Business context and reporting period
Southern California Edison Company (SCE), a regulated electric utility serving Southern, Central and Coastal California, reported unaudited results for the three months ended March 31, 2024. Comparisons are with the three months ended March 31, 2023; balance-sheet comparisons are with December 31, 2023.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Operating revenue | $4.064 billion | $3.950 billion |
| Operating income | $261 million | $608 million |
| Net income available to common stock | $65 million | $370 million |
| Management-defined core earnings | $513 million | $494 million |
| Operating cash flow | $1.086 billion | $(20) million |
| Capital expenditures | Approximately $1.2 billion | Approximately $1.3 billion |
| Cash and cash equivalents at March 31 | $850 million | $214 million at December 31, 2023 |
Operating expenses rose to $3.803 billion from $3.342 billion, including $614 million of wildfire-related claims, net of insurance recoveries, versus $96 million a year earlier. Interest expense increased to $374 million from $300 million. SCE recorded an income tax benefit of $84 million, compared with tax expense of $29 million; the reported effective tax rate was unusually negative at 381.8%.
At March 31, SCE had $28.555 billion of long-term debt and $1.597 billion of current maturities, plus $511 million of short-term debt. It had approximately $2.8 billion available under its revolving credit facility. Its debt-to-total-capitalization ratio was 0.58, within the covenant limit of 0.65.
Material changes versus the prior period
- Reported common-stock income fell $305 million, principally reflecting higher wildfire losses; core earnings increased $19 million. Core earnings are a non-GAAP measure and exclude items management views as nonrepresentative of ongoing results.
- Revenue increased $114 million, mainly due to higher authorized CPUC revenue and wildfire-mitigation recovery, partly offset by lower revenue associated with the customer-service system program.
- Purchased power and fuel costs declined $310 million, largely from lower power and gas prices and lower purchased-gas volumes. Operation and maintenance expense rose $210 million, including previously deferred wildfire-mitigation costs.
- Operating cash flow improved from a small outflow to $1.086 billion, helped by changes in regulatory accounts and wildfire claims cash flows. Investing cash outflow was $1.276 billion, while financing provided $934 million.
Outlook, commentary, risks and unusual items
- Rate case: SCE’s 2025 GRC application initially sought a 2025 revenue requirement of approximately $10.3 billion. In April 2024 rebuttal testimony, SCE revised this to approximately $10.1 billion, 21% above the adopted 2024 requirement. Intervenors proposed lower amounts; the CPUC had not made a final determination in the filing.
- Capital program: SCE forecasts $32.2–$37.5 billion of capital expenditures and weighted average annual rate base of $43.0–$60.6 billion for 2024–2028. These projections reflect the original GRC request, not the later rebuttal update. Q1 2024 capital expenditures, including accruals, were $1.2 billion.
- Wildfire claims: SCE recorded a $463 million pretax net charge for the 2017/2018 Wildfire/Mudslide Events in Q1, primarily after Woolsey mediation demands and settlement outcomes exceeded expectations. At March 31, estimated losses for remaining claims were $831 million; SCE had paid $8.8 billion under executed settlements and had another $200 million payable under executed settlements. Management warns actual losses could exceed accruals and says it cannot estimate the upper end of reasonably possible losses.
- Recovery uncertainty: SCE expects to seek CPUC recovery of approximately $6.9 billion of uninsured 2017/2018 claims. It had filed a $2.4 billion application for TKM-related losses and targeted Q3 2024 for a roughly $5 billion Woolsey-related filing. SCE could not conclude that uninsured CPUC-jurisdictional costs from these pre-AB 1054 events were probable of recovery. Regulatory disallowance could materially affect results and cash needs.
- Other wildfire exposure: SCE recorded $180 million of additional estimated losses for other wildfires in Q1, partly offset by expected insurance and rate recoveries. Remaining estimated losses were $780 million; several events remain under investigation or litigation, and some potential losses cannot be reliably estimated.
- Funding and risks: SCE expects to fund the next 12 months through operating cash flow, debt and bank financings, and available credit. In Q1 it issued $3.0 billion of mortgage bonds, with proceeds used partly for wildfire-related payments and refinancing. Key risks include wildfire liability and insurance availability, recovery of costs through regulated rates, customer affordability, interest rates, regulatory decisions, and access to capital markets.
Important facts for investors to verify
- Progress and outcomes of the 2025 GRC, including the final authorized revenue requirement and effect on the capital plan.
- Changes in wildfire claim estimates, settlements and trial outcomes, particularly Woolsey mediation and other wildfire cases.
- CPU C and FERC decisions on recovery of uninsured wildfire costs, and the timing and outcome of SCE’s recovery applications.
- Debt issuance, interest costs, credit ratings, available liquidity and compliance with debt covenants.
- Whether capital spending, wildfire mitigation and storage projects proceed on schedule and within forecast.