EIX

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended March 31, 2026, for Edison International (EIX) and its primary subsidiary, Southern California Edison Company (SCE). Edison International is a holding company for SCE, an investor-owned utility serving approximately 50,000 square miles in Southern, Central, and Coastal California, and Edison Energy (Trio), a global energy advisory firm. The filing highlights ongoing wildfire litigation, regulatory proceedings regarding cost recovery, and capital investment plans.

Key Financial Metrics

Material Changes vs. Prior Period

• Net Income Decline: Edison International's net income available to common shareholders decreased by $905 million (from $1,436 million in Q1 2025 to $531 million in Q1 2026). This was primarily driven by a $948 million decrease in SCE's net income.
• Non-Core Items Impact: The decline in net income is largely attributable to a reduction in non-core wildfire-related recoveries. In Q1 2025, SCE recorded $1,351 million in wildfire-related recoveries (primarily from the TKM Settlement Agreement), compared to only $13 million in Q1 2026.
• Core Earnings Growth: Despite the drop in GAAP net income, Core Earnings increased by $18 million to $546 million. This increase was driven by the adoption of the 2025 General Rate Case (GRC) final decision, which increased authorized revenues.
• Expense Increases: Interest expense increased by $210 million for SCE, largely due to the absence of a 2025 benefit related to cost recoveries under the TKM Settlement Agreement and higher borrowings. Depreciation and amortization increased by $92 million due to higher plant balances.

Guidance, Outlook, and Risks

Capital Program and Outlook

SCE forecasts total capital expenditures ranging from $37.5 billion to $40.6 billion for 2026–2030. The company expects to fund these requirements through operating cash flows, capital market financings, and equity contributions. In Q1 2026, SCE issued $1.2 billion in mortgage bonds and entered into a $1.5 billion term loan.

Wildfire Contingencies and Litigation

• Eaton Fire (Jan 2025): SCE has recorded $1.3 billion in losses related to settlements for the Eaton Fire. Expected recoveries include $917 million from customer-funded self-insurance, $295 million from the Wildfire Fund, and $70 million through FERC rates. The net after-tax charge to earnings was $9 million. However, the company states it is unable to reasonably estimate a range of losses for the Eaton Fire due to pending litigation (approx. 2,000 lawsuits) and a bellwether trial set for January 2027.
• 2017/2018 Wildfires: Litigation continues regarding the Thomas, Koenigstein, and Woolsey fires. SCE has settled most claims but faces ongoing proceedings with public entity plaintiffs.
• Other Wildfire Events: Accrued losses for other events (e.g., Saddle Ridge, Coastal, Fairview fires) are recorded, with trials scheduled for 2026 and 2027.

Regulatory and Credit Risks

• Wildfire Fund: SCE expects reimbursement from the Wildfire Fund for Eaton Fire losses exceeding $1.0 billion. The fund's claims-paying capacity for the Eaton Fire exceeds $21 billion as of September 2025.
• Prudency Review: SCE held a valid safety certification at the time of the Eaton Fire, creating a presumption of prudence. However, the CPUC must still determine prudency in a formal proceeding. If found imprudent, SCE may be required to reimburse the Wildfire Fund up to a Liability Cap of approximately $4.3 billion.
• Credit Ratings: The company notes that continued inaction on wildfire risk mitigation by the state could expose utilities to credit downgrades. As of March 31, 2026, SCE's debt-to-total capitalization ratio was 0.57 to 1, well within its covenant limit of 0.65 to 1.

Investor Verification Checklist

• Eaton Fire Liability Exposure: Verify the status of the ~2,000 pending lawsuits and the outcome of the January 2027 bellwether trial, as the company cannot currently estimate total losses.
• Wildfire Fund Reimbursement: Monitor the CPUC's prudency determination regarding the Eaton Fire, which dictates whether SCE must reimburse the Wildfire Fund and the extent of that reimbursement.
• Rate Recovery Timelines: Track the CPUC's approval of the $2.0 billion securitization financing for the Woolsey Fire and the $650 million revenue requirement adjustment for Eaton Fire self-insurance costs.
• Capital Expenditure Execution: Assess the ability to execute the $37.5–$40.6 billion capital plan (2026–2030) amidst supply chain constraints and rising interest rates.
• Regulatory Asset Realization: Confirm the recoverability of deferred wildfire costs and regulatory assets, particularly those subject to the "prudency" standard under AB 1054 and SB 254.