SCE-PG

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended March 31, 2026, for Edison International (the parent holding company) and its wholly-owned 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 material as a separate segment.

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 earnings. In Q1 2025, SCE recorded $947 million in non-core earnings primarily from the TKM Settlement Agreement and insurance reimbursements. In Q1 2026, non-core items resulted in a $16 million loss.
• Core Earnings Growth: Despite the drop in GAAP net income, Core Earnings increased by $18 million to $546 million. This growth was driven by the adoption of the 2025 General Rate Case (GRC) final decision, which increased authorized revenues.
• Revenue Increase: Operating revenue increased by $294 million year-over-year, primarily due to the 2025 GRC final decision and escalation mechanisms.
• Expense Increases: Interest expense increased by $210 million, largely due to the absence of a $171 million cost recovery benefit recorded in 2025 under the TKM Settlement Agreement. 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 the 2026–2030 period. The company expects to fund cash requirements through operating cash flows, capital market financings, and equity contributions from Edison International.

Wildfire Contingencies and Risks

• 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.
• Wildfire Fund: SCE expects to seek reimbursement from the Wildfire Fund's Initial Account for losses exceeding $1.0 billion. The fund's claims-paying capacity for the Eaton Fire exceeds $21 billion as of September 2025.
• Regulatory Prudency: SCE held a valid safety certification at the time of the Eaton Fire, creating a presumption of prudence. However, if the CPUC finds conduct imprudent, SCE may be required to reimburse the Wildfire Fund up to a Liability Cap of approximately $4.3 billion.
• Other Wildfires: Litigation continues regarding the 2017/2018 Wildfire/Mudslide Events (Thomas, Koenigstein, Woolsey) and Other Wildfire Events (Saddle Ridge, Coastal, Fairview). Accrued liabilities for these events totaled $183 million and $195 million respectively as of March 31, 2026.

Regulatory Proceedings

• Woolsey Settlement Financing: In April 2026, the CPUC issued a proposed decision approving a financing order for approximately $2.0 billion in securitized recovery bonds related to the Woolsey Fire.
• 2024 WMCE Filing: SCE filed to recover incremental wildfire mitigation and storm-related costs; a proposed decision is expected in Q1 2027.

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 review of the Eaton Fire to determine if SCE must reimburse the Wildfire Fund and the extent of that reimbursement.
• Core vs. GAAP Earnings: Analyze the divergence between GAAP net income (down significantly) and Core Earnings (up slightly) to understand the sustainability of earnings absent one-time wildfire settlement gains.
• Capital Expenditure Execution: Track the execution of the $37.5B–$40.6B capital plan against the backdrop of supply chain constraints and inflation.
• Regulatory Approvals: Confirm final CPUC decisions on the Woolsey Settlement financing order and the 2024 WMCE Filing to ensure expected cost recoveries are realized.