. Edison International and SCE believe the outcome of each of these other proceedings will not materially affect its financial position, results of operations and cash flows.
Southern California Wildfires and Mudslides
WildfiresCalifornia has experienced unprecedented weather conditions in recent years due to climate change and wildfires in SCE's territory, including those where SCE's equipment may be alleged to be associated with the fire's ignition, have caused loss of life and substantial damage in recent years. California has experienced unprecedented weather conditions in recent years due to climate change, and SCE's service territory remains susceptible to additional wildfire activity.
Numerous claims related to wildfire events have been initiated against SCE and Edison International. Edison International and SCE have incurred material losses in connection with the 2017/2018 Wildfire/Mudslide Events (defined below), which are described below. In addition, SCE's equipment has been, and may further be, alleged to be associated with several wildfires that have originated in Southern California subsequent to 2018, including the 2019/2020 Wildfires (defined below) and the Coastal Fire (defined below). Edison International and SCE expect that any losses incurred in connection with each of those post-2018 wildfires will be covered by insurance, subject to self-insured retentions and co-insurance, or third-party receivables, and expect that any such losses after recoveries will not be material.2018.
Liability Overview
The extent of legal liability for wildfire-related damages in actions against utilities depends on a number of factors, including whether the utility substantially caused or contributed to the damages and whether parties seeking recovery of damages will be required to show negligence in addition to causation. California courts have previously found utilities to be strictly liable for property damage along with associated interest and attorneys' fees, regardless of fault, by applying the theory of inverse condemnation when a utility's facilities were determined to be a substantial cause of a wildfire that caused the property damage. If inverse condemnation is held to be inapplicable to SCE in connection with a wildfire, SCE still could be held liable for property damages and associated interest if the property damages were found to have been proximately caused by SCE's negligence. If SCE were to be found negligent, SCE could also be held liable for, among other things, fire suppression costs, business interruption losses, evacuation costs, clean-up costs, medical expenses, and personal injury/wrongful death claims. Additionally, SCE could potentially be subject to fines and penalties for alleged violations of CPUC rules and state laws investigated in connection with the ignition of a wildfire.
While investigations into the cause of a wildfire event are conducted by one or more fire agencies, fire agency findings do not determine legal causation of or assign legal liability for a wildfire event. Final determinations of legal causation and liability for wildfire events, including determinations of whether SCE was negligent, would only be made during lengthy and complex litigation processes.processes and settlements may be reached before determinations of legal liability are ever made. Even when investigations are still pending or legal liability is disputed, an
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assessment of likely outcomes, including through future settlement of disputed claims, may require estimated losses to be accrued under accounting standards. Each reporting period, management reviews its loss estimates for remaining alleged and potential claims related to wildfire events. The process for estimating losses associated with alleged and potential wildfire related claims requires management to exercise significant judgment based on a number of assumptions and subjective factors, including, but not limited to: estimates of known and expected claims by third parties based on currently available information, opinions of counsel regarding litigation risk, the
53
status of and developments in the course of litigation, and prior experience litigating and settling wildfire litigation claims. As additional information becomes available, management's estimates and assumptions regarding the causes and financial impact of wildfire events may change.Actual losses incurred may be higher or lower than estimated based on several factors, including the uncertainty in estimating damages that have been or may be alleged.
2017/2018 Wildfire/Mudslide Events
Wildfires in SCE's territory in December 2017 and November 2018 caused loss of life, substantial damage to both residential and business properties, and service outages for SCE customers. The investigating government agencies, the Ventura County Fire Department ("VCFD") and California Department of Forestry and Fire Protection ("CAL FIRE"), have determined that the largest of the 2017 fires in SCE's territory originated on December 4, 2017, in the Anlauf Canyon area of Ventura County (the investigating agencies refer to this fire as the "Thomas Fire"), followed shortly thereafter by a second fire that originated near Koenigstein Road in the City of Santa Paula (the "Koenigstein Fire"). The December 4, 2017 fires eventually burned substantial acreage in both Ventura and Santa Barbara Counties. According to CAL FIRE, the Thomas and Koenigstein Fires, collectively, burned over 280,000 acres, destroyed or damaged an estimated 1,343 structures and resulted in 2two confirmed fatalities. The largest of the November 2018 fires in SCE's territory, known as the "Woolsey Fire," originated in Ventura County and burned acreage in both Ventura and Los Angeles Counties. According to CAL FIRE, the Woolsey Fire burned almost 100,000 acres, destroyed an estimated 1,643 structures, damaged an estimated 364 structures and resulted in 3three confirmed fatalities. NaNFour additional fatalities are alleged to have been associated with the Woolsey Fire.
As described below, multiple lawsuits related to the Thomas and Koenigstein Fires and the Woolsey Fire have been initiated against SCE and Edison International. Some of the Thomas and Koenigstein Fires lawsuits claim that SCE and Edison International have responsibility for the damages caused by debris flows and flooding in Montecito and surrounding areas in January 2018 (the "Montecito Mudslides") based on a theory alleging that SCE has responsibility for the Thomas and/or Koenigstein Fires and further alleging that the Thomas and/or Koenigstein Fires proximately caused the Montecito Mudslides. According to Santa Barbara County initial reports, the Montecito Mudslides destroyed an estimated 135 structures, damaged an estimated 324 structures, and resulted in 21 confirmed fatalities, with 2two additional fatalities presumed. One of the presumed fatalities has beenbut not officially confirmed.
The Thomas Fire, the Koenigstein Fire, the Montecito Mudslides (defined below) and the Woolsey Fire are each referred to as a "2017/2018 Wildfire/Mudslide Event," and, collectively, referred to as the "2017/2018 Wildfire/Mudslide Events."
As of June 30, 2022, Edison International and2023, SCE had paid $6.9$8.1 billion under executed settlements, had $86$130 million to be paid under executed settlements, including $65 million to be paid under the SED Agreement (as defined below), and had $0.9 billion$572 million of estimated losses for remaining alleged and potential claims and for the SED Agreement (defined below) reflected on theirits consolidated balance sheets related to the 2017/2018 Wildfire/Mudslide Events. As of the same date, Edison International and SCE had assets for expected recoveries through FERC electric rates of $134$43 million on theirits consolidated balance sheets and had exhausted expected insurance recoveries related to the 2017/2018 Wildfire/Mudslide Events.
The estimated losses for the 2017/2018 Wildfire/Mudslide Events do not include an estimate of potential losses related to certain alleged and potential claims made by the California Governor's Office of Emergency Service ("Cal OES") seeking recovery on behalf of itself and 30 state and local government entities that did not pursue their own suits against SCE, but sustained damage in the 2017/2018 Wildfire/Mudslide Events and received funding through the Federal Emergency Management Agency ("FEMA") that was dispersed by the Cal OES. As of the filing of this report, SCE has not concluded that losses related to FEMA funds disbursed by Cal OES are probable.
Edison International and SCE may incur a material loss in excess of amounts accrued in connection with the remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events. Due to the number of uncertainties and possible outcomes related to the 2017/2018 Wildfire/Mudslide Events litigation, Edison International and SCE cannot estimate the upper end of the range of reasonably possible losses that may be incurred.
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Estimated losses for the 2017/2018 Wildfire/Mudslide Events litigation are based on a number of assumptions and are subject to change as additional information becomes available. Actual losses incurred may be higher or lower than estimated based
60
on several factors, including the uncertainty in estimating damages that have been or may be alleged. For instance, SCE will receive additional information with respect to damages claimed particularly with respect to plaintiffs inas the Woolsey litigation, as milestones in the litigation are met.claims mediation processes progress. Other factors that can cause actual losses incurred to be higher or lower than estimated include the ability to reach settlements and the outcomes of settlements reached through the ongoing claims mediation processes, uncertainties related to the sufficiency of insurance held by plaintiffs, uncertainties related to the litigation processes, including whether plaintiffs will ultimately pursue claims, uncertainty as to the legal and factual determinations to be made during litigation, including uncertainty as to the contributing causes of the 2017/2018 Wildfire/Mudslide Events, the complexities associated with fires that merge and whether inverse condemnation will be held applicable to SCE with respect to damages caused by the Montecito Mudslides, and the uncertainty as to how these factors impact future settlements.
The CPUC and FERC may not allow SCE to recover uninsured losses through electric rates if it is determined that such losses were not reasonably or prudently incurred. SCE will seek rate recovery of prudently-incurred actualprudently incurred losses and related costs realized in connection with the 2017/2018 Wildfire/Mudslide Events in excess of available insurance, other than for any obligations under the SED Agreement (as defined below). See "Loss Estimates for Third Party Claims and Potential Recoveries from Insurance and through Electric Rates" below for additional information.
External Investigations and Internal Review
The VCFD and CAL FIRE have jointly issued reports concerning their findings regarding the causes of the Thomas Fire and the Koenigstein Fire. The reports did not address the causes of the Montecito Mudslides. SCE has also received a non-final redacted draft of a report from the VCFD regarding Woolsey Fire (the "Redacted Woolsey Report"). SCE cannot predict when the VCFD will release its final report regarding the Woolsey Fire. The VCFD and CAL FIRE findings do not determine legal causation of or assign legal liability for the Thomas, Koenigstein or Woolsey Fires; final determinations of legal causation and liability would only be made during lengthy and complex litigation.
The CPUC's Safety and Enforcement Division ("SED") conducted investigations to assess SCE's compliance with applicable rules and regulations in areas impacted by the Thomas, Koenigstein and Woolsey Fires. As discussed below, in October 2021, SCE and the SED executed the SED Agreement (as defined below) to resolve the SED's investigations into the 2017/2018 Wildfire/Mudslide Events.
The California Attorney General's Office has completed its investigation of the Thomas Fire and the Woolsey Fire without pursuing criminal charges.
SCE's internal review into the facts and circumstances of each of the 2017/2018 Wildfire/Mudslide Events is complex and time consuming. SCE expects to obtain and review additional information and materials in the possession of third parties during the course of its internal reviews and the litigation processes.
Thomas Fire
On March 13, 2019, the VCFD and CAL FIRE jointly issued a report concluding, after ruling out other possible causes, that the Thomas Fire was started by SCE power lines coming into contact during high winds, resulting in molten metal falling to the ground. However, the report does not state that their investigation found molten metal on the ground. At this time, based on available information, SCE has not determined whetherbelieves that it is likely that its equipment causedwas not associated with the ignition of the Thomas Fire. Based on publicly available radar data showing a smoke plume in the Anlauf Canyon area emerging in advance of the report's indicated start time and other evidence, SCE believes that the Thomas Fire started at least 12 minutes prior to any issue involving SCE's system and at least 15 minutes prior to the start time indicated in the report. SCE is continuing to assess the extent of damages that may be attributable to the Thomas Fire.
55
Koenigstein Fire
On March 20, 2019, the VCFD and CAL FIRE jointly issued a report finding that the Koenigstein Fire was caused when an energized SCE electrical wire separated and fell to the ground along with molten metal particles and ignited the dry
61
vegetation below. As previously disclosed, SCE believes that its equipment was associated with the ignition of the Koenigstein Fire. SCE is continuing to assess the extent of damages that may be attributable to the Koenigstein Fire.
Montecito Mudslides
SCE's internal review includes inquiry into whether the Thomas and/or Koenigstein Fires proximately caused or contributed to the Montecito Mudslides, whether, and to what extent, the Thomas and/or Koenigstein Fires were responsible for the damages in the Montecito area and other factors that potentially contributed to the losses that resulted from the Montecito Mudslides. Many other factors, including, but not limited to, weather conditions and insufficiently or improperly designed and maintained debris basins, roads, bridges and other channel crossings, could have proximately caused, contributed to or exacerbated the losses that resulted from the Montecito Mudslides.
At this time, based on available information, SCE has not been able to determine whether the Thomas Fire or the Koenigstein Fire, or both, were responsible for the damages in the Montecito area. In the event that SCE is determined to have caused the fire that spread to the Montecito area, SCE cannot predict whether, if fully litigated, the courts would conclude that the Montecito Mudslides were caused or contributed to by the Thomas and/or Koenigstein Fires or that SCE would be liable for some or all of the damages caused by the Montecito Mudslides.
Woolsey Fire
SCE's internal review into the facts and circumstances of the Woolsey Fire is ongoing. SCE has reported to the CPUC that there was an outage on SCE's electric system in the vicinity of where the Woolsey Fire reportedly began on November 8, 2018. SCE is aware of witnesses who saw fire in the vicinity of SCE's equipment at the time the fire was first reported. While SCE did not find evidence of downed electrical wires on the ground in the suspected area of origin, it observed a pole support wire in proximity to an electrical wire that was energized prior to the outage.
The Redacted Woolsey Report states that the VCFD investigation team determined that electrical equipment owned and operated by SCE was the cause of the Woolsey Fire. Absent additional evidence, SCE believes that it is likely that its equipment was associated with the ignition of the Woolsey Fire. SCE expects to obtain and review additional information and materials in the possession of CAL FIRE and others during the course of its internal review and the Woolsey Fire litigation process, including SCE equipment that has been retained by CAL FIRE.
Litigation
Multiple lawsuits related to the 2017/2018 Wildfire/Mudslide Events naming SCE as a defendant have been filed by three categories of plaintiffs: individual plaintiffs, subrogation plaintiffs and public entity plaintiffs. A number of the lawsuits also name Edison International as a defendant and some of the lawsuits were filed as purported class actions. The litigation could take a number of years to be resolved because of the complexity of the matters and number of plaintiffs.
On October 4, 2018, the Los Angeles Superior Court denied Edison International's and SCE's challenge to the application of inverse condemnation to SCE with respect to the Thomas and Koenigstein Fires and, on February 26, 2019, the California Supreme Court denied SCE's petition to review the Superior Court's decision. In April 2022, following a stipulated judgment entered against SCE in the TKM litigation, SCE filed an appeal related to inverse condemnation in the California Court of Appeal.
In January 2019, SCE filed a cross-complaint against certain local public entities alleging that failures by these entities, such as failure to adequately plan for flood hazards and build and maintain adequate debris basins, roads, bridges and other
56
channel crossings, among other things, caused, contributed to or exacerbated the losses that resulted from the Montecito Mudslides. These cross-claims in the Montecito Mudslides litigation were not released as part of the Local Public Entity Settlements (as defined below).
Settlements
In the fourth quarter of 2019, SCE paid $360 million to a number of local public entities to resolve those parties' collective claims arising from the 2017/2018 Wildfire/Mudslide Events (the "Local Public Entity Settlements").
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In the third quarter of 2020, Edison International and SCE entered into an agreement (the "TKM Subrogation Settlement") under which all of the insurance subrogation plaintiffs' in the Thomas Fire, Koenigstein Fire and Montecito Mudslides litigation (the "TKM Subrogation Plaintiffs") collective claims arising from the Thomas Fire, Koenigstein Fire or Montecito Mudslides have been resolved. Under the TKM Subrogation Settlement, SCE paid the TKM Subrogation Plaintiffs an aggregate of $1.2 billion in October 2020 and also agreed to pay $0.555 for each dollar in claims to be paid by the TKM Subrogation Plaintiffs to their policy holders on or before July 15, 2023, up to an agreed upon cap.
In January 2021, Edison International and SCE entered into an agreement (the "Woolsey Subrogation Settlement") under which all of the insurance subrogation plaintiffs' in the Woolsey Fire litigation (the "Woolsey Subrogation Plaintiffs") collective claims arising from the Woolsey Fire have been resolved. Under the Woolsey Subrogation Settlement, SCE paid the Woolsey Subrogation Plaintiffs an aggregate of $2.2 billion in March and April 2021. SCE has also agreed to pay $0.67 for each dollar in claims to be paid by the Woolsey Subrogation Plaintiffs to their policy holders on or before July 15, 2023, up to an agreed upon cap.
As of June 30, 2022,2023, SCE has also entered into settlements with approximately 10,0008,000 individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation. In 20202022, 2021 and 2021,2020, SCE entered into settlements with individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation under which it agreed to pay an aggregate of approximately $1.7 billion, $1.7 billion and $300 million, and $1.7 billion, respectively, to those individual plaintiffs. In the first and second quarters of 20222023, SCE entered into settlements with individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation under which it agreed to pay an aggregate of approximately $700$148 million and $400$278 million, respectively, to those individual plaintiffs. The statutes of limitations for individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events have expired.
Edison International and SCE did not admit wrongdoing or liability as part of any of the settlements described above. Other claims and potential claims related to the 2017/2018 Wildfire/Mudslide Events remain. SCE continues to explore reasonable settlement opportunities with other plaintiffs in the outstanding 2017/2018 Wildfire/Mudslide Events litigation.
SED Agreement
In October 2021, SCE and the SED executed an agreement (the "SED Agreement") to resolve the SED's investigations into the 2017/2018 Wildfire/Mudslide Events and three other 2017 wildfires for, among other things, aggregate costs of $550 million. The $550 million in costs is comprised of a $110 million fine to be paid to the State of California General Fund, $65 million of shareholder-funded safety measures, and an agreement by SCE to waive its right to seek cost recovery in CPUC-jurisdictional rates for $375 million of third-party uninsured claims payments. The SED Agreement provides that SCE may, on a permanent basis, exclude from its ratemaking capital structure any after-tax charges to equity or debt borrowed to finance costs incurred under the SED Agreement. The SED Agreement also imposes other obligations on SCE, including reporting requirements and safety-focused studies. The CPUC initially approved the SED Agreement in December 2021. In response to a legal challenge by The Utility Reform Network, the matter was remanded for further analysis of the factors required to be considered for penalty assessments relative to the SED Agreement. In July 2022, the CPUC issued a revised resolution considering the penalty assessment factors and re-approving the SED Agreement. The deadline for The Utility Reform Network to file an appeal is August 15, 2022. SCE's obligations under the SED Agreement will only commence aftercommenced on August 15, 2022, when CPUC approval of the SED Agreement isbecame final and non-appealable. SCE did not admit imprudence, negligence or liability with respect to the 2017/2018 Wildfire/Mudslide Events in the SED Agreement.
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Loss Estimates for Third Party Claims and Potential Recoveries from Insurance and through Electric Rates
At June 30, 20222023 and December 31, 2021,2022, Edison International's and SCE's consolidated balance sheets includeincluded fixed payments to be made under executed settlement agreements and accrued estimated losses of $1.0 billion$702 million and $1.7$1.1 billion, respectively, for the 2017/2018 Wildfire/Mudslide Events. The following table presents changes in estimated losses since December 31, 2021:2022:
| | | | | | |
(in millions) |
| | |
| | |
Balance at December 31, 20211 | | $ | 1,734 | |||
Balance at December 31, 20221 | | $ | 1,119 | |||
Increase in accrued estimated losses | |
| 416 | |
| 90 |
Amounts paid | |
| (1,171) | |
| (507) |
Balance at June 30, 20222 | | $ | 979 | |||
Balance at June 30, 20232 | | $ | 702 | |||
| 1 | At December 31, |
| 2 | At June 30, 2023, $71 million in current liabilities, wildfire-related claims, on Edison International's and SCE's consolidated balance sheets consisted of $65 million of settlements executed and $6 million of short term payables under the SED Agreement in connection with the 2017/2018 Wildfire/Mudslide Events. At June 30, 2023, the $1,309 million included in deferred credits and other liabilities, wildfire-related claims, on Edison International's and SCE's consolidated balance sheets included Edison International's and SCE's best estimate of expected losses for remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events of $572 million, $59 million of long term payables under the SED Agreement and other wildfire-related claims estimates of $678 million. |
For the three months and six months ended June 30, 2023 and 2022, Edison International's and SCE's consolidated statements of income included charges for the estimated losses, net of expected recoveries from insurance and FERC customers, related to the 2017/2018 Wildfire/Mudslide Events as follows:
| | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, | ||||||||
(in millions) |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
Charge for wildfire-related claims | | $ | — | | $ | — | | $ | 90 | | $ | 416 |
Expected revenue from FERC customers | |
| — | | | — | |
| (6) | |
| (26) |
Total pre-tax charge | |
| — | |
| — | |
| 84 | |
| 390 |
Income tax benefit | |
| — | | | — | |
| (23) | | | (109) |
Total after-tax charge | | $ | — | | $ | — | | $ | 61 | | $ | 281 |
For events that occurred in 2017 and early 2018, principally the Thomas and Koenigstein Fires and Montecito Mudslides, SCE had $1.0 billion of wildfire-specific insurance coverage, subject to a self-insured retention of $10 million per occurrence. For the Woolsey Fire, SCE had an additional $1.0 billion of wildfire-specific insurance coverage, subject to a self-insured retention of $10 million per occurrence. Edison International and SCE record a receivable for insurance recoveries when recovery of a recorded loss is determined to be probable.
In total, through June 30, 2022,2023, SCE has accrued estimated losses of $7.9$8.8 billion, has paid or agreedis obligated to pay approximately $7.0$8.3 billion in settlements, including $65 million to be paid under the SED Agreement, and has recovered $2.0 billion from its insurance carriers in relation to the 2017/2018 Wildfire/Mudslide Events.
Recovery of SCE's actual losses realized in connection with the 2017/2018 Wildfire/Mudslide Events in excess of available insurance is subject to approval by regulators. Under accounting standards for rate-regulated enterprises, SCE defers costs as regulatory assets when it concludes that such costs are probable of future recovery in electric rates. SCE utilizes objectively
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determinable evidence to form its view on probability of future recovery. The only directly comparable precedent in which a California investor-owned utility has sought recovery for uninsured wildfire-related costs is San Diego Gas & Electric's ("SDG&E's&E") requests for cost recovery related to 2007 wildfire activity, where the FERC allowed recovery of all FERC-jurisdictional wildfire-related costs while the CPUC rejected recovery of all CPUC-jurisdictional wildfire-related costs based on a determination that SDG&E did not meet the CPUC's prudency standard. As a result, while SCE does not agree with the CPUC's decision, it believes that the CPUC's interpretation and application of the prudency standard to SDG&E creates substantial uncertainty regarding how that standard will be applied to an investor-owned utility in wildfire cost-recovery proceedings for fires ignited prior to July 12, 2019. SCE will continue to evaluate the probability of recovery based on available evidence, including judicial, legislative and regulatory decisions, including any CPUC decisions illustrating the interpretation and/or application of the prudency standard when making determinations regarding recovery of uninsured wildfire-related costs. While the CPUC has not made a determination regarding SCE's prudency relative to any of the 2017/2018 Wildfire/Mudslide Events, SCE is unable to conclude, at this time, that uninsured CPUC-jurisdictional wildfire-related costs are probable of recovery through
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electric rates. SCE would record a regulatory asset at the time it obtains sufficient information to support a conclusion that recovery is probable.
Through the operation of its FERC Formula Rate, and based upon the precedent established in SDG&E's recovery of FERC-jurisdictional wildfire-related costs, SCE believes it is probable it will recover its FERC-jurisdictional wildfire and mudslide related costs and has recorded total expected recoveries of $382 million within the FERC balancing account. This was the FERC portion of the total estimated losses accrued. As of June 30, 2023, collections have reduced the regulatory assets remaining in the FERC balancing account to $43 million.
In July 2019, SCE filed a CEMA application with the CPUC to seek recovery of, among other things, approximately $60 million of capital expenditures and capital related expenses incurred to restore service to customers and to repair, replace and restore buildings and SCE's facilities damaged or destroyed as a result of six 2017 fires, primarily the Thomas and Koenigstein Fires. In August 2021, the CPUC issued a final decision which denied without prejudice SCE's application to recover a revenue requirement of $8 million for all six 2017 wildfires on the basis that SCE did not demonstrate that it was prudent in relation to the Thomas and Rye fires and had failed to segregate the costs attributable to the other four fires. Of the $8 million revenue requirement that was denied, $6 million was for the Thomas and Rye fires. CAL FIRE has determined that the Thomas and Rye fires were caused by SCE equipment. The decision allows SCE to submit additional applications with the CPUC to recover the costs associated with the Thomas and Rye fires, does not specify a deadline for any such applications, and directs that SCE must prove it was prudent in relation to the Thomas and/or Rye fires, as applicable, in any such future applications. As required by the final decision with respect to the other four fires, SCE filed supplemental testimony in November 2021 segregating the restoration costs attributable to each such fire. In June 2022, the CPUC approved SCE's entire request with respect to the other four fires. As of June 30, 2022,2023, SCE has $182$173 million in assets recorded in property, plant and equipment in relation to restoration costs related to the 2017/2018 Wildfire/Mudslide Events which may not be recoverable. These assets would be impaired if the restoration costs are permanently disallowed by the CPUC in future cost recovery proceedings. SCE continuesexpects to incurseek to recover costs incurred for reconstructing its system and restoring service to structures that were damaged or destroyed by the Thomas, Koenigstein and Woolsey Fires and plans to file additionalin future applications with the CPUC to recover such costs.CPUC.
Through the operation of its FERC Formula Rate, and based upon the precedent established in SDG&E's recovery of FERC-jurisdictional wildfire-related costs, SCE believes it is probable it will recover its FERC-jurisdictional wildfire and mudslide related costs and has recorded total expected recoveries of $326 million within the FERC balancing account. This was the FERC portion of the total estimated losses accrued. As of June 30, 2022, collections have reduced the regulatory assets remaining in the FERC balancing account to $134 million.
2019/2020Post-2018 Wildfires
Several wildfires have significantly impacted portions of SCE's service territory in 2019 and 2020after 2018 (the wildfires that originated in Southern California in 2019 and 2020after 2018 where SCE's equipment may be alleged to be associated with the fire's ignition are referred to collectively as the "2019/2020"Post-2018 Wildfires"). AsNumerous claims related to the Post-2018 Wildfires have been initiated against SCE and Edison International. The SED is also conducting investigations with respect to several Post-2018 Wildfires.
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Through June 30, 2022, Edison International and 2023, SCE hadhas recorded total estimated losses (established at the lower end of the estimated range of reasonably possible losses) of $269$702 million, and expected recoveries from insurance of approximately $214$473 million reflected and expected recoveries through electric rates of $166 million related to the Post-2018 Wildfires. The after-tax net charges to earnings recorded through June 30, 2023 have been $45 million.
As of June 30, 2023, SCE had paid $30 million under executed settlements related to the Post-2018 Wildfires and Edison International's and SCE's estimated losses for remaining alleged and potential claims related to the Post-2018 Wildfires was $672 million. As of the same date, SCE had assets for expected recoveries through insurance of $466 million and through electric rates of $166 million on theirits consolidated balance sheets related to the 2019/2020Post-2018 Wildfires.
OneExpected recoveries from insurance recorded for the Post-2018 Wildfires are supported by SCE's insurance coverage for multiple policy years. While Edison International and SCE may incur material losses in excess of the 2019/2020amounts accrued for certain of the Post-2018 Wildfires, theEdison International and SCE expect that any losses incurred in connection with any such fire will be covered by insurance, subject to self-insured retentions and co-insurance, and expect that any such losses after expected recoveries from insurance and through electric rates will not be material.
2019 Saddle Ridge Fire
The "Saddle Ridge Fire," originated in Los Angeles countyCounty in October 2019 and burned approximately 9,000 acres, destroyed an estimated 19 structures, damaged an estimated 88 structures, and resulted in one fatality and injuries to 8 individualsfire fighters. In an unsigned and 1 fatality. An investigation intoundated report that SCE received in December 2022, the Los Angeles Fire Department stated with respect to the Saddle Ridge Fire that the cause of ignition was unintentional, the form of heat was undetermined, the item first ignited was undetermined and the material type first ignited was undetermined. The Los Angeles Fire Department report noted that no other competent ignition sources other than SCE’s transmission lines were found in the specific origin area of the Saddle Ridge Fire. SCE has been advised that the Los Angeles Fire Department investigation of the Saddle Ridge Fire remains open. A jury trial in the Saddle Ridge Fire litigation is being led by the Los Angeles Fire Department.currently set for January 2024. Based on pending litigation and without considering insurance recoveries, it is reasonably possible that SCE will incur a material loss in connection with the Saddle Ridge Fire, but the range of reasonably possible losses that could be incurred cannot be estimated at this time. SCE has not accrued a charge for potential losses relating to the Saddle Ridge Fire.
Another of the 2019/2020 Wildfires, theBobcat Fire
The "Bobcat Fire" was reported in the vicinity of Cogswell Dam in Los Angeles County California in September 2020. The United States Forest Service ("USFS") has reported that the Bobcat Fire burned approximately 116,000 acres in Los Angeles County, destroyed an estimated 87 homes, 1 commercial property and 83 minor structures, damaged an estimated 28 homes and 19 minor structures, and resulted in injuries to 6 firefighters. In addition, the USFS hasfire authorities have estimated suppression costs at $80 million. A camera in the vicinity of Cogswell Dam captured the initial stages of a fire with the first observed smoke approximately six minutes before an SCE circuit in the area experienced an anomaly (a
65
relay). An investigation into the cause of the Bobcat Fire is beingwas led by the USFS. In May 2023, SCE received a report of investigation from the USFS, in which the USFS finds that the Bobcat Fire was caused when an SCE electrical wire made contact with a tree limb. A jury trial in the Bobcat Fire litigation is currently set for January 2024. SCE expects to obtain and review additional information and materials in the possession of third parties during the course of its internal reviews and the USFS has taken a specific section of an SCE overhead conductor in the vicinity of Cogswell Dam into possession as part of its investigation. SCE understands that the USFS has also taken three tree branches in the area into possession. The SED is also conducting an investigation of the Bobcat Fire.litigation process. SCE has accrued material charges for potential losses relating to the Bobcat Fire. The accrued charges correspond to the lower end of the estimated range of reasonably possible losses that may be incurred in connection with the Bobcat Fire and isare subject to change as additional information becomes available. While Edison International and SCE may incur a material loss in excess of the amount accrued, they cannot estimate the upper end of the range of reasonably possible losses that may be incurred.
2022 Coastal Fire
The "Coastal Fire" originated in Orange County in May 2022 and burned approximately 200 acres. The Orange County Fire Authority ("OCFA") has reported that the Coastal Fire destroyed 20 residential structures and damaged 11 residential structures. In addition, 2Two firefighters also reportedly sustained minor injuries. In addition, fire authorities have estimated suppression
60
costs at approximately $3 million. While SCE's investigation remains ongoing, SCE's information reflects that a SCE circuit in the area experienced an anomaly (a relay) approximately 2 minutes prior to the reported time of the fire. An investigation into the cause of the Coastal Fire is being led by the OCFA. The OCFA has retained SCE equipment in connection with its investigation. Based on pendingSCE expects to obtain and review additional information and materials in the possession of third parties during the course of its internal reviews and the litigation and without considering insurance recoveries, it isprocess. SCE has accrued material charges for potential losses relating to the Coastal Fire. The accrued charges correspond to the lower end of the estimated range of reasonably possible losses that SCE will incur a material lossmay be incurred in connection with the Coastal Fire butand are subject to change as additional information becomes available. While Edison International and SCE may incur a material loss in excess of the amount accrued, they cannot estimate the upper end of the range of reasonably possible losses that couldmay be incurred cannot beincurred.
2022 Fairview Fire
The "Fairview Fire" originated in Riverside County in September 2022 and burned approximately 28,000 acres. CAL FIRE has reported that the Fairview Fire destroyed 22 residential structures, damaged 5 residential structures, and destroyed or damaged 17 minor structures. CAL FIRE also reported 2 civilian fatalities, 1 civilian injury and 2 injuries to responding fire personnel. In addition, fire authorities have estimated suppression costs at this time.$39 million. While SCE's investigation remains ongoing, SCE's information reflects that a SCE circuit in the area experienced an anomaly (relay) approximately 8 minutes prior to the reported start time of the fire. An investigation into the cause of the Fairview Fire is being led by CAL FIRE. CAL FIRE has retained SCE equipment in connection with its investigation. SCE expects to obtain and review additional information and materials in the possession of third parties during the course of its internal reviews and the litigation process. SCE has not accrued a chargematerial charges for potential losses relating to the CoastalFairview Fire. The accrued charges correspond to the lower end of the estimated range of reasonably possible losses that may be incurred in connection with the Fairview Fire and are subject to change as additional information becomes available. While Edison International and SCE may incur a material loss in excess of the amount accrued, they cannot estimate the upper end of the range of reasonably possible losses that may be incurred.
Loss Estimates for Third Party Claims and Potential Recoveries from Insurance and through Electric Rates
At June 30, 2023 and December 31, 2022, Edison International's and SCE's consolidated balance sheets included accrued estimated losses of $672 million and $682 million, respectively, for the Post-2018 Wildfires.
The following table presents changes in estimated losses since December 31, 2022:
| | | |
(in millions) |
| | |
Balance at December 31, 2022 | | $ | 682 |
Increase in accrued estimated losses | |
| 6 |
Amounts paid | |
| (16) |
Balance at June 30, 2023 | | $ | 672 |
For the three months and six months ended June 30, 2023 and 2022, Edison International's and SCE's consolidated statements of income included charges for the estimated losses, net of expected recoveries from insurance and customers, related to the Post-2018 Wildfires as follows, respectively:
| | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, | ||||||||
(in millions) |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
Edison International and SCE: | | | | | | | | | | | | |
Charge for wildfire-related claims | | $ | — | | $ | 45 | | $ | 6 | | $ | 150 |
Expected insurance recoveries | |
| — | | | (43) | |
| — | |
| (139) |
Total pre-tax charge | |
| — | |
| 2 | |
| 6 | |
| 11 |
Income tax benefit | |
| — | | | (1) | | | (2) | | | (3) |
Total after-tax charge | | $ | — | | $ | 1 | | $ | 4 | | $ | 8 |
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Recovery of SCE's losses realized in connection with the Post-2018 Wildfires in excess of available insurance is subject to approval by regulators. The CPUC and FERC may not allow SCE to recover uninsured losses through electric rates if it is determined that such losses were not prudently incurred. Under accounting standards for rate-regulated enterprises, SCE defers costs as regulatory assets when it concludes that such costs are probable of future recovery in electric rates. SCE utilizes objectively determinable evidence to form its view on the probability of future recovery. As discussed above, there is evidence of a California investor-owned utility seeking recovery for uninsured wildfire-related costs and FERC allowing recovery of all FERC-jurisdictional wildfire-related costs while the CPUC rejected recovery of all CPUC-jurisdictional wildfire-related costs based on a determination that the utility did not meet the CPUC's prudency standard. This evidence was prior to the adoption of AB 1054 on July 12, 2019, after which date AB 1054 clarified that the CPUC must find a utility to be prudent if the utility's conduct related to the ignition was consistent with actions that a reasonable utility would have undertaken in good faith under similar circumstances, at the relevant point in time, and based on the information available at that time. Further, utilities with a valid safety certification at the time of the relevant wildfire will be presumed to have acted prudently related to a wildfire ignition unless a party in the cost recovery proceeding creates serious doubt as to the reasonableness of the utility's conduct, at which time, the burden shifts back to the utility to prove its conduct was prudent. Each of the Post-2018 Wildfires was ignited after July 12, 2019, and SCE has held a valid safety certificate since July 15, 2019. While a California investor-owned utility has not yet sought recovery for uninsured claims and other costs related to wildfires ignited after the adoption of AB 1054, SCE believes that for fires ignited after July 12, 2019, and investor-owned utilities holding a safety certificate at the time of the fire, the CPUC will apply a standard of review similar to that applied by the FERC which presumes all costs requested by an investor-owned utility are reasonable and prudent unless serious doubt as to the reasonableness of the utility’s conduct is raised. As such, SCE has concluded, at this time, that both uninsured CPUC-jurisdictional and uninsured FERC-jurisdictional wildfire-related costs related to the Post-2018 Wildfires, other than for those already authorized for inclusion in electric rates, are probable of recovery through electric rates. As of June 30, 2023, SCE has recorded total expected recoveries related to the Post-2018 Wildfires of $152 million within the WEMA and risk management balancing account and $14 million within the FERC balancing account. SCE will continue to evaluate the probability of recovery based on available evidence, including regulatory decisions, including any CPUC decisions illustrating the interpretation and/or application of the prudency standard under AB 1054, and, for each applicable fire, evidence that could cast serious doubt as to the reasonableness of SCE's conduct relative to that fire.
Wildfire Insurance Coverage
In May 2023, the CPUC allowed SCE to establish an expanded self-insurance program for wildfire-related costs that will be funded through CPUC-jurisdictional rates, with $150 million collected for the second half of 2023 and, in the absence of wildfire-related claims, $300 million collected for 2024. If losses are accrued for wildfire-related claims for wildfires that occur between July 1, 2023 and the end of 2024, customer rates will be increased in subsequent years, as needed, to allow for full recovery of the amounts accrued, subject to a shareholder contribution of 2.5% of any self-insurance costs ultimately paid exceeding $500 million in any year, up to a maximum annual contribution of $12.5 million. If adopted in the 2025 GRC, this self-insurance framework would continue, supporting a self-insurance fund of up to $1.0 billion. SCE’s self-insurance program meets its obligation to maintain reasonable insurance coverage under AB 1054 for the July 1, 2023 through June 30, 2024 period.
SCE has approximately $1.0 billion of wildfire-specific insurance coverage for events that may occuroccurred during the period July 1, 2022 through June 30, 2023, subject to $50up to $100 million of self-insured retention and up to approximately $13 million of co-insurance per fire, which results in aggregate net coverage of approximately $937 million. Of this coverage, approximately $102 million is provided by EIS and approximately $835 million is provided by other commercial insurers and approximately $102 million is provided by Edison Insurance Services ("EIS"insurance carriers (commercial insurance carriers other than EIS are referred to herein as "Third-Party Commercial Insurers").
SCE hadhas approximately $1.0 billion of wildfire-specific insurance coverage for events that occurred during the period July 1, 2021 through June 30, 2022, subject to $50up to $100 million of self-insured retention and co-insurance per fire, as well as
62
additional co-insurance of up to approximately $75$63 million of co-insurance,for the policy year, which resulted in net coverage of approximately $875 million provided by commercial insurers plusThird-Party Commercial Insurers and $28 million provided by EIS for part of the policy year.
Various coverage limitations within the policies that make up SCE's wildfire insurance coverage could result in additional material self-insured costs, for instance in the event of multiple wildfire occurrences during a policy period. SCE believes that its insurance coverage for the July 1, 2022 through June 30, 2023 period meets its obligation to maintain reasonable insurance coverage under AB 1054.
SCE's wildfire insurance expense for the July 1, 2022 through June 30, 2023 policy period prior to any regulatory deferrals, will bewas approximately $450 million, of which $357 million is paid to commercial insurance carriers.Third-Party Commercial Insurers. SCE's wildfire insurance expense for the July 1, 2021 through June 30, 2022 policy period prior to any regulatory deferrals, was approximately $437 million, of which $413 million was paid to commercial insurance carriers.Third-Party Commercial Insurers. The difference between the commercial insuranceThird-Party Commercial Insurer cost and total cost in both policy years was paid in premiums to EIS. Wildfire insurance premiums paid for the July 1, 2021 through June 30, 2022 and July 1, 2022 through June 30, 2023 policy periods are being recovered through customer rates. See Note 17 for further information.
While SCE's cost of obtaining commercial wildfire insurance coverage was lower in 2022 compared to 2021, SCE's cost of obtaining wildfire insurance coverage in recent years is significantly higher than costs incurred prior to the 2017/2018 Wildfire/Mudslide Events due to, among other things, the number of significant wildfire events throughout California and the application of inverse condemnation to investor-owned utilities. While SCE is required to maintain reasonable insurance
66
coverage under AB 1054, SCE may not be able to obtain a reasonable amount of wildfire insurance, at a reasonable cost, from commercial insurers for future policy periods.
Employment Litigation Matter
In August 2017, Justin Page and Alfredo Martinez, brought a lawsuit against SCE and Edison International in Los Angeles Superior Court ("Page/Martinez Matter"). Both Mr. Page and Mr. Martinez brought claims of retaliation and failure to prevent retaliation based on allegations that while they were employees of SCE they were retaliated against for reporting harassment of various female employees of SCE. Mr. Page additionally claimed that he was subjected to sexual harassment during the course of his employment. In June 2022, a jury found in favor of Mr. Page and Mr. Martinez and awarded them aggregate compensatory damages of $24.6 million and aggregate punitive damages of $440 million. In July 2022 the parties entered into agreements to resolve Mr. Page's and Mr. Martinez's collective claims in the Page/Martinez Matter. Edison International and SCE did not admit wrongdoing or liability as partrecord a receivable for insurance recoveries when recovery of the settlement. Edison International and SCE have accrued a liability, net of expected recoveries from insurance, of $23 million as of June 30, 2022.recorded loss is determined to be probable.
Environmental Remediation
SCE records its environmental remediation and restoration liabilities when site assessments and/or remedial actions are probable and a range of reasonably likely cleanup costs can be estimated. SCE reviews its sites and measures the liability quarterly, by assessing a range of reasonably likely costs for each identified site using currently available information, including existing technology, presently enacted laws and regulations, experience gained at similar sites, and the probable level of involvement and financial condition of other potentially responsible parties. These estimates include costs for site investigations, remediation, operation and maintenance, monitoring, and site closure. Unless there is a single probable amount, SCE records the lower end of this reasonably likely range of costs (reflected in "Other long-term liabilities") at undiscounted amounts as timing of cash flows is uncertain.
At June 30, 2022,2023, SCE's recorded estimated minimum liability to remediate its 2625 identified material sites (sites with a liability balance at June 30, 2022,2023, in which the upper end of the range of expected costs is at least $1 million) was $259$249 million, including $166$162 million related to San Onofre. In addition to these sites, SCE also has 1413 immaterial sites with a liability balance as of June 30, 2022,2023, for which the total minimum recorded liability was $4$3 million. Of the $263$252 million total environmental remediation liability for SCE, $244$234 million has been recorded as a regulatory asset. SCE expects to recover $38$35 million through an incentive mechanism that allows SCE to recover 90% of its environmental remediation costs at certain sites (SCE may request to include additional sites in this mechanism) and $206$199 million through proceedings that allow SCE to recover up to 100% of the costs incurred at certain sites through customer rates. SCE's identified sites include several sites for which there is a lack of currently available information, including the nature and magnitude of contamination, and the extent, if any, that SCE may be held responsible for contributing to any costs incurred for remediating these sites. Thus, no reasonable estimate of cleanup costs can be made for these sites.
The ultimate costs to clean up SCE's identified sites may vary from its recorded liability due to numerous uncertainties inherent in the estimation process, such as: the extent and nature of contamination; the scarcity of reliable data for identified sites; the varying costs of alternative cleanup methods; developments resulting from investigatory studies; the possibility of identifying additional sites; and the time periods over which site remediation is expected to occur. SCE believes that, due to these uncertainties, it is reasonably possible that cleanup costs at the identified material sites and immaterial sites could exceed its recorded liability by up to $118$120 million and $9$7 million, respectively. The upper limit of this range of costs was estimated using assumptions least favorable to SCE among a range of reasonably possible outcomes.
SCE expects to clean up and mitigate its identified sites over a period of up to 40 years. Remediation costs for each of the next five years are expected to range from $7$8 million to $27$28 million. Costs incurred for the six months ended June 30, 2023 and 2022 were $7 million and 2021 were $4 million, and $5 million, respectively.
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Based upon the CPUC's regulatory treatment of environmental remediation costs incurred at SCE, SCE believes that costs ultimately recorded will not materially affect its results of operations, financial position, or cash flows. There can be no
63
assurance, however, that future developments, including additional information about existing sites or the identification of new sites, will not require material revisions to estimates.
Nuclear Insurance
SCE is a member of Nuclear Electric Insurance Limited ("NEIL"), a mutual insurance company owned by entities with nuclear facilities. NEIL provides insurance for nuclear property damage, including damages caused by acts of terrorism up to specified limits, and for accidental outages for active facilities. The amount of nuclear property damage insurance purchased for San Onofre and Palo Verde exceeds the minimum federal requirement of $50 million and $1.1 billion, respectively. If NEIL losses at any nuclear facility covered by the arrangement were to exceed the accumulated funds for these insurance programs, SCE could be assessed retrospective premium adjustments of up to approximately $30$24 million per year.
Federal law limits public offsite liability claims for bodily injury and property damage from a nuclear incident to the amount of available financial protection, which is currently approximately $13.5 billion for Palo Verde and $560 million for San Onofre.Onofre and $13.7 billion for Palo Verde. SCE and other owners of San Onofre and Palo Verde have purchased the maximum private primary insurance available through a Facility Form issued by American Nuclear Insurers. SCE withdrew from participation in the secondary insurance pool for San Onofre for offsite liability insurance effective January 5, 2018. Based on its ownership interests in Palo Verde, SCE could be required to pay a maximum of approximately $65 million per nuclear incident for future incidents. However, it would have to pay no more than approximately $10 million per future incident in any one year. Based on its ownership interests in San Onofre and Palo Verde prior to January 5, 2018, SCE could be required to pay a maximum of approximately $255 million per nuclear incident and a maximum of $38 million per year per incident for liabilities arising from events prior to January 5, 2018, although SCE is not aware of any such events.
Upstream Lighting Program
From 2017 – 2019, SCE administered the Upstream Lighting Program, part of a statewide program administered by investor-owned utilities that offered discounted energy efficient light bulbs to customers through incentives to lighting manufacturers. The CPUC began investigating the programs administered by the investor-owned utilities based on reports that investor-owned utilities, including SCE, shipped a significant number of bulbs under the program that could not be tracked to customers. Beginning in January 2020, the CPUC has sought comments on remedies related to SCE's implementation of the Upstream Lighting Program from 2017 through 2019 program years. SCE undertook an independent investigation of bulbs shipped to retailers categorized as grocery and discount businesses during the 2017 to 2019 program years and found that there were overstocking of bulbs and program management shortcomings. Incentives paid to manufacturers for bulbs shipped to grocery and discount businesses during the relevant period, including those that were sold to customers, were approximately $91 million. In addition, SCE received incentives related to the bulbs shipped to grocery and discount businesses through an energy efficiency incentive mechanism ("ESPI Mechanism") of approximately $3.5 million related to the bulbs shipped in 2017 and 2018. SCE may also receive incentives of approximately $1.3 million under the ESPI Mechanism in 2022 related to bulbs shipped to grocery and discount businesses in 2018 and 2019.
In January 2021, the Public Advocates Office and The Utility Reform Network provided comments to the CPUC arguing that SCE imprudently managed the program. In March 2021, SCE filed comments arguing that remedies of approximately $21 million are appropriate. In May 2022, the CPUC issued an order directing SCE to show cause as to why SCE should not be required to: (i) refund ratepayer funding for the portion of the program budget associated with light bulbs that were unaccounted for, (ii) refund ESPI awards associated with unaccounted-for light bulbs, and (iii) pay penalties for misrepresenting program progress and results to the CPUC. In June 2022, SCE responded to the order, again arguing that remedies of approximately $21 million are appropriate. In July 2022, the Public Advocates Office and The Utility Reform Network responded to the order requesting: a refund of $33 million of ESPI awards, which includes incentives associated
68
with the Upstream Lighting Program and other energy efficiency programs; a refund of $92 million of incentives paid to manufacturers and associated program administrative costs; $98 million in fines.
SCE has accrued a charge for potential losses relating to the Upstream Lighting Program. The accrued charge corresponds to the lower end of the estimated range of reasonably possible losses that may be incurred in connection with the Upstream Lighting Program and is subject to change as additional information becomes available. While Edison International and SCE may incur a material loss in excess of the amount accrued, they cannot estimate the upper end of the range of reasonably possible losses that may be incurred.
Note 13. Equity
Common Stock Issuances
As of June 30, 2023, Edison International has not issued any shares through its "at-the-market" ("ATM") program established in August 2022. Under the ATM program, Edison International may sell shares of its common stock having an aggregate sales price of up to $500 million. Edison International has no obligation to sell the remaining shares available under the ATM program.
Edison International continued to settle its ongoing common stock requirements of various internal programs through issuance of new common stock. During the three months ended June 30, 2022, 393,8632023, 484,041 shares of common stock were issued as stock compensation awards for net cash receipts of $20$28 million, 64,53160,691 shares of new common stock were issued in lieu of distributing $5$4 million to shareholders opting to receive dividend payments in the form of additional common stock and 31,00041,000 shares of common stock were issued to employees through the 401(k) defined contribution savings plan for net cash receipts of $2$3 million as dividend payments.
During the six months ended June 30, 2022, 784,8322023, 808,479 shares of common stock were issued as stock compensation awards for net cash receipts of $31$39 million, 136,346128,005 shares of new common stock were issued in lieu of distributing $9 million to shareholders opting to receive dividend payments in the form of additional common stock, 71,00070,000 shares of common stock were issued to employees through the 401(k) defined contribution savings plan for net cash receipts of $5 million as dividend payments 14,269and 26,481 shares of common stock were issued to employees through the Employee Stock Purchase PlanESPP for net cash receipts of $1 million and 12,864 shares$2 million.
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In February 2022, Edison International terminated its "at-the-market" ("ATM") program established in May 2019. Edison International did not issue any shares during 2022 through the ATM program.
Equity Contributions
For both the three and six months ended June 30, 2022, SCE received a total of $700 million in capital contributions from Edison International Parent to support SCE's capital program, maintain the equity portion of SCE's capital structure at authorized levels and for general corporate purposes.
Note 14. Accumulated Other Comprehensive Loss
Edison International's accumulated other comprehensive loss, net of tax, consist of:
| | | | | | | | | | | | | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, | | Three months ended June 30, | | Six months ended June 30, | | ||||||||||||||||
(in millions) |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2023 |
| 2022 |
| 2023 |
| 2022 | | ||||||||
Beginning balance | | $ | (52) | | $ | (67) | | $ | (54) | | $ | (69) | | $ | (9) | | $ | (52) | | $ | (11) | | $ | (54) | |
Pension and PBOP – net loss: | |
| | |
|
| |
|
| |
|
| |||||||||||||
Pension and PBOP: | |
| | |
|
| |
|
| |
|
| | ||||||||||||
Reclassified from accumulated other comprehensive loss1 | |
| 4 | |
| 2 | |
| 6 | |
| 4 | |
| 1 | |
| 4 | |
| 1 | |
| 6 | |
Foreign currency translation adjustments | | | — | | | — | | | 2 | | | — | | ||||||||||||
Change | |
| 4 | |
| 2 | |
| 6 | |
| 4 | |
| 1 | |
| 4 | |
| 3 | |
| 6 | |
Ending Balance | | $ | (48) | | $ | (65) | | $ | (48) | | $ | (65) | | $ | (8) | | $ | (48) | | $ | (8) | | $ | (48) | |
| 1 | These items are included in the computation of net periodic pension and PBOP Plan |
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SCE's accumulated other comprehensive loss, net of tax, consists of:
| | | | | | | | | | | | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, | | Three months ended June 30, | | Six months ended June 30, | ||||||||||||||||
(in millions) |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||||
Beginning balance | | $ | (31) | | $ | (39) | | $ | (32) | | $ | (41) | | $ | (8) | | $ | (31) | | $ | (8) | | $ | (32) |
Pension and PBOP – net loss: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Reclassified from accumulated other comprehensive loss1 | |
| 3 | |
| 1 | |
| 4 | |
| 3 | |
| — | |
| 3 | |
| — | |
| 4 |
Change | |
| 3 | |
| 1 | |
| 4 | |
| 3 | |
| — | |
| 3 | |
| — | |
| 4 |
Ending Balance | | $ | (28) | | $ | (38) | | $ | (28) | | $ | (38) | | $ | (8) | | $ | (28) | | $ | (8) | | $ | (28) |
| 1 | These items are included in the computation of net periodic pension and PBOP Plan |
Note 15. Other Income
Other income net of expenses is as follows:
| | | | | | | | | | | | |
| | Three months ended | | Six months ended | ||||||||
| | June 30, | | June 30, | ||||||||
(in millions) |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
SCE other income (expense): |
| |
|
| |
|
| |
|
| |
|
Equity allowance for funds used during construction | | $ | 39 | | $ | 30 | | $ | 75 | | $ | 61 |
Increase in cash surrender value of life insurance policies and life insurance benefits | |
| 9 | |
| 6 | |
| 20 | |
| 21 |
Interest income | |
| 66 | |
| 15 | |
| 126 | |
| 17 |
Net periodic benefit income – non-service components | |
| 26 | |
| 31 | |
| 52 | |
| 65 |
Civic, political and related activities and donations | |
| (7) | |
| (9) | |
| (16) | |
| (18) |
Other | |
| (6) | |
| (5) | |
| (10) | |
| (7) |
Total SCE other income | |
| 127 | |
| 68 | |
| 247 | |
| 139 |
Other income (expense) of Edison International Parent and Other: | |
|
| |
|
| |
|
| |
|
|
Net loss on equity securities | |
| — | |
| (4) | |
| (3) | |
| (6) |
Other | |
| 1 | |
| 2 | |
| 3 | |
| 1 |
Total Edison International other income | | $ | 128 | | $ | 66 | | $ | 247 | | $ | 134 |
| | | | | | | | | | | | |
| | Three months ended | | Six months ended | ||||||||
| | June 30, | | June 30, | ||||||||
(in millions) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
SCE other income (expense): |
| |
|
| |
|
| |
|
| |
|
Equity allowance for funds used during construction | | $ | 30 | | $ | 25 | | $ | 61 | | $ | 60 |
Increase in cash surrender value of life insurance policies and life insurance benefits | |
| 6 | |
| 15 | |
| 21 | |
| 25 |
Interest income | |
| 15 | |
| 1 | |
| 17 | |
| 1 |
Net periodic benefit income – non-service components | |
| 31 | |
| 33 | |
| 65 | |
| 66 |
Civic, political and related activities and donations | |
| (9) | |
| (8) | |
| (18) | |
| (12) |
Other | |
| (5) | |
| (2) | |
| (7) | |
| (4) |
Total SCE other income | |
| 68 | |
| 64 | |
| 139 | |
| 136 |
Other income (expense) of Edison International Parent and Other: | |
|
| |
|
| |
|
| |
|
|
Net (losses) gains on equity securities | |
| (4) | |
| 12 | |
| (6) | |
| 12 |
Other | |
| 2 | |
| — | |
| 1 | |
| — |
Total Edison International other income | | $ | 66 | | $ | 76 | | $ | 134 | | $ | 148 |
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Note 16. Supplemental Cash Flows Information
Supplemental cash flows information is:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Edison International | | SCE | | | Edison International | | SCE | ||||||||||||||||
| | Six months ended June 30, | | | Six months ended June 30, | ||||||||||||||||||||
(in millions) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||||
Cash payments (receipts): |
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Interest, net of amounts capitalized | | $ | 438 | | $ | 408 | | $ | 375 | | $ | 345 | | | $ | 634 | | $ | 438 | | $ | 520 | | $ | 375 |
Income taxes, net | |
| (60) | |
| (87) | |
| (42) | |
| (87) | | |
| — | |
| (60) | |
| — | |
| (42) |
Non-cash financing and investing activities: | |
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Dividends declared but not paid: | |
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Common stock | |
| 267 | |
| 252 | |
| 325 | |
| 0 | | |
| 283 | |
| 267 | |
| 350 | |
| 325 |
Preference stock of SCE | |
| 5 | |
| 0 | |
| 5 | |
| 0 | | |
| 8 | |
| 5 | |
| 8 | |
| 5 |
SCE's accrued capital expenditures at June 30, 2023 and 2022 and 2021 were $609$489 million and $478$609 million, respectively. Accrued capital expenditures will be included as an investing activity in the consolidated statements of cash flowflows in the period paid.
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Note 17. Related-Party Transactions
SCE has previously purchased wildfire liability insurance from Edison Insurance Services, Inc. ("EIS"),EIS, a wholly-owned subsidiary of Edison International. In July 2022, SCE purchased wildfire liability insurance for premiums of $273 million, from EIS.EIS for the period to June 30, 2023. EIS fully reinsured the exposure for these policies through the commercial reinsurance market, with reinsurance limits and premiums equal to those of the insurance purchased by SCE, except for a contract for apremium of $93 million under which EIS provided insurance protection to SCE. SCE will recordrecorded the premium as insurance expense and will recordrecorded equal revenue due to customer funding through regulatory cost recovery mechanisms, therefore there will bewas no earnings impact on SCE's consolidated statement of income. EIS will recordrecorded the premium as insurance revenue. On the Edison International consolidated statement of income, the EIS insurance revenue will eliminateeliminated with SCE's insurance expense, therefore the SCE customer revenues will impactincreased the earnings of Edison International.
The amount of insurance expense and corresponding revenue was $22 million for the three months ended June 30, 2023 and $44 million for the six months ended June 30, 2023.
The related-party transactions included in SCE's consolidated balance sheets for wildfire-related insurance purchased from EIS and related expected insurance recoveries were as follows:
| | | | | | | | | | | | | |
| | June 30, | | December 31, | | | June 30, | | December 31, | ||||
(in millions) |
| 2022 |
| 2021 | |
| 2023 |
| 2022 | ||||
Prepaid insurance1 | | $ | — | | $ | 52 | | | $ | — | | $ | 106 |
Long-term insurance receivable due from affiliate | | | 119 | | | — | | | | 334 | | | 334 |
1 | Reflected in "Prepaid expenses" on SCE's consolidated balance sheets. |
The expense for wildfire-related insurance premiums paid to EIS was $40$66 million and $44$40 million for the three months ended June 30, 2023 and 2022, respectively, and 2021,$132 million and $79 million and $87 million for the six months ended June 30, 20222023 and 2021,2022, respectively.
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CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The management of Edison International and SCE, under the supervision and with the participation of Edison International's and SCE's respective Chief Executive Officers and Chief Financial Officers, have evaluated the effectiveness of Edison International's and SCE's disclosure controls and procedures (as that term is defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended), respectively, as of the end of the second quarter of 2022.2023. Based on that evaluation, Edison International's and SCE's respective Chief Executive Officers and Chief Financial Officers have each concluded that, as of the end of the period, Edison International's and SCE's disclosure controls and procedures, respectively, were effective.
Changes in Internal Control Over Financial Reporting
There were no changes in Edison International's or SCE's internal control over financial reporting, respectively, during the second quarter of 20222023 that have materially affected, or are reasonably likely to materially affect, Edison International's or SCE's internal control over financial reporting.
Jointly Owned Utility Plant
Edison International's and SCE's respective scope of evaluation of internal control over financial reporting includes their Jointly Owned Utility Projects as discussed in "Notes to Consolidated Financial Statements—Note 2. Property, Plant and Equipment" in the 20212022 Form 10-K.
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LEGAL PROCEEDINGS
2017/2018 Wildfire/Mudslide Events
Multiple lawsuits related to the 2017/2018 Wildfire/Mudslide Events naming SCE as a defendant have been filed by three categories of plaintiffs: individual plaintiffs, subrogation plaintiffs and public entity plaintiffs. A number of the lawsuits also name Edison International as a defendant and some of the lawsuits were filed as purported class actions. The litigation could take a number of years to be resolved because of the complexity of the matters and number of plaintiffs.
As of July 21, 2022,20, 2023, SCE was aware of approximately 150 currently120 pending unsettled lawsuits, representing approximately 1,5001,000 plaintiffs, related to the Thomas and Koenigstein Fires naming SCE as a defendant. Approximately 80 of the approximately 150 pending120 lawsuits also name Edison International as a defendant based on its ownership and alleged control of SCE. One of the lawsuits was filed as a purported class action. The lawsuits, which have been filed in the superior courts of Ventura, Santa Barbara and Los Angeles Counties allege, among other things, negligence, inverse condemnation, trespass, private nuisance, and violations of the public utilities and health and safety codes. SCE and certain of the individual plaintiffs in the Thomas and Koenigstein Fire litigation have been pursuing settlements of claims under a mediation program adopted to promote an efficient and orderly settlement process. Some individual plaintiffs have opted to pursue trial outside of the settlement program.
Approximately 3050 of the approximately 150120 pending unsettled lawsuits mentioned in the paragraph above allege that SCE has responsibility for the Thomas and/or Koenigstein Fires and that the Thomas and/or Koenigstein Fires proximately caused the Montecito Mudslides, resulting in the plaintiffs' claimed damages. Many of the Montecito Mudslides lawsuits also name Edison International as a defendant based on its ownership and alleged control of SCE. In addition to other causes of action, some of the Montecito Mudslides lawsuits also allege personal injury and wrongful death. A bellwether jury trial previously scheduled for October 12, 2020 was vacated due to the wide-spread disruption caused by the COVID-19 pandemic.
As of July 21, 2022,20, 2023, SCE was aware of approximately 370300 currently pending unsettled lawsuits, representing approximately 4,5002,000 plaintiffs, related to the Woolsey Fire naming SCE as a defendant. Approximately 110260 of the 370300 lawsuits also name Edison
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International as a defendant based on its ownership and alleged control of SCE. At least one of the lawsuits was filed as a purported class action. The lawsuits, which have been filed in the superior courts of Ventura and Los Angeles Counties allege, among other things, negligence, inverse condemnation, personal injury, wrongful death, trespass, private nuisance, and violations of the public utilities and health and safety codes. SCE and certain of the individual plaintiffs in the Woolsey Fire litigation have been pursuing settlements of claims under a mediation program adopted to promote an efficient and orderly settlement process. Some individual plaintiffs may opt to pursue trial outside of the settlement program.
The Thomas and Koenigstein Fires and Montecito Mudslides lawsuits are being coordinated in the Los Angeles Superior Court. The Woolsey Fire lawsuits have also been coordinated in the Los Angeles Superior Court.
For further information, including regarding settlement activity related to the 2017/2018 Wildfire/Mudslide Events, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides."
Environmental Proceedings
Each of Edison International and SCE have elected to disclose environmental proceedings described in Item 103(c)(3)(iii) of Regulation SKS-K unless it reasonably believes that such proceeding will result in no monetary sanctions, or in monetary sanctions, exclusive of interest and costs, of less than $1,000,000.
OTHER INFORMATION
Trading Plans
During the quarter ended June 30, 2023, no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).
7368
EXHIBITS
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Exhibit Number |
| Description |
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10.1 | | |
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31.1 | | |
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31.2 | | |
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32.1 | | |
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32.2 | | |
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101.1 | | Financial statements from the quarterly report on Form 10-Q of Edison International for the quarter ended June 30, |
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101.2 | | Financial statements from the quarterly report on Form 10-Q of Southern California Edison Company for the quarter ended June 30, |
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Balance Sheets; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to Consolidated Financial Statements | ||
| | |
104 | | The cover page of this report formatted in Inline XBRL (included as Exhibit 101) |
* Incorporated by reference pursuant to Rule 12b-32.
Edison International and SCE will furnish a copy of any exhibit listed in the accompanying Exhibit Index upon written request and upon payment to Edison International or SCE of their reasonable expenses of furnishing such exhibit, which shall be limited to photocopying charges and, if mailed to the requesting party, the cost of first-class postage.
7569
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.
| EDISON INTERNATIONAL |
| | SOUTHERN CALIFORNIA EDISON COMPANY |
| | | | |
By: | /s/ | | By: | /s/ |
|
Executive Vice President and (Duly Authorized Officer and Principal Accounting Officer) | | |
Senior Vice President and (Duly Authorized Officer and Principal Accounting Officer) |
| | | | |
Date: | July | | Date: | July |
7670