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

FORM 10-Q
(Mark One)
þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2016March 31, 2017
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                        to

Commission
File Number
 
Exact Name of Registrant
as specified in its charter
 
State or Other Jurisdiction of
Incorporation or Organization
 
IRS Employer
Identification Number
1-9936 EDISON INTERNATIONAL California 95-4137452
1-2313 SOUTHERN CALIFORNIA EDISON COMPANY California 95-1240335

EDISON INTERNATIONAL SOUTHERN CALIFORNIA EDISON COMPANY
2244 Walnut Grove Avenue
(P.O. Box 976)
Rosemead, California 91770
(Address of principal executive offices)
 
2244 Walnut Grove Avenue
(P.O. Box 800)
Rosemead, California 91770
(Address of principal executive offices)
(626) 302-2222
(Registrant's telephone number, including area code)
 
(626) 302-1212
(Registrant's telephone number, including area code)

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.

Edison International        Yes þ No o    Southern California Edison Company    Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Edison International        Yes þ No o    Southern California Edison Company    Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of "accelerated filer," "large accelerated filer," andaccelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-12 of the Exchange Act. (Check One):
Edison International
Large Accelerated Filer þ
Accelerated Filer ¨
Non-accelerated Filer ¨
Smaller Reporting Company ¨
Emerging growth company ¨
Southern California Edison Company
Large Accelerated Filer ¨
Accelerated Filer ¨
Non-accelerated Filer þ
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 þ    Southern California Edison Company    Yes ¨ No þ
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
Common Stock outstanding as of OctoberApril 28, 2016:2017:  
Edison International 325,811,206 shares
Southern California Edison Company 434,888,104 shares
   
   






TABLE OF CONTENTS
      SEC Form 10-Q Reference Number
GLOSSARY
iii
 
FORWARD-LOOKING STATEMENTS
1
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
43
Part I, Item 2
 
MANAGEMENT OVERVIEW
43
 
  
Highlights of Operating Results
4
2018 General Rate Case
53
 
  
Capital Program
64
Regulatory Proceedings
4
 
 
RESULTS OF OPERATIONS
65
 
 
Southern California Edison Company
65
 
  
Three months ended September 30,March 31, 2017 versus March 31, 2016 versus September 30, 2015
65
 
   
Earning Activities
6
 
   
Cost-Recovery Activities
7
Nine months ended September 30, 2016 versus September 30, 2015
9
Earning Activities
8
Cost-Recovery Activities
106
 
 
Supplemental Operating Revenue Information
96
 
 
Income Taxes
7
Edison International Parent and Other
7
Income from Continuing Operations
7
Strategic Review of Edison Energy Group Competitive Businesses
7
LIQUIDITY AND CAPITAL RESOURCES
7
Southern California Edison Company
7
Available Liquidity
8
Capital Investment Plan
8
Dividend Restrictions
8
Margin and Collateral Deposits
9
 
 
Edison International Parent and Other
9
 
 
Income from Continuing Operations
10
Income (Loss) from Discontinued Operations (Net of Tax)
10
LIQUIDITY AND CAPITAL RESOURCES
10
Southern California Edison Company
10
Available Liquidity
11
Regulatory Proceedings
11
Capital Investment Plan
12
Dividend Restrictions
14
Margin and Collateral Deposits
14
Edison International Parent and Other
14
Historical Cash Flows
159
 
  
Southern California Edison Company
159
 
  
Edison International Parent and Other
1812
 
 
Contingencies
19
Environmental Remediation
1913
 
 
MARKET RISK EXPOSURES
1913
 
 
Commodity Price Risk
1913
 
 
Credit Risk
1913
 
 
CRITICAL ACCOUNTING ESTIMATES AND POLICIES
2013
 
 
NEW ACCOUNTING GUIDANCE
2013
 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK FACTORS
2013
Part I, Item 1A3
RISKS RELATING TO SOUTHERN CALIFORNIA EDISON COMPANYFINANCIAL STATEMENTS
2014
Part I, Item 1
Edison International Consolidated Statements of Income
14
 
 
Regulatory RisksEdison International Consolidated Statements of Comprehensive Income
2015
Edison International Consolidated Balance Sheets
16
Edison International Consolidated Statements of Cash Flows
18
SCE Consolidated Statements of Income
19
 


i





 
Competitive and Market Risks
20
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
21
Part I, Item 3
FINANCIAL STATEMENTS
22
Part I, Item 1
Edison International Consolidated Statements of Income
22
Edison International Consolidated Statements of Comprehensive Income
23
Edison International Consolidated Balance Sheets
24
Edison International Consolidated Statements of Cash Flows
26
SCE Consolidated Statements of Income
27
SCE Consolidated Statements of Comprehensive Income
2719
 
 
SCE Consolidated Balance Sheets
2820
 
 
SCE Consolidated Statements of Cash Flows
3022
 
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3123
 
  
Note 1. Summary of Significant Accounting Policies
3123
 
  
Note 2. Consolidated Statements of Changes in Equity
3425
 
  
Note 3. Variable Interest Entities
3527
 
  
Note 4. Fair Value Measurements
3729
 
  
Note 5. Debt and Credit Agreements
4132
 
  
Note 6. Derivative Instruments
4133
 
  
Note 7. Income Taxes
4335
 
  
Note 8. Compensation and Benefit Plans
4436
 
  
Note 9. Investments
4737
 
  
Note 10. Regulatory Assets and Liabilities
4838
 
  
Note 11. Commitments and Contingencies
5039
 
  
Note 12. Preferred and Preference Stock of SCEAccumulated Other Comprehensive Loss
5443
 
  
Note 13. AccumulatedInterest and Other Comprehensive LossIncome and Other Expenses
5444
 
  
Note 14. Interest and Other Income and Other Expenses
55
Note 15. Discontinued Operations
55
Note 16. Supplemental Cash Flows Information
5644
 
CONTROLS AND PROCEDURES
5644
Part I, Item 4
 
Disclosure Controls and Procedures
5644
 
 
Changes in Internal Control Over Financial Reporting
5645
 
 
Jointly Owned Utility Plant
5645
 
LEGAL PROCEEDINGS
5745
Part II, Item 1
OTHER INFORMATION
57
Part II, Item 5
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
5745
Part II, Item 2
 
Purchases of Equity Securities by Edison International and Affiliated Purchasers
5745
 
EXHIBITS
5846
Part II, Item 6
SIGNATURES
5947
 
This is a combined Form 10-Q separately filed by Edison International and Southern California Edison Company. Information contained herein relating to an individual company is filed by such company on its own behalf. Each company makes representations only as to itself and makes no other representation whatsoever as to any other company.



ii





GLOSSARY
The following terms and abbreviations appearing in the text of this report have the meanings indicated below.
AFUDCallowance for funds used during construction
20152016 Form 10-K Edison International's and SCE's combined Annual Report on Form 10-K for the year-ended December 31, 20152016
AFUDCallowance for funds used during construction
ALJ administrative law judge
APSArizona Public Service Company
ARO(s) asset retirement obligation(s)
Bcf billion cubic feet
Bonus Depreciation Current federal tax deduction of a percentage of the qualifying property placed in service during periods permitted under tax laws 
BRRBA Base Revenue Requirement Balancing Account
CAAClean Air Act
CAISO California Independent System Operator
CARBCalifornia Air Resources Board
Competitive Businessesbusinesses focused on providing energy solutions, including distributed generation and/or storage, to commercial and industrial customers; engaging in competitive transmission opportunities; and exploring distributed water treatment and recycling.
CPUC California Public Utilities Commission
CRRsDERs congestion revenue rightsdistributed energy resources
DOE U.S. Department of Energy
DRPDistributed Resources Plan
Edison Energy Edison Energy, LLC, a wholly-owned subsidiary of Edison Energy Group that advises and provides energy solutions to large energy users
Edison Energy Group Edison Energy Group, Inc., the holding company for the Competitive Businessessubsidiaries engaged in competitive businesses focused on providing energy services, including distributed generation, and/or storage to commercial and industrial customers
EME Edison Mission Energy
EME Settlement AgreementSettlement Agreement entered into by Edison International, EME, and the Consenting Noteholders in February 2014
EMG Edison Mission Group Inc., a wholly owned subsidiary of Edison International and the parent company of EME and Edison Capital
EPSearnings per share
ERRA energy resource recovery account
FERC Federal Energy Regulatory Commission
Four Corners
coal fueled electric generating facility located in Farmington, New Mexico in
which SCE held a 48% ownership interest
GAAP generally accepted accounting principles used in the United States
GHG greenhouse gas
GRC general rate case
GWh gigawatt-hours
HLBV hypothetical liquidation at book value
IRS Internal Revenue Service
Joint Proxy Statement Edison International's and SCE's definitive Proxy Statement filed with the SEC in connection with Edison International's and SCE's Annual Shareholders' Meeting held on April 28, 201627, 2017
MD&A 
Management's Discussion and Analysis of Financial Condition and Results
of Operations in this report
MHI Mitsubishi Heavy Industries, Ltd.Inc. and a related company
Moody'sMoody's Investors Servicecompanies
MW megawatts
MWdc megawatts measured for solar projects representing the accumulated peak capacity of all the solar modules
MWhmegawatt-hours


iii





NAAQSnational ambient air quality standards
NEIL Nuclear Electric Insurance Limited
NEM net energy metering
NERC North American Electric Reliability Corporation
NRC Nuclear Regulatory Commission
ORA CPUC's Office of Ratepayers Advocates
OII Order Instituting Investigation
Palo Verde 
large pressurized water 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&EPacific Gas & Electric Company
QF(s) qualifying facility(ies)


iii





ROE return on common equity
S&P Standard & Poor's Ratings Services
San Onofre retired nuclear generating facility located in south San Clemente, California in which SCE holds a 78.21% ownership interest
San Onofre OII Settlement Agreement Settlement Agreement by and among SCE, The Utility Reform Network, the CPUC's Office of Ratepayer Advocates andTURN, ORA, SDG&E, which was later joined by the Coalition of California Utility Employees, and Friends of the Earth, (together, the "Settling Parties"), dated November 20, 2014
SCE Southern California Edison Company
SDG&E San Diego Gas & Electric
SEC U.S. Securities and Exchange Commission
SED Safety and Enforcement Division of the CPUC, formerly known as the Consumer Protection and Safety Division or CPSD
SoCalGas Southern California Gas Company
SoCore Energy LLC SoCore Energy LLC, a subsidiary of Edison Energy Group that provides solar energy and energy storage solutions
TURN The Utility Reform Network
US EPA U.S. Environmental Protection Agency
VIE(s)variable interest entity(ies)



iv





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 statementstatements that doesdo 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 of 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 in a timely manner from its customers through regulated rates, including regulatory assetscosts related to San Onofre;Onofre and proposed spending on grid modernization;
decisions and other actions by the CPUC, the FERC, the NRC and other regulatory authorities, including the determinations of authorized rates of return or return on equity, approval of proposed spending on grid modernization, the outcome of San Onofre CPUC proceedings, and delays in regulatory actions;
ability of Edison International or SCE to borrow funds and access the capital markets on reasonable terms;
risks associated with cost allocation, including the potential movement of costs to bundledcertain customers, caused by the ability of cities, counties, and certain other public agencies to generate and/or purchase electricity for their local residents and businesses, along with other possible customer bypass or departure due to increased adoption of DERs or technological advancements in the generation, storage, transmission, distribution, and use of electricity, and supported by public policy, government regulations and incentives;
risks inherent in the construction ofSCE's transmission and distribution infrastructure replacement and expansion projects,investment program, including those related to project site identification, public opposition, environmental mitigation, construction, permitting, power curtailment costs (payments due under power contracts in the event there is insufficient transmission to enable acceptance of power delivery), and governmental approvals;
risks associated with the operation of transmission and distribution assets and power generating facilities, including public safety issues, failure, availability, efficiency, and output of equipment and availability and cost of spare parts;
risks associated with the retirement and decommissioning of nuclear generating facilities;San Onofre, including those related to public opposition, permitting, governmental approvals, and cost overruns;
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 and customer data;
abilitythe outcome of the strategic review of Edison InternationalEnergy Group, which may include changes to develop its Competitive Businesses, manage newexisting competitive business risks, and recover and earn a return on its investment in newly developed models and/or acquired businesses;exit of certain business activities;
cost and availability of electricity, including the ability to procure sufficient resources to meet expected customer needs in the event of power plant outages or significant counterparty defaults under power-purchasepower purchase agreements;
environmental laws and regulations, at both the state and federal levels, or changes in the application of those laws, that could require additional expenditures or otherwise affect the cost and manner of doing business;
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 and effective tax rate;
changes in the fair value of investments and other assets;
changes in interest rates and rates of inflation, including escalation rates, which may be adjusted by public utility regulators;
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, WECCWestern Electricity Coordination Council, and similar regulatory bodies in adjoining regions;


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;


cost and availability of labor, equipment, and materials;
ability to obtain sufficient insurance, including insurance relating to SCE's nuclear facilities and wildfire-related liability, and to recover the costs of such insurance or in the absence of insurance the ability to recover uninsured losses;
potential for penalties or disallowance for non-compliance with applicable laws and regulations;
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;
disruption of natural gas supply due to unavailability of storage facilities, which could lead to electricity service interruptions; and
weather conditions and natural disasters.
Additional information about risks and uncertainties, including more detail about the factors described in this report, is contained throughout this MD&Areport and in Edison International's and SCE's combined 2015the 2016 Form 10-K, including the "Risk Factors" section. Readers are urged to read this entire report, including the information incorporated by reference, as well as the 20152016 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. Additionally, Edison International and SCE provide direct links to SCE's regulatory filings with the CPUC and the FERC in open proceedings most important to investors at www.edisoninvestor.com (SCE Regulatory Highlights) so that such filings are available to all investors upon SCE filing with the relevant agency. Edison International and SCE also routinely post or provide direct links to presentations, documents and other information that may be of interest to investors at www.edisoninvestor.com (Events and Presentations) in order to publicly disseminate such information.
The MD&A for the ninethree months ended September 30, 2016March 31, 2017 discusses material changes in the consolidated financial condition, results of operations and other developments of Edison International and SCE since December 31, 2015,2016, and as compared to the ninethree months ended September 30, 2015.March 31, 2016. This discussion presumes that the reader has read or has access to Edison International's and SCE's MD&A for the calendar year 20152016 (the "year-ended 20152016 MD&A"), which was included in the 20152016 Form 10-K.
Except when otherwise stated, references to each of Edison International, SCE, EMG, Edison Energy Group, EME or Edison Capital mean each such company with its subsidiaries on a consolidated basis. References to "Edison International Parent and Other" mean Edison International Parent and its consolidated competitive subsidiaries.

















(This page has been left blank intentionally.)



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MANAGEMENT OVERVIEW
Highlights of Operating Results
Edison International is the parent holding company of SCE. SCE is a public utility primarily engaged in the business of supplying and delivering electricity to an approximately 50,000 square mile area of southern California. Edison International is also the parent company of Edison Energy Group, a holding company for subsidiaries that are engaged in pursing competitive businesses focused on providingbusiness opportunities across energy solutionsservices and distributed solar to commercial and industrial customers, including distributed energy resources, engaging in transmission opportunities, and exploring distributed water treatment and recycling (the "Competitive Businesses").customers. Such business activities are currently not material to report as a separate business segment. 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. Unless otherwise described, all of the information contained in this report relates to both filers.
Three months ended September 30,   Nine months ended September 30,   Three months ended March 31,  
(in millions)2016 2015 Change 2016 2015 Change 2017 
20161
 Change
Net income (loss) attributable to Edison InternationalNet income (loss) attributable to Edison International          Net income (loss) attributable to Edison International    
Continuing operations                 
SCE$435
 $389
 $46
 $1,037
 $1,079
 $(42) $349
 $295
 $54
Edison International Parent and Other(16) (11) (5) (71) (23) (48) 13
 (15) 28
Discontinued operations—
 43
 (43) (1) 43
 (44) —
 1
 (1)
Edison International419
 421
 (2) 965
 1,099
 (134) 362
 281
 81
Less: Non-core items                 
SCE—
 —
 —
 —
 —
 —
 —
 —
 —
Edison International Parent and Other—
 1
 (1) 5
 7
 (2) —
 2
 (2)
Discontinued operations—
 43
 (43) (1) 43
 (44) —
 1
 (1)
Total non-core items—
 44
 (44) 4
 50
 (46) —
 3
 (3)
Core earnings (losses)                 
SCE435
 389
 46
 1,037
 1,079
 (42) 349
 295
 54
Edison International Parent and Other(16) (12) (4) (76) (30) (46) 13
 (17) 30
Edison International$419
 $377
 $42
 $961
 $1,049
 $(88) $362
 $278
 $84
1
First quarter 2016 earnings were updated to reflect the implementation of the accounting standard for share-based payments effective January 1, 2016. See "Notes to Consolidated Financial Statements—Note 1" for further information.
Edison International's earnings are prepared in accordance with GAAP used in the United States.GAAP. Management uses core earnings 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'scompany'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, income resulting from allocation of losses to tax equity investors under the hypothetical liquidation at book value ("HLBV")HLBV accounting method, and income or loss from significant discrete items that management does not consider representative of ongoing earnings, such as exit activities, including sale of certain assets and other activities that are no longer continuing, write downs, asset impairments and other gains and losses related to certain tax, regulatory, or legal settlements or proceedings.
Edison International's first quarter 2017 earnings increased $81 million from the first quarter of 2016, comprised of an increase in SCE's earnings for the three months ended September 30, 2016 increased by $46of $54 million, primarilyan increase in Edison International Parent and Other earnings of $28 million, and a decrease in income from discontinued operations of $1 million. SCE's increase in earnings was due to increased revenue from the timing of the implementation of the 2015 proposed GRC decision and incremental return on pole loading rate base, partially offset by higher income tax expense.


SCE’s earnings for the nine months ended September 30, 2016 decreased by $42 million, which includes lower income tax benefits partially offset by an increase in revenue from the escalation mechanism set forth in the 2015 GRC decision, lower operation and the 2016 incremental return on the pole loading rate base.
During the nine months ended September 30, 2015, SCE recorded $100 million ofmaintenance expenses and higher income tax benefits from revisions to liabilities for uncertain tax positions (see "Results of Operations—SCE" for further information).
During the first six months of 2015, pending the outcome of the 2015 GRC decision, SCE recognized GRC-related revenue largely based on the 2014 authorized revenue requirement. During 2015, SCE recorded revenue refunds to customers which totaled $451 million to reflect the final decision in the 2015 GRC. In the third quarter of 2015, SCE recorded a revenue refund of $233 million as a result of receiving the proposed GRC decision, of which a total of $70 million ($41 million after-tax) was attributable to the first six months of 2015. In addition, SCE's results of operations for the three and nine months ended September 30, 2016 included an increase in revenue of approximately $46 million ($27 million after-tax) and $142 million ($84 million after-tax), respectively, from the escalation mechanism set forth in the final 2015 GRC decision. The annual escalation increase implemented in customer rates for 2016 was $203 million.
partially offset by higher net financing costs. Edison International Parent and Other losses from continuing operations for the third quarter and nine months ended September 30, 2016 increased by $5 million and $48 million, respectively. Losses for the third quarter consisted of $4 million ofincrease in net income was due to higher core losses and $1earnings of $30 million of lower non-core earnings. Losses for the nine months ended September 30, 2016 consisted of $46 million of higher core losses and $2 million of lower non-core earnings. During the second quarter of 2016, Edison International Parent and Other recorded an after-tax charge of $13 millionThe increase in core earnings was due to higher income tax benefits related to the buy-out of an earn-out provision with the former shareholders of a company acquired by Edison Energy at the end of 2015. The buy-out was completed, together with modification to employment contracts, in order to align long-term incentive compensation. In addition, core losses for the threestock option exercises.


Capital Program
Total capital expenditures (including accruals) were $647 million and nine months ended September 30, 2016 included higher operating and development costs and lower revenue and gross margin from the sale of solar systems at Edison Energy Group. Results during 2015 includedincome from Edison Capital's investments in affordable housing projects which were sold at the end of 2015.
Consolidated non-core items included:
Income of $1$729 million for the first three months ended September 30, 2015of 2017 and income2016, respectively. In the year-ended 2016 MD&A, SCE projected 2017 capital expenditures of $5approximately $4.2 billion. Those expenditures included $182 million of grid modernization capital spending that will promote increased safety and $7 millionreliability and will also allow for a timely ramp-up of grid modernization capital expenditures in subsequent years. SCE has requested CPUC approval of a memorandum account to facilitate recovery in rates of such expenditures. The memorandum account has not yet been approved by the CPUC. SCE may receive further guidance on grid modernization spending from the CPUC as part of the DRP proceeding in the second half of 2017. SCE currently projects 2017 capital expenditures of $4.0 billion, reflecting the lack of approval of a grid modernization memorandum account and minor delays on the start of construction for the nine months ended September 30, 2016Mesa Substation Project. Actual capital spending may be affected by: changes in regulatory, environmental and 2015, respectively. The income was related to losses (netengineering design requirements; permitting and project delays; cost and availability of distributions) allocated to tax equity investors under the HLBV accounting method. Edison International reflected in core earnings the operating results of the solar rooftop projects, related financingslabor, equipment, and the priority return to the tax equity investor. The losses allocated to the tax equity investor under HLBV accounting method results in income allocated to subsidiaries of Edison International, neither of which is due to the operating performance of the projects but rather due to the allocation of income tax attributes under the tax equity financing. Accordingly, Edison International has included the non-operating allocation of income as a non-core item.materials; and other factors. For further information on HLBV,regarding the capital program see "Liquidity and Capital Resources—Capital Investment Plan" and the 2015 Form 10-K, "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies.year-ended 2016 MD&A, "Management Overview—Capital Program."
Income from discontinued operations, net of tax, of $43 million for the three and nine months ended September 30, 2015. The income was due to $16 million in insurance recoveries ($28 million pre-tax) related to the EME bankruptcy and $27 million of income tax benefits based on filing of the 2014 tax returns in the third quarter of 2015.
Regulatory Proceedings
2018 General Rate Case
InAs discussed in the year-ended 2016 MD&A, in September 2016, SCE filed its 2018 GRC application for the three-year period 2018 – 2020, which requested a 2018 revenue requirement of $5.885 billion, an increase of $222 million over the projected 2017 GRC authorized revenue requirement.
In addition, SCEApril 2017, ORA recommended that SCE's requested $482018 base revenue requirement be decreased by approximately $208 million, comprised of approximately $164 million in one-time balancingoperations and maintenance expense reductions and approximately $44 million in capital-related revenue requirement reductions largely related to the proposed reduction of 100% of grid modernization capital spending. ORA proposed capturing grid modernization spending in a memorandum account recoveries. This represents a 2.7% increase over presentlyfor review in the 2021 GRC if any spending is authorized total rates.by the CPUC. Testimony from other parties related to SCE's 2018 GRC request also includes proposed revenue requirement increases of $533 millionapplication is due in 2019 and $570 million in 2020. For 2019 and 2020, respectively, these represent 4.2% and 5.2% increases over presently authorized total rates.
The capital programs requested in SCE's 2018 GRC are focused on safety and reliability through investments in the distribution grid to replace aging equipment and enhance capabilities to integrate increasing amounts of Distributed Energy Resources ("DER"). For further information, see "—Capital Program" below.
SCE's 2018 GRC request identifies areas of reduced operating cost to partially mitigate the customer rate impacts of the request.


May 2017.
SCE requested that the CPUC issue a final decision by the end of 2017. If the schedule for a final decision is delayed, SCE will request the CPUC to issue an order directing that the authorized revenue requirement changes be effective January 1, 2018. SCE cannot predict the revenue requirement the CPUC will ultimately authorize for 2018 through 2020 or forecast the timing of a final decision.
Permanent Retirement of San Onofre
Capital ProgramReplacement steam generators were installed at San Onofre in 2010 and 2011. On January 31, 2012, a leak suddenly occurred in one of the heat transfer tubes in San Onofre's Unit 3 steam generators. The Unit was safely taken off-line and subsequent inspections revealed excessive tube wear. Unit 2 was off-line for a planned outage when areas of unexpected tube wear were also discovered. On June 6, 2013, SCE decided to permanently retire Units 2 and 3.
BasedMHI Claims
In March 2017, SCE received a decision from the International Chamber of Commerce International Court of Arbitration on claims against MHI regarding failure of the replacement steam generators that MHI supplied for San Onofre. The net recovery awarded to SCE was initially determined to be $52 million. An adjustment to the interest awarded to SCE subsequently reduced the net recovery to $47 million. SCE has determined that it will not appeal the decision. As a result of uncertainty associated with the allocation of the award under the San Onofre OII Settlement Agreement, SCE recorded a regulatory liability for the net recovery.
For more information on the 2018 GRC request,challenges to the settlement of the San Onofre OII and the arbitration tribunal decision on MHI, see "Notes to Consolidated Financial Statements—Note 11. Commitments and Contingencies—Contingencies—San Onofre Related Matters."


Cost of Capital
In April 2017, the CPUC issued a proposed decision that would have adopted the petition previously filed by SCE, forecasts capital expendituresPacific Gas & Electric Company, SDG&E, and SoCalGas (collectively, the "Investor-Owned Utilities"), ORA, and TURN to modify the prior CPUC decisions addressing the Investor-Owned Utilities' costs of up to $23.3 billioncapital. The decision, if adopted by the CPUC, would have established SCE's authorized ROE at 10.30%, beginning January 1, 2018. Subsequently in April 2017, the CPUC withdrew the proposed decision from the agenda of its April 27 meeting. Timing for 2016 – 2020. The requested CPUC capital expenditures include traditional capital spending, such as infrastructure replacement and maintenance, expansions and additions due to load growth and work requested by customers, as well as expenditures for grid modernization to support improved safety and reliability and increased levelsadditional action on the settling parties’ petition has not been defined. For more information on the terms of distributed energy resources. Traditional capital spending for 2016 – 2017 reflects SCE's forecast capital expenditures for CPUC and FERC capital projects. Also included in 2016 and 2017 capital expenditures is the approval of a memorandum account to facilitate recovery in rates of grid modernization expenditures. Traditional capital expenditures for 2018 – 2020 reflect the amounts requestedsettling parties' petition, see "Management Overview—Regulatory Proceedings" in the 2018 GRC filing and FERC capital projects. The CPUC has approved 81%, 89% and 92% of the traditional capital expenditures requested in the 2009, 2012 and 2015 GRC decisions, respectively. While SCE cannot predict the level of traditional capital spending that will be approved in the 2018 GRC decision, management is not aware of factors that would cause the percentage of SCE's request that is ultimately approved to be materially different from what has been approved in recent GRC decisions.
As noted above, SCE has requested approval from the CPUC to establish a memorandum account to facilitate the recovery in rates ofyear-ended 2016 – 2017 grid modernization capital expenditures. Failure to obtain CPUC approval of this memorandum account, or a similar cost recording mechanism, by the end of 2016 or early 2017 could delay or reduce SCE’s 2018 – 2020 grid modernization capital expenditures. SCE does not have prior approval experience with grid modernization capital expenditures and, therefore, is unable to predict an expected outcome. Forecasted expenditures for FERC capital projects is subject to timely receipt of permitting, licensing and regulatory approvals (see "Liquidity and Capital Resources—SCE—Capital Investment Plan" for details on major transmission projects). The following table sets forth a summary of capital expenditures for 2016 – 2020 on the basis described above:
(in millions) 20162017201820192020Total 2016 – 2020
Traditional capital expenditures       
Transmission $536
$1,037
$912
$1,035
$900
$4,420
Distribution1
 2,965
3,053
3,214
3,153
3,096
15,481
Generation 235
203
225
216
206
1,085
Total requested2 traditional capital expenditures
 $3,736
$4,293
$4,351
$4,404
$4,202
$20,986
Grid modernization capital expenditures $26
$182
$637
$751
$714
$2,310
Total capital expenditures $3,762
$4,475
$4,988
$5,155
$4,916
$23,296
1
Includes $12 million Charge Ready Pilot (2016) and $69 million of Energy Storage (2016 – 2020).
2 Capital expenditures for 2016 and 2017 reflect management's expectations based on the 2015 GRC decision.
Capital expenditures for traditional capital expenditures projects under CPUC jurisdiction for 2016 and 2017 are recovered through the authorized revenue requirement in SCE's 2015 GRC. The 2018 – 2020 capital expenditures are included in the 2018 GRC application request discussed above. Recovery for 2016 – 2020 planned expenditures for projects under FERC jurisdiction will be pursued through FERC-authorized mechanisms. For further information regarding the capital program, see "Liquidity and Capital Resources—SCE—Capital Investment Plan."
SCE’s estimated weighted average annual rate base for 2016 – 2020 using the capital expenditures set forth in the table above is as follows:
(in millions)2016 2017201820192020
Rate base for requested traditional capital expenditures$24,943
 $26,440
$29,348
$31,585
$33,739
Rate base for requested grid modernization capital expenditures—
 —
279
802
1,398
Total rate base$24,943
 $26,440
$29,627
$32,387
$35,137
The rate base above does not reflect reductions from the amounts requested in the 2018 GRC that may be included in a final decision.MD&A.
RESULTS OF OPERATIONS
Southern California Edison Company
SCE's results of operations are derived mainly through two sources:
Earning activities – representing revenue authorized by the CPUC and FERC which is intended to provide SCE 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 revenuerevenues or penalties related to incentive mechanisms, other operating revenue, and regulatory charges or disallowances.
Cost-recovery activities – representing certain 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. 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), and certain operation and maintenance expenses. SCE earns no return on these activities.
The following table is a summary of SCE's results of operations for the periods indicated.
Three months ended September 30,March 31, 2017 versus March 31, 2016 versus September 30, 2015
Three months ended September 30, 2016Three months ended September 30, 2015Three months ended March 31, 2017Three months ended March 31, 2016
(in millions)Earning
Activities		Cost-
Recovery
Activities		Total
Consolidated		Earning
Activities		Cost-
Recovery
Activities		Total
Consolidated		Earning
Activities		Cost-
Recovery
Activities		Total
Consolidated		Earning
Activities		Cost-
Recovery
Activities		Total
Consolidated
Operating revenue$1,811
$1,941
$3,752
$1,711
$2,046
$3,757
$1,552
$904
$2,456
$1,522
$913
$2,435
Purchased power and fuel—
1,719
1,719
—
1,785
1,785
—
784
784
—
794
794
Operation and maintenance481
221
702
498
258
756
451
120
571
484
119
603
Depreciation, decommissioning and amortization519
—
519
504
2
506
497
—
497
475
—
475
Property and other taxes91
—
91
84
—
84
97
—
97
91
—
91
Total operating expenses1,091
1,940
3,031
1,086
2,045
3,131
1,045
904
1,949
1,050
913
1,963
Operating income720
1
721
625
1
626
507
—
507
472
—
472
Interest expense(136)(1)(137)(130)(1)(131)(141)—
(141)(131)—
(131)
Other income and expenses23
—
23
14


14
26
—
26
26
—
26
Income before income taxes607
—
607
509
—
509
392
—
392
367
—
367
Income tax expense141
—
141
92
—
92
12
—
12
42
—
42
Net income466
—
466
417
—
417
380
—
380
325
—
325
Preferred and preference stock dividend requirements31
—
31
28
—
28
31
—
31
30
—
30
Net income available for common stock$435
$—
$435
$389
$—
$389
$349
$—
$349
$295
$—
$295
Net income available for common stock  $349
 $295
Less:     
Non-core earnings  —
 —
Core earnings1
 $435
 $389
  $349
 $295
Non-core earnings —
 —
Total SCE GAAP earnings $435
 $389
1 
See use of non-GAAP financial measures in "Management Overview—Highlights of Operating Results."


Earning Activities
Earning activities were primarily affected by the following:
Higher operating revenue of $100$30 million primarily due to the following:
An increase in CPUC revenue of approximately $116$59 million primarily due to the implementation of the 2015 GRC decision.


During the third quarter of 2016, SCE increased authorized revenue approximately $46 million based on the escalation mechanism as set forth in the 2015 GRC decision. In the third quarter of 2015, SCE recorded an estimated revenue refund to customers based on the proposed decision of which $70 million is attributable to the first and second quarters of 2015 (see "Management Overview—Highlights of Operating Results" above for further information).
An increase in FERC-related revenue of $17 million primarily due to higher operating costs including amortization of the regulatory asset associated with the Coolwater-Lugo transmission project (see "Liquidity and Capital Resources—SCE—Capital Investment Plan—Major Transmission Projects—Coolwater-Lugo" for further information).
An increase of $21 million primarily due to tax benefits recognized in 2015 related to net operating loss carrybacks for San Onofre decommissioning costs, resulting in a reduction in revenue in 2015 (offset in income taxes).
A decrease in revenue of approximately $54$31 million for 2016resulting from lower 2017 incremental tax benefits recognized through the tax accounting memorandum account ("TAMA") and the pole loading balancing account (offset in income taxes as discussed below).
An increaseThe receipt of the MHI arbitration decision triggered a tax deduction for the abandonment of San Onofre. As a result, SCE recorded a decrease in CPUC revenue of $17approximately $65 million ($10 million after-tax) related(offset in income taxes as discussed below) which will be credited to the 2016 incremental return on the pole loading rate base in the pole loading balancing account.customers. See "Notes to Consolidated Financial Statements—Note 7. Income Taxes" for further information.
Lower operation and maintenance costs of $17$33 million primarily related to lower outside service costs and lower labor costs due to workforce reductions. Thesethe impact of SCE's operational and service excellence initiatives as well as lower costs were partially offset by increased transmission and distribution costs for fire storm and drought relatedstorm-related activities.
Higher depreciation, decommissioning, and amortization expense of $15$22 million primarily related to depreciation on transmission and distribution investments and amortization of the regulatory asset related to the Coolwater-Lugo transmission project, as discussed above.investments.
Higher other income and expensesinterest expense of $9$10 million primarily due to higher insurance benefits in 2016. See "Notes to Consolidated Financial Statements—Note 14. Interest and Other Income and Other Expenses" for further details.increased borrowings.
HigherLower income taxes of $49$30 million primarily due to higher pre-tax income. Included inthe following:
Higher income taxes is $32tax benefits of $39 million related to a tax deduction for the abandonment of 2016San Onofre (offset with revenue above).
Lower tax expense of $10 million related to the settlement of open tax positions with the IRS for taxable years 2007 through 2012.
Lower income tax benefits of $18 million related to incremental tax benefits for TAMA and the pole loading balancing accounts (offset in revenue above) partially offset by lowerhigher income tax benefits in 20162017 on other property-related items.items, including cost of removal and depreciation deductions.
Higher pre-tax income for the first quarter of 2017, as discussed above.
Cost-Recovery Activities
Cost-recovery activities were primarily affected by the following:
Lower purchased power and fuel costs of $66$10 million primarily driven by lower load relatedrealized losses on hedging activities ($2 million in 2017 compared to cooler weather.
Lower operation and maintenance expense of $37$27 million primarily due to lower transmission access charges and lower spending on various public purpose programs.


The following table is a summary of SCE's results of operations for the periods indicated.
Nine months ended September 30, 2016 versus September 30, 2015
 Nine months ended September 30, 2016Nine months ended September 30, 2015
(in millions)
Earning
Activities
Cost-
Recovery
Activities
Total
Consolidated
Earning
Activities
Cost-
Recovery
Activities
Total
Consolidated
Operating revenue$4,842
$4,114
$8,956
$4,870
$4,296
$9,166
Purchased power and fuel—
3,576
3,576
—
3,648
3,648
Operation and maintenance1,456
537
1,993
1,455
646
2,101
Depreciation, decommissioning and amortization1,497
—
1,497
1,448
1
1,449
Property and other taxes268
—
268
254
—
254
Total operating expenses3,221
4,113
7,334
3,157
4,295
7,452
Operating income1,621
1
1,622
1,713
1
1,714
Interest expense(401)(1)(402)(397)(1)(398)
Other income and expenses71
—
71
54
—
54
Income before income taxes1,291
—
1,291
1,370
—
1,370
Income tax expense162
—
162
207
—
207
Net income1,129
—
1,129
1,163
—
1,163
Preferred and preference stock dividend requirements92
—
92
84
—
84
Net income available for common stock$1,037
$—
$1,037
$1,079
$—
$1,079
Core earnings1




$1,037




$1,079
Non-core earnings



—




—
Total SCE GAAP earnings



$1,037




$1,079
1
See use of non-GAAP financial measures in "Management Overview—Highlights of Operating Results."
Earning Activities
Earning activities were primarily affected by the following:
Lower operating revenue of $28 million primarily due to the following:
During the second quarter of 2016, SCE recorded a revenue refund to customers of $133 million for 2012 – 2014 incremental tax benefits related to repair deductions (offset in income taxes as discussed below). This revenue refund resulted from the CPUC's approval of SCE's request to refund incremental tax repair deductions that were not addressed in SCE's 2015 GRC decision. See "Liquidity and Capital Resources—SCE—Regulatory Proceedings—Tax Repair Deductions and Memorandum Account" for further information.
A decrease in revenue of approximately $148 million for 2016 incremental tax benefits recognized through the tax accounting memorandum account ("TAMA") and the pole loading balancing account (offset in income taxes as discussed below).
An increase in revenue of $43 million ($25 million after-tax) related to the 2016 incremental return on the pole loading rate base recorded through the pole loading balancing account.
An increase in CPUC revenue of approximately $142 million primarily related to the increase in authorized revenue from the escalation mechanism set forth in the 2015 GRC decision (see "Management Overview—Highlights of Operating Results" above for further information).
An increase in FERC-related revenue of $49 million primarily related to higher operating costs including amortization of the regulatory asset associated with the Coolwater-Lugo transmission project and rate base growth2016) partially offset by a $15 million increase in 2015 revenue due to a change in estimate under the FERC formula rate mechanism.
An increase of $35 million primarily due to tax benefits recognized in 2015 related to net operating loss carrybacks for San Onofre decommissioning costs resulting in a reduction in revenue in 2015 (offset in income taxes).
Higher operation and maintenance expense primarily due to an increase of $28 million related to transmission and distribution costs for rain and fire storm-related activities and drought related activities offset by lower labor and other costs due to the workforce reductions.


Higher depreciation, decommissioning and amortization expense of $49 million primarily related to depreciation on transmission and distribution investments and amortization of the regulatory asset related to the Coolwater-Lugo plant, as discussed above.
Higher property and other taxes of $14 million primarily due to higher property assessed values in 2016.
Higher other income and expenses of $17 million primarily due to higher insurance benefits in 2016 and lower advertising expense in 2016. See "Notes to Consolidated Financial Statements—Note 14. Interest and Other Income and Other Expenses" for details.
Lower income taxes of $45 million primarily due to lower pre-tax income and the following discrete items:
Higher income tax benefits in 2016 primarily related to $79 million related to the flow-through of incremental tax benefits for 2012 – 2014 to customers and $88 million of 2016 incremental tax benefits for TAMA and pole loading balancing accounts (both offset in revenue above). These items were partially offset by lower tax benefits on other property-related items in 2016.
A change in liabilities related to uncertain tax positions related to repair deductions, which resulted in income tax benefits of $100 million during the second quarter of 2015.
Cost-Recovery Activities
Cost-recovery activities were primarily affected by the following:
Lower purchased power and fuel of $72 million primarily duegas prices experienced in 2017 relative to lower load related to cooler weather.
Lower operation and maintenance expense of $109 million primarily due to lower transmission access charges, and lower spending on various public purpose programs.2016.
Supplemental Operating Revenue Information
SCE's retail billed and unbilled revenue (excluding wholesale sales and balancing account overcollections/undercollections) was $3.7 billion and $8.6$2.4 billion for both the three and nine months ended September 30, 2016, respectively, compared to $4.3 billionMarch 31, 2017 and $9.7 billion for the respective periods in 2015.2016.
Retail billed and unbilled revenue for the three and nine months ended September 30, 2016March 31, 2017 reflects a rate decreaseincrease of $437 million and $858$113 million and a sales volume decrease of $232 million and $251 million, respectively.$79 million. The rate decreases for both periods wereincrease was due to implementationsimplementation of the 20162017 ERRA rate decrease and the 2015 GRC decision in January 2016.increase. The sales volume decreases for both periods weredecrease was due to lower load requirements related to coolerunseasonably warm weather experienced in the thirdfirst quarter of 2016 compared to the same period last year.2016.
As a result of the CPUC-authorized decoupling mechanism, SCE earnings are not affected by changes in retail electricity sales (see "Business—SCE—Overview of Ratemaking Process" in the 20152016 Form 10-K).


Income Taxes
SCE's income tax expense increased by $49 million and decreased by $45$30 million for the three and nine months ended September 30, 2016, respectively,March 31, 2017 compared to the same periodsperiod in 2015.2016.
The effective tax rates were 23.2%3.1% and 18.1%11.4% for the three months ended September 30,March 31, 2017 and 2016, and 2015, respectively. The effective tax rates were 12.5% and 15.1% for the nine months ended September 30, 2016 and 2015, respectively. SCE's effective tax rate is lower than the statutory rate primarily due to CPUC's 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 benefits related to repair deductions, mainly due to flow-through income tax benefits recorded through balancing accounts.expense. The decrease in the effective tax rate from 2015 to 2016 for the nine months ended September 30, 2016decrease is mainly dueprimarily related to the $133 million revenue refund to customers partially offset by revisions in liabilities related to uncertainratemaking treatment on the San Onofre tax positions.abandonment.
See "Notes to Consolidated Financial Statements—Note 7. Income Taxes" for a reconciliation of the federal statutory rate of 35% to the effective income tax rates and "Liquidity and Capital Resources—SCE—Regulatory Proceedings—Tax Repair Deductions and Memorandum Account" below for more information.rates.
Edison International Parent and Other
Results of operations for Edison International Parent and Other include amounts from other Edison International subsidiaries that are not significant as a reportable segment, as well as intercompany eliminations.


Income from Continuing Operations
The following table summarizes the results of Edison International Parent and Other:
Three months ended September 30, Nine months ended September 30, Three months ended March 31,
(in millions)2016 2015 2016 2015 2017 2016
Edison Energy Group and subsidiaries1
$(6) $(3) $(30) $(3) $(6) $(6)
Edison Mission Group and subsidiaries—
 1
 (4) 13
 (1) —
Corporate expenses and other2
(10) (9) (37) (33) 20
 (9)
Total Edison International Parent and Other$(16) $(11) $(71) $(23) $13
 $(15)
1  
Includes incomeof $5 million for the nine months ended September 30, 2016 compared to income ofless than $1 million and $7$2 million for the three and nine months ended September 30, 2015March 31, 2017 and 2016, respectively, related to losses (net of distributions) allocated to tax equity investors under the HLBV accounting method.
2 
Includes interest expense (pre-tax) of $10 million and $7$8 million for the three months ended September 30,March 31, 2017 and 2016, and 2015, respectively, and $27 million and $21 million for the nine months ended September 30, 2016 and 2015, respectively.
The lossincome from continuing operations of Edison International Parent and Other increased $5 million and $48was $13 million for the three and nine months ended September 30, 2016, respectively,March 31, 2017 compared to a loss of $15 million for the same periodsperiod in 2015.2016. The increase in the lossincome for the first ninethree months of 20162017 was primarily due to:to higher income tax benefits related to stock option exercises ($35 million and $2 million for the three months ended March 31, 2017 and 2016, respectively).
An increase in losses
Strategic Review of Edison Energy Group fromCompetitive Businesses
Edison International is performing a $13 million after-tax charge during the second quarter of 2016 from a buy-out of an earn-out provision contained in onestrategic review of the 2015 acquisitions. The buy-out was completed, together with modification to employment contracts, in order to align long-term incentive compensation. In addition, there were higher operating and development expenses and lower revenue and gross margin from the salecompetitive businesses pursued by subsidiaries of solar systems for the three and nine months ended September 30, 2016. The results during the first nine months of 2016Edison Energy Group. Competitive businesses include the three businesses acquiredenergy services provided by Edison Energy and distributed solar solutions provided by SoCore Energy. The outcome of the strategic review may affect Edison International's ability to fully recover its investments in December 2015these businesses. Edison International's investments in SoCore Energy and expanded sales and support personnel. Revenue for Edison Energy Group for the three and nine months ended September 30, 2016 was $15were $195 million and $30$103 million, respectively, compared to $7 million and $16 million for the respective periods in 2015.
A decrease in income from Edison Mission Group and subsidiariesas of $17 million for the nine months ended September 30, 2016 primarily due to income related to affordable housing projects in 2015. In December 2015, EMG's subsidiary, Edison Capital completed the sale of its remaining affordable housing investments portfolio which represents the exit from this business activity.
Income (Loss) from Discontinued Operations (Net of Tax)
Loss from discontinued operations, net of tax, was $1 million for the nine months ended September 30, 2016 compared to income of $43 million for the three and nine months ended September 30, 2015. The 2015 income was due to $27 million of income tax benefits based on filing of the 2014 tax returns in the third quarter of 2015 and $16 million in insurance recoveries ($28 million pre-tax) related to the EME bankruptcy.March 31, 2017.
LIQUIDITY AND CAPITAL RESOURCES
Southern California Edison Company
SCE's ability to operate its business, fund capital expenditures, and implement its business strategy is dependent upon its cash flow 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, collateral requirements, interest obligations and dividend payments to Edison International, and the outcome of tax and regulatory matters.
In the next 12 months, SCE expects to fund its obligations, capital expenditures, and dividends usingthrough operating cash flows, tax benefits, and capital market financings, of debt and preferred equity, as needed. SCE also has availability under its credit facilities to fund liquidity requirements.


Available Liquidity
At September 30, 2016,March 31, 2017, SCE had approximately $2.35$2.66 billion available under its $2.75 billion multi-year revolving credit facility. In January 2017, SCE borrowed $300 million under a Term Loan Agreement and reissued $135 million of pollution control bonds. In March 2017, SCE issued $700 million of first and refunding mortgage bonds. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."
Debt Covenant
The debt covenant in SCE's credit facility limits its debt to total capitalization ratio to less than or equal to 0.65 to 1. At September 30, 2016,March 31, 2017, SCE's debt to total capitalization ratio was 0.430.44 to 1.
Regulatory Proceedings
San Onofre CPUC Proceedings
In May 2016, and in consideration of the CPUC's December 2015 decision sanctioning SCE for failing to disclose ex parte communications relevant to the San Onofre OII, the Assigned Commissioner and ALJ issued a ruling to reopen the record upon which the CPUC had, in November 2014, approved the San Onofre OII Settlement Agreement among SCE, TURN, ORA, SDG&E, the Coalition of California Utility Employees, and Friends of the Earth. See "Notes to Consolidated Financial Statements—Note 11. Commitments and Contingencies—Contingencies—San Onofre Related Matters—San Onofre CPUC Proceedings" for more information.
Energy Efficiency Incentive Mechanism
In September 2016, SCE filed a request for energy efficiency incentives of approximately $11 million related to Part 2 of its 2014 program year and approximately $12 million related to Part 1 of its 2015 program year. SCE expects a decision on these requests in the fourth quarter of 2016. There is no assurance that the CPUC will make an award for any given year.
In August 2016, a proposed settlement agreement between TURN, ORA andAt March 31, 2017, SCE was filedin compliance with the CPUC relatedall other financial covenants that affect access to the rehearing of prior CPUC decisions for $74.5 million of incentive awards that SCE received for savings achieved by its 2006 – 2008 energy efficiency programs. The settlement agreement fully resolves the disputes as they relate to SCE in exchange for SCE refunding approximately $13.5 million of the incentives awarded over a three year period or, at SCE's option, for SCE making a one-time credit of the present value of that amount to the BRRBA. The CPUC issued a final decision approving the settlement agreement in October 2016.
Long Beach Service Interruptions
In July 2015, SCE's customers who are served via the network portion of SCE's electric system in Long Beach, California experienced service interruptions due to multiple underground vault fires and underground cable failures. The portion affected is the only significant portion of SCE’s distribution network that is arranged in a network configuration. In July 2016, the CPUC initiated an investigation ("Long Beach OII") of these events and their causes based on an investigation by the CPUC's Safety and Enforcement Division ("SED"). The SED investigation, among other things, identified problems with maintenance, inspection, and management of SCE's Long Beach electrical system, and emergency response and communications capabilities. The Long Beach OII will consider whether SCE violated statutes, rules or regulations, maintained adequate, accurate, and complete records, and provided sufficient emergency response and communications to various parties during the power outages. While SCE believes it is probable that penalties will be assessed, neither the CPUC nor SED has proposed a penalty amount. Consequently, although potential penalties in this matter could be significant, SCE is currently unable to estimate their amount. See "Notes to Consolidated Financial Statements—Note 11. Commitments and Contingencies—Contingencies—Long Beach Service Interruptions" for more information.
Cost of Capital
As discussed in the year-ended 2015 MD&A, SCE and the other Joint Investor-Owned Utilities submitted a petition to the CPUC in connection with their request for a one-year extension of the due date for the filing of the next cost of capital applications. A final decision approving the Joint Investor-Owned Utilities' petition was approved on February 25, 2016. As extended, the Joint Investor-Owned Utilities must file their next cost of capital applications by April 20, 2017 instead of April 20, 2016. SCE's authorized rate of return and capital structure for CPUC-related activities will remain unchanged through December 31, 2017. See "Business—SCE—Overview of Ratemaking Process—CPUC" in the 2015 Form 10-K for details on SCE's cost of capital and authorized rates of return.


FERC Formula Rates
In June 2016, SCE provided its preliminary 2017 annual transmission revenue requirement update to interested parties. The update provided support for an increase in SCE's transmission revenue requirement of $98 million or 9% over amounts currently authorized in rates. The increase is mainly due to the completion of several major transmission projects and an underrecovery in rates for revenue in 2015, which is being recovered through the formula rate true up process. SCE expects to file its 2017 annual update with the FERC by December 1, 2016 and the proposed rates would be effective January 1, 2017.
Tax Repair Deductions and Memorandum Account
SCE recognized earnings and a regulatory asset for deferred income taxes related to 2012 – 2014 tax repair deductions. As a result of the CPUC's rate base offset in the 2015 GRC decision, SCE wrote down this regulatory asset in full during 2015. The after-tax charge was reflected in "Income tax expense" on the December 31, 2015 consolidated statement of income. The amount of tax repair deductions the CPUC used to establish the rate base offset was based on SCE's forecast of 2012 – 2014 tax repair deductions from the Notice of Intent filed in the 2015 GRC. The amount of tax repair deductions included in the Notice of Intent was less than the actual tax repair deductions SCE reported on its 2012 through 2014 income tax returns. In April 2016, the CPUC granted SCE's request to reduce SCE's BRRBA by $234 million in future periods subject to the timing and final outcome of audits that may be conducted by tax authorities. The refunds will result in flowing incremental tax benefits for 2012 – 2014 to customers. SCE refunded $133 million during the second quarter of 2016. SCE did not record a gain or loss from this reduction. Regulatory assets recorded from flow through tax benefits are recovered through SCE's general rate case proceedings.capital.
Capital Investment Plan
Major Transmission Projects
A summary of SCE'sBelow are updates for large transmission and substation projects duringsince the next five yearsfiling of the 2016 Form 10-K. SCE is presented below:
Project NameProject Lifecycle Phase
Direct Expenditures (in millions)1
Remaining Investment (in millions)1
Scheduled In-Service Date
Tehachapi 4-11Construction$2,450$179
2016 – 2017
West of DeversLicensing$1,075$1,0312021
Mesa SubstationLicensing$608$592
2020 – 2021
Alberhill SystemLicensing$397$3612021
Riverside Transmission ReliabilityLicensing$233$2302021
Eldorado-Lugo-Mohave Upgrade

Planning$269$2662019
1
Direct expenditures include direct labor, land and contract costs incurred for the respectivecurrently evaluating the timing of its major construction projects. For further information on these projects, and exclude overhead costs that are included in the capital expenditures forecasted for remaining investment.
Tehachapi
The Tehachapi Project consists of new and upgraded electric transmission lines and substations between eastern Kern County and San Bernardino County and was undertaken to bring renewable resources in Kern County to energy consumers in the Los Angeles basin and the California energy grid. The project consists of eleven segments. Segments 1-3 were placed in service beginning in 2009 through 2013. For more information, see "Liquidity and Capital Resources—SCE—Capital Investment Plan—Major Transmission Projects—Tehachapi"Projects" in the year-ended 2015year-end 2016 MD&A.


Major Transmission Projects
West of Devers
In August 2016,March 2017, the CPUC approved the project as recommended by SCE. An alternative project withissued a modified scope had been considered as part of required environmental impact reviews as discussed in the year-ended 2015 MD&A. ORA filed andecision denying ORA's September 2016 Application for Rehearing regarding the West of Devers Upgrade Project which sought additional project modifications and environmental mitigation measures. This action confirmed SCE's proposed project, which is on track to be placed in September 2016 stating thatservice in 2021.
Mesa Substation
In February 2017, the August 2016CPUC issued a final decision failed to followapproving the California Environmental Quality Act when it approved SCE’sMesa Substation Project largely consistent with SCE's proposed project and should have approved therejected alternative project with the amended scope. SCE does not know whenconfigurations proposed by CPUC staff. Timing of the CPUC will issue a decision onapproval and preconstruction requirements for obtaining other permits and approvals have delayed the Application.start of construction. As a result, of the delay in receipt of project approval from the CPUC, SCE is evaluating possible delays in the timing of project capital expenditures.
Mesa Substation
The Mesa Substation Project consists of demolishing the existing 220 kV Mesa Substation and constructing a new 500 kV substation. The Mesa Substation project would address reliability concerns by providing additional transmission import capability, allowing greater flexibility in the siting of new generation, and reducing the total amount of new generation required to meet local reliability needs in the Western Los Angeles Basin area. SCE has filed its permitrevised the projected in-service date to construct the project with the CPUC and the project is included in the current 2016 – 2020 capital investment plan.2022.
Alberhill System
In October 2016,April 2017, the CPUC issued a final environmental impact report that identifiedfor the Alberhill System. This report rejected different alternatives recommended by CPUC staff and intervenors, selecting SCE's proposed project alternatives as beingthe environmentally superior to SCE’s proposed project. The $608 million estimated cost for this project reflectsA final CPUC decision is anticipated by the scope proposed by SCE. Any possible project delays or cost increases that may result from a CPUC approvalend of an alternative scope have not been reflected in the capital investment plan table above.
Alberhill System
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 unincorporated and incorporated portions of western Riverside County. The Project was designed to meet long-term forecasted electrical demand in the proposed Alberhill Project area and to increase electrical system reliability. In April 2016, the CPUC issued a draft environmental impact report that identified an alternative substation site. The $397 million estimated cost for this project reflects the scope proposed by SCE. Any possible project delays or cost increases that may result from a CPUC approval of an alternative scope have not been reflected in the capital investment plan table above.
Riverside Transmission Reliability
The Riverside Transmission Reliability Project is a joint project between SCE and Riverside Public Utilities (RPU), the municipal utility department of the City of Riverside. While RPU would be responsible for constructing some of the Project's facilities within Riverside, SCE's portion of the Project consists of constructing upgrades to its system, including a new 230-kV Substation; certain interconnection and telecommunication facilities and transmission lines in the cities of Riverside, Jurupa Valley and Norco and in portions of unincorporated Riverside County. The purpose of the Project is to provide RPU and its customers with adequate transmission capacity to serve existing and projected load, to provide for long-term system capacity for load growth, and to provide needed system reliability. Due to changed circumstances since the time the Project was originally developed, in July 2016 SCE informed the CPUC that it now supports a revised description of the Project. The CPUC is reviewing the revised Project and is expected to commence a supplemental environmental review in the fourth quarter of 2016. As a result of the delay in receipt of project approval from the CPUC, SCE is evaluating possible delays in the timing of project capital expenditures.
Eldorado-Lugo-Mohave Upgrade
The Eldorado-Lugo-Mohave Upgrade Project will increase capacity on existing transmission lines to allow additional renewable energy to flow from Nevada to southern California. The Project would modify SCE’s existing Eldorado, Lugo, and Mohave electrical substations to accommodate the increased current flow from Nevada to southern California; increase the power flow through the existing 500 kV transmission lines by constructing two new capacitors along the lines; raise transmission tower heights to meet ground clearance requirements, and install communication wire on our transmission lines to allow for communication between existing SCE substations.2017.
Coolwater-Lugo
In February 2016, SCE filed an abandoned plant recovery request at2017, the FERC for the costs of the cancelled Coolwater-Lugo transmission project pursuant to the authority granted by FERC forapproved a settlement allowing SCE to recover 100% of all prudently-incurred costs if the project is cancelled for reasons beyond SCE's control. The project was cancelled by the CPUC in 2015 due to a reduction in need. SCE requested recovery of the $37.1 million inof costs that SCE incurred for the project over a twelve-month period


through the FERC transmission formula rate. In May 2016, the FERC issued an order finding that the project was cancelled for reasons beyond SCE's control, and granted SCE recovery of 100% of the prudently-incurred costs of the project, as proposed by SCE but set for hearing and settlement the $8.5 million in overhead costs assigned by SCErelated to the project to determine whether these costs are reasonable.cancelled Coolwater-Lugo transmission project.
Dividend Restrictions
The CPUC regulates SCE's capital structure which limits the dividends it may pay Edison International. SCE may make distributions to Edison International as long as the common equity component of SCE's capital structure remains at or above 48% on a 13-month weighted average basis. At September 30, 2016March 31, 2017, SCE's 13-month weighted-average common equity component of total capitalization was 50.4% and the maximum additional dividend that SCE could pay to Edison International under this limitation was approximately $567$603 million, resulting in a restriction on net assets of approximately $13.8$14.0 billion.
In the thirdfirst quarter of 2016,2017, SCE declared and paid a dividend to Edison International of $170$191 million. Future dividend amounts and timing of distributions are dependent on a number of factors including the level of capital expenditures, operating cash flows and earnings.


Margin and Collateral Deposits
Certain derivative instruments, power procurement contracts and other contractual arrangements contain collateral requirements. Future collateral requirements may differ from the requirements at September 30, 2016March 31, 2017, due to the addition of incremental power and energy procurement contracts with collateral requirements, if any, and the impact of changes in wholesale power and natural gas prices on SCE's contractual obligations.
Some of the power procurement contracts contain provisions that require SCE to maintain an investment grade credit rating from the major credit rating agencies. If SCE's credit rating were to fall below investment grade, SCE may be required to pay the liability or post additional collateral.
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 September 30, 2016.March 31, 2017.
(in millions)  
Collateral posted as of September 30, 20161
 $163
Incremental collateral requirements for power procurement contracts resulting from a potential downgrade of SCE's credit rating to below investment grade 19
Incremental collateral requirements for power procurement contracts resulting from adverse market price movement2
 3
Posted and potential collateral requirements $185
(in millions)  
Collateral posted as of March 31, 20171
 $93
Incremental collateral requirements for power contracts resulting from a potential downgrade of SCE's credit rating to below investment grade 22
Incremental collateral requirements for power contracts resulting from adverse market price movement2
 3
Posted and potential collateral requirements $118
1 
Net collateral is provided to counterparties and other brokers consisted of $1 million of cash which was offset against net derivative liabilities in the consolidated balance sheets, $4 millionform of cash reflected in "Other current assets" on the consolidated balance sheets and $158 million in letters of credit and surety bonds.
2 
Incremental collateral requirements were based on potential changes in SCE's forward positions as of September 30, 2016March 31, 2017 due to adverse market price movements over the remaining lives of the existing power procurement contracts using a 95% confidence level.
Edison International Parent and Other
Edison International Parent and Other's liquidity and its ability to pay operating expenses and pay dividends to common shareholders are dependent on dividends from SCE, realization of tax benefits, and access to bank and capital markets. Edison International may also finance working capital requirements, payment of obligations, and capital investments, including capital contributions to subsidiaries to fund new businesses, with commercial paper or other borrowings, subject to availability in the bank and capital markets.
At September 30, 2016,March 31, 2017, Edison International Parent had $732$955 million available under its $1.25 billion multi-year revolving credit facility. In March 2017, Edison International issued $400 million of senior notes. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."
The debt covenant in Edison International Parent's credit facility requires a consolidated debt to total capitalization ratio as defined in the credit agreement of less than or equal to 0.65 to 1. At September 30, 2016,March 31, 2017, Edison International Parent's consolidated debt to total capitalization ratio was 0.460.48 to 1.


In August 2014,At March 31, 2017, Edison International entered into an amendment of the EME Settlement AgreementParent was in compliance with all other financial covenants that finalized the remaining matters relatedaffect access to the EME Settlement. Edison International made the final payment of $214 million in September 2016. Edison International has net operating loss and tax credit carryforwards retained by EME, which are available to offset future consolidated taxable income or tax liabilities. In December 2015, the PATH Act of 2015 extended 50% bonus depreciation for qualifying property retroactive to January 1, 2015 and through 2017 and provided for 40% bonus depreciation in 2018 and 30% in 2019. As a result, realization of these tax benefits has been deferred (currently forecasted through 2022). The timing of realization of these tax benefits may be further delayed in the event of future extensions of bonus depreciation and the value of the net operating loss carryforwards could be permanently reduced in the event that tax reform decreases the current corporate tax rate.capital.
Historical Cash Flows
Southern California Edison Company
Nine months ended September 30,Three months ended March 31,
(in millions)2016 20152017 2016
Net cash provided by operating activities$2,836
 $2,951
$931
 $884
Net cash used in financing activities(380) (96)
Net cash provided by (used in) financing activities56
 (57)
Net cash used in investing activities(2,443) (2,855)(926) (832)
Net increase in cash and cash equivalents$13
 $—
Net increase (decrease) in cash and cash equivalents$61
 $(5)


Net Cash Provided by Operating Activities
The following table summarizes major categories of net cash provided by operating activities as provided in more detail in SCE's consolidated statements of cash flows for the ninethree months ended September 30, 2016March 31, 2017 and 2015.2016.
Nine months ended September 30, Change in cash flowsThree months ended March 31, Change in cash flows
(in millions)20162015 2016/201520172016 2017/2016
Net income$1,129
$1,163
  $380
$325
  
Non-cash items1
1,606
1,307
  724
531
  
Subtotal$2,735
$2,470
 $265
$1,104
$856
 $248
Changes in cash flow resulting from working capital2
(32)(682) 650
(155)(35) (120)
Derivative assets and liabilities, net15
25
 (10)
Regulatory assets and liabilities, net189
1,318
 (1,129)
Other noncurrent assets and liabilities, net3
(71)(180) 109
Derivative assets and liabilities(12)5
 (17)
Regulatory assets and liabilities129
119
 10
Other noncurrent assets and liabilities3
(135)(61) (74)
Net cash provided by operating activities$2,836
$2,951
 $(115)$931
$884
 $47
1 
Non-cash items include depreciation, decommissioning and amortization, allowance for equity during construction, impairment and other charges, deferred income taxes and investment tax credits, and other.
2 
Changes in working capital items include receivables, inventory, accounts payable, prepaid and accrued taxes, and other current assets and liabilities.
3 Includes the nuclear decommissioning trusts.


Net cash provided by operating activities was impacted by the following:
Net income increased in 2017 by $55 million primarily due to higher authorized revenue in 2017 due to the escalation mechanism as set forth in the 2015 GRC decision, lower operation and maintenance expenses, and higher income tax benefits, partially offset by higher net financing costs.
Net cash for working capital was $(32)$(155) million and $(682)$(35) million during the ninethree months ended September 30,March 31, 2017 and 2016, and 2015, respectively. The net cash for each period was primarily related to seasonal usage, which resulted in timingthe reductions of receiptspayables (including payments for payroll-related costs and purchase power) of $230 million and $215 million during the first quarters of 2017 and 2016, respectively, partially offset by reductions of receivables from customers of $(230)($130 million and $(825) during$170 million in 2017 and 2016, and 2015, respectively, and timing of disbursements for purchased power of $190 million and $180 million during 2016 and 2015, respectively.respectively).
Net cash provided by regulatory assets and liabilities, including changes in over (under) collections of balancing accounts.accounts was $129 million and $119 million during the three months ended March 31, 2017 and 2016, respectively. SCE has a number of balancing accounts, which impact cash flows based on differences between timing of collection of amounts through rates and accrual expenditures. During the first nine months of 2016 and 2015, cashCash flows were primarily impacted by the following:
Lower2017
Higher cash due to $64 million of overcollections for the public purpose and energy efficiency programs. Overcollections for public purpose and energy efficiency programs increased due to lower spending for these programs.
Higher cash due to realization of $47 million in proceeds from the MHI arbitration. For further information on the MHI claims, see "Notes to Consolidated Financial Statements—Note 11. Commitments and Contingencies—Contingencies—San Onofre Related Matters."
BRRBA overcollections decreased by $66 million during the first three months of 2017 primarily due to the refund of 2015 overcollections resulting from the implementation of the 2015 GRC decision, which was authorized to be refunded to customers over a decreasetwo year period. The BRRBA tracks the differences between amounts authorized by the CPUC in the GRC proceedings and amounts billed to customers.
SCE had an increase in cash of approximately $84 million primarily due to lower spending for the new system generation program, which records the benefits and costs of power purchase agreements and SCE-owned peaker generation units associated with new generation resources.


2016
Higher cash due to an increase in overcollections of $134 million for the public purpose and energy efficiency programs due to lower spending for these programs during the first three months of 2016.
ERRA overcollections for fuel and purchased power of $231decreased by $75 million during the first ninethree months of 2016 primarily due to the implementation of the 2016 ERRA rate decrease in January 2016, partially offset by lower than forecasted power and gas prices experienced in 2016. Higher
SCE had an increase in cash due to a decrease in ERRA undercollections for fuel and purchased power of $1.1 billion during the first nine months of 2015approximately $60 million primarily due to lower powerthe timing of greenhouse gas auction revenue and gas prices experienced in 2015 and the 2015 application of 2013 and 2014 nuclear decommissioning costsclimate credit refunds against ERRA undercollections.
The BRRBA tracks differences between amounts authorized by the CPUC in the GRC proceedings and amounts billed to customers. BRRBA overcollections increased $190 million in the first nine months of 2016. The increase to BRRBA resulted from a $206 million reclassification from TAMA to BRRBA to refund customers and a refund to customers of $133 million for 2012 – 2014 incremental tax benefits related to repair deductions. See "Liquidity and Capital Resources—SCE—Regulatory Proceedings—Tax Repair Deductions and Memorandum Account" for further information. The increase to BRRBA overcollections from refunding tax benefits was partially offset by the implementation of the 2015 GRC decision in January 2016.
The public purpose and energy efficiency programs track the differences between amounts authorized by the CPUC and amounts incurred to fund programs established by the CPUC. Overcollections increased by $300 million during the first nine months of 2016 due to higher funding and lower spending for these programs. Overcollections decreased by $120 million during the first nine months of 2015 due to increased spending for these programs.
The 2015 GRC decision established the TAMA. As a result of this memorandum account, together with a balancing account for pole loading expenditures, any differences between the authorized tax repair deductions and actual tax repair deductions will be adjusted through customer rates. Overcollections decreased by $143 million during the first nine months of 2016 primarily due to a $206 million reclassification from TAMA to BRRBA to refund customers as discussed above, partially offset by higher tax repair deductions than forecasted in rates.
During the second quarter of 2016, the Department of Energy litigation memorandum account was established to track a refund of $122 million received by SCE in May 2016 from the federal government related to the Department of Energy's failure to meet its obligation to begin accepting spent nuclear fuel from San Onofre. These damages recovered by SCE are subject to CPUC review as to how these amounts would be distributed among customers, shareholders, or to offset fuel decommissioning or storage costs. See "Notes to Consolidated Financial Statements—Note 11. Commitments and Contingencies—Contingencies—Spent Nuclear Fuel" for further discussion.
Net cash provided by regulatory assets and liabilities also consisted of a cash inflow of $318 million in 2015 due to the revenue collected from customers that was estimated to be refunded as part of the 2015 GRC proposed decision.
Cash flows used in other noncurrent assets and liabilities were $71primarily related to net earnings from nuclear decommissioning trust investments ($27 million and $180$10 million in the first nine months of2017 and 2016, respectively) and 2015, respectively. Major factors affecting cash flow related to noncurrent assets and liabilities were activities related to SCE's nuclear decommissioning trusts (principally related to the paymentpayments of decommissioning costs). Decommissioning costs of San Onofre were approximately $125($45 million and $129$41 million in 2017 and 2016, respectively). See "Nuclear Decommissioning Activities" below for the nine months ended September 30, 2016 and 2015, respectively (such costs were recorded as a reduction of SCE's asset retirement obligation).


further discussion.
Net Cash Used inProvided by (Used in) Financing Activities
The following table summarizes cash provided by (used in) financing activities for the ninethree months ended September 30, 2016March 31, 2017 and 2015.2016. Issuances of debt and preference stock are discussed in "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements—Long-Term Debt" and "—Note 12. Preferred and Preference Stock of SCE.Debt."
Nine months ended September 30,Three months ended March 31,
(in millions)2016 20152017 2016
Issuances of first and refunding mortgage bonds, net$—
 $1,287
Issuances of pollution control bonds, net—
 128
Issuances of first and refunding mortgage bonds, net of discount and issuance costs$692
 $—
Issuance of term loan300
 —
Remarketing of pollution control bonds, net of issuance costs134
 —
Long-term debt matured or repurchased(81) (761)(40) (40)
Issuances of preference stock, net294
 319
Issuances of preference stock, net of issuance costs—
 294
Redemptions of preference stock(125) (325)—
 (125)
Short-term debt financing, net189
 (251)
Short-term debt (repayments), net of borrowings and discount(769) 52
Payments of common stock dividends to Edison International(510) (441)(191) (170)
Payments of preferred and preference stock dividends(97) (91)(36) (35)
Other(50) 39
(34) (33)
Net cash used in financing activities$(380) $(96)
Net cash provided by (used in) financing activities$56
 $(57)
Net Cash Used in Investing Activities
Cash flows used in investing activities are primarily due to capital expenditures and funding of nuclear decommissioning trusts. Capital expenditures were $2.7 billion and $3.1 billion for the nine months ended September 30, 2016 and 2015, respectively, primarily related to transmission and distribution investments ($929 million and generation investments. The decrease$950 million for the three months ended March 31, 2017 and 2016, respectively). In addition, in capital expenditures duringthe first three months of 2016, was primarily due to lower FERC capital spending. Net proceedsSCE had a net redemption of nuclear decommissioning trust investments were $159 million and $242 millionof $106 million. See "Nuclear Decommissioning Activities" below for the nine months ended September 30, 2016 and 2015, respectively. The 2016 net proceeds from sale of nuclear decommissioning trust investments was due to disbursements less net earnings during the period. The 2015 net proceeds from sale of nuclear decommissioning trust investments was used to pay 2013 and 2014 decommissioning costs less net earnings during the period. In addition, during the third quarter of 2016, SCE received proceeds of $140 million for the available cash surrender value of life insurance policies. The proceeds were used for general corporate purposes.further discussion.


Nuclear Decommissioning TrustsActivities
SCE's statement of cash flows includes nuclear decommissioning activities, of the Nuclear Decommissioning Trusts, which are reflected in the following line items:
Nine months ended September 30,Three months ended March 31,
(in millions)2016 20152017 2016
Net cash used in operating activities:
Nuclear decommissioning trusts
$(159) $(249)
Net cash used in operating activities:
Net earnings from nuclear decommissioning trust investments
$27
 $10
SCE's decommissioning costs(45) (41)
Net cash flow from investing activities:
Proceeds from sale of investments
2,075
 2,507
1,718
 793
Purchases of investments(1,916) (2,265)(1,719) (687)
Net cash impact$—
 $(7)$(19) $75
Net cash used in operating activities of the nuclear decommissioning trusts relate to interest and dividends less administrative expenses, taxes, and SCE's decommissioning costs. See "Notes to Consolidated Financial Statements—Note 9. Investments" for further information. SuchInvesting activities represent the source (use)purchase and sale of investments within the funds for investing activities.nuclear decommissioning trusts, including the reinvestment of earnings from nuclear decommissioning trust investments. The net cash impact represents the contributions made byreflects timing of decommissioning payments ($45 million and $41 million in 2017 and 2016, respectively) and reimbursements to SCE to the nuclear decommissioning trusts. During the nine months ended September 30, 2015, SCE made a contribution of $7 million to the non-qualified decommissioning trust pursuant to a CPUC decision related to decommissioning costs for San Onofre Unit 1.


In future periods, decommissioning costs of San Onofre will increase significantly. Beginning in March 2016, funds for decommissioning costs are requested from the nuclear decommissioning trusts one monthtrust ($26 million and $116 million in advance. Decommissioning disbursements are funded from sales2017 and 2016, respectively). The 2016 net cash impact included reimbursements for 2016 and a portion of investments of the nuclear2015, 2014, and 2013 decommissioning trusts. See "Notes to Consolidated Financial Statements—Note 9. Investments" for further information.costs.
Edison International Parent and Other
The table below sets forth condensed historical cash flow from operations for Edison International Parent and Other.
Nine months ended September 30,Three months ended March 31,
(in millions)2016 20152017 2016
Net cash used in operating activities$(336) $(118)$(52) $(29)
Net cash provided by financing activities280
 122
56
 12
Net cash used in investing activities(34) (2)(11) (2)
Net (decrease) increase in cash and cash equivalents$(90) $2
Net decrease in cash and cash equivalents$(7) $(19)
Net Cash Used in Operating Activities
Net cash used in operating activities was impacted byincreased $23 million during the following:
$214 million and $204 millionfirst three months of cash2017 compared to 2016 due to higher interest payments made to the Reorganization Trust in September 2016 and 2015, respectively, related to the EME Settlement Agreement. See "Notes to Consolidated Financial Statements—Note 15. Discontinued Operations—EME Chapter 11 Bankruptcy" for further information.
$122 million receipt of intercompany tax-allocation payments in 2015.
$21 million outflow in June 2016 related to the buy-out of an earn-out provision with the former shareholders of a company acquired by Edison Energy in 2015. See "Results of Operations—Edison International Parentlong-term debt and Other—Income from Continuing Operations" for further information.
$101 million cash outflow from operating activities in 2016 compared to $36 million cash outflow in 2015 due to the timing of payments and receipts relating to interest and operating costs.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was as follows:
Nine months ended September 30,Three months ended March 31,
(in millions)2016 20152017 2016
Dividends paid to Edison International common shareholders$(469) $(408)$(177) $(156)
Dividends received from SCE510
 441
191
 170
Payment for stock-based compensation(53) (116)
Receipt from stock option exercises30
 65
Long-term debt issuance, net397
 —
Short-term debt financing, net(129) 139
Payment for stock-based compensation, net of receipt from stock option exercises(116) (16)
Long-term debt issuance, net of discount and issuance costs398
 397
Short-term debt repayments, net of borrowings and discount(244) (384)
Other(6) 1
4
 1
Net cash provided by financing activities$280
 $122
$56
 $12


Contingencies
SCE has contingencies related to San Onofre Related Matters, Energy Efficiency Incentive Mechanism,Long Beach Service Interruptions, Nuclear Insurance, Wildfire Insurance, and Spent Nuclear Fuel, which are discussed in "Notes to Consolidated Financial Statements—Note 11. Commitments and Contingencies."
Environmental Remediation
As of September 30, 2016, SCE had identified 19 material sites for remediation and recorded an estimated minimum liability of $130 million. SCE expects to recover 90% of its remediation costs at certain sites. See "Notes to Consolidated Financial Statements—Note 11. Commitments and Contingencies—Contingencies—Environmental Remediation" for further discussion.
MARKET RISK EXPOSURES
Edison International's and SCE's primary market risks are described in the 20152016 Form 10-K. For a further discussion of market risk exposures, including commodity price risk, credit risk, and interest rate risk, see "Notes to Consolidated Financial Statements—Note 4. Fair Value Measurements" and "—Note 6. Derivative Instruments."
Commodity Price Risk
The fair value of outstanding derivative instruments used to mitigate exposure to commodity price risk was a net liability of $1.2 billion at both September 30, 2016and $1.1 billion March 31, 2017 and December 31, 2015.2016, respectively. For further discussion of fair value 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 setoff. 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 for both rated and non-rated counterparties based on credit ratings using published ratings of counterparties 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.
As of September 30, 2016,March 31, 2017, the amount of balance sheet exposure as described above broken down by the credit ratings of SCE's counterparties, was as follows:
September 30, 2016March 31, 2017
(in millions)
Exposure2
 Collateral Net Exposure
Exposure2
 Collateral Net Exposure
S&P Credit Rating1
          
A or higher$125
 $—
 $125
$64
 $—
 $64
Not rated6
 (16) —
Total$131
 $(16) $125
1 
SCE assigns a credit rating based on the lower of a counterparty's S&P, Fitch or Moody's rating. For ease of reference, the above table uses the S&P classifications to summarize risk, but reflects the lower of the twothree credit ratings.
2 
Exposure excludes amounts related to contracts classified as normal purchases and sales and non-derivative contractual commitments that are not recorded on the consolidated balance sheets, except for any related net accounts receivable.


CRITICAL ACCOUNTING ESTIMATES AND POLICIES
For a complete discussion on Edison International's and SCE's critical accounting policies, see "Critical Accounting Estimates and Policies" in the year-ended 20152016 MD&A.
NEW ACCOUNTING GUIDANCE
New accounting guidance is discussed in "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—New Accounting Guidance."
RISK FACTORS
The risk factors appearing in the 2015 Form 10-K under the headings set forth below are supplemented and updated as follows:
RISKS RELATING TO SOUTHERN CALIFORNIA EDISON COMPANY
Regulatory Risks
SCE is subject to extensive regulation and the risk of adverse regulatory decisions and changes in applicable regulations or legislation.
SCE operates in a highly regulated environment. SCE's business is subject to extensive federal, state and local energy, environmental and other laws and regulations. Among other things, the CPUC regulates SCE's retail rates and capital structure, and the FERC regulates SCE's wholesale rates. The NRC regulates the decommissioning of San Onofre. The construction, planning, and siting of SCE's power plants and transmission lines in California are also subject to regulation by the CPUC.
SCE must periodically apply for licenses and permits from these various regulatory authorities and abide by their respective orders. Should SCE be unsuccessful in obtaining necessary licenses or permits or should these regulatory authorities initiate any investigations or enforcement actions or impose penalties or disallowances on SCE, SCE's business could be materially affected. The process of obtaining licenses and permits from regulatory authorities may be delayed or defeated by concerted community opposition and such delay or defeat could have a material effect on SCE's business.
In September 2016, the California Governor signed into law several CPUC reform bills that establish rules governing, among other subjects, communications between the CPUC officials, staff and the regulated utilities. Changes to the rules and processes around ex parte communications could result in delayed decisions, increased investigations, enforcement actions and penalties. In addition, the CPUC or other parties may initiate investigations of past communications between public utilities, including SCE, and CPUC officials and staff that could result in reopening completed proceedings for reconsideration.
In addition, existing regulations may be revised or reinterpreted and new laws and regulations may be adopted or become applicable to SCE, or its facilities or operations, in a manner that may have a detrimental effect on SCE's business or result in significant additional costs. In addition, regulations adopted via the public initiative or legislative process may apply to SCE, or its facilities or operations, in a manner that may have a detrimental effect on SCE's business or result in significant additional costs.
Competitive and Market Risks
The electricity industry is undergoing change, including increased competition, technological advancements, and political and regulatory developments
California utilities are experiencing increasing deployment of distributed energy resources, such as solar, energy storage, energy efficiency and demand response technologies. This growth will eventually require modernization of the electric distribution grid to, among other things, accommodate two-way flows of electricity and increase the grid's capacity to interconnect distributed energy resources. To this end, the CPUC is conducting proceedings to: evaluate changes to the planning and operation of the electric distribution grid in order to prepare for higher penetration of distributed energy resources; consider future grid modernization and grid reinforcement investments; evaluate if traditional grid investments can be deferred by distributed energy resources, and if feasible, what, if any, compensation would be appropriate; and clarify the role of the electric distribution grid operator. The outcome of these proceedings is unknown. These changes could materially affect SCE's business model and its financial condition and results of operations.


Customer-owned generation itself reduces the amount of electricity those customers purchase from utilities and has the effect of increasing utility rates unless customer rates are designed to allocate the costs of the distribution grid across all customers that benefit from their use. For example, customers in California that generate their own power do not currently pay all transmission and distribution charges and non-bypassable charges, subject to limitations, which result in increased utility rates for those customers who do not own their generation. Such increases influence the public discussion regarding changes in the electric utility business model.
In addition, the FERC has adopted changes that have opened transmission development to competition from independent developers, allowing such developers to compete with incumbent utilities for the construction and operation of transmission facilities. For more information, see "Business—SCE—Competition" in the 2015 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.


FINANCIAL STATEMENTS
Consolidated Statements of IncomeEdison International Edison International 

  
 
Three months ended September 30,
Nine months ended September 30,Three months ended March 31,
(in millions, except per-share amounts, unaudited)2016 2015 2016
20152017 2016
Total operating revenue$3,767
 $3,763
 $8,985

$9,183
$2,463
 $2,440
Purchased power and fuel1,719
 1,785
 3,576

3,648
784
 794
Operation and maintenance740
 780
 2,090

2,159
596
 629
Depreciation, decommissioning and amortization521
 506
 1,504

1,451
499
 477
Property and other taxes92
 84
 269
 255
100
 92
Impairment and other charges—
 —
 21

—
5
 —
Total operating expenses3,072
 3,155
 7,460

7,513
1,984
 1,992
Operating income695
 608
 1,525

1,670
479
 448
Interest and other income32
 32
 97

114
33
 31
Interest expense(147) (138) (431)
(420)(152) (140)
Other expenses(9) (15) (29)
(40)(8) (6)
Income from continuing operations before income taxes571
 487
 1,162

1,324
352
 333
Income tax expense122
 82
 113

195
Income tax (benefit) expense(40) 28
Income from continuing operations449
 405
 1,049

1,129
392
 305
Income (loss) from discontinued operations, net of tax—
 43
 (1) 43
Income from discontinued operations, net of tax—
 1
Net income449
 448
 1,048

1,172
392
 306
Preferred and preference stock dividend requirements of SCE31
 28
 92

84
31
 30
Other noncontrolling interests(1) (1) (9) (11)(1) (5)
Net income attributable to Edison International common shareholders$419
 $421
 $965

$1,099
$362
 $281
Amounts attributable to Edison International common shareholders:    


   
Income from continuing operations, net of tax$419
 $378
 $966

$1,056
$362
 $280
Income (loss) from discontinued operations, net of tax—
 43
 (1)
43
Income from discontinued operations, net of tax—
 1
Net income attributable to Edison International common shareholders$419
 $421
 $965

$1,099
$362
 $281
Basic earnings per common share attributable to Edison International common shareholders:    


   
Weighted-average shares of common stock outstanding326
 326
 326

326
326
 326
Continuing operations$1.29
 $1.16
 $2.96

$3.24
$1.11
 $0.86
Discontinued operations—
 0.13
 —

0.13
Total$1.29
 $1.29
 $2.96

$3.37
$1.11
 $0.86
Diluted earnings per common share attributable to Edison International common shareholders:    


   
Weighted-average shares of common stock outstanding, including effect of dilutive securities329
 328
 329

329
329
 329
Continuing operations$1.27
 $1.15
 $2.94

$3.21
$1.10
 $0.85
Discontinued operations—
 0.13
 —

0.13
Total$1.27
 $1.28
 $2.94

$3.34
$1.10
 $0.85
Dividends declared per common share$0.4800
 $0.4175
 $1.4400

$1.2525
$0.5425
 $0.4800

The accompanying notes are an integral part of these consolidated financial statements.

2214






Consolidated Statements of Comprehensive Income  Edison International  Edison International 
     
Three months ended September 30, Nine months ended September 30, Three months ended March 31,
(in millions, unaudited)2016 2015 2016 2015 2017 2016
Net income$449
 $448
 $1,048
 $1,172
 $392
 $306
Other comprehensive income (loss), net of tax:       
Other comprehensive income, net of tax:    
Pension and postretirement benefits other than pensions:           
Net loss arising during the period plus amortization included in net income2
 2
 5
 4
Amortization of net loss included in net income 2
 2
Other—
 (1) —
 (1) 2
 —
Other comprehensive income, net of tax2
 1
 5
 3
 4
 2
Comprehensive income451
 449
 1,053
 1,175
 396
 308
Less: Comprehensive income attributable to noncontrolling interests30
 27
 81
 73
 30
 25
Comprehensive income attributable to Edison International$421
 $422
 $972
 $1,102
 $366
 $283


The accompanying notes are an integral part of these consolidated financial statements.

2315





Consolidated Balance SheetsEdison International Edison International 

(in millions, unaudited)September 30,
2016
December 31,
2015		March 31,
2017
December 31,
2016
ASSETS 
  
 
Cash and cash equivalents$84

$161
$150

$96
Receivables, less allowances of $58 and $62 for uncollectible accounts at respective dates999

771
Receivables, less allowances of $55 and $62 for uncollectible accounts at respective dates688

714
Accrued unbilled revenue570

565
266

370
Inventory310

267
237

239
Derivative assets60

79
69

73
Regulatory assets321

560
394

350
Other current assets261

251
242

281
Total current assets2,605

2,654
2,046

2,123
Nuclear decommissioning trusts4,376

4,331
4,352

4,242
Other investments76

203
89

83
Total investments4,452

4,534
4,441

4,325
Utility property, plant and equipment, less accumulated depreciation and amortization of $8,753 and $8,548 at respective dates36,064

34,945
Nonutility property, plant and equipment, less accumulated depreciation of $96 and $85 at respective dates167

140
Utility property, plant and equipment, less accumulated depreciation and amortization of $9,321 and $9,000 at respective dates36,951

36,806
Nonutility property, plant and equipment, less accumulated depreciation of $102 and $99 at respective dates217

194
Total property, plant and equipment36,231

35,085
37,168

37,000
Derivative assets67

84
Regulatory assets7,844

7,512
7,674

7,455
Other long-term assets358

360
411

416
Total long-term assets8,269

7,956
8,085

7,871








      
   
Total assets$51,557

$50,229
$51,740

$51,319


The accompanying notes are an integral part of these consolidated financial statements.

2416





Consolidated Balance Sheets
Edison International Edison International 


 
  
 
(in millions, except share amounts, unaudited)
September 30,
2016
December 31,
2015		March 31,
2017
December 31,
2016
LIABILITIES AND EQUITY
 
  
 
Short-term debt
$757

$695
$295

$1,307
Current portion of long-term debt
881

295
981

981
Accounts payable
1,180

1,310
844

1,342
Accrued taxes
130

72
86

50
Customer deposits
264

242
272

269
Derivative liabilities
223

218
237

216
Regulatory liabilities
1,030

1,128
804

756
Other current liabilities
877

967
897

991
Total current liabilities
5,342

4,927
4,416

5,912
Long-term debt
10,407

10,883
11,662

10,175
Deferred income taxes and credits
8,177

7,480
8,523

8,327
Derivative liabilities
1,070

1,100
989

941
Pensions and benefits
1,776

1,759
1,358

1,354
Asset retirement obligations
2,592

2,764
2,585

2,590
Regulatory liabilities
6,020

5,676
5,910

5,726
Other deferred credits and other long-term liabilities
2,168

2,246
2,048

2,102
Total deferred credits and other liabilities
21,803

21,025
21,413

21,040
Total liabilities
37,552

36,835
37,491

37,127
Commitments and contingencies (Note 11)










Redeemable noncontrolling interest —
 6
7
 5
Common stock, no par value (800,000,000 shares authorized; 325,811,206 shares issued and outstanding at respective dates)
2,503

2,484
2,510

2,505
Accumulated other comprehensive loss
(51)
(56)(49)
(53)
Retained earnings
9,362

8,940
9,590

9,544
Total Edison International's common shareholders' equity
11,814

11,368
12,051

11,996
Noncontrolling interests – preferred and preference stock of SCE

2,191

2,020
2,191

2,191
Total equity
14,005

13,388
14,242

14,187


Total liabilities and equity
$51,557

$50,229
$51,740

$51,319


The accompanying notes are an integral part of these consolidated financial statements.

2517





Consolidated Statements of Cash FlowsEdison International Edison International 


Nine months ended September 30,Three months ended March 31,
(in millions, unaudited)2016
20152017
2016
Cash flows from operating activities: 
  
 
Net income$1,048

$1,172
$392

$306
Less: (Loss) income from discontinued operations(1)
43
Less: income from discontinued operations—

1
Income from continuing operations1,049

1,129
392

305
Adjustments to reconcile to net cash provided by operating activities:

 

 
Depreciation, decommissioning and amortization1,575

1,515
520

499
Allowance for equity during construction(58)
(63)(19)
(22)
Impairment and other charges5

—
Deferred income taxes and investment tax credits127

202
(13)
27
Other17

(5)5

5
Nuclear decommissioning trusts
(159) (249)1
 (106)
EME settlement payments, net of insurance proceeds(209)
(176)
Changes in operating assets and liabilities:

 

 
Receivables(235)
(412)26

117
Inventory(43)
10
2

(1)
Accounts payable151

164
(226)
(184)
Prepaid and accrued taxes56
 (18)34
 66
Other current assets and liabilities(68)
(572)50

(43)
Derivative assets and liabilities, net15

25
Regulatory assets and liabilities, net189

1,318
Derivative assets and liabilities(12)
5
Regulatory assets and liabilities129

119
Other noncurrent assets and liabilities93

(35)(15)
68
Net cash provided by operating activities2,500

2,833
879

855
Cash flows from financing activities: 
  
 
Long-term debt issued or remarketed, net of discount and issuance costs of $3 and $16 for respective periods397

1,415
Long-term debt issued or remarketed, net of discount and issuance costs of $11 and $3 for respective periods1,524

397
Long-term debt matured(83)
(761)(40)
(40)
Preference stock issued, net294

319
—

294
Preference stock redeemed(125)
(325)—

(125)
Short-term debt financing, net60

(112)(1,013)
(332)
Settlements of stock-based compensation, net(139)
(51)
Dividends to noncontrolling interests(98)
(91)(37)
(35)
Dividends paid(469)
(408)(177)
(156)
Other(76) (11)(6) 3
Net cash provided by financing activities(100)
26
Net cash provided by (used in) financing activities112

(45)
Cash flows from investing activities: 
  
 
Capital expenditures(2,773)
(3,134)(939)
(951)
Proceeds from sale of nuclear decommissioning trust investments2,075

2,507
1,718

793
Purchases of nuclear decommissioning trust investments(1,916)
(2,265)(1,719)
(687)
Life insurance policy proceeds140
 —
Other(3)
35
3

11
Net cash used in investing activities(2,477)
(2,857)(937)
(834)
Net (decrease) increase in cash and cash equivalents(77)
2
Net increase (decrease) in cash and cash equivalents54

(24)
Cash and cash equivalents at beginning of period161

132
96

161
Cash and cash equivalents at end of period$84

$134
$150

$137

The accompanying notes are an integral part of these consolidated financial statements.

2618





Consolidated Statements of Income
Southern California Edison Company

  
Southern California Edison Company

 
         
Three months ended September 30, Nine months ended September 30, Three months ended March 31,
(in millions, unaudited)2016 2015 2016 2015 2017 2016
Operating revenue$3,752
 $3,757
 $8,956
 $9,166
 $2,456
 $2,435
Purchased power and fuel1,719
 1,785
 3,576
 3,648
 784
 794
Operation and maintenance702
 756
 1,993
 2,101
 571
 603
Depreciation, decommissioning and amortization519
 506
 1,497
 1,449
 497
 475
Property and other taxes91
 84
 268
 254
 97
 91
Total operating expenses3,031

3,131

7,334
 7,452
 1,949

1,963
Operating income721

626

1,622
 1,714
 507

472
Interest and other income32
 29
 97
 93
 33
 31
Interest expense(137) (131) (402) (398) (141) (131)
Other expenses(9) (15) (26) (39) (7) (5)
Income before income taxes607

509

1,291
 1,370
 392

367
Income tax expense141
 92
 162
 207
 12
 42
Net income466

417

1,129
 1,163
 380

325
Less: Preferred and preference stock dividend requirements31
 28
 92
 84
 31
 30
Net income available for common stock$435

$389

$1,037
 $1,079
 $349

$295

Consolidated Statements of Comprehensive Income          
          
Three months ended September 30, Nine months ended September 30,Three months ended March 31,
(in millions, unaudited)2016 2015 2016 20152017 2016
Net income$466
 $417
 $1,129
 $1,163
$380
 $325
Other comprehensive income, net of tax:          
Pension and postretirement benefits other than pensions:          
Net loss arising during the period plus amortization included in net income1
 1
 3
 3
Amortization of net loss included in net income1
 1
Other1
 —
Other comprehensive income, net of tax1
 1
 3
 3
2
 1
Comprehensive income$467
 $418
 $1,132
 $1,166
$382
 $326


The accompanying notes are an integral part of these consolidated financial statements.

2719





Consolidated Balance SheetsSouthern California Edison Company
(in millions, unaudited)September 30,
2016		 December 31, 2015March 31,
2017		 December 31, 2016
ASSETS      
Cash and cash equivalents$39
 $26
$100
 $39
Receivables, less allowances of $58 and $62 for uncollectible accounts at respective dates980
 724
Receivables, less allowances of $55 and $61 for uncollectible accounts at respective dates670
 699
Accrued unbilled revenue569
 564
265
 369
Inventory251
 256
235
 239
Derivative assets60
 79
69
 73
Regulatory assets321
 560
394
 350
Other current assets223
 234
307
 262
Total current assets2,443
 2,443
2,040
 2,031
Nuclear decommissioning trusts4,376
 4,331
4,352
 4,242
Other investments41
 168
61
 50
Total investments4,417
 4,499
4,413
 4,292
Utility property, plant and equipment, less accumulated depreciation and amortization of $8,753 and $8,548 at respective dates36,064
 34,945
Nonutility property, plant and equipment, less accumulated depreciation of $87 and $81 at respective dates76
 73
Utility property, plant and equipment, less accumulated depreciation and amortization of $9,321 and $9,000 at respective dates36,951
 36,806
Nonutility property, plant and equipment, less accumulated depreciation of $91 and $89 at respective dates75
 75
Total property, plant and equipment36,140
 35,018
37,026
 36,881
Derivative assets67
 84
Regulatory assets7,844
 7,512
7,674
 7,455
Other long-term assets231
 239
231
 232
Total long-term assets8,142
 7,835
7,905
 7,687
      
      
      
      
      
      
      
   
Total assets$51,142
 $49,795
$51,384
 $50,891

The accompanying notes are an integral part of these consolidated financial statements.

2820





Consolidated Balance SheetsSouthern California Edison Company
(in millions, except share amounts, unaudited)September 30,
2016		 December 31, 2015March 31,
2017		 December 31, 2016
LIABILITIES AND EQUITY      
Short-term debt$239
 $49
$—
 $769
Current portion of long-term debt479
 79
579
 579
Accounts payable1,172
 1,299
847
 1,344
Accrued taxes156
 46
88
 45
Customer deposits264
 242
272
 269
Derivative liabilities223
 218
237
 216
Regulatory liabilities1,030
 1,128
804
 756
Other current liabilities675
 760
656
 729
Total current liabilities4,238
 3,821
3,483
 4,707
Long-term debt9,987
 10,460
10,843
 9,754
Deferred income taxes and credits9,765
 9,073
10,323
 9,886
Derivative liabilities1,069
 1,100
989
 941
Pensions and benefits1,293
 1,284
898
 896
Asset retirement obligations2,590
 2,762
2,580
 2,586
Regulatory liabilities6,020
 5,676
5,910
 5,726
Other deferred credits and other long-term liabilities1,848
 1,947
1,735
 1,912
Total deferred credits and other liabilities22,585
 21,842
22,435
 21,947
Total liabilities36,810
 36,123
36,761
 36,408
Commitments and contingencies (Note 11)

 



 

Common stock, no par value (560,000,000 shares authorized; 434,888,104 shares issued and outstanding at each date)2,168
 2,168
2,168
 2,168
Additional paid-in capital658
 652
660
 657
Accumulated other comprehensive loss(19) (22)(18) (20)
Retained earnings9,280
 8,804
9,568
 9,433
Total common shareholder's equity12,087
 11,602
12,378
 12,238
Preferred and preference stock2,245
 2,070
2,245
 2,245
Total equity14,332
 13,672
14,623
 14,483
Total liabilities and equity$51,142
 $49,795
$51,384
 $50,891


The accompanying notes are an integral part of these consolidated financial statements.

2921





Consolidated Statements of Cash FlowsSouthern California Edison Company
Nine months ended September 30,Three months ended March 31,
(in millions, unaudited)2016 20152017 2016
Cash flows from operating activities:      
Net income$1,129
 $1,163
$380
 $325
Adjustments to reconcile to net cash provided by operating activities:      
Depreciation, decommissioning and amortization1,564
 1,509
517
 496
Allowance for equity during construction(58) (63)(19) (22)
Deferred income taxes and investment tax credits93
 (149)223
 54
Other7
 10
3
 3
Nuclear decommissioning trusts(159) (249)1
 (106)
Changes in operating assets and liabilities:      
Receivables(256) (436)28
 100
Inventory5
 21
5
 5
Accounts payable152
 192
(226) (175)
Prepaid and accrued taxes111
 99
(33) 60
Other current assets and liabilities(44) (558)71
 (25)
Derivative assets and liabilities, net15
 25
Regulatory assets and liabilities, net189
 1,318
Derivative assets and liabilities(12) 5
Regulatory assets and liabilities129
 119
Other noncurrent assets and liabilities88
 69
(136) 45
Net cash provided by operating activities2,836
 2,951
931
 884
Cash flows from financing activities:      
Long-term debt issued or remarketed, net of discount and issuance costs of $16 for the nine months ended September 30, 2015—
 1,415
Long-term debt issued or remarketed, net of discount and issuance costs of $9 for the three months ended March 31, 20171,126
 —
Long-term debt matured(81) (761)(40) (40)
Preference stock issued, net294
 319
—
 294
Preference stock redeemed(125) (325)—
 (125)
Short-term debt financing, net189
 (251)(769) 52
Dividends paid(607) (532)(227) (205)
Other(50) 39
(34) (33)
Net cash used in financing activities(380) (96)
Net cash provided by (used in) financing activities56
 (57)
Cash flows from investing activities:      
Capital expenditures(2,747) (3,121)(929) (950)
Proceeds from sale of nuclear decommissioning trust investments2,075
 2,507
1,718
 793
Purchases of nuclear decommissioning trust investments(1,916) (2,265)(1,719) (687)
Life insurance policy proceeds140
 —
Other5
 24
4
 12
Net cash used in investing activities(2,443)
(2,855)(926)
(832)
Net increase in cash and cash equivalents13
 —
Net increase (decrease) in cash and cash equivalents61
 (5)
Cash and cash equivalents, beginning of period26
 38
39
 26
Cash and cash equivalents, end of period$39
 $38
$100
 $21

The accompanying notes are an integral part of these consolidated financial statements.

3022





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1.    Summary of Significant Accounting Policies
Organization and Basis of Presentation
Edison International is the parent holding company of Southern California Edison Company ("SCE"). 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 International is also the parent company of Edison Energy Group, Inc., a holding company that holds interests infor subsidiaries that are engaged in pursuing competitive businesses focused on providingbusiness opportunities across energy solutions toservices and distributed solar for commercial and industrial customers, including distributed resources, engaging in competitive transmission opportunities, and exploring distributed water treatment and recycling.customers. Such competitive 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 nonutilitycompetitive subsidiaries. SCE's consolidated financial statements include the accounts of SCE and its wholly owned and controlled subsidiaries. All intercompany transactions have been eliminated from the consolidated financial statements.
Edison International's and SCE's significant accounting policies were described in Note 1 of "Notes to Consolidated Financial Statements" included in Edison International's and SCE's combined Annual Report on Form 10-K for the 2015year-ended December 31, 2016 (the "2016 Form 10-K.10-K"). This quarterly report should be read in conjunction with the financial statements and notes included in the 20152016 Form 10-K.
In the opinion of management, all adjustments, consisting of recurring accruals, 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 of America("GAAP") for the periods covered by this quarterly report on Form 10-Q. The results of operations for the three- and nine-month periodsthree-month period ended September 30, 2016March 31, 2017 are not necessarily indicative of the operating results for the full year.
The December 31, 20152016 financial statement data was derived from audited financial statements, but does not include all disclosures required by GAAP.
During the fourth quarter of 2016, Edison International and SCE early adopted an accounting principles generally acceptedstandard for share-based payments using the modified retrospective approach, effective January 1, 2016. Prior year financial statements have been updated to reflect the modified retrospective application of this accounting standard. For further information, see Note 1 and Note 18 of "Notes to Consolidated Financial Statements" included in the United States2016 Form 10-K and Note 2 and Note 7 of America. Certain prior year amounts have been reclassified for consistency with the current period presentation.this Form 10-Q.
Cash Equivalents
Cash equivalents includedincludes 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
(in millions) September 30,
2016		 December 31, 2015 September 30,
2016		 December 31, 2015 March 31,
2017		 December 31, 2016 March 31,
2017		 December 31, 2016
Money market funds $39
 $37
 $18
 $8
 $111
 $41
 $87
 $18
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 as follows:
  Edison International SCE
(in millions) September 30,
2016		 December 31, 2015 September 30,
2016		 December 31, 2015
Book balances reclassified to accounts payable $130
 $162
 $128
 $158
Inventory
Inventory is primarily composed of materials, supplies and spare parts, and stated at the lower of cost or market, cost being determined by the average cost method.
  Edison International SCE
(in millions) March 31,
2017		 December 31, 2016 March 31,
2017		 December 31, 2016
Book balances reclassified to accounts payable $75
 $138
 $70
 $136


Revenue Recognition
Operating revenue is recognized when electricity is delivered and includes amounts for services rendered but unbilled at the
end of each reporting period. During the first nine months of 2015, pending the outcome of the final decision in the 2015 GRC, SCE recognized revenue from CPUC activities largely based on the revenue requirement set forth in the 2015 proposed GRC decision received in September 2015. In the fourth quarter of 2015, SCE implemented the final 2015 GRC decision.
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, including performance shares and restricted stock units, which earn dividend equivalents on an equal basis with common shares once the awards are vested. EPS attributable to Edison International common shareholders was computed as follows:
 Three months ended September 30, Nine months ended September 30, Three months ended March 31,
(in millions, except per-share amounts) 2016 2015 2016 2015 2017 2016
Basic earnings per share – continuing operations:            
Income from continuing operations attributable to common shareholders $419
 $378
 $966
 $1,056
 $362
 $280
Participating securities dividends —
 —
 —
 (1) —
 —
Income from continuing operations available to common shareholders $419
 $378
 $966
 $1,055
 $362
 $280
Weighted average common shares outstanding 326
 326
 326
 326
 326
 326
Basic earnings per share – continuing operations $1.29
 $1.16
 $2.96
 $3.24
 $1.11
 $0.86
Diluted earnings per share – continuing operations:            
Income from continuing operations attributable to common shareholders $362
 $280
Participating securities dividends —
 —
Income from continuing operations available to common shareholders $419
 $378
 $966
 $1,055
 $362
 $280
Income impact of assumed conversions —
 —
 —
 1
 —
 —
Income from continuing operations available to common shareholders and assumed conversions $419
 $378
 $966
 $1,056
 $362
 $280
Weighted average common shares outstanding 326
 326
 326
 326
 326
 326
Incremental shares from assumed conversions 3
 2
 3
 3
 3
 3
Adjusted weighted average shares – diluted 329
 328
 329
 329
 329
 329
Diluted earnings per share – continuing operations $1.27
 $1.15
 $2.94
 $3.21
 $1.10
 $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 42,8901,355,930 and 2,054,8762,023,787 shares of common stock for the three months ended September 30,March 31, 2017 and 2016, and 2015, respectively, and 166,057 and 2,054,876 shares for the nine months ended September 30, 2016 and 2015, respectively, were outstanding, but were not included in the computation of diluted earnings per share because the exercise price of the awards was greater than the average market price of the common shares during the respective periods and, therefore, the effect would have been antidilutive.
Goodwill

Edison International assesses goodwill through annual goodwill impairment tests, at the reporting unit level, as of October 1st of each year.  As of September 30, 2016, goodwill is comprised of $78 million at the Edison Energy reporting unit and $22 million at the SoCore Energy reporting unit. Edison International will update these tests between annual tests if events occur or circumstances change such that it is more likely than not that the fair value of a reporting unit is below its carrying value.


New Accounting Guidance
Accounting Guidance Adopted
On April 7, 2015, the FASB issued an accounting standards update that requires debt issuance costs to be presented in the balance sheet as a direct reduction from the carrying amount of the related debt liability, consistent with debt discounts. Previously, accounting guidance required these costs to be presented as a deferred charge asset. Edison International and SCE adopted this guidance in the first quarter of 2016. At September 30, 2016, the amount of debt issuance costs that are reflected as a reduction of "Long-term debt" was $73 million for SCE and $79 million for Edison International. At December 31, 2015 the amount of debt issuance costs that have been reclassified from "Other long-term assets" to a reduction of "Long-term debt" was $77 million for SCE and $81 million for Edison International.
On April 15, 2015, the FASB issued an accounting standards update on fees paid by a customer for software licenses. This new standard provides guidance about whether a cloud computing arrangement includes a software license which may be capitalized in certain circumstances. If a cloud computing arrangement does not include a software license, then the arrangement should be accounted for as a service contract. Edison International and SCE adopted this guidance prospectively, effective January 1, 2016. The adoption of this standard did not have a material impact on Edison International's and SCE's consolidated financial statements.
Accounting Guidance Not Yet Adopted
OnIn May 28, 2014, the FASBFinancial Accounting Standards Board ("FASB") issued an accounting standards update on revenue recognition including enhanced disclosures and further amended the standard in 2016.2016 and 2017. Under the new standard, revenue is recognized when (or as) a good or service is transferred to the customer and the customer obtains control of the good or service. On July 9, 2015, the FASB approved a one-year deferral, updating the effective date toThis standard will be adopted on January 1, 2018. Edison International and SCE are currently evaluating this guidancehave completed the preliminary phases of their assessment of the impact on the consolidated financial statements and cannot determinedo not believe the impactadoption of this standard at this time.will have a material impact on the results of operations. As of March 31, 2017, approximately 98% of total operating revenue arises from SCE's tariff offerings that provide electricity to customers. For such arrangements, revenue from contracts with customers will be equivalent to the electricity supplied and billed in that period (including estimated billings). As such, there will not be a change in the timing or pattern of revenue recognition for such sales. Edison International and SCE anticipate adopting the standard using the modified retrospective application which means that Edison International and SCE would recognize the cumulative effect of initially applying the revenue standard as an adjustment to the opening balance of retained earnings in 2018.
OnIn January 5, 2016, the FASB issued an accounting standards update that amends the guidance on the classification and measurement of financial instruments. The amendments require equity investments (excluding those accounted for under the equity method or those that result in consolidation) to be measured at fair value, with changes in fair value recognized in net income. It also amends certain disclosure requirements associated with the fair value of financial instruments. In addition, the


new guidance requires financial assets and financial liabilities to be presented separately in the notes to the financial statements, grouped by measurement category and form of financial asset. Edison International and SCE will adopt this guidance effective January 1, 2018. The adoption of this standard is not expected to have a material impact on Edison International's and SCE's consolidated financial statements.
OnIn February 25, 2016, the FASB issued an accounting standards update related to lease accounting including enhanced disclosures. Under the new standard, a lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified assets for a period of time in exchange for consideration. Lessees will classify leases with a term of more than one year as either operating or finance leases and will need to recognize leases on the balance sheet as a right-of-use asset and a related lease liability.liability, and classify the leases as either operating or finance. The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. Operating leases will result in straight-line expense while finance leases will result in a front-loadedhigher initial expense pattern.pattern due to the interest component. SCE, as a regulated entity, is permitted to continue to have straight-line expense for finance leases, assuming the rate recovery is based upon current payments. Lessees can elect to exclude from the balance sheet short-term contracts one year or less. This guidance is effective January 1, 2019 but early2019. Early adoption is permitted.permitted, but Edison International and SCE do not expect to elect early adoption. The adoption of this standard is expected to increase right-of-use assets and lease liabilities in Edison International's and SCE's consolidated balance sheets. Edison International and SCE are currently evaluating this new guidance and cannot determine the impact of this standard at this time.will have on the results of operations and statements of cash flows.
On March 30, 2016,The FASB also issued accounting standards updates related to the impairment of financial instruments (effective January 1, 2020) and the presentation of certain cash receipts and payments in the statement of cash flows (effective January 1, 2018). Edison International and SCE are currently evaluating these updates to accounting standards.
In January 2017, the FASB issued an accounting standards update to simplify the accounting for share-based payments. Undergoodwill impairment. This accounting standards update changes the procedural steps in applying the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Edison International will apply this new guidance the tax effects related to share based payments will be recorded through the income statement. Currently, tax benefits in excess of compensation cost ("windfalls") are recorded in equity, and tax deficiencies ("shortfalls") are recorded in equity to the extent of previous windfalls, and then to the income statement. goodwill impairment test beginning in 2020.
In addition, as part of this new guidance an entity should recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period, subject to normal valuation allowance considerations. The new standard also will revise reporting on the statement of cash flows. Edison International and SCE are planning to adopt this standard using the modified retrospective approach, effective January 1, 2016. As a result, when adopted, all excess tax benefits resulting from 2016 stock option exercises will be reflected in the income statement. If Edison International and SCE had adopted this new standard in the current period, income tax expense for the nine months ended September 30, 2016 would have been reduced by approximately $18 million and $13 million, respectively. In addition, upon adoption, Edison International and SCE will record an increase to beginning


retained earnings for pre-2016 stock option exercises that had not been previously recorded in equity ($42 million and $6 million for Edison International and SCE, respectively).
On June 16, 2016,March 2017, the FASB issued an accounting standards update to amend the guidance on the impairment of financial instruments. The new guidance adds an impairment model, known aswhich amends the current requirements related to the presentation of the components of net periodic benefit cost for an entity's defined benefit pension and other postretirement plans. The adoption of this standard is not expected credit loss model, which was basedto have a material impact on expected losses rather than incurred losses. This guidance applies to most debt instruments, trade receivables, lease receivables, financial guarantee contracts,Edison International's and loan commitments. However, available-for-sale debt securities are excluded fromSCE's results of operations, but will result in the model's scope. This guidance is effective on January 1, 2020, but early adoption no earlier than January 1, 2019 is permitted.separate presentation of service costs as an operating expense and non-service costs within other income and expense. Edison International and SCE are currently evaluating the impact this new guidance.
On August 26, 2016,standard will have on the FASB issued an accountingconsolidated balance sheets. The new standards update to amend the guidance on the presentation and classification of certain cash receipts and cash payments in the statement of cash flows to reduce diversity in practice. This guidance addresses eight specific cash flow classification issues, including debt prepayment or extinguishment costs, proceeds from the settlement of corporate-owned life insurance, and distributions received from equity method investments. This standard also clarifies the application of the predominance principle where cash receipts and payments have aspects of more than one class of cash flows. The new standard is effective on January 1, 2018, but early adoption2018. It is permitted. Edison Internationalrequired to be applied on a retrospective basis for the presentation of the service cost component and SCE are currently evaluating this new guidance.the other components of net benefit cost and on a prospective basis for the capitalization of only the service cost component of net benefit cost.
Note 2.    Consolidated Statements of Changes in Equity
The following table provides Edison International's changes in equity for the ninethree months ended September 30, 2016:March 31, 2017:
Equity Attributable to Common Shareholders Noncontrolling Interests  Equity Attributable to Common Shareholders Noncontrolling Interests  
(in millions, except per-share amounts)
Common
Stock
 Accumulated
Other
Comprehensive Loss		 
Retained
Earnings
 Subtotal 
Preferred
and
Preference
Stock
 
Total
Equity
Common
Stock
 Accumulated
Other
Comprehensive Loss		 
Retained
Earnings
 Subtotal 
Preferred
and
Preference
Stock
 
Total
Equity
Balance at December 31, 2015$2,484
 $(56) $8,940
 $11,368
 $2,020
 $13,388
Balance at December 31, 2016$2,505
 $(53) $9,544
 $11,996
 $2,191
 $14,187
Net income—
 —
 965
 965
 92
 1,057
—
 —
 362
 362
 31
 393
Other comprehensive income—
 5
 —
 5
 —
 5
—
 4
 —
 4
 —
 4
Common stock dividends declared ($1.4400 per share)—
 —
 (469) (469) —
 (469)
Common stock dividends declared ($0.5425 per share)—
 —
 (177) (177) —
 (177)
Dividends to noncontrolling interests—
 —
 —
 —
 (92) (92)—
 —
 —
 —
 (31) (31)
Stock-based compensation1
 —
 (72) (71) —
 (71)—
 —
 (139) (139) —
 (139)
Non-cash stock-based compensation18
 —
 —
 18
 —
 18
5
 —
 —
 5
 —
 5
Issuance of preference stock—
 —
 —
 —
 294
 294
Redemption of preference stock—
 —
 (2) (2) (123) (125)
Balance at September 30, 2016$2,503
 $(51) $9,362
 $11,814
 $2,191
 $14,005
Balance at March 31, 2017$2,510
 $(49) $9,590
 $12,051
 $2,191
 $14,242



The following table provides Edison International's changes in equity for the ninethree months ended September 30, 2015March 31, 2016:
Equity Attributable to Common Shareholders Noncontrolling Interests  Equity Attributable to Common Shareholders Noncontrolling Interests  
(in millions, except per-share amounts)
Common
Stock
 Accumulated
Other
Comprehensive Loss		 
Retained
Earnings
 Subtotal 
Preferred
and
Preference
Stock
 
Total
Equity
Common
Stock
 Accumulated
Other
Comprehensive Loss		 
Retained
Earnings
 Subtotal 
Preferred
and
Preference
Stock
 
Total
Equity
Balance at December 31, 2014$2,445
 $(58) $8,573
 $10,960
 $2,022
 $12,982
Balance at December 31, 2015$2,484
 $(56) $8,940
 $11,368
 $2,020
 $13,388
Net income—
 —
 1,099
 1,099
 84
 1,183
—
 —
 281
1 
281
 30
 311
Other comprehensive loss—
 3
 —
 3
 —
 3
Common stock dividends declared ($1.2525 per share)—
 —
 (408) (408) —
 (408)
Other comprehensive income—
 2
 —
 2
 —
 2
Common stock dividends declared ($0.4800 per share)—
 —
 (156) (156) —
 (156)
Dividends to noncontrolling interests—
 —
 —
 —
 (84) (84)—
 —
 —
 —
 (30) (30)
Stock-based compensation13
 —
 (80) (67) —
 (67)—
 —
 (8)
1 
(8) —
 (8)
Non-cash stock-based compensation17
 —
 —
 17
 —
 17
6
 —
 —
 6
 —
 6
Issuance of preference stock—
 —
 —
 —
 319
 319
—
 —
 —
 —
 294
 294
Redemption of preference stock—
 —
 (4) (4) (321) (325)—
 —
 (3) (3) (122) (125)
Balance at September 30, 2015$2,475
 $(55) $9,180
 $11,600
 $2,020
 $13,620
Balance at March 31, 2016$2,490
 $(54) $9,054
 $11,490
 $2,192
 $13,682


1
Edison International adopted an accounting standard related to share-based payments during the fourth quarter of 2016, effective January 1, 2016. See Note 1 for further information. The table above reflects the adoption of this standard on January 1, 2016. Net income and stock-based compensation (as previously reported) were $271 million and $(50) million, respectively, for the three months ended March 31, 2016.
The following table provides SCE's changes in equity for the ninethree months ended September 30, 2016:March 31, 2017:
Equity Attributable to Edison International    Equity Attributable to Edison International    
(in millions)Common
Stock		 Additional
Paid-in
Capital		 Accumulated
Other
Comprehensive Loss		 Retained
Earnings		 Preferred
and
Preference
Stock		 Total
Equity		Common
Stock		 Additional
Paid-in
Capital		 Accumulated
Other
Comprehensive Loss		 Retained
Earnings		 Preferred
and
Preference
Stock		 Total
Equity
Balance at December 31, 2015$2,168
 $652
 $(22) $8,804
 $2,070
 $13,672
Balance at December 31, 2016$2,168
 $657
 $(20) $9,433
 $2,245
 $14,483
Net income—
 —
 —
 1,129
 —
 1,129
—
 —
 —
 380
 —
 380
Other comprehensive income—
 —
 3
 —
 —
 3
—
 —
 2
 —
 —
 2
Dividends declared on common stock—
 —
 —
 (510) —
 (510)—
 —
 —
 (191) —
 (191)
Dividends declared on preferred and preference stock—
 —
 —
 (92) —
 (92)—
 —
 —
 (31) —
 (31)
Stock-based compensation—
 2
 —
 (49) —
 (47)—
 —
 —
 (23) —
 (23)
Non-cash stock-based compensation—
 8
 —
 —
 —
 8
—
 3
 —
 —
 —
 3
Issuance of preference stock—
 (6) —
 —
 300
 294
Redemption of preference stock—
 2
 —
 (2) (125) (125)
Balance at September 30, 2016$2,168
 $658
 $(19) $9,280
 $2,245
 $14,332
Balance at March 31, 2017$2,168
 $660
 $(18) $9,568
 $2,245
 $14,623


The following table provides SCE's changes in equity for the ninethree months ended September 30, 2015March 31, 2016:
Equity Attributable to Edison International    Equity Attributable to Edison International    
(in millions)Common
Stock		 Additional
Paid-in
Capital		 Accumulated
Other
Comprehensive
Loss		 Retained
Earnings		 Preferred
and
Preference
Stock		 Total
Equity		Common
Stock		 Additional
Paid-in
Capital		 Accumulated
Other
Comprehensive
Loss		 Retained
Earnings		 Preferred
and
Preference
Stock		 Total
Equity
Balance at December 31, 2014$2,168
 $618
 $(28) $8,454
 $2,070
 $13,282
Balance at December 31, 2015$2,168
 $652
 $(22) $8,804
 $2,070
 $13,672
Net income—
 —
 —
 1,163
 —
 1,163
—
 —
 —
 325
1 
—
 325
Other comprehensive income—
 —
 3
 —
 —
 3
—
 —
 1
 —
 —
 1
Dividends declared on common stock—
 —
 —
 (441) —
 (441)—
 —
 —
 (170) —
 (170)
Dividends declared on preferred and preference stock—
 —
 —
 (84) —
 (84)—
 —
 —
 (30) —
 (30)
Stock-based compensation—
 28
 —
 (31) —
 (3)—
 —
 —
 (28)
1 
—
 (28)
Non-cash stock-based compensation—
 10
 —
 —
 —
 10
—
 3
 —
 —
 —
 3
Issuance of preference stock—
 (6) —
 —
 325
 319
—
 (6) —
 —
 300
 294
Redemption of preference stock—
 4
 —
 (4) (325) (325)—
 3
 —
 (3) (125) (125)
Balance at September 30, 2015$2,168
 $654
 $(25) $9,057
 $2,070
 $13,924
Balance at March 31, 2016$2,168
 $652
 $(21) $8,898
 $2,245
 $13,942
1
SCE adopted an accounting standard related to share-based payments during the fourth quarter of 2016, effective January 1, 2016. See Note 1 for further information. The table above reflects the adoption of this standard on January 1, 2016. Net income and stock-based compensation (as previously reported) were $317 million and $(34) million, respectively, for the three months ended March 31, 2016.
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. A subsidiary of Edison International is the primary beneficiary of an entityentities that ownsown rooftop solar projects. 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, dispatch, and compliance with regulatory and contractual requirements.


Variable Interest in VIEs that are not Consolidated
Power Purchase ContractsAgreements
SCE has power purchase agreements ("PPAs") that are classified as variable interests in VIEs, including tolling agreements through which SCE provides the natural gas to fuel the plants and contracts with qualifying facilities ("QFs") that contain variable pricing provisions based on the price of natural gas. 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.
As of the balance sheet date, the carrying amount of assets and liabilities in SCE's consolidated balance sheet that relate to its involvement with VIEs result from amounts due under the PPAs or the fair value of those derivative contracts. Under these contracts, SCE recovers the costs incurred through demonstration of compliance with its CPUC-approvedCalifornia Public Utilities Commission ("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 11 of the 20152016 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 4,3494,928 MW and 4,0624,383 MW at September 30, 2016March 31, 2017 and 20152016, respectively, and the amounts that SCE paid to these projects were $313140 million and $270127 million for the three months ended September 30,March 31, 2017 and 2016, and 2015, respectively, and $532 million and $451 million for nine months ended September 30, 2016 and 2015, respectively. These amounts are recoverable in customer rates, subject to reasonableness review.



Unconsolidated Trusts of SCE
SCE Trust I, Trust II, Trust III, Trust IV, and Trust V were formed in 2012, 2013, 2014, 2015, and 2016, respectively, for the exclusive purpose of issuing the 5.625%, 5.10%, 5.75%, 5.375%, and 5.45% 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 I, Trust II, Trust III, Trust IV, and Trust V issued to the public trust securities in the face amounts of $475 million, $400 million, $275 million, $325 million, and $300 million respectively, (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 F, Series G, Series H, Series J, and Series K Preference Stock issued by SCE in the principal amounts of $475 million, $400 million, $275 million, $325 million, and $300 million (cumulative, $2,500 per share liquidation values), respectively, which have substantially the same payment terms as the respective trust securities.
The Series F, Series G, Series H, Series J, and Series K Preference Stock and the corresponding trust securities do not have a maturity date. Upon any redemption of any shares of the Series F, Series G, Series H, Series J, or Series K Preference Stock, a corresponding dollar amount of trust securities will be redeemed by the applicable trust (see Note 12 for further information).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 I, Trust II, Trust III, Trust IV, and Trust IVV balance sheets as of September 30, 2016March 31, 2017 and December 31, 20152016, consisted of investments of $475 million, $400 million, $275 million, $325 million, and $325$300 million in the Series F, Series G, Series H, Series J, and Series JK Preference Stock, respectively, $475 million, $400 million, $275 million, $325 million, and $325$300 million of trust securities, respectively, and $10,000 each of common stock. The Trust V balance sheet as of September 30, 2016 consisted of investments of $300 million in the Series K Preference Stock, $300 million of trust securities, and $10,000 of common stock.


The following table provides a summary of the trusts' income statements:
  Three months ended September 30,
(in millions) Trust I Trust II Trust III Trust IV Trust V
2016          
Dividend income $7
 $5
 $4
 $4
 $4
Dividend distributions 7
 5
 4
 4
 4
2015          
Dividend income $7

$5

$4
 $2
 *
Dividend distributions 7

5

4
 2
 *
  Nine months ended September 30,
(in millions) Trust I Trust II Trust III Trust IV Trust V
2016          
Dividend income $20
 $15
 $12
 $13
 $9
Dividend distributions 20
 15
 12
 13
 9
2015 

 

 

 
 
Dividend income $20
 $15
 $12
 $2
 *
Dividend distributions 20
 15
 12
 2
 *
* Not applicable.
  Three months ended March 31,
(in millions) Trust I Trust II Trust III Trust IV Trust V
2017          
Dividend income $7
 $5
 $4
 $4
 $4
Dividend distributions 7
 5
 4
 4
 4
2016          
Dividend income $7

$5

$4
 $4
 $1
Dividend distributions 7

5

4
 4
 1


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 September 30, 2016March 31, 2017 and December 31, 20152016, 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.
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 exchanges (New York Mercantile Exchange and 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 tolling arrangements and derivative contracts that trade infrequently such as congestion revenue rights ("CRRs") and long-term power agreements.. 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. Changes in fair value are based on changes to forward market prices, including extrapolation of short-term observable inputs into forecasted prices for illiquid forward periods. 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 fair value 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:
September 30, 2016March 31, 2017
(in millions)Level 1 Level 2 Level 3 
Netting
and
Collateral1
 TotalLevel 1 Level 2 Level 3 
Netting
and
Collateral1
 Total
Assets at fair value                  
Derivative contracts$—
 $—
 $127
 $—
 $127
$—
 $15
 $55
 $—
 $70
Other33
 —
 —
 —
 33
103
 —
 —
 —
 103
Nuclear decommissioning trusts:                  
Stocks2
1,538
 —
 —
 —
 1,538
1,537
 —
 —
 —
 1,537
Fixed Income3
833
 1,935
 —
 —
 2,768
1,153
 1,588
 —
 —
 2,741
Short-term investments, primarily cash equivalents50
 59
 —
 —
 109
88
 84
 —
 —
 172
Subtotal of nuclear decommissioning trusts4
2,421
 1,994
 —
 —
 4,415
2,778
 1,672
 —
 —
 4,450
Total assets2,454
 1,994
 127
 —
 4,575
2,881
 1,687
 55
 —
 4,623
Liabilities at fair value                  
Derivative contracts—
 3
 1,290
 (1) 1,292
—
 5
 1,221
 —
 1,226
Total liabilities—
 3
 1,290
 (1) 1,292
—
 5
 1,221
 —
 1,226
Net assets (liabilities)$2,454
 $1,991
 $(1,163) $1
 $3,283
$2,881
 $1,682
 $(1,166) $—
 $3,397
December 31, 2015December 31, 2016
(in millions)Level 1 Level 2 Level 3 
Netting
and
Collateral1
 TotalLevel 1 Level 2 Level 3 
Netting
and
Collateral1
 Total
Assets at fair value                  
Derivative contracts$—
 $—
 $163
 $—
 $163
$—
 $6
 $68
 $—
 $74
Other28
 —
 —
 —
 28
33
 —
 —
 —
 33
Nuclear decommissioning trusts:                  
Stocks2
1,460
 —
 —
 —
 1,460
1,547
 —
 —
 —
 1,547
Fixed Income3
947
 1,776
 —
 —
 2,723
865
 1,751
 —
 —
 2,616
Short-term investments, primarily cash equivalents91
 81
 —
 —
 172
36
 170
 —
 —
 206
Subtotal of nuclear decommissioning trusts4
2,498
 1,857
 —
 —
 4,355
2,448
 1,921
 —
 —
 4,369
Total assets2,526
 1,857
 163
 —
 4,546
2,481
 1,927
 68
 —
 4,476
Liabilities at fair value                  
Derivative contracts—
 22
 1,311
 (15) 1,318
—
 —
 1,157
 —
 1,157
Total liabilities—
 22
 1,311
 (15) 1,318
—
 —
 1,157
 —
 1,157
Net assets (liabilities)$2,526
 $1,835
 $(1,148) $15
 $3,228
$2,481
 $1,927
 $(1,089) $—
 $3,319
1 
Represents the netting of assets and liabilities under master netting agreements and cash collateral across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level.
2 
Approximately 68% and 70% of SCE's equity investments were located in the United States at both September 30, 2016March 31, 2017 and December 31, 2015.2016, respectively.
3 
Includes corporate bonds, which were diversified and included collateralized mortgage obligations and other asset backed securities of $83 million and $111$79 million at September 30, 2016March 31, 2017 and December 31, 2015,2016, respectively.
4 
Excludes net payables of $39$98 million and net payables of $24$127 million at September 30, 2016March 31, 2017 and December 31, 2015,2016, respectively, which consist of interest and dividend receivables as well as receivables and payables related to SCE's pending securities sales and purchases.


Edison International Parent and Other
Edison International Parent and Other assets measured at fair value consisted of money market funds of $2124 million and $29$23 million at September 30, 2016March 31, 2017 and December 31, 20152016, respectively, classified as Level 1.



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 September 30, 
Nine months ended
September 30,
 Three months ended March 31,
(in millions) 2016 2015 2016 2015 2017 2016
Fair value of net liabilities at beginning of period $(1,170) $(1,044) $(1,148) $(902) $(1,089) $(1,148)
Total realized/unrealized gains (losses):        
Total realized/unrealized losses:    
Included in regulatory assets and liabilities1
 8
 (49) (14) (191) (77) (65)
Settlements (1) —
 (1) —
Fair value of net liabilities at end of period $(1,163) $(1,093) $(1,163) $(1,093) $(1,166) $(1,213)
Change during the period in unrealized gains and losses related to assets and liabilities held at the end of the period $(57) $(94) $(122) $(249) $(102) $(84)
1 
Due to regulatory mechanisms, SCE's realized and unrealized gains and losses are recorded as regulatory assets and liabilities.
Edison International and SCE recognize the fair value for transfers in and transfers out of each level at the end of each reporting period. There were no material transfers between any levels during 20162017 and 20152016.
Valuation Techniques Used to Determine Fair Value
The process of determining fair value is the responsibility of SCE's risk management department, which reports to SCE's chief financial officer. This department obtains observable and unobservable inputs through broker quotes, exchanges, and internal valuation techniques that use both standard and proprietary models to determine fair value. Each reporting period, the risk and finance departments collaborate to determine the appropriate fair value methodologies and classifications for each derivative. Inputs are validated for reasonableness by comparison against prior prices, other broker quotes, and volatility fluctuation thresholds. Inputs used and valuations are reviewed period-over-period and compared with market conditions to determine reasonableness.
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 (in millions) SignificantRange
 Assets LiabilitiesValuation Technique(s)Unobservable Input(Weighted Average)
Congestion revenue rights     
September 30, 2016$125
 $—
Market simulation model and auction pricesLoad forecast6,289 MW - 24,349 MW
     
Power prices1
$0 - $110.44
     
Gas prices2
$1.98 - $5.72
December 31, 2015152
 —
Market simulation model and auction pricesLoad forecast6,289 MW - 24,349 MW
     
Power prices1
$0 - $110.44
     
Gas prices2
$1.98 - $5.72
Tolling      
September 30, 20163
 1,286
Option modelVolatility of gas prices14% - 46% (20%)
     Volatility of power prices27% - 43% (30%)
     Power prices$24.03 - $48.40 ($34.30)
December 31, 201510
 1,297
Option modelVolatility of gas prices15% - 58% (20%)
     Volatility of power prices26% - 38% (30%)
     Power prices$24.15 - $46.93 ($34.80)
 Fair Value (in millions) SignificantRange
 Assets LiabilitiesValuation Technique(s)Unobservable Input(Weighted Average)
Congestion revenue rights     
March 31, 2017$55
 $—
Market simulation model and auction pricesLoad forecast3,708 MW - 22,840 MW
     
Power prices1
$3.65 - $99.58
     
Gas prices2
$2.51 - $4.87
December 31, 201667
 —
Market simulation model and auction pricesLoad forecast3,708 MW - 22,840 MW
     
Power prices1
$3.65 - $99.58
     
Gas prices2
$2.51 - $4.87
Tolling      
March 31, 2017—
 1,210
Option modelVolatility of gas prices16% - 39% (25%)
     Volatility of power prices26% - 140% (36%)
     Power prices$18.01 - $45.28 ($30.70)
December 31, 2016—
 1,154
Option modelVolatility of gas prices15% - 48% (20%)
     Volatility of power prices29% - 71% (40%)
     Power prices$23.40 - $51.24 ($34.70)
1 
Prices are in dollars per megawatt-hour.
2 
Prices are in dollars per million British thermal units.


Level 3 Fair Value Sensitivity
Congestion Revenue Rights
For CRRs, where SCE is the buyer, generally increases (decreases) in forecasted load in isolation would result in increases (decreases) to the fair value. In general, an increase (decrease) in electricity and gas prices at illiquid locations tends to result in increases (decreases) to fair value; however, changes in electricity and gas prices in opposite directions may have varying results on fair value.
Tolling Arrangements
The fair values of SCE's tolling arrangements contain intrinsic value and time value. Intrinsic value is the difference between the market price and strike price of the underlying commodity. Time value is made up of several components, including volatility, time to expiration, and interest rates. The option model for tolling arrangements reflects plant specific information such as operating and start-up costs.
For tolling arrangements where SCE is the buyer, increases in volatility of the underlying commodity prices would result in increases to fair value as it represents greater price movement risk. As power and gas prices increase, the fair value of tolling arrangements tends to increase. The valuation of tolling arrangements is also impacted by the correlation between gas and power prices. As the correlation increases, the fair value of tolling arrangements tends to decline.
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. The fair value of these financial instruments is based on evaluated prices that reflect significant observable market information such as reported trades, actual trade information of similar securities, benchmark yields, broker/dealer quotes, issuer spreads, bids, offers, and relevant credit information.
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 current portion of long-term debt) are as follows:
 September 30, 2016 December 31, 2015 March 31, 2017 December 31, 2016
(in millions) 
Carrying
Value1
 
Fair
Value
 
Carrying
Value1
 
Fair
Value
 
Carrying
Value1
 
Fair
Value
 
Carrying
Value1
 
Fair
Value
SCE $10,466
 $12,419
 $10,539
 $11,592
 $11,422
 $12,665
 $10,333
 $11,539
Edison International 11,288
 13,266
 11,178
 12,252
 12,643
 13,894
 11,156
 12,368
1  
Carrying value is net of debt issuance costs.
The fair value of Edison InternationalInternational's and SCE's short-term and long-term debt is classified as Level 2 and is based on evaluated prices that reflect significant observable market information such as reported trades, actual trade information of similar securities, benchmark yields, broker/dealer quotes of new issue prices, and relevant credit information.
The carrying value of Edison International's and SCE's trade receivables and payables, other investments, and short-term debt approximates fair value.


Note 5.    Debt and Credit Agreements
Long-Term Debt
DuringIn January 2017, SCE borrowed $300 million under a Term Loan Agreement due July 2018, with a variable interest rate based on the London Interbank Offered Rate plus 65 basis points (1.53% at March 31, 2017). The proceeds were used for general corporate purposes.
In January 2017, SCE reissued $135 million of 2.625% pollution-control bonds subject to mandatory remarketing in December 2023. The proceeds were used for general corporate purposes.


In March 2017, SCE issued $700 million of 4.00% first quarter of 2016,and refunding mortgage bonds due in 2047 and Edison International issued $400 million of 2.95%2.125% senior notes due in 2023.2020. The proceeds from these bonds were used to repay commercial paper borrowings and for general corporate purposes. In addition, the proceeds from SCE's bonds were used to fund SCE's capital program.
Credit Agreements and Short-Term Debt
SCE and Edison International Parent have multi-year revolving credit facilities of $2.75 billion and $1.25 billion, respectively. During the third quarter of 2016, SCE and Edison International Parent extended the maturity dates torespectively, both maturing in July 2020.2021. SCE's credit facility is generally used to support commercial paper borrowings and letters of credit issued for procurement-related collateral requirements, balancing account undercollections and for general corporate purposes, including working capital requirements to support operations and capital expenditures. Edison International Parent's credit facility is used to support commercial paper borrowings and for general corporate purposes.
At September 30, 2016March 31, 2017, SCE'sSCE had no outstanding commercial paper, net of discount, was $239 million at a weighted-average interest rate of 0.60%.paper. At September 30, 2016March 31, 2017, letters of credit issued under SCE's credit facility aggregated $157$91 million and are scheduled to expire in twelve months or less. At December 31, 20152016, the outstanding commercial paper, net of discount, was $49$769 million at a weighted-average interest rate of 0.51%0.9%.
At September 30, 2016March 31, 2017, Edison International Parent's outstanding commercial paper, net of discount, was $518$295 million at a weighted-average interest rate of 0.69%1.18%. At December 31, 20152016, the outstanding commercial paper, net of discount, was $646$538 million at a weighted-average interest rate of 0.78%0.97%.
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 power purchase agreements.PPAs. SCE's natural gas price exposure arises from natural gas purchased for the Mountainview power plant and peaker plants, QFqualifying facility contracts where pricing is based on a monthly natural gas index, and power purchase agreementsPPAs 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 or selling excess power. In addition, SCE would be exposed to the risk of non-payment of accounts receivable, primarily related to the sales of excess power and realized gains on derivative instruments.
Certain power contracts contain master netting agreements or similar agreements, which generally allow counterparties subject to the agreement to setoff 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 contracts contain a provision that requires SCE to maintain an investment grade rating from each of the major credit rating agencies, 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 was $15$19 million and $38$12 million as of September 30, 2016March 31, 2017 and December 31, 2015, respectively.2016, respectively, for which SCE has posted $12 million collateral at September 30, 2016both March 31, 2017 and no collateral at December 31, 20152016 to its counterparties at the respective dates for its derivative liabilities and related outstanding payables. If the credit-risk-related contingent features underlying these agreements were triggered on September 30, 2016,March 31, 2017, SCE would be required to post $16$8 million of additional collateral of which $2 million is related to outstanding payables that are net of collateral already posted.


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 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:
 September 30, 2016   March 31, 2017  
 Derivative Assets Derivative Liabilities Net
Liability		 Derivative Assets Derivative Liabilities Net
Liability
(in millions) Short-Term Long-Term Subtotal Short-Term Long-Term Subtotal  Short-Term Long-Term Subtotal Short-Term Long-Term Subtotal 
Commodity derivative contracts                            
Gross amounts recognized $62
 $67
 $129
 $226
 $1,069
 $1,295
 $1,166
 $70
 $1
 $71
 $238
 $989
 $1,227
 $1,156
Gross amounts offset in the consolidated balance sheets (2) —
 (2) (2) —
 (2) —
 (1) —
 (1) (1) —
 (1) —
Cash collateral posted1
 —
 —
 —
 (1) —
 (1) (1) —
 —
 —
 —
 —
 —
 —
Net amounts presented in the consolidated balance sheets $60
 $67
 $127
 $223
 $1,069
 $1,292
 $1,165
 $69
 $1
 $70
 $237
 $989
 $1,226
 $1,156
 December 31, 2015   December 31, 2016  
 Derivative Assets Derivative Liabilities Net
Liability		 Derivative Assets Derivative Liabilities Net
Liability
(in millions) Short-Term Long-Term Subtotal Short-Term Long-Term Subtotal  Short-Term Long-Term Subtotal Short-Term Long-Term Subtotal 
Commodity derivative contracts                            
Gross amounts recognized $81
 $84
 $165
 $235
 $1,100
 $1,335
 $1,170
 $74
 $1
 $75
 $217
 $941
 $1,158
 $1,083
Gross amounts offset in the consolidated balance sheets (2) —
 (2) (2) —
 (2) —
 (1) —
 (1) (1) —
 (1) —
Cash collateral posted1
 —
 —
 —
 (15) —
 (15) (15) —
 —
 —
 —
 —
 —
 —
Net amounts presented in the consolidated balance sheets $79
 $84
 $163
 $218
 $1,100
 $1,318
 $1,155
 $73
 $1
 $74
 $216
 $941
 $1,157
 $1,083
1 
In addition, at September 30, 2016 andMarch 31, 2017, there is no cash collateral posted that is not offset against derivative liabilities. At December 31, 2015,2016, SCE had posted $4received $2 million and $31 million, respectively, of cash collateral that is not offset against derivative liabilitiesassets and is reflected in "Other current assets"liabilities" on the consolidated balance sheets.
Income 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 purchasepurchased power costs recovered from customers. As a result, realized gains and losses do not affect earnings, but may temporarily affect cash flows. Due to 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 recorded in cash flows from operating activities in the consolidated statements of cash flows.


The following table summarizes the components of SCE's economic hedging activity:
 Three months ended September 30, Nine months ended September 30, Three months ended March 31,
(in millions) 2016 2015 2016 2015 2017 2016
Realized losses $(1) $(28) $(53) $(103) $(2) $(27)
Unrealized (losses) gains (2) (67) 6
 (152)
Unrealized losses (85) (64)


Notional Volumes of Derivative Instruments
The following table summarizes the notional volumes of derivatives used for SCE hedging activities:
 Economic Hedges Economic Hedges
Commodity Unit of Measure September 30, 2016 December 31, 2015 Unit of Measure March 31, 2017 December 31, 2016
Electricity options, swaps and forwards GWh 1,872
 6,221 GWh 1,812
 1,816
Natural gas options, swaps and forwards Bcf 13
 32 Bcf 123
 36
Congestion revenue rights GWh 85,430
 109,740 GWh 79,224
 93,319
Tolling arrangements GWh 63,654
 70,663 GWh 58,153
 61,093
Note 7.    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:
Edison International SCE
Three months ended September 30, 
Nine months ended September 30,

Three months ended March 31,
(in millions)2016 2015 2016 20152017 2016 2017 2016
Edison International:       
Income from continuing operations before income taxes$571
 $487
 $1,162
 $1,324
$352
 $333
 $392
 $367
Provision for income tax at federal statutory rate of 35%200
 170
 407
 463
124
 117
 137
 128
Increase in income tax from:              
State tax, net of federal benefit20
 6
 30
 23
10
 6
 13
 9
Property-related1
(79) (79) (296) (207)
Property-related(113) (79) (113) (79)
Change related to uncertain tax positions(5) 10
 (4) (53)(12) (1) (11) (1)
Shared-based compensation1
(43) (10) (8) (8)
Other(14) (25) (24) (31)(6) (5) (6) (7)
Total income tax (benefit) expense from continuing operations$122
 $82
 $113
 $195
$(40) $28
 $12
 $42
Effective tax rate21.4% 16.8% 9.7% 14.7%(11.4)% 8.4% 3.1% 11.4%
SCE:       
Income from continuing operations before income taxes$607
 $509
 $1,291
 $1,370
Provision for income tax at federal statutory rate of 35%212
 178
 452
 480
Increase in income tax from:       
State tax, net of federal benefit25
 8
 40
 23
Property-related1
(79) (79) (296) (207)
Change related to uncertain tax positions(7) 9
 (9) (56)
Other(10) (24) (25) (33)
Total income tax (benefit) expense from continuing operations$141
 $92
 $162
 $207
Effective tax rate23.2% 18.1% 12.5% 15.1%
1  
DuringIncludes state taxes for Edison International and SCE of $6 million and $1 million, respectively, for the second quarter of 2016, SCE recorded $79three months ended March 31, 2017 and $3 million and $2 million, respectively, for 2012 – 2014 incremental tax benefits relatedthe three months ended March 31, 2016. Refer to repair deductions, which were flowed-through to customers ($133 million pre-tax).Note 1 for further information.


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.
Repair DeductionsIn March 2017, SCE received the final decision on claims against, and counterclaims of, Mitsubishi Heavy Industries, Inc. and related companies (together, "MHI") from the arbitration tribunal, the International Chamber of Commerce, discussed further in Note 11. San Onofre was permanently shut down on June 7, 2013 as a result of failure of replacement steam generators supplied by MHI. With the resolution of the insurance claim against Nuclear Electric Insurance Limited ("NEIL") in October 2015 and the conclusion of the arbitration proceeding against MHI, a tax abandonment loss of $698 million and $1.14 billion for federal and state income tax purposes, respectively, was claimed in the first quarter of 2017, resulting in a flow-through tax benefit of approximately $39 million impacting the effective tax rate. Due to the tax abandonment loss recognized this quarter, Edison International and SCE both expect to report a federal taxable loss in 2017. In addition, Edison International expects to report a California taxable loss in 2017. 
Previously, SCE recognized earnings and


Unrecognized Tax Benefits
In the first quarter of 2017, Edison International settled all open tax positions with the Internal Revenue Service ("IRS") for taxable years 2007 through 2012. The following table provides a regulatory assetreconciliation of unrecognized tax benefits for deferred income taxes related to 2012 – 2014 tax repair deductions. As2017 as a result of the CPUC's rate base offset in the 2015 GRC decision, SCE wrote down this regulatory asset in full during 2015. The after-tax charge was reflected in "Income tax expense" on the December 31, 2015 consolidated statement of income. The amount of tax repair deductions the CPUC used to establish the rate base offset was based on SCE's forecast of 2012 – 2014 tax repair deductions from the Notice of Intent filed in the 2015 GRC. The amount of tax repair deductions included in the Notice of Intent was less than the actual tax repair deductions SCE reported on its 2012 through 2014 income tax returns. In April 2016, the CPUC granted SCE's request to reduce SCE's Base Revenue Requirement Balancing Account ("BRRBA") by $234 million in future periods subject to the timing and final outcome of audits that may be conducted by tax authorities. The refunds will result in flowing incremental tax benefits for 2012 – 2014 to customers. SCE refunded $133 million ($79 million after-tax) during the second quarter of 2016. SCE did not record a gain or loss from this reduction. Regulatory assets recorded from flow through tax benefits are recovered through SCE's general rate case proceedings.audit settlement:
(in millions)Edison International SCE
Balance at January 1, 2017$471
 $371
Tax positions taken during the current year:   
   Increases10
 10
Tax positions taken during a prior year:   
   Increases2
 2
   Decreases(10) (10)
   Decreases for settlements during the period(82) (78)
Balance at March 31, 2017$391
 $295
Tax Disputes
Tax Years 2007 – 2012
In the first quarter of 2017, Edison International has reached a tentative settlement agreementsettled all open tax positions with the IRS for thetaxable years 2007 – 2012 tax years. The final agreement, when approved, is not expectedthrough 2012. Edison International previously made cash deposits which are sufficient to have a material impact on the financial statements.
During the second quarter of 2015, the Company received the IRS Revenue Agent Reportsettle all outstanding liabilities for the 2010 – 2012 tax years. Edison International's and SCE'sthis audit cycle. Total liabilities included tax reserves, were re-measured at that timepreviously settled issues, and $94 millionan estimate of associated interest and $100 million, respectively, of income tax benefits were recorded in the comparable quarter for the prior year.

penalties. 
Tax years that remain open for examination by the IRS and the California Franchise Tax Board are 20072013 – 2015 and 20032010 – 2015, respectively. Edison International has settled all open tax position with the IRS for taxable years prior to 2013.  Tax years 2003 – 2009 are currently under protest with the California Franchise Tax Board.
Note 8.    Compensation and Benefit Plans
Pension Plans
Edison International made contributions of $9825 million during the ninethree months ended September 30, 2016,March 31, 2017, which includes contributions of $81$21 million by SCE. Edison International expects to make contributions of $22$111 million during the remainder of 2016,2017, which includes $14$64 million from SCE. Annual contributions made by SCE to most of SCE's pension plans are anticipated to be recovered through CPUC-approved regulatory mechanisms. Annual contributions to these plans are expected to be, at a minimum, equal to the related annual expense.


Pension expense components for continuing operations are:
Edison International SCE
Three months ended September 30, Nine months ended September 30,Three months ended March 31,
(in millions)2016 2015 2016 20152017 2016 2017 2016
Edison International:       
Service cost$39
 $35
 $117
 $105
$36
 $39
 $35
 $38
Interest cost44
 41
 132
 124
41
 44
 37
 41
Expected return on plan assets(56) (57) (168) (171)(53) (56) (50) (53)
Amortization of prior service cost1
 1
 3
 3
1
 1
 1
 1
Amortization of net loss1
9
 9
 27
 27
5
 9
 4
 8
Expense under accounting standards$37
 $29
 $111
 $88
$30
 $37
 $27
 $35
Regulatory adjustment(9) (2) (27) (4)(3) (9) (3) (9)
Total expense recognized$28
 $27
 $84
 $84
$27
 $28
 $24
 $26
SCE:       
Service cost$38
 $35
 $114
 $104
Interest cost41
 38
 123
 113
Expected return on plan assets(53) (53) (159) (160)
Amortization of prior service cost1
 1
 3
 4
Amortization of net loss1
8
 7
 24
 22
Expense under accounting standards$35
 $28
 $105
 $83
Regulatory adjustment(9) (2) (27) (4)
Total expense recognized$26
 $26
 $78
 $79
1 
Includes the amount of net loss reclassified from other comprehensive loss. The amount reclassified for Edison International and SCE was $3 million and $2 million, respectively, for the three months ended September 30, 2016,March 31, 2017, and $9 million and $5 million, respectively, for the nine months ended September 30, 2016. The amount reclassified for Edison International and SCE was $4$3 million and $2 million, respectively, for the three months ended September 30, 2015 and $11 million and $6 million, respectively, for the nine months ended September 30, 2015.March 31, 2016.


Under GAAP, a settlement is recorded when lump-sum payments exceed estimated annual service and interest costs. Lump sum payments made in April 2017 to Edison International executives retiring in 2016 from the Executive Retirement Plan exceeded the estimated service and interest costs, resulting in a partial settlement of that plan. A settlement loss of approximately $7.7 million ($4.6 million after-tax) is expected to be recorded at Edison International in the second quarter of 2017.
Postretirement Benefits Other Than Pensions
Edison International made contributions of $255 million during the ninethree months ended September 30, 2016March 31, 2017 and expects to make contributions of $816 million during the remainder of 2016,2017, substantially all of which are expected to be made by SCE. Annual contributions related to SCE employees made to SCE plans are anticipated to be recovered through CPUC-approved regulatory mechanisms and are expected to be, at a minimum, equal to the total annual expense for these plans. Benefits under these plans, with some exceptions, are generally unvested and subject to change. Under the terms of the Edison International Health and Welfare Plan ("PBOP Plan") each participating employer (Edison International or its participating subsidiaries) is responsible for the costs and expenses of all PBOP Plan benefits with respect to its employees and former employees. A participating employer may terminate the PBOP Plan benefits with respect to its employees and former employees, as may SCE (as PBOP Plan sponsor), and, accordingly, the participants' PBOP Plan benefits are not vested benefits.


PBOP expense components for continuing operations are:
Edison International SCE
Three months ended September 30, Nine months ended September 30,Three months ended March 31,
(in millions)2016 2015 2016 20152017 2016 2017 2016
Edison International:       
Service cost$10
 $12
 $30
 $36
$9
 $10
 $9
 $10
Interest cost26
 29
 78
 86
24
 26
 24
 26
Expected return on plan assets(28) (28) (84) (85)(27) (28) (27) (28)
Amortization of prior service cost(1) (3) (3) (9)(1) (1) (1) (1)
Amortization of net loss—
 5
 —
 17
Total expense$7
 $15
 $21
 $45
$5
 $7
 $5
 $7
SCE:       
Service cost$10
 $12
 $30
 $36
Interest cost26
 28
 78
 84
Expected return on plan assets(28) (28) (84) (84)
Amortization of prior service cost(1) (3) (3) (9)
Amortization of net loss—
 6
 —
 17
Total expense$7
 $15
 $21
 $44
Workforce Reductions
SCE continues to focus on productivity improvements to mitigate rate pressure from its capital program, optimize its cost structure and improve operational efficiency, which is expected to result in further workforce reductions through 2016. During the nine months ended September 30, 2016, SCE increased the estimated impact for approved workforce reductions.
The following table provides a summary of changes in the accrued severance liability associated with these reductions:
(in millions)  
Balance at January 1, 2016 $22
Additions 21
Payments (34)
Balance at September 30, 2016 $9
The liability presented in the table above is reflected in "Other current liabilities" on the consolidated balance sheets. The severance costs are included in "Operation and maintenance" on the consolidated income statements.


Note 9.    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):
Longest
Maturity
Dates
 Amortized Cost Fair Value
Longest
Maturity
Dates
 Amortized Cost Fair Value
(in millions) September 30,
2016		 December 31,
2015		 September 30,
2016		 December 31, 2015 March 31,
2017		 December 31,
2016		 March 31,
2017		 December 31, 2016
Stocks— $321
 $304
 $1,538
 $1,460
— $291
 $319
 $1,537
 $1,547
Municipal bonds2054 653
 691
 813
 840
2054 645
 659
 753
 766
U.S. government and agency securities2055 1,114
 1,070
 1,215
 1,128
2055 1,308
 1,131
 1,380
 1,191
Corporate bonds2057 656
 708
 740
 755
2057 552
 600
 608
 659
Short-term investments and receivables/payables1
One-year 67
 144
 70
 148
One-year 71
 75
 74
 79
Total  $2,811
 $2,917
 $4,376
 $4,331
  $2,867
 $2,784
 $4,352
 $4,242
1
Short-term investments include $81$36 million and $114 million of repurchase agreements payable by financial institutions which earn interest, are fully secured by U.S. Treasury securities and maturedmature by April 3, 2017 and January 5, 20164, 2017 as of March 31, 2017 and December 31, 2015.2016, respectively.
Trust fund earnings (based on specific identification) increase the trust fund balance and the AROasset retirement obligation ("ARO") regulatory liability. Unrealized holding gains, net of losses, were $1.61.5 billion and $1.4 billion at September 30, 2016both March 31, 2017 and December 31, 20152016, respectively..


The following table sets forth a summary of changes in the fair value of the trust:
 Three months ended September 30, Nine months ended September 30, Three months ended March 31,
(in millions) 2016 2015 2016 2015 2017 2016
Balance at beginning of period $4,344
 $4,836
 $4,331
 $4,799
 $4,242
 $4,331
Gross realized gains 18
 183
 61
 215
 99
 17
Gross realized losses (1) (10) (5) (15) (16) (3)
Unrealized gains (losses), net 32
 (316) 153
 (343)
Unrealized gains, net of losses 27
 59
Other-than-temporary impairments (2) (10) (10) (22) (1) (7)
Interest and dividends 28
 28
 88
 88
 28
 29
Contributions —
 —
 —
 7
Income taxes (5) —
 (47) (14) —
 (18)
Decommissioning disbursements (38) (319) (192) (319) (26) (116)
Administrative expenses and other —
 (4) (3) (8) (1) (2)
Balance at end of period $4,376
 $4,388
 $4,376
 $4,388
 $4,352
 $4,290
Trust assets are used to pay income taxes as the Trust files separate income tax returns from SCE.taxes. Deferred tax liabilities related to net unrealized gains at September 30, 2016March 31, 2017 were $383$373 million. Accordingly, the fair value of Trusttrust assets available to pay future decommissioning costs, net of deferred income taxes, totaled $4.0 billion at September 30, 2016.March 31, 2017. Due to regulatory mechanisms, changes in assets of the trusts from income or loss items have no impact on operating revenue or earnings.


Acquisitions
During the third quarter, a subsidiaryDecommissioning disbursements are funded from sales of SoCore Energy agreed to acquire equity interests in up to 20 solar garden development projects in Minnesota as partinvestments of the SunEdison bankruptcy proceedings, subject to certain conditions. The exclusivity period on six of the projects expired in October 2016 under the terms of the agreement and consequently, the projects were not acquired. There are 14 remaining projects totaling 94 MWdc with a purchase price up to $41.9 million, if all projects achieve the required conditions. SoCore Energy would also reimburse SunEdison up to $8.7 million of project specific interconnection costs. Not all of the projects are expected to achieve the closing conditions. Three of these development projects (21 MWdc) are expected to be acquired in the fourth quarter of 2016. SoCore Energy expects to fund construction costs and arrange third-party tax equity and debt financing by completion of construction.nuclear decommissioning trusts.
Note 10.    Regulatory Assets and Liabilities
Regulatory Assets
SCE's regulatory assets included on the consolidated balance sheets are:
(in millions)September 30,
2016		 December 31,
2015		March 31,
2017		 December 31,
2016
Current:      
Regulatory balancing accounts$135
 $382
$139
 $135
Energy derivatives167
 159
186
 150
Unamortized investments, net of accumulated amortization37
 49
Other19
 19
32
 16
Total current321
 560
394
 350
Long-term:      
Deferred income taxes, net4,346
 3,757
Deferred income taxes, net of liabilities4,689
 4,478
Pensions and other postretirement benefits829
 849
711
 710
Energy derivatives1,010
 1,027
996
 947
Unamortized investments, net143
 182
Unamortized investments, net of accumulated amortization79
 80
San Onofre899
 1,043
815
 857
Unamortized loss on reacquired debt189
 201
180
 184
Regulatory balancing accounts36
 36
68
 66
Environmental remediation128
 129
125
 126
Other264
 288
11
 7
Total long-term7,844
 7,512
7,674
 7,455
Total regulatory assets$8,165
 $8,072
$8,068
 $7,805


Regulatory Liabilities
SCE's regulatory liabilities included on the consolidated balance sheets are:
(in millions)September 30,
2016		 December 31,
2015		March 31,
2017		 December 31,
2016
Current:      
Regulatory balancing accounts$999
 $1,106
$740
 $736
San Onofre MHI arbitration award1
47
 —
Other31
 22
17
 20
Total current1,030
 1,128
804
 756
Long-term:      
Costs of removal2,842
 2,781
2,838
 2,847
Recoveries in excess of ARO liabilities1
1,769
 1,502
Recoveries in excess of ARO liabilities2
1,735
 1,639
Regulatory balancing accounts1,348
 1,314
1,278
 1,180
Other61
 79
59
 60
Total long-term6,020
 5,676
5,910
 5,726
Total regulatory liabilities$7,050
 $6,804
$6,714
 $6,482
1
Represents SCE's net recovery from claims against MHI. See Note 11 for further discussion.
2
Represents the cumulative differences between ARO expenses and amounts collected in rates primarily for the decommissioning of the SCE's nuclear generation facilities. Decommissioning costs recovered through rates are primarily placed in nuclear decommissioning trusts. This regulatory liability also represents the deferral of realized and unrealized gains and losses on the nuclear decommissioning trust investments. See Note 9.9 for further discussion.
Net Regulatory Balancing Accounts
The following table summarizes the significant components of regulatory balancing accounts included in the above tables of regulatory assets and liabilities:
(in millions)September 30,
2016		 December 31,
2015		March 31,
2017		 December 31,
2016
Asset (liability)      
Energy resource recovery account$(208) $(439)$30
 $(20)
New system generation balancing account(7) (171)(97) (6)
Public purpose programs and energy efficiency programs(983) (683)(1,056) (992)
Tax accounting memorandum account and pole loading balancing account(105) (248)(136) (142)
Base rate recovery balancing account(509) (319)(360) (426)
Department of Energy litigation memorandum account1

(122) —
Department of Energy litigation memorandum account

(123) (122)
Greenhouse gas auction revenue(77) (75)(3) 31
FERC balancing accounts(87) 74
(93) (69)
Other(78) (141)27
 31
Liability$(2,176) $(2,002)$(1,811) $(1,715)
1
Represents proceeds from the Department of Energy resulting from its failure to meet its obligation to begin accepting spent nuclear fuel from San Onofre. Damages recovered are subject to CPUC review as to how these amounts would be distributed among customers, shareholders, or to offset fuel decommissioning or storage costs. See Note 11 for further discussion.


Note 11.    Commitments and Contingencies
Third-Party Power Purchase Agreements
During the first quarter of 2017, SCE had existing PPAs that met the critical contract provisions. The commitments for these contracts are estimated to be: $48 million in 2017, $116 million in 2018, $117 million in 2019, $119 million in 2020, $120 million in 2021, and $955 million for the remaining period thereafter. For further information, see Note 11 in the 2016 Form 10-K.


Indemnities
Edison International and SCE have various financial and performance guarantees and indemnity agreements, which are issued in the normal course of business.
Edison International and SCE have provided indemnifications through contracts entered into in the normal course of business. These are primarily indemnifications against adverse litigation outcomes in connection with underwriting agreements, and indemnities for specified environmental liabilities and income taxes with respect to assets sold. 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.
SCE has indemnified the City of Redlands, California in connection with Mountainview'sthe Mountainview power plant's California Energy Commission permit for cleanup or associated actions related to groundwater contaminated by perchlorate due to the disposal of filter cake at the City's solid waste landfill. The obligations under this agreement are not limited to a specific time period or subject to a maximum liability. SCE has not recorded a liability related to this indemnity.
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 these other proceedings will not, individually or in the aggregate, materially affect its financial position, results of operations financial position or liquidity.and cash flows.
San Onofre Related Matters
Replacement steam generators were installed at San Onofre in 2010 and 2011. On January 31, 2012, a leak suddenly occurred in one of the heat transfer tubes in San Onofre's Unit 3 steam generators. The Unit was safely taken off-line and subsequent inspections revealed excessive tube wear. Unit 2 was off-line for a planned outage when areas of unexpected tube wear were also discovered. On June 6, 2013, SCE decided to permanently retire Units 2 and 3.
San Onofre CPUC Proceedings
In November 2014, the CPUC approved the Settlement Agreement by and among SCE, The Utility Reform Network, the CPUC's Office of Ratepayer Advocates and San Diego Gas & Electric ("SDG&E"), which was later joined by the Coalition of California Utility Employees and Friends of the Earth, dated November 20, 2014 (the "San Onofre OII Settlement AgreementAgreement"), which resolved the CPUC's investigation regarding the Steam Generator Replacement Projectsteam generator replacement project at San Onofre and the related outages and subsequent shutdown of San Onofre. In May 2016, and in considerationSubsequently, the San Onofre Order Instituting Investigation ("OII") proceeding record was reopened by a joint ruling of the CPUC's December 2015 decision sanctioningAssigned Commissioner and the Assigned administrative law judge ("ALJ") to consider whether, in light of SCE for failing to disclosenot reporting certain ex parte communications relevant to the San Onofre OII, the Assigned Commissioner and ALJ issuedon a ruling to reopen the record upon which the CPUC had, in November 2014, approvedtimely basis, the San Onofre OII Settlement Agreement among SCE, TURN, ORA, SDG&E, the Coalition of California Utility Employees, and Friends of the Earth. The ruling also established a ban on all ex parte communications in the proceeding. The ruling established a briefing schedule for parties to address whether, in light of the ex parte rules violations, the San Onofre OII Settlement Agreement remainsremained reasonable, consistent with the law, and in the public interest, which is the standard the CPUC applies in reviewing settlements submitted for approval. In comments filed with the CPUC in July 2016, SCE assertsasserted that the San Onofre OII Settlement Agreement continues to meet this standard and therefore should not be disturbed. A number of the parties to the San Onofre OII, however, have askedrequested that the CPUC in their comments to either modify the San Onofre OII Settlement Agreement or vacate its previous approval of the settlement and reinstate the San Onofre OII for further proceedings.
In a December 2016 joint ruling, the Assigned Commissioner and the Assigned ALJ expressed concerns about the extent to which the failure to timely report ex parte communications had impacted the settlement negotiations and directed SCE is unableand SDG&E to predictmeet and confer with the outcomeother parties in the San Onofre OII to consider changing the terms of this matter. Thethe San Onofre OII Settlement AgreementAgreement. The ruling set out a schedule requiring that at least two meet-and-confer sessions be held in the first quarter of 2017 and requiring the parties to submit a joint status report to the CPUC by April 28, 2017 if no modifications have been agreed to by some or all of the parties as a result of the meet-and-confer process. The parties held three meet-and-confer sessions. In March 2017, SCE and other parties reported to the CPUC that the parties participating in the meet-and-confer process have agreed to mediate the issues identified in the December 2016 joint ruling. In April 2017, SCE and other meet-and-confer parties filed a joint motion to extend the April 28, 2017 joint report deadline to August 15, 2017. SCE has recorded a regulatory asset of $815 million at March 31, 2017 to reflect the expected recoveries under the San Onofre OII Settlement Agreement. Management assesses at the end of each reporting period whether regulatory assets are probable of future recovery. SCE assessed the San Onofre regulatory asset at March 31, 2017 and continues to conclude that the asset is


probable, though not certain, of recovery based on SCE's knowledge of facts and judgment in applying the relevant regulatory principles to the issue. SCE does not affect proceedings related to recoveries from third parties describedbelieve that the conclusions in the MHI arbitration, discussed below, but does describe how shareholders and customers will share any recoveries.change the expectation on the probability of recovery of the San Onofre regulatory asset.
Challenges related to the Settlement of San Onofre CPUC Proceedings
A federal lawsuit challenging the CPUC's authority to permit rate recovery of San Onofre costs and an application to the CPUC for rehearing of its decision approving the San Onofre OII Settlement Agreement were filed in November and December 2014, respectively. In April 2015, the federal lawsuit was dismissed with prejudice and the plaintiffs in that case appealed the dismissal to the Ninth Circuit in May 2015. Both the appeal and the application for rehearing remain pending.


In April 2015, the Alliance for Nuclear Responsibility ("A4NR") filed a petition to modify the CPUC's decision approving the San Onofre OII Settlement Agreement based on SCE's alleged failures to disclose communications between SCE and CPUC decision-makers pertaining to issues in the San Onofre OII. The petition seeks the reversal of the decision approving the San Onofre OII Settlement Agreement and reopening of the OII proceeding. Subsequently, TURN and ORA filed responses supporting A4NR's petition to reopen the San Onofre OII proceeding. In August 2015, ORA filed its own petition to modify the CPUC's decision approving the San Onofre OII Settlement Agreement seeking to set aside the settlement and reopen the San Onofre OII proceeding. SCE and SDG&E responded to this petition in September 2015. In December 2015, the CPUC issued a decision fining SCE for violations of the CPUC ethics rule and failure to disclose ex parte communications relevant to the San Onofre OII. In May 2016, the CPUC issued an order reopening the record to review the San Onofre OII Settlement Agreement against its standards for approving settlements, in light of its December 2015 decision imposing fines against SCE. The record remains open and CPUC’s review of the San Onofre OII Settlement Agreement is pending.meet-and-confer sessions, the Ninth Circuit cancelled the hearing that had been scheduled for February 9, 2017 and ordered the parties to notify the Ninth Circuit of the status of the San Onofre OII by May 1, 2017 and periodically thereafter.
In July 2015, a purported securities class action lawsuit was filed in federal court against Edison International, its then Chief Executive Officer and its then Chief Financial Officer. The complaint was later amended to include SCE's former President as a defendant. The lawsuit alleges that the defendants violated the securities laws by failing to disclose that Edison International had ex parte contacts with CPUC decision-makers regarding the San Onofre OII that were either unreported or more extensive than initially reported. The complaint purports to be filed on behalf of a class of persons who acquired Edison International common stock between March 21, 2014 and June 24, 2015. OnIn September 14, 2016, the Courtfederal court granted defendants’ motion to dismiss the complaint, with an opportunity for plaintiff to amend the complaint. Plaintiff filed an amended complaint and defendants again moved to dismiss the complaint in October 2016.2016 and a decision is pending.
Also in July 2015, a federal shareholder derivative lawsuit was filed against members of the Edison International Board of Directors for breach of fiduciary duty and other claims. The federal derivative lawsuit is based on similar allegations to the federal class action securities lawsuit and seeks monetary damages, including punitive damages, and various corporate governance reforms. An additional federal shareholder derivative lawsuit making essentially the same allegations was filed in August 2015 and was subsequently consolidated with the July 2015 federal derivative lawsuit. OnIn September 14, 2016, the Courtfederal court granted defendants’defendants' motion to dismiss the consolidated complaint, with an opportunity for plaintiffplaintiffs to amend the complaint. PlaintiffPlaintiffs did not file an amended complaint by the required date. Plaintiffs' deadline to appeal the federal court's order granting defendants' motion to dismiss lapsed in March 2017 and no appeal was filed.
In October 2015, a shareholder derivative lawsuit was filed in California state court against members of the Edison International Board of Directors for breach of fiduciary duty and other claims, making similar allegations to those in the federal derivative lawsuits discussed above. The California state court action is currently on hold in light of the pending federal suits discussed above.
In November 2015, a purported securities class action lawsuit was filed in federal court against Edison International, its then Chief Executive Officer and its Treasurer by an Edison International employee, alleging claims under the Employee Retirement Income Security Act ("ERISA").Act. The complaint purports to be filed on behalf of a class of Edison International employees who were participants in the Edison 401(k) Savings Plan and invested in the Edison International Stock Fund between March 27, 2014 and June 24, 2015. The complaint alleges that defendants breached their fiduciary duties because they knew or should have known that investment in the Edison International Stock Fund was imprudent because the price of Edison International common stock was artificially inflated due to Edison International's alleged failure to disclose certain ex parte communications with CPUC decision-makers related to the San Onofre OII. In July 2016, the federal court granted the defendants' motion to dismiss the lawsuit with an opportunity for the plaintiff to amend her complaint. Plaintiff filed an amended complaint in July 2016, that dismissed Edison International as a named defendant and the remaining defendants filed a motion to dismiss in August 2016. Defendants’These defendants' motion will bewas heard by the court in November 2016.2016 and a decision is pending.
Edison International and SCE cannot predict the outcome of thesethe open proceedings.
MHI Claims
SCE is also pursuingpursued claims against Mitsubishi Heavy Industries, Ltd. and a related company ("MHI"),MHI, which designed and supplied the replacement steam generators. MHI warranted the replacement steam generators for an initial period of 20 years from acceptance and is contractually obligated to repair or replace defective items with dispatch and to pay specified damages for certain repairs. MHI's stated liability under the purchase agreement is limited to $138 million and excludes consequential damages, defined to include "the cost of replacement power;" however, limitations in the contract are subject to applicable exceptions both in the contract and under law. SCE has advised MHI that it believes one or more of such exceptions apply and that MHI's liability is not limited to $138 million. MHI has advised SCE that it disagrees. In October 2013, SCE sent MHI a formal request for binding arbitration under the auspices of the International Chamber of Commerce


in accordance with the purchase contract seeking damages for all losses. In the request for arbitration, SCE allegesalleged contract and tort claims and seekssought at least $4 billion in damages on behalf of itself and its customers and in its capacity as Operating Agent for San Onofre. MHI has denied any liability and has asserted counterclaims for $41 million, for which SCE has denied any liability. Each of the other San Onofre owners (SDG&E and Riverside) sued MHI, alleging claims arising from MHI's supplying the faulty steam generators. These litigation claims have been stayed pending the arbitration. The other co-owners (SDG&E and Riverside) have beenwere added as additional claimants in the arbitration. The arbitration is being conducted pursuant to a confidentiality order issued byIn March 2017, the arbitration panel. Hearings concluded


tribunal found MHI liable for breach of contract, but rejected claimants' other claims. The tribunal found that damages were subject to contractual limitations on April 29, 2016. Aliability. In addition, the tribunal ordered the claimants to pay MHI's legal costs but rejected MHI's counterclaims. The net recovery awarded to SCE was initially determined to be $52 million. An adjustment to the interest awarded to SCE subsequently reduced the net recovery to approximately $47 million. The decision may be issued by year-end 2016 but could be later.
SCE, on behalf of itself andis the other San Onofre co-owners, has submitted seven invoices to MHI totaling $149 million for steam generator repair costs incurred through April 30, 2013. MHI paid the first invoice of $45 million, while reserving its right to challenge it and subsequently rejected a portionfinal award of the first invoice andtribunal but can be challenged in court on limited grounds. SCE has determined that it will not paid further invoices, claiming further documentation is required, which SCE disputes. SCE recorded its shareappeal the decision. As a result of uncertainty associated with the allocation of the invoice paid (approximately $35 million) as a reduction of repair and inspection costs in 2012.
Underaward under the San Onofre OII Settlement Agreement, recoveries from MHI (including amounts paid by MHI underSCE recorded a regulatory liability for the first invoice), if any, will first be applied to reimburse costs incurred in pursuing such recoveries, including litigation costs. To the extent SCE's share of recoveries from MHI exceed such costs, they will be allocated 50% to customers and 50% to SCE.
The first $282 million of SCE's customers' portion of such recoveries from MHI will be distributed to customers via a credit to a sub-account of SCE's BRRBA, reducing revenue requirements from customers. Amounts in excess of the first $282 million distributable to SCE customers will reduce SCE's regulatory asset represented by the unamortized balance of investment in San Onofre base plant, reducing the revenue requirement needed to amortize such investment. The amortization period, however, will be unaffected. Any additional amounts received after the regulatory asset is recovered will be applied to the BRRBA.
The San Onofre OII Settlement Agreement provides the utilities with the discretion to resolve the MHI dispute without CPUC approval, but the utilities are obligated to use their best efforts to inform the CPUC of any settlement or other resolution of these disputes to the extent this is possible without compromising any aspect of the resolution. SCE and SDG&E have also agreed to allow the CPUC to review the documentation of any final resolution of the MHI dispute and the litigation costs incurred in pursuing claims against MHI to ensure they are not exorbitant in relation to the recovery obtained. There is no assurance that there will be any recovery from MHI or that, if there is a recovery, it will equal or exceed the litigation costs incurred to pursue thenet recovery.
Energy Efficiency Incentive Mechanism
In August 2016, a proposed settlement agreement between TURN, ORA and SCE was filed with the CPUC related to the rehearing of prior CPUC decisions for $74.5 million of incentive awards that SCE received for savings achieved by its 2006 – 2008 energy efficiency programs. The settlement agreement fully resolves the disputes as they relate to SCE in exchange for SCE refunding approximately $13.5 million of the incentives awarded over a three year period or, at SCE's option, for SCE making a one-time credit of the present value of that amount to the BRRBA. The CPUC issued a final decision approving the settlement agreement in October 2016.
Long Beach Service Interruptions
In July 2015, SCE's customers who are served via the network portion of SCE's electric system in Long Beach, California experienced service interruptions due to multiple underground vault fires and underground cable failures. The portion affected is the only significant portion of SCE’s distribution network that is arranged in a network configuration. No personal injuries have been reported in connection with these events and, subject to applicable deductibles, SCE is generally insured against customer claims arising from these events. SCE instituted an internal investigation and commissioned an external investigation of these events and their causes, which revealed that the main cause of the interruptions was a lack of adequate management oversight of the downtown network system. The investigations also revealed deficiencies in maintaining the knowledge base on the configuration and operation of the network system, and a lack of sophisticated controls needed to more efficiently and effectively prevent and respond to the cascading events that occurred. In July 2016, the CPUC initiated an investigation ("Long Beach OII") of these events and their causes based on an investigation by the CPUC's Safety and Enforcement Division ("SED"). The SED investigation, among other things, identified problems with maintenance, inspection, and management of SCE's Long Beach electrical system, and emergency response and communications capabilities. The Long Beach OII will consider whether SCE violated statutes, rules or regulations, maintained adequate, accurate, and complete records, and provided sufficient emergency response and communications to various parties during the power outages. SCE has been directed to show cause at hearings why the CPUC should not find it in violation of the


relevant statutes, rules and regulations. A hearing on the Long Beach OII has been scheduled for February 2017. While SCE believes it is probable that penalties will be assessed, neither the CPUC nor SED has proposed a penalty amount. Consequently, although potential penalties in this matter could be significant, SCE is currently unable to estimate their amount.
Environmental Remediation
SCE records its environmental remediation 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 September 30, 2016,March 31, 2017, SCE's recorded estimated minimum liability to remediate its 19 identified material sites (sites with a liability balance at March 31, 2017, in which the upper end of the range of the costs is at least $1 million) was $130$127 million, including $78$75 million related to San Onofre. In addition to these sites, SCE also has 3917 immaterial sites with a liability balance as of March 31, 2017, for which the total minimum recorded liability was $4$3 million. Of the $134$130 million total environmental remediation liability for SCE, $128$125 million has been recorded as a regulatory asset. SCE expects to recover $46$47 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) and $82$78 million through a mechanism that allows SCE to recover 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 $166149 million and $8 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 30 years. Remediation costs for each of the next fourfive years are expected to range from $75 million to $2418 million. Costs incurred for the ninethree months ended September 30,March 31, 2017 and 2016 and 2015 were $3$2 million and $5$1 million, respectively.
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 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 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 $1.06 billion.$1.06 billion. 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 $52$52 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 $13.4 billion. Based on its ownership interests, SCE could


be required to pay a maximum of approximately $255$255 million per nuclear incident. However, it would have to pay no more than approximately $38$38 million per incident in any one year.
For more information on nuclear insurance coverage, see Note 11 in the 20152016 Form 10-K.


Wildfire Insurance
Severe wildfires in California have given rise to large damage claims against California utilities for fire-related losses alleged to be the result of the failure of electric and other utility equipment. Invoking a California Court of Appeal decision, plaintiffs pursuing these claims have relied on the doctrine of inverse condemnation, which can impose strict liability (including liability for a claimant's attorneys' fees) for property damage. Prolonged droughtDrought conditions in California have also increased the duration of the wildfire season and the risk of severe wildfire events. SCE has approximately $1 billion of insurance coverage for wildfire liabilities for the period ending on May 31, 2017. SCE has a self-insured retention of $10 million per wildfire occurrence. SCE or its contractors may experience coverage reductions and/or increased insurance costs in future years. No assurance can be given that future losses will not exceed the limits of SCE's or its contractors' insurance coverage.
Spent Nuclear Fuel
Under federal law, the U.S. Department of Energy ("DOE") is responsible for the selection and construction of a facility for the permanent disposal of spent nuclear fuel and high-level radioactive waste. The DOE has not met its contractual obligation to accept spent nuclear fuel. Extended delays by the DOE have led to the construction of costly alternatives and associated siting and environmental issues. Currently, both San Onofre and Palo Verde have interim storage for spent nuclear fuel on site sufficient for their current license period.
In June 2010, the United States Court of Federal Claims issued a decision granting SCE and the San Onofre co-owners damages of approximately $142 million (SCE share $112 million) to recover costs incurred through December 31, 2005 for the DOE's failure to meet its obligation to begin accepting spent nuclear fuel from San Onofre. SCE received payment from the federal government in the amount of the damage award. In April 2016, SCE, as operating agent, settled a lawsuit on behalf of the San Onofre owners against the DOE for $162 million, including reimbursement for legal costs (SCE share $124 million) to compensate for damages caused by the DOE's failure to meet its obligation to begin accepting spent nuclear fuel for the period from January 1, 2006 to December 31, 2013. The settlement also provides for a claim submission/audit process for expenses incurred from 2014 – 2016, where SCE will submit a claim for damages caused by the DOE failure to accept spent nuclear fuel each year, followed by a government audit and payment of the claim. This process will make additional legal action to recover damages incurred in 2014 – 2016 unnecessary. The first such claim covering damages for 2014 and– 2015 was filed on September 30, 2016 for $56.4approximately $56 million. In February 2017, the DOE reviewed the 2014 – 2015 claim submission and reduced the original request to approximately $43 million primarily due to DOE allocation limits. SCE accepted the DOE's determination, and the government will pay the 2014 – 2015 claim under the terms of the settlement. SCE will make the claim submission for 2016 damages in the third quarter of 2017. All damages recovered by SCE are subject to CPUC review as to how these amounts would be distributed among customers, shareholders, or to offset fuel decommissioning or storage costs.
Note 12.    Preferred and Preference Stock of SCE
During the first quarter of 2016, SCE issued $300 million of 5.45% Series K Preference Stock (120,004 shares; cumulative, $2,500 liquidation value) to SCE Trust V, a special purpose entity formed to issue trust securities as discussed in Note 3. The Series K Preference Stock may be redeemed at par, in whole, but not in part, at any time prior to March 15, 2026 if certain changes in tax or investment company laws occur. On or after March 15, 2026, SCE may redeem the Series K shares at par, in whole or in part, and if not so redeemed, distributions will accrue and be payable at a floating rate. The shares are not subject to mandatory redemption. The proceeds were used to redeem $125 million of SCE's Series D Preference Stock and for general corporate purposes.
Note 13.12.    Accumulated Other Comprehensive Loss
Edison International'sThe changes in accumulated other comprehensive loss, net of tax, consist of:
Edison International SCE
Three months ended September 30, Nine months ended September 30,Three months ended March 31,
(in millions)2016 2015 2016 20152017 2016 2017 2016
Beginning balance$(53) $(56) $(56) $(58)$(53) $(56) $(20) $(22)
Pension and PBOP – net loss:    
         
Other comprehensive loss before reclassifications—
 —
 —
 (4)
Reclassified from accumulated other comprehensive loss1
2
 2
 5
 8
2
 2
 1
 1
Other—
 (1) —
 (1)2
 —
 1
 —
Change2
 1
 5
 3
4
 2
 2
 1
Ending Balance$(51) $(55) $(51) $(55)$(49) $(54) $(18) $(21)
1 
These items are included in the computation of net periodic pension and PBOP Plan expense. See Note 8 for additional information.


SCE's accumulated other comprehensive loss, net of tax consist of:

 Three months ended September 30, Nine months ended September 30,
(in millions)2016 2015 2016 2015
Beginning balance$(20) $(26) $(22) $(28)
Pension and PBOP – net loss:       
Other comprehensive loss before reclassifications—
 —
 —
 (1)
    Reclassified from accumulated other comprehensive loss1
1
 1
 3
 4
Change1
 1
 3
 3
Ending Balance$(19) $(25) $(19) $(25)
1
These items are included in the computation of net periodic pension and PBOP expense. See Note 8 for additional information.
Note 14.13.    Interest and Other Income and Other Expenses
Interest and other income and other expenses are as follows:
  Three months ended September 30, Nine months ended September 30,
(in millions) 2016 2015 2016 2015
SCE interest and other income:        
Equity allowance for funds used during construction $16
 $21
 $58
 $63
Increase in cash surrender value of life insurance policies and life insurance benefits 12
 5
 29
 22
Interest income 1
 1
 4
 4
Other 3
 2
 6
 4
Total SCE interest and other income 32
 29
 97
 93
Other income of Edison International Parent and Other1
 —
 3
 —
 21
Total Edison International interest and other income $32
 $32
 $97
 $114
SCE other expenses:        
Civic, political and related activities and donations 6
 8
 $19
 $21
Other 3
 7
 7
 18
Total SCE other expenses 9
 15
 26
 39
Other expense of Edison International Parent and Other —
 —
 3
 1
Total Edison International other expenses $9
 $15
 $29
 $40
1
Reflects Edison Capital's income related to the sale of affordable housing projects for the three and nine months ended September 30, 2015.
Note 15.    Discontinued Operations
EME Chapter 11 Bankruptcy
In December 2012, EME and certain of its wholly-owned subsidiaries filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Illinois, Eastern Division. The Amended Plan of Reorganization, including the EME Settlement Agreement, was completed on April 1, 2014 with the sale of substantially all of EME's assets to NRG Energy, Inc. and the transactions called for in the EME Settlement Agreement, including an initial cash payment to the Reorganization Trust of $225 million in April 2014. For further discussion of the EME Settlement Agreement, see the 2015 Form 10-K, "Notes to Consolidated Financial Statements —Note 15."
In August 2014, Edison International entered into an amendment of the EME Settlement Agreement that finalized the remaining matters related to the EME Settlement including setting the amount of the two installment payments. Edison International made an installment payment of $204 million in September 2015 and made the remaining $214 million payment in September 2016.


Loss from discontinued operations, net of tax, was $1 million for the nine months ended September 30, 2016. Income from discontinued operations, net of tax, was $43 million for the three- and nine-month periods in 2015. The 2015 income was due to $27 million of income tax benefits based on filing of the 2014 tax returns in the third quarter of 2015 and $16 million in insurance recoveries ($28 million pre-tax) related to EME bankruptcy.
 Three months ended March 31,
(in millions)2017 2016
SCE interest and other income:   
Equity allowance for funds used during construction$19
 $22
Increase in cash surrender value of life insurance policies and life insurance benefits12
 7
Interest income1
 —
Other1
 2
Total SCE interest and other income33
 31
Total Edison International interest and other income$33
 $31
SCE other expenses:   
Civic, political and related activities and donations$(4) $(5)
Other(3) —
Total SCE other expenses(7) (5)
Other expenses of Edison International Parent and Other(1) (1)
Total Edison International other expenses$(8) $(6)
Note 16.14.    Supplemental Cash Flows Information
Supplemental cash flows information for continuing operations is:
Edison International SCEEdison International SCE
Nine months ended September 30,Three months ended March 31,
(in millions)2016 2015 2016 20152017 2016 2017 2016
Cash payments for interest and taxes:              
Interest, net of amounts capitalized$417
 $434
 $408
 $409
$167
 $158
 $152
 $149
Tax payments, net12
 3
 35
 125
Tax payments, net of refunds—
 2
 —
 11
Non-cash financing and investing activities:              
Dividends declared but not paid:              
Common stock$156
 $136
 $—
 $147
$177
 $156
 $—
 $—
Preferred and preference stock1
 —
 1
 —
1
 1
 1
 1
Details of debt exchange:       
Pollution-control bonds redeemed (2.875%)$—
 $(203) $—
 $(203)
Pollution-control bonds issued (1.875%)—
 203
 —
 203
SCE's accrued capital expenditures at September 30, 2016March 31, 2017 and 20152016 were $268$275 million and $403$360 million, respectively. Accrued capital expenditures will be included as an investing activity in the consolidated statements of cash flow in the period paid.
During the second quarter of 2015, SCE amended a power contract classified as a capital lease, which resulted in a reduction in the lease obligation and asset by $147 million.
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 thirdfirst quarter of 2016.2017. 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 thirdfirst quarter of 20162017 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 SCEUtility Projects as discussed in Note 2. Property, Plant and Equipment in the 20152016 Form 10-K.


LEGAL PROCEEDINGS
The following proceeding was previously reported to comply with SEC regulations, which require disclosure of certain information about proceedings arising under federal, state or local environmental provisions if a company reasonably believes that such proceedings might result in monetary sanctions of $100,000 or more.
Shaver Lake Dam Project Administrative Civil Liability Complaint
In 2011, SCE installed a PVC plastic geomembrane liner on the Shaver Lake Dam to prevent water seepage. Before starting the project, SCE received the required regulatory permits and approvals. SCE and the California Department of Fish and Wildlife executed a Streambed Alteration Agreement in November 2011 that governed SCE's activities in Shaver Lake as required by state and federal law. SCE also obtained the required federal Clean Water Act Certification in November 2011 for the project's completion.
In February 2012, the California Department of Fish and Wildlife and the Central Valley Regional Water Quality Control Board alleged that SCE had violated provisions of the Streambed Alteration Agreement and certain conditions of the federal Clean Water Act Certification. SCE disputed these allegations, but agreed with the regulatory agencies to settle the matter for $3 million without admitting wrongdoing.
OTHER INFORMATION
Amendment of Bylaws
On October 27, 2016, the Boards of Directors of Edison International and SCE amended each company’s Bylaws to: (i) permit the Board of Directors to change the date of the annual meeting of shareholders in Article II, Section 2; (ii) eliminate provisions in Article II, Section 7 and Article V, Section 1 that restate provisions in the California Corporations Code; (iii) revise provisions in Article III, Section 1 and Article V, Sections 3 and 4 related to the powers of the Board of Directors that are generally duplicative of other provisions; (iv) update the descriptions of officer duties in Article IV; and (v) make other minor clarifications and refinements. The foregoing description of the amendments to the Bylaws is qualified in its entirety by reference to the revised Bylaws, which are filed as Exhibits 3.1 and 3.2 to this report.None.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchases of Equity Securities by Edison International and Affiliated Purchasers
The following table contains information about all purchases of Edison International Common Stock made by or on behalf of Edison International in the thirdfirst quarter of 2016.2017.
Period
(a) Total
Number of Shares
(or Units)
Purchased1
 
(b) Average
Price Paid per Share (or Unit)1
 
(c) Total
Number of Shares
(or Units)
Purchased
as Part of
Publicly
Announced
Plans or
Programs
 
(d) Maximum
Number (or
Approximate
Dollar Value)
of Shares
(or Units) that May
Yet Be Purchased
Under the Plans or
Programs
July 1, 2016 to July 31, 2016134,419
  $77.17
  — —
August 1, 2016 to August 31, 2016190,183
  75.76
  — —
September 1, 2016 to September 30, 2016170,875
  73.12
  — —
Total495,477
  $75.23
  — —
Period
(a) Total
Number of Shares
(or Units)
Purchased1
 
(b) Average
Price Paid per Share (or Unit)1
 
(c) Total
Number of Shares
(or Units)
Purchased
as Part of
Publicly
Announced
Plans or
Programs
 
(d) Maximum
Number (or
Approximate
Dollar Value)
of Shares
(or Units) that May
Yet Be Purchased
Under the Plans or
Programs
January 1, 2017 to January 31, 20171,071,723
  $72.35
  — —
February 1, 2017 to February 28, 20172,778,550
  74.02
  — —
March 1, 2017 to March 31, 2017447,903
  79.65
  — —
Total4,298,176
  $74.19
  — —
1 
The shares were purchased by agents acting on Edison International's behalf for delivery to plan participants to fulfill requirements in connection with Edison International's: (i) 401(k) Savings Plan; (ii) Dividend Reinvestment and Direct Stock Purchase Plan; and (iii) long-term incentive compensation plans. The shares were purchased in open-market transactions pursuant to plan terms or participant elections. The shares were never registered in Edison International's name and none of the shares purchased were retired as a result of the transactions.


EXHIBITS
Exhibit
Number
 Description
   
3.110.1** Edison International Bylaws, as amended effective October 27, 2016
3.2
Southern California Edison Company Bylaws, as amended effective October 27, 2016

10.1**
Edison International 20082017 Executive Retirement Plan, as amended and restated effective August 24, 2016

Annual Incentive Program
   
10.2** 
Edison International Executive Incentive Compensation Plan, as amended2017 Long-Term Incentives Terms and restated effective August 24, 2016

10.3**
Southern California Edison Company Executive Supplemental Benefit Program, as amended effective August 24, 2016


10.4**
Edison International and Southern California Edison Company Director Compensation Schedule, as adopted August 25, 2016

10.5**
Edison International 2008 Executive Severance Plan, as amended and restated effective August 24, 2016

Conditions
   
31.1 Certifications of the Chief Executive Officer and Chief Financial Officer of Edison International pursuant to Section 302 of the Sarbanes-Oxley Act
   
31.2 Certifications of the Chief Executive Officer and Chief Financial Officer of Southern California Edison Company pursuant to Section 302 of the Sarbanes-Oxley Act
   
32.1 Certifications of the Chief Executive Officer and the Chief Financial Officer of Edison International required by Section 906 of the Sarbanes-Oxley Act
   
32.2 Certifications of the Chief Executive Officer and the Chief Financial Officer of Southern California Edison Company required by Section 906 of the Sarbanes-Oxley Act
   
101.1 Financial statements from the quarterly report on Form 10-Q of Edison International for the quarter ended September 30, 2016,March 31, 2017, filed on NovemberMay 1, 2016,2017, formatted in XBRL: (i) the Consolidated Statements of Income; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to Consolidated Financial Statements
   
101.2 Financial statements from the quarterly report on Form 10-Q of Southern California Edison Company for the quarter ended September 30, 2016,March 31, 2017, filed on NovemberMay 1, 2016,2017, formatted in XBRL: (i) the Consolidated Statements of Income; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to Consolidated Financial Statements

** Indicates a management contract or compensatory plan or arrangement, as required by Item 15(a)(3) of Form 10-K.

**Indicates a management contract or compensatory plan or arrangement, as required by Item 15(a)(3) of Form 10-K.



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/ Aaron D. Moss By:/s/ Connie J. Erickson
     
 
Aaron D. Moss
Vice President and Controller
(Duly Authorized Officer and
Principal Accounting Officer)
  
Connie J. Erickson
Vice President and Controller
(Duly Authorized Officer and
Principal Accounting Officer)
     
Date:NovemberMay 1, 20162017 Date:NovemberMay 1, 20162017


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