SCE-PG

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended June 30, 2025, for Edison International (the parent holding company) and its primary 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. The filing also includes Edison International Parent and Other, which includes the competitive energy subsidiary Trio.

Key Financial Metrics

Revenue and Profit (Six Months Ended June 30, 2025)

Cash Flow and Liquidity (Six Months Ended June 30, 2025)

• Operating Cash Flow: Edison International generated $2,106 million; SCE generated $2,251 million.
• Investing Cash Flow: Edison International used $3,002 million; SCE used $2,999 million, primarily for capital expenditures of $3.1 billion.
• Financing Cash Flow: Edison International generated $991 million; SCE generated $897 million.
• Liquidity: As of June 30, 2025, SCE held $77 million in cash and had approximately $2.9 billion available under its revolving credit facility. Edison International Parent held $63 million in cash with $1.3 billion available under its credit facility.

Debt and Capital Structure

• Debt Issuance: During the six months ended June 30, 2025, SCE issued $3.0 billion in first and refunding mortgage bonds. Edison International Parent issued $550 million in senior notes.
• Debt Ratios: SCE's debt-to-total capitalization ratio was 0.58 to 1. Edison International's consolidated ratio was 0.64 to 1.
• Credit Ratings: As of July 24, 2025, SCE held Baa1 (Moody's), BBB (Fitch), and BBB (S&P) ratings. Edison International Parent held Baa2 (Moody's), BBB (Fitch), and BBB (S&P) ratings.

Material Changes vs. Prior Period

Year-Over-Year Performance (Six Months Ended June 30)

• Net Income Increase: Edison International's net income increased by $1,351 million ($1,779 million vs. $428 million in 2024). This was driven primarily by a $1,422 million increase in SCE's net income.
• Non-Core Items: The increase in net income was largely due to a $1,400 million improvement in non-core items for SCE, specifically related to the TKM Settlement Agreement (Thomas Fire, Koenigstein Fire, Montecito Mudslides). In 2025, SCE recorded cost recoveries of approximately $1.6 billion authorized under this settlement, compared to significant charges in 2024.
• Core Earnings: SCE's core earnings increased slightly by $22 million ($1,094 million vs. $1,072 million), reflecting higher operation and maintenance expenses offset by interest expense benefits from cost recoveries.
• Operating Expenses: Total operating expenses for SCE decreased by $1,869 million year-over-year, primarily due to a $1,969 million decrease in wildfire-related claims (net of recoveries) driven by the TKM settlement recoveries.

Guidance, Outlook, and Risks

Regulatory Proceedings and Rate Cases

• 2025 General Rate Case (GRC): In July 2025, the CPUC issued a proposed decision authorizing a base rate revenue requirement of $9.8 billion for 2025 (an increase of ~$1.2 billion over 2024). The decision also projects revenue requirements of $10.2 billion, $10.6 billion, and $11.0 billion for 2026, 2027, and 2028, respectively. A final decision is pending.
• Cost of Capital: SCE filed an application for a 2026-2028 cost of capital, seeking a Return on Equity (ROE) of 11.75%. The current authorized ROE is 10.33%.

Wildfire Contingencies and Risks

• Eaton Fire (January 2025): A major wildfire in Los Angeles County caused 18 civilian fatalities and destroyed over 6,000 structures. SCE believes it is probable that its equipment was associated with the ignition. While material losses are expected, the company cannot reasonably estimate a range of losses at this time due to ongoing investigations and litigation complexities. Approximately 300 lawsuits representing 4,500 plaintiffs are pending.
• 2017/2018 Wildfire/Mudslide Events: Through June 30, 2025, SCE has recorded estimated losses of $9.9 billion, with $2.0 billion recovered from insurance and $1.8 billion expected to be recovered through rates. The remaining estimated loss for alleged and potential claims is $202 million.
• Other Wildfire Events: Estimated losses for other events (e.g., Saddle Ridge, Bobcat, Silverado, Coastal, Fairview) total $1.2 billion, with $800 million expected insurance recoveries and $130 million expected rate recoveries. Remaining estimated losses are $336 million.
• Wildfire Insurance Fund: SCE has $1.0 billion of customer-funded self-insurance coverage for 2025. Losses exceeding this amount may be reimbursed from the Wildfire Insurance Fund, subject to prudency determinations and fund capacity.

Capital Program

• Total capital expenditures for the six months ended June 30, 2025, were $3.1 billion.
• SCE forecasts total capital expenditures of $26.6 billion to $31.5 billion for the 2025-2028 period.

Investor Verification Checklist

• Eaton Fire Liability: Verify the status of the Los Angeles County Fire Department investigation and the potential magnitude of uninsured losses, as the company currently cannot estimate a loss range.
• TKM Settlement Implementation: Confirm the finalization of the securitization of the $1.6 billion cost recovery authorized under the TKM Settlement Agreement.
• 2025 GRC Final Decision: Monitor the CPUC's final decision on the 2025 General Rate Case, which could materially alter the proposed revenue requirements and capital expenditure authorizations.
• Woolsey Fire Recovery: Track the CPUC proceeding regarding the Woolsey Fire, where SCE is seeking recovery of $5.4 billion in losses but has not yet recorded a regulatory asset due to prudency uncertainties.
• Cost of Capital Application: Review the outcome of SCE's application for a higher ROE (11.75%) for the 2026-2028 period, which could increase revenue requirements by approximately $382 million.
• Wildfire Insurance Fund Solvency: Assess the remaining capacity of the Wildfire Insurance Fund, particularly given recent payouts for other utilities (e.g., PG&E's Kincade and Dixie Fires).