Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 30, 2024, for Edison International (the parent holding company) and its primary subsidiary, Southern California Edison Company (SCE). SCE is an investor-owned public utility supplying electricity to approximately 50,000 square miles in Southern, Central, and Coastal California. Edison International also owns Edison Energy, LLC (Trio), a global energy advisory firm, though its activities are not currently material as a separate segment.
Key Financial Metrics
| Metric (in millions) | Edison International (3 Months) | Edison International (6 Months) | SCE (3 Months) | SCE (6 Months) |
|---|---|---|---|---|
| Operating Revenue | $4,336 | $8,414 | $4,324 | $8,388 |
| Net Income | $509 | $561 | $572 | $678 |
| Net Income Available to Common Shareholders | $439 | $428 | $523 | $588 |
| Core Earnings (Non-GAAP) | $475 | $913 | $559 | $1,072 |
| Operating Cash Flow (6 Months) | $1,372 | N/A | $1,530 | N/A |
| Capital Expenditures (6 Months) | $2,700 | N/A | $2,698 | N/A |
| Total Debt (Long-term + Current) | $36,402 | N/A | $31,282 | N/A |
| Cash and Cash Equivalents | $465 | N/A | $68 | N/A |
Note: Core earnings exclude non-core items such as wildfire claims and expenses, which are treated as non-representative of ongoing earnings.
Material Changes vs. Prior Period
- Quarterly Performance: Edison International's net income increased by $85 million (24%) compared to Q2 2023, driven primarily by a $103 million increase in SCE's net income. SCE's core earnings rose $88 million due to higher authorized revenue in Track 4 and an increased rate of return, partially offset by higher interest expenses.
- Semi-Annual Performance: For the six months ended June 30, 2024, Edison International's net income decreased by $236 million compared to the same period in 2023. This decline was primarily due to a $309 million increase in non-core losses related to wildfire claims, which was partially offset by a $107 million increase in SCE's core earnings.
- Wildfire Claims: Significant non-core charges were recorded for the 2017/2018 Wildfire/Mudslide Events ($478 million pre-tax for six months) and Other Wildfires ($121 million pre-tax for six months). These charges reflect accrued estimated losses net of expected recoveries.
- Interest Expense: Interest expense increased significantly ($74 million for the quarter; $139 million for six months) due to higher interest rates on long-term debt and increased borrowings.
Guidance, Outlook, and Risks
Regulatory Proceedings and Rate Cases
- 2025 General Rate Case (GRC): SCE filed an application requesting a 2025 revenue requirement of approximately $10.3 billion (later updated to $10.5 billion). Intervenors have proposed lower figures ($9.3 billion to $10.0 billion). The CPUC approved the extension of the customer-funded wildfire self-insurance program through the 2025 GRC period.
- Cost Recovery: SCE is seeking CPUC-jurisdictional rate recovery of approximately $6.9 billion of uninsured claims related to the 2017/2018 Wildfire/Mudslide Events. A filing for the Woolsey Fire is targeted for Q3 2024. Recovery is subject to the CPUC's prudency standard, which remains a significant uncertainty.
Capital Program
- SCE forecasts total capital expenditures of $32.2 billion to $37.5 billion for 2024–2028.
- Major projects include the Riverside Transmission Reliability Project (restarting work) and the Alberhill System Project (seeking final CPUC approval).
Risks and Contingencies
- Wildfire Liability: SCE faces ongoing litigation and investigations regarding the 2017/2018 Wildfire/Mudslide Events and other wildfires (e.g., Bobcat, Fairview, Saddle Ridge). As of June 30, 2024, estimated losses for remaining alleged claims related to the 2017/2018 events were $598 million, with $9.2 billion already paid under settlements. Actual losses could exceed accrued amounts.
- Regulatory Uncertainty: The ability to recover uninsured wildfire costs through rates is contingent on regulatory determinations of prudency. The CPUC's interpretation of the prudency standard for pre-AB 1054 fires remains uncertain.
- Interest Rates and Inflation: Rising interest rates increase borrowing costs and interest expense. Inflation impacts labor, equipment, and material costs.
- Decommissioning: Risks associated with the decommissioning of the San Onofre nuclear facility, including cost overruns and permitting delays.
Investor Verification Checklist
- Wildfire Accruals: Verify the sufficiency of the $598 million accrued for remaining 2017/2018 claims and the $581 million for Other Wildfires against ongoing litigation developments.
- Rate Recovery Probability: Monitor CPUC decisions on the 2025 GRC and the specific cost recovery applications for the Thomas, Koenigstein, Montecito, and Woolsey fires to assess the likelihood of recovering the ~$6.9 billion in uninsured costs.
- Interest Rate Sensitivity: Assess the impact of sustained high interest rates on future interest expense and the cost of capital adjustment mechanism.
- Capital Expenditure Execution: Track progress on major transmission projects (Riverside, Alberhill) and the $32.2–$37.5 billion capital program forecast.
- Liquidity Position: Confirm availability under the $3.4 billion revolving credit facility and the ability to access capital markets for refinancing wildfire-related debt.