Southern California Edison Company — FY2022 Form 10-K
Business context and reporting period. SCE is a wholly owned, regulated electric utility serving approximately 5.2 million customers across about 50,000 square miles of Southern California. This combined filing covers the year ended December 31, 2022, with 2021 comparatives; it does not provide standalone fourth-quarter results. Edison International’s results are distinct from SCE’s and are not summarized here unless relevant to SCE.
Financial performance and liquidity
| Metric | FY2022 | FY2021 | Change / context |
|---|---|---|---|
| Operating revenue | $17.172 billion | $14.874 billion | Up 15.4%; includes cost-recovery revenue, for which SCE earns no return. |
| Operating income | $1.513 billion | $1.510 billion | Nearly unchanged. |
| Net income | $954 million | $935 million | Up 2.0%. |
| Net income available for common stock | $847 million | $829 million | Up 2.2%. |
| Operating cash flow | $3.319 billion | $158 million | Improved substantially, in part from working-capital and wildfire-claim payment timing. |
| Capital expenditures | $5.7 billion | $5.4 billion | Continued high investment in the grid and wildfire mitigation. |
| Cash and revolving credit availability | $766 million cash; $2.7 billion available | $279 million cash | Credit availability under SCE’s $3.4 billion revolver; facility expires May 2026. |
| Debt | $27.2 billion | — | Balance-sheet short-term debt, current long-term debt and long-term debt combined; the filing does not provide this same aggregate comparison in the supplied text. |
Higher revenue reflected GRC escalation, rate-base growth, and authorization to recover previously deferred wildfire and other costs. Expense increases included purchased power and fuel costs, operations and maintenance, depreciation, and interest. Purchased power and fuel expense rose to $6.375 billion from $5.540 billion; interest expense increased to $1.005 billion from $791 million. A conventional margin comparison should be interpreted cautiously because a substantial portion of revenue reimburses costs without an earnings return.
SCE reported a debt-to-total-capitalization ratio of 0.56, within its credit-facility covenant limit of 0.65. At year-end, ratings were Baa2/BBB-/BBB, with positive outlooks from Moody’s and Fitch and stable from S&P. SCE expects to fund near-term needs from operating cash flow, financing and, as needed, parent equity contributions.
Material changes and significant items
- SCE’s earnings available for common stock rose modestly, while reported results remained heavily affected by wildfire-related charges. The 2017/2018 wildfire and mudslide events generated a $1.220 billion pretax charge in 2022, or $879 million after tax.
- At year-end, estimated remaining losses for the 2017/2018 events were $934 million; SCE had exhausted expected insurance recoveries for those events. It had accrued $682 million of estimated remaining claims for post-2018 wildfires, with expected insurance and rate recoveries recorded separately.
- In 2022, SCE recorded an $81 million after-tax charge related to the CPUC’s Upstream Lighting Program decision. The final decision required $76.1 million in customer refunds, $6.8 million in incentive refunds and $19.06 million in fines, plus investigation costs.
- Year-end rate base, excluding AB 1054 excluded capital expenditures, increased to $40.6 billion from $37.9 billion. Capital expenditures were $5.7 billion, including $1.2 billion for wildfire mitigation.
- The ERRA and PABA were undercollected by approximately $1.5 billion at year-end, principally due to higher gas and power prices. A rate change took effect January 1, 2023; further customer-rate adjustments may follow if balances remain above the trigger.
Outlook, regulation and risks
- Investment plan: Forecast capital expenditures are $6.0 billion in 2023 and $5.8 billion in 2024; a range case is $5.7 billion and $5.2 billion, respectively. Planned 2024–2025 capital expenditures for additional programs are estimated at $5.3 billion to $6.8 billion, subject to regulatory approval and execution.
- Rates and authorized returns: The CPUC set SCE’s 2023–2025 return on equity at 10.05% and weighted average return on rate base at 7.44% for 2023. The decision was estimated to reduce 2023 revenue requirements by about $90 million versus the then-current cost of capital in rates; rehearing could affect collections. SCE requested an $8.6 billion 2024 revenue requirement, $938 million above 2023, with a proposed CPUC decision expected in the fourth quarter of 2023.
- Wildfire recovery: SCE expects to seek approximately $6 billion of CPUC rate recovery for eligible 2017/2018 wildfire-related costs, with an initial application targeted for the third quarter of 2023 requesting about $2 billion. Recovery is uncertain: SCE said it could not conclude uninsured CPUC-jurisdictional costs for these pre-AB 1054 events were probable of recovery. Remaining claims could exceed accruals, and the upper end of potential losses could not be estimated.
- Wildfire mitigation and reliability: SCE’s territory remains exposed to wildfire and extreme-weather risk. Utility-owned storage projects totaling 537.5 MW were delayed by supply-chain, permitting and other issues; the contractor expected them in service before June 2023, but SCE identified further delay risk. Contractual liquidated damages could reach $89 million, subject to force-majeure claims and other relief.
- San Onofre: SCE’s share of the estimated decommissioning cost for Units 2 and 3 was $2.6 billion in 2021 dollars, with completion currently estimated for 2053. Its share of trust funds for those units was $2.2 billion at year-end 2022. Cost overruns, spent-fuel storage delays and potential CPUC disallowances remain risks.
- Other exposures: Inflation, higher interest rates, supply and labor constraints, regulatory decisions, customer departures to community choice aggregators, cybersecurity and operational risks could affect costs, cash flows, financing or recovery. The filing also identifies uncertainty around wildfire insurance availability and the Wildfire Insurance Fund’s capacity.
Management describes California’s clean-energy transition as a driver of grid investment and electrification. SCE reported that about 48% of 2022 customer deliveries came from carbon-free resources. It plans to file its 2025 General Rate Case in May 2023. The filing provides plans and forecasts, not earnings guidance.
Key facts for investors to verify
- Progress and outcomes of the CPUC wildfire cost-recovery applications, including the initial expected 2023 filing and the prudency standard applied.
- Changes to recorded wildfire liabilities, insurance and regulatory-recovery receivables, and settlement payments—especially for the 2017/2018 events and post-2018 fires.
- CPU C decisions on the 2024 GRC request, wildfire mitigation cost recovery, and any rehearing of the cost-of-capital decision.
- Actual 2023–2024 capital spending, storage-project completion, and the timing and amount of customer rate changes tied to energy undercollections.
- Debt maturities, liquidity, credit ratings and collateral needs, alongside the funding required for wildfire claims and San Onofre decommissioning.
Audit note: PwC gave an unqualified opinion on SCE’s financial statements. SCE management reported effective internal control over financial reporting; the filing states that SCE’s auditor was not engaged to attest to that assessment.