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 June 30, 2017March 31, 2018
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, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-12 of the Exchange Act. (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¨
Edison International        o        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:
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 July 25, 2017:April 27, 2018:  
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
3
Part I, Item 2
 
MANAGEMENT OVERVIEW
3
 
  
Highlights of Operating Results
3
 
  
Capital ProgramSouthern California Wildfires
4
 
  
Regulatory ProceedingsMontecito Mudslides
5
Permanent Retirement of San Onofre
5
Capital Program
6
2018 General Rate Case
6
 
 
RESULTS OF OPERATIONS
6
 
 
Southern California Edison Company
6
 
  
Three months ended June 30,March 31, 2018 versus March 31, 2017 versus June 30, 2016
7
 
   
Earning Activities
7
 
   
Cost-Recovery Activities
8
 
 
Six months ended June 30, 2017 versus June 30, 2016
8
Earning Activities
8
Cost-Recovery Activities
9
Supplemental Operating Revenue Information
108
 
 
Income Taxes
108
 
 
Edison International Parent and Other
109
 
  
Strategic Review of Edison Energy Group Competitive Businesses
109
 
  
Income from Continuing Operations
119
 
 
LIQUIDITY AND CAPITAL RESOURCES
119
 
 
Southern California Edison Company
119
 
  
Available Liquidity
119
 
  
Capital Investment Plan
1210
 
  
Dividend Restrictions
1210
 
  
Margin and Collateral Deposits
1311
 
 
Edison International Parent and Other
1311
 
 
Historical Cash Flows
1412
 
  
Southern California Edison Company
1412
 
  
Edison International Parent and Other
1615
 
 
Contingencies
1715
 
 
MARKET RISK EXPOSURES
1715
 
 
Commodity Price Risk
1715
 
 
Credit Risk
1716
 
 
CRITICAL ACCOUNTING ESTIMATES AND POLICIES
1716
 
 
NEW ACCOUNTING GUIDANCE
1716
 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
1716
Part I, Item 3
FINANCIAL STATEMENTS
18
Part I, Item 1
 
Edison International Consolidated Statements of Income
18
 
 
Edison International Consolidated Statements of Comprehensive Income
19
 


i





 
Edison International Consolidated Balance Sheets
20
 
 
Edison International Consolidated Statements of Cash Flows
22
 
 
SCE Consolidated Statements of Income
23
 
 
SCE Consolidated Statements of Comprehensive Income
23
 
 
SCE Consolidated Balance Sheets
24
 
 
SCE Consolidated Statements of Cash Flows
26
 
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
27
 
  
Note 1. Summary of Significant Accounting Policies
27
 
  
Note 2. Consolidated Statements of Changes in Equity
3031
 
  
Note 3. Variable Interest Entities
3132
 
  
Note 4. Fair Value Measurements
3334
 
  
Note 5. Debt and Credit Agreements
3637
 
  
Note 6. Derivative Instruments
3738
 
  
Note 7. Income TaxesRevenue
3940
 
  
Note 8. Compensation and Benefit Plans
41
Note 9. Investments
42
Note 10. Regulatory Assets and LiabilitiesIncome Taxes
43
 
  
Note 11. Commitments9. Compensation and ContingenciesBenefit Plans
44
 
  
Note 10. Investments
45
Note 11. Regulatory Assets and Liabilities
47
Note 12. PreferredCommitments and Preference Stock of SCEContingencies
48
 
  
Note 13. Accumulated Other Comprehensive Loss
4954
 
  
Note 14. Interest and Other Income and Other Expenses
4955
 
  
Note 15. Supplemental Cash Flows Information
5055
 
CONTROLS AND PROCEDURES
5056
Part I, Item 4
 
Disclosure Controls and Procedures
5056
 
 
Changes in Internal Control Over Financial Reporting
5056
 
 
Jointly Owned Utility Plant
5056
 
LEGAL PROCEEDINGS
5056
Part II, Item 1
December 2017 Wildfires Litigation
56
Montecito Mudslides Litigation
56
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
5157
Part II, Item 2
 
Purchases of Equity Securities by Edison International and Affiliated Purchasers
5157
 
EXHIBITS
5258
Part II, Item 6
SIGNATURES
5359
 
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.
20162017 Form 10-K Edison International's and SCE's combined Annual Report on Form 10-K for the year-ended December 31, 20162017
AFUDC allowance for funds used during construction
ALJ administrative law judge
ARO(s) asset retirement obligation(s)
Bcf billion cubic feet
Bonus Depreciationbonus 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
CAISO California Independent System Operator
Cal FireCalifornia Department of Forestry and Fire Protection
CCAsCommunity Choice Aggregators which are cities, counties, and certain other public agencies with the authority to generate and/or purchase electricity for their local residents and businesses
CPUC California Public Utilities Commission
DERsdistributed energy resources
DOE U.S. Department of Energy
DERsdistributed energy resources
DRP Distributed 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 subsidiaries engaged in competitive businesses focused on providing energy services, including distributed generation and/or storage, to commercial and industrial customers
EME Edison Mission Energy
EMGEME Settlement Agreement Settlement Agreement by and among Edison Mission Group Inc., a wholly owned subsidiary ofEnergy, Edison International and the parent company of EME and Edison CapitalConsenting Noteholders identified therein, dated February 18, 2014
ERRA energy resource recovery accountEnergy Resource Recovery Account
FASBFinancial Accounting Standards Board
FERC Federal Energy Regulatory Commission
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 27, 201726, 2018
MD&A 
Management's Discussion and Analysis of Financial Condition and Results
of Operations in this report
MHI Mitsubishi Heavy Industries, Inc. and related companies
MW megawatts
MWdc megawatts measured for solar projects representing the accumulated peak capacity of all the solar modules
NDCTPNuclear Decommissioning Cost Triennial Proceeding
NEIL Nuclear Electric Insurance Limited
NEM net energy metering
NERC North American Electric Reliability Corporation
NOLnet operating loss


iii





NRC Nuclear Regulatory Commission
ORA CPUC's Office of Ratepayers Advocates
OII Order Instituting Investigation
OII PartiesSCE, SDG&E, The Alliance for Nuclear Responsibility, The California Large Energy Consumers Association, California State University, Citizens Oversight dba Coalition to Decommission San Onofre, the Coalition of California Utility Employees, the Direct Access Customer Coalition, Ruth Henricks, ORA, TURN, and Women's Energy Matters, all of whom are parties to the Revised San Onofre Settlement Agreement
Palo Verde 
nuclear electric generating facility located near
Phoenix, Arizona in which SCE holds a 15.8% ownership interest
PBOP(s) postretirement benefits other than pension(s)
QF(s)Prior San Onofre Settlement Agreement qualifying facility(ies)


iii





San Onofre OII Settlement Agreement by and among TURN, ORA, SDG&E, the Coalition of California Utility Employees, and Friends of the Earth, dated November 20, 2014
Revised San Onofre
Settlement Agreement
Revised San Onofre OII Settlement Agreement among OII Parties, dated January 30, 2018
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, TURN, ORA, SDG&E, the Coalition of California Utility Employees, and Friends of the Earth, 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 SoCore Energy LLC, a former subsidiary of Edison Energy Group that provides solar energywas sold in April 2018
TAMATax Accounting Memorandum Account
Tax ReformTax Cuts and energy storage solutionsJobs Act signed into law on December 22, 2017
TURN The Utility Reform Network
US EPA U.S. Environmental Protection Agency




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 statements that do not directly relate to a historical or current fact. Other information distributed by Edison International and SCE that is incorporated in this report, or that refers to or incorporates this report, may also contain forward-looking statements. In this report and elsewhere, the words "expects," "believes," "anticipates," "estimates," "projects," "intends," "plans," "probable," "may," "will," "could," "would," "should," and variations of such words and similar expressions, or discussions of strategy or plans, are intended to identify forward-looking statements. Such statements necessarily involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Some of the risks, uncertainties and other important factors that could cause results to differ from those currently expected, or that otherwise could impact Edison International and SCE, include, but are not limited to the:
ability of SCE to recover its costs in a timely manner from its customers through regulated rates, including costs related to San Onofreuninsured wildfire-related and proposedmudslide-related liabilities, spending on grid modernization;modernization and other capital spending incurred prior to explicit regulatory approval;
ability to obtain sufficient insurance at a reasonable cost, including insurance relating to SCE's nuclear facilities and wildfire-related and mudslide-related exposure, and to recover the costs of such insurance or, in the absence of insurance, the ability to recover uninsured losses;
decisions and other actions by the CPUC, the FERC, the NRC and other regulatory authorities, including determinations of authorized rates of return or return on equity, the outcome2018 GRC, the recoverability of San Onofre CPUC proceedings,wildfire-related and the 2018 GRC,mudslide-related costs, and delays in regulatory actions;
ability of Edison International or SCE to borrow funds and access the bank and capital markets on reasonable terms;
risks associated with the decommissioning of San Onofre, including those related to public opposition, permitting, governmental approvals, on-site storage of spent nuclear fuel, and cost overruns;
extreme weather-related incidents and other natural disasters, including earthquakes and events caused, or exacerbated, by climate change, such as wildfires;
risks associated with cost allocation including the potential movementresulting in higher rates for utility bundled service customers because of costs to certain 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;CCAs;
risks inherent in SCE's transmission and distribution infrastructure 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), changes in the CAISO's transmission plans, 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 decommissioning of 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, employee and customer data;
the outcome of the strategic reviewability of Edison Energy Group, which may include changesInternational to existingdevelop competitive businesses, manage new business models and/risks, and recover and earn a return on its investment in newly developed or 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 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;acquired businesses;
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(which may be adjusted by public utility regulators;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, Western 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; and
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.accounts.
Additional information about risks and uncertainties, including more detail about the factors described in this report, is contained throughout this report and in the 20162017 Form 10-K, including the "Risk Factors" section. Readers are urged to read this entire report, including information incorporated by reference, as well as the 20162017 Form 10-K, and carefully consider the risks, uncertainties, and other factors that affect Edison International's and SCE's businesses. Forward-looking statements speak only as of the date they are made and neither Edison International nor SCE are obligated to publicly update or revise forward-looking statements. Readers should review future reports filed by Edison International and SCE with the SEC. Edison International and SCE provide direct links to SCE'scertain SCE and other parties' regulatory filings and documents with the CPUC and the FERC and certain agency rulings and notices in open proceedings most important to investors at www.edisoninvestor.com (SCE Regulatory Highlights) so that such filings, rulings and notices are available to all investors. Edison International and SCE post or provide direct links to certain documents and information related to Southern California wildfires which may be of interest to investors upon SCE filing with the relevant agency.at www.edisoninvestor.com (Southern California Wildfires) in order to publicly disseminate such information. 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 sixthree months ended June 30, 2017March 31, 2018 discusses material changes in the consolidated financial condition, results of operations and other developments of Edison International and SCE since December 31, 2016,2017, and as compared to the sixthree months ended June 30, 2016.March 31, 2017. This discussion presumes that the reader has read or has access to Edison International's and SCE's MD&A for the calendar year 20162017 (the "year-ended 20162017 MD&A"), which was included in the 20162017 Form 10-K.
Except when otherwise stated, references to each of Edison International, SCE, EMG,or 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.


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 and Edison Energy Group. SCE is aan 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 is a holding company for subsidiaries engaged in pursingpursuing competitive business opportunities across energy services and distributed solarmanaged portfolio solutions to commercial and industrial customers. SuchEdison Energy Group's 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 June 30,   Six months ended June 30,   Three months ended March 31,  
(in millions) 2017 
20161
 Change 2017 
20161
 Change 2018 2017 Change
Net income (loss) attributable to Edison InternationalNet income (loss) attributable to Edison International          Net income (loss) attributable to Edison International    
Continuing operations                  
SCE $307
 $318
 $(11) $656
 $612
 $44
 $286
 $349
 $(63)
Edison International Parent and Other (29) (36) 7
 (16) (50) 34
 (68) 13
 (81)
Discontinued operations —
 (2) 2
 —
 (1) 1
Edison International 278
 280
 (2) 640
 561
 79
 218
 362
 (144)
Less: Non-core items                  
SCE —
 —
 —
 —
 —
 —
 —
 —
 —
Edison International Parent and Other —
 2
 (2) 1
 4
 (3) (44) —
 (44)
Discontinued operations —
 (2) 2
 —
 (1) 1
Total non-core items —
 —
 —
 1
 3
 (2) (44) —
 (44)
Core earnings (losses)                  
SCE 307
 318
 (11) 656
 612
 44
 286
 349
 (63)
Edison International Parent and Other (29) (38) 9
 (17) (54) 37
 (24) 13
 (37)
Edison International $278
 $280
 $(2) $639
 $558
 $81
 $262
 $362
 $(100)
1
The earnings for the three and six months ended June 30, 2016 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. Summary of Significant Accounting Policies" for further information.
Edison International's earnings are prepared in accordance with 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'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 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.proceedings, and exit activities, including sale of certain assets and other activities that are no longer continuing.
Edison International's secondfirst quarter 20172018 earnings decreased $2$144 million from the secondfirst quarter of 2016,2017, comprised of a decreasedecline in SCE's earnings of $11$63 million a decreaseand an increase in Edison International Parent and Other's losses of $7 million, and a decrease in losses from discontinued operations of $2$81 million. The decrease inSCE's lower core earnings at SCE was primarily due to a reduction in CPUC revenue related to prior overcollections.


Edison International's earnings for the six months ended June 30, 2017 increased $79 millionresulted from the six months ended June 30, 2016, comprisedimpact of an increase in SCE's earningsthe July 2017 cost of $44 million, a decrease in Edison International Parent and Other's losses of $34 million, and a decrease in losses from discontinued operations of $1 million. The increase in earnings at SCE was primarily related to an increase incapital decision on GRC revenue, from the escalation mechanism set forth in the 2015 GRC decision and lowerhigher operation and maintenance expenses partially offset by the CPUC revenue adjustment discussed above and higher net financing costs.
Edison International Parent and Other's decreaseincrease in losses for the three and six months ended 2017March 31, 2018 was due to lowerhigher core losses of $9$37 million and $37 million, respectively, and lowerhigher non-core earningslosses of $2 million and $3 million, respectively.$44 million. The decreaseincrease in core losses was due to higherlower income tax benefits related to stock option exercises and the impact of Tax Reform on pre-tax losses.


Consolidated non-core items for the first quarter of 2018 and 2017 settlementincluded:
Impairment and other charges of federal$66 million ($48 million after tax) in the first quarter of 2018 resulting from Edison International's agreement to sell SoCore Energy to a third party. The net assets of SoCore Energy have been recorded at fair value, less expected transaction costs (see "Results of Operations—Edison International Parent and Other—Strategic Review of Edison Energy Group Competitive Business—Sale of SoCore Energy").
Income of $6 million ($4 million after-tax) and less than $1 million for the first quarter of 2018 and 2017, respectively, related to losses (net of distributions) allocated to tax equity investors under the HLBV accounting method. Edison International core earnings reflected the operating results of the solar projects, related financings 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 audits for 2007 – 2012.attributes under the tax equity financing. Accordingly, Edison International has included the non-operating allocation of income as a non-core item. For further information on HLBV, see Note 1 of "Notes to Consolidated Financial Statements" included in the 2017 Form 10-K.
Southern California Wildfires
In December 2017, several wind-driven wildfires (the "December 2017 Wildfires") impacted portions of SCE's service territory and caused substantial damage to both residential and business properties and service outages for SCE customers. The largest of these fires, known as the Thomas Fire, originated in Ventura County and burned acreage located in both Ventura and Santa Barbara Counties. According to the most recent California Department of Forestry and Fire Protection ("Cal Fire") incident information reports, the Thomas Fire burned over 280,000 acres, destroyed an estimated 1,063 structures, damaged an estimated 280 structures and resulted in one fatality.
Determining wildfire origin and cause is often a complex and time-consuming process, and several investigations into the facts and circumstances of the Thomas Fire are believed to be ongoing. SCE has been advised that the origins and causes of the fire are being investigated by Cal Fire and the Ventura County Fire Department. In connection with its investigation of the Thomas Fire, Cal Fire has removed and retained certain of SCE's equipment that was located near suspected ignition points of the fire. The CPUC's SED is also conducting an investigation to assess the compliance of SCE and its facilities with applicable rules and regulations in areas impacted by the Thomas Fire. In addition, as it does in all wildfire matters in which its facilities may or are alleged to be involved, SCE is conducting its own investigation of the Thomas Fire. At this time, SCE cannot predict when its own investigation, or the investigations of Cal Fire, the Ventura County Fire Department or the SED, will be completed.
SCE is aware of multiple lawsuits filed related to the Thomas Fire naming SCE as a defendant. Several of the lawsuits also name Edison International as a defendant. Certain California courts have previously found utilities to be strictly liable for property damage, regardless of fault, by applying the theory of inverse condemnation when a utilities’ facilities were determined to be a substantial cause of a wildfire that caused property damage. Any potential liability for December 2017 Wildfire-related damages will depend on a number of factors, including whether SCE substantially caused, or contributed to, the damages and whether parties seeking recovery of damages will be required to show negligence in addition to causation.
Given the preliminary stages of the investigations and the uncertainty as to the causes of the Thomas Fire, and the extent and magnitude of potential damages, Edison International and SCE are currently unable to predict the outcome of the claims made against SCE and Edison International or reasonably estimate a range of losses that may be incurred. SCE and Edison International’s potential liability related to the Thomas Fire could be substantial.
SCE has approximately $1 billion of wildfire-specific insurance coverage, subject to a self-insured retention of $10 million per occurrence, for wildfire-related claims for the period ending on May 31, 2018. SCE also has approximately $300 million of additional insurance coverage for wildfire-related occurrences for the period from December 31, 2017 to December 31, 2018, which may be used in addition to the $1 billion in wildfire insurance for wildfire events occurring on or after December 31, 2017 and on or before May 31, 2018, and would be available for new wildfire events, if any, occurring after May 31, 2018 and on or before December 30, 2018. Various coverage limitations within the policies that make up SCE's wildfire insurance coverage could result in material self-insured costs in the event of multiple wildfire occurrences during a policy period. Should responsibility for a significant portion of the damages related to the December 2017 Wildfires be attributed to SCE, SCE's insurance may not be sufficient to cover all such damages. In addition, SCE may not be authorized to recover its uninsured damages through electric service rates if, for example, the CPUC finds that the damages were incurred because SCE was not a prudent manager of its facilities.


Edison International and SCE are pursuing legislative, regulatory and legal strategies to address the application of a strict liability standard to wildfire-related damages without the ability to recover resulting damages in rates. Edison International and SCE cannot predict whether or when a solution mitigating the significant risk faced by a California investor-owned utility related to wildfires will be achieved.
For further information, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires" and "Legal Proceedings—December 2017 Wildfire Litigation."
Montecito Mudslides
In January 2018, torrential rains in Santa Barbara County produced mudslides and flooding in Montecito and surrounding areas (the "Montecito Mudslides"). According to Santa Barbara County initial reports, the Montecito Mudslides destroyed an estimated 135 structures, damaged an estimated 324 structures and resulted in at least 21 fatalities, with two additional fatalities presumed.
Of the lawsuits mentioned above, several allege that SCE has responsibility for the Thomas Fire and that the Thomas Fire proximately caused the Montecito Mudslides, resulting in the plaintiffs' claimed damages. Some of the Montecito Mudslides lawsuits also name Edison International as a defendant. Edison International and SCE are currently unable to predict the outcome of the claims made against SCE and Edison International or reasonably estimate a range of losses that may be incurred. SCE and Edison International's potential liability related to the Montecito Mudslides could be substantial, SCE's insurance may not be sufficient to cover such damages, and SCE may not be authorized to recover any uninsured damages in rates.
For further information, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Montecito Mudslides" and "Legal Proceedings—Montecito Mudslides Litigation."
Permanent Retirement of San Onofre
Entry into Revised Settlement and Utility Shareholder Agreements
As discussed in the year-ended 2017 MD&A, on January 30, 2018, the OII Parties entered into a Revised San Onofre Settlement Agreement in the CPUC OII proceeding regarding the steam generator replacement project at San Onofre and the related outages and subsequent shutdown of San Onofre. If approved by the CPUC, the Revised San Onofre Settlement Agreement will resolve all issues under consideration in the San Onofre OII and will modify the Prior San Onofre Settlement Agreement. If approved by the CPUC, the Revised San Onofre Settlement Agreement will also result in the dismissal of a federal lawsuit currently pending in the Ninth Circuit Court of Appeals challenging the CPUC's authority to permit rate recovery of San Onofre costs. The Revised San Onofre Settlement Agreement was the result of multiple mediation sessions in 2017 and January 2018 and was signed on January 30, 2018 following a settlement conference in the OII, as required under CPUC rules.
Implementation of the terms of the Revised San Onofre Settlement Agreement is subject to the approval of the CPUC, as to which there is no assurance. The OII Parties have agreed to exercise their best efforts to obtain CPUC approval, but there can be no certainty of when or what the CPUC will actually decide.
The San Onofre OII Assigned Commissioner and Assigned ALJ have issued joint rulings that, among other things, (i) direct the parties to submit joint testimony to the CPUC in support of the Revised San Onofre Settlement Agreement on April 27, 2018; (ii) direct all parties to submit briefing on whether an attorneys' fees provision in a related settlement agreement pertaining to the dismissal of a federal lawsuit challenging the Prior San Onofre Settlement Agreement impacts the integrity of the CPUC's intervenor compensation program; and (iii) schedule a public participation hearing and a status conference. In lieu of the joint testimony, with the ALJ's consent, the parties submitted a joint stipulation of facts in support of the Revised San Onofre Settlement Agreement on April 27, 2018.


Capital Program
SCE'sTotal capital expenditures forecast(including accruals) were $853 million and $647 million for the first three months of 2018 and 2017, – 2020 period has been revised since the filingrespectively. SCE's first quarter capital spending was consistent with its 2018 plan and SCE continues to project 2018 capital expenditures of the 2016 Form 10-K, as indicatedapproximately $4.2 billion for 2018. As discussed in the table below. The update reflects a reductionyear-ended 2017 MD&A in 2017 capital expenditures primarily due to the lack of approvalabsence of a grid modernization memorandum account (see below for further information), lower than expected new customer meters and delays on FERC projects. The update also reflects SCE's revised requested capital expenditures for 2018 – 2020 resulting from SCE's 2018 GRC rebuttal testimony, filed in June 2017.
The 2017 capital program had originally included expenditures of $182 million for grid modernization capital spending.decision, SCE has requested CPUC approval ofdeveloped, and is executing against, a memorandum account2018 capital expenditure plan that will allow SCE to facilitate recovery in rates of such expenditures. The memorandum account has not yet been approved by the CPUC and may not be approved. Certain of the grid modernization capital expenditures promote safety and reliability as well as facilitating integration of distributed energy resources and are the focus of SCE's reduced grid modernization capital expenditures in 2017. This spending also would allow for a timely ramp-up of grid modernization capital expenditures in subsequent years. These expenditures are included in traditional distribution capital expenditures for 2017 in the table below. SCE may receive further guidance on grid modernization spending from the CPUC as part of the DRP proceeding in the second half of 2017.
Traditional capital expenditures for 2017 reflects SCE's forecast capital expenditures for CPUC and FERC capital projects. Traditional capital expenditures for 2018 – 2020 reflect the amounts requested in the 2018 GRC filing and subsequently updated in SCE's rebuttal testimony as well as the expected spending for FERC capital projects. Recovery for 2017 – 2020 planned expenditures for traditional capital projects under FERC jurisdiction will be pursued through FERC-authorized mechanisms. 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 traditionalramp up its capital spending that will be approvedprogram over the three-year GRC period to meet what is ultimately authorized in the 2018 GRC decision management is not awarewhile minimizing the associated risk 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. SCE does not have prior approval experience with grid modernization capital expenditures and, therefore, is unable to predict an expected outcome.unauthorized spending. Forecasted expenditures for FERC capital projects are subject to change due to, among other things, timeliness of permitting, licensing, regulatory approvals, and regulatory approvals.contractor bids. For further information regarding updates for large transmission and substation projects,the capital program see "Liquidity and Capital Resources—SCE—Capital Investment Plan.Plan" and the year-ended 2017 MD&A, "Management Overview—Capital Program."
TotalDistribution Grid Development
Transportation Electrification Plan
In January 2017, SCE filed a transportation electrification plan with the CPUC to accelerate the adoption of electric transportation, which is critical to California's climate change and GHG reduction objectives. The plan proposes a five-year program to fund medium- and heavy-duty vehicle charging infrastructure that follows the model developed for SCE's Charge Ready program. The proposal has an estimated five-year cost of $554 million ($532 million capital) in 2016 dollars. In March 2018, the CPUC issued a proposed decision granting SCE $208 million in 2016 dollars to install the charging infrastructure at a minimum of 700 sites to support the electrification of at least 6,500 medium-and-heavy-duty electric vehicles. If adopted as proposed, the decision will allow customers the option to own the charging infrastructure, which would reduce the costs it can attribute to capital expenditures (including accruals) were $1.4 billion and $1.6 billion for the first six months of 2017 and 2016, respectively. The following table sets forth a summary of forecasted capital expenditures for 2017 – 2020spending. SCE has filed comments on the basis described above:
(in millions) 2017201820192020Total 2017 – 2020
Traditional capital expenditures1
      
Distribution2
 $3,080
$3,174
$3,119
$3,048
$12,421
Transmission 501
956
1,003
1,046
3,506
Generation 199
220
212
201
832
Total requested traditional capital expenditures1, 3
 $3,780
$4,350
$4,334
$4,295
$16,759
Grid modernization capital expenditures2
 $—
$538
$649
$608
$1,795
Total capital expenditures $3,780
$4,888
$4,983
$4,903
$18,554
1
Includes Energy Storage of $60 million in the 2017 – 2020 period. Also, includes $12 million Charge Ready Pilot in 2017.
2
2017 capital expenditures related to grid modernizationproposed decision opposing treating customer-owned charging infrastructure as an expense and advocating to remove minimum site requirements based on incorrect cost estimates. SCE expects a final decision in the second quarter of 2018. SCE plans to propose additional programs and pilots in the future. The capital costs for these proposed projects are not included in traditional distribution capital expenditures.
3
Capital expenditures for 2017 reflect management's expectations based on the 2015 GRC decision.


SCE's estimated weighted average annualcapital spending and rate base for 2017 – 2020 using the capital expenditures set forth in the table above is as follows:
(in millions) 2017201820192020
Rate base for requested traditional capital expenditures $26,212
$28,997
$31,088
$33,122
Rate base for requested grid modernization capital expenditures —
261
695
1,195
Total rate base $26,212
$29,258
$31,783
$34,317
The rate base above does not reflect reductions from the amounts requested in the 2018 GRC that may be included in a final decision.forecasts.
Regulatory Proceedings
2018 General Rate Case
In September 2016,As discussed in the year-end 2017 MD&A, in December 2017 SCE filed its 2018an update in the GRC applicationproceedings for the three-year period 2018 – 2020, which requested a2020. SCE updated its 2018 revenue requirement ofrequest from $5.885 billion anto $5.673 billion, a $33 million increase of $222 million over the projected 2017 GRC authorized revenue requirement. In June 2017 in its rebuttal testimony, SCE revised its requested 2018 revenue requirement, to $5.859 billion, which would be a $196 million increase. The rebuttal testimony alsoand proposed post-test year increases in 2019 and 2020 of $480$477 million and $556$554 million, respectively. In February 2018, SCE further updated its request to incorporate the changes associated with Tax Reform, which resulted in a revenue requirement request of $5.534 billion, a decrease of $139 million from the December update filing and a $106 million decrease from the 2017 GRC authorized revenue requirement. SCE proposed post-test year increases in 2019 and 2020 of $292 million and $319 million, respectively, decreases from the December update filing of $185 million and $235 million, respectively.
In April 2017, the ORA recommended that SCE's original requestedA final 2018 baseGRC decision is not expected until later in 2018. Until a GRC decision is issued, SCE is recognizing revenue requirement be decreased by approximately $208 million, comprised of approximately $164 million in operations 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. To the extent any spending is authorized, the ORA proposed capturing grid modernization spending in a memorandum account for review in the 2021 GRC. TURN recommended reductions of 78% of grid modernization capital expenditures in 2018 and rate base adjustments of approximately $700 million of historical capital expenditures, primarily related to certain distribution infrastructure replacement programs. The impact of TURN's recommendations would decrease SCE's original requested 2018 base revenue requirement by approximately $93 million.
SCE requested thatbased on 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 the2017 authorized revenue requirement, changes beadjusted for the July 2017 cost of capital decision and Tax Reform. The CPUC has approved the establishment of a GRC memorandum account, which will make the 2018 revenue requirement adopted by the CPUC effective as of January 1, 2018. SCE cannot predict the revenue requirement the CPUC will ultimately authorize for 2018 through 2020 or forecastprovide assurance on the timing of a final decision.
Permanent Retirement of San Onofre
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
As discussed in the year-ended 2016 MD&A, 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 and SDG&E to meet and confer with the other parties in the San Onofre OII to consider changing the terms of the San Onofre OII Settlement Agreement. In March 2017, SCE and the parties participating in the meet-and-confer process initiated a mediation of the issues identified in the December 2016 joint ruling. The CPUC has established a joint report deadline of August 15, 2017, at which time the parties must report on the outcome of the meet-and-confer process.
SCE has recorded a regulatory asset of $772 million at June 30, 2017 to reflect the expected recoveries under the San Onofre OII Settlement Agreement. SCE assessed the San Onofre regulatory asset at June 30, 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. Such judgment is subject to uncertainty, and regulatory principles and precedents are not necessarily binding and are capable of interpretation.



MHI 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 challenges to the settlement of the San Onofre OII, the arbitration tribunal decision on MHI, and the San Onofre regulatory asset, see "Notes to Consolidated Financial Statements—Note 11. Commitments and Contingencies—Contingencies—San Onofre Related Matters."
Cost of Capital
In July 2017, the CPUC issued a final decision that adopted the petition previously filed by SCE, Pacific 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 capital. The decision extended the deadline for the next Investor-Owned Utilities cost of capital application to April 2019, reset SCE's authorized cost of long-term debt and preferred stock beginning January 1, 2018; and established SCE's authorized ROE at 10.30%, beginning January 1, 2018. For more information on the terms of the settling parties' petition, see "Management Overview—Regulatory Proceedings—Cost of Capital" in the year-ended 2016 MD&A.
FERC Formula Rates
In June 2017, SCE provided its preliminary 2018 annual transmission revenue requirement update to interested parties. The update reflects a decrease in SCE's transmission revenue requirement of $15 million or 1.3% lower than amounts currently authorized in rates. SCE expects to file its 2018 annual update with the FERC by October 31, 2017 with the proposed rates effective January 1, 2018. In addition, SCE expects to file a new formula rate with the FERC by October 31, 2017. Once the new formula rate is accepted by the FERC, it will supersede the existing formula rate, including the 2018 annual update, and could become effective as early as January 1, 2018. FERC has the authority and commonly suspends new rates for up to five months. If the new formula rate is suspended by the FERC, the 2018 transmission revenue requirement rate established in the 2018 annual update will be effective from January 1, 2018 until the end of the suspension of the new formula rate. The new formula rate will be subject to refund from the end of the suspension until it is ultimately approved by the FERC.
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 revenues or penalties related to incentive mechanisms, other operating revenue, and regulatory charges or disallowances.
Cost-recovery activities – representing CPUC- and FERC- authorized balancing accounts which allow for recovery of specific project or program costs, subject to reasonableness review or compliance with upfront standards. 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 June 30,March 31, 2018 versus March 31, 2017 versus June 30, 2016
Three months ended June 30, 2017Three months ended June 30, 2016Three months ended March 31, 2018Three months ended March 31, 2017
(in millions)Earning
Activities		Cost-
Recovery
Activities		Total
Consolidated		Earning
Activities		Cost-
Recovery
Activities		Total
Consolidated		Earning
Activities		Cost-
Recovery
Activities		Total
Consolidated		Earning ActivitiesCost-Recovery ActivitiesTotal Consolidated
Operating revenue$1,584
$1,369
$2,953
$1,509
$1,259
$2,768
$1,513
$1,041
$2,554
$1,552
$904
$2,456
Purchased power and fuel—
1,175
1,175
—
1,064
1,064
—
926
926
—
784
784
Operation and maintenance473
193
666
492
195
687
Depreciation, decommissioning and amortization510
—
510
503
—
503
Operation and maintenance1
509
142
651
450
130
580
Depreciation and amortization459
—
459
497
—
497
Property and other taxes84
1
85
85
—
85
105
—
105
97
—
97
Other operating income(1)—
(1)—
—
—
Total operating expenses1,067
1,369
2,436
1,080
1,259
2,339
1,072
1,068
2,140
1,044
914
1,958
Operating income517
—
517
429
—
429
441
(27)414
508
(10)498
Interest expense(146)—
(146)(134)—
(134)(155)—
(155)(141)—
(141)
Other income and expenses24
—
24
22
—
22
Other income and expenses1
24
27
51
25
10
35
Income before income taxes395
—
395
317
—
317
310
—
310
392
—
392
Income tax expense57
—
57
(32)—
(32)
Income tax expense (benefits)(6)—
(6)12
—
12
Net income338
—
338
349
—
349
316
—
316
380
—
380
Preferred and preference stock dividend requirements31
—
31
31
—
31
30
—
30
31
—
31
Net income available for common stock$307
$—
$307
$318
$—
$318
$286
$—
$286
$349
$—
$349
Net income available for common stock  $307
 $318
  $286
 $349
Less:          
Non-core earnings  —
 —
  —
 —
Core earnings1
  $307
 $318
Core earnings2
  $286
 $349
1
Expenses for the three months ended March 31, 2017 were updated to reflect the implementation of the accounting standard update for net periodic benefit costs related to the defined benefit pension and other postretirement plans.For further information, see Note 1 in the "Notes to Consolidated Financial Statements."
2 
See use of non-GAAP financial measures in "Management Overview—Highlights of Operating Results."
Earning Activities
Earning activities were primarily affected by the following:
HigherLower operating revenue of $75$39 million primarily due to the following:
An increaseA decrease of $36 million in CPUC revenue related to recognizing revenue based on the 2017 authorized revenue requirement, adjusted for the July 2017 cost of approximately $58capital decision and the impact of Tax Reform. See "Management Overview—2018 General Rate Case" for further information.
A decrease in FERC revenue of $15 million primarily due to the escalation mechanism as set forthreduction in the 2015 GRC decision andfederal corporate income tax rate resulting from Tax Reform.
A decrease in revenue of $10 million related to $18 million resulting from the amortization of higher operating costs subject to balancing account treatment (primarily offsetexcess deferred tax assets as a result of Tax Reform (offset in depreciation expenseincome taxes below). These increases were partially offset by $9$8 million of lower revenue related to the extension of bonus depreciation and a $17 million revenue reduction for the expected refund to customers of prior overcollections identified in the second quarter of 2017.
An increase in revenue of $77 million related to2018 incremental tax benefits refunded to customers (offset in income taxes below). The increase inSee the year-end 2017 MD&A, "Management Overview—Tax Reform" for further information.
In 2017, revenue resultedrelated to San Onofre were reduced by $22 million, resulting from a 2016$65 million reduction related to the tax abandonment of San Onofre (offset in income taxes below) partially offset by revenue refund to customers of $133$43 million related to 2012 – 2014 incremental income tax deductions, partially offset by higher year-over-year incremental tax benefits recognized in balancing accounts for 2017 activities.
A decrease in FERC-related revenuethe recovery of $31 million primarily due to $19 million amortization of the San Onofre regulatory asset associated withand authorized return as provided by the Coolwater-Lugo transmission project recognizedPrior San Onofre Settlement Agreement. There is no revenue recorded in 2016 (offset in depreciation below) and2018 for San Onofre as a $7 million reduction to FERC revenue due to a change in estimate underresult of the FERC formula rate mechanism.Revised San
Lower

Onofre Settlement Agreement (see "Management Overview—Permanent Retirement of San Onofre" for further information).
Higher operation and maintenance costs of $19$59 million primarily due to the impact of SCE's operational and service excellence initiatives and lower storm-related activities partially offset byhigher insurance premiums associated with additional wildfire insurance coverage entered into in December 2017, higher transmission and distribution costs for line clearing.clearing and other maintenance expenses.
HigherLower depreciation decommissioning, and amortization expense of $7$38 million primarily related to depreciation on transmission and distribution investments partially offset bythe amortization of the San Onofre regulatory asset relatedin 2017 (offset in revenue above) and lower intangible plant amortization.
Higher property and other taxes of $8 million primarily due to Coolwater-Lugo plant recordedhigher assessed values for property taxes in 2016.


2018.
Higher interest expense of $12$14 million primarily due to increased borrowings.
HigherLower income taxestax expense of $89$18 million primarily due to lower pre-tax income for the following:
Lowerfirst quarter of 2018 at a lower federal income tax benefits of $45 million due to $79 million of flow-through incremental benefits for 2012 – 2014 to customers recorded in 2016rate partially offset by higher income tax benefits in 2017 of $34 millionprimarily related to flow through of incrementalthe ratemaking treatment on the San Onofre tax abandonment. In addition, SCE had lower tax benefits for TAMA andrefunded to customers in 2018 offset by tax benefits from the pole loading balancing accountsamortization of excess deferred tax assets as a result of Tax Reform (offset in revenue above).
Lower net income tax benefits in See the year-end 2017 MD&A, "Management Overview—Tax Reform" for other property-related items, including cost of removal and depreciation deductions.
Higher pre-tax income for the second quarter of 2017, as discussed above.further information.
Cost-Recovery Activities
Cost-recovery activities were primarily affected by the following:
Higher purchased power and fuel costs of $111$142 million primarily driven by higher power prices and gas pricesvolume experienced in 20172018 relative to 2016, partially offset by lower realized losses on hedging activities ($3 million in 2017, compared to $25 million in 2016).
The following table is a summary of SCE's results of operations for the periods indicated.
Six months ended June 30, 2017 versus June 30, 2016
 Six months ended June 30, 2017Six months ended June 30, 2016
(in millions)Earning
Activities		Cost-
Recovery
Activities		Total
Consolidated		Earning
Activities		Cost-
Recovery
Activities		Total
Consolidated
Operating revenue$3,136
$2,273
5,409
$3,031
$2,173
$5,204
Purchased power and fuel—
1,959
1,959
—
1,858
1,858
Operation and maintenance924
313
1,237
975
315
1,290
Depreciation, decommissioning and amortization1,007
—
1,007
978
—
978
Property and other taxes181
1
182
176
—
176
Total operating expenses2,112
2,273
4,385
2,129
2,173
4,302
Operating income1,024
—
1,024
902
—
902
Interest expense(287)—
(287)(265)—
(265)
Other income and expenses50
—
50
46
—
46
Income before income taxes787
—
787
683
—
683
Income tax expense69
—
69
10
—
10
Net income718
—
718
673
—
673
Preferred and preference stock dividend requirements62
—
62
61
—
61
Net income available for common stock$656
$—
$656
$612
$—
$612
Net income available for common stock



$656




$612
Less:













   Non-core earnings



—




—
Core earnings1




$656




$612
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 $105 million primarily due to the following:
An increase in CPUC revenue of approximately $117 million primarily due to the escalation mechanism as set forth in the 2015 GRC decision and $19 million of higher operating costs subject to balancing account treatment (primarily offset in depreciation expense below). These increases were partially offset by $16 million of lower revenue related to the extension of bonus depreciation and a $17 million revenue reduction for the expected refund to customers of prior overcollections identified in the second quarter of 2017.
An increase in revenue of $42 million related to tax benefits refunded to customers (offset in income taxes below). The increase in revenue resulted from a 2016 revenue refund to customers of $133 million related to 2012 – 2014 incremental income tax deductions, partially offset by higher year-over-year incremental tax benefits recognized in balancing accounts for 2017 activities and a $65 millioncongestion revenue reduction related to the tax abandonment of San Onofre.
right credits.
A decrease in FERC-related revenue of $30 million primarily related to higher operating costs in 2016 including amortization of the regulatory asset associated with the Coolwater-Lugo transmission project (offset in depreciation below) and a $7 million reduction to FERC revenue due to a change in estimate under the FERC formula rate mechanism.
LowerHigher operation and maintenance costs of $51 million primarily due to the impact of SCE's operational and service excellence initiatives, lower storm-related activities partially offset by higher transmission and distribution costs for line clearing.
Higher depreciation, decommissioning, and amortization expense of $29 million primarily related to depreciation on transmission and distribution investments partially offset by amortization of the regulatory asset related to Coolwater-Lugo plant recorded in 2016.
Higher interest expense of $22 million primarily due to increased borrowings and higher interest on balancing accounts in 2017.
Higher income taxes of $59 million primarily due to the following:
Lower income tax benefits of $25 million due to $79 million of flow-through incremental tax benefits for 2012 – 2014 to customers recorded in 2016 partially offset by higher income tax benefits in 2017 of $39 million related to a tax deduction for the abandonment of San Onofre and higher income tax benefits in 2017 of $15 million related to incremental tax benefits for TAMA and the pole loading balancing accounts (offset in revenue above)
Higher net income tax benefits in 2017 for other property-related items, including cost of removal and depreciation deductions.
Higher pre-tax income for the six months ended June 30, 2017, as discussed above.
Cost-Recovery Activities
Cost-recovery activities were primarily affected by the following:
Higher purchased power and fuel costs of $101$12 million primarily driven by higher power and gas prices experienced in 2017 relative to 2016,transmission access charges, partially offset by lower realized lossesspending on hedging activities ($5various public purpose programs.
Higher other income and expenses of $17 million primarily driven by higher net periodic benefit income - non-service cost components in 2017 compared2018 relative to $52 million in 2016).2017. See "Notes to Consolidated Financial Statements—Note 9. Compensation and Benefit Plans" for further information.


Supplemental Operating Revenue Information
SCE's retail billed and unbilled revenue (excluding wholesale sales and balancing account overcollections/undercollections)sales) was $2.6$2.4 billion and $5.0$2.3 billion for the three and six months ended June 30,March 31, 2018 and 2017, respectively, compared to $2.5 billion and $4.9 billion for the respective period in 2016.respectively.
Retail billed and unbilled revenue for the three and six months ended June 30, 2017 and 2016 reflects a rate increase of $102 million and $214 million, respectively, and a sales volume decrease of $32 million and $111 million, respectively. The rate increases were due to implementation of the 2017 ERRA rate increase. The sales volume decreases were primarily due to warmer weather experienced in the first and second quarter of 2016March 31, 2018 was higher compared to the same period in 2017.2017 primarily due to the implementation of the 2018 ERRA rate increase.
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 20162017 Form 10-K).
Income Taxes
SCE's income tax expense increaseddecreased by $89 million and $59$18 million for the three and six months ended June 30, 2017March 31, 2018 compared to the same periods in 2016.2017.
The effective tax rates were 14.4%(1.9)% and (10.1)%3.1% for the three months ended June 30,March 31, 2018 and 2017, and 2016, respectively. The effective tax rates were 8.8% and 1.5% for the six months ended June 30, 2017 and 2016, respectively. SCE's effective tax rate is lower thanbelow the federal statutory rate of 21% and 35% for the three months ended March 31, 2018 and 2017, respectively, 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 expense. The effective tax rate increasedecrease for the three and six months ended June 30, 2017March 31, 2018 was primarily due to the $133 million revenue refund to customers that was recorded in 2016. The increase in the effectivelower pre-tax income at a lower federal tax rate for the six month period was partially offset by higher tax benefits in 2017 primarily related to the ratemaking treatment on the San Onofre tax abandonment recorded in 2017.abandonment.
See "Notes to Consolidated Financial Statements—Note 7.8. Income Taxes" for a reconciliation of the federal statutory rate of 35% to the effective income tax 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.
Strategic Review of Edison Energy Group Competitive Businesses
Sale of SoCore Energy
On February 28, 2018, Edison International is in the process of completingagreed to sell SoCore Energy LLC ("SoCore Energy"), a strategic reviewthen subsidiary of Edison Energy Group's competitive businesses. The competitive businesses are undertaken through Edison Energy Group, and include energy services provided by Edison Energy and distributed solar solutions provided by SoCore Energy. While not all aspectsto a third party, subject to the completion of the strategic review have been finalized,closing conditions, which were subsequently satisfied on April 16, 2018. As a result, Edison International has concluded that it will evaluate potential sale opportunitiesaccounted for the assets and liabilities of SoCore Energy and consolidate management across Edison Energy Group. Edison Energy will continue to pursue the growth of its existing energy services and portfolio advisory service practice for large energy users in the United States.
In connection with the strategic review, Edison International evaluated the recoverability of goodwill and recorded an impairment of SoCore Energy's goodwill totaling $16.5 million ($10 million after-tax) in the second quarter of 2017. In light of the decision to evaluate sale opportunities for SoCore Energy, Edison International considered the application ofas held for sale accounting treatment under the applicable accounting guidance. However, Edison International concluded that, as of June 30, 2017, it was not probable that the investment in SoCore Energy would be sold within one year, therefore the long-lived assetsMarch 31, 2018 and recognized a pre-tax loss of SoCore Energy were not subject$66 million ($48 million after-tax). See "Notes to heldConsolidated Financial Statements—Note 10. Investments" for sale accounting treatment. Under held for sale accounting treatment, the net assets of SoCore Energy ($209 million at June 30, 2017) would be recorded at the lower of book value or as net realizable value, including transaction costs.further information.


Income from Continuing Operations
The following table summarizes the results of Edison International Parent and Other:
 Three months ended June 30,Six months ended June 30, Three months ended March 31,
(in millions) 2017 20162017 2016 2018 2017
Edison Energy Group and subsidiaries1
 $(17) $(17)$(23) $(22) $(52) $(6)
Edison Mission Group and subsidiaries (1) (4)(2) (4)
Corporate expenses and other2
 (11) (15)9
 (24)
Corporate expenses and other subsidiaries (16) 19
Total Edison International Parent and Other $(29) $(36)$(16) $(50) $(68) $13
1  
Includes income of $4 million and less than $1 million and $1 million for the three and six months ended June 30,March 31, 2018 and 2017, respectively, compared to income of $2 million and $4 million for the same periods in 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 $12 million and $9 million for the three months ended June 30, 2017 and 2016, respectively, and $22 million and $17 million for the six months ended June 30, 2017 and 2016, respectively.
The loss from continuing operations of Edison International Parent and Other decreased $7 million and $34 million for the three and six months ended June 30, 2017, respectively, compared to the same periods in 2016 primarily due to:
Higher income tax benefits related to stock option exercises ($2 million and $1was $68 million for the three months ended June 30, 2017 and 2016, respectively, and $37 million and $4March 31, 2018 compared to income of $13 million for the six months ended June 30, 2017 and 2016, respectively) andsame period in 2017. The increase in loss was primarily due to a $48 million after-tax impairment charge that resulted from the sale of SoCore Energy (as discussed above), lower income tax benefits in 2017of $35 million related to settlements withstock option exercises, and the IRS for taxable years 2007 – 2012.
In the second quarterimpact of 2017, Edison Energy Group recorded a $10 million after-tax charge from a goodwill impairmentTax Reform on the SoCore Energy reporting unit and a $13 million after-tax charge during the second quarter of 2016 from a buy-out of an earn-out provision contained in one of the 2015 acquisitions.pre-tax losses.
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 any dividend payments to Edison International and preferred and preference shareholders, and the outcome of tax and regulatory matters.
In the next 12 months, SCE expects to fund its obligations, capital expenditures, and dividendscash requirements through operating cash flows, tax benefits, and capital market financings of debt and preferred equity, as needed. SCE also has availability under its credit facilitiesfacility to fund liquiditycash requirements.
Available Liquidity
At June 30, 2017,March 31, 2018, SCE had approximately $2.48$2.58 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.The credit facility is available for borrowing needs until July 2022. In March 2017,2018, SCE issued $700 million$1.25 billion of first and refunding mortgage bonds. In June 2017, SCE issued $475 million of preference stock.The proceeds from these bonds were used to repay commercial paper borrowings and for general corporate purposes. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements"Agreements."
SCE may finance balancing account undercollections and "—Note 12. Preferredworking capital requirements to support operations and Preference Stockcapital expenditures with commercial paper, its credit facility or other borrowings, subject to availability in the bank and capital markets. As necessary, SCE will utilize its available liquidity, capital market financings of SCE."debt and preferred equity or parent company contributions to SCE equity in order to meet its obligations as they become due, including any potential costs related to the December 2017 Wildfires and Montecito Mudslides (see "Management Overview—Southern California Wildfires" and "—Montecito Mudslides" for further information).


Debt Covenant
TheA 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 June 30, 2017,March 31, 2018, SCE's debt to total capitalization ratio was 0.430.45 to 1.
At June 30, 2017,March 31, 2018, SCE was in compliance with all other financial covenants that affect access to capital.


Capital Investment Plan
Below are updates for large transmission and substation projects since the filing of the 20162017 Form 10-K. SCE is currently evaluating the timing of its major construction projects. For further information on these projects, see "Liquidity and Capital Resources—SCE—Capital Investment Plan—Major Transmission Projects" in the year-end 20162017 MD&A.
Major Transmission Projects
WestAlberhill System
The Alberhill System Project would consist of Devers
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 March 2017,April 2018, the CPUC issued a proposed decision denying ORA's September 2016 ApplicationSCE’s request for Rehearing regardinga certificate of public convenience and necessity based on the West of Devers Upgradepresiding administrative law judge's conclusion that the Alberhill System Project which sought additional project modificationsis not needed. SCE continues to believe the Alberhill System Project is needed to serve forecasted local area demand and environmental mitigation measures. This action confirmed SCE's proposed project, which is on track to be placed in service in 2021.increase operating flexibility. SCE expects to obtain competitive bids for the Project in the second half of 2017, which may result in a change to the expected cost of the Project.
Mesa Substation
In February 2017,has filed comments requesting that the CPUC issued a finaldeny the proposed decision approvingas currently proposed and instead grant the Mesa Substation Project largely consistent with SCE's proposed projectcertificate of public convenience and rejected alternative project configurations proposed by CPUC staff. SCE expects to obtain competitive bids for the Project in the second half of 2017, which may result in a change to the expected cost of the Project. Preconstruction requirements for obtaining other permits and approvals are progressing and construction is planned to begin the third quarter of 2017. SCE expects the Mesa Substation project to go into service in 2022.
Alberhill System
In April 2017, the CPUC issued a final environmental impact reportnecessity for the Alberhill System Project. This report rejected different alternatives recommended by CPUC staff and intervenors, selecting SCE's proposed project as the environmentally superior project. A final CPUC decision to approve the Project for construction is anticipated duringin 2018. As SCE preparesis unable to predict the outcome of this matter.
Approximately 48% of the Alberhill System Project costs spent to date would be subject to recovery through CPUC revenue and 52% through FERC revenue. In October 2017, SCE obtained approval from the FERC for abandoned plant treatment for the commencementAlberhill System Project, which allows SCE to seek recovery of construction, updated annual100% of all prudently-incurred costs after the approval date and 50% of prudently incurred costs prior to the approval date. Excluding land costs, which may be recovered through sale to a third party, SCE has incurred $39 million of capital spending willexpenditures, including overhead costs, as of March 31, 2018, of which $29 million may not be incorporated intorecoverable if the project is cancelled. SCE's total capital expenditures for the Alberhill System Project are estimated to be $486 million, of which approximately $175 million is included in the 2018 – 2020 capital program forecast.period.
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, SCE informed the CPUC in August 2016 that it supports revisions to the proposed Project. TheIn April 2018, the CPUC continues to collect information regardingissued a subsequent environmental impact report which included a new route alternative, different from SCE’s proposed project, as the revised Project in support of a supplemental environmental review. Potential revisions toenvironmentally preferred project and proposed an additional 220-kV underground power line. SCE is assessing the Project have not been reflected in the direct expenditures or scheduled in service date of 2021, however, revisions are likely to increase the total direct expenditures and delay the completionpotential cost impacts of the Project.
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.new route alternative and underground power line. SCE is evaluating the competitive bids received and expects to award the bid for the Projecta CPUC decision in the second half of 2017, which may result in a change to the expected cost of the Project.
Coolwater-Lugo
In the first quarter of 2017, the FERC approved a settlement allowing SCE to recover 100% of the requested $37.1 million of costs incurred by SCE related to the cancelled Coolwater-Lugo transmission project.late 2018 or early 2019.
Dividend Restrictions
On January 31, 2018, SCE paid Edison International a dividend of $212 million that was declared during the fourth quarter of 2017. On February 22, 2018, SCE declared a dividend to Edison International of $212 million that will be paid in the second quarter of 2018.
The CPUC regulates SCE's capital structure which limits the dividends it may pay Edison International. Under CPUC regulations, 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.basis, or otherwise satisfies the CPUC requirements. If the Revised San Onofre Settlement Agreement is approved by the CPUC, SCE may exclude the $448 million after-tax charge


resulting from the implementation of the Revised San Onofre Settlement Agreement from its ratemaking capital structure (see "Notes to Consolidated Financial Statements— Note 12. Commitment and Contingencies" for further information on the Revised San Onofre Settlement Agreement). At June 30, 2017,March 31, 2018, without excluding the $448 million after-tax charge, SCE's 13-month weighted-averageaverage common equity component of total capitalization was 50.2%49.7% and the maximum additional dividend that SCE could pay to Edison International under this limitation was approximately $564$446 million, resulting in a restriction on net assets of approximately $14.6$14.3 billion. If the Revised San Onofre Settlement Agreement had been approved by the CPUC at March 31, 2018, the common equity component of SCE's capital structure would have been 50.0% on a 13-month average basis.
InAs a California corporation, SCE's ability to pay dividends is also governed by its obligations under the second quarter of 2017, SCE declared and paidCalifornia General Corporation Law. California law requires that for a dividend to Edison Internationalbe declared: (a) retained earnings must equal or exceed the proposed dividend, or (b) immediately after the dividend is made, the value of $191 million. Futurethe corporation's assets must exceed the value of its liabilities plus amounts required to be paid in order to liquidate stock senior to the shares receiving the dividend. Additionally, a California corporation may not declare a dividend amountsif it is, or as a result of the dividend would be, likely to be unable to meet its liabilities as they mature.
The timing and timingamount of distributionsfuture dividends are also dependent on a number of other factors including the level ofSCE's requirements to fund other obligations and capital expenditures, and its ability to access the capital markets, and generate operating cash flows and earnings. If SCE incurs significant costs related to the December 2017 Wildfires or the Montecito Mudslides and is unable to recover such costs through insurance or from customers or access capital markets on reasonable terms, SCE may be limited in its ability to pay future dividends to Edison international and its preferred and preference shareholders.


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 June 30, 2017,March 31, 2018, 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 June 30, 2017.
March 31, 2018.
(in millions)  
Collateral posted as of June 30, 20171
 $54
Incremental collateral requirements for power contracts resulting from a potential downgrade of SCE's credit rating to below investment grade 65
Incremental collateral requirements for power contracts resulting from adverse market price movement2
 4
Posted and potential collateral requirements $123
(in millions)  
Collateral posted as of March 31, 20181
 $106
Incremental collateral requirements for power procurement contracts resulting from a potential downgrade of SCE's credit rating to below investment grade 36
Incremental collateral requirements for power procurement contracts resulting from adverse market price movement2
 1
Posted and potential collateral requirements $143
1
1 Net collateral provided to counterparties and other brokers consisted of $105 million in letters of credit and surety bonds and $1 million of cash.
Net collateral provided to counterparties and other brokers consisted of $55 million in letters of credit and surety bonds and $1 million of cash reflected in "Other current liabilities" on the consolidated balance sheets.
2 
Incremental collateral requirements were based on potential changes in SCE's forward positions as of June 30, 2017March 31, 2018 due to adverse market price movements over the remaining lives of the existing power contracts using a 95% confidence level.
Edison International Parent and Other
In the next 12 months, Edison International expects to fund its cash requirements through operating cash flows, tax benefits and bank and capital market financings, as needed. Edison International also has availability under its credit facility. 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 its access to the bank and capital markets. In addition to having sufficient liquidity, Edison International's ability to pay dividends is dependent upon meeting California law requirements for the declaration of dividends. For information on the California law requirements on the declaration of dividends, see "—SCE—Dividend Restrictions." Edison International intends to maintain its target payout ratio of 45% – 55% of SCE's core earnings, subject to the factors identified above. Edison International may also finance working capital


requirements, payment of obligations, and capital investments, including capital contributions to subsidiaries, and any common stock dividends with commercial papershort-term or other borrowings,financings, subject to availability in the bank and capital markets.
As a result of the expected sale of SoCore Energy, Edison Energy Group made several distributions to Edison International Parent including dividend payments of $55 million in the first quarter of 2018 and dividend payments of $46 million in April 2018. For further information, see "Notes to Consolidated Financial Statements—Note 10. Investments."
At June 30, 2017,March 31, 2018, Edison International Parent had $906approximately $58 million of cash and cash equivalents and $1.25 billion available of net borrowing capacity under its $1.25 billion multi-year revolving credit facility. The credit facility is available for borrowing needs until July 2022. In January 2018, Edison International Parent issued a $500 million term loan. In March 2017,2018, Edison International Parent issued $400$550 million of 4.125% senior notes. The proceeds from the March 2018 issuance were used to repay the $500 million term loan discussed above and for general corporate purposes. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."
TheA 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 June 30, 2017,March 31, 2018, Edison International Parent's consolidated debt to total capitalization ratio was 0.460.50 to 1.
At June 30, 2017,March 31, 2018, Edison International Parent was also in compliance with all other financial covenants that affect access to capital.


Historical Cash Flows
Southern California Edison Company
Six months ended June 30,Three months ended March 31,
(in millions)2017 20162018 
20171
Net cash provided by operating activities$1,521
 $1,516
$801
 $936
Net cash provided by financing activities101
 149
Net cash (used in) provided by financing activities(216) 56
Net cash used in investing activities(1,622) (1,671)(1,085) (931)
Net decrease in cash and cash equivalents$—
 $(6)
Net (decrease) increase in cash, cash equivalents and restricted cash$(500) $61
1
Net cash for the three months ended March 31, 2017 was updated to reflect the implementation of the accounting standards updates for cash flows related to cash receipts and restricted cash.
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 sixthree months ended June 30, 2017March 31, 2018 and 2016.2017.
Six months ended June 30, Change in cash flowsThree months ended March 31, Change in cash flows
(in millions)20172016 2017/20162018 
20174
 2018/2017
Net income$718
$673
  $316
 $380
  
Non-cash items1
1,198
980
  465
 728
  
Subtotal$1,916
$1,653
 $263
$781
 $1,108
 $(327)
Changes in cash flow resulting from working capital2
(221)(120) (101)(354) (165) (189)
Derivative assets and liabilities(19)15
 (34)
Regulatory assets and liabilities39
90
 (51)405
 129
 276
Other noncurrent assets and liabilities3
(194)(122) (72)(31) (136) 105
Net cash provided by operating activities$1,521
$1,516
 $5
$801
 $936
 $(135)
1 
Non-cash items include depreciation decommissioning and amortization, allowance for equity during construction, 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.
4
Cash flow for the three months ended March 31, 2017 was updated to reflect the implementation of the accounting standards updates for cash flows related to cash receipts and restricted cash.


Net cash provided by operating activities was impacted by the following:
Net income increaseddecreased in 20172018 by $45$64 million primarily due to higherthe impact of the July 2017 cost of capital decision on GRC revenue, in 2017 due to the escalation mechanism set forth in the 2015 GRC decision and lowerhigher operation and maintenance expenses partially offset by reductions in CPUC revenue related to prior overcollections and higher net financing costs. The refundDuring the first three months of 2018, the amounts billed to customers was recordedbased on the 2017 authorized GRC revenue requirement and therefore, a regulatory liability (see below) has been established to correct cost sharing between customers and shareholders.record any associated adjustments.
Net cash for working capital was $(221)$(354) million and $(120)$(165) million during the sixthree months ended June 30,March 31, 2018 and 2017, and 2016, respectively. The reduction in net cash for working capital for each period was primarily related to the increase in receivables from customers ($147 million and $177 million in 2017 and 2016, respectively), and the timingreductions of disbursementspayables (including payments for payroll-related costs and purchased power). During of $235 million and $230 million during the first six monthsquarters of 2018 and 2017, there was a reductionrespectively, and changes in payablesreceivables from customers of $55$(222) million compared to an increase in payables of $302018 and $133 million for the same period in 2016.2017.
Net cash provided by regulatory assets and liabilities, including changes in over (under) collections of balancing accounts was $39$405 million and $90$129 million during the sixthree months ended June 30,March 31, 2018 and 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. Cash flows were primarily impacted by the following:
2018
Higher cash due to $143 million of overcollections for the public purpose and energy efficiency programs resulting from lower program spending.
BRRBA overcollections increased by $122 million during the first three months of 2018 primarily due to the timing of revenue, partially offset by the refund of 2016 TAMA overcollections.
Higher cash of $42 million due to cash collected for San Onofre under the Prior San Onofre Settlement Agreement. For further information, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Permanent Retirement of San Onofre."
Higher cash reflected in regulatory liabilities of approximately $90 million primarily due to the delay in the 2018 GRC decision. Until a final 2018 GRC decision is issued, SCE recognized revenue for the first quarter of 2018 largely based on the 2017 authorized revenue requirement (see discussion above).
2017
Higher cash due to $72$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 and approximately $34 million from the Department of Energy related to spent nuclear fuel.arbitration. For further information on the MHI claims, and spent nuclear fuel, see "Notes to Consolidated Financial Statements—Note 11.12. Commitments and Contingencies—Contingencies—Permanent Retirement of San Onofre Related Matters" and "—Spent Nuclear Fuel.Onofre."
ERRA undercollections for fuel and purchased power were $228 million in 2017 compared to overcollections of $20 million in 2016. ERRA undercollections increased $248 million during the first six months of 2017 primarily due to seasonal rates and a refund of prior year overcollections.
BRRBA overcollections decreased by $169$66 million during the first sixthree months of 2017 primarily due to the refundsrefund of 2016 overcollections related to TAMA, a revenue refund to customers of $133 million for 2012 – 2014 incremental tax benefits related to repair deductions, and 2015 overcollections resulting from the implementation of the 2015 GRC decision, which was authorized to be refunded to customers over a two yeartwo-year period. The BRRBA tracks the differences between amounts authorized by the CPUC in the GRC proceedings and amounts billed to customers.
An increase inHigher cash of approximately $303$84 million primarily due to recovery of prior FERC undercollections and lower spending for the new system generation program, including lower capacity payments. The new system generation programwhich 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 $145 million for the public purpose and energy efficiency programs due to higher funding and lower spending for these programs during the first six months of 2016.
ERRA overcollections for fuel and purchased power decreased by $187 million during the first six 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.
An increase in cash of approximately $132 million primarily due to a $122 million refund from the Department of Energy's failure to meet its obligation to begin accepting spent nuclear fuel from San Onofre. See "Notes to Consolidated Financial Statements—Note 11. Commitments and Contingencies—Contingencies—Spent Nuclear Fuel" for further discussion.
Cash flows used in other noncurrent assets and liabilities were primarily related to net earnings from nuclear decommissioning trust investments ($2630 million and $9$27 million in 20172018 and 2016,2017, respectively) and SCE's payments of decommissioning costs ($9841 million and $88$45 million in 20172018 and 2016,2017, respectively). See "Nuclear Decommissioning Activities" below for further discussion.


Net Cash (Used in) Provided by Financing Activities
The following table summarizes cash provided by financing activities for the sixthree months ended June 30, 2017March 31, 2018 and 2016.2017. 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."
Six months ended June 30,Three months ended March 31,
(in millions)2017 20162018 2017
Issuances of first and refunding mortgage bonds, net of discount and issuance costs$692
 $—
$1,239
 $692
Issuance of term loan300
 —
—
 300
Remarketing of pollution control bonds, net of issuance costs134
 —
—
 134
Long-term debt matured or repurchased(441) (41)(40) (40)
Issuances of preference stock, net of issuance costs463
 294
Redemptions of preference stock—
 (125)
Short-term debt (repayments), net of borrowings and discount(550) 457
Short-term debt repayments, net of borrowings and discount(1,168) (769)
Payments of common stock dividends to Edison International(382) (340)(212) (191)
Payments of preferred and preference stock dividends(62) (61)(36) (36)
Other(53) (35)1
 (34)
Net cash provided by financing activities$101
 $149
Net cash (used in) provided by financing activities$(216) $56
Net Cash Used in Investing Activities
Cash flows used in investing activities are primarily due to capital expenditures related to transmission and distribution investments ($1.71.1 billion and $1.8 billion$934 million for the sixthree months ended June 30,March 31, 2018 and 2017, and 2016, respectively). In addition, induring the first sixthree months of 2017 and 2016,2018, SCE had a net redemption of nuclear decommissioning trust investments of $73 million and $144 million, respectively.$24 million. See "Nuclear Decommissioning Activities" below for further discussion.
Nuclear Decommissioning Activities
SCE's statement of cash flows includes nuclear decommissioning activities, which are reflected in the following line items:
Six months ended June 30,Three months ended March 31,
(in millions)2017 20162018 2017
Net cash used in operating activities:
Net earnings from nuclear decommissioning trust investments
$26
 $9
$30
 $27
SCE's decommissioning costs(98) (88)(41) (45)
Net cash flow from investing activities:
Proceeds from sale of investments
3,046
 1,391
Net cash provided by investing activities:
Proceeds from sale of investments
931
 1,718
Purchases of investments(2,973) (1,247)(907) (1,719)
Net cash impact$1
 $65
$13
 $(19)
Net cash used in operating activities relate to interest and dividends less administrative expenses, taxes, and SCE's decommissioning costs. See "Notes to Consolidated Financial Statements—Note 9.10. Investments" for further information. Investing activities represent the purchase and sale of investments within the nuclear decommissioning trusts, including the reinvestment of earnings from nuclear decommissioning trust investments. The net cash impact reflects timing of decommissioning payments ($9841 million and $88$45 million in 20172018 and 2016,2017, respectively) and reimbursements to SCE from the nuclear decommissioning trust ($9954 million and $153$26 million in 2018 and 2017, and 2016, respectively). The 2016 net cash impact included reimbursements for 2016 and a portion of 2015, 2014, and 2013 decommissioning costs.


Edison International Parent and Other
The table below sets forth condensed historical cash flow from operations for Edison International Parent and Other.
 Six months ended June 30,
(in millions)2017 2016
Net cash used in operating activities$(88) $(84)
Net cash provided by financing activities122
 50
Net cash used in investing activities(32) (10)
Net increase (decrease) in cash and cash equivalents$2
 $(44)
 Three months ended March 31,
(in millions)2018 
20171
Net cash provided by (used in) operating activities$58
 $(52)
Net cash (used in) provided by financing activities(529) 56
Net cash used in investing activities(12) (10)
Net decrease in cash and cash equivalents$(483) $(6)
1
Net cash for the three months ended March 31, 2017 was updated to reflect the implementation of the accounting standards updates for cash flows related to cash receipts and restricted cash.
Net Cash Provided by Financing(Used in) Operating Activities
Net cash provided by (used in) operating activities was impacted by the following:
$75 million cash inflow from tax refunds in 2018.
$17 million and $52 million cash outflow from operating activities in 2018 and 2017, respectively, primarily due to payments relating to interest and operating costs.
Net Cash (Used in) Provided by Financing Activities
Net cash (used in) provided by financing activities was as follows:
Six months ended June 30,Three months ended March 31,
(in millions)2017 20162018 2017
Dividends paid to Edison International common shareholders$(354) $(313)$(197) $(177)
Dividends received from SCE382
 340
212
 191
Payment for stock-based compensation, net of receipt from stock option exercises(120) (21)(6) (116)
Long-term debt issuance, net of discount and issuance costs397
 397
Issuance of long-term debt, net of discount and issuance costs544
 398
Short-term debt repayments, net of borrowings and discount(192) (351)(1,093) (244)
Other9
 (2)
Net cash provided by financing activities$122
 $50
Other1
11
 4
Net cash (used in) provided by financing activities$(529) $56
1
During the three months ended March 31, 2018, Edison International Parent received dividend payments of $55 million from Edison Energy Group.


Contingencies
SCE has contingencies related to San Onofre Related Matters, Nuclear Insurance, Wildfire Insurance,December 2017 Wildfires, Montecito Mudslides, Environmental Remediation, and Spent Nuclear Fuel, which are discussed in "Notes to Consolidated Financial Statements—Note 11.12. Commitments and Contingencies."
MARKET RISK EXPOSURES
Edison International's and SCE's primary market risks are described in the 20162017 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
SCE records derivative instruments on its consolidated balance sheets as either assets or liabilities measured at fair value unless otherwise exempted from derivative treatment as normal purchases or sales. The fair value of outstanding derivative instruments used to mitigate exposure to commodity price risk was reflected as a net liabilityasset of $999$94 million and $1.1 billion$109 million on SCE's consolidated balance sheets at June 30, 2017March 31, 2018 and December 31, 2016,2017, 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 June 30, 2017,March 31, 2018, the amount of balance sheet exposure as described above broken down by the credit ratings of SCE's counterparties, was as follows:
June 30, 2017March 31, 2018
(in millions)
Exposure2
 Collateral Net Exposure
Exposure2
 Collateral Net Exposure
S&P Credit Rating1
          
A or higher$59
 $—
 $59
A or higher3
$95
 $—
 $95
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 three credit ratings.ratings from S&P or Moody's.
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.
3
Exposure to companies with S&P Credit Rating below A is immaterial.
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 20162017 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."
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.























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FINANCIAL STATEMENTS
Consolidated Statements of Income
Edison International 
Edison International 


  

 

Three months ended June 30, Six months ended June 30,
Three months ended March 31,
(in millions, except per-share amounts, unaudited)
2017 2016 2017
2016
2018 2017
Total operating revenue
$2,965
 $2,777
 $5,428

$5,218

$2,564
 $2,463
Purchased power and fuel
1,175
 1,064
 1,959

1,858

926
 784
Operation and maintenance
707
 721
 1,303

1,350

675
 604
Depreciation, decommissioning and amortization
512
 505
 1,011

982
Depreciation and amortization
462
 499
Property and other taxes 86
 85
 186
 178
 107
 100
Impairment and other charges
16
 21
 21

21
 66
 5
Other operating income
(2) —
Total operating expenses
2,496
 2,396
 4,480

4,389

2,234
 1,992
Operating income
469
 381
 948

829

330
 471
Interest and other income
37
 33
 70

65
Interest expense
(159) (144) (311)
(284)
(170) (152)
Other expenses
(12) (11) (20)
(19)
Other income and expenses
51
 33
Income from continuing operations before income taxes
335
 259
 687

591

211
 352
Income tax expense (benefit)
26
 (51) (14)
(24)
Income tax benefit
(31) (40)
Income from continuing operations
309
 310
 701

615

242
 392
Income from discontinued operations, net of tax —
 (2) —
 (1)
Net income
309
 308
 701

614

242
 392
Preferred and preference stock dividend requirements of SCE
31
 31
 62

61

30
 31
Other noncontrolling interests —
 (3) (1) (8) (6) (1)
Net income attributable to Edison International common shareholders
$278
 $280
 $640

$561

$218
 $362
Amounts attributable to Edison International common shareholders:
    



   
Income from continuing operations, net of tax
$278
 $282
 $640

$562

$218
 $362
Income from discontinued operations, net of tax
—
 (2) —

(1)
Net income attributable to Edison International common shareholders
$278
 $280
 $640

$561

$218
 $362
Basic earnings per common share attributable to Edison International common shareholders:
    



   
Weighted-average shares of common stock outstanding
326
 326
 326

326

326
 326
Continuing operations
$0.85
 $0.87
 $1.96

$1.72

$0.67
 $1.11
Discontinued operations
—
 (0.01) —

—
Total
$0.85
 $0.86
 $1.96

$1.72

$0.67
 $1.11
Diluted earnings per common share attributable to Edison International common shareholders:
    



   
Weighted-average shares of common stock outstanding, including effect of dilutive securities
329
 330
 329

330

327
 329
Continuing operations
$0.85
 $0.86
 $1.95

$1.70

$0.67
 $1.10
Discontinued operations
—
 (0.01) —

—
Total
$0.85
 $0.85
 $1.95

$1.70

$0.67
 $1.10
Dividends declared per common share
$0.5425
 $0.4800
 $1.0850

$0.9600

$0.6050
 $0.5425

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

18






Consolidated Statements of Comprehensive Income Edison International  Edison International 
        
 Three months ended June 30, Six months ended June 30, Three months ended March 31,
(in millions, unaudited) 2017 2016 2017 2016 2018 2017
Net income $309
 $308
 $701
 $614
 $242  $392 
Other comprehensive income, net of tax:        
Other comprehensive income (loss), net of tax:    
Pension and postretirement benefits other than pensions:            
Amortization of net loss included in net income 1
 1
 3
 3
Net gain or loss arising during the period plus amortization included in net income 2  2 
Other —
 —
 2
 —
 (5) 2 
Other comprehensive income, net of tax 1
 1
 5
 3
Other comprehensive (loss) income, net of tax (3) 4 
Comprehensive income 310
 309
 706
 617
 239  396 
Less: Comprehensive income attributable to noncontrolling interests 31
 28
 61
 53
 24  30 
Comprehensive income attributable to Edison International $279
 $281
 $645
 $564
 $215  $366 


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

19





Consolidated Balance SheetsEdison International Edison International 

(in millions, unaudited)June 30,
2017
December 31,
2016		March 31,
2018
December 31,
2017
ASSETS 
  
 
Cash and cash equivalents$98

$96
$105

$1,091
Receivables, less allowances of $58 and $62 for uncollectible accounts at respective dates833

714
Receivables, less allowances of $53 and $54 for uncollectible accounts at respective dates628

717
Accrued unbilled revenue399

370
511

212
Inventory235

239
247

242
Income tax receivables132
 224
Prepaid expenses164
 233
Derivative assets58

73
92

105
Regulatory assets634

350
678

703
Other current assets289

281
165

202
Assets of business held for sale270
 —
Total current assets2,546

2,123
2,992

3,729
Nuclear decommissioning trusts4,381

4,242
4,334

4,440
Other investments87

83
81

73
Total investments4,468

4,325
4,415

4,513
Utility property, plant and equipment, less accumulated depreciation and amortization of $8,914 and $9,000 at respective dates37,267

36,806
Nonutility property, plant and equipment, less accumulated depreciation of $106 and $99 at respective dates245

194
Utility property, plant and equipment, less accumulated depreciation and amortization of $9,254 and $9,355 at respective dates39,152

38,708
Nonutility property, plant and equipment, less accumulated depreciation of $74 and $114 at respective dates83

342
Total property, plant and equipment37,512

37,000
39,235

39,050
Regulatory assets7,850

7,455
4,932

4,914
Other long-term assets377

416
369

374
Total long-term assets8,227

7,871
5,301

5,288








      
      
   
Total assets$52,753

$51,319
$51,943

$52,580


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

20





Consolidated Balance SheetsEdison International Edison International 

 
  
 
(in millions, except share amounts, unaudited)June 30,
2017
December 31,
2016		March 31,
2018
December 31,
2017
LIABILITIES AND EQUITY 
  
 
Short-term debt$566

$1,307
$70

$2,393
Current portion of long-term debt581

981
479

481
Accounts payable1,113

1,342
1,033

1,503
Accrued taxes15

50
92

23
Customer deposits275

269
287

281
Derivative liabilities190

216
Regulatory liabilities903

756
1,347

1,121
Other current liabilities959

991
1,197

1,266
Liabilities of business held for sale142
 —
Total current liabilities4,602

5,912
4,647

7,068
Long-term debt11,662

10,175
13,367

11,642
Deferred income taxes and credits8,709

8,327
4,685

4,567
Derivative liabilities869

941
Pensions and benefits1,377

1,354
909

943
Asset retirement obligations2,618

2,590
2,878

2,908
Regulatory liabilities5,961

5,726
8,683

8,614
Other deferred credits and other long-term liabilities2,143

2,102
2,885

2,953
Total deferred credits and other liabilities21,677

21,040
20,040

19,985
Total liabilities37,941

37,127
38,054

38,695
Commitments and contingencies (Note 11)




Commitments and contingencies (Note 12)




Redeemable noncontrolling interest12
 5
—
 19
Common stock, no par value (800,000,000 shares authorized; 325,811,206 shares issued and outstanding at respective dates)2,515

2,505
2,531

2,526
Accumulated other comprehensive loss(48)
(53)(46)
(43)
Retained earnings9,679

9,544
9,211

9,188
Total Edison International's common shareholders' equity12,146

11,996
11,696

11,671
Noncontrolling interests – preferred and preference stock of SCE
2,654

2,191
2,193

2,193
Total equity14,800

14,187
Other noncontrolling interests—

2
Total Equity13,889

13,866













   
      
Total liabilities and equity$52,753

$51,319
$51,943

$52,580


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

21





Consolidated Statements of Cash FlowsEdison International Edison International 


Six months ended June 30,Three months ended March 31,
(in millions, unaudited)2017
20162018
2017
Cash flows from operating activities: 
  
 
Net income$701

$614
$242

$392
Less: loss from discontinued operations—

(1)
Income from continuing operations701

615
Adjustments to reconcile to net cash provided by operating activities:

 

 
Depreciation, decommissioning and amortization1,048

1,025
Depreciation and amortization479

520
Allowance for equity during construction(41)
(42)(22)
(19)
Impairment and other charges21

—
66

5
Deferred income taxes and investment tax credits(12)
(40)4

(13)
Other11

11
17

9
Nuclear decommissioning trusts
(73) (144)(24) 1
EME insurance proceeds—

1
Changes in operating assets and liabilities:

 

 
Receivables(115)
(33)77

27
Inventory8

(41)(7)
2
Accounts payable34

67
(216)
(226)
Prepaid and accrued taxes(40) 1
Tax receivables and payables162
 34
Other current assets and liabilities(113)
(135)(277)
39
Derivative assets and liabilities(19)
15
Regulatory assets and liabilities39

90
Regulatory assets and liabilities, net405

129
Other noncurrent assets and liabilities(16)
42
(47)
(16)
Net cash provided by operating activities1,433

1,432
859

884
Cash flows from financing activities: 
  
 
Long-term debt issued or remarketed, net of discount and issuance costs of $12 and $3 for respective periods1,523

397
Long-term debt issued or remarketed, net of discount and issuance costs of $17 and $11 for respective periods1,783

1,524
Long-term debt matured(442)
(41)(41)
(40)
Preference stock issued, net463

294
Preference stock redeemed—

(125)
Short-term debt financing, net(742)
106
(2,261)
(1,013)
Settlements of stock-based compensation, net(152)
(61)
Dividends to noncontrolling interests(62)
(61)
Payments for stock-based compensation(10) (313)
Receipt from stock option exercises2
 174
Dividends and distribution to noncontrolling interests(36)
(37)
Dividends paid(354)
(313)(197)
(177)
Other(11) 3
15
 (6)
Net cash provided by financing activities223

199
Net cash (used in) provided by financing activities(745)
112
Cash flows from investing activities: 
  
 
Capital expenditures(1,749)
(1,828)(1,137)
(944)
Proceeds from sale of nuclear decommissioning trust investments3,046

1,391
931

1,718
Purchases of nuclear decommissioning trust investments(2,973)
(1,247)(907)
(1,719)
Other22

3
16

4
Net cash used in investing activities(1,654)
(1,681)(1,097)
(941)
Net increase (decrease) in cash and cash equivalents2

(50)
Cash and cash equivalents at beginning of period96

161
Cash and cash equivalents at end of period$98

$111
Net (decrease) increase in cash, cash equivalents and restricted cash including cash held for sale(983)
55
Less: Net increase in cash held for sale43
 —
Net (decrease) increase in cash, cash equivalents and restricted cash(1,026) 55
Cash, cash equivalents and restricted cash at beginning of period1,132

114
Cash, cash equivalents and restricted cash at end of period$106

$169

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

22





Consolidated Statements of Income 
Southern California Edison Company

 
Southern California Edison Company

 
          
 Three months ended June 30, Six months ended June 30, Three months ended March 31,
(in millions, unaudited) 2017 2016 2017 2016 2018 2017
Operating revenue $2,953
 $2,768
 $5,409
 $5,204
 $2,554
 $2,456
Purchased power and fuel 1,175
 1,064
 1,959
 1,858
 926
 784
Operation and maintenance 666
 687
 1,237
 1,290
 651
 580
Depreciation, decommissioning and amortization 510
 503
 1,007
 978
Depreciation and amortization 459
 497
Property and other taxes 85
 85
 182
 176
 105
 97
Other operating income (1) —
Total operating expenses 2,436

2,339

4,385
 4,302
 2,140

1,958
Operating income 517

429

1,024
 902
 414

498
Interest and other income 36
 33
 69
 65
Interest expense (146) (134) (287) (265) (155) (141)
Other expenses (12) (11) (19) (19)
Other income and expenses 51
 35
Income before income taxes 395

317

787
 683
 310

392
Income tax expense 57
 (32) 69
 10
Income tax (benefit) expense (6) 12
Net income 338

349

718
 673
 316

380
Less: Preferred and preference stock dividend requirements 31
 31
 62
 61
 30
 31
Net income available for common stock $307

$318

$656
 $612
 $286

$349

Consolidated Statements of Comprehensive IncomeSouthern California Edison Company Southern California Edison Company 
          
Three months ended June 30, Six months ended June 30,Three months ended March 31,
(in millions, unaudited)2017 2016 2017 20162018 2017
Net income$338
 $349
 $718
 $673
$316  $380 
Other comprehensive income, net of tax:       
Other comprehensive income (loss), net of tax:   
Pension and postretirement benefits other than pensions:          
Amortization of net loss included in net income1
 1
 2
 2
Net loss arising during the period plus amortization included in net income2  1 
Other(1) —
 —
 —
(5) 1 
Other comprehensive income, net of tax—
 1
 2
 2
Other comprehensive (loss) income, net of tax(3) 2 
Comprehensive income$338
 $350
 $720
 $675
$313  $382 


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

23





Consolidated Balance SheetsSouthern California Edison Company
(in millions, unaudited)June 30,
2017		 December 31, 2016March 31,
2018		 December 31, 2017
ASSETS      
Cash and cash equivalents$39
 $39
$15
 $515
Receivables, less allowances of $57 and $61 for uncollectible accounts at respective dates816
 699
Receivables, less allowances of $53 for uncollectible accounts at both dates617
 693
Accrued unbilled revenue399
 369
510
 212
Inventory232
 239
246
 242
Income tax receivables218
 229
Prepaid expenses164
 228
Derivative assets58
 73
92
 105
Regulatory assets634
 350
678
 703
Other current assets275
 262
162
 160
Total current assets2,453
 2,031
2,702
 3,087
Nuclear decommissioning trusts4,381
 4,242
4,334
 4,440
Other investments63
 50
61
 52
Total investments4,444
 4,292
4,395
 4,492
Utility property, plant and equipment, less accumulated depreciation and amortization of $8,914 and $9,000 at respective dates37,267
 36,806
Nonutility property, plant and equipment, less accumulated depreciation of $92 and $89 at respective dates74
 75
Utility property, plant and equipment, less accumulated depreciation and amortization of $9,254 and $9,355 at respective dates39,152
 38,708
Nonutility property, plant and equipment, less accumulated depreciation of $71 and $97 at respective dates76
 77
Total property, plant and equipment37,341
 36,881
39,228
 38,785
Regulatory assets7,850
 7,455
4,932
 4,914
Other long-term assets226
 232
243
 237
Total long-term assets8,076
 7,687
5,175
 5,151
      
      
      
      
      
      
      
      
      
Total assets$52,314
 $50,891
$51,500
 $51,515

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

24





Consolidated Balance SheetsSouthern California Edison Company
(in millions, except share amounts, unaudited)June 30,
2017		 December 31, 2016March 31,
2018		 December 31, 2017
LIABILITIES AND EQUITY      
Short-term debt$219
 $769
$70
 $1,238
Current portion of long-term debt179
 579
479
 479
Accounts payable1,103
 1,344
1,036
 1,519
Accrued taxes17
 45
94
 24
Accrued interest206
 174
Customer deposits275
 269
287
 281
Derivative liabilities190
 216
Regulatory liabilities903
 756
1,347
 1,121
Other current liabilities500
 555
1,181
 1,225
Total current liabilities3,592
 4,707
4,494
 5,887
Long-term debt10,845
 9,754
11,629
 10,428
Deferred income taxes and credits10,482
 9,886
6,005
 5,890
Derivative liabilities868
 941
Pensions and benefits943
 896
453
 483
Asset retirement obligations2,611
 2,586
2,878
 2,892
Regulatory liabilities5,961
 5,726
8,683
 8,614
Other deferred credits and other long-term liabilities1,817
 1,912
2,610
 2,649
Total deferred credits and other liabilities22,682
 21,947
20,629
 20,528
Total liabilities37,119
 36,408
36,752
 36,843
Commitments and contingencies (Note 11)

 

Commitments and contingencies (Note 12)

 

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 capital651
 657
673
 671
Accumulated other comprehensive loss(18) (20)(22) (19)
Retained earnings9,674
 9,433
9,684
 9,607
Total common shareholder's equity12,475
 12,238
12,503
 12,427
Preferred and preference stock2,720
 2,245
2,245
 2,245
Total equity15,195
 14,483
14,748
 14,672
   
   
   
   
Total liabilities and equity$52,314
 $50,891
$51,500
 $51,515


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

25





Consolidated Statements of Cash FlowsSouthern California Edison Company
Six months ended June 30,Three months ended March 31,
(in millions, unaudited)2017 20162018 2017
Cash flows from operating activities:      
Net income$718
 $673
$316
 $380
Adjustments to reconcile to net cash provided by operating activities:      
Depreciation, decommissioning and amortization1,042
 1,017
Depreciation and amortization475
 517
Allowance for equity during construction(41) (42)(22) (19)
Deferred income taxes and investment tax credits193
 —
(3) 223
Other4
 5
15
 7
Nuclear decommissioning trusts(73) (144)(24) 1
Changes in operating assets and liabilities:      
Receivables(118) (59)70
 29
Inventory8
 2
(7) 5
Accounts payable22
 73
(230) (226)
Prepaid and accrued taxes(37) (13)
Tax receivables and payables81
 (33)
Other current assets and liabilities(96) (123)(268) 60
Derivative assets and liabilities(19) 15
Regulatory assets and liabilities39
 90
Regulatory assets and liabilities, net405
 129
Other noncurrent assets and liabilities(121) 22
(7) (137)
Net cash provided by operating activities1,521
 1,516
801
 936
Cash flows from financing activities:      
Long-term debt issued or remarketed, net of discount and issuance costs of $9 for the six months ended June 30, 20171,126
 —
Long-term debt matured(441) (41)
Preference stock issued, net463
 294
Preference stock redeemed—
 (125)
Long-term debt issued or remarketed, net of discount and issuance costs of $11 and $9 for the respective periods1,239
 1,126
Long-term debt matured or repurchased(40) (40)
Short-term debt financing, net(550) 457
(1,168) (769)
Payments for stock-based compensation(3) (56)
Receipt from stock option exercises1
 33
Dividends paid(444) (401)(248) (227)
Other(53) (35)3
 (11)
Net cash provided by financing activities101
 149
Net cash (used in) provided by financing activities(216) 56
Cash flows from investing activities:      
Capital expenditures(1,712) (1,822)(1,124) (934)
Proceeds from sale of nuclear decommissioning trust investments3,046
 1,391
931
 1,718
Purchases of nuclear decommissioning trust investments(2,973) (1,247)(907) (1,719)
Other17
 7
15
 4
Net cash used in investing activities(1,622)
(1,671)(1,085)
(931)
Net decrease in cash and cash equivalents—
 (6)
Cash and cash equivalents, beginning of period39
 26
Cash and cash equivalents, end of period$39
 $20
Net (decrease) increase in cash, cash equivalents and restricted cash(500) 61
Cash, cash equivalents and restricted cash at beginning of period515
 40
Cash, cash equivalents and restricted cash at end of period$15
 $101

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

26





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") and Edison Energy Group, Inc. ("Edison Energy Group"). 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.,is a holding company for subsidiaries, including Edison Energy, LLC ("Edison Energy"), engaged in pursuing competitive business opportunities across energy services and distributed solarmanaged portfolio solutions for commercial and industrial customers. Such business activities are currently not material to report as a separate business segment. These combined notes to the consolidated financial statements apply to both Edison International and SCE unless otherwise described. Edison International's consolidated financial statements include the accounts of Edison International, SCE, and other wholly owned and controlled subsidiaries. References to Edison International refer to the consolidated group of Edison International and its subsidiaries. References to Edison International Parent and Other refer to Edison International Parent and its competitive subsidiaries. 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 year-ended December 31, 20162017 (the "2016"2017 Form 10-K"). This quarterly report should be read in conjunction with the financial statements and notes included in the 20162017 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 ("GAAP") for the periods covered by this quarterly report on Form 10-Q. The results of operations for the three- and six-month periodsthree-month period ended June 30, 2017March 31, 2018 are not necessarily indicative of the operating results for the full year.
The December 31, 20162017 financial statement data was derived from audited financial statements, but does not include all disclosures required by GAAP.
During the fourth quarter of 2016,Effective January 1, 2018, Edison International and SCE early adopted anseveral accounting standard for share-based payments using the modified retrospective approach, effective January 1, 2016.standards retrospectively. Prior year financial statements have been updated to reflect the modified retrospective application of this accounting standard.these standards as applicable. For further information, see "New Accounting Guidance" below.
Sale of SoCore Energy
On February 28, 2018, Edison International agreed to sell SoCore Energy LLC ("SoCore Energy"), a then subsidiary of Edison Energy Group, to a third party, subject to the completion of closing conditions, which were satisfied on April 16, 2018. As a result, Edison International accounted for the assets and liabilities of SoCore Energy as held for sale as of March 31, 2018 on the consolidated Edison International balance sheet. See Note 1 and Note 18 of "Notes to Consolidated Financial Statements" included in the 2016 Form 10-K and Note 2 and Note 7 of this Form 10-Q.10 for further information.
Cash, Cash Equivalents and Restricted Cash
Cash equivalents includes 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) June 30,
2017		 December 31, 2016 June 30,
2017		 December 31, 2016 March 31,
2018		 December 31, 2017 March 31,
2018		 December 31, 2017
Money market funds $41
 $41
 $18
 $18
 $43
 $1,024
 $—
 $483


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 Edison International SCE
(in millions) June 30,
2017		 December 31, 2016 June 30,
2017		 December 31, 2016 March 31,
2018		 December 31, 2017 March 31,
2018		 December 31, 2017
Book balances reclassified to accounts payable $54
 $138
 $54
 $136
 $40
 $64
 $40
 $63
Edison International's restricted cash at March 31, 2018 and December 31, 2017 was $27 million and $41 million, respectively. Restricted cash primarily relates to funds held by SoCore Energy and its consolidated affiliates pursuant to project financing or purchase agreements, most of which are expected to lapse during 2018. As discussed above, Edison International accounted for the assets and liabilities of SoCore Energy as held for sale as of March 31, 2018 (see Note 10 for further information).
The following table sets forth the cash, cash equivalents and restricted cash included in the consolidated statements of cash flows:
(in millions) March 31, 2018 December 31, 2017
Edison International:    
 Cash and cash equivalents $105
 $1,091
 Short-term restricted cash 1
 1
 40
 Long-term restricted cash 2
 —
 1
Total cash, cash equivalents, and restricted cash3
 $106
 $1,132
SCE:    
 Cash and cash equivalents $15
 $515
Total cash, cash equivalents, and restricted cash $15
 $515
1
Reflected in "Other current assets" on Edison International's consolidated balance sheets.
2
Reflected in "Other long-term assets" on Edison International's consolidated balance sheets.
3
Excludes SoCore Energy's cash and cash equivalents of $18 million and short-term and long-term restricted cash of $26 million at March 31, 2018, which were reflected in "Assets of business held for sale" on Edison International's consolidated balance sheets (see Note 10 for additional information).
Revenue Recognition
During the first three months of 2018, pending the outcome of the 2018 GRC decision, SCE recognized GRC-related revenue based on the 2017 authorized revenue requirement, adjusted for the July 2017 cost of capital decision and the impact of Tax Reform. The amounts billed to customers for the first three months of 2018 was also based on the 2017 authorized revenue requirement and a regulatory liability has been established to record any associated adjustments. The CPUC has authorized the establishment of a GRC memorandum account, which will make the 2018 revenue requirement ultimately adopted by the CPUC effective as of January 1, 2018. SCE cannot predict the revenue requirement the CPUC will authorize or provide assurance on the timing of a final decision. In December 2017, the FERC issued an order setting the effective date of SCE's new FERC formula rate as January 1, 2018, subject to settlement procedures and refund. Pending resolution of the FERC formula rate proceeding, SCE is recognizing revenue based on the FERC formula rate adjusted for the impact of Tax Reform and other adjustments.



Goodwill
Edison International assesses goodwill through annual goodwill impairment tests, at the reporting unit level as of October 1st of each year. Edison International updates 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. In connection with a strategic review of the Edison Energy Group's competitive businesses, Edison International evaluated the recoverability of goodwill and recorded an impairment of SoCore Energy's goodwill totaling $16.5 million ($10 million after-tax) in the second quarter of 2017. 
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 June 30, Six months ended June 30, Three months ended March 31,
(in millions, except per-share amounts) 2017 2016 2017 2016 2018 2017
Basic earnings per share – continuing operations:            
Income from continuing operations attributable to common shareholders $278
 $282
 $640
 $562
 $218
 $362
Participating securities dividends —
 —
 —
 —
 —
 —
Income from continuing operations available to common shareholders $278
 $282
 $640
 $562
 $218
 $362
Weighted average common shares outstanding 326
 326
 326
 326
 326
 326
Basic earnings per share – continuing operations $0.85
 $0.87
 $1.96
 $1.72
 $0.67
 $1.11
Diluted earnings per share – continuing operations:            
Income from continuing operations attributable to common shareholders $278
 $282
 $640
 $562
 $218
 $362
Participating securities dividends —
 —
 —
 —
 —
 —
Income from continuing operations available to common shareholders $278
 $282
 $640
 $562
 $218
 $362
Income impact of assumed conversions —
 —
 —
 —
 —
 —
Income from continuing operations available to common shareholders and assumed conversions $278
 $282
 $640
 $562
 $218
 $362
Weighted average common shares outstanding 326
 326
 326
 326
 326
 326
Incremental shares from assumed conversions 3
 4
 3
 4
 1
 3
Adjusted weighted average shares – diluted 329
 330
 329
 330
 327
 329
Diluted earnings per share – continuing operations $0.85
 $0.86
 $1.95
 $1.70
 $0.67
 $1.10
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 1,327,3106,222,294 and 42,8901,355,930 shares of common stock for the three months ended June 30,March 31, 2018 and 2017, and 2016, respectively, and 1,370,200 and 47,861 shares for the six months ended June 30, 2017 and 2016, respectively, were outstanding, but were not included in the computation of diluted earnings per share because the effect would have been antidilutive.
New Accounting Guidance
Accounting Guidance Not Yet Adopted
In May 2014, the Financial Accounting Standards Board ("FASB") issued an accounting standards update on revenue recognition and further amended the standard in 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. This standard will be adopted on January 1, 2018. Edison International and SCE have completed the preliminary phases of their assessment of the impact on the consolidated financial statements and do not believe the adoption of this standard will have a material impact on the financial position or results of operations. For the six months ended June 30, 2017, approximately 95% 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. This standard will require enhanced disclosures, including a disaggregation of revenue from contracts with customers. Edison International and SCE plan to disaggregate customer contract revenue between revenue from earnings activities and revenue from cost-recovery activities. Some revenue arrangements, such as alternative revenue programs which include balancing account overcollections and undercollections, are excluded from the scope of the new standard and, therefore, will be accounted for and presented separately from revenuesrevenue recognized underfrom contracts with customers in the new standard on thedisclosures. Edison International and SCE consolidated financial statements. Edison International and SCE anticipate adopting theadopted this standard effective January 1, 2018, using the modified retrospective application which meansmethod for contracts that were not completed as of the adoption date. Edison International and SCE would recognize anyrecognized a cumulative effect of initially applying the revenue standard as an adjustment to increase the opening balance of retained earnings by approximately $5 million ($7 million pre-tax) on January 1, 2018. This adjustment is related to variable consideration recognized at Edison Energy which is not subject to potential significant reversal and has no further performance obligations. See Note 7 for further details.
In January 2016, the FASB issued an accounting standards update that amends the guidance on the classification and measurement of financial instruments. The amendments requireinstruments, and further amended the guidance in 2018. Under the new guidance, equity investments (excluding those accounted for under the equity method or those that result in consolidation) are required to be measured at fair value, with changes in fair value recognized in net income. ItThe new guidance also amends certain disclosure requirements associated with the fair value of financial instruments. In addition, the new guidanceinstruments and 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. assets.


Edison International and SCE will adoptadopted this guidance effective January 1, 2018. Edison International recognized a cumulative effect adjustment to increase the opening balance of retained earnings and accumulated other comprehensive loss by $5 million ($8 million pre-tax) on January 1, 2018. See Note 2 for further details.
The FASB issued two accounting standards updates related to the statement of cash flows. One standard update clarifies the presentation and classification of certain cash receipts and payments in the statement of cash flows and other requires restricted cash to be presented with cash and cash equivalents in the statement of cash flows. Edison International and SCE adopted these standards effective January 1, 2018, using the retrospective approach. The adoption of these standards did not have a material impact on Edison International's and SCE's consolidated statement of cash flows.
In March 2017, the FASB issued an accounting standards update on the presentation of the components of net periodic benefit cost for an entity's defined benefit pension and other postretirement plans. Edison International and SCE adopted this guidance effective January 1, 2018. The adoption of this standard isdid not expected to have a material impact on Edison International's and SCE's consolidated financial statements.statements, but did result in the separate presentation of service costs as an operating expense and non-service costs within other income and expenses and limits the capitalization of benefit costs to the service cost component. The standard was adopted retrospectively with respect to the income statement presentation requirement and prospectively for the capitalization requirement. During the three months ended March 31, 2017, non-service costs (benefits) totaled $(8) million and $(9) million for Edison International and SCE, respectively, which were reclassified from "Operation and maintenance" to "Other income and expenses." See Note 9 and Note 14 for further details.
Accounting Guidance Not Yet Adopted
In February 2016, the FASB issued an accounting standards update related to lease accounting including enhanced disclosures.and further amended the standard in 2018. The updated standard is effective January 1, 2019. 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 need to recognize leases on the balance sheet as a right-of-use asset and a related lease 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,adjustments, such as for initial direct costs. OperatingEdison International's operating leases will result in straight-line expense while finance leases will result in a higher initial expense pattern due to the interest component. SCE, as a regulated entity, is permitted to continue to have straight-linerecognize expense for finance leases, assumingusing the timing that conforms to the regulatory rate recovery is based upon current payments.treatment. Lessees can elect to exclude from the balance sheet short-term contracts of one year or less. This guidance is effective January 1, 2019. Early adoption isstandard requires retrospective application to previously issued financial statements for 2018 and 2017. Although permitted, but Edison International and SCE dohas elected not expectto adopt this standard prior to January 1, 2019. The standard will provide entities with an optional transition method to apply the new requirements in the period of adoption without retrospective application to previous periods. Edison International and SCE are evaluating whether to elect early adoption.this optional transition method. The adoption of this standard will increase right-of-use assets and lease liabilities in Edison International's and SCE's consolidated balance sheets. Edison International and SCE are currently implementing a new lease accounting system and are evaluating the impact this standard will have on the results of operations and statements of cash flowsconsolidated balance sheets and lease disclosures.
The FASB also issued an accounting standards update related to the impairment of financial instruments, effective January 1, 2020. The new guidance provides an impairment model, known as the current expected credit loss model, which is based on expected credit losses rather than incurred losses. Edison International and SCE are currently evaluating the impact of this new guidance.
The FASB also issued accounting standards updates related to the presentation and classification of certain cash receipts and payments in the statement of cash flows, including a change to the amount of cash, cash equivalents, and restricted cash explained when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This standard is effective January 1, 2018 and requires retrospective application. Edison International and SCE are currently evaluating the impact of this new guidance.
In January 2017, the FASB issued an accounting standards update to simplify the accounting for goodwill 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 guidance to the goodwill impairment test beginning in 2020.
In March 2017,February 2018, the FASB issued an accounting standards update which amends the current requirements related to stranded income tax effects due to the presentation2017 Tax Reform enacted on December 22, 2017. As a result of the componentslower federal corporate tax rate, deferred taxes were re-measured with the impact included in operating income in December 2017. The tax effects of net periodic benefit costitems within AOCI were appropriately left unadjusted (i.e. stranded tax effects) and, therefore, are not stated at the revised tax rate. The new accounting guidance provides entities with an election to reclassify from AOCI to retained earnings for an entity's defined benefit pension and other postretirement plans.stranded income tax effects resulting from the 2017 Tax Reform. The adoption of this standard is not expected to have a material impact on Edison International's and SCE's financial position or results of operations, but will resultnew guidance should be applied either in the separate presentationperiod of service costs as an operating expense and non-service costs within other income and expense.adoption or retrospectively to each period(s) in which the effect of the rate change is recognized. The new standards updateguidance is effective on January 1, 2018. It is required to be applied on a retrospective basis for2019 with early adoption permitted. Edison International and SCE are in the presentationprocess of evaluating the service cost component and 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.new guidance.


Note 2.    Consolidated Statements of Changes in Equity
The following table provides Edison International's changes in equity for the sixthree months ended June 30, 2017:March 31, 2018:
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 Other
Preferred
and
Preference
Stock
 
Total
Equity
Balance at December 31, 2016$2,505
 $(53) $9,544
 $11,996
 $2,191
 $14,187
Balance at December 31, 2017$2,526
 $(43) $9,188
 $11,671
 $2
$2,193
 $13,866
Net income—
 —
 640
 640
 62
 702
—
 —
 218
 218
 (3)30
 245
Other comprehensive income—
 5
 —
 5
 —
 5
—
 2
 —
 2
 —
—
 2
Common stock dividends declared ($1.0850 per share)—
 —
 (354) (354) —
 (354)
Cumulative effect of accounting changes1
—
 (5) 10
 5
 —
—
 5
Common stock dividends declared ($0.6050 per share)—
 —
 (197) (197) —
—
 (197)
Dividends to noncontrolling interests—
 —
 —
 —
 (62) (62)—
 —
 —
 —
 —
(30) (30)
Stock-based compensation—
 —
 (151) (151) —
 (151)—
 —
 (8) (8) —
—
 (8)
Non-cash stock-based compensation10
 —
 —
 10
 —
 10
Issuance of preference stock—
 —
 —
 —
 463
 463
Balance at June 30, 2017$2,515
 $(48) $9,679
 $12,146
 $2,654
 $14,800
Noncash stock-based compensation5
 —
 —
 5
 —
—
 5
Other—
 —
 —
 —
 1
—
 1
Balance at March 31, 2018$2,531
 $(46) $9,211
 $11,696
 $—
$2,193
 $13,889
1
Edison International recognized cumulative effect adjustments to the opening balance of retained earnings and accumulated other comprehensive loss on January 1, 2018 related to the adoption of the accounting standards updates on revenue recognition and measurement of financial instruments, effective January 1, 2018.
The following table provides Edison International's changes in equity for the sixthree months ended June 30, 2016:March 31, 2017:
 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
Balance at December 31, 2015$2,484
 $(56) $8,940
 $11,368
 $2,020
 $13,388
Net income—
 —
 561
1 
561
 61
 622
Other comprehensive income—
 3
 —
 3
 —
 3
Common stock dividends declared ($0.9600 per share)—
 —
 (313) (313) —
 (313)
Dividends to noncontrolling interests—
 —
 —
 —
 (61) (61)
Stock-based compensation—
 —
 (18)
1 
(18) —
 (18)
Non-cash stock-based compensation12
 —
 —
 12
 —
 12
Issuance of preference stock—
 —
 —
 —
 294
 294
Redemption of preference stock—
 —
 (2) (2) (123) (125)
Balance at June 30, 2016$2,496
 $(53) $9,168
 $11,611
 $2,191
 $13,802
 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
Balance at December 31, 2016$2,505
 $(53) $9,544
 $11,996
 $2,191
 $14,187
Net income—
 —
 362
 362
 31
 393
Other comprehensive income—
 4
 —
 4
 —
 4
Common stock dividends declared ($0.5425 per share)—
 —
 (177) (177) —
 (177)
Dividends to noncontrolling interests—
 —
 —
 —
 (31) (31)
Stock-based compensation—
 —
 (139) (139) —
 (139)
Noncash stock-based compensation5
 —
 —
 5
 —
 5
Balance at March 31, 2017$2,510
 $(49) $9,590
 $12,051
 $2,191
 $14,242
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 $546 million and $(60) million, respectively, for the six months ended June 30, 2016.


The following table provides SCE's changes in equity for the sixthree months ended June 30, 2017:March 31, 2018:
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, 2016$2,168
 $657
 $(20) $9,433
 $2,245
 $14,483
Balance at December 31, 2017$2,168
 $671
 $(19) $9,607
 $2,245
 $14,672
Net income—
 —
 —
 718
 —
 718
—
 —
 —
 316
 —
 316
Other comprehensive income—
 —
 2
 —
 —
 2
—
 —
 2
 —
 —
 2
Cumulative effect of accounting change1
—
 —
 (5) 5
 —
 —
Dividends declared on common stock—
 —
 —
 (382) —
 (382)—
 —
 —
 (212) —
 (212)
Dividends declared on preferred and preference stock—
 —
 —
 (62) —
 (62)—
 —
 —
 (30) —
��(30)
Stock-based compensation—
 —
 —
 (33) —
 (33)—
 —
 —
 (2) —
 (2)
Non-cash stock-based compensation—
 6
 —
 —
 —
 6
Issuance of preference stock—
 (12) —
 —
 475
 463
Balance at June 30, 2017$2,168
 $651
 $(18) $9,674
 $2,720
 $15,195
Noncash stock-based compensation—
 2
 —
 —
 —
 2
Balance at March 31, 2018$2,168
 $673
 $(22) $9,684
 $2,245
 $14,748
1
SCE recognized a cumulative effect adjustment to the opening balance of retained earnings and accumulated other comprehensive loss on January 1, 2018 related to the adoption of the accounting standards update on measurement of financial instruments, effective January 1, 2018.
The following table provides SCE's changes in equity for the sixthree months ended June 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—
 —
 —
 673
1 
—
 673
—
 —
 —
 380
 —
 380
Other comprehensive income—
 —
 2
 —
 —
 2
—
 —
 2
 —
 —
 2
Dividends declared on common stock—
 —
 —
 (340) —
 (340)—
 —
 —
 (191) —
 (191)
Dividends declared on preferred and preference stock—
 —
 —
 (61) —
 (61)—
 —
 —
 (31) —
 (31)
Stock-based compensation—
 —
 —
 (34)
1 
—
 (34)—
 —
 —
 (23) —
 (23)
Non-cash stock-based compensation—
 6
 —
 —
 —
 6
Issuance of preference stock—
 (6) —
 —
 300
 294
Redemption of preference stock—
 2
 —
 (2) (125) (125)—
 3
 —
 —
 —
 3
Balance at June 30, 2016$2,168
 $654
 $(20) $9,040
 $2,245
 $14,087
Balance at March 31, 2017$2,168
 $660
 $(18) $9,568
 $2,245
 $14,623
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 $662 million and $(40) million, respectively, for the six months ended June 30, 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 entities that own 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 site and equipment selection, construction, operation and maintenance, fuel procurement, dispatch, and compliance with regulatory and contractual requirements.


Variable Interest in VIEs that are not Consolidated
Power Purchase Agreements
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 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.PPAs. Under these contracts, SCE recovers the costs incurred through demonstration of compliance with its California 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 20162017 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 4,9003,454 MW and 4,3494,928 MW at June 30,March 31, 2018 and 2017, and 2016, respectively, and the amounts that SCE paid to these projects were $106$143 million and $92$140 million for the three months ended June 30,March 31, 2018 and 2017, and 2016, respectively, and $246 million and $219 million for six months ended June 30, 2017 and 2016, 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, Trust V, and Trust VI were formed in 2012, 2013, 2014, 2015, 2016, and 2017, respectively, for the exclusive purpose of issuing the 5.625%, 5.10%, 5.75%, 5.375%, 5.45%, and 5.00% trust preference securities, respectively ("trust securities"). The trusts are VIEs. SCE has concluded that it is not the primary beneficiary of these VIEs as it does not have the obligation to absorb the expected losses or the right to receive the expected residual returns of the trusts. SCE Trust I, Trust II, Trust III, Trust IV, Trust V and Trust VI issued to the public trust securities in the face amounts of $475 million, $400 million, $275 million, $325 million, $300 million, and $475 million (cumulative, liquidation amounts of $25 per share), respectively, and $10,000 of common stock each to SCE. The trusts invested the proceeds of these trust securities in Series F, Series G, Series H, Series J, Series K, and Series L Preference Stock issued by SCE in the principal amounts of $475 million, $400 million, $275 million, $325 million, $300 million, and $475 million (cumulative, $2,500 per share liquidation values), respectively, which have substantially the same payment terms as the respective trust securities.
The Series F, Series G, Series H, Series J, Series K, and Series L Preference Stock and the corresponding trust securities do not have a maturity date. Upon any redemption of any shares of the Series F, Series G, Series H, Series J, Series K, or Series L Preference Stock, a corresponding dollar amount of trust securities will be redeemed by the applicable trust. The applicable trust will make distributions at the same rate and on the same dates on the applicable series of trust securities if and when the SCE board of directors declares and makes dividend payments on the related Preference Stock. The applicable trust will use any dividends it receives on the related Preference Stock to make its corresponding distributions on the applicable series of trust securities. If SCE does not make a dividend payment to any of these trusts, SCE would be prohibited from paying dividends on its common stock. SCE has fully and unconditionally guaranteed the payment of the trust securities and trust distributions, if and when SCE pays dividends on the related Preference Stock.
TheSCE formed Trust I, a VIE, in 2012 for the exclusive purpose of issuing 5.625% trust preference securities. SCE Trust II, Trust III, Trust IV, and Trust V balance sheets as of June 30, 2017 and December 31, 2016, consisted of investmentsI issued trust securities in the face amounts of $475 million $400 million, $275 million, $325 million, and $300 million into the Series F, Series G, Series H, Series J, and Series K Preference Stock, respectively, $475 million, $400 million, $275 million, $325 million, and $300 million of trust securities, respectively, and $10,000 each of common stock. The Trust VI balance sheet as of June 30, 2017 consisted of investments of $475 million in the Series L Preference Stock, $475 million of trust securities,public and $10,000 of common stock.
stock to SCE. SCE Trust I invested the proceeds of these trust securities in Series F Preference Stock issued by SCE in the principal amount of $475 million. In July 2017, all of the outstanding Series F Preference Stock was redeemed, and accordingly, SCE Trust I redeemed $475 million of trust securities from the public and $10,000 of common stock from SCE. See Note 12 for additional information.As a result in September 2017, SCE Trust I was terminated.
The Trust II, Trust III, Trust IV, Trust V and Trust VI balance sheets as of March 31, 2018 and December 31, 2017, consisted of investments of $400 million, $275 million, $325 million, $300 million, and $475 million in the Series G, Series H, Series J, Series K and Series L Preference Stock, respectively, $400 million, $275 million, $325 million, $300 million, and $475 million of trust securities, respectively, and $10,000 each of common stock.


The following table provides a summary of the trusts' income statements:
  Three months ended June 30,
(in millions) Trust I Trust II Trust III Trust IV Trust V Trust VI
2017            
Dividend income $6
 $5
 $4
 $5
 $4
 $—
Dividend distributions 6
 5
 4
 5
 4
 —
2016            
Dividend income $6

$5

$4
 $5
 $4
 *
Dividend distributions 6

5

4
 5
 4
 *
Six months ended June 30, Three months ended March 31,
(in millions) Trust I Trust II Trust III Trust IV Trust V Trust VI Trust I Trust II Trust III Trust IV Trust V Trust VI
2018            
Dividend income *
 $5
 $4
 $4
 $4
 $6
Dividend distributions *
 5
 4
 4
 4
 6
2017                        
Dividend income $13
 $10
 $8
 $9
 $8
 $—
 $7

$5

$4
 $4
 $4
 *
Dividend distributions 13
 10
 8
 9
 8
 —
 7

5

4
 4
 4
 *
2016            
Dividend income $13
 $10
 $8
 $9
 $5
 *
Dividend distributions 13
 10
 8
 9
 5
 *
* Not applicable.applicable
Note 4.    Fair Value Measurements
Recurring Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (referred to as an "exit price"). Fair value of an asset or liability considers assumptions that market participants would use in pricing the asset or liability, including assumptions about nonperformance risk. As of June 30, 2017March 31, 2018 and December 31, 2016,2017, 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"). 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 derivative instruments.


SCE
The following table sets forth assets and liabilities of SCE that were accounted for at fair value by level within the fair value hierarchy:
June 30, 2017March 31, 2018
(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$—
 $23
 $36
 $—
 $59
$—
 $15
 $82
 $(2) $95
Other29
 —
 —
 —
 29
12
 21
 —
 —
 33
Nuclear decommissioning trusts:                  
Stocks2
1,611
 —
 —
 —
 1,611
1,520
 —
 —
 —
 1,520
Fixed Income3
1,049
 1,559
 —
 —
 2,608
1,076
 1,639
 —
 —
 2,715
Short-term investments, primarily cash equivalents111
 119
 —
 —
 230
59
 108
 —
 —
 167
Subtotal of nuclear decommissioning trusts4
2,771
 1,678
 —
 —
 4,449
2,655
 1,747
 —
 —
 4,402
Total assets2,800
 1,701
 36
 —
 4,537
2,667
 1,783
 82
 (2) 4,530
Liabilities at fair value                  
Derivative contracts—
 10
 1,048
 —
 1,058
—
 3
 1
 (3) 1
Total liabilities—
 10
 1,048
 —
 1,058
—
 3
 1
 (3) 1
Net assets (liabilities)$2,800
 $1,691
 $(1,012) $—
 $3,479
Net assets$2,667
 $1,780
 $81
 $1
 $4,529
December 31, 2016December 31, 2017
(in millions)Level 1 Level 2 Level 3 
Netting
and
Collateral1
 TotalLevel 1 Level 2 Level 3 
Netting
and
Collateral1
 Total
Assets at fair value                  
Derivative contracts$—
 $6
 $68
 $—
 $74
$—
 $9
 $102
 $(1) $110
Other33
 —
 —
 —
 33
495
 —
 —
 —
 495
Nuclear decommissioning trusts:                  
Stocks2
1,547
 —
 —
 —
 1,547
1,596
 —
 —
 —
 1,596
Fixed Income3
865
 1,751
 —
 —
 2,616
1,065
 1,665
 —
 —
 2,730
Short-term investments, primarily cash equivalents36
 170
 —
 —
 206
101
 72
 —
 —
 173
Subtotal of nuclear decommissioning trusts4
2,448
 1,921
 —
 —
 4,369
2,762
 1,737
 —
 —
 4,499
Total assets2,481
 1,927
 68
 —
 4,476
3,257
 1,746
 102
 (1) 5,104
Liabilities at fair value                  
Derivative contracts—
 —
 1,157
 —
 1,157
—
 2
 1
 (2) 1
Total liabilities—
 —
 1,157
 —
 1,157
—
 2
 1
 (2) 1
Net assets (liabilities)$2,481
 $1,927
 $(1,089) $—
 $3,319
Net assets$3,257
 $1,744
 $101
 $1
 $5,103
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.collateral.
2 
Approximately 68%70% and 70%69% of SCE's equity investments were in companies located in the United States at June 30, 2017March 31, 2018 and December 31, 2016,2017, respectively.
3 
Includes corporate bonds, which were diversified and included collateralized mortgage obligations and other asset backed securities of $74$113 million and $79$102 million at June 30, 2017March 31, 2018 and December 31, 2016,2017, respectively.
4 
Excludes net payables of $68 million and $127$59 million at June 30, 2017March 31, 2018 and December 31, 2016,2017, 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 $23$43 million and $541 million at both June 30, 2017March 31, 2018 and December 31, 2016,2017, 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 June 30, Six months ended June 30,
(in millions) 2017 2016 2017 2016
Fair value of net liabilities at beginning of period $(1,166) $(1,213) $(1,089) $(1,148)
Total realized/unrealized losses:        
Included in regulatory assets and liabilities1
 11
 43
 (66) (22)
Contract amendment2
 143
 —
 143
 —
Fair value of net liabilities at end of period $(1,012)
$(1,170)
$(1,012)
$(1,170)
Change during the period in unrealized gains and losses related to assets and liabilities held at the end of the period $(12) $19
 $(97) $(54)
  Three months ended March 31,
(in millions) 2018 2017
Fair value of net assets (liabilities) at beginning of period $101
 $(1,089)
Total realized/unrealized gains (losses):    
Included in regulatory assets and liabilities1
 (20) (77)
Fair value of net assets (liabilities) at end of period2
 $81
 $(1,166)
Change during the period in unrealized gains and losses related to assets and liabilities held at the end of the period $5
 $(102)
1 
Due to regulatory mechanisms, SCE's realized and unrealized gains and losses are recorded as regulatory assets and liabilities.
2 Represents a tolling contract that was amended during the second quarter of 2017, which is no longer accounted for as a derivative as of June 30, 2017.
2
During the third quarter of 2017, SCE designated certain derivative contracts as normal purchase and normal sale contracts, which resulted in a reclassification of $914 million from derivative liabilities to other 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 20172018 and 2016.2017.
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     
June 30, 2017$36
 $—
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      
June 30, 2017—
 1,043
Option modelVolatility of gas prices13% - 43% (21%)
     Volatility of power prices27% - 67% (34%)
     Power prices$23.41 - $47.10 ($33.16)
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)


 Fair Value (in millions) Significant 
 Assets LiabilitiesValuation Technique(s)Unobservable InputRange
Congestion revenue rights     
March 31, 2018$81
 $—
Market simulation model and auction pricesLoad forecast5,002 MW - 22,970 MW
     
Power prices1
$(15.00) - $120.00
     
Gas prices2
$2.46 - $4.37
     CAISO CRR Auction prices$(6.22) - $8.66
December 31, 2017$102
 —
Market simulation model and auction pricesLoad forecast5,002 MW - 22,970 MW
     
Power prices1
$(15.00) - $120.00
     
Gas prices2
$2.46 - $4.37
     CAISO CRR Auction prices$(9.41) - $8.66
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. There are no securities classified as Level 3 in the nuclear decommissioning trusts.
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:
 June 30, 2017 December 31, 2016 March 31, 2018 December 31, 2017
(in millions) 
Carrying
Value1
 
Fair
Value
 
Carrying
Value1
 
Fair
Value
 
Carrying
Value1
 
Fair
Value
 
Carrying
Value1
 
Fair
Value
Edison International $13,846
 $14,940
 $12,123
 $13,760
SCE $11,024
 $12,507
 $10,333
 $11,539
 $12,108
 $13,225
 $10,907
 $12,547
Edison International 12,243
 13,742
 11,156
 12,368
1  
Carrying value is net of debt issuance costs.
The fair value of Edison International'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
During the first quarter of 2017, SCEIn January 2018, Edison International Parent borrowed $300$500 million under a Term Loan Agreement due July 2018,in January 2019, with a variable interest rate based on the London Interbank Offered Rate plus 6560 basis points (1.82% at June 30, 2017).points. The proceeds were used to repay Edison International Parent's commercial paper borrowings. In March 2018, Edison International Parent issued $550 million of 4.125% senior notes due 2028. The proceeds from the March 2018 issuance were used to repay the $500 million Term Loan discussed above and for general corporate purposes.


During the first quarter of 2017,In March 2018, SCE reissued $135issued $450 million of 2.625% pollution-control bonds subject to mandatory remarketing in December 2023. The proceeds were used for general corporate purposes.
During the first quarter of 2017, SCE issued $700 million of 4.00%2.90% first and refunding mortgage bonds due in 2047 and Edison International issued2021, $400 million of 2.125% senior notes3.65% first and refunding mortgage bonds due in 2020.2028 and $400 million of 4.125% first and refunding mortgage bonds due 2048. 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, both maturing in July 2022. The maturity date for both credit facilities was extended in July 2017. 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 June 30, 2017, SCEMarch 31, 2018, SCE's outstanding commercial paper, net of discount, was $219$70 million at a weighted-average interest rate of 1.29%2.24%. At June 30, 2017,March 31, 2018, letters of credit issued under SCE's credit facility aggregated $53$103 million and are scheduled to expire in twelve months or less. At December 31, 2016,2017, the outstanding commercial paper, net of discount, was $769$738 million at a weighted-average interest rate of 0.9%1.75%. In December 2017, SCE borrowed $500 million from the credit facility. The interest rate on this loan was 2.46% on December 31, 2017. In January 2018, SCE repaid its $500 million borrowings with cash on hand.
At June 30, 2017,March 31, 2018, Edison International Parent'sParent had no outstanding commercial paper, net of discount, was $344 million at a weighted-average interest rate of 1.38%.paper. At December 31, 2016,2017, the outstanding commercial paper, net of discount, was $538$639 million at a weighted-average interest rate of 0.97%1.70%. In December 2017, Edison International borrowed $500 million from the credit facility. The interest rate on this loan was 2.56% on December 31, 2017. In January 2018, Edison International repaid its $500 million borrowings with cash on hand.
Note 6.    Derivative Instruments
Derivative financial instruments are used to manage exposure to commodity price risk. These risks are managed in part by entering into forward commodity transactions, including options, swaps, and futures. To mitigate credit risk from counterparties in the event of nonperformance, master netting agreements are used whenever possible and counterparties may be required to pledge collateral depending on the creditworthiness of each counterparty and the risk associated with the transaction.
Commodity Price Risk
Commodity price risk represents the potential impact that can be caused by a change in the market value of a particular commodity. SCE's electricity price exposure arises from energy purchased from and sold to wholesale markets as a result of differences between SCE's load requirements and the amount of energy delivered from its generating facilities and PPAs. SCE's natural gas price exposure arises from natural gas purchased for the Mountainview power plant and peaker plants, qualifying facilityQF contracts where pricing is based on a monthly natural gas index, and PPAs in which SCE has agreed to provide the natural gas needed for generation, referred to as tolling arrangements.
Credit and Default Risk
Credit and default risk represent the potential impact that can be caused if a counterparty were to default on its contractual obligations and SCE would be exposed to spot markets for buying replacement power 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 setoffoffset 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 $11 million and $12$1 million as of June 30, 2017both March 31, 2018 and December 31, 2016, respectively,2017, for which SCE has posted $8 million and $12less than $1 million collateral at June 30, 2017both March 31, 2018 and December 31, 2016, respectively2017, 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 June 30, 2017,March 31, 2018, SCE would be required to post $21$12 million of additional collateral of which $18$11 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 also offset against margin and cash collateral deposits. In addition, SCE has provided collateral in the form of letters of credit. Collateral requirements can vary depending upon the level of unsecured credit extended by counterparties, changes in market prices relative to contractual commitments, and other factors. See Note 4 for a discussion of fair value of derivative instruments. The following table summarizes the gross and net fair values of SCE's commodity derivative instruments:
 June 30, 2017   March 31, 2018  
 Derivative Assets Derivative Liabilities Net
Liability		 Derivative Assets Derivative Liabilities Net
Asset
(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 $60
 $1
 $61
 $192
 $868
 $1,060
 $999
 $94
 $3
 $97
 $4
 $—
 $4
 $93
Gross amounts offset in the consolidated balance sheets (2) —
 (2) (2) —
 (2) —
 (2) —
 (2) (2) —
 (2) —
Cash collateral posted1
 —
 —
 —
 —
 —
 —
 —
Cash collateral posted —
 —
 —
 (1) —
 (1) 1
Net amounts presented in the consolidated balance sheets $58
 $1
 $59
 $190
 $868
 $1,058
 $999
 $92
 $3
 $95
 $1
 $—
 $1
 $94
 December 31, 2016   December 31, 2017  
 Derivative Assets Derivative Liabilities Net
Liability		 Derivative Assets Derivative Liabilities Net
Asset
(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 $74
 $1
 $75
 $217
 $941
 $1,158
 $1,083
 $106
 $5
 $111
 $3
 $—
 $3
 $108
Gross amounts offset in the consolidated balance sheets (1) —
 (1) (1) —
 (1) —
 (1) —
 (1) (1) —
 (1) —
Cash collateral posted1
 —
 —
 —
 —
 —
 —
 —
Cash collateral posted —
 —
 —
 (1) —
 (1) 1
Net amounts presented in the consolidated balance sheets $73
 $1
 $74
 $216
 $941
 $1,157
 $1,083
 $105
 $5
 $110
 $1
 $—
 $1
 $109
1
In addition, at June 30, 2017 and December 31, 2016, SCE had received $1 million and $2 million, respectively, of collateral that is not offset against derivative assets and is reflected in "Other current 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 purchased power costs recovered from customers. As a result, realized gains and losses do not affect earnings, but may temporarily affect cash flows. Due to 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 recordedreported 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 June 30, Six months ended June 30, Three months ended March 31,
(in millions) 2017 2016 2017 2016 2018 2017
Realized losses $(3) $(25) $(5) $(52) $(12) $(2)
Unrealized gains (losses) 6
 72
 (80) 8
Unrealized losses (14) (85)


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 June 30, 2017 December 31, 2016 Unit of Measure March 31, 2018 December 31, 2017
Electricity options, swaps and forwards GWh 1,731
 1,816 GWh 542 475
Natural gas options, swaps and forwards Bcf 144
 36 Bcf 135 143
Congestion revenue rights GWh 63,103
 93,319 GWh 64,830 78,765
Tolling arrangements GWh 41,924
 61,093
Note 7.    Revenue
Revenue is recognized by Edison International and SCE when a performance obligation to transfer control of the promised goods is satisfied or when services are rendered to our customers. This typically occurs when electricity is delivered to our customers, which includes amounts for services rendered but unbilled at the end of a reporting period.
Edison International Parent and Other revenue primarily relates to Edison Energy Group, a holding company for subsidiaries engaged in pursuing competitive business opportunities across energy services and managed portfolio solutions to commercial and industrial customers. The revenue for Edison International Parent and Other is immaterial to Edison International.
CPUC and FERC rates decouple authorized revenue from the volume of electricity sales and the price of energy procured so that SCE receives revenue equal to amounts authorized by the relevant regulatory agencies. As a result, the volume of electricity sold to customers and specific customer classes does not have a direct impact on SCE's financial results. SCE's revenue is disaggregated by two revenue sources:
Earning activities – representing revenue authorized by the CPUC and FERC which is intended to provide SCE 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 revenues or penalties related to incentive mechanisms, other operating revenue, and regulatory charges or disallowances.
Cost-recovery activities – representing CPUC- and FERC- authorized balancing accounts which allow for recovery of specific project or program costs, subject to reasonableness review or compliance with upfront standards. 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 revenue:
 Three months ended March 31, 2018Three months ended March 31, 2017
(in millions)Earning
Activities		Cost-
Recovery
Activities		Total
Consolidated		Earning ActivitiesCost-Recovery ActivitiesTotal Consolidated
Revenues from contracts with customers$1,536
$1,192
$2,728
*
*
*
Alternative revenue programs and other operating revenue(23)(151)(174)*
*
*
Total operating revenue$1,513
$1,041
$2,554
$1,552
$904
$2,456
* As discussed in Note 1, prior period amounts have not been adjusted under the modified retrospective method.
SCE's Revenue from Contracts with Customers
Provision of Electricity
SCE principally generates revenue from contracts with customers through supplying and delivering electricity to its customers. Rates charged to customers are based on tariff rates, approved by the CPUC and FERC. Revenue is authorized by the CPUC through triennial GRC proceedings which are intended to provide SCE a reasonable opportunity to recover its costs and earn a return on its CPUC-jurisdictional rate base. The CPUC sets an annual revenue requirement for the base year


and the remaining two years are set by a methodology established in the GRC proceeding. Differences between the amount collected and authorized levels are either collected from or refunded to customers, and therefore, such differences do not impact operating revenue (see alternative revenue programs below for further information). In addition to the utility earnings activity revenue described above, SCE also earns revenue to recover costs for power procurement and other activities. SCE earns no return on these activities.
Revenue is authorized by the FERC through a formula rate which is intended to provide SCE a reasonable opportunity to recover transmission capital and operating costs that are prudently incurred, including a return on its FERC-jurisdictional rate base. Under the operation of the formula rate, transmission revenue is updated to actual cost of service annually.
For SCE's electricity sales for non-residential customers, SCE satisfies the performance obligation of delivering electricity over time as the customers simultaneously receive and consume the delivered electricity. Since SCE has a right to invoice an amount that corresponds to the value of the delivered electricity mandated in the tariff rates established by the CPUC and FERC, SCE is eligible for and has elected the right-to-invoice practical expedient which allows SCE to recognize revenue for tariff sales in the amount for which SCE has a right to invoice. This is consistent with how SCE recognized revenue for tariff sales prior to the adoption of the new standard.
Energy sales for residential customers are typically on a month to month implied contract for transmission, distribution and generation services, while commercial and other non-residential customer contracts can extend up to 20 years. Revenue is recognized over time as the energy is supplied and delivered to its customers and the respective revenue is billed and paid on a monthly basis.
Sales and Use Taxes
SCE bills certain sales and use taxes levied by state or local governments to its customers. Included in these sales and use taxes are franchise fees, which SCE pays to various municipalities (based on contracts with these municipalities) in order to operate within the limits of the municipality. SCE bills these franchise fees to its customers based on a CPUC-authorized rate. These franchise fees, which are required to be paid regardless of SCE's ability to collect from the customer, are accounted for on a gross basis. Revenue is reflected in "Revenue from contracts with customers" in 2018 (see table above) and in "Operating revenue" in 2017 and expenses are reflected in "Operation and maintenance." SCE's franchise fees billed to customers were $28 million and $29 million for the three months ended March 31, 2018 and 2017, respectively. When SCE acts as an agent for sales and use tax, the taxes are accounted for on a net basis. Amounts billed to and collected from customers for these taxes are remitted to the taxing authorities and are not recognized as electric utility revenue.
Provision of Electrical Transmissions Services and Other Revenue from Contracts with Customers
SCE also provides services to non-residential customers that include the use of SCE's owned transmission lines to transmit electricity from generation facilities to the grid and provide the use of SCE-owned facilities to connect to the grid. SCE contracts with its customers through contracts that are on a month to month basis. The contract pricing for the use of SCE's transmission lines is mandated by tariff rates approved by either the CPUC or FERC, as applicable. Revenue is recognized over time as the services are provided. The revenue is billed and paid monthly.
SCE also earns an immaterial amount of revenue through telecommunication services and the sale of excess energy to customers.
The estimated revenue expected to be recognized in the future related to SCE's performance obligations that are not completed (or partially completed) at March 31, 2018 is immaterial.
SCE's Alternative Revenue Programs
Alternative Revenue Programs – Decoupling
Rates charged to customers are based on CPUC- and FERC- authorized revenue requirements as discussed above. CPUC and FERC rates decouple authorized revenue from the volume of electricity sales. Differences between amounts collected and authorized levels are either collected from or refunded to customers, and therefore, SCE earns revenue equal to amounts authorized.
The differences between amounts billed and authorized levels for both CPUC and FERC are reflected in "Alternative revenue programs and other operating revenue" in 2018 (see table above) and in "Operating revenue" in 2017.


Other Alternative Revenue Programs
The CPUC and FERC have authorized additional, alternative revenue programs which adjust billings for the effects of broad external factors or to compensate SCE for demand-side management initiatives and provide for incentive awards if SCE achieves certain objectives. These alternative revenue programs have been authorized to allow SCE to recover costs that SCE has been authorized to pass on to customers, including costs to purchase electricity and natural gas; and to fund public purpose, demand response, and customer energy efficiency programs. In general, revenue is recognized for these alternative revenue programs at the time the costs are incurred and, for incentive-based programs, at the time the awards are approved by the CPUC. SCE begins recognizing revenues for these programs when a program has been established by an order from either the CPUC or FERC that allows for automatic adjustment of future rates, the amount of revenue for the period is objectively determinable and probable of recovery and the revenue will be collected within 24 months following the end of the annual period.
SCE's Contract Balances
The following table provides information about SCE's receivables, accrued unbilled revenue and contract liabilities related to contracts from customers:
(in millions)March 31,
2018		 December 31,
2017
Receivables:   
Billed revenue$526
 $613
Accrued unbilled revenues510
 212
Total receivables$1,036
 $825
Contract liabilities1
$21
 $20
1
Contract liabilities are included in "Other current liabilities" and "Other deferred credits and long-term liabilities" on the consolidated balance sheets.
SCE's contract receivables are shown above, gross of allowance for uncollectible accounts. Activities in the allowance for doubtful accounts for SCE's contracts with customers were as follows:
(in millions)2018
Balance at January 1,$36
Charged to costs and expenses7
Write-offs(6)
Balance at March 31,$37
SCE's contract liabilities primarily relate to cash advances received from customers for executory services related to the use of SCE's operating assets. Revenue is recognized monthly as the services are provided.
The following table provides a summary of significant changes in SCE's contract liabilities:
(in millions)2018
Balance at January 1,$20
Additions14
Revenue recognized during the period(13)
Balance at March 31,$21



Note 8.    Income Taxes
Effective Tax Rate
The table below provides a reconciliation of income tax expense computed at the federal statutory income tax rate to the income tax provision:
Edison International SCE
Three months ended June 30, Six months ended June 30,Three months ended March 31,
(in millions)2017 2016 2017 20162018 2017 2018 2017
Edison International:              
Income from continuing operations before income taxes$335
 $259
 $687
 $591
$211
 $352
 $310
 $392
Provision for income tax at federal statutory rate of 35%117
 91
 241
 207
Provision for income tax at federal statutory rate of 21% and 35%, respectively 1
44
 124
 65
 137
Increase in income tax from:        
    
  
State tax, net of federal benefit6
 4
 16
 11
(5) 10
 1
 13
Property-related1
(83) (138) (196) (217)
Property-related(69) (113) (69) (113)
Change related to uncertain tax positions(6) 2
 (18) 1
—
 (12) (1) (11)
Shared-based compensation2
(3) (4) (46) (15)—
 (43) —
 (8)
Other(5) (6) (11) (11)(1) (6) (2) (6)
Total income tax expense (benefit) from continuing operations$26
 $(51) $(14) $(24)
Total income tax (benefit) expense from continuing operations$(31) $(40) $(6) $12
Effective tax rate7.8% (19.7)% (2.0)% (4.1)%(14.7)% (11.4)% (1.9)% 3.1%
SCE:       
Income from continuing operations before income taxes$395
 $317
 $787
 $683
Provision for income tax at federal statutory rate of 35%138
 111
 275
 239
Increase in income tax from:       
State tax, net of federal benefit9
 6
 22
 15
Property-related1
(83) (138) (196) (217)
Change related to uncertain tax positions—
 (1) (11) (2)
Shared-based compensation2
(1) (3) (9) (11)
Other(6) (7) (12) (14)
Total income tax expense (benefit) from continuing operations$57
 $(32) $69
 $10
Effective tax rate14.4% (10.1)% 8.8 % 1.5 %
1 
DuringIn December 2017, Tax Reform was signed into law. This comprehensive reform of tax law reduces the second quarter of 2016, SCE recorded $79 million for 2012 – 2014 incrementalfederal corporate income tax benefits relatedrate from 35% to repair deductions, which were flowed-through to customers ($133 million pre-tax).
2
Includes state taxes for Edison International and SCE of $4 million and $1 million, respectively, for the three months ended June 30, 2017 and $10 million and $2 million, respectively, for the six months ended June 30, 2017. Includes state taxes for Edison International and SCE of $3 million and $2 million, respectively, for the six months ended June 30, 2016. Refer to Note21%, effective January 1, for further information.2018.


2 Includes state taxes for Edison International and SCE of $6 million and $1 million, respectively, for the three months ended March 31, 2017.
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.
In 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 For further ininformation, see 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 $691 million and $1.13 billion for federal and state income tax purposes, respectively, was claimed10 included in the first six months 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 during the first six months of 2017, Edison International and SCE both expect to report federal and California tax losses in 2017.Form 10-K.
Unrecognized Tax Benefits
 The following table provides a reconciliation of unrecognized tax benefits:

Edison International SCE
(in millions)2018 2017 2018 2017
Balance at January 1,$432
 $471
 $331
 $371
Tax positions taken during the current year:       
   Increases8
 10
 8
 10
Tax positions taken during a prior year:       
   Increases—
 2
 —
 2
   Decreases(3) (10) (3) (10)
   Decreases for settlements during the period1
—
 (82) —
 (78)
Balance at March 31,$437
 $391
 $336
 $295
1 In the first quarter of 2017, Edison International settled all open tax positions with the Internal Revenue Service ("IRS")IRS for taxable years 2007 through 2012. The following table provides a reconciliation of unrecognized tax benefits for 2017 as a result of the audit settlement:

(in millions)Edison International SCE
Balance at January 1, 2017$471
 $371
Tax positions taken during the current year:   
   Increases20
 20
Tax positions taken during a prior year:   
   Increases3
 3
   Decreases—
 —
   Decreases for settlements during the period(83) (78)
Balance at June 30, 2017$411
 $316

Tax Disputes
In the first quarter of 2017, Edison International settled all open tax positions with the IRS for taxable years 2007 through 2012. Edison International has previously made cash deposits to cover the estimated tax and interest liability from this audit cycle and expects a $7 million refund of this deposited amount.
Tax years that remain open for examination by the IRS and the California Franchise Tax Board are 20132014 – 20152016 and 2010 – 2015,2016, respectively. Edison International has settled all open tax position with the IRS for taxable years prior to 2013. 
Tax years 20031994 – 2006 are currently in settlement negotiations with the California Franchise Tax Board. While we expect to resolve these tax years within the next twelve months, the impacts cannot be reasonably estimated until further progress has been made. Tax years 2007 – 2009 are currently under protest with the California Franchise Tax Board.


Note 8.9.    Compensation and Benefit Plans
Pension Plans
Edison International made contributions of $76$18 million during the sixthree months ended June 30, 2017,March 31, 2018, which includes contributions of $44$13 million by SCE. Edison International expects to make contributions of $60$48 million during the remainder of 2017,2018, which includes $41$37 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.
PensionNet periodic pension expense components for continuing operations are:
Edison International SCE
Three months ended June 30, Six months ended June 30,Three months ended March 31,
(in millions)2017 2016 2017 20162018 
2017 2
 2018 
2017 2
Edison International:       
Service cost$36
 $39
 $72
 $78
Interest cost41
 44
 82
 88
Expected return on plan assets(53) (56) (106) (112)
Settlement costs1
8
 —
 8
 —
Amortization of prior service cost1
 1
 2
 2
Amortization of net loss2
5
 9
 10
 18
Expense under accounting standards$38
 $37
 $68
 $74
Regulatory adjustment(3) (9) (6) (18)
Total expense recognized$35
 $28
 $62
 $56
SCE:       
Service cost$35
 $38
 $70
 $76
$32
 $36
 $31
 $35
Interest cost37
 41
 74
 82
35
 41
 32
 37
Expected return on plan assets(50) (53) (100) (106)(57) (53) (53) (50)
Amortization of prior service cost1
 1
 2
 2
1
 1
 1
 1
Amortization of net loss2
4
 8
 8
 16
Expense under accounting standards$27
 $35
 $54
 $70
Regulatory adjustment(3) (9) (6) (18)
Amortization of net loss1
2
 5
 1
 4
Regulatory adjustment (deferred)2
 (3) 2
 (3)
Total non-service cost$(17) $(9) $(17) $(11)
Total expense recognized$24

$26

$48

$52
$15
 $27
 $14
 $24
1
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) was recorded at Edison International in the second quarter of 2017.
2 
Includes the amount of net loss reclassified from other comprehensive loss. The amount reclassified for Edison International and SCE was $2 million and $1 million, respectively, for the three months ended June 30, 2017, and $5 millionMarch 31, 2018, and $3 million respectively, for the six months ended June 30, 2017. The amount reclassified for Edison International and SCE was $3 million and $1$2 million, respectively, for the three months ended June 30, 2016,March 31, 2017.
2
During the first quarter of 2018, Edison International and $6 million and $3 million, respectively,SCE adopted an accounting standard retrospectively related to the presentation of the components of net periodic benefit costs for the six months ended June 30, 2016.defined benefit pension and other postretirement plans. Prior years' consolidated income statements have been updated to reflect the retrospective application of this accounting standard. Service and non-service costs are included in "Operation and maintenance" and "Other income and expenses," respectively, on the consolidated income statement. See Note 1 for further information.
Postretirement Benefits Other Than Pensions ("PBOP(s)")
Edison International made contributions of $10$3 million during the sixthree months ended June 30, 2017March 31, 2018 and expects to make contributions of $11$9 million during the remainder of 2017,2018, 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 unvestedin retirement depends on a number of factors, including the employee's years of service, age, hire date, and subject to change.retirement date. Under the terms of the Edison International Health and Welfare Benefit 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.


Net periodic PBOP expense components for continuing operations are:
Edison International SCE
Three months ended June 30, Six months ended June 30,Three months ended March 31,
(in millions)2017 2016 2017 20162018 
2017 1
 2018 
2017 1
Edison International:       
Service cost$9
 $10
 $18
 $20
$9
 $9
 $9
 $9
Interest cost24
 26
 48
 52
21
 24
 21
 24
Expected return on plan assets(27) (28) (54) (56)(30) (27) (30) (27)
Amortization of prior service cost(1) (1) (2) (2)—
 (1) —
 (1)
Total non-service cost$(9) $(4) $(9) $(4)
Total expense$5
 $7
 $10
 $14
$—
 $5
 $—
 $5
SCE:       
Service cost$9
 $10
 $18
 $20
Interest cost24
 26
 48
 52
Expected return on plan assets(27) (28) (54) (56)
Amortization of prior service cost(1) (1) (2) (2)
Total expense$5
 $7
 $10
 $14
1
During the first quarter of 2018, Edison International and SCE adopted an accounting standard retrospectively related to the presentation of the components of net periodic benefit costs for the defined benefit pension and other postretirement plans. Prior years' consolidated income statements have been updated to reflect the retrospective application of this accounting standard. Service and non-service costs are included in "Operation and maintenance" and "Other income and expenses," respectively, on the consolidated income statement. See Note 1 for further information.
Note 9.10.    Investments
Nuclear Decommissioning Trusts
Future decommissioning costs related to SCE's nuclear assets are expected to be funded from independent decommissioning trusts.
The following table sets forth amortized cost and fair value of the trust investments (see Note 4 for a discussion of fair value of the trust investments):
Longest
Maturity
Dates
 Amortized Cost Fair Value
Longest
Maturity
Dates
 Amortized Cost Fair Value
(in millions) June 30,
2017		 December 31,
2016		 June 30,
2017		 December 31, 2016 March 31,
2018		 December 31,
2017		 March 31,
2018		 December 31, 2017
Stocks— $304
 $319
 $1,611
 $1,547
— *
 $236
 $1,520
 $1,596
Municipal bonds2054 617
 659
 737
 766
2054 636
 643
 740
 768
U.S. government and agency securities2067 1,209
 1,131
 1,288
 1,191
2067 1,259
 1,235
 1,331
 1,319
Corporate bonds2057 523
 600
 584
 659
2057 593
 579
 644
 643
Short-term investments and receivables/payables1
One-year 156
 75
 161
 79
One-year 95
 110
 99
 114
Total  $2,809
 $2,784
 $4,381
 $4,242
  $2,583
 $2,803
 $4,334
 $4,440
*Effective January 1, 2018, SCE adopted an accounting standards update related to the classification and measurement of financial instruments in which equity investments are measured at fair value. See Note 1 for further information.
1
Short-term investments include $32$37 million and $114$29 million of repurchase agreements payable by financial institutions which earn interest, are fully secured by U.S. Treasury securities and mature by July 3, 2017April 2, 2018 and January 4, 20172, 2018 as of June 30, 2017March 31, 2018 and December 31, 2016,2017, respectively.
Trust fund earnings (based on specific identification) increase the trust fund balance and the asset retirement obligation ("ARO") regulatory liability. Unrealized holding gains, net of losses, were $1.5 billion and $1.6 billion at March 31, 2018 and $1.5 billion at June 30, 2017 and December 31, 2016, respectively.2017, respectively, and other-than-temporary impairments of $159 million and $143 million at the respective periods.


The following table sets forth a summary of changes in the fair value of the trust:
  Three months ended June 30, Six months ended June 30,
(in millions) 2017 2016 2017 2016
Balance at beginning of period $4,352
 $4,290
 $4,242
 $4,331
Gross realized gains 13
 22
 112
 75
Gross realized losses —
 (1) (16) (4)
Unrealized gains, net of losses 87
 72
 114
 113
Other-than-temporary impairments (3) (8) (4) (33)
Interest and dividends 31
 32
 59
 60
Income taxes (26) (24) (26) (42)
Decommissioning disbursements (73) (38) (99) (154)
Administrative expenses and other —
 (1) (1) (2)
Balance at end of period $4,381
 $4,344
 $4,381
 $4,344
Trust assets are used to pay income taxes.taxes arising from trust investing activity. Deferred tax liabilities related to net unrealized gains at June 30, 2017March 31, 2018 were $388$375 million. Accordingly, the fair value of trust assets available to pay future decommissioning costs, net of deferred income taxes, totaled $4.0 billion at June 30, 2017.March 31, 2018.
For the three months ended March 31, 2018 and 2017, gross realized gains were $61 million and $99 million, respectively, and gross realized losses were $8 million and $16 million, respectively. Unrealized losses, net of gains, for equity securities were $63 million and unrealized gains, net of losses, for equity securities were $20 million for the three months ended March 31, 2018 and 2017, respectively. Due to regulatory mechanisms, changes in assets of the trusts from income or loss items have no impact on operating revenue or earnings.
Decommissioning disbursements are funded from salesSale of investmentsSoCore Energy
On February 28, 2018, Edison International agreed to sell SoCore Energy to a third party, subject to the completion of closing conditions, which were satisfied April 16, 2018. As a result, Edison International accounted for the nuclear decommissioning trusts.assets and liabilities of SoCore Energy as held for sale as of March 31, 2018 and recognized a pre-tax loss of $66 million ($48 million after-tax). The following table summarizes the assets and liabilities held for sale at March 31, 2018:
(in millions)March 31, 2018
Assets: 
Cash and cash equivalents$18
Short-term restricted cash25
Receivables6
Non-utility property, plant and equipment1
203
Other assets18
Total assets of business held for sale$270
Liabilities: 
Accounts payable$1
Accrued liabilities4
Debt obligations82
Other liabilities27
Noncontrolling interest (NCI)28
Total liabilities and NCI of business held for sale1
$142
1
During the first quarter of 2018, the carrying value of assets and liabilities was adjusted to fair value less transaction costs, which resulted in a pre-tax loss of $66 million recorded in "Impairment and other charges" in Edison International's consolidated income statements.


Note 10.11.    Regulatory Assets and Liabilities
Regulatory Assets
SCE's regulatory assets included on the consolidated balance sheets are:
(in millions)June 30,
2017		 December 31,
2016		March 31,
2018		 December 31,
2017
Current:      
Regulatory balancing accounts$374
 $135
$459
 $484
Energy derivatives and other power contracts199
 150
Unamortized investments, net of accumulated amortization25
 49
Power contracts and energy derivatives203
 203
Other36
 16
16
 16
Total current634
 350
678
 703
Long-term:      
Deferred income taxes, net of liabilities4,875
 4,478
3,202
 3,143
Pensions and other postretirement benefits712
 710
268
 271
Energy derivatives and other power contracts969
 947
Power contracts and energy derivatives774
 799
Unamortized investments, net of accumulated amortization78
 80
116
 123
San Onofre772
 857
San Onofre1
72
 72
Unamortized loss on reacquired debt176
 184
164
 168
Regulatory balancing accounts72
 66
160
 143
Environmental remediation123
 126
140
 144
Other73
 7
36
 51
Total long-term7,850
 7,455
4,932
 4,914
Total regulatory assets$8,484
 $7,805
$5,610
 $5,617



1
In accordance with the Revised San Onofre Settlement Agreement, SCE wrote down the San Onofre regulatory asset. SCE has requested to apply $72 million of the U.S. Department of Energy ("DOE") proceeds, currently reflected as a regulatory liability in the DOE litigation memorandum account, against the remaining San Onofre regulatory asset. See Note 12 for further information.
Regulatory Liabilities
SCE's regulatory liabilities included on the consolidated balance sheets are:
(in millions)June 30,
2017		 December 31,
2016		March 31,
2018		 December 31,
2017
Current:      
Regulatory balancing accounts$822
 $736
$1,124
 $1,009
San Onofre MHI arbitration award1
47
 —
Other34
 20
Energy derivatives61
 74
San Onofre1
47
 5
Other2
115
 33
Total current903
 756
1,347
 1,121
Long-term:      
Costs of removal2,820
 2,847
2,772
 2,741
Recoveries in excess of ARO liabilities2
1,758
 1,639
Re-measurement of deferred taxes2,834
 2,892
Recoveries in excess of ARO liabilities3
1,496
 1,575
Regulatory balancing accounts1,326
 1,180
1,482
 1,316
Other postretirement benefits26
 26
Other57
 60
73
 64
Total long-term5,961
 5,726
8,683
 8,614
Total regulatory liabilities$6,864
 $6,482
$10,030
 $9,735


1
Represents SCE's net recovery from claims against MHI.During the three months ended March 31, 2018, SCE recorded San Onofre revenue based on the Prior San Onofre Settlement Agreement. As a result of the Revised San Onofre Settlement Agreement, SCE recorded a regulatory liability pending the CPUC approval of the agreement. See Note 1112 for further discussion.additional information.
2
During the three months ended March 31, 2018, SCE recorded CPUC revenue based on the 2017 authorized revenue requirements adjusted for the July 2017 cost of capital decision and Tax Reform pending the outcome of the 2018 GRC. SCE recorded a regulatory liability primarily associated with these adjustments.
3
Represents the cumulative differences between ARO expenses and amounts collected in rates primarily for the decommissioning of 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 910 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)June 30,
2017		 December 31,
2016		March 31,
2018		 December 31,
2017
Asset (liability)      
Energy resource recovery account$228
 $(20)$413
 $464
New system generation balancing account(175) (6)(213) (197)
Public purpose programs and energy efficiency programs(1,064) (992)(1,288) (1,145)
Tax accounting memorandum account and pole loading balancing account(197) (142)(260) (259)
Base rate recovery balancing account(257) (426)
Department of Energy litigation memorandum account

(156) (122)
Base revenue requirement balancing account(322) (200)
DOE litigation memorandum account

(156) (156)
Greenhouse gas auction revenue24
 31
(50) (22)
FERC balancing accounts(136) (69)(222) (205)
Catastrophic event memorandum account94
 90
Other31
 31
17
 (68)
Liability$(1,702) $(1,715)$(1,987) $(1,698)
Note 11.12.    Commitments and Contingencies
Third-Party Power Purchase Agreements
During the first six months of 2017, SCE had existing PPAs that met the critical contract provisions (including completion of major milestones for construction). The commitments for these contracts are estimated to be: $50 million in 2017, $120 million in 2018, $122 million in 2019, $123 million in 2020, $124 million in 2021, and $1.0 billion 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 the 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 and cash flows.


Southern California Wildfires
In December 2017, several wind-driven wildfires (the "December 2017 Wildfires") impacted portions of SCE's service territory and caused substantial damage to both residential and business properties and service outages for SCE customers. The largest of these fires, known as the Thomas Fire, originated in Ventura County and burned acreage located in both Ventura and Santa Barbara Counties. According to the most recent California Department of Forestry and Fire Protection ("Cal Fire") incident information reports, the Thomas Fire burned over 280,000 acres, destroyed an estimated 1,063 structures, damaged an estimated 280 structures and resulted in one fatality. As of March 31, 2018, SCE had incurred approximately $46 million of capital expenditures related to restoration of service resulting from the December 2017 Wildfires.
Determining wildfire origin and cause is often a complex and time-consuming process, and several investigations into the facts and circumstances of the Thomas Fire are believed to be ongoing. SCE has been advised that the origins and causes of the fire are being investigated by Cal Fire and the Ventura County Fire Department. In connection with its investigation of the Thomas Fire, Cal Fire has removed and retained certain of SCE's equipment that was located near suspected ignition points of the fire. SCE expects that the Ventura County Fire Department and/or Cal Fire will ultimately issue reports concerning the origins and causes of the Thomas Fire but cannot predict when these reports will be released or if any findings will be issued before the investigations are completed. The CPUC's SED is also conducting an investigation to assess the compliance of SCE and its facilities with applicable rules and regulations in areas impacted by the Thomas Fire. In addition, as it does in all wildfire matters in which its facilities may or are alleged to be involved, SCE is conducting its own investigation of the Thomas Fire. At this time, SCE cannot predict when its own investigation, or the investigations of Cal Fire, the Ventura County Fire Department or the SED, will be completed.
Any potential liability for December 2017 Wildfire-related damages will depend on a number of factors, including whether SCE substantially caused, or contributed to, the damages and whether parties seeking recovery of damages will be required to show negligence in addition to causation. Certain California courts have previously found utilities to be strictly liable for property damage, regardless of fault, by applying the theory of inverse condemnation when a utility's facilities were determined to be a substantial cause of a wildfire that caused the property damage. The rationale stated by these courts for applying this theory to investor-owned utilities is that property damages resulting from a public improvement, such as the distribution of electricity, can be spread across the larger community that benefited from such improvement. However, in November 2017, the CPUC issued a decision denying SDG&E's request to include in its rates uninsured wildfire-related costs arising from several 2007 fires, finding that SDG&E did not prudently manage and operate its facilities prior to or at the outset of the 2007 wildfires.
When inverse condemnation is held to be applicable to a utility, the utility may be held liable for property damages and associated interest and attorney's fees. If inverse condemnation is held to be inapplicable to SCE in connection with the December 2017 Wildfires, SCE could be held liable for property damages and associated interest if the property damages were found to have been proximately caused by SCE's alleged negligence. If SCE is found negligent, SCE could also be held liable for, among other things, fire suppression costs, business interruption losses, evacuation costs, medical expenses and personal injury/wrongful death claims. These potential liabilities, in the aggregate, could be substantial. Additionally, SCE could potentially be subject to fines for alleged violations of CPUC rules and laws in connection with the December 2017 Wildfires.
SCE is aware of multiple lawsuits filed related to the Thomas Fire naming SCE as a defendant. Several of the lawsuits also name Edison International as a defendant and some of the lawsuits were filed as purported class actions. The lawsuits, which have been filed in the superior courts of Ventura, Santa Barbara and Los Angeles Counties allege, among other things, negligence, inverse condemnation, trespass, private nuisance, and violations of the public utilities and health and safety codes. The Chair of the California Judicial Council has ordered that the lawsuits be coordinated in the Los Angeles Superior Court. SCE expects to be the subject of additional lawsuits related to the Thomas Fire. The litigation could take a number of years to be resolved because of the complexity of the matters and the time needed to complete the ongoing investigations.
Given the preliminary stages of the investigations and the uncertainty as to the causes of the Thomas Fire, and the extent and magnitude of potential damages, Edison International and SCE are currently unable to predict the outcome of the claims made against SCE and Edison International or reasonably estimate a range of losses that may be incurred.
SCE has approximately $1 billion of wildfire-specific insurance coverage, subject to a self-insured retention of $10 million per occurrence, for wildfire-related claims for the period ending on May 31, 2018. SCE also has approximately $300 million of additional insurance coverage for wildfire-related occurrences for the period from December 31, 2017 to December 31, 2018, which may be used in addition to the $1 billion in wildfire insurance for wildfire events occurring on or after December 31, 2017 and on or before May 31, 2018, and would be available for new wildfire events, if any, occurring after


May 31, 2018 and on or before December 30, 2018. Various coverage limitations within the policies that make up SCE's wildfire insurance coverage could result in material self-insured costs in the event of multiple wildfire occurrences during a policy period. Should responsibility for a significant portion of the damages related to the December 2017 Wildfires be attributed to SCE, SCE's insurance may not be sufficient to cover all such damages. In addition, SCE may not be authorized to recover its uninsured damages through electric service rates if, for example, the CPUC finds that the damages were incurred because SCE was not a prudent manager of its facilities.
Edison International and SCE are pursuing legislative, regulatory and legal strategies to address the application of a strict liability standard to wildfire-related damages without the ability to recover resulting damages in rates. Edison International and SCE cannot predict whether or when a solution mitigating the significant risk faced by a California investor-owned utility related to wildfires will be achieved.
Montecito Mudslides
In January 2018, torrential rains in Santa Barbara County produced mudslides and flooding in Montecito and surrounding areas (the "Montecito Mudslides"). According to Santa Barbara County initial reports, the Montecito Mudslides destroyed an estimated 135 structures, damaged an estimated 324 structures, and resulted in at least 21 fatalities, with two additional fatalities presumed.
Of the lawsuits mentioned above, several allege that SCE has responsibility for the Thomas Fire and that the Thomas Fire proximately caused the Montecito Mudslides, resulting in the plaintiffs' claimed damages. Some of the Montecito Mudslides lawsuits also name Edison International as a defendant. In addition to other causes of action, some of the Montecito Mudslides lawsuits also allege personal injury and wrongful death. The Chair of the California Judicial Council has ordered that the Thomas Fire and Montecito Mudslides lawsuits be coordinated in the Los Angeles Superior Court. SCE expects that additional lawsuits related to the Montecito Mudslides will be filed.
In the event that SCE is determined to have liability for damages caused by the Thomas Fire, SCE cannot predict whether the courts will conclude that the Montecito Mudslides were caused by the Thomas Fire or that SCE is liable for damages caused by the Montecito Mudslides. As a result, Edison International and SCE are currently unable to predict the outcome of the claims made against SCE and Edison International or reasonably estimate a range of losses that may be incurred. If it is determined that the Montecito Mudslides were caused by the Thomas Fire and that SCE is liable for damages caused by the Montecito Mudslides, then SCE's insurance coverage for such damages may be limited to its wildfire insurance. SCE also has other general liability insurance coverage of approximately $450 million but it is uncertain whether these other policies would apply to liabilities alleged to be related to the mudslides. Additionally, if SCE is determined to be liable for a significant portion of costs associated with the Montecito Mudslides, SCE's insurance may not be sufficient to cover all such damages. In addition, SCE may not be authorized to recover its uninsured damages through electric service rates if, for example, the CPUC finds that the damages were incurred because SCE was not a prudent manager of its facilities.
If it is ultimately determined that SCE is legally responsible for damages caused by the Montecito Mudslides and inverse condemnation is held to be applicable to SCE, SCE may be held liable for resulting property damages and associated interest and attorney's fees. If inverse condemnation is held to be inapplicable to SCE in connection with the Montecito Mudslides, SCE could be held liable for property damages and associated interest if the property damages were found to have been proximately caused by SCE’s alleged negligence. If SCE is found negligent, SCE could also be held liable for, among other things, business interruption losses, evacuation costs, clean-up costs, medical expenses and personal injury/wrongful death claims associated with the Montecito Mudslides. These potential liabilities, in the aggregate, could be substantial. SCE cannot predict whether it will be subjected to regulatory fines related to the Montecito Mudslides.
Permanent Retirement of 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 San Onofre OII Settlement Agreement by and among SCE, The Utility Reform Network ("TURN"), the CPUC's Office of RatepayerRatepayers Advocates and("ORA"), 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"Prior San Onofre OII Settlement Agreement"), which, at the time, resolved the CPUC's investigation regarding the steam generator replacement project at San Onofre and the related outages and subsequent shutdown of San Onofre. Subsequently, the San Onofre Order Instituting Investigation ("OII") proceeding record was reopened by a joint ruling of the Assigned Commissioner and the Assigned administrative law judge ("ALJ") to consider whether, in light of SCEthe Company not reporting certain ex parte communications on a timely basis, the Prior San Onofre OII Settlement Agreement remained 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,
Entry into Revised Settlement
On January 30, 2018, SCE, asserted that theSDG&E, The Alliance for Nuclear Responsibility, The California Large Energy Consumers Association, California State University, Citizens Oversight dba Coalition to Decommission San Onofre, OIIthe Coalition of California Utility Employees, the Direct Access Customer Coalition, Ruth Henricks, ORA, TURN, and Women's Energy Matters (the "OII Parties") entered into a Revised San Onofre 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 requested that the CPUC 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 and SDG&E to meet and confer with the other parties in the San Onofre OII proceeding (the "Revised San Onofre Settlement Agreement"). If approved by the CPUC, the Revised San Onofre Settlement Agreement will resolve all issues under consideration in the San Onofre OII and will modify the Prior San Onofre Settlement Agreement. If approved by the CPUC, the Revised San Onofre Settlement Agreement will also result in the dismissal of a federal lawsuit currently pending in the Ninth Circuit Court of Appeals challenging the CPUC's authority to consider changingpermit rate recovery of San Onofre costs. The Revised San Onofre Settlement Agreement was the result of multiple mediation sessions in 2017 and January 2018 and was signed on January 30, 2018 following a settlement conference in the OII, as required under CPUC rules.
Implementation of the terms of the Revised San Onofre Settlement Agreement is subject to the approval of the CPUC, as to which there is no assurance. The OII Parties have agreed to exercise their best efforts to obtain CPUC approval, but there can be no certainty of when or what the CPUC will actually decide.
The San Onofre OII Assigned Commissioner and Assigned ALJ have issued joint rulings that, among other things, (i) direct the parties to submit joint testimony to the CPUC in support of the Revised San Onofre Settlement Agreement.Agreement on April 27, 2018; (ii) direct all parties to submit briefing on whether an attorneys' fees provision in a related settlement agreement pertaining to the dismissal of a federal lawsuit challenging the Prior San Onofre Settlement Agreement impacts the integrity of the CPUC's intervenor compensation program; and (iii) schedule a public participation hearing and a status conference. In March 2017,lieu of joint testimony, with the ALJ's consent, the parties submitted a joint stipulation of facts in support of the Revised San Onofre Settlement Agreement on April 27, 2018.
Disallowances, Refunds and Recoveries
If the Revised San Onofre Settlement Agreement is approved by the CPUC, SCE and the parties participating in the meet-and-confer process initiated a mediationSDG&E (the "Utilities") will cease rate recovery of San Onofre costs as of the issues identified in the December 2016 joint ruling. The CPUC has established a joint report deadline of August 15, 2017, at which time the parties must report on the outcome of the meet-and-confer process.date their combined remaining San Onofre regulatory assets equal $775 million (the "Cessation Date"). SCE has recorded a regulatory asset of $772 million at June 30, 2017previously requested the CPUC 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.authorize SCE assessedto reduce the San Onofre regulatory asset at June 30,by applying $72 million of proceeds received from litigation with the DOE related to DOE's failure to meet its obligation to begin accepting spent nuclear fuel from San Onofre. If that request is approved by the CPUC, the Cessation Date is estimated to be December 19, 2017. If that request is not approved by the CPUC, the Cessation Date is estimated to be April 21, 2018. The Utilities will refund to customers San Onofre-related amounts recovered in rates after the Cessation Date. SCE will retain amounts collected under the Prior San Onofre Settlement Agreement before the Cessation Date. SCE also will retain $47 million of proceeds received in 2017 from arbitration with Mitsubishi Heavy Industries ("MHI") over MHI's delivery of faulty steam generators. In the Revised San Onofre Settlement Agreement, SCE retains the right to sell its stock of nuclear fuel and continuesnot share such proceeds with customers, as was provided in the Prior San Onofre Settlement Agreement. SCE intends to concludesell its nuclear fuel inventory as market conditions warrant. Sales of nuclear fuel may be significant.
Under the Prior San Onofre Settlement Agreement, the Utilities agreed to fund $25 million for a Research, Development and Demonstration program that is intended to develop technologies and methodologies to reduce greenhouse gas emissions ("GHG Reduction Program"). The Utilities' funding obligation is reduced to $12.5 million under 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. Such judgment is subject to uncertainty, and regulatory principles and precedents are not necessarily binding and are capable of interpretation.Revised San Onofre Settlement Agreement.


If approved by the CPUC, the Revised San Onofre Settlement Agreement will also provide certain exclusions from the determination of SCE's ratemaking capital structure. Notwithstanding that SCE will no longer recover its San Onofre regulatory asset, the debt borrowed to finance the regulatory asset will continue to be excluded from SCE's ratemaking capital structure. Additionally, SCE may exclude the after-tax charge resulting from the implementation of the Revised San Onofre Settlement Agreement from its ratemaking capital structure.
Additional 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 Prior 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. In light of the San Onofre OII 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. TheIn October 2017, the Ninth Circuit scheduled a hearing for February 13, 2018 and directed the parties have filedto file a status report on January 30, 2018. As part of the required status reportsRevised San Onofre Settlement Agreement, subject to CPUC approval of the Revised San Onofre Settlement Agreement, the plaintiffs agreed to dismiss this case with prejudice. In light of these developments, the court.February 13 hearing was cancelled and the Ninth Circuit appeal is currently stayed.
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 initial complaint purportedpurports to be filed on behalf of a class of persons who acquired Edison International common stock between March 21, 2014 and June 24, 2015 (the "Class Period"). In September 2016, the federal court granted defendants’defendants' motion to dismiss the complaint, with an opportunity for plaintiff to amend the complaint. Plaintiff filed ana second amended complaint in October 2016, which the federal court dismissed again with an opportunity for the plaintiff to amend the complaint. Plaintiff filed a third amended complaint in May 2017, which extends the Class Period to August 10, 2015. Defendants filed a motion to dismiss the third amended complaint in June 2017, and are awaiting a ruling.
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. In September 2016, the federal court granted defendants' motion to dismiss the consolidated complaint,dismissed with an opportunity for plaintiffs to amend the complaint. Plaintiffs did not file an amended complaint by the required date. Plaintiffs' deadline to appeal the federal court's order granting defendants' motion to dismiss lapsedprejudice in March 2017 and no appeal was filed.
In October 2015, a shareholder derivative lawsuit was filed in California state court against members of2018. Plaintiffs' have appealed 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. In light of the ruling in the parallel federal derivative lawsuit discussed above, plaintiff requested that the court voluntarily dismiss the state court action. The action was dismissed in April 2017.dismissal.
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. 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. These defendants' motion was heard by the court in November 2016. In June 2017, the federal court again granted defendants' motion to dismiss the lawsuit with an opportunity for the plaintiff to amend her complaint. Plaintiff filed an amended complaint in early July 2017. Defendants have filed motion to dismiss the amended complaint, which will bewas heard by the court in October 2017.2017, and are awaiting a ruling.
Edison International and SCE cannot predict the outcome of the openthese proceedings.
MHI Claims
SCE pursued claims against MHI, which designed and supplied the replacement steam generators. In October 2013, SCE sent MHI a formal request for binding arbitration under the auspices of the International Chamber of Commerce seeking damages for all losses. SCE alleged contract and tort claims and sought at least $4 billion in damages on behalf of itself and its customers and in its capacity as Operating Agent for San Onofre. MHI denied any liability and asserted counterclaims for $41 million, for which SCE 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 were added as additional claimants in the arbitration. In March 2017, the arbitration tribunal found MHI liable for breach of contract, but rejected claimants' other claims. The tribunal found that damages were subject to contractual limitations on liability. 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 is the final award of the tribunal but can be challenged in court on limited grounds. 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.
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 June 30, 2017,March 31, 2018, SCE's recorded estimated minimum liability to remediate its 1920 identified material sites (sites with a liability balance at June 30, 2017,March 31, 2018, in which the upper end of the range of the costs is at least $1 million) was $125$142 million, including $74$92 million related to San Onofre. In addition to these sites, SCE also has 1716 immaterial sites with a liability balance as of June 30, 2017,March 31, 2018, for which the total minimum recorded liability was $3$4 million. Of the $128$146 million total environmental remediation liability for SCE, $123$140 million has been recorded as a regulatory asset. SCE expects to recover $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 $75$93 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 $150$131 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 five years are expected to range from $5$4 million to $18 million. Costs incurred for the sixthree months ended June 30,March 31, 2018 and 2017 and 2016 were $4 million and $1$2 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 $50 million and $1.06 billion.billion, respectively. If NEIL losses at any nuclear facility covered by the arrangement were to exceed the accumulated funds for these insurance programs, SCE could be assessed retrospective premium adjustments of up to approximately $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.$13.1 billion for Palo Verde and $560 million for San Onofre. SCE and other owners of San Onofre and Palo Verde have purchased the maximum private primary insurance available through a Facility Form issued by American Nuclear Insurers ("ANI"). SCE withdrew from participation in the secondary insurance pool for San Onofre for offsite liability insurance effective January 5, 2018. Based on its ownership interests in Palo Verde, SCE could


be required to pay a maximum of approximately $60 million per nuclear incident for future incidents. However, it would have to pay no more than approximately $9 million per future incident in any one year. SCE could be required to pay a maximum of approximately $255 million per nuclear incident. However, it would have to pay no more than approximatelyincident and a maximum of $38 million per year per incident infor liabilities arising from events prior to January 5, 2018, although SCE is not aware of any one year.such events.
For more information on nuclear insurance coverage, see Note 11 in the 20162017 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. Drought 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, 2018. SCE has a self-insured retention of $10 million per wildfire occurrence. Various coverage limitations within the policies that make up this insurance coverage could result in additional self-insured costs in the event of multiple wildfire occurrences during the policy period. SCE or its vegetation management 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 insurance coverage.
Spent Nuclear Fuel
Under federal law, the U.S. Department of Energy ("DOE")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 willmay 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 – 2015 was filed on September 30, 2016 for approximately $56 million. In February 2017, the DOE reviewed the 2014 – 2015 claim submission and reduced the original request to approximately $43 million (SCE share was approximately $34 million) primarily due to DOE allocation limits.. SCE accepted the DOE's determination, and the government will paypaid the 2014 – 2015 claim under the terms of the settlement. In October 2017, SCE will makefiled a claim covering damages for 2016 for approximately $58 million. In March 2018, the DOE completed its review of SCE’s 2016 claim submission and determined that SCE should be reimbursed approximately $44 million, not allowing recovery of approximately $14 million. In April 2018, SCE submitted a request for 2016 damages inreconsideration of the third quarterDOE's March 2018 determination, requesting that the DOE allow recovery of 2017.an additional $1.2 million. 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 second quarter of 2017, SCE issued $475 million of 5.00% Series L preference stock (190,004 shares; cumulative, $2,500 liquidation value) to SCE Trust VI, a special purpose entity formed to issue trust securities as discussed in Note 3. The Series L preference stock may be redeemed at a premium, in whole, but not in part, at any time prior to June 26, 2022 if certain changes in tax or investment company law or interpretation or applicable rating agency equity credit criteria occur. On or after June 26, 2022, SCE may redeem the Series L shares at par, in whole or in part. The shares are not subject to mandatory redemption. In July 2017, the proceeds were used to redeem $475 million of SCE's Series F Preference Stock.


Note 13.    Accumulated Other Comprehensive Loss
Edison International'sThe changes in accumulated other comprehensive loss, net of tax, consist of:
Edison International SCE
Three months ended June 30, Six months ended June 30,Three months ended March 31,
(in millions)2017 2016 2017 20162018 2017 2018 2017
Beginning balance$(49) $(54) $(53) $(56)$(43) $(53) $(19) $(20)
Pension and PBOP – net loss:              
Reclassified from accumulated other comprehensive loss1
1
 1
 3
 3
2
 2
 2
 1
Other—
 —
 2
 —
Other2
(5) 2
 (5) 1
Change1
 1
 5
 3
(3) 4
 (3) 2
Ending Balance$(48) $(53) $(48) $(53)$(46) $(49) $(22) $(18)
1 
These items are included in the computation of net periodic pension and PBOP Plan expense. See Note 89 for additional information.
SCE's accumulated other comprehensive loss, net of tax consist of:
 Three months ended June 30, Six months ended June 30,
(in millions)2017 2016 2017 2016
Beginning balance$(18) $(21) $(20) $(22)
Pension and PBOP – net loss:       
    Reclassified from accumulated other comprehensive loss1
1
 1
 2
 2
Other(1) —
 —
 —
Change—
 1
 2
 2
Ending Balance$(18) $(20) $(18) $(20)
12 
These items are included inEffective January 1, 2018, Edison International and SCE adopted an accounting standards update related to the computationmeasurement of net periodic pensionfinancial instruments. As a result of this new accounting guidance, Edison International and PBOP Plan expense.SCE recognized cumulative effect adjustments to the opening balance of retained earnings and accumulated other comprehensive loss on January 1, 2018. See Note 81 for additionalfurther information.


Note 14.    Interest and Other Income and Other Expenses
Interest and otherOther income and other expenses are as follows:
 Three months ended June 30, Six months ended June 30,
(in millions)2017 2016 2017 2016
SCE interest and other income:       
Equity allowance for funds used during construction$23
 $19
 $41
 $42
Increase in cash surrender value of life insurance policies and life insurance benefits10
 11
 22
 17
Interest income1
 2
 3
 3
Other2
 1
 3
 3
Total SCE interest and other income36
 33

69

65
Other income of Edison International Parent and Other1
 —
 1
 —
Total Edison International interest and other income$37
 $33

$70

$65
SCE other expenses:       
Civic, political and related activities and donations$7
 $8
 $10
 $12
Other5
 3
 9
 7
Total SCE other expenses12
 11

19

19
Other expenses of Edison International Parent and Other—
 —
 1
 —
Total Edison International other expenses$12
 $11

$20

$19
 Three months ended March 31,
(in millions)2018 2017
SCE other income and expenses:   
Equity allowance for funds used during construction$22
 $19
Increase in cash surrender value of life insurance policies and life insurance benefits8
 12
Interest income4
 1
Net periodic benefit income (costs) - non-service cost components26
 9
Civic, political and related activities and donations(4) (4)
Other(5) (2)
Total SCE other income and expenses51
 35
Other income and expenses of Edison International Parent and Other:   
Net periodic benefit income (costs) - non-service cost components—
 (1)
 Other—
 (1)
Total Edison International other income and expenses$51
 $33


Note 15.    Supplemental Cash Flows Information
Supplemental cash flows information for continuing operations is:
Edison International SCEEdison International SCE
Six months ended June 30,Three months ended March 31,
(in millions)2017 2016 2017 20162018 2017 2018 2017
Cash payments for interest and taxes:              
Interest, net of amounts capitalized$240
 $228
 $223
 $221
$164
 $167
 $149
 $152
Tax payments, net of refunds14
 12
 20
 32
Tax refunds(93) —
 (18) —
Non-cash financing and investing activities:              
Dividends declared but not paid:              
Common stock$177
 $156
 $—
 $—
$197
 $177
 $212
 $—
Preferred and preference stock12
 12
 12
 12
1
 1
 1
 1
SCE's accrued capital expenditures at June 30,March 31, 2018 and 2017 and 2016 were $283$399 million and $338$275 million, respectively. Accrued capital expenditures will be included as an investing activity in the consolidated statements of cash flow in the period paid.


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 secondfirst quarter of 2017.2018. 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 secondfirst quarter of 20172018 that have materially affected, or are reasonably likely to materially affect, Edison International's or SCE's internal control over financial reporting.
Jointly Owned Utility Plant
Edison International's and SCE's respective scope of evaluation of internal control over financial reporting includes their Jointly Owned Utility Projects as discussed in Note 2. Property, Plant and Equipment in the 20162017 Form 10-K.
LEGAL PROCEEDINGS
None.
December 2017 Wildfires Litigation
The December 2017 Wildfires impacted portions of SCE's service territory and caused substantial damage to both residential and business properties and service outages for SCE customers. The largest of these fires, known as the Thomas Fire, originated in Ventura County and burned acreage located in both Ventura and Santa Barbara Counties. According to the most recent Cal Fire incident information reports, the Thomas Fire burned over 280,000 acres, destroyed an estimated 1,063 structures, damaged an estimated 280 structures and resulted in one fatality.
As of April 27, 2018, SCE was aware of at least 52 lawsuits related to the Thomas Fire naming SCE as a defendant. Seventeen of these lawsuits also name Edison International as a defendant and at least four of the lawsuits were filed as purported class actions. The lawsuits, which have been filed in the superior courts of Ventura, Santa Barbara and Los Angeles Counties allege, among other things, negligence, inverse condemnation, trespass, private nuisance, and violations of the public utilities and health and safety codes. The Chair of the California Judicial Council has ordered that the lawsuits be coordinated in the Los Angeles Superior Court.
Montecito Mudslides Litigation
In January 2018, torrential rains in Santa Barbara County produced mudslides and flooding in Montecito and surrounding areas. According to Santa Barbara County initial reports, the Montecito Mudslides destroyed an estimated 135 structures, damaged an estimated 324 structures, and resulted in at least 21 fatalities, with two additional fatalities presumed.
Twenty-nine of the 52 lawsuits mentioned under "December 2017 Wildfires Litigation" above allege that SCE has responsibility for the Thomas Fire and that the Thomas Fire proximately caused the Montecito Mudslides, resulting in the plaintiffs’ claimed damages. Eleven of the Montecito Mudslides lawsuits also name Edison International as a defendant. In addition to other causes of action, some of the Montecito Mudslides lawsuits also allege personal injury and wrongful death. The Chair of the California Judicial Council has ordered that the Thomas Fire and Montecito Mudslides lawsuits be coordinated in the Los Angeles Superior Court.



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 secondfirst quarter of 2017.2018.
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
April 1, 2017 to April 30, 2017160,144
  $80.68
  — —
May 1, 2017 to May 31, 2017311,524
  $79.32
  — —
June 1, 2017 to June 30, 2017232,253
  $79.97
  — —
Total703,921
  $79.84
  — —
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, 2018 to January 31, 2018120,022
  $62.63
  �� —
February 1, 2018 to February 28, 201879,352
  $62.21
  — —
March 1, 2018 to March 31, 2018103,142
  $62.72
  — —
Total302,516
  $62.55
  — —
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
   
10.1 
Term Loan Credit Agreement, dated as of January 26, 2018, among Edison International, the several banks and other financial institutions from time to time parties thereto, and Citibank, N.A., as administrative agent for the lenders (File No. 1-9936, filed as Exhibit 10.1 to Edison International’s Form 8-K dated and filed January 26, 2018)*

   
3.110.2 
Restated Articles of Incorporation of Southern CaliforniaRevised San Onofre Settlement Agreement dated January 30, 2018 (File No. 1-9936, filed as Exhibit 10.1 to Edison Company, together with all Certificates of Determination of Preferences of all outstanding PreferredInternational’s Form 8-K dated January 30, 2018 and Preference Stockfiled January 31, 2018)*
10.3**
Edison International 2018 Long-Term Incentives Terms and Conditions
10.4**
Edison International 2008 Executive Disability Plan, as amended and restated effective April 2, 2018

10.5**
Edison International 2008 Executive Severance Plan, as amended and restated effective April 2, 2018

10.6**
Edison International 2008 Executive Retirement Plan, as amended and restated effective August 24, 2016 (as amended) (File No. 1-9936, filed as Exhibit 10.8 to Edison International's Form 10-K dated December 31, 2017 and filed February 22, 2018)*

10.7**
Edison International Executive Deferred Compensation Plan, as amended and restated effective June 19, 2014 (as amended)

10.8**
Edison International 2008 Executive Deferred Compensation Plan, as amended and restated effective December 9, 2015 (as amended)
   
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 June 30, 2017,March 31, 2018, filed on July 27, 2017,May 1, 2018, 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 June 30, 2017,March 31, 2018, filed on July 27, 2017,May 1, 2018, 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

* Incorporated by reference pursuant to Rule 12b-32
** 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. EricksonAaron D. Moss
     
 
Aaron D. Moss
Vice President and Controller
(Duly Authorized Officer and
Principal Accounting Officer)
  
Connie J. EricksonAaron D. Moss
Vice President and Controller
(Duly Authorized Officer and
Principal Accounting Officer)
     
Date:July 27, 2017May 1, 2018 Date:July 27, 2017May 1, 2018


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