0000827052 eix:SouthernCaliforniaEdisonCompanyMember eix:OtherOperatingLeasesMember srt:MinimumMember 2019-09-30

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



(Mark One)
þ☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	September 30, ~~2017~~2019
o☐	TRANSITION 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)~~



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

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.

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 Yesþ No oSouthern California Edison Company Yesþ 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 Filerþ	Accelerated Filer¨	Non-accelerated Filer¨	Smaller Reporting Company¨	Emerging growth company¨
	þ	☐	☐	☐	☐
Southern California Edison Company	Large Accelerated Filer¨	Accelerated Filer¨	Non-accelerated Filerþ	Smaller Reporting Company¨	Emerging growth company¨
		☐	þ	☐	☐

Securities registered pursuant to Section 12(b) of the Act:

Edison International:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	EIX	NYSE	LLC

Southern California Edison Company:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Cumulative Preferred Stock, 4.08% Series	SCEpB	NYSE American LLC
Cumulative Preferred Stock, 4.24% Series	SCEpC	NYSE American LLC
Cumulative Preferred Stock, 4.32% Series	SCEpD	NYSE American LLC
Cumulative Preferred Stock, 4.78% Series	SCEpE	NYSE American LLC



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 ☐ 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).

~~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 October ~~27, 2017:~~24, 2019:
Edison International		~~325,811,206~~358,601,135 shares
Southern California Edison Company		434,888,104 shares

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.~~

The following terms and abbreviations appearing in the text of this report have the meanings indicated below.



~~2016~~2017/2018 Wildfire/Mudslide Events		the Thomas Fire, the Koenigstein Fire, the Montecito Mudslides and the Woolsey Fire, collectively
2018 Form 10-K		Edison International's and SCE's combined Annual Report on Form 10-K for the ~~year-ended~~year ended December 31, ~~2016~~2018
AB 1054		California Assembly Bill 1054, executed by the Governor of California on July 12, 2019
AFUDC		allowance for funds used during construction
ALJ		administrative law judge
ARO(s)		asset retirement obligation(s)
Bcf		billion cubic feet
~~Bonus Depreciation~~bonus depreciation		~~Current federal~~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 Advocates		CPUC's Public Advocates Office (formerly known as the Office of Ratepayer Advocates or ORA)
CAL FIRE		California Department of Forestry and Fire Protection
CCAs		Community Choice Aggregators which are cities, counties, and certain other public agencies with the authority to generate and/or purchase electricity for their local residents and businesses
Commission on Catastrophic Wildfire Cost and Recovery		Commission on Catastrophic Wildfire Cost and Recovery established by the California Governor’s Office of Planning and Research as required by California Senate Bill 901
CPUC		California Public Utilities Commission
December 2017 Wildfires		several wind-driven wildfires, including the Thomas Fire and the Koenigstein Fire, that occurred in December 2017 and impacted portions of SCE's service territory
DERs		distributed energy resources
DOE		U.S. Department of Energy
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~~a wholly-owned subsidiary of Edison International, is a holding company for subsidiaries engaged in competitive businesses ~~focused on providing~~that provide energy services ~~managed portfolio solutions, and distributed solar solutions~~ to commercial and industrial customers
EME		Edison Mission Energy
~~EMG~~EME Settlement Agreement		Settlement Agreement by and among Edison Mission ~~Group Inc., a wholly owned subsidiary of~~Energy, Edison International and the ~~parent company~~Consenting Noteholders identified therein, dated February 18, 2014
Electric Service Provider		an entity that offers electric power and ancillary services to customers that take final delivery of ~~EME~~electric power and ~~Edison Capital~~do not resell the power
ERRA		~~energy resource recovery account~~Energy Resource Recovery Account
FASB		Financial Accounting Standards Board
FERC		Federal Energy Regulatory Commission
FERC 2018 Settlement Period		January 1, 2018 through November 11, 2019
Fitch		Fitch Ratings, Inc.
GAAP		generally accepted accounting principles ~~used in the United States~~
GHG		greenhouse gas
GRC		general rate case
GS&RP		Grid Safety and Resiliency Program
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,~~25, 2019
Koenigstein Fire		a wind-driven fire that originated near Koenigstein Road in the City of Santa Paula in Ventura County on December 4, 2017
Liability Cap		If the insurance fund allowed under AB 1054 is established, and subject to certain other conditions, a cap on the aggregate requirement to reimburse the insurance fund over a trailing three calendar year period equal to 20% of the equity portion of the utility’s transmission and distribution rate base in the year of the prudency determination
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
Montecito Mudslides		the mudslides and flooding in Montecito, Santa Barbara County, that occurred in January 2018
Moody's		Moody's Investors Service, Inc.
MW		megawatts
MWdc		megawatts measured for solar projects representing the accumulated peak capacity of all the solar modules
NDCTP		Nuclear Decommissioning Cost Triennial Proceeding
NEIL		Nuclear Electric Insurance Limited
NEM		net energy metering
NERC		North American Electric Reliability Corporation
NOL		net operating loss
NRC		Nuclear Regulatory Commission
~~ORA~~		~~CPUC's Office of Ratepayers Advocates~~
OII		Order Instituting Investigation
OII Parties		SCE, 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, Cal Advocates, TURN, and Women's Energy Matters, all of whom are parties to the Revised San Onofre Settlement Agreement
PABA		Portfolio Allocation Balancing Account
Palo Verde		nuclear electric generating facility located near Phoenix, Arizona in which SCE holds a 15.8% ownership interest
PBOP(s)		postretirement benefits other than pension(s)
~~QF(s)~~PCIA		~~qualifying facility(ies)~~

Power Charge Indifference Adjustment

~~ROE~~PG&E		~~return on common equity~~Pacific Gas & Electric Company
~~S&P~~Prior San Onofre Settlement Agreement		~~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,~~Cal Advocates, 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 and modified on August 2, 2018
ROE		return on common equity
S&P		Standard & Poor's Financial Services LLC
San Onofre		retired nuclear generating facility located in south San Clemente, California in which SCE holds a 78.21% ownership interest
SCE		Southern California Edison Company, a wholly-owned subsidiary of Edison International
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 energy~~was sold in April 2018



TAMA		Tax Accounting Memorandum Account
Tax Reform		Tax Cuts and ~~energy storage solutions~~Jobs Act signed into law on December 22, 2017
Thomas Fire		a wind-driven fire that originated in the Anlauf Canyon area Ventura County on December 4, 2017
TOU		Time-Of-Use
TURN		The Utility Reform Network
US EPA		U.S. Environmental Protection Agency
VCFD		The Ventura County Fire Department
WMP		a wildfire mitigation plan required to be filed every three years under California Assembly Bill 1054 to describe a utility's plans to construct, operate, and maintain electrical lines and equipment that will help minimize the risk of catastrophic wildfires caused by such electrical lines and equipment
Wildfire Insurance Fund		The insurance fund established pursuant to AB 1054
Woolsey Fire		a wind-driven fire that originated in Ventura County in November 2018

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:

regions, and changes in California's environmental priorities that lessen the importance the state places on GHG reduction;

Additional information about risks and uncertainties, including more detail about the factors described in this report, is contained throughout this report and in the ~~2016~~2018 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 ~~2016~~2018 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's~~certain SCE and other parties' regulatory filings and documents with the CPUC and the FERC and ~~material~~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 nine months ended September 30, ~~2017~~2019 discusses material changes in the consolidated financial condition, results of operations and other developments of Edison International and SCE since December 31, ~~2016,~~2018 and as compared to the nine months ended September 30, ~~2016.~~2018. This discussion presumes that the reader has read or has access to Edison International's and SCE's MD&A for the calendar year ~~2016~~2018 (the "year-ended ~~2016~~2018 MD&A"), which was included in the ~~2016~~2018 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 and "Edison International Parent" mean Edison International on a stand-alone basis, not consolidated with its 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~~Edison Energy which is engaged in ~~pursuing~~the competitive business ~~opportunities across~~of providing energy services ~~managed portfolio solutions, and distributed solar solutions~~ to commercial and industrial customers. ~~Such~~Edison Energy'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 the information contained in this report relates to both filers.


		Three months ended September 30,							Nine months ended September 30,										Three months ended September 30,									Nine months ended September 30,
(in millions)		2017		2016¹			Change		2017			2016¹			Change				2019			2018			Change			2019				2018			Change
Net income (loss) attributable to Edison International	Net income (loss) attributable to Edison International																	Net income (loss) attributable to Edison International
Continuing operations
SCE		$	465	$	435		$	30	$	1,121		$	1,048		$	73			$	503		$	536		$	(33	)	$	1,215			$	1,119		$	96
Edison International Parent and Other		5		(14		)	19		(11		)	(65		)	54				(32		)	(23		)	(9		)	(74		)		(112		)	38
Discontinued operations		—		—			—		—			(1		)	1
Edison International		470		421			49		1,110			982			128				471			513			(42		)	1,141				1,007			134
Less: Non-core items
SCE		—		—			—		—			—			—				(48		)	7			(55		)	(99		)	—	7			(106		)
Edison International Parent and Other		—		—			—		1			5			(4		)		—			(4		)	4			—				(46		)	46
Discontinued operations		—		—			—		—			(1		)	1
Total non-core items		—		—			—		1			4			(3		)		(48		)	3			(51		)	(99		)		(39		)	(60		)
Core earnings (losses)
SCE		465		435			30		1,121			1,048			73				551			529			22			1,314				1,112			202
Edison International Parent and Other		5		(14		)	19		(12		)	(70		)	58				(32		)	(19		)	(13		)	(74		)		(66		)	(8		)
Edison International		$	470	$	421		$	49	$	1,109		$	978		$	131			$	519		$	510		$	9		$	1,240			$	1,046		$	194

Edison International's earnings are prepared in accordance with GAAP. Management uses core earnings (losses) internally for financial planning and for analysis of performance. Core earnings (losses) are also used when communicating with investors and analysts regarding Edison International's earnings results to facilitate comparisons of the company's performance from period to period. Core earnings (losses) are a non-GAAP financial measure and may not be comparable to those of other companies. Core earnings (losses) are defined as earnings attributable to Edison International shareholders less non-core items. Non-core items include income or loss from discontinued operations ~~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 write downs, asset impairments and other income and expense related to changes in law, outcomes in tax, regulatory or legal proceedings, and exit activities, including sale of certain assets and other activities that are no longer ~~continuing, write downs, asset impairments and other gains and losses related to certain tax, regulatory, or legal settlements or proceedings.~~

Edison International's third quarter ~~2017~~2019 earnings ~~increased $49~~decreased $42 million from the third quarter of ~~2016, comprised~~2018, resulting from a decrease in SCE's earnings of $33 million and an increase in Edison International Parent and Other's losses of $9 million. SCE's lower earnings consisted of $55 million of higher non-core losses and $22 million of higher core earnings. The increase in core earnings was primarily due to the adoption of the 2018 GRC final decision in the second quarter of 2019 and higher FERC revenue due to the pending settlement of SCE's 2018 Formula Rate proceeding, partially offset by higher wildfire mitigation expenses. SCE had higher non-core losses from the amortization of SCE's contributions to the Wildfire Insurance Fund.

Edison International's earnings for the nine months ended September 30, 2019 increased $134 million from the nine months ended September 30, 2018, resulting from an increase in SCE's earnings of ~~$30~~$96 million and a decrease in Edison International Parent and Other's losses of ~~$19~~$38 million. SCE's higher earnings consisted of $106 million of higher non-core losses and $202 million of higher core earnings. The increase in core earnings ~~at SCE~~ was primarily due to the ~~escalation mechanism set forth~~adoption of the 2018 GRC final decision in the ~~2015 GRC decision.~~second quarter of 2019, higher FERC revenue due to the pending settlement of SCE's 2018 Formula Rate

~~Edison International's earnings for the nine months ended September 30, 2017 increased $128 million from the nine months ended September 30, 2016, comprised~~

proceeding and timing of ~~an increase in SCE's earnings~~regulatory deferrals of ~~$73 million, a decrease in~~ wildfire insurance costs, partially offset by higher wildfire mitigation and other maintenance expenses.

Edison International Parent and Other's increase in losses for the three months ended September 30, 2019 was due to higher core losses of ~~$54~~$13 million ~~and a decrease in losses~~primarily from ~~discontinued operations of $1 million. The increase in earnings at SCE was primarily related to an increase in revenue from the escalation mechanism set forth in the 2015 GRC decision~~higher interest expense and lower ~~operation and maintenance expenses, partially offset by a reduction in CPUC revenue related to prior overcollections and higher net financing costs.~~non-core losses of $4 million.

Edison International Parent and Other's decrease in losses for the ~~three and~~ nine months ended September 30, ~~2017~~2019 was due to ~~lower~~higher core losses of ~~$19~~$8 million ~~and $58 million, respectively,~~primarily from higher interest expense, partially offset by lower losses from the competitive businesses under Edison Energy Group and lower non-core ~~earnings~~losses of ~~$4 million~~$46 million.

Consolidated non-core items for the nine months ended September 30, ~~2017. The decrease~~2019 and 2018 primarily included:

~~SCE's~~disallowed historical capital expenditures ~~forecast for the 2017 – 2020 period has been revised since the filing of the 2016 Form 10-K, as indicated~~ in ~~the table below. The update also reflects SCE's revised requested capital expenditures for 2018 – 2020 resulting from~~ SCE's 2018 GRC ~~rebuttal testimony, filed~~final decision.

~~The 2017 capital program had originally included expenditures~~2019 for SCE related to changes in the allocation of ~~$182 million for grid modernization capital spending. SCE has requested CPUC approval~~deferred tax re-measurement between customers and shareholders as a result of a ~~memorandum account~~CPUC resolution issued in February 2019. The resolution determined that customers are only entitled to ~~facilitate recovery~~excess deferred taxes which were included when setting rates and other deferred tax re-measurement belongs to shareholders.

Traditional capital expenditures for 2017 reflect 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 traditional capital spending that will be approved in the 2018 GRC decision, management is not aware of factors that would cause the percentage of SCE's request that is ultimately approved to be materially different from what has been approved in recent GRC decisions. SCE does not have prior approval experience with grid modernization capital expenditures and, therefore, is unable to predict an expected outcome. Forecasted expenditures for FERC capital projects are subject to change due to timeliness of permitting, licensing and regulatory approvals. For further information regarding updates for large transmission and substation projects, see "Liquidity and Capital Resources—SCE—Capital Investment Plan."

It is unlikely that SCE will receive a 2018 GRC decision in 2017. It is also uncertain whether SCE will receive firm guidance on grid modernization spending as part of the DRP proceeding during 2017. SCE is currently developing an approach for 2018 capital spending, based on these contingencies, which will allow SCE to ~~ramp up its capital spending~~fund a research, development and demonstration program intended to ~~meet~~develop technologies and methodologies to reduce GHG emissions.

Total capital expenditures (including accruals) were $2.3 billion and $2.4 billion for the first nine months of 2017 and 2016, respectively. The following table sets forth a summary of forecasted capital expenditures for 2017 – 2020 on the basis described above:

(in millions) 2017 2018 2019 2020 Total 2017 – 2020
Traditional capital expenditures¹

Distribution²
$ 2,975
$ 3,174
$ 3,119
$ 3,048
$ 12,316
Transmission 500
956
1,003
1,046
3,505
Generation 205
220
212
201
838
Total requested traditional capital expenditures^{1, 3}
$ 3,680
$ 4,350
$ 4,334
$ 4,295
$ 16,659
Grid modernization capital expenditures²
$ —
$ 538
$ 649
$ 608
$ 1,795
Total capital expenditures $ 3,680
$ 4,888
$ 4,983
$ 4,903
$ 18,454

~~SCE's estimated weighted average annual rate base for 2017 – 2020 using the capital expenditures set forth in the table above is as follows:~~

(in millions) 2017 2018 2019 2020
Rate base for requested traditional capital expenditures $ 26,133
$ 28,947
$ 31,040
$ 33,076
Rate base for requested grid modernization capital expenditures —
261
695
1,195
Total rate base $ 26,133
$ 29,208
$ 31,735
$ 34,271

~~The rate base above does not reflect reductions from the amounts requested in the 2018 GRC that may be included in a final decision.~~April 2018.

~~Regulatory Proceedings~~

2018 General Rate Case

In ~~September 2016,~~May 2019, the CPUC approved a final decision in SCE's 2018 GRC. The final decision authorized a revenue requirement of $5.116 billion for 2018 and identified changes to certain balancing accounts, including the expansion of the TAMA to include the impacts of all differences between forecast and recorded tax expense. The final decision also disallowed certain historical spending, largely related to specific pole replacements the CPUC determined were performed prematurely.

The final decision allows a post-test year rate making mechanism that escalates capital additions by 2.49% for both 2019 and 2020. It also allows operation and maintenance expenses to be escalated for 2019 and 2020 through the use of various escalation factors for labor, non-labor and medical expenses. The methodology set forth in the final decision results in a revenue requirement of $5.451 billion in 2019 and $5.863 billion in 2020.

The revenue requirements in the 2018 GRC final decision are retroactive to January 1, 2018. SCE recorded the prior period impact of the 2018 GRC final decision in the second quarter of 2019, including an increase to core earnings of $131 million from the application of the decision to revenue, depreciation expense and income tax expense and a non-core impairment of utility property, plant and equipment of $170 million ($123 million after-tax) related to disallowed historical capital expenditures. See “Results of Operations—SCE” and "Notes to Consolidated Financial Statements—Note 11. Regulatory Assets and Liabilities" for further information.

2021 General Rate Case

In August 2019, SCE filed its ~~2018~~2021 GRC application for the three-year period ~~2018~~2021 – ~~2020,~~2023, which requested a ~~2018~~2021 revenue requirement of ~~$5.885~~$7.601 billion, an increase of ~~$222 million~~$1.155 billion over the ~~projected 2017 GRC authorized revenue requirement. In June 2017 in its rebuttal testimony, SCE revised its requested 2018~~2020 revenue requirement ~~to $5.859 billion, which would be~~authorized in the 2018 GRC and updated for anticipated post test-year ratemaking changes. Including the impact of anticipated lower kWh sales in 2021 and $87.1 million of one-time memorandum account recoveries, this represents a ~~$196 million increase. The rebuttal testimony~~12.7% increase over 2020 rates. SCE's 2021 GRC request also includes proposed ~~post-test year increases in 2019 and 2020 of $480 million and $556 million, respectively.~~

~~In April 2017, the ORA recommended that SCE's original requested 2018 base~~ revenue requirement ~~be decreased by approximately $208 million, comprised~~increases of ~~approximately $164~~$400 million in ~~operations~~2022 and ~~maintenance expense reductions and approximately $44~~$531 million in ~~capital-related~~2023.

SCE's requested increase to its 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~~GRC application, based on the current ROE and capital structure, is largely due to SCE's efforts to reduce wildfire risk. Certain of ~~78% of~~SCE's key wildfire mitigation forecast expenditures are subject to significant potential volatility. As a result, SCE has proposed establishing two-way balancing

accounts for wildfire mitigation-related enhanced vegetation management, inspection activities, and grid ~~modernization~~hardening, as well as for insurance premiums.

SCE's 2021 GRC request excludes the revenue requirement associated with the approximately $1.6 billion in wildfire risk mitigation capital expenditures ~~in 2018 and initially recommended adjustments to~~that SCE will exclude from the equity portion of SCE's rate base as required under AB 1054.

The capital programs requested in SCE's 2021 GRC include the infrastructure and programs necessary to implement California's ambitious public policy goals, including wildfire mitigation, de-carbonization of the economy through electrification and integration of distributed energy resources across a rapidly modernizing grid, see "—Capital Program" for historical capital expenditures, including a reduction of $700 million, primarily related to certain distribution infrastructure replacement programs. In a September 2017 filing, TURN reduced their recommended rate base adjustment to approximately $550 million. The impact of TURN's updated recommendations would decrease SCE's original requested 2018 base revenue requirement by approximately $114 million.further details.

~~Public participation hearings are scheduled in mid-November and update filings are due in early December. While~~ SCE ~~requested~~is requesting that the CPUC issue a final decision by the end of ~~2017, it is unlikely that such timing will be achieved.~~2020. If the ~~schedule for a final~~ decision is delayed beyond 2020, SCE will, consistent with CPUC practice in prior GRCs, request the CPUC to issue an order directing that the authorized revenue requirement changes be effective January 1, ~~2018.~~2021.

Wildfire Mitigation and Wildfire Insurance Expenses

In response to the increase in wildfire activity, faster progression of, and increased damage from wildfires across SCE's service territory and throughout California, SCE ~~cannot predict~~is currently incurring wildfire mitigation and wildfire insurance related spending at levels significantly exceeding amounts authorized in the ~~revenue requirement~~2018 GRC. Several regulatory mechanisms exist to allow SCE to track and seek recovery of these incremental costs. In accordance with the accounting standards applicable to rate-regulated enterprises, SCE defers costs as regulatory assets that are probable of future recovery from customers and has recorded regulatory assets for these incremental costs at September 30, 2019. While SCE believes such costs are probable of future recovery, there is no assurance that SCE will collect all amounts currently deferred as regulatory assets.

In December 2018, the CPUC ~~will ultimately authorize~~approved the establishment of the Wildfire Expense Memorandum Account ("WEMA") to track incremental wildfire insurance costs and uninsured wildfire-related claims costs. As of September 30, 2019, SCE has recognized $230 million of regulatory assets in the WEMA related to incremental wildfire insurance costs.

In May 2019, the CPUC approved SCE's 2019 WMP. The CPUC decision requires SCE to meet certain reporting requirements, capture data, improve its metrics for ~~2018 through 2020 or forecast~~evaluating performance, and update its next WMP in the ~~timing~~areas of inspection and maintenance, vegetation management, system hardening, and situational awareness. Additionally, on July 31, 2019, SCE and certain parties to SCE's GS&RP proceeding submitted a motion to the CPUC requesting approval 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~~settlement agreement. If 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~~approves the settlement ~~negotiations~~agreement, SCE will be authorized to spend approximately $526 million ($407 million capital) in 2018 dollars, between 2018 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. On August 15, 2017, SCE notified the CPUC that the parties in the San Onofre OII Settlement Agreement were unable to reach agreement on possible changes to2020. If the settlement ~~unanimously~~agreement is approved by the CPUC, SCE will establish a balancing account to track GS&RP costs and forecasted costs for the GS&RP will be included in ~~2014.~~rates with a subsequent reasonableness review through the annual ERRA proceeding.

All other wildfire mitigation costs above those that are authorized will be subject to a subsequent reasonableness review, either through a later phase of the 2021 GRC or a separate application. As of September 30, 2019, SCE has recognized $169 million of regulatory assets related to incremental wildfire mitigation expenses and recorded $411 million of wildfire mitigation capital expenditures that may be eligible for recovery through the GS&RP and WMP memorandum accounts.

Total capital expenditures (including accruals) were $3.3 billion and $2.9 billion for the first nine months of 2019 and 2018, respectively.

Based on the 2021 GRC request, SCE forecasts capital expenditures for 2019 – 2023 to be approximately $23.8 billion to $25.6 billion. SCE's capital expenditure forecast for 2019 and 2020 has been updated since the filing of the 2018 Form 10-K to reflect planned CPUC jurisdictional spending as informed by the 2018 GRC final decision, including authorized capitalization rates, spending associated with SCE's wildfire mitigation-related capital expenditures under the GS&RP and WMP, and current expectations of FERC- jurisdictional spending. SCE's capital expenditure forecast for 2021 – 2023 reflects the requested CPUC jurisdictional spending included in the 2021 GRC application, approved non-GRC CPUC capital spending, and current expectations of FERC- jurisdictional capital spending. Based on management judgment using historical precedent of previously authorized amounts and potential permitting delays and other operational considerations, a range case has been provided reflecting a 10% reduction on the total capital forecast from 2021 through 2023 and a 10% reduction on FERC capital spending and non-GRC programs for 2020.

SCE's 2019 – 2023 forecast for major capital expenditures are set forth in the table below:



(in billions)	2019		2020		2021		2022		2023		Total 2019 – 2023
Distribution	$	3.2	$	3.3	$	3.4	$	3.4	$	3.3	$	16.6
Transmission	0.8		0.8		0.8		0.8		0.6		3.8
Generation	0.2		0.2		0.2		0.2		0.2		1.0
Subtotal	4.2		4.3		4.4		4.4		4.1		21.4
Estimated wildfire mitigation-related capital expenditures	0.4		0.7		0.9		1.0		1.2		4.2
Total estimated capital expenditures	$	4.6	$	5.0	$	5.3	$	5.4	$	5.3	$	25.6
Total estimated capital expenditures using range case discussed above	$	4.6	$	4.8	$	4.8	$	4.8	$	4.8	$	23.8

SCE's authorized CPUC-jurisdictional rate base is determined through the GRC and other regulatory proceedings. Differences between actual and CPUC authorized capital expenditures are addressed in subsequent GRC or other regulatory proceedings. FERC-jurisdictional rate base is generally determined based on actual capital expenditures.

Reflected below is SCE's weighted average annual rate base for 2018 – 2023 incorporating CPUC capital expenditures authorized in the 2018 GRC final decision, expected FERC capital expenditures and capital expenditures included in the 2021 GRC application. Under AB 1054, approximately $1.6 billion of wildfire risk mitigation capital expenditures cannot be included in the equity portion of SCE's rate base and instead can be recovered through issuance of securitized bonds. Accordingly, the table below does not reflect this $1.6 billion of wildfire risk mitigation capital expenditures. The table below does not reflect rate base associated with projects or programs that have not yet been approved by the CPUC. In addition, a third-party holds an option to invest up to $400 million in the West of Devers Transmission project at the estimated in-service date of 2021. The rate base has been reduced to reflect this option.



(in billions)	2018		2019		2020		2021		2022		2023
Rate base for expected capital expenditures	$	28.5	$	30.7	$	33.4	$	36.0	$	38.2	$	40.8
Rate base for expected capital expenditures (using range case described above)	$	28.5	$	30.7	$	33.2	$	35.3	$	36.9	$	39.0

Southern California Wildfires and Mudslides

Multiple factors have contributed to increased wildfire activity, faster progression of and increased damage from wildfires across SCE's service territory and throughout California. These include the buildup of dry vegetation in areas severely impacted by years of historic drought, lack of adequate clearing of hazardous fuels by responsible parties, higher temperatures, lower humidity, and strong Santa Ana winds. At the same time that wildfire risk has been increasing in Southern California, residential and commercial development has occurred and is occurring in some of the highest-risk areas. Such factors can increase the likelihood and extent of wildfires. SCE has determined that approximately 27% of its service territory is in areas identified as high fire risk.

In March 2019, the VCFD and CAL FIRE issued separate reports finding that the Thomas Fire and the Koenigstein Fire were each caused by SCE equipment. At this time, based on available information, SCE has not determined whether its equipment caused the Thomas Fire. Based on publicly available radar data showing a smoke plume in the Anlauf Canyon area emerging in advance of the start time of the Thomas Fire indicated in the Thomas Fire report, SCE believes that the Thomas Fire started at least 12 minutes prior to any issue involving SCE's system and at least 15 minutes prior to the start time indicated in the report. SCE has previously disclosed that SCE believed its equipment was associated with the ignition of the Koenigstein

Fire. SCE is continuing to assess the progression of the Thomas and Koenigstein Fires and the extent of damages that may be attributable to each fire.

SCE has received a non-final redacted draft of a report from the VCFD subject to a protective order in the litigation related to the Woolsey fire and, other than the information disclosed in this Form 10-Q, is not authorized to release the report or its contents to the public at this time. The draft report states that the VCFD investigation team determined that electrical equipment owned and operated by SCE was the cause of the Woolsey Fire. Absent additional evidence, SCE believes that it is likely that its equipment was associated with the ignition of the Woolsey Fire.

Multiple lawsuits related to the Thomas and Koenigstein Fires and the Woolsey Fire have been initiated against SCE and Edison International. Some of the Thomas and Koenigstein Fires lawsuits claim that SCE and Edison International have responsibility for the damages caused by the Montecito Mudslides based on a theory alleging that SCE has responsibility for the Thomas and/or Koenigstein Fires and that the Thomas and/or Koenigstein Fires proximately caused the Montecito Mudslides.

SCE's internal review into the facts and circumstances of each of the 2017/2018 Wildfire/Mudslide Events is ongoing, and SCE expects to obtain and review additional information and materials in the possession of third parties during the course ofits internal reviews and the litigation processes. Final determinations of liability for the Thomas Fire, the Koenigstein Fire, the Montecito Mudslides and the Woolsey Fire, including determinations of whether SCE was negligent, would only be made during lengthy and complex litigation processes.

Even when investigations are still pending or liability is disputed, an assessment of likely outcomes, including through future settlement of disputed claims, may require a liability to be accrued under accounting standards. Based on information available to SCE and consideration of the risks associated with litigation, Edison International and SCE expect to incur a material loss in connection with the 2017/2018 Wildfire/Mudslide Events and have accrued a liability of $4.7 billion in the fourth quarter of 2018. This liability corresponds to the lower end of the reasonably estimated range of expected potential losses that may be incurred in connection with the 2017/2018 Wildfire/Mudslide Events and is subject to change as additional information becomes available.

Edison International and SCE will seek to offset any actual losses realized in connection with the 2017/2018 Wildfire/Mudslide Events with recoveries from insurance policies in place at the time of the events and, to the extent actual losses exceed insurance, through electric rates. In the fourth quarter of 2018, Edison International and SCE also recorded expected recoveries from insurance of $2.0 billion and expected recoveries through FERC electric rates of $135 million, which is the FERC portion of the $4.7 billion liability it accrued. SCE believes that, in light of the CPUC's decision in a cost recovery proceeding involving SDG&E arising from several 2007 wildfires in SDG&E's service area, there is substantial uncertainty regarding how the CPUC will interpret and apply its prudency standard to an investor-owned utility in future wildfire cost-recovery proceedings for fires ignited prior to July 12, 2019. Accordingly, while the CPUC has not made a determination regarding SCE's prudency relative to any of the 2017/2018 Wildfire/Mudslide Events, SCE is unable to conclude, at this time, that uninsured CPUC-jurisdictional wildfire-related costs are probable of recovery through electric rates.

Edison International and SCE continue to pursue legislative, regulatory and legal strategies to address the application of a strict liability standard to wildfire-related damages without the ability to recover resulting costs in electric rates.

2019 Wildfire Legislation

On July 12, 2019, AB 1054 was signed by the Governor of California and became effective immediately. The summary of the wildfire legislation in this report is based on SCE's interpretation of the legislation and is qualified in its entirety by, and should be read together with, AB 1054 and companion Assembly Bill 111.

Wildfire Insurance Fund

AB 1054 provided for the Wildfire Insurance Fund to reimburse utilities for payment of third-party damage claims arising from certain wildfires that exceed, in aggregate in a calendar year, the greater of $1 billion or the utility's insurance coverage. The Wildfire Insurance Fund was established in September 2019 when both SCE and SDG&E made their initial contributions to the fund. The Wildfire Insurance Fund is available for claims related to wildfires ignited after July 12, 2019 that are determined to have been caused by a utility by the responsible government investigatory agency.

$3 billion to the Wildfire Insurance Fund over a 10-year period. If PG&E is unable to participate in the Wildfire Insurance Fund, the investor-owned utility aggregate annual contributions to the fund are expected to be approximately $1 billion. In addition to PG&E's, SCE's and SDG&E's contributions to the Wildfire Insurance Fund, $13.5 billion is expected to be collected from their ratepayers through a dedicated rate component to support a $10.5 billion contribution to the fund. Based on a decision adopted by the CPUC in October 2019 in the Order Instituting Rulemaking to Consider Authorization of a Non-Bypassable Charge to Support the Wildfire Insurance Fund, PG&E’s ratepayers will not be required to contribute to the fund if PG&E does not participate in the Wildfire Insurance Fund. In that case, $7.5 billion will be collected from SCE's and SDG&E's ratepayers through the dedicated rate component to support a contribution to the Wildfire Insurance Fund. In addition to funding contributions to the Wildfire Insurance Fund, the amount collected from utility ratepayers will pay for, among other things, any interest and financing costs related to any bonds that are issued to support the contributions to the Wildfire Insurance Fund.

SCE made an initial contribution of approximately $2.4 billion to the Wildfire Insurance Fund in September 2019, and has committed to make ten annual contributions of approximately $95 million per year to the fund, starting on January 1, 2020. Edison International supported SCE's initial contribution to the Wildfire Insurance Fund by raising $1.2 billion from the issuance of Edison International equity. SCE raised the remaining $1.2 billion from the issuance of long-term debt. SCE's contributions to the Wildfire Insurance Fund will not be recoverable through electric rates and will be excluded from the measurement of SCE's CPUC-jurisdictional authorized capital structure. SCE will also not be entitled to cost recovery for any borrowing costs incurred in connection with its contributions to the Wildfire Insurance Fund.

Participating investor-owned utilities will be reimbursed from the Wildfire Insurance Fund for eligible claims, subject to the fund administrator's review, and will be required to reimburse the fund for withdrawn amounts that the CPUC disallows up to the Liability Cap. A utility will not be eligible for the Liability Cap if it does not maintain a valid safety certification or its actions or inactions that resulted in the wildfire are found to constitute conscious or willful disregard of the rights and safety of others. On July 25, 2019, SCE obtained its initial safety certification that will be valid for twelve months. The initial Liability Cap for SCE will be approximately $2.5 billion based on its 2019 rate base, and will be adjusted annually. SCE will not be allowed to recover borrowing costs incurred to reimburse the fund for amounts that the CPUC disallows. The Wildfire Insurance Fund and, consequently the Liability Cap, will terminate when the administrator determines that the fund has been exhausted.

AB 1054 Prudency Standard

As a result of the establishment of the Wildfire Insurance Fund, AB 1054 created a new standard that the CPUC must apply when assessing the prudency of a utility in connection with a request for recovery of wildfire costs for wildfires ignited after July 12, 2019. Under AB 1054, the CPUC is required to find a utility to be prudent if the utility's conduct related to the ignition was consistent with actions that a reasonable utility would have undertaken under similar circumstances, at the relevant point in time, and based on the information available at that time. Utilities with a valid safety certification will be presumed to have acted prudently related to a wildfire ignition unless a party in the cost recovery proceeding creates serious doubt as to the reasonableness of the utility's conduct, at which time, the burden shifts back to the utility to prove its conduct was reasonable. If a utility does not have a valid safety certification, it will have the burden to prove, based on a preponderance of evidence, that its conduct was prudent. The new prudency standard will survive the termination of the ~~meet-and-confer process,~~Wildfire Insurance Fund.

Utilities participating in the Wildfire Insurance Fund that are found to be prudent are not required to reimburse the fund for amounts withdrawn from the fund and can recover wildfire costs through electric rates if the fund has been exhausted.

Capital Expenditure Requirement

Under AB 1054, approximately $1.6 billion spent by SCE ~~asked~~on wildfire risk mitigation capital expenditures cannot be included in the equity portion of SCE's rate base. SCE can apply for an irrevocable order from the CPUC to ~~affirm that~~finance these capital expenditures, including through the ~~San Onofre OII Settlement Agreement is fair, reasonable~~issuance of securitized bonds, and ~~in the public interest. Other parties~~can recover any prudently incurred financing costs. SCE expects to ~~the meet-and-confer process petitioned the CPUC on a broad range of litigation positions, certain of which included substantial additional disallowances.~~

On October 10, 2017, the Assigned Commissioner and ALJ issued a Ruling ordering additional process to resolve the San Onofre OII. The Ruling did not set aside nor confirm the San Onofre OII Settlement Agreement but stated that the CPUC required an additional record to address the appropriate cost allocation for the premature shutdown of San Onofre Units 2 and 3, in the event the CPUC decides that the settlement does not meet the CPUC's standards for approval of settlements. The Ruling sets an expedited schedule with a status conference on November 7, 2017 and hearings tentatively scheduled to end in March 2018. The CPUC has not announced the expected timing for a decision.

SCE has recorded a regulatory asset of $730 million at September 30, 2017 to reflect the expected recoveries under the San Onofre OII Settlement Agreement. SCE assessed the San Onofre regulatory asset at September 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 subject to interpretation.

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. 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.finance this capital requirement by issuing securitized bonds.

For ~~more~~further 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.~~1. Summary of Significant Accounting Policies—Initial and annual contributions to the wildfire insurance fund established pursuant to California Assembly Bill 1054 ", "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—~~San Onofre Related Matters.~~Southern California Wildfires and Mudslides" and "Legal Proceedings."

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, and established SCE's authorized ROE at 10.30%, both beginning January 1, 2018. In October 2017, the CPUC approved SCE's updated debt and preferred rates that SCE filed in September 2017. 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 October 2017, SCE filed its 2018 annual update with the FERC with rates effective January 1, 2018. The update reflected a decrease in SCE's transmission revenue requirement of $13 million or 1.1% lower than amounts currently authorized in rates due to lower undercollections in previous periods. In addition, SCE filed its new formula rate with the FERC in October 2017 resulting in an additional decrease to the 2018 annual update of $6 million or 0.5%. 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 may suspend 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.

~~Power Charge Indifference Adjustment Rulemaking~~

In September 2017, the CPUC issued a Scoping Memo for its rulemaking to review, revise, and consider alternatives to the Power Charge Indifference Adjustment ("PCIA"), which is a charge that is applied to departing load customers and is intended to maintain bundled service customer indifference to departing load (including Community Choice Aggregator or CCA formation). The Scoping Memo adopts an overall goal of implementing the existing California statutory requirements regarding customer indifference for the proceeding. The CPUC has adopted a schedule with an expected resolution by the third quarter of 2018.

RESULTS OF OPERATIONS

~~Southern California Edison Company~~SCE

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~~revenue or penalties related to incentive mechanisms, other operating revenue, and regulatory charges or disallowances.

Cost-recovery activities – representing CPUC- and FERC- authorized balancing accounts, which allow for recovery of specific project or program costs, subject to reasonableness review or compliance with upfront standards. 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.

Impact of 2018 GRC

Upon receipt of the 2018 GRC final decision in May 2019, SCE recorded the impact retroactive to January 1, 2018, which increased core earnings by $131 million primarily due to the application of the 2018 GRC final decision to revenue, depreciation expense and income tax expense. Depreciation expense decreased as a result of lower authorized depreciation rates. An increase in the authorized revenue requirement for income tax expenses offset income tax expenses recognized during 2018 and the first quarter of 2019. SCE also recorded an impairment charge of $170 million ($123 million after-tax) related primarily to the write-off of specific pole replacements the CPUC determined were performed prematurely.

The 2018 GRC final decision determines the amount of revenue that SCE is authorized to collect from customers to recover anticipated costs, including return on rate base. The 2018 GRC final decision approved an authorized revenue requirement of $5.116 billion for 2018, the first year (Test Year) of the three-year GRC period, and authorized annual increases under a set escalation mechanism based on labor, non-labor and medical expenses.

In the absence of a 2018 GRC final decision, SCE recognized revenue in 2018 and the first quarter of 2019 based on the 2017 authorized revenue requirement, adjusted for items SCE determined to be probable of occurring, primarily the July 2017 cost of capital decision and Tax Reform. Adjustments were also made to 2017 authorized revenue to reflect changes in authorized tax benefits for certain balancing accounts.

As indicated in the table below, authorized revenue in the 2018 GRC final decision is less than the amount recognized in 2018:



(in millions)	2017 Authorized Revenue		Adjustments			2018 Revenue Recognized in Form 10-K			2018 Test Year Authorized Revenue			Adjustment to 2018 Revenue recorded in 2019
Authorized revenue	$	5,640	$	(235	)	$	5,405		$	5,116		$	(289	)	¹
Cost of service:
Operation and maintenance	1,931		(11		)	1,920			1,582			(338		)	²
Depreciation	1,575		59			1,634			1,579			(55		)	³
Property and payroll taxes	285		9			294			315			21
Income taxes	257		(287		)	(30		)	(19		)	11
Authorized return	1,592		(5		)	1,587			1,659			72
Total authorized revenue	$	5,640	$	(235	)	$	5,405		$	5,116		$	(289	)


¹	The change in authorized revenue in the Test Year is comprised of $129 million in earnings activities and $160 million in cost recovery activities.


²	Authorized revenue for operation and maintenance costs decreased due to:

$178 million reduction for earnings activities primarily from SCE's initiatives to improve operational efficiency, which has resulted in lower forecasted costs than included in the 2017 authorized amounts.

$160 million reduction in cost-recovery activities, which do not impact earnings, primarily for medical and employee benefit costs.

³ Authorized revenue for depreciation decreased, as discussed above.

After the application of escalation factors to the Test Year, the CPUC authorized SCE to collect $5.451 billion from customers in 2019. During the second quarter of 2019, SCE recorded a reduction of revenue of $265 million to reflect $289 million of lower authorized revenue related to 2018 and $24 million of higher authorized revenue in 2019. The 2018 GRC final decision is retroactive to January 1, 2018 and the reduction of revenue contributes to a refund to customers of $554 million, which SCE recorded as a regulatory liability as of June 30, 2019. SCE expects to refund these amounts to customers through December 2020.

The following table is a summary of SCE's results of operations for the periods indicated.

Three months ended September 30, ~~2017~~2019 versus September 30, ~~2016~~2018


	Three months ended September 30, 2017									Three months ended September 30, 2016									Three months ended September 30, 2019									Three months ended September 30, 2018
(in millions)	Earning Activities			Cost- Recovery Activities			Total Consolidated			Earning Activities			Cost- Recovery Activities			Total Consolidated			Earning Activities			Cost- Recovery Activities			Total Consolidated			Earning Activities			Cost- Recovery Activities			Total Consolidated
Operating revenue	$	1,677		$	1,975		$	3,652		$	1,811		$	1,941		$	3,752		$	1,832		$	1,900		$	3,732		$	1,777		$	2,483		$	4,260
Purchased power and fuel	—			1,783			1,783			—			1,719			1,719			—			1,708			1,708			—			2,306			2,306
Operation and maintenance	489			192			681			481			221			702			609			210			819			447			204			651
Depreciation and amortization	521			—			521			519			—			519			459			—			459			466			—			466
Property and other taxes	98			(1		)	97			91			—			91			98			—			98			96			—			96
Impairment and other																			—			—			—			(10		)	—			(10		)
Other operating income	(8		)	—			(8		)	—			—			—			(1		)	—			(1		)	(3		)	—			(3		)
Total operating expenses	1,100			1,974			3,074			1,091			1,940			3,031			1,165			1,918			3,083			996			2,510			3,506
Operating income	577			1			578			720			1			721
Operating income (loss)																			667			(18		)	649			781			(27		)	754
Interest expense	(148		)	(1		)	(149		)	(136		)	(1		)	(137		)	(182		)	(1		)	(183		)	(173		)	—			(173		)
Other income and expenses	33			—			33			23			—			23
Other income and (expense)																			39			19			58			45			27			72
Income before income taxes	462			—			462			607			—			607			524			—			524			653			—			653
Income tax (benefit) expense	(35		)	—			(35		)	141			—			141
Income tax (benefit)/expense																			(10		)	—			(10		)	86			—			86
Net income	497			—			497			466			—			466			534			—			534			567			—			567
Preferred and preference stock dividend requirements	32			—			32			31			—			31			31			—			31			31			—			31
Net income available for common stock	$	465		$	—		$	465		$	435		$	—		$	435		$	503		$	—		$	503		$	536		$	—		$	536
Net income available for common stock							$	465								$	435								$	503								$	536
Less:
Non-core earnings							—									—
Less: Non-core (expense)/income																									(48		)							7
Core earnings¹							$	465								$	435								$	551								$	529

Earning activities were primarily affected by the following:

Cost-Recovery Activities

Cost-recovery activities were primarily affected by ~~the following:~~

~~The following table is a summary of SCE's results of operations for the periods indicated.~~

Nine months ended September 30, ~~2017~~2019 versus September 30, ~~2016~~2018

Earning activities were primarily affected by the following:

Cost-Recovery Activities

Cost-recovery activities were primarily affected by the following:

Supplemental Operating Revenue Information

SCE's retail billed and unbilled revenue (excluding wholesale ~~sales and balancing account overcollections/undercollections)~~sales) was ~~$4.0~~$3.5 billion and ~~$9.0~~$4.0 billion ~~for the three and nine months ended September 30, 2017, respectively, compared to $3.7 billion and $8.6 billion for the respective periods in 2016.~~

~~Retail billed and unbilled revenue~~ for the three months ended September 30, ~~2017 was higher compared to the same period in 2016 due to a rate increase of $225 million~~2019 and a sales volume increase of $85 million. The rate increase was due to implementation of the 2017 ERRA rate increase. The sales volume increase was primarily due to warmer weather experienced in the third quarter of 2017 compared to the same period in 2016. Retail billed2018, respectively, and ~~unbilled revenue~~$8.6 billion and $9.0 billion for the nine months ended September 30, ~~2017 was higher~~2019 and 2018, respectively.

The decrease for the nine months ended September 30, 2019 compared to the same period in ~~2016~~2018 is primarily ~~due~~related to ~~the implementation of the 2017 ERRA rate increase.~~lower load related to customer departures to CCAs and cooler weather. See "—Cost-Recovery Activities" for further details.

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 2016 Form 10-K).~~sales.

Income Taxes

SCE's income tax ~~expense decreased~~benefit increased by ~~$176~~$96 million and ~~$117~~$261 million for the three and nine months ended September 30, ~~2017~~respectively, compared to the same periods in ~~2016.~~2018.

The effective tax rates were ~~(7.6)~~(1.9)% and ~~23.2%~~13.2% for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. The effective tax rates were ~~2.7%~~(16.3)% and ~~11.7%~~6.1% for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. SCE's effective tax rate is ~~lower than~~below the federal statutory rate of 21% 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 decrease for the three ~~and nine~~ months ended September 30, ~~2017 was~~2019 is primarily due to ~~higher incremental repair~~the accelerated amortization of excess deferred income taxes in connection with the pending settlement of SCE's FERC 2018 Formula Rate proceeding and return to provision adjustments associated with the filing of the 2018 Federal tax ~~benefits and benefits recognized for tax accounting method changes, all of which will be refunded to customers.~~return. The ~~change in the~~ effective tax rate decrease for the nine months ended September 30, ~~2017 also included higher~~2019 is primarily due to tax benefits ~~related to~~on property-related items recorded as a result of 2018 GRC final decision and also includes the ~~ratemaking treatment on~~change in the ~~San Onofre~~allocation of excess deferred tax ~~abandonment recorded~~re-measurement between customers and shareholders as a result of a CPUC resolution issued in ~~2017 and lower tax benefits for the $133 million revenue refund to customers that was recorded in 2016.~~February 2019.

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~~

During the third quarter of 2017, Edison International completed a strategic review 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. Edison International has concluded that it will evaluate strategic options, including potential sale opportunities for SoCore Energy and consolidate management across Edison Energy Group. Edison Energy will continue to pursue a proof of concept of its existing energy services and managed portfolio solutions practice for large energy users in the United States. Under the proof of concept, Edison Energy will seek to achieve a breakeven earnings run rate and 5% target customer penetration by the end of 2019.

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 of held for sale accounting treatment under the applicable accounting guidance. However, Edison International concluded that, as of September 30, 2017, it was not probable that the investment in SoCore Energy would be sold within one year, therefore the long-lived assets of SoCore Energy were not subject to held for sale accounting treatment. Under held for sale accounting treatment, the net assets of SoCore Energy ($228 million at September 30, 2017) would be recorded at the lower of book value or as net realizable value, including transaction costs.

~~Income~~Loss from ~~Continuing~~ Operations

The following table summarizes the results of Edison International Parent and Other:

Three months ended September 30, Nine months ended September 30,
(in millions) 2017 2016 2017 2016
Edison Energy Group and subsidiaries¹
$ 3
$ (5 ) $ (20 ) $ (28 )
Edison Mission Group and subsidiaries —
—
(2 ) (4 )
Corporate expenses and other²
2
(9 ) 11
(33 )
Total Edison International Parent and Other $ 5
$ (14 ) $ (11 ) $ (65 )



	Three months ended September 30,						Nine months ended September 30,
(in millions)	2019			2018			2019			2018
Edison Energy Group and subsidiaries	$	—		$	(6	)	$	(4	)	$	(61	)
Corporate expenses and other subsidiaries	(32		)	(17		)	(70		)	(51		)
Total Edison International Parent and Other	$	(32	)	$	(23	)	$	(74	)	$	(112	)


¹	~~Includes income~~of less than $1 million and $1 million for the three and nine months ended September 30, 2017, respectively, compared to income of less than $1 million and $5 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 $10 million for the three months ended September 30, 2017 and 2016, respectively, and $34 million and $27 million for the nine months ended September 30, 2017 and 2016, respectively.

The loss from ~~continuing~~ operations of Edison International Parent and Other ~~decreased $19~~increased $9 million and ~~$54~~decreased $38 million for the three and nine months ended September 30, ~~2017,~~2019, respectively, compared to the same periods in ~~2016 primarily due to:~~2018.

~~Higher income tax benefits related to stock option exercises of $1 million and $34 million~~The increase for the three ~~and~~months ended September 30, 2019 is primarily driven by higher interest expenses as a result of increased borrowings. The decrease for the nine months ended September 30, 2017, respectively, $17 million of tax benefits recorded during the third quarter of 2017 from net operating loss carrybacks that resulted from the filing of the 2016 tax returns and $6 million of tax benefits recorded in the second quarter of 20172019 is primarily related to ~~settlements with~~an absence of an after-tax impairment charge of $49 million resulting from SoCore Energy in 2018 and lower losses at the ~~IRS for taxable years 2007 – 2012.~~

~~In the second quarter of 2017,~~competitive business under Edison Energy Group, recorded a $10 million after-tax charge from a goodwill impairment 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.partially offset by higher interest expense.

LIQUIDITY AND CAPITAL RESOURCES

~~Southern California Edison Company~~SCE

SCE's ability to operate its business, fund capital expenditures, and implement its business strategy is dependent upon its cash flow and access to the bank and capital markets. SCE's overall cash flows fluctuate based on, among other things, its ability to recover its costs in a timely manner from its customers through regulated rates, changes in commodity prices and volumes, collateral requirements, interest obligations, ~~and~~ dividend payments to and equity contributions from Edison International, obligations to 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 dividends~~cash requirements through operating cash flows, ~~tax benefits, and~~ capital market financings, and equity contributions from Edison International Parent, as needed. SCE also has availability under its credit ~~facilities~~facility to fund ~~liquidity~~cash requirements.

SCE made an initial contribution of $2.4 billion to the Wildfire Insurance Fund in September 2019 and has committed to make ten annual contributions of approximately $95 million to the fund, starting on January 1, 2020. Edison International Parent supported SCE's initial contribution to the Wildfire Insurance Fund by contributing $1.2 billion to SCE, which was raised from the issuance of Edison International Parent equity. SCE raised the remaining $1.2 billion from the issuance of long-term debt. SCE also expects to finance approximately $1.6 billion of capital expenses by issuing securitized bonds. Prior to issuance of such bonds, other debt instruments may be used to temporarily finance the expenditure. For further information, see "Management Overview—Southern California Wildfires and Mudslides."

SCE's long-term issuer credit ratings remain at investment grade levels after downgrade actions taken by the major credit agencies in the first quarter of 2019. In the third quarter of 2019, the major credit agencies changed SCE's outlook from negative to stable, due to the passage of AB 1054 and the establishment of the Wildfire Insurance Fund, which provided the Liability Cap and the new standard that the CPUC must apply when assessing the prudency of a utility. For further information, see "Management Overview—Southern California Wildfires and Mudslides." The following table summarizes SCE's current, long-term issuer credit ratings and outlook from the major credit rating agencies:



	Moody's	Fitch	S&P
Credit Rating	Baa2	BBB-	BBB
Outlook	Stable	Stable	Stable

SCE's credit ratings may be further affected if, among other things, regulators fail to successfully implement AB 1054 in a consistent and credit supportive manner or the Wildfire Insurance Fund is depleted by claims from catastrophic wildfires. Credit rating downgrades increase the cost and may impact the availability of short-term and long-term borrowings, including commercial paper, credit facilities, bond financings or other borrowings. In addition, some of SCE's power procurement contracts require SCE to pay related liabilities or post additional collateral if SCE's credit rating were to fall below investment grade rating from the major credit rating agencies. Incremental collateral requirements for power procurement contracts resulting from a potential downgrade of SCE's credit rating to below investment grade are $47 million as of September 30, 2019. In addition, if SCE's credit rating falls below investment grade, it may be required to post up to $50 million in collateral, in connection with its environmental remediation obligations, within 120 days of the end of the fiscal year in which the downgrade occurs. Furthermore, if SCE was downgraded below investment grade, counterparties may also institute new collateral requirements for future transactions. For further details, see "— Margin and Collateral Deposits."

Available Liquidity

At September 30, ~~2017,~~2019, SCE had approximately ~~$2.15~~$2.8 billion available under its ~~$2.75~~$3.0 billion ~~multi-year revolving~~ credit facility. In ~~addition,~~June 2019, SCE extended its credit facility through May 2024, pursuant to an option to extend, and may extend its credit facility for one additional year with the lenders' approval.

SCE borrowed $750 million under a term loan in February 2019 and issued $1.1 billion of first and refunding mortgage bonds in March 2019. The proceeds from the term loan and the March 2019 bond issuances were used to repay commercial paper borrowings and for general corporate purposes. In August 2019, SCE issued ~~debt~~$1.2 billion of first and ~~preference stock in 2017.~~refunding mortgage bonds. The proceeds of which, along with the equity contribution from Edison International Parent described below, were used to make SCE's initial contribution to the Wildfire Insurance Fund. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and ~~Credit Agreements"~~Equity Financing."

In April 2019, Edison International Parent contributed $750 million to SCE, which SCE used to repay its February 2019 term loan discussed above. In June 2019, Edison International Parent contributed $450 million to SCE, which SCE used to repay commercial paper borrowings and ~~"—Note 12. Preferred~~for general corporate purposes. In August 2019, Edison International Parent contributed $1.2 billion to SCE, which SCE used, along with the debt issuance described above, to make its initial contribution to the Wildfire Insurance Fund. In August 2019 and ~~Preference Stock of SCE.~~September 2019, Edison International Parent contributed $200 million and $450 million, respectively, for general corporate purposes.

SCE may finance balancing account undercollections and working capital requirements to support operations and capital 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, other borrowings or parent company contributions to SCE equity in order to meet its obligations as they become due, including any potential costs related to the 2017/2018 Wildfire/Mudslide Events. For further information, see "Management Overview—Southern California Wildfires and Mudslides."

Debt Covenant

A debt covenant in SCE's credit facility limits its debt to total capitalization ratio to less than or equal to 0.65 to 1. At September 30, ~~2017,~~2019, SCE's debt to total capitalization ratio was ~~0.43~~0.46 to 1.

At September 30, ~~2017,~~2019, 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 2016 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 2016 MD&A.

Major Transmission Projects

~~West of Devers~~Eldorado-Lugo-Mohave Upgrade

In ~~March 2017,~~April 2019, SCE filed an amended application for a certificate of public convenience and necessity with the CPUC, which included total project costs of $257 million, an increase of $24 million as compared to the previous estimate.

Riverside Transmission Reliability Project

In October 2018, the CPUC issued an environmental report that identified a decision denying ORA's September 2016 Application for Rehearing regarding the West of Devers Upgrade Project which sought additional project modifications and environmental mitigation measures. This action confirmednew route alternative, different from SCE's proposed ~~project, which is expected to be placed in service in 2021, although there is potential of a delay. SCE is evaluating the competitive bids received for transmission construction~~ and ~~expects to award the contract for the Project by the end of 2017, which may result in a change to the expected cost of the Project.~~

~~Mesa Substation~~

In February 2017, the CPUC issued a final decision approving the Mesa Substation Project largely consistent with SCE's proposed project and rejected alternative project configurations proposed by CPUC staff. SCE expects the Mesa Substation project to go into service in 2022. Competitive bids for the 220kV substation construction are under evaluation, and the remainder (550kV substation) will be put out for bid in 2018. SCE expects to award the bid for the 220kV substation construction by the end of 2017, which may result in a change to the expected cost. Preconstruction requirements for other permits and approvals have been obtained and construction began in October 2017.

~~Alberhill System~~

In April 2017, the CPUC issued a final environmental impact report for the Alberhill System Project. This report rejected different alternatives recommended by CPUC staff and intervenors, selecting SCE's proposedpreferred project, as the environmentally ~~superior project. A final~~preferred project and proposed an additional underground section of the proposed 220-kV power line. In June 2019, SCE filed testimony with the CPUC ~~decision~~that increased SCE's preferred project cost estimate to ~~approve~~$451 million and updated the ~~Project~~in-service date to 2024. This is an increase of $10 million and an extension of one year as compared to the previous estimate.

Regulatory Proceedings

2020 Cost of Capital Application

In April 2019, SCE filed an application with the CPUC for ~~construction~~authority to establish its authorized cost of capital for utility operations for a three-year term, beginning January 1, 2020. In its application, SCE requested a ROE of 16.60% for 2020 and committed to reduce its ROE if there was a material reduction in its wildfire cost recovery risk due to regulatory or legislative reform. In August 2019, as a result of the anticipated impact of AB 1054 on SCE's wildfire cost recovery risks, SCE updated its requested ROE to 11.45% for 2020, compared to its current CPUC ROE of 10.3%.

SCE also seeks to modify its current capital structure to increase the common equity component of its capital structure from its current authorized level of 48% to 52% in 2020 and correspondingly reduce its preferred equity from 9% to 5%. If this change is ~~anticipated during 2018. As~~not approved, SCE ~~prepares~~seeks an additional 0.3% ROE to account for the ~~commencement~~increased leverage. SCE does not propose to change its currently authorized level of ~~construction, updated annual~~long-term debt of 43%. In the application, SCE projects a cost of long-term debt of 4.74% and an embedded cost of preferred equity of 5.70% and requests that the CPUC authorize these costs for 2020. Based on the capital ~~spending~~structure and cost factors discussed above, SCE proposes a weighted average return on rate base of 8.28% for 2020.

Based on the revenue requirement approved in SCE's 2018 GRC, SCE's proposed cost of capital and capital structure will result in a projected revenue requirement increase in 2020 of approximately $204 million from revenue currently included in bundled electric rates of $9.4 billion.

FERC Formula Rate

2018 and 2019 Formula Rates

As discussed in the year-end 2018 MD&A, the FERC accepted, subject to refund and settlement procedures, SCE's request to implement its 2018 Formula Rate, effective January 1, 2018, to determine SCE's FERC transmission revenue requirement. In April 2019, SCE filed an application with the FERC to revise the 2018 Formula Rate with the 2019 Formula Rate, which was subsequently accepted by the FERC, effective November 11, 2019, subject to refund and settlement procedures.

In September 2019, SCE filed a settlement on its formula rates for the 2018 Formula Rate case that will establish SCE's FERC transmission revenue requirement for the FERC 2018 Settlement Period. The settlement provides for a weighted-average ROE of 11.2%, which includes a previously authorized 50 basis point incentive for CAISO participation and individual and previously authorized project incentives. Under the settlement, if the FERC issues a final, unappealable ruling that finds SCE is not eligible for the 50 basis point incentive for CAISO participation, then the ROE for the FERC 2018 Settlement Period will be ~~incorporated into~~reduced to 10.7%. The FERC has approved implementing this settlement on an interim basis pending the ~~capital program forecast.~~

~~Riverside Transmission Reliability~~

~~The Riverside Transmission Reliability Project is a joint project between SCE and Riverside Public Utilities (RPU), the municipal utility department~~FERC's consideration of the ~~City of Riverside. Due~~settlement. The transmission revenue requirement and rates that have been billed 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. The CPUC continues to collect information regarding the revised Project or other proposed revisions in support of a supplemental environmental review. Impacts from the potential revisions to the Project have not been reflected in the expected costs or scheduled in-service date of 2021.

~~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. SCE has proposed an expedited schedule and a non-standard review process with the regulatory permitting agencies in order to meet the current in-service date. SCE recently awarded the competitive bidcustomers for the ~~Project~~FERC 2018 Settlement Period were based on a total FERC weighted average ROE of 11.58%. SCE will true-up customer rates for the difference between its original request and ~~has~~the settlement from existing regulatory liabilities pending FERC's consideration of the settlement and will reverse the true-up if the settlement is not ~~yet incorporated~~approved by the ~~contract into~~FERC. SCE had been recognizing revenue during the ~~capital forecast.~~

~~Coolwater-Lugo~~FERC 2018 Settlement Period based on its expectations of the probable outcome of the 2018 Formula Rate case. Regulatory assets and liabilities were adjusted based on the probable approval of the 2018 Formula Rate case settlement, which resulted in recording a $48.4 million increase in net income.

In the ~~first quarter~~2019 Formula Rate case, SCE requested a base return on equity of ~~2017,~~17.12% ("FERC Base ROE"). The requested FERC Base ROE reflected a conventional ROE of 11.12% and an additional ROE of 6% to compensate investors for current wildfire risk. SCE's total ROE request, inclusive of project incentives and a 0.5% incentive for CAISO participation, was approximately 18.4%, compared to its proposed settlement for its 2018 Formula Rate of 11.2%.

In September 2019, SCE filed a partial settlement on the 2019 Formula Rate that modifies its requested FERC Base ROE from 17.12% to 11.97%. This reduced ROE request reflects a conventional ROE of 11.12% and an additional ROE of 0.85% to compensate investors for current wildfire risk. As with the equivalent reduction in SCE's requested ROE in its 2020 CPUC Cost of Capital proceeding, for SCE this partial settlement reflects the anticipated impact of AB 1054 on its requested ROE. As modified, SCE's total ROE request, inclusive of project incentives and a 0.5% incentive for CAISO participation, would be approximately 13.25%. The FERC has approved implementing the 2019 Formula Rate as revised by partial settlement effective as of November 12, 2019 pending the FERC's consideration of the partial settlement but subject to hearing and settlement procedures. If the partial settlement is not approved by the FERC, ~~approved a settlement allowing~~ SCE will increase customer rates to ~~recover 100%~~reflect the impact of the 2019 Formula Rate based on SCE's initial request being implemented effective as of November 12, 2019. Whether or not the partial settlement is approved by the FERC, amounts billed to customers under the 2019 Formula Rate will be subject to refund until the 2019 Formula Rate proceeding is ultimately resolved.

Energy Efficiency Mechanism

In October 2019, the CPUC approved incentives of approximately $10.6 million for activities in program years 2016 and 2017. The award is approximately 5% less than SCE's requested ~~$37.1~~award as a result of a CPUC decision that changed the formula used to calculate the Energy Efficiency Savings and Performance Incentive awards.

SCE has requested an award of approximately $16.7 million in incentives for activities in program years 2017 and 2018.

SCE Dividends

CPUC holding company rules require that SCE's dividend policy be established by SCE's Board of ~~costs incurred by~~Directors on the same basis as if SCE ~~related~~were a stand-alone utility company, and that the capital requirements of SCE, as deemed to be necessary to meet SCE's electricity service obligations, shall receive first priority from the ~~cancelled Coolwater-Lugo transmission project.~~

Boards of Directors of both Edison

~~Dividend Restrictions~~

~~The~~International and SCE. In addition, the CPUC regulates SCE's capital structure which limits the dividends it may pay ~~Edison International. SCE may make distributions~~ to ~~Edison International as long as~~its shareholders. Under SCE's interpretation of CPUC regulations, the common equity component of SCE's capital structure ~~remains~~must remain at or above 48% on a ~~13-month~~ weighted average basis over the 37-month period that SCE's capital structure is in effect for ratemaking purposes. Under AB 1054, the impact of SCE's contributions to the Wildfire Insurance Fund will be excluded from the measurement of SCE's CPUC-jurisdictional authorized capital structure. For further information, see "Management Overview—Southern California Wildfires and Mudslides."

Under SCE's interpretation of the CPUC's capital structure decisions, SCE is required to file an application for a waiver of the 48% equity ratio condition discussed above if an adverse financial event reduces its spot equity ratio below 47%. On February 28, 2019, SCE submitted an application to the CPUC for waiver of compliance with this equity ratio

requirement, describing that while the charge accrued in connection with the 2017/2018 Wildfire/Mudslide Events caused its equity ratio to fall below 47% on a spot basis as of December 31, 2018, SCE remains in compliance with the 48% equity ratio over the applicable 37-month average basis. In its application, SCE requested a limited waiver to exclude wildfire-related charges and wildfire-related debt issuances from its equity ratio calculations until a determination regarding cost recovery is made. Under the CPUC's rules, SCE will not be deemed to be in violation of the equity ratio requirement, and therefore may continue to issue debt and dividends, while the waiver application is pending resolution. For further information, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides." At September 30, ~~2017~~,2019, without excluding the $1.8 billion after-tax wildfire related charge incurred in 2018, SCE's ~~13-month weighted-average~~37-month average common equity component of total capitalization was ~~50.2%~~48.7% and the maximum additional dividend that SCE could pay to Edison International under this limitation was ~~approximately $554~~$236 million, resulting in a restriction on net assets of approximately ~~$14.4~~$17.4 billion. If the waiver had been approved by CPUC at September 30, 2019, SCE's 37-month average common equity component of total capitalization would have been 49.6%.

InAs a California corporation, SCE's ability to pay dividends is also governed by the ~~third quarter of 2017, SCE declared~~California General Corporation Law. California law requires that for a dividend to ~~Edison International~~be declared: (a) retained earnings must equal or exceed the proposed dividend, or (b) immediately after the dividend is made, the value of ~~$191 million. Future~~the corporation's assets must exceed the value of its liabilities plus amounts required to be paid, if any, in order to liquidate stock senior to the shares receiving the dividend. Additionally, a California corporation may not declare a dividend ~~amounts~~if it is, or as a result of the dividend would be, likely to be unable to meet its liabilities as they mature. Prior to declaring dividends, SCE's Board of Directors evaluates available information, including when applicable, information pertaining to the 2017/2018 Wildfire/Mudslide Events, to ensure that the California law requirements for the declarations are met.

The timing and ~~timing~~amount of ~~distributions~~future dividends are also dependent on a number of other factors including ~~the level of~~SCE'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 2017/2018 Wildfire/Mudslide Events 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. In addition, certain environmental remediation obligations require financial assurance that may be in the form of collateral postings. Future collateral requirements may differ from the requirements at September 30, ~~2017~~,2019 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~~obligations, and the impact of ~~the power 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~~ratings falling below investment ~~grade, SCE may be required to pay the liability or post additional collateral.~~grade.

The table below provides the amount of collateral posted by SCE to its counterparties as well as the potential collateral that would have been required as of September 30, ~~2017.~~

2019.

(in millions)
Collateral posted as of September 30, 2017¹
$ 274
Incremental collateral requirements for power contracts resulting from a potential downgrade of SCE's credit rating to below investment grade 33
Incremental collateral requirements for power contracts resulting from adverse market price movement²
2
Posted and potential collateral requirements $ 309



(in millions)
Collateral posted¹	$	260
Incremental collateral requirements for power and energy procurement contracts resulting from a potential downgrade of SCE's credit rating to below investment grade²	47
Incremental collateral requirements for power and energy procurement contracts resulting from adverse market price movement³	31
Posted and potential collateral requirements	$	338

¹Net collateral provided to counterparties and other brokers consisted of $224 million in letters of credit and surety bonds and $36 million of cash, of which $8 million was offset against net derivative liabilities and $28 million of cash collateral was reflected in "Other current assets" on the consolidated balance sheets.

¹²

~~Collateral provided~~If SCE's credit rating falls below investment grade, existing power and energy procurement contracts would require $47 million of incremental collateral. Counterparties may also institute new collateral requirements, applicable to ~~counterparties and other brokers consisted~~future transactions, at the time of ~~$269~~a downgrade. Furthermore, SCE may also be required to post up to $50 million in ~~letters~~collateral in connection with its environmental remediation obligations, within 120 days of ~~credit and surety bonds and $5 million~~the end of ~~cash.~~the fiscal year in which the downgrade occurs.


²³	Incremental collateral requirements were based on potential changes in SCE's forward positions as of September 30, ~~2017~~2019 due to adverse market price movements over the remaining lives of ~~the~~ existing power contracts using a 95% confidence level.

Decommissioning of San Onofre

As discussed in the year-end 2018 MD&A, spent fuel transfer operations at San Onofre were suspended on August 3, 2018 due to an incident that occurred when an SCE contractor was loading a spent fuel canister into the Independent Spent Fuel Storage Installation (ISFSI). In May 2019, after an extensive review, the NRC determined that fuel loading can be safely resumed at San Onofre. SCE commenced fuel transfer operations at San Onofre in July 2019. In October 2019, the California Coastal Commission approved SCE's application for the Coastal Development Permit required to start major decommissioning activities at San Onofre. The permit may be challenged by interested parties. SCE plans on commencing major decommissioning activities in 2020 in accordance with the terms of the permit, subject to any legal challenges that may be raised by interested parties.

Edison International Parent and Other

In the next 12 months, Edison International expects to fund its net cash requirements through capital market and bank financings, including by issuing additional debt and equity, as needed.

At September 30, 2019, Edison International Parent had no borrowings on its $1.5 billion credit facility. In June 2019, Edison International Parent extended its credit facility through May 2024, pursuant to an option to extend, and may extend the credit facility for one additional year with the lenders' approval.

In April 2019, Edison International Parent entered into a $1.0 billion term loan. Of the proceeds of the term loan, $750 million was contributed to SCE and the remainder of the proceeds were used for general corporate and working capital purposes. In June 2019, Edison International Parent issued $600 million of 5.75% senior notes due June 15, 2027. Of the proceeds of the senior notes offering, $450 million was contributed to SCE and the remainder of the proceeds were used for general corporate and working capital purposes. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Equity Financing."

In April 2019, Edison International Parent registered $1.5 billion of additional shares of its common stock with the SEC, of which it currently anticipates issuing up to $0.5 billion in 2019 through designated broker-dealers at prevailing market prices (an at-the-market offering).

In July 2019, Edison International issued approximately $2.2 billion of common stock in an underwritten offering. Of the proceeds of the common stock issuance, $1.2 billion was contributed to SCE for its initial contribution to the Wildfire Insurance Fund, $200 million and $450 million were contributed to SCE in August 2019 and September 2019, respectively, for general corporate purposes. The remaining $350 million will be used for general corporate purposes. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Equity Financing." Edison International believes that these contributions, along with future proceeds from the at-the-market offering, will enable SCE to increase the common

equity component of its capital structure to 52% in 2020 as proposed in SCE's Cost of Capital application filed with the CPUC in April 2019.

Edison International Parent and Other's liquidity and its ability to pay operating expenses and pay dividends to common shareholders are dependent on access to the bank and capital markets, dividends from SCE, realization of tax benefits, and ~~access~~its ability to ~~bank and capital markets.~~ meet California law requirements for the declaration of dividends. Prior to declaring dividends, Edison International's Board of Directors evaluates available information, including when applicable, information pertaining to the 2017/2018 Wildfire/Mudslide Events, to ensure that the California law requirements for the declarations are met. For information on the California law requirements on the declaration of dividends, see "—SCE—SCE Dividends." 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 its ongoing cash requirements, including common stock dividends, working capital requirements, payment of obligations, and capital investments, including capital contributions to subsidiaries, with ~~commercial paper~~short-term or other ~~borrowings,~~financings, subject to availability in the bank and capital markets.

At September 30, 2017, Edison International Parent had $677 million available under its $1.25 billion multi-year revolving credit facility. In addition, Edison International issued debt in 2017. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."

A 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~~0.70 to 1. At September 30, ~~2017,~~2019, Edison International Parent's consolidated debt to total capitalization ratio was ~~0.47~~0.55 to 1.

At September 30, ~~2017,~~2019, Edison International Parent was ~~also~~ in compliance with all ~~other~~ financial covenants that affect access to capital.

Edison International Parent's long-term issuer credit ratings remain at investment grade levels after downgrade actions taken by the major credit rating agencies in the first quarter of 2019. In the third quarter of 2019, the major credit agencies changed Edison International Parent's outlook from negative to stable, due to the passage of AB 1054 and the establishment of the Wildfire Insurance Fund, which provided the Liability Cap and the new standard that the CPUC must apply when assessing the prudency of a utility. For further information, see "Management Overview—Southern California Wildfires and Mudslides."

The following table summarizes Edison International Parent's current long-term issuer credit ratings and outlook from the major credit rating agencies:



	Moody's	Fitch	S&P
Credit Rating	Baa3	BBB-	BBB
Outlook	Stable	Stable	Stable

Edison International Parent's credit ratings may be further affected if, among other things, regulators fail to successfully implement AB 1054 in a consistent and credit supportive manner or the Wildfire Insurance Fund is depleted by claims from catastrophic wildfires. Credit rating downgrades increase the cost and may impact the availability of short-term and long-term borrowings, including commercial paper, credit facilities, note financings or other borrowings.

Net Operating Loss and Tax Credit Carryforwards

Edison International has net operating loss and tax credit carryforwards retained by SCE, which are available to offset future consolidated taxable income or tax liabilities. In May 2019, SCE received the 2018 GRC final decision, which included a reduction in revenue and taxable income for 2018 through 2020. At September 30, 2019, net operating loss and tax credit carryforwards reflect the impact of the 2018 GRC final decision, the potential for claims related to the 2017/2018 Wildfire/Mudslide Events, and participation in the Wildfire Insurance Fund as described in AB 1054. Edison International expects to realize its NOL and tax credit carryforward position through 2027.

Historical Cash Flows

~~Southern California Edison Company~~

SCE

Nine months ended September 30,
(in millions) 2017 2016
Net cash provided by operating activities $ 2,793
$ 2,838
Net cash used in financing activities (339 ) (382 )
Net cash used in investing activities (2,432 ) (2,443 )
Net increase in cash and cash equivalents $ 22
$ 13



	Nine months ended September 30,
(in millions)	2019			2018
Net cash (used in) provided by operating activities	$	(639	)	$	2,258
Net cash provided by financing activities	4,039			340
Net cash used in investing activities	(3,336		)	(3,074		)
Net increase (decrease) in cash, cash equivalents and restricted cash	$	64		$	(476	)

Net Cash (Used in) Provided by Operating Activities

The following table summarizes major categories of net cash (used in) provided by operating activities as provided in more detail in SCE's consolidated statements of cash flows for the nine months ended September 30, ~~2017~~2019 and ~~2016.~~2018.


	Nine months ended September 30,						Change in cash flows			Nine months ended September 30,						Change in cash flows
(in millions)	2017			2016			2017/2016			2019			2018			2019/2018
Net income	$	1,215		$	1,140					$	1,306		$	1,210
Non-cash items¹	1,853			1,597						1,277			1,697
Subtotal	$	3,068		$	2,737		$	331		$	2,583		$	2,907		$	(324	)
Contributions to Wildfire Insurance Fund										(2,363		)	—			(2,363		)
Changes in cash flow resulting from working capital²	(553		)	(32		)	(521		)	(247		)	(692		)	445
Derivative assets and liabilities	(24		)	15			(39		)
Regulatory assets and liabilities	560			189			371			(470		)	213			(683		)
Other noncurrent assets and liabilities³	(258		)	(71		)	(187		)	(142		)	(170		)	28
Net cash provided by operating activities	$	2,793		$	2,838		$	(45	)
Net cash (used in) provided by operating activities										$	(639	)	$	2,258		$	(2,897	)


¹	Non-cash items include depreciation and amortization, allowance for equity during construction, impairment and other, deferred income taxes and investment tax credits, and other.


²	Changes in working capital items include receivables, inventory, accounts payable, ~~prepaid~~tax receivables and ~~accrued taxes,~~payables, and other current assets and liabilities.

³Includes the nuclear decommissioning trusts. See "Nuclear Decommissioning Activities" below for further information.

Net cash (used in) provided by operating activities was impacted by the following:

Net income and non-cash items decreased in 2019 by $324 million. Net Income increased ~~in 2017~~ by ~~$75~~$96 million primarily due to the adoption of the 2018 GRC final decision in the second quarter of 2019, higher FERC revenue ~~in 2017~~ due to the ~~escalation mechanism set forth in the 2015 GRC decision~~pending settlement of SCE's 2018 Formula Rate proceeding, and ~~lower operation and maintenance expenses,~~timing of regulatory deferrals of wildfire insurance costs, partially offset by ~~reductions~~higher wildfire mitigation and other maintenance expenses. The $420 million decrease in ~~CPUC revenue~~non-cash items included changes in deferred income taxes and investment credits of $(207) million and $108 million in 2019 and 2018, respectively, depreciation and amortization of $1.3 billion and $1.6 billion in 2019 and 2018, respectively, and an impairment charge of $170 million recorded in 2019 related to ~~prior overcollections and higher financing costs.~~disallowed historical capital expenditures in SCE's 2018 GRC final decision.

Net cash used in operating activities was also impacted by cash outflow of $2.4 billion related to SCE's contribution to the Wildfire Insurance Fund in September 2019. See "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies" for further information.

Net cash outflow for working capital ~~for~~was $247 million and $692 million during the nine months ended September 30, ~~2017~~2019 and ~~2016~~2018, respectively. Net cash for working capital in 2019 was ~~primarily related~~impacted by insurance premium payments of $453 million for wildfire-related coverage, partially offset by net tax refunds of $166 million. The working capital outflow was also due to ~~the~~an increase in receivables from customers ~~($370~~of $533 million and ~~$261~~$632 million in ~~2017~~2019 and ~~2016, respectively)~~2018, respectively, and ~~the timing of disbursements (including payments for payroll-related costs and purchased power). During the first nine months of 2017, there was~~ an increase in payables of ~~$30 million compared to $195 million for the same period in 2016. In addition, net cash for working capital included changes in tax payables of $(146)~~$270 million in ~~2017 and $111 million in 2016~~2019 primarily ~~due~~related to ~~the utilization of net operating losses in 2017.~~

purchased power.

Net cash provided by regulatory assets and liabilities, including changes in ~~over (under) collections~~overcollections of balancing accounts was ~~$560~~$(470) million and ~~$189~~$213 million during the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, 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:

~~2017~~

The 2015 GRC decision established the TAMA. As a result of this memorandum account, together with a balancing account for pole loading expenditures, 2015 – 2017 tax benefits or costs associated with certain events are tracked and adjusted annually through customer rates. Overcollections increased

2019

BRRBA overcollections decreased by ~~$319~~$33 million ~~during the first nine months of 2017~~ primarily due to ~~higher~~refunds of prior overcollections (including incremental tax ~~repair deductions~~benefits), offset by distribution revenue previously collected from customers in 2019 and 2018 that are being refunded over an 18-month period, starting in July 2019, as part of SCE's 2018 GRC final decision.

PABA was established in May 2019 to determine and pro-ratably recover from responsible bundled service and departing load customers the “above-market” costs of all generation resources that are eligible for cost recovery. Net undercollections for ERRA, PABA and the new system generation program decreased by $93 million primarily due to recovery of prior ERRA undercollections and overcollections of generation revenue occurring in 2019 and 2018 that are being refunded over an 18-month period, starting in July 2019, as part of SCE's 2018 GRC final decision. The cash inflow was partially offset by lower sales than forecasted in rates, higher than forecasted power and ~~$118~~gas prices experienced in 2019, charges from CPUC-authorized contract terminations and refunds of prior overcollections from the new system generation program.

Elimination of approximately $360 million ~~of higher benefits recognized for tax accounting method changes. The~~in a regulatory liability that was established in 2018 to record adjustments associated with the delay in the 2018 GRC decision. In May 2019, the CPUC approved the final decision in SCE's 2018 GRC, resulting in 2019 and 2018 overcollections ~~in 2017 are expected to be~~being refunded to customers ~~in January 2018.~~through BRRBA and PABA, as discussed above.

Undercollections of $234 million related to wildfire-related expenses that are probable of future recovery from customers, including risk mitigation costs and insurance premiums. See "Notes to Consolidated Financial Statements—Note 11. Regulatory Assets and Liabilities" for further information.

Higher cash due to $186 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 and recovery of prior year undercollections.

Higher cash due to $140 million of overcollections related to FERC balancing accounts. Overcollections increased due to recovery of prior FERC undercollections and lower costs than forecasted in the FERC formula rate.

~~Higher cash due to $94~~$141 million of overcollections related to the timing of greenhouse gas auction revenue and ~~climate credit~~low carbon fuel standard credits sales, and the related refunds and rebates to ~~customers, which are expected to be refunded to customers in the fourth quarter of 2017.~~eligible customers.

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. For further information on the MHI claims and spent nuclear fuel, see "Notes to Consolidated Financial Statements—Note 11. Commitments and Contingencies—Contingencies—San Onofre Related Matters" and "—Spent Nuclear Fuel."2018

BRRBA overcollections ~~decreased~~increased by ~~$161~~$478 million during the first nine months of 2018 primarily due to a $263 million reclassification of 2017 incremental tax benefits from TAMA to BRRBA (to be refunded in 2019) and higher sales than forecasted in rates, partially offset by a refund of 2016 incremental tax benefits.

Higher cash due to $138 million of overcollections for the public purpose and energy efficiency programs resulting from lower program spending.

Higher cash reflected in regulatory liabilities of approximately $269 million primarily due to the ~~refunds of 2016 overcollections related to TAMA, a revenue refund~~delay in the 2018 GRC decision. Amounts billed to customers during the first nine months of ~~$133 million~~2018 were based on the 2017 authorized GRC revenue requirement, however, the amount of revenue recognized was adjusted mainly for ~~2012 – 2014 incremental tax benefits related to repair deductions,~~the July 2017 cost of capital decision and ~~2015 overcollections resulting from~~Tax Reform pending the ~~implementation~~outcome of the ~~2015~~2018 GRC ~~decision, which~~and therefore, a regulatory liability was ~~authorized~~established to ~~be refunded to customers over a two year period. The BRRBA tracks the differences between amounts authorized by the CPUC in the GRC proceedings and amounts billed to customers.~~record any associated adjustments.

Net undercollections for ERRA and the new system generation program were ~~$91~~$592 million and $267 million at September 30, ~~2017 compared to net overcollections of $26 million at~~2018 and December 31, ~~2016.~~2017, respectively. Net undercollections increased ~~$117~~$325 million during the first nine months of ~~2017~~2018 primarily due to ~~a refund of prior year overcollections and~~ an increase in costs due to higher ~~load requirements than forecasted in rates.~~

~~2016~~

Higher cash due to an increase in overcollections of $300 million for the public purpose and energy efficiency programs due to higher funding and lower spending for these programs during the first nine months of 2016.

ERRA overcollections for fuel and purchased power decreased by $231 million during the first nine 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.~~

An2018 and higher load requirements than forecasted in rates, partially offset by an increase in cash due to recovery of ~~approximately $122~~prior year undercollections.

TAMA overcollections decreased by $290 million primarily due to a reclassification from TAMA to BRRBA to refund customers as discussed above.

During the third quarter of 2018, SCE requested approval from the ~~Department~~CPUC to track and recover wildfire related costs including insurance premiums in excess of ~~Energy's failure~~the amounts that will be ultimately approved in the 2018 GRC decision. At September 30, 2018, SCE had a regulatory asset of $63 million related 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.these costs.

Cash flows used in other noncurrent assets and liabilities were primarily related to net earnings from nuclear decommissioning trust investments ($4719 million and ~~$33~~$29 million in ~~2017~~2019 and ~~2016,~~2018, respectively), and SCE's payments of decommissioning costs ($~~170~~126 million and ~~$125~~$109 million in ~~2017~~2019 and ~~2016, respectively) and changes in uncertain tax positions due to the utilization of net operating losses ($(105) million and $(4) million in 2017 and 2016,~~2018, 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 nine months ended September 30, ~~2017~~2019 and ~~2016.~~2018. 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.~~Equity Financing."

Nine months ended September 30,
(in millions) 2017 2016
Issuances of first and refunding mortgage bonds, net of premium (discount) and issuance costs $ 1,011
$ —
Issuance of term loan 300
—
Remarketing of pollution control bonds, net of issuance costs 134
—
Long-term debt matured or repurchased (781 ) (81 )
Issuances of preference stock, net of issuance costs 463
294
Redemptions of preference stock (475 ) (125 )
Short-term debt (repayments), net of borrowings and discount (441 ) 189
Payments of common stock dividends to Edison International (382 ) (510 )
Payments of preferred and preference stock dividends (99 ) (97 )
Other (69 ) (52 )
Net cash used in financing activities $ (339 ) $ (382 )



	Nine months ended September 30,
(in millions)	2019			2018
Issuances of first and refunding mortgage bonds, net of discount and issuance costs	$	2,306		$	2,692
Capital contribution from Edison International Parent	3,050			—
Long-term debt matured	(81		)	(639		)
Short-term debt repayments, net of borrowings and discount	(721		)	(1,137		)
Payments of common stock dividends to Edison International	(400		)	(474		)
Payments of preferred and preference stock dividends	(96		)	(96		)
Other	(19		)	(6		)
Net cash provided by financing activities	$	4,039		$	340

Net Cash Used in Investing Activities

Cash flows used in investing activities are primarily due to capital expenditures related to transmission and distribution investments ($~~2.6~~3.5 billion and ~~$2.7~~$3.2 billion for the ~~nine months~~nine-month periods ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively). ~~During the first nine months of 2017 and 2016,~~In addition, SCE had a net redemption of nuclear decommissioning trust investments of ~~$117~~$114 million and ~~$159~~$86 million during the nine months ended September 30, 2019 and 2018, respectively. See "Nuclear Decommissioning Activities" below for further discussion. In addition, during the first nine months of 2017 and 2016, SCE received proceeds of $26 million and $140 million, respectively, for loans on the cash surrender value of life insurance policies. The proceeds were used for general corporate purposes.

Nuclear Decommissioning Activities

SCE's statement of cash flows includes nuclear decommissioning activities, which are reflected in the following line items:


	Nine months ended September 30,						Nine months ended September 30,
(in millions)	2017			2016			2019			2018
Net cash used in operating activities: Net earnings from nuclear decommissioning trust investments	$	47		$	33
Net cash used in operating activities:
Net earnings from nuclear decommissioning trust investments							$	19		$	29
SCE's decommissioning costs	(170		)	(125		)	(126		)	(109		)
Net cash provided by investing activities: Proceeds from sale of investments	3,974			2,075
Net cash provided by investing activities:
Proceeds from sale of investments							3,354			3,017
Purchases of investments	(3,857		)	(1,916		)	(3,240		)	(2,931		)
Net cash impact	$	(6	)	$	67		$	7		$	6

Net cash used in operating activities ~~relate~~relates 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 ($~~170~~126 million and ~~$125~~$109 million in ~~2017~~2019 and ~~2016,~~2018, respectively) and reimbursements to SCE from the nuclear decommissioning trust ($~~164~~133 million and ~~$192~~$115 million in ~~2017~~2019 and ~~2016,~~2018, 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.~~Other, including intercompany eliminations.

Nine months ended September 30,
(in millions) 2017 2016
Net cash used in operating activities $ (103 ) $ (336 )
Net cash provided by financing activities 163
280
Net cash used in investing activities (61 ) (34 )
Net decrease in cash and cash equivalents $ (1 ) $ (90 )



	Nine months ended September 30,
(in millions)	2019			2018
Net cash (used in) provided by operating activities	$	(178	)	$	13
Net cash provided by (used in) financing activities	519			(651		)
Net cash (used in) provided by investing activities	(9		)	61
Net increase (decrease) in cash and cash equivalents	$	332		$	(577	)

Net Cash ~~Used in~~(Used in) Provided by Operating Activities

Net cash ~~used in~~(used in) provided by operating activities was impacted by the following:

$~~103~~101 million cash outflow related to intercompany tax-allocation payments in 2019 and $75 million cash inflow from income tax refunds 2018.

$77 million and $62 million cash outflow from operating activities in ~~2017 compared to $101 million cash outflow in 2016~~2019 and 2018, respectively, primarily due to payments ~~and receipts~~ relating to interest and operating costs.

~~$214 million of cash payment made to the Reorganization Trust in September 2016 related to the EME Settlement Agreement.~~

$21 million outflow in June 2016 related to the buy-out of an earn-out provision with the former shareholders of a company acquired by Edison Energy in 2015. See "Results of Operations—Edison International Parent and Other—Income from Continuing Operations" for further information.

Net Cash Provided by (Used in) Financing Activities

Net cash provided by (used in) financing activities was as follows:


	Nine months ended September 30,						Nine months ended September 30,
(in millions)	2017			2016			2019			2018
Dividends paid to Edison International common shareholders	$	(530	)	$	(469	)	$	(594	)	$	(591	)
Dividends received from SCE	382			510			400			474
Payment for stock-based compensation, net of receipt from stock option exercises	(129		)	(25		)
Long-term debt issuance, net of discount and issuance costs	791			397
Capital contribution to SCE							(3,050		)	—
Issuance of long-term debt, net of discount and issuance costs							596			545
Issuance of common stock							2,165			—
Issuance of term loan							1,000			—
Long-term debt repayment	(401		)	(2		)	—			(15		)
Short-term debt borrowings, net of (repayments) and discount	40			(129		)
Short-term debt repayments, net of borrowings and discount							(1		)	(1,091		)
Other	10			(2		)	3			27
Net cash provided by financing activities	$	163		$	280
Net cash provided by (used in) financing activities							$	519		$	(651	)

Net Cash (Used in) Provided by Investing Activities

Net cash (used in) provided by investing activities decreased $70 million during the nine months of 2019 compared to 2018 primarily due to a cash inflow of $78 million from the sale of SoCore Energy in April 2018.

Contingencies

SCE has contingencies related to ~~San Onofre Related Matters,~~the 2017/2018 Wildfire/Mudslide Events, wildfire insurance, Environmental Remediation, Nuclear Insurance ~~Wildfire Insurance,~~and Spent Nuclear Fuel, ~~and other legal matters,~~ 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 ~~2016~~2018 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 ~~liability~~asset of ~~$1.1 billion at December 31, 2016. During the third quarter of 2017, SCE designated certain derivative contracts as normal purchase~~$64 million and ~~normal sale contracts, which resulted in a reclassification of $914~~$167 million ~~from derivative liabilities to other liabilities. These liabilities will be amortized over the remaining contract terms. The fair value of the remaining derivative instruments~~on SCE's consolidated balance sheets at September 30, ~~2017 was $35 million.~~

2019 and December 31, 2018, 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~~of 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 Based on SCE's policies and risk exposures related to credit, SCE does not anticipate a material adverse effect on their financial statements as a result of counterparty nonperformance. At September 30, ~~2017, the amount of balance sheet exposure as described above broken down by the credit ratings~~2019, 97% of SCE's power and gas trading counterparty credit risk exposure is associated with entities that have an investment grade rating of A or higher. SCE assigns a credit rating to counterparties ~~was as follows:~~based on the lower of a counterparty's S&P or Moody's rating.

September 30, 2017
(in millions)
Exposure²
Collateral Net Exposure
S&P Credit Rating¹

A or higher $ 38
$ —
$ 38


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.


²	Exposure excludes amounts related to contracts classified as normal purchases and sales and non-derivative contractual commitments that are not recorded on the consolidated balance sheets, except for any related net accounts receivable.

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

For a ~~complete~~ discussion onof Edison International's and SCE's critical accounting policies, other than the policy described below, see "Critical Accounting Estimates and Policies" in the year-ended ~~2016~~2018 MD&A.

Contributions to the Wildfire Insurance Fund

Nature of Estimates Required. At September 30, 2019, Edison International and SCE have a $2.8 billion long-term asset and a $323 million current asset reflected as "Wildfire Insurance Fund contributions" in the consolidated balance sheets, for an initial $2.4 billion contribution made during the third quarter of 2019 and the present value of annual contributions SCE has committed to make to the Wildfire Insurance Fund. At September 30, 2019, a long-term liability of $782 million and a current liability of $94 million have been reflected as "Other deferred credits and other long-term liabilities" and "Other current liabilities", respectively, for the present value of unpaid contribution amounts. Contributions were discounted to the present value at the date SCE committed to participate in the Wildfire Insurance Fund using US treasury interest rates.

Management concluded it would be most appropriate to account for the contributions to the Wildfire Insurance Fund similar to prepaid insurance, ratably allocating the expense to periods based on an estimated period of coverage.

Key Assumptions and Approach Used. The Wildfire Insurance Fund does not have a defined life. Instead, the Wildfire Insurance Fund will terminate when the administrator determines that the fund has been exhausted. Management estimates that the Wildfire Insurance Fund will provide insurance coverage for a period of 10 years. The determination of the correct period in which to record an expense in relation to contributions to the Wildfire Insurance Fund depends, among other factors, on management's assessment of: the future occurrence and magnitude of wildfires; the involvement of SCE, or other electrical corporations, in the ignition of those fires; the probable future outcomes of CPUC cost recovery proceedings for wildfire claims, which may require reimbursement of the fund by electrical corporations; the participation of PG&E in the fund; and the use of the contributions by the administrator of the Wildfire Insurance Fund. Further information regarding these factors may become available due to the actions of the fund administrator, or other entities, which could require management to reassess the period of coverage. In estimating the period of coverage, Edison International and SCE used a Monte Carlo simulation based on five years of historical data from wildfires caused by electrical equipment to estimate expected loss. The details of the operation of the Wildfire Insurance Fund and estimates related to claims by SCE, PG&E and SDG&E from the fund have been applied to expected loss simulations to estimate the period of coverage of the fund. The most sensitive inputs to the estimated period of coverage are the expected frequency of wildfire events caused by electrical

equipment and the estimated costs associated with those forecasted events. Using a longer period of historical data significantly increases the estimated period of coverage of the fund.

Effect if Different Assumptions Used. Changes in the estimated life of the insurance fund could have a material impact on the expense recognition.

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.

FINANCIAL STATEMENTS

Consolidated Statements of Income
Edison International

Three months ended September 30, Nine months ended September 30,
(in millions, except per-share amounts, unaudited)
2017 2016 2017
2016
Operating revenue
$ 3,672
$ 3,767
$ 9,100

$ 8,985
Purchased power and fuel
1,783
1,719
3,742

3,576
Operation and maintenance
713
740
2,016

2,090
Depreciation and amortization
524
521
1,535

1,504
Property and other taxes 98
92
284
269
Impairment charges —
—
22
—
Other operating (income) and expenses
(7 ) —
(8 )
21
Total operating expenses
3,111
3,072
7,591

7,460
Operating income
561
695
1,509

1,525
Interest and other income
42
32
111

97
Interest expense
(162 ) (147 ) (473 )
(431 )
Other expenses
(9 ) (9 ) (28 )
(29 )
Income from continuing operations before income taxes
432
571
1,119

1,162
Income tax (benefit) expense
(69 ) 120
(83 )
96
Income from continuing operations
501
451
1,202

1,066
Income from discontinued operations, net of tax —
—
—
(1 )
Net income
501
451
1,202

1,065
Preferred and preference stock dividend requirements of SCE
32
31
94

92
Other noncontrolling interests (1 ) (1 ) (2 ) (9 )
Net income attributable to Edison International common shareholders
$ 470
$ 421
$ 1,110

$ 982
Amounts attributable to Edison International common shareholders:

Income from continuing operations, net of tax
$ 470
$ 421
$ 1,110

$ 983
Income from discontinued operations, net of tax
—
—
—

(1 )
Net income attributable to Edison International common shareholders
$ 470
$ 421
$ 1,110

$ 982
Basic earnings per common share attributable to Edison International common shareholders:

Weighted-average shares of common stock outstanding
326
326
326

326
Continuing operations
$ 1.44
$ 1.29
$ 3.41

$ 3.01
Discontinued operations
—
—
—

—
Total
$ 1.44
$ 1.29
$ 3.41

$ 3.01
Diluted earnings per common share attributable to Edison International common shareholders:

Weighted-average shares of common stock outstanding, including effect of dilutive securities
328
330
329

330
Continuing operations
$ 1.43
$ 1.27
$ 3.38

$ 2.98
Discontinued operations
—
—
—

—
Total
$ 1.43
$ 1.27
$ 3.38

$ 2.98
Dividends declared per common share
$ 0.5425
$ 0.4800
$ 1.6275

$ 1.4400



Consolidated Statements of Income	Edison International

	Three months ended September 30,						Nine months ended September 30,
(in millions, except per-share amounts, unaudited)	2019			2018			2019			2018
Total operating revenue	$	3,741		$	4,269		$	9,377		$	9,648
Purchased power and fuel	1,708			2,306			3,848			4,344
Operation and maintenance	841			674			2,318			2,068
Depreciation and amortization	459			466			1,260			1,391
Property and other taxes	99			97			302			301
Impairment and other	—			(11		)	166			60
Other operating income	(2		)	(2		)	(5		)	(5		)
Total operating expenses	3,105			3,530			7,889			8,159
Operating income	636			739			1,488			1,489
Interest expense	(214		)	(188		)	(619		)	(538		)
Other income and (expense)	58			76			151			176
Income before taxes	480			627			1,020			1,127
Income tax (benefit) expense	(22		)	83			(212		)	43
Net income	502			544			1,232			1,084
Preferred and preference stock dividend requirements of SCE	31			31			91			91
Other noncontrolling interests	—			—			—			(14		)
Net income attributable to Edison International common shareholders	$	471		$	513		$	1,141		$	1,007
Basic earnings per share:
Weighted-average shares of common stock outstanding	347			326			333			326
Basic earnings per common share attributable to Edison International common shareholders	$	1.36		$	1.57		$	3.43		$	3.09
Diluted earnings per share:
Weighted-average shares of common stock outstanding, including effect of dilutive securities	349			327			334			327
Diluted earnings per common share attributable to Edison International common shareholders	$	1.35		$	1.57		$	3.42		$	3.08

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

2027


Consolidated Statements of Comprehensive Income	Edison International													Edison International

	Three months ended September 30,					Nine months ended September 30,				Three months ended September 30,				Nine months ended September 30,
(in millions, unaudited)	2017			2016		2017		2016		2019		2018		2019		2018
Net income	$	501		$	451	$	1,202	$	1,065	$	502	$	544	$	1,232	$	1,084
Other comprehensive income, net of tax:
Pension and postretirement benefits other than pensions:
Amortization of net loss included in net income	2			2		5		5		2		1		5		5
Other	(2		)	—		—		—		—		1		—		(4		)
Other comprehensive income, net of tax	—			2		5		5		2		2		5		1
Comprehensive income	501			453		1,207		1,070		504		546		1,237		1,085
Less: Comprehensive income attributable to noncontrolling interests	31			30		92		83		31		31		91		77
Comprehensive income attributable to Edison International	$	470		$	423	$	1,115	$	987	$	473	$	515	$	1,146	$	1,008

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

2128


Consolidated Balance Sheets	Edison International				Edison International

(in millions, unaudited)	September 30, 2017		December 31, 2016		September 30, 2019		December 31, 2018
ASSETS
Cash and cash equivalents	$	117	$	96	$	547	$	144
Receivables, less allowances of $55 and $62 for uncollectible accounts at respective dates	1,105		714
Receivables, less allowances of $51 and $52 for uncollectible accounts at respective dates					1,099		730
Accrued unbilled revenue	352		370		639		482
Inventory	229		239		348		282
Prepaid taxes	179		1
Income tax receivables					127		191
Prepaid expenses					293		148
Derivative assets	36		73		49		171
Regulatory assets	445		350		1,120		1,133
Wildfire Insurance Fund contributions					323		—
Other current assets	295		280		117		78
Total current assets	2,758		2,123		4,662		3,359
Nuclear decommissioning trusts	4,415		4,242		4,479		4,120
Other investments	72		83		89		63
Total investments	4,487		4,325		4,568		4,183
Utility property, plant and equipment, less accumulated depreciation and amortization of $9,173 and $9,000 at respective dates	37,666		36,806
Nonutility property, plant and equipment, less accumulated depreciation of $109 and $99 at respective dates	295		194
Utility property, plant and equipment, less accumulated depreciation and amortization of $9,873 and $9,566 at respective dates					43,150		41,269
Nonutility property, plant and equipment, less accumulated depreciation of $84 and $82 at respective dates					85		79
Total property, plant and equipment	37,961		37,000		43,235		41,348
Regulatory assets	8,028		7,455		5,731		5,380
Wildfire Insurance Fund contributions					2,849		—
Operating lease right-of-use assets					705		—
Other long-term assets	358		416		2,462		2,445
Total long-term assets	8,386		7,871		11,747		7,825













Total assets	$	53,592	$	51,319	$	64,212	$	56,715

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

2229


Consolidated Balance Sheets	Edison International						Edison International

(in millions, except share amounts, unaudited)	September 30, 2017			December 31, 2016			September 30, 2019			December 31, 2018
LIABILITIES AND EQUITY
Short-term debt	$	908		$	1,307		$	1,000		$	720
Current portion of long-term debt	583			981			479			79
Accounts payable	1,104			1,342			1,663			1,511
Accrued taxes	90			50
Customer deposits	276			269			302			299
Derivative liabilities	3			216
Regulatory liabilities	1,281			756			1,010			1,532
Current portion of operating lease liabilities							91			—
Other current liabilities	1,164			991			1,458			1,254
Total current liabilities	5,409			5,912			6,003			5,395
Long-term debt	11,638			10,175			17,066			14,632
Deferred income taxes and credits	9,141			8,327			5,023			4,576
Derivative liabilities	—			941
Pensions and benefits	1,378			1,354			861			869
Asset retirement obligations	2,682			2,590			3,030			3,031
Regulatory liabilities	5,858			5,726			8,544			8,329
Operating lease liabilities							615			—
Wildfire-related claims							4,669			4,669
Other deferred credits and other long-term liabilities	2,863			2,102			3,048			2,562
Total deferred credits and other liabilities	21,922			21,040			25,790			24,036
Total liabilities	38,969			37,127			48,859			44,063
Commitments and contingencies (Note 11)
Redeemable noncontrolling interest	13			5
Common stock, no par value (800,000,000 shares authorized; 325,811,206 shares issued and outstanding at respective dates)	2,520			2,505
Commitments and contingencies (Note 12)
Common stock, no par value (800,000,000 shares authorized; 358,522,961 and 325,811,206 shares issued and outstanding at respective dates)							4,746			2,545
Accumulated other comprehensive loss	(48		)	(53		)	(55		)	(50		)
Retained earnings	9,944			9,544			8,469			7,964
Total Edison International's common shareholders' equity	12,416			11,996			13,160			10,459
Noncontrolling interests – preferred and preference stock of SCE	2,194			2,191			2,193			2,193
Total equity	14,610			14,187			15,353			12,652










Total liabilities and equity	$	53,592		$	51,319		$	64,212		$	56,715

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

2330

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

2431

Southern California Edison Company

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

2532



Consolidated Balance Sheets	Southern California Edison Company



(in millions, unaudited)	September 30, 2019		December 31, 2018
ASSETS
Cash and cash equivalents	$	86	$	21
Receivables, less allowances of $51 for uncollectible accounts at both dates	1,087		711
Accrued unbilled revenue	638		482
Inventory	348		282
Income tax receivables	131		312
Prepaid expenses	292		144
Derivative assets	49		171
Regulatory assets	1,120		1,133
Wildfire Insurance Fund contributions	323		—
Other current assets	105		69
Total current assets	4,179		3,325
Nuclear decommissioning trusts	4,479		4,120
Other investments	74		45
Total investments	4,553		4,165
Utility property, plant and equipment, less accumulated depreciation and amortization of $9,873 and $9,566 at respective dates	43,150		41,269
Nonutility property, plant and equipment, less accumulated depreciation of $78 and $77 at respective dates	81		75
Total property, plant and equipment	43,231		41,344
Regulatory assets	5,731		5,380
Wildfire Insurance Fund contributions	2,849		—
Operating lease right-of-use assets	701		—
Long-term insurance receivable due from affiliate	1,000		1,000
Other long-term assets	1,378		1,360
Total long-term assets	11,659		7,740









Total assets	$	63,622	$	56,574

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



Consolidated Balance Sheets	Southern California Edison Company

(in millions, unaudited) September 30,
2017 December 31, 2016
ASSETS
Cash and cash equivalents $ 61
$ 39
Receivables, less allowances of $55 and $61 for uncollectible accounts at respective dates 1,087
699
Accrued unbilled revenue 351
369
Inventory 229
239
Prepaid taxes 209
16
Derivative assets 36
73
Regulatory assets 445
350
Other current assets 270
246
Total current assets 2,688
2,031
Nuclear decommissioning trusts 4,415
4,242
Other investments 49
50
Total investments 4,464
4,292
Utility property, plant and equipment, less accumulated depreciation and amortization of $9,173 and $9,000 at respective dates 37,666
36,806
Nonutility property, plant and equipment, less accumulated depreciation of $94 and $89 at respective dates 73
75
Total property, plant and equipment 37,739
36,881
Regulatory assets 8,028
7,455
Other long-term assets 229
232
Total long-term assets 8,257
7,687

Total assets $ 53,148
$ 50,891



(in millions, except share amounts, unaudited)	September 30, 2019			December 31, 2018
LIABILITIES AND EQUITY
Short-term debt	$	—		$	720
Current portion of long-term debt	79			79
Accounts payable	1,663			1,519
Customer deposits	302			299
Regulatory liabilities	1,010			1,532
Current portion of operating lease liabilities	90			—
Other current liabilities	1,182			997
Total current liabilities	4,326			5,146
Long-term debt	15,129			12,892
Deferred income taxes and credits	6,360			5,898
Pensions and benefits	434			433
Asset retirement obligations	3,030			3,031
Regulatory liabilities	8,544			8,329
Operating lease liabilities	611			—
Wildfire-related claims	4,669			4,669
Other deferred credits and other long-term liabilities	2,874			2,391
Total deferred credits and other liabilities	26,522			24,751
Total liabilities	45,977			42,789
Commitments and contingencies (Note 12)
Preferred and preference stock	2,245			2,245
Common stock, no par value (560,000,000 shares authorized; 434,888,104 shares issued and outstanding at respective dates)	2,168			2,168
Additional paid-in capital	3,737			680
Accumulated other comprehensive loss	(25		)	(23		)
Retained earnings	9,520			8,715
Total equity	17,645			13,785









Total liabilities and equity	$	63,622		$	56,574

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



~~Consolidated Balance Sheets~~	~~Southern California Edison Company~~

(in millions, except share amounts, unaudited) September 30,
2017 December 31, 2016
LIABILITIES AND EQUITY
Short-term debt $ 329
$ 769
Current portion of long-term debt 579
579
Accounts payable 1,100
1,344
Accrued taxes 92
45
Customer deposits 276
269
Derivative liabilities 3
216
Regulatory liabilities 1,281
756
Other current liabilities 1,098
729
Total current liabilities 4,758
4,707
Long-term debt 10,426
9,754
Deferred income taxes and credits 10,966
9,886
Derivative liabilities —
941
Pensions and benefits 944
896
Asset retirement obligations 2,675
2,586
Regulatory liabilities 5,858
5,726
Other deferred credits and other long-term liabilities 2,528
1,912
Total deferred credits and other liabilities 22,971
21,947
Total liabilities 38,155
36,408
Commitments and contingencies (Note 11)

Common stock, no par value (560,000,000 shares authorized; 434,888,104 shares issued and outstanding at each date) 2,168
2,168
Additional paid-in capital 668
657
Accumulated other comprehensive loss (18 ) (20 )
Retained earnings 9,930
9,433
Total common shareholder's equity 12,748
12,238
Preferred and preference stock 2,245
2,245
Total equity 14,993
14,483
Total liabilities and equity $ 53,148
$ 50,891

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

2734



Consolidated Statements of Cash Flows	Southern California Edison Company


	Nine months ended September 30,						Nine months ended September 30,
(in millions, unaudited)	2017			2016			2019			2018
Cash flows from operating activities:
Net income	$	1,215		$	1,140		$	1,306		$	1,210
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization	1,581			1,564			1,312			1,632
Allowance for equity during construction	(65		)	(58		)	(75		)	(76		)
Impairment and other							166			(10		)
Deferred income taxes and investment tax credits	337			84			(207		)	108
Other	—			7			81			43
Nuclear decommissioning trusts	(117		)	(159		)	(114		)	(86		)
Contributions to Wildfire Insurance Fund							(2,363		)	—
Changes in operating assets and liabilities:
Receivables	(389		)	(256		)	(392		)	(337		)
Inventory	11			5			(68		)	(25		)
Accounts payable	(16		)	152			275			2
Prepaid and accrued taxes	(146		)	111
Tax receivables and payables							279			80
Other current assets and liabilities	(13		)	(44		)	(341		)	(412		)
Derivative assets and liabilities	(24		)	15
Regulatory assets and liabilities	560			189
Regulatory assets and liabilities, net							(470		)	213
Other noncurrent assets and liabilities	(141		)	88			(28		)	(84		)
Net cash provided by operating activities	2,793			2,838
Net cash (used in) provided by operating activities							(639		)	2,258
Cash flows from financing activities:
Long-term debt issued or remarketed, net of premium, discount and issuance costs of $10 for the nine months ended September 30, 2017	1,445			—
Long-term debt matured or repurchased	(781		)	(81		)
Preference stock issued, net	463			294
Preference stock redeemed	(475		)	(125		)
Long-term debt issued, net of premium, discount and issuance costs of $6 and $58 for the respective periods							2,306			2,692
Long-term debt matured							(81		)	(639		)
Capital contributions from Edison International Parent							3,050			—
Short-term debt financing, net	(441		)	189			(721		)	(1,137		)
Payments for stock-based compensation	(80		)	(121		)	(39		)	(16		)
Receipt from stock option exercises	45			73
Receipts from stock option exercises							22			8
Dividends paid	(481		)	(607		)	(496		)	(570		)
Other	(34		)	(4		)	(2		)	2
Net cash used in financing activities	(339		)	(382		)
Net cash provided by financing activities							4,039			340
Cash flows from investing activities:
Capital expenditures	(2,596		)	(2,747		)	(3,495		)	(3,223		)
Proceeds from sale of nuclear decommissioning trust investments	3,974			2,075			3,354			3,017
Purchases of nuclear decommissioning trust investments	(3,857		)	(1,916		)	(3,240		)	(2,931		)
Life insurance policy loan proceeds	26			140
Other	21			5			45			63
Net cash used in investing activities	(2,432		)	(2,443		)	(3,336		)	(3,074		)
Net increase in cash and cash equivalents	22			13
Cash and cash equivalents, beginning of period	39			26
Cash and cash equivalents, end of period	$	61		$	39
Net increase (decrease) in cash, cash equivalents and restricted cash							64			(476		)
Cash, cash equivalents and restricted cash at beginning of period							22			515
Cash, cash equivalents and restricted cash at end of period							$	86		$	39

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

2835

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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~~Edison Energy, LLC ("Edison Energy") which is engaged in ~~pursuing~~the competitive business ~~opportunities across~~of providing energy services ~~managed portfolio solutions, and distributed solar solutions for~~to commercial and industrial customers. ~~Such~~Edison Energy's business activities are currently not material to report as a separate business segment. These combined notes to the consolidated financial statements apply to both Edison International and SCE unless otherwise described. Edison International's consolidated financial statements include the accounts of Edison International, SCE, and other wholly owned and controlled subsidiaries. References to Edison International refer to the consolidated group of Edison International and its subsidiaries. References to ~~Edison~~"Edison International Parent and ~~Other~~Other" refer to Edison International Parent and its competitive subsidiaries and "Edison International Parent" refer to Edison International on a stand-alone basis, not consolidated with its subsidiaries. SCE's consolidated financial statements include the accounts of SCE 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~~the "Notes to Consolidated Financial Statements" included in Edison International's and SCE's combined Annual Report on Form 10-K for the ~~year-ended~~year ended December 31, ~~2016~~2018 (the ~~"2016~~"2018 Form 10-K"). This quarterly report should be read in conjunction with the financial statements and notes included in the ~~2016~~2018 Form 10-K.

In the opinion of management, all adjustments, consisting only of adjustments of a normal recurring ~~accruals,~~nature, have been made that are necessary to fairly state the consolidated financial position, results of operations, and cash flows in accordance with accounting principles generally accepted in the United States ("GAAP") for the periods covered by this quarterly report on Form 10-Q. The results of operations for the three- and nine-month periods ended September 30, ~~2017~~2019 are not necessarily indicative of the operating results for the full year. Certain prior period amounts have been conformed to the current period's presentation.

The December 31, ~~2016~~2018 financial statement data was derived from audited financial statements, but does not include all disclosures required by GAAP.

During the fourth quarter of 2016, Edison International and SCE early adopted an accounting standard for share-based payments using the modified retrospective approach, effective January 1, 2016. Prior year financial statements have been updated to reflect the modified retrospective application of this accounting standard. For further information, see Note 1 and Note 18 of "Notes to Consolidated Financial Statements" included in the 2016 Form 10-K and Note 2 and Note 7 of this Form 10-Q.

Cash, Cash Equivalents and Restricted Cash

Cash equivalents ~~includes~~include 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
(in millions)	September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
Money market funds	$	493	$	116	$	41	$	1

Edison International SCE
(in millions) September 30,
2017 December 31, 2016 September 30,
2017 December 31, 2016
Money market funds $ 49
$ 41
$ 25
$ 18

Cash is temporarily invested until required for check clearing. Checks issued, but not yet paid by the financial institution, are reclassified from cash to accounts payable at the end of each reporting period as follows:



	Edison International				SCE
(in millions)	September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
Book balances reclassified to accounts payable	$	63	$	65	$	61	$	65

Short-term restricted cash¹


¹	Reflected in "Other current assets" on Edison International's and SCE's consolidated balance sheets.

Goodwill

At September 30, 2019, Edison International has $59 million of goodwill, all of which is related to its Edison Energy reporting unit. Goodwill constitutes the majority of Edison International's $83 million investment in Edison Energy. Edison International assesses goodwill through an annual goodwill impairment ~~tests,~~test, at the reporting unit level as of October 1st of each year. Edison International ~~updates these tests~~will update its goodwill impairment test 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~~The fair value of the Edison Energy ~~Group's competitive businesses,~~reporting unit is estimated using the income approach, which utilizes discounted cash flow analysis based on the earnings expected to be generated in the future. This determination requires significant assumptions and estimates in forecasting future cash flows and establishing a market discount rate and a terminal value. The most critical assumption affecting the estimate of the Edison ~~International evaluated~~Energy reporting unit's fair value is its forecasted growth in sales to commercial and industrial customers. Edison Energy is currently in the ~~recoverability~~process of updating its long-term plan. A reduction in expected future cash flows could result in a goodwill impairment.

Revenue Recognition

Regulatory Proceedings

2018 General Rate Case

In May 2019, the California Public Utilities Commission ("CPUC") approved a final decision in SCE's 2018 GRC. The final decision authorized a revenue requirement of $5.116 billion for 2018 and identified changes to certain balancing accounts, including the expansion of the TAMA to include the impacts of all differences between forecast and recorded ~~an impairment~~tax expense. The final decision also disallowed certain historical spending, largely related to specific pole replacements the CPUC determined were performed prematurely.

The final decision allows a post-test year rate making mechanism that escalates capital additions by 2.49% for both 2019 and 2020. It also allows operation and maintenance expenses to be escalated for 2019 and 2020 through the use of ~~SoCore Energy's goodwill totaling $16.5 million ($10 million after-tax)~~various escalation factors for labor, non-labor and medical expenses. The methodology set forth in the final decision results in a revenue requirement of $5.451 billion in 2019 and $5.863 billion in 2020.

An increase to earnings of $131 million from the application of the decision to revenue, depreciation expense and income tax expense. Depreciation expense decreased as a result of lower authorized depreciation rates. An increase in the authorized revenue requirement for income tax expenses offsets income tax expenses recognized during 2018 and the first quarter of 2019. The reduction of revenue of $265 million reflects $289 million of lower authorized revenue related to 2018 and $24 million of higher authorized revenue in 2019. The reduction in revenue contributes to a refund to customers of $554 million which SCE recorded as a regulatory liability as of June 30, 2019. SCE expects to refund these amounts to customers through December 2020.

An impairment of utility property, plant and equipment of $170 million ($123 million after-tax) related to disallowed historical capital expenditures, primarily the write-off of specific pole replacements the CPUC determined were performed prematurely.

See Note 11 for further information.

2018 and 2019 FERC Formula Rate

In October 2017, SCE filed its 2018 formula rate ("Formula Rate") with the FERC. In December 2017, the FERC issued an order setting the effective date of SCE's 2018 FERC Formula Rate as of January 1, 2018, subject to settlement procedures and refund. In November 2018, SCE filed its 2019 annual update with the FERC with the proposed rates effective January 1, 2019, subject to settlement procedures and refund, and requested a decrease in transmission revenue requirement of $131 million, or 11% from amounts currently authorized in rates. In April 2019, SCE filed an application with the FERC to revise the 2018 Formula Rate with the 2019 Formula Rate, which was subsequently accepted by the FERC, effective November 11, 2019, subject to refund and settlement procedures. In September 2019, SCE filed a settlement on its formula rates for the 2018 Formula Rate case that, will establish SCE's FERC transmission revenue requirement for January 1, 2018 through November 11, 2019 (the “FERC 2018 Settlement Period”). The settlement provides for a weighted-average ROE of 11.2%, which includes a previously authorized 50 basis point incentive for CAISO participation and individual and previously authorized project incentives. Under the settlement, if the FERC issues a final, unappealable ruling that finds SCE is not eligible for the 50 basis point incentive for CAISO participation, then the ROE for the FERC 2018 Settlement Period will be reduced to 10.7%. The FERC has approved implementing this settlement on an interim basis pending the FERC's consideration of the settlement. The transmission revenue requirement and rates that have been billed to customers for the FERC 2018 Settlement Period were based on a total FERC weighted average ROE of 11.58%. SCE will true-up customer rates for the difference between its original request and the settlement from existing regulatory liabilities pending FERC's consideration of the settlement and will reverse the true-up if the settlement is not approved by the FERC. SCE had been recognizing revenue during the FERC 2018 Settlement Period based on its expectations of the probable outcome of the 2018 Formula Rate case. Regulatory assets and liabilities were adjusted based on the probable approval of the 2018 Formula Rate case settlement, which resulted in recording a $48.4 million increase in net income.

In the 2019 Formula Rate case, SCE requested a base return on equity of 17.12% ("FERC Base ROE"). The requested FERC Base ROE reflected a conventional ROE of 11.12% and an additional ROE of 6% to compensate investors for current wildfire risk. SCE's total ROE request, inclusive of project incentives and a 0.5% incentive for CAISO participation, was approximately 18.4%, compared to its proposed settlement for its 2018 Formula Rate of 11.2%.

In September 2019, SCE filed a partial settlement on the 2019 Formula Rate that modifies its requested FERC Base ROE from 17.12% to 11.97%. This reduced ROE request reflects a conventional ROE of 11.12% and an additional ROE of 0.85% to compensate investors for current wildfire risk. As with the equivalent reduction in SCE's requested ROE in its 2020 CPUC Cost of ~~September 30, 2017, goodwill~~Capital proceeding, for SCE, this partial settlement reflects the anticipated impact of AB 1054 on its requested ROE. As modified, SCE's total ROE request, inclusive of project incentives and a 0.5% incentive for CAISO participation, would be approximately 13.25%. The FERC has approved implementing the 2019 Formula Rate as revised by partial settlement effective as of November 12, 2019 pending the FERC's consideration of the partial settlement but subject to hearing and settlement procedures. If the partial settlement is ~~comprised~~not approved by the FERC, SCE will increase customer rates to reflect the impact of ~~$78 million at~~ the ~~Edison Energy reporting unit and $5 million at~~2019 Formula Rate based on SCE's initial request being implemented effective as of November 12, 2019. Whether or not the ~~SoCore Energy reporting unit.~~partial settlement is approved by the FERC, amounts billed to customers under the 2019 Formula Rate will be subject to refund until the 2019 Formula Rate proceeding is ultimately resolved.

See Note 7 for further information on SCE's revenue.

Earnings Per Share

Edison International computes earnings per common share ("EPS") using the two-class method, which is an earnings allocation formula that determines EPS for each class of common stock and participating security. Edison International's participating securities are stock-based compensation awards payable in common shares, including ~~performance shares and~~ restricted stock units, which earn dividend equivalents on an equal basis with common shares once the awards are vested. EPS attributable to Edison International common shareholders was computed as follows:



	Three months ended September 30,				Nine months ended September 30,
(in millions, except per-share amounts)	2019		2018		2019		2018
Basic earnings per share:
Net income attributable to common shareholders	$	471	$	513	$	1,141	$	1,007
Participating securities dividends	—		—		—		—
Net income available to common shareholders	$	471	$	513	$	1,141	$	1,007
Weighted average common shares outstanding	347		326		333		326
Basic earnings per share	$	1.36	$	1.57	$	3.43	$	3.09
Diluted earnings per share:
Net income attributable to common shareholders	$	471	$	513	$	1,141	$	1,007
Participating securities dividends	—		—		—		—
Net income available to common shareholders	$	471	$	513	$	1,141	$	1,007
Income impact of assumed conversions	—		—		—		—
Net income available to common shareholders and assumed conversions	$	471	$	513	$	1,141	$	1,007
Weighted average common shares outstanding	347		326		333		326
Incremental shares from assumed conversions	2		1		1		1
Adjusted weighted average shares – diluted	349		327		334		327
Diluted earnings per share	$	1.35	$	1.57	$	3.42	$	3.08

Three months ended September 30, Nine months ended September 30,
(in millions, except per-share amounts) 2017 2016 2017 2016
Basic earnings per share – continuing operations:
Income from continuing operations attributable to common shareholders $ 470
$ 421
$ 1,110
$ 983
Participating securities dividends —
—
—
—
Income from continuing operations available to common shareholders $ 470
$ 421
$ 1,110
$ 983
Weighted average common shares outstanding 326
326
326
326
Basic earnings per share – continuing operations $ 1.44
$ 1.29
$ 3.41
$ 3.01
Diluted earnings per share – continuing operations:
Income from continuing operations attributable to common shareholders $ 470
$ 421
$ 1,110
$ 983
Participating securities dividends —
—
—
—
Income from continuing operations available to common shareholders $ 470
$ 421
$ 1,110
$ 983
Income impact of assumed conversions —
—
—
—
Income from continuing operations available to common shareholders and assumed conversions $ 470
$ 421
$ 1,110
$ 983
Weighted average common shares outstanding 326
326
326
326
Incremental shares from assumed conversions 2
4
3
4
Adjusted weighted average shares – diluted 328
330
329
330
Diluted earnings per share – continuing operations $ 1.43
$ 1.27
$ 3.38
$ 2.98

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 ~~1,365,671~~1,398,884 and ~~42,890~~3,817,072 shares of common stock for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, and ~~1,373,736~~5,997,917 and ~~166,057~~6,042,695 shares for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, were outstanding, but were not included in the computation of diluted earnings per share because the effect would have been antidilutive.

Initial and annual contributions to the wildfire insurance fund established pursuant to California Assembly Bill 1054 (the "Wildfire Insurance Fund" and "AB 1054")

Edison International and SCE accounted for the contributions to the Wildfire Insurance Fund similar to prepaid insurance. No period of coverage was provided in AB 1054, therefore expense is being allocated to periods ratably based on an estimated period of coverage. At September 30, 2019, Edison International and SCE have a $2.8 billion long-term asset and a $323 million current asset reflected as "Wildfire Insurance Fund contributions" in the consolidated balance sheets, for an initial $2.4 billion contribution made during the third quarter of 2019 and the present value of annual contributions SCE has committed to make to the Wildfire Insurance Fund. At September 30, 2019, a long-term liability of $782 million and a current liability of $94 million have been reflected as "Other deferred credits and other long-term liabilities" and "Other current liabilities", respectively, for the present value of unpaid contribution amounts. Contributions were discounted to the present value at the date SCE committed to participate in the Wildfire Insurance Fund using US treasury interest rates.

A period of 10 years is being used to amortize the asset. All expenses related to the contributions are being reflected in "operation and maintenance" in the consolidated statements of income. Changes in the estimated period of coverage provided by the Wildfire Insurance Fund could lead to material changes in the future expense recognition. In estimating the period of coverage Edison International and SCE used Monte Carlo simulations based on five years of historical data from wildfires caused by electrical equipment to estimate expected loss. The details of the operation of the Wildfire Insurance Fund and estimates related to claims by SCE, PG&E and SDG&E from the fund, have been applied to the expected loss simulations to estimate the period of coverage of the fund. The most sensitive inputs to the estimated period of coverage are the expected

~~Asset Retirement Obligation~~

~~During 2017,~~frequency of wildfire events caused by electrical equipment and the estimated costs associated with those forecasted events. Edison International and SCE ~~recorded revisions~~evaluate all inputs annually, or upon claims being made from the fund for catastrophic wildfires, the expected life of the insurance fund will be adjusted as required.

Edison International and SCE will assess the Wildfire Insurance Fund contribution assets for impairment in the event that a participating utility's electrical equipment is found to ~~its asset retirement obligation ("ARO") resulting~~be the substantial cause of a catastrophic wildfire, based on the ability of SCE to benefit from the coverage provided by the Wildfire Insurance Fund in an ~~increase of $142 million. The revisions resulted from an updated decommissioning cost estimate for Palo Verde and~~amount equal to the ~~expected decommissioning of a hydroelectric facility.~~recorded assets.

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 onOn January 1, ~~2018.~~2019, Edison International and SCE ~~have completed~~adopted accounting standards updates that require lessees to recognize a lease on the ~~evaluation of all significant revenue streams.~~balance sheet as a right-of-use ("ROU") asset and related lease liability and classify the lease as either operating or finance. Edison International and SCE ~~do not believe~~adopted this guidance using the modified retrospective approach for leases that existed as of the adoption ~~of this standard will have a material impact on~~date and elected the ~~financial position or results of operations. For the nine months ended September 30, 2017, approximately 95% of total operating revenue arises from SCE's tariff offerings that provide electricity~~optional transition method not to ~~customers. For such arrangements, revenue from contracts with customers will be equivalent~~restate periods prior 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.~~adoption date. Edison International and SCE ~~are in~~also elected the ~~process~~package of ~~implementing~~practical expedients not to reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs, and the ~~system~~practical expedient not to reassess existing land easements. Adoption of this standard increased ROU assets and ~~process changes necessary to comply with this standard's enhanced disclosure requirements.~~lease liabilities on the consolidated balance sheets by $956 million and $951 million as of January 1, 2019 for 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 over- and under-collections, are excluded fromrespectively. The standard did not materially impact the ~~scope~~consolidated statements of ~~the new standard and, therefore, will be accounted~~income for ~~and presented separately from revenues recognized under the new standard on the~~ Edison International and SCE consolidated financial statements. Edison International and SCE will adopt the standard by using the modified retrospective method by recognizing a cumulative effect adjustment to the opening balance of retained earningsor SCE.

Based on accounting standards adopted at January 1, ~~2018. Edison International and SCE do not expect the cumulative effect adjustment to be material.~~

In January 2016, the FASB issued an accounting standards update that amends the guidance on the classification and measurement of financial instruments. The amendments require equity investments (excluding those accounted for under the equity method or those that result in consolidation) to be measured at fair value, with changes in fair value recognized in net income. It also amends certain disclosure requirements associated with the fair value of financial instruments. In addition, the new guidance requires financial assets and financial liabilities to be presented separately in the notes to the financial statements, grouped by measurement category and form of financial asset. Edison International and SCE will adopt this guidance effective January 1, 2018. SCE's nuclear decommissioning trust investments contain equity investments that are classified as available-for-sale. Due to regulatory mechanisms, the change in fair value of these investments has no impact on net income and, therefore, the adoption of this standard is not expected to have a material impact on Edison International's and SCE's consolidated financial statements.

~~In February 2016, the FASB issued an accounting standards update related to lease accounting including enhanced disclosures. Under the new standard,~~2019, 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~~This occurs when an entity has the right to ~~recognize leases on~~obtain substantially all of the ~~balance sheet~~economic benefits from and has the right to direct the use of the identified asset. SCE determines if an arrangement is a lease at contract inception, and for all classes of assets, SCE includes both lease and non-lease components as a ~~right-of-use asset~~single component and accounts for it as a ~~related lease liability, and classify the leases as either operating or finance. The liability will be equal to~~lease. Lease liabilities are recognized based on the present value of the lease ~~payments. The asset will be~~payments over the lease term at the commencement date. Lease ROU assets are based on the liability, subject to ~~adjustment,~~adjustments, such as ~~for initial direct costs.~~lease incentives. In measuring lease assets and liabilities, SCE excludes variable lease payments, other than those that depend on an index, a rate or are in substance fixed payments. SCE's lease terms include options to extend or terminate the lease when it is reasonably certain that such options will be exercised. Operating leases ~~will result~~are included in ~~straight-line expense~~operating lease ROU assets and operating lease liabilities on the consolidated balance sheets. Finance leases are included in property, plant and equipment and other liabilities on the consolidated balance sheets. See Note 13 for further information.

In February 2018, the FASB issued an accounting standards update to provide entities an election to reclassify stranded tax effects resulting from Tax Reform from accumulated other comprehensive income to retained earnings. Stranded tax effects originated in December 2017 when deferred taxes were re-measured at the lower federal corporate tax rate with the impact included in operating income, while ~~finance leases will result in a higher initial expense pattern due~~the tax effects of items within accumulated other comprehensive income were not similarly adjusted. Edison International and SCE adopted this guidance on January 1, 2019 and reclassified stranded tax effects of $10 million and $5 million, respectively, from accumulated other comprehensive income to retained earnings. See Notes 2 and 14 for further information.

In August 2018, the ~~interest component.~~FASB issued an accounting standards update to remove, modify, and add certain disclosure requirements related to fair value measurement. Edison International and SCE as a regulated entity, is permitted to continue to have straight-line expense for finance leases, assuming the rate recovery is based upon current payments. Lessees can elect to exclude from the balance sheet short-term contracts one year or less. Thisadopted this guidance is effective January 1, 2019. ~~Early~~The adoption ~~is permitted, but~~of this guidance did not have a material impact on Edison International's and SCE's disclosures. See Note 4 for further information.

Accounting Guidance Not Yet Adopted

In June 2016, the FASB issued an accounting standards update to require the use of the current expected credit loss model to measure impairment of financial instruments and the use of an allowance to record estimated credit losses on available-for-sale debt securities. The guidance, as amended in November 2018 and May 2019, allows entities to irrevocably elect the fair value option for any financial instrument previously measured on an amortized costs basis. Edison International and SCE have identified accounts receivable and available for sale debt securities held in nuclear decommissioning trusts as financial assets in scope for this guidance. Edison International and SCE are in the process of implementing process changes necessary to comply with the standard's disclosure requirements. Edison International and SCE do not ~~expect to elect early adoption. The~~believe the adoption of ~~this~~the standard will ~~increase right-of-use assets~~have a material impact on the financial position or results of operations and ~~lease liabilities in Edison International's~~will apply a prospective adoption approach to available-for-sale debt securities and ~~SCE's consolidated balance sheets.~~a modified retrospective approach to all other financial assets. Edison International and SCE ~~are currently evaluating~~will not elect the ~~impact~~fair value option. Edison International and SCE will adopt this ~~standard will have on the results of operations and statements of cash flows and lease disclosures.~~

~~The FASB also issued an accounting standards update related to the impairment of financial instruments,~~guidance 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. These standards are effective January 1, 2018 and require retrospective application. Restricted cash as of September 30, 2017 was $15 million at Edison International and was less than $1 million at SCE.

In January 2017, the FASB issued an accounting standards update to simplify the accounting for goodwill ~~impairment. This accounting standards update changes~~impairment by changing the procedural steps ~~in applying~~to apply the goodwill impairment test. AAfter the adoption of this accounting standards update, goodwill impairment will ~~now~~ be measured as 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~~tests beginning in 2020.

In ~~March 2017,~~August 2018, the FASB issued an accounting standards update which ~~amends~~aligns the ~~current~~requirement for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing costs incurred to develop or obtain internal-use software. The guidance also clarified presentation requirements for reporting implementation costs in the financial statements. Edison International and SCE completed an evaluation of hosting arrangements that are service contracts with incurred implementation costs and currently the implementation costs are immaterial, as such the guidance will be applied prospectively. Edison International and SCE will adopt this guidance effective January 1, 2020.

In August 2018, the FASB issued an accounting standards update to remove, modify, and add certain disclosure requirements related to ~~the presentation of the components of net periodic benefit cost for an entity's~~employer-sponsored defined benefit pension ~~and~~or other postretirement plans. The guidance is effective January 1, 2021, with early adoption permitted. Edison International and SCE are currently evaluating the impact of the guidance and do not expect 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 result in the separate presentation of service costs as an operating expense and non-service costs within other income and expense and limit the capitalization of benefit costs to the service cost component. During the three and nine months ended September 30, 2017, service costs totaled $45 million and $135 million, respectively, for Edison International and $44 million and $132 million, respectively, for SCE. During the three and nine months ended September 30, 2017, non-service costs were $(14) million and $(32) million, respectively, for Edison International and $(15) million and $(45) million, respectively, for SCE. The new standards update is effective on January 1, 2018. It is required to be applied on a retrospective basis for the presentation of 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.materially affect disclosures.

Note 2. Consolidated Statements of Changes in Equity

The following table provides Edison International's changes in equity for the three and nine months ended September 30, ~~2017:~~

2019:

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 —
—
1,110
1,110
94
1,204
Other comprehensive income —
5
—
5
—
5
Common stock dividends declared ($1.6275 per share) —
—
(530 ) (530 ) —
(530 )
Dividends to noncontrolling interests —
—
—
—
(94 ) (94 )
Stock-based compensation —
—
(165 ) (165 ) —
(165 )
Non-cash stock-based compensation 15
—

15
—
15
Issuance of preference stock —
—
—
—
463
463
Redemption of preference stock —
—
(15 ) (15 ) (460 ) (475 )
Balance at September 30, 2017 $ 2,520
$ (48 ) $ 9,944
$ 12,416
$ 2,194
$ 14,610



	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, 2018	$	2,545	$	(50	)	$	7,964		$	10,459		$	2,193		$	12,652
Net income	—		—			278			278			30			308
Other comprehensive income	—		2			—			2			—			2
Cumulative effect of accounting changes¹	—		(10		)	10			—			—			—
Common stock dividends declared ($0.6125 per share)	—		—			(200		)	(200		)	—			(200		)
Dividends to noncontrolling interests ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock)	—		—			—			—			(30		)	(30		)
Stock-based compensation	—		—			(18		)	(18		)	—			(18		)
Noncash stock-based compensation	5		—			—			5			—			5
Balance at March 31, 2019	$	2,550	$	(58	)	$	8,034		$	10,526		$	2,193		$	12,719
Net income	—		—			392			392			30			422
Other comprehensive income	—		1			—			1			—			1
Common stock dividends declared ($0.6125 per share)	—		—			(200		)	(200		)	—			(200		)
Dividends to noncontrolling interests ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock)	—		—			—			—			(30		)	(30		)
Stock-based compensation	—		—			(4		)	(4		)	—			(4		)
Noncash stock-based compensation	5		—			—			5			—			5
Balance at June 30, 2019	$	2,555	$	(57	)	$	8,222		$	10,720		$	2,193		$	12,913
Net income	—		—			471			471			31			502
Other comprehensive income	—		2			—			2			—			2
Common stock issued, net of issuance cost	2,185		—			—			2,185			—			2,185
Common stock dividends declared ($0.6125 per share)	—		—			(219		)	(219		)	—			(219		)
Dividends to noncontrolling interests ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock)	—		—			—			—			(31		)	(31		)
Stock-based compensation	—		—			(5		)	(5		)	—			(5		)
Noncash stock-based compensation	6		—			—			6			—			6
Balance at September 30, 2019	$	4,746	$	(55	)	$	8,469		$	13,160		$	2,193		$	15,353


¹	Edison International recognized cumulative effect adjustments to the opening balance of retained earnings and accumulated other comprehensive loss on January 1, 2019 related to the adoption of the accounting standards updates on the reclassification of stranded tax effects resulting from Tax Reform. See Note 1 for further information.

The following table provides Edison International's changes in equity for the three and nine months ended September 30, ~~2016:~~

2018:

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 —
—
982
¹
982
92
1,074
Other comprehensive income —
5
—
5
—
5
Common stock dividends declared ($1.4400 per share) —
—
(469 ) (469 ) —
(469 )
Dividends to noncontrolling interests —
—
—
—
(92 ) (92 )
Stock-based compensation (1 ) —
(30 )
¹
(31 ) —
(31 )
Non-cash stock-based compensation 18
—
—
18
—
18
Issuance of preference stock —
—
—
—
294
294
Redemption of preference stock —
—
(2 ) (2 ) (123 ) (125 )
Balance at September 30, 2016 $ 2,501
$ (51 ) $ 9,421
$ 11,871
$ 2,191
$ 14,062



	Equity Attributable to Common Shareholders											Noncontrolling Interests
(in millions, except per-share amounts)	Common Stock		Accumulated Other Comprehensive Loss			Retained Earnings			Subtotal			Other			Preferred and Preference Stock			Total Equity
Balance at December 31, 2017	$	2,526	$	(43	)	$	9,188		$	11,671		$	2		$	2,193		$	13,866
Net income (loss)	—		—			218			218			(3		)	30			245
Other comprehensive income	—		2			—			2			—			—			2
Cumulative effect of accounting changes¹	—		(5		)	10			5			—			—			5
Common stock dividends declared ($0.6050 per share)	—		—			(197		)	(197		)	—			—			(197		)
Dividends to noncontrolling interests ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock)	—		—			—			—			—			(30		)	(30		)
Stock-based compensation	—		—			(8		)	(8		)	—			—			(8		)
Noncash stock-based compensation	5		—			—			5			—			—			5
Other	—		—			—			—			1			—			1
Balance at March 31, 2018	$	2,531	$	(46	)	$	9,211		$	11,696		$	—		$	2,193		$	13,889
Net income (loss)	—		—			276			276			(8		)	30			298
Other comprehensive income	—		2			—			2			—			—			2
Contribution from tax equity investor	—		—			—			—			24			—			24
Common stock dividends declared ($0.6050 per share)	—		—			(197		)	(197		)	—			—			(197		)
Dividends to noncontrolling interests ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock)	—		—			—			—			—			(30		)	(30		)
Stock-based compensation	—		—			(4		)	(4		)	—			—			(4		)
Noncash stock-based compensation	6		—			—			6			—			—			6
Deconsolidation of SoCore Energy	—		—			—			—			(15		)	—			(15		)
Other	—		—			—			—			(1		)	—			(1		)
Balance at June 30, 2018	$	2,537	$	(44	)	$	9,286		$	11,779		$	—		$	2,193		$	13,972
Net income	—		—			513			513			—			31			544
Other comprehensive income	—		2			—			2			—			—			2
Common stock dividends declared ($0.6050 per share)	—		—			(197		)	(197		)	—			—			(197		)
Dividends to noncontrolling interests ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock)	—		—			—			—			—			(31		)	(31		)
Stock-based compensation	—		—			(5		)	(5		)	—			—			(5		)
Noncash stock-based compensation	4		—			—			4			—			—			4
Balance at September 30, 2018	$	2,541	$	(42	)	$	9,597		$	12,096		$	—		$	2,193		$	14,289

Edison International ~~adopted an accounting standard~~recognized a cumulative effect adjustment to the opening balance of retained earnings and accumulated other comprehensive loss on January 1, 2018 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~~the accounting standards update on ~~January 1, 2016. Net income~~revenue recognition and ~~stock-based compensation (as previously reported) were $965 million and $(72) million, respectively, for~~ the ~~nine months ended September 30, 2016.~~measurement of financial instruments.

~~The following table provides SCE's changes in equity for the nine months ended September 30, 2017:~~

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
Balance at December 31, 2016 $ 2,168
$ 657
$ (20 ) $ 9,433
$ 2,245
$ 14,483
Net income —
—
—
1,215
—
1,215
Other comprehensive income —
—
2
—
—
2
Dividends declared on common stock —
—
—
(573 ) —
(573 )
Dividends declared on preferred and preference stock —
—
—
(94 ) —
(94 )
Stock-based compensation —
—
—
(36 ) —
(36 )
Non-cash stock-based compensation —
8
—
—
—
8
Issuance of preference stock —
(12 ) —
—
475
463
Redemption of preference stock —
15
—
(15 ) (475 ) (475 )
Balance at September 30, 2017 $ 2,168
$ 668
$ (18 ) $ 9,930
$ 2,245
$ 14,993

The following table provides SCE's changes in equity for the three and nine months ended September 30, ~~2016:~~2019:

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
Balance at December 31, 2015 $ 2,168
$ 652
$ (22 ) $ 8,804
$ 2,070
$ 13,672
Net income —
—
—
1,140
¹
—
1,140
Other comprehensive income —
—
3
—
—
3
Dividends declared on common stock —
—
—
(510 ) —
(510 )
Dividends declared on preferred and preference stock —
—
—
(92 ) —
(92 )
Stock-based compensation —
—
—
(43 )
¹
—
(43 )
Non-cash stock-based compensation —
8
—
—
—
8
Issuance of preference stock —
(6 ) —
—
300
294
Redemption of preference stock —
2
—
(2 ) (125 ) (125 )
Balance at September 30, 2016 $ 2,168
$ 656
$ (19 ) $ 9,297
$ 2,245
$ 14,347



(in millions, except per-share amounts)	Preferred and Preference Stock		Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Total Equity
Balance at December 31, 2018	$	2,245	$	2,168	$	680		$	(23	)	$	8,715		$	13,785
Net income	—		—		—			—			323			323
Other comprehensive income	—		—		—			1			—			1
Cumulative effect of accounting change¹	—		—		—			(5		)	5			—
Dividends declared on common stock ($0.4599 per share)	—		—		—			—			(200		)	(200		)
Dividends declared on preferred and preference stock ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock)	—		—		—			—			(30		)	(30		)
Stock-based compensation	—		—		—			—			(12		)	(12		)
Noncash stock-based compensation	—		—		3			—			—			3
Balance at March 31, 2019	$	2,245	$	2,168	$	683		$	(27	)	$	8,801		$	13,870
Net income	—		—		—			—			449			449
Other comprehensive income	—		—		—			1			—			1
Capital contribution from Edison International Parent	—		—		1,200			—			—			1,200
Dividends declared on preferred and preference stock ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock)	—		—		—			—			(30		)	(30		)
Stock-based compensation	—		—		—			—			(1		)	(1		)
Noncash stock-based compensation	—		—		3			—			—			3
Balance at June 30, 2019	$	2,245	$	2,168	$	1,886		$	(26	)	$	9,219		$	15,492
Net income	—		—		—			—			534			534
Other comprehensive income	—		—		—			1			—			1
Capital contribution from Edison International Parent	—		—		1,850			—			—			1,850
Dividends declared on common stock ($0.4599 per share)	—		—		—			—			(200		)	(200		)
Dividends declared on preferred and preference stock ($1.02 - $1.195 per share for preferred stock; $62.50 - $143.75 per share for preference stock)	—		—		—			—			(31		)	(31		)
Stock-based compensation	—		—		(2		)	—			(2		)	(4		)
Noncash stock-based compensation	—		—		3			—			—			3
Balance at September 30, 2019	$	2,245	$	2,168	$	3,737		$	(25	)	$	9,520		$	17,645

SCE ~~adopted an accounting standard~~recognized a cumulative effect adjustment to the opening balance of retained earnings and accumulated other comprehensive loss on January 1, 2019 related to ~~share-based payments during~~ the ~~fourth quarter~~adoption of ~~2016, effective January 1, 2016.~~the accounting standards update on the reclassification of stranded tax effects resulting from Tax Reform. See Note 1 for further information. ~~The table above reflects~~

The following table provides SCE's changes in equity for the three and nine months ended September 30, 2018:



(in millions, except per-share amounts)	Preferred and Preference Stock		Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Retained Earnings			Total Equity
Balance at December 31, 2017	$	2,245	$	2,168	$	671	$	(19	)	$	9,607		$	14,672
Net income	—		—		—		—			316			316
Other comprehensive income	—		—		—		2			—			2
Cumulative effect of accounting change¹							(5		)	5			—
Dividends declared on common stock ($0.4875 per share)	—		—		—		—			(212		)	(212		)
Dividends declared on preferred and preference stock ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock)	—		—		—		—			(30		)	(30		)
Stock-based compensation	—		—		—		—			(2		)	(2		)
Noncash stock-based compensation	—		—		2		—			—			2
Balance at March 31, 2018	$	2,245	$	2,168	$	673	$	(22	)	$	9,684		$	14,748
Net income	—		—		—		—			327			327
Other comprehensive income	—		—		—		1			—			1
Dividends declared on common stock ($0.2299 per share)	—		—		—		—			(100		)	(100		)
Dividends declared on preferred and preference stock ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock)	—		—		—		—			(30		)	(30		)
Stock-based compensation	—		—		—		—			(3		)	(3		)
Noncash stock-based compensation	—		—		3		—			—			3
Balance at June 30, 2018	$	2,245	$	2,168	$	676	$	(21	)	$	9,878		$	14,946
Net income	—		—		—		—			567			567
Other comprehensive income	—		—		—		1			—			1
Dividends declared on common stock ($0.6071 per share)	—		—		—		—			(264		)	(264		)
Dividends declared on preferred and preference stock ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock)	—		—		—		—			(31		)	(31		)
Stock-based compensation	—		—		—		—			(4		)	(4		)
Noncash stock-based compensation	—		—		2		—			—			2
Balance at September 30, 2018	$	2,245	$	2,168	$	678	$	(20	)	$	10,146		$	15,217

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 ~~this standard~~the accounting standards update on ~~January 1, 2016. Net income and stock-based compensation (as previously reported) were $1.13 billion and $(49) million, respectively, for~~ the ~~nine months ended September 30, 2016.~~measurement of financial instruments.

Note 3. Variable Interest Entities

A ~~VIE~~variable interest entity ("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 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 ("QF") that contain variable pricing provisions based on the price of natural ~~gas.~~gas and renewable energy contracts through which SCE absorbs commodity price risk. 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 current amounts due under the PPAs. Under these contracts, SCE recovers the costs incurred through demonstration of compliance with its ~~California Public Utilities Commission ("CPUC")-approved~~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 1112 of the ~~2016~~2018 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 ~~4,858~~4,894 MW and ~~4,349~~3,602 MW at September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, and the amounts that SCE paid to these projects were ~~$325~~$353 million and ~~$313~~$328 million for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, and ~~$571~~$628 million and ~~$532~~$567 million for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, 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~~Board of ~~directors~~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.

~~In July 2017, SCE Trust I redeemed $475 million of trust securities from the public and $10,000 of common stock from SCE. As a result in September 2017, SCE Trust I was terminated.~~

The Trust II, Trust III, Trust IV, Trust V and Trust VVI balance sheets as of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, consisted of investments of $400 million, $275 million, $325 million, $300 million, and ~~$300~~$475 million in the Series G, Series H, Series J, Series K and Series KL Preference Stock, respectively, $400 million, $275 million, $325 million, $300 million, and ~~$300~~$475 million of trust securities, respectively, and $10,000 each of common stock. ~~The Trust VI balance sheet as of September 30, 2017 consisted of investments of $475 million in the Series L Preference Stock, $475 million of trust securities, and $10,000 of common stock.~~

The following table provides a summary of the trusts' income statements:


	Three months ended September 30,												Three months ended September 30,
(in millions)	Trust I		Trust II		Trust III		Trust IV		Trust V		Trust VI		Trust II		Trust III		Trust IV		Trust V		Trust VI
2017
2019
Dividend income	$	1	$	5	$	4	$	4	$	4	$	6	$	5	$	4	$	4	$	4	$	6
Dividend distributions	1		5		4		4		4		6		5		4		4		4		6
2016
2018
Dividend income	$	7	$	5	$	4	$	4	$	4	*		$	5	$	4	$	4	$	4	$	6
Dividend distributions	7		5		4		4		4		*		5		4		4		4		6

Nine months ended September 30,

Recurring Fair Value Measurements

Assets and liabilities are categorized into a three-level fair value hierarchy based on valuation inputs used to determine fair value.

Assumptions are made in order to value derivative contracts in which observable inputs are not available. In circumstances where fair value cannot be verified with observable market transactions, it is possible that a different valuation model could produce a materially different estimate of fair value. Modeling methodologies, inputs, and techniques are reviewed and assessed as markets continue to develop and more pricing information becomes available and the fair value is adjusted when it is concluded that a change in inputs or techniques would result in a new valuation that better reflects the fair value of those derivative contracts. See Note 6 for a discussion of derivative instruments.

The following table sets forth assets and liabilities of SCE that were accounted for at fair value by level within the fair value hierarchy:

September 30, 2017
(in millions) Level 1 Level 2 Level 3
Netting
and
Collateral¹
Total
Assets at fair value
Derivative contracts $ —
$ 14
$ 24
$ —
$ 38
Other 36
—
—
—
36
Nuclear decommissioning trusts:
Stocks²
1,655
—
—
—
1,655
Fixed Income³
1,057
1,588
—
—
2,645
Short-term investments, primarily cash equivalents 34
109
—
—
143
Subtotal of nuclear decommissioning trusts⁴
2,746
1,697
—
—
4,443
Total assets 2,782
1,711
24
—
4,517
Liabilities at fair value
Derivative contracts —
1
2
—
3
Total liabilities —
1
2
—
3
Net assets $ 2,782
$ 1,710
$ 22
$ —
$ 4,514

Subtotal of nuclear decommissioning trusts⁴



	December 31, 2018
(in millions)	Level 1		Level 2		Level 3		Netting and Collateral¹			Total
Assets at fair value
Derivative contracts	$	—	$	32	$	141	$	—		$	173
Other	9		21		—		—			30
Nuclear decommissioning trusts:
Stocks²	1,382		—		—		—			1,382
Fixed Income³	1,001		1,665		—		—			2,666
Short-term investments, primarily cash equivalents	120		95		—		—			215
Subtotal of nuclear decommissioning trusts⁴	2,503		1,760		—		—			4,263
Total assets	2,512		1,813		141		—			4,466
Liabilities at fair value
Derivative contracts	—		13		—		(7		)	6
Total liabilities	—		13		—		(7		)	6
Net assets	$	2,512	$	1,800	$	141	$	7		$	4,460

Edison International Parent and Other

Edison International Parent and Other assets measured at fair value consisted of money market funds of ~~$24~~$452 million and ~~$23~~$115 million at September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively, classified as Level 1.

SCE Fair Value of Level 3

The following table sets forth a summary of changes in SCE's fair value of Level 3 net derivative assets and liabilities:



	Three months ended September 30,					Nine months ended September 30,
(in millions)	2019		2018			2019			2018
Fair value of net assets at beginning of period	$	63	$	52		$	141		$	101
Total realized/unrealized losses¹	—		(21		)	(78		)	(70		)
Fair value of net assets at end of period²	$	63	$	31		$	63		$	31
Change during the period in unrealized gains and losses related to assets and liabilities held at the end of the period	$	30	$	7		$	27		$	7

Three months ended September 30,
Nine months ended September 30,

(in millions) 2017 2016 2017 2016
Fair value of net liabilities at beginning of period $ (1,012 ) $ (1,170 ) $ (1,089 ) $ (1,148 )
Total realized/unrealized gains (losses):
Included in regulatory assets and liabilities¹
120
8
54
(14 )
Settlements —
(1 ) —
(1 )
Contract amendment²
—
—
143
—
Normal purchase and normal sale designation³
$ 914
$ —
$ 914
$ —
Fair value of net assets (liabilities) at end of period $ 22

$ (1,163 )
$ 22

$ (1,163 )
Change during the period in unrealized gains and losses related to assets and liabilities held at the end of the period $ 6
$ (57 ) $ 6
$ (122 )

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 September 30, 2017.~~

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 2017 and 2016.

~~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)					Significant	Range
	Assets		Liabilities		Valuation Technique(s)	Unobservable Input	(Weighted Average)
Congestion revenue rights
September 30, 2019	$	70	$	7	Auction prices	CAISO CRR auction prices	$(3.33) - $11.58 ($0.96)
December 31, 2018	141		—		Auction prices	CAISO CRR auction prices	$(7.41) - $41.52 ($1.62)

Fair Value (in millions) Significant Range
Assets Liabilities Valuation Technique(s) Unobservable Input (Weighted Average)
Congestion revenue rights
September 30, 2017 $ 24
$ —
Market simulation model and auction prices Load forecast 3,708 MW - 22,840 MW

Power prices¹
$3.65 - $99.58

Gas prices²
$2.51 - $4.87
December 31, 2016 67
—
Market simulation model and auction prices Load forecast 3,708 MW - 22,840 MW

Power prices¹
$3.65 - $99.58

Gas prices²
$2.51 - $4.87
Tolling³

December 31, 2016 —
1,154
Option model Volatility of gas prices 15% - 48% (20%)
Volatility of power prices 29% - 71% (40%)
Power prices $23.40 - $51.24 ($34.70)

³During 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. These liabilities will be amortized over the remaining contract terms.

Level 3 Fair Value ~~Sensitivity~~

~~Congestion Revenue Rights~~Uncertainty

For CRRs, ~~where SCE is the buyer, generally~~ increases ~~(decreases)~~or decreases in ~~forecasted load in isolation~~CAISO auction prices would result in ~~increases (decreases) to the~~higher or lower 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.value as of September 30, 2019, respectively.

Nuclear Decommissioning Trusts

SCE's nuclear decommissioning trust investments include equity securities, U.S. treasury securities, and other fixed income securities. Equity and treasury securities are classified as Level 1 as fair value is determined by observable market prices in active or highly liquid and transparent markets. The remaining fixed income securities are classified as Level 2. 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:



	September 30, 2019				December 31, 2018
(in millions)	Carrying Value¹		Fair Value²		Carrying Value¹		Fair Value²
Edison International	$	17,545	$	19,514	$	14,711	$	14,844
SCE	15,208		17,081		12,971		13,180

September 30, 2017 December 31, 2016
(in millions)
Carrying
Value¹

Fair
Value

Carrying
Value¹

Fair
Value
SCE $ 11,005
$ 12,554
$ 10,333
$ 11,539
Edison International 12,221
13,788
11,156
12,368


¹	Carrying value is net of debt issuance costs.

²The 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.~~2.

Note 5. Debt and ~~Credit Agreements~~Equity Financing

Long-Term Debt

During the first quarter of ~~2017,~~2019, SCE issued $500 million of 4.20% first and refunding mortgage bonds due in 2029 and $600 million of 4.875% first and refunding mortgage bonds due in 2049. The proceeds were used to repay commercial paper borrowings and for general corporate purposes.

During the second quarter of 2019, Edison International Parent issued $600 million of 5.75% senior notes due June 15, 2027. Of the proceeds of the senior note offering, $450 million was contributed to SCE with the remainder used for general corporate and working capital purposes.

In August 2019, SCE issued $400 million of 2.85% first and refunding mortgage bonds due in 2029 and $800 million of 4.00% first and refunding mortgage bonds due in 2047. The proceeds, along with proceeds from the equity issuance described below, were used to make SCE's initial contribution to the Wildfire Insurance Fund of $2.4 billion in September 2019. For further information, see "— Equity".

Credit Agreements and Short-Term Debt

In February 2019, SCE borrowed ~~$300~~$750 million under a Term Loan Agreement due ~~July 2018,~~in February 2020, with a variable interest rate based on the London Interbank Offered Rate plus 6570 basis points. The proceeds were used ~~for general corporate purposes.~~

~~During the first quarter of 2017, SCE reissued $135 million of 2.625% pollution-control bonds subject to mandatory remarketing in December 2023. The proceeds were used for general corporate purposes.~~

During the first quarter of 2017 and in September 2017, SCE issued $700 million and $300 million, respectively, of 4.00% first and refunding mortgage bonds due in 2047. The aggregate principal amount of these bonds totaled $1.0 billion and the proceeds from the first quarter issuance were used to repay ~~commercial paper borrowings, to fund~~ SCE's ~~capital program and for general corporate purposes. The proceeds from the September 2017 issuance were used to repay the $300 million Term Loan Agreement discussed above.~~

~~During the first quarter of 2017, Edison International issued $400 million of 2.125% senior notes due in 2020. The proceeds were used to repay~~ commercial paper borrowings and for general corporate purposes.

In ~~August 2017,~~April 2019, Edison International ~~issued $400 million of 2.40% senior notes~~Parent borrowed $1.0 billion under a Term Loan Agreement due in ~~2022. In September 2017,~~April 2020, with a variable interest rate based on the London Interbank Offered Rate plus 90 basis points. Of the proceeds ~~from~~of the ~~August 2017 issuance were~~term loan, $750 million was contributed to SCE with the remainder used for general corporate and working capital purposes. SCE used the $750 million contribution to repay ~~$400 million of Edison International's 3.75% senior notes.~~

~~Project Financings~~its February 2019 Term Loan discussed above.

In October 2017, indirect subsidiaries of Edison Energy Group entered into approximately $100 million in non-recourse debt and tax equity financings to support investments in ground mount solar projects. The tax equity investor in these solar projects will receive an initial allocation of 99% of taxable losses and tax credits, followed by 67% of taxable income and losses after the initial period and 15.6% of cash flows until certain conditions are met, including attaining a specified rate of return. A subsidiary of Edison Energy Group has the option after certain conditions are met to purchase the tax equity investor's interest at the higher of fair value or the after-tax amount necessary to achieve a specified 20-year rate of return.

~~Credit Agreements and Short-Term Debt~~

June 2019, SCE and Edison International Parent ~~have~~amended the maturity date of their multi-year revolving credit facilities of ~~$2.75~~$3.0 billion and ~~$1.25~~$1.5 billion, respectively. ~~During the third quarter of 2017,~~The facilities now mature in May 2024, with an option to extend for an additional year, which may be exercised upon agreement between SCE ~~and~~or Edison International Parent ~~extended the maturity date to July 2022.~~and their respective lenders. SCE's credit facility is generally used to support commercial paper borrowings and letters of credit issued for procurement-related collateral requirements, balancing account undercollections and for general corporate purposes, including working capital requirements to support operations and capital expenditures. Edison International Parent's credit facility is used to support commercial paper borrowings and for general corporate purposes.

At September 30, ~~2017, SCE's~~2019, SCE had 0 outstanding commercial ~~paper, net of discount, was $329 million at a weighted-average interest rate of 1.29%.~~paper. At September 30, ~~2017~~,2019, letters of credit issued under SCE's credit facility aggregated ~~$267~~$222 million, ~~and~~substantially all of which are scheduled to expire in twelve months or less. At December 31, ~~2016~~,2018, the outstanding commercial paper, net of discount, was ~~$769~~$720 million at a weighted-average interest rate of ~~0.9%~~3.23%.

At ~~September 30, 2017~~, Edison International ~~Parent's~~Parent had 0 outstanding commercial paper ~~net of discount, was $573 million~~ at ~~a weighted-average interest rate of 1.37%. At~~ both September 30, 2019 and December 31, ~~2016~~,2018.

Equity

In May 2019, Edison International filed a prospectus supplement and executed several distribution agreements with certain sales agents to establish an "at-the-market" ("ATM") program under which it may sell shares of its common stock having an aggregate sales price of up to $1.5 billion. As of September 30, 2019, no sales had occurred and Edison International has no obligation to sell the ~~outstanding~~shares available under the ATM program.

In June 2019, SCE received a $450 million capital contribution from Edison International Parent to repay commercial paper ~~net~~borrowings and for general corporate purposes.

In July 2019, Edison International issued approximately $2.2 billion of ~~discount,~~common stock in an underwritten offering. Of the proceeds, $1.2 billion was ~~$538~~contributed to SCE, which SCE used, along with the long-term debt issuance described above, to make its $2.4 billion initial contribution to the Wildfire Insurance Fund in September 2019. In August 2019 and September 2019, SCE received capital contributions of $200 million ~~at a weighted-average interest rate of 0.97%~~and $450 million, respectively, for general corporate purposes. The remaining $350 million will be used for general corporate purposes. For further information, see "— Long-Term Debt".

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 facility~~QF 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 and gas contracts contain master netting agreements or similar agreements, which generally allow counterparties subject to the agreement to offset amounts when certain criteria are met, such as in the event of default. The objective of netting is to reduce credit exposure. Additionally, to reduce SCE's risk exposures counterparties may be required to pledge collateral depending on the creditworthiness of each counterparty and the risk associated with the transaction.

Certain power and gas contracts contain a provision that requires SCE to maintain an investment grade rating from 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~~As of September 30, 2019, SCE did 0t have a net fair value liability of derivatives with credit-risk-related contingent features, as such, SCE had 0 collateral posted to its counterparties. As of December 31, 2018, the net fair value of all derivative liabilities with these credit-risk-related contingent features was $2$4 million, ~~and $12 million as of September 30, 2017 and December 31, 2016, respectively,~~ for which SCE ~~has~~ posted ~~$15 million and $12~~$17 million collateral ~~at September 30, 2017 and December 31, 2016, respectively,~~ to its counterparties for its derivative liabilities and related outstanding payables. If the credit-risk-related contingent features underlying these agreements were triggered on September 30, ~~2017,~~2019, SCE would be required to post ~~$15~~$1 million of ~~additional collateral of which $13 million is related to outstanding payables that are net of collateral already posted.~~collateral.

Fair Value of Derivative Instruments

SCE presents its derivative assets and liabilities on a net basis on its consolidated balance sheets when subject to master netting agreements or similar agreements. Derivative positions are also offset against margin and cash collateral deposits. In addition, SCE has provided collateral in the form of letters of credit. Collateral requirements can vary depending upon the level of unsecured credit extended by counterparties, changes in market prices relative to contractual commitments and other factors. See Note 4 for a discussion of fair value of derivative instruments. The following table summarizes the gross and net fair values of SCE's commodity derivative instruments:



	September 30, 2019
	Derivative Assets									Derivative Liabilities									Net Assets
(in millions)	Short-Term			Long-Term¹			Subtotal			Short-Term²			Long-Term			Subtotal			Net Assets
Commodity derivative contracts
Gross amounts recognized	$	63		$	17		$	80		$	22		$	2		$	24		$	56
Gross amounts offset in the consolidated balance sheets	(14		)	(2		)	(16		)	(14		)	(2		)	(16		)	—
Cash collateral posted³	—			—			—			(8		)	—			(8		)	8
Net amounts presented in the consolidated balance sheets	$	49		$	15		$	64		$	—		$	—		$	—		$	64

September 30, 2017
Derivative Assets Derivative Liabilities Net
Asset
(in millions) Short-Term Long-Term Subtotal Short-Term Long-Term
Subtotal²

Commodity derivative contracts
Gross amounts recognized $ 37
$ 2
$ 39
$ 4
$ —
$ 4
$ 35
Gross amounts offset in the consolidated balance sheets (1 ) —
(1 ) (1 ) —
(1 ) —
Cash collateral posted¹
—
—
—
—
—
—
—
Net amounts presented in the consolidated balance sheets $ 36
$ 2
$ 38
$ 3
$ —
$ 3
$ 35



	December 31, 2018
	Derivative Assets						Derivative Liabilities								Net Assets
(in millions)	Short-Term		Long-Term¹		Subtotal		Short-Term²			Long-Term		Subtotal			Net Assets
Commodity derivative contracts
Gross amounts recognized	$	171	$	2	$	173	$	13		$	—	$	13		$	160
Gross amounts offset in the consolidated balance sheets	—		—		—		—			—		—			—
Cash collateral posted³	—		—		—		(7		)	—		(7		)	7
Net amounts presented in the consolidated balance sheets	$	171	$	2	$	173	$	6		$	—	$	6		$	167

December 31, 2016
Derivative Assets Derivative Liabilities Net
Liability
(in millions) 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
Gross amounts offset in the consolidated balance sheets (1 ) —
(1 ) (1 ) —
(1 ) —
Cash collateral posted¹
—
—
—
—
—
—
—
Net amounts presented in the consolidated balance sheets $ 73
$ 1
$ 74
$ 216
$ 941
$ 1,157
$ 1,083
¹Included in "Other long-term assets" on Edison International's and SCE's consolidated balance sheets.

²Included in "Other current liabilities" on Edison International's and SCE's consolidated balance sheets.

³At September 30, 2019, SCE posted $36 million of cash, of which $8 million was offset against net derivative liabilities and $28 million was reflected in "Other current assets" on the consolidated balance sheets. As December 31, 3018, SCE posted $7 million of cash, of which was offset against net derivative liabilities on the consolidated balance sheets.

In addition, at September 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.


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. These liabilities will be amortized over the remaining contract terms.

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 ~~recorded~~reported in cash flows from operating activities in the consolidated statements of cash flows.

The following table summarizes the components of SCE's economic hedging activity:


	Three months ended September 30,						Nine months ended September 30,						Three months ended September 30,						Nine months ended September 30,
(in millions)	2017			2016			2017			2016			2019			2018			2019			2018
Realized losses	$	(3	)	$	(1	)	$	(8	)	$	(53	)
Realized (losses) gains													$	(47	)	$	23		$	(17	)	$	3
Unrealized gains (losses)	116			(2		)	37			6			24			(9		)	(104		)	(35		)

Notional Volumes of Derivative Instruments

The following table summarizes the notional volumes of derivatives used for SCE hedging activities:



		Economic Hedges
Commodity	Unit of Measure	September 30, 2019	December 31, 2018
Electricity options, swaps and forwards	GWh	5,015	2,786
Natural gas options, swaps and forwards	Bcf	21	20
Congestion revenue rights	GWh	54,365	54,453

Note 7. Revenue

SCE's revenue is disaggregated by two revenue sources:

Earning activities – representing revenue authorized by the CPUC and FERC, which is intended to provide SCE a reasonable opportunity to recover its costs and earn a return on its net investment in generation, transmission, and distribution assets. The annual revenue requirements are comprised of authorized operation and maintenance costs, depreciation, taxes, and a return consistent with the capital structure. Also, included in earnings activities are revenue or penalties related to incentive mechanisms, other operating revenue, and regulatory charges or disallowances.

The following table is a summary of SCE's revenue:



	Three months ended September 30, 2019									Three months ended September 30, 2018
(in millions)	Earning Activities			Cost- Recovery Activities			Total Consolidated			Earning Activities			Cost-Recovery Activities		Total Consolidated
Revenues from contracts with customers^1,2,3	$	1,862		$	2,022		$	3,884		$	1,851		$	2,255	$	4,106
Alternative revenue programs and other operating revenue⁴	$	(30	)	$	(122	)	$	(152	)	$	(74	)	$	228	$	154
Total operating revenue	$	1,832		$	1,900		$	3,732		$	1,777		$	2,483	$	4,260

Economic Hedges
Commodity Unit of Measure September 30, 2017 December 31, 2016
Electricity options, swaps and forwards GWh 874
1,816
Natural gas options, swaps and forwards Bcf 137
36
Congestion revenue rights GWh 74,849
93,319
Tolling arrangements GWh —
61,093



	Nine months ended September 30, 2019						Nine months ended September 30, 2018
(in millions)	Earning Activities		Cost- Recovery Activities		Total Consolidated		Earning Activities			Cost-Recovery Activities		Total Consolidated
Revenues from contracts with customers^1,2,3	$	4,896	$	3,746	$	8,642	$	4,921		$	4,593	$	9,514
Alternative revenue programs and other operating revenue⁴	$	23	$	683	$	706	$	(96	)	$	199	$	103
Total operating revenue	$	4,919	$	4,429	$	9,348	$	4,825		$	4,792	$	9,617

In the absence of a 2018 GRC decision, SCE recognized CPUC revenue in 2018 and the three months ended March 31, 2019 based on the 2017 authorized revenue requirement adjusted mainly for the July 2017 cost of capital decision and Tax Reform. SCE recorded the impact of the 2018 GRC final decision in the second quarter of 2019, including a $265 million reduction in revenue. The 2018 GRC final decision results in 2018 and 2019 base rate revenue requirements of $5.116 billion and $5.451 billion, respectively. For further information, see Note 1.


²	At September 30, 2019 and December 31, 2018, SCE's receivables related to contracts from customers were $1.5 billion and $1.1 billion, respectively, which include accrued unbilled revenue of $638 million and $482 million, respectively.


³	Includes SCE's franchise fees billed to customers of $42 million and $48 million for the three months ended September 30, 2019 and 2018, respectively, and $95 million and $104 million for the nine months ended September 30, 2019 and 2018, respectively.


⁴	Includes differences between amounts billed and authorized levels for both CPUC and FERC.

Note 7.8. Income Taxes

Effective Tax Rate

The table below provides a reconciliation of income tax expense computed at the federal statutory income tax rate to the income tax provision:



	Three months ended September 30,						Nine months ended September 30,
(in millions)	2019			2018			2019			2018
Edison International:
Income from operations before income taxes	$	480		$	627		$	1,020		$	1,127
Provision for income tax at federal statutory rate of 21%	101			132			214			237
Increase in income tax from:
State tax, net of federal benefit	5			26			—			21
Property-related	(124		)	(76		)	(267		)	(214		)
Change related to uncertain tax positions	—			1			—			1
Share-based compensation	(1		)	(1		)	(3		)	(1		)
2018 GRC Final Decision	—			—			(80		)	—
Deferred tax re-measurement¹	—			—			(69		)	—
Other	(3		)	1			(7		)	(1		)
Total income tax benefit	$	(22	)	$	83		$	(212	)	$	43
Effective tax rate	(4.6		)%	13.2		%	(20.8		)%	3.8		%
SCE:
Income from operations before income taxes	$	524		$	653		$	1,123		$	1,288
Provision for income tax at federal statutory rate of 21%	110			137			236			270
Increase in income tax from:
State tax, net of federal benefit	8			29			6			33
Property-related²	(124		)	(76		)	(267		)	(214		)
Change related to uncertain tax positions	—			(1		)	—			(2		)
Share-based compensation	—			(1		)	(2		)	(1		)
2018 GRC Final Decision	—			—			(80		)	—
Deferred tax re-measurement¹	—			—			(69		)	—
Other	(4		)	(2		)	(7		)	(8		)
Total income tax benefit	$	(10	)	$	86		$	(183	)	$	78
Effective tax rate	(1.9		)%	13.2		%	(16.3		)%	6.1		%

Three months ended September 30, Nine months ended September 30,
(in millions) 2017 2016 2017 2016
Edison International:
Income from continuing operations before income taxes $ 432
$ 571
$ 1,119
$ 1,162
Provision for income tax at federal statutory rate of 35% 151
200
392
407
Increase in income tax from:
State tax, net of federal benefit 7
20
23
30
Property-related¹
(201 ) (79 ) (396 ) (296 )
Change related to uncertain tax positions —
(5 ) (17 ) (4 )
Shared-based compensation²
(4 ) (2 ) (50 ) (17 )
Other (22 ) (14 ) (35 ) (24 )
Total income tax (benefit) expense from continuing operations $ (69 ) $ 120
$ (83 ) $ 96
Effective tax rate (16.0 )% 21.0 % (7.4 )% 8.3 %
SCE:
Income from continuing operations before income taxes $ 462
$ 607
$ 1,249
$ 1,291
Provision for income tax at federal statutory rate of 35% 162
212
437
452
Increase in income tax from:
State tax, net of federal benefit 12
25
34
40
Property-related¹
(201 ) (79 ) (396 ) (296 )
Change related to uncertain tax positions (1 ) (7 ) (13 ) (9 )
Shared-based compensation²
(1 ) —
(10 ) (11 )
Other (6 ) (10 ) (18 ) (25 )
Total income tax (benefit) expense from continuing operations $ (35 ) $ 141
$ 34
$ 151
Effective tax rate (7.6 )% 23.2 % 2.7 % 11.7 %
¹Relates to changes in the allocation of deferred tax re-measurement between customers and shareholders as a result of a CPUC resolution issued in February 2019. The resolution determined that customers are only entitled to excess deferred taxes which were included when setting rates, while other deferred tax re-measurement belongs to the shareholders.

^{1 2}

~~Includes incremental tax benefits related to repair deductions and tax accounting method changes which are required to be flowed back to customers. During~~In the third quarter of ~~2017,~~2019, SCE recorded $70 million ($118 million pre-tax) of tax benefits related to tax accounting method changes resulting from the filing of SCE's 2016 tax returns. During the second quarter of 2016, SCE recorded $79 million ($133 million pre-tax) for 2012 – 2014 incremental tax benefits, primarily related to ~~repair deductions.~~


²	~~Includes state taxes for Edison International~~FERC settlement and SCE of $10 million and $2 million, respectively, for the nine months ended September 30, 2017. Includes state taxes for Edison International and SCE of $3 million and $2 million, respectively, for the nine months ended September 30, 2016. Refer to Note 1 for further information.prior year tax return true up.

The CPUC requires flow-through ratemaking treatment for the current tax benefit arising from certain property-related and other temporary differences which reverse over time. Flow-through items reduce current authorized revenue requirements in SCE's rate cases and result in a regulatory asset for recovery of deferred income taxes in future periods. The difference between the authorized amounts as determined in SCE's rate cases, adjusted for balancing and memorandum account activities, and the recorded flow-through items also result in increases or decreases in regulatory assets with a corresponding impact on the effective tax rate to the extent that recorded deferred amounts are expected to be recovered in future rates. For further information, see Note ~~10.~~11.

~~In March 2017,~~2018 GRC Final Decision

During the second quarter of 2019, SCE received the final decision on claims against, and counterclaims of, Mitsubishi Heavy Industries, Inc. and related companies (together, "MHI") from the arbitration tribunal, the International Chamber of Commerce, discussed further in Note 11. San Onofre was permanently shut down on June 7, 2013 asrecorded 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 claimed in the first six months of 2017, resulting in a flow-through tax benefit of ~~approximately $39~~$80 million ~~impacting the effective tax rate. Due~~related to the adoption of the 2018 GRC final decision mainly related to tax ~~abandonment loss recognized during~~benefits on property-related items. This change results primarily from an updated estimate in the ~~first nine months~~amount of ~~2017, Edison International and SCE both expect~~excess deferred taxes returned to ~~report federal and California tax losses in 2017.~~ratepayers for the year 2018.

~~Unrecognized~~ Tax ~~Benefits~~Disputes

~~In the first quarter of 2017, Edison International settled all~~Tax years that remain open ~~tax positions with~~for examination by the Internal Revenue Service ("IRS") ~~for taxable years 2007 through 2012. The following table provides a reconciliation of unrecognized tax benefits for~~and the California Franchise Tax Board are 2016 – 2018 and 2010 – 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:
   Increases 39
39
Tax positions taken during a prior year:
   Increases 1
1
   Decreases (5 ) (4 )
   Decreases for settlements during the period (83 ) (78 )
Balance at September 30, 2017 $ 423
$ 329

~~Tax Disputes~~

~~In the first quarter of 2017,~~respectively. Edison International has settled all open tax positions with the IRS for taxable years ~~2007 through 2012.~~prior to 2013.

In the fourth quarter of 2018, Edison International ~~has previously made cash deposits to cover~~recorded the ~~estimated tax and interest liability from this audit cycle and expects~~impacts of a ~~$7 million refund of this deposited amount.~~

~~Tax years that remain open for examination by the IRS and~~settlement reached with the California Franchise Tax Board ~~are 2014 – 2016 and 2010 – 2016, respectively. Edison International has settled all open~~for tax ~~position with the IRS for taxable years prior to 2013.~~

~~Tax~~ years 1994 – 2006 ~~are currently~~that resulted in ~~settlement negotiations with~~a $65 million refund of tax and interest. This refund was received in 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.~~second quarter of 2019. 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~~ ~~$100 million~~ during the nine months ended September 30, 2017, which includes contributions of $64 million by SCE. Edison International expects to make contributions of $15 million during the remainder of 2017, which includes $1 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.

Net periodic pension expense components ~~for continuing operations~~ are:



	Three months ended September 30,						Nine months ended September 30,
(in millions)	2019			2018			2019			2018
Edison International:
Service cost	$	31		$	32		$	95		$	96
Non-service cost (benefit)
Interest cost	38			35			116			105
Expected return on plan assets	(52		)	(56		)	(156		)	(169		)
Amortization of prior service cost	—			1			1			2
Amortization of net loss¹	2			2			6			6
Regulatory adjustment	(4		)	2			(12		)	7
Total non-service benefit²	$	(16	)	$	(16	)	$	(45	)	$	(49	)
Total expense recognized	$	15		$	16		$	50		$	47
SCE:
Service cost	$	31		$	31		$	93		$	93
Non-service cost (benefit)
Interest cost	35			32			106			96
Expected return on plan assets	(48		)	(52		)	(146		)	(159		)
Amortization of prior service cost	—			1			1			2
Amortization of net loss¹	1			1			4			4
Regulatory adjustment	(4		)	2			(12		)	7
Total non-service benefit²	$	(16	)	$	(16	)	$	(47	)	$	(50	)
Total expense recognized	$	15		$	15		$	46		$	43

Three months ended September 30, Nine months ended September 30,
(in millions) 2017 2016 2017 2016
Edison International:
Service cost $ 36
$ 39
$ 108
$ 117
Interest cost 41
44
123
132
Expected return on plan assets (53 ) (56 ) (159 ) (168 )
Settlement costs¹
—
—
8
—
Amortization of prior service cost —
1
2
3
Amortization of net loss²
4
9
14
27
Expense under accounting standards $ 28
$ 37
$ 96
$ 111
Regulatory adjustment (3 ) (9 ) (9 ) (27 )
Total expense recognized $ 25
$ 28
$ 87
$ 84
SCE:
Service cost $ 35
$ 38
$ 105
$ 114
Interest cost 37
41
111
123
Expected return on plan assets (50 ) (53 ) (150 ) (159 )
Amortization of prior service cost —
1
2
3
Amortization of net loss²
4
8
12
24
Expense under accounting standards $ 26
$ 35
$ 80
$ 105
Regulatory adjustment (3 ) (9 ) (9 ) (27 )
Total expense recognized $ 23

$ 26

$ 71

$ 78

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.

Includes the amount of net loss reclassified from other comprehensive loss. The amount reclassified for Edison International and SCE was $3 million and $1 million, respectively, for the three months ended September 30, 2017, and $8 million and $4 million, respectively, for the nine months ended September 30, 2017. The amount reclassified for Edison International and SCE was $3$2 million and $2 million, respectively, for the three months ended September 30, ~~2016,~~2019, and $9$6 million and $5 million, respectively, for the nine months ended September 30, ~~2016.~~2019. The amount reclassified for Edison International and SCE was $2 million and $1 million, respectively, for the three months ended September 30, 2018, and $6 million and $4 million, respectively, for the nine months ended September 30, 2018.

²Included in "Other income and (expense)" on Edison International's and SCE's consolidated statement of income.

Postretirement Benefits Other Than Pensions

~~Edison International made contributions of~~ ~~$16 million~~ ~~during the nine months ended September 30, 2017 and expects to make contributions of~~ ~~$5 million~~ during the remainder of 2017, substantially all of which are expected to be made by SCE. Annual contributions related to SCE employees made to SCE plans are anticipated to be recovered through CPUC-approved regulatory mechanisms and are expected to be, at a minimum, equal to the total annual expense for these plans. Benefits under these plans, with some exceptions, are generally unvested and subject to change. Under the terms of the Edison International Health and Welfare Plan ("~~PBOP Plan"~~PBOP") 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~~Edison International and SCE are:



	Three months ended September 30,						Nine months ended September 30,
(in millions)	2019			2018			2019			2018
Service cost	$	8		$	10		$	24		$	29
Non-service cost (benefit)
Interest cost	21			21			63			63
Expected return on plan assets	(28		)	(31		)	(84		)	(91		)
Amortization of prior service cost	(1		)	—			(1		)	(1		)
Amortization of net gain	—			—			(2		)	—
Regulatory adjustment	5			—			17			—
Total non-service benefit¹	$	(3	)	$	(10	)	$	(7	)	$	(29	)
Total expense	$	5		$	—		$	17		$	—

Three months ended September 30, Nine months ended September 30,
(in millions) 2017 2016 2017 2016
Edison International:
Service cost $ 9
$ 10
$ 27
$ 30
Interest cost 24
26
72
78
Expected return on plan assets (27 ) (28 ) (81 ) (84 )
Amortization of prior service cost —
(1 ) (2 ) (3 )
Total expense $ 6
$ 7
$ 16
$ 21
SCE:
Service cost $ 9
$ 10
$ 27
$ 30
Interest cost 24
26
72
78
Expected return on plan assets (27 ) (28 ) (81 ) (84 )
Amortization of prior service cost —
(1 ) (2 ) (3 )
Total expense $ 6
$ 7
$ 16
$ 21
¹Included in "Other income and (expense)" on Edison International's and SCE's consolidated statement of income.

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
(in millions)	Longest Maturity Dates	September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
Stocks	—	*		*		$	1,619	$	1,381
Municipal bonds	2057	$	692	$	665	847		767
U.S. government and agency securities	2067	1,113		1,193		1,272		1,288
Corporate bonds	2068	640		573		721		611
Short-term investments and receivables/payables¹	One-year	19		70		20		73
Total		$	2,464	$	2,501	$	4,479	$	4,120

Longest
Maturity
Dates
Amortized Cost Fair Value
(in millions) September 30,
2017 December 31,
2016 September 30,
2017 December 31, 2016
Stocks — $ 290
$ 319
$ 1,655
$ 1,547
Municipal bonds 2054 612
659
738
766
U.S. government and agency securities 2067 1,220
1,131
1,298
1,191
Corporate bonds 2057 545
600
609
659
Short-term investments and receivables/payables¹
One-year 111
75
115
79
Total $ 2,778
$ 2,784
$ 4,415
$ 4,242


*	Equity investments are measured at fair value.


¹	Short-term investments include ~~$114~~$36 million and $71 million of repurchase agreements payable by financial institutions which earn interest, are fully secured by U.S. Treasury securities and mature by October 1, 2019 and January ~~4, 2017 as of December 31, 2016. No repurchase agreements were held~~2, 2019 as of September 30, ~~2017.~~2019 and December 31, 2018, 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 ~~$1.6~~$1.7 billion and ~~$1.5~~$1.4 billion at September 30, ~~2017~~2019 and December 31, ~~2016, respectively.~~

~~The following table sets forth a summary~~2018, respectively, and other-than-temporary impairments of ~~changes in~~$159 million and $170 million at the ~~fair value of the trust:~~

Three months ended September 30, Nine months ended September 30,
(in millions) 2017 2016 2017 2016
Balance at beginning of period $ 4,381
$ 4,344
$ 4,242
$ 4,331
Gross realized gains 22
18
134
61
Gross realized losses (3 ) (1 ) (19 ) (5 )
Unrealized gains, net of losses 65
32
179
153
Other-than-temporary impairments (2 ) (2 ) (6 ) (10 )
Interest and dividends 28
28
87
88
Income taxes (9 ) (5 ) (35 ) (47 )
Decommissioning disbursements (65 ) (38 ) (164 ) (192 )
Administrative expenses and other (2 ) —
(3 ) (3 )
Balance at end of period $ 4,415
$ 4,376
$ 4,415
$ 4,376
respective periods.

Trust assets are used to pay income ~~taxes.~~taxes arising from trust investing activity. Deferred tax liabilities related to net unrealized gains were $432 million and $323 million at September 30, ~~2017 were $402 million.~~2019 and December 31, 2018, respectively. Accordingly, the fair value of trust assets available to pay future decommissioning costs, net of deferred income taxes, totaled $4.0 billion and $3.8 billion at September 30, ~~2017.~~ 2019 and December 31, 2018, respectively.

The following table summarizes the gains and (losses) for the trust investments:



	Three months ended September 30,						Nine months ended September 30,
(in millions)	2019			2018			2019			2018
Gross realized gains	$	19		$	28		$	64		$	115
Gross realized loss	(1		)	(7		)	(1		)	(17		)
Net unrealized gains for equity securities	3			72			209			4

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 sales of investments of the nuclear decommissioning trusts.~~

Note ~~10.~~11. Regulatory Assets and Liabilities

Regulatory Assets

SCE's regulatory assets included on the consolidated balance sheets are:



(in millions)	September 30, 2019		December 31, 2018
Current:
Regulatory balancing accounts	$	823	$	814
Power contracts	275		305
Other	22		14
Total current	1,120		1,133
Long-term:
Deferred income taxes, net of liabilities	3,950		3,589
Pensions and other postretirement benefits	281		271
Power contracts	465		700
Unamortized investments, net of accumulated amortization	117		118
Unamortized loss on reacquired debt	145		153
Regulatory balancing accounts	550		360
Environmental remediation	132		134
Other	91		55
Total long-term	5,731		5,380
Total regulatory assets	$	6,851	$	6,513

(in millions) September 30,
2017 December 31,
2016
Current:
Regulatory balancing accounts $ 216
$ 135
Energy derivatives and other power contracts 203
150
Unamortized investments, net of accumulated amortization 12
49
Other 14
16
Total current 445
350
Long-term:
Deferred income taxes, net of liabilities 5,211
4,478
Pensions and other postretirement benefits 712
710
Energy derivatives and other power contracts 839
947
Unamortized investments, net of accumulated amortization 105
80
San Onofre 730
857
Unamortized loss on reacquired debt 172
184
Regulatory balancing accounts 86
66
Environmental remediation 124
126
Other 49
7
Total long-term 8,028
7,455
Total regulatory assets $ 8,473
$ 7,805

Regulatory Liabilities

SCE's regulatory liabilities included on the consolidated balance sheets are:



(in millions)	September 30, 2019		December 31, 2018
Current:
Regulatory balancing accounts	$	957	$	1,080
Energy derivatives	41		158
2018 GRC¹	—		274
Other	12		20
Total current	1,010		1,532
Long-term:
Cost of removal	2,721		2,769
Re-measurement of deferred taxes²	2,474		2,776
Recoveries in excess of ARO liabilities³	1,494		1,130
Regulatory balancing accounts	1,490		1,344
Other postretirement benefits	198		185
Other	167		125
Total long-term	8,544		8,329
Total regulatory liabilities	$	9,554	$	9,861

(in millions) September 30,
2017 December 31,
2016
Current:
Regulatory balancing accounts $ 1,188
$ 736
San Onofre MHI arbitration award¹
47
—
Other 46
20
Total current 1,281
756
Long-term:
Costs of removal 2,736
2,847
Recoveries in excess of ARO liabilities²
1,719
1,639
Regulatory balancing accounts 1,344
1,180
Other 59
60
Total long-term 5,858
5,726
Total regulatory liabilities $ 7,139
$ 6,482

~~Represents SCE's net recovery from claims against MHI. See~~During 2018, SCE recorded CPUC revenue based on the 2017 authorized revenue requirement adjusted for the July 2017 cost of capital decision and Tax Reform pending the outcome of the 2018 GRC. SCE recorded regulatory liabilities associated with these adjustments. In May 2019, these regulatory liabilities were reversed due to the adoption of 2018 GRC final decision. For further information, see Note ~~11 for further discussion.~~1.

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. ThisSCE decreased its regulatory liability ~~also represents~~and recorded an income tax benefit of $69 million during the ~~deferral~~first nine months of ~~realized~~2019 related to changes in the allocation of deferred tax re-measurement between customers and ~~unrealized gains and losses on the nuclear decommissioning trust investments. See~~shareholders. For further information, see Note ~~9 for further discussion.~~8.

³Represents 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 10 for further discussion.

Net Regulatory Balancing and Memorandum Accounts

The following table summarizes the significant components of regulatory balancing and memorandum accounts included in the above tables of regulatory assets and liabilities:



(in millions)	September 30, 2019			December 31, 2018
Asset (liability)
Energy resource recovery account	$	205		$	815
Portfolio allocation balancing account¹	341			—
New system generation balancing account	102			(74		)
Public purpose programs and energy efficiency programs	(1,260		)	(1,200		)
Tax accounting memorandum account and pole loading balancing account²	(18		)	28
Base revenue requirement balancing account³	(595		)	(628		)
DOE litigation memorandum account	(70		)	(69		)
Greenhouse gas auction revenue and low carbon fuel standard revenue	(222		)	(81		)
FERC balancing accounts	(96		)	(180		)
Wildfire-related memorandum accounts⁴	506			272
Other	33			(133		)
Liability	$	(1,074	)	$	(1,250	)

(in millions) September 30,
2017 December 31,
2016
Asset (liability)
Energy resource recovery account $ 190
$ (20 )
New system generation balancing account (99 ) (6 )
Public purpose programs and energy efficiency programs (1,178 ) (992 )
Tax accounting memorandum account and pole loading balancing account (461 ) (142 )
Base rate recovery balancing account (265 ) (426 )
Department of Energy litigation memorandum account

(156 ) (122 )
Greenhouse gas auction revenue (63 ) 31
FERC balancing accounts (209 ) (69 )
Other 11
31
Liability $ (2,230 ) $ (1,715 )


¹	In May 2019, the CPUC approved a portfolio allocation balancing account to determine and pro-ratably recover from responsible bundled service and departing load customers the “above-market” costs of all generation resources that are eligible for cost recovery.


²	The 2018 GRC final decision approved changes to expand the use of the two-way TAMA. The expanded TAMA will track revenue differences resulting from changes in income tax expense caused by net revenue changes, mandatory or elective tax law changes, tax accounting changes, tax procedural changes, or tax policy changes during the 2018 GRC period.

³ The base revenue requirement balancing account at September 30, 2019 includes recovery of $107 million of premiums related to a 12-month, $300 million wildfire insurance policy purchased in December 2017.

⁴The wildfire-related memorandum accounts represent wildfire-related costs that are probable of future recovery from customers, subject to a reasonableness review. The Catastrophic Event Memorandum Account ("CEMA") is used to track the costs related to restoring service and damage repair, upon declaration of disasters by state or federal authorities. In December 2018, the CPUC approved the establishment of the Wildfire Expense Memorandum Account ("WEMA") to track incremental wildfire insurance costs and uninsured wildfire-related claims costs. In March 2019, the CPUC approved a fire risk mitigation memorandum account ~~(TAMA) provides that tax benefits or~~to track costs associated with certain events be tracked and adjusted annually in rates, including tax accounting method changes, changes in tax laws and regulations impacting depreciation or tax repair deductions, forecasted and actual differences in tax repair deductions, and the impact, if any, of a private letter ruling related to ~~compliance with normalization regulations~~the reduction of fire risk that are incremental to the ~~IRS. During~~amount in SCE's revenue requirement. In June 2019, the ~~third quarter of 2017, SCE recorded $118 million of tax benefits related~~CPUC approved a wildfire mitigation plan memorandum account to ~~tax accounting method changes resulting from the filing of~~track costs incurred to implement SCE's ~~2016 tax returns~~Wildfire Mitigation Plan that are not currently reflected in ~~October 2017.~~revenue requirements.

Note ~~11.~~12. Commitments and Contingencies

~~Third-Party Power Purchase Agreements~~

During the first nine months of 2017, SCE had existing PPAs that met the critical contract provisions (including completion of major milestones for construction). SCE's net additional commitments for power purchase agreements are estimated to be: $27 million in 2018, $72 million in 2019, $62 million in 2020, $20 million in 2021, and $1.2 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~~agreed to provide indemnifications through contracts entered into in the normal course of business. These are primarily indemnifications against adverse litigation outcomes in connection with underwriting agreements, 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~~agreed to indemnify 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. As of September 30, 2019, there has been no groundwater contamination identified. Thus, 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.

~~San Onofre Related Matters~~Southern California Wildfires and Mudslides

~~Replacement steam generators were installed at San Onofre~~Multiple factors have contributed to increased wildfire activity, faster progression of and increased damage from wildfires across SCE's service territory and throughout California. These include the buildup of dry vegetation in ~~2010~~areas severely impacted by years of historic drought, lack of adequate clearing of hazardous fuels by responsible parties, higher temperatures, lower humidity, and ~~2011. On January 31, 2012, a leak suddenly~~strong Santa Ana winds. At the same time that wildfire risk has been increasing in Southern California, residential and commercial development has occurred and is occurring in ~~one~~some of the ~~heat transfer tubes~~highest-risk areas. Such factors can increase the likelihood and extent of wildfires. SCE has determined that approximately 27% of its service territory is in ~~San Onofre's Unit~~areas identified as high fire risk.

In December 2017 and November 2018, wind-driven wildfires impacted portions of SCE's service territory, causing substantial damage to both residential and business properties and service outages for SCE customers. The investigating government agencies, the Ventura County Fire Department ("VCFD") and California Department of Forestry and Fire Protection ("CAL FIRE"), have determined that the largest of the 2017 fires originated on December 4, 2017, in the Anlauf Canyon area of Ventura County (the investigating agencies refer to this fire as the "Thomas Fire"), followed shortly thereafter by a second fire that originated near Koenigstein Road in the City of Santa Paula (the "Koenigstein Fire"). While the progression of these two fires remains under review, the December 4, 2017 fires eventually burned substantial acreage in both Ventura and Santa Barbara Counties. According to CAL FIRE, the Thomas and Koenigstein Fires, collectively, burned over 280,000 acres, destroyed or damaged an estimated 1,343 structures and resulted in 2 confirmed fatalities. The largest of the November 2018 fires, known as the "Woolsey Fire", originated in Ventura County and burned acreage in both Ventura and Los Angeles Counties. According to CAL FIRE, the Woolsey Fire burned almost 100,000 acres, destroyed an estimated 1,643 structures, damaged an estimated 364 structures and resulted in 3 ~~steam generators. The Unit was safely taken off-line~~confirmed fatalities. NaN additional fatalities have been associated with the Woolsey Fire.

As described below, multiple lawsuits related to the Thomas and ~~subsequent inspections revealed excessive tube wear. Unit~~Koenigstein Fires and the Woolsey Fire have been initiated against SCE and Edison International. Some of the Thomas and Koenigstein Fires lawsuits claim that SCE and Edison International have responsibility for the damages caused by mudslides and flooding in Montecito and surrounding areas in January 2018 (the "Montecito Mudslides") based on a theory alleging that SCE has responsibility for the Thomas and/or Koenigstein Fires and that the Thomas and/or Koenigstein Fires proximately caused the Montecito Mudslides. According to Santa Barbara County initial reports, the Montecito Mudslides destroyed an estimated 135 structures, damaged an estimated 324 structures, and resulted in 21 confirmed fatalities, with 2 ~~was off-line for~~additional fatalities presumed.

In October 2019, a ~~planned outage when areas~~wind-driven fire known as the "Saddle Ridge Fire" originated in Los Angeles California and caused significant damage in Los Angeles County. According to the Los Angeles Fire Department (“LAFD”), the Saddle Ridge Fire has burned approximately 9,000 acres, destroyed an estimated 19 structures, damaged an estimated 88 structures, and resulted in 1 fatality. An investigation into the cause 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 unanimously approved the Settlement Agreement by and among SCE, The Utility Reform Network, the CPUC's Office of Ratepayer Advocates and San Diego Gas & Electric ("SDG&E"), which was later joined~~Saddle Ridge Fire is being led by the ~~Coalition~~LAFD, and LAFD investigators have identified the area of ~~California Utility Employees and Friends~~origin of the ~~Earth, dated November 20, 2014 (the "San Onofre OII Settlement Agreement"), which resolved the CPUC's~~Saddle Ridge Fire as a 50 by 70 foot area beneath an SCE high voltage transmission tower. The SED is also conducting an 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")~~Saddle Ridge Fire. SCE reported to ~~consider whether, in light of SCE not reporting certain~~ ~~ex parte~~ communications on a timely basis, the 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, SCE asserted that the San Onofre OII Settlement Agreement continues to meet this standard and therefore should not be disturbed.

~~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. On August 15, 2017, SCE notified the CPUC that ~~the parties in the San Onofre OII Settlement Agreement~~SCE facilities were ~~unable to reach agreement on possible changes~~impacted close-in-time to the ~~settlement unanimously approved~~reported time of the fire on October 10, 2019. Given the preliminary stage of SCE’s review into the Saddle Ridge Fire, SCE is unable at this time to determine if it will incur a material loss as a result of the fire.

Liability Overview

The extent of liability for wildfire-related damages in actions against utilities depends 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. California courts have previously found utilities to be strictly liable for property damage along with associated interest and attorneys' fees, regardless of fault, by applying the theory of inverse condemnation when a utility's facilities were determined to be a substantial cause of a wildfire that caused the property damage. If inverse condemnation is held to be inapplicable to SCE in connection with a wildfire, SCE still could be held liable for property damages and associated interest if the property damages were found to have been proximately caused by SCE's negligence. If SCE were to be found negligent, SCE could also be held liable for, among other things, fire suppression

costs, business interruption losses, evacuation costs, clean-up costs, medical expenses, and personal injury/wrongful death claims. Additionally, SCE could potentially be subject to fines for alleged violations of CPUC rules and state laws in ~~2014. In~~ connection with the ~~termination~~ignition of a wildfire.

Final determinations of liability for the Thomas Fire, the Koenigstein Fire, the Montecito Mudslides and the Woolsey Fire (each a "2017/2018 Wildfire/Mudslide Event," and, collectively, the "2017/2018 Wildfire/Mudslide Events"), including determinations of whether SCE was negligent, would only be made during lengthy and complex litigation processes. Even when investigations are still pending or liability is disputed, an assessment of likely outcomes, including through future settlement of disputed claims, may require a liability to be accrued under accounting standards. Based on information available to SCE and consideration of the ~~meet-and-confer process,~~risks associated with litigation, Edison International and SCE ~~asked~~expect to incur a material loss in connection with the 2017/2018 Wildfire/Mudslide Events and have accrued a liability of $4.7 billion in the fourth quarter of 2018. In the fourth quarter of 2018, Edison International and SCE also recorded expected recoveries from insurance of $2.0 billion and expected recoveries through FERC electric rates of $135 million. The net charge to earnings recorded in the fourth quarter of 2018 was $1.8 billion after-tax. The liability that was accrued corresponds to the lower end of the reasonably estimated range of expected potential losses that may be incurred in connection with the 2017/2018 Wildfire/Mudslide Events and is subject to change as additional information becomes available. Edison International and SCE will seek to offset any actual losses realized with recoveries from insurance policies in place at the time of the events and, to the extent actual losses exceed insurance, through electric rates. The CPUC and FERC may not allow SCE to recover uninsured losses through electric rates if it is determined that such losses were not reasonably or prudently incurred. See "—Loss Estimates for Third Party Claims and Potential Recoveries from Insurance and through Electric Rates" for additional information.

External Investigations and Internal Review

The VCFD and CAL FIRE have issued reports concerning their findings regarding the causes of the Thomas Fire and the Koenigstein Fire. The reports did not address the causes of the Montecito Mudslides. SCE has also received a non-final redacted draft of a report from the VCFD regarding Woolsey Fire (the "Redacted Woolsey Report"). SCE received the Redacted Woolsey Report subject to a protective order in the litigation related to the Woolsey fire and, other than the information disclosed in this Form 10-Q, is not authorized to release the report or its contents to the public at this time. The VCFD and CAL FIRE findings do not determine legal causation of or assign legal liability for the Thomas, Koenigstein or Woolsey Fires; final determinations of legal causation and liability would only be made during lengthy and complex litigation.

The CPUC's Safety Enforcement Division ("SED") is also conducting investigations to assess SCE's compliance with applicable rules and regulations in areas impacted by the Thomas, Koenigstein and Woolsey Fires. SCE cannot predict when the SED's investigations will be completed.

Edison International and SCE are aware of separate ongoing investigations by the California Attorney General's Office of the Thomas Fire and the Woolsey Fire for the purpose of determining whether any criminal violations have occurred. SCE could be subject to material fines, penalties, or restitution if it is determined that it failed to comply with applicable laws and regulations. SCE is not aware of any basis for felony liability with regards to the Thomas Fire, the Koenigstein Fire or the Woolsey Fire.

SCE's internal review into the facts and circumstances of each of the 2017/2018 Wildfire/Mudslide Events is complex and time consuming. SCE expects to obtain and review additional information and materials in the possession of third parties during the course of its internal reviews and the litigation processes.

Thomas Fire

On March 13, 2019, the VCFD and CAL FIRE issued a report concluding, after ruling out other possible causes, that the Thomas Fire was started by SCE power lines coming into contact during high winds, resulting in molten metal falling to the ground. However, the report does not state that molten metal was found on the ground in that location during their investigation. At this time, based on available information, SCE has not determined whether its equipment caused the Thomas Fire. Based on publicly available radar data showing a smoke plume in the Anlauf Canyon area emerging in advance of the report's indicated start time, SCE believes that the Thomas Fire started at least 12 minutes prior to any issue involving SCE's system and at least 15 minutes prior to the start time indicated in the report. SCE is continuing to assess the progression of the Thomas Fire and the extent of damages that may be attributable to that fire.

Koenigstein Fire

On March 20, 2019, the VCFD and CAL FIRE issued a report finding that the Koenigstein Fire was caused when an energized SCE electrical wire separated and fell to the ground along with molten metal particles and ignited the dry vegetation below. As previously disclosed, SCE believes that its equipment was associated with the ignition of the Koenigstein Fire. SCE is continuing to assess the progression of the Koenigstein Fire and the extent of damages that may be attributable to that fire.

Montecito Mudslides

SCE's internal review includes inquiry into whether the Thomas and/or Koenigstein Fires proximately caused or contributed to the Montecito Mudslides, whether, and to what extent, the Thomas and/or Koenigstein Fires were responsible for the damages in the Montecito area and other factors that potentially contributed to the losses that resulted from the Montecito Mudslides. Many other factors, including, but not limited to, weather conditions and insufficiently or improperly designed and maintained debris basins, roads, bridges and other channel crossings, could have proximately caused, contributed to or exacerbated the losses that resulted from the Montecito Mudslides.

At this time, based on available information, SCE has not been able to determine whether the Thomas Fire or the Koenigstein Fire, or both, were responsible for the damages in the Montecito area. In the event that SCE is determined to have caused the fire that spread to the Montecito area, SCE cannot predict whether, if fully litigated, the courts would conclude that the Montecito Mudslides were caused or contributed to by the Thomas and/or Koenigstein Fires or that SCE would be liable for some or all of the damages caused by the Montecito Mudslides.

Woolsey Fire

SCE's internal review into the facts and circumstances of the Woolsey Fire is ongoing. SCE has reported to the CPUC that there was an outage on SCE's electric system in the vicinity of where the Woolsey Fire reportedly began on November 8, 2018. SCE is aware of witnesses who saw fire in the vicinity of SCE's equipment at the time the fire was first reported. While SCE did not find evidence of downed electrical wires on the ground in the suspected area of origin, it observed a pole support wire in proximity to an electrical wire that was energized prior to the outage.

~~affirm~~The Redacted Woolsey Report states that the ~~San Onofre OII Settlement Agreement~~VCFD investigation team determined that electrical equipment owned and operated by SCE was the cause of the Woolsey Fire. Absent additional evidence, SCE believes that it is ~~fair, reasonable~~likely that its equipment was associated with the ignition of the Woolsey Fire. SCE expects to obtain and review additional information and materials in the ~~public interest.~~possession of CAL FIRE and others during the course of its internal review and the Woolsey Fire litigation process, including SCE equipment that has been retained by CAL FIRE.

Wildfire-related Litigation

Multiple lawsuits related to the 2017/2018 Wildfire/Mudslide Events naming SCE as a defendant have been filed. 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~~lawsuits also name Edison International as a defendant and some of the ~~settlement~~lawsuits were filed as purported class actions. The lawsuits, which have been filed in the superior courts of Ventura, Santa Barbara and ~~reinstate~~Los Angeles Counties in the ~~San Onofre OII for further proceedings. Several~~case of the ~~parties to~~Thomas and Koenigstein Fires and the ~~meet-and-confer process petitioned the CPUC on a broad range of litigation positions, certain of which included substantial additional disallowances.~~

~~On October 10, 2017, the Assigned Commissioner~~Montecito Mudslides, and ALJ issued a Ruling ordering additional process to resolve the San Onofre OII. The Ruling did not set aside nor confirm the San Onofre OII Settlement Agreement but stated that the CPUC required an additional record to address the appropriate cost allocation for the premature shutdown of San Onofre Units 2in Ventura and 3,Los Angeles Counties in the ~~event~~case of the ~~CPUC decides that~~Woolsey Fire, allege, among other things, negligence, inverse condemnation, trespass, private nuisance, personal injury, wrongful death, and violations of the ~~settlement does not meet~~California Public Utilities and Health and Safety Codes. SCE expects to be the ~~CPUC's standards for approval~~subject of settlements. The Ruling sets an expedited schedule with a status conference on November 7, 2017 and hearings tentatively scheduled to end in March 2018. The CPUC has not announced the expected timing for a decision.

SCE has recorded a regulatory asset of $730 million at September 30, 2017 to reflect the expected recoveries under the San Onofre OII Settlement Agreement. Management assesses at the end of each reporting period whether regulatory assets are probable of future recovery. SCE assessed the San Onofre regulatory asset at September 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 subject to interpretation.

~~Additional Challenges~~additional lawsuits related to the ~~Settlement~~2017/2018 Wildfire/Mudslide Events. The litigation could take a number of ~~San Onofre CPUC Proceedings~~years to be resolved because of the complexity of the matters and number of plaintiffs.

~~A federal lawsuit challenging~~The Thomas and Koenigstein Fires and Montecito Mudslides lawsuits are being coordinated in the ~~CPUC's authority to permit rate recovery of San Onofre costs~~Los Angeles Superior Court. The Woolsey Fire lawsuits have also been coordinated in the Los Angeles Superior Court. On October 4, 2018, the Superior Court denied Edison International's and ~~an application~~SCE's challenge to the ~~CPUC~~application of inverse condemnation to SCE with respect to the Thomas and Koenigstein Fires and, on February 26, 2019, the California Supreme Court denied SCE's petition to review the Superior Court's decision. In January 2019, SCE filed a cross-complaint against certain governmental entities alleging that failures by these entities, such as failure to adequately plan for ~~rehearing~~flood hazards and build and maintain adequate debris basins, roads, bridges and other channel crossings, among other things, caused, contributed to or exacerbated the losses that resulted from the Montecito Mudslides.

Additionally, in July 2018 and September 2018, 2 separate derivative lawsuits for breach of ~~its decision approving the San Onofre OII Settlement Agreement~~fiduciary duties and unjust enrichment were filed in ~~November~~the Los Angeles Superior Court against certain current and ~~December 2014, respectively. In April 2015,~~former members of the ~~federal lawsuit was dismissed with prejudice~~Boards of Directors of Edison International and SCE. Edison International and SCE are identified as nominal defendants in those actions. The derivative lawsuits generally allege that the individual defendants violated their fiduciary duties by causing or

allowing SCE to operate in an unsafe manner in violation of relevant regulations, resulting in substantial liability and damage from the Thomas and Koenigstein Fires and the ~~plaintiffs in that case appealed~~Montecito Mudslides. The July 2018 lawsuit has been dismissed at plaintiff's request and the ~~dismissal to the Ninth Circuit in May 2015.~~ September 2018 lawsuit is currently stayed.

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. In October 2017, the Ninth Circuit scheduled a hearing for February 13,November 2018, ~~and directed the parties to file a status report on January 30, 2018.~~

~~In July 2015,~~ a purported ~~securities~~ class action lawsuit alleging securities fraud and related claims was filed in federal court against Edison International, ~~its then Chief Executive Officer~~SCE and ~~its then Chief Financial Officer.~~certain current and former officers of Edison International and SCE. The ~~complaint was later amended to include SCE's former President as a defendant. The lawsuit~~plaintiff alleges that Edison International and SCE made false and/or misleading statements in filings with the ~~defendants violated the securities laws~~Securities and Exchange Commission by failing to disclose that SCE had allegedly failed to maintain its electric transmission and distribution networks in compliance with safety regulations, and that those alleged safety violations led to fires that occurred in 2018, including the Woolsey Fire.

In January 2019, 2 separate derivative lawsuits alleging breach of fiduciary duties, securities fraud, misleading proxy statements, unjust enrichment, and related claims were filed in federal court against all current and certain former members of the Boards of Directors and certain current and former officers of Edison International ~~had~~ and SCE. Edison International and SCE are named as nominal defendants in those actions. The derivative lawsuits generally allege that the individual defendants breached their fiduciary duties and made misleading statements or allowed misleading statements to be made (i) between March 21, 2014 and August 10, 2015, with respect to certain ex parte ~~contacts~~ communications between SCE and CPUC decision-makers concerning the settlement of the San Onofre Order Instituting Investigation proceeding (the "San Onofre OII") and (ii) from February 23, 2016 to the present, concerning compliance with ~~CPUC decision-makers~~applicable laws and regulations concerning electric system maintenance and operations related to wildfire risks. The lawsuits generally allege that these breaches of duty and misstatements led to substantial liability and damage resulting from the disclosure of SCE's ex parte communications in connection with the San Onofre OII settlement, and from the 2017/2018 Wildfire/Mudslide Events. For more information regarding the San Onofre OII, see Note 12 in the 2018 Form 10-K.

Loss Estimates for Third Party Claims and Potential Recoveries from Insurance and through Electric Rates

At September 30, 2019 and December 31, 2018, Edison International's and SCE's balance sheets include estimated losses (established at the lower end of the reasonably estimated range of expected losses) of $4.7 billion for the 2017/2018 Wildfire/Mudslide Events.

The process for estimating losses associated with wildfire litigation claims requires management to exercise significant judgment based on a number of assumptions and subjective factors, including but not limited to estimates based on currently available information and assessments, opinions regarding litigation risk, and prior experience with litigating and settling other wildfire cases. As additional information becomes available, management estimates and assumptions regarding the causes and financial impact of the 2017/2018 Wildfire/Mudslide Events may change. Such additional information is expected to become available from multiple external sources, during the course of litigation, and from SCE's ongoing internal review, including, among other things, information regarding the extent of damages that may be attributable to any fire determined to have been substantially caused by SCE's equipment, information that may be obtained from the equipment in CAL FIRE's possession, and information pertaining to fire progression, suppression activities, alleged damages and insurance claims.

As described above, the liability corresponds to the lower end of the reasonably estimated range of expected losses that may be incurred in connection with the 2017/2018 Wildfire/Mudslide Events and is subject to change as additional information becomes available. Edison International and SCE currently believe that it is reasonably possible that the amount of the actual loss will be greater than the amount accrued. However, Edison International and SCE are currently unable to reasonably estimate an upper end of the range of expected losses given the uncertainty as to the legal and factual determinations to be made during litigation, including uncertainty as to the contributing causes of the 2017/2018 Wildfire/Mudslide Events, the complexities associated with fires that merge, whether inverse condemnation will be held applicable to SCE with respect to damages caused by the Montecito Mudslides, and the preliminary nature of the litigation processes.

For events that occurred in 2017 and early 2018, principally the Thomas and Koenigstein Fires and Montecito Mudslides, SCE has $1 billion of wildfire-specific insurance coverage, subject to a self-insured retention of $10 million per occurrence. SCE also had 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 Montecito Mudslides. For the Woolsey Fire, SCE has an additional $1 billion of wildfire-specific insurance coverage, subject to a self-insured retention of $10 million per occurrence. Edison International and SCE record a receivable for insurance recoveries when recovery of a recorded loss is determined to be probable. At September 30, 2019, Edison International and SCE had recorded $2.0 billion for expected insurance recoveries associated with the recorded loss for the 2017/2018 Wildfire/Mudslide Events. SCE will seek to recover uninsured costs resulting from the 2017/2018 Wildfire/Mudslide Events through electric rates. The amount of the receivable is subject to change based on additional information. Recovery of these costs is subject to approval by regulators. Under accounting standards for rate-regulated enterprises, SCE defers costs as regulatory assets when it concludes that such costs are probable

of future recovery in electric rates. SCE utilizes objectively determinable evidence to form its view on probability of future recovery. The only directly comparable precedent in which a California investor-owned utility has sought recovery for uninsured wildfire-related costs is SDG&E's requests for cost recovery related to 2007 wildfire activity, where FERC allowed recovery of all FERC-jurisdictional wildfire-related costs while the CPUC rejected recovery of all CPUC-jurisdictional wildfire-related costs based on a determination that SDG&E did not meet the CPUC's prudency standard. As a result, while SCE does not agree with the CPUC's decision, it believes that the CPUC's interpretation and application of the prudency standard to SDG&E creates substantial uncertainty regarding how that standard will be applied to an investor-owned utility in future wildfire cost-recovery proceedings for fires ignited prior to July 12, 2019. SCE will continue to evaluate the probability of recovery based on available evidence, including judicial, legislative and regulatory decisions, including any CPUC decisions illustrating the interpretation and/or application of the prudency standard when making determinations regarding recovery of uninsured wildfire-related costs. While the CPUC has not made a determination regarding SCE's prudency relative to any of the 2017/2018 Wildfire/Mudslide Events, SCE is unable to conclude, at this time, that uninsured CPUC-jurisdictional wildfire-related costs are probable of recovery through electric rates. SCE would record a regulatory asset at the time it obtains sufficient information to support a conclusion that recovery is probable. SCE will seek recovery of the CPUC portion of any uninsured wildfire-related costs through its WEMA or its CEMA. In July 2019, SCE filed a CEMA application with the CPUC to seek recovery of, among other things, approximately $5.9 million in costs incurred to restore service to customers and to repair, replace and restore buildings and SCE's facilities damaged or destroyed as a result of the Thomas and Koenigstein Fires. SCE continues to incur costs for reconstructing its system and restoring service to structures that were ~~either unreported~~damaged or ~~more extensive than initially reported. The initial complaint purported~~destroyed by these two fires and plans to file additional applications with the CPUC to recover such costs. See "Recovery of Wildfire-Related Costs" below.

Through the operation of its FERC Formula Rate, and based upon the precedent established in SDG&E's recovery of FERC-jurisdictional wildfire-related costs, SCE believes it is probable it will recover its FERC-jurisdictional wildfire and mudslide related costs and has recorded a regulatory asset of $135 million, the FERC portion of the $4.7 billion liability accrued.

Current Wildfire Insurance Coverage

SCE has approximately $1.2 billion of wildfire-specific insurance coverage for events that may occur during the period June 1, 2019 through June 30, 2020, subject to up to $115 million of co-insurance and $50 million of self-insured retention, which results in net coverage of approximately $1 billion. Various coverage limitations within the policies that make up SCE's wildfire insurance coverage could result in additional material self-insured costs in the event of multiple wildfire occurrences during a policy period or with a single wildfire with damages in excess of the policy limits.

SCE's cost of obtaining wildfire insurance coverage has increased significantly as a result of, among other things, the number of recent and significant wildfire events throughout California and the application of inverse condemnation to investor-owned utilities. As such, SCE may not be able to obtain sufficient wildfire insurance, at a reasonable cost, in the future.

Based on policies currently in effect, SCE anticipates that its wildfire insurance expense in 2019, prior to any regulatory deferrals, will total approximately $400 million. In February 2019, the CPUC approved recovery of $107 million of the costs incurred by SCE to obtain a 12-month, $300 million wildfire insurance policy in December 2017. As a result of this decision, SCE will recover these insurance premiums during 2019. As of September 30, 2019, SCE had regulatory assets of approximately $265 million related to wildfire insurance costs and believes that such amounts are probable of recovery. While SCE believes that amounts deferred are probable of recovery, there is no assurance that SCE will be allowed to recover costs that have been incurred, or costs incurred in the future for additional wildfire insurance, in electric rates.

SCE tracks insurance premium costs related to wildfire liability insurance policies as well as other wildfire-related costs in its WEMA. In July 2019, SCE filed a WEMA application with the CPUC to seek recovery of $478 million in wildfire insurance premium costs incurred in excess of premiums approved in the 2018 GRC.

Recovery of Wildfire-Related Costs

Pre-AB 1054 Cost Recovery

California courts have previously found investor-owned utilities to be ~~filed on behalf~~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 ~~class~~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 ~~persons who acquired~~ electricity, can be spread across the larger community that benefited from such improvement through recovery of uninsured wildfire-related costs in electric rates. 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 wildfires, finding that SDG&E did not meet the prudency standard because it did not prudently manage and operate its facilities prior to or at the outset of the 2007 wildfires. In July 2018, the

CPUC denied both SDG&E's application for rehearing on its cost recovery request and a joint application for rehearing filed by SCE and PG&E limited to the applicability of inverse condemnation principles in the same proceeding. The California Court of Appeal, the California Supreme Court and the United States Supreme Court have denied SDG&E's petitions for review of the CPUC's denial of SDG&E's application.

Edison International ~~common stock between March 21, 2014~~ and ~~June 24, 2015 (the "Class Period"). In September 2016,~~SCE continue to pursue legislative, regulatory and legal strategies to address the ~~federal court granted defendants' motion~~application of a strict liability standard to ~~dismiss~~wildfire-related damages without the ~~complaint, with an opportunity for plaintiff~~ability to ~~amend~~recover resulting costs in electric rates.

2019 Wildfire Legislation

On July 12, 2019, AB 1054 was signed by the complaint. Plaintiff filed an amended complaint, 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,Governor of California and ~~are awaiting a ruling.~~

~~Also in July 2015, a federal shareholder derivative lawsuit was filed against members~~became effective immediately. The summary of the ~~Edison International Board of Directors for breach of fiduciary duty and other claims. The federal derivative lawsuit~~wildfire legislation below is based on ~~similar allegations to~~SCE’s interpretation of AB 1054. A lawsuit challenging 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, 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 lapsed in March 2017 and no appeal was filed.

~~In October 2015, a shareholder derivative lawsuit was filed in California state court against members~~validity of the Edison International Board of Directors for breach of fiduciary duty and other claims, making similar allegations to those in the federal derivative lawsuits discussed above. 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.

~~In November 2015, a purported securities class action lawsuit~~AB 1054 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 was heard by the court in October 2017, and are awaiting a ruling.

19, 2019. Edison International and SCE ~~cannot~~are unable to predict the outcome of ~~the open proceedings.~~this lawsuit.

~~MHI Claims~~Wildfire Insurance Fund

~~SCE pursued claims against MHI, which designed and supplied the replacement steam generators. In October 2013, SCE sent MHI~~

AB 1054 provided for a ~~formal request~~wildfire insurance fund("Wildfire Insurance Fund") to reimburse utilities for ~~binding arbitration under the auspices~~payment 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, allegingthird-party damage claims arising from ~~MHI's supplying~~certain wildfires that exceed, in aggregate in a calendar year, the ~~faulty steam generators. These litigation~~greater of $1 billion or the utility's insurance coverage. The Wildfire Insurance Fund was established in September 2019 when both SCE and SDG&E made their initial contributions to the fund. The Wildfire Insurance Fund is available for claims related to wildfires ignited after July 12, 2019 that are determined to have been ~~stayed pending~~caused by a utility by the ~~arbitration. The~~responsible government investigatory agency.

SCE and SDG&E have collectively made initial contributions of approximately $2.7 billion to the Wildfire Insurance Fund. While PG&E has agreed to make an initial contribution of approximately $4.8 billion to the Wildfire Insurance Fund, its participation in, and contributions to, the fund are subject to it emerging from bankruptcy and meeting certain other ~~co-owners were added as additional claimants~~conditions prior to June 30, 2020. SCE, SDG&E and PG&E are also expected to make aggregate annual contributions of $3 billion to the Wildfire Insurance Fund over a 10-year period. If PG&E is unable to participate in the ~~arbitration.~~Wildfire Insurance Fund, the investor-owned utility aggregate annual contributions to the fund are expected to be approximately $1 billion. In ~~March 2017,~~addition to PG&E's, SCE's and SDG&E's contributions to the ~~arbitration tribunal found MHI liable~~Wildfire Insurance Fund, $13.5 billion is expected to be collected from their ratepayers through a dedicated rate component to support a $10.5 billion contribution to the fund. Based on a decision adopted by the CPUC in October 2019 in the Order Instituting Rulemaking to Consider Authorization of a Non-Bypassable Charge to Support the Wildfire Insurance Fund, PG&E’s ratepayers will not be required to contribute to the fund if PG&E does not participate in the Wildfire Insurance Fund. In that case, $7.5 billion will be collected from SCE's and SDG&E's ratepayers through the dedicated rate component to support a contribution to the Wildfire Insurance Fund. In addition to funding contributions to the Wildfire Insurance Fund, the amount collected from utility ratepayers will pay for, ~~breach~~among other things, any interest and financing costs related to any bonds that are issued to support the contributions to the Wildfire Insurance Fund.

SCE made an initial contribution of ~~contract, but rejected claimants' other claims. The tribunal found that damages were~~approximately $2.4 billion to the Wildfire Insurance Fund in September, 2019 and has committed to make ten annual contributions of approximately $95 million per year to the fund, starting on January 1, 2020. Edison International supported SCE's initial contribution to the Wildfire Insurance Fund by raising $1.2 billion from the issuance of Edison International equity. SCE raised the remaining $1.2 billion from the issuance of long-term debt. SCE's contributions to the Wildfire Insurance Fund will not be recoverable through electric rates and will be excluded from the measurement of SCE's CPUC-jurisdictional authorized capital structure. SCE will also not be entitled to cost recovery for any borrowing costs incurred in connection with its contributions to the Wildfire Insurance Fund. See Note 1 for information on the accounting impact of SCE's contributions to the Wildfire Insurance Fund.

Participating investor-owned utilities will be reimbursed from the Wildfire Insurance Fund for eligible claims, subject to ~~contractual limitations on liability. In addition,~~ the ~~tribunal ordered~~fund administrator's review, and will be required to reimburse 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~~fund for withdrawn amounts that the CPUC disallows, subject, in some instances, to the ~~interest awarded~~Liability Cap (as defined below). If the utility has maintained a valid safety certification and its actions or inactions that resulted in the wildfire are not found to constitute conscious or willful disregard of the rights and safety of others, the aggregate requirement to reimburse the fund over a trailing three calendar year period is capped at 20% of the equity portion of the utility's transmission and distribution rate base in the year of the prudency determination ("Liability Cap"). The initial Liability Cap for SCE ~~subsequently reduced~~will be approximately $2.5 billion based on its 2019 rate base, and will be adjusted annually. SCE will not be allowed to recover borrowing costs incurred to reimburse the ~~net recovery to $47 million.~~ fund for amounts that the CPUC disallows. The Wildfire Insurance Fund, and consequently the Liability Cap, will terminate when the administrator determines that the fund has been exhausted.

AB 1054 Prudency Standard

As a result of ~~uncertainty associated with~~ the ~~allocation~~establishment of the ~~award~~Wildfire Insurance Fund, AB 1054 created a new standard that the CPUC must apply when assessing the prudency of a utility in connection with a request for recovery of wildfire costs for wildfires ignited after July 12, 2019. Under AB 1054, the CPUC is required to find a utility to be prudent if the utility's conduct related to the ignition was consistent with actions that a reasonable utility would have undertaken under similar circumstances, at the relevant point in time, and based on the information available at that time. Prudent conduct under the ~~San Onofre OII Settlement Agreement,~~AB 1054 standard is not limited to the optimum practice, method, or act to the exclusion of others, but rather encompasses a spectrum of possible practices, methods, or acts consistent with utility system needs, the interest of the ratepayers, and the requirements of governmental agencies. AB 1054 also provides that the CPUC may determine that wildfire costs may be recoverable, in whole or in part, by taking into account factors within and outside the utility's control, including humidity, temperature, and winds. Further, utilities with a valid safety certification will be presumed to have acted prudently related to a wildfire ignition unless a party in the cost recovery proceeding creates serious doubt as to the reasonableness of the utility's conduct, at which time, the burden shifts back to the utility to prove its conduct was reasonable. If a utility does not have a valid safety certification, it will have the burden to prove, based on a preponderance of evidence, that its conduct was prudent. The new prudency standard will survive the termination of the Wildfire Insurance Fund.

Capital Expenditure Requirement

Under AB 1054, approximately $1.6 billion spent by SCE ~~recorded~~on wildfire risk mitigation capital expenditures cannot be included in the equity portion of SCE's rate base. SCE can apply for an irrevocable order from the CPUC to finance these capital expenditures, including through the issuance of securitized bonds, and can recover any prudently incurred financing costs. SCE expects to finance this capital requirement by issuing securitized bonds.

Wildfire Mitigation Plan and Safety Certification

Under AB 1054, SCE is required to file a ~~regulatory liability~~wildfire mitigation plan every three years beginning in 2020, and can obtain an annual safety certification upon the submission of certain required safety information, including an approved wildfire mitigation plan. On July 25, 2019, SCE obtained its initial safety certification that will be valid for ~~the net recovery.~~twelve months.

Environmental Remediation

SCE records its environmental remediation liabilities when site assessments and/or remedial actions are probable and a range of reasonably likely cleanup costs can be estimated. SCE reviews its sites and measures the liability quarterly, by assessing a range of reasonably likely costs for each identified site using currently available information, including existing technology, presently enacted laws and regulations, experience gained at similar sites, and the probable level of involvement and financial condition of other potentially responsible parties. These estimates include costs for site investigations, remediation, operation and maintenance, monitoring, and site closure. Unless there is a single probable amount, SCE records the lower end of this reasonably likely range of costs (reflected in "Other long-term liabilities") at undiscounted amounts as timing of cash flows is uncertain.

At September 30, ~~2017,~~2019, SCE's recorded estimated minimum liability to remediate its 1921 identified material sites (sites with a liability balance at September 30, ~~2017,~~2019, in which the upper end of the range of the costs is at least $1 million) was ~~$125~~$133 million, including ~~$74~~$88 million related to San Onofre. In addition to these sites, SCE also has 1715 immaterial sites with a liability balance as of September 30, ~~2017,~~2019, for which the total minimum recorded liability was $4 million. Of the ~~$129~~$137 million total environmental remediation liability for SCE, ~~$123~~$132 million has been recorded as a regulatory asset. SCE expects to recover ~~$46~~$41 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 ~~$77~~$91 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 ~~$151~~$141 million and $8$7 million, respectively. The upper limit of this range of costs was estimated using assumptions least favorable to SCE among a range of reasonably possible outcomes.

SCE expects to clean up and mitigate its identified sites over a period of up to 30 years. Remediation costs for each of the next five years are expected to range from $5$7 million to $17 million. Costs incurred for the nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 were $6$4 million and $3$7 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,~~Nuclear Electric Insurance Limited ("NEIL"), a mutual insurance company owned by entities with nuclear facilities. NEIL provides insurance for nuclear property damage, including damages caused by acts of terrorism up to specified limits, and for accidental outages for active facilities. The amount of nuclear property damage insurance purchased for San Onofre and Palo Verde exceeds the minimum federal requirement of $50 million and $1.06 ~~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.~~$13.9 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. SCE withdrew from participation in the secondary insurance pool for San Onofre for offsite liability insurance effective January 5, 2018. Based on its ownership interests in Palo Verde, SCE could be required to pay a maximum of approximately $65 million per nuclear incident for future incidents. However, it would have to pay no more than approximately $10 million per future incident in any one year. SCE could be required to pay a maximum of approximately $255 million per nuclear ~~incident. However, it would have to pay no more than approximately~~incident 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.~~

~~For more information on nuclear insurance coverage, see Note 11 in the 2016 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 utility practices and/or~~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 and other severe weather conditions in California have also increased the duration of the wildfire season and the risk of severe wildfiresuch 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. In the event of fire-related losses involving utility practices and/or the failure of electric and other utility equipment, SCE may be unable to recover self-insured retention or losses in excess of insurance coverage from customers.

Spent Nuclear Fuel

Under federal law, the ~~U.S.~~ Department of Energy ("DOE") is responsible for the selection and construction of a facility for the permanent disposal of spent nuclear fuel and high-level radioactive waste. The DOE has not met its contractual obligation to accept spent nuclear fuel. Extended delays by the DOE have led to the construction of costly alternatives and associated siting and environmental issues. Currently, both San Onofre and Palo Verde have interim storage for spent nuclear fuel on site sufficient for their current license period.

In June 2010, the United States Court of Federal Claims issued a decision granting SCE and the San Onofre co-owners damages of approximately $142 million ~~(SCE~~(SCE's 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~~(SCE's share $124 million, which included reimbursement for approximately $2 million in legal ~~costs (SCE share $124 million)~~and other costs), 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. In August 2018, the CPUC approved SCE's proposal to return the SCE share of the award to customers based on the amount that customers actually contributed for fuel storage costs; resulting in approximately $105.6 million of the SCE share being returned to customers and the remaining $16.6 million being returned to shareholders. Of the $105.6 million, $71.6 million was applied against the remaining San Onofre Regulatory Asset in accordance with the Revised San Onofre Settlement Agreement.

The April 2016 settlement also ~~provides~~provided for a claim submission/audit process for expenses incurred from 2014 – 2016, where SCE ~~will~~may 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~~made additional legal action to recover damages incurred in 2014 ~~– 2016~~–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~~(SCE's share was approximately $34 million) ~~primarily due to DOE allocation limits.~~. SCE accepted the DOE's determination, and the government paid the

2014 – 2015 claim under the terms of the settlement. In October 2017, SCE filed a claim covering damages for 2016 for approximately ~~$59~~$58 million. ~~All~~In May 2018, the DOE approved reimbursement of approximately $45 million (SCE's share was approximately $35 million) of SCE's 2016 damages, ~~recovered by~~disallowing recovery of approximately $13 million. SCE accepted the DOE's determination, and the government paid the 2016 claim under the terms of the

settlement. The damages awards are subject to CPUC review as to how ~~these~~the amounts ~~would~~will be ~~distributed~~refunded among customers, shareholders, or to offset ~~fuel decommissioning or storage~~other costs.

In August 2017, SCE settled a dispute brought by Citizens Oversight and an individual that sought to overturn the California Coastal Commission's approval of a coastal development permit granted in October 2015 for the expansion of San Onofre ISFSI (a dry cask storage facility for the long-term, on-site storage of nuclear fuel). The plaintiffs primarily alleged that the California Coastal Commission did not adequately consider alternative, offsite locations for the ISFSI. The parties' settlement permits the current ISFSI project to proceed while steps are taken to identify the potential for moving the fuel offsite in the future. In the settlement, SCE agreed to use "commercially reasonable efforts" to relocate San Onofre fuel to an offsite storage facility, agreeing to spend up to $4 million, which will be funded by the nuclear decommissioning trust, principally for retaining experts and preparing spent nuclear fuel transportation and strategic plans applicable to a potential relocation of the fuel.

~~SCE Collective Bargaining Agreement~~

Approximately 3,900 of SCE's full-time employees are covered by collective bargaining agreements with the International Brotherhood of Electrical Workers ("IBEW"). SCE and IBEW recently negotiated, and among other things, IBEW ratified, 3% per year wage increases covering calendar years 2018 and 2019. The wage increases are effective as of October 2, 2017. The IBEW collective bargaining agreements expire on December 31, 2019.

Note ~~12. Preferred~~13. Leases

Leases as Lessee

SCE enters into various agreements to purchase power, electric capacity and ~~Preference Stock~~other energy products that may be accounted for as leases as SCE has dispatch rights that determine when and how a plant runs. Prior to January 1, 2019, a power purchase agreement contained a lease when SCE purchased substantially all of the output from a specific plant and did not otherwise meet a fixed price unit of output exception. SCE also leases property and equipment primarily related to vehicles, office space and other equipment. The terms of the contracts included in the table below are primarily 10 and 20 years for PPA leases, 5 to 72 years for office leases, and 5 to 12 years for the remaining other operating leases.

The following table summarizes SCE's lease payments for operating and finance leases as of September 30, 2019.



(in millions)	PPA Operating Leases^1,2		Other Operating Leases³		PPA Finance Leases¹
2019	$	20	$	11	$	—
2020	70		35		1
2021	48		28		1
2022	48		23		2
2023	47		17		2
Thereafter	536		104		9
Total lease payments	$	769	$	218	$	15
Amount representing interest⁴	226		60		6
Lease liabilities	$	543	$	158	$	9

At December 31, 2018, SCE's future expected minimum lease commitments under non-cancellable leases were as follows:



(in millions)	PPA Operating Leases¹		Other Operating Leases³		PPA Capital Leases¹
2019	$	148	$	42	$	5
2020	124		31		6
2021	103		27		6
2022	79		22		6
2023	47		17		5
Thereafter	536		101		66
Total lease payments	$	1,037	$	240	$	94
Amount representing executory costs					25
Amount representing interest					33
Net commitments					$	36


¹	Excludes expected purchases from most renewable energy contracts, which do not meet the definition of a lease payment since renewable power generation is contingent on external factors.


²	During the second quarter of 2019, SCE amended 3 power contracts that resulted in a $161 million reduction in ROU assets and lease liabilities as these contracts no longer qualify as leases.


³	Excludes escalation clauses based on consumer price or other indices and residual value guarantees that are not considered probable at the commencement date of the lease.


⁴	Lease payments are discounted to their present value using SCE's incremental borrowing rates.

Supplemental balance sheet information related to SCE's leases was as follows:



(in millions)	September 30, 2019
Operating leases:
Operating lease ROU assets	$	701
Current portion of operating lease liabilities	90
Operating lease liabilities	611
Total operating lease liabilities	$	701

Finance leases included in:
Utility property, plant and equipment, gross	$	14
Accumulated depreciation	(5		)
Utility property, plant and equipment, net	9
Other current liabilities	—
Other long-term liabilities	9
Total finance lease liabilities	$	9

The timing of SCE's recognition of the lease expense conforms to ratemaking treatment for SCE's recovery of the cost of electricity and is included in purchased power for operating leases and interest and amortization expense for finance leases. The following table summarizes the components of SCE's lease expense:



(in millions)	Three months ended September 30, 2019		Nine months ended September 30, 2019
PPA leases:
Operating lease cost	$	38	$	98
Finance lease cost	1		1
Variable lease cost	751		1,742
Total PPA lease cost	790		1,841
Other operating leases cost	12		35
Total lease cost	$	802	$	1,876

Other information related to leases was as follows:



(in millions, except lease term and discount rate)	Nine months ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
PPA leases	$	98
Other leases	34

ROU assets obtained in exchange for lease obligations:
Other operating leases	23

Weighted average remaining lease term (in years):
Operating leases
PPA leases	16.03
Other leases	12.75
PPA Finance leases	11.71

Weighted average discount rate:
Operating leases
PPA leases	4.44		%
Other leases	3.89		%
PPA Finance leases	8.74		%

Leases as Lessor

SCE also enters into operating leases to rent certain land and facilities as a lessor. These leases primarily have terms that range from 15 to 65 years. During the ~~second quarter~~three and nine months ended September 30, 2019, SCE recognized $4 million and $14 million, respectively, in lease income, which is included in operating revenue on the consolidated statements of ~~2017, SCE issued $475 million of 5.00% Series L preference stock (190,004 shares; cumulative, $2,500 liquidation value)~~income. At September 30, 2019, the undiscounted cash flow expected to ~~SCE Trust VI, a special purpose entity formed to issue trust securities~~be received from lease payments for the remaining years is 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 and certain other conditions are satisfied. 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.follows:



(in millions)
2019	$	4
2020	14
2021	10
2022	10
2023	9
Thereafter	155
Total	$	202

Note ~~13.~~14. Accumulated Other Comprehensive Loss

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


	Three months ended September 30,						Nine months ended September 30,						Three months ended September 30,						Nine months ended September 30,
(in millions)	2017			2016			2017			2016			2019			2018			2019			2018
Beginning balance	$	(48	)	$	(53	)	$	(53	)	$	(56	)	$	(57	)	$	(44	)	$	(50	)	$	(43	)
Pension and PBOP – net loss:
Reclassified from accumulated other comprehensive loss¹	2			2			5			5			2			1			5			5
Other	(2		)	—			—			—
Other²													—			1			(10		)	(4		)
Change	—			2			5			5			2			2			(5		)	1
Ending Balance	$	(48	)	$	(51	)	$	(48	)	$	(51	)	$	(55	)	$	(42	)	$	(55	)	$	(42	)


¹	These items are included in the computation of net periodic pension and PBOP Plan expense. See Note 89 for additional information.

Edison International recognized cumulative effect adjustments to the opening balance of retained earnings and accumulated other comprehensive loss on January 1, 2019 and 2018 related to the adoption of the accounting standards update on the reclassification of stranded tax effects resulting from Tax Reform in 2019 and the measurement of financial instruments in 2018. See Note 1 for further information on the reclassification of stranded tax effects.

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


	Three months ended September 30,						Nine months ended September 30,						Three months ended September 30,						Nine months ended September 30,
(in millions)	2017			2016			2017			2016			2019			2018			2019			2018
Beginning balance	$	(18	)	$	(20	)	$	(20	)	$	(22	)	$	(26	)	$	(21	)	$	(23	)	$	(19	)
Pension and PBOP – net loss:
Reclassified from accumulated other comprehensive loss¹	—			1			2			3			1			1			3			4
Other²													—			—			(5		)	(5		)
Change	—			1			2			3			1			1			(2		)	(1		)
Ending Balance	$	(18	)	$	(19	)	$	(18	)	$	(19	)	$	(25	)	$	(20	)	$	(25	)	$	(20	)


¹	These items are included in the computation of net periodic pension and PBOP Plan expense. See Note 89 for additional information.

SCE recognized cumulative effect adjustments to the opening balance of retained earnings and accumulated other comprehensive loss on January 1, 2019 and 2018 related to the adoption of the accounting standards update on the reclassification of stranded tax effects resulting from Tax Reform in 2019 and the measurement of financial instruments in 2018. See Note 1 for further information on the reclassification of stranded tax effects.

Note ~~14. Interest and~~15. Other Income and ~~Other Expenses~~(Expense)

~~Interest and other~~Other income and ~~other expenses~~(expense) are as follows:



	Three months ended September 30,						Nine months ended September 30,
(in millions)	2019			2018			2019			2018
SCE other income and (expense):
Equity allowance for funds used during construction	$	26		$	32		$	75		$	76
Increase in cash surrender value of life insurance policies and life insurance benefits	9			16			27			30
Interest income	13			6			29			15
Net periodic benefit income – non-service components	19			26			54			79
Civic, political and related activities and donations	(5		)	(9		)	(26		)	(25		)
Other	(4		)	1			(7		)	(2		)
Total SCE other income and (expense)	58			72			152			173
Other income and (expense) of Edison International Parent and Other:
Net periodic benefit costs – non-service components	—			—			(2		)	(1		)
Other	—			4			1			4
Total Edison International other income and (expense)	$	58		$	76		$	151		$	176

Three months ended September 30,
Nine months ended September 30,

(in millions) 2017 2016 2017 2016
SCE interest and other income:
Equity allowance for funds used during construction $ 24
$ 16
$ 65
$ 58
Increase in cash surrender value of life insurance policies and life insurance benefits 12
12
34
29
Interest income 3
1
5
4
Other 3
3
7
6
Total SCE interest and other income 42
32

111

97
Other income of Edison International Parent and Other —
—
—
—
Total Edison International interest and other income $ 42
$ 32

$ 111

$ 97
SCE other expenses:
Civic, political and related activities and donations $ 6
$ 6
$ 17
$ 19
Other 3
3
11
7
Total SCE other expenses 9
9

28

26
Other expenses of Edison International Parent and Other —
—
—
3
Total Edison International other expenses $ 9
$ 9

$ 28

$ 29

Note ~~15.~~16. Supplemental Cash Flows Information

Supplemental cash flows information ~~for continuing operations~~ is:



	Edison International						SCE
	Nine months ended September 30,
(in millions)	2019			2018			2019			2018
Cash payments for interest and taxes:
Interest, net of amounts capitalized	$	582		$	509		$	518		$	466
Tax refunds, net	(65		)	(92		)	(166		)	(17		)
Non-cash financing and investing activities:
Dividends declared but not paid:
Common stock	$	220		$	197		$	—		$	314

Edison International SCE
Nine months ended September 30,
(in millions) 2017 2016 2017 2016
Cash payments for interest and taxes:
Interest, net of amounts capitalized $ 453
$ 417
$ 421
$ 408
Tax payments, net of refunds 13
12
20
35
Non-cash financing and investing activities:
Dividends declared but not paid:
Common stock $ 177
$ 156
$ 191
$ —
Preferred and preference stock 1
1
1
1

SCE's accrued capital expenditures at September 30, ~~2017~~2019 and ~~2016~~2018 were ~~$319~~$486 million and ~~$268~~$421 million, respectively. Accrued capital expenditures will be included as an investing activity in the consolidated statements of cash flow in the period paid.

Note 17. Related-Party Transactions

For the three months ended September 30, 2019, SCE did not purchase wildfire liability insurance from Edison Insurance Services, Inc. ("EIS"), a wholly-owned subsidiary of Edison International. For the nine months ended September 30, 2019, SCE purchased wildfire liability insurance with premiums of $260 million. The related-party transactions included in SCE's consolidated balance sheets for wildfire-related insurance purchased from EIS were as follows:



(in millions)	September 30, 2019		December 31, 2018
Long-term insurance receivable due from affiliate	$	1,000	$	1,000
Prepaid insurance¹	42		13
Current payables due to affiliate²	—		4

¹Reflected in "Prepaid expenses" on SCE's consolidated balance sheets.

²Reflected in "Accounts payable" on SCE's consolidated balance sheets.

The amortization expense for wildfire-related insurance was $51 million and $35 million for the three months ended September 30, 2019 and 2018 respectively, and $123 million and $106 million for the nine months ended September 30, 2019 and 2018, respectively.

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 third quarter of ~~2017.~~2019. 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 third quarter of ~~2017~~2019 that have materially affected, or are reasonably likely to materially affect, Edison International's or SCE's internal control over financial reporting.

Jointly Owned Utility Plant

Edison International's and SCE's respective scope of evaluation of internal control over financial reporting includes their Jointly Owned Utility Projects as discussed in Notes to Consolidated Financial Statements—Note 2. Property, Plant and Equipment in the ~~2016~~2018 Form 10-K.

LEGAL PROCEEDINGS

~~None.~~

Thomas Fire and Koenigstein Fire Litigation

In December 2017, wind-driven wildfires impacted portions of SCE's service territory, causing substantial damage to both residential and business properties and service outages for SCE customers. The VCFD and CAL FIRE have determined that the largest of the 2017 fires originated on December 4, 2017, in the Anlauf Canyon area of Ventura County (the investigating agencies refer to this fire as the "Thomas Fire"), followed shortly thereafter by the Koenigstein Fire. According to CAL FIRE, the Thomas and Koenigstein Fires burned over 280,000 acres, destroyed or damages an estimated 1,343 structures and resulted in two fatalities.

As of October 24, 2019, SCE was aware of at least 198 lawsuits, representing approximately 3,000 plaintiffs, related to the Thomas and Koenigstein Fires naming SCE as a defendant. Ninety-eight of these lawsuits also name Edison International as a defendant based on its ownership and alleged control of SCE. 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 lawsuits have been coordinated in the Los Angeles Superior Court. Three categories of plaintiffs have filed lawsuits against SCE and Edison International relating to the Thomas Fire, Koenigstein Fire and Montecito Mudslides: individual plaintiffs, subrogation plaintiffs and public entity plaintiffs. An initial jury trial for a limited number of plaintiffs, sometimes referred to as a bellwether jury trial, on certain fire only matters is scheduled for April 20, 2020.

For further information, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides."

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.

Seventy-nine of the 198 lawsuits mentioned under "Thomas Fire and Koenigstein Fire Litigation" above allege that SCE has responsibility for the Thomas and/or Koenigstein Fires and that the Thomas and/or Koenigstein Fires proximately caused the Montecito Mudslides, resulting in the plaintiffs' claimed damages. Thirty-four of the 79 Montecito Mudslides lawsuits also name Edison International as a defendant based on its ownership and alleged control of SCE. In addition to other causes of action, some of the Montecito Mudslides lawsuits also allege personal injury and wrongful death. The Thomas and Koenigstein Fires lawsuits and the Montecito Mudslides lawsuits have been coordinated in the Los Angeles Superior Court.

Three categories of plaintiffs have filed lawsuits against SCE and Edison International relating to the Thomas Fire, Koenigstein Fire and Montecito Mudslides: individual plaintiffs, subrogation plaintiffs and public entity plaintiffs.

For further information, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides."

Woolsey Fire Litigation

In November 2018, wind-driven 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 Woolsey Fire, originated in Ventura County and burned acreage located in both Ventura and Los Angeles Counties. According to CAL FIRE, the Woolsey Fire burned almost 100,000 acres, destroyed an estimated 1,643 structures, damaged an estimated 364 structures and resulted in three fatalities. Two additional fatalities have also been associated with the Woolsey Fire.

As of October 24, 2019, SCE was aware of at least 102 lawsuits, representing approximately 3,000 plaintiffs, related to the Woolsey Fire naming SCE as a defendant. Eighty-six of these lawsuits also name Edison International as a defendant based on its ownership and alleged control of SCE. At least two of the lawsuits were filed as purported class actions. The lawsuits, which have been filed in the superior courts of Ventura and Los Angeles Counties allege, among other things, negligence, inverse condemnation, personal injury, wrongful death, trespass, private nuisance, and violations of the public utilities and health and safety codes. The Woolsey Fire lawsuits have been coordinated in the Los Angeles Superior Court. Three categories of plaintiffs have filed lawsuits against SCE and Edison International relating to the Woolsey Fire: individual plaintiffs, subrogation plaintiffs and public entity plaintiffs. An initial jury trial for a limited number of plaintiffs on certain matters, sometimes referred to as a bellwether jury trial, is scheduled in July 2020.

For further information, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides."

RISK FACTORS

SCE's anticipated new customer service system is subject to implementation and cost-recovery risks that could materially affect SCE's business and financial condition.

SCE is currently testing a new customer service system that it anticipates implementing in 2021. If the customer service system does not function as intended upon implementation, SCE could experience, among other things, delayed or inaccurate customer bills that lead to over- or under- collections and other customer service concerns or degradation. Further, the process of implementing new technologies like the new customer service system represents opportunity for cybersecurity attacks on our information systems, which could lead to sensitive confidential personal and other data being compromised. Customer service degradation or the compromise of sensitive confidential personal and other data, could result in violations of applicable privacy and other laws, material financial loss to SCE or to its customers, customer dissatisfaction, loss of confidence in SCE's security measures, and significant litigation and/or regulatory exposure, all of which could materially affect SCE's financial condition and results of operations and materially damage the business reputation of Edison International and SCE.

The expected cost of the new customer service system is significantly higher than SCE had originally projected. If the CPUC determines that any costs incurred by SCE to build, test and implement the customer service system were not reasonably or prudently incurred, SCE will not be able to recover such costs through electric rates.

SCE will not benefit from all of the features of AB 1054 if the Wildfire Insurance Fund is exhausted.

Catastrophic wildfires could rapidly exhaust the Wildfire Insurance Fund and SCE will not be reimbursed by the Wildfire Insurance Fund or benefit from the Liability Cap if the fund has been exhausted as a result of damage claims previously incurred by SCE or the other participating utilities. Also, SCE will not benefit from a presumption of prudency or the Liability Cap established under AB 1054 if SCE is unable to maintain a valid safety certification from the CPUC.

In addition, because PG&E's participation in, and contributions to, the Wildfire Insurance Fund are subject to it emerging from bankruptcy and meeting certain other conditions prior to June 30, 2020, the Wildfire Insurance Fund may be smaller than is currently anticipated.

For more information on AB 1054, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides—Recovery of Wildfire-Related Costs—2019 Wildfire Legislation."

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 third quarter of ~~2017.~~2019.

Period
(a) Total
Number of Shares
(or Units)
Purchased¹

(b) Average
Price Paid per Share (or Unit)¹

(c) Total
Number of Shares
(or Units)
Purchased
as Part of
Publicly
Announced
Plans or
Programs

(d) Maximum
Number (or
Approximate
Dollar Value)
of Shares
(or Units) that May
Yet Be Purchased
Under the Plans or
Programs
July 1, 2017 to July 31, 2017 109,698
$ 78.41
— —
August 1, 2017 to August 31, 2017 367,285
$ 80.16
— —
September 1, 2017 to September 30, 2017 209,997
$ 79.12
— —
Total 686,980
$ 79.56
— —



Period	(a) Total Number of Shares (or Units) Purchased¹	(b) Average Price Paid per Share (or Unit)¹			(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
July 1, 2019 to July 31, 2019	255,127		$	69.40	—	—
August 1, 2019 to August 31, 2019	—		—		—	—
September 1, 2019 to September 30, 2019	—		—		—	—
Total	255,127		$	69.40	—	—

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.

¹The 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.

~~Purchases of Equity Securities by SCE and Affiliated Purchasers~~

~~The following table contains information about all purchases of SCE Series F Preference Stock made by or on behalf of SCE in the third quarter of 2017.~~

Period
(a) Total
Number of Shares
(or Units)
Purchased¹

(b) Average
Price Paid per Share (or Unit)¹

(c) Total
Number of Shares
(or Units)
Purchased
as Part of
Publicly
Announced
Plans or
Programs

(d) Maximum
Number (or
Approximate
Dollar Value)
of Shares
(or Units) that May
Yet Be Purchased
Under the Plans or
Programs
July 1, 2017 to July 31, 2017 190,004
$ 2,513.00
190,004 —
August 1, 2017 to August 31, 2017 —
—
— —
September 1, 2017 to September 30, 2017 —
$ —
— —
Total 190,004
$ 2,513.00
190,004 —


¹	~~On July 19, 2017, SCE repurchased 190,004 shares of the Series F Preference Shares, at~~ ~~$2,513(liquidation value and accrued dividends) per share. The redemption of SCE's Series F Preference Stock was announced via an SCE press release on June 19, 2017.~~

EXHIBITS



Exhibit Number		Description



10.1**10.1		Edison International ~~and Southern California Edison Company~~ Director ~~Compensation Schedule,~~Matching Gifts Program, as ~~adopted August 24, 2017~~revised effective January 1, 2019 *

31.1		Certifications of the Chief Executive Officer and Chief Financial Officer of Edison International pursuant to Section 302 of the Sarbanes-Oxley Act

31.2		Certifications of the Chief Executive Officer and Chief Financial Officer of Southern California Edison Company pursuant to Section 302 of the Sarbanes-Oxley Act

32.1		Certifications of the Chief Executive Officer and the Chief Financial Officer of Edison International required by Section 906 of the Sarbanes-Oxley Act

32.2		Certifications of the Chief Executive Officer and the Chief Financial Officer of Southern California Edison Company required by Section 906 of the Sarbanes-Oxley Act

101.1		Financial statements from the quarterly report on Form 10-Q of Edison International for the quarter ended September 30, ~~2017,~~2019, filed on October ~~30, 2017,~~29, 2019, formatted in XBRL: (i) the Consolidated Statements of Income; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to Consolidated Financial Statements

101.2		Financial statements from the quarterly report on Form 10-Q of Southern California Edison Company for the quarter ended September 30, ~~2017,~~2019, filed on October ~~30, 2017,~~29, 2019, 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

104		The cover page of this report formatted in Inline XBRL (included as Exhibit 101)


*	Indicates a management contract or compensatory plan or arrangement, as required by Item 15(a)(3).

** IndicatesEdison International and SCE will furnish a ~~management contract~~copy of any exhibit listed in the accompanying Exhibit Index upon written request and upon payment to Edison International or ~~compensatory plan or arrangement, as required by Item 15(a)(3)~~SCE of ~~Form 10-K~~their reasonable expenses of furnishing such exhibit, which shall be limited to photocopying charges and, if mailed to the requesting party, the cost of first-class postage.

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/ Aaron D. Moss

	Aaron D. Moss Vice President and Controller (Duly Authorized Officer and Principal Accounting Officer)		Aaron D. Moss Vice President and Controller (Duly Authorized Officer and Principal Accounting Officer)

Date:	October ~~30, 2017~~29, 2019	Date:	October ~~30, 2017~~29, 2019

5879



	~~Edison International Consolidated Balance Sheets~~Historical Cash Flows		2221
		Southern California Edison Company	21
		Edison International ~~Consolidated Statements of Cash Flows~~Parent and Other	24
	~~SCE Consolidated Statements of Income~~Contingencies		24
	MARKET RISK EXPOSURES		25
	~~SCE Consolidated Statements of Comprehensive Income~~Commodity Price Risk		25
	~~SCE Consolidated Balance Sheets~~Credit Risk		25
	CRITICAL ACCOUNTING ESTIMATES AND POLICIES		25
	NEW ACCOUNTING GUIDANCE		26
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			~~SCE~~26	Part I, Item 3
FINANCIAL STATEMENTS			27	Part I, Item 1
	Edison International Consolidated Statements of ~~Cash Flows~~Income		27
	Edison International Consolidated Statements of Comprehensive Income		28
	~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Edison International Consolidated Balance Sheets		29
			~~Note 1. Summary~~Edison International Consolidated Statements of ~~Significant Accounting Policies~~Cash Flows		2931
			~~Note 2.~~SCE Consolidated Statements of ~~Changes in Equity~~Income		32
			~~Note 3. Variable Interest Entities~~SCE Consolidated Statements of Comprehensive Income		3432
	SCE Consolidated Balance Sheets		~~Note 4. Fair Value Measurements~~33
	SCE Consolidated Statements of Cash Flows		35
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS		36
		Note ~~5. Debt and Credit Agreements~~1. Summary of Significant Accounting Policies	4036
		Note ~~6. Derivative Instruments~~2. Consolidated Statements of Changes in Equity	4142
		Note ~~7. Income Taxes~~	43
		~~Note 8. Compensation and Benefit Plans~~	44
		~~Note 9. Investments~~3. Variable Interest Entities	46
		Note ~~10. Regulatory Assets and Liabilities~~4. Fair Value Measurements	47
		Note ~~11. Commitments~~5. Debt and ~~Contingencies~~Equity Financing	4950
		Note ~~12. Preferred and Preference Stock of SCE~~6. Derivative Instruments	5351
		Note ~~13. Accumulated Other Comprehensive Loss~~	53
		~~Note 14. Interest and Other Income and Other Expenses~~7. Revenue	54
		Note 8. Income Taxes	55
		Note 9. Compensation and Benefit Plans	56
		Note 10. Investments	57
		Note 11. Regulatory Assets and Liabilities	58
		Note 12. Commitments and Contingencies	60
		Note 13. Leases	69
		Note 14. Accumulated Other Comprehensive Loss	72
		Note 15. Other Income and (Expense)	73
		Note 16. Supplemental Cash Flows Information	5473



					SEC Form 10-Q Reference Number
GLOSSARY				~~iii~~iv
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 Program~~2018 General Rate Case		4
		2021 General Rate Case		~~Regulatory Proceedings~~4
		Wildfire Mitigation and Wildfire Insurance Expenses		5
		Capital Program		5
		~~RESULTS OF OPERATIONS~~Southern California Wildfires and Mudslides		76
	~~Southern California Edison Company~~RESULTS OF OPERATIONS			79
				~~Three months ended September 30, 2017 versus September 30, 2016~~			8
			~~Earning Activities~~	8
			~~Cost-Recovery Activities~~Southern California Edison Company	9
		~~Nine months ended September 30, 2017 versus September 30, 2016~~Impact of 2018 GRC		9
				~~Earning Activities~~		9
			~~Cost-Recovery Activities~~	10
	~~Supplemental Operating Revenue Information~~			11
	~~Income Taxes~~			11
	~~Edison International Parent and Other~~Three months ended September 30, 2019 versus September 30, 2018			11
			~~Strategic Review of Edison Energy Group Competitive Businesses~~Earning Activities	11
		~~Income from Continuing Operations~~	12
	~~LIQUIDITY AND CAPITAL RESOURCES~~			12
	~~Southern California Edison Company~~Cost-Recovery Activities			12
		Nine~~Available Liquidity~~ months ended September 30, 2019 versus September 30, 2018		12
			~~Capital Investment Plan~~Earning Activities	13
			Cost-Recovery Activities	13
		~~Dividend Restrictions~~Supplemental Operating Revenue Information		14
		~~Margin and Collateral Deposits~~Income Taxes		14
	Edison International Parent and Other			14
		Loss from Operations		14
	~~Historical Cash Flows~~LIQUIDITY AND CAPITAL RESOURCES			15
	Southern California Edison Company			15
		~~Southern California Edison Company~~Available Liquidity		15
		~~Edison International Parent~~Capital Investment Plan		16
		Regulatory Proceedings		16
		SCE Dividends		18
		Margin and ~~Other~~Collateral Deposits		18
	~~Contingencies~~	18
	~~MARKET RISK EXPOSURES~~			18
	~~Commodity Price Risk~~Decommissioning of San Onofre			19
	~~Credit Risk~~Edison International Parent and Other			19
	~~CRITICAL ACCOUNTING ESTIMATES AND POLICIES~~			19
	~~NEW ACCOUNTING GUIDANCE~~			19
~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~				19	~~Part I, Item 3~~
~~FINANCIAL STATEMENTS~~				20	~~Part I, Item 1~~
	~~Edison International Consolidated Statements of Income~~			20
	~~Edison International Consolidated Statements of Comprehensive Income~~			21



		Note 17. Related-Party Transactions	74
CONTROLS AND PROCEDURES			5575	Part I, Item 4
	Disclosure Controls and Procedures		5575
	Changes in Internal Control Over Financial Reporting		5575
	Jointly Owned Utility Plant		5575
LEGAL PROCEEDINGS			5575	Part II, Item 1
	Thomas Fire and Koenigstein Fire Litigation		75
	Montecito Mudslides Litigation		75
	Woolsey Fire Litigation		76
RISK FACTORS			76	Part II, Item 1A
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			5677	Part II, Item 2
	Purchases of Equity Securities by Edison International and Affiliated Purchasers		56
	~~Purchases of Equity Securities by SCE and Affiliated Purchasers~~		5677
EXHIBITS			5778	Part II, Item 6
SIGNATURES			5879


¹	The earnings for the three and nine months ended September 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.


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 modernization are included in traditional distribution capital expenditures.~~


³	~~Capital expenditures for 2017 reflect management's expectations based on the 2015 GRC decision.~~


¹	See use of non-GAAP financial measures in "Management Overview—Highlights of Operating Results."


	Nine months ended September 30, 2017									Nine months ended September 30, 2016									Nine months ended September 30, 2019									Nine months ended September 30, 2018
(in millions)	Earning Activities			Cost- Recovery Activities			Total Consolidated			Earning Activities			Cost- Recovery Activities			Total Consolidated			Earning Activities			Cost- Recovery Activities			Total Consolidated			Earning Activities			Cost- Recovery Activities			Total Consolidated
Operating revenue	$	4,813		$	4,248		$	9,061		$	4,842		$	4,114		$	8,956		$	4,919		$	4,429		$	9,348		$	4,825		$	4,792		$	9,617
Purchased power and fuel	—			3,742			3,742			—			3,576			3,576			—			3,848			3,848			—			4,344			4,344
Operation and maintenance	1,413			505			1,918			1,456			537			1,993			1,622			637			2,259			1,468			528			1,996
Depreciation and amortization	1,528			—			1,528			1,497			—			1,497			1,259			—			1,259			1,387			—			1,387
Property and other taxes	279			—			279			268			—			268			300			—			300			298			—			298
Impairment and other																			166			—			166			(10		)	—			(10		)
Other operating income	(8		)	—			(8		)	—			—			—			(4		)	—			(4		)	(5		)	—			(5		)
Total operating expenses	3,212			4,247			7,459			3,221			4,113			7,334			3,343			4,485			7,828			3,138			4,872			8,010
Operating income	1,601			1			1,602			1,621			1			1,622
Operating income (loss)																			1,576			(56		)	1,520			1,687			(80		)	1,607
Interest expense	(435		)	(1		)	(436		)	(401		)	(1		)	(402		)	(548		)	(1		)	(549		)	(490		)	(2		)	(492		)
Other income and expenses	83			—			83			71			—			71
Other income and (expense)																			95			57			152			91			82			173
Income before income taxes	1,249			—			1,249			1,291			—			1,291			1,123			—			1,123			1,288			—			1,288
Income tax expense	34			—			34			151			—			151
Income tax (benefit)/expense																			(183		)	—			(183		)	78			—			78
Net income	1,215			—			1,215			1,140			—			1,140			1,306			—			1,306			1,210			—			1,210
Preferred and preference stock dividend requirements	94			—			94			92			—			92			91			—			91			91			—			91
Net income available for common stock	$	1,121		$	—		$	1,121		$	1,048		$	—		$	1,048		$	1,215		$	—		$	1,215		$	1,119		$	—		$	1,119
Net income available for common stock							$	1,121								$	1,048								$	1,215								$	1,119
Less:
Non-core earnings							—									—
Less: Non-core (expense)/income																									(99		)							7
Core earnings¹							$	1,121								$	1,048								$	1,314								$	1,112



(in millions)
Collateral posted as of September 30, 2017¹	$	274
Incremental collateral requirements for power contracts resulting from a potential downgrade of SCE's credit rating to below investment grade	33
Incremental collateral requirements for power contracts resulting from adverse market price movement²	2
Posted and potential collateral requirements	$	309



	September 30, 2017
(in millions)	Exposure²		Collateral		Net Exposure
S&P Credit Rating¹
A or higher	$	38	$	—	$	38



(in millions, unaudited)	September 30, 2017		December 31, 2016
ASSETS
Cash and cash equivalents	$	61	$	39
Receivables, less allowances of $55 and $61 for uncollectible accounts at respective dates	1,087		699
Accrued unbilled revenue	351		369
Inventory	229		239
Prepaid taxes	209		16
Derivative assets	36		73
Regulatory assets	445		350
Other current assets	270		246
Total current assets	2,688		2,031
Nuclear decommissioning trusts	4,415		4,242
Other investments	49		50
Total investments	4,464		4,292
Utility property, plant and equipment, less accumulated depreciation and amortization of $9,173 and $9,000 at respective dates	37,666		36,806
Nonutility property, plant and equipment, less accumulated depreciation of $94 and $89 at respective dates	73		75
Total property, plant and equipment	37,739		36,881
Regulatory assets	8,028		7,455
Other long-term assets	229		232
Total long-term assets	8,257		7,687







Total assets	$	53,148	$	50,891


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 ~~69%~~72% and ~~70%~~71% of SCE's equity investments were in companies located in the United States at September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively.


³	Includes corporate bonds, which were diversified ~~and included~~by the inclusion of collateralized mortgage obligations and other asset backed securities of ~~$80~~$64 million and ~~$79~~$67 million at September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively.


⁴	Excludes net payables of ~~$28~~$137 million and ~~$127~~$143 million at September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively, which consist of interest and dividend receivables as well as receivables and payables related to SCE's pending securities sales and purchases.


¹	Due to regulatory mechanisms, SCE's realized and unrealized gains and losses are recorded as regulatory assets and liabilities.


³²	~~During the third quarter~~ There were no material transfers into or out of ~~2017, SCE designated certain derivative contracts as normal purchase~~Level 3during 2019 and ~~normal sale contracts, which resulted in a reclassification of $914 million from derivative liabilities to other liabilities. These liabilities will be amortized over the remaining contract terms.~~2018.


²	~~Prices are in dollars per million British thermal units.~~



(in millions)	Edison International			SCE
Balance at January 1, 2017	$	471		$	371
Tax positions taken during the current year:
Increases	39			39
Tax positions taken during a prior year:
Increases	1			1
Decreases	(5		)	(4		)
Decreases for settlements during the period	(83		)	(78		)
Balance at September 30, 2017	$	423		$	329