SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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(Mark One) | ||
☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from to | |
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Commission 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 |
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EDISON INTERNATIONAL | SOUTHERN CALIFORNIA EDISON COMPANY | |
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2244 Walnut Grove Avenue | 2244 Walnut Grove Avenue | |
(P.O. Box 976) | (P.O. Box 800) | |
Rosemead,California91770 | Rosemead,California91770 | |
(Address of principal executive offices) | (Address of principal executive offices) | |
(626)302-2222 | (626)302-1212 | |
(Registrant's telephone number, including area code) | (Registrant's telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
Edison International:
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, no par value | EIX | NYSE LLC |
Southern California Edison Company: None.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Edison International | Yes ☑ No ☐ | Southern California Edison Company | Yes ☑ No ☐ |
Indicate by check mark whether the registrant has submitted electronically 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).
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Edison International | Yes ☑ No ☐ | ||||
Southern California Edison Company | Yes ☑ No ☐ | ||||
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-12 of the Exchange Act.
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Edison International | Large Accelerated Filer | Accelerated Filer | Non-accelerated Filer | Smaller Reporting Company | Emerging growth company | |||||
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☐ | | ☐ | | ☐ | ||||||||
Southern California Edison Company | | Large Accelerated Filer | | Accelerated Filer | | Non-accelerated Filer | | Smaller Reporting Company | | Emerging growth company | ||
| | ☐ | | ☐ | | ☑ | | ☐ | | ☐ | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Edison International | ☐ | Southern California Edison Company | ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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Edison International | Yes ☐ No ☑ | Southern California Edison Company | Yes☐ No ☑ |
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
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Common Stock outstanding as of | | |
Edison International | 382,983,023 Shares | |
Southern California Edison Company | 434,888,104 |
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SEC Form 10-Q | ||||||
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 4 | |||||
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| Part II, Item 6 | ||||||
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This is a combined Form 10-Q is separately filed by Edison International and Southern California Edison Company.SCE. Information contained hereinin this document relating to an individual companySCE is filed by such company on its own behalf. Each companyEdison International and separately by SCE. SCE makes representations onlyno representation as to itselfinformation relating to Edison International or its subsidiaries, except as it may relate to SCE and makes no other representation whatsoever as to any other company.its subsidiaries.
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The following terms and abbreviations appearing in the text of this report have the meanings indicated below.
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2017/2018 Wildfire/Mudslide Events | the Thomas Fire, the Koenigstein Fire, the Montecito Mudslides and the Woolsey Fire, collectively | |
2022 Form 10-K | | Edison International's and SCE's combined Annual Report on Form 10-K for the |
2022 MD&A | | Edison International's and SCE's MD&A for |
AB 1054 | | California Assembly Bill 1054, executed by the governor of California on July 12, 2019 |
AB 1054 Excluded Capital Expenditures | $1.6 billion in wildfire risk mitigation capital expenditures that SCE has excluded from the equity portion of SCE's rate base as required under AB 1054 | |
AB 1054 Liability Cap | | a cap on the aggregate requirement to reimburse the Wildfire Insurance Fund over a trailing three calendar year period which applies if certain conditions are met and is equal to 20% of the equity portion of the utility's transmission and distribution rate base, excluding general plant and intangibles, in the year of the applicable prudency determination |
ARO(s) | | asset retirement obligation(s) |
BRRBA | ||
Base Revenue Requirement Balancing Account | ||
CAISO | California Independent System Operator | |
Capital Structure Compliance Period | | January 1, 2023 to December 31, 2025, the current compliance period for SCE's CPUC authorized capital structure |
CAPP | | California Arrearage Payment Program |
CCAs | community choice aggregators which are cities, counties, and certain other public agencies with the authority to generate and/or purchase electricity for their local residents and businesses | |
CDP | | Coastal Development Permit |
CEMA | | Catastrophic Event Memorandum Account |
COVID-19 | | Coronavirus disease 2019 |
CPUC | | California Public Utilities Commission |
CSRP | | Customer Service Re-platform, a SCE project to implement a new customer service system |
Edison Energy | Edison Energy, LLC, | |
Edison International | ||
| Proxy Statement filed with the SEC in connection with Edison International's | |
EIS | | Edison Insurance Services, Inc., a wholly-owned subsidiary of Edison International licensed to provide insurance to Edison International and its subsidiaries |
Electric Service Provider | an entity that provides electric power and ancillary services to retail customers, other than utilities (investor-owned utilities and CCAs) | |
ERRA | Energy Resource Recovery Account | |
Fast curve settings | | protective settings, used to mitigate the risk of wildfires, that enable quicker relays than under traditional settings |
FERC | Federal Energy Regulatory Commission | |
Fitch | | Fitch Ratings, Inc. |
GAAP | | generally accepted accounting principles in the United States |
GHG | | greenhouse gas |
GRC | | general rate case |
IRA | Inflation Reduction Act of 2022 | |
Koenigstein Fire | | a wind-driven fire that originated near Koenigstein Road in the City of Santa Paula in Ventura County, California, on December 4, 2017 |
MD&A | | Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Montecito Mudslides | | the debris flows and flooding in |
Moody's | | Moody's Investors Service, Inc. |
MW | | megawatts |
NDCTP | | Nuclear Decommissioning Cost Triennial Proceeding, a CPUC proceeding to review decommissioning costs |
NERC | | |
North American Electric Reliability Corporation | ||
NRC | | United States Nuclear Regulatory Commission |
NSGBA | | New System Generation Balancing Account |
OEIS | | Office of |
PABA | | Portfolio Allocation Balancing Account |
Palo Verde | | nuclear electric generating facility located near Phoenix, Arizona in which SCE holds a 15.8% ownership interest |
PBOP(s) | | postretirement benefits other than pension(s) |
PG&E | |
Pacific Gas & Electric Company | ||
Post-2018 Wildfires | | Collectively, all the wildfires that originated in Southern California after 2018 where SCE's equipment may be alleged to be associated with the fire's ignition |
PSPS | | Public Safety Power Shutoff(s) |
ROE | | return on common equity |
S&P | | Standard & Poor's |
San Onofre | | retired nuclear generating facility located in south San Clemente, California in which SCE holds a 78.21% ownership interest |
SCE | | |
Southern California Edison Company, a wholly-owned subsidiary of Edison International | ||
SCE Recovery Funding LLC | | a bankruptcy remote, wholly owned special purpose subsidiary, consolidated by SCE |
SDG&E | | San Diego Gas & Electric |
SEC | | U.S. Securities and Exchange Commission |
SED | | Safety and Enforcement Division of the CPUC |
SED Agreement | | an agreement dated October 21, 2021 between SCE and the SED regarding the 2017/2018 Wildfire/Mudslide Events and three other 2017 wildfires |
Thomas Fire | | a |
TKM | | collectively, the Thomas Fire, the Koenigstein Fire and the Montecito Mudslides |
TKM Subrogation Plaintiffs | | the plaintiffs party to the TKM Subrogation Settlement, representing all the insurance subrogation plaintiffs in the TKM litigation at the time of the settlement |
TKM Subrogation Settlement | | a settlement entered into by Edison International and SCE in September 2020 in the TKM litigation to which the TKM Subrogation Plaintiffs are party |
WEMA | | Wildfire Expense Memorandum Account |
WMP | | a wildfire mitigation plan required to be filed under AB 1054 to describe a utility's plans to construct, operate, and maintain electrical lines and equipment that will help minimize the risk of catastrophic wildfires caused by such electrical lines and equipment |
Wildfire Insurance Fund | | the insurance fund established under AB 1054 |
Woolsey Fire | | a wind-driven fire that originated in Ventura County in November 2018 |
Woolsey Subrogation Plaintiffs | | the plaintiffs party to the Woolsey Subrogation Settlement, representing all the insurance subrogation plaintiffs in the Woolsey Fire litigation at the time of the settlement |
Woolsey Subrogation Settlement | | a settlement entered into by Edison International and SCE in January 2021 in the Woolsey litigation to which the Woolsey Subrogation Plaintiffs are party |
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This quarterly report on Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect Edison International's and SCE's current expectations and projections about future events based on Edison International's and SCE's knowledge of present facts and circumstances and assumptions about future events and include any statements that do not directly relate to a historical or current fact. Other information distributed by Edison International and SCE that is incorporated in this report, or that refers to or incorporates this report, may also contain forward-looking statements. In this report and elsewhere, the words "expects," "believes," "anticipates," "estimates," "projects," "intends," "plans," "probable," "may," "will," "could," "would," "should," and variations of such words and similar expressions, or discussions of strategy or plans, are intended to identify forward-looking statements. Such statements necessarily involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Some of the risks, uncertainties and other important factors that could cause results to differ from those currently expected, or that otherwise could impact Edison International and SCE, include, but are not limited to the:
| ● | ability of SCE to recover its costs through regulated rates, including uninsured wildfire-related and debris flow-related costs, costs incurred to mitigate the risk of utility equipment causing future wildfires, costs incurred as a result of the COVID-19 pandemic, and increased costs due to supply chain constraints, inflation and rising interest rates; |
| ● | ability of SCE to implement its WMP and capital program; |
| ● | risks of regulatory or legislative restrictions that would limit SCE's ability to implement operational measures to mitigate wildfire risk, including PSPS and fast curve settings, when conditions warrant or would otherwise limit SCE's operational practices relative to wildfire risk mitigation; |
| ● | risks associated with SCE implementing PSPS, including regulatory fines and penalties, claims for damages and reputational harm; |
| ● | ability of SCE to maintain a valid safety certification; |
| ● | ability of Edison International and SCE to obtain sufficient insurance at a reasonable cost, including insurance relating to wildfire-related claims, and to recover the costs of such insurance or, in the event liabilities exceed insured amounts, the ability to recover uninsured losses (including amounts paid for self-insured retention and co-insurance) from customers or other parties; |
| ● | extreme weather-related incidents (including events caused, or exacerbated, by climate change, such as wildfires, debris flows, flooding, droughts, high wind events and extreme heat events) and other natural disasters (such as earthquakes), which could cause, among other things, public safety issues, property damage, rotating outages and other operational issues (such as issues due to damaged infrastructure), PSPS activations and unanticipated costs; |
| ● | risk that AB 1054 does not effectively mitigate the significant exposure faced by California investor-owned utilities related to liability for damages arising from catastrophic wildfires where utility facilities are alleged to be a substantial cause, including the longevity of the Wildfire Insurance Fund and the CPUC's interpretation of and actions under AB 1054, including its interpretation of the prudency standard clarified by AB 1054; |
| ● | ability of Edison International and SCE to effectively attract, manage, develop and retain a skilled workforce, including its contract workers; |
| ● | decisions and other actions by the CPUC, OEIS, the FERC, the NRC and other governmental authorities, including decisions and actions related to nationwide or statewide crisis, determinations of authorized rates of return or return on equity, the recoverability of wildfire-related and debris flow-related costs, issuance of SCE's wildfire safety certification, |
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| wildfire mitigation efforts, approval and implementation of electrification programs, and delays in executive, regulatory and legislative actions; |
| ● | cost and availability of labor, equipment and materials, including as a result of supply chain constraints and inflation; |
| ● | ability of Edison International or SCE to borrow funds and access bank and capital markets on reasonable terms; |
| ● | risks associated with the decommissioning of San Onofre, including those related to worker and public safety, public opposition, permitting, governmental approvals, on-site storage of spent nuclear fuel and other radioactive material, delays, contractual disputes, and cost overruns; |
| ● | pandemics, such as COVID-19, and other events that cause regional, statewide, national or global disruption, which could impact, among other things, Edison International's and SCE's business, operations, cash flows, liquidity and/or financial results and cause Edison International and SCE to incur unanticipated costs; |
| ● | physical security of Edison International's and SCE's critical assets and personnel and the cybersecurity of Edison International's and SCE's critical information technology systems for grid control, and business, employee and customer data; |
| ● | risks associated with cost allocation resulting in higher rates for utility bundled service customers because of possible customer bypass or departure for other electricity providers such as CCAs and Electric Service Providers; |
| ● | risks inherent in SCE's capital investment program, including those related to project site identification, public opposition, environmental mitigation, construction, permitting, contractor performance, availability of labor, equipment and materials, weather, changes in the CAISO's transmission plans, and governmental approvals; |
| ● | risks associated with the operation of electrical facilities, including worker and public safety issues, the risk of utility assets causing or contributing to wildfires, failure, availability, efficiency, and output of equipment and facilities, and availability and cost of spare parts; |
| ● | actions by credit rating agencies to downgrade Edison International or SCE's credit ratings or to place those ratings on negative watch or negative outlook; |
| ● | changes in tax laws and regulations, at both the state and federal levels, or changes in the application of those laws, that could affect recorded deferred tax assets and liabilities, effective tax rates and cash flows; |
| ● | changes in future taxable income, or changes in tax law, that would limit Edison International's and SCE's realization of expected net operating loss and tax credit carryover benefits prior to expiration; |
| ● | changes in the fair value of investments and other assets; |
| ● | changes in interest rates and potential adjustments to SCE's ROE based on changes in Moody's utility bond rate index; |
| ● | changes in rates of inflation (including whether inflation-related adjustments to SCE's authorized revenues allowed by the public utility regulators are commensurate with inflation rates); |
| ● | governmental, statutory, regulatory, or administrative changes or initiatives affecting the electricity industry, including the market structure rules applicable to each market adopted by the NERC, CAISO, Western Electricity Coordinating Council, and similar regulatory bodies in adjoining regions, and changes in the United States' and California's environmental priorities that lessen the importance placed on GHG reduction and other climate related priorities; |
| ● | availability and creditworthiness of counterparties and the resulting effects on liquidity in the power and fuel markets and/or the ability of counterparties to pay amounts owed in excess of collateral provided in support of their obligations; |
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| ● | potential for penalties or disallowance for non-compliance with applicable laws and regulations, including fines, penalties and disallowances related to wildfires where SCE's equipment is alleged to be associated with ignition; and |
| ● | cost of fuel for generating facilities and related transportation, which could be impacted by, among other things, disruption of natural gas storage facilities, to the extent not recovered through regulated rate cost escalation provisions or balancing accounts. |
Additional information about risks and uncertainties, including more detail about the factors described in this report, is contained throughout this report and in the 20162022 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 20162022 Form 10-K, and carefully consider the risks, uncertainties, and other factors that affect Edison International's and SCE's businesses. Forward-looking statements speak only as of the date they are made and neither Edison International nor SCE are obligated to publicly update or revise forward-looking statements. Readers should review future reports filed by Edison International and SCE with the SEC. Edison International and SCE post or provide direct links to SCE's(i) certain SCE and other parties' regulatory filings and documents with the CPUC and the FERC and materialcertain agency rulings and notices in open proceedings most importantin a section titled "SCE Regulatory Highlights," (ii) certain documents and information related to Southern California wildfires which may be of interest to investors at www.edisoninvestor.com (SCE Regulatory Highlights) so that such filings are available to all investors upon SCE filing with the relevant agency. Edison Internationalin a section titled "Southern California Wildfires," and SCE also routinely post or provide direct links to(iii) presentations, documents and other information that may be of interest to investors in a section titled "Presentations and Updates" at www.edisoninvestor.com (Events and Presentations) in order to publicly disseminate such information.
The MD&A for the ninethree months ended September 30, 2017March 31, 2023 discusses material changes in the consolidated financial condition, results of operations and other developments of Edison International and SCE since December 31, 2016,2022 and as compared to the ninethree months ended September 30, 2016.March 31, 2022. This discussion presumes that the reader has read or has access to Edison International's and SCE'sthe 2022 MD&A for the calendar year 2016 (the "year-ended 2016 MD&A"), which was included in the 2016 Form 10-K.
Except when otherwise stated, references to each of Edison International SCE, EMG, Edison Energy Group, EME or Edison CapitalSCE mean each such company with its subsidiaries on a consolidated basis. References to "Edison International Parent and Other" mean Edison International Parent and its subsidiaries other than SCE and its subsidiaries and "Edison International Parent" mean Edison International on a stand-alone basis, not consolidated competitive subsidiaries.with its subsidiaries. Unless otherwise described, all the information contained in this report relates to both filers.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Highlights of Operating Results
Edison International is the ultimate parent holding company of SCE.SCE and Edison Energy. 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 InternationalEnergy is also the parent company of Edison Energy Group, a holding company for subsidiaries engaged in pursuingthe competitive business opportunities acrossof providing integrated decarbonization and energy services, managed portfolio solutions, and distributed solar solutions to commercial, institutional and industrial customers. Suchcustomers in North America and Europe. 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, | |||||||||||||||||||||||
| (in millions) | 2017 | 20161 | Change | 2017 | 20161 | Change | ||||||||||||||||||
| Net income (loss) attributable to Edison International | ||||||||||||||||||||||||
| Continuing operations | ||||||||||||||||||||||||
| SCE | $ | 465 | $ | 435 | $ | 30 | $ | 1,121 | $ | 1,048 | $ | 73 | ||||||||||||
| Edison International Parent and Other | 5 | (14 | ) | 19 | (11 | ) | (65 | ) | 54 | |||||||||||||||
| Discontinued operations | — | — | — | — | (1 | ) | 1 | |||||||||||||||||
| Edison International | 470 | 421 | 49 | 1,110 | 982 | 128 | ||||||||||||||||||
| Less: Non-core items | ||||||||||||||||||||||||
| SCE | — | — | — | — | — | — | ||||||||||||||||||
| Edison International Parent and Other | — | — | — | 1 | 5 | (4 | ) | |||||||||||||||||
| Discontinued operations | — | — | — | — | (1 | ) | 1 | |||||||||||||||||
| Total non-core items | — | — | — | 1 | 4 | (3 | ) | |||||||||||||||||
| Core earnings (losses) | ||||||||||||||||||||||||
| SCE | 465 | 435 | 30 | 1,121 | 1,048 | 73 | ||||||||||||||||||
| Edison International Parent and Other | 5 | (14 | ) | 19 | (12 | ) | (70 | ) | 58 | |||||||||||||||
| Edison International | $ | 470 | $ | 421 | $ | 49 | $ | 1,109 | $ | 978 | $ | 131 | ||||||||||||
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.continuing.
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SCE | | $ | 370 | | $ | 147 | | $ | 223 |
Edison International Parent and Other | |
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Edison International | | | 310 | | | 84 | | | 226 |
Less: Non-core items | |
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SCE | |
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2017/2018 Wildfire/Mudslide Events claims and expenses, net of recoveries | | | (90) | | | (396) | | | 306 |
Wildfire Insurance Fund expense | |
| (52) | | | (53) | |
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2021 NDCTP estimated loss | | | (30) | | | — | | | (30) |
Income tax benefits1 | | | 48 | | | 126 | | | (78) |
Edison International Parent and Other | |
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Customer revenues for EIS insurance contract | | | 22 | | | — | | | 22 |
Income tax expense1 | | | (4) | | | — | | | (4) |
Total non-core items | | | (106) | | | (323) | | | 217 |
Core earnings (losses) | |
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| 470 | |
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Edison International Parent and Other | |
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Edison International | | $ | 416 | | $ | 407 | | $ | 9 |
| 1 | SCE and Edison International Parent and Other non-core items are tax-effected at an estimated statutory rate of approximately 28%; customer revenues for EIS insurance contract are tax-effected at an estimated statutory rate of approximately 20%. |
Edison International's thirdfirst quarter 20172023 earnings increased $49$226 million from the thirdfirst quarter of 2016, comprised of2022, resulting from an increase in SCE's earnings of $30$223 million and a decrease in Edison International Parent and Other's losses of $19$3 million. SCE's higher net earnings consisted of $199 million of lower non-core losses and $24 million of higher core earnings. Edison
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International Parent and Other's lower losses consisted of $18 million of higher non-core earnings and $15 million of higher core losses.
The increase in SCE's core earnings at SCEfor the three months ended March 31, 2023 from the same period in 2022 was primarily due to the escalation mechanism set forth in the 2015 GRC decision.
The increase in Edison International Parent and Other's decrease incore losses for the three and nine months ended September 30, 2017March 31, 2023 was due to lower core losses of $19 million and $58 million, respectively, and lower non-core earnings of $4 million for the nine months ended September 30, 2017. The decrease in core losses for the quarter wasprimarily due to higher income tax benefits resulting from net operating loss carrybacks frominterest expense.
Consolidated non-core items for the filingthree months ended March 31, 2023 and 2022 primarily included:
| ● | Charges of $52 million ($38 million after-tax) recorded in 2023 and $53 million ($38 million after-tax) recorded in 2022 from the amortization of SCE's contribution to the Wildfire Insurance Fund. See "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies" in the 2022 Form 10-K for further information. |
| ● | Charges of $90 million ($65 million after-tax) recorded in 2023 and $396 million ($285 million after-tax) recorded in 2022 for 2017/2018 Wildfire/Mudslide Events claims and expenses, net of recoveries. See "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies" for further information. |
| ● | A charge of $30 million ($21 million after-tax) recorded in 2023 for estimated losses related to the reasonableness review of recorded San Onofre Units 2 and 3 decommissioning costs in the 2021 NDCTP. See "Liquidity and Capital Resources—SCE—Decommissioning of San Onofre" for more information. |
| ● | Customer revenues of $22 million ($18 million after-tax) recorded in 2023 related to an EIS insurance contract. See "Notes to Consolidated Financial Statements—Note 17. Related-Party Transactions" for further information. |
See "Results of Operations" for discussion of SCE's and Edison International Parent and Other's results of operations.
Customer-funded Self-Insurance
In April 2023, the CPUC issued a proposed decision which, if adopted, would approve a joint petition for modification of the 2016 tax returns in 2017.2021 GRC decision filed by SCE, The year-to-date decrease also reflects higher income tax benefits related to stock option exercisesUtility Reform Network and the 2017 settlement of federal income tax audits for 2007 – 2012.
Capital Program
Total capital expenditures promote safety(including accruals) were $1.3 billion for both the first three months ended March 31, 2023 and reliability as well as facilitate integration of distributed energy resources and are2022. SCE expects to file its 2025 GRC application with the focus of SCE's reduced grid modernizationCPUC in May 2023 including its capital expenditures in 2017. These expenditures are included in traditional distribution capital expendituresexpenditure requests for 2017 in the table below.
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| (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 expenditures1, 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 | ||||||
| (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 | |||||
As discussed in the year-ended 2016 MD&A, in a December 2016 joint ruling,2022 Form 10-K, multiple lawsuits and investigations related to the Assigned Commissioner2017/2018 Wildfire/Mudslide Events have been initiated against SCE and Edison International. SCE has previously settled claims under the Local Public Entity Settlement, the TKM Subrogation Settlement, the Woolsey Subrogation Settlement and the Assigned ALJ expressed concerns about the extent to which the failure to timely report
Each reporting period, management reviews its loss estimates for remaining alleged 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 changespotential claims related to the settlement unanimously approved by2017/2018 Wildfire/Mudslide Events. As a result of management's first quarter 2023 review, a $90 million increase in estimated losses for the CPUC in 2014. In connection with2017/2018 Wildfire/Mudslide Events as of March 31, 2023 was recorded. As a result, SCE recorded expected recoveries through FERC electric rates of $6 million against the termination ofcharge. The resulting net charge to earnings was $84 million ($61 million after-tax).
Estimated losses for the meet-and-confer process, SCE asked the CPUC to affirm that the San Onofre OII Settlement Agreement is fair, reasonable and in the public interest. Other parties to the meet-and-confer process petitioned the CPUC2017/2018 Wildfire/Mudslide Events litigation are based on a broad rangenumber of litigation positions, certain of which included substantial additional disallowances.
Through March 31, 2023, SCE has accrued estimated losses of $8.8 billion, expected recoveries from insurance of $2.0 billion and expected recoveries through FERC electric rates of $382 million related to the 2017/2018 Wildfire/Mudslide Events. The after-tax net charges to earnings recorded through March 31, 2023 have been $4.7 billion.
As of March 31, 2023, SCE had paid $7.8 billion under executed settlements and had $135 million to be $52 million. An adjustmentpaid under executed settlements, including $120 million to be paid under the SED Agreement, related to the interest awarded2017/2018 Wildfire/Mudslide Events. As of the same date, SCE had recovered $2.0 billion through insurance and approximately $319 million through FERC-jurisdictional electric rates.
After giving effect to SCE subsequently reducedall payment obligations under settlements entered into through March 31, 2023, including under the net recoverySED Agreement, Edison International's and SCE's best estimate of expected losses for remaining alleged and potential claims related to $47the 2017/2018 Wildfire/Mudslide Events was $988 million. As of the same date, SCE had assets for expected recoveries through FERC electric rates of $63 million on its consolidated balance sheets and had exhausted expected insurance recoveries related to the 2017/2018 Wildfire/Mudslide Events. Edison International and SCE may incur a resultmaterial loss in excess of uncertainty associatedamounts accrued in connection with the allocationremaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events.
SCE will seek CPUC-jurisdictional rate recovery of prudently-incurred losses and related costs realized in connection with the 2017/2018 Wildfire/Mudslide Events in excess of available insurance and FERC-jurisdictional recoveries, other than for any obligations under the SED Agreement. Based on Edison International's and SCE's current best estimate of expected losses for the 2017/2018 Wildfire/Mudslide Events, SCE currently expects to seek CPUC-jurisdictional rate recovery of approximately $6 billion by filing several future applications with the CPUC. SCE targets the third quarter of 2023 for the first of such cost recovery applications, and expects to request recovery of approximately $2 billion in that filing
6
related to TKM. SCE's plans with respect to these filings may be delayed or modified. For example, the filings may be delayed if proceedings related to the 2017/2018 Wildfire/Mudslide Events do not progress as anticipated. SCE believes that, in light of the award underCPUC'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 San Onofre OII Settlement Agreement,CPUC will interpret and apply its prudency standard to an investor-owned utility in wildfire cost-recovery proceedings for fires ignited prior to the adoption of AB 1054 on July 12, 2019. Accordingly, while the CPUC has not made a determination regarding SCE's prudency relative to any of the 2017/2018 Wildfire/Mudslide Events, SCE recorded a regulatory liability foris unable to conclude, at this time, that uninsured CPUC-jurisdictional wildfire-related costs related to the net recovery.
For morefurther information on the challenges to the settlement of the San Onofre OII, the arbitration tribunal decision on MHI,Southern California Wildfires and the San Onofre regulatory asset,Mudslides, see "Risk Factors," "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," "Business—Southern California Wildfires" in the 2022 Form 10-K and "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—San Onofre Related Matters."
SCE
SCE's results of operations are derived mainly through two sources:
| ● | Earning activities – representing revenue authorized by the CPUC and the FERC, which is intended to provide SCE with a reasonable opportunity to recover its costs and earn a return on its net investment in generation, transmission and distribution assets. The annual revenue requirements are comprised of authorized operation and maintenance costs, depreciation, taxes and a return consistent with the capital structure. Also, included in earnings activities are revenue or penalties related to incentive mechanisms, other operating revenue, and regulatory charges or disallowances. |
| ● | Cost-recovery activities – representing CPUC- and FERC- authorized balancing accounts, which allow for recovery of specific project or program costs, subject to reasonableness review or compliance with upfront standards, as well as non-bypassable rates collected for SCE Recovery Funding LLC. Cost-recovery activities include rates which provide recovery, subject to reasonableness review of, among other things, fuel costs, purchased power costs, public purpose related-program costs (including energy efficiency and demand-side management programs), certain operation and maintenance expenses (including vegetation management and wildfire insurance), and repayment of bonds and financing costs of SCE Recovery Funding LLC. SCE earns no return on these activities. |
The following table is a summary of SCE's results of operations for the periods indicated.
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| Three months ended September 30, 2017 | Three months ended September 30, 2016 | |||||||||||||||||
| (in millions) | 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 | ||||||
| Purchased power and fuel | — | 1,783 | 1,783 | — | 1,719 | 1,719 | ||||||||||||
| Operation and maintenance | 489 | 192 | 681 | 481 | 221 | 702 | ||||||||||||
| Depreciation and amortization | 521 | — | 521 | 519 | — | 519 | ||||||||||||
| Property and other taxes | 98 | (1 | ) | 97 | 91 | — | 91 | |||||||||||
| Other operating income | (8 | ) | — | (8 | ) | — | — | — | ||||||||||
| Total operating expenses | 1,100 | 1,974 | 3,074 | 1,091 | 1,940 | 3,031 | ||||||||||||
| Operating income | 577 | 1 | 578 | 720 | 1 | 721 | ||||||||||||
| Interest expense | (148 | ) | (1 | ) | (149 | ) | (136 | ) | (1 | ) | (137 | ) | ||||||
| Other income and expenses | 33 | — | 33 | 23 | — | 23 | ||||||||||||
| Income before income taxes | 462 | — | 462 | 607 | — | 607 | ||||||||||||
| Income tax (benefit) expense | (35 | ) | — | (35 | ) | 141 | — | 141 | ||||||||||
| Net income | 497 | — | 497 | 466 | — | 466 | ||||||||||||
| Preferred and preference stock dividend requirements | 32 | — | 32 | 31 | — | 31 | ||||||||||||
| Net income available for common stock | $ | 465 | $ | — | $ | 465 | $ | 435 | $ | — | $ | 435 | ||||||
| Net income available for common stock | $ | 465 | $ | 435 | ||||||||||||||
| Less: | ||||||||||||||||||
| Non-core earnings | — | — | ||||||||||||||||
Core earnings1 | $ | 465 | $ | 435 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
|
| Three months ended March 31, 2023 | | | Three months ended March 31, 2022 | | ||||||||||||||
| | | | | Cost- | | | | | | | | | Cost- | | | | | ||
| | Earning | | Recovery | | Total | | | Earning | | Recovery | | Total | | ||||||
(in millions) |
| Activities |
| Activities |
| Consolidated |
|
| Activities |
| Activities |
| Consolidated | | ||||||
Operating revenue | | $ | 2,233 | | $ | 1,717 | | $ | 3,950 | | | $ | 2,267 | | $ | 1,694 | | $ | 3,961 | |
Purchased power and fuel | | | — | | | 1,318 | |
| 1,318 | | | | — | | | 1,037 | |
| 1,037 | |
Operation and maintenance | | | 670 | | | 411 | |
| 1,081 | | | | 790 | | | 676 | |
| 1,466 | |
Wildfire-related claims, net of insurance recoveries | | | 96 | | | — | |
| 96 | | | | 425 | | | — | |
| 425 | |
Wildfire Insurance Fund expense | | | 52 | | | — | |
| 52 | | | | 53 | | | — | |
| 53 | |
Depreciation and amortization | | | 649 | | | 7 | |
| 656 | | | | 579 | | | 4 | |
| 583 | |
Property and other taxes | | | 137 | | | 2 | |
| 139 | | | | 116 | | | 8 | |
| 124 | |
Other operating income | | | — | | | — | |
| — | | | | (2) | | | — | |
| (2) | |
Total operating expenses | |
| 1,604 | |
| 1,738 | | | 3,342 | | |
| 1,961 | |
| 1,725 | | | 3,686 | |
Operating income (loss) | |
| 629 | |
| (21) | | | 608 | | |
| 306 | |
| (31) | | | 275 | |
Interest expense | |
| (295) | | | (5) | | | (300) | | |
| (210) | |
| (3) | | | (213) | |
Other income | |
| 94 | | | 26 | | | 120 | | |
| 37 | |
| 34 | | | 71 | |
Income before income taxes | |
| 428 | |
| — | | | 428 | | |
| 133 | |
| — | | | 133 | |
Income tax expense (benefit) | |
| 29 | | | — | | | 29 | | |
| (40) | |
| — | | | (40) | |
Net income | |
| 399 | |
| — | | | 399 | | |
| 173 | |
| — | | | 173 | |
Less: Preference stock dividend requirements | |
| 29 | | | — | | | 29 | | |
| 26 | |
| — | | | 26 | |
Net income available for common stock | | $ | 370 | | $ | — | | $ | 370 | | | $ | 147 | | $ | — | | $ | 147 | |
Earning Activities
Earning activities were primarily affected by the following:
| ● | Lower operating revenue of $34 million primarily due to the following: |
| ● | A decrease of CPUC-related revenue of $183 million due to lower wildfire-related expenses that had been authorized for recovery during 2022 through tracks 2 and 3 of the 2021 GRC. |
| ● | An increase of CPUC-related revenue of $102 million due to the escalation mechanism set forth in the 2021 GRC decision. |
| ● | An increase of $63 million of revenue related to CSRP revenue requirements approved in 2022 and 2023. See "Liquidity and Capital Resources—SCE—Regulatory Proceedings" for more information. |
| ● | A decrease of FERC-related revenue of $20 million due to lower wildfire-related claims and expenses to be recovered in FERC revenues. |
| ● | An increase of FERC-related revenue of $6 million due to rate base growth. |
| ● | Lower operation and maintenance expenses of $120 million. |
| ● | In 2022, SCE recognized $241 million of previously deferred wildfire-related expenses upon approval of the 2021 GRC track 2, compared to $84 million previously deferred expenses recognized in 2023, primarily related to the 2021 GRC track 3 and CSRP approvals. The wildfire and CSRP-related expenses were offset in revenue above. |
| ● | In 2023, SCE accrued $30 million in estimated losses relating to the 2021 NDCTP. See "Liquidity and Capital Resources—SCE— Decommissioning of San Onofre" for more information. |
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| ● | Wildfire-related claims were impacted by charges of $90 million and $416 million recorded in 2023 and 2022, respectively, related to the 2017/2018 Wildfire/Mudslide Events. Also included in the charges are $6 million and $9 million recorded in 2023 and 2022, respectively, for self-insured retention expenses related to the Post-2018 wildfires. See "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides." |
| ● | Higher depreciation and amortization expense of $70 million primarily due to recognition of previously deferred CSRP-related expenses (offset in revenue above) and increased plant balances in 2023. |
| ● | Higher property and other taxes of $21 million primarily due to higher property assessed value in 2023. |
| ● | Higher interest expense of $85 million primarily due to increased long-term borrowing, higher interest rates on long-term debt, short-term debt and balancing account overcollections. |
| ● | Higher other income of $57 million primarily due to a higher interest rate applied to balancing account undercollections. |
| ● | See "Income Taxes" below for the explanation of the $69 million increase in income tax expenses. |
Cost-Recovery Activities
Operating revenue and the corresponding operating expenses in cost-recovery activities were primarily affected by the following:
| ● | Higher purchased power and fuel costs of $281 million, primarily due to higher power and gas prices, partially offset by hedging gains. |
| ● | Lower operation and maintenance costs of $265 million. In 2022, SCE recognized $160 million of wildfire-related expenses previously deferred upon obtaining approval of the 2021 GRC track 2 and $109 million of previously deferred uncollectible costs through a balancing account. |
| Nine months ended September 30, 2017 | Nine months ended September 30, 2016 | |||||||||||||||||
| (in millions) | 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 | ||||||
| Purchased power and fuel | — | 3,742 | 3,742 | — | 3,576 | 3,576 | ||||||||||||
| Operation and maintenance | 1,413 | 505 | 1,918 | 1,456 | 537 | 1,993 | ||||||||||||
| Depreciation and amortization | 1,528 | — | 1,528 | 1,497 | — | 1,497 | ||||||||||||
| Property and other taxes | 279 | — | 279 | 268 | — | 268 | ||||||||||||
| Other operating income | (8 | ) | — | (8 | ) | — | — | — | ||||||||||
| Total operating expenses | 3,212 | 4,247 | 7,459 | 3,221 | 4,113 | 7,334 | ||||||||||||
| Operating income | 1,601 | 1 | 1,602 | 1,621 | 1 | 1,622 | ||||||||||||
| Interest expense | (435 | ) | (1 | ) | (436 | ) | (401 | ) | (1 | ) | (402 | ) | ||||||
| Other income and expenses | 83 | — | 83 | 71 | — | 71 | ||||||||||||
| Income before income taxes | 1,249 | — | 1,249 | 1,291 | — | 1,291 | ||||||||||||
| Income tax expense | 34 | — | 34 | 151 | — | 151 | ||||||||||||
| Net income | 1,215 | — | 1,215 | 1,140 | — | 1,140 | ||||||||||||
| Preferred and preference stock dividend requirements | 94 | — | 94 | 92 | — | 92 | ||||||||||||
| Net income available for common stock | $ | 1,121 | $ | — | $ | 1,121 | $ | 1,048 | $ | — | $ | 1,048 | ||||||
| Net income available for common stock | $ | 1,121 | $ | 1,048 | ||||||||||||||
| Less: | ||||||||||||||||||
| Non-core earnings | — | — | ||||||||||||||||
Core earnings1 | $ | 1,121 | $ | 1,048 | ||||||||||||||
Supplemental Operating Revenue Information
As a result of the CPUC-authorized decoupling mechanism, SCE earningsrevenues are not affected by changes in retail electricity sales (see "Business—SCE—Overview of Ratemaking Process" in the 2016 Form 10-K).
Income Taxes
The increase in income tax expense decreased by $176 million and $117of $69 million for the three and nine months ended September 30, 2017March 31, 2023 compared to the same periodsperiod in 2016.
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 significantreportable as a reportable segment,segments, as well as intercompany eliminations.
9
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 March 31, | | ||||
(in millions) |
| 2023 |
| 2022 | | ||
Edison Energy Group and subsidiaries | | $ | (2) | | $ | (5) | |
Corporate expenses and other subsidiaries | |
| (32) | |
| (32) | |
Edison International Parent and Other net loss | | $ | (34) | | $ | (37) | |
Preferred stock dividend requirement | | | 26 | | | 26 | |
Edison International Parent and Other net loss attributable to common stock | | $ | (60) | | $ | (63) | |
The net loss attributable to common stock from continuing operations of Edison International Parent and Other decreased $19 million and $54$3 million for the three and nine months ended September 30, 2017, respectively,March 31, 2023 compared to the same periodsperiod in 20162022, primarily due to:
SCE
SCE's ability to operate its business, fund capital expenditures, and implement its business strategy is dependent upon its cash flowflows and access to the bank and capital markets. SCE's overall cash flows fluctuate based on, among other things, its ability to recover its costs in a timely manner from its customers through regulated rates, changes in commodity prices and volumes, collateral requirements, interest obligations, and dividend payments to and equity contributions from Edison International, obligations to preference shareholders, and the outcome of tax, regulatory and regulatorylegal matters.
In the next 12 months, SCE expects to fund its obligations, capital expenditures, and dividendscash requirements through operating cash flows, tax benefits, and capital market and bank financings and equity contributions from Edison International Parent, as needed. SCE also has availability under its credit facilitiesfacility to fund liquiditycash requirements. SCE expects to issue bonds to finance or refinance eligible sustainable projects. For further information about eligible sustainable projects, see "Liquidity and Capital Resources—SCE" in the 2022 MD&A. SCE also expects to issue additional debt for general corporate purposes and to finance payments for future resolutions of claims related to the 2017/2018 Wildfire/Mudslide Events.
SCE has invested all $1.6 billion of the required AB 1054 Excluded Capital Expenditures. SCE issued securitized bonds in the amounts of $338 million, $533 million and $775 million in February 2021, February 2022 and April 2023, respectively, to finance these expenditures and related financing costs. SCE used the proceeds of the April 2023 securitized bonds to repay a term loan of $730 million prior to its maturity in May 2023.
In the first quarter of 2023, Moody's upgraded SCE's credit rating from Baa2 to Baa1 and revised SCE's rating outlook from positive to stable. In April 2023, Fitch upgraded SCE's credit rating from BBB- to BBB and revised SCE's rating outlook from positive to stable. The following tables summarizes SCE’s current long-term issuer credit ratings and outlook from the major credit rating agencies:
| | | | | | |
| Moody's | Fitch | S&P | |||
Credit Rating | Baa1 | BBB | BBB | |||
Outlook | Stable | Stable | Stable |
SCE's credit ratings may be affected if, among other things, regulators fail to successfully implement AB 1054 in a consistent and credit supportive manner or the Wildfire Insurance Fund is depleted by claims from catastrophic wildfires. Credit rating downgrades increase the cost and may impact the availability of short-term and long-term borrowings, including commercial paper, credit facilities, bond financings or other borrowings. In addition, some of SCE's power procurement contracts would
require SCE to pay related liabilities or post additional collateral if SCE's credit rating were to fall below investment grade. For further details, see "—Margin and Collateral Deposits."
The cost of capital adjustment mechanism set by the CPUC could impact SCE's results of operations and cash flows. The cost of capital adjustment mechanism's benchmark beginning January 1, 2023, is the 12-month, October 1, 2021 through September 30, 2017,2022, average Moody's Baa utility bond yield of 4.37%. If the difference between the benchmark and the average of the same index for the 12-month period from October 1, 2022 to September 30, 2023 exceeds 100-basis points, SCE's CPUC-authorized ROE will be adjusted for 2024 by half the amount of the difference (up or down). The average Moody's Baa utility bond yield between October 1, 2022 and April 25, 2023 was 5.72%. The spot rate for Moody's Baa utility bond was 5.42% on April 25, 2023. An average Moody's Baa utility bond yield of 4.94% or higher from April 26, 2023 through September 30, 2023 would trigger the mechanism to adjust upward. For further information see "Business—SCE— Overview of Ratemaking Process" in the 2022 Form 10-K.
Available Liquidity
At March 31, 2023, SCE had cash on hand of $690 million and approximately $2.15$2.5 billion available underto borrow on its $2.75$3.4 billion multi-year revolving credit facility. In addition, SCE issued debtThe credit facility is available for borrowing needs until May 2026 and preference stock in 2017.the aggregate maximum principal amount may be increased up to $4.0 billion, provided that additional lender commitments are obtained. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements"Agreements."
SCE may finance balancing account undercollections and "—Note 12. Preferredworking capital requirements to support operations and Preference Stock of SCE.capital expenditures with commercial paper, its credit facilities 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 costs related to the 2017/2018 Wildfire/Mudslide Events. For further information, see "Management Overview—Southern California Wildfires and Mudslides."
Debt Covenant
SCE's credit facility limits itsfacilities and term loan require a debt to total capitalization ratio toas defined in the applicable agreements of less than or equal to 0.65 to 1. At September 30, 2017,March 31, 2023, SCE's debt to total capitalization ratio was 0.430.57 to 1.
At September 30, 2017,March 31, 2023, SCE was in compliance with all other financial covenants that affect access to capital.
Regulatory Proceedings
Wildfire Related Regulatory Proceedings
In response to the increase in wildfire activity, and faster progression of and increased damage from wildfires across SCE's service territory and throughout California, SCE has incurred wildfire mitigation, wildfire insurance and wildfire and drought restoration related spending at levels significantly exceeding amounts authorized in SCE's GRCs.
Wildfire Expense Memorandum Account
SCE tracks insurance premium costs related to wildfire liability insurance policies as well as other wildfire-related costs in its WEMA. In December 2020, SCE filed a WEMA application with the CPUC to seek recovery of $215 million of costs recorded in WEMA at December 31, 2020. The costs are updatesprimarily related to incremental wildfire insurance premium expenses and associated costs for large transmission and substation projects sincewildfire liability insurance policies that provide coverage for the filinglast six months 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.
11
CSRP
In March 2023, the CPUC approved SCE's second CSRP application to recover approximately $59 million of capital expenditures and $28 million of operation and maintenance expenses incurred from May 2021 to December 2021, resulting in a revenue requirement of $65 million. The decision also approved SCE seeking review and cost recovery of additional post-implementation CSRP costs incurred from January 2022 through December 2024 in its 2025 GRC filing.
ERRA Proceeding
In January 2023, as a result of undercollection in ERRA and PABA at the end of 2022 due to higher gas and power prices, SCE filed an expedited ERRA trigger application with the CPUC. In April 2023, the CPUC approved SCE to recover a revenue requirement of up to $596 million over 12 months beginning June 1, 2023. The decision also granted SCE authority to decline to place some or all of the increase into rates if its forecast reasonably demonstrates that it will not need some or all of the increase in order to bring its ERRA trigger balance within the prescribed threshold. See "Business—SCE—Overview of Ratemaking Process" in 2022 10-K for further information of ERRA trigger mechanism.
Capital Investment Plan
Major Transmission and Utility Owned Storage Projects
Eldorado-Lugo-Mohave Upgrade Project which sought additional project modifications and environmental mitigation measures. This action confirmed SCE's proposed project, which is
The total costs for the Eldorado-Lugo-Mohave Upgrade Project are expected to exceed amounts currently approved in the certificate of public convenience and necessity granted by the CPUC due to delays in regulatory approvals, contractor performance issues, COVID-19 and the availability of CAISO outage windows. Additional work may also be placedrequired to mitigate the impact of the project on nearby gas lines. SCE expects to request CPUC approval for the additional expenditures and expects the project to be in service in 2023. See "Liquidity—SCE—Capital Investment Plan" in 2022 10-K for further information.
Utility Owned Storage
As discussed in the 2022 Form 10-K, in October 2021, althoughSCE contracted with Ameresco, Inc. ("Ameresco") for the construction of utility owned energy storage projects at three sites in SCE's service territory with an aggregate capacity of 537.5 MW.
In April 2023, Ameresco discovered damage to some of the equipment at one of the projects which makes up 225 MW of the 537.5 MW aggregate capacity. SCE has received a notice of potential force majeure event from Ameresco noting that Ameresco is performing further analyses on the cause of the damage and asserting that rainstorms at the project site may have caused or contributed to the damage. SCE believes that there is potentialsignificant risk that this project will not be in-service to meet summer peak reliability needs.
Ameresco has advised SCE that it currently expects the other two projects to be in-service prior to August 2023.
Decommissioning of San Onofre
As discussed in the 2022 Form 10-K, in February 2022, SCE filed its application in the 2021 NDCTP with the CPUC requesting reasonableness review of approximately $570 million (SCE share in 2022 dollars) of recorded San Onofre Units 2 and 3 decommissioning costs incurred during the period 2018 to 2020. Intervenors in the proceeding have recommended approximately $115 million (SCE share in 2022 dollars) in disallowances for San Onofre Units 2 and 3 decommissioning costs. This amount includes a delay.recommended disallowance of approximately $45 million in costs associated with an August 2018 incident that occurred when an SCE is evaluating the competitive bids receivedcontractor was loading a spent nuclear fuel canister into an ISFSI resulting in fuel transfer operations being suspended 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 costapproximately one year. The remainder of the Project.recommended disallowance amount is
12
primarily for contractor staffing costs incurred during 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 servicedelay 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.
Margin and Collateral Deposits
Certain derivative instruments, power and energy procurement contracts and other contractual arrangements contain collateral requirements. In addition, certain environmental remediation obligations require financial assurance that may be in the form of collateral postings. Future collateral requirements may differ from the requirements at
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.
| (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 addition to amounts shown in the table, power and fuel contract counterparties may also institute new collateral requirements, applicable to future transactions to allow SCE to continue trading in power and fuel contracts at the time of a downgrade or upon significant increases in market prices. Furthermore, SCE may also be required to post up to $50 million in collateral in connection with its environmental remediation obligations, within 120 days of the end of the fiscal year in which the downgrade occurs.
| | | |
(in millions) |
| | |
Collateral posted as of March 31, 20231 | | $ | 356 |
Incremental collateral requirements for purchased power and fuel contracts resulting from a potential downgrade of SCE's credit rating to below investment grade2 | |
| 59 |
Incremental collateral requirements for SCE's financial hedging activities resulting from adverse market price movement3 | |
| 71 |
Posted and potential collateral requirements | | $ | 486 |
1 | Net collateral provided to counterparties and other brokers consisted of |
2 | Represents potential collateral requirements for accounts payable and mark-to-market valuation at March 31, 2023. Requirement varies throughout the period and is generally lower at the end of the month. |
3 | Incremental collateral requirements were based on potential changes in SCE's forward positions as of |
Edison International Parent and Other
In the next 12 months, Edison International expects to fund its net cash requirements through cash on hand, dividends from SCE, and capital market and bank financings. Edison International may finance its ongoing cash requirements, including dividends, working capital requirements, payment of obligations, and capital investments, including capital contributions to subsidiaries, with short-term or other financings, subject to availability in the bank and capital markets.
At March 31, 2023, Edison International Parent and Other had cash on hand of $146 million and $878 million available to borrow on its $1.5 billion revolving credit facility. The credit facility is available for borrowing needs until May 2026 and the aggregate maximum principal amount may be increased up to $2.0 billion, provided that additional lender commitments are obtained. For further information, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."
13
In March 2023, Edison International Parent issued $500 million of junior subordinated notes, due in 2053, which provide approximately $250 million of equity content as viewed by rating agencies. Edison International expects to raise any additional equity this year through its internal programs, which are estimated to generate approximately $100 million. The total expected equity content is consistent with the $300 million to $400 million of equity content identified in Edison International's 2023 financing plan.
Edison International Parent and Other's liquidity and its ability to pay operating expenses and pay dividends to preferred and common shareholders are dependent on access to the bank and capital markets, dividends from SCE, realization of tax benefits and accessits ability to bankmeet California law requirements for the declaration of dividends. Prior to declaring dividends, Edison International's Board of Directors evaluates available information to ensure that the California law requirements for the declarations are met. For information on the California law requirements on the declaration of dividends, see "Liquidity and capital markets.Capital Resources—SCE—SCE Dividends" in the 2022 Form 10-K. Edison International may also finance working capital requirements, paymentintends to maintain its target payout ratio of obligations, and capital investments, including capital contributions to subsidiaries, with commercial paper or other borrowings,45% – 55% of SCE's core earnings, subject to availability in the bankfactors identified above.
Edison International's ability to declare and capital markets.
Edison International Parent's credit facility requires a consolidated debt to total capitalization ratio as defined in the credit agreementapplicable agreements of less than or equal to 0.650.70 to 1. At September 30, 2017,March 31, 2023, Edison International Parent'sInternational's consolidated debt to total capitalization ratio was 0.470.64 to 1.
At September 30, 2017,March 31, 2023, Edison International Parent was also in compliance with all other financial covenants that affect access to capital.
In the first quarter of 2023, Moody's upgraded Edison International's credit rating from Baa3 to Baa2 and revised Edison International's rating outlook from positive to stable. In April 2023, Fitch upgraded Edison International's credit rating from BBB- to BBB and revised Edison International's rating outlook from positive to stable The following table summarizes Edison International Parent's current long-term issuer credit ratings and outlook from the major credit rating agencies:
| | | | | | |
| Moody's | Fitch | S&P | |||
Credit Rating | Baa2 | BBB | BBB | |||
Outlook | Stable | Stable | Stable |
Edison International Parent's credit ratings may be affected if, among other things, regulators fail to successfully implement AB 1054 in a consistent and credit supportive manner or the Wildfire Insurance Fund is depleted by claims from catastrophic wildfires. Credit rating downgrades increase the cost and may impact the availability of short-term and long-term borrowings, including commercial paper, credit facilities, note financings or other borrowings.
Edison International Income Taxes
Inflation Reduction Act of 2022
On August 16, 2022, the IRA was signed into law. The law imposes a 15% corporate alternative minimum tax ("CAMT") on adjusted financial statement income ("AFSI") of corporations with average AFSI exceeding $1 billion over a specified 3-year period. The CAMT was effective beginning January 1, 2023. Based on the current interpretation of the law and historical financial data, Edison International estimates that it will exceed the $1 billion threshold and be subject to CAMT on its consolidated Federal tax returns beginning in 2025. SCE expects to be subject to CAMT on its stand-alone Federal return beginning in 2024.
The law also includes significant extensions, expansions, and enhancements of numerous energy-related investment tax credits, as well as creating new credits applicable to electricity production which may apply to SCE's capital expenditures.
14
Under the IRA, SCE expects to generate investment tax credits related to its utility owned storage projects, which will accrue to the benefit of its customers.
Historical Cash Flows
| 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 | |||
SCE
| | | | | | | |
| | Three months ended March 31, | | ||||
(in millions) |
| 2023 |
| 2022 | | ||
Net cash (used in) provided by operating activities | | $ | (20) | | $ | 827 | |
Net cash provided by financing activities | |
| 1,249 | |
| 171 | |
Net cash used in investing activities | |
| (1,305) | |
| (1,159) | |
Net decrease in cash and cash equivalents | | $ | (76) | | $ | (161) | |
Net Cash (Used in) Provided by Operating Activities
The following table summarizes major categories of net cash provided byfor operating activities as provided in more detail in SCE's consolidated statements of cash flows for the ninethree months ended September 30, 2017March 31, 2023 and 2016.
| | | | | | | | | | |
| | Three months ended March 31, | | Change in cash flows | | |||||
(in millions) |
| 2023 |
| 2022 |
| 2023/2022 |
| |||
Net income |
| $ | 399 |
| $ | 173 |
| |
| |
Non-cash items1 | |
| 719 | |
| 611 |
| |
| |
Subtotal | |
| 1,118 | | | 784 |
| $ | 334 | |
Changes in cash flow resulting from working capital2 | |
| (725) | |
| 78 |
| | (803) | |
Regulatory assets and liabilities | |
| (296) | |
| 259 |
| | (555) | |
Wildfire related claims3 | | | (133) | | | (196) | | | 63 | |
Other noncurrent assets and liabilities4 | |
| 16 | |
| (98) |
| | 114 | |
Net cash (used in) provided by operating activities | | $ | (20) | | $ | 827 | | $ | (847) | |
| Nine months ended September 30, | Change in cash flows | ||||||||||
| (in millions) | 2017 | 2016 | 2017/2016 | ||||||||
| Net income | $ | 1,215 | $ | 1,140 | |||||||
Non-cash items1 | 1,853 | 1,597 | |||||||||
| Subtotal | $ | 3,068 | $ | 2,737 | $ | 331 | |||||
Changes in cash flow resulting from working capital2 | (553 | ) | (32 | ) | (521 | ) | |||||
| Derivative assets and liabilities | (24 | ) | 15 | (39 | ) | ||||||
| Regulatory assets and liabilities | 560 | 189 | 371 | ||||||||
Other noncurrent assets and liabilities3 | (258 | ) | (71 | ) | (187 | ) | |||||
| Net cash provided by operating activities | $ | 2,793 | $ | 2,838 | $ | (45 | ) | ||||
| 1 | |
| Non-cash items include depreciation and amortization, allowance for equity during construction, deferred income taxes, |
| 2 | |
| Changes in working capital items include receivables, accrued unbilled revenue, inventory, amortization of prepaid expenses, accounts payable, |
| 3 | 2023 amount represents payments of $221 million for 2017/2018 Wildfire/Mudslide Events and $7 million for Post-2018 Wildfires, partially offset by an increase in wildfire estimated losses of $96 million. 2022 amount represents payment of $717 million for 2017/2018 Wildfire/Mudslide Events, partially offset by an increase in wildfire estimated losses of $521 million. |
| 4 | Includes nuclear decommissioning trusts. See "Nuclear Decommissioning Activities" below for further information. 2022 amount also includes outflow from increase in wildfire insurance receivables of $96 million. |
Net cash (used in) provided by operating activities was impacted by the following:
Net income and non-cash items increased in 20172023 by $75$334 million primarily due to higher revenue in 2017 due to thefrom escalation mechanism set forth in the 20152021 GRC final decision, and lower operation and maintenance expenses, partially offset by reductionshigher net interest expense.
Net changes in CPUC revenue related to prior overcollectionscash resulting from working capital was an outflow of $725 million and higher financing costs.
15
$161 million (mainly due to $185 million of CAPP funds received in January 2022), and a net operating lossesdecrease in 2017.
Net cash (used in) provided by regulatory assets and liabilities, including changes in over (under) collections ofnet undercollections recorded in balancing accounts, was $560$(296) million and $189$259 million during the ninethree months ended September 30, 2017March 31, 2023 and 2016,2022, respectively. SCE has a number of balancing and memorandum accounts, which impact cash flows based on differences between timing of collection of amounts through rates and accrual expenditures. Cash flows were primarily impacted by the following:
2023
| ● | Decreased overcollections of $234 million for GHG revenue related to climate credits provided to customers, partially offset by GHG revenue related to GHG auction revenue received. |
| ● | Undercollections of wildfire related memorandum and balancing accounts increased by $106 million primarily due to additional wildfire risk mitigation and restoration costs incurred. |
| ● | Net undercollections of BRRBA increased by $26 million primarily due to lower sales volume in 2023, partially offset by recovery of prior year undercollections from various tracks of the 2021 GRC. |
| ● | Net undercollections for ERRA, PABA and NSGBA decreased by $14 million primarily due to recovery of prior PABA undercollections, partially offset by current year undercollections due to lower than forecast sale volume. |
2022
| ● | Net undercollections of BRRBA increased by $511 million primarily due to $401 million of expense authorized under GRC track 2 for collection in customer rates starting March 2022 over a 36-month period, and current year undercollections due to actual billed prices lower than forecast due to timing, partially offset by recovery of prior year undercollections, including 2021 GRC authorized additional revenue requirement for the first nine months of 2021 to be collected over a 27-month period starting October 2021. |
| ● | Undercollections decreased by $371 million related to wildfire risk mitigation memorandum and balancing accounts as a result of approval to recover costs in GRC track 2, which were transferred to BRRBA for recovery as mentioned above, partially offset by additional wildfire risk mitigation costs incurred. |
| ● | Net undercollections for ERRA, PABA and NSGBA decreased by $72 million primarily due to recovery of prior PABA and NSGBA undercollections, partially offset by current year undercollections due to delay in rate change and higher market exposure. |
| ● | Increased overcollections of $221 million for the public purpose and energy efficiency programs as a result of lower program spending due to timing. |
| ● | Increase in overcollection of $144 million for excess California Department of Water Resources ("DWR") bond and power charges to berefunded to customers over a 12-month period beginning in June 2022. |
16
Net Cash Used inProvided by Financing Activities
The following table summarizes cash provided by financing activities for the ninethree months ended September 30, 2017March 31, 2023 and 2016.2022. 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.Agreements."
| 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 | ) | |
| | | | | | | |
| | | Three months ended March 31, | | |||
(in millions) | | 2023 |
| 2022 | | ||
Issuances of long-term debt, including premium/discount and net of issuance costs | | $ | 1,186 | | $ | 1,713 | |
Long-term debt repaid |
| | (1) |
| | (365) | |
Short-term debt repaid | | | — | | | (518) | |
Commercial paper borrowing (repayment), net | | | 431 | | | (306) | |
Payment of common stock dividends to Edison International |
| | (350) |
| | (325) | |
Payment of preference stock dividends |
| | (29) |
| | (32) | |
Other |
| | 12 |
| | 4 | |
Net cash provided by financing activities | | $ | 1,249 | | $ | 171 | |
Net Cash Used in Investing Activities
Cash flows used in investing activities are primarily due to total capital expenditures related to transmission and distribution investments ($2.6of $1.3 billion and $2.7$1.2 billion for the ninethree months ended September 30, 2017March 31, 2023 and 2016, respectively). During the first nine months of 2017 and 2016,2022, respectively. In addition, SCE had a net redemption of nuclear decommissioning trust investments of $117$19 million and $159$34 million during the three months ended March 31, 2023 and 2022, 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 statementconsolidated statements of cash flows includesinclude nuclear decommissioning activities, which are reflected in the following line items:
| Nine months ended September 30, | |||||||
| (in millions) | 2017 | 2016 | |||||
Net cash used in operating activities: Net earnings from nuclear decommissioning trust investments | $ | 47 | $ | 33 | |||
| SCE's decommissioning costs | (170 | ) | (125 | ) | |||
Net cash provided by investing activities: Proceeds from sale of investments | 3,974 | 2,075 | |||||
| Purchases of investments | (3,857 | ) | (1,916 | ) | |||
| Net cash impact | $ | (6 | ) | $ | 67 | ||
| | | | | | | |
|
| Three months ended March 31, | | ||||
(in millions) |
| 2023 |
| 2022 | | ||
Net cash used in operating activities: | | | | | | | |
Net earnings from nuclear decommissioning trust investments | | $ | 21 | | $ | 19 | |
SCE's decommissioning costs |
| | (57) |
| | (35) |
|
Net cash provided by investing activities: |
| | |
| | |
|
Proceeds from sale of investments | | | 951 | | | 867 | |
Purchases of investments |
| | (932) |
| | (833) |
|
Net cash (outflow) inflow | | $ | (17) | | $ | 18 | |
Net cash used in operating activities relaterelates to interest and dividends less administrative expenses, taxes and SCE's decommissioning costs. See "Notes to Consolidated Financial Statements—Note 9. Investments" for further information. 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 ($17057 million and $125$35 million in 20172023 and 2016,2022, respectively) and reimbursements to SCE from the nuclear decommissioning trust ($16440 million and $192$53 million in 20172023 and 2016,2022 respectively). The 2016 net cash impact included reimbursements for 2016 and a portion of 2015, 2014, and 2013 decommissioning costs.
The table below sets forth condensed historical cash flow from operations for Edison International Parent and Other.Other, including intercompany eliminations.
17
| Nine months ended September 30, | ||||||||||||||
| | | | | | | | |||||||
| | Three months ended March 31, | | |||||||||||
| (in millions) | 2017 | 2016 |
| 2023 |
| 2022 | | |||||||
| Net cash used in operating activities | $ | (103 | ) | $ | (336 | ) | | $ | (70) | | $ | (35) | | |
| Net cash provided by financing activities | 163 | 280 |
| | 67 |
| | 34 |
| |||||
| Net cash used in investing activities | (61 | ) | (34 | ) | ||||||||||
| Net decrease in cash and cash equivalents | $ | (1 | ) | $ | (90 | ) | ||||||||
Net cash provided by investing activities |
| | — |
| | 2 |
| |||||||
Net (decrease) increase in cash, cash equivalents and restricted cash | | $ | (3) | | $ | 1 | | |||||||
Net Cash Used in Operating Activities
Net cash used in operating activities was impacted by the following:
| ● | $70 million and $35 million cash outflow from operating activities in 2023 and 2022, respectively, primarily due to payments relating to interest and operating costs. The 2022 amount is partially offset by $18 million income tax refund received from the California Franchise Tax Board. |
Net Cash Provided by Financing Activities
Net cash provided by financing activities was as follows:
| Nine months ended September 30, | |||||||
| (in millions) | 2017 | 2016 | |||||
| Dividends paid to Edison International common shareholders | $ | (530 | ) | $ | (469 | ) | |
| Dividends received from SCE | 382 | 510 | |||||
| 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 | |||||
| Long-term debt repayment | (401 | ) | (2 | ) | |||
| Short-term debt borrowings, net of (repayments) and discount | 40 | (129 | ) | ||||
| Other | 10 | (2 | ) | ||||
| Net cash provided by financing activities | $ | 163 | $ | 280 | |||
| | | | | | | |
| | Three months ended March 31, | | ||||
(in millions) |
| 2023 |
| 2022 | | ||
Dividends paid to Edison International common shareholders | | $ | (277) | | $ | (262) | |
Dividends paid to Edison International preferred shareholders | | | (52) | | | (46) | |
Dividends received from SCE |
| | 350 |
| | 325 |
|
Long-term debt issuance, net of discount and issuance costs |
| | 495 |
| | — |
|
Long-term debt repayments |
| | (400) |
| | — |
|
Repayments of term loan |
| | (600) |
| | — |
|
Commercial paper financing, net |
| | 529 |
| | — |
|
Other |
| | 22 |
| | 17 |
|
Net cash provided by financing activities | | $ | 67 | | $ | 34 | |
Edison International's and other legal matters, whichSCE's contingencies are discussed in "Notes to Consolidated Financial Statements—Note 11.12. Commitments and Contingencies—Contingencies."
Edison International's and SCE's primary market risks are described in the 20162022 Form 10-K.10-K, and there have been no material changes for the three months ended March 31, 2023. For a further discussion of market risk exposures, including commodity price risk credit risk, and interest ratecredit risk, see "Notes to Consolidated Financial Statements—Note 4. Fair Value Measurements" and "—Note 6. Derivative Instruments."
| September 30, 2017 | |||||||||||
| (in millions) | Exposure2 | Collateral | Net Exposure | ||||||||
S&P Credit Rating1 | |||||||||||
| A or higher | $ | 38 | $ | — | $ | 38 | |||||
CRITICAL ACCOUNTING ESTIMATES AND POLICIES
For a complete discussion onof Edison International's and SCE's critical accounting policies, see "Critical Accounting Estimates and Policies" in the year-ended 20162022 MD&A.
There have been no material changes in recently issued or adopted accounting guidance is discussedstandards from those disclosed in "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—New Accounting Guidance."Guidance" in the 2022 Form 10-K.
18
Information responding to this section is included in the MD&A under the heading "Market Risk Exposures" and is incorporated herein by reference.
19
FINANCIAL STATEMENTS
Consolidated Statements of Income | Edison International |
| | | | | | |
| | Three months ended | ||||
| | March 31, | ||||
(in millions, except per-share amounts, unaudited) |
| 2023 |
| 2022 | ||
Operating revenue | | $ | 3,966 | | $ | 3,968 |
Purchased power and fuel | |
| 1,318 | |
| 1,037 |
Operation and maintenance | |
| 1,084 | |
| 1,487 |
Wildfire-related claims, net of insurance recoveries | |
| 96 | |
| 425 |
Wildfire Insurance Fund expense | |
| 52 | |
| 53 |
Depreciation and amortization | |
| 656 | |
| 583 |
Property and other taxes | |
| 140 | |
| 126 |
Other operating income | |
| — | |
| (2) |
Total operating expenses | |
| 3,346 | |
| 3,709 |
Operating income | |
| 620 | |
| 259 |
Interest expense | |
| (361) | |
| (246) |
Other income | |
| 119 | |
| 68 |
Income before income taxes | |
| 378 | |
| 81 |
Income tax expense (benefit) | |
| 13 | |
| (55) |
Net income | |
| 365 | |
| 136 |
Less: Preference stock dividend requirements of SCE | |
| 29 | |
| 26 |
Less: Preferred stock dividend requirement of Edison International | | | 26 | | | 26 |
Net income attributable to Edison International common shareholders | | $ | 310 | | $ | 84 |
Basic earnings per share: | |
|
| |
|
|
Weighted average shares of common stock outstanding | |
| 383 | |
| 381 |
Basic earnings per common share attributable to Edison International common shareholders | | $ | 0.81 | | $ | 0.22 |
Diluted earnings per share: | |
|
| |
|
|
Weighted average shares of common stock outstanding, including effect of dilutive securities | |
| 384 | |
| 382 |
Diluted earnings per common share attributable to Edison International common shareholders | | $ | 0.81 | | $ | 0.22 |
| 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 | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
20
| |
Consolidated Statements of Comprehensive Income | Edison International |
| | | | | | |
| | | Three months ended | |||
| | March 31, | ||||
(in millions, unaudited) |
| 2023 |
| 2022 | ||
Net income | | $ | 365 | | $ | 136 |
Other comprehensive income, net of tax: | |
|
| |
|
|
Pension and postretirement benefits other than pensions | |
| — | |
| 2 |
Foreign currency translation adjustments | | | 2 | | | — |
Other comprehensive income, net of tax | |
| 2 | |
| 2 |
Comprehensive income | |
| 367 | |
| 138 |
Less: Comprehensive income attributable to noncontrolling interests | |
| 29 | |
| 26 |
Comprehensive income attributable to Edison International | | $ | 338 | | $ | 112 |
| Consolidated Statements of Comprehensive Income | Edison International | |||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| (in millions, unaudited) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Net income | $ | 501 | $ | 451 | $ | 1,202 | $ | 1,065 | ||||||||
| 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 | ||||||||||||
| Other | (2 | ) | — | — | — | |||||||||||
| Other comprehensive income, net of tax | — | 2 | 5 | 5 | ||||||||||||
| Comprehensive income | 501 | 453 | 1,207 | 1,070 | ||||||||||||
| Less: Comprehensive income attributable to noncontrolling interests | 31 | 30 | 92 | 83 | ||||||||||||
| Comprehensive income attributable to Edison International | $ | 470 | $ | 423 | $ | 1,115 | $ | 987 | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
21
| |
Consolidated Balance Sheets | Edison International |
| | | | | | |
| | March 31, | | December 31, | ||
(in millions, unaudited) |
| 2023 |
| 2022 | ||
ASSETS |
| |
|
| |
|
Cash and cash equivalents | | $ | 836 | | $ | 914 |
Receivables, less allowances of $323 and $347 for uncollectible accounts at respective dates | |
| 1,451 | |
| 1,695 |
Accrued unbilled revenue | |
| 766 | |
| 641 |
Inventory | |
| 500 | |
| 474 |
Prepaid expenses | |
| 311 | |
| 248 |
Regulatory assets | |
| 2,817 | |
| 2,497 |
Wildfire Insurance Fund contributions | |
| 204 | |
| 204 |
Other current assets | |
| 325 | |
| 397 |
Total current assets | |
| 7,210 | |
| 7,070 |
Nuclear decommissioning trusts | |
| 4,093 | |
| 3,948 |
Marketable securities | | | 2 | | | 5 |
Other investments | |
| 62 | |
| 50 |
Total investments | |
| 4,157 | |
| 4,003 |
Utility property, plant and equipment, less accumulated depreciation and amortization of $12,505 and $12,260 at respective dates | |
| 53,955 | |
| 53,274 |
Nonutility property, plant and equipment, less accumulated depreciation of $108 and $106 at respective dates | |
| 215 | |
| 212 |
Total property, plant and equipment | |
| 54,170 | |
| 53,486 |
Regulatory assets (include $827 and $834 related to Variable Interest Entities "VIEs" at respective dates) | |
| 8,151 | |
| 8,181 |
Wildfire Insurance Fund contributions | |
| 2,104 | |
| 2,155 |
Operating lease right-of-use assets | |
| 1,346 | |
| 1,442 |
Long-term insurance receivables | | | 458 | | | 465 |
Other long-term assets | |
| 1,258 | |
| 1,239 |
Total long-term assets | |
| 13,317 | |
| 13,482 |
Total assets | | $ | 78,854 | | $ | 78,041 |
| Consolidated Balance Sheets | Edison International | ||||||
| (in millions, unaudited) | September 30, 2017 | December 31, 2016 | |||||
| ASSETS | |||||||
| Cash and cash equivalents | $ | 117 | $ | 96 | |||
| Receivables, less allowances of $55 and $62 for uncollectible accounts at respective dates | 1,105 | 714 | |||||
| Accrued unbilled revenue | 352 | 370 | |||||
| Inventory | 229 | 239 | |||||
| Prepaid taxes | 179 | 1 | |||||
| Derivative assets | 36 | 73 | |||||
| Regulatory assets | 445 | 350 | |||||
| Other current assets | 295 | 280 | |||||
| Total current assets | 2,758 | 2,123 | |||||
| Nuclear decommissioning trusts | 4,415 | 4,242 | |||||
| Other investments | 72 | 83 | |||||
| Total investments | 4,487 | 4,325 | |||||
| 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 | |||||
| Total property, plant and equipment | 37,961 | 37,000 | |||||
| Regulatory assets | 8,028 | 7,455 | |||||
| Other long-term assets | 358 | 416 | |||||
| Total long-term assets | 8,386 | 7,871 | |||||
| Total assets | $ | 53,592 | $ | 51,319 | |||
The accompanying notes are an integral part of these consolidated financial statements.
22
| Consolidated Balance Sheets | Edison International | ||||||
| (in millions, except share amounts, unaudited) | September 30, 2017 | December 31, 2016 | |||||
| LIABILITIES AND EQUITY | |||||||
| Short-term debt | $ | 908 | $ | 1,307 | |||
| Current portion of long-term debt | 583 | 981 | |||||
| Accounts payable | 1,104 | 1,342 | |||||
| Accrued taxes | 90 | 50 | |||||
| Customer deposits | 276 | 269 | |||||
| Derivative liabilities | 3 | 216 | |||||
| Regulatory liabilities | 1,281 | 756 | |||||
| Other current liabilities | 1,164 | 991 | |||||
| Total current liabilities | 5,409 | 5,912 | |||||
| Long-term debt | 11,638 | 10,175 | |||||
| Deferred income taxes and credits | 9,141 | 8,327 | |||||
| Derivative liabilities | — | 941 | |||||
| Pensions and benefits | 1,378 | 1,354 | |||||
| Asset retirement obligations | 2,682 | 2,590 | |||||
| Regulatory liabilities | 5,858 | 5,726 | |||||
| Other deferred credits and other long-term liabilities | 2,863 | 2,102 | |||||
| Total deferred credits and other liabilities | 21,922 | 21,040 | |||||
| Total liabilities | 38,969 | 37,127 | |||||
| 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 | |||||
| Accumulated other comprehensive loss | (48 | ) | (53 | ) | |||
| Retained earnings | 9,944 | 9,544 | |||||
| Total Edison International's common shareholders' equity | 12,416 | 11,996 | |||||
Noncontrolling interests – preferred and preference stock of SCE | 2,194 | 2,191 | |||||
| Total equity | 14,610 | 14,187 | |||||
| Total liabilities and equity | $ | 53,592 | $ | 51,319 | |||
| |
Consolidated Balance Sheets | Edison International |
| | | | | | |
| | March 31, | | December 31, | ||
(in millions, except share amounts, unaudited) |
| 2023 |
| 2022 | ||
LIABILITIES AND EQUITY |
| |
|
| |
|
Short-term debt | | $ | 1,645 | | $ | 2,015 |
Current portion of long-term debt | |
| 2,214 | |
| 2,614 |
Accounts payable | |
| 1,795 | |
| 2,359 |
Wildfire-related claims | | | 75 | | | 121 |
Customer deposits | |
| 172 | |
| 167 |
Regulatory liabilities | |
| 425 | |
| 964 |
Current portion of operating lease liabilities | |
| 420 | |
| 506 |
Other current liabilities | |
| 1,620 | |
| 1,601 |
Total current liabilities | |
| 8,366 | |
| 10,347 |
Long-term debt (include $809 related to VIEs at both dates) | |
| 29,442 | |
| 27,025 |
Deferred income taxes and credits | |
| 6,280 | |
| 6,149 |
Pensions and benefits | |
| 413 | |
| 422 |
Asset retirement obligations | |
| 2,733 | |
| 2,754 |
Regulatory liabilities | |
| 8,555 | |
| 8,211 |
Operating lease liabilities | |
| 926 | |
| 936 |
Wildfire-related claims | |
| 1,600 | |
| 1,687 |
Other deferred credits and other long-term liabilities | |
| 2,990 | |
| 2,988 |
Total deferred credits and other liabilities | |
| 23,497 | |
| 23,147 |
Total liabilities | |
| 61,305 | |
| 60,519 |
Commitments and contingencies (Note 12) | |
|
| |
|
|
Preferred stock (50,000,000 shares authorized; 1,250,000 shares of Series A and 750,000 shares of Series B issued and outstanding at respective dates) | | | 1,978 | | | 1,978 |
Common stock, no par value (800,000,000 shares authorized; 382,659,081 and 382,208,498 shares issued and outstanding at respective dates) | |
| 6,223 | |
| 6,200 |
Accumulated other comprehensive loss | |
| (9) | |
| (11) |
Retained earnings | |
| 7,456 | |
| 7,454 |
Total Edison International's shareholders' equity | |
| 15,648 | |
| 15,621 |
Noncontrolling interests – preference stock of SCE | |
| 1,901 | |
| 1,901 |
Total equity | |
| 17,549 | |
| 17,522 |
Total liabilities and equity | | $ | 78,854 | | $ | 78,041 |
The accompanying notes are an integral part of these consolidated financial statements.
23
| |
Consolidated Statements of Cash Flows | Edison International |
| | | | | | |
| | Three months ended March 31, | ||||
(in millions, unaudited) |
| 2023 |
| 2022 | ||
Cash flows from operating activities: |
| |
|
| |
|
Net income | | $ | 365 | | $ | 136 |
Adjustments to reconcile to net cash provided by operating activities: | |
| | |
| |
Depreciation and amortization | |
| 676 | |
| 624 |
Allowance for equity during construction | |
| (36) | |
| (30) |
Deferred income taxes | |
| 12 | |
| (55) |
Wildfire Insurance Fund amortization expense | |
| 52 | |
| 53 |
Other | |
| 8 | |
| 11 |
Nuclear decommissioning trusts | |
| (19) | |
| (34) |
Changes in operating assets and liabilities: | |
| | |
|
|
Receivables | |
| 227 | |
| 130 |
Inventory | |
| (29) | |
| (14) |
Accounts payable | |
| (508) | |
| (84) |
Tax receivables and payables | |
| (9) | |
| 54 |
Other current assets and liabilities | |
| (329) | |
| (30) |
Derivative assets and liabilities, net | | | (99) | | | 35 |
Regulatory assets and liabilities, net | |
| (296) | |
| 259 |
Wildfire-related insurance receivable | |
| — | |
| (96) |
Wildfire-related claims | |
| (133) | |
| (196) |
Other noncurrent assets and liabilities | |
| 28 | |
| 29 |
Net cash (used in) provided by operating activities | |
| (90) | |
| 792 |
Cash flows from financing activities: | |
|
| |
|
|
Long-term debt issued, net of discount and issuance costs of $19 and $20 for the respective periods | |
| 1,681 | |
| 1,713 |
Long-term debt repaid | |
| (401) | |
| (365) |
Short-term debt repaid | |
| (600) | |
| (518) |
Common stock issued | |
| 10 | |
| 4 |
Commercial paper borrowing (repayments), net | |
| 960 | |
| (306) |
Dividends and distribution to noncontrolling interests | |
| (29) | |
| (32) |
Common stock dividends paid | |
| (277) | |
| (262) |
Preferred stock dividends paid | | | (52) | | | (46) |
Other | |
| 24 | |
| 17 |
Net cash provided by financing activities | |
| 1,316 | |
| 205 |
Cash flows from investing activities: | |
|
| |
|
|
Capital expenditures | |
| (1,324) | |
| (1,207) |
Proceeds from sale of nuclear decommissioning trust investments | |
| 951 | |
| 867 |
Purchases of nuclear decommissioning trust investments | |
| (932) | |
| (833) |
Other | |
| — | |
| 16 |
Net cash used in investing activities | |
| (1,305) | |
| (1,157) |
Net decrease in cash, cash equivalents and restricted cash | |
| (79) | |
| (160) |
Cash, cash equivalents and restricted cash at beginning of period | |
| 917 | |
| 394 |
Cash, cash equivalents and restricted cash at end of period | | $ | 838 | | $ | 234 |
| Consolidated Statements of Cash Flows | Edison International | ||||||
| Nine months ended September 30, | |||||||
| (in millions, unaudited) | 2017 | 2016 | |||||
| Cash flows from operating activities: | |||||||
| Net income | $ | 1,202 | $ | 1,065 | |||
| Less: loss from discontinued operations | — | (1 | ) | ||||
| Income from continuing operations | 1,202 | 1,066 | |||||
| Adjustments to reconcile to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 1,591 | 1,575 | |||||
| Allowance for equity during construction | (65 | ) | (58 | ) | |||
| Impairment charges | 22 | — | |||||
| Deferred income taxes and investment tax credits | 77 | 114 | |||||
| Other | 8 | 17 | |||||
| Nuclear decommissioning trusts | (117 | ) | (159 | ) | |||
| EME settlement payments, net of insurance proceeds | — | (209 | ) | ||||
| Changes in operating assets and liabilities: | |||||||
| Receivables | (387 | ) | (235 | ) | |||
| Inventory | 10 | (43 | ) | ||||
| Accounts payable | (11 | ) | 151 | ||||
| Prepaid and accrued taxes | (128 | ) | 56 | ||||
| Other current assets and liabilities | (17 | ) | (68 | ) | |||
| Derivative assets and liabilities | (24 | ) | 15 | ||||
| Regulatory assets and liabilities | 560 | 189 | |||||
| Other noncurrent assets and liabilities | (31 | ) | 91 | ||||
| Net cash provided by operating activities | 2,690 | 2,502 | |||||
| Cash flows from financing activities: | |||||||
| Long-term debt issued or remarketed, net of premium, discount and issuance costs of $1 and $(3) for respective periods | 2,236 | 397 | |||||
| Long-term debt matured or repurchased | (1,182 | ) | (83 | ) | |||
| Preference stock issued, net | 463 | 294 | |||||
| Preference stock redeemed | (475 | ) | (125 | ) | |||
| Short-term debt financing, net | (401 | ) | 60 | ||||
| Payments for stock-based compensation | (365 | ) | (175 | ) | |||
| Receipt from stock option exercises | 201 | 102 | |||||
| Dividends to noncontrolling interests | (100 | ) | (98 | ) | |||
| Dividends paid | (530 | ) | (469 | ) | |||
| Other | (23 | ) | (5 | ) | |||
| Net cash used in financing activities | (176 | ) | (102 | ) | |||
| Cash flows from investing activities: | |||||||
| Capital expenditures | (2,660 | ) | (2,773 | ) | |||
| Proceeds from sale of nuclear decommissioning trust investments | 3,974 | 2,075 | |||||
| Purchases of nuclear decommissioning trust investments | (3,857 | ) | (1,916 | ) | |||
| Life insurance policy loan proceeds | 26 | 140 | |||||
| Other | 24 | (3 | ) | ||||
| Net cash used in investing activities | (2,493 | ) | (2,477 | ) | |||
| Net increase (decrease) in cash and cash equivalents | 21 | (77 | ) | ||||
| Cash and cash equivalents at beginning of period | 96 | 161 | |||||
| Cash and cash equivalents at end of period | $ | 117 | $ | 84 | |||
The accompanying notes are an integral part of these consolidated financial statements.
24
| Consolidated Statements of Income | Southern California Edison Company | |||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| (in millions, unaudited) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Operating revenue | $ | 3,652 | $ | 3,752 | $ | 9,061 | $ | 8,956 | ||||||||
| Purchased power and fuel | 1,783 | 1,719 | 3,742 | 3,576 | ||||||||||||
| Operation and maintenance | 681 | 702 | 1,918 | 1,993 | ||||||||||||
| Depreciation and amortization | 521 | 519 | 1,528 | 1,497 | ||||||||||||
| Property and other taxes | 97 | 91 | 279 | 268 | ||||||||||||
| Other operating income | (8 | ) | — | (8 | ) | — | ||||||||||
| Total operating expenses | 3,074 | 3,031 | 7,459 | 7,334 | ||||||||||||
| Operating income | 578 | 721 | 1,602 | 1,622 | ||||||||||||
| Interest and other income | 42 | 32 | 111 | 97 | ||||||||||||
| Interest expense | (149 | ) | (137 | ) | (436 | ) | (402 | ) | ||||||||
| Other expenses | (9 | ) | (9 | ) | (28 | ) | (26 | ) | ||||||||
| Income before income taxes | 462 | 607 | 1,249 | 1,291 | ||||||||||||
| Income tax (benefit) expense | (35 | ) | 141 | 34 | 151 | |||||||||||
| Net income | 497 | 466 | 1,215 | 1,140 | ||||||||||||
| Less: Preferred and preference stock dividend requirements | 32 | 31 | 94 | 92 | ||||||||||||
| Net income available for common stock | $ | 465 | $ | 435 | $ | 1,121 | $ | 1,048 | ||||||||
| |
Consolidated Statements of Income | Southern California Edison Company |
| | | | | | |
| | Three months ended | ||||
| | March 31, | ||||
(in millions, unaudited) |
| 2023 |
| 2022 | ||
Operating revenue | | $ | 3,950 | | $ | 3,961 |
Purchased power and fuel | |
| 1,318 | |
| 1,037 |
Operation and maintenance | |
| 1,081 | |
| 1,466 |
Wildfire-related claims, net of insurance recoveries | |
| 96 | |
| 425 |
Wildfire Insurance Fund expense | |
| 52 | |
| 53 |
Depreciation and amortization | |
| 656 | |
| 583 |
Property and other taxes | |
| 139 | |
| 124 |
Other operating income | |
| — | |
| (2) |
Total operating expenses | |
| 3,342 | |
| 3,686 |
Operating income | |
| 608 | |
| 275 |
Interest expense | |
| (300) | |
| (213) |
Other income | |
| 120 | |
| 71 |
Income before income taxes | |
| 428 | |
| 133 |
Income tax expense (benefit) | |
| 29 | |
| (40) |
Net income | |
| 399 | |
| 173 |
Less: Preference stock dividend requirements | |
| 29 | |
| 26 |
Net income available for common stock | | $ | 370 | | $ | 147 |
| |
Consolidated Statements of Comprehensive Income | Southern California Edison Company |
| | | | | | |
| | | Three months ended | |||
| | March 31, | ||||
(in millions, unaudited) |
| 2023 |
| 2022 | ||
Net income | | $ | 399 | | $ | 173 |
Other comprehensive income, net of tax: | |
|
| |
|
|
Pension and postretirement benefits other than pensions | |
| — | |
| 1 |
Other comprehensive income, net of tax | |
| — | |
| 1 |
Comprehensive income | | $ | 399 | | $ | 174 |
| Consolidated Statements of Comprehensive Income | Southern California Edison Company | ||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
| (in millions, unaudited) | 2017 | 2016 | 2017 | 2016 | |||||||||||
| Net income | $ | 497 | $ | 466 | $ | 1,215 | $ | 1,140 | |||||||
| Other comprehensive income, net of tax: | |||||||||||||||
| Pension and postretirement benefits other than pensions: | |||||||||||||||
| Amortization of net loss included in net income | — | 1 | 2 | 3 | |||||||||||
| Other comprehensive income, net of tax | — | 1 | 2 | 3 | |||||||||||
| Comprehensive income | $ | 497 | $ | 467 | $ | 1,217 | $ | 1,143 | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
25
Consolidated Balance Sheets | Southern California Edison Company |
| | | | | | |
| | March 31, | | December 31, | ||
(in millions, unaudited) |
| 2023 |
| 2022 | ||
ASSETS |
| |
|
| |
|
Cash and cash equivalents | | $ | 690 | | $ | 766 |
Receivables, less allowances of $323 and $347 for uncollectible accounts at respective dates | |
| 1,427 | |
| 1,675 |
Accrued unbilled revenue | |
| 766 | |
| 638 |
Inventory | |
| 500 | |
| 474 |
Prepaid expenses | |
| 333 | |
| 292 |
Regulatory assets | |
| 2,817 | |
| 2,497 |
Wildfire Insurance Fund contributions | |
| 204 | |
| 204 |
Other current assets | |
| 315 | |
| 384 |
Total current assets | |
| 7,052 | |
| 6,930 |
Nuclear decommissioning trusts | |
| 4,093 | |
| 3,948 |
Other investments | |
| 47 | |
| 36 |
Total investments | |
| 4,140 | |
| 3,984 |
Utility property, plant and equipment, less accumulated depreciation and amortization of $12,505 and $12,260 at respective dates | |
| 53,955 | |
| 53,274 |
Nonutility property, plant and equipment, less accumulated depreciation of $95 and $94 at respective dates | |
| 209 | |
| 206 |
Total property, plant and equipment | |
| 54,164 | |
| 53,480 |
Regulatory assets (include $827 and $834 related to VIEs at respective dates) | |
| 8,151 | |
| 8,181 |
Wildfire Insurance Fund contributions | |
| 2,104 | |
| 2,155 |
Operating lease right-of-use assets | |
| 1,337 | |
| 1,433 |
Long-term insurance receivables | | | 133 | | | 139 |
Long-term insurance receivables due from affiliate | |
| 334 | |
| 334 |
Other long-term assets | |
| 1,188 | |
| 1,171 |
Total long-term assets | |
| 13,247 | |
| 13,413 |
Total assets | | $ | 78,603 | | $ | 77,807 |
| (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 | |||
The accompanying notes are an integral part of these consolidated financial statements.
26
Consolidated Balance Sheets | Southern California Edison Company |
| | | | | | |
| | March 31, | | December 31, | ||
(in millions, except share amounts, unaudited) |
| 2023 |
| 2022 | ||
LIABILITIES AND EQUITY |
| |
|
| |
|
Short-term debt | | $ | 626 | | $ | 925 |
Current portion of long-term debt | |
| 2,214 | |
| 2,214 |
Accounts payable | |
| 1,790 | |
| 2,351 |
Wildfire-related claims | | | 75 | | | 121 |
Customer deposits | |
| 172 | |
| 167 |
Regulatory liabilities | |
| 425 | |
| 964 |
Current portion of operating lease liabilities | |
| 419 | |
| 505 |
Other current liabilities | |
| 1,592 | |
| 1,578 |
Total current liabilities | |
| 7,313 | |
| 8,825 |
Long-term debt (include $809 related to VIEs at both dates) | |
| 25,965 | |
| 24,044 |
Deferred income taxes and credits | |
| 7,693 | |
| 7,545 |
Pensions and benefits | |
| 103 | |
| 105 |
Asset retirement obligations | |
| 2,733 | |
| 2,754 |
Regulatory liabilities | |
| 8,555 | |
| 8,211 |
Operating lease liabilities | |
| 918 | |
| 928 |
Wildfire-related claims | |
| 1,600 | |
| 1,687 |
Other deferred credits and other long-term liabilities | |
| 2,916 | |
| 2,919 |
Total deferred credits and other liabilities | |
| 24,518 | |
| 24,149 |
Total liabilities | |
| 57,796 | |
| 57,018 |
Commitments and contingencies (Note 12) | |
|
| |
|
|
Preference stock | |
| 1,945 | |
| 1,945 |
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 | |
| 8,438 | |
| 8,441 |
Accumulated other comprehensive loss | |
| (8) | |
| (8) |
Retained earnings | |
| 8,264 | |
| 8,243 |
Total equity | |
| 20,807 | |
| 20,789 |
Total liabilities and equity | | $ | 78,603 | | $ | 77,807 |
| (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.
27
Consolidated Statements of Cash Flows | Southern California Edison Company |
| | | | | | |
| | Three months ended March 31, | ||||
(in millions, unaudited) |
| 2023 |
| 2022 | ||
Cash flows from operating activities: |
| |
|
| |
|
Net income | | $ | 399 | | $ | 173 |
Adjustments to reconcile to net cash provided by operating activities: | |
| | |
| |
Depreciation and amortization | |
| 673 | |
| 622 |
Allowance for equity during construction | |
| (36) | |
| (30) |
Deferred income taxes | |
| 28 | |
| (40) |
Wildfire Insurance Fund amortization expense | |
| 52 | |
| 53 |
Other | |
| 2 | |
| 6 |
Nuclear decommissioning trusts | |
| (19) | |
| (34) |
Changes in operating assets and liabilities: | |
| | |
| |
Receivables | |
| 235 | |
| 130 |
Inventory | |
| (29) | |
| (14) |
Accounts payable | |
| (505) | |
| (79) |
Tax receivables and payables | |
| (9) | |
| 36 |
Other current assets and liabilities | |
| (318) | |
| (30) |
Derivative assets and liabilities, net | | | (99) | | | 35 |
Regulatory assets and liabilities, net | |
| (296) | |
| 259 |
Wildfire-related insurance receivable | |
| — | |
| (96) |
Wildfire-related claims | |
| (133) | |
| (196) |
Other noncurrent assets and liabilities | |
| 35 | |
| 32 |
Net cash (used in) provided by operating activities | |
| (20) | |
| 827 |
Cash flows from financing activities: | |
|
| |
|
|
Long-term debt issued, net of discount and issuance costs of $14 and $20 for the respective periods | |
| 1,186 | |
| 1,713 |
Long-term debt repaid | | | (1) | | | (365) |
Short-term debt repaid | |
| — | |
| (518) |
Commercial paper borrowing (repayment), net | |
| 431 | |
| (306) |
Common stock dividends paid | | | (350) | | | (325) |
Preference stock dividends paid | |
| (29) | |
| (32) |
Other | |
| 12 | |
| 4 |
Net cash provided by financing activities | |
| 1,249 | |
| 171 |
Cash flows from investing activities: | |
|
| |
|
|
Capital expenditures | |
| (1,324) | |
| (1,207) |
Proceeds from sale of nuclear decommissioning trust investments | |
| 951 | |
| 867 |
Purchases of nuclear decommissioning trust investments | |
| (932) | |
| (833) |
Other | |
| — | |
| 14 |
Net cash used in investing activities | |
| (1,305) | |
| (1,159) |
Net decrease in cash and cash equivalents | |
| (76) | |
| (161) |
Cash and cash equivalents at beginning of period | |
| 766 | |
| 280 |
Cash and cash equivalents at end of period | | $ | 690 | | $ | 119 |
| Nine months ended September 30, | |||||||
| (in millions, unaudited) | 2017 | 2016 | |||||
| Cash flows from operating activities: | |||||||
| Net income | $ | 1,215 | $ | 1,140 | |||
| Adjustments to reconcile to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 1,581 | 1,564 | |||||
| Allowance for equity during construction | (65 | ) | (58 | ) | |||
| Deferred income taxes and investment tax credits | 337 | 84 | |||||
| Other | — | 7 | |||||
| Nuclear decommissioning trusts | (117 | ) | (159 | ) | |||
| Changes in operating assets and liabilities: | |||||||
| Receivables | (389 | ) | (256 | ) | |||
| Inventory | 11 | 5 | |||||
| Accounts payable | (16 | ) | 152 | ||||
| Prepaid and accrued taxes | (146 | ) | 111 | ||||
| Other current assets and liabilities | (13 | ) | (44 | ) | |||
| Derivative assets and liabilities | (24 | ) | 15 | ||||
| Regulatory assets and liabilities | 560 | 189 | |||||
| Other noncurrent assets and liabilities | (141 | ) | 88 | ||||
| Net cash provided by operating activities | 2,793 | 2,838 | |||||
| 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 | ) | |||
| Short-term debt financing, net | (441 | ) | 189 | ||||
| Payments for stock-based compensation | (80 | ) | (121 | ) | |||
| Receipt from stock option exercises | 45 | 73 | |||||
| Dividends paid | (481 | ) | (607 | ) | |||
| Other | (34 | ) | (4 | ) | |||
| Net cash used in financing activities | (339 | ) | (382 | ) | |||
| Cash flows from investing activities: | |||||||
| Capital expenditures | (2,596 | ) | (2,747 | ) | |||
| Proceeds from sale of nuclear decommissioning trust investments | 3,974 | 2,075 | |||||
| Purchases of nuclear decommissioning trust investments | (3,857 | ) | (1,916 | ) | |||
| Life insurance policy loan proceeds | 26 | 140 | |||||
| Other | 21 | 5 | |||||
| Net cash used in investing activities | (2,432 | ) | (2,443 | ) | |||
| 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 | |||
The accompanying notes are an integral part of these consolidated financial statements.
28
(Unaudited)
Note 1.Summary of Significant Accounting Policies
Organization and Basis of Presentation
Edison International is the ultimate parent holding company of Southern California Edison Company ("SCE") and Edison Energy, LLC ("Edison Energy Group"). 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 southernSouthern California. Edison International is also the parent company of Edison Energy Group Inc.,is an indirect wholly-owned subsidiary of Edison International and a holding company for subsidiariesEdison Energy, LLC ("Edison Energy") which is engaged in pursuingthe competitive business opportunities acrossof providing decarbonization and energy services, managed portfolio solutions and distributed solar solutions forto commercial, institutional and industrial customers. Suchcustomers in North America and Europe. 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 OtherOther" 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.subsidiaries and a variable interest entity, SCE Recovery Funding LLC., of which SCE is the primary beneficiary. 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 ofthe "Notes to Consolidated Financial Statements" included in Edison International's and SCE's combined Annual Report on Form 10-K for the year-endedyear ended December 31, 20162022 (the "2016"2022 Form 10-K"). This quarterly report should be read in conjunction with the financial statements and notes included in the 20162022 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-monthinterim periods ended
The December 31, 20162022 financial statement data was derived from audited financial statements but does not include all disclosures required by GAAP.
Cash, Cash Equivalents
Cash equivalents includesconsist of investments in money market funds. Generally, the carrying value of cash equivalents equals the fair value, as these investments have original maturities of three months or less. The cash equivalents were as follows:
| Edison International | SCE | |||||||||||||||
| (in millions) | September 30, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2016 | ||||||||||||
| Money market funds | $ | 49 | $ | 41 | $ | 25 | $ | 18 | ||||||||
| | | | | | | | | | | | |
|
| Edison International | | SCE | ||||||||
| | March 31, | | December 31, | | March 31, | | December 31, | ||||
(in millions) |
| 2023 |
| 2022 | | 2023 |
| 2022 | ||||
Money market funds | | $ | 136 | | $ | 784 | | $ | — | | $ | 647 |
Cash is temporarily invested until required for check clearing. Checks issued, but not yet paid by the financial institution, are reclassified from cash to accounts payable at the end of each reporting period as follows:period.
29
| Edison International | SCE | |||||||||||||||
| (in millions) | September 30, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2016 | ||||||||||||
| Book balances reclassified to accounts payable | $ | 85 | $ | 138 | $ | 85 | $ | 136 | ||||||||
The following table sets forth the reporting unit level ascash, cash equivalents and restricted cash included in the consolidated statements of October 1stcash flows:
| | | | | | |
| | March 31, |
| December 31, | ||
(in millions) |
| 2023 |
| 2022 | ||
Edison International: | |
| | |
| |
Cash and cash equivalents | | $ | 836 | | $ | 914 |
Short-term restricted cash1 | |
| 2 | |
| 3 |
Total cash, cash equivalents and restricted cash | | $ | 838 | | $ | 917 |
| 1 | Reflected in "Other current assets" on Edison International's consolidated balance sheets. |
Allowance for Uncollectible Accounts
The allowance for uncollectible accounts is recorded based on SCE's estimate of each year. Edison International updates these tests between annual tests if events occur or circumstances change such that it is more likely than not thatexpected credit losses and adjusted over the fair value of a reporting unit is below its carrying value. In connection with a strategic reviewlife of the Edison Energy Group's competitive businesses, Edison International evaluatedreceivables as needed. Since the recoverabilitycustomer base of goodwillSCE is concentrated in Southern California and recorded an impairmentexposes SCE to a homogeneous set of SoCore Energy's goodwill totaling $16.5 million ($10 million after-tax)economic conditions, the allowance is measured on a collective basis on the historical amounts written-off, assessment of customer collectibility and current economic trends, including unemployment rates and any likelihood of recession for the region.
The following table sets forth the changes in the second quarter of 2017. As of September 30, 2017, goodwill is comprised of $78 million at the Edison Energy reporting unit and $5 million at the SoCore Energy reporting unit.allowance for uncollectible accounts for SCE:
| | | | | | | | | | | | | | | | | | | |
| | Three months ended | | | Three months ended | ||||||||||||||
| | March 31, 2023 | | | March 31, 2022 | ||||||||||||||
(in millions) | | Customers | | All others | | Total | | | Customers | | All others | | Total | ||||||
Beginning balance | | $ | 334 |
| $ | 20 | | $ | 354 | 2 | | $ | 293 |
| $ | 16 | | $ | 309 |
Current period provision for uncollectible accounts1 | | | 20 | | | — | | | 20 | | | | 54 | | | 7 | | | 61 |
Write-offs, net of recoveries | |
| (28) | | | (2) | |
| (30) | | |
| (10) | |
| (7) | |
| (17) |
Ending balance | | $ | 326 |
| $ | 18 | | $ | 344 | 2 | | $ | 337 |
| $ | 16 | | $ | 353 |
| 1 | For the three months ended March 31, 2023 and 2022, $14 million and $41 million of the costs were probable of recovery from customers and recorded as regulatory assets, respectively. |
| 2 | Approximately $21 million and $7 million of allowance for uncollectible accounts are included in "Other long-term assets" on SCE's consolidated balance sheets as of March 31, 2023 and December 31, 2022, respectively. |
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. See Note 13 for further information.
30
| 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 | ||||||||
| | | | | | |
|
| Three months ended March 31, | ||||
(in millions, except per-share amounts) |
| 2023 |
| 2022 | ||
Basic earnings per share: | | | | | | |
Net income attributable to common shareholders | | $ | 310 | | $ | 84 |
Net income available to common shareholders | | $ | 310 | | $ | 84 |
Weighted average common shares outstanding | |
| 383 | | | 381 |
Basic earnings per share | | $ | 0.81 | | $ | 0.22 |
Diluted earnings per share: | |
| | | | |
Net income attributable to common shareholders | | $ | 310 | | $ | 84 |
Net income available to common shareholders | | $ | 310 | | $ | 84 |
Income impact of assumed conversions | |
| 1 | | | — |
Net income available to common shareholders and assumed conversions | | $ | 311 | | $ | 84 |
Weighted average common shares outstanding | |
| 383 | | | 381 |
Incremental shares from assumed conversions | |
| 1 | | | 1 |
Adjusted weighted average shares – diluted | |
| 384 | | | 382 |
Diluted earnings per share | | $ | 0.81 | | $ | 0.22 |
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 1,365,6714,414,113 and 42,8906,533,558 shares of common stock for the three months ended September 30, 2017March 31, 2023 and 2016, respectively, and 1,373,736 and 166,057 shares for the nine months ended September 30, 2017 and 2016,2022, respectively, were outstanding, but were not included in the computation of diluted earnings per share because the effect would have been antidilutive.
Revenue Recognition
Revenue is recognized when (or as) a good or service is transferred to the customer and the customer obtains control of the good or service. This standard will be adopted on January 1, 2018.by Edison International and SCE have completedwhen a performance obligation to transfer control of the evaluation of all significant revenue streams. Edison International and SCE do not believe the adoption of this standard will have a material impact on the financial positionpromised goods is satisfied 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 electricitywhen services are rendered to customers. For such arrangements, revenue from contracts withThis typically occurs when electricity is delivered to customers, will be equivalent towhich includes amounts for services rendered but unbilled at the electricity supplied and billed in that period (including estimated billings). As such, there will not beend of a change in the timing or pattern of revenue recognition for such sales. Edison International andreporting period.
Regulatory Proceedings
FERC 2023 Formula Rate Update
In November 2022, SCE are in the process of implementing the system and process changes necessary to comply with this standard's enhanced disclosure requirements. 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 from the scope of the new standard and, therefore, will be accounted 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 earnings on January 1, 2018. Edison International and SCE do not expect the cumulative effect adjustment to be material.
31
Note 2.Consolidated Statements of Changes in Equity
The following table provides Edison International's changes in equity for the ninethree months ended September 30, 2017:
| Equity Attributable to Common Shareholders | Noncontrolling Interests | ||||||||||||||||||||||
| (in millions, except per-share amounts) | Common Stock | Accumulated Other Comprehensive Loss | Retained Earnings | Subtotal | Preferred and Preference Stock | Total Equity | |||||||||||||||||
| Balance at December 31, 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 | ||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | Noncontrolling | | | | |
| | Equity Attributable to Edison International Shareholders | | Interests | | | | ||||||||||||||
| | | | | | | | Accumulated | | | | | | | | | | | | ||
| | | | | | | | Other | | | | | | | | | | | | ||
| | Preferred | | Common | | Comprehensive | | Retained | | | | | Preference | | Total | ||||||
(in millions, except per share amounts) |
| Stock | | Stock |
| Loss |
| Earnings |
| Subtotal |
| Stock |
| Equity | |||||||
Balance at December 31, 2022 | | $ | 1,978 | | $ | 6,200 | | $ | (11) | | $ | 7,454 | | $ | 15,621 | | $ | 1,901 | | $ | 17,522 |
Net income | | | — | |
| — | |
| — | |
| 336 | |
| 336 | |
| 29 | |
| 365 |
Other comprehensive income | | | — | |
| — | |
| 2 | |
| — | |
| 2 | |
| — | |
| 2 |
Common stock issued, net of issuance cost | | | — | |
| 15 | |
| — | |
| — | |
| 15 | |
| — | |
| 15 |
Common stock dividends declared ($0.7375 per share) | | | — | |
| — | |
| — | |
| (282) | |
| (282) | |
| — | |
| (282) |
Preferred stock dividend declared ($26.875 per share for Series A and $25.00 per share for Series B) | | | — | | | — | | | — | | | (52) | | | (52) | | | — | | | (52) |
Dividends to noncontrolling interests ($22.281 - $35.937 per share for preference stock) | | | — | |
| — | |
| — | |
| — | |
| — | |
| (29) | |
| (29) |
Noncash stock-based compensation | | | — | |
| 8 | |
| — | |
| — | |
| 8 | |
| — | |
| 8 |
Balance at March 31, 2023 | | $ | 1,978 | | $ | 6,223 | | $ | (9) | | $ | 7,456 | | $ | 15,648 | | $ | 1,901 | | $ | 17,549 |
The following table provides Edison International's changes in equity for the ninethree months ended September 30, 2016:
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | Noncontrolling | | | | |
| | Equity Attributable to Edison International Shareholders | | Interests | | | | ||||||||||||||
| | | | | | | | Accumulated | | | | | | | | | | | | ||
| | | | | | | | Other | | | | | | | | | | | | ||
| | Preferred | | Common | | Comprehensive | | Retained | | | | | Preference | | Total | ||||||
(in millions, except per share amounts) |
| Stock | | Stock |
| Loss |
| Earnings |
| Subtotal |
| Stock |
| Equity | |||||||
Balance at December 31, 2021 | | $ | 1,977 | | $ | 6,071 | | $ | (54) | | $ | 7,894 | | $ | 15,888 | | $ | 1,901 | | $ | 17,789 |
Net income | |
| — | |
| — | |
| — | |
| 110 | |
| 110 | |
| 26 | |
| 136 |
Other comprehensive income | |
| — | |
| — | |
| 2 | |
| — | |
| 2 | |
| — | |
| 2 |
Common stock issued, net of issuance cost | | | — | | | 12 | | | — | | | — | | | 12 | | | — | | | 12 |
Common stock dividends declared ($0.7000 per share) | |
| — | |
| — | |
| — | |
| (267) | |
| (267) | |
| — | |
| (267) |
Preferred stock dividend declared ($26.875 per share for Series A and $17.08333 per share for Series B) | | | — | | | — | | | — | | | (21) | | | (21) | | | — | | | (21) |
Dividends to noncontrolling interests ($11.160 - $35.936 per share for preference stock) | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (26) | |
| (26) |
Noncash stock-based compensation | |
| — | |
| 7 | |
| — | |
| — | |
| 7 | |
| — | |
| 7 |
Balance at March 31, 2022 | | $ | 1,977 | | $ | 6,090 | | $ | (52) | | $ | 7,716 | | $ | 15,731 | | $ | 1,901 | | $ | 17,632 |
32
| 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 | ||||||||||
The following table provides SCE's changes in equity for the ninethree 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 | ||||||||||
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated | | | | | | | ||
| | | | | | | Additional | | Other | | | | | | | |||
| | Preference | | Common | | Paid-in | | Comprehensive | | Retained | | Total | ||||||
(in millions, except per share amounts) |
| Stock |
| Stock |
| Capital |
| Loss |
| Earnings |
| Equity | ||||||
Balance at December 31, 2022 | | $ | 1,945 | | $ | 2,168 | | $ | 8,441 | | $ | (8) | | $ | 8,243 | | $ | 20,789 |
Net income | |
| — | |
| — | |
| — | |
| — | |
| 399 | |
| 399 |
Dividends declared on common stock ($0.8048 per share) | |
| — | |
| — | |
| — | |
| — | |
| (350) | |
| (350) |
Dividends on preference stock ($22.281 - $35.937 per share) | |
| — | |
| — | |
| — | |
| — | |
| (29) | |
| (29) |
Stock-based compensation | |
| — | |
| — | |
| (8) | |
| — | |
| — | |
| (8) |
Noncash stock-based compensation | |
| — | |
| — | |
| 5 | |
| — | |
| 1 | |
| 6 |
Balance at March 31, 2023 | | $ | 1,945 | | $ | 2,168 | | $ | 8,438 | | $ | (8) | | $ | 8,264 | | $ | 20,807 |
The following table provides SCE's changes in equity for the ninethree months ended September 30, 2016:
| 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 | ||||||||||
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated | | | | | | | ||
| | | | | | | Additional | | Other | | | | | | | |||
| | Preference | | Common | | Paid-in | | Comprehensive | | Retained | | Total | ||||||
(in millions, except per share amounts) |
| Stock |
| Stock |
| Capital |
| Loss |
| Earnings |
| Equity | ||||||
Balance at December 31, 2021 | | $ | 1,945 | | $ | 2,168 | | $ | 7,033 | | $ | (32) | | $ | 8,721 | | $ | 19,835 |
Net income | |
| — | |
| — | |
| — | |
| — | |
| 173 | |
| 173 |
Other comprehensive income | |
| — | |
| — | |
| — | |
| 1 | |
| — | |
| 1 |
Dividends declared on common stock ($0.7473 per share) | |
| — | |
| — | |
| — | |
| — | |
| (325) | |
| (325) |
Dividends declared on preference stock ($11.160 - $35.937 per share) | |
| — | |
| — | |
| — | |
| — | |
| (26) | |
| (26) |
Stock-based compensation | |
| — | |
| — | |
| (9) | |
| — | |
| — | |
| (9) |
Noncash stock-based compensation | |
| — | |
| — | |
| 4 | |
| — | |
| (1) | |
| 3 |
Balance at March 31, 2022 | | $ | 1,945 | | $ | 2,168 | | $ | 7,028 | | $ | (31) | | $ | 8,542 | | $ | 19,652 |
Note 3.Variable Interest Entities
A VIE is defined as a legal entity that meets one of two conditions: (1) the equity owners do not have sufficient equity at risk, or (2) the holders of the equity investment at risk, as a group, lack any of the following three characteristics: decision-making rights, the obligation to absorb losses or the right to receive the expected residual returns of the entity. The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most significantly impact the entity's economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. The primary beneficiary is required to consolidate the VIE. A subsidiary of Edison International is the primary beneficiary of entities that own rooftop solar projects. Commercial and operating activities are generally the factors that most significantly impact the economic performance of such VIEs. Commercial and operating activities include construction, operation and maintenance, fuel procurement, dispatch and compliance with regulatory and contractual requirements.
Variable Interest in VIEs that are Consolidated
SCE Recovery Funding LLC is a bankruptcy remote, wholly owned special purpose subsidiary, consolidated by SCE. SCE Recovery Funding LLC is a VIE and SCE is the primary beneficiary. SCE Recovery Funding LLC was formed in 2021 for the purpose of issuing and servicing securitized bonds related to SCE's AB 1054 Excluded Capital Expenditures.
33
In 2022 and 2021, SCE Recovery Funding LLC issued a total of $871 million of securitized bonds and used the proceeds to acquire SCE's right, title and interest in and to non-bypassable rates and other charges to be collected from certain existing and future customers in SCE's service territory, associated with the AB 1054 Excluded Capital Expenditures ("Recovery Property"), until the bonds are paid in full, and all financing costs have been recovered. The securitized bonds are secured by the Recovery Property and cash collections from the non-bypassable rates and other charges are the sole source of funds to satisfy the debt obligation. The bondholders have no recourse to SCE. In April 2023, SCE Recovery Funding LLC issued $775 million of securitized bonds. For further details, see Note 5.
The following table summarizes the impact of SCE Recovery Funding LLC on SCE's and Edison International's consolidated balance sheets.
| | | | | |
| | March 31, | | | December 31, |
(in millions) | | 2023 | | | 2022 |
Other current assets | $ | 63 | | $ | 45 |
Regulatory assets: non-current | | 827 | | | 834 |
Regulatory liabilities: current | | 39 | | | 33 |
Current portion of long-term debt | | 29 | | | 29 |
Other current liabilities | | 9 | | | 4 |
Long-term debt1 |
| 809 | | | 809 |
| 1 | The bondholders have no recourse to SCE. |
Variable Interest in VIEs that are not Consolidated
Power Purchase Agreements
SCE has power purchase agreements ("PPAs")PPAs that are classified as variable interests in VIEs, including tolling agreements through which SCE provides the natural gas to fuel the plants, fixed price contracts for renewable energy, and contracts with qualifying facilitiesresource adequacy agreements that, contain variable pricing provisions based onupon the priceseller's election, include the purchase of natural gas.energy at fixed prices. SCE has concluded that it is not the primary beneficiary of these VIEs since it does not control the commercial and operating activities of these entities. Since payments for capacity are the primary source of income, the most significant economic activity for these VIEs is the operation and maintenance of the power plants.
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 that are not consolidated result from amounts due under the PPAs. Under these contracts, SCE recovers the costs incurred through demonstration of compliance with its California Public Utilities Commission ("CPUC")-approvedCPUC-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 20162022 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 4,8583,844 MW and 4,3493,645 MW at September 30, 2017March 31, 2023 and 2016,2022, respectively, and the amounts that SCE paid to these projects were $325$170 million and $313$106 million for the three months ended September 30, 2017March 31, 2023 and 2016, respectively, and $571 million and $532 million for nine months ended September 30, 2017 and 2016,2022, 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
34
$275 million, $325 million, $300 million, and $475 million (cumulative, liquidation amounts of $25 per share), respectively, and $10,000 of common stock each to SCE. The trusts invested the proceeds of these trust securities in Series F, Series G, Series H, Series J, Series K, and Series L Preference Stock issued by SCE in the principal amounts of $475 million, $400 million, $275 million, $325 million, $300 million, and $475 million (cumulative, $2,500 per share liquidation values), respectively, which have substantially the same payment terms as the respective trust securities.
The Series F, Series G, Series H, Series J, Series K, and Series L Preference Stock and the corresponding trust securities do not have a maturity date. Upon any redemption of any shares of the Series F, Series G, Series H, Series J, Series K, or Series L Preference Stock, a corresponding dollar amount of trust securities will be redeemed by the applicable trust. The applicable trust will make distributions at the same rate and on the same dates on the applicable series of trust securities if and when the SCE board of directors declares and makes dividend payments on the related Preference Stock. The applicable trust will use any dividends it receives on the related Preference Stock to make its corresponding distributions on the applicable series of trust securities. If SCE does not make a dividend payment to any of these trusts, SCE would be prohibited from paying dividends on its common stock. SCE has fully and unconditionally guaranteed the payment of the trust securities and trust distributions, if and when SCE pays dividends on the related Preference Stock.
The Trust II, Trust III, Trust IV, Trust V and Trust VVI balance sheets as of September 30, 2017March 31, 2023 and December 31, 2016,2022 consisted of investments of $400$220 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$220 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, | ||||||||||||||||||||||||
| (in millions) | Trust I | Trust II | Trust III | Trust IV | Trust V | Trust VI | ||||||||||||||||||
| 2017 | ||||||||||||||||||||||||
| Dividend income | $ | 1 | $ | 5 | $ | 4 | $ | 4 | $ | 4 | $ | 6 | ||||||||||||
| Dividend distributions | 1 | 5 | 4 | 4 | 4 | 6 | ||||||||||||||||||
| 2016 | ||||||||||||||||||||||||
| Dividend income | $ | 7 | $ | 5 | $ | 4 | $ | 4 | $ | 4 | * | |||||||||||||
| Dividend distributions | 7 | 5 | 4 | 4 | 4 | * | ||||||||||||||||||
Nine months ended September 30, | ||||||||||||||||||||||||
| (in millions) | Trust I | Trust II | Trust III | Trust IV | Trust V | Trust VI | ||||||||||||||||||
| 2017 | ||||||||||||||||||||||||
| Dividend income | $ | 14 | $ | 15 | $ | 12 | $ | 13 | $ | 12 | $ | 6 | ||||||||||||
| Dividend distributions | 14 | 15 | 12 | 13 | 12 | 6 | ||||||||||||||||||
| 2016 | ||||||||||||||||||||||||
| Dividend income | $ | 20 | $ | 15 | $ | 12 | $ | 13 | $ | 9 | * | |||||||||||||
| Dividend distributions | 20 | 15 | 12 | 13 | 9 | * | ||||||||||||||||||
| | | | | | | | | | | | | | | |
| | Three months ended March 31, | |||||||||||||
(in millions) |
| Trust II |
| Trust III |
| Trust IV |
| Trust V |
| Trust VI | |||||
2023 | | | | | | | | | | | | | |
| |
Dividend income | | $ | 3 | | $ | 4 | | $ | 4 | | $ | 4 | | $ | 6 |
Dividend distributions | |
| 3 | |
| 4 | |
| 4 | |
| 4 | |
| 6 |
2022 | |
|
| |
|
| |
| | |
|
| |
|
|
Dividend income | | $ | 5 | | $ | 4 | | $ | 4 | | $ | 4 | | $ | 6 |
Dividend distributions | |
| 5 | | | 4 | | | 4 | | | 4 | | | 6 |
Note 4.Fair Value Measurements
Recurring Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (referred to as an "exit price"). Fair value of an asset or liability considers assumptions that market participants would use in pricing the asset or liability, including assumptions about nonperformance risk. As of September 30, 2017March 31, 2023 and December 31, 2016,2022, nonperformance risk was not material for Edison International and SCE.
Assets and liabilities are categorized into a three-level fair value hierarchy based on valuation inputs used to determine fair value.
Level 1 – The fair value of Edison International's and SCE's Level 1 assets and liabilities is determined using unadjusted quoted prices in active markets that are available at the measurement date for identical assets and liabilities. This level includes exchange-traded equity securities, U.S. treasury securities, mutual funds, and money market funds.
Level 2 – Edison International's and SCE's Level 2 assets and liabilities include fixed income securities, primarily consisting of U.S. government and agency bonds, municipal bonds and corporate bonds, and over-the-counter derivatives. The fair value of fixed income securities is determined using a market approach by obtaining quoted prices for similar assets and
35
liabilities in active markets and inputs that are observable, either directly or indirectly, for substantially the full term of the instrument.
The fair value of SCE's over-the-counter derivative contracts is determined using an income approach. SCE uses standard pricing models to determine the net present value of estimated future cash flows. Inputs to the pricing models include forward published or posted clearing prices from exchanges (New York Mercantile Exchange and Intercontinentalan exchange (Intercontinental Exchange) for similar instruments and discount rates. A primary price source that best represents trade activity for each market is used to develop observable forward market prices in determining the fair value of these positions. Broker quotes, prices from exchanges, or comparison to executed trades are used to validate and corroborate the primary price source. These price quotations reflect mid-market prices (average of bid and ask) and are obtained from sources believed to provide the most liquid market for the commodity.
Level 3 – The fair value of SCE's Level 3 assets and liabilities is determined using the income approach through various models and techniques that require significant unobservable inputs. This level includes derivative contracts that trade infrequently such as congestion revenue rights ("CRRs"). Edison International Parent and Other does not have any Level 3 assets and liabilities.
Assumptions are made in order to value derivative contracts in which observable inputs are not available. In circumstances where fair value cannot be verified with observable market transactions, it is possible that a different valuation model could produce a materially different estimate of fair value. Modeling methodologies, inputs, and techniques are reviewed and assessed as markets continue to develop and more pricing information becomes available, and the fair value is adjusted when it is concluded that a change in inputs or techniques would result in a new valuation that better reflects the fair value of those derivative contracts. See Note 6 for a discussion of derivative instruments.
SCE
The following table sets forth assets and liabilities of SCE that were accounted for at fair value by level within the fair value hierarchy:
| 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 | |||||||||
| | | | | | | | | | | | | | | |
|
| March 31, 2023 | |||||||||||||
| | | | | | | | | | | Netting | | | | |
| | | | | | | | | | | and | | |
| |
(in millions) |
| Level 1 |
| Level 2 |
| Level 3 |
| Collateral1 |
| Total | |||||
Assets at fair value | | | | | | | | | | | | | | | |
Derivative contracts | | $ | — | | $ | 83 | | $ | 50 | | $ | (59) | | $ | 74 |
Money market funds and other | |
| — | | | 22 | | | — | | | — |
| | 22 |
Nuclear decommissioning trusts: | |
| | | | | | | | | | |
| | |
Stocks2 | |
| 1,667 | | | — | | | — | | | — |
| | 1,667 |
Fixed Income3 | |
| 918 | | | 1,399 | | | — | | | — |
| | 2,317 |
Short-term investments, primarily cash equivalents | |
| 125 | | | 41 | | | — | | | — |
| | 166 |
Subtotal of nuclear decommissioning trusts4 | |
| 2,710 | |
| 1,440 | |
| — | |
| — |
| | 4,150 |
Total assets | |
| 2,710 | |
| 1,545 | |
| 50 | |
| (59) |
| | 4,246 |
Liabilities at fair value | |
|
| |
|
| |
|
| |
|
|
| |
|
Derivative contracts | |
| — | | | 56 | | | 3 | | | (59) |
| | — |
Total liabilities | |
| — | |
| 56 | |
| 3 | |
| (59) |
| | — |
Net assets | | $ | 2,710 | | $ | 1,489 | | $ | 47 | | $ | — | | $ | 4,246 |
| December 31, 2016 | |||||||||||||||||||
| (in millions) | Level 1 | Level 2 | Level 3 | Netting and Collateral1 | Total | ||||||||||||||
| Assets at fair value | |||||||||||||||||||
| Derivative contracts | $ | — | $ | 6 | $ | 68 | $ | — | $ | 74 | |||||||||
| Other | 33 | — | — | — | 33 | ||||||||||||||
| Nuclear decommissioning trusts: | |||||||||||||||||||
Stocks2 | 1,547 | — | — | — | 1,547 | ||||||||||||||
Fixed Income3 | 865 | 1,751 | — | — | 2,616 | ||||||||||||||
| Short-term investments, primarily cash equivalents | 36 | 170 | — | — | 206 | ||||||||||||||
Subtotal of nuclear decommissioning trusts4 | 2,448 | 1,921 | — | — | 4,369 | ||||||||||||||
| Total assets | 2,481 | 1,927 | 68 | — | 4,476 | ||||||||||||||
| Liabilities at fair value | |||||||||||||||||||
| Derivative contracts | — | — | 1,157 | — | 1,157 | ||||||||||||||
| Total liabilities | — | — | 1,157 | — | 1,157 | ||||||||||||||
| Net assets (liabilities) | $ | 2,481 | $ | 1,927 | $ | (1,089 | ) | $ | — | $ | 3,319 | ||||||||
36
| | | | | | | | | | | | | | | |
|
| December 31, 2022 | |||||||||||||
| | | | | | | | | | | Netting | | | | |
| | | | | | | | | | | and | | |
| |
(in millions) |
| Level 1 |
| Level 2 |
| Level 3 |
| Collateral1 |
| | Total | ||||
Assets at fair value | | | | | | | | | | | | | | | |
Derivative contracts | | $ | — | | $ | 392 | | $ | 67 | | $ | (218) | | $ | 241 |
Money market funds and other | |
| 647 | |
| 22 | |
| — | |
| — | |
| 669 |
Nuclear decommissioning trusts: | |
|
| |
|
| |
|
| |
|
| |
|
|
Stocks2 | |
| 1,610 | |
| — | |
| — | |
| — | |
| 1,610 |
Fixed Income3 | |
| 941 | |
| 1,281 | |
| — | |
| — | |
| 2,222 |
Short-term investments, primarily cash equivalents | |
| 137 | |
| 64 | |
| — | |
| — | |
| 201 |
Subtotal of nuclear decommissioning trusts4 | |
| 2,688 | |
| 1,345 | |
| — | |
| — | |
| 4,033 |
Total assets | |
| 3,335 | |
| 1,759 | |
| 67 | |
| (218) | |
| 4,943 |
Liabilities at fair value | |
|
| |
|
| |
|
| |
|
| |
|
|
Derivative contracts | |
| — | |
| 116 | |
| 4 | |
| (119) | |
| 1 |
Total liabilities | |
| — | |
| 116 | |
| 4 | |
| (119) | |
| 1 |
Net assets | | $ | 3,335 | | $ | 1,643 | | $ | 63 | | $ | (99) | | $ | 4,942 |
| 1 | |
| Represents the netting of assets and liabilities under master netting agreements and cash |
| 2 | |
| Approximately |
| 3 | |
| Includes corporate bonds, which were diversified |
| 4 | |
| Excludes net payables of |
SCE Fair Value of Level 3
The following table sets forth a summary of changes in SCE's fair value of Level 3 net derivative assets and liabilities:
| | | | | | |
| | March 31, | ||||
(in millions) | | 2023 | | 2022 | ||
Fair value of net assets at beginning of period | | $ | 63 | | $ | 44 |
Settlements | |
| (12) | |
| (3) |
Total realized/unrealized losses1,2 | |
| (4) | |
| (2) |
Fair value of net assets at end of period | | $ | 47 | | $ | 39 |
| 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 | ) | ||||||
| 1 | |
| Due to regulatory mechanisms, SCE's realized and unrealized gains and losses are recorded as regulatory assets and liabilities. |
| 2 | There were no material transfers into or out of Level 3 during 2023 and 2022. |
The following table sets forth SCE's valuation techniques and significant unobservable inputs used to determine fair value for significant Level 3 assets and liabilities:
| | | | | | | | | | | | | | | |
|
| Fair Value | | | | Significant | | | | Weighted | |||||
| | (in millions) | | Valuation | | Unobservable | | Range | | Average | |||||
|
| Assets |
| Liabilities |
| Technique |
| Input |
| (per MWh) |
| (per MWh) | |||
Congestion revenue rights | |
| | |
| | |
| |
| |
| |
| |
March 31, 2023 | | $ | 50 | | $ | 3 |
| Auction prices |
| CAISO CRR auction prices |
| $(5.83) - $47.91 | | $ | 1.47 |
December 31, 2022 | |
| 67 | |
| 4 |
| Auction prices |
| CAISO CRR auction prices |
| (7.91) - 3,856.67 | | | 1.64 |
37
| 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) | |||||||||
For CRRs, where SCE is the buyer, generally increases (decreases)or decreases in forecasted load in isolationCAISO auction prices would result in increases (decreases) to thehigher 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.
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.
Edison International Parent and Other
Edison International Parent and Other assets measured at fair value and classified as Level 1 consisted of equity investments of $2 million and $5 million and money market funds of $136 million and $137 million at March 31, 2023 and December 31, 2022, respectively. Assets measured at fair value and classified as Level 2 consisted of short-term investments of $1 million and $2 million at March 31, 2023 and December 31, 2022, respectively. There are no securities classified as Level 3 for Edison International Parent and Other.
Fair Value of Debt Recorded at Carrying Value
The carrying value and fair value of Edison International's and SCE's long-term debt (including the current portion of long-term debt) are as follows:
| | | | | | | | | | | | |
|
| March 31, 2023 |
| December 31, 2022 | ||||||||
| | Carrying | | Fair | | Carrying | | Fair | ||||
(in millions) |
| Value1 |
| Value2 |
| Value1 |
| Value2 | ||||
Edison International | | $ | 31,656 | | $ | 29,616 | | $ | 29,639 | | $ | 26,824 |
SCE | |
| 28,180 | |
| 26,104 | |
| 26,258 | |
| 23,469 |
| 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. |
| 2 | The fair value of Edison International's and SCE's short-term and long-term debt is classified as Level 2. |
Note 5.Debt and Credit Agreements
Long-Term Debt
In March 2023, SCE borrowed $300 million under a Term Loan Agreement due July 2018, with a variable interest rate based on the London Interbank Offered Rate plus 65 basis points. The proceeds were used for general corporate purposes.
In August 2017,March 2023, Edison International Parent issued $400$500 million of 2.40% senior8.125% junior subordinated notes due in 2022. In September 2017,2053, with interest rate resets every five years at a rate equal to the Five-year U.S. Treasury rate plus a spread of 3.864%. The proceeds from the August 2017 issuance were used to repay $400 million of Edison International's 3.75% senior notes.
38
Credit Agreements and Short-Term Debt
The following table summarizes the status of the credit facilities at March 31, 2023:
| | | | | | | | | | | | | | | | |
(in millions, except for rates) | ||||||||||||||||
| | Termination | | SOFR | | | | Outstanding | | Outstanding | | Amount | ||||
Borrower | | date | | plus (bps) |
| Commitment |
| borrowings |
| letters of credit |
| available | ||||
Edison International Parent1, 3 | | May 2026 | | 128 | | $ | 1,500 | | $ | 622 | | $ | — | | $ | 878 |
SCE2, 3 | | May 2026 | | 108 | | | 3,350 | | | 628 | | | 255 | | | 2,467 |
Total Edison International | $ | 4,850 | | $ | 1,250 | | $ | 255 | | $ | 3,345 | |||||
| 1 | At March 31, 2023, Edison International Parent had $622 million outstanding commercial paper, net of discount, at a weighted-average interest rate of 5.61%. |
| 2 | At March 31, 2023, SCE had $628 million outstanding commercial paper, net of discount, at a weighted-average interest rate of 5.63%. |
| 3 | Edison International Parent's and SCE's credit facilities have one additional one-year extension option. The aggregate maximum principal amount under the SCE and Edison International Parent revolving credit facilities may be increased up to $4.0 billion and $2.0 billion, respectively, provided that additional lender commitments are obtained. |
Debt Financing Subsequent to March 31, 2023
In April 2023, SCE Recovery Funding LLC issued $775 million of Senior Secured Recovery Bonds, Series 2023-A, in two tranches and used the proceeds to acquire SCE's right, title and interest in and to the Recovery Property. The two tranches of Senior Secured Recovery Bonds consisted of $425 million, 4.697% with final maturity in 2042 and $350 million, 5.112% with final maturity in 2049. For further details, see Note 3. SCE used the proceeds itreceived from the sale of Recovery Property to pay down the entire $730 million outstanding commercial paper, netamount of discount,its green term loan due in May 2023, which was $329 million atreclassified as a weighted-average interest ratelong-term obligation as of 1.29%. At September 30, 2017, letters of credit issued under SCE's credit facility aggregated $267 million and are scheduled to expire in twelve months or less. At DecemberMarch 31, 2016, the outstanding commercial paper, net of discount, was $769 million at a weighted-average interest rate of 0.9%.
Note 6.Derivative Instruments
Derivative financial instruments are used to manage exposure to commodity price risk. These risks are managed in part by entering into forward commodity transactions, including options, swaps and futures. To mitigate credit risk from counterparties in the event of nonperformance, master netting agreements are used whenever possible, and counterparties may be required to pledge collateral depending on the creditworthiness of each counterparty and the risk associated with the transaction.
Commodity Price Risk
Commodity price risk represents the potential impact that can be caused by a change in the market value of a particular commodity. SCE's electricity price exposure arises from energy purchased from and sold to wholesale markets as a result of differences between SCE's load requirements and the amount of energy delivered from its generating facilities and PPAs. SCE's natural gas price exposure arises from natural gas purchased for the Mountainview power plantplants, Peaker plants and peaker plants, qualifying facilityQualifying Facilities contracts where pricing is based on a monthly natural gas index and PPAs in which SCE has agreed to provide the natural gas needed for generation, referred to as tolling arrangements.
Credit and Default Risk
Credit and default risk represent the potential impact that can be caused if a counterparty were to default on its contractual obligations and SCE would be exposed to spot markets for buying replacement power 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.
39
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 that have credit ratings for SCE, referred to as a credit-risk-related contingent feature. If SCE's credit rating were to fall below investment grade, SCE may be required to post additional collateral to cover derivative liabilities and the related outstanding payables. The net fair value of all derivative liabilities with these credit-risk-related contingent features was $2 million and $12less than $1 million as of September 30, 2017March 31, 2023 and December 31, 2016, respectively,2022, for which SCE has posted $15no collateral and collateral of $24 million and $12 million collateral at September 30, 2017 and December 31, 2016, respectively, to its counterparties for its derivative liabilities and related outstanding payables.payables as of March 31, 2023 and December 31, 2022, respectively. If the credit-risk-related contingent features underlying these agreements were triggered on September 30, 2017,March 31, 2023, SCE would be required to post $15$2 million of additional collateral, most of which $13 million is related to outstanding payables that are net of collateral already posted.
Fair Value of Derivative Instruments
SCE presents its derivative assets and liabilities on a net basis on its consolidated balance sheets when subject to master netting agreements or similar agreements. Derivative positions are also offset against margin and cash collateral deposits. In addition, SCE has provided collateral in the form of letters of credit. Collateral requirements can vary depending upon the level of unsecured credit extended by counterparties, changes in market prices relative to contractual commitments and other factors. See Note 4 for a discussion of fair value of derivative instruments. The following table summarizes the gross and net fair values of SCE's commodity derivative instruments:
| | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 | | | | ||||||||||||||||
| | Derivative Assets | | Derivative Liabilities | | | | ||||||||||||||
(in millions) |
| Short-Term1 |
| Long-Term |
| Subtotal |
| Short-Term |
| Long-Term |
| Subtotal |
| Net Assets | |||||||
Commodity derivative contracts |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Gross amounts recognized | | $ | 133 | | $ | — | | $ | 133 | | $ | 59 | | $ | — | | $ | 59 | | $ | 74 |
Gross amounts offset in the consolidated balance sheets | |
| (59) | |
| — | |
| (59) | | | (59) | |
| — | |
| (59) | |
| — |
Net amounts presented in the consolidated balance sheets | | $ | 74 | | $ | — | | $ | 74 | | $ | — | | $ | — | | $ | — | | $ | 74 |
| | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2022 | | | | ||||||||||||||||
| | Derivative Assets | | Derivative Liabilities | | | | ||||||||||||||
(in millions) |
| Short-Term1 |
| Long-Term |
| Subtotal |
| Short-Term2 |
| Long-Term |
| Subtotal |
| Net Assets | |||||||
Commodity derivative contracts |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Gross amounts recognized | | $ | 459 | | $ | — | | $ | 459 | | $ | 120 | | $ | — | | $ | 120 | | $ | 339 |
Gross amounts offset in the consolidated balance sheets | |
| (119) | |
| — | |
| (119) | |
| (119) | |
| — | |
| (119) | |
| — |
Cash collateral received | |
| (99) | |
| — | |
| (99) | |
| — | |
| — | |
| — | |
| (99) |
Net amounts presented in the consolidated balance sheets | | $ | 241 | | $ | — | | $ | 241 | | $ | 1 | | $ | — | | $ | 1 | | $ | 240 |
| 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, 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 | ||||||||||||||
| 1 | Included in "Other current assets" on SCE's consolidated balance sheets. |
At March 31, 2023, SCE posted cash collateral and accrued the right to reclaim cash collateral which totaled $95 million, reflected in "Other current asset" on SCE’s consolidated balance sheets.
40
SCE recognizes realized gains and losses on derivative instruments as purchased power expense and expects that such gains or losses will be part of the purchased power costs recovered from customers. As a result, realized gains and losses do not affect earnings, but may temporarily affect cash flows. Due to expected future recovery from customers, unrealized gains and losses are recorded as regulatory assets and liabilities and therefore also do not affect earnings. The remaining effects of derivative activities and related regulatory offsets are recordedreported in cash flows from operating activities in theSCE’s 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, | |||||||||||||||
| (in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Realized losses | $ | (3 | ) | $ | (1 | ) | $ | (8 | ) | $ | (53 | ) | ||||
| Unrealized gains (losses) | 116 | (2 | ) | 37 | 6 | |||||||||||
| | | | | | |
| | | Three months ended March 31, | |||
(in millions) |
| | 2023 | | | 2022 |
Realized gains (losses) | | $ | 116 | | $ | (19) |
Unrealized (losses) gains | |
| (264) | |
| 53 |
Notional Volumes of Derivative Instruments
The following table summarizes the notional volumes of derivatives used for SCESCE's economic hedging activities:
| | | | | | |
| | Unit of | | Economic Hedges | ||
Commodity |
| Measure |
| March 31, 2023 |
| December 31, 2022 |
Electricity options, swaps and forwards |
| Gigawatt hours |
| 1,824 |
| 1,022 |
Natural gas options, swaps and forwards |
| Billion cubic feet |
| 46 |
| 42 |
Congestion revenue rights |
| Gigawatt hours |
| 36,672 |
| 44,028 |
Note 7.Revenue
SCE's revenue is disaggregated by two revenue sources:
| ● | Earning activities – representing revenue authorized by the CPUC and FERC, which is intended to provide SCE with a reasonable opportunity to recover its costs and earn a return on its net investment in generation, transmission and distribution assets. The annual revenue requirements are comprised of authorized operation and maintenance costs, depreciation, taxes and a return consistent with the capital structure. Also, included in earnings activities are revenue or penalties related to incentive mechanisms, other operating revenue, and regulatory charges or disallowances. |
| ● | Cost-recovery activities – representing CPUC- and FERC- authorized balancing accounts, which allow for recovery of specific project or program costs, subject to a reasonableness review or compliance with upfront standards, as well as non-bypassable rates collected for SCE Recovery Funding LLC. Cost-recovery activities include rates which provide recovery, subject to a reasonableness review of, among other things, fuel costs, purchased power costs, public purpose related-program costs (including energy efficiency and demand-side management programs), certain operation and maintenance expenses and repayment of bonds and financing costs of SCE Recovery Funding LLC. SCE earns no return on these activities. |
| 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 | ||||
41
The following table is a summary of SCE's revenue:
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | Three months ended March 31, 2023 | | Three months ended March 31, 2022 | | ||||||||||||||
| | | | | Cost- | | | | | | Cost- | | | | |||||
| | Earning | | Recovery | | Total | | Earning | | Recovery | | Total | | ||||||
(in millions) |
| Activities |
| Activities | | Consolidated |
| Activities |
| Activities |
| Consolidated |
| ||||||
Revenues from contracts with customers1,2 | | $ | 2,076 | | $ | 1,660 | | $ | 3,736 | | $ | 1,985 |
| $ | 1,375 |
| $ | 3,360 | |
Alternative revenue programs and other operating revenue3 | |
| 157 | |
| 57 | |
| 214 | |
| 282 |
| | 319 |
| | 601 | |
Total operating revenue | | $ | 2,233 | | $ | 1,717 | | $ | 3,950 | | $ | 2,267 | | $ | 1,694 | | $ | 3,961 | |
| 1 | SCE recorded CPUC revenue based on an annual revenue requirement set by a methodology established in the GRC proceeding and FERC revenue authorized through a formula rate. For further information, see Note 1. |
| 2 | At March 31, 2023 and December 31, 2022, SCE's receivables related to contracts from customers were $2.2 billion and $2.3 billion, respectively, which include accrued unbilled revenue of $766 million and $638 million, respectively. |
| 3 | Includes differences between amounts billed and authorized levels for both the CPUC and FERC. |
Deferred Revenue
As of March 31, 2023, SCE has deferred revenue of $377 million related to sale of the use of transfer capability of West of Devers transmission line, of which $13 million and $364 million are included in "Other current liabilities" and "Other deferred credits and other long-term liabilities," respectively, on SCE's consolidated balance sheets. The deferred revenue is amortized straight-line over a period of 30 years starting 2021.
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) | 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 | % | |||||||
| | | | | | | | | | | | | |
| | Edison International | | SCE | | ||||||||
| | Three months ended March 31, | | ||||||||||
(in millions) |
| 2023 |
| 2022 |
| 2023 |
| 2022 | | ||||
Income from operations before income taxes | | $ | 378 | | $ | 81 | | $ | 428 | | $ | 133 | |
Provision for income tax at federal statutory rate of 21% | |
| 79 | |
| 17 | |
| 90 | |
| 28 | |
Increase (decrease) in income tax from: | |
|
| |
|
| |
|
| |
|
| |
State tax, net of federal benefit | |
| (1) | |
| (17) | |
| 3 | |
| (13) | |
Property-related | |
| (58) | |
| (45) | |
| (58) | |
| (45) | |
Other | |
| (7) | |
| (10) | |
| (6) | |
| (10) | |
Total income tax expense (benefit) | | $ | 13 | | $ | (55) | | $ | 29 | | $ | (40) | |
Effective tax rate | |
| 3.4 | % |
| (67.9) | % |
| 6.8 | % |
| (30.1) | % |
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.
42
| (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
Tax years that remain open for examination by the IRS and the California Franchise Tax Board ("FTB") are 20142019 – 20162022 and 20102013 – 2016,2022, respectively. Edison International has settled all open tax position with the IRS for taxable years prior to 2013.
Note 8. 9.Compensation and Benefit Plans
Pension Plans
Net periodic pension expense components for continuing operations are:
| | | | | |
| Three months ended | ||||
| March 31, | ||||
(in millions) | 2023 |
| 2022 | ||
Edison International: | | | | | |
Service cost | $ | 25 | | $ | 30 |
Non-service cost (benefit) |
|
| |
|
|
Interest cost |
| 45 | |
| 27 |
Expected return on plan assets |
| (54) | |
| (57) |
Amortization of net loss |
| 1 | |
| 1 |
Regulatory adjustment |
| (12) | |
| 2 |
Total non-service benefit1 | $ | (20) | | $ | (27) |
Total expense recognized | $ | 5 | | $ | 3 |
SCE: | | | | | |
Service cost | $ | 24 | | $ | 29 |
Non-service cost (benefit) |
| | |
| |
Interest cost |
| 42 | |
| 25 |
Expected return on plan assets |
| (51) | |
| (54) |
Amortization of net loss |
| — | |
| 1 |
Regulatory adjustment |
| (12) | |
| 2 |
Total non-service benefit1 | $ | (21) | | $ | (26) |
Total expense recognized | $ | 3 | | $ | 3 |
| 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 | |||||||
| 1 | |
Postretirement Benefits Other Than Pensions
Net periodic PBOP expense components for continuing operationsEdison International and SCE are:
| | | | | | |
| | Three months ended | ||||
| | March 31, | ||||
(in millions) |
| 2023 |
| 2022 | ||
Service cost | | $ | 5 | | $ | 8 |
Non-service cost (benefit) | |
|
| |
|
|
Interest cost | |
| 18 | |
| 14 |
Expected return on plan assets | |
| (27) | |
| (24) |
Amortization of net gain | |
| (12) | |
| (12) |
Regulatory adjustment | |
| 16 | |
| 14 |
Total non-service benefit1 | | $ | (5) | | $ | (8) |
Total expense | | $ | — | | $ | — |
| 1 | Included in "Other income" on Edison International's and SCE's consolidated statements of income. |
| 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 | |||||||
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Nuclear Decommissioning Trusts
Future decommissioning costs related to SCE's nuclear assets are expected to be funded from independent decommissioning trusts.
The following table sets forth amortized cost and fair value of the trust investments (see Note 4 for a discussion of fair value of the trust investments):
| | | | | | | | | | | | | | |
| | | | Amortized Costs | | Fair Values | ||||||||
| | Longest | | March 31, | | December 31, | | March 31, | | December 31, | ||||
(in millions) |
| Maturity Dates |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
Municipal bonds |
| 2061 |
| $ | 634 |
| $ | 672 | | $ | 734 | | $ | 754 |
Government and agency securities |
| 2073 |
| | 1,087 |
| | 1,025 | |
| 1,174 | |
| 1,091 |
Corporate bonds |
| 2070 |
| | 379 |
| | 351 | |
| 409 | |
| 377 |
Short-term investments and receivables/payables1 |
| One-year |
| | 104 |
| | 110 | |
| 109 | |
| 116 |
Total debt securities and other | | | | $ | 2,204 | | $ | 2,158 | | | 2,426 | | | 2,338 |
Equity securities |
| | | | | | | | | | 1,667 | | | 1,610 |
Total |
|
| | | | | | | | $ | 4,093 | | $ | 3,948 |
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 | |||||||||
| 1 | |
| Short-term investments |
Trust fund earnings (based on specific identification) increase the trust fund balance and the asset retirement obligation ("ARO") regulatory liability. Unrealized holding gains, net of losses, were $1.7 billion and $1.6 billion at March 31, 2023 and $1.5 billion at September 30, 2017 and December 31, 2016,2022, respectively.
| 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 | ||||||||
Trust assets are used to pay income taxes.taxes arising from trust investing activity. Deferred tax liabilities related to net unrealized gains were $359 million and $321 million at September 30, 2017 were $402 million.March 31, 2023 and December 31, 2022, respectively. Accordingly, the fair value of trust assets available to pay future decommissioning costs, net of deferred income taxes, totaled $4.0$3.7 billion and $3.6 billion at September 30, 2017. March 31, 2023 and December 31, 2022, respectively.
The following table summarizes the gains and losses for the trust investments:
| | | | | | |
| | Three months ended March 31, | ||||
(in millions) |
| 2023 |
| 2022 | ||
Gross realized gains | | $ | 71 | | $ | 15 |
Gross realized losses | |
| (23) | |
| (16) |
Net unrealized gains/(losses) for equity securities | |
| 75 | |
| (100) |
Due to regulatory mechanisms, changes in assets of the trusts from income or loss items have no impactdo not materially affect earnings.
Edison International Parent and Other's Investments
Edison International Parent and Other hold strategic investments in companies focused on operating revenue or earnings.developing electric technologies and services. As of March 31, 2023 and December 31, 2022, these investments consist of $2 million and $5 million of marketable securities, respectively, and $12 million of equity investments without readily determinable fair values (included as "Other investments" on Edison International's consolidated balance sheets) at both dates. For further information of fair value of marketable securities, see Note 4. The equity investments without readily determinable fair values balances included cumulative upward adjustments of $9 million at both March 31, 2023 and December 31, 2022. The cumulative upward adjustments resulted primarily from values determined by additional capital infusions.
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The following table summarizes unrealized gains/(losses) for equity investments held at the reporting date, recorded as "Other income" on Edison International's consolidated statements of income:
| | | | | | |
| | Three months ended March 31, | ||||
(in millions) |
| 2023 |
| 2022 | ||
Marketable securities | | $ | (3) | | $ | (2) |
Note 10.11. Regulatory Assets and Liabilities
Regulatory Assets
SCE's regulatory assets included on theits consolidated balance sheets are:
| (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 | |||
| | | | | | |
| | March 31, | | December 31, | ||
(in millions) |
| 2023 |
| 2022 | ||
Current: |
| |
|
| |
|
Regulatory balancing and memorandum accounts | | $ | 2,743 | | $ | 2,400 |
Power contracts | |
| 49 | |
| 71 |
Other | |
| 25 | |
| 26 |
Total current | |
| 2,817 | |
| 2,497 |
Long-term: | |
|
| |
|
|
Deferred income taxes, net of liabilities | |
| 5,282 | |
| 5,178 |
Unamortized investments, net of accumulated amortization | |
| 111 | |
| 113 |
Unamortized loss on reacquired debt | |
| 106 | |
| 109 |
Regulatory balancing and memorandum accounts | |
| 1,468 | |
| 1,589 |
Environmental remediation | |
| 238 | |
| 241 |
Recovery assets | | | 827 | | | 834 |
Other | |
| 119 | |
| 117 |
Total long-term | |
| 8,151 | |
| 8,181 |
Total regulatory assets | | $ | 10,968 | | $ | 10,678 |
Regulatory Liabilities
SCE's regulatory liabilities included on theits consolidated balance sheets are:
| | | | | | |
| | March 31, | | December 31, | ||
(in millions) |
| 2023 |
| 2022 | ||
Current: |
| |
|
| |
|
Regulatory balancing and memorandum accounts | | $ | 302 | | $ | 584 |
Energy derivatives | |
| 74 | |
| 338 |
Other | |
| 49 | |
| 42 |
Total current | |
| 425 | |
| 964 |
Long-term: | |
|
| |
|
|
Costs of removal | |
| 2,608 | |
| 2,589 |
Re-measurement of deferred taxes | |
| 2,237 | |
| 2,250 |
Recoveries in excess of ARO liabilities | |
| 1,378 | |
| 1,231 |
Regulatory balancing and memorandum accounts | |
| 1,317 | |
| 1,116 |
Pension and other postretirement benefits | |
| 999 | |
| 1,007 |
Other | |
| 16 | |
| 18 |
Total long-term | |
| 8,555 | |
| 8,211 |
Total regulatory liabilities | | $ | 8,980 | | $ | 9,175 |
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| (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 | |||
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, 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 | ) | |
| | | | | | |
| | March 31, | | December 31, | ||
(in millions) |
| 2023 |
| 2022 | ||
Asset (liability) |
| |
|
| |
|
Energy resource recovery account | | $ | 3 | | $ | 1,580 |
Portfolio allocation balancing account | |
| 1,381 | |
| (73) |
New system generation balancing account | |
| 46 | |
| (63) |
Public purpose programs and energy efficiency programs | |
| (1,785) | |
| (1,577) |
Base revenue requirement balancing account | |
| 1,134 | |
| 1,108 |
GRC wildfire mitigation balancing accounts | | | 125 | | | 67 |
Residential uncollectibles balancing account | | | 14 | | | — |
Greenhouse gas auction revenue and low carbon fuel standard revenue | |
| (55) | |
| (289) |
FERC balancing accounts | |
| (135) | |
| (123) |
Wildfire and drought restoration accounts | |
| 362 | |
| 352 |
Wildfire-related memorandum accounts | | | 1,206 | | | 1,168 |
COVID-19-related memorandum accounts | | | 69 | | | 67 |
Customer service re-platform memorandum account | | | 43 | | | 64 |
Tax accounting memorandum account and pole loading balancing account | | | 153 | | | 90 |
Excess bond and power charge balancing account | | | (21) | | | (56) |
Other | |
| 52 | |
| (26) |
Asset | | $ | 2,592 | | $ | 2,289 |
Note 11.12. Commitments and Contingencies
Indemnities
Edison International and SCE have various financial and performance guarantees and indemnity agreements which are issued in the normal course of business.
Edison International and SCE have providedagreed 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.sold or other contractual arrangements. Edison International's and SCE's obligations under these agreements may or may not be limited in terms of time and/or amount, and in some instances Edison International and SCE may have recourse against third parties. Edison International and SCE have not recorded a liability related to these indemnities. The overall maximum amount of the obligations under these indemnifications cannot be reasonably estimated.
Contingencies
In addition to the matters disclosed in these Notes, Edison International and SCE are involved in other legal, tax, and regulatory proceedings before various courts and governmental agencies regarding matters arising in the ordinary course of business. Edison International and SCE believe the outcome of each of these other proceedings will not individually or in the aggregate, materially affect its financial position, results of operations and cash flows.
Southern California Wildfires and Mudslides
California has experienced unprecedented weather conditions in 2010recent years due to climate change and 2011. On January 31, 2012, a leak suddenly occurredwildfires in one of the heat transfer tubes in San Onofre's Unit 3 steam generators. The Unit was safely taken off-line and subsequent inspections revealed excessive tube wear. Unit 2 was off-line for a planned outage when areas of unexpected tube wear were also discovered. On June 6, 2013, SCE decidedSCE's territory, including those where SCE's equipment may be alleged to permanently retire Units 2 and 3.
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Numerous claims related to which the failure to timely report ex parte communications had impacted the settlement negotiations and directedwildfire events have been initiated against SCE and SDG&E to meetEdison International. Edison International and confer with the other partiesSCE have incurred material losses 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 to the settlement unanimously approved by the CPUC in 2014. In connection with the termination2017/2018 Wildfire/Mudslide Events (defined below), which are described below. In addition, SCE's equipment has been, and may further be, alleged to be associated with wildfires that have originated in Southern California subsequent to 2018.
Liability Overview
The extent of legal liability for wildfire-related damages in actions against utilities depends on a number of factors, including whether the utility substantially caused or contributed to the damages and whether parties seeking recovery of damages will be required to show negligence in addition to causation. California courts have previously found utilities to be strictly liable for property damage along with associated interest and attorneys' fees, regardless of fault, by applying the theory of inverse condemnation when a utility's facilities were determined to be a substantial cause of a wildfire that caused the property damage. If inverse condemnation is held to be inapplicable to SCE in connection with a wildfire, SCE still could be held liable for property damages and associated interest if the property damages were found to have been proximately caused by SCE's negligence. If SCE were to be found negligent, SCE could also be held liable for, among other things, fire suppression costs, business interruption losses, evacuation costs, clean-up costs, medical expenses, and personal injury/wrongful death claims. Additionally, SCE could potentially be subject to fines and penalties for alleged violations of CPUC rules and state laws investigated in connection with the ignition of a wildfire.
Final determinations of legal liability for wildfire events, including determinations of whether SCE was negligent, would only be made during lengthy and complex litigation processes and settlements may be reached before determinations of legal liability are ever made. Even when investigations are still pending or legal liability is disputed, an assessment of likely outcomes, including through future settlement of disputed claims, may require estimated losses to be accrued under accounting standards. Each reporting period, management reviews its loss estimates for remaining alleged and potential claims related to wildfire events. The process for estimating losses associated with alleged and potential wildfire related claims requires management to exercise significant judgment based on a number of assumptions and subjective factors, including, but not limited to: estimates of known and expected claims by third parties based on currently available information, opinions of counsel regarding litigation risk, the status of and developments in the course of litigation, and prior experience litigating and settling wildfire litigation claims. As additional information becomes available, management's estimates and assumptions regarding the causes and financial impact of wildfire events may change. Actual losses incurred may be higher or lower than estimated based on several factors, including the uncertainty in estimating damages that have been or may be alleged.
2017/2018 Wildfire/Mudslide Events
Wildfires in SCE's territory in December 2017 and November 2018 caused loss of life, substantial damage to both residential and business properties, and service outages for SCE customers. The investigating government agencies, the Ventura County Fire Department ("VCFD") and California Department of Forestry and Fire Protection ("CAL FIRE"), have determined that the largest of the meet-and-confer process, SCE asked the CPUC to
As described below, multiple lawsuits related to the SettlementThomas and Koenigstein Fires and the Woolsey Fire have been initiated against SCE and Edison International. Some of San Onofre CPUC Proceedingsthe Thomas and Koenigstein Fires lawsuits claim that SCE and Edison
47
International have responsibility for the CPUC's authoritydamages caused by debris flows and flooding in Montecito and surrounding areas in January 2018 (the "Montecito Mudslides") based on a theory alleging that SCE has responsibility for the Thomas and/or Koenigstein Fires and further alleging that the Thomas and/or Koenigstein Fires proximately caused the Montecito Mudslides. According to permit rate recoverySanta Barbara County initial reports, the Montecito Mudslides destroyed an estimated 135 structures, damaged an estimated 324 structures, and resulted in 21 confirmed fatalities, with two additional fatalities presumed. One of San Onofre coststhe presumed fatalities was subsequently confirmed to be associated with the Montecito Mudslides.
The Thomas Fire, the Koenigstein Fire, the Montecito Mudslides (defined below) and an applicationthe Woolsey Fire are each referred to as a "2017/2018 Wildfire/Mudslide Event," and, collectively, referred to as the "2017/2018 Wildfire/Mudslide Events."
Each reporting period, management reviews its loss estimates for remaining alleged and potential claims related to the CPUC2017/2018 Wildfire/Mudslide Events. As a result of management's first quarter 2023 review, a $90 million increase in estimated losses for rehearingthe 2017/2018 Wildfire/Mudslide Events as of its decision approvingMarch 31, 2023 was recorded. As a result, Edison International and SCE also recorded expected recoveries through FERC electric rates of $6 million against the San Onofre OII Settlement Agreement were filed in November and December 2014, respectively. In April 2015, the federal lawsuit was dismissed with prejudicecharge, and the plaintiffs in that case appealedresulting net charge to earnings was $84 million ($61 million after-tax).
As of March 31, 2023, SCE had paid $7.8 billion under executed settlements, had $135 million to be paid under executed settlements, including $120 million to be paid under the dismissalSED Agreement (as defined below), and had $853 million of estimated losses for remaining alleged and potential claims reflected on its consolidated balance sheets related to the Ninth Circuit in May 2015. In light2017/2018 Wildfire/Mudslide Events. As of the San Onofre OII meet-and-confer sessions,same date, SCE had assets for expected recoveries through FERC electric rates of $63 million on its consolidated balance sheets and had exhausted expected insurance recoveries related to the Ninth Circuit cancelled2017/2018 Wildfire/Mudslide Events.
The estimated losses for the hearing that had been scheduled for February 9, 20172017/2018 Wildfire/Mudslide Events do not include an estimate of potential losses related to certain alleged and orderedpotential claims made by the parties to notify the Ninth CircuitCalifornia Governor's Office 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, 2018 and directed the parties to file a status report on January 30, 2018.
Edison International common stock between March 21, 2014 and June 24, 2015 (the "Class Period"). In September 2016, the federal court granted defendants' motion to dismiss the complaint, with an opportunity for plaintiff to amend the complaint. Plaintiff filed an amended complaint, which the federal court dismissed again with an opportunity for the plaintiff to amend the complaint. Plaintiff filedSCE may incur a third amended complaintmaterial loss in May 2017, which extends the Class Period to August 10, 2015. Defendants filed a motion to dismiss the third amended complaintexcess of amounts accrued in June 2017, and are awaiting a ruling.
Estimated losses for the 2017/2018 Wildfire/Mudslide Events litigation are based on a number of assumptions and are subject to change as additional information becomes available. Actual losses incurred may be higher or lower than estimated based on several factors, including the uncertainty in estimating damages that have been or may be alleged. For instance, SCE will receive additional information with respect to damages claimed as the claims mediation processes progress. Other factors that can cause actual losses incurred to be higher or lower than estimated include the ability to reach settlements and the outcomes of settlements reached through the ongoing claims mediation processes, uncertainties related to the sufficiency of insurance held by plaintiffs, uncertainties related to the litigation processes, including whether plaintiffs will ultimately pursue claims, uncertainty as to the legal and factual determinations to be made during litigation, including uncertainty as to the contributing causes of the 2017/2018 Wildfire/Mudslide Events, the complexities associated with fires that merge and whether inverse condemnation will be held applicable to SCE with respect to damages caused by the Montecito Mudslides, and the uncertainty as to how these factors impact future settlements.
The CPUC and FERC may not allow SCE to recover uninsured losses through electric rates if it is determined that such losses were not prudently incurred. SCE will seek rate recovery of prudently incurred losses and related costs realized in connection with the 2017/2018 Wildfire/Mudslide Events in excess of available insurance, other than for any obligations
48
under the SED Agreement (as defined below). See "Loss Estimates for Third Party Claims
External Investigations and Internal Review
The VCFD and CAL FIRE have jointly issued reports concerning their findings regarding the causes of the Thomas Fire and the Koenigstein Fire. The reports did not address the causes of the Montecito Mudslides. SCE pursued claims against MHI, whichhas also received a non-final redacted draft of a report from the VCFD regarding Woolsey Fire (the "Redacted Woolsey Report"). SCE cannot predict when the VCFD will release its final report regarding the Woolsey Fire. The VCFD and CAL FIRE findings do not determine legal causation of or assign legal liability for the Thomas, Koenigstein or Woolsey Fires; final determinations of legal causation and liability would only be made during lengthy and complex litigation.
The CPUC's Safety and Enforcement Division ("SED") conducted investigations to assess SCE's compliance with applicable rules and regulations in areas impacted by the Thomas, Koenigstein and Woolsey Fires. As discussed below, in October 2021, SCE and the SED executed the SED Agreement (as defined below) to resolve the SED's investigations into the 2017/2018 Wildfire/Mudslide Events.
The California Attorney General's Office has completed its investigation of the Thomas Fire and the Woolsey Fire without pursuing criminal charges.
SCE's internal review into the facts and circumstances of each of the 2017/2018 Wildfire/Mudslide Events is complex and time consuming. SCE expects to obtain and review additional information and materials in the possession of third parties during the course of its internal reviews and the litigation processes.
Thomas Fire
On March 13, 2019, the VCFD and CAL FIRE jointly issued a report concluding, after ruling out other possible causes, that the Thomas Fire was started by SCE power lines coming into contact during high winds, resulting in molten metal falling to the ground. However, the report does not state that their investigation found molten metal on the ground. At this time, based on available information, SCE has not determined 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 extent of damages that may be attributable to the Thomas Fire.
Koenigstein Fire
On March 20, 2019, the VCFD and CAL FIRE jointly issued a report finding that the Koenigstein Fire was caused when an energized SCE electrical wire separated and fell to the ground along with molten metal particles and ignited the dry vegetation below. SCE believes that its equipment was associated with the ignition of the Koenigstein Fire. SCE is continuing to assess the extent of damages that may be attributable to the Koenigstein Fire.
Montecito Mudslides
SCE's internal review includes inquiry into whether the Thomas and/or Koenigstein Fires proximately caused or contributed to the Montecito Mudslides, whether, and to what extent, the Thomas and/or Koenigstein Fires were responsible for the damages in the Montecito area and other factors that potentially contributed to the losses that resulted from the Montecito Mudslides. Many other factors, including, but not limited to, weather conditions and insufficiently or improperly designed and suppliedmaintained debris basins, roads, bridges and other channel crossings, could have proximately caused, contributed to or exacerbated the replacement steam generators. losses that resulted from the Montecito Mudslides.
49
At this time, based on available information, SCE has not been able to determine whether the Thomas Fire or the Koenigstein Fire, or both, were responsible for the damages in the Montecito area. In the event that SCE is determined to have caused the fire that spread to the Montecito area, SCE cannot predict whether, if fully litigated, the courts would conclude that the Montecito Mudslides were caused or contributed to by the Thomas and/or Koenigstein Fires or that SCE would be liable for some or all of the damages caused by the Montecito Mudslides.
Woolsey Fire
SCE's internal review into the facts and circumstances of the Woolsey Fire is ongoing. SCE has reported to the CPUC that there was an outage on SCE's electric system in the vicinity of where the Woolsey Fire reportedly began on November 8, 2018. SCE is aware of witnesses who saw fire in the vicinity of SCE's equipment at the time the fire was first reported. While SCE did not find evidence of downed electrical wires on the ground in the suspected area of origin, it observed a pole support wire in proximity to an electrical wire that was energized prior to the outage.
The Redacted Woolsey Report states that the VCFD investigation team determined that electrical equipment owned and operated by SCE was the cause of the Woolsey Fire. Absent additional evidence, SCE believes that it is likely that its equipment was associated with the ignition of the Woolsey Fire. SCE expects to obtain and review additional information and materials in the possession of CAL FIRE and others during the course of its internal review and the Woolsey Fire litigation process, including SCE equipment that has been retained by CAL FIRE.
Litigation
Multiple lawsuits related to the 2017/2018 Wildfire/Mudslide Events naming SCE as a defendant have been filed by three categories of plaintiffs: individual plaintiffs, subrogation plaintiffs and public entity plaintiffs. A number of the lawsuits also name Edison International as a defendant and some of the lawsuits were filed as purported class actions. The litigation could take a number of years to be resolved because of the complexity of the matters and number of plaintiffs.
On October 4, 2018, the Los Angeles Superior Court denied Edison International's and SCE's challenge to the application of inverse condemnation to SCE with respect to the Thomas and Koenigstein Fires and, on February 26, 2019, the California Supreme Court denied SCE's petition to review the Superior Court's decision. In April 2022, following a stipulated judgment entered against SCE in the TKM litigation, SCE filed an appeal related to inverse condemnation in the California Court of Appeal.
In January 2019, SCE filed a cross-complaint against certain local public entities alleging that failures by these entities, such as failure to adequately plan for flood hazards and build and maintain adequate debris basins, roads, bridges and other channel crossings, among other things, caused, contributed to or exacerbated the losses that resulted from the Montecito Mudslides. These cross-claims in the Montecito Mudslides litigation were not released as part of the Local Public Entity Settlements (as defined below).
Settlements
In the fourth quarter of 2019, SCE paid $360 million to a number of local public entities to resolve those parties' collective claims arising from the 2017/2018 Wildfire/Mudslide Events (the "Local Public Entity Settlements").
In the third quarter of 2020, Edison International and SCE entered into an agreement (the "TKM Subrogation Settlement") under which all of the insurance subrogation plaintiffs' in the Thomas Fire, Koenigstein Fire and Montecito Mudslides litigation (the "TKM Subrogation Plaintiffs") collective claims arising from the Thomas Fire, Koenigstein Fire or Montecito Mudslides have been resolved. Under the TKM Subrogation Settlement, SCE paid the TKM Subrogation Plaintiffs an aggregate of $1.2 billion in October 2020 and also agreed to pay $0.555 for each dollar in claims to be paid by the TKM Subrogation Plaintiffs to their policy holders on or before July 15, 2023, up to an agreed upon cap.
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In January 2021, Edison International and SCE entered into an agreement (the "Woolsey Subrogation Settlement") under which all of the insurance subrogation plaintiffs' in the Woolsey Fire litigation (the "Woolsey Subrogation Plaintiffs") collective claims arising from the Woolsey Fire have been resolved. Under the Woolsey Subrogation Settlement, SCE paid the Woolsey Subrogation Plaintiffs an aggregate of $2.2 billion in March and April 2021. SCE has also agreed to pay $0.67 for each dollar in claims to be paid by the Woolsey Subrogation Plaintiffs to their policy holders on or before July 15, 2023, up to an agreed upon cap.
As of March 31, 2023, SCE has also entered into settlements with approximately 10,000 individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation. In 2022, 2021 and 2020, SCE entered into settlements with individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation under which it agreed to pay an aggregate of approximately $1.7 billion, $1.7 billion and $300 million, respectively, to those individual plaintiffs. In the first quarter of 2023, SCE entered into settlements with individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation under which it agreed to pay an aggregate of approximately $148 million to those individual plaintiffs. The statutes of limitations for individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events have expired.
Edison International and SCE did not admit wrongdoing or liability as part of any of the settlements described above. Other claims and potential claims related to the 2017/2018 Wildfire/Mudslide Events remain. SCE continues to explore reasonable settlement opportunities with other plaintiffs in the outstanding 2017/2018 Wildfire/Mudslide Events litigation.
SED Agreement
In October 2013,2021, SCE sent MHIand the SED executed an agreement (the "SED Agreement") to resolve the SED's investigations into the 2017/2018 Wildfire/Mudslide Events and three other 2017 wildfires for, among other things, aggregate costs of $550 million. The $550 million in costs comprised of a formal request$110 million fine to be paid to the State of California General Fund, $65 million of shareholder-funded safety measures, and an agreement by SCE to waive its right to seek cost recovery in CPUC-jurisdictional rates for binding arbitration$375 million of third-party uninsured claims payments. The SED Agreement provides that SCE may, on a permanent basis, exclude from its ratemaking capital structure any after-tax charges to equity or debt borrowed to finance costs incurred under the auspicesSED Agreement. The SED Agreement also imposes other obligations on SCE, including reporting requirements and safety-focused studies. SCE's obligations under the SED Agreement commenced on August 15, 2022, when CPUC approval of the International ChamberSED Agreement became final and non-appealable. SCE did not admit imprudence, negligence or liability with respect to the 2017/2018 Wildfire/Mudslide Events in the SED Agreement.
Loss Estimates for Third Party Claims and Potential Recoveries from Insurance and through Electric Rates
At March 31, 2023 and December 31, 2022, Edison International's and SCE's consolidated balance sheets included fixed payments to be made under executed settlement agreements and accrued estimated losses of Commerce seeking damages$1.0 billion and $1.1 billion, respectively, for the 2017/2018 Wildfire/Mudslide Events. The following table presents changes in estimated losses since December 31, 2022:
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| | | |
(in millions) |
| | |
Balance at December 31, 20221 | | $ | 1,119 |
Increase in accrued estimated losses | |
| 90 |
Amounts paid | |
| (221) |
Balance at March 31, 20232 | | $ | 988 |
| 1 | At December 31, 2022, $121 million in current liabilities, wildfire-related claims, on Edison International's and SCE's consolidated balance sheets consisted of $65 million of settlements executed and $56 million of a short term payables under the SED Agreement in connection with the 2017/2018 Wildfire/Mudslide Events. At December 31, 2022, the $1,687 million included in deferred credits and other liabilities, wildfire-related claims, on Edison International's and SCE's consolidated balance sheets included Edison International's and SCE's best estimate of expected losses for remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events of $934 million, $64 million of a long term payables under the SED Agreement and other wildfire-related claims estimates of $689 million. |
| 2 | At March 31, 2023, $75 million in current liabilities, wildfire-related claims, on Edison International's and SCE's consolidated balance sheets consisted of $15 million of settlements executed and $60 million of a short term payables under the SED Agreement in connection with the 2017/2018 Wildfire/Mudslide Events. At March 31, 2023, the $1,600 million included in deferred credits and other liabilities, wildfire-related claims, on Edison International's and SCE's consolidated balance sheets included Edison International's and SCE's best estimate of expected losses for remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events of $853 million, $60 million of a long term payables under the SED Agreement and other wildfire-related claims estimates of $687 million. |
For the three months ended March 31, 2023 and 2022, Edison International's and SCE's consolidated statements of income included charges for the estimated losses, net of expected recoveries from insurance and FERC customers, related to the 2017/2018 Wildfire/Mudslide Events as follows:
| | | | | | |
| | Three months ended March 31, | ||||
(in millions) |
| 2023 |
| 2022 | ||
Charge for wildfire-related claims | | $ | 90 | | $ | 416 |
Expected revenue from FERC customers | |
| (6) | |
| (26) |
Total pre-tax charge | |
| 84 | |
| 390 |
Income tax benefit | |
| (23) | | | (109) |
Total after-tax charge | | $ | 61 | | $ | 281 |
For events that occurred in 2017 and early 2018, principally the Thomas and Koenigstein Fires and Montecito Mudslides, SCE had $1.0 billion of wildfire-specific insurance coverage, subject to a self-insured retention of $10 million per occurrence. For the Woolsey Fire, SCE had an additional $1.0 billion of wildfire-specific insurance coverage, subject to a self-insured retention of $10 million per occurrence.
In total, through March 31, 2023, SCE has accrued estimated losses of $8.8 billion, has paid or is obligated to pay approximately $7.9 billion in settlements, including $120 million to be paid under the SED Agreement, and has recovered $2.0 billion from its insurance carriers in relation to the 2017/2018 Wildfire/Mudslide Events.
Recovery of SCE's losses realized in connection with the 2017/2018 Wildfire/Mudslide Events in excess of available insurance is subject to approval by regulators. Under accounting standards for rate-regulated enterprises, SCE defers costs as regulatory assets when it concludes that such costs are probable of future recovery in electric rates. SCE utilizes objectively determinable evidence to form its view on probability of future recovery. The only directly comparable precedent in which a California investor-owned utility has sought recovery for uninsured wildfire-related costs is San Diego Gas & Electric's ("SDG&E") requests for cost recovery related to 2007 wildfire activity, where the FERC allowed recovery of all FERC-jurisdictional wildfire-related costs while the CPUC rejected recovery of all CPUC-jurisdictional wildfire-related costs based on a determination that SDG&E did not meet the CPUC's prudency standard. As a result, while SCE does not agree with the
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CPUC's decision, it believes that the CPUC's interpretation and application of the prudency standard to SDG&E creates substantial uncertainty regarding how that standard will be applied to an investor-owned utility in wildfire cost-recovery proceedings for fires ignited prior to July 12, 2019. SCE will continue to evaluate the probability of recovery based on available evidence, including judicial, legislative and regulatory decisions, including any CPUC decisions illustrating the interpretation and/or application of the prudency standard when making determinations regarding recovery of uninsured wildfire-related costs. While the CPUC has not made a determination regarding SCE's prudency relative to any of the 2017/2018 Wildfire/Mudslide Events, SCE is unable to conclude, at this time, that uninsured CPUC-jurisdictional wildfire-related costs are probable of recovery through electric rates. SCE would record a regulatory asset at the time it obtains sufficient information to support a conclusion that recovery is probable.
Through the operation of its FERC Formula Rate, and based upon the precedent established in SDG&E's recovery of FERC-jurisdictional wildfire-related costs, SCE believes it is probable it will recover its FERC-jurisdictional wildfire and mudslide related costs and has recorded total expected recoveries of $382 million within the FERC balancing account. This was the FERC portion of the total estimated losses accrued. As of March 31, 2023, collections have reduced the regulatory assets remaining in the FERC balancing account to $63 million.
In July 2019, SCE filed a CEMA application with the CPUC to seek recovery of, among other things, approximately $60 million of capital expenditures and capital related expenses incurred to restore service to customers and to repair, replace and restore buildings and SCE's facilities damaged or destroyed as a result of six 2017 fires, primarily the Thomas and Koenigstein Fires. In August 2021, the CPUC issued a final decision which denied without prejudice SCE's application to recover a revenue requirement of $8 million for all losses.six 2017 wildfires on the basis that SCE did not demonstrate that it was prudent in relation to the Thomas and Rye fires and had failed to segregate the costs attributable to the other four fires. Of the $8 million revenue requirement that was denied, $6 million was for the Thomas and Rye fires. CAL FIRE has determined that the Thomas and Rye fires were caused by SCE equipment. The decision allows SCE to submit additional applications with the CPUC to recover the costs associated with the Thomas and Rye fires, does not specify a deadline for any such applications, and directs that SCE must prove it was prudent in relation to the Thomas and/or Rye fires, as applicable, in any such future applications. As required by the final decision with respect to the other four fires, SCE filed supplemental testimony in November 2021 segregating the restoration costs attributable to each such fire. In June 2022, the CPUC approved SCE's entire request with respect to the other four fires. As of March 31, 2023, SCE has $176 million in assets recorded in property, plant and equipment in relation to restoration costs related to the 2017/2018 Wildfire/Mudslide Events which may not be recoverable. These assets would be impaired if the restoration costs are permanently disallowed by the CPUC in future cost recovery proceedings. SCE expects to seek to recover costs incurred for reconstructing its system and restoring service to structures that were damaged or destroyed by the Thomas, Koenigstein and Woolsey Fires in future applications with the CPUC.
Post-2018 Wildfires
Several wildfires have significantly impacted portions of SCE's service territory after 2018 (the wildfires that originated in Southern California after 2018 where SCE's equipment may be alleged contractto be associated with the fire's ignition are referred to collectively as the "Post-2018 Wildfires"). Numerous claims related to the Post-2018 Wildfires have been initiated against SCE and tortEdison International. The SED is also conducting investigations with respect to several Post-2018 Wildfires.
Through March 31, 2023, SCE has recorded total estimated losses of $702 million, expected recoveries from insurance of $473 million and expected recoveries through electric rates of $166 million related to the Post-2018 Wildfires. The after-tax net charges to earnings recorded through March 31, 2023 have been $45 million.
As of March 31, 2023, SCE had paid $21 million under executed settlements related to the Post-2018 Wildfires and Edison International's and SCE's estimated losses for remaining alleged and potential claims related to the Post-2018 Wildfires was $681 million. As of the same date, SCE had assets for expected recoveries through insurance of $473 million and soughtthrough electric rates of $166 million on its consolidated balance sheets related to the Post-2018 Wildfires.
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Expected recoveries from insurance recorded for the Post-2018 Wildfires are supported by SCE's insurance coverage for multiple policy years. While Edison International and SCE may incur material losses in excess of the amounts accrued for certain of the Post-2018 Wildfires, Edison International and SCE expect that any losses incurred in connection with any such fire will be covered by insurance, subject to self-insured retentions and co-insurance, and expect that any such losses after expected recoveries from insurance and through electric rates will not be material.
2019 Saddle Ridge Fire
The "Saddle Ridge Fire," originated in Los Angeles County in October 2019 and burned approximately 9,000 acres, destroyed an estimated 19 structures, damaged an estimated 88 structures, and resulted in one fatality and injuries to 8 fire fighters. In an unsigned and undated report that SCE received in December 2022, the Los Angeles Fire Department stated with respect to the Saddle Ridge Fire that the cause of ignition was unintentional, the form of heat was undetermined, the item first ignited was undetermined and the material type first ignited was undetermined. The Los Angeles Fire Department report noted that no other competent ignition sources other than SCE’s transmission lines were found in the specific origin area of the Saddle Ridge Fire. SCE has been advised that the Los Angeles Fire Department investigation of the Saddle Ridge Fire remains open. A jury trial in the Saddle Ridge Fire litigation is currently set for January 2024. Based on pending litigation and without considering insurance recoveries, it is reasonably possible that SCE will incur a material loss in connection with the Saddle Ridge Fire, but the range of reasonably possible losses that could be incurred cannot be estimated at least $4 billionthis time. SCE has not accrued a charge for potential losses relating to the Saddle Ridge Fire.
2020 Bobcat Fire
The "Bobcat Fire" was reported in damagesthe vicinity of Cogswell Dam in Los Angeles County in September 2020. The United States Forest Service ("USFS") has reported that the Bobcat Fire burned approximately 116,000 acres in Los Angeles County, destroyed an estimated 87 homes, 1 commercial property and 83 minor structures, damaged an estimated 28 homes and 19 minor structures, and resulted in injuries to 6 firefighters. In addition, fire authorities have estimated suppression costs at $80 million. While SCE’s investigation remains ongoing, SCE’s information reflects that a camera in the vicinity of Cogswell Dam captured the initial stages of a fire with the first observed smoke approximately six minutes before a SCE circuit in the area experienced an anomaly (a relay). An investigation into the cause of the Bobcat Fire is being led by the USFS, and the USFS has taken a specific section of an SCE overhead conductor in the vicinity of Cogswell Dam into possession as part of its investigation. SCE understands that the USFS has also taken three tree branches in the area into possession. SCE expects to obtain and review additional information and materials in the possession of third parties during the course of its internal reviews and the litigation process. SCE has accrued material charges for potential losses relating to the Bobcat Fire. The accrued charges correspond to the lower end of the estimated range of reasonably possible losses that may be incurred in connection with the Bobcat Fire and are subject to change as additional information becomes available. While Edison International and SCE may incur a material loss in excess of the amount accrued, they cannot estimate the upper end of the range of reasonably possible losses that may be incurred.
2022 Coastal Fire
The "Coastal Fire" originated in Orange County in May 2022 and burned approximately 200 acres. The Orange County Fire Authority ("OCFA") has reported that the Coastal Fire destroyed 20 residential structures and damaged 11 residential structures. Two firefighters also reportedly sustained minor injuries. In addition, fire authorities have estimated suppression costs at approximately $3 million. While SCE's investigation remains ongoing, SCE's information reflects that a SCE circuit in the area experienced an anomaly (a relay) approximately 2 minutes prior to the reported time of the fire. An investigation into the cause of the Coastal Fire is being led by the OCFA. The OCFA has retained SCE equipment in connection with its investigation. SCE expects to obtain and review additional information and materials in the possession of third parties during the course of its internal reviews and the litigation process. SCE has accrued material charges for potential losses relating to the Coastal Fire. The accrued charges correspond to the lower end of the estimated range of reasonably possible losses that may be incurred in connection with the Coastal Fire and are subject to change as additional information becomes available.
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While Edison International and SCE may incur a material loss in excess of the amount accrued, they cannot estimate the upper end of the range of reasonably possible losses that may be incurred.
2022 Fairview Fire
The "Fairview Fire" originated in Riverside County in September 2022 and burned approximately 28,000 acres. CAL FIRE has reported that the Fairview Fire destroyed 22 residential structures, damaged 5 residential structures, and destroyed or damaged 17 minor structures. CAL FIRE also reported 2 civilian fatalities, 1 civilian injury and 2 injuries to responding fire personnel. In addition, fire authorities have estimated suppression costs at $39 million. While SCE's investigation remains ongoing, SCE's information reflects that a SCE circuit in the area experienced an anomaly (relay) approximately 8 minutes prior to the reported start time of the fire. An investigation into the cause of the Fairview Fire is being led by CAL FIRE. CAL FIRE has retained SCE equipment in connection with its investigation. SCE expects to obtain and review additional information and materials in the possession of third parties during the course of its internal reviews and the litigation process. SCE has accrued material charges for potential losses relating to the Fairview Fire. The accrued charges correspond to the lower end of the estimated range of reasonably possible losses that may be incurred in connection with the Fairview Fire and are subject to change as additional information becomes available. While Edison International and SCE may incur a material loss in excess of the amount accrued, they cannot estimate the upper end of the range of reasonably possible losses that may be incurred.
Loss Estimates for Third Party Claims and Potential Recoveries from Insurance and through Electric Rates
At March 31, 2023 and December 31, 2022, Edison International's and SCE's consolidated balance sheets included accrued estimated losses of $681 million and $682 million, respectively, for the Post-2018 Wildfires.
The following table presents changes in estimated losses since December 31, 2022:
| | | |
(in millions) |
| | |
Balance at December 31, 2022 | | $ | 682 |
Increase in accrued estimated losses | |
| 6 |
Amounts paid | |
| (7) |
Balance at March 31, 2023 | | $ | 681 |
For the three months ended March 31, 2023 and 2022, Edison International's and SCE's consolidated statements of income included charges for the estimated losses, net of expected recoveries from insurance and customers, related to the Post-2018 Wildfires as follows, respectively:
| | | | | | |
| | Three months ended March 31, | ||||
(in millions) |
| 2023 |
| 2022 | ||
Edison International and SCE: | | | | | | |
Charge for wildfire-related claims | | $ | 6 | | $ | 105 |
Expected insurance recoveries | |
| — | |
| (96) |
Total pre-tax charge | |
| 6 | |
| 9 |
Income tax benefit | | | (2) | | | (2) |
Total after-tax charge | | $ | 4 | | $ | 7 |
Recovery of SCE's losses realized in connection with the Post-2018 Wildfires in excess of available insurance is subject to approval by regulators. The CPUC and FERC may not allow SCE to recover uninsured losses through electric rates if it is determined that such losses were not prudently incurred. Under accounting standards for rate-regulated enterprises, SCE defers costs as regulatory assets when it concludes that such costs are probable of future recovery in electric rates. SCE utilizes objectively determinable evidence to form its view on behalfthe probability of itselffuture recovery. As discussed above, there is evidence of a California investor-owned utility seeking recovery for uninsured wildfire-related costs and FERC allowing recovery of all FERC-jurisdictional wildfire-related costs while the CPUC rejected recovery of all CPUC-jurisdictional
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wildfire-related costs based on a determination that the utility did not meet the CPUC's prudency standard. This evidence was prior to the adoption of AB 1054 on July 12, 2019, after which date AB 1054 clarified that the CPUC must find a utility to be prudent if the utility's conduct related to the ignition was consistent with actions that a reasonable utility would have undertaken in good faith under similar circumstances, at the relevant point in time, and based on the information available at that time. Further, utilities with a valid safety certification at the time of the relevant wildfire will be presumed to have acted prudently related to a wildfire ignition unless a party in the cost recovery proceeding creates serious doubt as to the reasonableness of the utility's conduct, at which time, the burden shifts back to the utility to prove its 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.conduct was prudent. Each of the Post-2018 Wildfires was ignited after July 12, 2019, and SCE has held a valid safety certificate since July 15, 2019. While a California investor-owned utility has not yet sought recovery for uninsured claims and other San Onofre owners (SDG&Ecosts related to wildfires ignited after the adoption of AB 1054, SCE believes that for fires ignited after July 12, 2019, and Riverside) sued MHI, alleging claims arising from MHI's supplyinginvestor-owned utilities holding a safety certificate at the faulty steam generators. These litigation claims have been stayed pendingtime of the arbitration. Thefire, the CPUC will apply a standard of review similar to that applied by the FERC which presumes all costs requested by an investor-owned utility are reasonable and prudent unless serious doubt as to the reasonableness of the utility’s conduct is raised. As such, SCE has concluded, at this time, that both uninsured CPUC-jurisdictional and uninsured FERC-jurisdictional wildfire-related costs related to the Post-2018 Wildfires, other co-owners were addedthan for those already authorized for inclusion in electric rates, are probable of recovery through electric rates. As of March 31, 2023, SCE has recorded total expected recoveries related to the Post-2018 Wildfires of $152 million within the WEMA and risk management balancing account and $14 million within the FERC balancing account. SCE will continue to evaluate the probability of recovery based on available evidence, including regulatory decisions, including any CPUC decisions illustrating the interpretation and/or application of the prudency standard under AB 1054, and, for each applicable fire, evidence that could cast serious doubt as to the reasonableness of SCE's conduct relative to that fire.
Wildfire Insurance Coverage
SCE has approximately $1.0 billion of wildfire-specific insurance coverage for events that may occur during the period July 1, 2022 through June 30, 2023, subject to up to $100 million of self-insured retention and co-insurance per fire, which results in aggregate net coverage of approximately $937 million. Of this coverage, approximately $102 million is provided by EIS and approximately $835 million is provided by other commercial insurance carriers (commercial insurance carriers other than EIS are referred to herein as "Third-Party Commercial Insurers"). SCE has approximately $1.0 billion of wildfire-specific insurance coverage for events that occurred during the period July 1, 2021 through June 30, 2022, subject to up to $100 million of self-insured retention and co-insurance per fire, as well as additional claimantsco-insurance of up to $63 million for the policy year, which resulted in net coverage of approximately $875 million provided by Third-Party Commercial Insurers and $28 million provided by EIS for part of the arbitration. In March 2017,policy year.
SCE believes that its insurance coverage for the arbitration tribunal found MHI liableJuly 1, 2022 through June 30, 2023 period meets its obligation to maintain reasonable insurance coverage under AB 1054. Edison International and SCE record a receivable for breachinsurance recoveries when recovery of contract, but rejected claimants' other claims. The tribunal found that damages were subject to contractual limitations on liability. In addition, the tribunal ordered the claimants to pay MHI's legal costs but rejected MHI's counterclaims. The net recovery awarded to SCE was initiallya recorded loss is determined to be $52 million. An adjustmentprobable.
SCE's wildfire insurance expense for the July 1, 2022 through June 30, 2023 policy period will be approximately
$450 million, of which $357 million is paid to Third-Party Commercial Insurers. SCE's wildfire insurance expense for the July 1, 2021 through June 30, 2022 policy period was approximately $437 million, of which $413 million was paid to Third-Party Commercial Insurers. The difference between the Third-Party Commercial Insurer cost and total cost in both policy years was paid in premiums to EIS. Wildfire insurance premiums paid for the July 1, 2021 through June 30, 2022 and July 1, 2022 through June 30, 2023 policy periods are being recovered through customer rates. See Note 17 for further information.
While SCE's cost of obtaining wildfire insurance coverage from Third-Party Commercial Insurers was lower in 2022 compared to 2021, SCE's cost of obtaining wildfire insurance coverage in recent years is significantly higher than costs incurred prior to the interest awarded2017/2018 Wildfire/Mudslide Events due to, among other things, the number of significant wildfire events throughout California and the application of inverse condemnation to investor-owned utilities. While SCE subsequently reduced the net recoveryis required to $47 million. Asmaintain reasonable insurance coverage under AB 1054, SCE may not be able to obtain a resultreasonable amount of uncertainty associated with the allocationwildfire
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insurance, at a reasonable cost, from Third-Party Commercial Insurers for future policy periods. Subject to obtaining CPUC approval, SCE recorded a regulatory liabilityplans to expand its use of self-insurance for wildfire insurance coverage. SCE expects to obtain wildfire-specific insurance coverage for the net recovery.
Environmental Remediation
SCE records its environmental remediation and restoration liabilities when site assessments and/or remedial actions are probable and a range of reasonably likely cleanup costs can be estimated. SCE reviews its sites and measures the liability quarterly, by assessing a range of reasonably likely costs for each identified site using currently available information, including existing technology, presently enacted laws and regulations, experience gained at similar sites, and the probable level of involvement and financial condition of other potentially responsible parties. These estimates include costs for site investigations, remediation, operation and maintenance, monitoring, and site closure. Unless there is a single probable amount, SCE records the lower end of this reasonably likely range of costs (reflected in "Other long-term liabilities") at undiscounted amounts as timing of cash flows is uncertain.
At September 30, 2017,March 31, 2023, SCE's recorded estimated minimum liability to remediate its 1926 identified material sites (sites with a liability balance at September 30, 2017,March 31, 2023, in which the upper end of the range of theexpected costs is at least $1 million) was $125$254 million, including $74$164 million related to San Onofre. In addition to these sites, SCE also has 1712 immaterial sites with a liability balance as of September 30, 2017,March 31, 2023, for which the total minimum recorded liability was $4$3 million. Of the $129$257 million total environmental remediation liability for SCE, $123$238 million has been recorded as a regulatory asset. SCE expects to recover $46$36 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)sites in this mechanism) and $77$202 million through a mechanismproceedings that allowsallow SCE to recover up to 100% of the costs incurred at certain sites through customer rates. SCE's identified sites include several sites for which there is a lack of currently available information, including the nature and magnitude of contamination, and the extent, if any, that SCE may be held responsible for contributing to any costs incurred for remediating these sites. Thus, no reasonable estimate of cleanup costs can be made for these sites.
The ultimate costs to clean up SCE's identified sites may vary from its recorded liability due to numerous uncertainties inherent in the estimation process, such as: the extent and nature of contamination; the scarcity of reliable data for identified sites; the varying costs of alternative cleanup methods; developments resulting from investigatory studies; the possibility of identifying additional sites; and the time periods over which site remediation is expected to occur. SCE believes that, due to these uncertainties, it is reasonably possible that cleanup costs at the identified material sites and immaterial sites could exceed its recorded liability by up to $151$118 million and $8 million, respectively. The upper limit of this range of costs was estimated using assumptions least favorable to SCE among a range of reasonably possible outcomes.
SCE expects to clean up and mitigate its identified sites over a period of up to 3040 years. Remediation costs for each of the next five years are expected to range from $5$8 million to $17$29 million. Costs incurred for the ninethree months ended September 30, 2017March 31, 2023 and 20162022 were $6 million and $3 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 $1.06 billion.$50 million and $1.1 billion, respectively. If
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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$30 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.$560 million for San Onofre and $13.7 billion for Palo Verde. SCE and other owners of San Onofre and Palo Verde have purchased the maximum private primary insurance available through a Facility Form issued by American Nuclear Insurers. SCE withdrew from participation in the secondary insurance pool for San Onofre for offsite liability insurance effective January 5, 2018. Based on its ownership interests in Palo Verde, SCE could be required to pay a maximum of approximately $65 million per nuclear incident for future incidents. However, it would have to pay no more than approximately $10 million per future incident in any one year. Based on its ownership interests in San Onofre and Palo Verde prior to January 5, 2018, SCE could be required to pay a maximum of approximately $255 million per nuclear incident. However, it would have to pay no more than approximatelyincident and a maximum of $38 million per year per incident for liabilities arising from events prior to January 5, 2018, although SCE is not aware of any such events.
Note 13. Equity
Common Stock Issuances
As of March 31, 2023, Edison International has not issued any shares through its "at-the-market" ("ATM") program established in any one year.
Edison International continued to settle its ongoing common stock requirements of various internal programs through issuance of new common stock. During the three months ended March 31, 2023, 324,438 shares of common stock were issued as stock compensation awards for net cash receipts of $11 million, 67,314 shares of new common stock were issued in lieu of distributing $5 million to shareholders opting to receive dividend payments in the 2016 Form 10-K.
Note 13.14. Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss, net of tax, consist of:
| | | | | | | | | | | | |
| | | Edison International | | | SCE | ||||||
| | Three months ended March 31, | ||||||||||
(in millions) |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
Beginning balance | | $ | (11) | | $ | (54) | | $ | (8) | | $ | (32) |
Pension and PBOP: | |
|
| |
|
| |
|
| |
|
|
Reclassified from accumulated other comprehensive loss1 | |
| — | |
| 2 | |
| — | |
| 1 |
Foreign currency translation adjustments | | | 2 | | | — | | | — | | | — |
Change | |
| 2 | |
| 2 | |
| — | |
| 1 |
Ending Balance | | $ | (9) | | $ | (52) | | $ | (8) | | $ | (31) |
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
| (in millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||
| Beginning balance | $ | (48 | ) | $ | (53 | ) | $ | (53 | ) | $ | (56 | ) | |||
| Pension and PBOP – net loss: | |||||||||||||||
Reclassified from accumulated other comprehensive loss1 | 2 | 2 | 5 | 5 | |||||||||||
| Other | (2 | ) | — | — | — | ||||||||||
| Change | — | 2 | 5 | 5 | |||||||||||
| Ending Balance | $ | (48 | ) | $ | (51 | ) | $ | (48 | ) | $ | (51 | ) | |||
| 1 | |
| These items are included in the computation of net periodic pension and PBOP Plan expense. See Note |
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| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
| (in millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||
| Beginning balance | $ | (18 | ) | $ | (20 | ) | $ | (20 | ) | $ | (22 | ) | |||
| Pension and PBOP – net loss: | |||||||||||||||
Reclassified from accumulated other comprehensive loss1 | — | 1 | 2 | 3 | |||||||||||
| Change | — | 1 | 2 | 3 | |||||||||||
| Ending Balance | $ | (18 | ) | $ | (19 | ) | $ | (18 | ) | $ | (19 | ) | |||
| 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 | |||||||
| | | | | |
| Three months ended | ||||
| March 31, | ||||
(in millions) | 2023 |
| 2022 | ||
SCE other income (expense): | |
|
| |
|
Equity allowance for funds used during construction | $ | 36 | | $ | 30 |
Increase in cash surrender value of life insurance policies and life insurance benefits |
| 11 | |
| 16 |
Interest income |
| 60 | |
| 3 |
Net periodic benefit income – non-service components |
| 26 | |
| 34 |
Civic, political and related activities and donations |
| (9) | |
| (9) |
Other |
| (4) | |
| (3) |
Total SCE other income |
| 120 | |
| 71 |
Other income (expense) of Edison International Parent and Other: |
|
| |
|
|
Net loss on equity securities |
| (3) | |
| (2) |
Other |
| 2 | |
| (1) |
Total Edison International other income | $ | 119 | | $ | 68 |
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) | 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 | |||||||||||
| | | | | | | | | | | | |
| | Edison International | | SCE | ||||||||
| | Three months ended March 31, | ||||||||||
(in millions) |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
Cash payments (receipts): |
| |
|
| |
|
| |
|
| |
|
Interest, net of amounts capitalized | | $ | 326 | | $ | 275 | | $ | 292 | | $ | 253 |
Income taxes, net | |
| — | |
| (60) | |
| — | |
| (42) |
Non-cash financing and investing activities: | |
| | |
| | |
| | |
| |
Dividends declared but not paid: | |
| | |
| | |
| | |
| |
Common stock | |
| 282 | |
| 267 | |
| 350 | |
| 325 |
Preference stock of SCE | |
| 8 | |
| 4 | |
| 8 | |
| 4 |
SCE's accrued capital expenditures at September 30, 2017March 31, 2023 and 20162022 were $319$592 million and $268$728 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
SCE has previously purchased wildfire liability insurance from EIS, a wholly-owned subsidiary of Edison International. In July 2022, SCE purchased wildfire liability insurance for premiums of $273 million, from EIS for the period to June 30, 2023. EIS fully reinsured the exposure for these policies through the commercial reinsurance market, with reinsurance limits and premiums equal to those of the insurance purchased by SCE, except for a contract for a premium of $93 million under which EIS provided insurance protection to SCE. SCE recorded the premium as insurance expense and recorded equal revenue due to customer funding through regulatory cost recovery mechanisms, therefore there was no earnings impact on SCE's consolidated statement of income. EIS recorded the premium as insurance revenue. On the Edison International consolidated statement of income, the EIS insurance revenue eliminated with SCE's insurance expense, therefore the SCE customer revenues increased the earnings of Edison International. The amount of insurance expense and corresponding revenue was $22 million for the three months ended March 31, 2023.
The related-party transactions included in SCE's consolidated balance sheets for wildfire-related insurance purchased from EIS and related expected insurance recoveries were as follows:
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| | | | | | |
| | March 31, | | December 31, | ||
(in millions) |
| 2023 |
| 2022 | ||
Prepaid insurance1 | | $ | 53 | | $ | 106 |
Long-term insurance receivable due from affiliate | | | 334 | | | 334 |
1 | Reflected in "Prepaid expenses" on SCE's consolidated balance sheets. |
The expense for wildfire-related insurance premiums paid to EIS was $66 million and $39 million for the three months ended March 31, 2023 and 2022, respectively.
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Disclosure Controls and Procedures
The management of Edison International and SCE, under the supervision and with the participation of Edison International's and SCE's respective Chief Executive Officers and Chief Financial Officers, have evaluated the effectiveness of Edison International's and SCE's disclosure controls and procedures (as that term is defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended), respectively, as of the end of the thirdfirst quarter of 2017.2023. Based on that evaluation, Edison International's and SCE's respective Chief Executive Officers and Chief Financial Officers have each concluded that, as of the end of the period, Edison International's and SCE's disclosure controls and procedures, respectively, were effective.
Changes in Internal Control Over Financial Reporting
There were no changes in Edison International's or SCE's internal control over financial reporting, respectively, during the thirdfirst quarter of 20172023 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 EquipmentEquipment" in the 20162022 Form 10-K.
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2017/2018 Wildfire/Mudslide Events
Multiple lawsuits related to the 2017/2018 Wildfire/Mudslide Events naming SCE as a defendant have been filed by three categories of plaintiffs: individual plaintiffs, subrogation plaintiffs and public entity plaintiffs. A number of the lawsuits also name Edison International as a defendant and some of the lawsuits were filed as purported class actions. The litigation could take a number of years to be resolved because of the complexity of the matters and number of plaintiffs.
As of April 25, 2023, SCE was aware of approximately 150 pending unsettled lawsuits, representing approximately 1,000 plaintiffs, related to the Thomas and Koenigstein Fires naming SCE as a defendant. Approximately 100 of the approximately 150 lawsuits also name Edison International as a defendant based on its ownership and alleged control of SCE. One of the lawsuits was filed as a purported class action. The lawsuits, which have been filed in the superior courts of Ventura, Santa Barbara and Los Angeles Counties allege, among other things, negligence, inverse condemnation, trespass, private nuisance, and violations of the public utilities and health and safety codes. SCE and certain of the individual plaintiffs in the Thomas and Koenigstein Fire litigation have been pursuing settlements of claims under a mediation program adopted to promote an efficient and orderly settlement process. Some individual plaintiffs have opted to pursue trial outside of the settlement program.
Approximately 50 of the approximately 150 pending unsettled lawsuits mentioned in the paragraph above allege that SCE has responsibility for the Thomas and/or Koenigstein Fires and that the Thomas and/or Koenigstein Fires proximately caused the Montecito Mudslides, resulting in the plaintiffs' claimed damages. Many of the Montecito Mudslides lawsuits also name Edison International as a defendant based on its ownership and alleged control of SCE. In addition to other causes of action, some of the Montecito Mudslides lawsuits also allege personal injury and wrongful death.
As of April 25, 2023, SCE was aware of approximately 350 currently pending unsettled lawsuits, representing approximately 3,000 plaintiffs, related to the Woolsey Fire naming SCE as a defendant. Approximately 300 of the 350 lawsuits also name Edison International as a defendant based on its ownership and alleged control of SCE. At least one of the lawsuits was filed as a purported class action. The lawsuits, which have been filed in the superior courts of Ventura and Los Angeles Counties allege, among other things, negligence, inverse condemnation, personal injury, wrongful death, trespass, private nuisance, and violations of the public utilities and health and safety codes. SCE and certain of the individual plaintiffs in the Woolsey Fire litigation have been pursuing settlements of claims under a mediation program adopted to promote an efficient and orderly settlement process. Some individual plaintiffs may opt to pursue trial outside of the settlement program.
The Thomas and Koenigstein Fires and Montecito Mudslides lawsuits are being coordinated in the Los Angeles Superior Court. The Woolsey Fire lawsuits have also been coordinated in the Los Angeles Superior Court.
For further information, including regarding settlement activity related to the 2017/2018 Wildfire/Mudslide Events, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides."
Environmental Proceedings
Each of Equity Securities by Edison International and Affiliated PurchasersSCE have elected to disclose environmental proceedings described in Item 103(c)(3)(iii) of Regulation S-K unless it reasonably believes that such proceeding will result in no monetary sanctions, or in monetary sanctions, exclusive of interest and costs, of less than $1,000,000.
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| 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 | — | — | |||||||
EXHIBITS
|
| 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 | — | |||||||
|
ExhibitNumber | Description | |
| | |
10.1** | | Edison International 2023 Long-Term Incentives Terms and Conditions |
| | |
31.1 | | |
| | |
31.2 | | |
| | |
32.1 | | |
| | |
32.2 | | |
| | |
101.1 | | Financial statements from the quarterly report on Form 10-Q of Edison International for the quarter ended |
| | |
101.2 | | Financial statements from the quarterly report on Form 10-Q of Southern California Edison Company for the quarter ended |
| | |
104 | | The cover page of this report formatted in Inline XBRL (included as Exhibit 101) |
Edison International and SCE will furnish a copy of Form 10-Kany exhibit listed in the accompanying Exhibit Index upon written request and upon payment to Edison International or SCE of their reasonable expenses of furnishing such exhibit, which shall be limited to photocopying charges and, if mailed to the requesting party, the cost of first-class postage.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.
| ||||
EDISON INTERNATIONAL | | SOUTHERN CALIFORNIA EDISON COMPANY | ||
| | | | |
By: | /s/ | | By: | /s/ |
| ||||
Kate Sturgess Vice President and Controller (Duly Authorized Officer and Principal Accounting Officer) | | | Kate Sturgess Vice President and Controller (Duly Authorized Officer and Principal Accounting Officer) | |
| | | | |
Date: | May 2, 2023 | | Date: | May 2, 2023 |
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