Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
CommissionFile Number
Exact Name of Registrantas specified in its charter
State or Other Jurisdiction ofIncorporation or Organization
IRS EmployerIdentification Number
1-9936
EDISON INTERNATIONAL
California
95-4137452
1-2313
SOUTHERN CALIFORNIA EDISON COMPANY
95-1240335
2244 Walnut Grove Avenue
(P.O. Box 976)
(P.O. Box 800)
Rosemead, California 91770
(Address of principal executive offices)
(626) 302-2222
(626) 302-1212
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Edison International:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, no par value
EIX
NYSE LLC
Southern California Edison Company: None.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Edison International
Yes ☑ No ☐
Southern California Edison Company
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-12 of the Exchange Act.
Large Accelerated Filer
Accelerated Filer
Non-accelerated Filer
Smaller Reporting Company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
Yes☐ No ☑
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
Common Stock outstanding as of April 25, 2023:
382,983,023 Shares
434,888,104 Shares
TABLE OF CONTENTS
SEC Form 10-Q
Reference Number
GLOSSARY
iii
FORWARD-LOOKING STATEMENTS
1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
4
Part I, Item 2
MANAGEMENT OVERVIEW
Highlights of Operating Results
Customer-funded Self-Insurance
5
Capital Program
Southern California Wildfires and Mudslides
6
RESULTS OF OPERATIONS
7
Three months ended March 31, 2023 versus March 31, 2022
8
Earning Activities
Cost-Recovery Activities
9
Supplemental Operating Revenue Information
Income Taxes
Edison International Parent and Other
Loss from Operations
10
LIQUIDITY AND CAPITAL RESOURCES
Available Liquidity
11
Regulatory Proceedings
Capital Investment Plan
12
Decommissioning of San Onofre
Margin and Collateral Deposits
13
Edison International Income taxes
14
Historical Cash Flows
15
17
Contingencies
18
MARKET RISK EXPOSURES
CRITICAL ACCOUNTING ESTIMATES AND POLICIES
NEW ACCOUNTING GUIDANCE
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
19
Part I, Item 3
i
FINANCIAL STATEMENTS
20
Part I, Item 1
Edison International Consolidated Statements of Income
Edison International Consolidated Statements of Comprehensive Income
21
Edison International Consolidated Balance Sheets
22
Edison International Consolidated Statements of Cash Flows
24
SCE Consolidated Statements of Income
25
SCE Consolidated Statements of Comprehensive Income
SCE Consolidated Balance Sheets
26
SCE Consolidated Statements of Cash Flows
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
29
Note 1. Summary of Significant Accounting Policies
Note 2. Consolidated Statements of Changes in Equity
32
Note 3. Variable Interest Entities
33
Note 4. Fair Value Measurements
35
Note 5. Debt and Credit Agreements
38
Note 6. Derivative Instruments
39
Note 7. Revenue
41
Note 8. Income Taxes
42
Note 9. Compensation and Benefit Plans
43
Note 10. Investments
44
Note 11. Regulatory Assets and Liabilities
45
Note 12. Commitments and Contingencies
46
Note 13. Equity
58
Note 14. Accumulated Other Comprehensive Loss
Note 15. Other Income
59
Note 16. Supplemental Cash Flows Information
Note 17. Related-Party Transactions
CONTROLS AND PROCEDURES
61
Part I, Item 4
Disclosure Controls and Procedures
Changes in Internal Control Over Financial Reporting
Jointly Owned Utility Plant
LEGAL PROCEEDINGS
62
Part II, Item 1
2017/2018 Wildfire/Mudslide Events
Environmental Proceedings
EXHIBITS
63
Part II, Item 6
SIGNATURES
64
This combined Form 10-Q is separately filed by Edison International and SCE. Information contained in this document relating to SCE is filed by Edison International and separately by SCE. SCE makes no representation as to information relating to Edison International or its subsidiaries, except as it may relate to SCE and its subsidiaries.
ii
The following terms and abbreviations appearing in the text of this report have the meanings indicated below.
the Thomas Fire, the Koenigstein Fire, the Montecito Mudslides and the Woolsey Fire, collectively
2022 Form 10-K
Edison International's and SCE's combined Annual Report on Form 10-K for the year ended December 31, 2022
2022 MD&A
Edison International's and SCE's MD&A for the calendar year 2022, which was included in the 2022 Form 10‑K
AB 1054
California Assembly Bill 1054, executed by the governor of California on July 12, 2019
AB 1054 Excluded Capital Expenditures
$1.6 billion in wildfire risk mitigation capital expenditures that SCE has excluded from the equity portion of SCE's rate base as required under AB 1054
AB 1054 Liability Cap
a cap on the aggregate requirement to reimburse the Wildfire Insurance Fund over a trailing three calendar year period which applies if certain conditions are met and is equal to 20% of the equity portion of the utility's transmission and distribution rate base, excluding general plant and intangibles, in the year of the applicable prudency determination
ARO(s)
asset retirement obligation(s)
BRRBA
Base Revenue Requirement Balancing Account
CAISO
California Independent System Operator
Capital Structure Compliance Period
January 1, 2023 to December 31, 2025, the current compliance period for SCE's CPUC authorized capital structure
CAPP
California Arrearage Payment Program
CCAs
community choice aggregators which are cities, counties, and certain other public agencies with the authority to generate and/or purchase electricity for their local residents and businesses
CDP
Coastal Development Permit
CEMA
Catastrophic Event Memorandum Account
COVID-19
Coronavirus disease 2019
CPUC
California Public Utilities Commission
CSRP
Customer Service Re-platform, a SCE project to implement a new customer service system
Edison Energy
Edison Energy, LLC, an indirect wholly-owned subsidiary of Edison International engaged in the competitive business of providing integrated decarbonization and energy solutions to commercial, institutional and industrial customers in North America and Europe
Edison International Proxy Statement
Proxy Statement filed with the SEC in connection with Edison International's Annual Meeting of Shareholders' held on April 27, 2023
EIS
Edison Insurance Services, Inc., a wholly-owned subsidiary of Edison International licensed to provide insurance to Edison International and its subsidiaries
Electric Service Provider
an entity that provides electric power and ancillary services to retail customers, other than utilities (investor-owned utilities and CCAs)
ERRA
Energy Resource Recovery Account
Fast curve settings
protective settings, used to mitigate the risk of wildfires, that enable quicker relays than under traditional settings
FERC
Federal Energy Regulatory Commission
Fitch
Fitch Ratings, Inc.
GAAP
generally accepted accounting principles in the United States
GHG
greenhouse gas
GRC
general rate case
IRA
Inflation Reduction Act of 2022
Koenigstein Fire
a wind-driven fire that originated near Koenigstein Road in the City of Santa Paula in Ventura County, California, on December 4, 2017
MD&A
Management's Discussion and Analysis of Financial Condition and Results of Operations
Montecito Mudslides
the debris flows and flooding in Montecito, Santa Barbara County, California, that occurred in January 2018
Moody's
Moody's Investors Service, Inc.
MW
megawatts
NDCTP
Nuclear Decommissioning Cost Triennial Proceeding, a CPUC proceeding to review decommissioning costs
NERC
North American Electric Reliability Corporation
NRC
United States Nuclear Regulatory Commission
NSGBA
New System Generation Balancing Account
OEIS
Office of Energy Infrastructure Safety of the California Natural Resources Agency
PABA
Portfolio Allocation Balancing Account
Palo Verde
nuclear electric generating facility located near Phoenix, Arizona in which SCE holds a 15.8% ownership interest
PBOP(s)
postretirement benefits other than pension(s)
PG&E
Pacific Gas & Electric Company
Post-2018 Wildfires
Collectively, all the wildfires that originated in Southern California after 2018 where SCE's equipment may be alleged to be associated with the fire's ignition
PSPS
Public Safety Power Shutoff(s)
ROE
return on common equity
S&P
Standard & Poor's Financial Services LLC
San Onofre
retired nuclear generating facility located in south San Clemente, California in which SCE holds a 78.21% ownership interest
SCE
Southern California Edison Company, a wholly-owned subsidiary of Edison International
SCE Recovery Funding LLC
a bankruptcy remote, wholly owned special purpose subsidiary, consolidated by SCE
SDG&E
San Diego Gas & Electric
SEC
U.S. Securities and Exchange Commission
SED
Safety and Enforcement Division of the CPUC
SED Agreement
an agreement dated October 21, 2021 between SCE and the SED regarding the 2017/2018 Wildfire/Mudslide Events and three other 2017 wildfires
Thomas Fire
a wind-driven fire that originated in the Anlauf Canyon area of Ventura County, California, on December 4, 2017
TKM
collectively, the Thomas Fire, the Koenigstein Fire and the Montecito Mudslides
TKM Subrogation Plaintiffs
the plaintiffs party to the TKM Subrogation Settlement, representing all the insurance subrogation plaintiffs in the TKM litigation at the time of the settlement
TKM Subrogation Settlement
a settlement entered into by Edison International and SCE in September 2020 in the TKM litigation to which the TKM Subrogation Plaintiffs are party
WEMA
Wildfire Expense Memorandum Account
WMP
a wildfire mitigation plan required to be filed under AB 1054 to describe a utility's plans to construct, operate, and maintain electrical lines and equipment that will help minimize the risk of catastrophic wildfires caused by such electrical lines and equipment
Wildfire Insurance Fund
the insurance fund established under AB 1054
Woolsey Fire
a wind-driven fire that originated in Ventura County in November 2018
Woolsey Subrogation Plaintiffs
the plaintiffs party to the Woolsey Subrogation Settlement, representing all the insurance subrogation plaintiffs in the Woolsey Fire litigation at the time of the settlement
Woolsey Subrogation Settlement
a settlement entered into by Edison International and SCE in January 2021 in the Woolsey litigation to which the Woolsey Subrogation Plaintiffs are party
iv
This quarterly report on Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect Edison International's and SCE's current expectations and projections about future events based on Edison International's and SCE's knowledge of present facts and circumstances and assumptions about future events and include any statements that do not directly relate to a historical or current fact. Other information distributed by Edison International and SCE that is incorporated in this report, or that refers to or incorporates this report, may also contain forward-looking statements. In this report and elsewhere, the words "expects," "believes," "anticipates," "estimates," "projects," "intends," "plans," "probable," "may," "will," "could," "would," "should," and variations of such words and similar expressions, or discussions of strategy or plans, are intended to identify forward-looking statements. Such statements necessarily involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Some of the risks, uncertainties and other important factors that could cause results to differ from those currently expected, or that otherwise could impact Edison International and SCE, include, but are not limited to the:
2
Additional information about risks and uncertainties, including more detail about the factors described in this report, is contained throughout this report and in the 2022 Form 10-K, including the "Risk Factors" section. Readers are urged to read this entire report, including information incorporated by reference, as well as the 2022 Form 10-K, and carefully consider the risks, uncertainties, and other factors that affect Edison International's and SCE's businesses. Forward-looking statements speak only as of the date they are made and neither Edison International nor SCE are obligated to publicly update or revise forward-looking statements. Readers should review future reports filed by Edison International and SCE with the SEC. Edison International and SCE post or provide direct links to (i) certain SCE and other parties' regulatory filings and documents with the CPUC and the FERC and certain agency rulings and notices in open proceedings in a section titled "SCE Regulatory Highlights," (ii) certain documents and information related to Southern California wildfires which may be of interest to investors in a section titled "Southern California Wildfires," and (iii) presentations, documents and information that may be of interest to investors in a section titled "Presentations and Updates" at www.edisoninvestor.com in order to publicly disseminate such information. The reports, presentations, documents and information contained on, or connected to, the Edison investor website are not deemed part of, and are not incorporated by reference into, this report.
The MD&A for the three months ended March 31, 2023 discusses material changes in the consolidated financial condition, results of operations and other developments of Edison International and SCE since December 31, 2022 and as compared to the three months ended March 31, 2022. This discussion presumes that the reader has read or has access to the 2022 MD&A.
Except when otherwise stated, references to each of Edison International or SCE mean each such company with its subsidiaries on a consolidated basis. References to "Edison International Parent and Other" mean Edison International Parent and its subsidiaries other than SCE and its subsidiaries and "Edison International Parent" mean Edison International on a stand-alone basis, not consolidated with its subsidiaries. Unless otherwise described, all the information contained in this report relates to both filers.
3
Edison International is the ultimate parent holding company of SCE and Edison Energy. SCE is an investor-owned public utility primarily engaged in the business of supplying and delivering electricity to an approximately 50,000 square mile area of southern California. Edison Energy is engaged in the competitive business of providing integrated decarbonization and energy solutions to commercial, institutional and industrial customers in North America and Europe. Edison Energy's business activities are currently not material to report as a separate business segment.
Edison International's earnings are prepared in accordance with GAAP. Management uses core earnings (losses) internally for financial planning and for analysis of performance. Core earnings (losses) are also used when communicating with investors and analysts regarding Edison International's earnings results to facilitate comparisons of the company's performance from period to period. Core earnings (losses) are a non-GAAP financial measure and may not be comparable to those of other companies. Core earnings (losses) are defined as earnings attributable to Edison International shareholders less non-core items. Non-core items include income or loss from discontinued operations and income or loss from significant discrete items that management does not consider representative of ongoing earnings, such as write downs, asset impairments and other income and expense related to changes in law, outcomes in tax, regulatory or legal proceedings, and exit activities, including sale of certain assets and other activities that are no longer continuing.
Three months ended
March 31,
(in millions)
2023
2022
Change
Net income (loss) attributable to Edison International
$
370
147
223
(60)
(63)
310
84
226
Less: Non-core items
2017/2018 Wildfire/Mudslide Events claims and expenses, net of recoveries
(90)
(396)
306
Wildfire Insurance Fund expense
(52)
(53)
2021 NDCTP estimated loss
(30)
—
Income tax benefits1
48
126
(78)
Customer revenues for EIS insurance contract
Income tax expense1
(4)
Total non-core items
(106)
(323)
217
Core earnings (losses)
494
470
(15)
416
407
Edison International's first quarter 2023 earnings increased $226 million from the first quarter 2022, resulting from an increase in SCE's earnings of $223 million and a decrease in Edison International Parent and Other's losses of $3 million. SCE's higher net earnings consisted of $199 million of lower non-core losses and $24 million of higher core earnings. Edison
International Parent and Other's lower losses consisted of $18 million of higher non-core earnings and $15 million of higher core losses.
The increase in SCE's core earnings for the three months ended March 31, 2023 from the same period in 2022 was primarily due to revenue from the escalation mechanism set forth in the 2021 GRC final decision, partially offset by higher net interest expense.
The increase in Edison International Parent and Other's core losses for the three months ended March 31, 2023 was primarily due to higher interest expense.
Consolidated non-core items for the three months ended March 31, 2023 and 2022 primarily included:
See "Results of Operations" for discussion of SCE's and Edison International Parent and Other's results of operations.
In April 2023, the CPUC issued a proposed decision which, if adopted, would approve a joint petition for modification of the 2021 GRC decision filed by SCE, The Utility Reform Network and the Public Advocates Office. If approved by the CPUC, the petition would allow SCE to expand its use of self-insurance. The self-insurance program would be funded through CPUC-jurisdictional rates with $150 million collected for the second half of 2023 and, in the absence of wildfire-related claims, $300 million collected for 2024. These modifications would result in a reduction to current revenue requirements of $80 million in 2023 and, subject to adjustment, $160 million in 2024. If losses are accrued for wildfire-related claims, the petition for modification contains an adjustment mechanism which would increase rates in subsequent years to allow for recovery of the amounts accrued, subject to a shareholder contribution of 2.5% of any self-insurance costs ultimately paid exceeding $500 million in any year, up to a maximum annual contribution of $12.5 million.
Total capital expenditures (including accruals) were $1.3 billion for both the first three months ended March 31, 2023 and 2022. SCE expects to file its 2025 GRC application with the CPUC in May 2023 including its capital expenditure requests for the years 2025 to 2028. For further information regarding the capital program, see "Liquidity and Capital Resources—SCE—Capital Investment Plan" and "Management Overview—Capital Program" in the 2022 MD&A.
As discussed in the 2022 Form 10-K, multiple lawsuits and investigations related to the 2017/2018 Wildfire/Mudslide Events have been initiated against SCE and Edison International. SCE has previously settled claims under the Local Public Entity Settlement, the TKM Subrogation Settlement, the Woolsey Subrogation Settlement and the SED Agreement. In addition, SCE has also entered into settlements with approximately 10,000 individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation as of March 31, 2023.
Each reporting period, management reviews its loss estimates for remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events. As a result of management's first quarter 2023 review, a $90 million increase in estimated losses for the 2017/2018 Wildfire/Mudslide Events as of March 31, 2023 was recorded. As a result, SCE recorded expected recoveries through FERC electric rates of $6 million against the charge. The resulting net charge to earnings was $84 million ($61 million after-tax).
Estimated losses for the 2017/2018 Wildfire/Mudslide Events litigation are based on a number of assumptions and are subject to change as additional information becomes available. Actual losses incurred may be higher or lower than estimated based on several factors, including the uncertainty in estimating damages that have been or may be alleged. For instance, SCE will receive additional information with respect to damages claimed as the claims mediation processes progress. Other factors that can cause actual losses incurred to be higher or lower than estimated include the ability to reach settlements and the outcomes of settlements reached through the ongoing claims mediation processes, uncertainties related to the sufficiency of insurance held by plaintiffs, uncertainties related to the litigation processes, including whether plaintiffs will ultimately pursue claims, uncertainty as to the legal and factual determinations to be made during litigation, including uncertainty as to the contributing causes of the 2017/2018 Wildfire/Mudslide Events, the complexities associated with fires that merge and whether inverse condemnation will be held applicable to SCE with respect to damages caused by the Montecito Mudslides, and the uncertainty as to how these factors impact future settlements.
Through March 31, 2023, SCE has accrued estimated losses of $8.8 billion, expected recoveries from insurance of $2.0 billion and expected recoveries through FERC electric rates of $382 million related to the 2017/2018 Wildfire/Mudslide Events. The after-tax net charges to earnings recorded through March 31, 2023 have been $4.7 billion.
As of March 31, 2023, SCE had paid $7.8 billion under executed settlements and had $135 million to be paid under executed settlements, including $120 million to be paid under the SED Agreement, related to the 2017/2018 Wildfire/Mudslide Events. As of the same date, SCE had recovered $2.0 billion through insurance and approximately $319 million through FERC-jurisdictional electric rates.
After giving effect to all payment obligations under settlements entered into through March 31, 2023, including under the SED Agreement, Edison International's and SCE's best estimate of expected losses for remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events was $988 million. As of the same date, SCE had assets for expected recoveries through FERC electric rates of $63 million on its consolidated balance sheets and had exhausted expected insurance recoveries related to the 2017/2018 Wildfire/Mudslide Events. Edison International and SCE may incur a material loss in excess of amounts accrued in connection with the remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events.
SCE will seek CPUC-jurisdictional rate recovery of prudently-incurred losses and related costs realized in connection with the 2017/2018 Wildfire/Mudslide Events in excess of available insurance and FERC-jurisdictional recoveries, other than for any obligations under the SED Agreement. Based on Edison International's and SCE's current best estimate of expected losses for the 2017/2018 Wildfire/Mudslide Events, SCE currently expects to seek CPUC-jurisdictional rate recovery of approximately $6 billion by filing several future applications with the CPUC. SCE targets the third quarter of 2023 for the first of such cost recovery applications, and expects to request recovery of approximately $2 billion in that filing
related to TKM. SCE's plans with respect to these filings may be delayed or modified. For example, the filings may be delayed if proceedings related to the 2017/2018 Wildfire/Mudslide Events do not progress as anticipated. SCE believes that, in light of the CPUC's decision in a cost recovery proceeding involving SDG&E arising from several 2007 wildfires in SDG&E's service area, there is substantial uncertainty regarding how the CPUC will interpret and apply its prudency standard to an investor-owned utility in wildfire cost-recovery proceedings for fires ignited prior to the adoption of AB 1054 on July 12, 2019. Accordingly, while the CPUC has not made a determination regarding SCE's prudency relative to any of the 2017/2018 Wildfire/Mudslide Events, SCE is unable to conclude, at this time, that uninsured CPUC-jurisdictional wildfire-related costs related to the 2017/2018 Wildfire/Mudslide Events are probable of recovery through electric rates.
For further information on Southern California Wildfires and Mudslides, see "Risk Factors," "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—Initial and annual contributions to the wildfire insurance fund established pursuant to California Assembly Bill 1054," "Business—Southern California Wildfires" in the 2022 Form 10-K and "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides" in this report.
SCE's results of operations are derived mainly through two sources:
The following table is a summary of SCE's results of operations for the periods indicated.
Three months ended March 31, 2023
Three months ended March 31, 2022
Cost-
Earning
Recovery
Total
Activities
Consolidated
Operating revenue
2,233
1,717
3,950
2,267
1,694
3,961
Purchased power and fuel
1,318
1,037
Operation and maintenance
670
411
1,081
790
676
1,466
Wildfire-related claims, net of insurance recoveries
96
425
52
53
Depreciation and amortization
649
656
579
583
Property and other taxes
137
139
116
124
Other operating income
(2)
Total operating expenses
1,604
1,738
3,342
1,961
1,725
3,686
Operating income (loss)
629
(21)
608
(31)
275
Interest expense
(295)
(5)
(300)
(210)
(3)
(213)
Other income
94
120
37
34
71
Income before income taxes
428
133
Income tax expense (benefit)
(40)
Net income
399
173
Less: Preference stock dividend requirements
Net income available for common stock
Earning activities were primarily affected by the following:
Operating revenue and the corresponding operating expenses in cost-recovery activities were primarily affected by the following:
As a result of the CPUC-authorized decoupling mechanism, SCE revenues are not affected by changes in retail electricity sales.
The increase in income tax expense of $69 million for the three months ended March 31, 2023 compared to the same period in 2022 was primarily driven by the increase in pre-tax income. The effective tax rates were 6.8% and (30.1)% for the three months ended March 31, 2023 and 2022, respectively. SCE’s effective tax rate is below the federal statutory rate of 21% for 2023 and 2022 primarily due to the CPUC’s ratemaking treatment for the current tax benefit arising from certain property-related and other temporary differences, which reverse over time. The accounting treatment for these temporary differences results in recording regulatory assets and liabilities for amounts that would otherwise be recorded to deferred tax expense.
See "Notes to Consolidated Financial Statements—Note 8. Income Taxes" for a reconciliation of the federal statutory rate to the effective income tax rates.
Results of operations for Edison International Parent and Other include amounts from other subsidiaries that are not reportable as segments, as well as intercompany eliminations.
The following table summarizes the results of Edison International Parent and Other:
Three months ended March 31,
Edison Energy Group and subsidiaries
Corporate expenses and other subsidiaries
(32)
Edison International Parent and Other net loss
(34)
(37)
Preferred stock dividend requirement
Edison International Parent and Other net loss attributable to common stock
The net loss attributable to common stock from operations of Edison International Parent and Other decreased $3 million for the three months ended March 31, 2023 compared to the same period in 2022, primarily due to higher interest expense, partially offset by earnings of $22 million ($18 million after-tax) recorded in 2023 related to customer revenues for an EIS insurance contract. See "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies" and "Notes to Consolidated Financial Statements—Note 17. Related Party Transactions.
SCE's ability to operate its business, fund capital expenditures, and implement its business strategy is dependent upon its cash flows and access to the bank and capital markets. SCE's overall cash flows fluctuate based on, among other things, its ability to recover its costs in a timely manner from its customers through regulated rates, changes in commodity prices and volumes, collateral requirements, interest obligations, dividend payments to and equity contributions from Edison International, obligations to preference shareholders, and the outcome of tax, regulatory and legal matters.
In the next 12 months, SCE expects to fund its cash requirements through operating cash flows, capital market and bank financings and equity contributions from Edison International Parent, as needed. SCE also has availability under its credit facility to fund cash requirements. SCE expects to issue bonds to finance or refinance eligible sustainable projects. For further information about eligible sustainable projects, see "Liquidity and Capital Resources—SCE" in the 2022 MD&A. SCE also expects to issue additional debt for general corporate purposes and to finance payments for future resolutions of claims related to the 2017/2018 Wildfire/Mudslide Events.
SCE has invested all $1.6 billion of the required AB 1054 Excluded Capital Expenditures. SCE issued securitized bonds in the amounts of $338 million, $533 million and $775 million in February 2021, February 2022 and April 2023, respectively, to finance these expenditures and related financing costs. SCE used the proceeds of the April 2023 securitized bonds to repay a term loan of $730 million prior to its maturity in May 2023.
In the first quarter of 2023, Moody's upgraded SCE's credit rating from Baa2 to Baa1 and revised SCE's rating outlook from positive to stable. In April 2023, Fitch upgraded SCE's credit rating from BBB- to BBB and revised SCE's rating outlook from positive to stable. The following tables summarizes SCE’s current long-term issuer credit ratings and outlook from the major credit rating agencies:
Credit Rating
Baa1
BBB
Outlook
Stable
SCE's credit ratings may be affected if, among other things, regulators fail to successfully implement AB 1054 in a consistent and credit supportive manner or the Wildfire Insurance Fund is depleted by claims from catastrophic wildfires. Credit rating downgrades increase the cost and may impact the availability of short-term and long-term borrowings, including commercial paper, credit facilities, bond financings or other borrowings. In addition, some of SCE's power procurement contracts would
require SCE to pay related liabilities or post additional collateral if SCE's credit rating were to fall below investment grade. For further details, see "—Margin and Collateral Deposits."
The cost of capital adjustment mechanism set by the CPUC could impact SCE's results of operations and cash flows. The cost of capital adjustment mechanism's benchmark beginning January 1, 2023, is the 12-month, October 1, 2021 through September 30, 2022, average Moody's Baa utility bond yield of 4.37%. If the difference between the benchmark and the average of the same index for the 12-month period from October 1, 2022 to September 30, 2023 exceeds 100-basis points, SCE's CPUC-authorized ROE will be adjusted for 2024 by half the amount of the difference (up or down). The average Moody's Baa utility bond yield between October 1, 2022 and April 25, 2023 was 5.72%. The spot rate for Moody's Baa utility bond was 5.42% on April 25, 2023. An average Moody's Baa utility bond yield of 4.94% or higher from April 26, 2023 through September 30, 2023 would trigger the mechanism to adjust upward. For further information see "Business—SCE— Overview of Ratemaking Process" in the 2022 Form 10-K.
At March 31, 2023, SCE had cash on hand of $690 million and approximately $2.5 billion available to borrow on its $3.4 billion revolving credit facility. The credit facility is available for borrowing needs until May 2026 and the aggregate maximum principal amount may be increased up to $4.0 billion, provided that additional lender commitments are obtained. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."
SCE may finance balancing account undercollections and working capital requirements to support operations and capital expenditures with commercial paper, its credit facilities or other borrowings, subject to availability in the bank and capital markets. As necessary, SCE will utilize its available liquidity, capital market financings, other borrowings or parent company contributions to SCE equity in order to meet its obligations as they become due, including costs related to the 2017/2018 Wildfire/Mudslide Events. For further information, see "Management Overview—Southern California Wildfires and Mudslides."
Debt Covenant
SCE's credit facilities and term loan require a debt to total capitalization ratio as defined in the applicable agreements of less than or equal to 0.65 to 1. At March 31, 2023, SCE's debt to total capitalization ratio was 0.57 to 1.
At March 31, 2023, SCE was in compliance with all financial covenants that affect access to capital.
Wildfire Related Regulatory Proceedings
In response to the increase in wildfire activity, and faster progression of and increased damage from wildfires across SCE's service territory and throughout California, SCE has incurred wildfire mitigation, wildfire insurance and wildfire and drought restoration related spending at levels significantly exceeding amounts authorized in SCE's GRCs.
SCE tracks insurance premium costs related to wildfire liability insurance policies as well as other wildfire-related costs in its WEMA. In December 2020, SCE filed a WEMA application with the CPUC to seek recovery of $215 million of costs recorded in WEMA at December 31, 2020. The costs are primarily related to incremental wildfire insurance premium expenses and associated costs for wildfire liability insurance policies that provide coverage for the last six months of 2020. In March 2023, the CPUC issued a proposed decision which, if approved, would authorize recovery of $207 million. The amount not approved in this decision relates to wildfire liability insurance coverage previously allocated to San Onofre, which SCE expects to be eligible for recovery from the nuclear decommissioning trusts or from SCE customers in a future cost recovery proceeding.
In March 2023, the CPUC approved SCE's second CSRP application to recover approximately $59 million of capital expenditures and $28 million of operation and maintenance expenses incurred from May 2021 to December 2021, resulting in a revenue requirement of $65 million. The decision also approved SCE seeking review and cost recovery of additional post-implementation CSRP costs incurred from January 2022 through December 2024 in its 2025 GRC filing.
ERRA Proceeding
In January 2023, as a result of undercollection in ERRA and PABA at the end of 2022 due to higher gas and power prices, SCE filed an expedited ERRA trigger application with the CPUC. In April 2023, the CPUC approved SCE to recover a revenue requirement of up to $596 million over 12 months beginning June 1, 2023. The decision also granted SCE authority to decline to place some or all of the increase into rates if its forecast reasonably demonstrates that it will not need some or all of the increase in order to bring its ERRA trigger balance within the prescribed threshold. See "Business—SCE—Overview of Ratemaking Process" in 2022 10-K for further information of ERRA trigger mechanism.
Major Transmission and Utility Owned Storage Projects
Eldorado-Lugo-Mohave Upgrade Project
The total costs for the Eldorado-Lugo-Mohave Upgrade Project are expected to exceed amounts currently approved in the certificate of public convenience and necessity granted by the CPUC due to delays in regulatory approvals, contractor performance issues, COVID-19 and the availability of CAISO outage windows. Additional work may also be required to mitigate the impact of the project on nearby gas lines. SCE expects to request CPUC approval for the additional expenditures and expects the project to be in service in 2023. See "Liquidity—SCE—Capital Investment Plan" in 2022 10-K for further information.
Utility Owned Storage
As discussed in the 2022 Form 10-K, in October 2021, SCE contracted with Ameresco, Inc. ("Ameresco") for the construction of utility owned energy storage projects at three sites in SCE's service territory with an aggregate capacity of 537.5 MW.
In April 2023, Ameresco discovered damage to some of the equipment at one of the projects which makes up 225 MW of the 537.5 MW aggregate capacity. SCE has received a notice of potential force majeure event from Ameresco noting that Ameresco is performing further analyses on the cause of the damage and asserting that rainstorms at the project site may have caused or contributed to the damage. SCE believes that there is significant risk that this project will not be in-service to meet summer peak reliability needs.
Ameresco has advised SCE that it currently expects the other two projects to be in-service prior to August 2023.
As discussed in the 2022 Form 10-K, in February 2022, SCE filed its application in the 2021 NDCTP with the CPUC requesting reasonableness review of approximately $570 million (SCE share in 2022 dollars) of recorded San Onofre Units 2 and 3 decommissioning costs incurred during the period 2018 to 2020. Intervenors in the proceeding have recommended approximately $115 million (SCE share in 2022 dollars) in disallowances for San Onofre Units 2 and 3 decommissioning costs. This amount includes a recommended disallowance of approximately $45 million in costs associated with an August 2018 incident that occurred when an SCE contractor was loading a spent nuclear fuel canister into an ISFSI resulting in fuel transfer operations being suspended for approximately one year. The remainder of the recommended disallowance amount is
primarily for contractor staffing costs incurred during a delay in issuance of the CDP to allow for decommissioning. In the first quarter of 2023, SCE accrued $30 million in estimated losses relating to the 2021 NDCTP.
Certain derivative instruments, power and energy procurement contracts and other contractual arrangements contain collateral requirements. In addition, certain environmental remediation obligations require financial assurance that may be in the form of collateral postings. Future collateral requirements may differ from the requirements at March 31, 2023, due to the addition of incremental power and energy procurement contracts with collateral requirements, if any, the impact of changes in wholesale power and natural gas prices on SCE's contractual obligations, and the impact of SCE's credit ratings falling below investment grade.
The table below provides the amount of collateral posted by SCE to its counterparties as well as the potential collateral that would have been required as of March 31, 2023, if SCE's credit rating had been downgraded to below investment grade as of that date. The table below also provides the potential collateral that could be required due to adverse changes in wholesale power and natural gas prices over the remaining lives of existing power and fuel derivative contracts.
In addition to amounts shown in the table, power and fuel contract counterparties may also institute new collateral requirements, applicable to future transactions to allow SCE to continue trading in power and fuel contracts at the time of a downgrade or upon significant increases in market prices. Furthermore, SCE may also be required to post up to $50 million in collateral in connection with its environmental remediation obligations, within 120 days of the end of the fiscal year in which the downgrade occurs.
Collateral posted as of March 31, 20231
356
Incremental collateral requirements for purchased power and fuel contracts resulting from a potential downgrade of SCE's credit rating to below investment grade2
Incremental collateral requirements for SCE's financial hedging activities resulting from adverse market price movement3
Posted and potential collateral requirements
486
Net collateral provided to counterparties and other brokers consisted of $261 million in letters of credit and surety bonds and $95 million of cash collateral.
Represents potential collateral requirements for accounts payable and mark-to-market valuation at March 31, 2023. Requirement varies throughout the period and is generally lower at the end of the month.
Incremental collateral requirements were based on potential changes in SCE's forward positions as of March 31, 2023 due to adverse market price movements over the remaining lives of the existing power and fuel derivative contracts using a 95% confidence level.
In the next 12 months, Edison International expects to fund its net cash requirements through cash on hand, dividends from SCE, and capital market and bank financings. Edison International may finance its ongoing cash requirements, including dividends, working capital requirements, payment of obligations, and capital investments, including capital contributions to subsidiaries, with short-term or other financings, subject to availability in the bank and capital markets.
At March 31, 2023, Edison International Parent and Other had cash on hand of $146 million and $878 million available to borrow on its $1.5 billion revolving credit facility. The credit facility is available for borrowing needs until May 2026 and the aggregate maximum principal amount may be increased up to $2.0 billion, provided that additional lender commitments are obtained. For further information, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."
In March 2023, Edison International Parent issued $500 million of junior subordinated notes, due in 2053, which provide approximately $250 million of equity content as viewed by rating agencies. Edison International expects to raise any additional equity this year through its internal programs, which are estimated to generate approximately $100 million. The total expected equity content is consistent with the $300 million to $400 million of equity content identified in Edison International's 2023 financing plan.
Edison International Parent and Other's liquidity and its ability to pay operating expenses and pay dividends to preferred and common shareholders are dependent on access to the bank and capital markets, dividends from SCE, realization of tax benefits and its ability to meet California law requirements for the declaration of dividends. Prior to declaring dividends, Edison International's Board of Directors evaluates available information to ensure that the California law requirements for the declarations are met. For information on the California law requirements on the declaration of dividends, see "Liquidity and Capital Resources—SCE—SCE Dividends" in the 2022 Form 10-K. Edison International intends to maintain its target payout ratio of 45% – 55% of SCE's core earnings, subject to the factors identified above.
Edison International's ability to declare and pay common dividends may be restricted under the terms of its Series A and Series B Preferred Stock. For further information, see "Notes to Consolidated Financial Statements—Note 14. Equity" in the 2022 Form 10-K.
Edison International Parent's credit facility requires a consolidated debt to total capitalization ratio as defined in the applicable agreements of less than or equal to 0.70 to 1. At March 31, 2023, Edison International's consolidated debt to total capitalization ratio was 0.64 to 1.
At March 31, 2023, Edison International Parent was in compliance with all financial covenants that affect access to capital.
In the first quarter of 2023, Moody's upgraded Edison International's credit rating from Baa3 to Baa2 and revised Edison International's rating outlook from positive to stable. In April 2023, Fitch upgraded Edison International's credit rating from BBB- to BBB and revised Edison International's rating outlook from positive to stable The following table summarizes Edison International Parent's current long-term issuer credit ratings and outlook from the major credit rating agencies:
Baa2
Edison International Parent's credit ratings may be affected if, among other things, regulators fail to successfully implement AB 1054 in a consistent and credit supportive manner or the Wildfire Insurance Fund is depleted by claims from catastrophic wildfires. Credit rating downgrades increase the cost and may impact the availability of short-term and long-term borrowings, including commercial paper, credit facilities, note financings or other borrowings.
Edison International Income Taxes
On August 16, 2022, the IRA was signed into law. The law imposes a 15% corporate alternative minimum tax ("CAMT") on adjusted financial statement income ("AFSI") of corporations with average AFSI exceeding $1 billion over a specified 3-year period. The CAMT was effective beginning January 1, 2023. Based on the current interpretation of the law and historical financial data, Edison International estimates that it will exceed the $1 billion threshold and be subject to CAMT on its consolidated Federal tax returns beginning in 2025. SCE expects to be subject to CAMT on its stand-alone Federal return beginning in 2024.
The law also includes significant extensions, expansions, and enhancements of numerous energy-related investment tax credits, as well as creating new credits applicable to electricity production which may apply to SCE's capital expenditures.
Under the IRA, SCE expects to generate investment tax credits related to its utility owned storage projects, which will accrue to the benefit of its customers.
Net cash (used in) provided by operating activities
(20)
827
Net cash provided by financing activities
1,249
171
Net cash used in investing activities
(1,305)
(1,159)
Net decrease in cash and cash equivalents
(76)
(161)
Net Cash (Used in) Provided by Operating Activities
The following table summarizes major categories of net cash for operating activities as provided in more detail in SCE's consolidated statements of cash flows for the three months ended March 31, 2023 and 2022.
Change in cash flows
2023/2022
Non-cash items1
719
611
Subtotal
1,118
784
334
Changes in cash flow resulting from working capital2
(725)
78
(803)
Regulatory assets and liabilities
(296)
259
(555)
Wildfire related claims3
(133)
(196)
Other noncurrent assets and liabilities4
16
(98)
114
(847)
Net cash (used in) provided by operating activities was impacted by the following:
Net income and non-cash items increased in 2023 by $334 million primarily due to revenue from escalation mechanism set forth in the 2021 GRC final decision, partially offset by higher net interest expense.
Net changes in cash resulting from working capital was an outflow of $725 million and an inflow of $78 million during the three months ended March 31, 2023 and 2022, respectively. Net cash outflow for 2023 was primarily due to decreases in payables of $695 million mainly from payments of power purchase contracts driven by a decrease in gas prices from December 2022, and $171 million cash outflow for margin and collateral deposits due to the decrease in the market value of power and gas derivatives, partially offset by inflow from net decreases in customer receivables and unbilled revenue of $113 million. Net cash inflow for 2022 was primarily due to a net decrease in customer receivables and unbilled revenue of
$161 million (mainly due to $185 million of CAPP funds received in January 2022), and a net decrease in prepaid insurance of $88 million, partially offset by a decrease in payables of $166 million.
Net cash (used in) provided by regulatory assets and liabilities, including changes in net undercollections recorded in balancing accounts, was $(296) million and $259 million during the three months ended March 31, 2023 and 2022, respectively. SCE has a number of balancing and memorandum accounts, which impact cash flows based on differences between timing of collection of amounts through rates and accrual expenditures. Cash flows were primarily impacted by the following:
Net Cash Provided by Financing Activities
The following table summarizes cash provided by financing activities for the three months ended March 31, 2023 and 2022. Issuances of debt are discussed in "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."
Issuances of long-term debt, including premium/discount and net of issuance costs
1,186
1,713
Long-term debt repaid
(1)
(365)
Short-term debt repaid
(518)
Commercial paper borrowing (repayment), net
431
(306)
Payment of common stock dividends to Edison International
(350)
(325)
Payment of preference stock dividends
(29)
Other
Net Cash Used in Investing Activities
Cash flows used in investing activities are primarily due to total capital expenditures of $1.3 billion and $1.2 billion for the three months ended March 31, 2023 and 2022, respectively. In addition, SCE had a net redemption of nuclear decommissioning trust investments of $19 million and $34 million during the three months ended March 31, 2023 and 2022, respectively. See "Nuclear Decommissioning Activities" below for further discussion.
Nuclear Decommissioning Activities
SCE's consolidated statements of cash flows include nuclear decommissioning activities, which are reflected in the following line items:
Net cash used in operating activities:
Net earnings from nuclear decommissioning trust investments
SCE's decommissioning costs
(57)
(35)
Net cash provided by investing activities:
Proceeds from sale of investments
951
867
Purchases of investments
(932)
(833)
Net cash (outflow) inflow
(17)
Net cash used in operating activities relates to interest and dividends less administrative expenses, taxes and SCE's decommissioning costs. Investing activities represent the purchase and sale of investments within the nuclear decommissioning trusts, including the reinvestment of earnings from nuclear decommissioning trust investments. The net cash impact reflects timing of decommissioning payments ($57 million and $35 million in 2023 and 2022, respectively) and reimbursements to SCE from the nuclear decommissioning trust ($40 million and $53 million in 2023 and 2022 respectively).
The table below sets forth condensed historical cash flow from operations for Edison International Parent and Other, including intercompany eliminations.
Net cash used in operating activities
(70)
67
Net cash provided by investing activities
Net (decrease) increase in cash, cash equivalents and restricted cash
Net Cash Used in Operating Activities
Net cash used in operating activities was impacted by the following:
Net cash provided by financing activities was as follows:
Dividends paid to Edison International common shareholders
(277)
(262)
Dividends paid to Edison International preferred shareholders
(46)
Dividends received from SCE
350
325
Long-term debt issuance, net of discount and issuance costs
495
Long-term debt repayments
(400)
Repayments of term loan
(600)
Commercial paper financing, net
529
Edison International's and SCE's contingencies are discussed in "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies."
Edison International's and SCE's primary market risks are described in the 2022 Form 10-K, and there have been no material changes for the three months ended March 31, 2023. For further discussion of market risk exposures, including commodity price risk and credit risk, see "Notes to Consolidated Financial Statements—Note 4. Fair Value Measurements" and "—Note 6. Derivative Instruments."
For a discussion of Edison International's and SCE's critical accounting policies, see "Critical Accounting Estimates and Policies" in the 2022 MD&A.
There have been no material changes in recently issued or adopted accounting standards from those disclosed in "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—New Accounting Guidance" in the 2022 Form 10-K.
Information responding to this section is included in the MD&A under the heading "Market Risk Exposures" and is incorporated herein by reference.
Consolidated Statements of Income
(in millions, except per-share amounts, unaudited)
3,966
3,968
1,084
1,487
140
3,346
3,709
Operating income
620
(361)
(246)
119
68
378
81
(55)
365
136
Less: Preference stock dividend requirements of SCE
Less: Preferred stock dividend requirement of Edison International
Net income attributable to Edison International common shareholders
Basic earnings per share:
Weighted average shares of common stock outstanding
383
381
Basic earnings per common share attributable to Edison International common shareholders
0.81
0.22
Diluted earnings per share:
Weighted average shares of common stock outstanding, including effect of dilutive securities
384
382
Diluted earnings per common share attributable to Edison International common shareholders
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements of Comprehensive Income
(in millions, unaudited)
Other comprehensive income, net of tax:
Pension and postretirement benefits other than pensions
Foreign currency translation adjustments
Other comprehensive income, net of tax
Comprehensive income
367
138
Less: Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Edison International
338
112
Consolidated Balance Sheets
December 31,
ASSETS
Cash and cash equivalents
836
914
Receivables, less allowances of $323 and $347 for uncollectible accounts at respective dates
1,451
1,695
Accrued unbilled revenue
766
641
Inventory
500
474
Prepaid expenses
311
248
Regulatory assets
2,817
2,497
Wildfire Insurance Fund contributions
204
Other current assets
397
Total current assets
7,210
7,070
Nuclear decommissioning trusts
4,093
3,948
Marketable securities
Other investments
50
Total investments
4,157
4,003
Utility property, plant and equipment, less accumulated depreciation and amortization of $12,505 and $12,260 at respective dates
53,955
53,274
Nonutility property, plant and equipment, less accumulated depreciation of $108 and $106 at respective dates
215
212
Total property, plant and equipment
54,170
53,486
Regulatory assets (include $827 and $834 related to Variable Interest Entities "VIEs" at respective dates)
8,151
8,181
2,104
2,155
Operating lease right-of-use assets
1,346
1,442
Long-term insurance receivables
458
465
Other long-term assets
1,258
1,239
Total long-term assets
13,317
13,482
Total assets
78,854
78,041
(in millions, except share amounts, unaudited)
LIABILITIES AND EQUITY
Short-term debt
1,645
2,015
Current portion of long-term debt
2,214
2,614
Accounts payable
1,795
2,359
Wildfire-related claims
75
121
Customer deposits
172
167
Regulatory liabilities
964
Current portion of operating lease liabilities
420
506
Other current liabilities
1,620
1,601
Total current liabilities
8,366
10,347
Long-term debt (include $809 related to VIEs at both dates)
29,442
27,025
Deferred income taxes and credits
6,280
6,149
Pensions and benefits
413
422
Asset retirement obligations
2,733
2,754
8,555
8,211
Operating lease liabilities
926
936
1,600
1,687
Other deferred credits and other long-term liabilities
2,990
2,988
Total deferred credits and other liabilities
23,497
23,147
Total liabilities
61,305
60,519
Commitments and contingencies (Note 12)
Preferred stock (50,000,000 shares authorized; 1,250,000 shares of Series A and 750,000 shares of Series B issued and outstanding at respective dates)
1,978
Common stock, no par value (800,000,000 shares authorized; 382,659,081 and 382,208,498 shares issued and outstanding at respective dates)
6,223
6,200
Accumulated other comprehensive loss
(9)
(11)
Retained earnings
7,456
7,454
Total Edison International's shareholders' equity
15,648
15,621
Noncontrolling interests – preference stock of SCE
1,901
Total equity
17,549
17,522
Total liabilities and equity
23
Consolidated Statements of Cash Flows
Cash flows from operating activities:
Adjustments to reconcile to net cash provided by operating activities:
624
Allowance for equity during construction
(36)
Deferred income taxes
Wildfire Insurance Fund amortization expense
(19)
Changes in operating assets and liabilities:
Receivables
227
130
(14)
(508)
(84)
Tax receivables and payables
54
Other current assets and liabilities
(329)
Derivative assets and liabilities, net
(99)
Regulatory assets and liabilities, net
Wildfire-related insurance receivable
(96)
Other noncurrent assets and liabilities
792
Cash flows from financing activities:
Long-term debt issued, net of discount and issuance costs of $19 and $20 for the respective periods
1,681
(401)
Common stock issued
Commercial paper borrowing (repayments), net
960
Dividends and distribution to noncontrolling interests
Common stock dividends paid
Preferred stock dividends paid
1,316
205
Cash flows from investing activities:
Capital expenditures
(1,324)
(1,207)
Proceeds from sale of nuclear decommissioning trust investments
Purchases of nuclear decommissioning trust investments
(1,157)
Net decrease in cash, cash equivalents and restricted cash
(79)
(160)
Cash, cash equivalents and restricted cash at beginning of period
917
394
Cash, cash equivalents and restricted cash at end of period
838
234
174
690
1,427
1,675
638
333
292
315
7,052
6,930
47
36
4,140
3,984
Nonutility property, plant and equipment, less accumulated depreciation of $95 and $94 at respective dates
209
206
54,164
53,480
Regulatory assets (include $827 and $834 related to VIEs at respective dates)
1,337
1,433
Long-term insurance receivables due from affiliate
1,188
1,171
13,247
13,413
78,603
77,807
626
925
1,790
2,351
419
505
1,592
1,578
7,313
8,825
25,965
24,044
7,693
7,545
103
105
918
928
2,916
2,919
24,518
24,149
57,796
57,018
Preference stock
1,945
Common stock, no par value (560,000,000 shares authorized; 434,888,104 shares issued and outstanding at respective dates)
2,168
Additional paid-in capital
8,438
8,441
(8)
8,264
8,243
20,807
20,789
27
673
622
235
(505)
(318)
Long-term debt issued, net of discount and issuance costs of $14 and $20 for the respective periods
Preference stock dividends paid
Cash and cash equivalents at beginning of period
280
Cash and cash equivalents at end of period
(Unaudited)
Note 1.Summary of Significant Accounting Policies
Organization and Basis of Presentation
Edison International is the ultimate parent holding company of Southern California Edison Company ("SCE") and Edison Energy, LLC ("Edison Energy Group"). SCE is an investor-owned public utility primarily engaged in the business of supplying and delivering electricity to an approximately 50,000 square mile area of Southern California. Edison Energy Group is an indirect wholly-owned subsidiary of Edison International and a holding company for Edison Energy, LLC ("Edison Energy") which is engaged in the competitive business of providing decarbonization and energy solutions to commercial, institutional and industrial customers in North America and Europe. Edison Energy's business activities are currently not material to report as a separate business segment. These combined notes to the consolidated financial statements apply to both Edison International and SCE unless otherwise described. Edison International's consolidated financial statements include the accounts of Edison International, SCE, and other wholly owned and controlled subsidiaries. References to Edison International refer to the consolidated group of Edison International and its subsidiaries. References to "Edison International Parent and Other" refer to Edison International Parent and its competitive subsidiaries and "Edison International Parent" refer to Edison International on a stand-alone basis, not consolidated with its subsidiaries. SCE's consolidated financial statements include the accounts of SCE, its wholly owned and controlled subsidiaries and a variable interest entity, SCE Recovery Funding LLC., of which SCE is the primary beneficiary. All intercompany transactions have been eliminated from the consolidated financial statements.
Edison International's and SCE's significant accounting policies were described in the "Notes to Consolidated Financial Statements" included in Edison International's and SCE's combined Annual Report on Form 10-K for the year ended December 31, 2022 (the "2022 Form 10-K"). This quarterly report should be read in conjunction with the financial statements and notes included in the 2022 Form 10-K.
In the opinion of management, all adjustments, consisting only of adjustments of a normal recurring nature, have been made that are necessary to fairly state the consolidated financial position, results of operations, and cash flows in accordance with accounting principles generally accepted in the United States ("GAAP") for the periods covered by this quarterly report on Form 10-Q. The results of operations for the interim periods presented are not necessarily indicative of the operating results for the full year.
The December 31, 2022 financial statement data was derived from audited financial statements but does not include all disclosures required by GAAP. Certain prior period amounts have been conformed to the current period's presentation, including the separate presentation of common stock and preference stock dividends in SCE's consolidated statements of cash flows.
Cash, Cash Equivalents and Restricted Cash
Cash equivalents consist of investments in money market funds. Generally, the carrying value of cash equivalents equals the fair value, as these investments have original maturities of three months or less. The cash equivalents were as follows:
Money market funds
647
Cash is temporarily invested until required for check clearing. Checks issued, but not yet paid by the financial institution, are reclassified from cash to accounts payable at the end of each reporting period.
The following table sets forth the cash, cash equivalents and restricted cash included in the consolidated statements of cash flows:
Short-term restricted cash1
Total cash, cash equivalents and restricted cash
Allowance for Uncollectible Accounts
The allowance for uncollectible accounts is recorded based on SCE's estimate of expected credit losses and adjusted over the life of the receivables as needed. Since the customer base of SCE is concentrated in Southern California and exposes SCE to a homogeneous set of economic conditions, the allowance is measured on a collective basis on the historical amounts written-off, assessment of customer collectibility and current economic trends, including unemployment rates and any likelihood of recession for the region.
The following table sets forth the changes in allowance for uncollectible accounts for SCE:
March 31, 2023
March 31, 2022
Customers
All others
Beginning balance
354
293
309
Current period provision for uncollectible accounts1
Write-offs, net of recoveries
(28)
(10)
(7)
Ending balance
326
344
337
353
Earnings Per Share
Edison International computes earnings per common share ("EPS") using the two-class method, which is an earnings allocation formula that determines EPS for each class of common stock and participating security. Edison International's participating securities are stock-based compensation awards, payable in common shares, which earn dividend equivalents on an equal basis with common shares once the awards are vested. See Note 13 for further information.
30
EPS attributable to Edison International common shareholders was computed as follows:
(in millions, except per-share amounts)
Net income attributable to common shareholders
Net income available to common shareholders
Weighted average common shares outstanding
Basic earnings per share
Income impact of assumed conversions
Net income available to common shareholders and assumed conversions
Incremental shares from assumed conversions
Adjusted weighted average shares – diluted
Diluted earnings per share
In addition to the participating securities discussed above, Edison International also may award stock options, which are payable in common shares and are included in the diluted earnings per share calculation. Stock option awards to purchase 4,414,113 and 6,533,558 shares of common stock for the three months ended March 31, 2023 and 2022, respectively, were outstanding, but were not included in the computation of diluted earnings per share because the effect would have been antidilutive.
Revenue Recognition
Revenue is recognized by Edison International and SCE when a performance obligation to transfer control of the promised goods is satisfied or when services are rendered to customers. This typically occurs when electricity is delivered to customers, which includes amounts for services rendered but unbilled at the end of a reporting period.
FERC 2023 Formula Rate Update
In November 2022, SCE filed its 2023 annual update with the FERC with the proposed rates effective January 1, 2023, subject to settlement procedures and refund. Pending resolution of the FERC formula rate proceedings, SCE recognized revenue in the first quarter of 2023 based on the FERC 2023 annual update rate, subject to refund.
31
Note 2.Consolidated Statements of Changes in Equity
The following table provides Edison International's changes in equity for the three months ended March 31, 2023:
Noncontrolling
Equity Attributable to Edison International Shareholders
Interests
Accumulated
Preferred
Common
Comprehensive
Retained
Preference
(in millions, except per share amounts)
Stock
Loss
Earnings
Equity
Balance at December 31, 2022
336
Other comprehensive income
Common stock issued, net of issuance cost
Common stock dividends declared ($0.7375 per share)
(282)
Preferred stock dividend declared ($26.875 per share for Series A and $25.00 per share for Series B)
Dividends to noncontrolling interests ($22.281 - $35.937 per share for preference stock)
Noncash stock-based compensation
Balance at March 31, 2023
The following table provides Edison International's changes in equity for the three months ended March 31, 2022:
Balance at December 31, 2021
1,977
6,071
(54)
7,894
15,888
17,789
110
Common stock dividends declared ($0.7000 per share)
(267)
Preferred stock dividend declared ($26.875 per share for Series A and $17.08333 per share for Series B)
Dividends to noncontrolling interests ($11.160 - $35.936 per share for preference stock)
(26)
Balance at March 31, 2022
6,090
7,716
15,731
17,632
The following table provides SCE's changes in equity for the three months ended March 31, 2023:
Additional
Paid-in
Capital
Dividends declared on common stock ($0.8048 per share)
Dividends on preference stock ($22.281 - $35.937 per share)
Stock-based compensation
The following table provides SCE's changes in equity for the three months ended March 31, 2022:
7,033
8,721
19,835
Dividends declared on common stock ($0.7473 per share)
Dividends declared on preference stock ($11.160 - $35.937 per share)
7,028
8,542
19,652
Note 3.Variable Interest Entities
A VIE is defined as a legal entity that meets one of two conditions: (1) the equity owners do not have sufficient equity at risk, or (2) the holders of the equity investment at risk, as a group, lack any of the following three characteristics: decision-making rights, the obligation to absorb losses or the right to receive the expected residual returns of the entity. The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most significantly impact the entity's economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. The primary beneficiary is required to consolidate the VIE. Commercial and operating activities are generally the factors that most significantly impact the economic performance of such VIEs. Commercial and operating activities include construction, operation and maintenance, fuel procurement, dispatch and compliance with regulatory and contractual requirements.
Variable Interest in VIEs that are Consolidated
SCE Recovery Funding LLC is a bankruptcy remote, wholly owned special purpose subsidiary, consolidated by SCE. SCE Recovery Funding LLC is a VIE and SCE is the primary beneficiary. SCE Recovery Funding LLC was formed in 2021 for the purpose of issuing and servicing securitized bonds related to SCE's AB 1054 Excluded Capital Expenditures.
In 2022 and 2021, SCE Recovery Funding LLC issued a total of $871 million of securitized bonds and used the proceeds to acquire SCE's right, title and interest in and to non-bypassable rates and other charges to be collected from certain existing and future customers in SCE's service territory, associated with the AB 1054 Excluded Capital Expenditures ("Recovery Property"), until the bonds are paid in full, and all financing costs have been recovered. The securitized bonds are secured by the Recovery Property and cash collections from the non-bypassable rates and other charges are the sole source of funds to satisfy the debt obligation. The bondholders have no recourse to SCE. In April 2023, SCE Recovery Funding LLC issued $775 million of securitized bonds. For further details, see Note 5.
The following table summarizes the impact of SCE Recovery Funding LLC on SCE's and Edison International's consolidated balance sheets.
Regulatory assets: non-current
834
Regulatory liabilities: current
Long-term debt1
809
Variable Interest in VIEs that are not Consolidated
Power Purchase Agreements
SCE has PPAs that are classified as variable interests in VIEs, including agreements through which SCE provides the natural gas to fuel the plants, fixed price contracts for renewable energy, and resource adequacy agreements that, upon the seller's election, include the purchase of energy at fixed prices. SCE has concluded that it is not the primary beneficiary of these VIEs since it does not control the commercial and operating activities of these entities. Since payments for capacity are the primary source of income, the most significant economic activity for these VIEs is the operation and maintenance of the power plants.
As of the balance sheet date, the carrying amount of assets and liabilities in SCE's consolidated balance sheet that relate to involvement with VIEs that are not consolidated result from amounts due under the PPAs. Under these contracts, SCE recovers the costs incurred through demonstration of compliance with its CPUC-approved long-term power procurement plans. SCE has no residual interest in the entities and has not provided or guaranteed any debt or equity support, liquidity arrangements, performance guarantees, or other commitments associated with these contracts other than the purchase commitments described in Note 12 of the 2022 Form 10-K. As a result, there is no significant potential exposure to loss to SCE from its variable interest in these VIEs. The aggregate contracted capacity dedicated to SCE from these VIE projects was 3,844 MW and 3,645 MW at March 31, 2023 and 2022, respectively, and the amounts that SCE paid to these projects were $170 million and $106 million for the three months ended March 31, 2023 and 2022, respectively. These amounts are recoverable in customer rates, subject to reasonableness review.
Unconsolidated Trusts of SCE
SCE Trust II, Trust III, Trust IV, Trust V, and Trust VI were formed in 2013, 2014, 2015, 2016, and 2017, respectively, for the exclusive purpose of issuing the 5.10%, 5.75%, 5.375%, 5.45%, and 5.00% trust preference securities, respectively ("trust securities"). The trusts are VIEs. SCE has concluded that it is not the primary beneficiary of these VIEs as it does not have the obligation to absorb the expected losses or the right to receive the expected residual returns of the trusts. SCE Trust II, Trust III, Trust IV, Trust V and Trust VI issued to the public trust securities in the face amounts of $400 million,
$275 million, $325 million, $300 million, and $475 million (cumulative, liquidation amounts of $25 per share), respectively, and $10,000 of common stock each to SCE. The trusts invested the proceeds of these trust securities in Series G, Series H, Series J, Series K, and Series L Preference Stock issued by SCE in the principal amounts of $400 million, $275 million, $325 million, $300 million, and $475 million (cumulative, $2,500 per share liquidation values), respectively, which have substantially the same payment terms as the respective trust securities.
The Series G, Series H, Series J, Series K, and Series L Preference Stock and the corresponding trust securities do not have a maturity date. Upon any redemption of any shares of the Series G, Series H, Series J, Series K, or Series L Preference Stock, a corresponding dollar amount of trust securities will be redeemed by the applicable trust. The applicable trust will make distributions at the same rate and on the same dates on the applicable series of trust securities if and when the SCE board of directors declares and makes dividend payments on the related Preference Stock. The applicable trust will use any dividends it receives on the related Preference Stock to make its corresponding distributions on the applicable series of trust securities. If SCE does not make a dividend payment to any of these trusts, SCE would be prohibited from paying dividends on its common stock. SCE has fully and unconditionally guaranteed the payment of the trust securities and trust distributions, if and when SCE pays dividends on the related Preference Stock.
The Trust II, Trust III, Trust IV, Trust V and Trust VI balance sheets as of March 31, 2023 and 2022 consisted of investments of $220 million, $275 million, $325 million, $300 million, and $475 million in the Series G, Series H, Series J, Series K and Series L Preference Stock, respectively, $220 million, $275 million, $325 million, $300 million, and $475 million of trust securities, respectively, and $10,000 each of common stock.
The following table provides a summary of the trusts' income statements:
Trust II
Trust III
Trust IV
Trust V
Trust VI
Dividend income
Dividend distributions
Note 4.Fair Value Measurements
Recurring Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (referred to as an "exit price"). Fair value of an asset or liability considers assumptions that market participants would use in pricing the asset or liability, including assumptions about nonperformance risk. As of March 31, 2023 and December 31, 2022, nonperformance risk was not material for Edison International and SCE.
Assets and liabilities are categorized into a three-level fair value hierarchy based on valuation inputs used to determine fair value.
Level 1 – The fair value of Edison International's and SCE's Level 1 assets and liabilities is determined using unadjusted quoted prices in active markets that are available at the measurement date for identical assets and liabilities. This level includes exchange-traded equity securities, U.S. treasury securities, mutual funds, and money market funds.
Level 2 – Edison International's and SCE's Level 2 assets and liabilities include fixed income securities, primarily consisting of U.S. government and agency bonds, municipal bonds and corporate bonds, and over-the-counter derivatives. The fair value of fixed income securities is determined using a market approach by obtaining quoted prices for similar assets and
liabilities in active markets and inputs that are observable, either directly or indirectly, for substantially the full term of the instrument.
The fair value of SCE's over-the-counter derivative contracts is determined using an income approach. SCE uses standard pricing models to determine the net present value of estimated future cash flows. Inputs to the pricing models include forward published or posted clearing prices from an exchange (Intercontinental Exchange) for similar instruments and discount rates. A primary price source that best represents trade activity for each market is used to develop observable forward market prices in determining the fair value of these positions. Broker quotes, prices from exchanges, or comparison to executed trades are used to validate and corroborate the primary price source. These price quotations reflect mid-market prices (average of bid and ask) and are obtained from sources believed to provide the most liquid market for the commodity.
Level 3 – The fair value of SCE's Level 3 assets and liabilities is determined using the income approach through various models and techniques that require significant unobservable inputs. This level includes derivative contracts that trade infrequently such as congestion revenue rights ("CRRs"). Edison International Parent and Other does not have any Level 3 assets and liabilities.
Assumptions are made in order to value derivative contracts in which observable inputs are not available. In circumstances where fair value cannot be verified with observable market transactions, it is possible that a different valuation model could produce a materially different estimate of fair value. Modeling methodologies, inputs, and techniques are reviewed and assessed as markets continue to develop and more pricing information becomes available, and the fair value is adjusted when it is concluded that a change in inputs or techniques would result in a new valuation that better reflects the fair value of those derivative contracts. See Note 6 for a discussion of derivative instruments.
The following table sets forth assets and liabilities of SCE that were accounted for at fair value by level within the fair value hierarchy:
Netting
and
Level 1
Level 2
Level 3
Collateral1
Assets at fair value
Derivative contracts
83
(59)
74
Money market funds and other
Nuclear decommissioning trusts:
Stocks2
1,667
Fixed Income3
1,399
2,317
Short-term investments, primarily cash equivalents
125
166
Subtotal of nuclear decommissioning trusts4
2,710
1,440
4,150
1,545
4,246
Liabilities at fair value
56
Net assets
1,489
December 31, 2022
392
(218)
241
669
1,610
941
1,281
2,222
201
2,688
1,345
4,033
3,335
1,759
4,943
(119)
1,643
4,942
SCE Fair Value of Level 3
The following table sets forth a summary of changes in SCE's fair value of Level 3 net derivative assets and liabilities:
Fair value of net assets at beginning of period
Settlements
(12)
Total realized/unrealized losses1,2
Fair value of net assets at end of period
The following table sets forth SCE's valuation techniques and significant unobservable inputs used to determine fair value for significant Level 3 assets and liabilities:
Fair Value
Significant
Weighted
Valuation
Unobservable
Range
Average
Assets
Liabilities
Technique
Input
(per MWh)
Congestion revenue rights
Auction prices
CAISO CRR auction prices
$(5.83) - $47.91
1.47
(7.91) - 3,856.67
1.64
Level 3 Fair Value Uncertainty
For CRRs, increases or decreases in CAISO auction prices would result in higher or lower fair value, respectively.
Nuclear Decommissioning Trusts
SCE's nuclear decommissioning trust investments include equity securities, U.S. treasury securities, and other fixed income securities. Equity and treasury securities are classified as Level 1 as fair value is determined by observable market prices in active or highly liquid and transparent markets. The remaining fixed income securities are classified as Level 2. There are no securities classified as Level 3 in the nuclear decommissioning trusts.
Edison International Parent and Other assets measured at fair value and classified as Level 1 consisted of equity investments of $2 million and $5 million and money market funds of $136 million and $137 million at March 31, 2023 and December 31, 2022, respectively. Assets measured at fair value and classified as Level 2 consisted of short-term investments of $1 million and $2 million at March 31, 2023 and December 31, 2022, respectively. There are no securities classified as Level 3 for Edison International Parent and Other.
Fair Value of Debt Recorded at Carrying Value
The carrying value and fair value of Edison International's and SCE's long-term debt (including the current portion of long-term debt) are as follows:
Carrying
Fair
Value1
Value2
31,656
29,616
29,639
26,824
28,180
26,104
26,258
23,469
Note 5.Debt and Credit Agreements
Long-Term Debt
In March 2023, SCE issued $750 million of 5.30% first and refunding mortgage bonds due in 2028. The proceeds were used to fund the payment of wildfire claims above the amount of expected insurance proceeds. SCE also issued $450 million of 5.70% first and refunding mortgage bonds due in 2053. The proceeds were used to repay commercial paper borrowings and for general corporate purposes.
In March 2023, Edison International Parent issued $500 million of 8.125% junior subordinated notes due in 2053, with interest rate resets every five years at a rate equal to the Five-year U.S. Treasury rate plus a spread of 3.864%. The proceeds were used to repay commercial paper borrowings and for general corporate purposes.
Credit Agreements and Short-Term Debt
The following table summarizes the status of the credit facilities at March 31, 2023:
(in millions, except for rates)
Termination
SOFR
Outstanding
Amount
Borrower
date
plus (bps)
Commitment
borrowings
letters of credit
available
Edison International Parent1, 3
May 2026
128
1,500
878
SCE2, 3
108
3,350
628
255
2,467
Total Edison International
4,850
1,250
3,345
Debt Financing Subsequent to March 31, 2023
In April 2023, SCE Recovery Funding LLC issued $775 million of Senior Secured Recovery Bonds, Series 2023-A, in two tranches and used the proceeds to acquire SCE's right, title and interest in and to the Recovery Property. The two tranches of Senior Secured Recovery Bonds consisted of $425 million, 4.697% with final maturity in 2042 and $350 million, 5.112% with final maturity in 2049. For further details, see Note 3. SCE used the proceeds it received from the sale of Recovery Property to pay down the entire $730 million outstanding amount of its green term loan due in May 2023, which was reclassified as a long-term obligation as of March 31, 2023.
Note 6.Derivative Instruments
Derivative financial instruments are used to manage exposure to commodity price risk. These risks are managed in part by entering into forward commodity transactions, including options, swaps and futures. To mitigate credit risk from counterparties in the event of nonperformance, master netting agreements are used whenever possible, and counterparties may be required to pledge collateral depending on the creditworthiness of each counterparty and the risk associated with the transaction.
Commodity Price Risk
Commodity price risk represents the potential impact that can be caused by a change in the market value of a particular commodity. SCE's electricity price exposure arises from energy purchased from and sold to wholesale markets as a result of differences between SCE's load requirements and the amount of energy delivered from its generating facilities and PPAs. SCE's natural gas price exposure arises from natural gas purchased for the Mountainview power plants, Peaker plants and Qualifying Facilities contracts where pricing is based on a monthly natural gas index and PPAs in which SCE has agreed to provide the natural gas needed for generation, referred to as tolling arrangements.
Credit and Default Risk
Credit and default risk represent the potential impact that can be caused if a counterparty were to default on its contractual obligations and SCE would be exposed to spot markets for buying replacement power or selling excess power. In addition, SCE would be exposed to the risk of non-payment of accounts receivable, primarily related to the sales of excess power and realized gains on derivative instruments.
Certain power and gas contracts contain master netting agreements or similar agreements, which generally allow counterparties subject to the agreement to offset amounts when certain criteria are met, such as in the event of default. The objective of netting is to reduce credit exposure. Additionally, to reduce SCE's risk exposures, counterparties may be required to pledge collateral depending on the creditworthiness of each counterparty and the risk associated with the transaction.
Certain power and gas contracts contain a provision that requires SCE to maintain an investment grade rating from the major credit rating agencies that have credit ratings for SCE, referred to as a credit-risk-related contingent feature. If SCE's credit rating were to fall below investment grade, SCE may be required to post additional collateral to cover derivative liabilities and the related outstanding payables. The net fair value of all derivative liabilities with these credit-risk-related contingent features was less than $1 million as of March 31, 2023 and December 31, 2022, for which SCE posted no collateral and collateral of $24 million to its counterparties for its derivative liabilities and related outstanding payables as of March 31, 2023 and December 31, 2022, respectively. If the credit-risk-related contingent features underlying these agreements were triggered on March 31, 2023, SCE would be required to post $2 million of collateral, most of which is related to outstanding payables.
Fair Value of Derivative Instruments
SCE presents its derivative assets and liabilities on a net basis on its consolidated balance sheets when subject to master netting agreements or similar agreements. Derivative positions are also offset against margin and cash collateral deposits. In addition, SCE has provided collateral in the form of letters of credit. Collateral requirements can vary depending upon the level of unsecured credit extended by counterparties, changes in market prices relative to contractual commitments and other factors. See Note 4 for a discussion of fair value of derivative instruments. The following table summarizes the gross and net fair values of SCE's commodity derivative instruments:
Derivative Assets
Derivative Liabilities
Short-Term1
Long-Term
Short-Term
Net Assets
Commodity derivative contracts
Gross amounts recognized
Gross amounts offset in the consolidated balance sheets
Net amounts presented in the consolidated balance sheets
Short-Term2
459
339
Cash collateral received
240
At March 31, 2023, SCE posted cash collateral and accrued the right to reclaim cash collateral which totaled $95 million, reflected in "Other current asset" on SCE’s consolidated balance sheets.
40
Financial Statement Impact of Derivative Instruments
SCE recognizes realized gains and losses on derivative instruments as purchased power expense and expects that such gains or losses will be part of the purchased power costs recovered from customers. As a result, realized gains and losses do not affect earnings, but may temporarily affect cash flows. Due to expected future recovery from customers, unrealized gains and losses are recorded as regulatory assets and liabilities and therefore also do not affect earnings. The remaining effects of derivative activities and related regulatory offsets are reported in cash flows from operating activities in SCE’s consolidated statements of cash flows.
The following table summarizes the components of SCE's economic hedging activity:
Realized gains (losses)
Unrealized (losses) gains
(264)
Notional Volumes of Derivative Instruments
The following table summarizes the notional volumes of derivatives used for SCE's economic hedging activities:
Unit of
Economic Hedges
Commodity
Measure
Electricity options, swaps and forwards
Gigawatt hours
1,824
1,022
Natural gas options, swaps and forwards
Billion cubic feet
36,672
44,028
Note 7.Revenue
SCE's revenue is disaggregated by two revenue sources:
The following table is a summary of SCE's revenue:
Revenues from contracts with customers1,2
2,076
1,660
3,736
1,985
1,375
3,360
Alternative revenue programs and other operating revenue3
157
57
214
282
319
601
Total operating revenue
Deferred Revenue
As of March 31, 2023, SCE has deferred revenue of $377 million related to sale of the use of transfer capability of West of Devers transmission line, of which $13 million and $364 million are included in "Other current liabilities" and "Other deferred credits and other long-term liabilities," respectively, on SCE's consolidated balance sheets. The deferred revenue is amortized straight-line over a period of 30 years starting 2021.
Note 8.Income Taxes
Effective Tax Rate
The table below provides a reconciliation of income tax expense computed at the federal statutory income tax rate to the income tax provision:
Income from operations before income taxes
Provision for income tax at federal statutory rate of 21%
79
90
Increase (decrease) in income tax from:
State tax, net of federal benefit
(13)
Property-related
(58)
(45)
(6)
Total income tax expense (benefit)
Effective tax rate
3.4
%
(67.9)
6.8
(30.1)
The CPUC requires flow-through ratemaking treatment for the current tax benefit arising from certain property-related and other temporary differences which reverse over time. Flow-through items reduce current authorized revenue requirements in SCE's rate cases and result in a regulatory asset for recovery of deferred income taxes in future periods. The difference between the authorized amounts as determined in SCE's rate cases, adjusted for balancing and memorandum account activities, and the recorded flow-through items also result in increases or decreases in regulatory assets with a corresponding impact on the effective tax rate to the extent that recorded deferred amounts are expected to be recovered in future rates. For further information, see Note 11.
Tax Disputes
Tax years that remain open for examination by the IRS and the California Franchise Tax Board ("FTB") are 2019 – 2022 and 2013 – 2022, respectively.
Note 9.Compensation and Benefit Plans
Pension Plans
Net periodic pension expense components are:
Service cost
Non-service cost (benefit)
Interest cost
Expected return on plan assets
Amortization of net loss
Regulatory adjustment
Total non-service benefit1
(27)
Total expense recognized
SCE:
(51)
Postretirement Benefits Other Than Pensions ("PBOP")
Net periodic PBOP expense components for Edison International and SCE are:
(24)
Amortization of net gain
Total expense
Future decommissioning costs related to SCE's nuclear assets are expected to be funded from independent decommissioning trusts.
The following table sets forth amortized cost and fair value of the trust investments (see Note 4 for a discussion of fair value of the trust investments):
Amortized Costs
Fair Values
Longest
Maturity Dates
Municipal bonds
2061
634
672
734
754
Government and agency securities
2073
1,087
1,025
1,174
1,091
Corporate bonds
2070
379
351
409
377
Short-term investments and receivables/payables1
One-year
104
109
Total debt securities and other
2,204
2,158
2,426
2,338
Equity securities
Trust fund earnings (based on specific identification) increase the trust fund balance and the asset retirement obligation ("ARO") regulatory liability. Unrealized holding gains, net of losses, were $1.7 billion and $1.6 billion at March 31, 2023 and December 31, 2022, respectively.
Trust assets are used to pay income taxes arising from trust investing activity. Deferred tax liabilities related to net unrealized gains were $359 million and $321 million at March 31, 2023 and December 31, 2022, respectively. Accordingly, the fair value of trust assets available to pay future decommissioning costs, net of deferred income taxes, totaled $3.7 billion and $3.6 billion at March 31, 2023 and December 31, 2022, respectively.
The following table summarizes the gains and losses for the trust investments:
Gross realized gains
Gross realized losses
(23)
(16)
Net unrealized gains/(losses) for equity securities
(100)
Due to regulatory mechanisms, changes in assets of the trusts from income or loss items do not materially affect earnings.
Edison International Parent and Other's Investments
Edison International Parent and Other hold strategic investments in companies focused on developing electric technologies and services. As of March 31, 2023 and December 31, 2022, these investments consist of $2 million and $5 million of marketable securities, respectively, and $12 million of equity investments without readily determinable fair values (included as "Other investments" on Edison International's consolidated balance sheets) at both dates. For further information of fair value of marketable securities, see Note 4. The equity investments without readily determinable fair values balances included cumulative upward adjustments of $9 million at both March 31, 2023 and December 31, 2022. The cumulative upward adjustments resulted primarily from values determined by additional capital infusions.
The following table summarizes unrealized gains/(losses) for equity investments held at the reporting date, recorded as "Other income" on Edison International's consolidated statements of income:
Regulatory Assets
SCE's regulatory assets included on its consolidated balance sheets are:
Current:
Regulatory balancing and memorandum accounts
2,743
2,400
Power contracts
49
Total current
Long-term:
Deferred income taxes, net of liabilities
5,282
5,178
Unamortized investments, net of accumulated amortization
111
113
Unamortized loss on reacquired debt
106
1,468
1,589
Environmental remediation
238
Recovery assets
117
Total long-term
Total regulatory assets
10,968
10,678
Regulatory Liabilities
SCE's regulatory liabilities included on its consolidated balance sheets are:
302
584
Energy derivatives
Costs of removal
2,608
2,589
Re-measurement of deferred taxes
2,237
2,250
Recoveries in excess of ARO liabilities
1,378
1,231
1,317
1,116
Pension and other postretirement benefits
999
1,007
Total regulatory liabilities
8,980
9,175
Net Regulatory Balancing and Memorandum Accounts
The following table summarizes the significant components of regulatory balancing and memorandum accounts included in the above tables of regulatory assets and liabilities:
Asset (liability)
Energy resource recovery account
1,580
Portfolio allocation balancing account
1,381
(73)
New system generation balancing account
Public purpose programs and energy efficiency programs
(1,785)
(1,577)
Base revenue requirement balancing account
1,134
1,108
GRC wildfire mitigation balancing accounts
Residential uncollectibles balancing account
Greenhouse gas auction revenue and low carbon fuel standard revenue
(289)
FERC balancing accounts
(135)
(123)
Wildfire and drought restoration accounts
362
352
Wildfire-related memorandum accounts
1,206
1,168
COVID-19-related memorandum accounts
69
Customer service re-platform memorandum account
Tax accounting memorandum account and pole loading balancing account
153
Excess bond and power charge balancing account
(56)
Asset
2,592
2,289
Indemnities
Edison International and SCE have various financial and performance guarantees and indemnity agreements which are issued in the normal course of business.
Edison International and SCE have agreed to provide indemnifications through contracts entered into in the normal course of business. These are primarily indemnifications against adverse litigation outcomes in connection with underwriting agreements, indemnities for specified environmental liabilities and income taxes with respect to assets sold or other contractual arrangements. Edison International's and SCE's obligations under these agreements may or may not be limited in terms of time and/or amount, and in some instances Edison International and SCE may have recourse against third parties. Edison International and SCE have not recorded a liability related to these indemnities. The overall maximum amount of the obligations under these indemnifications cannot be reasonably estimated.
In addition to the matters disclosed in these Notes, Edison International and SCE are involved in other legal, tax, and regulatory proceedings before various courts and governmental agencies regarding matters arising in the ordinary course of business. Edison International and SCE believe the outcome of each of these other proceedings will not materially affect its financial position, results of operations and cash flows.
California has experienced unprecedented weather conditions in recent years due to climate change and wildfires in SCE's territory, including those where SCE's equipment may be alleged to be associated with the fire's ignition, have caused loss of life and substantial damage in recent years. SCE's service territory remains susceptible to additional wildfire activity.
Numerous claims related to wildfire events have been initiated against SCE and Edison International. Edison International and SCE have incurred material losses in connection with the 2017/2018 Wildfire/Mudslide Events (defined below), which are described below. In addition, SCE's equipment has been, and may further be, alleged to be associated with wildfires that have originated in Southern California subsequent to 2018.
Liability Overview
The extent of legal liability for wildfire-related damages in actions against utilities depends on a number of factors, including whether the utility substantially caused or contributed to the damages and whether parties seeking recovery of damages will be required to show negligence in addition to causation. California courts have previously found utilities to be strictly liable for property damage along with associated interest and attorneys' fees, regardless of fault, by applying the theory of inverse condemnation when a utility's facilities were determined to be a substantial cause of a wildfire that caused the property damage. If inverse condemnation is held to be inapplicable to SCE in connection with a wildfire, SCE still could be held liable for property damages and associated interest if the property damages were found to have been proximately caused by SCE's negligence. If SCE were to be found negligent, SCE could also be held liable for, among other things, fire suppression costs, business interruption losses, evacuation costs, clean-up costs, medical expenses, and personal injury/wrongful death claims. Additionally, SCE could potentially be subject to fines and penalties for alleged violations of CPUC rules and state laws investigated in connection with the ignition of a wildfire.
Final determinations of legal liability for wildfire events, including determinations of whether SCE was negligent, would only be made during lengthy and complex litigation processes and settlements may be reached before determinations of legal liability are ever made. Even when investigations are still pending or legal liability is disputed, an assessment of likely outcomes, including through future settlement of disputed claims, may require estimated losses to be accrued under accounting standards. Each reporting period, management reviews its loss estimates for remaining alleged and potential claims related to wildfire events. The process for estimating losses associated with alleged and potential wildfire related claims requires management to exercise significant judgment based on a number of assumptions and subjective factors, including, but not limited to: estimates of known and expected claims by third parties based on currently available information, opinions of counsel regarding litigation risk, the status of and developments in the course of litigation, and prior experience litigating and settling wildfire litigation claims. As additional information becomes available, management's estimates and assumptions regarding the causes and financial impact of wildfire events may change. Actual losses incurred may be higher or lower than estimated based on several factors, including the uncertainty in estimating damages that have been or may be alleged.
Wildfires in SCE's territory in December 2017 and November 2018 caused loss of life, substantial damage to both residential and business properties, and service outages for SCE customers. The investigating government agencies, the Ventura County Fire Department ("VCFD") and California Department of Forestry and Fire Protection ("CAL FIRE"), have determined that the largest of the 2017 fires in SCE's territory originated on December 4, 2017, in the Anlauf Canyon area of Ventura County (the investigating agencies refer to this fire as the "Thomas Fire"), followed shortly thereafter by a second fire that originated near Koenigstein Road in the City of Santa Paula (the "Koenigstein Fire"). The December 4, 2017 fires eventually burned substantial acreage in both Ventura and Santa Barbara Counties. According to CAL FIRE, the Thomas and Koenigstein Fires, collectively, burned over 280,000 acres, destroyed or damaged an estimated 1,343 structures and resulted in two confirmed fatalities. The largest of the November 2018 fires in SCE's territory, known as the "Woolsey Fire," originated in Ventura County and burned acreage in both Ventura and Los Angeles Counties. According to CAL FIRE, the Woolsey Fire burned almost 100,000 acres, destroyed an estimated 1,643 structures, damaged an estimated 364 structures and resulted in three confirmed fatalities. Four additional fatalities are alleged to have been associated with the Woolsey Fire.
As described below, multiple lawsuits related to the Thomas and Koenigstein Fires and the Woolsey Fire have been initiated against SCE and Edison International. Some of the Thomas and Koenigstein Fires lawsuits claim that SCE and Edison
International have responsibility for the damages caused by debris flows and flooding in Montecito and surrounding areas in January 2018 (the "Montecito Mudslides") based on a theory alleging that SCE has responsibility for the Thomas and/or Koenigstein Fires and further alleging that the Thomas and/or Koenigstein Fires proximately caused the Montecito Mudslides. According to Santa Barbara County initial reports, the Montecito Mudslides destroyed an estimated 135 structures, damaged an estimated 324 structures, and resulted in 21 confirmed fatalities, with two additional fatalities presumed. One of the presumed fatalities was subsequently confirmed to be associated with the Montecito Mudslides.
The Thomas Fire, the Koenigstein Fire, the Montecito Mudslides (defined below) and the Woolsey Fire are each referred to as a "2017/2018 Wildfire/Mudslide Event," and, collectively, referred to as the "2017/2018 Wildfire/Mudslide Events."
Each reporting period, management reviews its loss estimates for remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events. As a result of management's first quarter 2023 review, a $90 million increase in estimated losses for the 2017/2018 Wildfire/Mudslide Events as of March 31, 2023 was recorded. As a result, Edison International and SCE also recorded expected recoveries through FERC electric rates of $6 million against the charge, and the resulting net charge to earnings was $84 million ($61 million after-tax).
As of March 31, 2023, SCE had paid $7.8 billion under executed settlements, had $135 million to be paid under executed settlements, including $120 million to be paid under the SED Agreement (as defined below), and had $853 million of estimated losses for remaining alleged and potential claims reflected on its consolidated balance sheets related to the 2017/2018 Wildfire/Mudslide Events. As of the same date, SCE had assets for expected recoveries through FERC electric rates of $63 million on its consolidated balance sheets and had exhausted expected insurance recoveries related to the 2017/2018 Wildfire/Mudslide Events.
The estimated losses for the 2017/2018 Wildfire/Mudslide Events do not include an estimate of potential losses related to certain alleged and potential claims made by the California Governor's Office of Emergency Service ("Cal OES") seeking recovery on behalf of itself and 30 state and local government entities that did not pursue their own suits against SCE, but sustained damage in the 2017/2018 Wildfire/Mudslide Events and received funding through the Federal Emergency Management Agency ("FEMA") that was dispersed by the Cal OES. As of the filing of this report, SCE has not concluded that losses related to FEMA funds disbursed by Cal OES are probable.
Edison International and SCE may incur a material loss in excess of amounts accrued in connection with the remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events. Due to the number of uncertainties and possible outcomes related to the 2017/2018 Wildfire/Mudslide Events litigation, Edison International and SCE cannot estimate the upper end of the range of reasonably possible losses that may be incurred.
The CPUC and FERC may not allow SCE to recover uninsured losses through electric rates if it is determined that such losses were not prudently incurred. SCE will seek rate recovery of prudently incurred losses and related costs realized in connection with the 2017/2018 Wildfire/Mudslide Events in excess of available insurance, other than for any obligations
under the SED Agreement (as defined below). See "Loss Estimates for Third Party Claims and Potential Recoveries from Insurance and through Electric Rates" below for additional information.
External Investigations and Internal Review
The VCFD and CAL FIRE have jointly issued reports concerning their findings regarding the causes of the Thomas Fire and the Koenigstein Fire. The reports did not address the causes of the Montecito Mudslides. SCE has also received a non-final redacted draft of a report from the VCFD regarding Woolsey Fire (the "Redacted Woolsey Report"). SCE cannot predict when the VCFD will release its final report regarding the Woolsey Fire. The VCFD and CAL FIRE findings do not determine legal causation of or assign legal liability for the Thomas, Koenigstein or Woolsey Fires; final determinations of legal causation and liability would only be made during lengthy and complex litigation.
The CPUC's Safety and Enforcement Division ("SED") conducted investigations to assess SCE's compliance with applicable rules and regulations in areas impacted by the Thomas, Koenigstein and Woolsey Fires. As discussed below, in October 2021, SCE and the SED executed the SED Agreement (as defined below) to resolve the SED's investigations into the 2017/2018 Wildfire/Mudslide Events.
The California Attorney General's Office has completed its investigation of the Thomas Fire and the Woolsey Fire without pursuing criminal charges.
SCE's internal review into the facts and circumstances of each of the 2017/2018 Wildfire/Mudslide Events is complex and time consuming. SCE expects to obtain and review additional information and materials in the possession of third parties during the course of its internal reviews and the litigation processes.
On March 13, 2019, the VCFD and CAL FIRE jointly issued a report concluding, after ruling out other possible causes, that the Thomas Fire was started by SCE power lines coming into contact during high winds, resulting in molten metal falling to the ground. However, the report does not state that their investigation found molten metal on the ground. At this time, based on available information, SCE has not determined whether its equipment caused the Thomas Fire. Based on publicly available radar data showing a smoke plume in the Anlauf Canyon area emerging in advance of the report's indicated start time, SCE believes that the Thomas Fire started at least 12 minutes prior to any issue involving SCE's system and at least 15 minutes prior to the start time indicated in the report. SCE is continuing to assess the extent of damages that may be attributable to the Thomas Fire.
On March 20, 2019, the VCFD and CAL FIRE jointly issued a report finding that the Koenigstein Fire was caused when an energized SCE electrical wire separated and fell to the ground along with molten metal particles and ignited the dry vegetation below. SCE believes that its equipment was associated with the ignition of the Koenigstein Fire. SCE is continuing to assess the extent of damages that may be attributable to the Koenigstein Fire.
SCE's internal review includes inquiry into whether the Thomas and/or Koenigstein Fires proximately caused or contributed to the Montecito Mudslides, whether, and to what extent, the Thomas and/or Koenigstein Fires were responsible for the damages in the Montecito area and other factors that potentially contributed to the losses that resulted from the Montecito Mudslides. Many other factors, including, but not limited to, weather conditions and insufficiently or improperly designed and maintained debris basins, roads, bridges and other channel crossings, could have proximately caused, contributed to or exacerbated the losses that resulted from the Montecito Mudslides.
At this time, based on available information, SCE has not been able to determine whether the Thomas Fire or the Koenigstein Fire, or both, were responsible for the damages in the Montecito area. In the event that SCE is determined to have caused the fire that spread to the Montecito area, SCE cannot predict whether, if fully litigated, the courts would conclude that the Montecito Mudslides were caused or contributed to by the Thomas and/or Koenigstein Fires or that SCE would be liable for some or all of the damages caused by the Montecito Mudslides.
SCE's internal review into the facts and circumstances of the Woolsey Fire is ongoing. SCE has reported to the CPUC that there was an outage on SCE's electric system in the vicinity of where the Woolsey Fire reportedly began on November 8, 2018. SCE is aware of witnesses who saw fire in the vicinity of SCE's equipment at the time the fire was first reported. While SCE did not find evidence of downed electrical wires on the ground in the suspected area of origin, it observed a pole support wire in proximity to an electrical wire that was energized prior to the outage.
The Redacted Woolsey Report states that the VCFD investigation team determined that electrical equipment owned and operated by SCE was the cause of the Woolsey Fire. Absent additional evidence, SCE believes that it is likely that its equipment was associated with the ignition of the Woolsey Fire. SCE expects to obtain and review additional information and materials in the possession of CAL FIRE and others during the course of its internal review and the Woolsey Fire litigation process, including SCE equipment that has been retained by CAL FIRE.
Litigation
Multiple lawsuits related to the 2017/2018 Wildfire/Mudslide Events naming SCE as a defendant have been filed by three categories of plaintiffs: individual plaintiffs, subrogation plaintiffs and public entity plaintiffs. A number of the lawsuits also name Edison International as a defendant and some of the lawsuits were filed as purported class actions. The litigation could take a number of years to be resolved because of the complexity of the matters and number of plaintiffs.
On October 4, 2018, the Los Angeles Superior Court denied Edison International's and SCE's challenge to the application of inverse condemnation to SCE with respect to the Thomas and Koenigstein Fires and, on February 26, 2019, the California Supreme Court denied SCE's petition to review the Superior Court's decision. In April 2022, following a stipulated judgment entered against SCE in the TKM litigation, SCE filed an appeal related to inverse condemnation in the California Court of Appeal.
In January 2019, SCE filed a cross-complaint against certain local public entities alleging that failures by these entities, such as failure to adequately plan for flood hazards and build and maintain adequate debris basins, roads, bridges and other channel crossings, among other things, caused, contributed to or exacerbated the losses that resulted from the Montecito Mudslides. These cross-claims in the Montecito Mudslides litigation were not released as part of the Local Public Entity Settlements (as defined below).
In the fourth quarter of 2019, SCE paid $360 million to a number of local public entities to resolve those parties' collective claims arising from the 2017/2018 Wildfire/Mudslide Events (the "Local Public Entity Settlements").
In the third quarter of 2020, Edison International and SCE entered into an agreement (the "TKM Subrogation Settlement") under which all of the insurance subrogation plaintiffs' in the Thomas Fire, Koenigstein Fire and Montecito Mudslides litigation (the "TKM Subrogation Plaintiffs") collective claims arising from the Thomas Fire, Koenigstein Fire or Montecito Mudslides have been resolved. Under the TKM Subrogation Settlement, SCE paid the TKM Subrogation Plaintiffs an aggregate of $1.2 billion in October 2020 and also agreed to pay $0.555 for each dollar in claims to be paid by the TKM Subrogation Plaintiffs to their policy holders on or before July 15, 2023, up to an agreed upon cap.
In January 2021, Edison International and SCE entered into an agreement (the "Woolsey Subrogation Settlement") under which all of the insurance subrogation plaintiffs' in the Woolsey Fire litigation (the "Woolsey Subrogation Plaintiffs") collective claims arising from the Woolsey Fire have been resolved. Under the Woolsey Subrogation Settlement, SCE paid the Woolsey Subrogation Plaintiffs an aggregate of $2.2 billion in March and April 2021. SCE has also agreed to pay $0.67 for each dollar in claims to be paid by the Woolsey Subrogation Plaintiffs to their policy holders on or before July 15, 2023, up to an agreed upon cap.
As of March 31, 2023, SCE has also entered into settlements with approximately 10,000 individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation. In 2022, 2021 and 2020, SCE entered into settlements with individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation under which it agreed to pay an aggregate of approximately $1.7 billion, $1.7 billion and $300 million, respectively, to those individual plaintiffs. In the first quarter of 2023, SCE entered into settlements with individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation under which it agreed to pay an aggregate of approximately $148 million to those individual plaintiffs. The statutes of limitations for individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events have expired.
Edison International and SCE did not admit wrongdoing or liability as part of any of the settlements described above. Other claims and potential claims related to the 2017/2018 Wildfire/Mudslide Events remain. SCE continues to explore reasonable settlement opportunities with other plaintiffs in the outstanding 2017/2018 Wildfire/Mudslide Events litigation.
In October 2021, SCE and the SED executed an agreement (the "SED Agreement") to resolve the SED's investigations into the 2017/2018 Wildfire/Mudslide Events and three other 2017 wildfires for, among other things, aggregate costs of $550 million. The $550 million in costs comprised of a $110 million fine to be paid to the State of California General Fund, $65 million of shareholder-funded safety measures, and an agreement by SCE to waive its right to seek cost recovery in CPUC-jurisdictional rates for $375 million of third-party uninsured claims payments. The SED Agreement provides that SCE may, on a permanent basis, exclude from its ratemaking capital structure any after-tax charges to equity or debt borrowed to finance costs incurred under the SED Agreement. The SED Agreement also imposes other obligations on SCE, including reporting requirements and safety-focused studies. SCE's obligations under the SED Agreement commenced on August 15, 2022, when CPUC approval of the SED Agreement became final and non-appealable. SCE did not admit imprudence, negligence or liability with respect to the 2017/2018 Wildfire/Mudslide Events in the SED Agreement.
Loss Estimates for Third Party Claims and Potential Recoveries from Insurance and through Electric Rates
At March 31, 2023 and December 31, 2022, Edison International's and SCE's consolidated balance sheets included fixed payments to be made under executed settlement agreements and accrued estimated losses of $1.0 billion and $1.1 billion, respectively, for the 2017/2018 Wildfire/Mudslide Events. The following table presents changes in estimated losses since December 31, 2022:
51
Balance at December 31, 20221
1,119
Increase in accrued estimated losses
Amounts paid
(221)
Balance at March 31, 20232
988
For the three months ended March 31, 2023 and 2022, Edison International's and SCE's consolidated statements of income included charges for the estimated losses, net of expected recoveries from insurance and FERC customers, related to the 2017/2018 Wildfire/Mudslide Events as follows:
Charge for wildfire-related claims
Expected revenue from FERC customers
Total pre-tax charge
390
Income tax benefit
(109)
Total after-tax charge
281
For events that occurred in 2017 and early 2018, principally the Thomas and Koenigstein Fires and Montecito Mudslides, SCE had $1.0 billion of wildfire-specific insurance coverage, subject to a self-insured retention of $10 million per occurrence. For the Woolsey Fire, SCE had an additional $1.0 billion of wildfire-specific insurance coverage, subject to a self-insured retention of $10 million per occurrence.
In total, through March 31, 2023, SCE has accrued estimated losses of $8.8 billion, has paid or is obligated to pay approximately $7.9 billion in settlements, including $120 million to be paid under the SED Agreement, and has recovered $2.0 billion from its insurance carriers in relation to the 2017/2018 Wildfire/Mudslide Events.
Recovery of SCE's losses realized in connection with the 2017/2018 Wildfire/Mudslide Events in excess of available insurance is subject to approval by regulators. Under accounting standards for rate-regulated enterprises, SCE defers costs as regulatory assets when it concludes that such costs are probable of future recovery in electric rates. SCE utilizes objectively determinable evidence to form its view on probability of future recovery. The only directly comparable precedent in which a California investor-owned utility has sought recovery for uninsured wildfire-related costs is San Diego Gas & Electric's ("SDG&E") requests for cost recovery related to 2007 wildfire activity, where the FERC allowed recovery of all FERC-jurisdictional wildfire-related costs while the CPUC rejected recovery of all CPUC-jurisdictional wildfire-related costs based on a determination that SDG&E did not meet the CPUC's prudency standard. As a result, while SCE does not agree with the
CPUC's decision, it believes that the CPUC's interpretation and application of the prudency standard to SDG&E creates substantial uncertainty regarding how that standard will be applied to an investor-owned utility in wildfire cost-recovery proceedings for fires ignited prior to July 12, 2019. SCE will continue to evaluate the probability of recovery based on available evidence, including judicial, legislative and regulatory decisions, including any CPUC decisions illustrating the interpretation and/or application of the prudency standard when making determinations regarding recovery of uninsured wildfire-related costs. While the CPUC has not made a determination regarding SCE's prudency relative to any of the 2017/2018 Wildfire/Mudslide Events, SCE is unable to conclude, at this time, that uninsured CPUC-jurisdictional wildfire-related costs are probable of recovery through electric rates. SCE would record a regulatory asset at the time it obtains sufficient information to support a conclusion that recovery is probable.
Through the operation of its FERC Formula Rate, and based upon the precedent established in SDG&E's recovery of FERC-jurisdictional wildfire-related costs, SCE believes it is probable it will recover its FERC-jurisdictional wildfire and mudslide related costs and has recorded total expected recoveries of $382 million within the FERC balancing account. This was the FERC portion of the total estimated losses accrued. As of March 31, 2023, collections have reduced the regulatory assets remaining in the FERC balancing account to $63 million.
In July 2019, SCE filed a CEMA application with the CPUC to seek recovery of, among other things, approximately $60 million of capital expenditures and capital related expenses incurred to restore service to customers and to repair, replace and restore buildings and SCE's facilities damaged or destroyed as a result of six 2017 fires, primarily the Thomas and Koenigstein Fires. In August 2021, the CPUC issued a final decision which denied without prejudice SCE's application to recover a revenue requirement of $8 million for all six 2017 wildfires on the basis that SCE did not demonstrate that it was prudent in relation to the Thomas and Rye fires and had failed to segregate the costs attributable to the other four fires. Of the $8 million revenue requirement that was denied, $6 million was for the Thomas and Rye fires. CAL FIRE has determined that the Thomas and Rye fires were caused by SCE equipment. The decision allows SCE to submit additional applications with the CPUC to recover the costs associated with the Thomas and Rye fires, does not specify a deadline for any such applications, and directs that SCE must prove it was prudent in relation to the Thomas and/or Rye fires, as applicable, in any such future applications. As required by the final decision with respect to the other four fires, SCE filed supplemental testimony in November 2021 segregating the restoration costs attributable to each such fire. In June 2022, the CPUC approved SCE's entire request with respect to the other four fires. As of March 31, 2023, SCE has $176 million in assets recorded in property, plant and equipment in relation to restoration costs related to the 2017/2018 Wildfire/Mudslide Events which may not be recoverable. These assets would be impaired if the restoration costs are permanently disallowed by the CPUC in future cost recovery proceedings. SCE expects to seek to recover costs incurred for reconstructing its system and restoring service to structures that were damaged or destroyed by the Thomas, Koenigstein and Woolsey Fires in future applications with the CPUC.
Several wildfires have significantly impacted portions of SCE's service territory after 2018 (the wildfires that originated in Southern California after 2018 where SCE's equipment may be alleged to be associated with the fire's ignition are referred to collectively as the "Post-2018 Wildfires"). Numerous claims related to the Post-2018 Wildfires have been initiated against SCE and Edison International. The SED is also conducting investigations with respect to several Post-2018 Wildfires.
Through March 31, 2023, SCE has recorded total estimated losses of $702 million, expected recoveries from insurance of $473 million and expected recoveries through electric rates of $166 million related to the Post-2018 Wildfires. The after-tax net charges to earnings recorded through March 31, 2023 have been $45 million.
As of March 31, 2023, SCE had paid $21 million under executed settlements related to the Post-2018 Wildfires and Edison International's and SCE's estimated losses for remaining alleged and potential claims related to the Post-2018 Wildfires was $681 million. As of the same date, SCE had assets for expected recoveries through insurance of $473 million and through electric rates of $166 million on its consolidated balance sheets related to the Post-2018 Wildfires.
Expected recoveries from insurance recorded for the Post-2018 Wildfires are supported by SCE's insurance coverage for multiple policy years. While Edison International and SCE may incur material losses in excess of the amounts accrued for certain of the Post-2018 Wildfires, Edison International and SCE expect that any losses incurred in connection with any such fire will be covered by insurance, subject to self-insured retentions and co-insurance, and expect that any such losses after expected recoveries from insurance and through electric rates will not be material.
2019 Saddle Ridge Fire
The "Saddle Ridge Fire," originated in Los Angeles County in October 2019 and burned approximately 9,000 acres, destroyed an estimated 19 structures, damaged an estimated 88 structures, and resulted in one fatality and injuries to 8 fire fighters. In an unsigned and undated report that SCE received in December 2022, the Los Angeles Fire Department stated with respect to the Saddle Ridge Fire that the cause of ignition was unintentional, the form of heat was undetermined, the item first ignited was undetermined and the material type first ignited was undetermined. The Los Angeles Fire Department report noted that no other competent ignition sources other than SCE’s transmission lines were found in the specific origin area of the Saddle Ridge Fire. SCE has been advised that the Los Angeles Fire Department investigation of the Saddle Ridge Fire remains open. A jury trial in the Saddle Ridge Fire litigation is currently set for January 2024. Based on pending litigation and without considering insurance recoveries, it is reasonably possible that SCE will incur a material loss in connection with the Saddle Ridge Fire, but the range of reasonably possible losses that could be incurred cannot be estimated at this time. SCE has not accrued a charge for potential losses relating to the Saddle Ridge Fire.
2020 Bobcat Fire
The "Bobcat Fire" was reported in the vicinity of Cogswell Dam in Los Angeles County in September 2020. The United States Forest Service ("USFS") has reported that the Bobcat Fire burned approximately 116,000 acres in Los Angeles County, destroyed an estimated 87 homes, 1 commercial property and 83 minor structures, damaged an estimated 28 homes and 19 minor structures, and resulted in injuries to 6 firefighters. In addition, fire authorities have estimated suppression costs at $80 million. While SCE’s investigation remains ongoing, SCE’s information reflects that a camera in the vicinity of Cogswell Dam captured the initial stages of a fire with the first observed smoke approximately six minutes before a SCE circuit in the area experienced an anomaly (a relay). An investigation into the cause of the Bobcat Fire is being led by the USFS, and the USFS has taken a specific section of an SCE overhead conductor in the vicinity of Cogswell Dam into possession as part of its investigation. SCE understands that the USFS has also taken three tree branches in the area into possession. SCE expects to obtain and review additional information and materials in the possession of third parties during the course of its internal reviews and the litigation process. SCE has accrued material charges for potential losses relating to the Bobcat Fire. The accrued charges correspond to the lower end of the estimated range of reasonably possible losses that may be incurred in connection with the Bobcat Fire and are subject to change as additional information becomes available. While Edison International and SCE may incur a material loss in excess of the amount accrued, they cannot estimate the upper end of the range of reasonably possible losses that may be incurred.
2022 Coastal Fire
The "Coastal Fire" originated in Orange County in May 2022 and burned approximately 200 acres. The Orange County Fire Authority ("OCFA") has reported that the Coastal Fire destroyed 20 residential structures and damaged 11 residential structures. Two firefighters also reportedly sustained minor injuries. In addition, fire authorities have estimated suppression costs at approximately $3 million. While SCE's investigation remains ongoing, SCE's information reflects that a SCE circuit in the area experienced an anomaly (a relay) approximately 2 minutes prior to the reported time of the fire. An investigation into the cause of the Coastal Fire is being led by the OCFA. The OCFA has retained SCE equipment in connection with its investigation. SCE expects to obtain and review additional information and materials in the possession of third parties during the course of its internal reviews and the litigation process. SCE has accrued material charges for potential losses relating to the Coastal Fire. The accrued charges correspond to the lower end of the estimated range of reasonably possible losses that may be incurred in connection with the Coastal Fire and are subject to change as additional information becomes available.
While Edison International and SCE may incur a material loss in excess of the amount accrued, they cannot estimate the upper end of the range of reasonably possible losses that may be incurred.
2022 Fairview Fire
The "Fairview Fire" originated in Riverside County in September 2022 and burned approximately 28,000 acres. CAL FIRE has reported that the Fairview Fire destroyed 22 residential structures, damaged 5 residential structures, and destroyed or damaged 17 minor structures. CAL FIRE also reported 2 civilian fatalities, 1 civilian injury and 2 injuries to responding fire personnel. In addition, fire authorities have estimated suppression costs at $39 million. While SCE's investigation remains ongoing, SCE's information reflects that a SCE circuit in the area experienced an anomaly (relay) approximately 8 minutes prior to the reported start time of the fire. An investigation into the cause of the Fairview Fire is being led by CAL FIRE. CAL FIRE has retained SCE equipment in connection with its investigation. SCE expects to obtain and review additional information and materials in the possession of third parties during the course of its internal reviews and the litigation process. SCE has accrued material charges for potential losses relating to the Fairview Fire. The accrued charges correspond to the lower end of the estimated range of reasonably possible losses that may be incurred in connection with the Fairview Fire and are subject to change as additional information becomes available. While Edison International and SCE may incur a material loss in excess of the amount accrued, they cannot estimate the upper end of the range of reasonably possible losses that may be incurred.
At March 31, 2023 and December 31, 2022, Edison International's and SCE's consolidated balance sheets included accrued estimated losses of $681 million and $682 million, respectively, for the Post-2018 Wildfires.
The following table presents changes in estimated losses since December 31, 2022:
682
681
For the three months ended March 31, 2023 and 2022, Edison International's and SCE's consolidated statements of income included charges for the estimated losses, net of expected recoveries from insurance and customers, related to the Post-2018 Wildfires as follows, respectively:
Edison International and SCE:
Expected insurance recoveries
Recovery of SCE's losses realized in connection with the Post-2018 Wildfires in excess of available insurance is subject to approval by regulators. The CPUC and FERC may not allow SCE to recover uninsured losses through electric rates if it is determined that such losses were not prudently incurred. Under accounting standards for rate-regulated enterprises, SCE defers costs as regulatory assets when it concludes that such costs are probable of future recovery in electric rates. SCE utilizes objectively determinable evidence to form its view on the probability of future recovery. As discussed above, there is evidence of a California investor-owned utility seeking recovery for uninsured wildfire-related costs and FERC allowing recovery of all FERC-jurisdictional wildfire-related costs while the CPUC rejected recovery of all CPUC-jurisdictional
55
wildfire-related costs based on a determination that the utility did not meet the CPUC's prudency standard. This evidence was prior to the adoption of AB 1054 on July 12, 2019, after which date AB 1054 clarified that the CPUC must find a utility to be prudent if the utility's conduct related to the ignition was consistent with actions that a reasonable utility would have undertaken in good faith under similar circumstances, at the relevant point in time, and based on the information available at that time. Further, utilities with a valid safety certification at the time of the relevant wildfire will be presumed to have acted prudently related to a wildfire ignition unless a party in the cost recovery proceeding creates serious doubt as to the reasonableness of the utility's conduct, at which time, the burden shifts back to the utility to prove its conduct was prudent. Each of the Post-2018 Wildfires was ignited after July 12, 2019, and SCE has held a valid safety certificate since July 15, 2019. While a California investor-owned utility has not yet sought recovery for uninsured claims and other costs related to wildfires ignited after the adoption of AB 1054, SCE believes that for fires ignited after July 12, 2019, and investor-owned utilities holding a safety certificate at the time of the fire, the CPUC will apply a standard of review similar to that applied by the FERC which presumes all costs requested by an investor-owned utility are reasonable and prudent unless serious doubt as to the reasonableness of the utility’s conduct is raised. As such, SCE has concluded, at this time, that both uninsured CPUC-jurisdictional and uninsured FERC-jurisdictional wildfire-related costs related to the Post-2018 Wildfires, other than for those already authorized for inclusion in electric rates, are probable of recovery through electric rates. As of March 31, 2023, SCE has recorded total expected recoveries related to the Post-2018 Wildfires of $152 million within the WEMA and risk management balancing account and $14 million within the FERC balancing account. SCE will continue to evaluate the probability of recovery based on available evidence, including regulatory decisions, including any CPUC decisions illustrating the interpretation and/or application of the prudency standard under AB 1054, and, for each applicable fire, evidence that could cast serious doubt as to the reasonableness of SCE's conduct relative to that fire.
Wildfire Insurance Coverage
SCE has approximately $1.0 billion of wildfire-specific insurance coverage for events that may occur during the period July 1, 2022 through June 30, 2023, subject to up to $100 million of self-insured retention and co-insurance per fire, which results in aggregate net coverage of approximately $937 million. Of this coverage, approximately $102 million is provided by EIS and approximately $835 million is provided by other commercial insurance carriers (commercial insurance carriers other than EIS are referred to herein as "Third-Party Commercial Insurers"). SCE has approximately $1.0 billion of wildfire-specific insurance coverage for events that occurred during the period July 1, 2021 through June 30, 2022, subject to up to $100 million of self-insured retention and co-insurance per fire, as well as additional co-insurance of up to $63 million for the policy year, which resulted in net coverage of approximately $875 million provided by Third-Party Commercial Insurers and $28 million provided by EIS for part of the policy year.
SCE believes that its insurance coverage for the July 1, 2022 through June 30, 2023 period meets its obligation to maintain reasonable insurance coverage under AB 1054. Edison International and SCE record a receivable for insurance recoveries when recovery of a recorded loss is determined to be probable.
SCE's wildfire insurance expense for the July 1, 2022 through June 30, 2023 policy period will be approximately $450 million, of which $357 million is paid to Third-Party Commercial Insurers. SCE's wildfire insurance expense for the July 1, 2021 through June 30, 2022 policy period was approximately $437 million, of which $413 million was paid to Third-Party Commercial Insurers. The difference between the Third-Party Commercial Insurer cost and total cost in both policy years was paid in premiums to EIS. Wildfire insurance premiums paid for the July 1, 2021 through June 30, 2022 and July 1, 2022 through June 30, 2023 policy periods are being recovered through customer rates. See Note 17 for further information.
While SCE's cost of obtaining wildfire insurance coverage from Third-Party Commercial Insurers was lower in 2022 compared to 2021, SCE's cost of obtaining wildfire insurance coverage in recent years is significantly higher than costs incurred prior to the 2017/2018 Wildfire/Mudslide Events due to, among other things, the number of significant wildfire events throughout California and the application of inverse condemnation to investor-owned utilities. While SCE is required to maintain reasonable insurance coverage under AB 1054, SCE may not be able to obtain a reasonable amount of wildfire
insurance, at a reasonable cost, from Third-Party Commercial Insurers for future policy periods. Subject to obtaining CPUC approval, SCE plans to expand its use of self-insurance for wildfire insurance coverage. SCE expects to obtain wildfire-specific insurance coverage for the period that will begin on July 1, 2023 from Third-Party Commercial Insurers, through self-insurance, or a combination of both.
Environmental Remediation
SCE records its environmental remediation and restoration liabilities when site assessments and/or remedial actions are probable and a range of reasonably likely cleanup costs can be estimated. SCE reviews its sites and measures the liability quarterly, by assessing a range of reasonably likely costs for each identified site using currently available information, including existing technology, presently enacted laws and regulations, experience gained at similar sites, and the probable level of involvement and financial condition of other potentially responsible parties. These estimates include costs for site investigations, remediation, operation and maintenance, monitoring, and site closure. Unless there is a single probable amount, SCE records the lower end of this reasonably likely range of costs (reflected in "Other long-term liabilities") at undiscounted amounts as timing of cash flows is uncertain.
At March 31, 2023, SCE's recorded estimated minimum liability to remediate its 26 identified material sites (sites with a liability balance at March 31, 2023, in which the upper end of the range of expected costs is at least $1 million) was $254 million, including $164 million related to San Onofre. In addition to these sites, SCE also has 12 immaterial sites with a liability balance as of March 31, 2023, for which the total minimum recorded liability was $3 million. Of the $257 million total environmental remediation liability for SCE, $238 million has been recorded as a regulatory asset. SCE expects to recover $36 million through an incentive mechanism that allows SCE to recover 90% of its environmental remediation costs at certain sites (SCE may request to include additional sites in this mechanism) and $202 million through proceedings that allow SCE to recover up to 100% of the costs incurred at certain sites through customer rates. SCE's identified sites include several sites for which there is a lack of currently available information, including the nature and magnitude of contamination, and the extent, if any, that SCE may be held responsible for contributing to any costs incurred for remediating these sites. Thus, no reasonable estimate of cleanup costs can be made for these sites.
The ultimate costs to clean up SCE's identified sites may vary from its recorded liability due to numerous uncertainties inherent in the estimation process, such as: the extent and nature of contamination; the scarcity of reliable data for identified sites; the varying costs of alternative cleanup methods; developments resulting from investigatory studies; the possibility of identifying additional sites; and the time periods over which site remediation is expected to occur. SCE believes that, due to these uncertainties, it is reasonably possible that cleanup costs at the identified material sites and immaterial sites could exceed its recorded liability by up to $118 million and $8 million, respectively. The upper limit of this range of costs was estimated using assumptions least favorable to SCE among a range of reasonably possible outcomes.
SCE expects to clean up and mitigate its identified sites over a period of up to 40 years. Remediation costs for each of the next five years are expected to range from $8 million to $29 million. Costs incurred for the three months ended March 31, 2023 and 2022 were both $2 million.
Based upon the CPUC's regulatory treatment of environmental remediation costs incurred at SCE, SCE believes that costs ultimately recorded will not materially affect its results of operations, financial position, or cash flows. There can be no assurance, however, that future developments, including additional information about existing sites or the identification of new sites, will not require material revisions to estimates.
Nuclear Insurance
SCE is a member of Nuclear Electric Insurance Limited ("NEIL"), a mutual insurance company owned by entities with nuclear facilities. NEIL provides insurance for nuclear property damage, including damages caused by acts of terrorism up to specified limits, and for accidental outages for active facilities. The amount of nuclear property damage insurance purchased for San Onofre and Palo Verde exceeds the minimum federal requirement of $50 million and $1.1 billion, respectively. If
NEIL losses at any nuclear facility covered by the arrangement were to exceed the accumulated funds for these insurance programs, SCE could be assessed retrospective premium adjustments of up to approximately $30 million per year.
Federal law limits public offsite liability claims for bodily injury and property damage from a nuclear incident to the amount of available financial protection, which is currently approximately $560 million for San Onofre and $13.7 billion for Palo Verde. SCE and other owners of San Onofre and Palo Verde have purchased the maximum private primary insurance available through a Facility Form issued by American Nuclear Insurers. SCE withdrew from participation in the secondary insurance pool for San Onofre for offsite liability insurance effective January 5, 2018. Based on its ownership interests in Palo Verde, SCE could be required to pay a maximum of approximately $65 million per nuclear incident for future incidents. However, it would have to pay no more than approximately $10 million per future incident in any one year. Based on its ownership interests in San Onofre and Palo Verde prior to January 5, 2018, SCE could be required to pay a maximum of approximately $255 million per nuclear incident and a maximum of $38 million per year per incident for liabilities arising from events prior to January 5, 2018, although SCE is not aware of any such events.
Common Stock Issuances
As of March 31, 2023, Edison International has not issued any shares through its "at-the-market" ("ATM") program established in August 2022. Under the ATM program, Edison International may sell shares of its common stock having an aggregate sales price of up to $500 million. Edison International has no obligation to sell the remaining shares available under the ATM program.
Edison International continued to settle its ongoing common stock requirements of various internal programs through issuance of new common stock. During the three months ended March 31, 2023, 324,438 shares of common stock were issued as stock compensation awards for net cash receipts of $11 million, 67,314 shares of new common stock were issued in lieu of distributing $5 million to shareholders opting to receive dividend payments in the form of additional common stock, 29,000 shares of common stock were issued to employees through the 401(k) defined contribution savings plan for net cash receipts of $2 million as dividend payments and 26,481 shares of common stock were issued to employees through the ESPP for net cash receipts of $2 million.
The changes in accumulated other comprehensive loss, net of tax, consist of:
Pension and PBOP:
Reclassified from accumulated other comprehensive loss1
Ending Balance
Other income net of expenses is as follows:
SCE other income (expense):
Equity allowance for funds used during construction
Increase in cash surrender value of life insurance policies and life insurance benefits
Interest income
60
Net periodic benefit income – non-service components
Civic, political and related activities and donations
Total SCE other income
Other income (expense) of Edison International Parent and Other:
Net loss on equity securities
Total Edison International other income
Supplemental cash flows information is:
Cash payments (receipts):
Interest, net of amounts capitalized
253
Income taxes, net
(42)
Non-cash financing and investing activities:
Dividends declared but not paid:
Common stock
267
Preference stock of SCE
SCE's accrued capital expenditures at March 31, 2023 and 2022 were $592 million and $728 million, respectively. Accrued capital expenditures will be included as an investing activity in the consolidated statements of cash flow in the period paid.
SCE has previously purchased wildfire liability insurance from EIS, a wholly-owned subsidiary of Edison International. In July 2022, SCE purchased wildfire liability insurance for premiums of $273 million, from EIS for the period to June 30, 2023. EIS fully reinsured the exposure for these policies through the commercial reinsurance market, with reinsurance limits and premiums equal to those of the insurance purchased by SCE, except for a contract for a premium of $93 million under which EIS provided insurance protection to SCE. SCE recorded the premium as insurance expense and recorded equal revenue due to customer funding through regulatory cost recovery mechanisms, therefore there was no earnings impact on SCE's consolidated statement of income. EIS recorded the premium as insurance revenue. On the Edison International consolidated statement of income, the EIS insurance revenue eliminated with SCE's insurance expense, therefore the SCE customer revenues increased the earnings of Edison International. The amount of insurance expense and corresponding revenue was $22 million for the three months ended March 31, 2023.
The related-party transactions included in SCE's consolidated balance sheets for wildfire-related insurance purchased from EIS and related expected insurance recoveries were as follows:
Prepaid insurance1
Long-term insurance receivable due from affiliate
Reflected in "Prepaid expenses" on SCE's consolidated balance sheets.
The expense for wildfire-related insurance premiums paid to EIS was $66 million and $39 million for the three months ended March 31, 2023 and 2022, respectively.
The management of Edison International and SCE, under the supervision and with the participation of Edison International's and SCE's respective Chief Executive Officers and Chief Financial Officers, have evaluated the effectiveness of Edison International's and SCE's disclosure controls and procedures (as that term is defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended), respectively, as of the end of the first quarter of 2023. Based on that evaluation, Edison International's and SCE's respective Chief Executive Officers and Chief Financial Officers have each concluded that, as of the end of the period, Edison International's and SCE's disclosure controls and procedures, respectively, were effective.
There were no changes in Edison International's or SCE's internal control over financial reporting, respectively, during the first quarter of 2023 that have materially affected, or are reasonably likely to materially affect, Edison International's or SCE's internal control over financial reporting.
Edison International's and SCE's respective scope of evaluation of internal control over financial reporting includes their Jointly Owned Utility Projects as discussed in "Notes to Consolidated Financial Statements—Note 2. Property, Plant and Equipment" in the 2022 Form 10-K.
As of April 25, 2023, SCE was aware of approximately 150 pending unsettled lawsuits, representing approximately 1,000 plaintiffs, related to the Thomas and Koenigstein Fires naming SCE as a defendant. Approximately 100 of the approximately 150 lawsuits also name Edison International as a defendant based on its ownership and alleged control of SCE. One of the lawsuits was filed as a purported class action. The lawsuits, which have been filed in the superior courts of Ventura, Santa Barbara and Los Angeles Counties allege, among other things, negligence, inverse condemnation, trespass, private nuisance, and violations of the public utilities and health and safety codes. SCE and certain of the individual plaintiffs in the Thomas and Koenigstein Fire litigation have been pursuing settlements of claims under a mediation program adopted to promote an efficient and orderly settlement process. Some individual plaintiffs have opted to pursue trial outside of the settlement program.
Approximately 50 of the approximately 150 pending unsettled lawsuits mentioned in the paragraph above allege that SCE has responsibility for the Thomas and/or Koenigstein Fires and that the Thomas and/or Koenigstein Fires proximately caused the Montecito Mudslides, resulting in the plaintiffs' claimed damages. Many of the Montecito Mudslides lawsuits also name Edison International as a defendant based on its ownership and alleged control of SCE. In addition to other causes of action, some of the Montecito Mudslides lawsuits also allege personal injury and wrongful death.
As of April 25, 2023, SCE was aware of approximately 350 currently pending unsettled lawsuits, representing approximately 3,000 plaintiffs, related to the Woolsey Fire naming SCE as a defendant. Approximately 300 of the 350 lawsuits also name Edison International as a defendant based on its ownership and alleged control of SCE. At least one of the lawsuits was filed as a purported class action. The lawsuits, which have been filed in the superior courts of Ventura and Los Angeles Counties allege, among other things, negligence, inverse condemnation, personal injury, wrongful death, trespass, private nuisance, and violations of the public utilities and health and safety codes. SCE and certain of the individual plaintiffs in the Woolsey Fire litigation have been pursuing settlements of claims under a mediation program adopted to promote an efficient and orderly settlement process. Some individual plaintiffs may opt to pursue trial outside of the settlement program.
The Thomas and Koenigstein Fires and Montecito Mudslides lawsuits are being coordinated in the Los Angeles Superior Court. The Woolsey Fire lawsuits have also been coordinated in the Los Angeles Superior Court.
For further information, including regarding settlement activity related to the 2017/2018 Wildfire/Mudslide Events, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides."
Each of Edison International and SCE have elected to disclose environmental proceedings described in Item 103(c)(3)(iii) of Regulation S-K unless it reasonably believes that such proceeding will result in no monetary sanctions, or in monetary sanctions, exclusive of interest and costs, of less than $1,000,000.
Exhibit Number
Description
10.1**
Edison International 2023 Long-Term Incentives Terms and Conditions
31.1
Certifications of the Chief Executive Officer and Chief Financial Officer of Edison International pursuant to Section 302 of the Sarbanes-Oxley Act
31.2
Certifications of the Chief Executive Officer and Chief Financial Officer of Southern California Edison Company pursuant to Section 302 of the Sarbanes-Oxley Act
32.1
Certifications of the Chief Executive Officer and the Chief Financial Officer of Edison International required by Section 906 of the Sarbanes-Oxley Act
32.2
Certifications of the Chief Executive Officer and the Chief Financial Officer of Southern California Edison Company required by Section 906 of the Sarbanes-Oxley Act
101.1
Financial statements from the quarterly report on Form 10-Q of Edison International for the quarter ended March 31, 2023, filed on May 2, 2023, formatted in Inline XBRL: (i) the Consolidated Statements of Income; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to Consolidated Financial Statements
101.2
Financial statements from the quarterly report on Form 10-Q of Southern California Edison Company for the quarter ended March 31, 2023, filed on May 2, 2023, formatted in Inline XBRL: (i) the Consolidated Statements of Income; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to Consolidated Financial Statements
The cover page of this report formatted in Inline XBRL (included as Exhibit 101)
** Indicates a management contract or compensatory plan or arrangement, as required by Item 15(a)(3).
Edison International and SCE will furnish a copy of any exhibit listed in the accompanying Exhibit Index upon written request and upon payment to Edison International or SCE of their reasonable expenses of furnishing such exhibit, which shall be limited to photocopying charges and, if mailed to the requesting party, the cost of first-class postage.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.
By:
/s/ Kate Sturgess
Kate Sturgess
Vice President and Controller
(Duly Authorized Officer and Principal Accounting Officer)
Date:
May 2, 2023