EIX

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended June 30, 2024, 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 Southern, Central, and Coastal California, and Edison Energy (Trio), a global energy advisory firm. The company operates under the regulatory oversight of the California Public Utilities Commission (CPUC) and the Federal Energy Regulatory Commission (FERC).

Key Financial Metrics

Material Changes vs. Prior Period

• Quarterly Earnings: Edison International's net income available to common shareholders increased by $85 million (24%) to $439 million in Q2 2024 compared to Q2 2023. This was driven by a $103 million increase in SCE's net income, partially offset by a higher loss from Edison International Parent and Other.
• Year-to-Date Earnings: Net income decreased by $236 million (36%) to $428 million for the six months ended June 30, 2024. The decline was primarily due to a $309 million increase in non-core wildfire-related charges at SCE, which was partially offset by a $107 million increase in core earnings.
• Revenue Growth: Operating revenue increased by $372 million (9.4%) for the quarter and $485 million (6.1%) for the six months, driven by higher authorized revenue in Track 4 of the General Rate Case (GRC) and increased wildfire mitigation and restoration expenses authorized for recovery.
• Interest Expense: Interest expense rose significantly, increasing by $88 million for the quarter and $171 million for the 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 (updated to $10.5 billion in rebuttal testimony). In July 2024, the CPUC approved the extension of SCE's customer-funded wildfire self-insurance program through the 2025 GRC period.
• Wildfire Cost Recovery: SCE is seeking CPUC rate recovery of approximately $6.9 billion in uninsured claims related to the 2017/2018 Wildfire/Mudslide Events. A $2.4 billion application for the Thomas, Koenigstein, and Montecito events was filed in August 2023. A separate application for the Woolsey Fire is targeted for Q3 2024.

Capital Program

• Total capital expenditures were $2.5 billion for the six months ended June 30, 2024. SCE forecasts total capital expenditures of $32.2 billion to $37.5 billion for 2024–2028.

Key Risks and Contingencies

• Wildfire Liability: As of June 30, 2024, SCE has accrued estimated losses of $9.9 billion for the 2017/2018 Wildfire/Mudslide Events, with $2.0 billion recovered from insurance and $440 million expected from FERC rates. The after-tax net charge to earnings recorded through June 30, 2024, was $5.4 billion. Remaining estimated losses for these events are $598 million.
• Other Wildfires: Accrued estimated losses for "Other Wildfires" (post-2018 and other 2017/2018 fires) were $581 million as of June 30, 2024.
• Regulatory Uncertainty: There is substantial uncertainty regarding the CPUC's application of the prudency standard for cost recovery of uninsured wildfire costs, particularly for fires ignited prior to the adoption of AB 1054 in 2019.
• San Onofre Decommissioning: A probable disallowance of $30 million related to decommissioning costs was recorded in 2023; a settlement was proposed by the CPUC in May 2024.

Investor Verification Checklist

• Wildfire Accruals: Verify the stability of the $598 million remaining estimated loss for 2017/2018 events and the $581 million for Other Wildfires, noting the potential for material losses in excess of accrued amounts.
• Rate Recovery Probability: Assess the likelihood of CPUC approval for the $6.9 billion cost recovery application, given the precedent of the SDG&E 2007 wildfire decision.
• Interest Rate Sensitivity: Monitor the impact of rising interest rates on future interest expense and the cost of capital adjustment mechanism.
• Capital Expenditure Execution: Track progress on the $32.2–$37.5 billion capital program (2024–2028) and potential delays in major transmission projects like the Riverside Transmission Reliability Project.
• Liquidity Position: Confirm availability under the $3.4 billion revolving credit facility and the status of the $1.6 billion securitized bonds issued for AB 1054 excluded capital expenditures.