SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
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(Mark One) | ||||||||
☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||
| For the transition period from to |
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Commission | Exact Name of Registrant | | State or Other Jurisdiction of | IRS Employer | ||||||||||||||||
1-9936 | | EDISON INTERNATIONAL | | California | | 95-4137452 | ||||||||||||||
1-2313 | | SOUTHERN CALIFORNIA EDISON COMPANY | | California | | 95-1240335 |
EDISON INTERNATIONAL | SOUTHERN CALIFORNIA EDISON COMPANY | |||||||||||||||||||||||||||||||
2244 Walnut Grove Avenue | 2244 Walnut Grove Avenue | |||||||||||||||||||||||||||||||
(P.O. Box 976) | (P.O. Box 800) | |||||||||||||||||||||||||||||||
Rosemead, | California | 91770 | Rosemead, | California | 91770 | |||||||||||||||||||||||||||
(Address of principal executive offices) | (Address of principal executive offices) | |||||||||||||||||||||||||||||||
(626) | 302-2222 | (626) | 302-1212 | |||||||||||||||||||||||||||||
(Registrant's telephone number, including area code) | (Registrant's telephone number, including area code) |
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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
: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 ☐ |
Edison International Yes þ No oSouthern California Edison Company Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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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 |
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| ☑ | | ☐ | | ☐ |
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 | ||||||||||||||||||
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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 | 379,438,053 Shares | |||
Southern California Edison Company | 434,888,104 Shares |
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SEC Form 10-Q | ||||||||||||||||||||||||||
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This is a combined Form 10-Q separately filed by Edison International and Southern California Edison Company. Information contained herein relating to an individual company is filed by such company on its own behalf.
iii
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 | ||||
2019/2020 Wildfires | | wildfires that originated in Southern California in 2019 and 2020 where SCE's equipment may be alleged to be associated with the fire's ignition | |||
2020 Form 10-K | | Edison | |||
AB 1054 | | California Assembly Bill 1054, executed by the governor of California on July 12, 2019 | |||
AB 1054 Excluded Capital Expenditures | approximately $1.6 billion in wildfire risk mitigation capital expenditures that SCE will exclude 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, 2020 to December 31, 2022, the current compliance period for SCE's CPUC authorized capital structure | |||
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 | ||||
CEMA |
| Catastrophic Event Memorandum Accounts | |||
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 | |||
DERs | | distributed energy resources | |||
Edison Energy | Edison Energy, LLC, a wholly-owned subsidiary of Edison Energy Group that is engaged in the competitive business of providing data-driven energy | ||||
Edison Energy Group | Edison Energy Group, Inc., | ||||
Edison International Proxy Statement | | Proxy Statement to be filed with the SEC in connection with Edison International's Annual Meeting of Shareholders' held on April 22, 2021 | |||
Electric Service Provider | an entity that offers electric power and ancillary services to retail customers, other than electrical corporations (like SCE) and CCAs | ||||
ERRA | Energy Resource Recovery Account | ||||
FERC | Federal Energy Regulatory Commission | ||||
FHPMA | |||||
Fire Hazard Prevention Memorandum Account | |||||
Fitch | | Fitch Ratings, Inc. | |||
GAAP | | generally accepted accounting principles | |||
GHG | | greenhouse gas | |||
GRC | | general rate case | |||
GS&RP | Grid Safety and Resiliency Program | ||||
iv
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 | |||
kV | | unit of electrical potential equal to 1000 volts | |||
MD&A | | Management's Discussion and Analysis of Financial Condition and Results | |||
Montecito Mudslides | | the | |||
Moody's | | Moody's Investors Service, Inc. | |||
NERC |
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North American Electric Reliability Corporation | |||||
NRC | | Nuclear Regulatory Commission | |||
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 |
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Pacific Gas & Electric Company | |||||
PSPS | | Public Safety Power Shutoffs | |||
ROE | | return on common equity | |||
RPS |
| renewables portfolio standard | |||
S&P | | Standard & Poor's Financial Services LLC | |||
San Onofre | | retired nuclear generating facility located in south San Clemente, California in which SCE holds a 78.21% ownership interest | |||
SCE | | Southern California Edison Company, a wholly-owned subsidiary of Edison International | |||
SDG&E | | San Diego Gas & Electric | |||
SEC | | U.S. Securities and Exchange Commission | |||
SED | | Safety and Enforcement Division of the CPUC | |||
April 2018 | |||||
Tax Reform | | Tax Cuts and Jobs Act signed into law on December 22, 2017 | |||
Thomas Fire | | a wind-driven fire that originated in the Anlauf Canyon area of Ventura County, California, on December 4, 2017 | |||
TKM | | collectively, the Thomas Fire, the Koenigstein Fire and the Montecito Mudslides | |||
TKM Subrogation Plaintiffs |
| the plaintiffs party to the TKM Subrogation Settlement, representing all the insurance subrogation plaintiffs in the TKM litigation at the time of the settlement | |||
TKM Subrogation Settlement |
| a settlement entered into by Edison International and SCE in September 2020 in the TKM litigation to which the TKM Subrogation Plaintiffs are party | |||
VCFD | | Ventura County Fire Department | |||
WEMA | | Wildfire Expense Memorandum Account | |||
WMP | | a wildfire mitigation plan required to be filed | |||
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 | |||
WSD | | Wildfire Safety Division of the CPUC |
v
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'sInternational’s and SCE'sSCE’s current expectations and projections about future events based on Edison International'sInternational’s and SCE'sSCE’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 to implement SCE's new customer service system and costs incurred as a result of the COVID-19 pandemic; |
● | ability of SCE to implement its WMP; |
● | risks of regulatory or legislative restrictions that would limit SCE’s ability to implement PSPS when conditions warrant or would otherwise limit SCE’s operational PSPS practices; |
● | risks associated with implementing PSPS, including regulatory fines and penalties, claims for damages and reputational harm; |
● | ability of SCE to maintain a valid safety certification; |
● | ability to obtain sufficient insurance at a reasonable cost, including insurance relating to SCE's nuclear facilities and 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 from customers or other parties; |
● | extreme weather-related incidents (including events caused, or exacerbated, by climate change, such as wildfires, debris flows, 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, operational issues (such as rotating outages and issues due to damaged infrastructure), PSPS activations and unanticipated costs; |
● | risks associated with AB 1054 effectively mitigating the significant risk 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 new prudency standard established under AB 1054; |
● | decisions and other actions by the CPUC, 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, wildfire mitigation efforts, and delays in executive, regulatory and legislative actions; |
● | ability of Edison International or SCE to borrow funds and access bank and capital markets on reasonable terms; |
1
● | risks associated with the decommissioning of San Onofre, including those related to worker and public safety, public opposition, permitting, governmental approvals, on-site storage of spent nuclear fuel, 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 transmission and distribution infrastructure investment program, including those related to project site identification, public opposition, environmental mitigation, construction, permitting, power curtailment costs (payments due under power contracts in the event there is insufficient transmission to enable acceptance of power delivery), changes in the CAISO's transmission plans, and governmental approvals; |
● | risks associated with the operation of transmission and distribution assets and power generating facilities, including 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 and effective tax rate; |
● | 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 rates of inflation, including escalation rates (which may be adjusted by public utility regulators); |
● | governmental, statutory, regulatory, or administrative changes or initiatives affecting the electricity industry, including the market structure rules applicable to each market adopted by the NERC, CAISO, Western Electricity Council, and similar regulatory bodies in adjoining regions, and changes in the United States' and California's environmental priorities that lessen the importance the state places on GHG reduction; |
● | availability and creditworthiness of counterparties and the resulting effects on liquidity in the power and fuel markets and/or the ability of counterparties to pay amounts owed in excess of collateral provided in support of their obligations; |
● | cost and availability of labor, equipment and materials; |
● | potential for penalties or disallowance for non-compliance with applicable laws and regulations; and |
2
● | cost of fuel for generating facilities and related transportation, which could be impacted by, among other things, disruption of natural gas storage facilities, to the extent not recovered through regulated rate cost escalation provisions or balancing accounts. |
Additional information about risks and uncertainties, including more detail about the factors described in this report, is contained throughout this report and in the 20192020 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 20192020 Form 10-K, and carefully consider the risks, uncertainties, and other factors that affect Edison International'sInternational’s and SCE'sSCE’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.
The MD&A for the sixthree months ended June 30, 2020March 31, 2021 discusses material changes in the consolidated financial condition, results of operations and other developments of Edison International and SCE since December 31, 20192020 and as compared to the sixthree months ended June 30, 2019.March 31, 2020. This discussion presumes that the reader has read or has access to Edison International'sInternational’s and SCE'sSCE’s MD&A for the calendar year 20192020 (the "2019"2020 MD&A"), which was included in the 20192020 Form 10-K.
Except when otherwise stated, references to each of Edison International, SCE, or Edison Energy Group mean each such company with its subsidiaries on a consolidated basis. References to "Edison International Parent and Other" mean Edison International Parent and its consolidated competitive subsidiaries and "Edison International Parent" mean Edison International on a stand-alone basis, not consolidated with its subsidiaries. Unless otherwise described, all the information contained in this report relates to both filers.
3
Edison International is the parent holding company of SCE and Edison Energy Group. SCE is an investor-owned public utility primarily engaged in the business of supplying and delivering electricity to customers in an approximately 50,000 square mile area of southern California. Edison Energy Group is a holding company for Edison Energy which is engaged in the competitive business of providing data-driven energy servicessolutions to commercial, institutional and industrial customers. Edison Energy's business activities are currently not material to report as a separate business segment. Except when otherwise stated, references to each of
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(in millions) |
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| 2020 |
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Net income (loss) attributable to Edison International |
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SCE | | $ | 296 | | $ | 219 | | $ | 77 |
Edison International Parent and Other | |
| (37) | |
| (36) | |
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Edison International | |
| 259 | |
| 183 | |
| 76 |
Less: Non-core items | |
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SCE | |
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2017/2018 Wildfire/Mudslide Events expenses | | | (4) | | | — | | | (4) |
Wildfire Insurance Fund expense | |
| (38) | |
| (60) | |
| 22 |
Re-measurement of tax liabilities | | | — | | | 18 | | | (18) |
Edison International Parent and Other | |
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Re-measurement of tax liabilities | | | — | | | (3) | | | 3 |
Total non-core items | |
| (42) | |
| (45) | |
| 3 |
Core earnings (losses) | |
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SCE | |
| 338 | |
| 261 | |
| 77 |
Edison International Parent and Other | |
| (37) | |
| (33) | |
| (4) |
Edison International | | $ | 301 | | $ | 228 | | $ | 73 |
Edison International, SCE, or Edison Energy Group mean each such company with its subsidiaries on a consolidated basis. 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 June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | 2020 | 2019 | Change | 2020 | 2019 | Change | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to Edison International | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SCE | $ | 381 | $ | 419 | $ | (38) | $ | 600 | $ | 712 | $ | (112) | ||||||||||||||||||||||||||||||||||||||||||||
Edison International Parent and Other | (63) | (27) | (36) | (99) | (42) | (57) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Edison International | 318 | 392 | (74) | 501 | 670 | (169) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Less: Non-core items | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SCE | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wildfire Insurance Fund expense | (60) | — | (60) | (120) | — | (120) | ||||||||||||||||||||||||||||||||||||||||||||||||||
2017/2018 Wildfire/Mudslide expenses | (9) | — | (9) | (9) | — | (9) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Disallowed historical capital expenditures in SCE's 2018 GRC decision | — | (123) | 123 | — | (123) | 123 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Sale of San Onofre nuclear fuel | 37 | — | 37 | 37 | 3 | 34 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Re-measurement of uncertain tax positions related to tax years 2010 – 2012 | — | — | — | 18 | — | 18 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Re-measurement of deferred taxes | — | — | — | — | 69 | (69) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Edison International Parent and Other | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill impairment | (25) | — | (25) | (25) | — | (25) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Re-measurement of uncertain tax positions related to tax years 2010 – 2012 | — | — | — | (3) | — | (3) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total non-core items | (57) | (123) | 66 | (102) | (51) | (51) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Core earnings (losses) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SCE | 413 | 542 | (129) | 674 | 763 | (89) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Edison International Parent and Other | (38) | (27) | (11) | (71) | (42) | (29) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Edison International | $ | 375 | $ | 515 | $ | (140) | $ | 603 | $ | 721 | $ | (118) |
Edison International's secondInternational’s first quarter 20202021 earnings decreased $74increased $76 million from the secondfirst quarter of 2019,2020, resulting from a decreasean increase in SCE'sSCE’s earnings of $38$77 million and an increase in Edison International Parent and Other'sOther’s losses of $36$1 million. SCE'sSCE’s higher earnings consists of $77 million of higher core earnings, and non-core losses consistent with the prior year.
The increase in SCE’s core earnings was primarily due to lower earnings consistedexpenses related to wildfire mitigation activities and employee benefits as well as higher income from the equity portion of $91allowance for funds used during construction ("AFUDC").
Edison International Parent and Other’s losses for the three months ended March 31, 2021, which are largely consistent with prior year, consist of $4 million of higher core losses, partially offset by $3 million of lower non-core losses and $129 millionlosses.
4
Consolidated non-core items for the sixthree months ended June 30,March 31, 2021 and 2020 and 2019 primarily included:
● | Charges of $53 million ($38 million after-tax) recorded in 2021 and $84 million ($60 million after-tax) recorded in 2020 from the amortization of SCE’s contributions to the Wildfire Insurance Fund. See "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies" for further information. |
● | A charge of $5 million ($4 million after-tax) in 2021 for 2017/2018 Wildfire/Mudslide Events expenses. |
● | An income tax benefit of $18 million and income tax expense of $3 million recorded in 2020 for SCE and Edison International Parent and Other, respectively, due to re-measurement of uncertain tax positions related to the 2010 – 2012 California state tax filings currently under audit. |
See "Results of Operations" for discussion of SCE and Edison International Parent and Other results of operations.
Southern California began experiencingWildfires and Mudslides
California has experienced unprecedented weather conditions in recent years and SCE's service territory remains susceptible to additional wildfire activity in 2021 and beyond. The worsening conditions across California increase the impactslikelihood of the COVID-19 pandemic in the first quarter of 2020. The total impacts of the pandemic are still emerging and will vary depending on the severity of impacts on society and the economy of the US and California, but itwildfires, including those where SCE's equipment may have a material impact on SCE's abilitybe alleged to execute its planned work, including wildfire mitigation and capital projects and on the liquidity, cash flows and results of operations of Edison International and SCE. Factors that may increase in severity or that may emerge to cause these impacts include lack of availability of company and contractor employees to perform their job functions, supply chain disruptions, stop-work orders and limitations on the ability to obtain permits for work from local governments, reduced electricity usage by commercial and industrial customers
In addition to the investments SCE had requested a revenue requirementis making through its WMP, SCE also uses PSPS program to proactively de-energize power lines to mitigate the risk of $7.6 billion.
SCE's equipment has been, and may further be, alleged to be associated with several wildfires that have originated in Southern California subsequent to 2018. Edison International and SCE expect that any losses incurred in connection with those fires will be covered by insurance, subject to self-insured retentions and co-insurance, and expect that any such losses after insurance recoveries will not be material.
2017/2018 Wildfire/Mudslide Events
As discussed in the second quarter of 2020 SCE entered into settlements with an immaterial number of individual plaintiffs inForm 10-K, multiple lawsuits related to the 2017/2018 Wildfire/Mudslide Events litigation under which it agreedhave been initiated against SCE and Edison International.
Through March 31, 2021, Edison International and SCE have recorded total pre-tax charges of $6.2 billion, expected recoveries from insurance of $2.0 billion and expected recoveries through FERC electric rates of $233 million related to pay an aggregate of approximately $16 million to those individual plaintiffs. SCE continues to explore settlement opportunities with other plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation.
As of the reasonably estimated range of expected losses that mayMarch 31, 2021, SCE had paid $2.4 billion under executed settlements and had $1.8 billion to be incurred in connection withpaid under executed settlements related to the 2017/2018 Wildfire/Mudslide EventsEvents. As of the same date, SCE had recovered $1.3 billion through insurance and is subject$142 million through FERC-jurisdictional electric rates.
After giving effect to change as additional information becomes available. Each reporting period, management reviews its loss estimatesall settlements entered into through March 31, 2021, Edison International and SCE's best estimate of expected losses for remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events was $2.0 billion. The remaining estimated losses for the 2017/2018 Wildfire/Mudslide Events do not include an estimate of any potential fines or penalties that could be levied against SCE in connection with the 2017/2018 Wildfire/Mudslide
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Events. The processEdison International and SCE are currently unable to reasonably estimate the magnitude of any such fines or penalties, or the associated timing if they were to be imposed. Estimated losses for estimating losses associated with wildfirethe 2017/2018 Wildfire/Mudslide Events litigation claims requires management to exercise significant judgmentare based on a number of assumptions and subjective factors, including, but not limited to: estimates of known and expected claims by third partiesare subject to change as additional information becomes available. Actual losses incurred may be higher or lower than estimated based on currently available information, opinionsseveral factors, including: the uncertainty as to the legal and factual determinations to be made during litigation, including uncertainty as to the contributing causes of counsel regardingthe 2017/2018 Wildfire/Mudslide Events, the complexities associated with fires that merge, whether inverse condemnation will be held applicable to SCE with respect to damages caused by the Montecito Mudslides, uncertainties related to the litigation risk,processes, the status ofuncertainty in estimating damages that may be alleged, and developments in the course of litigation, and prior experience litigating and settling wildfire litigation claims.
SCE will seek to offset anyCPUC-jurisdictional rate recovery of prudently-incurred, actual losses realized in connection with the 2017/2018 Wildfire/Mudslide Events with recoveries from insurance policies in place at the timeexcess of the events and, to the extent actual losses exceed insurance, through electric rates. As of June 30, 2020, Edison International and SCE have remaining expected recoveries from insurance of $1.6 billion and through FERC electric rates of $77 million on their consolidated balance sheets related to the 2017/2018 Wildfire/Mudslide Events.available insurance. SCE believes that, in light of the CPUC's decision in a cost recovery proceeding involving SDG&E arising from several 2007 wildfires in SDG&E's service area, there is substantial uncertainty regarding how the CPUC will interpret and apply its prudency standard to an investor-owned utility in future wildfire cost-recovery proceedings for fires ignited prior to July 12, 2019. Accordingly, while the CPUC has not made a determination regarding SCE's prudency relative to any of the 2017/2018 Wildfire/Mudslide Events, SCE is unable to conclude, at this time, that uninsured CPUC-jurisdictional wildfire-related costs are probable of recovery through electric rates.
Current Wildfire Insurance Coverage
SCE has approximately $1.0 billion of wildfire-specific insurance coverage for events that may occur during the period July 1, 2020 through June 30, 2021, subject to $50 million of self-insured retention and up to $80 million of co-insurance, and $50 million of self-insured retention, which results in net coverage of approximately $870 million. Various coverage limitations within the policies that make up SCE's wildfire insurance coverage could result in additional material self-insured costs, for instance in the event of multiple wildfire occurrences during a policy period or with a single wildfire with damages in excess of the policy limits.period. SCE believes that its insurance coverage
2019 Wildfire Legislation
In July 2019, AB 1054 was signed by the governor of California and became effective immediately. The summary of the wildfire legislation in this report is based on SCE'sSCE’s interpretation of the legislation and is qualified in its entirety by, and should be read together with, AB 1054 and companion Assembly Bill 111.
AB 1054 Prudency Standard
Under AB 1054, the CPUC must apply a new standard when assessing the prudency of a utility in connection with a request for recovery of wildfire costs for wildfires ignited after July 12, 2019. Utilities with a valid safety certification will be presumed to have acted prudently related to a wildfire ignition unless a party in the cost recovery proceeding creates serious doubt as to the reasonableness of the utility's conduct, at which time, the burden shifts back to the utility to prove its conduct was prudent. If a utility does not have a valid safety certification, it will have the burden to prove, based on a preponderance of evidence, that its conduct was prudent.
Wildfire Insurance Fund
AB 1054 also provided for the Wildfire Insurance Fund to reimburse utilitiesa utility for payment of certain third-party damage claims arising from certain wildfires that exceed, in aggregate in a calendar year, the greater of $1.0 billion or the utility's insurance coverage. The Wildfire Insurance Fund was established in September 2019 and is available for claims relatedcoverage required to wildfires ignited after July 12, 2019 that are determined bybe maintained under AB 1054. Through March 31, 2021, the responsible government investigatory agency to have been caused by a utility.
Participating investor-owned utilities will be reimbursed from the Wildfire Insurance Fund for eligible claims, subject to the fund administrator's review. Utilities participating in the Wildfire Insurance Fund are not required to reimburse the fund for amounts withdrawn from the fund that the CPUC finds were prudently incurred and can recover such prudently incurred wildfire costs through electric rates if the fund has been exhausted. SCE will reimburse the fund for any withdrawn amounts if SCE receives payment of such amounts under an indemnification agreement or from an insurance
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provider or other third-party. SCE will also be required to reimburse the fund for withdrawn amounts that the CPUC disallows subject in some instances, to the AB 1054 Liability Cap. A utility will not be eligible for the AB 1054 Liability Cap if it does not maintain a valid safety certification or its actions or inactions that resulted in the wildfire are found to constitute conscious or willful disregard of the rights and safety of others. Based on SCE's 2020forecasted weighted-average 2021 transmission and distribution rate base, excluding general plant and intangibles, and using the equity portion of SCE's CPUC authorized capital structure of 52%, SCE's requirement to reimburse the Wildfire Insurance Fund for eligible claims disallowed in 20202021 would be capped at approximately $3.0$3.2 billion. SCE will not be allowed to recover borrowing costs incurred to reimburse the fund for amounts that the CPUC disallows. The Wildfire Insurance Fund and, consequently, the AB 1054 Liability Cap, will terminate when the administrator determines that the fund has been exhausted.
Safety Certification and Wildfire Mitigation Plan
Under AB 1054, SCE can obtain an annual safety certification upon the submission of certain required safety information, including an approved wildfire mitigation plan.WMP. On July 25, 2019,September 17, 2020, SCE obtained its initiala safety certification that iswill be valid for 12 months. Notwithstanding its 12-month term, if SCE requests a new safety certification prior to the expiration of its initialcurrent safety certification, then its initialcurrent safety certification will remain valid until the CPUCWSD acts on itsSCE's request for a new safety certification.
SCE submittedfiled its request for a new safety certification2020 – 2022 WMP in JuneFebruary 2020.
Capital Expenditure Requirement
Under AB 1054, approximately $1.6 billion of spending by SCE on wildfire risk mitigation capital expenditures made after August 1, 2019, cannot be included in the equity portion of SCE's rate base. SCE can apply for irrevocable orders from the CPUC to finance these AB 1054 Excluded Capital Expenditures, including through the issuance of securitized bonds, and can recover any prudently incurred financing costs. In JulyNovember 2020, SCE applied forthe CPUC issued an irrevocable order from the CPUCpermitting SCE to finance $337approximately $340 million, comprised of AB 1054 Excluded Capital Expenditures incurred in connection with GS&RP and prudently incurred financing costs, through the issuance of securitized bonds. As of June 30, 2020,March 31, 2021, SCE has spent $811 million onapproximately $1.5 billion in AB 1054 Excluded Capital Expenditures. SCE issued securitized bonds in the amount of $338 million in February 2021 and expects to seek additional irrevocable orders from the CPUC to finance the remaining AB 1054 Excluded Capital Expenditures.
For further information, see in the 2019 Form 10-K "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—Initial and annual contributions to the wildfire insurance fund established pursuant to California Assembly Bill 1054" and in this reportthe 2020 Form 10-K and "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides" in this report.
CSRP
In April 2021, SCE implemented a new customer service system, which replaced a majority of SCE’s customer systems. The project is referred to as the Customer Service Re-Platform (CSRP). SCE has tracked the cost of the CSRP system implementation in a previously approved memorandum account and "Legal Proceedings."will seek CPUC recovery of the CSRP implementation costs in a future application anticipated to be filed with the CPUC in 2021. Total forecasted expenditures for the CSRP project are approximately $540 million in capital and $90 million in operations and maintenance from inception through 2021. If approved, the project is expected to increase SCE’s rate base by approximately $500 million by 2023.
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COVID-19
As discussed in the 2020 Form 10-K, the COVID-19 pandemic is having a significant impact on global society and economies. As a result of the pandemic, Edison International and SCE have experienced increased costs, but the pandemic has not had a pervasive impact on SCE's or Edison International's ability to operate their business.
As a result of the pandemic and increased estimates of uncollectible expenses, largely related to the economic impacts of the pandemic on SCE’s customers, SCE has recognized $231 million of incremental costs as of March 31, 2021, of which $87 million has been deferred to memorandum accounts for future CPUC reasonableness review and $144 million has been transferred to balancing accounts pending recovery. In addition to the increases in expected uncollectible accounts, SCE has incurred incremental costs associated with sequestering certain SCE employees at essential work locations and coordination of SCE's response to the emergency.
In April 2021, the CPUC issued a decision to adopt a COVID-19 disconnection moratorium for medium-large commercial and industrial electric customers and established a memorandum account to track, and seek recovery of, the resulting costs.
SCE expects to securitize $112 million of incremental residential uncollectible expenses associated with the economic effects of the COVID-19 pandemic, subject to approval of a financing order by the CPUC. See "Liquidity and Capital Resources—SCE—Regulatory Proceedings—Financing Order" for further details.
For further information see "Notes to the Consolidated Financial Statements—Note 11. Regulatory Assets and Liabilities" in this filing and "Management Overview—COVID-19" and "Risk Factors" in the 2020 MD&A.
2021 General Rate Case
The 2021 GRC consists of four separate tracks. Track 1 is similar to previous GRCs and addresses revenue requirements for the three-year period of 2021 – 2023. Tracks 2 and 3 address the reasonableness of 2018 – 2019 and 2020 wildfire mitigation costs that were incremental to amounts authorized in the 2018 GRC, respectively. In January 2020, a CPUC decision introduced a third attrition year in current and future GRCs. As a result, track 4 will address the revenue requirement for 2024. SCE is scheduled to submit its testimony for track 4 in May 2022.
As discussed in the 2020 Form 10-K, in the 2021 GRC, SCE has requested a test year revenue requirement of $7.6 billion, an approximately $1.3 billion increase over the 2020 revenue requirement authorized in the 2018 GRC as updated for post test-year ratemaking changes. SCE’s request proposes post test-year increases in 2022 and 2023 of $452 million and $524 million, respectively. SCE’s request excludes the revenue requirement associated with the approximately $1.6 billion of AB 1054 Excluded Capital Expenditures. The CPUC has approved the establishment of a memorandum account making the authorized revenue requirement changes effective January 1, 2021. SCE cannot predict the revenue requirement the CPUC will ultimately authorize or forecast the timing of a final decision. SCE is recognizing revenue based on the 2020 authorized revenue requirement until a GRC decision is issued.
For more information on tracks 2 and 3 of the 2021 GRC, see "Liquidity and Capital Resources—SCE—Regulatory Proceedings—Wildfire Related Regulatory Proceedings—2021 General Rate Case Wildfire Mitigation Memorandum Account Balances."
Wildfire Mitigation, Wildfire Insurance and Restoration Expenses
As discussed in the 2020 Form 10-K, 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 is currently incurring wildfire mitigation, wildfire insurance and wildfire and drought restoration related spending at levels significantly exceeding amounts authorized in its 2018 GRC.
As of March 31, 2021, SCE has recognized $901 million of regulatory assets related to incremental wildfire mitigation expenses, including depreciation expense from $1.8 billion of total incremental wildfire mitigation capital expenditures. The regulatory assets include $401 million of operations and maintenance expense approved for recovery in the GRC track 2 proceeding. SCE expects to securitize this amount, subject to approval of a financing order by the CPUC. See "Liquidity and Capital Resources—SCE—Regulatory Proceedings—Financing Order" for further details. In the event these costs are not authorized for securitization, SCE will include the costs in customer rates as soon as practicable.
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Additionally, SCE has recognized $397 million of regulatory assets associated with drought and wildfire restoration and $241 million of regulatory assets related to incremental wildfire insurance expenses. While SCE believes such costs are probable of future recovery, there is no assurance that SCE will collect all amounts currently deferred as regulatory assets.
In January 2021, the CPUC approved recovery of certain incremental wildfire mitigation expenses through track 2 of the 2021 GRC. In February 2021, the AB 1054 Excluded Capital Expenditures incurred in connection with GS&RP and prudently incurred financing costs previously deferred to memorandum accounts were recovered through securitization.
For additional information, see "Liquidity and Capital Resources—SCE" and "Liquidity and Capital Resources—SCE—Regulatory Proceedings—Wildfire Related Regulatory Proceedings."
Capital Program
Total capital expenditures (including accruals) were $2.3$1.1 billion and $2.0$1.0 billion for the first sixthree months ofended March 31, 2021 and 2020, and 2019, respectively. SCE forecasts capital expenditures
As discussed in the range2020 MD&A, in the absence of $19.4 billiona 2021 GRC decision, SCE has developed, and is executing against, a 2021 capital expenditure plan that will allow SCE to $21.2 billion for 2020 – 2023, which includes SCE's revised capital request reflectedmeet what is ultimately authorized in the 2021 GRC rebuttal testimony. SCE forecasts weighted average annual rate basedecision while minimizing the associated risk of $33.5 billion for 2020. unauthorized spending.
The 20202021 actual capital spending may be affected by changes in regulatory, environmental and engineering design requirements, permitting and project delays, cost and availability of labor, equipment and materials and other factors. SCE has taken steps to minimize outages for customers subject to stay-at-home orders. SCE has assessed the impact of this and the broader potential impacts of the COVID-19 pandemic on its ability to execute the 2020 capital program and expects to execute the capital program substantially as planned. For further information regarding the COVID-19 pandemic see "— COVID-19." For further information regarding the capital program see "Liquidity and Capital Resources—SCE—Capital Investment Plan."
RESULTS OF OPERATIONS
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 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. Cost-recovery activities include rates which provide recovery, subject to reasonableness review of, among other things, fuel costs, purchased power costs, public purpose related-program costs (including energy efficiency and demand-side management programs) and certain operation and maintenance expenses. SCE earns no return on these activities. |
The following table is a summary of SCE'sSCE’s results of operations for the periods indicated.
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Three months ended June 30, 2020 | Three months ended June 30, 2019 | |||||||||||||||||||||||||||||||
(in millions) | Earning Activities | Cost- Recovery Activities | Total Consolidated | Earning Activities | Cost- Recovery Activities | Total Consolidated | ||||||||||||||||||||||||||
Operating revenue | $ | 1,775 | $ | 1,205 | $ | 2,980 | $ | 1,537 | $ | 1,263 | $ | 2,800 | ||||||||||||||||||||
Purchased power and fuel | — | 1,068 | 1,068 | — | 1,135 | 1,135 | ||||||||||||||||||||||||||
Operation and maintenance | 575 | 166 | 741 | 425 | 146 | 571 | ||||||||||||||||||||||||||
Wildfire insurance fund expense | 83 | — | 83 | — | — | — | ||||||||||||||||||||||||||
Depreciation and amortization | 489 | — | 489 | 320 | — | 320 | ||||||||||||||||||||||||||
Property and other taxes | 103 | — | 103 | 93 | — | 93 | ||||||||||||||||||||||||||
Impairment and other | (52) | — | (52) | 170 | — | 170 | ||||||||||||||||||||||||||
Other operating income | — | — | — | (2) | — | (2) | ||||||||||||||||||||||||||
Total operating expenses | 1,198 | 1,234 | 2,432 | 1,006 | 1,281 | 2,287 | ||||||||||||||||||||||||||
Operating income (loss) | 577 | (29) | 548 | 531 | (18) | 513 | ||||||||||||||||||||||||||
Interest expense | (193) | — | (193) | (187) | (1) | (188) | ||||||||||||||||||||||||||
Other income | 53 | 29 | 82 | 37 | 19 | 56 | ||||||||||||||||||||||||||
Income before income taxes | 437 | — | 437 | 381 | — | 381 | ||||||||||||||||||||||||||
Income tax expense/(benefit) | 26 | — | 26 | (68) | — | (68) | ||||||||||||||||||||||||||
Net income | 411 | — | 411 | 449 | — | 449 | ||||||||||||||||||||||||||
Preferred and preference stock dividend requirements | 30 | — | 30 | 30 | — | 30 | ||||||||||||||||||||||||||
Net income available for common stock | $ | 381 | $ | — | $ | 381 | $ | 419 | $ | — | $ | 419 | ||||||||||||||||||||
Net income available for common stock | $ | 381 | $ | 419 | ||||||||||||||||||||||||||||
Less: Non-core expense | (32) | (123) | ||||||||||||||||||||||||||||||
Core earnings1 | $ | 413 | $ | 542 |
| | | | | | | | | | | | | | | | | | | | |
|
| Three months ended March 31, 2021 | | | Three months ended March 31, 2020 | | ||||||||||||||
| | | | | Cost- | | | | | | | | | Cost- | | | | | ||
| | Earning | | Recovery | | Total | | | Earning | | Recovery | | Total | | ||||||
(in millions) |
| Activities |
| Activities |
| Consolidated |
|
| Activities |
| Activities |
| Consolidated |
| ||||||
Operating revenue | | $ | 1,767 | | $ | 1,186 | | $ | 2,953 | | | $ | 1,741 | | $ | 1,039 | | $ | 2,780 | |
Purchased power and fuel | | | — | | | 1,013 | |
| 1,013 | | | | 2 | | | 926 | |
| 928 | |
Operation and maintenance | | | 621 | | | 206 | |
| 827 | | | | 717 | | | 142 | |
| 859 | |
Wildfire Insurance Fund expense | | | 53 | | | — | |
| 53 | | | | 84 | | | — | |
| 84 | |
Depreciation and amortization | | | 524 | | | — | |
| 524 | | | | 483 | | | — | |
| 483 | |
Property and other taxes | | | 124 | | | 1 | |
| 125 | | | | 110 | | | — | |
| 110 | |
Total operating expenses | |
| 1,322 | |
| 1,220 | | | 2,542 | | |
| 1,396 | |
| 1,068 | | | 2,464 | |
Operating income (loss) | |
| 445 | |
| (34) | | | 411 | | |
| 345 | |
| (29) | | | 316 | |
Interest expense | |
| (184) | | | — | | | (184) | | |
| (194) | |
| — | | | (194) | |
Other income | |
| 38 | | | 34 | | | 72 | | |
| 23 | |
| 29 | | | 52 | |
Income before taxes | |
| 299 | |
| — | | | 299 | | |
| 174 | |
| — | | | 174 | |
Income tax benefit | |
| (24) | | | — | | | (24) | | |
| (75) | |
| — | | | (75) | |
Net income | |
| 323 | |
| — | | | 323 | | |
| 249 | |
| — | | | 249 | |
Less: Preferred and preference stock dividend requirements | |
| 27 | | | — | | | 27 | | |
| 30 | �� |
| — | | | 30 | |
Net income available for common stock | | $ | 296 | | $ | — | | $ | 296 | | | $ | 219 | | $ | — | | $ | 219 | |
Net income available for common stock | | | | | | | | $ | 296 | | | | | | | | | $ | 219 | |
Less: Non-core expense | |
|
| |
|
| |
| (42) | | |
|
| |
|
| |
| (42) | |
Core earnings1 | | |
| |
|
| | $ | 338 | | |
|
| |
|
| | $ | 261 | |
1 | See use of non-GAAP financial measures in "Management Overview—Highlights of Operating Results." |
Earning Activities
Earning activities were primarily affected by the following:
● | Higher operating revenue of $26 million primarily due to the following: |
● | An increase in CPUC-related revenue of $11 million primarily due to higher rate base earning a return through balancing accounts and higher operating costs subject to balancing account treatment. |
● | An increase in FERC-related revenue and other operating revenue of $15 million primarily due to FERC rate base growth. |
● | Lower operation and maintenance costs of $96 million primarily due to the following: |
● | Lower expenses of $36 million related to wildfire-mitigation costs including inspections and preventive maintenance. |
● | Lower employee benefit expenses of $20 million from short-term incentive compensation. |
● | Decreased other expenses of $40 million primarily due to lower customer uncollectible expenses, worker's compensation costs and environmental remediation. The impact on utility earnings activities from residential uncollectible accounts decreased as the CPUC authorized cost recovery for those amounts through the Residential Uncollectible Balancing Account ("RUBA"). |
● | Lower Wildfire Insurance Fund expense of $31 million due to the change in the estimated life of the Wildfire Insurance Fund which increased the amortization period of SCE contributions in 2021. See "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingences" for further information. |
● | Higher depreciation and amortization expense of $41 million primarily due to increased plant balances in 2021. |
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● | Higher property and other taxes of $14 million primarily due to higher property assessed values in 2021. |
● | Lower interest expense of $10 million primarily due to lower interest rate on balancing accounts, partially offset by increased borrowings. |
● | Higher other income of $15 million primarily due to higher AFUDC equity income. |
● | Lower income tax benefit of $51 million primarily due to higher pre-tax income and a tax benefit in 2020 from the re-measurement of uncertain tax positions. |
Cost-Recovery Activities
Cost-recovery activities were primarily affected by the following:
● | Higher purchased power and fuel costs of $87 million primarily due to higher power and gas prices from extreme winter weather in February 2021, partially offset by higher congestion revenue right credits and the CAISO generation surcharge of $59 million incurred in 2020. |
● | Higher operation and maintenance costs of $64 million due to the CAISO transmission refund received in 2020 for $66 million related to the surcharge mentioned above and the authorization to recover uncollectible costs through the RUBA, partially offset by lower transmission access charges. |
Six months ended June 30, 2020 | Six months ended June 30, 2019 | |||||||||||||||||||||||||||||||
(in millions) | Earning Activities | Cost- Recovery Activities | Total Consolidated | Earning Activities | Cost- Recovery Activities | Total Consolidated | ||||||||||||||||||||||||||
Operating revenue | $ | 3,516 | $ | 2,244 | $ | 5,760 | $ | 3,087 | $ | 2,529 | $ | 5,616 | ||||||||||||||||||||
Purchased power and fuel | 2 | 1,994 | 1,996 | — | 2,140 | 2,140 | ||||||||||||||||||||||||||
Operation and maintenance | 1,292 | 308 | 1,600 | 1,014 | 426 | 1,440 | ||||||||||||||||||||||||||
Wildfire insurance fund expense | 167 | — | 167 | — | — | — | ||||||||||||||||||||||||||
Depreciation and amortization | 972 | — | 972 | 800 | — | 800 | ||||||||||||||||||||||||||
Property and other taxes | 213 | — | 213 | 202 | — | 202 | ||||||||||||||||||||||||||
Impairment and other | (52) | — | (52) | 166 | — | 166 | ||||||||||||||||||||||||||
Other operating income | — | — | — | (3) | — | (3) | ||||||||||||||||||||||||||
Total operating expenses | 2,594 | 2,302 | 4,896 | 2,179 | 2,566 | 4,745 | ||||||||||||||||||||||||||
Operating income (loss) | 922 | (58) | 864 | 908 | (37) | 871 | ||||||||||||||||||||||||||
Interest expense | (387) | — | (387) | (365) | (1) | (366) | ||||||||||||||||||||||||||
Other income | 76 | 58 | 134 | 56 | 38 | 94 | ||||||||||||||||||||||||||
Income before income taxes | 611 | — | 611 | 599 | — | 599 | ||||||||||||||||||||||||||
Income tax benefit | (49) | — | (49) | (173) | — | (173) | ||||||||||||||||||||||||||
Net income | 660 | — | 660 | 772 | — | 772 | ||||||||||||||||||||||||||
Preferred and preference stock dividend requirements | 60 | — | 60 | 60 | — | 60 | ||||||||||||||||||||||||||
Net income available for common stock | $ | 600 | $ | — | $ | 600 | $ | 712 | $ | — | $ | 712 | ||||||||||||||||||||
Net income available for common stock | $ | 600 | $ | 712 | ||||||||||||||||||||||||||||
Less: Non-core expense | (74) | (51) | ||||||||||||||||||||||||||||||
Core earnings1 | $ | 674 | $ | 763 |
Supplemental Operating Revenue Information
SCE’s retail billed and unbilled revenue (excluding wholesale sales) was $2.7 billion and $2.6$2.5 billion for the three months ended June 30,March 31, 2021 and 2020, and 2019 respectively, and $5.3 billion and $5.2 billion for the six months ended June 30, 2020 and 2019 respectively.
The increase for the three months and six months ended June 30, 2020March 31, 2021 compared to the same periods in 20192020 is primarily due to higher CPUC revenue due to the adoption of the 2018 GRC decision, partially offset by lower cost-recovery activities related to lower purchased power and fuel costs driven by contract amendments. In addition, the six months ended June 30, 2020 includes lower purchased power and fuel costs driven by lowerhigher power and gas prices. See "—Earnings Activities" and "—Cost-Recovery Activities" for further details.
As a result of the CPUC-authorized decoupling mechanism, SCE earnings are not affected by changes in retail electricity sales.
SCE’s income tax benefit decreased by $94 million and $124$51 million for the three and six months ended June 30, 2020March 31, 2021 compared to the same period in 2019.
The effective tax rates were (8.0)% and (28.9)(43.1)% for the sixthree months ended June 30,March 31, 2021 and 2020, and 2019, respectively. SCE'sSCE’s effective tax rate is below the federal statutory rate of 21% primarily due to CPUC'sCPUC’s ratemaking treatment for the current tax benefit arising from certain property-related and other temporary differences, which reverse over time. The accounting treatment for these temporary differences results in recording regulatory assets and liabilities for amounts that would otherwise be recorded to deferred income tax expense. The effective tax rate increase for the three months ended June 30, 2020 is primarily due to the absence of a tax benefit recorded in 2019 from the adoption of the 2018 GRC final decision. The effective tax rate increase for the six months ended June 30, 2020 is primarily due to the absence of tax benefit from the adoption of the 2018 GRC final decision and the absence of the 2019 changes in the allocation of deferred tax re-measurement between customers and shareholders that resulted from a CPUC resolution, partially offset by tax benefits from re-measurement of uncertain tax positions related to the 2010 – 2012 California state tax filings currently under audit.
See "Notes to Consolidated Financial Statements—Note 8. Income Taxes" for a reconciliation of the federal statutory rate to the effective income tax rates.
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Results of operations for Edison International Parent and Other include amounts from other Edison International subsidiaries that are not significant as a reportable segment, as well as intercompany eliminations.
The following table summarizes the results of Edison International Parent and Other:
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||||||||||||||
(in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||
Edison Energy Group and subsidiaries | $ | (27) | $ | (1) | $ | (29) | $ | (4) | ||||||||||||||||||||||||||||||||||||
Corporate expenses and other subsidiaries | (36) | (26) | (70) | (38) | ||||||||||||||||||||||||||||||||||||||||
Total Edison International Parent and Other | $ | (63) | $ | (27) | $ | (99) | $ | (42) | ||||||||||||||||||||||||||||||||||||
Less: Non-core expense | (25) | — | (28) | — | ||||||||||||||||||||||||||||||||||||||||
Core earnings1 | $ | (38) | $ | (27) | $ | (71) | $ | (42) |
| | | | | | | |
| | Three months ended March 31, | | ||||
(in millions) |
| 2021 |
| 2020 | | ||
Edison Energy Group and subsidiaries | | $ | (3) | | $ | (2) | |
Corporate expenses and other subsidiaries | |
| (34) | |
| (34) | |
Total Edison International Parent and Other | | $ | (37) | | $ | (36) | |
Less: Non-core expense | | | — | | | (3) | |
Core losses1 | | $ | (37) | | $ | (33) | |
1 See use of non-GAAP financial measures in "Management Overview - Overview—Highlights of Operating Results."
SCE’s ability to operate its business, fund capital expenditures, and implement its business strategy is dependent upon its cash flow and access to the bank and capital markets. SCE'sSCE’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, dividend payments to and equity contributions from Edison International, obligations to preferred and preference shareholders, and the outcome of tax, regulatory orand legal matters.
The COVID-19 pandemic may cause narrower access to, or further increased costs of accessing, bank and capital markets. As a precaution, in March and April 2020, SCE brought forward debt issuances that had been planned for later in the year to provide additional financing flexibility given possible future market uncertainty. For further details, see "Management Overview—COVID-19" and "—Available Liquidity."
In the next 12 months, SCE expects to fund its cash requirements through operating cash flows, capital market financings, and equity contributions from Edison International Parent, as needed. SCE also has availability under its credit facilities to fund cash requirements.
In addition, in the second quarter of 2021, SCE expectsplans to file an application with the CPUC to finance up to $1.0 billion through the approximately $1.6 billionissuance of securitized bonds. For further details, see "—Regulatory Proceedings—Financing Order."
In April 2021, SCE issued $400 million of floating rate first and refunding mortgage bonds due in 2023, $400 million of floating rate first and refunding mortgage bonds due in 2024, $350 million of first and refunding mortgage bonds due in 2023 and $700 million of first and refunding mortgage bonds due in 2024. Floating rate bonds will pay interest at a floating rate equal to the Secured Overnight Financing Rate ("SOFR") plus a spread. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements." The proceeds of these issuances were used to fund the payment of wildfire claims exceeding insurance proceeds, including amounts paid under the Woolsey Subrogation Settlement.
In February 2021, SCE Recovery Funding LLC, a bankruptcy remote, wholly owned special purpose subsidiary of SCE, issued $338 million of Senior Secured Recovery Bonds Series 2021-A ("Recovery Bonds") in three tranches, of $138 million, $100 million and $100 million with final maturities in 2033, 2040 and 2045, respectively, and used the proceeds of the Recovery Bonds to acquire SCE's right to collect charges associated with the AB 1054 Excluded Capital Expenditures by issuing securitized bonds.from certain existing and future SCE customers ("Recovery Property"). SCE used the proceeds it received from the sale of the Recovery Property to reimburse itself for previously incurred AB 1054 Excluded Capital Expenditures, including the retirement of related debt and financing costs. For further information,details, see "Management Overview—Southern California Wildfires"Notes to Consolidated Financial Statements—Note 3. Variable Interest Entities," "Notes to Consolidated Financial Statements—Note 5. Debt and Mudslides.Credit Agreements" and "Notes to Consolidated Financial Statements—Note 11. Regulatory Assets and Liabilities."
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In January 2021, SCE issued $150 million and $750 million first and refunding mortgage bonds due in 2030 and 2051, respectively. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements." PriorThe proceeds were primarily used to repay SCE's commercial paper borrowings and for general corporate purposes.
In February 2021, Edison International made a $325 million equity contribution to SCE. In March 2021, Edison International made a $575 million equity contribution to SCE from the proceeds of an issuance of preferred stock.
Edison International is issuing securities with equity content as viewed by rating agencies, such bonds, otheras common or preferred stock, in 2021, to enable SCE to issue debt, instruments are being usedincluding the debt SCE issued in April 2021 and debt to temporarily finance payments for future resolution of wildfire claims related to the expenditures, including a term loan of $475 million2017/2018 Wildfire/Mudslide Events, while allowing Edison International and a 364-day revolving credit facility for $800 million entered into during the first quarter of 2020.
The following table summarizes SCE'sSCE’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 | Negative |
SCE’s credit ratings may be further affected if, among other things, regulators fail to successfully implement AB 1054 in a consistent and credit supportive manner or the Wildfire Insurance Fund is depleted by claims from catastrophic wildfires. The broad economic impacts of the COVID-19 pandemic may also affect SCE'sSCE’s credit rating.ratings. For further information see "Management Overview—COVID-19" in this report and "Risk Factors."Factors" in the 2020 Form 10-K. 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'sSCE’s power procurement contracts require SCE to pay related liabilities or post additional collateral if SCE'sSCE’s credit rating were to fall below investment grade from the major credit rating agencies.grade. Incremental collateral requirements for power procurement contracts resultingand environmental remediation obligations would result from a potential downgrade of SCE'sSCE’s credit rating to below investment grade are $66 million as of June 30, 2020. In addition, if SCE's credit rating falls below investment grade, it may be required to post up to $50 million in collateral, in connection with its environmental remediation obligations, within 120 days of the end of the fiscal year in which the downgrade occurs. Furthermore, if SCE was downgraded below investment grade, counterparties may also institute new collateral requirements for future transactions.grade. For further details, see "—Margin and Collateral Deposits."
The cost of capital mechanism set by the CPUC could impact SCE's results of operations and cash flows. The benchmark value for the current mechanism is the 12-month, October 1, 2018 through September 30, 2019, average Moody’s Baa utility bond yield of 4.5%. If the difference between the benchmark and the average of the same index for the 12-month period to September 30, 2021 exceeds 100-basis points, SCE's CPUC-authorized ROE will be adjusted for 2022 by half the amount of the difference (up or down). If the mechanism is triggered, SCE's costs of long-term debt and preferred equity will also be adjusted for 2022 to reflect the then current embedded costs and projected interest rates. The average Moody's Baa utility bond yield between October 1, 2020 and April 20, 2021 was 3.33%. The spot rate for Moody’s Baa utility bond was 3.53% on April 20, 2021 and an average Moody’s Baa utility bond yield of 3.69% or less from April 21, 2021 through September 30, 2021 will trigger the mechanism. SCE is required to file its next cost of capital application by April 2022 for rates effective beginning January 2023. For further information see "Business—SCE— Overview of Ratemaking Process" in the 2020 Form 10-K.
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At June 30, 2020,March 31, 2021, SCE had cash on hand of $254$25 million.
The following table summarizes the status of SCE's credit facility. The credit facility is available for borrowing needs until May 2024 and may be extended for one additional year with the lenders' approval. The aggregate maximum principal amount under the credit facility may be increased up to $4.0 billion, provided additional lender commitments are obtained.
| | | | | | | | | | | | | | | | | | |
(in millions, except for rates) | ||||||||||||||||||
Execution | | Termination | | LIBOR | | | | | | Outstanding | | Outstanding | | Amount | ||||
date | | date | | plus (bps) | | Use of proceeds |
| Commitment |
| borrowings |
| letters of credit |
| available | ||||
March 2020 | | May 2021 | | 65 | | Finance a portion of the AB 1054 Capital Expenditures1 | | $ | 800 | | $ | 800 | | $ | — | | $ | — |
May 2020 | | May 2021 | | 150 | | Undercollections related to COVID-19 and general corporate purposes | | | 1,500 | | | — | | | — | | | 1,500 |
June 2019 | | May 2024 | | 108 | | Support commercial paper borrowings and general corporate purposes2, 3 | |
| 3,000 | |
| 674 | |
| 120 | |
| 2,206 |
Total SCE: | $ | 5,300 | | $ | 1,474 | | $ | 120 | | $ | 3,706 |
1 | In February 2021, SCE and the lenders amended the March 2020 credit agreement and have extended the termination date from March 2021 to May 2021. This credit facility may also be extended for two 364-day periods, at the lenders' discretion. The aggregate maximum principal amount may be increased up to $1.1 billion provided that additional lender commitments are obtained. |
2 | At March 31, 2021 SCE had $674 million outstanding commercial paper, net of discount, at a weighted-average interest rate of 0.32%. |
3 | 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. |
SCE may finance balancing account undercollections and working capital requirements to support operations and capital expenditures with commercial paper, its credit facilities or other borrowings, subject to availability in the bank and capital markets. As necessary, SCE will utilize its available liquidity, capital market financings, other borrowings or parent company contributions to SCE equity in order to meet its obligations as they become due, including any potential costs related to the 2017/2018 Wildfire/Mudslide Events. For further information, see "Management Overview—Southern California Wildfires and Mudslides."
Debt Covenant
SCE’s credit facilities and term loan require a debt to total capitalization ratio as defined in the applicable agreements of less than or equal to 0.65 to 1. At June 30, 2020, SCE'sMarch 31, 2021, SCE’s debt to total capitalization ratio was 0.480.51 to 1.
At June 30, 2020,March 31, 2021, SCE was in compliance with all financial covenants that affect access to capital.
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Regulatory Proceedings
Wildfire Related Regulatory Proceedings
2021 General Rate Case Wildfire Mitigation Memorandum Account Balances
SCE's GRC track 2 expenditures, which occurred during 2018 and 2019, predominantly related to enhanced overhead inspections, an expanded vegetation management program and expert consultant contract labor costs supporting SCE's wildfire mitigation activities. The majority of these expenditures were recorded in the WMP memorandum account and the FHPMA.
In October 2018,January 2021, the CPUC issued an environmental report that identifiedapproved a new route alternative, as the environmentally preferred project and proposed an additional underground sectionsettlement between parties to track 2 of the proposed 220-kV power line. 2021 GRC, which led to a $41 million increase to regulatory deferrals for 2018 – 2019 in the fourth quarter of 2020. The revenue requirement under the settlement was $391 million, after adjusting for flow through taxes. Due to the determination that the AB 1054 Excluded Capital Expenditures associated with track 2 were reasonably incurred, they were eligible for recovery through securitization, and were not part of the settlement revenue requirement. For information on securitization of the approved expense, see "—Financing Order."
In March 2020,2021, SCE made its 2021 GRC track 3 filing with the alternative project with revised scopeCPUC. In its filing, SCE requested reasonableness review of approximately $1.2 billion of wildfire mitigation costs incurred prior to 2021, consisting of $476 million of incremental operations and an updated costmaintenance expense and $679 million of $584incremental capital expenditures. The track 3 expenditures predominantly related to grid hardening, vegetation management, PSPS activities and enhancements to grid operations. The capital expenditures included $502 million was approved by CPUC. of GS&RP capital expenditures not previously subject to settlement.
The scheduled in-service dateCPUC schedule for SCE's 2021 GRC includes a proposed decision on track 3 in the first quarter of the project has been extended from 20242022. The $679 million in incremental capital expenditures to 2026.
2020 Emergency Wildfire Restoration
Multiple wildfires occurred during 2020 which caused damage within SCE's service territory and to SCE's Big Creek hydroelectric facility. Restoration work is ongoing in relation to these wildfires. In 2020 and the first quarter of 2021, SCE recorded $235 million of incremental operation and maintenance expenses and $410 million of capital expenditures in relation to these restoration efforts. SCE expects to file CEMA requests for recovery of amounts incremental to authorized revenue requirements beginning in 2021.
Financing order
SCE plans on applying for an irrevocable order from the CPUC in the proceeding did not excludesecond quarter of 2021 to finance up to $1.0 billion of costs through the $1.8 billion net charge and was 45.2% issuance of securitized bonds, as of December 31, 2018 (atwell as the time the common equity component of SCE's CPUC authorized capital structure was required to remain at or above 48% on a weighted average basis over the applicable 37-month period). SCE’s spot equity ratio on December 31, 2018 would have been 48.7% had the $1.8 billion net charge been excluded, therefore SCE will notify the CPUC if its spot ratio drops below 47.7% in any quarter. For further information, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides."
Capital Structure Compliance Period through the reporting date together with forecasted performance and expected financing activitiesInvestment Plan
Major Transmission Projects
Eldorado-Lugo-Mohave Upgrade
Construction for the remainderproject began in November 2020 and the project is expected to be operational in June 2022. On January 20, 2021, the Secretary of the Capital Structure Compliance Period. SCE expects to be compliant with its CPUC authorized capital structure at December 31, 2022.Interior issued a suspension order that effectively placed a 60-day hold on any
15
new project construction on federal land. In February 2021, the California General Corporation Law. California law requires that for a dividend to be declared: (a) retained earnings must equal or exceed the proposed dividend, or (b) immediately after the dividend is made, the valueDepartment of the corporation's assets must exceed the value of its liabilities plus amounts required to be paid, if any, in order to liquidate stock senior to the shares receiving the dividend. Additionally,Interior issued a California corporation may not declare a dividend if it is, or as a resultwaiver of the dividend would be, likelysuspension order allowing the project to be unable to meet its liabilities as they mature. Prior to declaring dividends, SCE's Board of Directors evaluates available information, including when applicable, information pertaining to the 2017/2018 Wildfire/Mudslide Events, to ensure that the California law requirements for the declarations are met. On June 24, 2020, SCE declared a dividend to Edison International of $269 million.
Certain derivative instruments, power and energy procurement contracts and other contractual arrangements contain collateral requirements. In addition, certain environmental remediation obligations require financial assurance that may be in the form of collateral postings. Future collateral requirements may differ from the requirements at June 30, 2020March 31, 2021 due to the addition of incremental power and energy procurement contracts with collateral requirements, if any, the impact of changes in wholesale power and natural gas prices on SCE'sSCE’s contractual obligations and the impact of SCE'sSCE’s credit ratings falling below investment grade.
The table below provides the amount of collateral posted by SCE to its counterparties as well as the potential collateral that would have been required as of June 30, 2020March 31, 2021, if SCE'sSCE’s credit rating had been downgraded to below investment grade as of that date. The table below also provides the potential collateral that could be required due to adverse changes in wholesale power and natural gas prices over the remaining lives of existing power and energy procurement contracts.
In addition to the amounts presented in the table below, SCE has a service agreement with Southern California Gas Company to purchase, schedule and balance natural gas supplies for SCE owned generation and contracts for which SCE is the fuel manager. In February 2021, extreme winter conditions in large parts of the United States led to significant increases in natural gas prices which affected the potential | ||||||||
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 not reflected above.downgrade. 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, 20211 | | $ | 129 |
Incremental collateral requirements for purchased power and fuel contracts resulting from a potential downgrade of SCE's credit rating to below investment grade2 | |
| 37 |
Incremental collateral requirements for purchased power and fuel contracts resulting from adverse market price movement3 | |
| 24 |
Posted and potential collateral requirements | | $ | 190 |
1 | Net collateral provided to counterparties and other brokers consisted of $127 million in letters of credit and surety bonds and $2 million of cash collateral which was reflected in "Other current assets" on the consolidated balance sheets. |
2 | Represents collateral requirements for accounts payable and market-to-market valuation at March 31, 2021. 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 March 31, 2021 due to adverse market price movements over the remaining lives of the existing power contracts using a 95% confidence level. |
Edison International Parent and Other
In the next 12 months, Edison International expects to fund its net cash requirements through cash on hand, dividends from SCE, and capital market and bank financings, including by issuing additional debt and equity, as needed.financings. Edison International may finance its ongoing cash requirements, including common stock 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.
The COVID-19 pandemic may cause narrower access to, or further increased costs of accessing, bank and capital markets. As a precaution, in March and April 2020, Edison International brought forward debt and equity issuances that had been planned for later in the year to provide additional financing flexibility given possible future market uncertainty. For further details, see "Management Overview—COVID-19."
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At June 30, 2020,March 31, 2021, Edison International Parent had cash on hand of $270$364 million and no borrowings on its $1.5 billion revolving credit facility. The credit facility is available for borrowing needs until May 2024 and may be extended for one additional year with the lenders'lenders’ approval. Under certain circumstances, the aggregate maximum principal amount under the credit facility may be increased up to $2.0 billion, provided additional lender commitments are obtained.
Edison International Parent borrowed $800is issuing securities with equity content as viewed by rating agencies, such as common or preferred stock, in 2021 to enable SCE to issue debt, including the debt SCE issued in April 2021 and debt to finance payments for future resolution of wildfire claims related to the 2017/2018 Wildfire/Mudslide Events, while allowing Edison International and SCE to maintain investment grade credit ratings. Edison International expects to issue further securities with up to approximately $375 million under a term loan agreement. The proceeds were used for general corporate purposes. of equity content to invest in SCE in 2021.
In May 2020,March 2021, Edison International issued approximately $800 million1,250,000 shares of common stock in a registered direct offering.its 5.375% Fixed-Rate Reset Cumulative Perpetual Preferred Stock, Series A, liquidation value of $1,000 per share (the "Series A Preferred Stock"), regarded by rating agencies as having 50% equity content. The proceeds were used to pay off the outstanding balance of the $800 million term loan mentioned aboverepay Edison International’s commercial paper borrowings and for general corporate purposes.purposes, including making a $575 million equity contribution to SCE. For further details, see "Notes to Consolidated Financial Statements—Note 13. Equity."
Edison International Parent issued $400 millionexpects to make further capital contributions to SCE in 2021 to maintain the common equity component of senior notes due 2025. The proceeds were used to repay all $400 million of Edison International Parent's outstanding Senior Notes due 2020.SCE’s capital structure, after CPUC allowed exclusions, at 52% on a weighted average basis over the Capital Structure Compliance Period. For further details,information, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."
Edison International Parent and Other'sOther’s liquidity and its ability to pay operating expenses and pay dividends to common shareholders are dependent on access to the bank and capital markets, dividends from SCE, realization of tax benefits and its ability to meet California law requirements for the declaration of dividends. Prior to declaring dividends, Edison International'sInternational’s Board of Directors evaluates available information, including when applicable, information pertaining to the 2017/2018 Wildfire/Mudslide Events, to ensure that the California law requirements for the declarations are met. For information on the California law requirements on the declaration of dividends, see "—SCE—SCE Dividends."Dividends" in the 2020 MD&A. Edison International intends to maintain its target payout ratio of 45% – 55% of SCE'sSCE’s core earnings, subject to the factors identified above.
Edison International Parent expectsInternational's ability to make further capital contributions to SCE in 2020 to increasedeclare and pay common dividends may be restricted under the common equity componentterms of its capital structure, after deducting CPUC allowed exclusions, to 52% on a weighted average basis over the Capital Structure Compliance Period.Series A Preferred Stock. For further information see "—SCE—SCE Dividends."
Edison International Parent'sParent’s credit facility requires a consolidated debt to total capitalization ratio as defined in the applicable agreements of less than or equal to 0.70 to 1. At June 30, 2020,March 31, 2021, Edison International Parent's consolidated debt to total capitalization ratio was 0.560.58 to 1.
At June 30, 2020,March 31, 2021, Edison International Parent was in compliance with all financial covenants that affect access to capital.
The following table summarizes Edison International Parent'sParent’s current long-term issuer credit ratings and outlook from the major credit rating agencies:
| | | | | | | ||||||||
| Moody's | Fitch | S&P | |||||||||||
Long-term Issuer Credit Rating | Baa3 | BBB- | BBB | |||||||||||
Outlook | Stable | Stable | Negative |
Edison International Parent'sParent’s credit ratings may be further affected if, among other things, regulators fail to successfully implement AB 1054 in a consistent and credit supportive manner or the Wildfire Insurance Fund is depleted by claims from catastrophic wildfires. The broad economic impacts of the COVID-19 pandemic may also affect Edison International'sInternational’s credit rating. For further information see "Management Overview—COVID-19" in this filing and "Risk Factors."Factors" in the 2020 Form 10-K. 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.
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Six months ended June 30, | |||||||||||||||||
(in millions) | 2020 | 2019 | |||||||||||||||
Net cash provided by operating activities | $ | 683 | $ | 673 | |||||||||||||
Net cash provided by financing activities | 1,931 | 1,467 | |||||||||||||||
Net cash used in investing activities | (2,384) | (2,135) | |||||||||||||||
Net increase in cash, cash equivalents and restricted cash | $ | 230 | $ | 5 |
| | | | | | |
| | Three months ended March 31, | ||||
(in millions) |
| 2021 |
| 2020 | ||
Net cash provided by operating activities | | $ | 48 | | $ | 334 |
Net cash provided by financing activities | |
| 1,204 | |
| 1,368 |
Net cash used in investing activities | |
| (1,282) | |
| (1,274) |
Net (decrease) increase in cash, cash equivalents and restricted cash | | $ | (30) | | $ | 428 |
Net Cash Provided by Operating Activities
The following table summarizes major categories of net cash provided by operating activities as provided in more detail in SCE'sSCE’s consolidated statements of cash flows for the sixthree months ended June 30, 2020March 31, 2021 and 2019.2020.
| | | | | | | | | |
| | Three months ended March 31, | | Change in cash flows | |||||
(in millions) |
| 2021 |
| 2020 |
| 2021/2020 | |||
Net income |
| $ | 323 |
| $ | 249 |
| |
|
Non-cash items1 | |
| 541 | |
| 535 |
| |
|
Subtotal | |
| 864 | | | 784 |
| $ | 80 |
Changes in cash flow resulting from working capital2 | |
| (138) | |
| (107) |
| | (31) |
Regulatory assets and liabilities | |
| (70) | |
| (372) |
| | 302 |
Other noncurrent assets and liabilities3 | |
| (608) | |
| 29 |
| | (637) |
Net cash provided by operating activities | | $ | 48 | | $ | 334 | | $ | (286) |
1 | Non-cash items include depreciation and amortization, allowance for equity during construction, deferred income taxes, Wildfire Insurance Fund amortization expenses and other. |
2 | Changes in working capital items include receivables, accrued unbilled revenue, prepaid expenses, inventory, accounts payable, tax receivables and payables, and other current assets and liabilities. |
3 | Includes changes in wildfire-related insurance receivables and wildfire-related claims. Also includes nuclear decommissioning trusts. See "Nuclear Decommissioning Activities" below for further information. |
Six months ended June 30, | Change in cash flows | ||||||||||||||||||||||
(in millions) | 2020 | 2019 | 2020/2019 | ||||||||||||||||||||
Net income | $ | 660 | $ | 772 | |||||||||||||||||||
Non-cash items1 | 1,067 | 784 | |||||||||||||||||||||
Subtotal | 1,727 | 1,556 | $ | 171 | |||||||||||||||||||
Changes in cash flow resulting from working capital2 | (120) | (235) | 115 | ||||||||||||||||||||
Regulatory assets and liabilities | (927) | (543) | (384) | ||||||||||||||||||||
Other noncurrent assets and liabilities3 | 3 | (105) | 108 | ||||||||||||||||||||
Net cash provided by operating activities | $ | 683 | $ | 673 | $ | 10 |
Net cash provided by operating activities was impacted by the following:
Net income and non-cash items increased in 20202021 by $171$80 million primarily due to
Net cash outflow for working capital was $120$138 million and $235$107 million during the sixthree months ended June 30,March 31, 2021 and 2020, and 2019, respectively. Net cash outflow for working capital reduced from 2019 to 2020in 2021 is primarily due to insurance premium paymentsa net increase in unbilled revenue and customer receivables of $90$108 million and $431decrease in payables of $115 million for wildfire-related coverage. Net cash outflow in 2020 and 2019, respectively.was primarily due to timing of disbursements of $226 million, partially offset by a change in receivables from customers of $70 million. Net cash outflow for working capital in both periods was impacted by increases in receivables from customers including increases in accrued unbilled revenueinsurance premium payments of $245$16 million and $149$72 million for wildfire-related coverage in 2021 and 2020, and 2019, respectively. Net cash outflow for working capital in 2019 was partially offset by an increase in accounts payable and accrued expenses of $170 million.
Net cash used in regulatory assets and liabilities, including changesincreases in net undercollections of balancing accounts was $927$70 million and $543$372 million during the sixthree months ended June 30,March 31, 2021 and 2020, and 2019, 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:
2021
● | Net undercollections of BRRBA were $662 million and $622 million at March 31, 2021 and December 31, 2020, respectively. Net undercollections increased by $40 million primarily due to current year undercollections due to lower sales volume partially offset by recovery of prior year undercollections, including WEMA and GS&RP to be collected over a two-year and one-year period, respectively, starting October 2020. |
18
● | Undercollections of $38 million related to wildfire-related expenses that are probable of future recovery from customers, including wildfire risk mitigation costs, insurance premiums, service restoration and damage repair costs. See "Notes to Consolidated Financial Statements—Note 11. Regulatory Assets and Liabilities" for further information. |
● | Undercollections of $36 million related to service restoration and damage repair costs that were tracked in CEMA accounts, primarily due to wildfire events incurred in 2018, 2019 and 2020. See "Notes to Consolidated Financial Statements—Note 11. Regulatory Assets and Liabilities" for further information. |
● | Net undercollections for ERRA, PABA and the New System Generation Balancing Account decreased by $100 million primarily due to recovery of prior PABA and NSGBA undercollections, overcollection due to higher than expected load, partially offset by undercollections due to higher open market exposure and higher gas and power price driven by extreme winter conditions in large part of the United States in February 2021. |
● | Net undercollections of $40 million from COVID-19-related memorandum and balancing accounts. |
2020
● | Net undercollections of BRRBA were $101 million at March 31, 2020, compared to net overcollections of $328 million at December 31, 2019. Net undercollections increased by $429 million primarily due to refunds of prior overcollections (including incremental tax benefits and overcollections of distribution revenue that are being refunded over an 18-month period, starting in July 2019, as part of SCE's 2018 GRC final decision) and current year undercollections due to lower than forecasted sales volumes. |
● | Additional undercollections of $79 million related to wildfire-related expenses that are probable of future recovery from customers, including wildfire risk mitigation costs, insurance premiums, service restoration and damage repair costs. |
● | Higher cash due to $110 million of overcollections related to the timing of receiving GHG auction revenue and low carbon fuel standard credit sales, and the related refunds and rebates to eligible customers. SCE is accelerating the semi-annual payment of California climate credits to customers, normally made in the fourth quarter, into the second quarter of 2020 pursuant to an April 2020 CPUC decision. |
● | Net undercollections for ERRA, PABA and the New System Generation Balancing Account decreased by $45 million primarily due to recovery of prior ERRA undercollections, partially offset by lower sales than forecasted in rates in ERRA, refunds of prior overcollections from the New System Generation Balancing Account and refund of 2019 and 2018 overcollections of generation revenue over an 18-month period, starting in July 2019, as part of SCE's 2018 GRC final decision. |
Cash flows (used in) provided by (used in) other noncurrent assets and liabilities were primarily related to wildfire claim payments of $(620) million, partially offset by insurance recoveries of $43 million in the first quarter of 2021 and $58 million of wildfire related insurance recoveries in 2020, respectively. Cash flow for other noncurrent assets and liabilities also includes payments of decommissioning costs ($61 million in 2021 and $43 million in 2020, respectively), partially offset by SCE’s net earnings from nuclear decommissioning trust investments ($4923 million in 2021 and $27 million in 2020, and $37 million in 2019, respectively) and SCE's payments of decommissioning costs ($98 million in both 2020 and 2019). See "Nuclear Decommissioning Activities" below for further discussion. Also includes wildfire related insurance recovery
19
Net Cash Provided by Financing Activities
The following table summarizes cash provided by financing activities for the sixthree months ended June 30, 2020March 31, 2021 and 2019.2020. Issuances of debt are discussed in "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."
Six months ended June 30, | |||||||||||||||||
(in millions) | 2020 | 2019 | |||||||||||||||
Issuances of first and refunding mortgage bonds, plus premium and net of discount and issuance costs | $ | 2,330 | $ | 1,087 | |||||||||||||
Issuance of term loan, net of repayment | 475 | — | |||||||||||||||
Long-term debt matured | (414) | (41) | |||||||||||||||
Short-term debt repayments, net of borrowings and discount | (550) | (508) | |||||||||||||||
Capital contribution from Edison International Parent | 888 | 1,200 | |||||||||||||||
Payments of common stock dividends to Edison International | (738) | (200) | |||||||||||||||
Payments of preferred and preference stock dividends | (60) | (60) | |||||||||||||||
Other | — | (11) | |||||||||||||||
Net cash provided by financing activities | $ | 1,931 | $ | 1,467 |
| | | | | | |
|
| Three months ended March 31, | ||||
(in millions) | | 2021 |
| 2020 | ||
Issuances of first and refunding mortgage bonds, including premium/discount and net of issuance costs | | $ | 1,223 | | $ | 1,719 |
Long-term debt repaid or repurchased |
| | (490) |
| | (40) |
Short-term debt financing, net |
| | (22) |
| | 475 |
Commercial paper repayment, net of borrowing |
| | (51) |
| | (550) |
Capital contributions from Edison International Parent |
| | 900 |
| | 269 |
Payment of common stock dividends to Edison International |
| | (325) |
| | (469) |
Payment of preferred and preference stock dividends |
| | (32) |
| | (36) |
Other |
| | 1 |
| | — |
Net cash provided by financing activities | | $ | 1,204 | | $ | 1,368 |
Net Cash Used in Investing Activities
Cash flows used in investing activities are primarily due to capital expenditures related to transmission and distribution investments ($2.51.4 billion and $2.2$1.3 billion for the six-monththree-month periods ended June 30,March 31, 2021 and 2020, and 2019, respectively). In addition, SCE had a net redemption (purchase) of nuclear decommissioning trust investments of $62$52 million and $72$(14) million during the six monthsthree-month periods ended June 30,March 31, 2021 and 2020, and 2019, respectively. See "Nuclear Decommissioning Activities" below for further discussion.
Nuclear Decommissioning Activities
SCE’s consolidated statements of cash flows includesinclude nuclear decommissioning activities, which are reflected in the following line items:
Six months ended June 30, | |||||||||||||||||
(in millions) | 2020 | 2019 | |||||||||||||||
Net cash used in operating activities: | |||||||||||||||||
Net earnings from nuclear decommissioning trust investments | $ | 49 | $ | 37 | |||||||||||||
SCE's decommissioning costs | (98) | (98) | |||||||||||||||
Net cash provided by investing activities: | |||||||||||||||||
Proceeds from sale of investments | 3,225 | 2,440 | |||||||||||||||
Purchases of investments | (3,163) | (2,368) | |||||||||||||||
Net cash impact | $ | 13 | $ | 11 |
| | | | | | |
| | Three months ended March 31, | ||||
(in millions) |
| 2021 |
| 2020 | ||
Net cash used in operating activities: | | | | | | |
Net earnings from nuclear decommissioning trust investments | | $ | 23 | | $ | 27 |
SCE’s decommissioning costs |
| | (61) |
| | (43) |
Net cash provided by investing activities: |
| | |
| | |
Proceeds from sale of investments | | | 1,270 | | | 1,407 |
Purchases of investments |
| | (1,218) |
| | (1,421) |
Net cash impact | | $ | 14 | | $ | (30) |
Net cash used in operating activities relates to interest and dividends less administrative expenses, taxes and SCE'sSCE’s decommissioning costs. See "Notes to Consolidated Financial Statements—Note 10. Investments" for further information. Investing activities represent the purchase and sale of investments within the nuclear decommissioning trusts, including the reinvestment of earnings from nuclear decommissioning trust investments. The net cash impact reflects timing of decommissioning payments $98($61 million and $43 million in both2021 and 2020, and 2019respectively) and reimbursements to SCE from the nuclear decommissioning trust ($11175 million and $109$13 million in 2021 and 2020, and 2019, respectively).
20
The table below sets forth condensed historical cash flow from operations for Edison International Parent and Other, including intercompany eliminations.
Six months ended June 30, | |||||||||||||||||
(in millions) | 2020 | 2019 | |||||||||||||||
Net cash used in operating activities | $ | (58) | $ | (75) | |||||||||||||
Net cash provided by financing activities | 292 | 184 | |||||||||||||||
Net cash used in investing activities | (8) | (1) | |||||||||||||||
Net increase in cash and cash equivalents | $ | 226 | $ | 108 |
| | | | | | |
|
| Three months ended March 31, | ||||
(in millions) |
| 2021 |
| 2020 | ||
Net cash provided by (used in) operating activities | | $ | 24 | | $ | (19) |
Net cash provided by financing activities |
| | 307 |
| | 863 |
Net cash used in investing activities |
| | — |
| | (4) |
Net increase in cash and cash equivalents | | $ | 331 | | $ | 840 |
Net Cash Used inProvided by (Used in) Operating Activities
Net cash used inprovided by (used in) operating activities was impacted by the following:
● | $63 million cash inflow from wildfire insurance recovery received by Edison Insurance Services, Inc. ("EIS"), a wholly-owned subsidiary of Edison International in 2021. |
● | $39 million and $19 million cash outflow from operating activities in 2021 and 2020, respectively, primarily due to payments relating to interest and operating costs. |
Net Cash Provided by Financing Activities
Net cash provided by financing activities was as follows:
Six months ended June 30, | |||||||||||||||||
(in millions) | 2020 | 2019 | |||||||||||||||
Dividends paid to Edison International common shareholders | $ | (454) | $ | (399) | |||||||||||||
Dividends received from SCE | 738 | 200 | |||||||||||||||
Capital contribution to SCE | (888) | (1,200) | |||||||||||||||
Issuance of long-term debt, net of discount and issuance costs | 396 | 595 | |||||||||||||||
Repayment of long-term debt | (400) | — | |||||||||||||||
Issuance of common stock | 884 | — | |||||||||||||||
Issuance of term loan, net of repayment | — | 1,000 | |||||||||||||||
Other | 16 | (12) | |||||||||||||||
Net cash provided by financing activities | $ | 292 | $ | 184 |
| | | | | | |
|
| Three months ended March 31, | ||||
(in millions) |
| 2021 |
| 2020 | ||
Dividends paid to Edison International common shareholders | | $ | (247) | | $ | (226) |
Dividends received from SCE |
| | 325 |
| | 469 |
Capital contributions to SCE |
| | (900) |
| | (269) |
Issuance of common stock |
| | 15 |
| | 74 |
Issuance of preferred stock, net of issuance costs | | | 1,237 | | | — |
Issuance of term loan |
| | — |
| | 800 |
Commercial paper repayment, net |
| | (129) |
| | — |
Other |
| | 6 |
| | 15 |
Net cash provided by financing activities | | $ | 307 | | $ | 863 |
Contingencies
SCE has contingencies related to wildfire and mudslidedebris flow events, wildfire insurance, environmental remediation, nuclear insurance, spent nuclear fuel and the Tehachapi Transmission Project,Upstream Lighting Program, which are discussed in "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies."
Edison International'sInternational’s and SCE'sSCE’s primary market risks are described in the 20192020 Form 10-K. For a further discussion of market risk exposures, including commodity price risk, credit risk, and interest rate risk, see "Notes to Consolidated Financial Statements—Note 4. Fair Value Measurements" and "—Note 6. Derivative Instruments."
SCE records derivative instruments on its consolidated balance sheets as either assets or liabilities measured at fair value unless otherwise exempted from derivative treatment as normal purchases or sales. The fair value of outstanding derivative instruments used to mitigate exposure to commodity price risk was reflected as a net asset of $1$99 million and $86$108 million on SCE'sSCE’s consolidated balance sheets at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively. For further discussion of fair value measurements and the fair value hierarchy, see "Notes to Consolidated Financial Statements—Note 4. Fair Value Measurements" and "— Note 6. Derivative Instruments."
21
Credit risk exposure from counterparties for power and gas trading activities is measured as the sum of net accounts receivable (accounts receivable less accounts payable) and the current fair value of net derivative assets (derivative assets less derivative liabilities) reflected on the consolidated balance sheets. SCE enters into master agreements which typically provide for a right of setoff. Accordingly, SCE'sSCE’s credit risk exposure from counterparties is based on a net exposure under these arrangements. SCE manages the credit risk on the portfolio of counterparties based on credit ratings and other publicly disclosed information, such as financial statements, regulatory filings and press releases, to guide it in the process of setting credit levels, risk limits and contractual arrangements, including master netting agreements. Based on SCE'sSCE’s policies and risk exposures related to credit, SCE does not anticipate a material adverse effect on their financial statements as a result of counterparty nonperformance. At June 30, 2020, SCE'sMarch 31, 2021, SCE’s power and gas trading counterparty credit risk exposure was $34$96 million, which is associated with entities that have an investment grade rating of A or higher. SCE assigns a credit rating to counterparties based on the lower of a counterparty'scounterparty’s S&P or Moody'sMoody’s rating. At June 30, 2020 the majority of SCE's power and gas trading counterparty credit risk exposure was to CAISO market participants. The broad economic impacts of the COVID-19 pandemic are still emerging and may increase credit risk across CAISO market participants, as of June 30, 2020, no impacts had been noted.
For more information related to credit risks, see "Notes to Consolidated Financial Statements—Note 6. Derivative Instruments."
For a discussion of Edison International'sInternational’s and SCE'sSCE’s critical accounting policies, see "Critical Accounting Estimates and Policies" in the year-ended 20192020 MD&A.
New accounting guidance is discussed in "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—New Accounting Guidance."
Information responding to this section is included in the MD&A under the heading "Market Risk Exposures" and is incorporated herein by reference.
22
23
FINANCIAL STATEMENTS
Consolidated Statements of Income | Edison International |
| | | | | | |
| | Three months ended | ||||
| | March 31, | ||||
(in millions, except per-share amounts, unaudited) |
| 2021 |
| 2020 | ||
Total operating revenue | | $ | 2,960 | | $ | 2,790 |
Purchased power and fuel | |
| 1,013 | |
| 928 |
Operation and maintenance | |
| 844 | |
| 881 |
Wildfire Insurance Fund expense | |
| 53 | |
| 84 |
Depreciation and amortization | |
| 525 | |
| 484 |
Property and other taxes | |
| 126 | |
| 111 |
Total operating expenses | |
| 2,561 | |
| 2,488 |
Operating income | |
| 399 | |
| 302 |
Interest expense | |
| (217) | |
| (225) |
Other income | |
| 72 | |
| 52 |
Income before income taxes | |
| 254 | |
| 129 |
Income tax benefit | |
| (36) | |
| (84) |
Net income | |
| 290 | |
| 213 |
Preferred and preference stock dividend requirements of SCE | |
| 27 | |
| 30 |
Preferred stock dividend requirement of Edison International | | | 4 | | | — |
Net income attributable to Edison International common shareholders | | $ | 259 | | $ | 183 |
Basic earnings per share: | |
|
| |
|
|
Weighted average shares of common stock outstanding | |
| 379 | |
| 363 |
Basic earnings per common share attributable to Edison International common shareholders | | $ | 0.68 | | $ | 0.50 |
Diluted earnings per share: | |
|
| |
|
|
Weighted average shares of common stock outstanding, including effect of dilutive securities | |
| 380 | |
| 364 |
Diluted earnings per common share attributable to Edison International common shareholders | | $ | 0.68 | | $ | 0.50 |
24
Consolidated Statements of Income | Edison International | |||||||||||||||||||||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||||||||||||||
(in millions, except per-share amounts, unaudited) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||
Total operating revenue | $ | 2,987 | $ | 2,812 | $ | 5,777 | $ | 5,636 | ||||||||||||||||||||||||||||||||||||
Purchased power and fuel | 1,068 | 1,135 | 1,996 | 2,140 | ||||||||||||||||||||||||||||||||||||||||
Operation and maintenance | 762 | 595 | 1,643 | 1,477 | ||||||||||||||||||||||||||||||||||||||||
Wildfire Insurance Fund expense | 83 | — | 167 | — | ||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 489 | 321 | 973 | 801 | ||||||||||||||||||||||||||||||||||||||||
Property and other taxes | 103 | 93 | 214 | 203 | ||||||||||||||||||||||||||||||||||||||||
Impairment and other | (18) | 170 | (18) | 166 | ||||||||||||||||||||||||||||||||||||||||
Other operating income | — | (2) | — | (3) | ||||||||||||||||||||||||||||||||||||||||
Total operating expenses | 2,487 | 2,312 | 4,975 | 4,784 | ||||||||||||||||||||||||||||||||||||||||
Operating income | 500 | 500 | 802 | 852 | ||||||||||||||||||||||||||||||||||||||||
Interest expense | (229) | (211) | (454) | (405) | ||||||||||||||||||||||||||||||||||||||||
Other income | 81 | 55 | 133 | 93 | ||||||||||||||||||||||||||||||||||||||||
Income before taxes | 352 | 344 | 481 | 540 | ||||||||||||||||||||||||||||||||||||||||
Income tax expense (benefit) | 4 | (78) | (80) | (190) | ||||||||||||||||||||||||||||||||||||||||
Net income | 348 | 422 | 561 | 730 | ||||||||||||||||||||||||||||||||||||||||
Preferred and preference stock dividend requirements of SCE | 30 | 30 | 60 | 60 | ||||||||||||||||||||||||||||||||||||||||
Net income attributable to Edison International common shareholders | $ | 318 | $ | 392 | $ | 501 | $ | 670 | ||||||||||||||||||||||||||||||||||||
Basic earnings per share: | ||||||||||||||||||||||||||||||||||||||||||||
Weighted average shares of common stock outstanding | 375 | 326 | 367 | 326 | ||||||||||||||||||||||||||||||||||||||||
Basic earnings per common share attributable to Edison International common shareholders | $ | 0.85 | $ | 1.20 | $ | 1.37 | $ | 2.05 | ||||||||||||||||||||||||||||||||||||
Diluted earnings per share: | ||||||||||||||||||||||||||||||||||||||||||||
Weighted average shares of common stock outstanding, including effect of dilutive securities | 376 | 327 | 368 | 327 | ||||||||||||||||||||||||||||||||||||||||
Diluted earnings per common share attributable to Edison International common shareholders | $ | 0.85 | $ | 1.20 | $ | 1.36 | $ | 2.05 | ||||||||||||||||||||||||||||||||||||
| |
Consolidated Statements of Comprehensive Income | Edison International |
| | | | | | |
| | Three months ended | ||||
| | March 31, | ||||
(in millions, unaudited) |
| 2021 |
| 2020 | ||
Net income | | $ | 290 | | $ | 213 |
Other comprehensive income, net of tax: | |
|
| |
|
|
Pension and postretirement benefits other than pensions | |
| 2 | |
| 2 |
Other comprehensive income, net of tax | |
| 2 | |
| 2 |
Comprehensive income | |
| 292 | |
| 215 |
Less: Comprehensive income attributable to noncontrolling interests | |
| 27 | |
| 30 |
Comprehensive income attributable to Edison International | | $ | 265 | | $ | 185 |
25
Consolidated Statements of Comprehensive Income | Edison International | |||||||||||||||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||||||||
(in millions, unaudited) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||
Net income | $ | 348 | $ | 422 | $ | 561 | $ | 730 | ||||||||||||||||||||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||||||||||||||||||||||||
Pension and postretirement benefits other than pensions: | ||||||||||||||||||||||||||||||||||||||
Amortization of net loss included in net income | 2 | 1 | 4 | 3 | ||||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax | 2 | 1 | 4 | 3 | ||||||||||||||||||||||||||||||||||
Comprehensive income | 350 | 423 | 565 | 733 | ||||||||||||||||||||||||||||||||||
Less: Comprehensive income attributable to noncontrolling interests | 30 | 30 | 60 | 60 | ||||||||||||||||||||||||||||||||||
Comprehensive income attributable to Edison International | $ | 320 | $ | 393 | $ | 505 | $ | 673 |
Consolidated Balance Sheets | Edison International | ||||||||||||||||
(in millions, unaudited) | June 30, 2020 | December 31, 2019 | |||||||||||||||
ASSETS | |||||||||||||||||
Cash and cash equivalents | $ | 524 | $ | 68 | |||||||||||||
Receivables, less allowances of $91 and $50 accounts at respective dates | 936 | 788 | |||||||||||||||
Accrued unbilled revenue | 629 | 488 | |||||||||||||||
Inventory | 382 | 364 | |||||||||||||||
Income tax receivables | 108 | 118 | |||||||||||||||
Prepaid expenses | 49 | 214 | |||||||||||||||
Regulatory assets | 1,692 | 1,009 | |||||||||||||||
Wildfire Insurance Fund contributions | 323 | 323 | |||||||||||||||
Other current assets | 153 | 188 | |||||||||||||||
Total current assets | 4,796 | 3,560 | |||||||||||||||
Nuclear decommissioning trusts | 4,566 | 4,562 | |||||||||||||||
Other investments | 84 | 64 | |||||||||||||||
Total investments | 4,650 | 4,626 | |||||||||||||||
Utility property, plant and equipment, less accumulated depreciation and amortization of $10,371 and $9,958 at respective dates | 45,386 | 44,198 | |||||||||||||||
Nonutility property, plant and equipment, less accumulated depreciation of $90 and $86 at respective dates | 167 | 87 | |||||||||||||||
Total property, plant and equipment | 45,553 | 44,285 | |||||||||||||||
Regulatory assets | 6,528 | 6,088 | |||||||||||||||
Wildfire Insurance Fund contributions | 2,606 | 2,767 | |||||||||||||||
Operating lease right-of-use assets | 672 | 693 | |||||||||||||||
Other long-term assets | 2,246 | 2,363 | |||||||||||||||
Total long-term assets | 12,052 | 11,911 | |||||||||||||||
Total assets | $ | 67,051 | $ | 64,382 |
Consolidated Balance Sheets | Edison International | |||||||||||||||||||
(in millions, except share amounts, unaudited) | June 30, 2020 | December 31, 2019 | ||||||||||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||||
Short-term debt | $ | 475 | $ | 550 | ||||||||||||||||
Current portion of long-term debt | 1,029 | 479 | ||||||||||||||||||
Accounts payable | 1,657 | 1,752 | ||||||||||||||||||
Accrued interest | 312 | 261 | ||||||||||||||||||
Customer deposits | 281 | 302 | ||||||||||||||||||
Regulatory liabilities | 857 | 972 | ||||||||||||||||||
Current portion of operating lease liabilities | 65 | 80 | ||||||||||||||||||
Other current liabilities | 1,223 | 1,127 | ||||||||||||||||||
Total current liabilities | 5,899 | 5,523 | ||||||||||||||||||
Long-term debt | 19,238 | 17,864 | ||||||||||||||||||
Deferred income taxes and credits | 5,295 | 5,078 | ||||||||||||||||||
Pensions and benefits | 656 | 674 | ||||||||||||||||||
Asset retirement obligations | 3,013 | 3,029 | ||||||||||||||||||
Regulatory liabilities | 8,395 | 8,385 | ||||||||||||||||||
Operating lease liabilities | 607 | 613 | ||||||||||||||||||
Wildfire-related claims | 4,561 | 4,568 | ||||||||||||||||||
Other deferred credits and other long-term liabilities | 2,941 | 3,152 | ||||||||||||||||||
Total deferred credits and other liabilities | 25,468 | 25,499 | ||||||||||||||||||
Total liabilities | 50,605 | 48,886 | ||||||||||||||||||
Commitments and contingencies (Note 12) | ||||||||||||||||||||
Common stock, 0 par value (800,000,000 shares authorized; 378,207,496 and 361,985,133 shares issued and outstanding at respective dates) | 5,908 | 4,990 | ||||||||||||||||||
Accumulated other comprehensive loss | (65) | (69) | ||||||||||||||||||
Retained earnings | 8,410 | 8,382 | ||||||||||||||||||
Total Edison International's common shareholders' equity | 14,253 | 13,303 | ||||||||||||||||||
Noncontrolling interests – preferred and preference stock of SCE | 2,193 | 2,193 | ||||||||||||||||||
Total equity | 16,446 | 15,496 | ||||||||||||||||||
Total liabilities and equity | $ | 67,051 | $ | 64,382 |
Consolidated Statements of Cash Flows | Edison International | |||||||||||||||||||
Six months ended June 30, | ||||||||||||||||||||
(in millions, unaudited) | 2020 | 2019 | ||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||
Net income | $ | 561 | $ | 730 | ||||||||||||||||
Adjustments to reconcile to net cash provided by operating activities: | ||||||||||||||||||||
Depreciation and amortization | 1,005 | 837 | ||||||||||||||||||
Allowance for equity during construction | (51) | (49) | ||||||||||||||||||
Impairment and other | (18) | 166 | ||||||||||||||||||
Deferred income taxes | (58) | (182) | ||||||||||||||||||
Wildfire Insurance Fund amortization expense | 167 | — | ||||||||||||||||||
Other | 32 | 13 | ||||||||||||||||||
Nuclear decommissioning trusts | (62) | (72) | ||||||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||||
Receivables | (108) | (72) | ||||||||||||||||||
Inventory | (19) | (49) | ||||||||||||||||||
Accounts payable | 14 | 221 | ||||||||||||||||||
Tax receivables and payables | 31 | 65 | ||||||||||||||||||
Other current assets and liabilities | (23) | (423) | ||||||||||||||||||
Regulatory assets and liabilities, net | (927) | (543) | ||||||||||||||||||
Wildfire-related insurance receivable | 73 | — | ||||||||||||||||||
Other noncurrent assets and liabilities | 8 | (44) | ||||||||||||||||||
Net cash provided by operating activities | 625 | 598 | ||||||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||
Long-term debt issued, plus premium and net of discount and issuance costs of $26 and $(18) for the respective periods | 2,726 | 1,682 | ||||||||||||||||||
Long-term debt repaid or repurchased | (814) | (41) | ||||||||||||||||||
Term loan issued | 1,275 | 1,750 | ||||||||||||||||||
Term loan repaid | (800) | (750) | ||||||||||||||||||
Common stock issued | 884 | — | ||||||||||||||||||
Short-term debt financing, net | (550) | (509) | ||||||||||||||||||
Payments for stock-based compensation | (3) | (48) | ||||||||||||||||||
Receipts from stock option exercises | 14 | 25 | ||||||||||||||||||
Dividends and distribution to noncontrolling interests | (60) | (60) | ||||||||||||||||||
Dividends paid | (454) | (399) | ||||||||||||||||||
Other | 5 | 1 | ||||||||||||||||||
Net cash provided by financing activities | 2,223 | 1,651 | ||||||||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||
Capital expenditures | (2,514) | (2,235) | ||||||||||||||||||
Proceeds from sale of nuclear decommissioning trust investments | 3,225 | 2,440 | ||||||||||||||||||
Purchases of nuclear decommissioning trust investments | (3,163) | (2,368) | ||||||||||||||||||
Other | 60 | 27 | ||||||||||||||||||
Net cash used in investing activities | (2,392) | (2,136) | ||||||||||||||||||
Net increase in cash, cash equivalents and restricted cash | 456 | 113 | ||||||||||||||||||
Cash, cash equivalents and restricted cash at beginning of period | 70 | 152 | ||||||||||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | 526 | $ | 265 | ||||||||||||||||
Consolidated Statements of Income | Southern California Edison Company | ||||||||||||||||||||||||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
(in millions, unaudited) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||||||||||||||||
Operating revenue | $ | 2,980 | $ | 2,800 | $ | 5,760 | $ | 5,616 | |||||||||||||||||||||||||||||||||||||||
Purchased power and fuel | 1,068 | 1,135 | 1,996 | 2,140 | |||||||||||||||||||||||||||||||||||||||||||
Operation and maintenance | 741 | 571 | 1,600 | 1,440 | |||||||||||||||||||||||||||||||||||||||||||
Wildfire Insurance Fund expense | 83 | — | 167 | — | |||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 489 | 320 | 972 | 800 | |||||||||||||||||||||||||||||||||||||||||||
Property and other taxes | 103 | 93 | 213 | 202 | |||||||||||||||||||||||||||||||||||||||||||
Impairment and other | (52) | 170 | (52) | 166 | |||||||||||||||||||||||||||||||||||||||||||
Other operating income | — | (2) | — | (3) | |||||||||||||||||||||||||||||||||||||||||||
Total operating expenses | 2,432 | 2,287 | 4,896 | 4,745 | |||||||||||||||||||||||||||||||||||||||||||
Operating income | 548 | 513 | 864 | 871 | |||||||||||||||||||||||||||||||||||||||||||
Interest expense | (193) | (188) | (387) | (366) | |||||||||||||||||||||||||||||||||||||||||||
Other income | 82 | 56 | 134 | 94 | |||||||||||||||||||||||||||||||||||||||||||
Income before taxes | 437 | 381 | 611 | 599 | |||||||||||||||||||||||||||||||||||||||||||
Income tax expense (benefit) | 26 | (68) | (49) | (173) | |||||||||||||||||||||||||||||||||||||||||||
Net income | 411 | 449 | 660 | 772 | |||||||||||||||||||||||||||||||||||||||||||
Less: Preferred and preference stock dividend requirements | 30 | 30 | 60 | 60 | |||||||||||||||||||||||||||||||||||||||||||
Net income available for common stock | $ | 381 | $ | 419 | $ | 600 | $ | 712 |
Consolidated Statements of Comprehensive Income | Southern California Edison Company | ||||||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||
(in millions, unaudited) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||
Net income | 411 | $ | 449 | $ | 660 | $ | 772 | ||||||||||||||||||||||
Other comprehensive income, net of tax: | |||||||||||||||||||||||||||||
Pension and postretirement benefits other than pensions: | |||||||||||||||||||||||||||||
Amortization of net loss included in net income | 1 | 1 | 3 | 2 | |||||||||||||||||||||||||
Other comprehensive income, net of tax | 1 | 1 | 3 | 2 | |||||||||||||||||||||||||
Comprehensive income | $ | 412 | $ | 450 | $ | 663 | $ | 774 |
| | ||||
Consolidated Balance Sheets | Edison |
| | | | | | |
| | March 31, | | December 31, | ||
(in millions, unaudited) |
| 2021 |
| 2020 | ||
ASSETS |
| |
|
| |
|
Cash and cash equivalents | | $ | 389 | | $ | 87 |
Receivables, less allowances of $226 and $188 for uncollectible accounts at respective dates | |
| 1,093 | |
| 1,130 |
Accrued unbilled revenue | |
| 673 | |
| 521 |
Insurance receivable | |
| 603 | |
| 708 |
Income tax receivables | | | 0 | | | 68 |
Inventory | |
| 416 | |
| 405 |
Prepaid expenses | |
| 163 | |
| 281 |
Regulatory assets | |
| 1,578 | |
| 1,314 |
Wildfire Insurance Fund contributions | |
| 204 | |
| 323 |
Other current assets | |
| 209 | |
| 224 |
Total current assets | |
| 5,328 | |
| 5,061 |
Nuclear decommissioning trusts | |
| 4,763 | |
| 4,833 |
Other investments | |
| 59 | |
| 53 |
Total investments | |
| 4,822 | |
| 4,886 |
Utility property, plant and equipment, less accumulated depreciation and amortization of $10,827 and $10,681 at respective dates | |
| 48,097 | |
| 47,653 |
Nonutility property, plant and equipment, less accumulated depreciation of $96 and $94 at respective dates | |
| 187 | |
| 186 |
Total property, plant and equipment | |
| 48,284 | |
| 47,839 |
Regulatory assets (includes $331 at 2021 related to Variable Interest Entities "VIEs") | |
| 7,543 | |
| 7,120 |
Wildfire Insurance Fund contributions | |
| 2,512 | |
| 2,443 |
Operating lease right-of-use assets | |
| 1,071 | |
| 1,088 |
Long-term insurance receivables | | | 75 | | | 75 |
Other long-term assets | |
| 870 | |
| 860 |
Total long-term assets | |
| 12,071 | |
| 11,586 |
Total assets | | $ | 70,505 | | $ | 69,372 |
(in millions, unaudited) | June 30, 2020 | December 31, 2019 | |||||||||
ASSETS | |||||||||||
Cash and cash equivalents | $ | 254 | $ | 24 | |||||||
Receivables, less allowances of $90 and $49 for uncollectible accounts at respective dates | 932 | 777 | |||||||||
Accrued unbilled revenue | 629 | 488 | |||||||||
Inventory | 382 | 364 | |||||||||
Income tax receivables | 122 | 148 | |||||||||
Prepaid expenses | 49 | 213 | |||||||||
Regulatory assets | 1,692 | 1,009 | |||||||||
Wildfire Insurance Fund contributions | 323 | 323 | |||||||||
Other current assets | 145 | 184 | |||||||||
Total current assets | 4,528 | 3,530 | |||||||||
Nuclear decommissioning trusts | 4,566 | 4,562 | |||||||||
Other investments | 65 | 46 | |||||||||
Total investments | 4,631 | 4,608 | |||||||||
Utility property, plant and equipment, less accumulated depreciation and amortization of $10,371 and $9,958 at respective dates | 45,386 | 44,198 | |||||||||
Nonutility property, plant and equipment, less accumulated depreciation of $83 and $80 at respective dates | 162 | 83 | |||||||||
Total property, plant and equipment | 45,548 | 44,281 | |||||||||
Regulatory assets | 6,528 | 6,088 | |||||||||
Wildfire Insurance Fund contributions | 2,606 | 2,767 | |||||||||
Operating lease right-of-use assets | 668 | 689 | |||||||||
Long-term insurance receivables due from affiliate | 803 | 803 | |||||||||
Other long-term assets | 1,424 | 1,507 | |||||||||
Total long-term assets | 12,029 | 11,854 | |||||||||
Total assets | $ | 66,736 | $ | 64,273 |
26
| | ||||
Consolidated Balance Sheets | Edison |
| | | | | | |
| | March 31, | | December 31, | ||
(in millions, except share amounts, unaudited) |
| 2021 |
| 2020 | ||
LIABILITIES AND EQUITY |
| |
|
| |
|
Short-term debt | | $ | 2,520 | | $ | 2,398 |
Current portion of long-term debt | |
| 909 | |
| 1,029 |
Accounts payable | |
| 1,602 | |
| 1,980 |
Wildfire-related claims | | | 1,812 | | | 2,231 |
Customer deposits | |
| 225 | |
| 243 |
Regulatory liabilities | |
| 524 | |
| 569 |
Current portion of operating lease liabilities | |
| 215 | |
| 215 |
Other current liabilities | |
| 1,690 | |
| 1,612 |
Total current liabilities | |
| 9,497 | |
| 10,277 |
Long-term debt (includes $327 at 2021 related to VIEs) | |
| 20,165 | |
| 19,632 |
Deferred income taxes and credits | |
| 5,474 | |
| 5,368 |
Pensions and benefits | |
| 554 | |
| 563 |
Asset retirement obligations | |
| 2,902 | |
| 2,930 |
Regulatory liabilities | |
| 8,881 | |
| 8,589 |
Operating lease liabilities | |
| 856 | |
| 873 |
Wildfire-related claims | |
| 2,082 | |
| 2,281 |
Other deferred credits and other long-term liabilities | |
| 2,871 | |
| 2,910 |
Total deferred credits and other liabilities | |
| 23,620 | |
| 23,514 |
Total liabilities | |
| 53,282 | |
| 53,423 |
Commitments and contingencies (Note 12) | |
|
| |
|
|
Preferred stock (50,000,000 shares authorized; 1,250,000 shares issued and outstanding at March 31, 2021) | | | 1,237 | | | — |
Common stock, 0 par value (800,000,000 shares authorized; 379,433,168 and 378,907,147 shares issued and outstanding at respective dates) | |
| 5,989 | |
| 5,962 |
Accumulated other comprehensive loss | |
| (67) | |
| (69) |
Retained earnings | |
| 8,163 | |
| 8,155 |
Total Edison International’s shareholders’ equity | |
| 15,322 | |
| 14,048 |
Noncontrolling interests – preference stock of SCE | |
| 1,901 | |
| 1,901 |
Total equity | |
| 17,223 | |
| 15,949 |
Total liabilities and equity | | $ | 70,505 | | $ | 69,372 |
(in millions, except share amounts, unaudited) | June 30, 2020 | December 31, 2019 | |||||||||
LIABILITIES AND EQUITY | |||||||||||
Short-term debt | $ | 475 | $ | 550 | |||||||
Current portion of long-term debt | 1,029 | 79 | |||||||||
Accounts payable | 1,657 | 1,779 | |||||||||
Accrued interest | 289 | 241 | |||||||||
Customer deposits | 281 | 302 | |||||||||
Regulatory liabilities | 857 | 972 | |||||||||
Current portion of operating lease liabilities | 64 | 79 | |||||||||
Other current liabilities | 949 | 1,057 | |||||||||
Total current liabilities | 5,601 | 5,059 | |||||||||
Long-term debt | 16,107 | 15,132 | |||||||||
Deferred income taxes and credits | 6,708 | 6,451 | |||||||||
Pensions and benefits | 223 | 237 | |||||||||
Asset retirement obligations | 3,013 | 3,029 | |||||||||
Regulatory liabilities | 8,395 | 8,385 | |||||||||
Operating lease liabilities | 604 | 610 | |||||||||
Wildfire-related claims | 4,561 | 4,568 | |||||||||
Other deferred credits and other long-term liabilities | 2,743 | 2,975 | |||||||||
Total deferred credits and other liabilities | 26,247 | 26,255 | |||||||||
Total liabilities | 47,955 | 46,446 | |||||||||
Commitments and contingencies (Note 12) | |||||||||||
Preferred and preference stock | 2,245 | 2,245 | |||||||||
Common stock, 0 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 | 4,829 | 3,939 | |||||||||
Accumulated other comprehensive loss | (36) | (39) | |||||||||
Retained earnings | 9,575 | 9,514 | |||||||||
Total equity | 18,781 | 17,827 | |||||||||
Total liabilities and equity | $ | 66,736 | $ | 64,273 |
27
| | ||||
Consolidated Statements of Cash Flows | Edison International |
| | | | | | |
| | Three months ended March 31, | ||||
(in millions, unaudited) |
| 2021 |
| 2020 | ||
Cash flows from operating activities: |
| |
|
| |
|
Net income | | $ | 290 | | $ | 213 |
Adjustments to reconcile to net cash provided by operating activities: | |
|
| |
|
|
Depreciation and amortization | |
| 542 | |
| 501 |
Allowance for equity during construction | |
| (35) | |
| (21) |
Deferred income taxes | |
| (37) | |
| (58) |
Wildfire Insurance Fund amortization expense | |
| 53 | |
| 84 |
Other | |
| 11 | |
| 23 |
Nuclear decommissioning trusts | |
| (52) | |
| 14 |
Changes in operating assets and liabilities: | |
|
| |
|
|
Receivables | |
| 15 | |
| (30) |
Inventory | |
| (12) | |
| 1 |
Accounts payable | |
| (151) | |
| (129) |
Tax receivables and payables | |
| 178 | |
| 31 |
Other current assets and liabilities | |
| (168) | |
| 41 |
Regulatory assets and liabilities, net | |
| (70) | |
| (372) |
Wildfire-related insurance receivable | |
| 105 | |
| 58 |
Wildfire-related claims | |
| (618) | |
| 0 |
Other noncurrent assets and liabilities | |
| 21 | |
| (41) |
Net cash provided by operating activities | |
| 72 | |
| 315 |
Cash flows from financing activities: | |
|
| |
|
|
Long-term debt issued, plus premium and net of discount and issuance costs of $(15) and $19 for the respective periods | |
| 1,223 | |
| 1,719 |
Long-term debt repaid or repurchased | |
| (490) | |
| (40) |
Short-term debt issued | |
| 305 | |
| 1,275 |
Short-term debt repaid | |
| (327) | |
| — |
Common stock issued | |
| 15 | |
| 74 |
Preferred stock issued, net | |
| 1,237 | |
| — |
Commercial paper repayment, net of borrowing | |
| (180) | |
| (550) |
Dividends and distribution to noncontrolling interests | |
| (32) | |
| (36) |
Dividends paid | |
| (247) | |
| (226) |
Other | |
| 7 | |
| 15 |
Net cash provided by financing activities | |
| 1,511 | |
| 2,231 |
Cash flows from investing activities: | |
|
| |
|
|
Capital expenditures | |
| (1,358) | |
| (1,268) |
Proceeds from sale of nuclear decommissioning trust investments | |
| 1,270 | |
| 1,407 |
Purchases of nuclear decommissioning trust investments | |
| (1,218) | |
| (1,421) |
Other | |
| 24 | |
| 4 |
Net cash used in investing activities | |
| (1,282) | |
| (1,278) |
Net increase in cash, cash equivalents and restricted cash | |
| 301 | |
| 1,268 |
Cash, cash equivalents and restricted cash at beginning of period | |
| 89 | |
| 70 |
Cash, cash equivalents and restricted cash at end of period | | $ | 390 | | $ | 1,338 |
28
| |
Consolidated Statements of Income | Southern California Edison Company |
| | | | | | |
| | Three months ended | ||||
| | March 31, | ||||
(in millions, unaudited) |
| 2021 |
| 2020 | ||
Operating revenue | | $ | 2,953 | | $ | 2,780 |
Purchased power and fuel | |
| 1,013 | |
| 928 |
Operation and maintenance | |
| 827 | |
| 859 |
Wildfire Insurance Fund expense | |
| 53 | |
| 84 |
Depreciation and amortization | |
| 524 | |
| 483 |
Property and other taxes | |
| 125 | |
| 110 |
Total operating expenses | |
| 2,542 | |
| 2,464 |
Operating income | |
| 411 | |
| 316 |
Interest expense | |
| (184) | |
| (194) |
Other income | |
| 72 | |
| 52 |
Income before taxes | |
| 299 | |
| 174 |
Income tax benefit | |
| (24) | |
| (75) |
Net income | |
| 323 | |
| 249 |
Less: Preferred and preference stock dividend requirements | |
| 27 | |
| 30 |
Net income available for common stock | | $ | 296 | | $ | 219 |
| |
Consolidated Statements of Comprehensive Income | Southern California Edison Company |
| | | | | | |
| | Three months ended | ||||
| | March 31, | ||||
(in millions, unaudited) |
| 2021 |
| 2020 | ||
Net income | | $ | 323 | | $ | 249 |
Other comprehensive income, net of tax: | |
|
| |
|
|
Pension and postretirement benefits other than pensions | |
| 2 | |
| 2 |
Other comprehensive income, net of tax | |
| 2 | |
| 2 |
Comprehensive income | | $ | 325 | | $ | 251 |
Six months ended June 30, | ||||||||||||||||||||
(in millions, unaudited) | 2020 | 2019 | ||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||
Net income | $ | 660 | $ | 772 | ||||||||||||||||
Adjustments to reconcile to net cash provided by operating activities: | ||||||||||||||||||||
Depreciation and amortization | 1,001 | 834 | ||||||||||||||||||
Allowance for equity during construction | (51) | (49) | ||||||||||||||||||
Impairment and other | (52) | 166 | ||||||||||||||||||
Deferred income taxes | (22) | (175) | ||||||||||||||||||
Wildfire Insurance Fund amortization expense | 167 | — | ||||||||||||||||||
Other | 24 | 8 | ||||||||||||||||||
Nuclear decommissioning trusts | (62) | (72) | ||||||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||||
Receivables | (114) | (80) | ||||||||||||||||||
Inventory | (19) | (49) | ||||||||||||||||||
Accounts payable | (12) | 212 | ||||||||||||||||||
Tax receivables and payables | 47 | 103 | ||||||||||||||||||
Other current assets and liabilities | (22) | (421) | ||||||||||||||||||
Regulatory assets and liabilities, net | (927) | (543) | ||||||||||||||||||
Wildfire-related insurance receivable | 73 | — | ||||||||||||||||||
Other noncurrent assets and liabilities | (8) | (33) | ||||||||||||||||||
Net cash provided by operating activities | 683 | 673 | ||||||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||
Long-term debt issued, plus premium and net of discount and issuance costs of $30 and $(13) for the respective periods | 2,330 | 1,087 | ||||||||||||||||||
Long-term debt repaid or repurchased | (414) | (41) | ||||||||||||||||||
Term loan issued | 475 | 750 | ||||||||||||||||||
Term loan repaid | — | (750) | ||||||||||||||||||
Capital contributions from Edison International Parent | 888 | 1,200 | ||||||||||||||||||
Short-term debt financing, net | (550) | (508) | ||||||||||||||||||
Payments for stock-based compensation | (5) | (29) | ||||||||||||||||||
Receipts from stock option exercises | — | 16 | ||||||||||||||||||
Dividends paid | (798) | (260) | ||||||||||||||||||
Other | 5 | 2 | ||||||||||||||||||
Net cash provided by financing activities | 1,931 | 1,467 | ||||||||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||
Capital expenditures | (2,512) | (2,234) | ||||||||||||||||||
Proceeds from sale of nuclear decommissioning trust investments | 3,225 | 2,440 | ||||||||||||||||||
Purchases of nuclear decommissioning trust investments | (3,163) | (2,368) | ||||||||||||||||||
Other | 66 | 27 | ||||||||||||||||||
Net cash used in investing activities | (2,384) | (2,135) | ||||||||||||||||||
Net increase in cash, cash equivalents and restricted cash | 230 | 5 | ||||||||||||||||||
Cash, cash equivalents and restricted cash at beginning of period | 24 | 22 | ||||||||||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | 254 | $ | 27 |
29
Consolidated Balance Sheets | Southern California Edison Company |
| | | | �� | | |
| | March 31, | | December 31, | ||
(in millions, unaudited) |
| 2021 |
| 2020 | ||
ASSETS |
| |
|
| |
|
Cash and cash equivalents | | $ | 25 | | $ | 55 |
Receivables, less allowances of $226 and $188 for uncollectible accounts at respective dates | |
| 1,089 | |
| 1,126 |
Accrued unbilled revenue | |
| 673 | |
| 521 |
Insurance receivable | | | 398 | | | 440 |
Insurance receivable from affiliate | | | 268 | | | 268 |
Income tax receivables | |
| — | |
| 69 |
Inventory | |
| 416 | |
| 405 |
Prepaid expenses | |
| 163 | |
| 280 |
Regulatory assets | |
| 1,578 | |
| 1,314 |
Wildfire Insurance Fund contributions | |
| 204 | |
| 323 |
Other current assets | |
| 200 | |
| 216 |
Total current assets | |
| 5,014 | |
| 5,017 |
Nuclear decommissioning trusts | |
| 4,763 | |
| 4,833 |
Other investments | |
| 44 | |
| 37 |
Total investments | |
| 4,807 | |
| 4,870 |
Utility property, plant and equipment, less accumulated depreciation and amortization of $10,827 and $10,681 at respective dates | |
| 48,097 | |
| 47,653 |
Nonutility property, plant and equipment, less accumulated depreciation of $88 and $86 at respective dates | |
| 181 | |
| 180 |
Total property, plant and equipment | |
| 48,278 | |
| 47,833 |
Regulatory assets (includes $331 at 2021 related to VIEs) | |
| 7,543 | |
| 7,120 |
Wildfire Insurance Fund contributions | |
| 2,512 | |
| 2,443 |
Operating lease right-of-use assets | |
| 1,063 | |
| 1,085 |
Long-term insurance receivables | | | 75 | | | 75 |
Other long-term assets | |
| 853 | |
| 843 |
Total long-term assets | |
| 12,046 | |
| 11,566 |
Total assets | | $ | 70,145 | | $ | 69,286 |
30
Consolidated Balance Sheets | Southern California Edison Company |
| | | | | | |
| | March 31, | | December 31, | ||
(in millions, except share amounts, unaudited) |
| 2021 |
| 2020 | ||
LIABILITIES AND EQUITY |
| |
|
| |
|
Short-term debt | | $ | 2,520 | | $ | 2,268 |
Current portion of long-term debt | |
| 909 | |
| 1,029 |
Accounts payable | |
| 1,603 | |
| 1,983 |
Wildfire-related claims | | | 1,812 | | | 2,231 |
Customer deposits | |
| 225 | |
| 243 |
Regulatory liabilities | |
| 524 | |
| 569 |
Current portion of operating lease liabilities | |
| 214 | |
| 214 |
Other current liabilities | |
| 1,366 | |
| 1,294 |
Total current liabilities | |
| 9,173 | |
| 9,831 |
Long-term debt (includes $327 at 2021 related to VIEs) | |
| 17,031 | |
| 16,499 |
Deferred income taxes and credits | |
| 6,903 | |
| 6,783 |
Pensions and benefits | |
| 139 | |
| 144 |
Asset retirement obligations | |
| 2,902 | |
| 2,930 |
Regulatory liabilities | |
| 8,881 | |
| 8,589 |
Operating lease liabilities | |
| 849 | |
| 871 |
Wildfire-related claims | |
| 2,082 | |
| 2,281 |
Other deferred credits and other long-term liabilities | |
| 2,663 | |
| 2,708 |
Total deferred credits and other liabilities | |
| 24,419 | |
| 24,306 |
Total liabilities | |
| 50,623 | |
| 50,636 |
Commitments and contingencies (Note 12) | |
|
| |
|
|
Preference stock | |
| 1,945 | |
| 1,945 |
Common stock, 0 par value (560,000,000 shares authorized; 434,888,104 shares issued and outstanding at respective dates) | |
| 2,168 | |
| 2,168 |
Additional paid-in capital | |
| 6,286 | |
| 5,387 |
Accumulated other comprehensive loss | |
| (39) | |
| (41) |
Retained earnings | |
| 9,162 | |
| 9,191 |
Total equity | |
| 19,522 | |
| 18,650 |
Total liabilities and equity | | $ | 70,145 | | $ | 69,286 |
31
Consolidated Statements of Cash Flows | Southern California Edison Company |
| | | | | | |
| | Three months ended March 31, | ||||
(in millions, unaudited) |
| 2021 |
| 2020 | ||
Cash flows from operating activities: |
| |
|
| |
|
Net income | | $ | 323 | | $ | 249 |
Adjustments to reconcile to net cash provided by operating activities: | |
| | |
| |
Depreciation and amortization | |
| 540 | |
| 499 |
Allowance for equity during construction | |
| (35) | |
| (21) |
Deferred income taxes | |
| (25) | |
| (47) |
Wildfire Insurance Fund amortization expense | |
| 53 | |
| 84 |
Other | |
| 8 | |
| 20 |
Nuclear decommissioning trusts | |
| (52) | |
| 14 |
Changes in operating assets and liabilities: | |
|
| |
| |
Receivables | |
| 16 | |
| (30) |
Inventory | |
| (12) | |
| 1 |
Accounts payable | |
| (154) | |
| (156) |
Tax receivables and payables | |
| 178 | |
| 35 |
Other current assets and liabilities | |
| (166) | |
| 43 |
Regulatory assets and liabilities, net | |
| (70) | |
| (372) |
Wildfire-related insurance receivable | |
| 42 | |
| 58 |
Wildfire-related claims | |
| (618) | |
| 0 |
Other noncurrent assets and liabilities | |
| 20 | |
| (43) |
Net cash provided by operating activities | |
| 48 | |
| 334 |
Cash flows from financing activities: | |
|
| |
|
|
Long-term debt issued, plus premium and net of discount and issuance costs of $(15) and $19 for the respective periods | |
| 1,223 | |
| 1,719 |
Long-term debt repaid | | | (490) | | | (40) |
Short-term debt borrowed | |
| 305 | |
| 475 |
Short-term debt repaid | |
| (327) | |
| 0 |
Capital contributions from Edison International Parent | |
| 900 | |
| 269 |
Commercial paper repayment, net of borrowing | |
| (51) | |
| (550) |
Dividends paid | |
| (357) | |
| (505) |
Other | |
| 1 | |
| 0 |
Net cash provided by financing activities | |
| 1,204 | |
| 1,368 |
Cash flows from investing activities: | |
|
| |
|
|
Capital expenditures | |
| (1,357) | |
| (1,267) |
Proceeds from sale of nuclear decommissioning trust investments | |
| 1,270 | |
| 1,407 |
Purchases of nuclear decommissioning trust investments | |
| (1,218) | |
| (1,421) |
Other | |
| 23 | |
| 7 |
Net cash used in investing activities | |
| (1,282) | |
| (1,274) |
Net (decrease) increase in cash, cash equivalents and restricted cash | |
| (30) | |
| 428 |
Cash, cash equivalents and restricted cash at beginning of period | |
| 56 | |
| 24 |
Cash, cash equivalents and restricted cash at end of period | | $ | 26 | | $ | 452 |
32
(Unaudited)
Note 1.Summary of Significant Accounting Policies
Organization and Basis of Presentation
Edison International is the parent holding company of Southern California Edison Company ("SCE") and Edison Energy Group, Inc. ("Edison Energy Group"). SCE is an investor-owned public utility primarily engaged in the business of supplying and delivering electricity to customers in an approximately 50,000 square mile area of southernSouthern California. Edison Energy Group is an indirect wholly-owned subsidiary of Edison International and a holding company for Edison Energy, LLC ("Edison Energy") which is engaged in the competitive business of providing data driven energy servicessolutions to commercial, institutional and industrial customers. Edison Energy'sEnergy’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'sInternational’s consolidated financial statements include the accounts of Edison International, SCE, and other wholly owned and controlled subsidiaries. References to Edison International refer to the consolidated group of Edison International and its subsidiaries. References to "Edison International Parent and Other" refer to Edison International Parent and its competitive subsidiaries and "Edison International Parent" refer to Edison International on a stand-alone basis, not consolidated with its subsidiaries. SCE'sSCE’s consolidated financial statements include the accounts of SCE, and its wholly owned and controlled subsidiaries.subsidiaries and a variable interest entity of which SCE is the primary beneficiary, SCE Recovery Funding LLC. All intercompany transactions have been eliminated from the consolidated financial statements.
Edison International'sInternational’s and SCE'sSCE’s significant accounting policies were described in the "Notes to Consolidated Financial Statements" included in Edison International'sInternational’s and SCE'sSCE’s combined Annual Report on Form 10-K for the year ended December 31, 20192020 (the "2019"2020 Form 10-K"). This quarterly report should be read in conjunction with the financial statements and notes included in the 20192020 Form 10-K.
In the opinion of management, all adjustments, consisting only of adjustments of a normal recurring nature, have been made that are necessary to fairly state the consolidated financial position, results of operations, and cash flows in accordance with accounting principles generally accepted in the United States ("GAAP") for the periods covered by this quarterly report on Form 10-Q. The results of operations for the three-month and six-month periods ended June 30, 2020March 31, 2021 are not necessarily indicative of the operating results for the full year. Certain prior period amounts have been conformed to the current period'speriod’s presentation.
The December 31, 20192020 financial statement data was derived from audited financial statements but does not include all disclosures required by GAAP.
Cash, Cash Equivalents and Restricted Cash
Cash equivalents include investments in money market funds. Generally, the carrying value of cash equivalents equals the fair value, as these investments have original maturities of three months or less. The cash equivalents were as follows:
Edison International | SCE | |||||||||||||||||||||||||||||||||||||
(in millions) | June 30, 2020 | December 31, 2019 | June 30, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||
Money market funds | $ | 479 | $ | 31 | $ | 214 | $ | — |
| | | | | | | | | | | | |
| | Edison International | | SCE | ||||||||
| | March 31, | | December 31, | | March 31, | | December 31, | ||||
(in millions) | | 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Money market funds | | $ | 360 | | $ | 62 | | $ | 3 | | $ | 38 |
Cash is temporarily invested until required for check clearing. Checks issued, but not yet paid by the financial institution, are reclassified from cash to accounts payable at the end of each reporting period as follows:
| | | | | | | | | | | | | |
|
| Edison International |
| SCE | | ||||||||
| | March 31, | | December 31, | | March 31, | | December 31, | | ||||
(in millions) |
| 2021 |
| 2020 |
| 2021 |
| 2020 | | ||||
Book balances reclassified to accounts payable | | $ | 59 | | $ | 69 | | $ | 59 | | $ | 69 | |
Edison International | SCE | |||||||||||||||||||||||||||||||||||||
(in millions) | June 30, 2020 | December 31, 2019 | June 30, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||
Book balances reclassified to accounts payable | $ | 64 | $ | 75 | $ | 64 | $ | 74 |
33
The following table sets forth the cash, cash equivalents and restricted cash included in the consolidated statements of cash flows:
| | | | | | |
| | March 31, |
| December 31, | ||
(in millions) |
| 2021 |
| 2020 | ||
Edison International: | |
| | |
| |
Cash and cash equivalents | | $ | 389 | | $ | 87 |
Short-term restricted cash1 | |
| 1 | |
| 2 |
Total cash, cash equivalents, and restricted cash | | $ | 390 | | $ | 89 |
SCE: | |
| | |
|
|
Cash and cash equivalents | | $ | 25 | | $ | 55 |
Short-term restricted cash1 | |
| 1 | |
| 1 |
Total cash, cash equivalents, and restricted cash | | $ | 26 | | $ | 56 |
1 | Reflected in "Other current assets" on Edison International’s and SCE’s consolidated balance sheets. |
(in millions) | June 30, 2020 | December 31, 2019 | ||||||||||||
Edison International: | ||||||||||||||
Cash and cash equivalents | $ | 524 | $ | 68 | ||||||||||
Short-term restricted cash1 | 2 | 2 | ||||||||||||
Total cash, cash equivalents, and restricted cash | $ | 526 | $ | 70 | ||||||||||
Allowance for Uncollectible Accounts
The allowance for uncollectible accounts is recorded based on SCE'sSCE’s estimate of expected credit losses and adjusted over the life of the receivables as needed. Since the customer base of SCE is concentrated in Southern California and exposes SCE to a homogeneous set of economic conditions, the allowance is measured on a collective basis on the historical amounts written-off, assessment of customer collectibility and current economic trends, including unemployment rates and any likelihood of recession for the region. At June 30, 2020,March 31, 2021, this included the estimated impacts of the COVID-19 pandemic.
The following table sets forth the changes in allowance for uncollectible accounts for SCE:
Three months ended June 30, 2020 | Six months ended June 30, 2020 | ||||||||||||||||||||||
(in millions) | Customers | All others | Customers | All others | |||||||||||||||||||
Beginning balance | $ | 47 | $ | 13 | $ | 35 | $ | 14 | |||||||||||||||
Plus: current period provision for uncollectible accounts | |||||||||||||||||||||||
Included in operation and maintenance expenses | 12 | 5 | 28 | 7 | |||||||||||||||||||
Deferred to regulatory assets | 21 | — | 21 | — | |||||||||||||||||||
Less: write-offs, net of recoveries | 5 | 3 | 9 | 6 | |||||||||||||||||||
Ending balance | $ | 75 | $ | 15 | $ | 75 | $ | 15 |
| | | | | | | | | | | | |
| | Three months ended | | Three months ended | ||||||||
| | March 31, 2021 | | March 31, 2020 | ||||||||
(in millions) | | Customers | | All others | | Customers | | All others | ||||
Beginning balance | | $ | 175 |
| $ | 13 |
| $ | 35 |
| $ | 14 |
Plus: current period provision for uncollectible accounts | | | | | | | | | | | | |
Included in operation and maintenance expenses | |
| 6 | |
| 4 | |
| 16 | |
| 2 |
Deferred to regulatory assets | |
| 34 | |
| — | |
| — | |
| 0 |
Less: write-offs, net of recoveries | |
| 5 | |
| 1 | |
| 4 | |
| 3 |
Ending balance | | $ | 210 |
| $ | 16 |
| $ | 47 |
| $ | 13 |
Revenue Recognition
Regulatory Proceedings
2021 General Rate Case
In May 2019, the CPUC approved2021 GRC, SCE has requested a decision in SCE's 2018 GRC.
The CPUC has approved the prior period impactestablishment of the 2018 GRC decision in the second quarter of 2019, including:
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'sInternational’s participating securities are stock-based compensation awards, payable in common shares, which earn dividend equivalents on an equal basis with common shares once the awards are vested. See Note 13 for further information.
34
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||||||||
(in millions, except per-share amounts) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||
Basic earnings per share: | ||||||||||||||||||||||||||||||||||||||
Net income attributable to common shareholders | $ | 318 | $ | 392 | $ | 501 | $ | 670 | ||||||||||||||||||||||||||||||
Net income available to common shareholders | $ | 318 | $ | 392 | $ | 501 | $ | 670 | ||||||||||||||||||||||||||||||
Weighted average common shares outstanding | 375 | 326 | 367 | 326 | ||||||||||||||||||||||||||||||||||
Basic earnings per share | $ | 0.85 | $ | 1.20 | $ | 1.37 | $ | 2.05 | ||||||||||||||||||||||||||||||
Diluted earnings per share: | ||||||||||||||||||||||||||||||||||||||
Net income attributable to common shareholders | $ | 318 | $ | 392 | $ | 501 | $ | 670 | ||||||||||||||||||||||||||||||
Net income available to common shareholders | $ | 318 | $ | 392 | $ | 501 | $ | 670 | ||||||||||||||||||||||||||||||
Net income available to common shareholders and assumed conversions | $ | 318 | $ | 392 | $ | 501 | $ | 670 | ||||||||||||||||||||||||||||||
Weighted average common shares outstanding | 375 | 326 | 367 | 326 | ||||||||||||||||||||||||||||||||||
Incremental shares from assumed conversions | 1 | 1 | 1 | 1 | ||||||||||||||||||||||||||||||||||
Adjusted weighted average shares – diluted | 376 | 327 | 368 | 327 | ||||||||||||||||||||||||||||||||||
Diluted earnings per share | $ | 0.85 | $ | 1.20 | $ | 1.36 | $ | 2.05 | ||||||||||||||||||||||||||||||
| | | | | | |
|
| Three months ended March 31, | ||||
(in millions, except per-share amounts) |
| 2021 |
| 2020 | ||
Basic earnings per share: | | | | | | |
Net income attributable to common shareholders | | $ | 259 | | $ | 183 |
Participating securities dividends | |
| — | | | — |
Net income available to common shareholders | | $ | 259 | | $ | 183 |
Weighted average common shares outstanding | |
| 379 | | | 363 |
Basic earnings per share | | $ | 0.68 | | $ | 0.50 |
Diluted earnings per share: | |
| | | | |
Net income attributable to common shareholders | | $ | 259 | | $ | 183 |
Participating securities dividends | |
| — | | | — |
Net income available to common shareholders | | $ | 259 | | $ | 183 |
Income impact of assumed conversions | |
| — | | | — |
Net income available to common shareholders and assumed conversions | | $ | 259 | | $ | 183 |
Weighted average common shares outstanding | |
| 379 | | | 363 |
Incremental shares from assumed conversions | |
| 1 | | | 1 |
Adjusted weighted average shares – diluted | |
| 380 | | | 364 |
Diluted earnings per share | | $ | 0.68 | | $ | 0.50 |
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 9,187,17811,412,075 and 7,426,3193,362,329 shares of common stock for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and 8,587,661 and 7,435,580 shares for the six months ended June 30, 2020 and 2019, respectively were outstanding, but were not included in the computation of diluted earnings per share because the effect would have been antidilutive.
New Accounting Guidance
Accounting Guidance Adopted
In August 2018, the FASB issued an accounting standards update which aligns the requirement for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing costs incurred to develop or obtain internal use software. The guidance also clarified presentation requirements for reporting implementation costs in the financial statements. Edison International and SCE adopted the standard on January 1, 2020 using the prospective adoption approach. The adoption of this guidance did not have a material impact on Edison International's and SCE's financial position or result of operations.
35
Note 2.Consolidated Statements of Changes in Equity
The following table provides Edison International'sInternational’s changes in equity for the sixthree months ended June 30, 2020:
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, 2019 | $ | 4,990 | $ | (69) | $ | 8,382 | $ | 13,303 | $ | 2,193 | $ | 15,496 | |||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | 183 | 183 | 30 | 213 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | 2 | — | 2 | — | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock issued, net of issuance cost | 88 | — | — | 88 | — | 88 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock dividends declared ($0.6375 per share) | — | — | (232) | (232) | — | (232) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends to noncontrolling interests ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock) | — | — | — | — | (30) | (30) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncash stock-based compensation | 7 | — | — | 7 | — | 7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2020 | $ | 5,085 | $ | (67) | $ | 8,333 | $ | 13,351 | $ | 2,193 | $ | 15,544 | |||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | 318 | 318 | 30 | 348 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | 2 | — | 2 | — | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock issued, net of issuance cost (Note 13) | 815 | — | — | 815 | — | 815 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock dividends declared ($0.6375 per share) | — | — | (241) | (241) | — | (241) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends to noncontrolling interests ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock) | — | — | — | — | (30) | (30) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncash stock-based compensation | 8 | — | — | 8 | — | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2020 | $ | 5,908 | $ | (65) | $ | 8,410 | $ | 14,253 | $ | 2,193 | $ | 16,446 | |||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | Noncontrolling | | | | |
| | Equity Attributable to Edison International Shareholders | | Interests | | | | ||||||||||||||
| | | | | | | | Accumulated | | | | | | | | | | | | ||
| | | | | | | | Other | | | | | | | | | | | | ||
| | Preferred | | Common | | Comprehensive | | Retained | | | | | Preference | | Total | ||||||
(in millions, except per share amounts) |
| Stock | | Stock |
| Loss |
| Earnings |
| Subtotal |
| Stock |
| Equity | |||||||
Balance at December 31, 2020 | | $ | — | | $ | 5,962 | | $ | (69) | | $ | 8,155 | | $ | 14,048 | | $ | 1,901 | | $ | 15,949 |
Net income | | | — | |
| — | |
| — | |
| 263 | |
| 263 | |
| 27 | |
| 290 |
Other comprehensive income | | | — | |
| — | |
| 2 | |
| — | |
| 2 | |
| — | |
| 2 |
Common stock issued, net of issuance cost | | | — | |
| 21 | |
| — | |
| — | |
| 21 | |
| — | |
| 21 |
Preferred stock issued, net of issuance cost | | | 1,237 | | | — | | | — | | | — | | | 1,237 | | | — | | | 1,237 |
Common stock dividends declared ($0.6625 per share) | | | — | |
| — | |
| — | |
| (251) | |
| (251) | |
| — | |
| (251) |
Preferred stock dividend accrued ($3.434 per share) | | | — | | | — | | | — | | | (4) | | | (4) | | | — | | | (4) |
Dividends to noncontrolling interests ($15.625 - $35.936 per share for preference stock) | | | — | |
| — | |
| — | |
| — | |
| — | |
| (27) | |
| (27) |
Noncash stock-based compensation | | | — | |
| 6 | |
| — | |
| — | |
| 6 | |
| — | |
| 6 |
Balance at March 31, 2021 | | $ | 1,237 | | $ | 5,989 | | $ | (67) | | $ | 8,163 | | $ | 15,322 | | $ | 1,901 | | $ | 17,223 |
The following table provides Edison International'sInternational’s changes in equity for the sixthree months ended June 30, 2019:March 31, 2020:
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Noncontrolling | | | | |
| | Equity Attributable to Common Shareholders | | Interests | | | | |||||||||||
| | | | | Accumulated | | | | | | | | Preferred | | | | ||
| | | | | Other | | | | | | | | and | | | | ||
| | Common | | Comprehensive | | Retained | | | | | Preference | | Total | |||||
(in millions, except per share amounts) |
| Stock |
| Loss |
| Earnings |
| Subtotal |
| Stock |
| Equity | ||||||
Balance at December 31, 2019 | | $ | 4,990 | | $ | (69) | | $ | 8,382 | | $ | 13,303 | | $ | 2,193 | | $ | 15,496 |
Net income | |
| — | |
| — | |
| 183 | |
| 183 | |
| 30 | |
| 213 |
Other comprehensive income | |
| — | |
| 2 | |
| — | |
| 2 | |
| — | |
| 2 |
Common stock issued, net of issuance cost | | | 88 | | | — | | | — | | | 88 | | | — | | | 88 |
Common stock dividends declared ($0.6375 per share) | |
| — | |
| — | |
| (232) | |
| (232) | |
| — | |
| (232) |
Dividends to noncontrolling interests ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock) | |
| — | |
| — | |
| — | |
| — | |
| (30) | |
| (30) |
Noncash stock-based compensation | |
| 7 | |
| — | |
| — | |
| 7 | |
| — | |
| 7 |
Balance at March 31, 2020 | | $ | 5,085 | | $ | (67) | | $ | 8,333 | | $ | 13,351 | | $ | 2,193 | | $ | 15,544 |
Equity Attributable to Common Shareholders | Noncontrolling Interests | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions, except per share amounts) | Common Stock | Accumulated Other Comprehensive Loss | Retained Earnings | Subtotal | Preferred and Preference Stock | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2018 | $ | 2,545 | $ | (50) | $ | 7,964 | $ | 10,459 | $ | 2,193 | $ | 12,652 | |||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | 278 | 278 | 30 | 308 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | 2 | — | 2 | — | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative effect of accounting changes1 | — | (10) | 10 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock dividends declared ($0.6125 per share) | — | — | (200) | (200) | — | (200) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends to noncontrolling interests ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock) | — | — | — | — | (30) | (30) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | (18) | (18) | — | (18) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncash stock-based compensation | 5 | — | — | 5 | — | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2019 | $ | 2,550 | $ | (58) | $ | 8,034 | $ | 10,526 | $ | 2,193 | $ | 12,719 | |||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | 392 | 392 | 30 | 422 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | 1 | — | 1 | — | 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock dividends declared ($0.6125 per share) | — | — | (200) | (200) | — | (200) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends to noncontrolling interests ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock) | — | — | — | — | (30) | (30) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | (4) | (4) | — | (4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncash stock-based compensation | 5 | — | — | 5 | — | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2019 | $ | 2,555 | $ | (57) | $ | 8,222 | $ | 10,720 | $ | 2,193 | $ | 12,913 | |||||||||||||||||||||||||||||||||||||||||||||||
36
The following table provides SCE'sSCE’s changes in equity for the sixthree months ended June 30, 2020:
(in millions, except per share amounts) | Preferred and Preference Stock | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Total Equity | |||||||||||||||||||||||||||||
Balance at December 31, 2019 | $ | 2,245 | $ | 2,168 | $ | 3,939 | $ | (39) | $ | 9,514 | $ | 17,827 | |||||||||||||||||||||||
Net income | — | — | — | — | 249 | 249 | |||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | 2 | — | 2 | |||||||||||||||||||||||||||||
Capital contribution from Edison International Parent | — | — | 269 | — | — | 269 | |||||||||||||||||||||||||||||
Dividends declared on common stock ($0.6185 per share) | — | — | — | — | (269) | (269) | |||||||||||||||||||||||||||||
Dividends declared on preferred stock ($0.255 - $0.299 per share) and preference stock ($15.625 - $35.936 per share) | — | — | — | — | (30) | (30) | |||||||||||||||||||||||||||||
Stock-based compensation | — | — | (5) | — | — | (5) | |||||||||||||||||||||||||||||
Noncash stock-based compensation | — | — | 4 | — | (1) | 3 | |||||||||||||||||||||||||||||
Balance at March 31, 2020 | $ | 2,245 | $ | 2,168 | $ | 4,207 | $ | (37) | $ | 9,463 | $ | 18,046 | |||||||||||||||||||||||
Net income | — | — | — | — | 411 | 411 | |||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | 1 | — | 1 | |||||||||||||||||||||||||||||
Capital contribution from Edison International Parent | — | — | 619 | — | — | 619 | |||||||||||||||||||||||||||||
Dividends declared on common stock ($0.6185 per share) | — | — | — | — | (269) | (269) | |||||||||||||||||||||||||||||
Dividends declared on preferred stock ($0.255 - $0.299 per share) and preference stock ($15.625 - $35.936 per share) | — | — | — | — | (30) | (30) | |||||||||||||||||||||||||||||
Noncash stock-based compensation | — | — | 3 | — | — | 3 | |||||||||||||||||||||||||||||
Balance at June 30, 2020 | $ | 2,245 | $ | 2,168 | $ | 4,829 | $ | (36) | $ | 9,575 | $ | 18,781 | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated | | | | | | | ||
| | | | | | | Additional | | Other | | | | | | | |||
| | Preference | | Common | | Paid-in | | Comprehensive | | Retained | | Total | ||||||
(in millions, except per share amounts) |
| Stock |
| Stock |
| Capital |
| Loss |
| Earnings |
| Equity | ||||||
Balance at December 31, 2020 | | $ | 1,945 | | $ | 2,168 | | $ | 5,387 | | $ | (41) | | $ | 9,191 | | $ | 18,650 |
Net income | |
| — | |
| — | |
| — | |
| — | |
| 323 | |
| 323 |
Other comprehensive income | |
| — | |
| — | |
| — | |
| 2 | |
| — | |
| 2 |
Capital contribution from Edison International Parent | |
| — | |
| — | |
| 900 | |
| — | |
| — | |
| 900 |
Dividends declared on common stock ($0.7473 per share) | |
| — | |
| — | |
| — | |
| — | |
| (325) | |
| (325) |
Dividends on preference stock ($15.625 - $35.936 per share) | |
| — | |
| — | |
| — | |
| — | |
| (27) | |
| (27) |
Stock-based compensation | |
| — | |
| — | |
| (4) | |
| — | |
| — | |
| (4) |
Noncash stock-based compensation | |
| — | |
| — | |
| 3 | |
| — | |
| — | |
| 3 |
Balance at March 31, 2021 | | $ | 1,945 | | $ | 2,168 | | $ | 6,286 | | $ | (39) | | $ | 9,162 | | $ | 19,522 |
The following table provides SCE'sSCE’s changes in equity for the sixthree months ended June 30, 2019:
(in millions, except per share amounts) | Preferred and Preference Stock | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Total Equity | |||||||||||||||||||||||||||||||||||
Balance at December 31, 2018 | $ | 2,245 | $ | 2,168 | $ | 680 | $ | (23) | $ | 8,715 | $ | 13,785 | |||||||||||||||||||||||||||||
Net income | — | — | — | — | 323 | 323 | |||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | 1 | — | 1 | |||||||||||||||||||||||||||||||||||
Cumulative effect of accounting change1 | (5) | 5 | — | ||||||||||||||||||||||||||||||||||||||
Dividends declared on common stock ($0.4599 per share) | — | — | — | — | (200) | (200) | |||||||||||||||||||||||||||||||||||
Dividends declared on preferred stock ($0.255 - $0.299 per share) and preference stock (15.625 - $35.936 per share) | — | — | — | — | (30) | (30) | |||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | (12) | (12) | |||||||||||||||||||||||||||||||||||
Noncash stock-based compensation | — | — | 3 | — | — | 3 | |||||||||||||||||||||||||||||||||||
Balance at March 31, 2019 | $ | 2,245 | $ | 2,168 | $ | 683 | $ | (27) | $ | 8,801 | $ | 13,870 | |||||||||||||||||||||||||||||
Net income | — | — | — | — | 449 | 449 | |||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | 1 | — | 1 | |||||||||||||||||||||||||||||||||||
Capital contribution from Edison International Parent | — | — | 1,200 | — | — | 1,200 | |||||||||||||||||||||||||||||||||||
Dividends declared on preferred and preference stock ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock) | — | — | — | — | (30) | (30) | |||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | (1) | (1) | |||||||||||||||||||||||||||||||||||
Noncash stock-based compensation | — | — | 3 | — | — | 3 | |||||||||||||||||||||||||||||||||||
Balance at June 30, 2019 | $ | 2,245 | $ | 2,168 | $ | 1,886 | $ | (26) | $ | 9,219 | $ | 15,492 | |||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | |
| | Preferred | | | | | | | | Accumulated | | | | | | | ||
| | and | | | | | 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, 2019 | | $ | 2,245 | | $ | 2,168 | | $ | 3,939 | | $ | (39) | | $ | 9,514 | | $ | 17,827 |
Net income | |
| — | |
| — | |
| — | |
| — | |
| 249 | |
| 249 |
Other comprehensive income | |
| — | |
| — | |
| — | |
| 2 | |
| — | |
| 2 |
Capital contribution from Edison International Parent | | | — | | | — | | | 269 | | | — | | | — | | | 269 |
Dividends declared on common stock ($0.6185 per share) | |
| — | |
| — | |
| — | |
| — | |
| (269) | |
| (269) |
Dividends declared on preferred stock ($0.255 - $0.299 per share) and preference stock (15.625 - $35.936 per share) | |
| — | |
| — | |
| — | |
| — | |
| (30) | |
| (30) |
Stock-based compensation | |
| — | |
| — | |
| (5) | |
| — | |
| — | |
| (5) |
Noncash stock-based compensation | |
| — | |
| — | |
| 4 | |
| — | |
| (1) | |
| 3 |
Balance at March 31, 2020 | | $ | 2,245 | | $ | 2,168 | | $ | 4,207 | | $ | (37) | | $ | 9,463 | | $ | 18,046 |
SCE recognized a cumulative effect adjustment to the opening balance of retained earnings and accumulated other comprehensive loss on January 1, 2019 related to the adoption of the accounting standards update on the reclassification of stranded tax effects resulting from Tax Reform.
Note 3.Variable Interest Entities
A VIEvariable interest entity ("VIE") is defined as a legal entity that meets one of two conditions: (1) the equity owners do not have sufficient equity at risk, or (2) the holders of the equity investment at risk, as a group, lack any of the following three characteristics: decision-making rights, the obligation to absorb losses or the right to receive the expected residual returns of the entity. The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most significantly impact the entity'sentity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. The primary beneficiary is required to consolidate the VIE. Commercial and operating activities are generally the factors that most significantly impact the economic performance of such VIEs. Commercial and operating activities include construction, operation and maintenance, fuel procurement, 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
37
2021 for the purpose of issuing and servicing securitized bonds related to SCE’s AB 1054 Excluded Capital Expenditures.
In February 2021, SCE Recovery Funding LLC issued $338 million of securitized bond in three tranches 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 bond is secured by the Recovery Property and cash collections from the non-bypassable rates and other charges are the sole source of funds to satisfy the debt obligation. The bondholders have no recourse to SCE. For further details, see Note 5.
The following table summarizes the impact of SCE Recovery Funding LLC on SCE’s and Edison Internationals’ consolidated balance sheets.
| | |
| | March 31, |
(in millions) | | 2021 |
Regulatory assets | $ | 1 |
Other current assets | | 4 |
Regulatory assets: Non-current | | 331 |
Current portion of long-term debt | | 6 |
Other current liabilities | | 3 |
Long-term debt1 |
| 327 |
1 | The bondholders have no recourse to SCE. |
Variable Interest in VIEs that are not Consolidated
Power Purchase Agreements
SCE has PPAs that are classified as variable interests in VIEs, including tolling agreements through which SCE provides the natural gas to fuel the plants contracts with qualifying facilities and combined heat and power facilities that contain variable pricing provisions based on the price of natural gas and fixed price contracts for renewable energy. 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'sSCE’s consolidated balance sheetsheets that relate to involvement with VIEs result from amounts due under the PPAs. Under these contracts, SCE recovers the costs incurred through demonstration of compliance with its CPUC-approved long-term power procurement plans. SCE has no residual interest in the entities and has not provided or guaranteed any debt or equity support, liquidity arrangements, performance guarantees, or other commitments associated with these contracts other than the purchase commitments described in Note 12 of the 20192020 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 6,5833,916 megawatts ("MW") and 4,8744,996 MW at June 30,March 31, 2021 and 2020, and 2019, respectively, and the amounts that SCE paid to these projects were $150$159 million and $122$151 million for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and $301 million and $275 million for the six months ended June 30, 2020 and 2019, respectively. These amounts are recoverable in customer rates, subject to reasonableness review.
Unconsolidated Trusts of SCE
SCE Trust II, Trust III, Trust IV, Trust V, and Trust VI were formed in 2013, 2014, 2015, 2016, and 2017, respectively, for the exclusive purpose of issuing the 5.10%, 5.75%, 5.375%, 5.45%, and 5.00% trust preference securities, respectively ("trust securities"). The trusts are VIEs. SCE has concluded that it is not the primary beneficiary of these VIEs as it does not have the obligation to absorb the expected losses or the right to receive the expected residual returns of the trusts. SCE Trust II, Trust III, Trust IV, Trust V and Trust VI issued trust securities to the public trust securities in the face amounts of $400 million, $275 million, $325 million, $300 million, and $475 million (cumulative, liquidation amounts of $25 per share), respectively, and $10,000 of common stock each to SCE. The trusts invested the proceeds of these trust securities in Series G, Series H, Series J, Series K, and Series L Preference Stock issued by SCE in the principal
38
amounts of $400 million, $275 million, $325 million, $300 million, and $475 million (cumulative, $2,500 per share liquidation values), respectively, which have substantially the same payment terms as the respective trust securities.
The Series G, Series H, Series J, Series K, and Series L Preference Stock and the corresponding trust securities do not have a maturity date. Upon any redemption of any shares of the Series G, Series H, Series J, Series K, or Series L Preference Stock, a corresponding dollar amount of trust securities will be redeemed by the applicable trust. The applicable trust will make distributions at the same rate and on the same dates on the applicable series of trust securities if and when the SCE Boardboard of Directorsdirectors declares and makes dividend payments on the related Preference Stock. The applicable trust will use any dividends it receives on the related Preference Stock to make its corresponding distributions on the applicable series of trust securities. If SCE does not make a dividend payment to any of these trusts, SCE would be prohibited from paying dividends on its common stock. SCE has fully and unconditionally guaranteed the payment of the trust securities and trust distributions, if and when SCE pays dividends on the related Preference Stock.
The Trust II, Trust III, Trust IV, Trust V and Trust VI balance sheets as of June 30,March 31, 2021 and December 31, 2020 and June 30, 2019, consisted of investments of $400$220 million, $275 million, $325 million, $300 million, and $475 million in the Series G, Series H, Series J, Series K and Series L Preference Stock, respectively, $400$220 million, $275 million, $325 million, $300 million, and $475 million of trust securities, respectively, and $10,000 each of common stock.
The following table provides a summary of the trusts'trusts’ income statements:
Three months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Trust II | Trust III | Trust IV | Trust V | Trust VI | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend income | $ | 5 | $ | 4 | $ | 5 | $ | 4 | $ | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend distributions | 5 | 4 | 5 | 4 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend income | $ | 5 | $ | 4 | $ | 5 | $ | 4 | $ | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend distributions | 5 | 4 | 5 | 4 | 6 |
Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Trust II | Trust III | Trust IV | Trust V | Trust VI | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend income | $ | 10 | $ | 8 | $ | 9 | $ | 8 | $ | 12 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend distributions | 10 | 8 | 9 | 8 | 12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend income | $ | 10 | $ | 8 | $ | 9 | $ | 8 | $ | 12 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend distributions | 10 | 8 | 9 | 8 | 12 |
| | | | | | | | | | | | | | | |
| | Three months ended March 31, | |||||||||||||
(in millions) |
| Trust II |
| Trust III |
| Trust IV |
| Trust V |
| Trust VI | |||||
2021 | | | | | | | | | | | | | |
| |
Dividend income | | $ | 5 | | $ | 4 | | $ | 4 | | $ | 4 | | $ | 6 |
Dividend distributions | |
| 5 | |
| 4 | |
| 4 | |
| 4 | |
| 6 |
2020 | |
|
| |
|
| |
|
| |
|
| |
|
|
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 June 30, 2020March 31, 2021 and December 31, 2019,2020, 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'sInternational’s and SCE'sSCE’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'sInternational’s and SCE'sSCE’s Level 2 assets and liabilities include fixed income securities, primarily consisting of U.S. government and agency bonds, municipal bonds and corporate bonds, and over-the-counter derivatives. The fair value of fixed income securities is determined using a market approach by obtaining quoted prices for similar assets and liabilities in active markets and inputs that are observable, either directly or indirectly, for substantially the full term of the instrument.
The fair value of SCE'sSCE’s over-the-counter derivative contracts is determined using an income approach. SCE uses standard pricing models to determine the net present value of estimated future cash flows. Inputs to the pricing models include forward published or posted clearing prices from an exchange (Intercontinental Exchange) for similar instruments and discount rates. A primary price source that best represents trade activity for each market is used to develop observable forward market prices in determining the fair value of these positions. Broker quotes, prices from
39
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'sSCE’s Level 3 assets and liabilities is determined using an 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:
| | | | | | | | | | | | | | | |
|
| March 31, 2021 | |||||||||||||
| | | | | | | | | | | Netting | | | | |
| | | | | | | | | | | and | | |
| |
(in millions) |
| Level 1 |
| Level 2 |
| Level 3 |
| Collateral1 |
| Total | |||||
Assets at fair value | | | | | | | | | | | | | | | |
Derivative contracts | | $ | 0 | | $ | 14 | | $ | 103 | | $ | (18) | | $ | 99 |
Money market funds and other | |
| 3 | |
| 23 | |
| 0 | |
| — |
| | 26 |
Nuclear decommissioning trusts: | |
| | |
| | |
|
| |
|
|
| | |
Stocks2 | |
| 1,897 | |
| 0 | |
| 0 | |
| — |
| | 1,897 |
Fixed Income3 | |
| 552 | |
| 1,932 | |
| 0 | |
| — |
| | 2,484 |
Short-term investments, primarily cash equivalents | |
| 483 | |
| 71 | |
| 0 | |
| — |
| | 554 |
Subtotal of nuclear decommissioning trusts4 | |
| 2,932 | |
| 2,003 | |
| 0 | |
| — |
| | 4,935 |
Total assets | |
| 2,935 | |
| 2,040 | |
| 103 | |
| (18) |
| | 5,060 |
Liabilities at fair value | |
|
| |
|
| |
|
| |
|
|
| |
|
Derivative contracts | |
| 0 | |
| 6 | |
| 12 | |
| (18) |
| | 0 |
Total liabilities | |
| 0 | |
| 6 | |
| 12 | |
| (18) |
| | 0 |
Net assets | | $ | 2,935 | | $ | 2,034 | | $ | 91 | | $ | 0 | | $ | 5,060 |
June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Netting and Collateral1 | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
Assets at fair value | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative contracts | $ | — | $ | 4 | $ | 36 | $ | (6) | $ | 34 | |||||||||||||||||||||||||||||||||||||||||||
Money market funds and other | 219 | 14 | — | — | 233 | ||||||||||||||||||||||||||||||||||||||||||||||||
Nuclear decommissioning trusts: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Stocks2 | 1,710 | — | — | — | 1,710 | ||||||||||||||||||||||||||||||||||||||||||||||||
Fixed Income3 | 520 | 2,162 | — | — | 2,682 | ||||||||||||||||||||||||||||||||||||||||||||||||
Short-term investments, primarily cash equivalents | 300 | 14 | — | — | 314 | ||||||||||||||||||||||||||||||||||||||||||||||||
Subtotal of nuclear decommissioning trusts4 | 2,530 | 2,176 | — | — | 4,706 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | 2,749 | 2,194 | 36 | (6) | 4,973 | ||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities at fair value | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative contracts | — | 65 | 2 | (34) | 33 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total liabilities | — | 65 | 2 | (34) | 33 | ||||||||||||||||||||||||||||||||||||||||||||||||
Net assets | $ | 2,749 | $ | 2,129 | $ | 34 | $ | 28 | $ | 4,940 | |||||||||||||||||||||||||||||||||||||||||||
40
| | | | | | | | | | | | | | | |
|
| December 31, 2020 | |||||||||||||
| | | | | | | | | | | Netting | | | | |
| | | | | | | | | | | and | | |
| |
(in millions) |
| Level 1 |
| Level 2 |
| Level 3 |
| Collateral1 |
| | Total | ||||
Assets at fair value | | | | | | | | | | | | | | | |
Derivative contracts | | $ | — | | $ | 6 | | $ | 120 | | $ | (18) | | $ | 108 |
Money market funds and other | |
| 39 | |
| 23 | |
| — | |
| — | |
| 62 |
Nuclear decommissioning trusts: | |
|
| |
|
| |
|
| |
|
| |
|
|
Stocks2 | |
| 1,908 | |
| — | |
| — | |
| — | |
| 1,908 |
Fixed Income3 | |
| 519 | |
| 2,113 | |
| — | |
| — | |
| 2,632 |
Short-term investments, primarily cash equivalents | |
| 447 | |
| 52 | |
| — | |
| — | |
| 499 |
Subtotal of nuclear decommissioning trusts4 | |
| 2,874 | |
| 2,165 | |
| — | |
| — | |
| 5,039 |
Total assets | |
| 2,913 | |
| 2,194 | |
| 120 | |
| (18) | |
| 5,209 |
Liabilities at fair value | |
|
| |
|
| |
|
| |
|
| |
|
|
Derivative contracts | |
| — | |
| 10 | |
| 12 | |
| (22) | |
| — |
Total liabilities | |
| — | |
| 10 | |
| 12 | |
| (22) | |
| — |
Net assets | | $ | 2,913 | | $ | 2,184 | | $ | 108 | | $ | 4 | | $ | 5,209 |
1 | Represents the netting of assets and liabilities under master netting agreements and cash collateral. |
2 | Approximately 73% and 71% of SCE’s equity investments were in companies located in the United States at March 31, 2021 and December 31, 2020, respectively. |
3 | Includes corporate bonds, which were diversified by the inclusion of collateralized mortgage obligations and other asset backed securities, of $30 million and $29 million at March 31 ,2021 and December 31, 2020, respectively. |
4 | Excludes net payables of $172 million and $206 million at March 31, 2021 and December 31, 2020, respectively, which consist of payables and receivables related to SCE’s pending securities purchases and sales as well as interest and dividend receivables. |
December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Netting and Collateral1 | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
Assets at fair value | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative contracts | $ | — | $ | 19 | $ | 83 | $ | (15) | $ | 87 | |||||||||||||||||||||||||||||||||||||||||||
Money market funds and other | 4 | 14 | — | — | 18 | ||||||||||||||||||||||||||||||||||||||||||||||||
Nuclear decommissioning trusts: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Stocks2 | 1,765 | — | — | — | 1,765 | ||||||||||||||||||||||||||||||||||||||||||||||||
Fixed Income3 | 738 | 2,024 | — | — | 2,762 | ||||||||||||||||||||||||||||||||||||||||||||||||
Short-term investments, primarily cash equivalents | 98 | 48 | — | — | 146 | ||||||||||||||||||||||||||||||||||||||||||||||||
Subtotal of nuclear decommissioning trusts4 | 2,601 | 2,072 | — | — | 4,673 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | 2,605 | 2,105 | 83 | (15) | 4,778 | ||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities at fair value | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative contracts | — | 11 | 5 | (15) | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total liabilities | — | 11 | 5 | (15) | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||
Net assets | $ | 2,605 | $ | 2,094 | $ | 78 | $ | — | $ | 4,777 |
Edison International Parent and Other
Edison International Parent and Other assets measured at fair value and classified as Level 1 consisted of money market funds of $265$357 million and $31$24 million at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, and classified as Level 2 consisted of short-term investments of $4 million and $5 million at March 31, 2021 and December 30, 2020, respectively.
SCE Fair Value of Level 3
The following table sets forth a summary of changes in SCE'sSCE’s fair value of Level 3 net derivative assets and liabilities:
| | | | | |
| Three months ended | ||||
| March 31, | ||||
(in millions) | 2021 | | 2020 | ||
Fair value of net assets at beginning of period | $ | 108 | | $ | 78 |
Purchases | | — | | | 7 |
Sales | | — | | | (1) |
Settlements |
| (14) | |
| (20) |
Total realized/unrealized losses 1,2 |
| (3) | |
| (12) |
Fair value of net assets at end of period | $ | 91 | | $ | 52 |
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 2021 and 2020. |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value of net assets at beginning of period | $ | 52 | $ | 95 | $ | 78 | $ | 141 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total realized/unrealized losses1 | (18) | (32) | (44) | (78) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value of net assets at end of period2 | 34 | 63 | 34 | 63 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change during the period in unrealized gains and losses related to assets and liabilities held at the end of the period | $ | (3) | $ | (7) | $ | (9) | $ | (3) |
41
The following table sets forth SCE'sSCE’s valuation techniques and significant unobservable inputs used to determine fair value for significant Level 3 assets and liabilities:
Fair Value (in millions) | Valuation | Significant | Weighted | ||||||||||||||||||||||||||
Assets | Liabilities | Technique | Unobservable Input | Range | Average | ||||||||||||||||||||||||
Congestion revenue rights | |||||||||||||||||||||||||||||
June 30, 2020 | $ | 36 | $ | 2 | Auction prices | CAISO CRR auction prices | $(3.62) - $23.24 | $1.59 | |||||||||||||||||||||
December 31, 2019 | 83 | 5 | Auction prices | CAISO CRR auction prices | (3.59) - 25.32 | 1.97 |
| | | | | | | | | | | | | | | |
|
| Fair Value | | | | Significant | | | | Weighted | |||||
| | (in millions) | | Valuation | | Unobservable | | Range | | Average | |||||
|
| Assets |
| Liabilities |
| Technique |
| Input |
| (per MWh) |
| (per MWh) | |||
Congestion revenue rights | |
| | |
| | |
| |
| |
| |
| |
March 31, 2021 | | $ | 103 | | $ | 12 |
| Auction prices |
| CAISO CRR auction prices |
| $(3.84) - $300.47 | | $ | 2.68 |
December 31, 2020 | |
| 120 | |
| 12 |
| Auction prices |
| CAISO CRR auction prices |
| (9.67) - 300.47 | | | 2.75 |
Level 3 Fair Value Uncertainty
For CRRs, increases or decreases in CAISO auction prices would result in higher or lower fair value, respectively, as of June 30, 2020, respectively.
Nuclear Decommissioning Trusts
SCE’s nuclear decommissioning trust investments include equity securities, U.S. treasury securities, and other fixed income securities. Equity and treasury securities are classified as Level 1 as fair value is determined by observable market prices in active or highly liquid and transparent markets. The remaining fixed income securities are classified as Level 2. The fair value of these financial instruments is based on evaluated prices that reflect significant observable market information such as reported trades, actual trade information of similar securities, benchmark yields, broker/dealer quotes, issuer spreads, bids, offers, and relevant credit information. There are no securities classified as Level 3 in the nuclear decommissioning trusts.
Fair Value of Debt Recorded at Carrying Value
The carrying value and fair value of Edison International'sInternational’s and SCE'sSCE’s long-term debt (including current portion of long-term debt) are as follows:
June 30, 2020 | December 31, 2019 | |||||||||||||||||||||||||||||||||||||
(in millions) | Carrying Value1 | Fair Value2 | Carrying Value1 | Fair Value2 | ||||||||||||||||||||||||||||||||||
Edison International | $ | 20,267 | $ | 23,332 | $ | 18,343 | $ | 20,137 | ||||||||||||||||||||||||||||||
SCE | 17,136 | 19,973 | 15,211 | 16,892 |
Carrying value is net of debt issuance costs.
| | | | | | | | | | | | |
|
| March 31, 2021 |
| December 31, 2020 | ||||||||
| | Carrying | | Fair | | Carrying | | Fair | ||||
(in millions) |
| Value1 |
| Value2 |
| Value1 |
| Value2 | ||||
Edison International | | $ | 21,074 | | $ | 22,963 | | $ | 20,337 | | $ | 23,824 |
SCE | |
| 17,940 | |
| 19,558 | |
| 17,204 | |
| 20,365 |
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 January 2021, SCE issued $100 million of 2.85% first and refunding mortgage bonds due in 2029, $500 million of 3.65% first and refunding mortgage bonds due in 2050, $400$150 million of 2.25% first and refunding mortgage bonds due in 2030 and $700$750 million of 3.65%2.95% first and refunding mortgage bonds due in 2050.2051. The proceeds were primarily used to repay SCE's commercial paper borrowings and for general corporate purposes.
Senior Secured Recovery Bonds
In February 2021, SCE Recovery Funding LLC issued $338 million of Senior Secured Recovery Bonds, Series 2021-A, in three tranches ("Recovery Bonds") and used the proceeds to acquire SCE's right, title and interest in and to non-bypassable rates and other charges associated with the AB 1054 Excluded Capital Expenditures to be collected from certain existing and future customers in SCE's service territory ("Recovery Property"). The three tranches of Recovery Bonds consisted of: $138 million, 0.86% with final maturity in 2033; $100 million, 1.94% with final maturity in 2040; and $100 million, 2.51% with final maturity in 2045. The Recovery Bonds are payable only from and secured by the Recovery Property. SCE Recovery Funding LLC is consolidated by SCE for financial reporting purposes, however, the
42
Recovery Bonds do not constitute a debt or other legal obligation of, or interest in, SCE or any of its affiliates, except for SCE Recovery Funding LLC. SCE used the proceeds it received from the sale of Recovery Property to reimburse itself for previously incurred AB 1054 Excluded Capital Expenditures, including the re-purchaseretirement of related debt and financing costs. For further details, see Note 3.
Credit Agreements and Short-Term Debt
The following table summarizes the status of the credit facilities at March 31, 2021:
| | | | | | | | | | | | | | | | | | |
(in millions, except for rates) | ||||||||||||||||||
Execution | | Termination | | LIBOR | | | | | | Outstanding | | Outstanding | | Amount | ||||
date | | date | | plus (bps) | | Use of proceeds |
| Commitment |
| borrowings |
| letters of credit |
| available | ||||
Edison International Parent | ||||||||||||||||||
June 2019 | | May 2024 | | 128 | | Support commercial paper borrowings and general corporate purposes1, 4 | | $ | 1,500 | | $ | — | | $ | — | | $ | 1,500 |
Total Edison International Parent: | $ | 1,500 | | $ | — | | $ | — | | $ | 1,500 | |||||||
SCE | ||||||||||||||||||
March 2020 | | May 2021 | | 65 | | Finance a portion of the AB 1054 Capital Expenditures2 | | $ | 800 | | $ | 800 | | $ | — | | $ | — |
May 2020 | | May 2021 | | 150 | | Undercollections related to COVID-19 and general corporate purposes | | | 1,500 | | | — | | | — | | | 1,500 |
June 2019 | | May 2024 | | 108 | | Support commercial paper borrowings and general corporate purposes3, 4 | |
| 3,000 | |
| 674 | |
| 120 | |
| 2,206 |
Total SCE: | $ | 5,300 | | $ | 1,474 | | $ | 120 | | $ | 3,706 | |||||||
Total Edison International: | $ | 6,800 | | $ | 1,474 | | $ | 120 | | $ | 5,206 |
1 | At March 31, 2021 Edison International Parent had 0 outstanding commercial paper. |
2 | In February 2021, SCE and the lenders amended the March 2020 credit agreement and have extended the termination date from March 2021 to May 2021. This credit facility may also be extended for two 364-day periods, at the lenders' discretion. The aggregate maximum principal amount may be increased up to $1.1 billion provided that additional lender commitments are obtained. |
3 | At March 31, 2021 SCE had $674 million outstanding commercial paper, net of discount, at a weighted-average interest rate of 0.32%. |
4 | 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. |
Term loan and other short-term debt
In February 2021, SCE tax exempt pollution control bonds.
Financing Subsequent to March 31, 2021
In April 2020,2021, SCE issued $600$400 million of 3.70%Secured Overnight Financing Rate ("SOFR") plus 0.64% first and refunding mortgage bonds due in 2025.2023, $400 million of SOFR plus 0.83% of first and refunding mortgage bonds due in 2024, $350 million of 0.70% first and refunding mortgage bonds due in 2023 and $700 million of 1.10% first and refunding mortgage bonds due in 2024. The proceeds of these issuances were used to finance undercollectionsfund the payment of revenues that SCE is authorized to recover from customers through regulatory balancing accounts.wildfire claims
43
exceeding insurance proceeds and also converted these bonds to a variable rate structure. SCE is the holder of these bonds and plans to re-market them subject to market conditions.
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'sSCE’s electricity price exposure arises from energy purchased from and sold to wholesale markets as a result of differences between SCE'sSCE’s load requirements and the amount of energy delivered from its generating facilities and PPAs. SCE'sSCE’s natural gas price exposure arises from natural gas purchased for the Mountainview power plant and peaker plants, QFQualifying 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.
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'sSCE’s risk exposures counterparties may be required to pledge collateral depending on the creditworthiness of each counterparty and the risk associated with the transaction.
Certain power and gas contracts contain a provision that requires SCE to maintain an investment grade rating from each of the major credit rating agencies, referred to as a credit-risk-related contingent feature. If SCE'sSCE’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 $32 million andwere less than $1 million as of June 30, 2020March 31, 2021 and December 31, 2019, respectively,2020, for which SCE posted 0 collateral to its counterparties for its derivative liabilities and related outstanding payables atfor both June 30, 2020 and December 31, 2019.periods. If the credit-risk-related contingent features underlying these agreements were triggered on June 30, 2020,March 31, 2021, SCE would be required to post $32$7 million of collateral, all of which of $1 million is related to outstanding payables.
44
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'sSCE’s commodity derivative instruments:
| | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2021 | | | | ||||||||||||||||
| | Derivative Assets | | Derivative Liabilities | | | | ||||||||||||||
(in millions) |
| Short-Term1 |
| Long-Term2 |
| Subtotal |
| Short-Term |
| Long-Term |
| Subtotal |
| Net Assets | |||||||
Commodity derivative contracts |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Gross amounts recognized | | $ | 97 | | $ | 20 | | $ | 117 | | $ | 13 | | $ | 5 | | $ | 18 | | $ | 99 |
Gross amounts offset in the consolidated balance sheets | |
| (13) | |
| (5) | |
| (18) | |
| (13) | |
| (5) | |
| (18) | |
| 0 |
Cash collateral posted3 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
| 0 |
Net amounts presented in the consolidated balance sheets | | $ | 84 | | $ | 15 | | $ | 99 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 99 |
| | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 | | | | ||||||||||||||||
| | Derivative Assets | | Derivative Liabilities | | | | ||||||||||||||
(in millions) |
| Short-Term1 |
| Long-Term2 |
| Subtotal |
| Short-Term |
| Long-Term |
| Subtotal |
| Net Assets | |||||||
Commodity derivative contracts |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Gross amounts recognized | | $ | 103 | | $ | 23 | | $ | 126 | | $ | 16 | | $ | 6 | | $ | 22 | | $ | 104 |
Gross amounts offset in the consolidated balance sheets | |
| (12) | |
| (6) | |
| (18) | |
| (12) | |
| (6) | |
| (18) | |
| 0 |
Cash collateral posted3 | |
| 0 | |
| 0 | |
| 0 | |
| (4) | |
| 0 | |
| (4) | |
| 4 |
Net amounts presented in the consolidated balance sheets | | $ | 91 | | $ | 17 | | $ | 108 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 108 |
1 | Included in "Other current assets" on Edison International’s and SCE’s consolidated balance sheets. |
2 | Included in "Other long-term assets" on Edison International’s and SCE’s consolidated balance sheets. |
3 | At March 31, 2021, SCE posted cash collateral of $2 million, which was reflected in "Other current assets" on the consolidated balance sheets. At December 31, 2020, SCE posted $17 million of cash, of which $4 million was offset against derivative liabilities and $13 millionwas reflected in "Other current assets" on the consolidated balance sheets. |
June 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Assets | Derivative Liabilities | Net Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Short-Term1 | Long-Term2 | Subtotal | Short-Term3 | Long-Term | Subtotal | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity derivative contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross amounts recognized | $ | 39 | $ | 1 | $ | 40 | $ | 67 | $ | — | $ | 67 | $ | (27) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross amounts offset in the consolidated balance sheets | (6) | — | (6) | (6) | — | (6) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash collateral posted4 | — | — | — | (28) | — | (28) | 28 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net amounts presented in the consolidated balance sheets | $ | 33 | $ | 1 | $ | 34 | $ | 33 | $ | — | $ | 33 | $ | 1 |
December 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Assets | Derivative Liabilities | Net Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Short-Term1 | Long-Term2 | Subtotal | Short-Term3 | Long-Term | Subtotal | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity derivative contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross amounts recognized | $ | 94 | $ | 8 | $ | 102 | $ | 14 | $ | 2 | $ | 16 | $ | 86 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross amounts offset in the consolidated balance sheets | (13) | (2) | (15) | (13) | (2) | (15) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash collateral posted4 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net amounts presented in the consolidated balance sheets | $ | 81 | $ | 6 | $ | 87 | $ | 1 | $ | — | $ | 1 | $ | 86 |
Financial Statement Impact of Derivative Instruments
SCE recognizes realized gains and losses on derivative instruments as purchased power and fuel 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 reported in cash flows from operating activities in the consolidated statements of cash flows.
The following table summarizes the components of SCE'sSCE’s economic hedging activity:
| | | | | | |
| | Three months ended March 31, | ||||
(in millions) |
| 2021 | | 2020 | ||
Realized gains (losses) | | $ | 112 | | $ | (44) |
Unrealized losses | |
| (6) | |
| (83) |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||
(in millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||||||||||
Realized (losses) gains | $ | (16) | $ | (2) | $ | (60) | $ | 30 | |||||||||||||||||||||||||||||||||
Unrealized losses | (31) | (78) | (114) | (128) |
45
The following table summarizes the notional volumes of derivatives used for SCE'sSCE’s economic hedging activities:
Economic Hedges | ||||||||||||||||||||||||||
Commodity | Unit of Measure | June 30, 2020 | December 31, 2019 | |||||||||||||||||||||||
Electricity options, swaps and forwards | GWh | 4,863 | 3,155 | |||||||||||||||||||||||
Natural gas options, swaps and forwards | Bcf | 50 | 43 | |||||||||||||||||||||||
Congestion revenue rights | GWh | 31,945 | 48,170 | |||||||||||||||||||||||
| | | | | | |
| | | | | | |
| | Unit of | | Economic Hedges | ||
Commodity |
| Measure |
| March 31, 2021 |
| December 31, 2020 |
Electricity options, swaps and forwards |
| GWh |
| 528 |
| 1,581 |
Natural gas options, swaps and forwards |
| Bcf |
| 29 |
| 34 |
Congestion revenue rights |
| GWh |
| 36,365 |
| 41,151 |
SCE’s revenue is disaggregated by two revenue sources:
● | Earning activities – representing revenue authorized by the CPUC and FERC, which is intended to provide SCE a reasonable opportunity to recover its costs and earn a return on its net investment in generation, transmission and distribution assets. The annual revenue requirements are comprised of authorized operation and maintenance costs, depreciation, taxes and a return consistent with the capital structure. Also, included in earnings activities are revenue or penalties related to incentive mechanisms, other operating revenue, and regulatory charges or disallowances. |
● | Cost-recovery activities – representing CPUC- and FERC- authorized balancing accounts, which allow for recovery of specific project or program costs, subject to reasonableness review or compliance with upfront standards. Cost-recovery activities include rates which provide recovery, subject to reasonableness review of, among other things, fuel costs, purchased power costs, public purpose related-program costs (including energy efficiency and demand-side management programs) and certain operation and maintenance expenses. SCE earns no return on these activities. |
The following table is a summary of SCE'sSCE’s revenue:
| | | | | | | | | | | | | | | | | | |
| | Three months ended March 31, 2021 | | Three months ended March 31, 2020 | ||||||||||||||
| | | | | Cost- | | | | | | Cost- | | | |||||
| | Earning | | Recovery | | Total | | Earning | | Recovery | | Total | ||||||
(in millions) |
| Activities |
| Activities | | Consolidated |
| Activities |
| Activities |
| Consolidated | ||||||
Revenues from contracts with customers1,2 | | $ | 1,704 | | $ | 1,195 | | $ | 2,899 | | $ | 1,624 |
| $ | 718 |
| $ | 2,342 |
Alternative revenue programs and other operating revenue3 | |
| 63 | |
| (9) | |
| 54 | |
| 117 |
| | 321 |
| | 438 |
Total operating revenue | | $ | 1,767 | | $ | 1,186 | | $ | 2,953 | | $ | 1,741 | | $ | 1,039 | | $ | 2,780 |
1 | In the absence of a 2021 GRC, SCE recorded CPUC revenue based on the 2020 authorized revenue requirements until a GRC decision is issued. For further information, see Note 1. |
2 | At March 31, 2021 and December 31, 2020, SCE’s receivables related to contracts from customers were $1.6 billion and $1.5 billion, respectively, which include accrued unbilled revenue of $673 million and $521 million, respectively. |
3 | Includes differences between amounts billed and authorized levels for both the CPUC and FERC. |
Three months ended June 30, 2020 | Three months ended June 30, 2019 | |||||||||||||||||||||||||||||||
(in millions) | Earning Activities | Cost- Recovery Activities | Total Consolidated | Earning Activities | Cost-Recovery Activities | Total Consolidated | ||||||||||||||||||||||||||
Revenues from contracts with customers1,2 | $ | 1,658 | $ | 1,220 | $ | 2,878 | $ | 1,532 | $ | 767 | $ | 2,299 | ||||||||||||||||||||
Alternative revenue programs and other operating revenue3 | 117 | (15) | 102 | 5 | 496 | 501 | ||||||||||||||||||||||||||
Total operating revenue | $ | 1,775 | $ | 1,205 | $ | 2,980 | $ | 1,537 | $ | 1,263 | $ | 2,800 |
Six months ended June 30, 2020 | Six months ended June 30, 2019 | |||||||||||||||||||||||||||||||
(in millions) | Earning Activities | Cost- Recovery Activities | Total Consolidated | Earning Activities | Cost-Recovery Activities | Total Consolidated | ||||||||||||||||||||||||||
Revenues from contracts with customers1,2 | $ | 3,282 | $ | 1,938 | $ | 5,220 | $ | 3,034 | $ | 1,724 | $ | 4,758 | ||||||||||||||||||||
Alternative revenue programs and other operating revenue3 | 234 | 306 | 540 | 53 | 805 | 858 | ||||||||||||||||||||||||||
Total operating revenue | $ | 3,516 | $ | 2,244 | $ | 5,760 | $ | 3,087 | $ | 2,529 | $ | 5,616 |
46
Effective Tax Rate
The table below provides a reconciliation of income tax expense computed at the federal statutory income tax rate to the income tax provision:
| | | | | | | | | | | | | |
|
| Edison International |
| SCE |
| ||||||||
| | Three months ended March 31, | | ||||||||||
(in millions) |
| 2021 |
| 2020 |
| 2021 |
| 2020 | | ||||
Income from operations before income taxes | | $ | 254 | | $ | 129 | | $ | 299 | | $ | 174 | |
Provision for income tax at federal statutory rate of 21% | |
| 53 | |
| 27 | |
| 63 | |
| 37 | |
Increase (decrease) in income tax from: | |
|
| |
|
| |
|
| |
|
| |
State tax, net of federal benefit | |
| (7) | |
| (13) | |
| (4) | |
| (12) | |
Property-related | |
| (83) | |
| (78) | |
| (83) | |
| (78) | |
Change related to uncertain tax position1 | |
| — | |
| (15) | |
| — | |
| (17) | |
Other | |
| 1 | |
| (5) | |
| — | |
| (5) | |
Total income tax benefit | | $ | (36) | | $ | (84) | | $ | (24) | | $ | (75) | |
Effective tax rate | |
| (14.2) | % |
| (65.1) | % |
| (8.0) | % |
| (43.1) | % |
1 | Primarily relates to the re-measurement of uncertain tax positions related to the 2010 – 2012 California state tax filings currently under audit. |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||
(in millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||||
Edison International: | |||||||||||||||||||||||||||||||||||
Income from operations before income taxes | $ | 352 | $ | 344 | $ | 481 | $ | 540 | |||||||||||||||||||||||||||
Provision for income tax at federal statutory rate of 21% | 74 | 72 | 101 | 113 | |||||||||||||||||||||||||||||||
Increase (decrease) in income tax from: | |||||||||||||||||||||||||||||||||||
State tax, net of federal benefit | 6 | 2 | (7) | (5) | |||||||||||||||||||||||||||||||
Property-related | (69) | (74) | (147) | (143) | |||||||||||||||||||||||||||||||
Change related to uncertain tax position1 | — | — | (15) | — | |||||||||||||||||||||||||||||||
Deferred tax re-measurement2 | — | — | — | (69) | |||||||||||||||||||||||||||||||
2018 GRC Decision | — | (80) | — | (80) | |||||||||||||||||||||||||||||||
Other | (7) | 2 | (12) | (6) | |||||||||||||||||||||||||||||||
Total income tax expense (benefit) | $ | 4 | $ | (78) | $ | (80) | $ | (190) | |||||||||||||||||||||||||||
Effective tax rate | 1.1 | % | (22.7) | % | (16.6) | % | (35.2) | % | |||||||||||||||||||||||||||
SCE: | |||||||||||||||||||||||||||||||||||
Income from operations before income taxes | $ | 437 | $ | 381 | $ | 611 | $ | 599 | |||||||||||||||||||||||||||
Provision for income tax at federal statutory rate of 21% | 92 | 80 | 129 | 126 | |||||||||||||||||||||||||||||||
Increase (decrease) in income tax from: | |||||||||||||||||||||||||||||||||||
State tax, net of federal benefit | 11 | 3 | (1) | (2) | |||||||||||||||||||||||||||||||
Property-related | (69) | (74) | (147) | (143) | |||||||||||||||||||||||||||||||
Change related to uncertain tax positions1 | (1) | — | (18) | — | |||||||||||||||||||||||||||||||
Deferred tax re-measurement2 | — | — | — | (69) | |||||||||||||||||||||||||||||||
2018 GRC Decision | — | (80) | — | (80) | |||||||||||||||||||||||||||||||
Other | (7) | 3 | (12) | (5) | |||||||||||||||||||||||||||||||
Total income tax expense (benefit) | $ | 26 | $ | (68) | $ | (49) | $ | (173) | |||||||||||||||||||||||||||
Effective tax rate | 5.9 | % | (17.8) | % | (8.0) | % | (28.9) | % |
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'sSCE’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'sSCE’s rate cases, adjusted for balancing and memorandum account activities, and the recorded flow-through items also result in increases or decreases in regulatory assets with a corresponding impact on the effective tax rate to the extent that recorded deferred amounts are expected to be recovered in future rates. For further information, see Note 11.
Tax Disputes
Tax years that remain open for examination by the IRS and the California Franchise Tax Board are 2016 – 20182019 and 20102013 – 2018,2019, respectively. Tax years 2007 – 2012 are currently subject to a settlement proceeding with the California Franchise Tax Board. Edison International does not expect to resolve these tax years within the next 12 months. Any impacts cannot be reasonably estimated until further progress is made.
47
Note 9.Compensation and Benefit Plans
Pension Plans
Net periodic pension expense components are:
| | | | | |
| | ||||
| Three months ended March 31, | ||||
(in millions) | 2021 |
| 2020 | ||
Edison International: | | | | | |
Service cost | $ | 34 | | $ | 31 |
Non-service cost (benefit) |
|
| |
|
|
Interest cost |
| 26 | |
| 31 |
Expected return on plan assets |
| (56) | |
| (54) |
Amortization of net loss1 |
| 3 | |
| 3 |
Regulatory adjustment |
| 4 | |
| 2 |
Total non-service benefit2 | $ | (23) | | $ | (18) |
Total expense recognized | $ | 11 | | $ | 13 |
SCE: | | | | | |
Service cost | $ | 33 | | $ | 30 |
Non-service cost (benefit) |
| | |
| |
Interest cost |
| 24 | |
| 28 |
Expected return on plan assets |
| (53) | |
| (51) |
Amortization of net loss1 |
| 2 | |
| 2 |
Regulatory adjustment |
| 4 | |
| 2 |
Total non-service benefit2 | $ | (23) | | $ | (19) |
Total expense recognized | $ | 10 | | $ | 11 |
1 | Represents the amount of net loss reclassified from other comprehensive loss. |
2 | Included in "Other income" on Edison International’s and SCE’s consolidated statement of income. |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||||||||||||||||
Edison International: | |||||||||||||||||||||||||||||||||||||||||||||||
Service cost | $ | 31 | $ | 32 | $ | 62 | $ | 64 | |||||||||||||||||||||||||||||||||||||||
Non-service cost (benefit) | |||||||||||||||||||||||||||||||||||||||||||||||
Interest cost | 30 | 39 | 61 | 78 | |||||||||||||||||||||||||||||||||||||||||||
Expected return on plan assets | (54) | (52) | (108) | (104) | |||||||||||||||||||||||||||||||||||||||||||
Amortization of prior service cost | 1 | 1 | 1 | 1 | |||||||||||||||||||||||||||||||||||||||||||
Amortization of net loss1 | 3 | 2 | 6 | 4 | |||||||||||||||||||||||||||||||||||||||||||
Regulatory adjustment | 2 | (4) | 4 | (8) | |||||||||||||||||||||||||||||||||||||||||||
Total non-service benefit2 | $ | (18) | $ | (14) | $ | (36) | $ | (29) | |||||||||||||||||||||||||||||||||||||||
Total expense recognized | $ | 13 | $ | 18 | $ | 26 | $ | 35 | |||||||||||||||||||||||||||||||||||||||
SCE: | |||||||||||||||||||||||||||||||||||||||||||||||
Service cost | $ | 30 | $ | 31 | $ | 60 | $ | 62 | |||||||||||||||||||||||||||||||||||||||
Non-service cost (benefit) | |||||||||||||||||||||||||||||||||||||||||||||||
Interest cost | 28 | 36 | 56 | 71 | |||||||||||||||||||||||||||||||||||||||||||
Expected return on plan assets | (51) | (49) | (102) | (98) | |||||||||||||||||||||||||||||||||||||||||||
Amortization of prior service cost | 1 | 1 | 1 | 1 | |||||||||||||||||||||||||||||||||||||||||||
Amortization of net loss1 | 2 | 2 | 4 | 3 | |||||||||||||||||||||||||||||||||||||||||||
Regulatory adjustment | 2 | (4) | 4 | (8) | |||||||||||||||||||||||||||||||||||||||||||
Total non-service benefit2 | $ | (18) | $ | (14) | $ | (37) | $ | (31) | |||||||||||||||||||||||||||||||||||||||
Total expense recognized | $ | 12 | $ | 17 | $ | 23 | $ | 31 | |||||||||||||||||||||||||||||||||||||||
Postretirement Benefits Other Than Pensions ("PBOP")
Net periodic PBOP expense components for Edison International and SCE are:
| | | | | |
| | | | | |
| Three months ended March 31, | ||||
(in millions) | 2021 |
| 2020 | ||
Service cost | $ | 10 | | $ | 9 |
Non-service cost (benefit) |
|
| |
|
|
Interest cost |
| 14 | |
| 17 |
Expected return on plan assets |
| (27) | |
| (30) |
Amortization of net gain |
| (8) | |
| (4) |
Regulatory adjustment |
| 11 | |
| 8 |
Total non-service benefit1 | $ | (10) | | $ | (9) |
Total expense | $ | — | | $ | — |
1 | Included in "Other income" on Edison International’s and SCE’s consolidated statement of income. |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||||||||||||||
(in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||
Service cost | $ | 9 | $ | 8 | $ | 18 | $ | 16 | ||||||||||||||||||||||||||||||||||||
Non-service cost (benefit) | ||||||||||||||||||||||||||||||||||||||||||||
Interest cost | 17 | 21 | 34 | 42 | ||||||||||||||||||||||||||||||||||||||||
Expected return on plan assets | (30) | (28) | (60) | (56) | ||||||||||||||||||||||||||||||||||||||||
Amortization of net gain | (4) | (1) | (8) | (2) | ||||||||||||||||||||||||||||||||||||||||
Regulatory adjustment | 8 | 6 | 16 | 12 | ||||||||||||||||||||||||||||||||||||||||
Total non-service benefit1 | $ | (9) | $ | (2) | $ | (18) | $ | (4) | ||||||||||||||||||||||||||||||||||||
Total expense | $ | — | $ | 6 | $ | — | $ | 12 | ||||||||||||||||||||||||||||||||||||
48
Nuclear Decommissioning Trusts
Future decommissioning costs related to SCE'sSCE’s nuclear assets are expected to be funded from independent decommissioning trusts.
The following table sets forth amortized cost and fair value of the trust investments (see Note 4 for a discussion of fair value of the trust investments):
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | Amortized Cost | | Fair Value | ||||||||
| | Longest | | March 31, | | December 31, | | March 31, | | December 31, | ||||
(in millions) |
| Maturity Dates |
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Stocks |
| — |
| | N/A |
| | N/A | | $ | 1,896 | | $ | 1,908 |
Municipal bonds |
| 2054 |
| $ | 1,044 |
| $ | 1,013 | |
| 1,212 | |
| 1,218 |
U.S. government and agency securities |
| 2067 |
| | 683 |
| | 740 | |
| 754 | |
| 864 |
Corporate bonds |
| 2070 |
| | 451 |
| | 460 | |
| 519 | |
| 550 |
Short-term investments and receivables/payables1 |
| One-year |
| | 366 |
| | 281 | |
| 382 | |
| 293 |
Total |
|
| | $ | 2,544 | | $ | 2,494 | | $ | 4,763 | | $ | 4,833 |
1 | Short-term investments include $144 million and $138 million of repurchase agreements payable by financial institutions which earn interest, are fully secured by U.S. Treasury securities and mature by April 1, 2021 and January 4, 2021 as of March 31, 2021 and December 31, 2020, respectively. |
Longest Maturity Dates | Amortized Cost | Fair Value | |||||||||||||||||||||||||||||||||||||||
(in millions) | June 30, 2020 | December 31, 2019 | June 30, 2020 | December 31, 2019 | |||||||||||||||||||||||||||||||||||||
Stocks | — | N/A | N/A | $ | 1,710 | $ | 1,765 | ||||||||||||||||||||||||||||||||||
Municipal bonds | 2057 | $ | 1,013 | $ | 822 | 1,194 | 970 | ||||||||||||||||||||||||||||||||||
U.S. government and agency securities | 2067 | 703 | 996 | 852 | 1,115 | ||||||||||||||||||||||||||||||||||||
Corporate bonds | 2070 | 542 | 597 | 636 | 679 | ||||||||||||||||||||||||||||||||||||
Short-term investments and receivables/payables1 | One-year | 168 | 32 | 174 | 33 | ||||||||||||||||||||||||||||||||||||
Total | $ | 2,426 | $ | 2,447 | $ | 4,566 | $ | 4,562 |
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 $1.8$2.0 billion and $2.1 billion at both June 30, 2020March 31, 2021 and December 31, 2019.
Trust assets are used to pay income taxes arising from trust investing activity. Deferred tax liabilities related to net unrealized gains were $425$477 million and $449$515 million at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively. Accordingly, the fair value of trust assets available to pay future decommissioning costs, net of deferred income taxes, totaled $4.1$4.3 billion at both June 30, 2020March 31, 2021 and December 31, 2019.
The following table summarizes the gains and losses for the trust investments:
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||
(in millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||||
Gross realized gains | $ | 75 | $ | 22 | $ | 114 | $ | 45 | |||||||||||||||||||||||||||
Gross realized loss | 1 | — | 3 | — | |||||||||||||||||||||||||||||||
Net unrealized gains (losses) for equity securities | 271 | 38 | (105) | 206 |
| | | | | | | |
| | Three months ended March 31, | | ||||
(in millions) |
| 2021 |
| 2020 | | ||
Gross realized gains | | $ | 111 | | $ | 39 | |
Gross realized loss | |
| 12 | |
| 2 | |
Net unrealized gains (losses) for equity securities | |
| 18 | |
| (376) | |
Due to regulatory mechanisms, changes in assets of the trusts from income or loss items have no impact on operating revenue or earnings.
49
Note 11. Regulatory Assets and Liabilities
Regulatory Assets
SCE’s regulatory assets included on the consolidated balance sheets are:
| | | | | | |
| | March 31, | | December 31, | ||
(in millions) |
| 2021 |
| 2020 | ||
Current: |
| |
|
| |
|
Regulatory balancing and memorandum accounts | | $ | 1,390 | | $ | 1,127 |
Power contracts | |
| 166 | |
| 165 |
Other | |
| 22 | |
| 22 |
Total current | |
| 1,578 | |
| 1,314 |
Long-term: | |
|
| |
|
|
Deferred income taxes, net of liabilities | |
| 4,526 | |
| 4,475 |
Pension and other postretirement benefits | |
| 8 | |
| 12 |
Power contracts | |
| 221 | |
| 239 |
Unamortized investments, net of accumulated amortization | |
| 112 | |
| 114 |
Unamortized loss on reacquired debt | |
| 130 | |
| 133 |
Regulatory balancing and memorandum accounts | |
| 1,815 | |
| 1,794 |
Environmental remediation | |
| 265 | |
| 247 |
Recovery assets1 | | | 331 | | | — |
Other | |
| 135 | |
| 106 |
Total long-term | |
| 7,543 | |
| 7,120 |
Total regulatory assets | | $ | 9,121 | | $ | 8,434 |
1 | Represents the balance associated with the AB 1054 Excluded Capital Expenditures related Recovery Properties and prudently incurred financing costs securitized in 2021 with issuance of the associated bond. The recovery period is until 2043, when the bonds are paid in full and all financing costs have been recovered. For further details, see Note 3. |
(in millions) | June 30, 2020 | December 31, 2019 | |||||||||
Current: | |||||||||||
Regulatory balancing and memorandum accounts | $ | 1,443 | $ | 798 | |||||||
Power contracts | 228 | 189 | |||||||||
Other | 21 | 22 | |||||||||
Total current | 1,692 | 1,009 | |||||||||
Long-term: | |||||||||||
Deferred income taxes, net of liabilities | 4,231 | 4,026 | |||||||||
Pensions and other postretirement benefits | 83 | 87 | |||||||||
Power contracts | 361 | 434 | |||||||||
Unamortized investments, net of accumulated amortization | 117 | 119 | |||||||||
Unamortized loss on reacquired debt | 138 | 142 | |||||||||
Regulatory balancing and memorandum accounts | 1,331 | 981 | |||||||||
Environmental remediation | 233 | 237 | |||||||||
Other | 34 | 62 | |||||||||
Total long-term | 6,528 | 6,088 | |||||||||
Total regulatory assets | $ | 8,220 | $ | 7,097 |
Regulatory Liabilities
SCE’s regulatory liabilities included on the consolidated balance sheets are:
| | | | | | |
| | March 31, | | December 31, | ||
(in millions) |
| 2021 |
| 2020 | ||
Current: |
| |
|
| |
|
Regulatory balancing and memorandum accounts | | $ | 427 | | $ | 471 |
Energy derivatives | |
| 84 | |
| 87 |
Other | |
| 13 | |
| 11 |
Total current | |
| 524 | |
| 569 |
Long-term: | |
|
| |
|
|
Cost of removal | |
| 2,727 | |
| 2,595 |
Re-measurement of deferred taxes | |
| 2,256 | |
| 2,283 |
Recoveries in excess of ARO liabilities1 | |
| 1,901 | |
| 1,930 |
Regulatory balancing and memorandum accounts | |
| 1,279 | |
| 1,062 |
Other postretirement benefits | |
| 673 | |
| 671 |
Other | |
| 45 | |
| 48 |
Total long-term | |
| 8,881 | |
| 8,589 |
Total regulatory liabilities | | $ | 9,405 | | $ | 9,158 |
(in millions) | June 30, 2020 | December 31, 2019 | |||||||||
Current: | |||||||||||
Regulatory balancing and memorandum accounts | $ | 846 | $ | 883 | |||||||
Energy derivatives | — | 80 | |||||||||
Other | 11 | 9 | |||||||||
Total current | 857 | 972 | |||||||||
Long-term: | |||||||||||
Cost of removal | 2,649 | 2,674 | |||||||||
Re-measurement of deferred taxes | 2,352 | 2,424 | |||||||||
Recoveries in excess of ARO liabilities1 | 1,600 | 1,569 | |||||||||
Regulatory balancing and memorandum accounts | 1,337 | 1,261 | |||||||||
Other postretirement benefits | 423 | 416 | |||||||||
Other | 34 | 41 | |||||||||
Total long-term | 8,395 | 8,385 | |||||||||
Total regulatory liabilities | $ | 9,252 | $ | 9,357 |
1 | Represents the cumulative differences between ARO expenses and amounts collected in rates primarily for the decommissioning of SCE’s nuclear generation facilities. Decommissioning costs recovered through rates are primarily placed in nuclear decommissioning trusts. This regulatory liability also represents the deferral of realized and unrealized gains and losses on the nuclear decommissioning trust investments. See Note 10 for further discussion. |
50
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) | June 30, 2020 | December 31, 2019 | |||||||||
Asset (liability) | |||||||||||
Energy resource recovery account | $ | (355) | $ | (23) | |||||||
Portfolio allocation balancing account | 745 | 537 | |||||||||
New system generation balancing account | 31 | 85 | |||||||||
Public purpose programs and energy efficiency programs | (1,322) | (1,244) | |||||||||
Base revenue requirement balancing account | 239 | (328) | |||||||||
Greenhouse gas auction revenue and low carbon fuel standard revenue | (23) | (196) | |||||||||
FERC balancing accounts | 32 | (127) | |||||||||
Wildfire-related memorandum accounts1 | 1,179 | 868 | |||||||||
COVID-19-related memorandum accounts2 | 49 | — | |||||||||
Other | 16 | 63 | |||||||||
Asset (liability) | $ | 591 | $ | (365) |
| | | | | | |
| | March 31, | | December 31, | ||
(in millions) |
| 2021 |
| 2020 | ||
Asset (liability) |
| |
|
| |
|
Energy resource recovery account | | $ | (133) | | $ | (89) |
Portfolio allocation balancing account | |
| 437 | |
| 497 |
New system generation balancing account | |
| (6) | |
| (10) |
Public purpose programs and energy efficiency programs | |
| (1,192) | |
| (1,130) |
Base revenue requirement balancing account | |
| 662 | |
| 622 |
Greenhouse gas auction revenue and low carbon fuel standard revenue | |
| (121) | |
| (125) |
FERC balancing accounts | |
| 12 | |
| 12 |
Wildfire and drought restoration accounts1 | |
| 397 | |
| 361 |
Wildfire-related memorandum accounts2 | | | 1,142 | | | 1,104 |
COVID-19-related memorandum accounts | | | 87 | | | 176 |
Customer service re-platform memorandum account3 | | | 37 | | | 30 |
Residential uncollectibles balancing account4 | | | 129 | | | — |
Other | |
| 48 | |
| (60) |
Asset | | $ | 1,499 | | $ | 1,388 |
1 | The wildfire and drought restoration accounts regulatory assets represent restorative costs that are recorded in a Catastrophic Event Memorandum Account ("CEMA"). |
2 | The wildfire-related memorandum accounts regulatory assets represent wildfire-related costs that are probable of future recovery from customers, subject to a reasonableness review. The Fire Hazard Prevention Memorandum Account ("FHPMA") is used to track costs related to fire safety and to implement fire prevention corrective action measures in extreme and very high fire threat areas. The Wildfire Expense Memorandum Account ("WEMA") is used to track incremental wildfire insurance costs and uninsured wildfire-related financing, legal and claims costs. During 2019, the CPUC approved a Wildfire Mitigation Plan memorandum account to track costs incurred to implement SCE's Wildfire Mitigation Plan that are not currently reflected in SCE's revenue requirements, a Grid Safety and Resiliency Program Memorandum Account ("GSRPMA") to track the costs of SCE's GS&RP that are incremental to costs approved for recovery in SCE's 2018 GRC and a fire risk mitigation memorandum account to track costs related to the reduction of fire risk that are incremental to costs approved for recovery in SCE's 2018 GRC that are not tracked in any other wildfire-related memorandum account. |
3 | CSRP memorandum account was established in the 2018 GRC to track costs for implementation of a new customer service system not currently reflected in SCE's revenue requirements. |
4 | In November 2020, the CPUC approved the establishment of the residential uncollectibles balancing account ("RUBA"), to track the difference (positive or negative) between the recorded uncollectibles expense for all customer groups and the total authorized uncollectibles revenuecollected from all customers subject to a cap equal to the actual recorded uncollectibles expense for residential customers. |
Note 12. Commitments and Contingencies
Indemnities
Edison International and SCE have various financial and performance guarantees and indemnity agreements which are issued in the normal course of business.
Edison International and SCE have agreed to provide indemnifications through contracts entered into in the normal course of business. These are primarily indemnifications against adverse litigation outcomes in connection with underwriting agreements, and indemnities for specified environmental liabilities and income taxes with respect to assets sold or other contractual arrangements. Edison International'sInternational’s and SCE'sSCE’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.
51
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
Wildfires in SCE's territory, including those where SCE's equipment may be alleged to be associated with the fire's ignition, have caused loss of life and substantial damage in recent years. Multiple factors have contributed to increased wildfire activity and faster progression of and increased damage from wildfires across SCE's service territory and throughoutin other areas of California. These include the buildup of dry vegetation in areas severely impacted by years of historic drought, lack of adequate clearing of hazardous fuels by responsible parties, higher temperatures, lower humidity, increased incidence of dry lightning, and strong Santa Ana winds. At the same time that wildfire risk has been increasing in Southern California, residential and commercial development has occurred and is occurring in some of the highest-risk areas. Such factors can increase the likelihood and extent of wildfires. SCE has determined that approximately 27% of its service territory is in areas identified as high fire risk.
California has experienced unprecedented weather conditions in recent years and SCE's service territory remains susceptible to additional wildfire activity in 2021 and beyond. The worsening conditions across California increase the likelihood of wildfires, including those where SCE's equipment may be alleged to be associated with the fire's ignition. In response to worsening weather and fuel conditions and increased wildfire activity over the past several years, wind-drivenSCE has developed and is implementing its 2020 – 2022 Wildfire Mitigation Plan ("WMP") to reduce the risk of SCE equipment contributing to the ignition of wildfires. In addition, California has increased its investment in wildfire prevention and fire suppression capabilities.
In addition to the investments SCE is making through its WMP, SCE also uses its Public Safety Power Shutoffs ("PSPS") program to proactively de-energize power lines to mitigate the risk of catastrophic wildfires impacted portionsduring extreme weather events. SCE initiated PSPS 12 times in 2020 as part of SCE's service territory, with wildfires in December 2017 and November 2018 causing lossits wildfire mitigation efforts, impacting an aggregate of life, substantial damage to both residential and business properties, and service outages for SCE customers. The investigating government agencies,approximately 140,000 unique customers. In January 2021, the Ventura County Fire Department ("VCFD") and California Department of Forestry and Fire Protection ("CAL FIRE"), have determined that the largestPresident of the 2017 fires originatedCPUC sent SCE a letter expressing her concern regarding SCE's execution of PSPS in 2020 and notifying SCE that it must implement a PSPS action plan to reduce the impacts of PSPS on December 4, 2017,the customers and communities it serves. On a risk-informed basis, SCE is making efforts to reduce the frequency and impacts of PSPS in the Anlauf Canyon area of Ventura County (the investigating agencies refer2021 as compared to this fire as the "Thomas Fire"), followed shortly thereafter by a second fire2020, assuming that originated near Koenigstein Roadweather patterns in the City of Santa Paula (the "Koenigstein Fire"). While2021 are similar to those experienced in 2020. SCE continuesmay be subject to review the progression of these two fires, the December 4, 2017 fires eventually burned substantial acreagemandated changes to, or restrictions on, its operational PSPS practices, regulatory fines and penalties, claims for damages and reputational harm if SCE does not execute PSPS in both Venturacompliance with applicable rules and Santa Barbara Counties. According to CAL FIRE, the Thomas and Koenigstein Fires, collectively, burned over 280,000 acres, destroyedregulations or damaged an estimated 1,343 structures and resulted in 2 confirmed fatalities. The largest of the November 2018 fires, known as the "Woolsey Fire," originated in Ventura County and burned acreage in both Ventura and Los Angeles Counties. According to CAL FIRE, the Woolsey Fire burned almost 100,000 acres, destroyed an estimated 1,643 structures, damaged an estimated 364 structures and resulted in 3 confirmed fatalities. NaN additional fatalities have been associated with the Woolsey Fire.
Edison International and SCE have incurred material losses in connection with the 2017/2018 Wildfire/Mudslide Events, which are described below. SCE's equipment has been, and may further be, alleged to be associated with several wildfires that the Thomas and/or Koenigstein Fires proximately caused the Montecito Mudslides. According to Santa Barbara County initial reports, the Montecito Mudslides destroyed an estimated 135 structures, damaged an estimated 324 structures, and resulted in 21 confirmed fatalities, with 2 additional fatalities presumed.
Liability Overview
The extent of 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,
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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 in connection with the ignition of a wildfire.
Final determinations of liability for the Thomas Fire, the Koenigstein Fire, the Montecito Mudslides and the Woolsey Fire (each a "2017/2018 Wildfire/Mudslide Event," and, collectively, the "2017/2018 Wildfire/Mudslide Events"),wildfire events, including determinations of whether SCE was negligent, would only be made during lengthy and complex litigation processes. Even when investigations are still pending or liability is disputed, an assessment of likely outcomes, including through future
2019/2020 Wildfires
Several wildfires significantly impacted portions of SCE's service territory in 2019 and 2020 (the wildfires that originated in Southern California in 2019 and 2020 where SCE's equipment may be alleged to be associated with the fire's ignition are referred to collectively as the "2019/2020 Wildfires"). Edison International and SCE expect that any losses incurred in connection with the 2019/2020 Wildfires will be covered by insurance, subject to self-insured retentions and co-insurance, and expect that any such losses after insurance recoveries will not be material. As of March 31, 2021, Edison International and SCE had estimated losses (established at the lower end of the reasonably estimated range of expected losses) of $118 million, and expected recoveries from insurance of $75 million, reflected on their consolidated balance sheets related to the 2019/2020 Wildfires.
One of the 2019/2020 Wildfires, 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 injuries to 8 individuals and 1 fatality. An investigation into the cause of the Saddle Ridge Fire is being led by the Los Angeles Fire Department. 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 possible losses that could be incurred cannot be estimated at this time. SCE has not accrued a charge for potential losses relating to the Saddle Ridge Fire.
Another of the 2019/2020 Wildfires, the "Bobcat Fire" was reported in the vicinity of Cogswell Dam in Los Angeles County, California in September 2020. The United States Forest Service ("USFS") has reported that the Bobcat Fire burned approximately 116,000 acres in Los Angeles County, destroyed an estimated 87 homes, 1 commercial property and 83 minor structures, damaged an estimated 28 homes and 19 minor structures, and resulted in injuries to 6 firefighters. In addition, the USFS has estimated suppression costs at $80 million. A camera in the vicinity of Cogswell Dam captured the initial stages of a fire with the first observed smoke approximately six minutes before an SCE circuit in the area experienced an anomaly (a 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. The SED is also conducting an investigation of the Bobcat Fire. SCE has accrued a charge for potential losses relating to the Bobcat Fire. The accrued charge corresponds to the lower end of the reasonably estimated range of expected losses that may be incurred in connection with the Bobcat Fire and is subject to change as additional information becomes available.
2017/2018 Wildfire/Mudslide Events
Wildfires in SCE's territory in December 2017 and November 2018 caused loss of life, substantial damage to both residential and business properties, and service outages for SCE customers. The investigating government agencies, the Ventura County Fire Department ("VCFD") and California Department of Forestry and Fire Protection ("CAL FIRE"), have determined that the largest of the 2017 fires in SCE's territory originated on December 4, 2017, in the Anlauf Canyon area of Ventura County (the investigating agencies refer to this fire as the "Thomas Fire"), followed shortly
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thereafter by a second fire that originated near Koenigstein Road in the City of Santa Paula (the "Koenigstein Fire"). The December 4, 2017 fires eventually burned substantial acreage in both Ventura and Santa Barbara Counties. According to CAL FIRE, the Thomas and Koenigstein Fires, collectively, burned over 280,000 acres, destroyed or damaged an estimated 1,343 structures and resulted in 2 confirmed fatalities. The largest of the November 2018 fires in SCE's territory, known as the "Woolsey Fire," originated in Ventura County and burned acreage in both Ventura and Los Angeles Counties. According to CAL FIRE, the Woolsey Fire burned almost 100,000 acres, destroyed an estimated 1,643 structures, damaged an estimated 364 structures and resulted in 3 confirmed fatalities. NaN additional fatalities have been associated with the Woolsey Fire. The Thomas Fire, the Koenigstein Fire, the Montecito Mudslides (defined below) and the Woolsey Fire are each referred to as a "2017/2018 Wildfire/Mudslide Event," and, collectively, referred to as the "2017/2018 Wildfire/Mudslide Events."
As described below, multiple lawsuits related to the Thomas and Koenigstein Fires and the Woolsey Fire have been initiated against SCE and Edison International. Some of the Thomas and Koenigstein Fires lawsuits claim that SCE and Edison International have responsibility for the damages caused by debris flows and flooding in Montecito and surrounding areas in January 2018 (the "Montecito Mudslides") based on a theory alleging that SCE has responsibility for the Thomas and/or Koenigstein Fires and further alleging that the Thomas and/or Koenigstein Fires proximately caused the Montecito Mudslides. According to Santa Barbara County initial reports, the Montecito Mudslides destroyed an estimated 135 structures, damaged an estimated 324 structures, and resulted in 21 confirmed fatalities, with 2 additional fatalities presumed. Based on information available to SCE and consideration of the risks associated with litigation, Edison International and SCE expect to incur a material loss in connection with the remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events.
As of June 30, 2020,March 31, 2021, Edison International and SCE havehad paid $2.4 billion in settlements, had $1.8 billion to be paid under executed settlements, including amounts to be paid under the Woolsey Subrogation Settlement, and had $2.0 billion of estimated liabilitieslosses for remaining alleged and potential claims reflected on their consolidated balance sheets related to the 2017/2018 Wildfire/Mudslide Events. As of $4.5 billionthe same date, Edison International and SCE also had assets for remaining expected recoveries from insurance of $1.6 billion$666 million, reflected as short-term assets, and through FERC electric rates of $77$91 million on their consolidated balance sheets related to the 2017/2018 Wildfire/Mudslide Events. The accrued liability corresponds toestimated losses for the lower end2017/2018 Wildfire/Mudslide Events do not include an estimate of the reasonably estimated range of expectedany potential lossesfines or penalties that maycould be incurredlevied against SCE in connection with the 2017/2018 Wildfire/Mudslide Events. Edison International and SCE are currently unable to reasonably estimate the magnitude of any such fines or penalties, or the associated timing if they were to be imposed. Estimated losses for the 2017/2018 Wildfire/Mudslide Events litigation are based on a number of assumptions and isare subject to change as additional information becomes available. Edison InternationalActual losses incurred may be higher or lower than estimated based on several factors, including: the uncertainty as to the legal and SCE will seekfactual determinations to offset any actual losses realized with recoveries from insurance policies in place atbe made during litigation, including uncertainty as to the timecontributing causes of the events and,2017/2018 Wildfire/Mudslide Events, the complexities associated with fires that merge, whether inverse condemnation will be held applicable to SCE with respect to damages caused by the Montecito Mudslides, uncertainties related to the extent actual losses exceed insurance, through electric rates. litigation processes, the uncertainty in estimating damages that may be alleged, and the uncertainty as to how these factors impact future settlements.
The CPUC and FERC may not allow SCE to recover uninsured losses through electric rates if it is determined that such losses were not reasonably or prudently incurred. See "Loss Estimates for Third Party Claims and Potential Recoveries from Insurance and through Electric Rates" below for additional information.
External Investigations and Internal Review
The VCFD and CAL FIRE have jointly issued reports concerning their findings regarding the causes of the Thomas Fire and the Koenigstein Fire. The reports did not address the causes of the Montecito Mudslides. SCE has also received a non-final redacted draft of a report from the VCFD regarding Woolsey Fire (the "Redacted Woolsey Report"). SCE received the Redacted Woolsey Report subject to a protective order in the litigation related to the Woolsey fire and, other than the information disclosed in this Form 10-Q, is not authorized to release the report or its contents to the public at this time. Based on information received at hearings in the Woolsey Fire litigation, SCE anticipates that the VCFD will release its final report regarding the Woolsey Fire in the fourth quarter of 2020.2021. 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.
SCE could be subject to material fines, penalties, or restitution for failure to comply with applicable laws and regulations.
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The CPUC's Safety and Enforcement Division ("SED") is also conductinghas conducted investigations to assess SCE's compliance with applicable rules and regulations in areas impacted by the Thomas, Koenigstein and Woolsey Fires. The CPUC may initiate proceedings to investigate these matters and SCE cannot predict when the SED's investigations willcould be completed. subject to material fines or penalties in connection with any such proceeding that is initiated.
Edison International and SCE understand that the California Attorney General's Office has completed its investigation of the Thomas Fire without pursuing criminal charges. Edison International and SCE are aware of an ongoing investigation by the California Attorney General's Office of the Woolsey Fire for the purpose of determining whether any criminal violations have occurred. SCE could be subject to material fines, penalties, or restitution if it is determined that it failed to comply with applicable laws and regulations. SCE is not aware of any basis for felony liability with regards to the Thomas Fire, the Koenigstein Fire or the Woolsey Fire.
SCE's internal review into the facts and circumstances of each of the 2017/2018 Wildfire/Mudslide Events is complex and time consuming. SCE expects to obtain and review additional information and materials in the possession of third parties during the course of its internal reviews and the litigation processes.
Thomas Fire
On March 13, 2019, the VCFD and CAL FIRE 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 progression of the Thomas Fire and the extent of damages that may be attributable to that fire.
Koenigstein Fire
On March 20, 2019, the VCFD and CAL FIRE 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. As previously disclosed, SCE believes that its equipment was associated with the ignition of the Koenigstein Fire. SCE is continuing to assess the progression of the Koenigstein Fire and the extent of damages that may be attributable to that fire.
Montecito Mudslides
SCE's internal review includes inquiry into whether the Thomas and/or Koenigstein Fires proximately caused or contributed to the Montecito Mudslides, whether, and to what extent, the Thomas and/or Koenigstein Fires were responsible for the damages in the Montecito area and other factors that potentially contributed to the losses that resulted from the Montecito Mudslides. Many other factors, including, but not limited to, weather conditions and insufficiently or improperly designed and maintained debris basins, roads, bridges and other channel crossings, could have proximately caused, contributed to or exacerbated the losses that resulted from the Montecito Mudslides.
At this time, based on available information, SCE has not been able to determine whether the Thomas Fire or the Koenigstein Fire, or both, were responsible for the damages in the Montecito area. In the event that SCE is determined to have caused the fire that spread to the Montecito area, SCE cannot predict whether, if fully litigated, the courts would conclude that the Montecito Mudslides were caused or contributed to by the Thomas and/or Koenigstein Fires or that SCE would be liable for some or all of the damages caused by the Montecito Mudslides.
Woolsey Fire
SCE’s internal review into the facts and circumstances of the Woolsey Fire is ongoing. SCE has reported to the CPUC that there was an outage on SCE'sSCE’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'sSCE’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
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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 lawsuits, which have been filed inBecause potential plaintiffs can still timely file claims related to the superior courts of Ventura, Santa Barbara and Los Angeles Counties in the case of the Thomas and Koenigstein Fires and the Montecito Mudslides, and in Ventura and Los Angeles Counties in the case of the Woolsey Fire, allege, among other things, negligence, inverse condemnation, trespass, private nuisance, personal injury, wrongful death, and violations of the California Public Utilities and Health and Safety Codes.2017/2018 Wildfire/Mudslide Events, SCE expects to be the subject of additional lawsuits related to the 2017/2018 Wildfire/Mudslide Events.events. 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 20, 2021, SCE was aware of at least 269 lawsuits, representing approximately 3,000 plaintiffs, related to the Thomas and Koenigstein Fires naming SCE as a defendant. One hundred forty of the 269 lawsuits also name Edison International as a defendant based on its ownership and alleged control of SCE. At least 4 of the lawsuits were filed as purported class actions. The lawsuits, which have been filed in the superior courts of Ventura, Santa Barbara and Los Angeles Counties allege, among other things, negligence, inverse condemnation, trespass, private nuisance, and violations of the public utilities and health and safety codes. An initial trial for a limited number of plaintiffs, sometimes referred to as a bellwether trial, on certain fire only matters is currently scheduled for October 18, 2021. The bellwether trial date may be further delayed to provide SCE and certain of the individual plaintiffs in the Thomas and Koenigstein Fire litigation the opportunity to pursue settlements of claims under a program adopted to promote an efficient and orderly settlement process.
NaN of the 269 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. NaN of the 61 Montecito Mudslides lawsuits also name Edison International as a defendant based on its ownership and alleged control of SCE. In addition to other causes of action, some of the Montecito Mudslides lawsuits also allege personal injury and wrongful death. A bellwether jury trial previously scheduled for October 12, 2020 was vacated due to the wide-spread disruption being caused by the COVID-19 pandemic.
As of April 20, 2021, SCE was aware of at least 313 lawsuits, representing approximately 6,000 plaintiffs, related to the Woolsey Fire naming SCE as a defendant. Two hundred fifty-three of the 313 lawsuits also name Edison International as a defendant based on its ownership and alleged control of SCE. At least 2 of the lawsuits were filed as purported class actions. The lawsuits, which have been filed in the superior courts of Ventura and Los Angeles Counties allege, among other things, negligence, inverse condemnation, personal injury, wrongful death, trespass, private nuisance, and violations of the public utilities and health and safety codes. A bellwether jury trial is currently scheduled for August 9, 2021. The bellwether trial date may be further delayed to provide SCE and certain of the individual plaintiffs in the Woolsey Fire litigation the opportunity to pursue settlements of claims under a program adopted to promote an efficient and orderly settlement process.
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. On October 4, 2018, the 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 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).
Additionally, in September 2018, a derivative lawsuit for breach of fiduciary duties and unjust enrichment was filed in the Los Angeles Superior Court against certain current and former members of the Boards of Directors of Edison International and SCE. Edison International and SCE are identified as nominal defendants in the action. The derivative lawsuit generally alleges that the individual defendants violated their fiduciary duties by causing or allowing SCE to
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operate in an unsafe manner in violation of relevant regulations, resulting in substantial liability and damage from the Thomas and Koenigstein Fires and the Montecito Mudslides. The lawsuit is currently stayed.
In November 2018, a purported class action lawsuit alleging securities fraud and related claims was filed in federal court against Edison International, SCE and certain current and former officers of Edison International and SCE. The plaintiff alleges that Edison International and SCE made false and/or misleading statements in filings with the Securities and
In January 2019, 2 separate derivative lawsuits alleging breach of fiduciary duties, securities fraud, misleading proxy statements, unjust enrichment, and related claims were filed in federal court against certain current and former members of the Boards of Directors and certain current and former officers of Edison International and SCE. Edison International and SCE are named as nominal defendants in those actions. The derivative lawsuits generally allege that the individual defendants breached their fiduciary duties and made misleading statements or allowed misleading statements to be made (i) between March 21, 2014 and August 10, 2015, with respect to certain ex partecommunications between SCE and CPUC decision-makersdecisionmakers concerning the settlement of the San Onofre Order Instituting Investigation proceeding (the "San Onofre OII") and (ii) from February 23, 2016 to the present, concerning compliance with applicable laws and regulations concerning electric system maintenance and operations related to wildfire risks. The lawsuits generally allege that these breaches of duty and misstatements led to substantial liability and damage resulting from the disclosure of SCE's ex partecommunications in connection with the San Onofre OII settlement, and from the 2017/2018 Wildfire/Mudslide Events. The lawsuits are currently stayed.
Settlements
In the fourth quarter of 2019, SCE paid $360 million to a number of local public entities to resolve those parties'parties’ collective claims arising from the 2017/2018 Wildfire/Mudslide Events (the "Local Public Entity Settlements").
In the secondthird quarter of 2020, Edison International and SCE entered into an agreement (the "TKM Subrogation Settlement") under which all of the insurance subrogation plaintiffs' in the Thomas Fire, Koenigstein Fire and Montecito Mudslides litigation (the "TKM Subrogation Plaintiffs") collective claims arising from the Thomas Fire, Koenigstein Fire or Montecito Mudslides have been resolved. Under the TKM Subrogation Settlement, SCE paid the TKM Subrogation Plaintiffs an aggregate of $1.2 billion in October 2020 and also agreed to pay $0.555 for each dollar in claims to be paid by the TKM Subrogation Plaintiffs to their policy holders on or before July 15, 2023, up to an agreed upon cap.
In January 2021, Edison International and SCE entered into an agreement (the "Woolsey Subrogation Settlement") under which all of the insurance subrogation plaintiffs' in the Woolsey Fire litigation (the "Woolsey Subrogation Plaintiffs") collective claims arising from the Woolsey Fire have been resolved. Under the Woolsey Subrogation Settlement, SCE paid the Woolsey Subrogation Plaintiffs an aggregate of $2.2 billion in March and April 2021. SCE has also agreed to pay $0.67 for each dollar in claims to be paid by the Woolsey Subrogation Plaintiffs to their policy holders on or before July 15, 2023, up to an agreed upon cap.
As of March 31, 2021, SCE has also entered into settlements with approximately 2,000 individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation. In 2020 SCE entered into settlements with an immaterial number of individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation under which it agreed to pay an aggregate of approximately $16$300 million to those individual plaintiffs.plaintiffs. Between December 31, 2020 and March 31, 2021, SCE continues to explore settlement opportunitiesalso entered into settlements with otherindividual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation. In total, SCE has accrued estimated losses of $4.9 billion, has paid orlitigation under which it agreed to pay $376an aggregate of approximately $200 million into those individual plaintiffs.
Edison International and SCE did not admit wrongdoing or liability as part of any of the settlements and has recovered $363 million from its insurance carriers through June 30, 2020 in relation to the 2017/2018 Wildfire/Mudslide Events.
SCE continues to explore reasonable settlement opportunities with wildfire litigation claims requires management to exercise significant judgment based on a number of assumptions and subjective factors, including, but not limited to: estimates of known and expected claims by third parties based on currently available information, opinions of counsel regarding litigation risk, the status of and developmentsother plaintiffs in the courseoutstanding 2017/2018 Wildfire/Mudslide Events litigation.
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Loss Estimates for Third Party Claims and prior experience litigatingPotential Recoveries from Insurance and settling wildfire litigation claims. As additional information becomes available, management's estimatesthrough Electric Rates
At March 31, 2021 and assumptions regarding the causesDecember 31, 2020, Edison International's and financial impactSCE's consolidated balance sheets include fixed payments to be made under executed settlement agreements and accrued estimated losses of $3.8 billion and $4.4 billion, respectively, for the 2017/2018 Wildfire/Mudslide Events may change further. Such additional information is expected to become available from multiple external sources during the course of litigation and settlement discussions and from SCE's ongoing internal review, including, among other things, information regarding the extent of damages that may be attributable to any fire determined to have been substantially caused by SCE's equipment, information that may be obtained from the equipmentEvents. The following table presents changes in CAL FIRE's possession, and information pertaining to fire progression, suppression activities, damages alleged by plaintiffs and insurance claims made by third parties.
| | | |
(in millions) |
| | |
Balance at December 31, 20201 | | $ | 4,383 |
Increase in accrued estimated losses to reflect best estimate | |
| — |
Amounts paid | |
| (620) |
Balance at March 31, 20212 | | $ | 3,763 |
1 | At December 31, 2020, $2,231 million in current liabilities, wildfire-related claims, on Edison International's and SCE's consolidated balance sheets includes an estimate for claims brought by insurance subrogation plaintiffs in the Woolsey Fire litigation, which were settled on January 22, 2021 for $2,212 million, and $19 million of other settlements executed in connection with the 2017/2018 Wildfire/Mudslide Events. At December 31, 2020, the $2,281 million included in deferred credits and other liabilities, wildfire-related claims on Edison International's and SCE's consolidated balance sheets includes Edison International and SCE's best estimate of expected losses for remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events after giving effect to the Woolsey Subrogation Settlement of $2,152 million and other wildfire-related claims estimates of $129 million. |
2 | At March 31, 2021, $1,812 million in current liabilities, wildfire-related claims, on Edison International's and SCE's consolidated balance sheets includes $1,772 million of settlements to be paid by April 22, 2021 under the Woolsey Subrogation Settlement, and $40 million of other settlements executed in connection with the 2017/2018 Wildfire/Mudslide Events. At March 31, 2021, the $2,082 million included in deferred credits and other liabilities, wildfire-related claims on Edison International's and SCE's consolidated balance sheets includes Edison International and SCE's best estimate of expected losses for remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events of $1,951 million and other wildfire-related claims estimates of $131 million. |
For events that occurred in 2017 and early 2018, principally the Thomas and Koenigstein Fires and Montecito Mudslides, SCE had $1.0 billion of wildfire-specific insurance coverage, subject to a self-insured retention of $10 million per occurrence. For the Woolsey Fire, SCE had an additional $1.0 billion of wildfire-specific insurance coverage, subject to a self-insured retention of $10 million per occurrence. Edison International and SCE record a receivable for insurance recoveries when recovery of a recorded loss is determined to be probable. The following table presents changes in expected insurance recoveries associated with the estimated losses for the 2017/2018 Wildfire/Mudslide Events since December 31, 2019:
| | | |
(in millions) |
|
| |
Balance at December 31, 2020 | | $ | 708 |
Insurance recoveries | |
| (42) |
Balance at March 31, 2021 | | $ | 666 |
At March 31, 2021, SCE had 0 remaining expected recoveries from insurance for the Thomas Fire, Koenigstein Fire and Montecito Mudslides litigation. At March 31, 2021, SCE had $666 million remaining in expected recoveries from insurance for the Woolsey Fire litigation, included in "Insurance receivable" and "Insurance receivable from affiliate" on the consolidated balance sheets of SCE and "Insurance receivable" on the consolidated balance sheets of Edison International. SCE expects that this insurance will seekbe exhausted after expected recoveries for the Woolsey Subrogation Settlement.
In total, SCE has accrued estimated losses of $6.2 billion, has paid or agreed to recover uninsured costs resultingpay approximately $4.2 billion in settlements and has recovered $1.3 billion, and has $666 million remaining in expected recoveries, from its insurance carriers through March 31, 2021 in relation to the 2017/2018 Wildfire/Mudslide Events.
Recovery of SCE's actual losses realized in connection with the 2017/2018 Wildfire/Mudslide Events through electric rates. Recoveryin excess of these costsavailable 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
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comparable precedent in which a California investor-owned utility has sought recovery for uninsured wildfire-related costs is SDG&E's requests for cost recovery related to 2007 wildfire activity, where the FERC allowed recovery of all FERC-jurisdictional wildfire-related costs while the CPUC rejected recovery of all CPUC-jurisdictional wildfire-related costs based on a determination that SDG&E did not meet the CPUC's prudency standard. As a result, while SCE does not agree with the CPUC's decision, it believes that the CPUC's interpretation and application of the prudency standard to SDG&E creates substantial uncertainty regarding how that standard will be applied to an investor-owned utility in future wildfire cost-recovery proceedings for fires ignited prior to July 12, 2019. SCE will continue to evaluate the probability of recovery based on available evidence, including judicial, legislative and regulatory decisions, including any CPUC decisions illustrating the interpretation and/or application of the prudency standard when making determinations regarding recovery of uninsured wildfire-related costs. While the CPUC has not made a determination regarding SCE's prudency relative to any of the 2017/2018 Wildfire/Mudslide Events, SCE is unable to conclude, at this time, that uninsured CPUC-jurisdictional wildfire-related costs are probable of recovery through electric rates. SCE would record a regulatory asset at the time it obtains sufficient information to support a conclusion that recovery is probable. SCE will seek CPUC-jurisdictional rate recovery of prudently-incurred, actual losses realized in connection with the CPUC portion2017/2018 Wildfire/Mudslide Events in excess of any uninsured wildfire-related costs through its WEMA or its CEMA. available insurance.
In July 2019, SCE filed a CEMA application with the CPUC to seek recovery of, among other things, approximately $6 million in costs incurred to restore service to customers and to repair, replace and restore buildings and SCE's facilities damaged or destroyed as a result of the Thomas and Koenigstein Fires. SCE continues to incur costs for reconstructing its system and restoring service to structures that were damaged or destroyed by these two fires and plans to file additional applications with the CPUC to recover such costs. See "Recovery of Wildfire-Related Costs" below.
Through the operation of its FERC Formula Rate, and based upon the precedent established in SDG&E's recovery of FERC-jurisdictional wildfire-related costs, SCE believes it is probable it will recover its FERC-jurisdictional wildfire and mudslide related costs and has recorded total regulatory assetsexpected recoveries of $149$233 million within the FERC balancing account. This was the FERC portion of the estimated losses accrued. As of June 30, 2020,March 31, 2021, collections have reduced the amountregulatory assets remaining in the FERC balancing account to $77$91 million.
Current Wildfire Insurance Coverage
SCE has approximately $1.0 billion of wildfire-specific insurance coverage for events that may occur during the period July 1, 2020 through June 30, 2021, subject to $50 million of self-insured retention and up to $80 million of co-insurance, and $50 million of self-insured retention, which results in net coverage of approximately $870 million. Various coverage limitations within the policies that make up SCE'sSCE’s wildfire insurance coverage could result in additional material self-insured costs, for instance in the event of multiple wildfire occurrences during a policy period or with a single wildfire with damages in excess of the policy limits. SCE believes that its insurance coverage for the July 1, 2020 through June 30, 2021 period meets its obligation to maintain reasonable insurance coverage under AB 1054.
Wildfire insurance expense in 2020, prior to any regulatory deferrals, will totalwas approximately $450 million. Wildfire insurance expense in 2019, prior to any regulatory deferrals, was approximately $400 million. Calendar year insurance expense reflects the portion of premiums attributable to policy coverage in that calendar year.
SCE tracks incremental insurance premium, self-insured retention and co-insurance costs related to wildfire liability insurance policies as well as other wildfire-related costs, including claims and legal costs, in its WEMA. In July 2019, SCE filed a WEMA application with the CPUC to seek recovery of an aggregate of $505 million, consisting of $478 million in wildfire insurance premium costs that havehad been incurred or willwere to be incurred before July 1, 2020 in excess of premiums approved in the 2018 GRC. The application also seeks recovery ofGRC and the corresponding financing costs. In September 2020, the CPUC approved SCE's July 2019 WEMA application and authorized SCE expectsto collect a CPUC decision ontotal revenue requirement of $505 million over a two-year period. SCE included the applicationauthorized revenue requirement in Septemberrates in October 2020.
SCE's cost of obtaining wildfire insurance coverage has increased significantly in recent years as a result of, among other things, the number of recent and significant wildfire events throughout California and the application of inverse
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condemnation to investor-owned utilities. As such, while SCE is required to maintain reasonable insurance coverage under AB 1054, SCE may not be able to obtain a reasonable amount of wildfire insurance, at a reasonable cost, for future policy periods.
Recovery of Wildfire-Related Costs
Pre-AB 1054 Cost Recovery
2019 Wildfire Legislation
In July 2019, AB 1054 was signed by the governor of California and became effective immediately. The summary of the wildfire legislation below is based on SCE'sSCE’s interpretation of AB 1054. A lawsuit challenging the validity of AB 1054 was filed in federal court on July 19, 2019. Edison International and SCE are unable to predict the outcome of this lawsuit.
AB 1054 Prudency Standard
Under AB 1054, created a new standard that the CPUC must apply a new standard when assessing the prudency of a utility in connection with a request for recovery of wildfire costs for wildfires ignited after July 12, 2019. Under AB 1054, the CPUC is required to find a utility to be prudent if the utility's conduct related to the ignition was consistent with actions that a reasonable utility would have undertaken under similar circumstances, at the relevant point in time, and based on the information available at that time. Prudent conduct under the AB 1054 standard is not limited to the optimum practice, method, or act to the exclusion of others, but rather encompasses a spectrum of possible practices, methods, or acts consistent with utility system needs, the interest of the ratepayers, and the requirements of governmental agencies. AB 1054 also provides that the CPUC may determine that wildfire costs may be recoverable, in whole or in part, by taking into account factors within and outside the utility's control, including humidity, temperature, and winds. Further, utilities with a valid safety certification will be presumed to have acted prudently related to a wildfire ignition unless a party in the cost recovery proceeding creates serious doubt as to the reasonableness of the utility's conduct, at which time, the burden shifts back to the utility to prove its conduct was reasonable.prudent. If a utility does not have a valid safety certification, it will have the burden to prove, based on a preponderance of evidence, that its conduct was prudent. The new prudency standard will survive the termination of the Wildfire Insurance Fund.
Utilities participating in the Wildfire Insurance Fund are not required to reimburse the fund for amounts withdrawn from the fund that the CPUC finds were prudently incurred and can recover such prudently incurred wildfire costs through electric rates if the fund has been exhausted.
Wildfire Insurance Fund
AB 1054 provided for the Wildfire Insurance Fund to reimburse a utility for payment of third-party damage claims arising from certain wildfires that exceed, in aggregate in a calendar year, the greater of $1.0 billion or the insurance coverage required to be maintained under AB 1054. The Wildfire Insurance Fund was established in September 2019 and is available for claims related to wildfires ignited after July 12, 2019 that are determined by the responsible government investigatory agency to have been caused by a utility.
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SCE and SDG&E collectively made their initial contributions totaling approximately $2.7 billion to the Wildfire Insurance Fund in September 2019. Upon its emergence from bankruptcy, on July 1, 2020, PG&E made its initial contribution of approximately $4.8 billion to the Wildfire Insurance Fund. PG&E, SCE and SDG&E are also collectively expected to make aggregate contributions of approximately $3.0 billion to the Wildfire Insurance Fund through annual contributions to the fund over a 10-year period, of which they have made two annual contributions totaling approximately $600 million. In addition to PG&E's, SCE's and SDG&E's contributions to the Wildfire Insurance Fund, PG&E, SCE and SDG&E are expected to collect $6.1 billion, $6.1 billion and $1.3 billion, respectively, from their customers over a 15-year period through a dedicated rate component. The amount collected from customers may be directly contributed to the Wildfire Insurance Fund or used to support the issuance of up to $10.5 billion in bonds by the California Department of Water Resources, the proceeds of which would be contributed to the fund. In addition to funding contributions to the Wildfire Insurance Fund, the amount collected from utility customers will pay for, among other things, any interest and financing costs related to any bonds that are issued by the California Department of Water Resources to support the contributions to the Wildfire Insurance Fund.
SCE made an initial contribution of approximately $2.4 billion to the Wildfire Insurance Fund in September 2019 and committed to make ten annual contributions of approximately $95 million per year to the fund, by no later than January 1 of each year. Through March 31, 2020, SCE has contributed approximately $2.6 billion to the Wildfire Insurance Fund. During 2020 SCE amortized its contributions to the Wildfire Insurance Fund over 10 years, based on evaluation of the fund's expected life based on fire experience. Based on information available in the first quarter of 2021 regarding catastrophic wildfires during 2019 and 2020, SCE reassessed its estimate of the life of the Wildfire Insurance Fund. Using 7 years of historical data (2014 – 2020) of wildfires caused by electrical utility equipment to create Monte Carlo simulations of expected loss, SCE expects the life of the fund to be 15 years from July 12, 2019 which will be reflected prospectively in amortization expense from January 1, 2021. SCE's contributions to the Wildfire Insurance Fund will not be recoverable through electric rates and will be excluded from the measurement of SCE's CPUC-jurisdictional authorized capital structure. SCE will also not be entitled to cost recovery for any borrowing costs incurred in connection with its contributions to the Wildfire Insurance Fund. See Note 1 in the 2020 Form 10-K for information on the accounting impact of SCE's contributions to the Wildfire Insurance Fund.
Reimbursement from Wildfire Insurance Fund and AB 1054 Liability Cap
Participating investor-owned utilities will be reimbursed from the Wildfire Insurance Fund for eligible claims, subject to the fund administrator's review. SCE will reimburse the fund for any withdrawn amounts if SCE receives payment of such amounts under an indemnification agreement or from an insurance provider or other third-party. SCE will also be required to reimburse the fund for withdrawn amounts that the CPUC disallows, subject to the AB 1054 Liability Cap (as defined below). If the utility has maintained a valid safety certification and its actions or inactions that resulted in the wildfire are not found to constitute conscious or willful disregard of the rights and safety of others, the aggregate requirement to reimburse the fund over a trailing three calendar year period is capped at 20% of the equity portion of the utility's transmission and distribution rate base in the year of the prudency determination ("AB 1054 Liability Cap"). Based on SCE's forecasted weighted-average 2021 transmission and distribution rate base, excluding general plant and intangibles, and using the equity portion of SCE's CPUC authorized capital structure of 52%, SCE's requirement to reimburse the Wildfire Insurance Fund for eligible claims disallowed in 2021 would be capped at approximately $3.2 billion.
SCE will not be allowed to recover borrowing costs incurred to reimburse the fund for amounts that the CPUC disallows. The Wildfire Insurance Fund and, consequently, the AB 1054 Liability Cap will terminate when the administrator determines that the fund has been exhausted.
As of March 31, 2021, the participating investor-owned utilities have not sought reimbursement of wildfire claims from the Wildfire Insurance Fund.
Safety Certification and Wildfire Mitigation Plan
Under AB 1054, SCE can obtain an annual safety certification upon the submission of certain required safety information, including an approved wildfire mitigation plan ("WMP"). On July 25, 2019,September 17, 2020, SCE obtained its initiala safety certification that will be valid for 12 months. Notwithstanding its 12-month term, if SCE requests a new safety
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certification prior to the expiration of its initialcurrent safety certification, then its initialcurrent safety certification will remain valid until the CPUC acts on its
Under AB 1054, SCE is required to submit a comprehensive WMP to the CPUC at least once every three years for review and approval. Beginning in 2020, each such comprehensive plan iswas required to cover at least a three-year period. In addition, SCE anticipates updating its comprehensive three-year plans annually in the intervening years.
SCE filed its 2020 – 2022 WMP in February 2020. In June 2020, the CPUC ratified the WSDWSD's conditional approval of SCE's 2020 – 2022 WMP. The approval is conditioned on SCE providing requested information to the WSD, including additional descriptions of how SCE is implementing, and will implement, certain requirements imposed by the WSD. The CPUC's ratification of the WSD's conditional approval of SCE'sSCE filed updates to its 2020 – 2022 WMP satisfies the AB 1054 requirement that SCE must have an approved WMPin February 2021 to, receive a safety certification.
Capital Expenditure Requirement
Under AB 1054, approximately $1.6 billion of spending by SCE on wildfire risk mitigation capital expenditures made after August 1, 2019, cannot be included in the equity portion of SCE's rate base ("AB 1054 Excluded Capital Expenditures"). SCE can apply for irrevocable orders from the CPUC to finance these AB 1054 Excluded Capital Expenditures, including through the issuance of securitized bonds, and can recover any prudently incurred financing costs. In JulyNovember 2020, SCE applied forthe CPUC issued an irrevocable order from the CPUCpermitting SCE to finance $337approximately $340 million, comprised of AB 1054 Excluded Capital Expenditures incurred in connection with GSRPGS&RP and prudently incurred financing costs, through the issuance of securitized bonds. As of June 30, 2020,March 31, 2021, SCE has spent $811 million onapproximately $1.5 billion in AB 1054 Excluded Capital Expenditures. SCE issued securitized bonds in the amount of $338 million in February 2021 and expects to seek additional irrevocable orders from the CPUC to finance the remaining AB 1054 Excluded Capital Expenditures.
Environmental Remediation
SCE records its environmental remediation and restoration liabilities when site assessments and/or remedial actions are probable and a range of reasonably likely cleanup costs can be estimated. SCE reviews its sites and measures the liability quarterly, by assessing a range of reasonably likely costs for each identified site using currently available information, including existing technology, presently enacted laws and regulations, experience gained at similar sites, and the probable level of involvement and financial condition of other potentially responsible parties. These estimates include costs for site investigations, remediation, operation and maintenance, monitoring, and site closure. Unless there is a single probable amount, SCE records the lower end of this reasonably likely range of costs (reflected in "Other long-term liabilities") at undiscounted amounts as timing of cash flows is uncertain.
At June 30, 2020, SCE'sMarch 31,2021, SCE’s recorded estimated minimum liability to remediate its 2327 identified material sites (sites with a liability balance at June 30, 2020,March 31, 2021, in which the upper end of the range of theexpected costs is at least $1 million) was $242$274 million, including $175$172 million related to San Onofre. In addition to these sites, SCE also has 1415 immaterial sites with a liability balance as of June 30, 2020,March 31, 2021, for which the total minimum recorded liability was $3$4 million. Of the $245$278 million total environmental remediation liability for SCE, $233$265 million has been recorded as a regulatory asset. SCE expects to recover $39 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 $194$226 million through a mechanismproceedings that allowsallow SCE to recover up to 100% of the costs incurred at certain sites through customer rates. SCE'sIn addition, SCE has other identified sites includeincluding 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'sSCE’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 $117 million and $8 million, respectively. The upper limit of
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this range of costs was estimated using assumptions least favorable to SCE among a range of reasonably possible outcomes.
SCE expects to clean up and mitigate its identified sites over a period of up to 30 years. Remediation costs for each of the next five years are expected to range from $7$13 million to $19$30 million. Costs incurred for both the sixthree months ended June 30,March 31, 2021 and 2020 and 2019 were $3 million and $2 million, respectively.
Based upon the CPUC'sCPUC’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
Nuclear Insurance
SCE is a member of Nuclear Electric Insurance Limited ("NEIL"), a mutual insurance company owned by entities with nuclear facilities. NEIL provides insurance for nuclear property damage, including damages caused by acts of terrorism up to specified limits, and for accidental outages for active facilities. The amount of nuclear property damage insurance purchased for San Onofre and Palo Verde exceeds the minimum federal requirement of $50 million and $1.1 billion, respectively. If NEIL losses at any nuclear facility covered by the arrangement were to exceed the accumulated funds for these insurance programs, SCE could be assessed retrospective premium adjustments of up to approximately $30 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 $13.8$13.7 billion for Palo Verde and $560 million for San Onofre. SCE and other owners of San Onofre and Palo Verde have purchased the maximum private primary insurance available through a Facility Form issued by American Nuclear Insurers. SCE withdrew from participation in the secondary insurance pool for San Onofre for offsite liability insurance effective January 5, 2018. Based on its ownership interests in Palo Verde, SCE could be required to pay a maximum of approximately $65 million per nuclear incident for future incidents. However, it would have to pay no more than approximately $10 million per future incident in any one year. Based on its ownership interests in San Onofre and Palo Verde prior to January 5, 2018, SCE could be required to pay a maximum of approximately $255 million per nuclear incident and a maximum of $38 million per year per incident for liabilities arising from events prior to January 5, 2018, although SCE is not aware of any such events.
Spent Nuclear Fuel
Under federal law, the DOE is responsible for the selection and construction of a facility for the permanent disposal of spent nuclear fuel and high-level radioactive waste. The DOE has not met its contractual obligation to accept spent nuclear fuel. Extended delays by the DOE have led to the construction of costly alternatives and associated siting and environmental issues. Currently, both San Onofre and Palo Verde have interim storage for spent nuclear fuel on site sufficient for their current license period.
A settlement entered into between SCE, as operating agent, settled a lawsuit on behalf of the San Onofre owners against the DOE for $162 million (SCE's share $124 million, which included reimbursement for approximately $2 million in legal and other costs), to compensate for damages caused by the DOE's failure to meet its obligation to begin accepting spent nuclear fuel for the period from January 1, 2006 to December 31, 2013. In August 2018, the CPUC approved SCE's proposal to return the SCE share of the award to customers based on the amount that customers actually contributed for fuel storage costs; resulting in approximately $106 million of the SCE share being returned to customers and the remaining $17 million being returned to shareholders. Of the $106 million, $72 million was applied against the remaining San Onofre Regulatory Asset in accordance with the Revised San Onofre Settlement Agreement.
In November 2019, SCE filed a new complaint against the DOE to recover damages incurred from January 1, 2017 through July 31, 2018.
Upstream Lighting Program
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independent investigation of bulbs shipped to retailers categorized as grocery and discount businesses during the 2017 to 2019 program years and found that there were overstocking of bulbs and program management shortcomings. Incentives paid to manufacturers for bulbs shipped to grocery and discount businesses during the relevant period, including those that were sold to customers, were approximately $91 million. In addition, SCE received incentives related to the bulbs shipped to grocery and discount businesses through an energy efficiency incentive mechanism ("ESPI Mechanism") of approximately $3.5 million related to the bulbs shipped in 2017 and 2018. SCE also expects to receive incentives of approximately $1.3 million under the ESPI Mechanism in 2022 related to bulbs shipped to grocery and discount businesses in 2018 and 2019.
In January 2021, the Public Advocates Office and The Utility Reform Network provided comments to the CPUC arguing that SCE imprudently managed the program and requesting: a protest alleging that $419refund of $33 million of costsESPI awards, which includes incentives associated with the Tehachapi Transmission Project are imprudentUpstream Lighting Program and shouldother energy efficiency programs; a refund of $92 million of incentives paid to manufacturers and associated program administrative costs; $140 million in fines; and additional program improvements to be disallowed from SCE's FERC rate base because these costs exceededprovided at shareholder expense. In March 2021, SCE filed reply comments arguing that remedies of approximately $21 million were appropriate.
SCE has accrued a charge for potential losses relating to the maximum reasonable cost identified byUpstream Lighting Program. The accrued charge corresponds to the CPUC when it granted the project's certificate of public convenience and necessity. As partlower end of the 2019 Formula Rate Settlement,reasonably estimated range of expected losses that may be incurred in connection with the CPUC withdrew its protest effectiveUpstream Lighting Program and is subject to change as of July 27, 2020. Refer to Note 1 for further details related to 2019 FERC Formula Rate.
Common Stock Issuances
During the three months ended March 31, 2021, Edison International issued 14,181,882did 0t issue any shares of common stock in a registered direct offering and received approximately $800 million in proceeds, before deducting fees and offering expenses of $14 million. The proceeds were used to pay off debt outstanding under a term loan agreement and for general corporate purposes. Refer to Note 5 for details of the term loan.
Edison International continued to settle its ongoing common stock requirements of various internal programs through issuance of new common stock. During the three and six months ended June 30, 2020, 448,000 and 1,171,800March 31, 2021, 259,700 shares of common stock were purchased by employees through the 401(k) defined contribution savings plan for net cash receipts of $26$15 million, and $72 million, 20,571 and 333,693183,985 shares of common stock were issued as stock compensation awards for net cash receipts of $1$4 million and $14 million and 72,910 and 129,01974,854 shares of new common stock were issued in lieu of distributing $5 million and $9$4 million to shareholders opting to receive dividend payments in the form of additional common stock respectively.
Equity Contributions
In the three and six months ended June 30, 2020,March 31, 2021, SCE received a total of $619 million and $888$900 million in capital contributions respectively, from Edison International Parent to support SCE'sSCE’s capital program, maintain the equity portion of SCE'sSCE’s capital structure at authorized levels and for general corporate purposes.
Preferred Stock Issuance
In March 2021, Edison International issued 1,250,000 shares of 5.375% Fixed-Rate Reset Cumulative Perpetual Preferred Stock, Series A, with a liquidation value of $1,000 per share (the "Series A preferred stock"). The dividends are payable on a semi-annual basis, commencing September 15, 2021. The dividend rate will be reset every five years beginning on March 15, 2026 to equal the then-current five-year U.S. Treasury rate plus a spread of 4.698%. The net proceeds of $1.2 billion were used to repay commercial paper borrowings and for general corporate purposes, including making a $575 million equity contribution to SCE.
Edison International may, at its option, redeem the Series A preferred stock in whole or in part during certain period of time prior to each of the dividend reset date at a price equal to $1,000 per share plus any accumulated and unpaid dividends. Edison International may also, at its option, redeem the Series A preferred stock in whole but not in part at a price equal to $1,020 per share plus any accumulated and unpaid dividends within a certain period of time following any
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change in the criteria rating agencies use that would have adverse effects on the equity credit attributed by rating agencies to the Series A preferred stock.
The Series A preferred stock ranks senior to Edison International’s common stock with respect to dividends rights and distribution rights upon liquidation. The Series A preferred stock is not subject to any mandatory sinking fund, retirement fund, purchase fund or other similar provisions. Holders of the shares of Series A preferred stock will not have the right to require Edison International to repurchase or redeem shares of the Series A preferred stock.
Note 14. Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss, net of tax, consist of:
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||||||||
(in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||
Beginning balance | $ | (67) | $ | (58) | $ | (69) | $ | (50) | ||||||||||||||||||||||||||||||
Pension and PBOP – net loss: | ||||||||||||||||||||||||||||||||||||||
Reclassified from accumulated other comprehensive loss1 | 2 | 1 | 4 | 3 | ||||||||||||||||||||||||||||||||||
Other2 | — | — | — | (10) | ||||||||||||||||||||||||||||||||||
Change | 2 | 1 | 4 | (7) | ||||||||||||||||||||||||||||||||||
Ending Balance | $ | (65) | $ | (57) | $ | (65) | $ | (57) |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||||||||
(in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||
Beginning balance | $ | (37) | $ | (27) | $ | (39) | $ | (23) | ||||||||||||||||||||||||||||||
Pension and PBOP – net loss: | ||||||||||||||||||||||||||||||||||||||
Reclassified from accumulated other comprehensive loss1 | 1 | 1 | 3 | 2 | ||||||||||||||||||||||||||||||||||
Other2 | — | — | — | (5) | ||||||||||||||||||||||||||||||||||
Change | 1 | 1 | 3 | (3) | ||||||||||||||||||||||||||||||||||
Ending Balance | $ | (36) | $ | (26) | $ | (36) | $ | (26) |
| | | | | | | | | | | | |
| | Edison International | | SCE | ||||||||
| | Three months ended March 31, | ||||||||||
(in millions) | | 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Beginning balance | | $ | (69) | | $ | (69) | | $ | (41) | | $ | (39) |
Pension and PBOP – net loss: | |
|
| |
|
| |
|
| |
|
|
Reclassified from accumulated other comprehensive loss1 | |
| 2 | |
| 2 | |
| 2 | |
| 2 |
Change | |
| 2 | |
| 2 | |
| 2 | |
| 2 |
Ending Balance | | $ | (67) | | $ | (67) | | $ | (39) | | $ | (37) |
1 | These items are included in the computation of net periodic pension and PBOP Plan expense. See Note 9 for additional information. |
Other income net of expenses is as follows:
| | | | | |
| Three months ended | ||||
| March 31, | ||||
(in millions) | 2021 |
| 2020 | ||
SCE other income (expense): | |
|
| |
|
Equity allowance for funds used during construction | $ | 35 | | $ | 21 |
Increase in cash surrender value of life insurance policies and life insurance benefits |
| 10 | |
| 10 |
Interest income |
| — | |
| 9 |
Net periodic benefit income – non-service components |
| 33 | |
| 28 |
Civic, political and related activities and donations |
| (4) | |
| (11) |
Other |
| (2) | |
| (5) |
Total SCE other income |
| 72 | |
| 52 |
Other income (expense) of Edison International Parent and Other: |
|
| |
|
|
Net periodic benefit costs – non-service components |
| 0 | |
| (1) |
Other |
| 0 | |
| 1 |
Total Edison International other income | $ | 72 | | $ | 52 |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||||||||
(in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||
SCE other income (expense): | ||||||||||||||||||||||||||||||||||||||
Equity allowance for funds used during construction | $ | 30 | $ | 32 | $ | 51 | $ | 49 | ||||||||||||||||||||||||||||||
Increase in cash surrender value of life insurance policies and life insurance benefits | 23 | 9 | 33 | 18 | ||||||||||||||||||||||||||||||||||
Interest income | 7 | 7 | 16 | 16 | ||||||||||||||||||||||||||||||||||
Net periodic benefit income – non-service components | 27 | 16 | 55 | 35 | ||||||||||||||||||||||||||||||||||
Civic, political and related activities and donations | (4) | (8) | (15) | (21) | ||||||||||||||||||||||||||||||||||
Other | (1) | — | (6) | (3) | ||||||||||||||||||||||||||||||||||
Total SCE other income | 82 | 56 | 134 | 94 | ||||||||||||||||||||||||||||||||||
Other income (expense) of Edison International Parent and Other: | ||||||||||||||||||||||||||||||||||||||
Net periodic benefit costs – non-service components | — | — | (1) | (2) | ||||||||||||||||||||||||||||||||||
Other | (1) | (1) | — | 1 | ||||||||||||||||||||||||||||||||||
Total Edison International other income | $ | 81 | $ | 55 | $ | 133 | $ | 93 |
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Note 16. Supplemental Cash Flows Information
Supplemental cash flows information is:
Edison International | SCE | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||
Cash payments (receipts): | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest, net of amounts capitalized | $ | 369 | $ | 301 | $ | 312 | $ | 268 | |||||||||||||||||||||||||||||||||||||||||||||
Income taxes, net | — | (65) | — | (101) | |||||||||||||||||||||||||||||||||||||||||||||||||
Non-cash financing and investing activities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared but not paid: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock | 241 | 200 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Preferred and preference stock | 12 | 12 | 12 | 12 | |||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | |
| | Edison International | | SCE | ||||||||
| | Three months ended March 31, | ||||||||||
(in millions) |
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Cash payments (receipts): |
| |
|
| |
|
| |
|
| |
|
Interest, net of amounts capitalized | | $ | 263 | | $ | 233 | | $ | 241 | | $ | 210 |
Income taxes, net | |
| (87) | |
| — | |
| (87) | |
| — |
Non-cash financing and investing activities: | |
| | |
| | |
| | |
| |
Dividends declared but not paid: | |
| | |
| | |
| | |
| |
Common stock | |
| 251 | |
| 232 | |
| 0 | |
| 0 |
SCE’s accrued capital expenditures at June 30,March 31, 2021 and 2020 and 2019 were $450$503 million and $463$451 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 purchased wildfire liability insurance with premiums of $176 million fordid 0t purchase wildfire liability insurance from Edison Insurance Services, Inc. ("EIS"), a wholly-owned subsidiary of Edison International. ForInternational in the threefirst quarter of 2021 and six months ended June 30, 2019, SCE purchased wildfire liability insurance with premiums of $74 million and $260 million from EIS.2020. The related-party transactions included in SCE'sSCE’s consolidated balance sheets for wildfire-related insurance purchased from EIS and related expected insurance recoveries were as follows:
(in millions) | June 30, 2020 | December 31, 2019 | ||||||||||||
Long-term insurance receivable due from affiliate | $ | 803 | $ | 803 | ||||||||||
Prepaid insurance1 | 1 | 10 | ||||||||||||
Reflected in "Prepaid expenses" on SCE's consolidated balance sheets.
| | | | | | |
| | March 31, | | December 31, | ||
(in millions) |
| 2021 |
| 2020 | ||
Current insurance receivable due from affiliate | | $ | 268 | | $ | 268 |
Prepaid insurance1 | |
| 28 | |
| 56 |
1 | Reflected in "Prepaid expenses" on SCE’s consolidated balance sheets. |
The expense for wildfire-related insurance premiums paid to EIS was $50$43 million and $41$50 million for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and $100 million and $72 million for the six months ended June 30, 2020 and 2019, respectively.
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The management of Edison International and SCE, under the supervision and with the participation of Edison International'sInternational’s and SCE'sSCE’s respective Chief Executive Officers and Chief Financial Officers, have evaluated the effectiveness of Edison International'sInternational’s and SCE'sSCE’s disclosure controls and procedures (as that term is defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended), respectively, as of the end of the secondfirst quarter of 2020.2021. Based on that evaluation, Edison International'sInternational’s and SCE'sSCE’s respective Chief Executive Officers and Chief Financial Officers have each concluded that, as of the end of the period, Edison International'sInternational’s and SCE'sSCE’s disclosure controls and procedures, respectively, were effective.
There were no changes in Edison International'sInternational’s or SCE'sSCE’s internal control over financial reporting, respectively, during the secondfirst quarter of 20202021 that have materially affected, or are reasonably likely to materially affect, Edison International'sInternational’s or SCE'sSCE’s internal control over financial reporting.
Edison International'sInternational’s and SCE'sSCE’s respective scope of evaluation of internal control over financial reporting includes their Jointly Owned Utility Projects as discussed in Notes to Consolidated Financial Statements—Note 2. Property, Plant and Equipment in the 20192020 Form 10-K.
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 plaintiffs, sometimes referred to as a bellwether jury trial, previously scheduled for October 12, 2020 was vacated due to the wide-spread disruption being caused by the COVID-19 pandemic.
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Edison International and SCE will furnish a copy of any exhibit listed in the accompanying Exhibit Index upon written request and upon payment to Edison International or SCE of their reasonable expenses of furnishing such exhibit, which shall be limited to photocopying charges and, if mailed to the requesting party, the cost of first-class postage.
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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/ Aaron D. Moss | | By: | /s/ Aaron D. Moss | ||||||||||
| Aaron D. Moss Vice President and Controller (Duly Authorized Officer and | | | Aaron D. Moss Vice President and Controller (Duly Authorized Officer and | ||||||||||
| | | | | ||||||||||
Date: | April 27, 2021 | | Date: | April 27, 2021 |
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