Energy for What’s Ahead
Edison International and Southern California Edison
2016 Annual Report
2244 Walnut Grove Avenue
Rosemead, CA 91770
www.edison.com
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2016 FINANCIAL HIGHLIGHTS
Dollar amounts in millions, except per-share data
Years ended December 31,
Operating revenue
Basic earnings (1)
Less: non-core items
2016
2015
2014
$11,869
$1,311
$11,524 $13,413
$1,612
$1,020
Write -down, impairment and other charges
Discontinued operations
Other items
Total non-core items
Core earnings (1)
Basic earnings per share (1)
Core earnings per share (1)
Total assets at December 31
Dividends paid per common share
Total shareholder return
Total employees
–
(382) (72)
12
185
5
2
17
(316) 115
$1,294
$1,497
$4.02 $3.13
$4.95
$3.97
$4.59
$4.10
$51,319
$50,229
$49,734
$1.92
$1.42
$1.67
24.9% (6.9)% 45.0%
12,390
12,768 13,690
35
31
$1,336
BUSINESS HIGHLIGHTS
Southern California Edison
Rate base (2)
Capital expenditures (2)
Peak demand (megawatts)
Total system sales (kilowatt-hours, in millions)
$25,923
$3,527
23,091
85,977
$24,596
$3,867
23,079
87,544
$23,254
$3,967
23,055
88,986
(1) Edison International’s earnings are prepared in accordance with generally accepted accounting principles (GAAP) used in the
United States. Management uses core earnings and core earnings per share (EPS) internally for financial planning and for analysis
of performance. Core earnings and core EPS are also used when communicating with analysts and investors regarding our
earnings results to facilitate comparisons of the Company’s performance from period to period. Core earnings and core EPS are
non-GAAP financial measures and may not be comparable to those of other companies. Core earnings and core EPS are defined
as basic earnings and basic EPS excluding income or loss from discontinued operations and income or loss from significant
discrete items that management does not consider representative of ongoing earnings. Basic earnings refer to net income
attributable to Edison International shareholders.
(2) Represents year-end rate base at December 31, which includes capital expenditures related to certain FERC-approved
projects during the construction phase. Capital expenditures for each year include accruals.
Inquiries may also be directed to:
Wells Fargo Shareowner Services
1110 Centre Point Curve, Suite 101
Mendota Heights, MN 55120-4100
Fax:
(651) 450-4033
Wells Fargo Shareowner ServicesSM
www.shareowneronline.com
Investor Relations
www.edisoninvestor.com
Email: invrel@sce.com
Phone: (877) 379-9515
Online account information:
www.shareowneronline.com
Dividend Reinvestment and
Direct Stock Purchase Plan
A prospectus and enrollment forms
for Edison International’s common
stock Dividend Reinvestment and
Direct Stock Purchase Plan are available
from Wells Fargo Shareowner
Services upon request
Edison International
Annual Meeting
The annual meeting of shareholders
will be held on Thursday, April 27,
2017, at 9:00 a.m., Pacific Time, at
the Hilton Los Angeles San Gabriel
Hotel, 225 West Valley Boulevard,
San Gabriel, California 91776.
Corporate Governance Practices
A description of Edison International’s
corporate governance practices is
available on our Web site at
www.edisoninvestor.com. The Edison
International Board Nominating/
Corporate Governance Committee
periodically reviews the Company’s
corporate governance practices and
makes recommendations to the
Company’s Board that the practices
be updated from time to time.
Stock Listing and Trading Information
Common Stock: The New York Stock
Exchange uses the ticker symbol EIX;
daily newspapers list the stock as
EdisonInt.
SCE’s 4.08%, 4.24%, 4.32% and
4.78% Series of $25 par value
cumulative preferred stock are listed
on the NYSE MKT stock exchange.
Shares of SCE’s preference stock are
not listed on an exchange. SCE Trust I,
SCE Trust II, SCE Trust III, SCE Trust
IV, and SCE Trust V, subsidiaries of
SCE, have issued Trust Preference
Securities which are listed on the
New York Stock Exchange.
Transfer Agent and Registrar
Wells Fargo Bank, N.A., which maintains
shareholder records, is the transfer
agent and registrar for Edison
International’s common stock and
Southern California Edison Company’s
preferred and preference stock.
Shareholders may call Wells Fargo
Shareowner Services, (800) 347-8625,
between 7 a.m. and 7 p.m. (Central
Time), Monday through Friday, to
speak with a representative (or to
use the interactive voice response
unit 24 hours a day, seven days a
week) regarding:
n stock transfer and name-change
requirements;
n address changes, including dividend
payment addresses;
n electronic deposit of dividends;
n taxpayer identification number
submissions or changes;
n duplicate 1099 and W-9 forms;
n notices of, and replacement of
destroyed stock certificates and
dividend checks;
n Edison International’s Dividend
Reinvestment and Direct
Stock Purchase Plan, including
enrollments, purchases,
withdrawals, terminations, transfers,
sales, duplicate statements and
direct debit of optional cash for
dividend reinvestment; and
n requests for access to online
account information.
Edison International and Southern California Edison 2016 Annual Report
Page 1
Letter to Shareholders
I am privileged to address you in my first letter to
shareholders as president and chief executive officer
of Edison International. It is humbling to lead a company
with a 130-year history as one of the builders of
the Southern California region and a recognized
innovator in the electric power industry. Since
assuming the role of CEO on October 1 after leading
our Southern California Edison (SCE) utility, I have
become ever more impressed by the skill and
dedication our team demonstrates every day serving
our customers, at both SCE and our Edison Energy
Group (EEG) of competitive businesses.
Our team will be asked to respond to new and
greater challenges and opportunities in the coming
years. Our company, our industry, and our global
economy are all in the midst of a profound transition.
New technologies are rapidly changing the electric
power landscape, giving customers and utilities alike
greater choices and creating new ways to work
more efficiently in every industry. Moreover, the
electric grid is emerging as a critical enabler of carbon
reduction across the entire economy, not just the
power sector, in order to address climate change.
While federal policies are evolving, the state of
California will continue to pursue greenhouse gas
reduction, and our company will be a key player in
this effort. Our customers and state policymakers
demand it. One of our key responsibilities is to work
constructively with government at the federal, state,
and local levels. We look to find areas where we can
work together, make an impact, and do right by our
customers, employees and stakeholders.
Edison International is uniquely positioned to lead
the transformative change underway in the electric
power industry. This leadership provides opportunities
for growth and adding value for our shareholders
while serving the interests of our customers, our
state, and the environment.
In 2016, we generated strong returns for shareholders.
Edison International’s stock price closed 2016 up
22 percent. Our stock outperformed our primary
benchmark, the Philadelphia Utilities Index, which
rose 13 percent in 2016. The S&P 500 Index rose
10 percent. Including the dividend, total return for
shareholders in 2016 was 25 percent, compared to
17 percent for the Philadelphia Utilities Index and
12 percent for the S&P 500.
In December, we increased our dividend for the
thirteenth consecutive year to an annual rate of
$2.17 per share – a 13 percent increase. This was
the third consecutive year we announced a double-
digit increase, and reflected our commitment to
returning our dividend in steps over time to our
target payout ratio of 45 to 55 percent of SCE’s
earnings. Dividend growth remains an important
element of Edison International’s value proposition
for investors as we target dividend growth at a
faster pace than SCE’s earnings growth.
Core earnings in 2016 were $3.97 per share and our
GAAP earnings were $4.02 per share. (See opposite
page for a reconciliation of core and GAAP earnings.)
These results compared to 2015 earnings of $4.10
and $3.13 per share, on the same basis.
Next, I want to review the operational and strategic
highlights of 2016 and priorities for 2017 at each of
our operating companies.
At SCE, our business strategy has three key elements.
First, maintain a safe and reliable wires network.
Second, be a key enabler of California’s commitment
to greenhouse gas reduction, led by our proposed
grid modernization efforts to support widespread
adoption of renewable and distributed energy, storage,
electric vehicle charging, and other technologies.
And finally, continue our operational excellence
journey to achieve top quartile performance in
safety, reliability, customer satisfaction, and costs.
Looking ahead to 2017, a major priority for SCE will
continue to be safety. Although we have made
progress on our journey to injury-free in recent
years, we must further intensify our focus on
employee and public safety. To that end, we have
elevated safety to one of our company’s six core
values. To increase our engagement and dedicate
additional senior leadership in this area, we have
created a new officer position at SCE: Vice President
of Safety, Security and Business Resiliency. We aim
Edison International and Southern California Edison 2016 Annual Report
Page 2
to eliminate serious injuries and fatalities and
protect our colleagues and customers from all types
of injuries.
On September 1, we filed SCE’s 2018 General Rate
Case at the California Public Utilities Commission.
This filing, which seeks to set customer rates for the
years 2018-2020, demonstrates our commitment
to SCE’s three strategy elements. We believe we
have made a strong case for our strategy and the
requested funding levels in our filing.
The grid modernization efforts included in our rate
request will support California’s implementation of
Senate Bill 32, signed by Governor Brown on
September 8. This legislation requires the state to
cut greenhouse gas emissions 40 percent below
1990 levels by 2030 in order to help address global
climate change.
We believe that California will have to move much
more aggressively than it has in the past -- and
sooner rather than later -- to meet these new
legislative mandates within a short 13 years. Many
of California’s policies to date have focused on
electric power generation, but that represents only
an estimated 20 percent of current statewide
greenhouse gas emissions. The largest source is the
transportation sector, with an estimated 36 percent
of current emissions. We believe that substantial
new efforts across all sectors of the economy will
be needed, and many of these efforts will require
significant electrification of sectors that today rely
on fossil fuels. Grid modernization is an important
part of the needed solution, and we see ourselves
as a key partner with California in this effort.
SCE is continuing to advance the electrification of
transportation in California. In January of 2017, we
and other investor-owned utilities filed applications
at the Public Utilities Commission laying out a
path for using transportation electrification to help
meet the state’s greenhouse gas reduction goals.
Transportation electrification is also an opportunity
to improve the health and environment for many
communities located near major transportation
corridors and encourage investment in
disadvantaged communities.
In addition, at year-end 2016, SCE installed 40
megawatts of company-owned battery storage across
three projects on our system, including the industry’s
first installations of batteries fully integrated into
peaking generation stations. The combination of
these projects and battery storage competitively
procured in the past 18 months makes SCE the
largest battery storage owner and purchaser of
battery storage services in North America as we move
to better integrate renewable energy resources.
In December, we received a ruling from the Public
Utilities Commission on SCE’s settlement regarding
the retired San Onofre Nuclear Generating Station.
The ruling directed SCE to confer with other parties
Edison International’s senior leadership team: Center front – Pedro J. Pizarro, President and Chief Executive Officer;
Middle row, left to right -- Gaddi H. Vasquez, Senior Vice President, Government Affairs; Jacqueline Trapp, Vice President, Human
Resources; Maria C. Rigatti, Executive Vice President and Chief Financial Officer; Adam S. Umanoff, Executive Vice President and Gen-
eral Counsel; Back row, left to right -- Ronald O. Nichols, President, Southern California Edison; Ronald L. Litzinger, President, Edison
Energy Group; Kevin M. Payne, Chief Executive Officer, Southern California Edison; Janet T. Clayton, Senior Vice President, Corporate
Communications; J. Andrew (Drew) Murphy, Senior Vice President, Strategic Planning.
Edison International and Southern California Edison 2016 Annual Report
Page 3
about possibly changing the terms of our previously
approved 2014 settlement. While we continue to
believe the previous settlement reflects a good
outcome for our customers, we are participating in
the process spelled out in the ruling. Also in
December, SCE selected a joint venture between
AECOM and EnergySolutions as the decommissioning
general contractor to dismantle San Onofre starting
in 2018. This is an important milestone in our 20-year
plan to safely decommission the plant.
At our Edison Energy Group of competitive
businesses, we are leveraging our insights into the
transformation underway in the electric power
industry by building new businesses primarily outside
of our Southern California footprint. Though small
today, EEG shows great promise. Its principal
businesses are in energy advisory services and
solutions for large commercial and industrial customers.
This includes commercial and community solar,
energy procurement advisory, arranging contracts
for renewable energy sourced away from the
customer’s location, and energy efficiency and energy
management capabilities. We see great potential
in integrating these into a broader “energy as a
service” product for customers throughout the U.S.
Feedback from the marketplace has been quite
encouraging. Our customers include a number of
Fortune 1000 companies and a dozen of the Fortune
50. For example, our team worked with General
Motors to identify renewable energy projects in Texas,
and then helped GM execute its largest wind deal
to date, which will allow 16 of its facilities to be
powered with 100 percent renewable energy by 2018.
We still have much work to do to flesh out a
compelling value proposition that will grow this
into a profitable business with meaningful scale.
We expect to complete evolving our initial business
case into a detailed business plan by the fall of
2017 with near-term milestones that our board,
management, and investors can use to measure
our progress. I am committed to implementing
our competitive business strategies at a pace that
creates opportunities for meaningful growth, yet is
a disciplined, capital-light approach that does not
detract from Edison International’s opportunity to
deliver above industry average earnings and dividend
growth and resulting value for investors.
I want to express my gratitude to the Edison
International board of directors for their guidance
and support. I especially want to thank retiring
directors Richard T. Schlosberg III and Jagjeet S.
Bindra for their years of service, and to welcome our
newest board member, Louis Hernandez Jr. I look
forward to working with the board under our new
governance model with myself as CEO and William
P. Sullivan as chair. I also want to salute Ted Craver
and Jim Scilacci, who retired in 2016 as Edison
International’s chief executive officer and chief
financial officer, respectively. Ted and Jim left our
company on sound footing for the future.
Our companies – both Southern California Edison
and Edison Energy Group – are grounded in a
common set of values. At the core, we’re wired the
same way in wanting our teams to serve customers
with respect and integrity, and always pushing
ourselves to get better. We have the drive, insights,
and innovation to successfully lead our industry’s
transformation and to deliver safe, reliable, clean,
and affordable energy. My talented and dedicated
teammates at Edison International are ready to do
remarkable things.
Pedro J. Pizarro
President and Chief Executive Officer
March 3, 2017
Edison International and Southern California Edison 2016 Annual Report
Page 4
Tomorrow’s Clean Energy Economy: Customer-driven. Modernized. Reliable.
Modernizing the Grid at Southern California Edison
Amid a profound shift underway in the energy business,
we are building the power grid of the future.
Today’s customers are adopting distributed energy resources – rooftop solar,
onsite storage, electric vehicles, and energy management systems – to achieve cost
savings, cleaner power, conservation, and enhanced reliability. California is at
the forefront of this power system transformation and is home to 50 percent of the
nation’s private solar systems – more than half a million businesses and homes.
In response, we at SCE are modernizing and reinforcing the grid to enable customers
to maximize the value of their investments. This will not only benefit individual
customers, but also will contribute significantly to local economies, a cleaner
environment, and grid resiliency.
Photo above: SCE’s Grid Control Center is at the heart of an
electricity distribution network that is becoming smarter – more digital,
resilient, and capable of accommodating new energy technologies
that customers plug in to the system.
Edison International and Southern California Edison 2016 Annual Report
Page 5
Reducing Emissions with Battery Storage
Large-scale batteries are emerging today as viable alternatives
to running carbon-emitting power plants.
Recent advances in the cost and efficiency of battery technologies have
created an opportunity to store larger amounts of electricity on the grid to
be used when needed, thereby reducing reliance on fuel-burning power plants.
After testing this technology with demonstration projects for several years,
we completed three major installations of grid battery storage in 2016. We contracted
with Tesla Energy for the construction of a 20-megawatt battery storage facility
at our Mira Loma substation in Ontario, California, and with General Electric
for the construction of two innovative 10-megawatt battery storage facilities
integrated with our peaker plants in Norwalk and Rancho Cucamonga.
Photo above: At our gas-fired peaker plant in Norwalk is one of two of the
world’s first battery and gas turbine hybrid systems. These systems are capable
of responding instantaneously to electric system needs while simultaneously
reducing greenhouse gas emissions and operating costs, a revolutionary
approach to renewable integration and system reliability.
Edison International and Southern California Edison 2016 Annual Report
Page 6
Tomorrow’s Clean Energy Economy: Customer-driven. Modernized. Reliable.
Enabling a Transportation Revolution
Converting the transportation sector from petroleum to electricity
is a key to meeting the climate challenge.
The largest source of greenhouse gas in California is the transportation sector,
with an estimated 36 percent of current emissions. A key priority for the state
is advancing the electrification of transportation. At SCE, we launched in 2016
our Charge Ready pilot to install 1,500 electric vehicle charging stations at “long-dwell”
locations such as apartment and office buildings. In January 2017, we filed an application
with state regulators laying out a path for using transportation electrification to help
meet the state’s greenhouse gas reduction goals while improving the health
and environment for many communities located near major transportation corridors
and encouraging investment in disadvantaged communities.
Photos above: With new dedicated power circuits and a substation, SCE is
supporting the Port of Long Beach on its Middle Harbor Project, which
includes emissions-reducing electric-powered equipment such as ship-to-shore
and rail-mounted gantry cranes and autonomous guided vehicles.
Inset: Electric car plugging in to an SCE Charge Ready site.
Edison International and Southern California Edison 2016 Annual Report
Page 7
Energy Services at Edison Energy Group
At EEG, we are building new businesses in energy services
for large commercial and industrial customers.
In its first full year of operation in 2016, Edison Energy Group added Altenex,
Delta Energy and ENERActive Solutions, and, along with SoCore Energy,
now offers a wide range of energy advisory services and solutions to businesses
across the country, including many in the Fortune 1000. For example, our team
worked with General Motors to analyze its overall energy portfolio, with the
objective of reducing energy costs, lowering the carbon footprint and limiting
risk from energy cost volatility. The team also reached a three-year agreement
with the San Diego Unified Port District to provide energy consulting and reporting
services aimed at reducing emissions and optimizing its energy management.
Photo above: SoCore Energy helped Dairyland Power Cooperative go solar with an 18-megawatt
project at 14 sites across Wisconsin and Iowa, which was recognized by PV Conference & Expo
in Chicago as one of the best photovoltaic projects in the Midwest. Also in 2016, SoCore agreed to
acquire a number of solar garden development projects in Minnesota, and signed a 25-year power
purchase agreement to provide solar power to the Port of Long Beach.
Edison International and Southern California Edison 2016 Annual Report
Page 8
Energy for What’s Ahead sm
Our Values
Safety
Integrity
Excellence
Respect
Continuous Improvement
Teamwork
Our Shared Enterprise
Together we provide an indispensable service that
powers society. We are a single enterprise that is stronger
than the sum of its parts.
Our Operating Priorities
We meet customer needs
We value diversity
We build productive partnerships
We protect the environment
We learn from experience and improve
We grow the value of our business
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission
File Number
1-9936
1-2313
Exact Name of Registrant
as specified in its charter
State or Other Jurisdiction of
Incorporation or Organization
IRS Employer
Identification Number
EDISON INTERNATIONAL
SOUTHERN CALIFORNIA EDISON COMPANY
California
California
95-4137452
95-1240335
EDISON INTERNATIONAL
2244 Walnut Grove Avenue
(P.O. Box 976)
Rosemead, California 91770
(Address of principal executive offices)
SOUTHERN CALIFORNIA EDISON COMPANY
2244 Walnut Grove Avenue
(P.O. Box 800)
Rosemead, California 91770
(Address of principal executive offices)
(626) 302-2222
(Registrant's telephone number, including area code)
(626) 302-1212
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Edison International: Common Stock, no par value
Southern California Edison Company: Cumulative Preferred Stock
4.08% Series, 4.24% Series, 4.32% Series, 4.78% Series
NYSE LLC
NYSE MKT LLC
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Edison International
Yes
No
Southern California Edison Company
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Edison International
Yes
No
Southern California Edison Company
Yes
No
Securities registered pursuant to Section 12(g) of the Act: 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
Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Edison International
Yes
No
Southern California Edison Company
Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Edison International
Southern California Edison Company
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of "accelerated filer," "large accelerated filer," and "smaller reporting company" in Rule 12b-12 of the Exchange Act. (Check One):
Edison International
Large Accelerated Filer
Accelerated Filer
Non-accelerated Filer
Smaller Reporting Company
Southern California Edison Company Large Accelerated Filer
Accelerated Filer
Non-accelerated Filer
Smaller Reporting Company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Edison International
Yes
No
Southern California Edison Company
Yes
No
Aggregate market value of voting and non-voting common equity held by non-affiliates of the registrants as of June 30, 2016, the last business day of the most
recently completed second fiscal quarter:
Edison International
Southern California Edison Company Wholly owned by Edison International
Approximately $25.3 billion
Common Stock outstanding as of February 17, 2017:
Edison International
Southern California Edison Company
325,811,206 shares
434,888,104 shares (wholly owned by Edison International)
Designated portions of the Proxy Statement relating to registrants' joint 2017 Annual Meeting of Shareholders have been incorporated by reference into the parts of
this report where indicated.
DOCUMENTS INCORPORATED BY REFERENCE
SEC Form 10-K
Reference Number
Part II, Item 7
TABLE OF CONTENTS
GLOSSARY ..............................................................................................................................
FORWARD-LOOKING STATEMENTS...............................................................................
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.......................................................................................
MANAGEMENT OVERVIEW ..............................................................................................
Highlights of Operating Results.......................................................................................
Electricity Industry Trends ..............................................................................................
Capital Program................................................................................................................
Edison International Dividend Policy .............................................................................
Regulatory Proceedings ....................................................................................................
RESULTS OF OPERATIONS ................................................................................................
Southern California Edison Company ............................................................................
Earning Activities........................................................................................................
Cost-Recovery Activities..............................................................................................
Supplemental Operating Revenue Information.........................................................
Income Taxes...............................................................................................................
Edison International Parent and Other ..........................................................................
Loss from Continuing Operations..............................................................................
Income from Discontinued Operations (Net of Tax) .................................................
LIQUIDITY AND CAPITAL RESOURCES.........................................................................
Southern California Edison Company ............................................................................
Available Liquidity ......................................................................................................
Capital Investment Plan .............................................................................................
Decommissioning of San Onofre ...............................................................................
SCE Dividends ............................................................................................................
Margin and Collateral Deposits .................................................................................
Regulatory Balancing Accounts .................................................................................
Edison International Parent and Other ..........................................................................
Net Operating Loss and Tax Credit Carryforwards...................................................
Edison Energy Group Capital Expenditures .............................................................
Historical Cash Flows .......................................................................................................
Southern California Edison Company.......................................................................
Edison International Parent and Other .....................................................................
Contractual Obligations and Contingencies...................................................................
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Contractual Obligations..............................................................................................
Contingencies ..............................................................................................................
Off-Balance Sheet Arrangements ....................................................................................
Environmental Developments ..........................................................................................
MARKET RISK EXPOSURES ..............................................................................................
Interest Rate Risk..............................................................................................................
Commodity Price Risk......................................................................................................
Credit Risk.........................................................................................................................
CRITICAL ACCOUNTING ESTIMATES AND POLICIES ..............................................
Rate Regulated Enterprises..............................................................................................
Income Taxes .....................................................................................................................
Nuclear Decommissioning – Asset Retirement Obligation............................................
Pensions and Postretirement Benefits Other than Pensions .........................................
Accounting for Contingencies ..........................................................................................
NEW ACCOUNTING GUIDANCE .......................................................................................
RISK FACTORS ......................................................................................................................
RISKS RELATING TO EDISON INTERNATIONAL ........................................................
RISKS RELATING TO SOUTHERN CALIFORNIA EDISON COMPANY ...................
Regulatory Risks ...............................................................................................................
Financing Risks .................................................................................................................
Competitive and Market Risks ........................................................................................
Operating Risks.................................................................................................................
Cybersecurity and Physical Security Risks ....................................................................
Environmental Risks.........................................................................................................
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .....
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ........................................
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM .........
Consolidated Statements of Income for Edison International......................................
Consolidated Statements of Comprehensive Income for Edison International ..........
Consolidated Balance Sheets for Edison International .................................................
Consolidated Statements of Cash Flows for Edison International...............................
Consolidated Statements of Changes in Equity for Edison International ...................
Consolidated Statements of Income for Southern California Edison Company.........
Consolidated Statements of Comprehensive Income for Southern California
Edison Company ...............................................................................................................
Consolidated Balance Sheets for Southern California Edison Company ....................
Consolidated Statements of Cash Flows for Southern California Edison Company..
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ii
Part I, Item 1A
Part II, Item 7A
Part II, Item 8
Consolidated Statements of Changes in Equity for Southern California Edison
Company ............................................................................................................................
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...........................................
Note 1. Summary of Significant Accounting Policies....................................................
Note 2. Property, Plant and Equipment .........................................................................
Note 3. Variable Interest Entities....................................................................................
Note 4. Fair Value Measurements...................................................................................
Note 5. Debt and Credit Agreements..............................................................................
Note 6. Derivative Instruments .......................................................................................
Note 7. Income Taxes .......................................................................................................
Note 8. Compensation and Benefit Plans .......................................................................
Note 9. Investments ..........................................................................................................
Note 10. Regulatory Assets and Liabilities......................................................................
Note 11. Commitments and Contingencies .....................................................................
Note 12. Preferred and Preference Stock of Utility........................................................
Note 13. Accumulated Other Comprehensive Loss........................................................
Note 14. Interest and Other Income and Other Expenses.............................................
Note 15. Discontinued Operations ...................................................................................
Note 16. Supplemental Cash Flows Information............................................................
Note 17. Related-Party Transactions...............................................................................
Note 18. Quarterly Financial Data (Unaudited).............................................................
SELECTED FINANCIAL DATA............................................................................................
CONTROLS AND PROCEDURES .......................................................................................
OTHER INFORMATION .......................................................................................................
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE ............................................................
BUSINESS.................................................................................................................................
CORPORATE STRUCTURE, INDUSTRY AND OTHER INFORMATION ...................
Subsidiaries of Edison International ...............................................................................
Regulation of Edison International as a Holding Company .........................................
Employees and Labor Relations ......................................................................................
Insurance............................................................................................................................
SOUTHERN CALIFORNIA EDISON COMPANY .............................................................
Regulation ..........................................................................................................................
Overview of Ratemaking Process ....................................................................................
Purchased Power and Fuel Supply ..................................................................................
Competition .......................................................................................................................
Properties ...........................................................................................................................
49
50
50
59
60
61
65
67
69
73
88
89
92
98
99
100
100
101
101
102
104
105
105
105
106
106
106
106
107
107
107
107
108
109
110
111
iii
Part II, Item 6
Part II, Item 9A
Part II, Item 9B
Part II, Item 9
Part I, Item 1
Seasonality .........................................................................................................................
112
ENVIRONMENTAL REGULATION OF EDISON INTERNATIONAL AND
SUBSIDIARIES........................................................................................................................
Greenhouse Gas Regulation .............................................................................................
UNRESOLVED STAFF COMMENTS ..................................................................................
PROPERTIES ..........................................................................................................................
LEGAL PROCEEDINGS........................................................................................................
EXECUTIVE OFFICERS OF EDISON INTERNATIONAL .............................................
EXECUTIVE OFFICERS OF SOUTHERN CALIFORNIA EDISON COMPANY.........
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE............
EXECUTIVE COMPENSATION ..........................................................................................
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS....................................
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE ....................................................................................................................
PRINCIPAL ACCOUNTANT FEES AND SERVICES........................................................
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES............................................................................................................................
Purchases of Equity Securities by Edison International and Affiliated Purchasers...
Purchases of Equity Securities by Southern California Edison Company and
Affiliated Purchasers ........................................................................................................
Comparison of Five-Year Cumulative Total Return......................................................
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES .............................................
Schedule I – Condensed Financial Information of Edison International Parent ...............
Schedule II – Valuation and Qualifying Accounts of Edison International and SCE........
SIGNATURES ..........................................................................................................................
EXHIBIT INDEX .....................................................................................................................
112
112
113
113
113
114
115
116
116
116
116
117
117
117
117
118
118
119
123
125
127
Part I, Item 1B
Part I, Item 2
Part I, Item 3
Part I, Item 3
Part I, Item 3
Part III, Item 10
Part III, Item 11
Part III, Item 12
Part III, Item 13
Part III, Item 14
Part II, Item 5
Part IV, Item 15
This is a combined Form 10-K separately filed by Edison International and Southern California Edison Company. Information
contained herein relating to an individual company is filed by such company on its own behalf. Each company makes
representations only as to itself and makes no other representation whatsoever as to any other company.
iv
GLOSSARY
The following terms and abbreviations appearing in the text of this report have the meanings indicated below.
AFUDC..............................
ALJ ....................................
ARO(s) ..............................
Bcf .....................................
Bonus depreciation ............
BRRBA..............................
CAISO ...............................
CPUC.................................
DOE...................................
DERs..................................
DRP ...................................
Edison Energy....................
Edison Energy Group ........
EME...................................
EME Settlement
Agreement .........................
EMG ..................................
ERRA.................................
FERC .................................
GAAP ................................
GHG ..................................
GRC...................................
GWh ..................................
HLBV ................................
IRS.....................................
Joint Proxy Statement........
allowance for funds used during construction
administrative law judge
asset retirement obligation(s)
billion cubic feet
Current federal tax deduction of a percentage of the qualifying property placed in service
during periods permitted under tax laws
Base Revenue Requirement Balancing Account
California Independent System Operator
California Public Utilities Commission
U.S. Department of Energy
distributed energy resources
Distributed Resources Plan
Edison Energy, LLC, a wholly-owned subsidiary of Edison Energy Group that advises and
provides energy solutions to large energy users
Edison Energy Group, Inc., the holding company for subsidiaries engaged in competitive
businesses focused on providing energy services, including distributed generation and/or
storage, to commercial and industrial customers
Edison Mission Energy
Settlement Agreement by and among Edison Mission Energy, Edison International and the
Consenting Noteholders identified therein, dated February 18, 2014
Edison Mission Group Inc., a wholly owned subsidiary of Edison International and the
parent company of EME and Edison Capital
energy resource recovery account
Federal Energy Regulatory Commission
generally accepted accounting principles
greenhouse gas
general rate case
gigawatt-hours
hypothetical liquidation at book value
Internal Revenue Service
Edison International's and SCE's definitive Proxy Statement filed with the SEC in
connection with Edison International's and SCE's Annual Shareholders' Meeting held on
April 27, 2017
MD&A............................... Management's Discussion and Analysis of Financial Condition and Results
of Operations in this report
MHI ................................... Mitsubishi Heavy Industries, Inc. and related companies
MW....................................
MWdc ................................
megawatts
megawatts measured for solar projects representing the accumulated peak capacity of all the
solar modules
Nuclear Electric Insurance Limited
net energy metering
North American Electric Reliability Corporation
Nuclear Regulatory Commission
CPUC's Office of Ratepayers Advocates
Order Instituting Investigation
NEIL ..................................
NEM ..................................
NERC ................................
NRC...................................
ORA...................................
OII......................................
Palo Verde..........................
PBOP(s).............................
QF(s)..................................
nuclear electric generating facility located near
Phoenix, Arizona in which SCE holds a 15.8% ownership interest
postretirement benefits other than pension(s)
qualifying facility(ies)
v
ROE ...................................
S&P....................................
San Onofre.........................
San Onofre OII Settlement
Agreement .........................
SCE....................................
SDG&E..............................
SEC....................................
SED....................................
SoCalGas ...........................
SoCore Energy...................
return on common equity
Standard & Poor's Ratings Services
retired nuclear generating facility located in south
San Clemente, California in which SCE holds a 78.21% ownership interest
Settlement Agreement by and among TURN, ORA, SDG&E, the Coalition of California
Utility Employees, and Friends of the Earth, dated November 20, 2014
Southern California Edison Company
San Diego Gas & Electric
U.S. Securities and Exchange Commission
Safety and Enforcement Division of the CPUC, formerly known as the Consumer Protection
and Safety Division or CPSD
Southern California Gas Company
SoCore Energy LLC, a subsidiary of Edison Energy Group that provides solar energy and
energy storage solutions
TURN ................................
US EPA..............................
The Utility Reform Network
U.S. Environmental Protection Agency
vi
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K 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:
• ability of SCE to recover its costs in a timely manner from its customers through regulated rates, including costs related to
San Onofre and proposed spending on grid modernization;
• decisions and other actions by the CPUC, the FERC, the NRC and other regulatory authorities, including determinations
of authorized rates of return or return on equity, approval of proposed spending on grid modernization, outcome of San
Onofre CPUC proceedings, and delays in regulatory actions;
• ability of Edison International or SCE to borrow funds and access the capital markets on reasonable terms;
•
•
•
•
risks associated with cost allocation, including the potential movement of costs to certain customers, caused by the ability
of cities, counties and certain other public agencies to generate and/or purchase electricity for their local residents and
businesses, along with other possible customer bypass or departure due to increased adoption of distributed energy
resources ("DERs") or technological advancements in the generation, storage, transmission, distribution and use of
electricity, and supported by public policy, government regulations and incentives;
risks inherent in the construction of SCE's transmission and distribution infrastructure investment program, including
those related to project site identification, public opposition, environmental mitigation, construction, permitting, power
curtailment costs (payments due under power contracts in the event there is insufficient transmission to enable acceptance
of power delivery), and governmental approvals;
risks associated with the operation of transmission and distribution assets and power generating facilities including: public
safety issues, failure, availability, efficiency, and output of equipment and availability and cost of spare parts;
risks associated with the decommissioning of San Onofre, including those related to public opposition, permitting,
governmental approvals, and cost overruns;
• physical security of Edison International's and SCE's critical assets and personnel and the cybersecurity of Edison
International's and SCE's critical information technology systems for grid control, and business and customer data;
• ability of Edison International to develop Edison Energy Group, manage new business risks, and recover and earn a return
on its investment in newly developed or acquired businesses;
• cost and availability of electricity, including the ability to procure sufficient resources to meet expected customer needs in
the event of power plant outages or significant counterparty defaults under power-purchase agreements;
• environmental laws and regulations, at both the state and federal levels, or changes in the application of those laws, that
could require additional expenditures or otherwise affect the cost and manner of doing business;
• changes in tax laws and regulations, at both the state and federal levels, or changes in the application of those laws; that
could affect recorded deferred tax assets and liabilities and effective tax rate;
• changes in the fair value of investments and other assets;
• changes in interest rates and rates of inflation, including escalation rates, which may be adjusted by public utility
regulators;
• governmental, statutory, regulatory or administrative changes or initiatives affecting the electricity industry, including the
market structure rules applicable to each market adopted by the NERC, CAISO, WECC and similar regulatory bodies in
adjoining regions;
1
• availability and creditworthiness of counterparties and the resulting effects on liquidity in the power and fuel markets and/
or the ability of counterparties to pay amounts owed in excess of collateral provided in support of their obligations;
• cost and availability of labor, equipment and materials;
• ability to obtain sufficient insurance, including insurance relating to SCE's nuclear facilities and wildfire-related liability,
and to recover the costs of such insurance or in the absence of insurance the ability to recover uninsured losses;
• potential for penalties or disallowance for non-compliance with applicable laws and regulations;
• cost of fuel for generating facilities and related transportation, which could be impacted by, among other things, disruption
of natural gas storage facilities, to the extent not recovered through regulated rate cost escalation provisions or balancing
accounts;
• disruption of natural gas supply due to unavailability of storage facilities, which could lead to electricity service
interruptions; and
• weather conditions and natural disasters.
See "Risk Factors" in this report for additional information on risks and uncertainties that could cause results to differ from
those currently expected or that otherwise could impact Edison International, SCE or their subsidiaries.
Additional information about risks and uncertainties, including more detail about the factors described in this report, is
contained throughout this report. Readers are urged to read this entire report, including information incorporated by
reference, and carefully consider the risk, 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 provide direct links to SCE's regulatory filings with the
CPUC and the FERC in open proceedings most important to investors at www.edisoninvestor.com (SCE Regulatory
Highlights) so that such filings are available to all investors upon SCE filing with the relevant agency.
Except when otherwise stated, references to each of Edison International, SCE, EMG, Edison Energy Group, EME or Edison
Capital mean each such company with its subsidiaries on a consolidated basis. References to "Edison International Parent and
Other" mean Edison International Parent and its consolidated competitive subsidiaries.
2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
MANAGEMENT OVERVIEW
Highlights of Operating Results
Edison International is the parent holding company of SCE. SCE is a public utility primarily engaged in the business of
supplying and delivering electricity to an approximately 50,000 square mile area of southern California. Edison International
is also the parent company of Edison Energy Group, a holding company for subsidiaries engaged in pursuing competitive
business opportunities across energy services and distributed solar to commercial and industrial customers. Such business
activities are currently not material to report as a separate business segment. 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. Unless otherwise described, all of the information contained in
this annual report relates to both filers.
(in millions)
Net income (loss) attributable to Edison International
Continuing operations
SCE
Edison International Parent and Other
Discontinued operations
Edison International
Less: Non-core items
SCE
Write-down, impairment and other charges
NEIL insurance recoveries
Edison International Parent and Other
Edison Capital sale of affordable housing portfolio
Income from allocation of losses to tax equity investor
Discontinued operations
Total non-core items
Core earnings (losses)
SCE
Edison International Parent and Other
Edison International
2016
2015
2016 vs 2015
Change
2014
$
$
$
1,376
(77)
12
1,311
$
998
(13)
35
1,020
—
—
—
5
12
17
(382)
12
10
9
35
(316)
$
378
(64)
(23)
291
382
(12)
(10)
(4)
(23)
333
1,453
(26)
185
1,612
(72)
—
—
2
185
115
1,376
(82)
1,294
$
1,368
(32)
1,336
$
8
(50)
(42) $
1,525
(28)
1,497
Edison International's earnings are prepared in accordance with GAAP used in the United States. Management uses core
earnings 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, income resulting from
allocation of losses to tax equity investor under the HLBV accounting method and income or loss from significant discrete
items that management does not consider representative of ongoing earnings, such as: exit activities, including sale of certain
assets and other activities that are no longer continuing, write downs, asset impairments and other gains and losses related to
certain tax, regulatory or legal settlements or proceedings.
Edison International's 2016 earnings increased $291 million, driven by an increase in SCE's earnings of $378 million
partially offset by increased costs at Edison International Parent and Other and lower income from discontinued operations.
SCE's increased net income consisted of $8 million of higher core earnings and $370 million of higher non-core earnings.
The increase in core earnings was due to an increase in revenue from the escalation mechanism set forth in the 2015 GRC
decision and lower operations and maintenance expenses, partially offset by higher net financing costs and tax expense.
3
Edison International Parent and Other results for 2016 consisted of $50 million of higher core losses and $14 million of lower
non-core earnings. During 2016, Edison International Parent and Other recorded an after-tax charge of $13 million related to
the buy-out of an earn-out provision with the former shareholders of a company acquired by Edison Energy at the end of
2015. The buy-out was completed, together with modification to employment contracts, in order to align long-term incentive
compensation. In addition, core losses for 2016 included higher operating and development costs and lower revenue and
gross margin from the sale of solar systems at Edison Energy Group. Results during 2015 included income from Edison
Capital's investments in affordable housing projects, which were sold at the end of 2015.
Consolidated non-core items for 2016 and 2015 for Edison International included:
• SCE's write-down of $382 million in 2015 of regulatory assets previously recorded for recovery of deferred income taxes
from 2012 – 2014 incremental tax repair deductions.
•
•
•
Income of $20 million ($12 million after-tax) in 2015 at SCE related to shareholder's portion of NEIL insurance
recoveries arising from the outage and shutdown of the San Onofre Units 2 and 3 generating stations and the recovery of
legal costs.
Income of $16 million ($10 million after-tax) in 2015 related to completion of the sale of Edison Capital's affordable
housing investment portfolio which represented the exit from this business activity.
Income of $5 million and $9 million for 2016 and 2015, respectively, related to losses (net of distributions) allocated to
tax equity investors under the HLBV accounting method. Edison International reflected in core earnings the operating
results of the solar projects, related financings and the priority return to the tax equity investor. The losses allocated to the
tax equity investor under HLBV accounting method results in income allocated to subsidiaries of Edison International,
neither of which is due to the operating performance of the projects but rather due to the allocation of income tax
attributes under the tax equity financing. Accordingly, Edison International has included the non-operating allocation of
income as a non-core item. For further information on HLBV, see "Notes to Consolidated Financial Statements—Note 1.
Summary of Significant Accounting Policies."
•
Income from discontinued operations, net of tax, was $12 million and $35 million for 2016 and 2015, respectively,
primarily related to the resolution of tax issues related to EME. The discontinued operations from 2015 also reflects
proceeds from insurance recoveries related to EME. See "Notes to Consolidated Financial Statements—Note 7. Income
Taxes" for further information.
See "Results of Operations" for discussion of SCE and Edison International Parent and Other results of operations, including
a comparison of 2015 results to 2014.
Electricity Industry Trends
The electric power industry is undergoing transformative change driven by technological advancements such as customer-
owned generation and energy storage, which could alter the nature of energy generation and delivery. California's
environmental policy objectives are accelerating the pace and scope of the industry change. The electric grid is a critical
enabler of the adoption of new energy technologies that support California's climate change and GHG reduction objectives,
which continue to be publicly supported by California policy makers notwithstanding a potential change in the federal
approach to such matters. The grid is also key to enabling more customer choices with respect to new energy technologies.
The transformative change taking place in the electric power industry is integral to Edison International's strategy.
SCE plans to be a key enabler of the adoption of new energy technologies that benefit customers of the electric grid while
also helping the state of California achieve its environmental goals. SCE expects to achieve these objectives through
modernizing the electric grid to improve the safety and reliability of the transmission and distribution network and enabling
increased penetration of DERs. SCE's ongoing focus to drive operational and service excellence should allow it to achieve
these objectives while controlling costs and customer rates. SCE's focus on the transmission and distribution side of the
utility business aligns with California's policy supporting competitive power markets. It also represents a lower risk than
investment in conventional, natural gas-fired generation, which faces potentially stricter GHG limits as well as the increasing
competitiveness of renewable resource fueled generation. For more information on the distribution grid development, see "—
Capital Program—Distribution Grid Development" below.
4
Changes in the electric power industry are impacting customers and jurisdictions outside California as well. Edison
International believes that other states will also pursue climate change and GHG reduction objectives, even if the federal
approach to such objectives changes, and large commercial and industrial customers will continue to pursue cost reduction
and sustainability goals. Edison Energy Group provides energy services to large commercial and industrial customers who
may be impacted by these changes. Edison Energy Group seeks to provide advice in dealing with increasingly complex tariff
and technology choices in order to support customers and their management of energy costs and risks.
Capital Program
Total capital expenditures (including accruals), were $3.5 billion in 2016. SCE's year-end rate base was $25.9 billion at
December 31, 2016 compared to $24.6 billion at December 31, 2015.
To support a safe and reliable transmission and distribution network, and to modernize the electric grid to enable increased
penetration of DERs, SCE forecasts capital expenditures of up to $19.3 billion for 2017 – 2020. The capital forecast for
2017 – 2020 reflects updates primarily to reflect the delay in receipt of project approvals on the West of Devers project and
the Mesa Substation project (see "Liquidity—Capital Investment Plan" for further information). The forecasted CPUC capital
expenditures include traditional capital spending, such as infrastructure replacement and maintenance, expansions and
additions due to load growth and work requested by customers, as well as expenditures for grid modernization to support
improved safety and reliability and increased levels of DERs. Traditional capital spending for 2017 reflects SCE's forecast
capital expenditures for CPUC and FERC capital projects. Also included in 2017 capital expenditures is a baseline of grid
modernization spending that will promote increased safety and reliability and also allow for a timely ramp-up of grid
modernization capital expenditures in subsequent years. SCE has requested CPUC approval of a memorandum account to
facilitate recovery in rates of such expenditures. The memorandum account has not yet been approved by the CPUC. SCE
may receive further guidance on grid modernization spending from the CPUC as part of the DRP proceeding in the second
half of 2017. Traditional capital expenditures for 2018 – 2020 reflect the amounts requested in the 2018 GRC filing and
FERC capital projects. The CPUC has approved 81%, 89% and 92% of the traditional capital expenditures requested in the
2009, 2012 and 2015 GRC decisions, respectively. While SCE cannot predict the level of traditional capital spending that will
be approved in the 2018 GRC decision, management is not aware of factors that would cause the percentage of SCE's request
that is ultimately approved to be materially different from what has been approved in recent GRC decisions. SCE does not
have prior approval experience with grid modernization capital expenditures and, therefore, is unable to predict an expected
outcome.
Forecasted expenditures for FERC capital projects is subject to timely receipt of permitting, licensing and regulatory
approvals. The following table sets forth a summary of capital expenditures for 2016 actual spend and a forecast for
2017 – 2020 on the basis described above:
(in millions)
Traditional capital expenditures
Distribution
Transmission
Generation
Total requested traditional capital expenditures1, 2
Grid modernization capital expenditures
Total capital expenditures
2016
Actual
2017
2018
2019
2020
Total
2017 – 2020
$
$
$
$
2,840 $
457
203
3,500 $
3,145 $
629
204
3,978 $
3,214 $
919
225
4,358 $
3,156 $
996
216
4,368 $
3,085 $
1,033
206
4,324 $
27 $
182 $
637 $
751 $
714 $
12,600
3,577
851
17,028
2,284
3,527 $
4,160 $
4,995 $
5,119 $
5,038 $
19,312
1
Includes Energy Storage of $50 million in 2016 and $60 million in the 2017 – 2020 period. Also, includes $12 million Charge Ready
Pilot in 2017.
2 Capital expenditures for 2017 reflect management's expectations based on the 2015 GRC decision.
Capital expenditures for traditional capital projects under CPUC jurisdiction for 2017 are included in SCE's 2015 GRC. The
2018 – 2020 capital expenditures are included in the 2018 GRC application request discussed below. Recovery for
2017 – 2020 planned expenditures for traditional capital projects under FERC jurisdiction will be pursued through FERC-
authorized mechanisms. For further information regarding the capital program, see "Liquidity and Capital Resources—SCE
—Capital Investment Plan."
5
SCE's estimated weighted average annual rate base for 2017 – 2020 using the capital expenditures set forth in the table above
is as follows:
(in millions)
Rate base for requested traditional capital expenditures
Rate base for requested grid modernization capital expenditures
Total rate base
2017
26,241 $
—
2018
29,052 $
279
2019
31,161 $
802
2020
33,229
1,398
26,241 $
29,331 $
31,963 $
34,627
$
$
The rate base above does not reflect reductions from the amounts requested in the 2018 GRC that may be included in a final
decision.
Distribution Grid Development
Distribution Resources Plan
In July 2015, SCE filed its DRP with the CPUC. The filing was made as part of a CPUC proceeding that was initiated to
support California's climate change and GHG reduction targets, modernize the electric distribution system to accommodate
two-way flows of energy associated with DERs, such as rooftop solar, and facilitate customer choice of new technologies and
services that reduce emissions and improve resilience. SCE's DRP included an indicative forecast of capital investment in
distribution automation, substation automation, communications systems, technology platforms and applications, and grid
reinforcement. The 2018 GRC includes operation and maintenance and capital expenditure requests consistent with SCE's
DRP operation and maintenance and capital spending. Capital investments for 2017 may be updated or revised based on
developments and guidance received from the CPUC as a part of the GRC, DRP rule making, technology availability, pace of
DER adoption, and other factors. In January 2016, the CPUC issued a scoping memo that provided for the issuance of
guidance on utility spending to modify its grid in order to support its DRP. SCE expects to receive such guidance in the
second half of 2017.
Charge Ready Program
In January 2016, the CPUC approved SCE's $22 million Charge Ready Phase 1 pilot program, which will allow SCE to
install light-duty vehicle charging infrastructure, provide rebates to offset the cost of qualified customer-owned charging
stations, and implement a supporting market education effort. Under the Phase 1 pilot program, SCE will build, own and
maintain the electric infrastructure needed to serve the qualified charging stations at participating customer locations.
Participating customers will install, own, maintain, and operate the charging stations. By the end of January 2017, SCE had
executed agreements for 50 sites to deploy 776 charge ports. The results of this pilot will help shape Phase 2 of the program.
SCE will file an application to obtain CPUC approval for Phase 2 after at least one year (Phase 1 launched in late May 2016)
and 1,000 charge ports have been deployed.
Transportation Electrification Plan
In January 2017, SCE filed a transportation electrification plan with the CPUC that aims to accelerate the adoption of electric
transportation, which is critical to California's climate change and GHG reduction objectives. The plan proposes a five-year
program to fund medium- and heavy-duty vehicle charging infrastructure that follows the model developed for SCE's Charge
Ready program discussed above. The proposal has an estimated five-year cost of $554 million ($532 million capital) in 2016
dollars. In addition, the plan proposes six pilot projects to be considered by the CPUC on an accelerated basis. The pilot
projects would install charging infrastructure for electric transit buses and the Port of Long Beach; build clusters of fast
charging sites in urban areas, and establish programs that would incentivize electric vehicle adoption. The estimated total cost
of the six pilot projects is approximately $19 million ($14 million capital) in 2016 dollars. SCE expects to propose additional
programs and pilots in the future.
All of the plan's proposed transportation electrification projects are subject to CPUC review and the timing and amount of
capital investments for any approved project will depend upon implementation decisions, including scope and pace of
adoption and GRC ratemaking decisions and other CPUC actions. SCE is unable to predict an expected outcome on or timing
of implementation of any of the proposed projects. The capital costs for these proposed projects are not included in SCE's
capital spending and rate base forecasts provided above.
6
Edison International Dividend Policy
In December 2016, Edison International declared a 13% increase to the annual dividend rate from $1.92 per share to
$2.17 per share. Edison International plans to increase its dividends to common shareholders at a higher than industry
average growth rate within its target payout ratio of 45% to 55% of SCE earnings in steps over time. This is expected to yield
a dividend growth at a faster pace than SCE's earnings growth.
Regulatory Proceedings
2018 General Rate Case
In September 2016, SCE filed its 2018 GRC application for the three-year period 2018 – 2020, which requested a 2018
revenue requirement of $5.885 billion, an increase of $222 million over the projected 2017 GRC authorized revenue
requirement. In addition, SCE requested $48 million in one-time balancing and memorandum account recoveries. This
represents a 2.7% increase over presently authorized total rates. SCE's 2018 GRC request also includes proposed revenue
requirement increases of $533 million in 2019 and $570 million in 2020. For 2019 and 2020, respectively, these represent
4.2% and 5.2% increases over presently authorized total rates.
The capital programs requested in SCE's 2018 GRC are focused on safety and reliability through investments in the
distribution grid to replace aging equipment and enhance capabilities to integrate increasing amounts of DERs. For further
information, see "—Capital Program" above.
SCE's 2018 GRC request identifies areas of reduced operating cost to partially mitigate the customer rate impacts of the
request.
SCE requested that the CPUC issue a final decision by the end of 2017. If the schedule for a final decision is delayed, SCE
will request the CPUC to issue an order directing that the authorized revenue requirement changes be effective January 1,
2018. SCE cannot predict the revenue requirement the CPUC will ultimately authorize for 2018 through 2020 or forecast the
timing of a final decision.
Permanent Retirement of San Onofre
Replacement steam generators were installed at San Onofre in 2010 and 2011. On January 31, 2012, a leak suddenly occurred
in one of the heat transfer tubes in San Onofre's Unit 3 steam generators. The Unit was safely taken off-line and subsequent
inspections revealed excessive tube wear. Unit 2 was off-line for a planned outage when areas of unexpected tube wear were
also discovered. On June 6, 2013, SCE decided to permanently retire Units 2 and 3.
San Onofre CPUC Proceedings
In November 2014, the CPUC approved the San Onofre OII Settlement Agreement, which resolved the CPUC's investigation
regarding the steam generator replacement project at San Onofre and the related outages and subsequent shutdown of San
Onofre. Subsequently, the San Onofre OII proceeding record was reopened by a joint ruling of the Assigned Commissioner
and the Assigned ALJ to consider whether, in light of the Company not reporting certain ex parte communications on a
timely basis, the San Onofre OII Settlement Agreement remained reasonable, consistent with the law and in the public
interest, which is the standard the CPUC applies in reviewing settlements submitted for approval. In comments filed with the
CPUC in July 2016, SCE asserted that the Settlement Agreement continues to meet this standard and therefore should not be
disturbed. A number of the parties to the OII, however, have requested that the CPUC either modify the San Onofre OII
Settlement Agreement or vacate its previous approval of the settlement and reinstate the OII for further proceedings.
In a December 2016 joint ruling, the Assigned Commissioner and the Assigned ALJ expressed concerns about the extent to
which the failure to timely report ex parte communications had impacted the settlement negotiations and directed SCE to
meet and confer with the other parties in the OII to consider changing the terms of the San Onofre OII Settlement Agreement.
The ruling set out a schedule requiring that at least two meet and confer sessions be held in the first quarter of 2017 and
requiring the parties to submit a joint status report to the CPUC by April 28, 2017 if no modifications have been agreed to by
some or all of the parties as a result of the meet and confer process. SCE has recorded a regulatory asset to reflect the
expected recoveries under the San Onofre OII Settlement Agreement. At December 31, 2016, $857 million remains to be
collected.
For more information on the challenges to the settlement of the San Onofre OII and the claims that SCE is pursuing against
MHI, see "Notes to Consolidated Financial Statements—Note 11. Commitments and Contingencies—Contingencies—San
Onofre Related Matters."
7
Cost of Capital
On February 7, 2017, SCE, Pacific Gas and Electric Company, SDG&E, and SoCalGas (collectively, the “Investor-Owned
Utilities”), ORA and TURN jointly filed a petition to modify the prior CPUC decisions addressing the Investor-Owned
Utilities' costs of capital. The requested modifications would extend the next cost of capital application filing deadline two
years to April 22, 2019 for the year 2020; reset SCE's authorized cost of long-term debt and preferred stock in 2018; and
reduce SCE's authorized ROE. Subject to the CPUC's approval of the petition for modification, SCE's authorized ROE will
be reduced from the current 10.45% to 10.30% beginning on January 1, 2018. The updated cost of capital and corresponding
revenue requirement impact will be submitted to the CPUC in September 2017, to be effective January 1, 2018. While the
actual changes to SCE's revenue requirement resulting from the petition for modification will not be known until SCE's filing
in September 2017, SCE estimates that its annual revenue requirement will be reduced by approximately $66 million
(approximately $39 million after-tax), beginning in 2018. Changes in market interest rates can have material effects on the
cost of SCE’s future financings and consequently on the estimated change in annual revenue requirements.
The petition for modification provides that SCE's long-term debt, preferred stock and common equity costs will be reset for
the year 2018 and will then remain unchanged until December 31, 2019 unless they are changed by the operation of the cost
of capital adjustment mechanism. SCE’s current ratemaking capital structure (48% common equity, 43% long-term debt, and
9% preferred equity) will remain unchanged and the cost of capital adjustment mechanism would not operate in 2017 but
could operate in 2018 to change the cost of capital for 2019. If the mechanism is activated for 2019, SCE’s new 10.30% ROE
will be adjusted according to the existing terms of the mechanism.
Energy Efficiency Incentive Mechanism
In December 2016, the CPUC awarded SCE incentives of approximately $18 million, approximately 75% of the requested
award, for Part 2 of the 2014 program year and Part 1 of the 2015 program year savings. There is no assurance that the CPUC
will make an award for any given year.
FERC Formula Rates
In November 2016, SCE filed its 2017 annual update with the FERC with the rates effective from January 1, 2017 to
December 31, 2017. The update provided support for an increase in SCE's transmission revenue requirement of $97 million
or 9% over amounts currently authorized in rates. The increase is mainly due to the completion of several major transmission
projects in 2015 and to recover prior undercollections. FERC has approved SCE's formula or methodology for setting
transmission rates under its jurisdiction through 2017. SCE is required to file a replacement rate methodology by November
2017, to be effective January 2018.
Long Beach Service Interruptions
In July 2015, SCE's customers who are served via the network portion of SCE's electric system in Long Beach, California
experienced service interruptions due to multiple underground vault fires and underground cable failures. No personal
injuries were reported in connection with these events. SCE expects to incur penalties as a result of these events. Although
resolution will be subject to settlement discussions with SED and CPUC review and approval, SCE has recorded a liability
for the estimated loss.
RESULTS OF OPERATIONS
SCE
SCE's results of operations are derived mainly through two sources:
• Earning activities – representing revenue authorized by the CPUC and FERC which is intended to provide SCE a
reasonable opportunity to recover its costs and earn a return on its net investment in generation, transmission and
distribution assets. The annual revenue requirements are comprised of authorized operation and maintenance costs,
depreciation, taxes and a return consistent with the capital structure. Also, included in earnings activities are revenues or
penalties related to incentive mechanisms, other operating revenue, and regulatory charges or disallowances.
• Cost-recovery activities – representing CPUC- and FERC-authorized balancing accounts which allow for recovery of
specific project or program costs, subject to reasonableness review or compliance with upfront standards. Cost-recovery
activities include rates which provide recovery, subject to reasonableness review of, among other things, fuel costs,
purchased power costs, public purpose related-program costs (including energy efficiency and demand-side management
programs) and certain operation and maintenance expenses. SCE earns no return on these activities.
8
The following table is a summary of SCE's results of operations for the periods indicated.
(in millions)
Operating revenue
Purchased power and fuel
Operation and maintenance
Depreciation, decommissioning and
amortization
Property and other taxes
Impairment and other charges
Total operating expenses
Operating income
Interest expense
Other income and expenses
Income before income taxes
Income tax expense
Net income
Preferred and preference stock
dividend requirements
Net income available for common
stock
Net income available for common
stock
Less: Non-core items
Impairment and other charges
NEIL insurance recoveries
Core earnings1
2016
Earning
Activities
Cost-
Recovery
Activities
Total
Consolidated
Earning
Activities
2015
Cost-
Recovery
Activities
Total
Consolidated
Earning
Activities
2014
Cost-
Recovery
Activities
Total
Consolidated
$ 6,504 $ 5,326 $
11,830 $ 6,305 $ 5,180 $
11,485 $ 6,831 $ 6,549 $
13,380
—
1,939
1,998
351
—
4,288
2,216
(540)
79
1,755
256
1,499
123
4,527
798
—
—
—
5,325
1
(1)
—
—
—
—
—
4,527
2,737
—
1,977
4,266
913
4,266
2,890
—
2,106
5,593
951
1,998
1,915
351
—
9,613
2,217
334
—
4,226
2,079
(541)
(525)
79
1,755
256
1,499
64
1,618
507
1,111
123
113
—
—
—
5,179
1
(1)
—
—
—
—
—
1,915
1,720
334
—
9,405
2,080
318
163
4,307
2,524
(526)
(528)
64
1,618
507
1,111
43
2,039
474
1,565
113
112
—
—
—
6,544
5
(5)
—
—
—
—
—
5,593
3,057
1,720
318
163
10,851
2,529
(533)
43
2,039
474
1,565
112
$ 1,376 $
— $
1,376 $
998 $
— $
998 $ 1,453 $
— $
1,453
$
1,376
$
998
$
1,453
—
—
(382)
12
(72)
—
$
1,376
$
1,368
$
1,525
1 See use of non-GAAP financial measures in "Management Overview—Highlights of Operating Results."
Earning Activities
2016 vs 2015
Earning activities were primarily affected by the following:
• Higher operating revenue of $199 million is primarily due to:
• An increase in revenue of approximately $191 million related to the increase in authorized revenue from the escalation
mechanism set forth in the 2015 GRC decision.
• An increase in FERC-related revenue of $68 million primarily related to higher operating costs including amortization
of the regulatory asset associated with the Coolwater-Lugo transmission project and rate base growth partially offset
by a $15 million increase in 2015 due to a change in estimate under the FERC formula rate mechanism.
• An increase in revenue of $25 million ($15 million after-tax) related to the incremental return on the pole loading rate
base recorded through the pole loading balancing account.
• An increase of $46 million primarily due to tax benefits recognized in 2015 related to net operating loss carrybacks for
San Onofre decommissioning costs resulting in a reduction in revenue in 2015 (offset in income taxes).
• A decrease in revenue of $52 million for incremental tax benefits refunded to customers. In 2016, SCE recorded a
revenue refund to customers of $133 million for 2012 – 2014 incremental tax benefits related to repair deductions
(offset in income taxes as discussed below). This revenue refund resulted from the CPUC's approval of SCE's request
to refund incremental tax repair deductions that were not addressed in SCE's 2015 GRC decision. Partially offsetting
9
the refund of 2012 – 2014 incremental tax repair deductions, SCE recognized $81 million lower incremental tax
repairs and other benefits refunded to customers through balancing accounts in 2016.
• Energy efficiency incentive awards were $18 million in 2016 compared to $29 million in 2015. In addition, in 2016,
the CPUC approved a settlement agreement in which SCE agreed to refund $13 million related to incentive awards
SCE received for savings achieved by its 2006 – 2008 energy efficiency programs.
• SCE's portion of NEIL insurance and legal cost recoveries of approximately $20 million in 2015 arising from the
outage and shutdown of the San Onofre Units 2 and 3 generating stations.
• A decrease of $29 million for other operating revenue resulting from lower contributions received from customers due
to the retroactive extension of bonus depreciation in the PATH Act of 2015.
• Lower operation and maintenance expense of $38 million primarily due to lower labor related to SCE's focus on
operational and service excellence as well as lower outside services partially offset by higher transmission and
distribution costs for rain and storm-related activities.
• Higher depreciation, decommissioning and amortization expense of $83 million primarily related to depreciation on
higher rate base and amortization of the regulatory asset related to the Coolwater-Lugo plant, as discussed above.
• Higher property and other taxes of $17 million primarily due to higher property assessed values in 2016.
• Higher interest expense of $15 million primarily due to reduced interest capitalization (AFUDC debt) related to lower
construction work in progress balances and a higher interest rate on balancing account overcollections in 2016.
• Higher other income and expenses of $15 million primarily due to higher insurance benefits and lower advertising
expense in 2016. See "Notes to Consolidated Financial Statements—Note 14. Interest and Other Income and Other
Expenses" for further information.
• Lower income taxes of $251 million primarily due to the following:
• Write-down of $382 million in 2015 of regulatory assets previously recorded for recovery of deferred income taxes
from 2012 – 2014 incremental tax repair deductions.
• Higher income tax benefits in 2016 of $31 million primarily due to $79 million related to the flow-through of
incremental tax benefits for 2012 – 2014 to customers partially offset by lower income tax benefits in 2016 of
$48 million related to the flow-through of incremental tax repair and other benefits refunded to customers through
balancing accounts.
• Lower income tax expense in 2016 of $13 million related to the adoption of the FASB guidance on accounting for
share-based payments (see "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting
Guidance—New Accounting Guidance" for further information).
• A change in liabilities related to uncertain tax positions related to repair deductions, which resulted in income tax
benefits of $100 million during the second quarter of 2015. See "—Income Taxes" below for more information.
• Higher pre-tax income in 2016, as discussed above.
• Higher preferred and preference stock dividends of $10 million primarily related to new issuances in 2016 and late 2015
partially offset by redemptions of preferred stock.
2015 vs 2014
Earning activities were primarily affected by the following:
• Lower operating revenue of $526 million is primarily due to:
• A decrease in authorized CPUC revenue of $379 million (excludes amounts classified as cost-recovery activities). The
decrease in revenue is primarily due to lower authorized revenue for operation and maintenance expenses and for
flow-through items for income tax benefits related to repair and cost of removal deductions.
• A decrease in revenue from approximately $300 million of tax benefits in excess of amounts authorized in the 2015
GRC and recognized through the TAMA and the pole loading balancing account (offset in income tax benefits
10
discussed below). In addition, SCE recorded $39 million ($26 million after-tax) of incremental return on the pole
loading rate base recorded through this balancing account.
• An increase in FERC-related revenue of $83 million primarily related to rate base growth and higher operating costs.
• An increase in San Onofre-related revenue of $40 million due to the implementation of the San Onofre OII Settlement
Agreement. Revenue for San Onofre for 2015 primarily related to recovery of amortization of the regulatory asset and
authorized return as provided by the San Onofre Settlement Agreement compared to revenue in 2014 related to
recovery of San Onofre's cost of service.
• Energy efficiency incentive awards were $29 million in 2015 compared to $22 million in 2014.
• SCE's portion of NEIL insurance and legal cost recoveries of approximately $20 million in 2015 (See "Notes to the
Consolidated Financial Statements—Note 11. Commitments and Contingencies—Contingencies—San Onofre Related
Matters" for further information on the agreement with NEIL).
• Higher revenue in 2014 from approval by the CPUC of a $30 million increase in the 2012 – 2014 authorized revenue
requirement related to deferred income taxes and from $15 million of generator settlements. See “Notes to the
Consolidated Financial Statements—Note 10. Regulatory Assets and Liabilities—Net Regulatory Balancing
Accounts.”
• Lower operation and maintenance expense of $129 million primarily due to:
• Lower San Onofre-related expense of $93 million. During 2014, San Onofre-related expenses were recorded as
operation and maintenance expenses. During 2015, the CPUC authorized SCE reimbursement of 2014 costs from the
nuclear decommissioning trusts with such reimbursement subsequently refunded to customers. During 2015,
decommissioning expenses were reimbursed from the nuclear decommissioning trust and, therefore, did not result in
operation and maintenance expenses.
• A decrease of $77 million primarily related to transmission and distribution, legal, and customer service costs partially
offset by higher outside service costs in 2015.
• Higher severance costs related to workforce reduction efforts ($26 million in 2015 and $2 million in 2014).
•
In 2015, SCE incurred a penalty of approximately $17 million related to not reporting certain ex parte communications
on a timely basis.
• Higher depreciation, decommissioning and amortization expense of $195 million primarily due to San Onofre-related
expense of $134 million in 2015 related to the amortization of the regulatory asset and a $61 million increase in
depreciation primarily related to transmission and distribution investments.
• Higher property and other taxes of $16 million primarily due to an increase in assessed property values in 2015.
•
Impairment and other charges of $163 million ($72 million after-tax) in 2014 related to the San Onofre OII Settlement
Agreement, as discussed below.
• Higher other income and expenses of $21 million primarily due to higher AFUDC equity income related to a higher rate
and higher construction work in progress balances in 2015 and a $15 million penalty recorded in 2014 resulting from the
San Bernardino and San Gabriel settlements. These increases were offset by $10 million of lower insurance benefits in
2015 and a $7 million of sales tax refund related to San Onofre received in 2014. See "Notes to Consolidated Financial
Statements—Note 14. Interest and Other Income and Other Expenses" for further information.
• Higher income taxes of $33 million primarily due to the following:
• Write-down of $382 million in 2015 of regulatory assets previously recorded for recovery of deferred income taxes
from 2012 – 2014 incremental tax repair deductions.
• An increase in income tax benefits in 2015 primarily related to $263 million (after-tax) of repair deductions (offset in
operating revenue above) for TAMA and pole loading balancing account partially offset by lower tax benefits on other
property-related items in 2015.
• A change in liabilities related to uncertain tax positions related to repair deductions, which resulted in income tax
benefits of $100 million and $29 million during the second quarters of 2015 and 2014, respectively. See "—Income
Taxes" below for more information.
11
• Lower pre-tax income in 2015, as discussed above, partially offset by the impact of the San Onofre OII Settlement
Agreement.
Cost-Recovery Activities
2016 vs 2015
Cost-recovery activities were primarily affected by the following:
• Higher purchased power and fuel of $261 million primarily due to the NEIL insurance recoveries received in 2015
(discussed below) and a change in portfolio mix partially offset by lower load related to cooler weather.
In October 2015, San Onofre owners reached an agreement with NEIL to resolve all insurance claims arising out of the
failures of the San Onofre replacement steam generators. SCE customer's portion of amounts recovered from NEIL has
been distributed to SCE customers via a credit to SCE's ERRA account of approximately $300 million in 2015.
• Lower operation and maintenance expense of $115 million primarily due to lower transmission access charges and lower
spending on various public purpose programs partially offset by an increase in transmission and distribution costs for
drought related activities.
2015 vs 2014
Cost-recovery activities were primarily affected by the following:
• Lower purchased power and fuel of $1.3 billion primarily driven by lower power and gas prices, the NEIL insurance
recoveries and the CAISO generation surcharge of $83 million in 2014 (as discussed below). These decreases were
partially offset by higher realized losses on economic hedging activities ($148 million in 2015 compared to $57 million in
2014). Fuel costs were $176 million in 2015 and $256 million in 2014.
During 2014, the CAISO issued invoices implementing a FERC order which revised FERC tariffs for costs associated
with scheduling coordinator activities. The impact of implementing the order and revised invoices resulted in a
transmission refund of $106 million reflected in operation and maintenance expense and a generation surcharge of
$83 million reflected in purchased power expense. These transactions did not impact earnings as the net refund was
provided to customers through a FERC balancing account mechanism.
• Lower operation and maintenance expense of $38 million primarily due to lower spending on various public purpose
programs, lower pension and benefit expenses and a decrease in transmission access charges, partially offset by the 2014
CAISO refund of $106 million as discussed above.
Supplemental Operating Revenue Information
SCE's retail billed and unbilled revenue (excluding wholesale sales and balancing account over/undercollections) was
$10.7 billion in 2016 and $12.2 billion for both 2015 and 2014.
The 2016 revenue reflects:
• A decrease of $1.15 billion primarily due to the implementations of the 2016 ERRA rate decrease and the 2015 GRC
decision in January 2016.
• A sales volume decrease of $321 million due to lower load requirements related to cooler weather experienced in 2016
compared to 2015.
The 2015 revenue reflects:
• An increase of $160 million primarily due to the implementations of the 2014 ERRA rate increase in June 2014 and the
San Onofre-related rate adjustment in January 2015.
• A sales volume decrease of $169 million due to lower load requirements related to cooler weather experienced in 2015
compared to 2014.
As a result of the CPUC-authorized decoupling mechanism, SCE earnings are not affected by changes in retail electricity
sales (see "Business—SCE—Overview of Ratemaking Process").
12
Income Taxes
SCE’s income tax provision decreased by $251 million in 2016 compared to 2015 and increased by $33 million in 2015
compared to 2014. The effective tax rates were 14.6%, 31.3% and 23.2% for 2016, 2015 and 2014, respectively. SCE's
effective tax rate is below the federal statutory rate of 35% primarily due to 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 income tax expense. The effective tax rate decrease in 2016 was primarily due to the
$382 million write-down in 2015 of regulatory assets (discussed in "Management Overview—Highlights of Operating
Results") partially offset by revisions in liabilities related to uncertain tax positions in 2015. The effective tax rate increase in
2015 was primarily due to a $382 million write-down in 2015 of regulatory assets and income tax benefits in 2014 related to
San Onofre OII Settlement Agreement, partially offset by higher income tax benefits related to tax repair deductions (as
discussed above) and the change in liabilities related to uncertain tax positions.
See "Notes to Consolidated Financial Statements—Note 7. Income Taxes" for a reconciliation of the federal statutory rate of
35% to the effective income tax rates and "Management Overview—Permanent Retirement of San Onofre" above for more
information.
Edison International Parent and Other
Results of operations for Edison International Parent and Other includes amounts from other subsidiaries that are not
significant as a reportable segment, as well as intercompany eliminations.
Loss from Continuing Operations
The following table summarizes the results of Edison International Parent and Other:
(in millions)
Edison Energy Group and subsidiaries1
Edison Mission Group and subsidiaries
Corporate expenses and other2
Total Edison International Parent and Other3
Years ended December 31,
2016
2015
2014
$
$
(38)
—
(39)
(77)
$
$
(6)
32
(39)
(13)
$
$
(5)
36
(57)
(26)
1 Includes income of $5 million, $9 million and $2 million in 2016, 2015, 2014 related to losses (net of distributions) allocated to tax
equity investors under the HLBV accounting method.
2 Includes interest expense (pre-tax) of $37 million, $31 million and $25 million in 2016, 2015, and 2014, respectively.
3
Includes income tax benefits of $15 million in 2016 related to the adoption of an accounting standard for share-based payments. See
"Notes to Consolidated Financial Statements—Note 1" for further information.
The loss from continuing operations of Edison International Parent and Other increased $64 million in 2016 compared to
2015 primarily due to:
• An increase in losses of Edison Energy Group of $32 million, including a $13 million after-tax charge during 2016 from a
buy-out of an earn-out provision contained in one of the 2015 acquisitions, higher operating and development expenses
and lower revenue and gross margin from the sale of solar systems in 2016 compared to 2015. The results for the twelve
months ended December 31, 2016 include the three businesses acquired by Edison Energy in December 2015 and
expanded sales and support personnel. Revenue for the Edison Energy Group was $42 million and $34 million for the
twelve months ended December 31, 2016 and 2015, respectively.
• A decrease in income from Edison Mission Group and subsidiaries of $32 million in 2016 primarily due to income related
to affordable housing projects in 2015. In December 2015, EMG's subsidiary, Edison Capital, completed the sale of its
remaining affordable housing investment portfolio which represents the exit of this business activity.
13
The loss from continuing operations of Edison International Parent and Other decreased $13 million in 2015 compared to
2014 primarily due to:
•
An increase in losses of Edison Energy Group primarily due to higher operating expenses for 2015. The change was
partially offset by an increase in income allocated to subsidiaries of Edison Energy Group under the HLBV accounting
method that resulted in losses allocated to tax equity investors. For further information, see "Management Overview—
Highlights of Operating Results."
•
In December 2015, EMG's subsidiary, Edison Capital, completed the sale of its remaining affordable housing investment
portfolio which represents the exit of this business activity. Earnings from Edison Capital were $30 million and
$34 million for 2015 and 2014, respectively.
• A decrease in the loss from corporate expenses and other primarily due to income tax benefits and lower corporate
expenses during 2015.
Income from Discontinued Operations (Net of Tax)
Income from discontinued operations, net of tax, was $12 million, $35 million and $185 million for the years ended
December 31, 2016, 2015 and 2014, respectively. The 2016 and 2015 income were primarily related to the resolution of tax
issues related to EME. The 2015 income also included insurance recoveries. The 2014 income was related to the impact of
completing the transactions called for in the EME Settlement Agreement and income tax benefits from resolution of uncertain
tax positions and other impacts related to EME.
LIQUIDITY AND CAPITAL RESOURCES
SCE
SCE's ability to operate its business, fund capital expenditures, and implement its business strategy is dependent upon its cash
flow 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 Edison International, and the outcome of tax and
regulatory matters.
In the next 12 months, SCE expects to fund its obligations, capital expenditures and dividends through operating cash flows,
tax benefits and capital market financings of debt and preferred equity, as needed. SCE also has availability under its credit
facilities to fund cash requirements.
Available Liquidity
At December 31, 2016, SCE had $1.89 billion available under its $2.75 billion credit facility. 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 or
other borrowings, subject to availability in the capital markets.
Debt Covenant
The debt covenant in SCE's credit facility limits its debt to total capitalization ratio to less than or equal to 0.65 to 1. At
December 31, 2016, SCE's debt to total capitalization ratio was 0.43 to 1.
At December 31, 2016, SCE was in compliance with all other financial covenants that affect access to capital.
14
Capital Investment Plan
Major Transmission Projects
A summary of SCE's large transmission and substation projects during the next four years is presented below. The timing of
the projects below is subject to timely receipt of permitting, licensing and regulatory approvals.
Project Name
West of Devers
Mesa Substation
Alberhill System
Riverside Transmission Reliability
Eldorado-Lugo-Mohave Upgrade
Project
Lifecycle Phase
Construction
Construction
Licensing
Licensing
Planning
Direct
Expenditures
(in millions)1
$1,075
Inception to
Date (in
millions)1
$58
$608
$397
$233
$269
$24
$36
$5
$5
Scheduled In-
Service Date
2021
2020 – 2021
2021
2021
2020
1 Direct expenditures include direct labor, land and contract costs incurred for the respective projects and exclude overhead
costs that are included in the capital expenditures forecasted for remaining investment.
West of Devers
The West of Devers Project consists of upgrading and reconfiguring approximately 48 miles of existing 220 kV transmission
lines between the Devers, El Casco, Vista and San Bernardino substations, increasing the power transfer capabilities in
support of California's renewable portfolio standards goals.
In August 2016, the CPUC approved the construction of the West of Devers Project. As a result of the delay in receipt of the
Project's approval from the CPUC, SCE has deferred the timing of project capital expenditures. ORA filed an Application for
Rehearing in September 2016 stating that the August 2016 decision failed to follow the California Environmental Quality Act
when it approved the Project and should have approved the alternative project with the amended scope. SCE does not know
when the CPUC will issue a decision on the Application for Rehearing. There is no stay of activities pending determination of
the Application for Rehearing and SCE is continuing to perform activities related to construction, such as environmental
permitting and mitigation planning in order to achieve a 2021 in-service date.
Mesa Substation
The Mesa Substation Project consists of demolishing the existing 220 kV Mesa Substation and constructing a new 500 kV
substation. The Mesa Substation project would address reliability concerns by providing additional transmission import
capability, allowing greater flexibility in the siting of new generation, and reducing the total amount of new generation
required to meet local reliability needs in the Western Los Angeles Basin area. In February 2017, the CPUC issued a final
decision approving SCE's proposed project. Construction planning activities that had been delayed pending the CPUC's final
decision have commenced.
Alberhill System
The Alberhill System Project consists of constructing a new 500-kV substation, two 500-kV transmission lines to connect the
proposed substation to the existing Serrano-Valley 500-kV transmission line, telecommunication equipment and
subtransmission lines in unincorporated and incorporated portions of western Riverside County. The Project was designed to
meet long-term forecasted electrical demand in the proposed Alberhill Project area and to increase electrical system
reliability. In April 2016, the CPUC issued a draft environmental impact report that identified an alternative substation site.
The $397 million estimated cost for this project reflects the scope proposed by SCE.
Riverside Transmission Reliability
The Riverside Transmission Reliability Project is a joint project between SCE and Riverside Public Utilities (RPU), the
municipal utility department of the City of Riverside. While RPU would be responsible for constructing some of the Project's
facilities within Riverside, SCE's portion of the Project consists of constructing upgrades to its system, including a new 230-
kV Substation; certain interconnection and telecommunication facilities and transmission lines in the cities of Riverside,
Jurupa Valley and Norco and in portions of unincorporated Riverside County. The purpose of the Project is to provide RPU
and its customers with adequate transmission capacity to serve existing and projected load, to provide for long-term system
capacity for load growth, and to provide needed system reliability. Due to changed circumstances since the time the Project
15
was originally developed, SCE informed the CPUC in July 2016 that it supports a revised description of the Project. The
CPUC continues to collect information regarding the revised Project in support of a supplemental environmental review.
Potential revisions to the Project have not been reflected in the direct expenditures or scheduled in service date in the table
above, however, revisions are likely to increase the total direct expenditures and delay the completion of the Project.
Eldorado-Lugo-Mohave Upgrade
The Eldorado-Lugo-Mohave Upgrade Project will increase capacity on existing transmission lines to allow additional
renewable energy to flow from Nevada to southern California. The Project would modify SCE’s existing Eldorado, Lugo, and
Mohave electrical substations to accommodate the increased current flow from Nevada to southern California; increase the
power flow through the existing 500 kV transmission lines by constructing two new capacitors along the lines; raise
transmission tower heights to meet ground clearance requirements; and install communication wire on our transmission lines
to allow for communication between existing SCE substations.
Tehachapi
The Tehachapi Project consists of new and upgraded electric transmission lines and substations between eastern Kern County
and San Bernardino County and was undertaken to bring renewable resources in Kern County to energy consumers in the Los
Angeles basin and the California energy grid. The project consists of eleven segments. Segments 1-3 were placed in service
beginning in 2009 through 2013. Segments 4-11 were placed in service in December 2016.
SCE filed a petition for modification with the CPUC in January 2017 to update the cost estimate for all elements of segments
4-11 to $2.7 billion (2016 dollars) from $2.0 billion (2016 dollars) of CPUC-approved cost findings. The cost increase is
based on several factors, including additional project scope, schedule delays and work stoppages due to regulatory activity,
increased environmental activities, and higher costs than the historical data used for estimates. Many of the cost increases are
due to external factors not contemplated when the initial cost estimates were developed and not accounted for in the CPUC's
original cost findings, which had also reduced the amount of contingency significantly below SCE's original estimates. Cost
recovery for nearly all transmission elements of the project is incorporated in the existing FERC rates, subject to FERC
review and approval.
Coolwater-Lugo
In February 2016, SCE filed an abandoned plant recovery request at FERC for the costs of the cancelled Coolwater-Lugo
transmission project pursuant to the authority granted by FERC for SCE to recover 100% of all prudently-incurred costs if
the project is cancelled for reasons beyond SCE's control. The project was cancelled by the CPUC in 2015 due to a reduction
in need. SCE requested recovery of the $37.1 million in costs that SCE incurred for the project over a twelve-month period
through the FERC transmission formula rate. In December 2016, SCE reached a settlement under which it will recover 100%
of the requested $37.1 million of costs incurred in return for certain additional procedural safeguards to be implemented in all
future abandoned plant recovery requests. The period for parties to file any protests to the settlement has expired without any
protests filed but the settlement remains subject to FERC approval.
Decommissioning of San Onofre
The decommissioning of a nuclear plant requires the management of three related activities: radiological decommissioning,
non-radiological decommissioning and the management of spent nuclear fuel. The decommissioning process is expected to
take many years. Decommissioning of San Onofre Unit 1 began in 1999 and major decommissioning work was completed in
2008, except for reactor vessel disposal and certain underground work that was deferred to allow for the construction of the
San Onofre Independent Spent Fuel Storage Installation. The initial activity phase of radiological decommissioning of Units
2 and 3 began in June 2013 with SCE filing a certification of permanent cessation of power operations at San Onofre with the
NRC. SCE is currently permitted to start major radiological decommissioning activities pursuant to NRC regulations,
provided SCE obtains all necessary environmental permits for decommissioning. SCE has engaged a decommissioning
general contractor to undertake a significant scope of decommissioning activities for Units 1, 2 and 3 at San Onofre.
During the second quarter of 2014, SCE updated its decommissioning cost estimate based on a site specific assessment. The
decommissioning cost estimate in 2014 dollars is $4.4 billion (SCE share is $3.3 billion) and includes costs from June 7,
2013 through to the respective completion dates to decommission San Onofre Units 2 and 3 estimated to be in 2052. The
decommissioning cost estimate is subject to a number of uncertainties including the cost of disposal of nuclear waste, cost of
removal of property, site remediation costs as well as a number of other assumptions and estimates, including when the
federal government may remove spent fuel canisters from the San Onofre site, as to which there can be no assurance. The
cost estimate is subject to change and such changes may be material. For further information, see "Notes to Consolidated
Financial Statements—Note 1. Summary of Significant Accounting Policies—Nuclear Decommissioning and Asset
16
Retirement Obligations." The CPUC will conduct a reasonableness review for costs for each year. SCE's share of the
decommissioning costs recorded during 2016 were $168 million and are subject to reasonableness review by the CPUC.
SCE has nuclear decommissioning trust funds for San Onofre Units 2 and 3 of $2.8 billion as of December 31, 2016. If the
decommissioning cost estimate and assumptions regarding trust performance do not change, SCE believes that future
contributions to the trust funds will not be necessary.
SCE Dividends
SCE made $701 million and $758 million in dividend payments to its parent, Edison International, in 2016 and 2015,
respectively. The timing and amount of future dividends are dependent upon several factors including the level of capital
expenditures, operating cash flows and earnings. See "Notes to Consolidated Financial Statements—Note 1. Summary of
Significant Accounting Policies—SCE Dividend Restrictions" for discussion of dividend restrictions.
Margin and Collateral Deposits
Certain derivative instruments, power procurement contracts and other contractual arrangements contain collateral
requirements. Future collateral requirements may differ from the requirements at December 31, 2016, due to the addition of
incremental power and energy procurement contracts with collateral requirements, if any, and the impact of changes in
wholesale power and natural gas prices on SCE's contractual obligations.
Some of the power procurement contracts contain provisions that require SCE to maintain an investment grade credit rating
from the major credit rating agencies. If SCE's credit rating were to fall below investment grade, SCE may be required to pay
the liability or post additional collateral.
The table below provides the amount of collateral posted by SCE to its counterparties as well as the potential collateral that
would be required as of December 31, 2016.
(in millions)
Collateral posted as of December 31, 20161
Incremental collateral requirements for power procurement contracts resulting from a
potential downgrade of SCE's credit rating to below investment grade
Incremental collateral requirements for power procurement contracts resulting from adverse
market price movement2
Posted and potential collateral requirements
$
$
91
37
3
131
1 Net collateral provided to counterparties and other brokers consisted $93 million in letters of credit and surety bonds
and $2 million of cash reflected in "Other current liabilities" on the consolidated balance sheets.
2
Incremental collateral requirements were based on potential changes in SCE's forward positions as of December 31,
2016 due to adverse market price movements over the remaining lives of the existing power procurement contracts
using a 95% confidence level.
Regulatory Balancing Accounts
SCE's cash flows are affected by regulatory balancing accounts over- or under-collections. Over- and under-collections
represent differences between cash collected in current rates for specified forecasted costs and the costs actually incurred.
With some exceptions, SCE seeks to adjust rates on an annual basis or at other designated times to recover or refund the
balances recorded in its balancing account. Under- or over-collections in these balancing accounts impact cash flows and can
change rapidly. Over- and under-collections accrue interest based on a three-month commercial paper rate published by the
Federal Reserve.
As of December 31, 2016, SCE had regulatory balancing account net overcollections of $1.7 billion, primarily consisting of
overcollections related to the base rate revenue account and public purpose-related and energy efficiency program costs.
Overcollections related to the base rate revenue account are expected to decrease as refunds are provided to customers during
2017. Overcollections related to public purpose-related programs are expected to decrease as costs are incurred to fund
programs established by the CPUC. See "Notes to Consolidated Financial Statements—Note 10. Regulatory Assets and
Liabilities" for further information.
17
Edison International Parent and Other
Edison International Parent and Other's liquidity and its ability to pay operating expenses and pay dividends to common
shareholders are dependent on dividends from SCE, realization of tax benefits and access to bank and capital markets. Edison
International may also finance working capital requirements, payment of obligations and capital investments, including
capital contributions to subsidiaries to fund new businesses, with commercial paper or other borrowings, subject to
availability in the capital markets.
At December 31, 2016, Edison International Parent had $712 million available under its $1.25 billion multi-year revolving
credit facility. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."
The debt covenant in Edison International Parent's credit facility requires a consolidated debt to total capitalization ratio as
defined in the credit agreement of less than or equal to 0.65 to 1. At December 31, 2016, Edison International Parent's
consolidated debt to total capitalization ratio was 0.47 to 1.
At December 31, 2016, Edison International Parent was in compliance with all financial covenants that affect access to
capital.
Net Operating Loss and Tax Credit Carryforwards
Edison International has approximately $1,152 million of net operating loss and tax credit carryforwards at December 31,
2016 (excluding $176 million of unrecognized tax benefits and $242 million of Capistrano Wind net operating loss and tax
credit carryforwards) which are available to offset future consolidated taxable income or tax liabilities (see Note 7 for further
information on taxes payable to Capistrano Wind). In December 2015, the PATH Act of 2015 extended 50% bonus
depreciation for qualifying property retroactive to January 1, 2015 and through 2017 and provided for 40% bonus
depreciation in 2018 and 30% in 2019. As a result, realization of these tax benefits has been deferred (currently forecasted to
be realized through 2021). The timing of realization of these tax benefits may be further delayed in the event of other changes
in tax regulations and the value of the net operating loss carryforwards could be permanently reduced if tax reform decreases
the corporate tax rate.
Edison Energy Group Capital Expenditures
Forecasted capital expenditures for Edison Energy Group's commercial solar activities are estimated to be $114 million in
2017. Edison Energy Group expects to finance a majority of these expenditures through project debt and tax equity
financings. For further information, see "Notes to Consolidated Financial Statements—Note 9. Investments."
Historical Cash Flows
SCE
(in millions)
Net cash provided by operating activities
Net cash (used in) provided by financing activities
Net cash used in investing activities
Net increase (decrease) in cash and cash equivalents
2016
2015
2014
$
$
3,523
(219)
(3,291)
13
$
$
4,624
(812)
(3,824)
(12)
$
$
3,660
181
(3,857)
(16)
18
Net Cash Provided by Operating Activities
The following table summarizes major categories of net cash provided by operating activities as provided in more detail in
SCE's consolidated statements of cash flows for 2016, 2015 and 2014.
(in millions)
Net income
Non cash items1
Subtotal
Changes in cash flow resulting from working
capital2
Derivative assets and liabilities, net
Regulatory assets and liabilities, net
Other noncurrent assets and liabilities, net3
Net cash provided by operating activities
Years ended December 31,
Change in cash flows
2016
2015
2014
2016/2015
2015/2014
$
$
$
1,499 $
1,111 $
2,108
2,231
3,607 $
3,342 $
236
13
(292)
(41)
3,523 $
16
45
1,729
(508)
4,624 $
1,565
2,381
3,946
79
(40)
(358)
33
3,660
$
$
265 $
(604)
220
(32)
(2,021)
467
(1,101) $
(63)
85
2,087
(541)
964
1 Non cash items include depreciation, decommissioning and amortization, allowance for equity during construction, impairment and
other charges, deferred income taxes and investment tax credits and other.
2 Changes in working capital items include receivables, inventory, accounts payable, prepaid and accrued taxes, and other current assets
and liabilities.
3
Includes the nuclear decommissioning trusts.
Net cash provided by operating activities was impacted by the following:
Net income and noncash items increased in 2016 by $265 million from 2015 and decreased in 2015 by $604 million from
2014. The increase in 2016 was primarily due to higher authorized revenue in 2016 from the escalation mechanism set forth
in the 2015 GRC decision. The decrease in 2015 was primarily due to the implementation of the 2015 GRC decision. The
factors that impacted these items are discussed under "Results of Operations—SCE—Earning Activities."
Net cash for working capital was $236 million, $16 million and $79 million in 2016, 2015 and 2014, respectively. The net
cash for 2016 and 2015 was primarily related to timing of disbursements ($45 million in 2016 and $120 million in 2015) and
timing of receipts from customers ($230 million in 2016 and $70 million in 2015). In addition, SCE had net tax payments of
$78 million in 2016 and $144 million in 2015. The net cash in 2014 was primarily related to net tax refunds of $88 million
due to net operating loss carrybacks to periods that SCE previously had taxable income.
Net cash provided by regulatory assets and liabilities, including changes in over (under) collections of balancing accounts,
was $(292) million, $1.7 billion and $(358) million in 2016, 2015 and 2014, respectively. SCE has a number of balancing
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:
2016
• Lower cash due to a decrease in ERRA overcollections for fuel and purchased power of $419 million in 2016 primarily
due to the implementation of the 2016 ERRA rate decrease in January 2016, partially offset by lower than forecasted
power and gas prices experienced in 2016.
• The public purpose and energy efficiency programs track differences between amounts authorized by the CPUC and
amounts incurred to fund programs established by the CPUC. Overcollections increased by $309 million in 2016 due to
higher funding and lower spending for these programs.
• SCE had a decrease in cash of approximately $182 million primarily due to a 2016 refund of 2015 overcollections
resulting from the implementation of the 2015 GRC decision which was authorized to be refunded to customers over a
two year period.
19
2015
• Higher cash due to a decrease in ERRA undercollections of $1.5 billion in 2015 primarily due to lower power and gas
prices experienced in 2015, the 2015 application of 2013 and 2014 nuclear decommissioning costs refunds against ERRA
undercollections and the NEIL settlement proceeds from insurance claims arising out of the failures of the San Onofre
replacement steam generators. In January 2015, SCE reclassified the regulatory liability for generator settlements to
ERRA to refund customers as required by the CPUC.
• During 2015, BRRBA overcollections increased by $314 million primarily due to revenue previously collected from
customers that was expected to be refunded as part of the 2015 GRC decision.
• Overcollections for the public purpose and energy efficiency programs decreased by $191 million in 2015 primarily due
to higher spending for these programs. The decrease was partially offset by an increase in funding of the new system
generation program for 2015.
• The 2015 GRC Decision established a tax accounting memorandum account (referred to as "TAMA"). As a result of this
memorandum account, together with a balancing account for pole loading expenditures, any differences between the
forecasted tax repair deductions and actual tax repair deductions will be adjusted through customer rates. At December 31,
2015, SCE had a regulatory liability of $248 million related to these accounts (impact of TAMA is offset in non-cash
items above).
2014
• During 2014, BRRBA overcollections decreased by $242 million primarily due to refunds to customers of approximately
$150 million, related to the sale of Four Corners, an electric generating facility in which SCE held a 48% ownership
interest, in December 2013.
• Overcollections for the public purpose and energy efficiency programs decreased by $278 million in 2014, respectively,
primarily due to higher spending for these programs. The decrease was partially offset by an increase in funding of the
new system generation program for 2014.
• During 2014, ERRA undercollections increased by $23 million primarily due to the amount and price of power and fuel
being higher than forecasted. The increase was partially offset by a $540 million reclassification from regulatory liabilities
to ERRA for collection of GRC revenue in excess of cost of service related to San Onofre consistent with its advice filing
in November 2014.
Cash flows (used in) provided by other noncurrent assets and liabilities were $(41) million, $(508) million and $33 million in
2016, 2015 and 2014, respectively. Major factors affecting cash flow related to noncurrent assets and liabilities were
activities related to SCE's nuclear decommissioning trusts (principally related to the payment of decommissioning costs).
Decommissioning costs of San Onofre were approximately $168 million and $216 million in 2016 and 2015, respectively
(such costs were recorded as a reduction of SCE's asset retirement obligation).
20
Net Cash (Used in) Provided by Financing Activities
The following table summarizes cash provided by financing activities for 2016, 2015 and 2014. Issuances of debt and
preference stock are discussed in "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements—Long-
Term Debt" and "—Note 12. Preferred and Preference Stock of Utility."
(in millions)
2016
2015
2014
Issuances of first and refunding mortgage bonds, net
$
— $
1,287
$
Issuances of pollution control bonds, net and other
Long-term debt matured or repurchased
Short-term debt financing, net
Issuances of preference stock, net
Payments of common stock dividends to Edison International
Redemptions of preference stock
Payments of preferred and preference stock dividends
Other
Net cash (used in) provided by financing activities
$
Net Cash Used in Investing Activities
—
(217)
719
294
(701)
(125)
(123)
(66)
(219)
$
126
(761)
(619)
319
(758)
(325)
(116)
35
(812)
$
498
—
(607)
490
269
(378)
—
(111)
20
181
Cash flows used in investing activities are primarily due to capital expenditures and funding of nuclear decommissioning
trusts. Capital expenditures were $3.6 billion for 2016, $4.2 billion for 2015 and $3.9 billion for 2014, primarily related to
transmission, distribution and generation investments. The decrease in capital expenditures during 2016 was primarily due to
lower FERC capital spending. Net proceeds (purchases) of nuclear decommissioning trust investments were $179 million,
$374 million and $(44) million for 2016, 2015 and 2014, respectively. See "Nuclear Decommissioning Trusts" below for
further discussion. The 2016 net proceeds from sale of nuclear decommissioning trust investments was used to fund
decommissioning costs less net earnings during the period. The 2015 net proceeds from sale of nuclear decommissioning
trust investments was used to fund 2013, 2014 and a portion of 2015 decommissioning costs less net earnings during the
period. The 2014 net purchase of nuclear decommissioning trust investments was due to net earnings during the period. In
addition, during the third quarter of 2016, SCE received proceeds of $140 million for a loan on the cash surrender value of
life insurance policies. The proceeds were used for general corporate purposes.
Nuclear Decommissioning Trusts
SCE's statement of cash flows includes activities of the Nuclear Decommissioning Trusts which are reflected in the following
line items:
(in millions)
Net cash (used in) provided by operating activities:
Nuclear decommissioning trusts
Net cash flow from investing activities:
Proceeds from sale of investments
Purchases of investments
Net cash impact
2016
2015
2014
$
$
(179)
$
(428)
$
39
3,212
(3,033)
— $
3,506
(3,132)
(54)
$
2,617
(2,661)
(5)
Net cash (used in) provided by operating activities of the nuclear decommissioning trusts relate to interest and dividends less
administrative expenses, taxes and decommissioning costs. See "Notes to Consolidated Financial Statements—Note 9.
Investments" for further information. Such activities represent the source (use) of the funds for investing activities. The net
cash impact represents the contributions made by SCE to the nuclear decommissioning trusts. During 2015, SCE made a
contribution of $54 million to the non-qualified decommissioning trust related to tax benefits received and pursuant to a
CPUC decision related to decommissioning costs for San Onofre Unit 1.
In future periods, decommissioning costs of San Onofre will increase significantly. Beginning in March 2016, funds for
decommissioning costs are requested from the nuclear decommissioning trusts one month in advance. Decommissioning
disbursements are funded from sales of investments of the nuclear decommissioning trusts. See "Notes to Consolidated
Financial Statements—Note 9. Investments" for further information.
21
Edison International Parent and Other
The table below sets forth condensed historical cash flow from operations for Edison International Parent and Other.
(in millions)
Net cash used in operating activities
Net cash provided by financing activities
Net cash used in investing activities
Net (decrease) increase in cash and cash equivalents
Net Cash Used in Operating Activities
2016
2015
2014
$
$
(267)
314
(125)
(78)
$
$
(115)
224
(68)
41
$
$
(412)
464
(50)
2
Net cash used in operating activities increased in 2016 by $152 million from 2015 and decreased in 2015 by $297 million
from 2014 due to:
•
•
•
•
$214 million, $204 million and $225 million of cash payments made to the Reorganization Trust in September 2016,
September 2015 and April 2014, respectively, related to the EME Settlement Agreement. See "Notes to Consolidated
Financial Statements—Note 15. Discontinued Operations—EME Chapter 11 Bankruptcy" for further information.
$143 million receipt of intercompany tax-allocation payments in 2015 and a $189 million deposit made with the IRS in
2014 related to open tax years 2003 through 2006.
$21 million outflow in June 2016 related to the buy-out of an earn-out provision with the former shareholders of a
company acquired by Edison Energy in 2015. See "Results of Operations—Edison International Parent and Other—Loss
from Continuing Operations" for further information.
$32 million cash outflow from operating activities in 2016, compared to $54 million cash inflow in 2015 and $2 million
cash outflow in 2014, due to timing of payments and receipts relating to interest and operating costs.
Net Cash Provided by Financing Activities
Net cash provided by financing activities were as follows:
(in millions)
2016
2015
2014
Dividends paid to Edison International common shareholders
$
Dividends received from SCE
Payment for stock-based compensation
Receipt from stock option exercises
Long-term debt issuance, net
Short-term debt financing, net
Other
$
(626)
701
(110)
59
397
(108)
1
$
(544)
758
(119)
67
7
47
8
Net cash provided by financing activities
$
314
$
224
$
(463)
378
(106)
66
(4)
589
4
464
Net Cash Used in Investing Activities
Net cash used in investing activities relates to Edison Energy Group's capital expenditures primarily for commercial solar
installations ($101 million in 2016, $15 million in 2015 and $49 million in 2014). In addition, the cash outflow in 2015 was
due to the acquisitions of three companies for approximately $100 million to support Edison Energy Group's commercial and
industrial services growth strategy. See "Notes to Consolidated Financial Statements—Note 9. Investments" for further
information.
22
Contractual Obligations and Contingencies
Contractual Obligations
Edison International Parent and Other and SCE's contractual obligations as of December 31, 2016, for the years 2017 through
2021 and thereafter are estimated below.
(in millions)
SCE:
Long-term debt maturities and interest1
Power purchase agreements:2
Renewable energy contracts
Qualifying facility contracts
Other power purchase agreements
Other operating lease obligations3
Purchase obligations:4
Other contractual obligations
Total SCE5,6,7
Edison International Parent and Other:
Long-term debt maturities and interest1
Total Edison International Parent and Other5
Total Edison International6,7
Total
Less than
1 year
1 to 3 years
3 to 5 years
More than
5 years
$
18,801
$
1,044
$
1,442
$
1,509
$
14,806
31,199
530
4,039
443
1,211
56,223
925
925
1,516
187
769
52
156
3,724
426
426
3,310
235
1,120
83
244
6,434
32
32
3,562
55
892
50
180
6,248
28
28
22,811
53
1,258
258
631
39,817
439
439
$
57,148
$
4,150
$
6,466
$
6,276
$
40,256
1 For additional details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements." Amount
includes interest payments totaling $8.36 billion and $93 million over applicable period of the debt for SCE and Edison
International Parent and Other, respectively.
2 Certain power purchase agreements entered into with independent power producers are treated as operating or capital leases. For
further discussion, see "Notes to Consolidated Financial Statements—Note 11. Commitments and Contingencies."
3 At December 31, 2016, SCE's minimum other operating lease payments were primarily related to vehicles, office space and
other equipment. For further discussion, see "Notes to Consolidated Financial Statements—Note 11. Commitments and
Contingencies."
4 For additional details, see "Notes to Consolidated Financial Statements—Note 11. Commitments and Contingencies." At
December 31, 2016, other commitments were primarily related to maintaining reliability and expanding SCE's transmission and
distribution system and capacity reduction contracts.
5 At December 31, 2016, Edison International Parent and Other and SCE had estimated contributions to the pension and PBOP
plans. SCE estimated contributions are $106 million, $106 million, $115 million, $157 million and $160 million in 2017, 2018,
2019, 2020 and 2021, respectively, which are excluded from the table above. Edison International Parent and Other estimated
contributions are $51 million, $18 million, $28 million, $26 million and $26 million for the same respective periods and are
excluded from the table above. These amounts represent estimates that are based on assumptions that are subject to change. See
"Notes to Consolidated Financial Statements—Note 8. Compensation and Benefit Plans" for further information.
6 At December 31, 2016, Edison International and SCE had a total net liability recorded for uncertain tax positions of
$471 million and $371 million, respectively, which is excluded from the table. Edison International and SCE cannot make
reliable estimates of the cash flows by period due to uncertainty surrounding the timing of resolving these open tax issues with
the tax authorities.
7 The contractual obligations table does not include derivative obligations and asset retirement obligations, which are discussed in
"Notes to Consolidated Financial Statements—Note 6. Derivative Instruments," and "—Note 1. Summary of Significant
Accounting Policies" and "—Note 9. Investments," respectively.
Contingencies
SCE has contingencies related to San Onofre Related Matters, Long Beach Service Interruptions, Nuclear Insurance, Wildfire
Insurance and Spent Nuclear Fuel, which are discussed in "Notes to Consolidated Financial Statements—Note 11.
Commitments and Contingencies."
2(cid:22)
Environmental Remediation
For a discussion of SCE's environmental remediation liabilities, see "Notes to Consolidated Financial Statements—Note 11.
Commitments and Contingencies—Environmental Remediation."
Off-Balance Sheet Arrangements
SCE has variable interests in power purchase contracts with variable interest entities and a variable interest in unconsolidated
Trust I, Trust II, Trust III, Trust IV and Trust V that issued $475 million (aggregate liquidation preference) of 5.625%,
$400 million (aggregate liquidation preference) of 5.10%, $275 million (aggregate liquidation preference) of 5.75%,
$325 million (aggregate liquidation preference) of 5.375% and $300 million (aggregate liquidation preference) of 5.45%,
trust securities, respectively, to the public, see "Notes to Consolidated Financial Statements—Note 3. Variable Interest
Entities."
Environmental Developments
For a discussion of environmental developments, see "Business—Environmental Regulation of Edison International and
Subsidiaries."
MARKET RISK EXPOSURES
Edison International's and SCE's primary market risks include fluctuations in interest rates, commodity prices and volumes,
and counterparty credit. Derivative instruments are used to manage market risks including market risks of SCE's customers.
For a further discussion of market risk exposures, including commodity price risk, credit risk and interest rate risk, see "Notes
to Consolidated Financial Statements—Note 6. Derivative Instruments" and "—Note 4. Fair Value Measurements."
Interest Rate Risk
Edison International and SCE are exposed to changes in interest rates primarily as a result of its financing, investing and
borrowing activities used for liquidity purposes, and to fund business operations and capital investments. The nature and
amount of Edison International and SCE's long-term and short-term debt can be expected to vary as a result of future business
requirements, market conditions and other factors. Fluctuations in interest rates can affect earnings and cash flows. Changes
in interest rates may impact SCE's authorized rate of return for the period beyond 2017, see "Business—SCE—Overview of
Ratemaking Process" for further discussion. The following table summarizes the increase or decrease to the fair value of
long-term debt including the current portion as of December 31, 2016, if the market interest rates were changed while leaving
all other assumptions the same:
(in millions)
Edison International
SCE
Commodity Price Risk
Carrying
Value
Fair Value
10% Increase
10% Decrease
$
$
11,156
10,333
$
12,368
11,539
$
11,892
11,070
12,876
12,040
SCE and its customers are exposed to the risk of a change in the market price of natural gas, electric power and transmission
congestion. SCE's hedging program is designed to reduce exposure to variability in market prices related to SCE's purchases
and sales of electric power and natural gas. SCE expects recovery of its related hedging costs through the ERRA balancing
account or CPUC-approved procurement plans, and as a result, exposure to commodity price is not expected to impact
earnings, but may impact timing of cash flows. As part of this program, SCE enters into energy options, swaps, forward
arrangements, tolling arrangements, and congestion revenue rights ("CRRs"). The transactions are pre-approved by the
CPUC or executed in compliance with CPUC-approved procurement plans.
Fair Value of Derivative Instruments
The fair value of derivative instruments is included in the consolidated balance sheets unless subject to an exception under
the applicable accounting guidance. Realized gains and losses from derivative instruments are expected to be recovered from
or refunded to customers through regulatory mechanisms and, accordingly, changes in SCE's fair value have no impact on
earnings. SCE does not use hedge accounting for these transactions due to this regulatory accounting treatment. For further
discussion on fair value measurements and the fair value hierarchy, see "Notes to Consolidated Financial Statements—Note 4.
Fair Value Measurements."
24
The fair value of outstanding derivative instruments used to mitigate exposure to commodity price risk was a net liability of
$1.1 billion and $1.2 billion at December 31, 2016 and 2015, respectively. The following table summarizes the increase or
decrease to the fair values of the net liability of derivative instruments included in the consolidated balance sheets as of
December 31, 2016, if the electricity prices or gas prices were changed while leaving all other assumptions constant:
(in millions)
Increase in electricity prices by 10%
Decrease in electricity prices by 10%
Increase in gas prices by 10%
Decrease in gas prices by 10%
Credit Risk
December 31, 2016
$
112
(92)
(36)
43
For information related to credit risks, see "Notes to Consolidated Financial Statements—Note 6. Derivative Instruments."
Credit risk exposure from counterparties for power and gas trading activities is measured as the sum of net accounts
receivable (accounts receivable less accounts payable) and the current fair value of net derivative assets (derivative assets less
derivative liabilities) reflected on the consolidated balance sheets. SCE enters into master agreements which typically provide
for a right of setoff. Accordingly, SCE's credit risk exposure from counterparties is based on a net exposure under these
arrangements. SCE manages the credit risk on the portfolio for both rated and non-rated counterparties based on credit ratings
using published ratings of counterparties and other publicly disclosed information, such as financial statements, regulatory
filings, and press releases, to guide it in the process of setting credit levels, risk limits and contractual arrangements,
including master netting agreements.
As of December 31, 2016, the amount of balance sheet exposure as described above broken down by the credit ratings of
SCE's counterparties, was as follows:
(in millions)
S&P Credit Rating1
A or higher
December 31, 2016
Exposure2
Collateral
Net Exposure
$
74
$
(3)
$
71
1
2
SCE assigns a credit rating based on the lower of a counterparty's S&P, Fitch or Moody's Investors Service rating. For ease of
reference, the above table uses the S&P classifications to summarize risk, but reflects the lower of the three credit ratings.
Exposure excludes amounts related to contracts classified as normal purchases and sales and non-derivative contractual commitments
that are not recorded on the consolidated balance sheets, except for any related net accounts receivable.
CRITICAL ACCOUNTING ESTIMATES AND POLICIES
The accounting policies described below are considered critical to obtaining an understanding of Edison International and
SCE's consolidated financial statements because their application requires the use of significant estimates and judgments by
management in preparing the consolidated financial statements. Management estimates and judgments are inherently
uncertain and may differ significantly from actual results achieved. Management considers an accounting estimate to be
critical if the estimate requires significant assumptions and changes in the estimate or, the use of alternative estimates, could
have a material impact on Edison International's results of operations or financial position. For more information on Edison
International's accounting policies, see "Notes to Consolidated Financial Statements—Note 1. Summary of Significant
Accounting Policies."
Rate Regulated Enterprises
Nature of Estimate Required. SCE follows the accounting principles for rate-regulated enterprises which are required for
entities whose rates are set by regulators at levels intended to recover the estimated costs of providing service, plus a return
on net investment, or rate base. Regulators may also impose certain penalties or grant certain incentives. Due to timing and
other differences in the collection of revenue, these principles allow a cost that would otherwise be charged as an expense by
an unregulated entity to be capitalized as a regulatory asset if it is probable that such cost is recoverable through future rates;
conversely the principles allow creation of a regulatory liability for amounts collected in rates to recover costs expected to be
incurred in the future or amounts collected in excess of costs incurred and are refundable to customers.
25
In November 2014, the CPUC approved the San Onofre OII Settlement Agreement, which resolved the CPUC's investigation
regarding the steam generator replacement project at San Onofre and the related outages and subsequent shutdown of San
Onofre. In a December 2016 joint ruling, the Assigned Commissioner and the Assigned ALJ expressed concerns about the
extent to which the failure to timely report ex parte communications had impacted the settlement negotiations and directed
SCE to meet and confer with the other parties in the OII to consider changing the terms of the San Onofre OII Settlement
Agreement.
In November 2015, SCE received the 2015 GRC decision. As part of this decision, the CPUC adopted a rate base offset
associated with forecasted tax repair deductions during 2012 – 2014. The 2015 rate base offset is $324 million and amortizes
on a straight line basis over 27 years. As a result of the rate base offset included in the final decision, SCE recorded an after
tax charge of $382 million during the fourth quarter of 2015 to write down the regulatory assets previously recorded for
recovery of deferred income taxes related to 2012 – 2014 incremental tax repair deductions.
Key Assumptions and Approach Used. SCE's management assesses at the end of each reporting period whether regulatory
assets are probable of future recovery by considering factors such as the current regulatory environment, the issuance of rate
orders on recovery of the specific or a similar incurred cost to SCE or other rate-regulated entities, and other factors that
would indicate that the regulator will treat an incurred cost as allowable for ratemaking purposes. Using these factors,
management has determined that existing regulatory assets and liabilities are probable of future recovery or settlement. This
determination reflects the current regulatory climate and is subject to change in the future. SCE's judgment that the San
Onofre Regulatory Asset recorded at December 31, 2016 is probable, though not certain, of recovery is based on SCE's
knowledge of the facts and judgment in applying the relevant regulatory principles to the issue. Such judgment is subject to
uncertainty, and regulatory principles and precedents are not necessarily binding and are capable of interpretation. SCE has
recorded a regulatory asset to reflect the expected recoveries under the San Onofre OII Settlement Agreement. At
December 31, 2016, $857 million remains to be collected.
Effect if Different Assumptions Used. Significant management judgment is required to evaluate the anticipated recovery of
regulatory assets, the recognition of incentives and revenue subject to refund, as well as the anticipated cost of regulatory
liabilities or penalties. If future recovery of costs ceases to be probable, all or part of the regulatory assets and liabilities
would have to be written off against current period earnings. At December 31, 2016, the consolidated balance sheets included
regulatory assets of $7.8 billion and regulatory liabilities of $6.5 billion. If different judgments were reached on recovery of
costs and timing of income recognition, SCE's earnings may vary from the amounts reported.
Income Taxes
Nature of Estimates Required. As part of the process of preparing its consolidated financial statements, Edison International
and SCE are required to estimate income taxes for each jurisdiction in which they operate. This process involves estimating
actual current period tax expense together with assessing temporary differences resulting from differing treatment of items,
such as depreciation, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are
included within Edison International and SCE's consolidated balance sheets, including net operating loss and tax credit
carryforwards that can be used to reduce liabilities in future periods.
Edison International and SCE take certain tax positions they believe are in accordance with the applicable tax laws. However,
these tax positions are subject to interpretation by the IRS, state tax authorities and the courts. Edison International and SCE
determine uncertain tax positions in accordance with the authoritative guidance.
Key Assumptions and Approach Used. Accounting for tax obligations requires management judgment. Edison International
and SCE's management use judgment in determining whether the evidence indicates it is more likely than not, based solely
on the technical merits, that a tax position will be sustained, and to determine the amount of tax benefits to be recognized.
Judgment is also used in determining the likelihood a tax position will be settled and possible settlement outcomes. In
assessing uncertain tax positions Edison International and SCE consider, among others, the following factors: the facts and
circumstances of the position, regulations, rulings, and case law, opinions or views of legal counsel and other advisers, and
the experience gained from similar tax positions. Edison International and SCE's management evaluates uncertain tax
positions at the end of each reporting period and makes adjustments when warranted based on changes in fact or law.
26
Effect if Different Assumptions Used. Actual income taxes may differ from the estimated amounts which could have a
significant impact on the liabilities, revenue and expenses recorded in the financial statements. Edison International and SCE
continue to be under audit or subject to audit for multiple years in various jurisdictions. Significant judgment is required to
determine the tax treatment of particular tax positions that involve interpretations of complex tax laws. Such liabilities are
based on judgment and a final determination could take many years from the time the liability is recorded. Furthermore,
settlement of tax positions included in open tax years may be resolved by compromises of tax positions based on current
factors and business considerations that may result in material adjustments to income taxes previously estimated.
Nuclear Decommissioning – Asset Retirement Obligation
Key Assumptions and Approach Used. The liability to decommission SCE's nuclear power facilities is based on
decommissioning studies performed in 2013 for Palo Verde and in 2014 for San Onofre Units 1, 2 and 3. See "Liquidity and
Capital Resources—SCE—Decommissioning of San Onofre" for further discussion of the plans for decommissioning of San
Onofre. SCE estimates that it will spend approximately $6.3 billion through 2079 to decommission its nuclear facilities. San
Onofre Units 1, 2 and 3 decommissioning cost estimates are updated in each Nuclear Decommissioning Triennial Proceeding.
Palo Verde decommissioning cost estimates are updated every three years by the operating agent, Arizona Public Services.
The current ARO estimates for San Onofre and Palo Verde are based on the assumptions from these decommissioning
studies:
• Decommissioning Costs. The estimated costs for labor, "material, equipment and other," and low-level radioactive waste
costs are included in each of the NRC decommissioning stages; license termination, site restoration, and spent fuel
storage.
• Escalation Rates. Annual escalation rates are used to convert the decommissioning cost estimates in base year dollars to
decommissioning cost estimates in future-year dollars. Escalation rates are primarily used for labor, material, equipment,
and low level radioactive waste burial costs. SCE's current estimates are based upon SCE's decommissioning cost
methodology used for ratemaking purposes. Average escalation rates range from 1.7% to 7.5% (depending on the cost
element) annually.
• Timing. Cost estimates for Palo Verde are based on an assumption that decommissioning will commence promptly after
the current NRC operating licenses expire. The Palo Verde 1, 2, 3 operating licenses currently expire in 2045, 2046 and
2047 respectively. San Onofre Unit 1 started decommissioning in 1998 and Units 2 and 3 began in 2013. Cost estimates
for San Onofre Units are currently based on completion of decommissioning activities by 2052.
• Spent Fuel Dry Storage Costs. Cost estimates are based on an assumption that the DOE will begin to take spent fuel in
2024, and will remove the last spent fuel from the San Onofre and Palo Verde sites by 2051 and 2075, respectively. Costs
for spent fuel monitoring are included until 2051 and 2075, respectively.
• Changes in Decommissioning Technology, Regulation, and Economics. The current cost studies assume the use of current
technologies under current regulations and at current cost levels.
Effect if Different Assumptions Used. The ARO for decommissioning SCE's nuclear facilities was $2.5 billion as of
December 31, 2016, based on decommissioning studies performed in 2013 for Palo Verde and in 2014 for San Onofre Units
1, 2 and 3. Changes in the estimated costs, execution strategy or timing of decommissioning, or in the assumptions and
judgments by management underlying these estimates, could cause material revisions to the estimated total cost to
decommission these facilities which could have a material effect on the recorded liability. The ARO for decommissioning San
Onofre Units 2 & 3 is expected to be updated after onboarding the decommissioning general contractor and the subsequent
development of a new decommissioning cost estimate during 2017.
The following table illustrates the increase to the ARO liability if the cost escalation rate was adjusted while leaving all other
assumptions constant:
(in millions)
Uniform increase in escalation rate of 1 percentage point
Increase to ARO and
Regulatory Asset at
December 31, 2016
481
$
The increase in the ARO liability driven by an increase in the escalation rate would result in a decrease in the regulatory
liability for recoveries in excess of ARO liabilities.
27
Pensions and Postretirement Benefits Other than Pensions ("PBOP(s)")
Nature of Estimate Required. Authoritative accounting guidance requires companies to recognize the overfunded or
underfunded status of defined benefit pension and other postretirement plans as assets and liabilities in the balance sheet; the
assets and/or liabilities are normally offset through other comprehensive income (loss). In accordance with authoritative
guidance for rate-regulated enterprises, regulatory assets and liabilities are recorded instead of charges and credits to other
comprehensive income (loss) for its postretirement benefit plans that are recoverable in utility rates. Edison International and
SCE have a fiscal year-end measurement date for all of its postretirement plans.
Key Assumptions of Approach Used. Pension and other postretirement obligations and the related effects on results of
operations are calculated using actuarial models. Two critical assumptions, discount rate and expected return on assets, are
important elements of plan expense, and the discount rate is important to liability measurement. Additionally, health care cost
trend rates are critical assumptions for postretirement health care plans. These critical assumptions are evaluated at least
annually. Other assumptions, which require management judgment, such as rate of compensation increases and rates of
retirement and turnover, are evaluated periodically and updated to reflect actual experience.
As of December 31, 2016, Edison International's and SCE's pension plans had a $4.3 billion and $3.8 billion benefit
obligation, respectively, and total 2016 expense for these plans was $101 million and $93 million, respectively. As of
December 31, 2016, the benefit obligation for both Edison International's and SCE's PBOP plans were $2.3 billion, and total
2016 expense for Edison International's and SCE's plans was $20 million and $19 million, respectively. Annual contributions
made to most of SCE's pension plans are currently recovered through CPUC-approved regulatory mechanisms and are
expected to be, at a minimum, equal to the related annual expense.
Pension expense is recorded for SCE based on the amount funded to the trusts, as calculated using an actuarial method
required for ratemaking purposes, in which the impact of market volatility on plan assets is recognized in earnings on a more
gradual basis. Any difference between pension expense calculated in accordance with ratemaking methods and pension
expense calculated in accordance with authoritative accounting guidance for pension is accumulated as a regulatory asset or
liability, and is expected, over time, to be recovered from or returned to customers. As of December 31, 2016, this cumulative
difference amounted to a regulatory asset of $95 million, meaning that the accounting method has recognized more in
expense than the ratemaking method since implementation of authoritative guidance for employers' accounting for pensions
in 1987.
Edison International and SCE used the following critical assumptions to determine expense for pension and other
postretirement benefit for 2016:
(in millions)
Discount rate1
Expected long-term return on plan assets2
Assumed health care cost trend rates3
Pension
Plans
Postretirement
Benefits Other
than Pensions
4.18%
7.00%
*
4.55%
5.60%
7.50%
* Not applicable to pension plans.
1 The discount rate enables Edison International and SCE to state expected future cash flows at a present
value on the measurement date. Edison International and SCE select its discount rate by performing a yield
curve analysis. This analysis determines the equivalent discount rate on projected cash flows, matching the
timing and amount of expected benefit payments. The AON-Hewitt yield curve is considered in
determining the discount rate.
2 To determine the expected long-term rate of return on pension plan assets, current and expected asset
allocations are considered, as well as historical and expected returns on plan assets. A portion of PBOP
trusts asset returns are subject to taxation, so the 5.6% rate of return on plan assets above is determined on
an after-tax basis. Actual time-weighted, annualized returns on the pension plan assets were 8.5%, 9.7%
and 5.8% for the one-year, five-year and ten-year periods ended December 31, 2016, respectively. Actual
time-weighted, annualized returns on the PBOP plan assets were 7.0%, 9.5% and 5.0% over these same
periods. Accounting principles provide that differences between expected and actual returns are recognized
over the average future service of employees.
3 The health care cost trend rate gradually declines to 5.0% for 2022 and beyond.
28
As of December 31, 2016, Edison International and SCE had unrecognized pension costs of $666 million and $598 million,
and unrecognized PBOP costs of $140 million and $136 million, respectively. The unrecognized pension and PBOP costs
primarily consisted of the cumulative impact of the reduced discount rates on the respective benefit obligations and the
cumulative difference between the expected and actual rate of return on plan assets. Of these deferred costs, $479 million of
SCE's pension costs and $33 million of SCE's PBOP costs are recorded as regulatory assets and is expected to be recovered
over the average expected future service of employees.
Edison International's and SCE's pension and PBOP plans are subject to limits established for federal tax deductibility. SCE
funds its pension and PBOP plans in accordance with amounts allowed by the CPUC. Executive pension plans have no plan
assets.
Effect if Different Assumptions Used. Changes in the estimated costs or timing of pension and other postretirement benefit
obligations, or the assumptions and judgments used by management underlying these estimates, could have a material effect
on the recorded expenses and liabilities.
The following table summarizes the increase or (decrease) to projected benefit obligation for pension and the accumulated
benefit obligation for PBOP if the discount rate were changed while leaving all other assumptions constant:
(in millions)
Change to projected benefit obligation for pension
Change to accumulated benefit obligation for PBOP
Edison International
SCE
Increase in
discount
rate by 1%
Decrease in
discount
rate by 1%
Increase in
discount
rate by 1%
Decrease in
discount
rate by 1%
$
$
(422)
(319)
$
513
372
$
(365)
(318)
444
370
A one percentage point increase in the expected rate of return on pension plan assets would decrease Edison International's
and SCE's current year expense by $31 million and $29 million, respectively, and a one percentage point increase in the
expected rate of return on PBOP plan assets would decrease both Edison International's and SCE's current year expense by
$20 million.
The following table summarizes the increase or (decrease) to accumulated benefit obligation and annual aggregate service
and interest costs for PBOP if the health care cost trend rate was changed while leaving all other assumptions constant:
(in millions)
Edison International
SCE
Increase in
health care
cost trend
rate by 1%
Decrease in
health care
cost trend
rate by 1%
Increase in
health care
cost trend
rate by 1%
Decrease in
health care
cost trend
rate by 1%
Change to accumulated benefit obligation for PBOP
$
Change to annual aggregate service and interest costs
$
244
11
$
(200)
(9)
$
243
11
(199)
(9)
Accounting for Contingencies
Nature of Estimates Required. Edison International and SCE record loss contingencies when management determines that
the outcome of future events is probable of occurring and when the amount of the loss can be reasonably estimated. Gain
contingencies are recognized in the financial statements when they are realized.
Key Assumptions and Approach Used. The determination of a reserve for a loss contingency is based on management
judgment and estimates with respect to the likely outcome of the matter, including the analysis of different scenarios.
Liabilities are recorded or adjusted when events or circumstances cause these judgments or estimates to change. In assessing
whether a loss is a reasonable possibility, Edison International and SCE may consider the following factors, among others:
the nature of the litigation, claim or assessment, available information, opinions or views of legal counsel and other advisors,
and the experience gained from similar cases. Edison International and SCE provide disclosures for material contingencies
when there is a reasonable possibility that a loss or an additional loss may be incurred.
Effect if Different Assumptions Used. Actual amounts realized upon settlement of contingencies may be different than
amounts recorded and disclosed and could have a significant impact on the liabilities, revenue and expenses recorded on the
consolidated financial statements. For a discussion of contingencies, guarantees and indemnities, see "Notes to Consolidated
Financial Statements—Note 11. Commitments and Contingencies."
29
NEW ACCOUNTING GUIDANCE
New accounting guidance is discussed in "Notes to Consolidated Financial Statements—Note 1. Summary of Significant
Accounting Policies—New Accounting Guidance."
RISK FACTORS
RISKS RELATING TO EDISON INTERNATIONAL
Edison International's liquidity depends on SCE's ability to pay dividends and tax allocation payments to Edison
International, monetization of tax benefits retained by EME, ability to borrow funds, and access to capital markets.
Edison International is a holding company and, as such, it has no operations of its own. Edison International's ability to meet
its financial obligations, make investments, and to pay dividends on its common stock is primarily dependent on the earnings
and cash flows of SCE and its ability to make upstream distributions. Prior to paying dividends to Edison International, SCE
has financial and regulatory obligations that must be satisfied, including, among others, debt service and preferred stock
dividends. In addition, CPUC holding company rules require that SCE's dividend policy be established by SCE's Board of
Directors on the same basis as if SCE were a stand-alone utility company, and that the capital requirements of SCE, as
deemed to be necessary to meet SCE's electricity service obligations, shall receive first priority from the Boards of Directors
of both Edison International and SCE. SCE may also owe tax-allocation payments to Edison International under applicable
tax-allocation agreements. Access to capital markets may be impacted by economic conditions that have an adverse effect on
Edison International's liquidity. See "Risks Relating to Southern California Edison Company" below for further discussion.
The Edison International consolidated tax group retains significant net operating loss and tax credit carryforwards.
Realization of such tax benefits may be delayed or permanently reduced by future tax legislation that extends bonus
depreciation or reduces the current corporate tax rate.
Edison International's business activities are concentrated in one industry and in one region.
Edison International business activities are concentrated in the electricity industry. Its principal subsidiary, SCE, serves
customers only in southern and central California. Although Edison International, through Edison Energy Group, is
developing competitive businesses that are diversified geographically, these businesses are not material. As a result, Edison
International's future performance may be affected by events and economic factors unique to California or by regional
regulation or legislation.
Edison International is developing businesses held by Edison Energy Group that may not be successful.
Edison International, through Edison Energy Group, is developing businesses to capitalize on changes in the electricity
industry. Edison International intends to invest in companies to develop the capabilities of the Edison Energy Group entities
but there can be no assurance that these entities will be profitable.
RISKS RELATING TO SOUTHERN CALIFORNIA EDISON COMPANY
Regulatory Risks
SCE is subject to extensive regulation and the risk of adverse regulatory decisions and changes in applicable regulations
or legislation.
SCE operates in a highly regulated environment. SCE's business is subject to extensive federal, state and local energy,
environmental and other laws and regulations. Among other things, the CPUC regulates SCE's retail rates and capital
structure, and the FERC regulates SCE's wholesale rates. The NRC regulates the decommissioning of San Onofre. The
construction, planning, and siting of SCE's power plants and transmission lines in California are also subject to regulation by
the CPUC and other local, state and federal agencies.
SCE must periodically apply for licenses and permits from these various regulatory authorities and abide by their respective
orders. Should SCE be unsuccessful in obtaining necessary licenses or permits or should these regulatory authorities initiate
any investigations or enforcement actions or impose penalties or disallowances on SCE, SCE's business could be materially
affected. The process of obtaining licenses and permits from regulatory authorities may be delayed or defeated by opponents
and such delay or defeat could have a material effect on SCE's business.
30
In September 2016, the California Governor signed into law several CPUC reform bills that establish rules governing, among
other subjects, communications between the CPUC officials, staff and the regulated utilities. Changes to the rules and
processes around ex parte communications could result in delayed decisions, increased investigations, enforcement actions
and penalties. In addition, the CPUC or other parties may initiate investigations of past communications between public
utilities, including SCE, and CPUC officials and staff that could result in reopening completed proceedings for
reconsideration.
In addition, existing regulations may be revised or reinterpreted and new laws and regulations may be adopted or become
applicable to SCE, or its facilities or operations, in a manner that may have a detrimental effect on SCE's business or result in
significant additional costs. In addition, regulations adopted via the public initiative or legislative process may apply to SCE,
or its facilities or operations, in a manner that may have a detrimental effect on SCE's business or result in significant
additional costs.
SCE's financial results depend upon its ability to recover its costs and to earn a reasonable rate of return on capital
investments in a timely manner from its customers through regulated rates.
SCE's ongoing financial results depend on its ability to recover its costs from its customers, including the costs of electricity
purchased for its customers, through the rates it charges its customers as approved by the CPUC and FERC. SCE's financial
results also depend on its ability to earn a reasonable return on capital, including long-term debt and equity. SCE's ability to
recover its costs and earn a reasonable rate of return can be affected by many factors, including the time lag between when
costs are incurred and when those costs are recovered in customers' rates and differences between the forecast or authorized
costs embedded in rates (which are set on a prospective basis) and the amount of actual costs incurred. The CPUC or the
FERC may not allow SCE to recover costs on the basis that such costs were not reasonably or prudently incurred or for other
reasons. Further, SCE may be required to incur expenses before the relevant regulatory agency approves the recovery of such
costs. For example, the recovery of the Tehachapi transmission project costs are subject to FERC approval and the public
need for the project is reviewed by the CPUC. SCE filed a petition for modification with the CPUC in January 2017 to update
the cost estimate for all elements of segments 4-11 to $2.7 billion (2016 dollars) from $2.0 billion (2016 dollars) of CPUC-
approved cost findings. For further information, see "Liquidity and Capital Resources—SCE—Capital Investment Plan—
Tehachapi" in the MD&A.
Changes in laws and regulations or changes in the political and regulatory environment also may have an adverse effect on
the SCE's ability to timely recover its costs and earn its authorized rate of return. In addition, SCE may be required to incur
costs to comply with new state laws or to implement new state policies before SCE is assured of cost recovery.
SCE's capital investment plan, increasing procurement of renewable power and energy storage, increasing environmental
regulations, leveling demand, and the cumulative impact of other public policy requirements, collectively place continuing
upward pressure on customer rates. If SCE is unable to obtain a sufficient rate increase or modify its rate design to recover its
costs (including an adequate return on capital) in rates in a timely manner, its financial condition and results of operations
could be materially affected. For further information on SCE's rate requests, see "Management Overview—Regulatory
Proceedings—2018 General Rate Case" and "—FERC Formula Rates" in the MD&A.
SCE's energy procurement activities are subject to regulatory and market risks that could materially affect its financial
condition and liquidity.
SCE obtains energy, capacity, environmental credits and ancillary services needed to serve its customers from its own
generating plants and through contracts with energy producers and sellers. California law and CPUC decisions allow SCE to
recover, through the rates it is allowed to charge its customers, reasonable procurement costs incurred in compliance with an
approved procurement plan. Nonetheless, SCE's cash flows remain subject to volatility primarily resulting from changes in
commodity prices. For instance, natural gas prices have increased due to the closure of the SoCalGas underground gas
storage facility in Aliso Canyon, California. Additionally, significant and prolonged gas use restrictions may adversely impact
the reliability of the electric grid if critical generation resources are limited in their operations. For further information, see
"Business—SCE—Purchased Power and Fuel Supply." SCE is also subject to the risks of unfavorable or untimely CPUC
decisions about the compliance with SCE's procurement plan and the reasonableness of certain procurement-related costs.
SCE may not be able to hedge its risk for commodities on economic terms or fully recover the costs of hedges through the
rates it is allowed to charge its customers, which could materially affect SCE's liquidity and results of operations, see "Market
Risk Exposures" in the MD&A.
31
Financing Risks
As a capital intensive company, SCE relies on access to the capital markets. If SCE were unable to access the capital
markets or the cost of financing were to substantially increase, its liquidity and operations could be materially affected.
SCE regularly accesses the capital markets to finance its activities and is expected to do so by its regulators as part of its
obligation to serve as a regulated utility. SCE's needs for capital for its ongoing infrastructure investment program are
substantial. SCE's ability to obtain financing, as well as its ability to refinance debt and make scheduled payments of
principal, interest and preferred stock dividends, are dependent on numerous factors, including SCE's levels of indebtedness,
maintenance of acceptable credit ratings, financial performance, liquidity and cash flow, and other market conditions. SCE's
inability to obtain additional capital from time to time could have a material effect on SCE's liquidity and operations.
Competitive and Market Risks
The electricity industry is undergoing change, including increased competition, technological advancements, and political
and regulatory developments
California utilities are experiencing increasing deployment by customers and third parties of DERs, such as solar generation,
energy storage, energy efficiency and demand response technologies. This growth will require modernization of the electric
distribution grid to, among other things, accommodate two-way flows of electricity and increase the grid's capacity to
interconnect DERs. To this end, the CPUC is conducting proceedings to: evaluate changes to the planning and operation of
the electric distribution grid in order to prepare for higher penetration of DERs; consider future grid modernization and grid
reinforcement investments; evaluate if traditional grid investments can be deferred by DERs, and if feasible, what, if any,
compensation to utilities would be appropriate; and clarify the role of the electric distribution grid operator. The outcome of
these proceedings is unknown. These changes could materially affect SCE's business model and its financial condition and
results of operations. For more information, see "Management Overview—Capital Program—Distribution Grid
Development" in the MD&A.
Customer-owned generation and community choice aggregators each reduce the amount of electricity customers purchase
from utilities and have the effect of increasing utility rates unless customer rates are designed to allocate the costs of the
distribution grid across all customers that benefit from its use. For example, customers in California that generate their own
power do not currently pay all transmission and distribution charges and non-bypassable charges, subject to limitations,
which result in increased utility rates for those customers who do not own their generation. Such increases influence the
public discussion regarding changes in the electric utility business model.
In addition, the FERC has opened transmission development to competition from independent developers, allowing such
developers to compete with incumbent utilities for the construction and operation of transmission facilities. For more
information, see "Business—SCE—Competition."
Operating Risks
SCE's financial condition and results of operations could be materially affected if it is unable to successfully manage the
risks inherent in operating and maintaining its facilities.
SCE's infrastructure is aging and could pose a risk to system reliability. In order to mitigate this risk, SCE is engaged in a
significant and ongoing infrastructure investment program. This substantial investment program elevates operational risks
and the need for superior execution in SCE's activities. SCE's financial condition and results of operations could be materially
affected if it is unable to successfully manage these risks as well as the risks inherent in operating and maintaining its
facilities, the operation of which can be hazardous. SCE's inherent operating risks include such matters as the risks of human
performance, workforce capabilities, public opposition to infrastructure projects, delays, environmental mitigation costs,
difficulty in estimating costs or in recovering costs that are above original estimates, system limitations and degradation, and
interruptions in necessary supplies.
32
Weather-related incidents and other natural disasters could materially affect SCE's financial condition and results of
operations.
Weather-related incidents and other natural disasters, including storms, wildfires and earthquakes, can disrupt the generation
and transmission of electricity, and can seriously damage the infrastructure necessary to deliver power to SCE's customers.
These events can lead to lost revenues and increased expenses, including higher maintenance and repair costs. They can also
result in regulatory penalties and disallowances, particularly if SCE encounters difficulties in restoring power to its customers
on a timely basis. These occurrences could materially affect SCE's business, financial condition and results of operations, and
the inability to restore power to SCE's customers could also materially damage the business reputation of SCE and Edison
International.
The generation, transmission and distribution of electricity are dangerous and involve inherent risks of damage to private
property and injury to employees and the general public.
Electricity is dangerous for employees and the general public should they come in contact with electrical current or
equipment, including through downed power lines or if equipment malfunctions. Injuries and property damage caused by
such events can subject SCE to liability that, despite the existence of insurance coverage, can be significant. No assurance
can be given that future losses will not exceed the limits of SCE's or its contractors' insurance coverage. The CPUC has
increased its focus on public safety with an emphasis on heightened compliance with construction and operating standards
and the potential for penalties being imposed on utilities. Additionally, the CPUC has delegated to its staff the authority to
issue citations to electric utilities, which can impose fines of up to $50,000 per violation per day, pursuant to the CPUC's
jurisdiction for violations of safety rules found in statutes, regulations, and the CPUC's General Orders. Such penalties and
liabilities could be significant and materially affect SCE's liquidity and results of operations.
There are inherent risks associated with owning and decommissioning nuclear power generating facilities and obtaining
cost reimbursement, including, among other things, costs exceeding estimates, execution risks, potential harmful effects
on the environment and human health and the danger of storage, handling and disposal of radioactive materials. Existing
insurance and ratemaking arrangements may not protect SCE fully against losses from a nuclear incident.
SCE expects to fund decommissioning costs with assets that are currently held in nuclear decommissioning trusts. SCE
believes that the nuclear decommissioning trusts' assets will be sufficient to pay the estimated costs of decommissioning
without further contributions but the costs ultimately incurred could exceed the current estimates. The costs of
decommissioning San Onofre are subject to reasonableness reviews by the CPUC. These costs may not be recoverable
through regulatory processes or otherwise unless SCE can establish that the costs were reasonably incurred. In addition, SCE
faces inherent execution risks including such matters as the risks of human performance, workforce capabilities, public
opposition, permitting delays, and governmental approvals.
Despite the fact that San Onofre is being decommissioned, the presence of spent nuclear fuel still poses a potential risk of a
nuclear incident. Federal law limits public liability claims from a nuclear incident to the amount of available financial
protection, which is currently approximately $13.4 billion. SCE and other owners of San Onofre and Palo Verde have
purchased the maximum private primary insurance available of $450 million per site. If nuclear incident liability claims were
to exceed $450 million, the remaining amount would be made up from contributions of approximately $13.0 billion made by
all of the nuclear facility owners in the U.S., up to an aggregate total of $13.4 billion. There is no assurance that the CPUC
would allow SCE to recover the required contribution made in the case of one or more nuclear incident claims that exceeded
$450 million. If this public liability limit of $13.4 billion is insufficient, federal law contemplates that additional funds may
be appropriated by Congress. There can be no assurance of SCE's ability to recover uninsured costs in the event the additional
federal appropriations are insufficient. For more information on nuclear insurance risk, see "Notes to Consolidated Financial
Statements—Note 11. Commitments and Contingencies—Contingencies—Nuclear Insurance."
SCE's insurance coverage for wildfires arising from its ordinary operations may not be sufficient.
Edison International has experienced increased costs and difficulties in obtaining insurance coverage for wildfires that could
arise from SCE's ordinary operations. Edison International, SCE or its contractors may experience coverage reductions and/or
increased wildfire insurance costs in future years. No assurance can be given that future losses will not exceed the limits of
SCE's or its contractors' insurance coverage. Uninsured losses and increases in the cost of insurance may not be recoverable
in customer rates. A loss which is not fully insured or cannot be recovered in customer rates could materially affect Edison
International's and SCE's financial condition and results of operations. For more information on wildfire insurance risk, see
"Notes to Consolidated Financial Statements—Note 11. Commitments and Contingencies—Contingencies—Wildfire
Insurance."
33
Cybersecurity and Physical Security Risks
SCE's systems and network infrastructure may be vulnerable to physical and cyber attacks, intrusions or other
catastrophic events that could result in their failure or reduced functionality.
Regulators, such as the NERC, and U.S. Government Departments, including the Departments of Defense, Homeland
Security and Energy, have noted that threat sources continue to seek to exploit potential vulnerabilities in the U.S. national
electric grid and other energy infrastructures and that such attacks and disruptions, both physical and cyber, are becoming
increasingly sophisticated and dynamic. As SCE moves from an analog to a digital electric grid, new cyber security risks may
arise. An example of such new risks is the installation of "smart" meters in SCE's service territory. This technology may
represent a new route for attacks on SCE's information systems. SCE's operations require the continuous availability of
critical information technology systems and network infrastructure. SCE's systems have been, and will likely continue to be,
subjected to computer attacks of malicious codes, unauthorized access attempts, and other illicit activities, but to date, SCE
has not experienced a material cyber security breach. Although SCE actively monitors developments in this area and is
involved in various industry groups and government initiatives, no security measures can completely shield such systems and
infrastructure from vulnerabilities to cyber attacks, intrusions or other catastrophic events that could result in their failure or
reduced functionality. If SCE's information technology systems security measures were to be breached or a critical system
failure were to occur without timely recovery, SCE could be unable to fulfill critical business functions such as delivery of
electricity to customers and/or sensitive confidential personal and other data could be compromised, which could result in
violations of applicable privacy and other laws, financial loss to SCE or to its customers, loss of confidence in SCE's security
measures, customer dissatisfaction, and significant litigation exposure, all of which could materially affect SCE's financial
condition and results of operations and materially damage the business reputation of Edison International and SCE.
Environmental Risks
SCE is subject to extensive environmental regulations that may involve significant and increasing costs and materially
affect SCE.
SCE is subject to extensive environmental regulations and permitting requirements that involve significant and increasing
costs and substantial uncertainty. SCE devotes significant resources to environmental monitoring, pollution control
equipment, mitigation projects, and emission allowances to comply with existing and anticipated environmental regulatory
requirements. Environmental regulations and permitting requirements also affect the cost and timing of transmission and
distribution projects. At the state level, the current trend is toward more stringent standards, stricter regulation, higher
reductions of GHG emissions, and more expansive application of environmental regulations. The adoption of laws and
regulations to implement greenhouse gas controls could materially affect operations of power plants, which could in turn
impact electricity markets and SCE's customer rates. SCE may also be exposed to risks arising from past, current or future
contamination at its former or existing facilities or with respect to offsite waste disposal sites that have been used in its
operations. Current and future California laws and regulations also increase the required amount of energy that must be
procured from renewable resources. See "Business—Environmental Regulation of Edison International and Subsidiaries" for
further discussion of environmental regulations under which SCE operates.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information responding to this section is included in the MD&A under the heading "Market Risk Exposures."
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
34
Report of Independent Registered Public Accounting Firm
To the Board of Directors and
Shareholders of Edison International
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income,
comprehensive income, changes in equity and cash flows present fairly, in all material respects, the financial position of
Edison International and its subsidiaries at December 31, 2016 and 2015, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2016 in conformity with accounting principles generally
accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the index
appearing under Item 15(a)(2) present fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal
Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Company's management is responsible for these financial statements and financial statement schedules, for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item
9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedules, and on the
Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the financial statements are free of material
misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our
audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
February 21, 2017
35
Report of Independent Registered Public Accounting Firm
To the Board of Directors and
Shareholders of Southern California Edison Company
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income,
comprehensive income, changes in equity and cash flows present fairly, in all material respects, the financial position of
Southern California Edison Company and its subsidiaries as of December 31, 2016 and 2015, and the results of their
operations and their cash flows for each of the three years in the period ended December 31, 2016 in conformity with
accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement
schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We conducted our audits of these financial
statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
February 21, 2017
36
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37
Consolidated Statements of Income
Edison International
(in millions, except per-share amounts)
Total operating revenue
Purchased power and fuel
Operation and maintenance
Depreciation, decommissioning and amortization
Property and other taxes
Impairment and other charges
Total operating expenses
Operating income
Interest and other income
Interest expense
Other expenses
Income from continuing operations before income taxes
Income tax expense
Income from continuing operations
Income from discontinued operations, net of tax
Net income
Preferred and preference stock dividend requirements of utility
Other noncontrolling interests
Net income attributable to Edison International common shareholders
Amounts attributable to Edison International common shareholders:
Income from continuing operations, net of tax
Income from discontinued operations, net of tax
Net income attributable to Edison International common shareholders
Basic earnings per common share attributable to Edison International
common shareholders:
Weighted-average shares of common stock outstanding
Continuing operations
Discontinued operations
Total
Diluted earnings per common share attributable to Edison International
common shareholders:
Weighted-average shares of common stock outstanding, including effect of
dilutive securities
Continuing operations
Discontinued operations
Total
Dividends declared per common share
Years ended December 31,
2016
2015
2014
$
11,869
$
11,524
$
13,413
4,527
2,868
2,007
354
21
9,777
2,092
123
(581)
(44)
1,590
177
1,413
12
1,425
123
(9)
1,311
1,299
12
1,311
326
3.99
0.03
4.02
330
3.94
0.03
3.97
1.9825
$
$
$
$
$
$
$
$
4,266
2,990
1,919
336
5
9,516
2,008
174
(555)
(59)
1,568
486
1,082
35
1,117
113
(16)
1,020
985
35
1,020
326
3.02
0.11
3.13
329
2.99
0.11
3.10
1.7325
5,593
3,149
1,720
322
157
10,941
2,472
147
(560)
(80)
1,979
443
1,536
185
1,721
112
(3)
1,612
1,427
185
1,612
326
4.38
0.57
4.95
329
4.33
0.56
4.89
1.4825
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
38
Consolidated Statements of Comprehensive Income
Edison International
(in millions)
Net income
Other comprehensive income (loss), net of tax:
Pension and postretirement benefits other than pensions:
Net gain (loss) arising during the period plus amortization included in
net income
Prior service cost arising during the period plus amortization included
in net income
Other
Other comprehensive income (loss), net of tax
Comprehensive income
Less: Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Edison International
Years ended December 31,
2016
2015
2014
$
1,425
$
1,117
$
1,721
2
—
1
3
1,428
114
1
1
—
2
1,119
97
(47)
—
2
(45)
1,676
109
$
1,314
$
1,022
$
1,567
The accompanying notes are an integral part of these consolidated financial statements.
39
Consolidated Balance Sheets
(in millions)
ASSETS
Cash and cash equivalents
Receivables, less allowances of $62 for uncollectible accounts at both dates
Accrued unbilled revenue
Inventory
Derivative assets
Regulatory assets
Other current assets
Total current assets
Nuclear decommissioning trusts
Other investments
Total investments
Utility property, plant and equipment, less accumulated depreciation and amortization of
$9,000 and $8,548 at respective dates
Nonutility property, plant and equipment, less accumulated depreciation of $99 and $85 at
respective dates
Total property, plant and equipment
Derivative assets
Regulatory assets
Other long-term assets
Total long-term assets
$
Edison International
December 31,
2016
2015
96
714
370
239
73
350
281
2,123
4,242
83
4,325
$
161
771
565
267
79
560
251
2,654
4,331
203
4,534
36,806
34,945
194
37,000
1
7,455
415
7,871
140
35,085
84
7,512
360
7,956
Total assets
$
51,319
$
50,229
The accompanying notes are an integral part of these consolidated financial statements.
40
Consolidated Balance Sheets
(in millions, except share amounts)
LIABILITIES AND EQUITY
Short-term debt
Current portion of long-term debt
Accounts payable
Accrued taxes
Customer deposits
Derivative liabilities
Regulatory liabilities
Other current liabilities
Total current liabilities
Long-term debt
Deferred income taxes and credits
Derivative liabilities
Pensions and benefits
Asset retirement obligations
Regulatory liabilities
Other deferred credits and other long-term liabilities
Total deferred credits and other liabilities
Total liabilities
Commitments and contingencies (Note 11)
Redeemable noncontrolling interest
Common stock, no par value (800,000,000 shares authorized; 325,811,206 shares issued
and outstanding at respective dates)
Accumulated other comprehensive loss
Retained earnings
Total Edison International's common shareholders' equity
Noncontrolling interests – preferred and preference stock of utility
Total equity
Edison International
December 31,
2016
2015
$
1,307
$
981
1,342
50
269
216
756
991
5,912
10,175
8,327
941
1,354
2,590
5,726
2,102
21,040
37,127
695
295
1,310
72
242
218
1,128
967
4,927
10,883
7,480
1,100
1,759
2,764
5,676
2,246
21,025
36,835
5
6
2,505
(53)
9,544
11,996
2,191
14,187
2,484
(56)
8,940
11,368
2,020
13,388
Total liabilities and equity
$
51,319
$
50,229
The accompanying notes are an integral part of these consolidated financial statements.
41
Consolidated Statements of Cash Flows
Edison International
(in millions)
Cash flows from operating activities:
Net income
Less: Income from discontinued operations
Income from continuing operations
Adjustments to reconcile to net cash provided by operating activities:
$
Depreciation, decommissioning and amortization
Allowance for equity during construction
Impairment and other charges
Deferred income taxes and investment tax credits
Other
Nuclear decommissioning trusts
EME settlement payments, net of insurance proceeds
Changes in operating assets and liabilities:
Receivables
Inventory
Accounts payable
Prepaid and accrued taxes
Other current assets and liabilities
Derivative assets and liabilities, net
Regulatory assets and liabilities, net
Other noncurrent assets and liabilities
Net cash provided by operating activities
Cash flows from financing activities:
Long-term debt issued or remarketed, net of discount and issuance costs of $7,
$17, and $6 at respective periods
Long-term debt matured or repurchased
Preference stock issued, net
Preference stock redeemed
Short-term debt financing, net
Dividends to noncontrolling interests
Dividends paid
Other
Net cash provided by (used in) financing activities
Cash flows from investing activities:
Capital expenditures
Proceeds from sale of nuclear decommissioning trust investments
Purchases of nuclear decommissioning trust investments
Life insurance policy loans proceeds
Other
Net cash used in investing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Years ended December 31,
2015
2014
2016
$
$
1,425
12
1,413
2,098
(74)
—
190
20
(179)
(209)
52
8
35
(6)
211
13
(292)
(24)
3,256
397
(220)
294
(125)
611
(123)
(626)
(113)
95
1,117
35
1,082
2,005
(87)
5
449
(28)
(428)
(176)
49
14
8
(28)
(24)
45
1,729
(106)
4,509
1,420
(762)
319
(325)
(572)
(116)
(544)
(8)
(588)
1,721
185
1,536
1,815
(65)
157
522
20
39
(225)
64
(25)
14
(100)
(103)
(40)
(358)
(3)
3,248
494
(607)
269
—
1,079
(111)
(463)
(16)
645
(3,734)
3,212
(3,033)
140
(1)
(3,416)
(65)
161
96
$
(4,225)
3,506
(3,132)
—
(41)
(3,892)
29
132
161
$
(3,906)
2,617
(2,661)
—
43
(3,907)
(14)
146
132
$
The accompanying notes are an integral part of these consolidated financial statements.
42
Consolidated Statements of Changes in Equity
Edison International
(in millions)
Equity Attributable to Common Shareholders
Accumulated
Other
Comprehensive
Loss
Common
Stock
Retained
Earnings
Subtotal
Noncontrolling
Interests
Preferred
and
Preference
Stock
Total
Equity
Balance at December 31, 2013
$ 2,403
$
(13) $ 7,548
$ 9,938
$
1,753
$ 11,691
Net income
Other comprehensive loss
Common stock dividends declared ($1.4825 per
share)
Dividends and distributions to noncontrolling
interests and other
Stock-based compensation and other
Noncash stock-based compensation and other
Issuance of preference stock
Balance at December 31, 2014
Net income
Other comprehensive income
Common stock dividends declared ($1.7325 per
share)
Dividends and distributions to noncontrolling
interests and other
Stock-based compensation and other
Noncash stock-based compensation and other
Issuance of preference stock
Redemption of preference stock
Balance at December 31, 2015
Net income
Other comprehensive income
Common stock dividends declared ($1.9825 per
share)
Dividends and distributions to noncontrolling
interests and other
Stock-based compensation and other
Noncash stock-based compensation and other
Issuance of preference stock
Redemption of preference stock
Balance at December 31, 2016
—
—
—
—
15
27
—
—
(45)
1,612
1,612
—
(45)
—
—
—
—
—
(483)
(483)
—
(104)
—
—
—
(89)
27
—
112
—
—
(112)
—
—
269
1,724
(45)
(483)
(112)
(89)
27
269
$ 2,445
$
(58) $ 8,573
$ 10,960
$
2,022
$ 12,982
—
—
—
—
15
24
—
—
—
2
—
—
—
—
—
—
1,020
1,020
—
2
(564)
(564)
—
(85)
—
—
(4)
—
(70)
24
—
(4)
113
—
—
(113)
—
—
319
(321)
1,133
2
(564)
(113)
(70)
24
319
(325)
$ 2,484
$
(56) $ 8,940
$ 11,368
$
2,020
$ 13,388
—
—
—
—
(1)
22
—
—
—
3
—
—
—
—
—
—
1,311
1,311
—
3
(646)
(646)
—
(59)
—
—
(2)
—
(60)
22
—
(2)
123
—
—
(123)
—
—
294
(123)
1,434
3
(646)
(123)
(60)
22
294
(125)
$ 2,505
$
(53) $ 9,544
$ 11,996
$
2,191
$ 14,187
The accompanying notes are an integral part of these consolidated financial statements.
43
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44
Consolidated Statements of Income
Southern California Edison Company
(in millions)
Operating revenue
Purchased power and fuel
Operation and maintenance
Depreciation, decommissioning and amortization
Property and other taxes
Impairment and other charges
Total operating expenses
Operating income
Interest and other income
Interest expense
Other expenses
Income before income taxes
Income tax expense
Net income
Less: Preferred and preference stock dividend requirements
Net income available for common stock
Consolidated Statements of Comprehensive Income
Years ended December 31,
2016
2015
2014
$
11,830
$ 11,485
$
13,380
4,527
2,737
1,998
351
—
9,613
2,217
123
(541)
(44)
1,755
256
1,499
123
$
1,376
$
4,266
2,890
1,915
334
—
9,405
2,080
123
(526)
(59)
1,618
507
1,111
113
998
5,593
3,057
1,720
318
163
10,851
2,529
122
(533)
(79)
2,039
474
1,565
112
$
1,453
(in millions)
Net income
Other comprehensive income (loss), net of tax:
Pension and postretirement benefits other than pensions:
Net gain (loss) arising during period plus amortization included in net
income
Prior service cost arising during the period plus amortization included in
net income
Other
Other comprehensive income (loss), net of tax
Comprehensive income
Years ended December 31,
2015
2014
2016
$
1,499
$
1,111
$
1,565
1
—
1
2
1,501
$
5
1
—
6
1,117
$
$
(19)
—
2
(17)
1,548
The accompanying notes are an integral part of these consolidated financial statements.
45
Consolidated Balance Sheets
Southern California Edison Company
(in millions)
ASSETS
Cash and cash equivalents
Receivables, less allowances of $61 and $62 for uncollectible accounts at respective dates
Accrued unbilled revenue
Inventory
Derivative assets
Regulatory assets
Other current assets
Total current assets
Nuclear decommissioning trusts
Other investments
Total investments
Utility property, plant and equipment, less accumulated depreciation of $9,000 and $8,548 at
respective dates
Nonutility property, plant and equipment, less accumulated depreciation of $89 and $81 at
respective dates
Total property, plant and equipment
Derivative assets
Regulatory assets
Other long-term assets
Total long-term assets
$
December 31,
2016
2015
39
699
369
239
73
350
262
2,031
4,242
50
4,292
$
26
724
564
256
79
560
234
2,443
4,331
168
4,499
36,806
34,945
75
36,881
1
7,455
231
7,687
73
35,018
84
7,512
239
7,835
Total assets
$
50,891
$
49,795
The accompanying notes are an integral part of these consolidated financial statements.
46
Consolidated Balance Sheets
Southern California Edison Company
(in millions, except share amounts)
LIABILITIES AND EQUITY
Short-term debt
Current portion of long-term debt
Accounts payable
Accrued taxes
Customer deposits
Derivative liabilities
Regulatory liabilities
Other current liabilities
Total current liabilities
Long-term debt
Deferred income taxes and credits
Derivative liabilities
Pensions and benefits
Asset retirement obligations
Regulatory liabilities
Other deferred credits and other long-term liabilities
Total deferred credits and other liabilities
Total liabilities
Commitments and contingencies (Note 11)
Common stock, no par value (560,000,000 shares authorized; 434,888,104 shares issued and
outstanding at each date)
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total common shareholder's equity
Preferred and preference stock
Total equity
Total liabilities and equity
$
December 31,
2016
2015
769
579
1,344
45
269
216
756
729
4,707
9,754
9,886
941
896
2,586
5,726
1,912
21,947
36,408
2,168
657
(20)
9,433
12,238
2,245
14,483
$
49
79
1,299
46
242
218
1,128
760
3,821
10,460
9,073
1,100
1,284
2,762
5,676
1,947
21,842
36,123
2,168
652
(22)
8,804
11,602
2,070
13,672
$
50,891
$
49,795
The accompanying notes are an integral part of these consolidated financial statements.
47
Consolidated Statements of Cash Flows
(in millions)
Cash flows from operating activities:
Net income
Adjustments to reconcile to net cash provided by operating activities:
Southern California Edison Company
Years ended December 31,
2015
2014
2016
$
1,499
$
1,111
$
1,565
Depreciation, decommissioning and amortization
Allowance for equity during construction
Impairment and other charges
Deferred income taxes and investment tax credits
Other
Nuclear decommissioning trusts
Changes in operating assets and liabilities:
Receivables
Inventory
Accounts payable
Prepaid and accrued taxes
Other current assets and liabilities
Derivative assets and liabilities, net
Regulatory assets and liabilities, net
Other noncurrent assets and liabilities
Net cash provided by operating activities
Cash flows from financing activities:
Long-term debt issued or remarketed, net of discount and issuance costs of
$17 and $2 for the years ended 2015 and 2014
Long-term debt matured or repurchased
Preferred stock issued, net
Preference stock redeemed
Short-term debt financing, net
Dividends paid
Other
Net cash (used in) provided by financing activities
Cash flows from investing activities:
Capital expenditures
Proceeds from sale of nuclear decommissioning trust investments
Purchases of nuclear decommissioning trust investments
Life insurance policy loans proceeds
Other
Net cash used in investing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
2,085
(74)
—
88
9
(179)
25
(3)
45
(16)
185
13
(292)
138
3,523
—
(217)
294
(125)
719
(824)
(66)
(219)
(3,633)
3,212
(3,033)
140
23
(3,291)
13
26
39
$
1,996
(87)
—
308
14
(428)
25
19
30
(16)
(42)
45
1,729
(80)
4,624
1,413
(761)
319
(325)
(619)
(874)
35
(812)
(4,210)
3,506
(3,132)
—
12
(3,824)
(12)
38
1,810
(65)
163
462
11
39
64
(19)
12
129
(107)
(40)
(358)
(6)
3,660
498
(607)
269
—
490
(489)
20
181
(3,857)
2,617
(2,661)
—
44
(3,857)
(16)
54
$
26
$
38
The accompanying notes are an integral part of these consolidated financial statements.
48
Consolidated Statements of Changes in Equity
Southern California Edison Company
(in millions)
Equity Attributable to Edison International
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Preferred
and
Preference
Stock
Total
Equity
Retained
Earnings
Balance at December 31, 2013
$
2,168
$
592
$
(11) $
7,594
$
1,795
$12,138
Net income
Other comprehensive loss
Dividends declared on common stock
Dividends declared on preferred and preference stock
Stock-based compensation
Noncash stock-based compensation
Issuance of preference stock
—
—
—
—
—
—
—
—
—
—
—
20
12
(6)
—
(17)
—
—
—
—
—
1,565
—
(525)
(112)
(64)
(4)
—
—
—
—
—
—
—
275
1,565
(17)
(525)
(112)
(44)
8
269
Balance at December 31, 2014
$
2,168
$
618
$
(28) $
8,454
$
2,070
$13,282
Net income
Other comprehensive income
Dividends declared on common stock
Dividends declared on preferred and preference stock
Stock-based compensation
Noncash stock-based compensation
Issuance of preference stock
Redemption of preference stock
Balance at December 31, 2015
Net income
Other comprehensive income
Dividends declared on common stock
Dividends declared on preferred and preference stock
Stock-based compensation
Noncash stock-based compensation
Issuance of preference stock
Redemption of preference stock
Balance at December 31, 2016
—
—
—
—
—
—
—
—
—
—
—
—
23
13
(6)
4
—
6
—
—
—
—
—
—
1,111
—
(611)
(113)
(33)
—
—
(4)
—
—
—
—
—
—
325
(325)
1,111
6
(611)
(113)
(10)
13
319
(325)
$
2,168
$
652
$
(22) $
8,804
$
2,070
$13,672
—
—
—
—
—
—
—
—
—
—
—
—
—
9
(6)
2
—
2
—
—
—
—
—
—
1,499
—
(701)
(123)
(44)
—
—
(2)
—
—
—
—
—
—
300
(125)
1,499
2
(701)
(123)
(44)
9
294
(125)
$
2,168
$
657
$
(20) $
9,433
$
2,245
$14,483
The accompanying notes are an integral part of these consolidated financial statements.
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1.
Summary of Significant Accounting Policies
Organization and Basis of Presentation
Edison International is the parent holding company of Southern California Edison Company ("SCE"). 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 International is also the parent company of Edison Energy Group, a holding
company for subsidiaries engaged in pursuing competitive business opportunities across energy services and distributed solar
for commercial and industrial customers. Such 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 nonutility subsidiaries. SCE's consolidated financial statements include the accounts of SCE and its wholly
owned and controlled subsidiaries. All intercompany transactions have been eliminated from the consolidated financial
statements.
Edison International's and SCE's accounting policies conform to accounting principles generally accepted in the United States
of America, including the accounting principles for rate-regulated enterprises, which reflect the ratemaking policies of the
California Public Utility Commission ("CPUC") and the Federal Energy Regulatory Commission ("FERC"). SCE applies
authoritative guidance for rate-regulated enterprises to the portion of its operations in which regulators set rates at levels
intended to recover the estimated costs of providing service, plus a return on net investments in assets, or rate base.
Regulators may also impose certain penalties or grant certain incentives. Due to timing and other differences in the collection
of electric utility revenue, these principles require an incurred cost that would otherwise be charged to expense by a
non-regulated entity to be capitalized as a regulatory asset if it is probable that the cost is recoverable through future rates;
and conversely the principles require recording of a regulatory liability for amounts collected in rates to recover costs
expected to be incurred in the future or amounts collected in excess of costs incurred and refundable to customers. SCE
assesses, at the end of each reporting period, whether regulatory assets are probable of future recovery. See Note 10 for
composition of regulatory assets and liabilities.
The preparation of financial statements in conformity with United States generally accepted accounting principles ("GAAP")
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and
expenses during the reported period. Actual results could differ from those estimates.
Cash Equivalents
Cash equivalents includes 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:
(in millions)
Money market funds
Edison International
SCE
December 31,
2016
2015
2016
2015
$
41
$
37
$
18
$
8
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 as follows:
(in millions)
Book balances reclassified to accounts payable
2016
2015
2016
2015
$
138
$
162
$
136
$
158
Edison International
SCE
December 31,
50
Allowance for Uncollectible Accounts
Allowances for uncollectible accounts are provided based upon a variety of factors, including historical amounts written-off,
current economic conditions and assessment of customer collectability.
Inventory
SCE's inventory is primarily composed of materials, supplies and spare parts, and generally stated at average cost.
Emission Allowances
SCE is allocated greenhouse gas ("GHG") allowances annually which it is then required to sell into quarterly auctions. GHG
proceeds from the auctions are recorded as a regulatory liability to be refunded to customers. SCE purchases GHG
allowances in quarterly auctions or from counterparties to satisfy its GHG emission compliance obligations and recovers such
costs of GHG allowances from customers. GHG allowances held for use are classified as "Other current assets" on the
consolidated balance sheets and are stated, similar to an inventory method, at the lower of weighted-average cost or market.
SCE had GHG allowances of $113 million and $79 million at December 31, 2016 and 2015, respectively. GHG emission
obligations were $95 million and $86 million at December 31, 2016 and 2015, respectively and are classified as "Other
current liabilities" on the consolidated balance sheets.
Property, Plant and Equipment
SCE plant additions, including replacements and betterments, are capitalized. Direct material and labor and indirect costs
such as construction overhead, administrative and general costs, pension and benefits, and property taxes are capitalized as
part of plant additions. The CPUC authorizes a rate for each of the indirect costs which are allocated to each project based on
either labor or total costs.
Estimated useful lives (authorized by the CPUC) and weighted-average useful lives of SCE's property, plant and equipment,
are as follows:
Generation plant
Distribution plant
Transmission plant
General plant and other
Estimated Useful Lives
10 years to 57 years
20 years to 60 years
40 years to 65 years
5 years to 60 years
Weighted-Average
Useful Lives
38 years
43 years
53 years
22 years
Depreciation of utility property, plant and equipment is computed on a straight-line, remaining-life basis. Depreciation
expense was $1.52 billion, $1.42 billion and $1.33 billion for 2016, 2015 and 2014, respectively. Depreciation expense stated
as a percent of average original cost of depreciable utility plant was, on a composite basis, 3.8%, 3.9% and 4.0% for 2016,
2015 and 2014, respectively. Replaced or retired property costs are charged to accumulated depreciation.
Nuclear fuel for the Palo Verde Nuclear Power Plant ("Palo Verde") is recorded as utility plant (nuclear fuel in the fabrication
and installation phase is recorded as construction in progress) in accordance with CPUC ratemaking procedures. Nuclear fuel
is amortized using the units of production method.
AFUDC represents the estimated cost of debt and equity funds that finance utility-plant construction and is capitalized during
certain plant construction. AFUDC is recovered in rates through depreciation expense over the useful life of the related asset.
AFUDC equity represents a method to compensate SCE for the estimated cost of equity used to finance utility plant additions
and is recorded as part of construction in progress. AFUDC equity was $74 million, $87 million and $65 million in 2016,
2015 and 2014, respectively, and is reflected in "Interest and other income." AFUDC debt was $23 million, $31 million and
$25 million in 2016, 2015 and 2014, respectively and is reflected as a reduction of "Interest expense."
Major Maintenance
Major maintenance costs for SCE's power plant facilities and equipment are expensed as incurred.
Impairment of Long-Lived Assets
Impairments of long-lived assets are evaluated based on a review of estimated future cash flows expected to be generated
whenever events or changes in circumstances indicate that the carrying amount of such investments or assets may not be
51
recoverable. If the carrying amount of a long-lived asset exceeds expected future cash flows, undiscounted and without
interest charges, an impairment loss is recognized in the amount of the excess of fair value over the carrying amount. Fair
value is determined via market, cost and income based valuation techniques, as appropriate. SCE's impaired assets are
recorded as a regulatory asset if it is deemed probable that such amounts will be recovered from customers.
In 2014, the CPUC approved the San Onofre OII Settlement Agreement that SCE had entered into with a number of
intervening parties. The San Onofre OII Settlement Agreement had resolved the CPUC's investigation regarding the Steam
Generator Replacement Project at San Onofre and the related outages and subsequent shutdown of San Onofre. In 2014, SCE
had recorded a pre-tax impairment charge of approximately $163 million (approximately $72 million after-tax). Including
amounts previously recorded as an impairment charge in 2013, the total impact of the San Onofre OII Settlement Agreement
was a pre-tax charge of $738 million (approximately $437 million after-tax).
In a December 2016 joint ruling, the Assigned Commissioner and the Assigned ALJ directed SCE to meet and confer with the
other parties in the OII to consider changing the terms of the San Onofre OII Settlement Agreement. See Note 11 for further
information.
Goodwill
Edison International assesses goodwill through annual goodwill impairment tests, at the reporting unit level, as of October 1st
of each year. The fair value of the Edison Energy and SoCore Energy reporting units exceeded their carrying values at the
date of the annual impairment analysis. As of December 31, 2016, goodwill is comprised of $78 million at the Edison Energy
reporting unit and $22 million at the SoCore Energy reporting unit. Edison International will update these tests between
annual tests if events occur or circumstances change such that it is more likely than not that the fair value of a reporting unit
is below its carrying value.
Nuclear Decommissioning and Asset Retirement Obligations
The fair value of a liability for an asset retirement obligation ("ARO") is recorded in the period in which it is incurred,
including a liability for the fair value of a conditional ARO, if the fair value can be reasonably estimated even though
uncertainty exists about the timing and/or method of settlement. When an ARO liability is initially recorded, SCE capitalizes
the cost by increasing the carrying amount of the related long-lived asset. For each subsequent period, the liability is
increased for accretion expense and the capitalized cost is depreciated over the useful life of the related asset.
AROs related to decommissioning of SCE's nuclear power facilities are based on site-specific studies conducted as part of
each Nuclear Decommissioning Cost Triennial Proceeding ("NDCTP") conducted before the CPUC. Revisions of an ARO
are established for updated site-specific decommissioning cost estimates.
SCE adjusts its nuclear decommissioning obligation into a nuclear-related ARO regulatory asset and also records an ARO
regulatory liability as a result of timing differences between the recognition of costs and the recovery of costs through the
ratemaking process. For further discussion, see Notes 9 and 10.
SCE has not recorded an asset retirement obligation for assets that are expected to operate indefinitely or where SCE cannot
estimate a settlement date (or range of potential settlement dates). As such, ARO liabilities are not recorded for certain
retirement activities, including certain hydroelectric facilities.
The following table summarizes the changes in SCE's ARO liability, including San Onofre and Palo Verde:
(in millions)
Beginning balance
Accretion1
Revisions
Liabilities settled
Ending balance
December 31,
2016
2015
$
$
2,762
157
(165)
(168)
2,586
$
$
2,819
173
(14)
(216)
2,762
1 An ARO represents the present value of a future obligation. Accretion is an increase in the liability to
account for the time value of money resulting from discounting.
52
The recorded liability to decommission SCE's nuclear power facilities (included in the table above) is $2.5 billion as of
December 31, 2016. In 2016, SCE updated the recorded liability for Palo Verde and San Onofre Unit 1 based on the 2013
decommissioning study performed for Palo Verde and the 2014 study for San Onofre Unit 1. The recorded liability for San
Onofre Unit 2 and 3 is based on a 2014 decommissioning study which followed the decision to permanently retire San
Onofre. The 2015 NDTCP filing is expected to be updated for San Onofre Units 2 and 3 after onboarding the
decommissioning general contractor and the subsequent development of a new decommissioning cost estimate during 2017.
Decommissioning costs, which are recovered through customer rates over the term of each nuclear facility's operating
license, are recorded as a component of depreciation expense, with a corresponding credit to the ARO regulatory liability.
Amortization of the ARO asset (included within the unamortized nuclear investment) and accretion of the ARO liability are
deferred as increases to the ARO regulatory liability account, resulting in no impact on earnings.
SCE has collected in rates amounts for the future costs of removal of its nuclear assets, and has placed those amounts in
independent trusts. The cost of removal amounts, in excess of amounts collected for assets not legally required to be
removed, are classified as regulatory liabilities.
Changes in the estimated costs, timing of decommissioning or the assumptions underlying these estimates could cause
material revisions to the estimated total cost to decommission. SCE currently estimates that it will spend approximately
$6.3 billion through 2079 to decommission its nuclear facilities. This estimate is based on SCE's decommissioning cost
methodology used for ratemaking purposes, escalated at rates ranging from 1.7% to 7.5% (depending on the cost element)
annually. These costs are expected to be funded from independent decommissioning trusts. SCE estimates annual after-tax
earnings on the decommissioning funds of 2.4% to 4.1%. Future decommissioning costs related to SCE's nuclear assets are
expected to be funded from independent decommissioning trusts. If the assumed return on trust assets is not earned or costs
escalate at higher rates, SCE expects that additional funds needed for decommissioning will be recoverable through future
rates. See Note 9 for further information.
Due to regulatory recovery of SCE's nuclear decommissioning expense, prudently incurred costs for nuclear
decommissioning activities do not affect SCE's earnings. SCE's nuclear decommissioning costs are subject to CPUC review
through the triennial regulatory proceeding. SCE's nuclear decommissioning trust investments primarily consist of fixed
income and equity investments that are classified as available-for-sale. Due to regulatory mechanisms, earnings and realized
gains and losses (including other-than-temporary impairments) have no impact on electric utility revenue. Unrealized gains
and losses on decommissioning trust funds increase or decrease the trust assets and the related regulatory asset or liability and
have no impact on electric utility revenue or decommissioning expense. SCE reviews each security for other-than-temporary
impairment on the last day of each month. If the fair value on the last day of two consecutive months is less than the cost for
that security, SCE recognizes a loss for the other-than-temporary impairment. If the fair value is greater or less than the cost
for that security at the time of sale, SCE recognizes a related realized gain or loss, respectively.
Deferred Financing Costs
Debt premium, discount and issuance expenses incurred in connection with obtaining financing are deferred and amortized
on a straight-line basis. Under CPUC ratemaking procedures, SCE's debt reacquisition expenses are amortized over the
remaining life of the reacquired debt or, if refinanced, the life of the new debt. SCE had unamortized losses on reacquired
debt of $184 million and $201 million at December 31, 2016 and 2015, respectively, reflected as long-term "Regulatory
assets" in the consolidated balance sheets. Edison International and SCE had unamortized debt issuance costs of $10 million
and $7 million at December 31, 2016, respectively, and $11 million and $7 million at December 31, 2015, respectively,
reflected in "Other long-term assets" on the consolidated balance sheets. In addition, Edison International and SCE had debt
issuance costs of $81 million and $71 million at December 31, 2016, respectively, and $81 million and $77 million at
December 31, 2015, respectively, reflected as a reduction of "Long-term debt" on the consolidated balance sheets.
Amortization of deferred financing costs charged to interest expense is as follows:
(in millions)
Amortization of deferred financing
costs charged to interest expense
Edison International
2016
2015
2014
2016
Years ended December 31,
SCE
2015
2014
$
31
$
33
$
36
$
27
$
28
$
32
53
Revenue Recognition
Revenue is recognized when electricity is delivered and includes amounts for services rendered but unbilled at the end of
each reporting period and reflected in "Operating revenue" on the consolidated statements of income. Rates charged to
customers are based on CPUC- and FERC-authorized revenue requirements. CPUC rates are implemented subsequent to final
approval.
CPUC rates decouple authorized revenue from the volume of electricity sales. Differences between amounts collected and
authorized levels are either collected from or refunded to customers, and therefore, SCE earns revenue equal to amounts
authorized. FERC rates also decouple revenue from volume of electricity sales. In November 2013, the FERC approved a
formula rate effective January 1, 2012 to determine SCE's FERC transmission revenue requirement, including its construction
work in progress ("CWIP") revenue requirement. Under operation of the formula rate, transmission revenue will be updated
to actual cost of service annually. Differences between amounts collected and determined under the formula rate are either
collected from or refunded to customers, and therefore, SCE earns revenue based on estimates of recorded rate base costs
under the FERC formula rate.
SCE bills certain sales and use taxes levied by state or local governments to its customers. Included in these sales and use
taxes are franchise fees, which SCE pays to various municipalities (based on contracts with these municipalities) in order to
operate within the limits of the municipality. SCE bills these franchise fees to its customers based on a CPUC-authorized rate.
These franchise fees, which are required to be paid regardless of SCE's ability to collect from the customer, are accounted for
on a gross basis and reflected in electric utility revenue and other operation and maintenance expense. SCE's franchise fees
billed to customers and recorded as revenue were $111 million, $138 million and $134 million in 2016, 2015 and 2014,
respectively. When SCE acts as an agent, the taxes are accounted for on a net basis. Amounts billed to and collected from
customers for these taxes are remitted to the taxing authorities and are not recognized as electric utility revenue.
Power Purchase Agreements
SCE enters into power purchase agreements in the normal course of business. A power purchase agreement may be
considered a variable interest in a variable interest entity. Under this classification, the power purchase agreement is
evaluated to determine if SCE is the primary beneficiary in the variable interest entity, in which case, such entity would be
consolidated. None of SCE's power purchase agreements resulted in consolidation of a variable interest entity at
December 31, 2016 and 2015. See Note 3 for further discussion of power purchase agreements that are considered variable
interests.
A power purchase agreement may also contain a lease for accounting purposes. This generally occurs when a power purchase
agreement (signed or modified after June 30, 2003) designates a specific power plant in which the buyer purchases
substantially all of the output and does not otherwise meet a fixed price per unit of output exception. SCE has a number of
power purchase agreements that contain leases. SCE's recognition of lease expense conforms to the ratemaking treatment for
SCE's recovery of the cost of electricity and is recorded in purchased power. See Note 11 for further discussion of SCE's
power purchase agreements, including agreements that are classified as operating and capital leases for accounting purposes.
A power purchase agreement that does not contain a lease may be classified as a derivative subject to a normal purchase and
sale exception, in which case the power purchase agreement is classified as an executory contract and accounted for on an
accrual basis. SCE purchases power under certain contracts that are not eligible for the normal purchase and sale exception
and are recorded as a derivative on the consolidated balance sheets at fair value. Most of SCE's qualifying facilities ("QFs")
contracts are not required to be recorded on the consolidated balance sheets because they either do not meet the definition of
a derivative or meet the normal purchase and sale exception. See Note 6 for further information on derivative instruments.
Power purchase agreements that do not meet the above classifications are accounted for on an accrual basis.
Derivative Instruments
SCE records derivative instruments on its consolidated balance sheets as either assets or liabilities measured at fair value
unless otherwise exempted from derivative treatment as normal purchases or sales. The normal purchases and sales exception
requires, among other things, physical delivery in quantities expected to be used or sold over a reasonable period in the
normal course of business. Realized gains and losses from SCE's derivative instruments are expected to be recovered from or
refunded to customers through regulatory mechanisms and, therefore, SCE's fair value changes have no impact on purchased-
power expense or earnings. SCE does not use hedge accounting for derivative transactions due to regulatory accounting
treatment.
54
Where SCE's derivative instruments are subject to a master netting agreement and certain criteria are met, SCE presents its
derivative assets and liabilities on a net basis on its consolidated balance sheets. In addition, derivative positions are offset
against margin and cash collateral deposits. The results of derivative activities are recorded as part of cash flows from
operating activities on the consolidated statements of cash flows. See Note 6 for further information on derivative
instruments.
Leases
SCE enters into power purchase agreements that may contain leases, as discussed under "Power Purchase Agreements"
above. SCE has also entered into a number of agreements to lease property and equipment in the normal course of business.
Minimum lease payments under operating leases are levelized (total minimum lease payments divided by the number of
years of the lease) and recorded as rent expense over the terms of the leases. Lease payments in excess of the minimum are
recorded as rent expense in the year incurred.
Capital leases are reported as long-term obligations on the consolidated balance sheets in "Other deferred credits and other
long-term liabilities." As a rate-regulated enterprise, SCE's capital lease amortization expense and interest expense are
reflected in "Purchased power and fuel" on the consolidated statements of income.
Stock-Based Compensation
Stock options, performance shares, deferred stock units and restricted stock units have been granted under Edison
International's long-term incentive compensation programs. Generally, Edison International does not issue new common
stock for settlement of equity awards. Rather, a third party is used to purchase shares from the market and deliver such shares
for the settlement of option exercises, performance shares, deferred stock units and restricted stock units. Performance shares
awarded in 2014 that are earned are settled half in cash and half in common stock, while the performance shares awarded in
2016 and 2015 that are earned are settled solely in cash. Deferred stock units and restricted stock units are settled in common
stock; however, Edison International will substitute cash awards to the extent necessary to pay tax withholding or any
government levies.
Stock-based compensation expense is recognized on a straight-line basis over the requisite service period. For awards granted
to retirement-eligible participants stock compensation expenses are recognized on a prorated basis over the initial year or
over the period between the date of grant and the date the participant first becomes eligible for retirement. Under new
accounting guidance adopted in 2016, share-based payments may create a permanent difference between the amount of
compensation expense recognized for book and tax purposes. The tax impact of this permanent difference is recognized in
earnings in the period it is created.
SCE Dividend Restrictions
The CPUC regulates SCE's capital structure which limits the dividends it may pay Edison International. SCE may make
distributions to Edison International as long as the common equity component of SCE's capital structure remains at or above
48% on a 13-month weighted average basis. At December 31, 2016, SCE's 13-month weighted-average common equity
component of total capitalization was 50.4% and the maximum additional dividend that SCE could pay to Edison
International under this limitation was approximately $585 million, resulting in a restriction on net assets of approximately
$13.9 billion.
55
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, including performance shares and
restricted stock units, which earn dividend equivalents on an equal basis with common shares once the awards are vested.
EPS attributable to Edison International common shareholders was computed as follows:
Years ended December 31,
2016
2015
2014
(in millions)
Basic earnings per share – continuing operations:
Income from continuing operations attributable to common
shareholders
Participating securities dividends
$
Income from continuing operations available to common shareholders $
Weighted average common shares outstanding
Basic earnings per share – continuing operations
Diluted earnings per share – continuing operations:
Income from continuing operations attributable to common
shareholders
Participating securities dividends
$
$
Income from continuing operations available to common shareholders $
Income impact of assumed conversions
Income from continuing operations available to common shareholders
and assumed conversions
Weighted average common shares outstanding
Incremental shares from assumed conversions
Adjusted weighted average shares – diluted
Diluted earnings per share – continuing operations
$
$
$
$
$
1,299
—
1,299
326
3.99
1,299
—
1,299
1
$
$
1,300
$
326
4
330
3.94
$
985
(1)
984
326
3.02
985
(1)
984
1
985
326
3
329
2.99
$
$
$
$
$
$
$
1,427
(1)
1,426
326
4.38
1,427
(1)
1,426
1
1,427
326
3
329
4.33
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
167,795, 2,046,045 and 125,345 shares of common stock for the years ended December 31, 2016, 2015 and 2014,
respectively, were outstanding, but were not included in the computation of diluted earnings per share because the effect
would have been antidilutive.
Income Taxes
Edison International and SCE estimate their income taxes for each jurisdiction in which they operate. This involves
estimating current period tax expense along with assessing temporary differences resulting from differing treatment of items
(such as depreciation) for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which
are included in the consolidated balance sheets. Income tax expense includes the current tax liability from operations and the
change in deferred income taxes during the year. Investment tax credits are deferred and amortized to income tax expense
over the lives of the properties or the term of the power purchase agreement of the respective project.
Interest income, interest expense and penalties associated with income taxes are reflected in "Income tax expense" on the
consolidated statements of income.
Edison International's eligible subsidiaries are included in Edison International's consolidated federal income tax and
combined state tax returns. Edison International has tax-allocation and payment agreements with certain of its subsidiaries.
Pursuant to an income tax-allocation agreement approved by the CPUC, SCE's tax liability is computed as if it filed its
federal and state income tax returns on a separate return basis.
56
Redeemable Noncontrolling Interest
Redeemable noncontrolling interest represents the portion of equity ownership in an entity that is not attributable to the
equity holders of Edison International and which have rights to put their ownership back to a subsidiary of Edison
International. Noncontrolling interest is initially recorded at fair value and is subsequently adjusted for income allocated to
the noncontrolling interest and any distributions paid to the noncontrolling interest.
Certain solar projects for commercial customers are organized as limited liability companies and have noncontrolling equity
investors (referred to as tax equity investors) which are entitled to allocations of earnings, tax attributes and cash flows in
accordance with contractual agreements that vary over time. These entities are consolidated for financial reporting purposes
but is not subject to income taxes as the taxable income (loss) and investment tax credits are allocated to the respective
owners. The total consolidated assets and liabilities of these entities were $74 million and $23 million, respectively, at
December 31, 2016 and were $82 million and $32 million, respectively, at December 31, 2015. Income (loss) of these entities
are allocated to the noncontrolling interest based on the hypothetical liquidation at book value ("HLBV") accounting method.
The HLBV accounting method is an approach that calculates the change in the claims of each member on the net assets of the
investment at the beginning and end of each period. Each member’s claim is equal to the amount each party would receive or
pay if the net assets of the investment were to liquidate at book value. Under the contract provisions, the tax equity investors'
claim on net assets decreases rapidly in early years due to allocation of tax benefits resulting in additional non-operating
income allocated to Edison International ($9 million and $16 million in 2016 and 2015, respectively).
New Accounting Guidance
Accounting Guidance Adopted
In April 2015, the FASB issued an accounting standards update that requires debt issuance costs to be presented in the
balance sheet as a direct reduction from the carrying amount of the related debt liability, consistent with debt discounts.
Previously, accounting guidance required these costs to be presented as a deferred charge asset. Edison International and SCE
adopted this guidance in the first quarter of 2016. At December 31, 2016, the amount of debt issuance costs that are reflected
as a reduction of "Long-term debt" was $71 million for SCE and $81 million for Edison International. At December 31, 2015,
the amount of debt issuance costs that have been reclassified from "Other long-term assets" to a reduction of "Long-term
debt" was $77 million for SCE and $81 million for Edison International.
In April 2015, the FASB issued an accounting standards update on fees paid by a customer for software licenses. This new
standard provides guidance about whether a cloud computing arrangement includes a software license which may be
capitalized in certain circumstances. If a cloud computing arrangement does not include a software license, then the
arrangement should be accounted for as a service contract. Edison International and SCE adopted this guidance prospectively,
effective January 1, 2016. The adoption of this standard did not have a material impact on Edison International's and SCE's
consolidated financial statements.
In May 2015, the FASB issued an accounting standards update which removes the requirement to categorize within the fair
value hierarchy all investments for which fair value is measured using net asset value per share or its equivalent as a practical
expedient. Edison International and SCE adopted in the fourth quarter of 2016. Certain prior year amounts have been
retrospectively adjusted.
In March 2016, the FASB issued an accounting standards update to simplify the accounting for share-based payments. Under
this new guidance, the tax effects related to share based payments are recorded through the income statement. Previously, tax
benefits in excess of compensation cost ("windfalls") were recorded in equity, and tax deficiencies ("shortfalls") were
recorded in equity to the extent of previous windfalls, and then to the income statement. In addition, as part of this new
guidance an entity recognizes excess tax benefits regardless of whether the benefit reduces taxes payable in the current
period, subject to normal valuation allowance considerations. Edison International and SCE adopted this guidance in the
fourth quarter of 2016 using the modified retrospective approach, effective January 1, 2016. As a result, all excess tax
benefits resulting from 2016 stock option exercises were reflected in the income statement. Income tax expense for Edison
International and SCE was reduced by approximately $28 million and $13 million, respectively, for the year ended
December 31, 2016. In addition, Edison International and SCE recorded an increase to beginning retained earnings for
pre-2016 stock option exercises that had not been previously recorded in equity ($42 million and $6 million for Edison
International and SCE, respectively). On a prospective basis, the excess tax benefits are classified as an operating activity
along with other income tax cash flows on the statement of cash flows. Accruals of compensation costs are based on the
number of awards that are expected to vest. Edison International and SCE made an accounting policy election to continue to
estimate the number of awards that are expected to vest rather than account for forfeitures when they occur.
57
Accounting Guidance Not Yet Adopted
In May 2014, the FASB issued an accounting standards update on revenue recognition including enhanced disclosures and
further amended the standard in 2016. Under the new standard, revenue is recognized when (or as) a good or service is
transferred to the customer and the customer obtains control of the good or service. This standard will be adopted on
January 1, 2018. Edison International and SCE have completed the preliminary phases of their assessment of the impact on
the consolidated financial statements and do not believe the adoption of this standard will have a material impact on the
results of operations. Edison International and SCE anticipate adopting the standard using the modified retrospective
application which means that Edison International and SCE would recognize the cumulative effect of initially applying the
revenue standard as an adjustment to the opening balance of retained earnings in 2018.
In January 2016, the FASB issued an accounting standards update that amends the guidance on the classification and
measurement of financial instruments. The amendments require equity investments (excluding those accounted for under the
equity method or those that result in consolidation) to be measured at fair value, with changes in fair value recognized in net
income. It also amends certain disclosure requirements associated with the fair value of financial instruments. In addition, the
new guidance requires financial assets and financial liabilities to be presented separately in the notes to the financial
statements, grouped by measurement category and form of financial asset. Edison International and SCE will adopt this
guidance effective January 1, 2018. The adoption of this standard is not expected to have a material impact on Edison
International's and SCE's consolidated financial statements.
In February 2016, the FASB issued an accounting standards update related to lease accounting including enhanced
disclosures. Under the new standard, a lease is defined as a contract, or part of a contract, that conveys the right to control the
use of identified assets for a period of time in exchange for consideration. Lessees will need to recognize leases on the
balance sheet as a right-of-use asset and a related lease liability, and classify the leases as either operating or finance. The
liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment,
such as for initial direct costs. Operating leases will result in straight-line expense while finance leases will result in a higher
initial expense pattern due to the interest component. SCE, as a regulated entity, is permitted to continue to have straight-line
expense for finance leases, assuming the rate recovery is based upon current payments. Lessees can elect to exclude from the
balance sheet short-term contracts one year or less. This guidance is effective January 1, 2019. Early adoption is permitted,
but Edison International and SCE do not expect to elect early adoption. The adoption of this standard is expected to increase
right-of-use assets and lease liabilities in Edison International's and SCE's consolidated balance sheets. Edison International
and SCE are currently evaluating the impact this standard will have on the results of operations and statements of cash flows.
In June 2016, the FASB issued an accounting standards update to amend the guidance on the impairment of financial
instruments. The new guidance adds an impairment model, known as the current expected credit loss model, which is based
on expected losses rather than incurred losses. This guidance applies to most debt instruments, trade receivables, lease
receivables, financial guarantee contracts, and loan commitments. This guidance is effective on January 1, 2020. Edison
International and SCE are currently evaluating this new guidance.
In August and November 2016, the FASB issued accounting standards updates to amend the guidance on the presentation and
classification of certain cash receipts and cash payments in the statement of cash flows to reduce diversity in practice. This
guidance addresses eight specific cash flow classification issues, including debt prepayment or extinguishment costs,
proceeds from the settlement of corporate-owned life insurance, distributions received from equity method investments and
restricted cash. This standard also clarifies the application of the predominance principle where cash receipts and payments
have aspects of more than one class of cash flows. The new standard is effective on January 1, 2018. Edison International and
SCE are currently evaluating this new guidance.
In January 2017, the FASB issued an accounting standards update to simplify the accounting for goodwill impairment. This
accounting standards update changes the procedural steps in applying the goodwill impairment test. A goodwill impairment
will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of
goodwill. Edison International will apply this guidance to the goodwill impairment test beginning in 2020.
58
Note 2.
Property, Plant and Equipment
SCE's property, plant and equipment included in the consolidated balance sheets is composed of the following:
(in millions)
Distribution
Transmission
Generation
General plant and other
Accumulated depreciation
Construction work in progress
Nuclear fuel, at amortized cost
$
December 31,
2016
2015
$
22,332
12,549
3,376
4,633
(9,000)
33,890
2,790
126
20,871
11,592
3,138
4,543
(8,548)
31,596
3,218
131
Total utility property, plant and equipment
$
36,806
$
34,945
Capitalized Software Costs
SCE capitalizes costs incurred during the application development stage of internal use software projects to property, plant,
and equipment. SCE amortizes capitalized software costs ratably over the expected lives of the software, ranging from 5 to
15 years and commencing upon operational use. Capitalized software costs, included in general plant and other above, were
$1.4 billion at both December 31, 2016 and 2015 and accumulated amortization was $0.8 billion and $0.9 billion, at
December 31, 2016 and 2015, respectively. Amortization expense for capitalized software was $249 million, $268 million
and $271 million in 2016, 2015 and 2014, respectively. At December 31, 2016, amortization expense is estimated to be
approximately $243 million annually for 2017 through 2021.
Jointly Owned Utility Projects
SCE owns undivided interests in several generating assets for which each participant provides its own financing. SCE's
proportionate share of these assets is reflected in the consolidated balance sheets and included in the above table. SCE's
proportionate share of expenses for each project is reflected in the consolidated statements of income. A portion of the
investments in Palo Verde generating stations is included in regulatory assets on the consolidated balance sheets. For further
information see Note 10.
The following is SCE's investment in each asset as of December 31, 2016:
(in millions)
Transmission systems:
Eldorado
Pacific Intertie
Generating station:
Palo Verde (nuclear)
Total
Plant in
Service
Construction
Work in
Progress
Accumulated
Depreciation
Nuclear Fuel
(at amortized cost)
Net Book
Value
Ownership
Interest
$
$
235 $
192
1,959
2,386 $
10 $
21
62
93 $
21 $
80
1,547
1,648 $
— $
—
126
126 $
59%
50%
16%
224
133
600
957
In addition, SCE has ownership interests in jointly owned power poles with other companies.
59
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. A
subsidiary of Edison International is the primary beneficiary of entities that own rooftop solar projects (for further
information, see Note 1—Redeemable Noncontrolling Interests). 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 not Consolidated
Power Purchase Contracts
SCE has power purchase agreements ("PPAs") that are classified as variable interests in VIEs, including tolling agreements
through which SCE provides the natural gas to fuel the plants and contracts with QFs that contain variable pricing provisions
based on the price of natural gas. 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 its
involvement with VIEs result from amounts due under the PPAs or the fair value of those derivative contracts. 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 11. 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 4,353 MW and
4,062 MW at December 31, 2016 and 2015, respectively, and the amounts that SCE paid to these projects were $788 million
and $640 million for the years ended December 31, 2016 and 2015, respectively. These amounts are recoverable in customer
rates, subject to reasonableness review.
Unconsolidated Trusts of SCE
SCE Trust I, Trust II, Trust III, Trust IV and Trust V were formed in 2012, 2013, 2014, 2015 and 2016 respectively, for the
exclusive purpose of issuing the 5.625%, 5.10%, 5.75%, 5.375% and 5.45% 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 I,
Trust II, Trust III, Trust IV and Trust V issued to the public trust securities in the face amounts of $475 million, $400 million,
$275 million, $325 million and $300 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 F, Series G, Series H, Series J
and Series K Preference Stock issued by SCE in the principal amounts of $475 million, $400 million, $275 million,
$325 million and $300 million (cumulative, $2,500 per share liquidation values), respectively, which have substantially the
same payment terms as the respective trust securities.
The Series F, Series G, Series H, Series J and Series K Preference Stock and the corresponding trust securities do not have a
maturity date. Upon any redemption of any shares of the Series F, Series G, Series H, Series J or Series K Preference Stock, a
corresponding dollar amount of trust securities will be redeemed by the applicable trust (see Note 12 for further information).
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.
60
The Trust I, Trust II, Trust III and Trust IV balance sheets as of December 31, 2016 and 2015 consisted of investments of
$475 million, $400 million, $275 million and $325 million in the Series F, Series G, Series H and Series J Preference Stock
respectively, $475 million, $400 million, $275 million and $325 million of trust securities, respectively and $10,000 each of
common stock. The Trust V balance sheet as of December 31, 2016 consisted of investments of $300 million in the Series K
Preference Stock, $300 million of trust securities, and $10,000 of common stock.
The following table provides a summary of the trusts' income statements:
Trust I
Trust II
Trust III
Trust IV
Trust V
Years ended December 31,
$
$
$
$
$
$
27
27
27
27
27
27
$
$
$
20
20
20
20
20
20
$
$
16
16
16
16
13
13
$
17
17
6
6
*
*
13
13
*
*
*
*
(in millions)
2016
Dividend income
Dividend distributions
2015
Dividend income
Dividend distributions
2014
Dividend income
Dividend distributions
* Not applicable
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 December 31, 2016 and 2015, 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 exchanges (New York Mercantile Exchange and 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 tolling arrangements and 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.
61
Assumptions are made in order to value derivative contracts in which observable inputs are not available. Changes in fair
value are based on changes to forward market prices, including extrapolation of short-term observable inputs into forecasted
prices for illiquid forward periods. 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 fair
value of derivative instruments.
SCE
The following table sets forth assets and liabilities of SCE that were accounted for at fair value by level within the fair value
hierarchy:
(in millions)
Assets at fair value
Derivative contracts
Other
Nuclear decommissioning trusts:
Stocks2
Fixed Income3
Short-term investments, primarily cash
equivalents
Subtotal of nuclear decommissioning trusts4
Total assets
Liabilities at fair value
Derivative contracts
Total liabilities
Net assets (liabilities)
(in millions)
Assets at fair value
Derivative contracts
Other
Nuclear decommissioning trusts:
Stocks2
Fixed Income3
Short-term investments, primarily cash
equivalents
Subtotal of nuclear decommissioning trusts4
Total assets
Liabilities at fair value
Derivative contracts
Total liabilities
Net assets (liabilities)
December 31, 2016
Level 1
Level 2
Level 3
Netting
and
Collateral1
Total
$
— $
33
1,547
865
36
2,448
2,481
—
—
$
6
—
—
1,751
170
1,921
1,927
—
—
$
2,481
$
1,927
$
68
—
—
—
—
—
68
1,157
1,157
(1,089)
$
— $
—
—
—
—
—
—
—
—
$
— $
74
33
1,547
2,616
206
4,369
4,476
1,157
1,157
3,319
December 31, 2015
Level 1
Level 2
Level 3
Netting
and
Collateral1
Total
$
— $
— $
28
1,460
947
91
2,498
2,526
—
—
—
—
1,776
81
1,857
1,857
22
22
$
2,526
$
1,835
$
62
163
—
—
—
—
—
163
$
— $
—
—
—
—
—
—
1,311
1,311
(1,148)
$
(15)
(15)
15
$
163
28
1,460
2,723
172
4,355
4,546
1,318
1,318
3,228
1 Represents the netting of assets and liabilities under master netting agreements and cash collateral across the levels of the fair value
hierarchy. Netting among positions classified within the same level is included in that level.
2 Approximately 70% of SCE's equity investments were located in the United States at both December 31, 2016 and 2015.
3
Includes corporate bonds, which were diversified and included collateralized mortgage obligations and other asset backed securities of
$79 million and $111 million at December 31, 2016 and 2015, respectively.
4 Excludes net payables of $127 million and $24 million at December 31, 2016 and 2015, which consist of interest and dividend
receivables as well as receivables and payables related to SCE's pending securities sales and purchases.
Edison International Parent and Other
Edison International Parent and Other assets measured at fair value consisted of money market funds of $23 million and
$29 million at December 31, 2016 and 2015, respectively, classified as Level 1.
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:
(in millions)
Fair value of net liabilities at beginning of period
Total realized/unrealized gains (losses):
Included in regulatory assets and liabilities1
Fair value of net liabilities at end of period
Change during the period in unrealized gains and losses related to assets and liabilities
held at the end of the period
December 31,
2016
2015
(1,148)
$
(902)
59
(1,089)
(70)
$
$
(246)
(1,148)
(311)
$
$
$
1 Due to regulatory mechanisms, SCE's realized and unrealized gains and losses are recorded as regulatory assets and liabilities.
Edison International and SCE recognize the fair value for transfers in and transfers out of each level at the end of each
reporting period. There were no significant transfers between any levels during 2016 and 2015.
Valuation Techniques Used to Determine Fair Value
The process of determining fair value is the responsibility of SCE's risk management department, which reports to SCE's
chief financial officer. This department obtains observable and unobservable inputs through broker quotes, exchanges and
internal valuation techniques that use both standard and proprietary models to determine fair value. Each reporting period, the
risk and finance departments collaborate to determine the appropriate fair value methodologies and classifications for each
derivative. Inputs are validated for reasonableness by comparison against prior prices, other broker quotes and volatility
fluctuation thresholds. Inputs used and valuations are reviewed period-over-period and compared with market conditions to
determine reasonableness.
63
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 (in millions)
Significant
Range
Assets
Liabilities
Valuation Technique(s)
Unobservable Input
(Weighted Average)
Congestion revenue rights
December 31, 2016
$
67
$
Market simulation model
and auction prices
—
December 31, 2015
152
Market simulation model
and auction prices
—
Load forecast
Power prices1
Gas prices2
Load forecast
Power prices1
Gas prices2
3,708 MW - 22,840 MW
$3.65 - $99.58
$2.51 - $4.87
6,289 MW - 24,349 MW
$0 - $110.44
$1.98 - $5.72
Tolling
December 31, 2016
—
1,154 Option model
Volatility of gas prices
15% - 48% (20%)
December 31, 2015
10
1,297 Option model
Volatility of gas prices
15% - 58% (20%)
Volatility of power prices
29% - 71% (40%)
Power prices
$23.40 - $51.24 ($34.70)
Volatility of power prices
26% - 38% (30%)
Power prices
$24.15 - $46.93 ($34.80)
1 Prices are in dollars per megawatt-hour.
2 Prices are in dollars per million British thermal units.
Level 3 Fair Value Sensitivity
Congestion Revenue Rights
For CRRs, where SCE is the buyer, generally increases (decreases) in forecasted load in isolation would result in increases
(decreases) to the fair value. In general, an increase (decrease) in electricity and gas prices at illiquid locations tends to result
in increases (decreases) to fair value; however, changes in electricity and gas prices in opposite directions may have varying
results on fair value.
Tolling Arrangements
The fair values of SCE's tolling arrangements contain intrinsic value and time value. Intrinsic value is the difference between
the market price and strike price of the underlying commodity. Time value is made up of several components, including
volatility, time to expiration, and interest rates. The option model for tolling arrangements reflects plant specific information
such as operating and start-up costs.
For tolling arrangements where SCE is the buyer, increases in volatility of the underlying commodity prices would result in
increases to fair value as it represents greater price movement risk. As power and gas prices increase, the fair value of tolling
arrangements tends to increase. The valuation of tolling arrangements is also impacted by the correlation between gas and
power prices. As the correlation increases, the fair value of tolling arrangements tends to decline.
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. The fair
value of these financial instruments is based on evaluated prices that reflect significant observable market information such as
reported trades, actual trade information of similar securities, benchmark yields, broker/dealer quotes, issuer spreads, bids,
offers and relevant credit information.
SCE's investment policies and CPUC requirements place limitations on the types and investment grade ratings of the
securities that may be held by the nuclear decommissioning trust funds. These policies restrict the trust funds from holding
alternative investments and limit the trust funds' exposures to investments in highly illiquid markets. With respect to equity
and fixed income securities, the trustee obtains prices from third-party pricing services which SCE is able to independently
64
corroborate as described below. The trustee monitors prices supplied by pricing services, including reviewing prices against
defined parameters' tolerances and performs research and resolves variances beyond the set parameters. SCE corroborates the
fair values of securities by comparison to other market-based price sources obtained by SCE's investment managers.
Differences outside established thresholds are followed-up with the trustee and resolved. For each reporting period, SCE
reviews the trustee determined fair value hierarchy and overrides the trustee level classification when appropriate.
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 current portion of long-term
debt) are as follows:
(in millions)
Edison International
SCE
1 Carrying value is net of debt issuance costs.
December 31, 2016
December 31, 2015
Carrying
Value1
Fair
Value
Carrying
Value1
Fair
Value
$
$
11,156
10,333
$
12,368
11,539
$
11,178
10,539
12,252
11,592
The fair value of Edison International's and SCE's short-term and long-term debt is classified as Level 2 and is based on
evaluated prices that reflect significant observable market information such as reported trades, actual trade information of
similar securities, benchmark yields, broker/dealer quotes of new issue prices and relevant credit information.
The carrying value of Edison International's and SCE's trade receivables and payables, other investments, and short-term debt
approximates fair value.
Note 5. Debt and Credit Agreements
Long-Term Debt
The following table summarizes long-term debt (rates and terms are as of December 31, 2016) of Edison International and
SCE:
(in millions)
Edison International Parent and Other:
Debentures and notes:
2017 – 2023 (2.95% to 3.75%)
Other long-term debt
Current portion of long-term debt
Unamortized debt discount and issuance costs, net
Total Edison International Parent and Other
SCE:
First and refunding mortgage bonds:
2017 – 2045 (1.125% to 6.05%)
Pollution-control bonds:
2028 – 2035 (1.375% to 5.0%)1
Debentures and notes:
2029 – 2053 (5.06% to 6.65%)
Current portion of long-term debt
Unamortized debt discount and issuance costs, net
Total SCE
Total Edison International
December 31,
2016
2015
$
$
800
32
(402)
(9)
421
9,357
774
307
(579)
(105)
9,754
10,175
$
$
614
31
(216)
(6)
423
9,436
909
307
(79)
(113)
10,460
10,883
1 Excludes outstanding bonds that have not been retired and may be remarketed to investors in the future. These
bonds have variable rates and are due in 2031 and 2033 at December 31, 2016 and 2031 at December 31, 2015.
65
Edison International and SCE long-term debt maturities over the next five years are the following:
(in millions)
2017
2018
2019
2020
2021
Project Financings
$
Edison
International
981
482
82
80
580
SCE
$
579
479
79
79
579
As of December 31, 2016 and 2015, indirect subsidiaries of Edison Energy Group owning solar projects had approximately
$22 million and $25 million outstanding under a 7-year term financing due in 2022 at a weighted average interest rate of
3.50% and 3.11%. In addition, tax equity investors in these solar projects receive 99% of taxable profits and losses and tax
credits of the projects as determined for federal income tax purposes for a six-year period following the completion of the
portfolio of projects and receive a priority return of 2% of their investment per year. After the six-year period, the tax equity
investor receives 5% of the taxable profits and losses and cash flow. A subsidiary of Edison Energy Group has a call option
for a nine-month period following five years after completion of the portfolio of projects to purchase the tax equity investors
interest and the tax equity investor has the right to put its ownership interest to such subsidiary in the event that the call
option is not exercised.
An indirect subsidiary of Edison Energy Group also entered into a non-recourse debt financing to support equity
contributions in certain solar projects through June 30, 2017. The maturity date of the borrowings under this agreement is
December 31, 2036. As of December 31, 2016 and 2015, there was $10 million and $6 million outstanding under this
agreement at a weighted average interest rate of 9%.
Liens and Security Interests
Almost all of SCE's properties are subject to a trust indenture lien. SCE has pledged first and refunding mortgage bonds as
collateral for borrowed funds obtained from pollution-control bonds issued by government agencies. SCE has a debt
covenant that requires a debt to total capitalization ratio be met. At December 31, 2016, SCE was in compliance with this
debt covenant.
All of the properties subject to the Edison Energy Group project financings discussed above are subject to a lien.
Credit Agreements and Short-Term Debt
The following table summarizes the status of the credit facilities at December 31, 2016:
(in millions)
Commitment
Outstanding borrowings
Outstanding letters of credit
Amount available
Edison
International
Parent
$
$
$
1,250
(538)
—
712
$
SCE
2,750
(769)
(91)
1,890
SCE and Edison International Parent have multi-year revolving credit facilities of $2.75 billion and $1.25 billion,
respectively, with both maturing in July 2021. SCE's credit facility is generally used to support commercial paper borrowings
and letters of credit issued for procurement-related collateral requirements, balancing account undercollections and for
general corporate purposes, including working capital requirements to support operations and capital expenditures. Edison
International Parent's credit facility is used to support commercial paper borrowings and for general corporate purposes.
At December 31, 2016, commercial paper supported by SCE's credit facility, net of discount, was $769 million at a weighted-
average interest rate of 0.9%. At December 31, 2016, letters of credit issued under SCE's credit facility aggregated
$91 million and are scheduled to expire in twelve months or less. At December 31, 2015, the outstanding commercial paper,
net of discount, was $49 million at a weighted-average interest rate of 0.51%.
66
At December 31, 2016, Edison International Parent's outstanding commercial paper, net of discount, was $538 million at a
weighted-average interest rate of 0.97%. This commercial paper was supported by the $1.25 billion multi-year revolving
credit facility. At December 31, 2015, the outstanding commercial paper, net of discount, was $646 million at a weighted-
average interest rate of 0.78%.
Debt Financing Subsequent to December 31, 2016
In January 2017, SCE borrowed $300 million under a Term Loan Agreement with a variable interest rate, initially set at
1.483%, due in July 2018. The proceeds were used for general corporate purposes.
In January 2017, SCE reissued $135 million of 2.625% pollution-control bonds with a mandatory purchase date in December
2023. These bonds mature in November 2033. The proceeds were used for general corporate purposes.
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 power
purchase agreements. SCE's natural gas price exposure arises from natural gas purchased for the Mountainview power plant
and peaker plants, QF contracts where pricing is based on a monthly natural gas index and power purchase agreements 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 contracts contain master netting agreements or similar agreements, which generally allow counterparties
subject to the agreement to setoff 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 contracts contain a provision that requires SCE to maintain an investment grade rating from each of the major
credit rating agencies, 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 $12 million and
$38 million as of December 31, 2016 and 2015, respectively, for which SCE has posted $12 million collateral and no
collateral to its counterparties at the respective dates for its derivative liabilities and related outstanding payables. If the
credit-risk-related contingent features underlying these agreements were triggered on December 31, 2016, SCE would be
required to post $4 million of additional collateral of which $4 million is related to outstanding payables that are net of
collateral already posted.
67
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 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:
(in millions)
Commodity derivative contracts
Gross amounts recognized
Gross amounts offset in
consolidated balance
sheets
Cash collateral posted1
Net amounts presented in the
consolidated balance sheets
December 31, 2016
Derivative Assets
Derivative Liabilities
Short-Term Long-Term
Subtotal
Short-Term Long-Term
Subtotal
Net
Liability
$
74
$
1
$
75
$
217
$
941
$
1,158
$
1,083
(1)
—
—
—
(1)
—
(1)
—
—
—
(1)
—
—
—
$
73
$
1
$
74
$
216
$
941
$
1,157
$
1,083
(in millions)
Commodity derivative contracts
Gross amounts recognized
Gross amounts offset in
consolidated balance
sheets
Cash collateral posted1
Net amounts presented in the
consolidated balance sheets
December 31, 2015
Derivative Assets
Derivative Liabilities
Short-Term Long-Term
Subtotal
Short-Term Long-Term
Subtotal
Net
Liability
$
81
$
84
$
165
$
235
$
1,100
$
1,335
$
1,170
(2)
—
—
—
(2)
—
(2)
(15)
—
—
(2)
(15)
—
(15)
$
79
$
84
$
163
$
218
$
1,100
$
1,318
$
1,155
1
In addition, at December 31, 2016, SCE received $2 million of collateral that is not offset against derivative assets and is reflected in
"Other current liabilities" on the consolidated balance sheets. At December 31, 2015, SCE had posted $31 million of cash collateral that
is not offset against derivative liabilities and is reflected in "Other current assets" on the consolidated balance sheets.
Income 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 purchase 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 recorded in cash flows from operating activities in the consolidated
statements of cash flows.
The following table summarizes the components of SCE's economic hedging activity:
(in millions)
Realized losses
Unrealized gains (losses)
Years ended December 31,
2016
2015
2014
$
$
(59)
84
$
(148)
(182)
(57)
(147)
68
Notional Volumes of Derivative Instruments
The following table summarizes the notional volumes of derivatives used for SCE hedging activities:
Commodity
Electricity options, swaps and forwards
Natural gas options, swaps and forwards
Congestion revenue rights
Tolling arrangements
Note 7.
Income Taxes
Current and Deferred Taxes
Unit of
Measure
GWh
Bcf
GWh
GWh
Economic Hedges
December 31,
2016
2015
1,816
36
93,319
61,093
6,221
32
109,740
70,663
Edison International's sources of income (loss) before income taxes are:
(in millions)
Income from continuing operations before income taxes
Income (loss) from discontinued operations before income taxes
Income before income tax
Years ended December 31,
2016
2015
2014
$
$
1,590
1
1,591
$
$
1,568
15
1,583
$
$
1,979
(525)
1,454
The components of income tax expense (benefit) by location of taxing jurisdiction are:
(in millions)
Current:
Federal
State
Deferred:
Federal
State
Total continuing operations
Discontinued operations1
Total
Edison International
2016
2015
2014
2016
Years ended December 31,
SCE
2015
2014
$
$
(46)
33
(13)
176
14
190
177
(11)
166
$
$
18
19
37
340
109
449
486
(21)
465
$
$
(99)
20
(79)
454
68
522
443
(710)
(267)
$
$
75
93
168
112
(24)
88
256
—
256
$
$
72
127
199
298
10
308
507
—
507
$
$
(89)
101
12
476
(14)
462
474
—
474
1 See Note 15 for a discussion of discontinued operations related to EME.
69
The components of net accumulated deferred income tax liability are:
(in millions)
Deferred tax assets:
Property and software related
Nuclear decommissioning trust assets in excess of
nuclear ARO liability
Loss and credit carryforwards
Regulatory balancing accounts
Pension and PBOPs
Other
Sub-total
Less valuation allowance
Total
Deferred tax liabilities:
Property-related
Capitalized software costs
Regulatory balancing accounts
Nuclear decommissioning trust assets
PBOPs
Other
Total
Accumulated deferred income tax liability, net1
$
1 Included in deferred income taxes and credits.
Net Operating Loss and Tax Credit Carryforwards
Edison International
SCE
December 31,
2016
2015
2016
2015
$
549
$
675
$
548
$
675
348
1,418
15
300
419
3,049
24
3,025
10,330
237
134
348
13
202
11,264
8,239
$
360
1,388
21
337
499
3,280
32
3,248
9,606
207
202
360
71
189
10,635
7,387
$
348
—
15
93
408
1,412
—
1,412
10,330
237
134
348
13
148
11,210
9,798
$
360
—
21
154
411
1,621
—
1,621
9,600
207
202
360
71
161
10,601
8,980
The amounts of net operating loss and tax credit carryforwards (after-tax) are as follows:
(in millions)
Expire between 2017 to 2035
No expiration date
Total1
Edison International
SCE
December 31, 2016
Loss
Carryforwards
Credit
Carryforwards
Loss
Carryforwards
Credit
Carryforwards
$
$
1,095
—
1,095
$
$
430
69
499
$
$
20
—
20
$
$
25
37
62
1 Deferred tax assets for net operating loss and tax credit carryforwards are reduced by unrecognized tax benefits of $176 million and
$82 million for Edison International and SCE, respectively.
Edison International has recorded a valuation allowance of $24 million for state net operating loss carryforwards estimated to
expire unused. In 2016, Edison International determined that $8 million of the assets subject to a valuation allowance, had no
expectation of recovery and were written off.
At December 31, 2015, Edison International and SCE had $42 million and $6 million, respectively, of federal net operating
loss carryforwards related to the tax benefit on employee stock plans that would be recorded to additional paid-in capital when
realized. In March 2016, the FASB issued an accounting standards update to simplify the accounting for share-based
payments. As part of this new guidance adopted in 2016, Edison International and SCE recorded an increase to beginning
retained earnings for these amounts. Refer to Note 1 for further information.
Edison International consolidates for federal income tax purposes, but not for financial accounting purposes, a group of wind
projects referred to as Capistrano Wind. The amount of net operating loss and tax credit carryforwards recognized as part of
deferred income taxes includes $242 million and $210 million related to Capistrano Wind at December 31, 2016 and 2015,
70
respectively. Under a tax allocation agreement, Edison International has recorded the liability as part of other long-term
liabilities related to its obligation to make payments to Capistrano Wind of these tax benefits when realized.
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:
(in millions)
Income from continuing operations
before income taxes
Provision for income tax at federal
statutory rate of 35%
Increase in income tax from:
Items presented with related state
income tax, net:
Regulatory asset write-off1
State tax, net of federal benefit
Property-related2
Change related to uncertain tax
positions
San Onofre OII settlement
Share-based compensation3
Other
Total income tax expense from
continuing operations
Effective tax rate
1 Includes federal and state.
Edison International
2016
2015
2014
2016
Years ended December 31,
SCE
2015
2014
$
1,590
$
1,568
$
1,979
$
1,755
$
1,618
$
2,039
556
549
693
614
566
714
—
29
(362)
(4)
—
(28)
(14)
382
5
(341)
(67)
—
—
(42)
—
56
(252)
5
(23)
—
(36)
—
43
(362)
(8)
—
(13)
(18)
382
34
(341)
(94)
—
—
(40)
—
55
(252)
12
(23)
—
(32)
$
$
177
11.1%
$
486
31.0%
$
443
22.4%
$
256
14.6%
$
507
31.3%
474
23.2%
2
3
Includes incremental repair benefits. See discussion of repair deductions below.
Includes state taxes of $(4) million and $(1) million for Edison International and SCE, respectively. Refer to Note 1 for further
information.
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.
Repair Deductions
Edison International made voluntary elections in 2009 and 2011 to change its tax accounting method for certain tax repair
costs incurred on SCE's transmission, distribution and generation assets. Incremental repair deductions represent amounts
recognized for regulatory accounting purposes in excess of amounts included in the authorized revenue requirements through
the GRC proceedings. Incremental repair deductions for the years 2012 – 2014 resulted in additional income tax benefits of
$133 million in 2014.
As part of the final decision in SCE's 2015 GRC, the CPUC adopted a rate base offset associated with these incremental tax
repair deductions during 2012 – 2014. The 2015 rate base offset is $324 million and amortizes on a straight line basis over 27
years. As a result of the rate base offset included in the final decision, SCE recorded an after tax charge of $382 million in
2015 to write down the net regulatory asset for recovery of deferred income taxes related to 2012 – 2014 incremental tax
repair deductions which is reflected in "Income tax expense" on the consolidated statements of income. The amount of tax
repair deductions the CPUC used to establish the rate base offset was based on SCE's forecast of 2012 – 2014 tax repair
deductions from the Notice of Intent filed in the 2015 GRC. The amount of tax repair deductions included in the Notice of
Intent was less than the actual tax repair deductions SCE reported on its 2012 through 2014 income tax returns. In April 2016,
71
the CPUC granted SCE's request to reduce SCE's BRRBA by $234 million in future periods subject to the timing and final
outcome of audits that may be conducted by tax authorities. The refunds will result in flowing incremental tax benefits for
2012 – 2014 to customers. SCE refunded $133 million ($79 million after-tax) during the second quarter of 2016. SCE did not
record a gain or loss from this reduction. Regulatory assets recorded from flow through tax benefits are recovered through
SCE's general rate case proceedings.
Accounting for Uncertainty in Income Taxes
Authoritative guidance related to accounting for uncertainty in income taxes requires an enterprise to recognize, in its financial
statements, the best estimate of the impact of a tax position by determining if the weight of the available evidence indicates it
is more likely than not, based solely on the technical merits, that the position will be sustained upon examination. The
guidance requires the disclosure of all unrecognized tax benefits, which includes both the reserves recorded for tax positions
on filed tax returns and the unrecognized portion of affirmative claims.
Unrecognized Tax Benefits
The following table provides a reconciliation of unrecognized tax benefits for continuing and discontinued operations:
(in millions)
Balance at January 1,
Tax positions taken during the
current year:
Increases
Tax positions taken during a prior
year:
Increases
Decreases1
Decreases for settlements during
the period2
Balance at December 31,
$
Edison International
SCE
December 31,
2016
2015
2014
2016
2015
2014
$
529
$
576
$
815
$
353
$
441
$
532
36
54
65
36
48
57
2
(96)
—
471
66
(165)
(2)
529
$
$
1
(143)
(162)
576
$
—
(18)
—
371
23
(159)
—
353
$
$
—
(93)
(55)
441
1 Decreases in prior year tax positions for 2016 relate to state tax receivables on various claims. Due to the tax risks associated with these
claims, the tax benefits were fully reserved at the time the asset was recorded. During 2016, the Company has determined that it will not
recognize these assets so the tax benefit and related tax reserve were written off. Decreases in tax positions for 2015 relate primarily to
re-measurement of uncertain tax positions in connection with receipt of the IRS Revenue Agent Report in June 2015. See discussions in
Tax Disputes below.
2
In the fourth quarter of 2014, Edison International has settled all open tax positions with the IRS for taxable years 2003 through 2006.
As of December 31, 2016 and 2015, if recognized, $347 million and $440 million, respectively, of the unrecognized tax
benefits would impact Edison International's effective tax rate; and $243 million and $256 million, respectively, of the
unrecognized tax benefits would impact SCE's effective tax rate.
Tax Disputes
Tax Years 2007 – 2012
Edison International has reached a tentative settlement agreement with the IRS for the 2007 – 2012 tax years. The final
agreement, when approved, is not expected to have a material impact on the financial statements.
During 2015, the Company received the IRS Revenue Agent Report for the 2010 – 2012 tax years. Edison International's and
SCE's tax reserves were re-measured at that time and $94 million and $100 million, respectively, of income tax benefits were
recorded in the comparable quarter for the prior year.
Tax years that remain open for examination by the IRS and the California Franchise Tax Board are 2007 – 2015 and
2003 – 2015, respectively.
72
Accrued Interest and Penalties
The total amount of accrued interest and penalties related to income tax liabilities for continuing and discontinued operations
are:
(in millions)
Accrued interest and penalties
Edison International
SCE
2016
Years ended December 31,
2015
2016
2015
$
128
$
122
$
41
$
40
The net after-tax interest and penalties recognized in income tax expense for continuing and discontinued operations are:
(in millions)
Net after-tax interest and penalties
tax benefit
Edison International
2016
2015
2014
2016
December 31,
SCE
2015
2014
$
6
$
9
$
41
$
2
$
14
$
16
Note 8. Compensation and Benefit Plans
Employee Savings Plan
The 401(k) defined contribution savings plan is designed to supplement employees' retirement income. The following
employer contributions were made for continuing operations:
(in millions)
2016
2015
2014
Edison
International
SCE
Years ended December 31,
$
$
69
73
71
68
72
70
Pension Plans and Postretirement Benefits Other Than Pensions
Pension Plans
Noncontributory defined benefit pension plans (some with cash balance features) cover most employees meeting minimum
service requirements. SCE recognizes pension expense for its nonexecutive plan as calculated by the actuarial method used
for ratemaking. The expected contributions (all by the employer) for Edison International and SCE are approximately
$136 million and $85 million, respectively, for the year ending December 31, 2017. Annual contributions made by SCE to
most of SCE's pension plans are anticipated to be recovered through CPUC-approved regulatory mechanisms.
The funded position of Edison International's pension is sensitive to changes in market conditions. Changes in overall interest
rate levels significantly affect the company's liabilities, while assets held in the various trusts established to fund Edison
International's pension are affected by movements in the equity and bond markets. Due to SCE's regulatory recovery
treatment, a regulatory asset has been recorded equal to the unfunded status (See Note 10).
73
Information on pension plan assets and benefit obligations for continuing and discontinued operations is shown below.
(in millions)
Change in projected benefit obligation
Projected benefit obligation at beginning of year
Service cost
Interest cost
Actuarial gain
Benefits paid
Other
Projected benefit obligation at end of year
Change in plan assets
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Benefits paid
Fair value of plan assets at end of year
Funded status at end of year
Amounts recognized in the consolidated balance sheets consist of 1:
Long-term assets
Current liabilities
Long-term liabilities
Amounts recognized in accumulated other comprehensive loss
consist of:
Prior service cost
Net loss1
Amounts recognized as a regulatory asset
Total not yet recognized as expense
Accumulated benefit obligation at end of year
Pension plans with an accumulated benefit obligation in excess of
plan assets:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
Edison International
SCE
Years ended December 31,
2016
2015
2016
2015
$
$
$
$
$
$
$
$
$
$
$
$
$
4,374
139
171
(125)
(275)
—
4,284
3,298
262
103
(275)
3,388
(896)
2
(50)
(848)
(896)
(1)
93
92
574
666
4,138
4,284
4,138
3,388
$
$
4,517
142
170
(149)
(305)
(1)
4,374
$
3,454
30
119
(305)
$
3,298
$ (1,076)
$
$
$
$
$
3,878
132
150
(140)
(229)
—
3,791
3,080
239
82
(229)
3,172
(619)
$
$
$
$
$
$
— $
(27)
(1,049)
$ (1,076)
$
— $
(4)
(615)
(619)
$
$
$
$
$
$
$
— $
— $
96
96
675
771
4,200
4,374
4,200
3,298
$
$
$
$
$
24
24
574
598
3,683
3,791
3,683
3,172
$
$
$
$
$
3,999
133
150
(143)
(261)
—
3,878
3,217
27
97
(261)
3,080
(798)
—
(4)
(794)
(798)
—
27
27
675
702
3,744
3,878
3,744
3,080
Weighted-average assumptions used to determine obligations at end
of year:
Discount rate
Rate of compensation increase
3.94%
4.00%
4.18%
4.00%
3.94%
4.00%
4.18%
4.00%
1 The SCE liability excludes a long-term payable due to Edison International Parent of $124 million and $123 million at December 31,
2016 and 2015, respectively, related to certain SCE postretirement benefit obligations transferred to Edison International Parent. SCE's
accumulated other comprehensive loss of $24 million and $27 million at December 31, 2016 and 2015, respectively, excludes net loss
of $20 million and $18 million related to these benefits.
74
Pension expense components for continuing operations are:
(in millions)
Service cost
Interest cost
$
Expected return on plan assets
Settlement costs1
Curtailment gain
Amortization of prior service cost
Amortization of net loss2
Expense under accounting standards
Regulatory adjustment (deferred)
Total expense recognized
$
Edison International
SCE
Years ended December 31,
2016
2015
2014
2016
2015
2014
139
172
(220)
—
—
4
27
122
(21)
101
$
142
$
133
$
136
$
139
$
170
(233)
—
—
5
40
124
(6)
118
$
181
(229)
45
(4)
5
12
143
8
$
151
$
156
(205)
—
—
4
23
114
(21)
93
$
155
(217)
—
—
5
35
117
(6)
111
$
128
164
(213)
42
—
5
7
133
8
141
1
2
Includes the amount of net loss reclassified from other comprehensive loss. The amount reclassified for Edison International was zero
for the both the years ended December 31, 2016 and 2015 and $3 million for the year ended December 31, 2014.
Includes the amount of net loss reclassified from other comprehensive loss. The amount reclassified for Edison International and SCE
was $10 million and $6 million, respectively, for the year ended December 31, 2016. The amount reclassified for Edison International
and SCE was $14 million and $8 million, respectively, for the year ended December 31, 2015. The amount reclassified for Edison
International and SCE was $9 million and $4 million, respectively, for the year ended December 31, 2014.
Under GAAP, a settlement is recorded when lump-sum payments exceed estimated annual service and interest costs. Lump-
sum payments to employees retiring in 2014 from the SCE Retirement Plan (primarily due to workforce reductions described
below) exceeded the estimated service and interest costs for that year. A settlement requires re-measurement of both the plan
pension obligations and plan assets as of the date of the settlement. Re-measurement assumption changes result in actuarial
gains and losses which are combined with previous unrecognized gains and losses. After re-measurement, GAAP requires an
acceleration of a portion of unrecognized net losses attributable to such lump-sum payments as additional pension expense as
reflected in the above table. The additional pension expense related to SCE did not impact net income as such amounts are
probable of recovery through future rates.
Other changes in pension plan assets and benefit obligations recognized in other comprehensive loss for continuing
operations:
Edison International
SCE
Years ended December 31,
(in millions)
Net loss (gain)
Amortization of net loss and other
Total recognized in other
comprehensive loss
Total recognized in expense and
other comprehensive loss
2016
2015
2014
2016
2015
2014
$
$
$
6
(10)
(4)
97
$
$
$
7
(15)
(8)
110
$
$
$
85
(13)
72
223
$
$
$
4
(6)
(2)
91
$
$
$
(9)
(9)
(18)
93
$
$
$
37
(4)
33
174
75
In accordance with authoritative guidance on rate-regulated enterprises, SCE records regulatory assets and liabilities instead
of charges and credits to other comprehensive income (loss) for the portion of SCE's postretirement benefit plans that are
recoverable in utility rates. The estimated pension amounts that will be amortized to expense in 2017 for continuing
operations are as follows:
(in millions)
Unrecognized net loss to be amortized1
Unrecognized prior service cost to be amortized
Edison
International
SCE
$
$
19
3
15
3
1 The amount of net loss expected to be reclassified from other comprehensive loss for Edison International's continuing operations and
SCE is $10 million and $6 million, respectively.
Edison International and SCE used the following weighted-average assumptions to determine pension expense for continuing
operations:
Discount rate
Rate of compensation increase
Expected long-term return on plan assets
Years ended December 31,
2016
2015
2014
4.18%
4.00%
7.00%
3.85%
4.00%
7.00%
4.50%
4.00%
7.00%
The following benefit payments, which reflect expected future service, are expected to be paid:
(in millions)
2017
2018
2019
2020
2021
2022 – 2026
Edison
International
SCE
Years ended December 31,
$
$
346
332
344
341
341
271
298
300
304
304
1,566
1,396
Postretirement Benefits Other Than Pensions ("PBOP(s)")
Most employees retiring at or after age 55 with at least 10 years of service may be eligible for postretirement medical, dental,
vision and life insurance benefits. Eligibility for a company contribution toward the cost of these benefits in retirement
depends on a number of factors, including the employee's years of service, age, hire date, and retirement date. Under the
terms of the Edison International Welfare Benefit Plan ("PBOP Plan") each participating employer (Edison International or its
participating subsidiaries) is responsible for the costs and expenses of all PBOP benefits with respect to its employees and
former employees. A participating employer may terminate the PBOP benefits with respect to its employees and former
employees, as may SCE (as Plan sponsor), and, accordingly, the participants' PBOP benefits are not vested benefits.
The expected contributions (substantially all of which are expected to be made by SCE) for PBOP benefits are $21 million
for the year ended December 31, 2017. Annual contributions related to SCE employees made to SCE plans are anticipated to
be recovered through CPUC-approved regulatory mechanisms and are expected to be, at a minimum, equal to the total annual
expense for these plans.
SCE has established three voluntary employee beneficiary associations trusts ("VEBA Trusts") that can only be used to pay
for retiree health care benefits of SCE. Once funded into the VEBA Trusts, neither SCE nor Edison International can
subsequently terminate benefits and recover remaining amounts in the VEBA Trusts. Participants of the PBOP Plan do not
have a beneficial interest in the VEBA Trusts. The VEBA Trust assets are sensitive to changes in market conditions. Changes
in overall interest rate levels significantly affect the company's liabilities, while assets held in the various trusts established to
76
fund Edison International's other postretirement benefits are affected by movements in the equity and bond markets. Due to
SCE's regulatory recovery treatment, the unfunded status is offset by a regulatory asset.
Information on PBOP Plan assets and benefit obligations is shown below:
(in millions)
Change in benefit obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Special termination benefits
Plan Amendments
Actuarial gain
Plan participants' contributions
Benefits paid
Benefit obligation at end of year
Change in plan assets
Fair value of plan assets at beginning of year
Actual return on assets
Employer contributions
Plan participants' contributions
Benefits paid
Fair value of plan assets at end of year
Funded status at end of year
Amounts recognized in the consolidated balance sheets consist of:
Current liabilities
Long-term liabilities
Amounts recognized in accumulated other comprehensive loss
consist of:
Net loss
Amounts recognized as a regulatory asset
Total not yet recognized as expense
Weighted-average assumptions used to determine obligations at
end of year:
Discount rate
Assumed health care cost trend rates:
Rate assumed for following year
Ultimate rate
Year ultimate rate reached
Edison International
SCE
Years ended December 31,
2016
2015
2016
2015
$
$
$
$
$
$
$
$
$
$
2,350
35
97
2
(6)
(110)
19
(111)
2,276
2,036
137
21
19
(111)
2,102
(174)
(14)
(160)
(174)
4
136
140
$
$
$
$
$
$
$
$
$
$
2,784
46
102
(2)
—
(500)
20
(100)
2,350
2,086
6
24
20
(100)
2,036
(314)
(15)
(299)
(314)
4
174
178
$
$
$
$
$
$
$
$
$
$
2,341
34
97
2
(6)
(110)
19
(111)
2,266
2,036
137
21
19
(111)
2,102
(164)
(13)
(151)
(164)
—
136
136
$
$
$
$
$
$
$
$
$
$
2,775
46
102
(2)
—
(500)
20
(100)
2,341
2,086
6
24
20
(100)
2,036
(305)
(15)
(290)
(305)
—
174
174
4.29%
4.55%
4.29%
4.55%
7.00%
5.00%
2022
7.50%
5.00%
2022
7.00%
5.00%
2022
7.50%
5.00%
2022
During 2016 and 2015, the PBOP plan had actuarial gains of $110 million and $500 million, respectively. The 2016 actuarial
gain is primarily related to $165 million in experience gain, offsetting by $95 million loss from a decrease in the discount rate
(from 4.55% as of December 31, 2015 to 4.29% as of December 31, 2016), and the adoption of new mortality tables, as
discussed below. The 2015 actuarial gain is primarily related to $300 million in experience gains, $140 million of income
from an increase in the discount rate (from 4.16% at December 31, 2014 to 4.55% as of December 31, 2015) due to higher
interest rates, and the adoption of new mortality tables, as discussed below.
77
In 2016 and 2015, Edison International and SCE adopted new mortality tables that the Society of Actuaries released in
October each year that reflect changes in life expectancy. At December 31, 2016 and 2015, this adoption resulted in a change
in Edison International's PBOP plans' accumulated postretirement benefit obligation of $(40) million and $(62) million,
respectively, including $(40) million and $(61) million, respectively, for SCE.
PBOP expense components for continuing operations are:
(in millions)
Service cost
Interest cost
Expected return on plan assets
Special termination benefits1
Amortization of prior service credit
Amortization of net loss
Total expense
Edison International
SCE
Years ended December 31,
2016
2015
2014
2016
2015
2014
$
$
35
97
(112)
2
(2)
—
20
$
46
$
40
$
34
$
46
$
102
(116)
1
(12)
3
117
(108)
3
(36)
6
97
(112)
2
(2)
—
102
(116)
1
(12)
2
$
24
$
22
$
19
$
23
$
40
117
(108)
3
(35)
5
22
1 Due to the reduction in workforce, SCE has incurred costs for extended retiree health care coverage.
In accordance with authoritative guidance on rate-regulated enterprises, SCE records regulatory assets and liabilities instead
of charges and credits to other comprehensive income (loss) for the portion of SCE's postretirement benefit plans that are
recoverable in utility rates. The estimated PBOP amounts that will be amortized to expense in 2017 for continuing operations
are as follows:
Unrecognized prior service credit to be amortized
Edison
International
SCE
$
(2)
$
(2)
Edison International and SCE used the following weighted-average assumptions to determine PBOP expense for continuing
operations:
Discount rate
Expected long-term return on plan assets
Assumed health care cost trend rates:
Current year
Ultimate rate
Year ultimate rate reached
Years ended December 31,
2016
2015
2014
4.55%
5.60%
7.50%
5.00%
2022
4.16%
5.50%
7.75%
5.00%
2021
5.00%
5.50%
7.75%
5.00%
2020
A one-percentage-point change in assumed health care cost trend rate would have the following effects on continuing
operations:
(in millions)
Edison International
SCE
One-
Percentage-
Point
Increase
One-
Percentage-
Point
Decrease
One-
Percentage-
Point
Increase
One-
Percentage-
Point
Decrease
Effect on accumulated benefit obligation as of December 31, 2016 $
Effect on annual aggregate service and interest costs
$
244
11
$
(200)
(9)
$
243
11
(199)
(9)
78
The following benefit payments are expected to be paid:
(in millions)
2017
2018
2019
2020
2021
2022 – 2026
Plan Assets
Edison
International
SCE
Years ended December 31,
$
$
98
102
105
109
113
612
98
102
105
109
112
609
Description of Pension and Postretirement Benefits Other than Pensions Investment Strategies
The investment of plan assets is overseen by a fiduciary investment committee. Plan assets are invested using a combination
of asset classes, and may have active and passive investment strategies within asset classes. Target allocations for 2016
pension plan assets were 29% for U.S. equities, 17% for non-U.S. equities, 35% for fixed income, 15% for opportunistic and/
or alternative investments and 4% for other investments. Target allocations for 2016 PBOP plan assets (except for
Represented VEBA which is 85% for fixed income, 10% for opportunistic/private equities, and 5% global equities) are 41%
for U.S. equities, 17% for non-U.S. equities, 34% for fixed income, 7% for opportunistic and/or alternative investments, and
1% for other investments. Edison International employs multiple investment management firms. Investment managers within
each asset class cover a range of investment styles and approaches. Risk is managed through diversification among multiple
asset classes, managers, styles and securities. Plan asset classes and individual manager performances are measured against
targets. Edison International also monitors the stability of its investment managers' organizations.
Allowable investment types include:
• United States Equities: Common and preferred stocks of large, medium, and small companies which are predominantly
United States-based.
• Non-United States Equities: Equity securities issued by companies domiciled outside the United States and in depository
receipts which represent ownership of securities of non-United States companies.
• Fixed Income: Fixed income securities issued or guaranteed by the United States government, non-United States
governments, government agencies and instrumentalities including municipal bonds, mortgage backed securities and
corporate debt obligations. A portion of the fixed income positions may be held in debt securities that are below
investment grade.
Opportunistic, Alternative and Other Investments:
• Opportunistic: Investments in short to intermediate term market opportunities. Investments may have fixed income and/or
equity characteristics and may be either liquid or illiquid.
• Alternative: Limited partnerships that invest in non-publicly traded entities.
• Other: Investments diversified among multiple asset classes such as global equity, fixed income currency and
commodities markets. Investments are made in liquid instruments within and across markets. The investment returns are
expected to approximate the plans' expected investment returns.
Asset class portfolio weights are permitted to range within plus or minus 3%. Where approved by the fiduciary investment
committee, futures contracts are used for portfolio rebalancing and to reallocate portfolio cash positions. Where authorized, a
few of the plans' investment managers employ limited use of derivatives, including futures contracts, options, options on
futures and interest rate swaps in place of direct investment in securities to gain efficient exposure to markets. Derivatives are
not used to leverage the plans or any portfolios.
79
Determination of the Expected Long-Term Rate of Return on Assets
The overall expected long-term rate of return on assets assumption is based on the long-term target asset allocation for plan
assets and capital markets return forecasts for asset classes employed. A portion of the PBOP trust asset returns are subject to
taxation, so the expected long-term rate of return for these assets is determined on an after-tax basis.
Capital Markets Return Forecasts
SCE's capital markets return forecast methodologies primarily use a combination of historical market data, current market
conditions, proprietary forecasting expertise, complex models to develop asset class return forecasts and a building block
approach. The forecasts are developed using variables such as real risk-free interest, inflation, and asset class specific risk
premiums. For equities, the risk premium is based on an assumed average equity risk premium of 5% over cash. The
forecasted return on private equity and opportunistic investments are estimated at a 2% premium above public equity,
reflecting a premium for higher volatility and lower liquidity. For fixed income, the risk premium is based off of a
comprehensive modeling of credit spreads.
Fair Value of Plan Assets
The PBOP Plan and the Southern California Edison Company Retirement Plan Trust (Master Trust) assets include
investments in equity securities, U.S. treasury securities, other fixed-income securities, common/collective funds, mutual
funds, other investment entities, foreign exchange and interest rate contracts, and partnership/joint ventures. Equity securities,
U.S. treasury securities, mutual and money market funds are classified as Level 1 as fair value is determined by observable,
unadjusted quoted market prices in active or highly liquid and transparent markets. The fair value of the underlying
investments in equity mutual funds are based on stock-exchange prices. The fair value of the underlying investments in fixed-
income mutual funds and other fixed income securities including municipal bonds are based on evaluated prices that reflect
significant observable market information such as reported trades, actual trade information of similar securities, benchmark
yields, broker/dealer quotes, issuer spreads, bids, offers and relevant credit information. Foreign exchange and interest rate
contracts are classified as Level 2 because the values are based on observable prices but are not traded on an exchange.
Futures contracts trade on an exchange and therefore are classified as Level 1. Common/collective funds and partnerships are
measured at fair value using the net asset value per share ("NAV") and have not been classified in the fair value hierarchy.
Other investment entities are valued similarly to common/collective funds and are therefore classified as NAV. The Level 1
registered investment companies are either mutual or money market funds. The remaining funds in this category are readily
redeemable and classified as NAV and are discussed further at Note 8 to the pension plan master trust investments table
below.
Edison International reviews the process/procedures of both the pricing services and the trustee to gain an understanding of
the inputs/assumptions and valuation techniques used to price each asset type/class. The trustee and Edison International's
validation procedures for pension and PBOP equity and fixed income securities are the same as the nuclear decommissioning
trusts. For further discussion see Note 4. The values of Level 1 mutual and money market funds are publicly quoted. The
trustees obtain the values of common/collective and other investment funds from the fund managers. The values of
partnerships are based on partnership valuation statements updated for cash flows. SCE's investment managers corroborate
the trustee fair values.
80
Pension Plan
The following table sets forth the Master Trust investments for Edison International and SCE that were accounted for at fair
value as of December 31, 2016 by asset class and level within the fair value hierarchy:
(in millions)
Level 1
Level 2
Level 3
NAV1
Total
U.S. government and agency securities2
$
Corporate stocks3
Corporate bonds4
Common/collective funds5
Partnerships/joint ventures6
Other investment entities7
Registered investment companies8
Interest-bearing cash
Other
Total
Receivables and payables, net
Net plan assets available for benefits
SCE's share of net plan assets
Corporate stocks3
Corporate bonds4
Common/collective funds5
Partnerships/joint ventures6
Other investment entities7
Registered investment companies8
Interest-bearing cash
Other
Total
Receivables and payables, net
Net plan assets available for benefits
SCE's share of net plan assets
$
217
720
—
—
—
—
124
42
—
309
15
725
—
—
—
—
—
112
$
— $
— $
—
—
—
—
—
—
—
—
—
—
692
333
253
6
—
—
526
735
725
692
333
253
130
42
112
$ 1,103
$ 1,161
$
— $ 1,284
$ 3,548
(160)
$ 3,388
$ 3,172
$
127
720
—
—
—
—
117
6
1
298
16
755
—
—
—
—
—
96
$
— $
— $
—
—
—
—
—
—
—
—
—
—
640
325
263
4
—
—
425
736
755
640
325
263
121
6
97
$
971
$ 1,165
$
— $ 1,232
$ 3,368
(70)
$ 3,298
$ 3,080
The following table sets forth the Master Trust investments that were accounted for at fair value as of December 31, 2015 by
asset class and level within the fair value hierarchy:
(in millions)
Level 1
Level 2
Level 3
NAV1
Total
U.S. government and agency securities2
$
1 These investments are measured at fair value using the net asset value per share practical expedient and have not been classified in
the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value
hierarchy to the net plan assets available for benefits.
2 Level 1 U.S. government and agency securities are U.S. treasury bonds and notes. Level 2 primarily relates to the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation.
3 Corporate stocks are diversified. At December 31, 2016 and 2015, respectively, performance for actively managed separate
accounts is primarily benchmarked against the Russell Indexes (62%) and (59%) and Morgan Stanley Capital International
(MSCI) index (38%) and (41%).
4 Corporate bonds are diversified. At December 31, 2016 and 2015, respectively, this category includes $76 million and
$123 million for collateralized mortgage obligations and other asset backed securities of which $27 million and $25 million are
below investment grade.
81
5 At December 31, 2016 and 2015, respectively, the common/collective assets were invested in equity index funds that seek to track
performance of the Standard and Poor's (S&P 500) Index (45% and 46%) and Russell 1000 indexes (15% and 14%). At
December 31, 2016 and 2015, 15% and 16% of the assets in this category are in index funds which seek to track performance in
the MSCI All Country World Index exUS and MSCI Europe, Australasia and Far East (EAFE) Index, respectively. A non-index
U.S. equity fund representing 23% and 22% of this category for 2016 and 2015, respectively, is actively managed.
6 At December 31, 2016 and 2015, respectively, 55% and 51% are invested in private equity funds with investment strategies that
include branded consumer products, clean technology and California geographic focus companies, 22% and 20% are invested in
publicly traded fixed income securities, 18% and 14% are invested in a broad range of financial assets in all global markets and
4% and 15% of the remaining partnerships are invested in asset backed securities, including distressed mortgages and commercial
and residential loans and debt and equity of banks.
7 Other investment entities were primarily invested in (1) emerging market equity securities, (2) a hedge fund that invests through
liquid instruments in a global diversified portfolio of equity, fixed income, interest rate, foreign currency and commodities
markets, and (3) domestic mortgage backed securities.
8 Level 1 of registered investment companies primarily consisted of a global equity mutual fund which seeks to outperform the
MSCI World Total Return Index. The funds classified as NAV primarily consisted of a fixed income securities fund.
At December 31, 2016 and 2015, respectively, approximately 69% and 63% of the publicly traded equity investments,
including equities in the common/collective funds, were located in the United States.
Postretirement Benefits Other than Pensions
The following table sets forth the VEBA Trust assets for Edison International and SCE that were accounted for at fair value
as of December 31, 2016 by asset class and level within the fair value hierarchy:
(in millions)
Level 1
Level 2
Level 3
NAV1
Total
U.S. government and agency securities2
$
$
— $
— $
Corporate stocks3
Corporate notes and bonds4
Common/collective funds5
Partnerships6
Registered investment companies7
Interest bearing cash
Other8
Total
Receivables and payables, net
Combined net plan assets available for benefits
$
222
230
—
—
—
48
48
4
59
—
877
—
—
—
—
103
—
—
—
—
—
—
—
—
—
462
79
1
—
—
281
230
877
462
79
49
48
107
2,133
(31)
2,102
$
$
$
552
$
1,039
$
— $
542
82
The following table sets forth the VEBA Trust assets for SCE that were accounted for at fair value as of December 31, 2015
by asset class and level within the fair value hierarchy:
(in millions)
Level 1
Level 2
Level 3
NAV1
Total
U.S. government and agency securities2
$
$
— $
— $
Corporate stocks3
Corporate notes and bonds4
Common/collective funds5
Partnerships6
Registered investment companies7
Interest bearing cash
Other8
Total
Receivables and payables, net
Combined net plan assets available for benefits
$
200
222
—
—
—
60
31
5
42
—
867
—
—
—
—
113
—
—
—
—
—
—
—
—
—
424
93
3
—
—
242
222
867
424
93
63
31
118
2,060
(24)
2,036
$
$
$
518
$
1,022
$
— $
520
1 These investments are measured at fair value using the net asset value per share practical expedient and have not been classified in the
fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the
net plan assets available for benefits.
2 Level 1 U.S. government and agency securities are U.S. treasury bonds and notes. Level 2 primarily relates to the Federal Home Loan
Mortgage Corporation and the Federal National Mortgage Association.
3 Corporate stock performance for actively managed separate accounts is primarily benchmarked against the Russell Indexes (47%) and
the MSCI All Country World Index (53%) for both 2016 and 2015.
4 Corporate notes and bonds are diversified and include approximately $47 million and $27 million for commercial collateralized
mortgage obligations and other asset backed securities at December 31, 2016 and 2015, respectively.
5 At December 31, 2016 and 2015, respectively, 39% and 38% of the common/collective assets are invested in a large cap index fund
which seeks to track performance of the Russell 1000 index. 39% and 41% of the remaining assets in this category are in index funds
which seek to track performance in the MSCI All Country World Index Investable Market Index and MSCI Europe, Australasia and Far
East (EAFE) Index. 18% and 17% in a non-index U.S. equity fund which is actively managed.
6 At December 31, 2016 and 2015, respectively, 59% and 56% of the partnerships are invested in private equity and venture capital
funds. Investment strategies for these funds include branded consumer products, clean and information technology and healthcare. 31%
and 21% are invested in a broad range of financial assets in all global markets. 9% and 23% of the remaining partnerships category is
invested in asset backed securities including distressed mortgages, distressed companies and commercial and residential loans and debt
and equity of banks.
7 Level 1 registered investment companies consist of a money market fund.
8 Other includes $76 million and $97 million of municipal securities at December 31, 2016 and 2015, respectively.
At December 31, 2016 and 2015, respectively, approximately 63% and 71% of the publicly traded equity investments,
including equities in the common/collective funds, were located in the United States.
Stock-Based Compensation
Edison International maintains a shareholder approved incentive plan (the 2007 Performance Incentive Plan) that includes
stock-based compensation. The maximum number of shares of Edison International's common stock authorized to be issued
or transferred pursuant to awards under the 2007 Performance Incentive Plan, as amended, is 66 million shares, plus the
number of any shares awarded under Edison International's prior plans that are outstanding as of April 26, 2007, which
expire, cancel or terminate without being exercised or shares being issued ("carry-over shares"). As of December 31, 2016,
Edison International had approximately 32 million shares remaining available for new award grants under its stock-based
compensation plans.
83
The following table summarizes total expense and tax benefits (expense) associated with stock based compensation:
(in millions)
Stock-based compensation expense1:
Stock options
Performance shares
Restricted stock units
Other
Total stock-based compensation
expense
Income tax benefits related to stock
compensation expense
Excess tax benefits2
$
$
$
Edison International
2016
2015
2014
2016
Years ended December 31,
SCE
2015
2014
14
13
6
1
34
41
—
$
14
$
7
7
1
29
12
15
$
$
$
$
$
$
$
16
16
7
1
40
16
15
$
$
$
7
6
3
—
16
20
—
$
$
$
8
4
4
—
16
7
23
8
8
4
—
20
8
20
1 Reflected in "Operation and maintenance" on Edison International's and SCE's consolidated statements of income.
2 Reflected in "Settlements of stock-based compensation, net" in the financing section of Edison International's and SCE's consolidated
statements of cash flows, "Common stock" in Edison International's consolidated balance sheets and "Additional paid-in capital" in
SCE's consolidated balance sheets. Edison International and SCE adopted the new accounting guidance for shared-based payments, see
Note 1 for further information.
Stock Options
Under various plans, Edison International has granted stock options at exercise prices equal to the closing price at the grant
date. Prior to 2007, average of the high and low price was used. Edison International may grant stock options and other
awards related to, or with a value derived from, its common stock to directors and certain employees. Options generally
expire 10 years after the grant date and vest over a period of four years of continuous service, with expense recognized
evenly over the requisite service period, except for awards granted to retirement-eligible participants, as discussed in "Stock-
Based Compensation" in Note 1. Additionally, Edison International will substitute cash awards to the extent necessary to pay
tax withholding or any government levies.
The fair value for each option granted was determined as of the grant date using the Black-Scholes option-pricing model. The
Black-Scholes option-pricing model requires various assumptions noted in the following table:
Expected terms (in years)
Risk-free interest rate
Expected dividend yield
Weighted-average expected dividend yield
Expected volatility
Weighted-average volatility
Years ended December 31,
2016
5.9
1.2% – 2.2%
2.5% – 3.0%
2.9%
2015
5.9
1.6% – 2.1%
2.6% – 3.2%
2.6%
2014
6.0
1.8% – 2.1%
2.4% – 2.7%
2.7%
17.2% – 17.5%
16.4% – 17.0%
17.8% – 19.1%
17.4%
16.5%
18.9%
The expected term represents the period of time for which the options are expected to be outstanding and is primarily based
on historical exercise and post-vesting cancellation experience and stock price history. The risk-free interest rate for periods
within the contractual life of the option is based on a zero coupon U.S. Treasury STRIPS (separate trading of registered
interest and principal of securities) whose maturity equals the option's expected term on the measurement date. Expected
volatility is based on the historical volatility of Edison International's common stock for the length of the option's expected
term for 2016. The volatility period used was 71 months, 71 months and 72 months at December 31, 2016, 2015 and 2014,
respectively.
84
The following is a summary of the status of Edison International's stock options:
Weighted-Average
Stock
options
Exercise
Price
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
(in millions)
Edison International:
Outstanding at December 31, 2015
12,866,597
$
Granted
Expired
Forfeited
Exercised
Outstanding at December 31, 2016
Vested and expected to vest at December 31, 2016
Exercisable at December 31, 2016
SCE:
Outstanding at December 31, 2015
Granted
Expired
Forfeited
Exercised
Transfers, net
Outstanding at December 31, 2016
Vested and expected to vest at December 31, 2016
2,120,009
—
(274,166)
(3,167,939)
11,544,501
11,437,110
7,685,341
5,840,057
959,478
—
(120,842)
(1,705,053)
(246,224)
4,727,416
4,667,784
$
$
Exercisable at December 31, 2016
2,782,770
$
45.93
67.41
—
64.02
42.93
50.26
50.12
43.99
47.77
67.36
—
61.96
44.59
59.29
51.81
51.63
44.04
6.02
5.99
4.93
6.24
6.21
4.84
$
$
$
$
250
215
95
78
At December 31, 2016, total unrecognized compensation cost related to stock options and the weighted-average period the
cost is expected to be recognized are as follows:
(in millions)
Unrecognized compensation cost, net of expected forfeitures
Weighted-average period (in years)
Edison
International
SCE
$
$
13
2.3
8
2.3
85
Supplemental Data on Stock Options
Edison International
SCE
Years ended December 31,
(in millions, except per award amounts)
2016
2015
2014
2016
2015
2014
Stock options:
Weighted average grant date fair
value per option granted
$
Fair value of options vested
Cash used to purchase shares to
settle options
Cash from participants to exercise
stock options
Value of options exercised
Tax benefits from options
exercised
Performance Shares
$
7.38
11
220
136
84
34
$
7.54
20
170
113
57
23
7.26
17
300
205
95
39
$
7.50
$
7.53
$
7.34
5
118
77
41
17
11
69
45
24
10
9
181
125
56
23
A target number of contingent performance shares were awarded to executives in March 2016, 2015 and 2014 and vest at
December 31, 2018, 2017 and 2016, respectively. The vesting of the grants is dependent upon market and financial
performance and service conditions as defined in the grants for each of the years. The number of performance shares earned
from each year's grants could range from zero to twice the target number (plus additional units credited as dividend
equivalents). Performance shares awarded in 2014 that are earned are settled half in cash and half in common stock, while
performance shares awarded in 2016 and 2015 that are earned are settled solely in cash. The portion of performance shares
that can be settled in cash is classified as a share-based liability award. The fair value of these shares is remeasured at each
reporting period, and the related compensation expense is adjusted. The portion of performance shares payable in common
stock is classified as a share-based equity award. Compensation expense related to these shares is based on the grant-date fair
value, which for each share is determined as the closing price of Edison International common stock on the grant date.
However, with respect to the portion of the performance shares payable in common stock that is subject to the financial
performance condition defined in the grants, the number of performance shares expected to be earned is subject to revision
and updated at each reporting period, with a related adjustment to compensation expense. Performance shares expense is
recognized ratably over the requisite service period based on the fair values determined (subject to the adjustments discussed
above), except for awards granted to retirement-eligible participants.
The fair value of market condition performance shares is determined using a Monte Carlo simulation valuation model.
86
The following is a summary of the status of Edison International's nonvested performance shares:
Edison International:
Nonvested at December 31, 2015
Granted
Forfeited
Vested1
Nonvested at December 31, 2016
SCE:
Equity Awards
Liability Awards
Weighted-
Average
Grant Date
Fair Value
Shares
Weighted-
Average
Fair Value
Shares
57,779
$
61.18
165,629
$
68.44
—
(1,258)
(56,521)
—
—
60.83
61.18
—
111,754
(13,502)
(56,384)
207,497
84.30
Nonvested at December 31, 2015
32,463
$
62.01
90,393
$
68.64
Granted
Forfeited
Vested1
Affiliate transfers, net
Nonvested at December 31, 2016
—
(1,012)
(29,080)
(2,371)
—
—
49.73
50.75
72.10
—
50,599
(5,751)
(28,963)
(9,611)
96,667
84.25
1 Relates to performance shares that will be paid in 2017 as performance targets were met at December 31, 2016.
Restricted Stock Units
Restricted stock units were awarded to Edison International's and SCE's executives in March 2016, 2015 and 2014 and vest
and become payable on January 2, 2019, January 2, 2018 and January 3, 2017, respectively. Each restricted stock unit
awarded includes a dividend equivalent feature and is a contractual right to receive one share of Edison International
common stock, if vesting requirements are satisfied. The vesting of Edison International's restricted stock units is dependent
upon continuous service through the end of the vesting period, except for awards granted to retirement-eligible participants.
The following is a summary of the status of Edison International's nonvested restricted stock units:
Edison International
SCE
Restricted
Stock Units
Weighted-
Average
Grant Date
Fair Value
Restricted
Stock Units
Weighted-
Average
Grant Date
Fair Value
Nonvested at December 31, 2015
248,143
$
Granted
Forfeited
Vested
Affiliate transfers, net
Nonvested at December 31, 2016
123,266
(16,435)
(9,579)
—
345,395
57.89
67.42
63.73
52.01
—
61.05
134,375
$
55,800
(7,580)
(8,032)
(13,775)
160,788
58.13
67.37
61.45
56.53
62.09
60.80
The fair value for each restricted stock unit awarded is determined as the closing price of Edison International common stock
on the grant date.
87
Workforce Reductions
SCE continues to focus on productivity improvements to mitigate rate pressure from its capital program, optimize its cost
structure and improve operational efficiency. During the year ended December 31, 2016, SCE increased the estimated impact
for approved workforce reductions.
The following table provides a summary of changes in the accrued severance liability associated with these reductions:
(in millions)
Balance at January 1, 2016
Additions
Payments
Balance at December 31, 2016
$
$
22
21
(40)
3
Severance costs are included in "Operation and maintenance" on the consolidated income statements.
Note 9.
Investments
Nuclear Decommissioning Trusts
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):
(in millions)
Stocks
Municipal bonds
U.S. government and agency securities
Corporate bonds
Short-term investments and receivables/payables1
Total
$
Longest
Maturity Date
—
2054
2055
2057
One-year
Amortized Cost
Fair Value
December 31,
2016
2015
2016
2015
$
319
659
1,131
600
75
304
691
1,070
708
144
$
1,547
$
766
1,191
659
79
1,460
840
1,128
755
148
$
2,784
$
2,917
$
4,242
$
4,331
1 Short-term investments include $114 million and $81 million of repurchase agreements payable by financial institutions which earn
interest, are fully secured by U.S. Treasury securities and mature by January 4, 2017 and January 5, 2016 as of December 31, 2016 and
2015, respectively.
Trust fund earnings (based on specific identification) increase the trust fund balance and the ARO regulatory liability.
Unrealized holding gains, net of losses, were $1.5 billion and $1.4 billion at December 31, 2016 and 2015, respectively.
88
The following table sets forth a summary of changes in the fair value of the trust:
(in millions)
Years ended December 31,
2016
2015
2014
Balance at beginning of period
$
4,331
$
4,799
$
4,494
Gross realized gains
Gross realized losses
Unrealized gains (losses)
Other-than-temporary impairments
Interest, dividends and other
Contributions
Income taxes
Decommissioning disbursements
Administrative expenses and other
Balance at end of period
92
(19)
44
(36)
116
—
(58)
(224)
(4)
4,242
$
326
(26)
(364)
(29)
115
54
(64)
(471)
(9)
4,331
$
197
(5)
75
(14)
118
5
(62)
(4)
(5)
4,799
$
Trust assets are used to pay income taxes as the Trust files separate income taxes returns from SCE. Deferred tax liabilities
related to net unrealized gains at December 31, 2016 were $348 million. Accordingly, the fair value of Trust assets available to
pay future decommissioning costs, net of deferred income taxes, totaled $3.9 billion at December 31, 2016. Due to regulatory
mechanisms, changes in assets of the trusts from income or loss items have no impact on operating revenue or earnings.
Beginning in 2016, funds for decommissioning costs are requested from the nuclear decommissioning trusts one month in
advance. Decommissioning disbursements are funded from sales of investments of the nuclear decommissioning trusts.
Acquisitions
On December 31, 2015, Edison Energy acquired three businesses for an aggregate purchase price of approximately $100
million, of which $90 million was allocated to goodwill and identifiable intangibles. Under the terms of the acquisition of one
of the agreements, the sellers were entitled to additional consideration (earn-out) in the event that certain financial thresholds
were achieved. During the second quarter of 2016, Edison Energy entered into an agreement to buy-out this earn-out provision
and recorded an after-tax charge of $13 million. The buy-out was completed, together with modification to employment
contracts, in order to align long-term incentive compensation.
During 2016, a subsidiary of SoCore Energy agreed to acquire equity interests in solar garden development projects in
Minnesota as part of the SunEdison bankruptcy proceedings, subject to certain conditions. The maximum purchase price is
$41.9 million if all projects achieve the required conditions. SoCore Energy would also reimburse SunEdison up to
$8.7 million of project-specific interconnection costs. Not all of the projects are expected to achieve the closing conditions.
Through February 1, 2017, SoCore Energy acquired four of these development projects (28 MWdc) for $10.5 million.
Note 10. Regulatory Assets and Liabilities
Included in SCE's regulatory assets and liabilities are regulatory balancing accounts. CPUC authorized balancing account
mechanisms require SCE to refund or recover any differences between forecasted and actual costs. The CPUC has authorized
balancing accounts for specified costs or programs such as fuel, purchased-power, demand-side management programs,
nuclear decommissioning and public purpose programs. Certain of these balancing accounts include a return on rate base of
7.90% in 2016 and 2015. The CPUC also authorizes the use of a balancing account to recover from or refund to customers
differences in revenue resulting from actual and forecasted electricity sales.
Amounts included in regulatory assets and liabilities are generally recorded with corresponding offsets to the applicable
income statement accounts.
89
Regulatory Assets
SCE's regulatory assets included on the consolidated balance sheets are:
(in millions)
Current:
Regulatory balancing accounts
Energy derivatives
Unamortized investments, net
Other
Total current
Long-term:
Deferred income taxes, net
Pensions and other postretirement benefits
Energy derivatives
Unamortized investments, net
San Onofre
Unamortized loss on reacquired debt
Regulatory balancing accounts
Environmental remediation
Other
Total long-term
Total regulatory assets
December 31,
2016
2015
$
$
135
150
49
16
350
4,478
710
947
80
857
184
66
126
7
7,455
7,805
$
$
382
159
—
19
560
3,757
849
1,027
182
1,043
201
36
129
288
7,512
8,072
SCE's regulatory assets related to energy derivatives are primarily an offset to unrealized losses on derivatives. The regulatory
asset changes based on fluctuations in the fair market value of the contracts, in which the original contracts expire in 10 to 45
years.
SCE's current and long-term unamortized investments include legacy meters retired as part of the Edison SmartConnect®
program. SCE's unamortized investments related to legacy meters are expected to be recovered by 2017 and earned a rate of
return of 6.46% in 2016 and 2015.
SCE's regulatory assets related to deferred income taxes represent tax benefits passed through to customers. The CPUC
requires SCE to flow through certain deferred income tax benefits to customers by reducing electricity rates, thereby deferring
recovery of such amounts to future periods. Based on current regulatory ratemaking and income tax laws, SCE expects to
recover its regulatory assets related to deferred income taxes over the life of the assets that give rise to the accumulated
deferred income taxes, approximately from 1 to 60 years.
SCE's regulatory assets related to pensions and other post-retirement plans represent the unfunded net loss and prior service
costs of the plans (see "Pension Plans and Postretirement Benefits Other than Pensions" discussion in Note 8). This amount is
being recovered through rates charged to customers.
SCE's unamortized investments long-term primarily include nuclear assets related to Palo Verde. Nuclear assets related to Palo
Verde are expected to be recovered by 2047 and earned a return of 7.90% in 2016 and 2015.
In accordance with the San Onofre OII Settlement Agreement, SCE is authorized to recover in rates its San Onofre regulatory
asset, generally over a ten-year period commencing February 1, 2012. Under the San Onofre OII Settlement Agreement (see
Note 11), SCE was allowed to earn a rate of return of 2.62% in 2016 and 2015 and is authorized to continue to earn this rate as
adjusted during the amortization period thereafter with changes in SCE's authorized return on debt and preferred equity. SCE's
regulatory assets related to San Onofre nuclear fuel will earn a return equal to commercial paper rate that the CPUC uses to
calculate interest on balancing accounts. In a December 2016 joint ruling, the Assigned Commissioner and the Assigned ALJ
directed SCE to meet and confer with the other parties in the OII to consider changing the terms of the San Onofre OII
Settlement Agreement. See Note 11 for further information.
90
SCE's net regulatory asset related to its unamortized loss on reacquired debt will be recovered over the original amortization
period of the reacquired debt over periods ranging from 10 to 35 years.
SCE's regulatory assets related to environmental remediation represents a portion of the costs incurred at certain sites that SCE
is allowed to recover through customer rates. See "Environmental Remediation" discussed in Note 11.
Regulatory Liabilities
SCE's regulatory liabilities included on the consolidated balance sheets are:
(in millions)
Current:
Regulatory balancing accounts
Other
Total current
Long-term:
Costs of removal
Recoveries in excess of ARO liabilities
Regulatory balancing accounts
Other
Total long-term
Total regulatory liabilities
December 31,
2016
2015
$
$
736
20
756
2,847
1,639
1,180
60
5,726
6,482
$
$
1,106
22
1,128
2,781
1,502
1,314
79
5,676
6,804
SCE's regulatory liabilities related to costs of removal represent differences between asset removal costs recorded and
amounts collected in rates for those costs.
SCE's regulatory liabilities related to recoveries in excess of ARO liabilities represents the cumulative differences between
ARO expenses and amounts collected in rates primarily for the decommissioning of the SCE's nuclear generation facilities.
Decommissioning costs recovered through rates are primarily placed in nuclear decommissioning trusts. This regulatory
liability also represents the deferral of realized and unrealized gains and losses on the nuclear decommissioning trust
investments. See Note 9.
Net Regulatory Balancing Accounts
Balancing account over and under collections represent differences between cash collected in current rates for specified
forecasted costs and such costs that are actually incurred. Undercollections are recorded as regulatory balancing account
assets. Overcollections are recorded as regulatory balancing account liabilities. With some exceptions, SCE seeks to adjust
rates on an annual basis or at other designated times to recover or refund the balances recorded in its balancing accounts.
Regulatory balancing accounts that SCE does not expect to collect or refund in the next 12 months are reflected in the long-
term section of the consolidated balance sheets. Regulatory balancing accounts do not have the right of offset and are
presented gross in the consolidated balance sheets. Under and over collections accrue interest based on a three-month
commercial paper rate published by the Federal Reserve.
91
The following table summarizes the significant components of regulatory balancing accounts included in the above tables of
regulatory assets and liabilities:
(in millions)
Asset (liability)
Energy resource recovery account
New system generation balancing account
Public purpose programs and energy efficiency programs
Base revenue requirement balancing account
Tax accounting memorandum account and pole loading
DOE litigation memorandum account1
Greenhouse gas auction revenue
FERC balancing accounts
Other
Liability
December 31,
2016
2015
$
$
(20)
(6)
(992)
(426)
(142)
(122)
31
(69)
31
(1,715)
$
$
(439)
(171)
(683)
(319)
(248)
—
(75)
74
(141)
(2,002)
1 Represents proceeds from the Department of Energy ("DOE") resulting from its failure to meet its obligation to begin accepting
spent nuclear fuel from San Onofre. Damages recovered are subject to CPUC review as to how these amounts would be distributed
among customers, shareholders, or to offset fuel decommissioning or storage costs. See Note 11 for further discussion.
Note 11. Commitments and Contingencies
Third-Party Power Purchase Agreements
SCE entered into various agreements, which were approved by the CPUC and met critical contract provisions (including
completion of major milestones for construction), to purchase power and electric capacity, including:
• Renewable Energy Contracts – California law requires retail sellers of electricity to comply with a RPS by delivering
renewable energy, primarily through power purchase contracts. Renewable energy contracts generally contain escalation
clauses requiring increases in payments. As of December 31, 2016, SCE had 119 renewable energy contracts.
• QF Power Purchase Agreements – Under the Public Utility Regulatory Policies Act of 1978 ("PURPA"), electric utilities
are required, with exceptions, to purchase energy and capacity from independent power producers that are qualifying co-
generation facilities and qualifying small power production facilities or QFs. As of December 31, 2016, SCE had 55 QF
contracts.
• Other Power Purchase Agreements – SCE has entered into 30 other power purchase agreements, including combined heat
and power contracts, tolling arrangements and resource adequacy contracts.
At December 31, 2016, the undiscounted future minimum expected payments for the SCE power purchase agreements that
have been approved by the CPUC and have completed major milestones for construction were as follows:
(in millions)
2017
2018
2019
2020
2021
Thereafter
Total future commitments
Renewable
Energy
Contracts
QF Power
Purchase
Agreements
Other
Purchase
Agreements
$
$
1,516
1,606
1,704
1,776
1,786
22,811
31,199
$
$
187
148
87
39
16
53
$
530
$
769
604
516
472
420
1,258
4,039
The table above includes contractual obligations for power procurement contracts that met the critical contract provisions as of
December 31, 2016 in which the term is over a year when it was executed. Additionally, SCE has signed contracts that have
not met the critical contract provisions that would increase contractual obligations by $53 million in 2017, $235 million in
92
2018, $312 million in 2019, $554 million in 2020, $630 million in 2021 and $9.1 billion thereafter, if all principal provisions
are completed.
Costs incurred for power purchase agreements were $3.3 billion in 2016, $3.2 billion in 2015 and $3.8 billion in 2014, which
include costs associated with contracts with terms of less than one year.
Many of the power purchase agreements that SCE entered into with independent power producers are accounted for as leases.
The following table shows the future minimum lease payments due under the contracts that are treated as operating and capital
leases (these amounts are also included in the table above). Due to the inherent uncertainty associated with the reliability of
the fuel source, expected purchases from most renewable energy contracts do not meet the definition of a minimum lease
payment and have been excluded from the operating and capital lease table below but remain in the table above. The future
minimum lease payments for capital leases are discounted to their present value in the table below using SCE's incremental
borrowing rate at the inception of the leases. The amount of this discount is shown in the table below as the amount
representing interest.
(in millions)
2017
2018
2019
2020
2021
Thereafter
Total future commitments
Amount representing executory costs
Amount representing interest
Net commitments
Operating
Leases
Capital
Leases
$
$
341
237
161
146
142
1,355
2,382
$
$
$
1
1
1
2
2
9
16
(7)
(2)
7
Operating lease expense for power purchase agreements was $1.9 billion in 2016, and $1.7 billion in both 2015 and
2014 (including contingent rents of $1.4 billion in 2016, $1.1 billion in 2015 and $944 million in 2014). Contingent rents for
capital leases were $109 million in 2016 and less than $1 million in both 2015 and 2014. The timing of SCE's recognition of
the lease expense conforms to ratemaking treatment for SCE's recovery of the cost of electricity and is included in purchased
power.
Other Lease Commitments
The following summarizes the estimated minimum future commitments for SCE's non-cancelable other operating leases
(excluding SCE's power purchase agreements discussed above):
(in millions)
2017
2018
2019
2020
2021
Thereafter
Total future commitments
Operating
Leases –
Other
$
$
52
46
37
28
22
258
443
Operating lease expense for other leases (primarily related to vehicles, office space and other equipment) were $68 million in
2016, $80 million in 2015 and $96 million in 2014. Certain leases on office facilities contain escalation clauses requiring
annual increases in rent. The rentals payable under these leases may increase by a fixed amount each year, a percentage over
base year, or the customer price index.
93
Other Commitments
The following summarizes the estimated minimum future commitments for SCE's other commitments:
(in millions)
2017
2018
2019
2020
2021
Thereafter
Total
Other contractual obligations
$
156
$
141
$
103
$
98
$
82
$
631
$
1,211
Costs incurred for other commitments were $141 million in 2016, $182 million in 2015 and $90 million in 2014. SCE has fuel
supply contracts for Palo Verde which require payment only if the fuel is made available for purchase. SCE also has
commitments related to maintaining reliability and expanding SCE's transmission and distribution system.
The table above excludes other contractual obligations that have not met the critical contract provisions. As of December 31,
2016, SCE has signed capacity reduction contracts that have not met critical contract provisions and are, therefore, not
included in the table above. These contracts would increase the contractual obligations by $3 million in 2017, $24 million in
2018, $94 million in 2019, $93 million in 2020, $71 million in 2021, and $478 million thereafter, if all principal provisions are
completed.
The table above does not include asset retirement obligations, which are discussed in Note 1.
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 provided indemnifications through contracts entered into in the normal course of business.
These are primarily indemnifications against adverse litigation outcomes in connection with underwriting agreements, and
indemnities for specified environmental liabilities and income taxes with respect to assets sold. 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.
SCE has indemnified the City of Redlands, California in connection with Mountainview's California Energy Commission
permit for cleanup or associated actions related to groundwater contaminated by perchlorate due to the disposal of filter cake
at the City's solid waste landfill. The obligations under this agreement are not limited to a specific time period or subject to a
maximum liability. SCE has not recorded a liability related to this indemnity.
Contingencies
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 these other proceedings will not, individually or in the
aggregate, materially affect its financial position, results of operations and cash flows.
San Onofre Related Matters
Replacement steam generators were installed at San Onofre in 2010 and 2011. On January 31, 2012, a leak suddenly occurred
in one of the heat transfer tubes in San Onofre's Unit 3 steam generators. The Unit was safely taken off-line and subsequent
inspections revealed excessive tube wear. Unit 2 was off-line for a planned outage when areas of unexpected tube wear were
also discovered. On June 6, 2013, SCE decided to permanently retire Units 2 and 3.
San Onofre CPUC Proceedings
In November 2014, the CPUC approved the San Onofre OII Settlement Agreement, which resolved the CPUC's investigation
regarding the steam generator replacement project at San Onofre and the related outages and subsequent shutdown of San
Onofre. Subsequently, the San Onofre OII proceeding record was reopened by a joint ruling of the Assigned Commissioner
and the Assigned ALJ to consider whether, in light of the Company not reporting certain ex parte communications on a timely
basis, the San Onofre OII Settlement Agreement remained reasonable, consistent with the law and in the public interest, which
is the standard the CPUC applies in reviewing settlements submitted for approval. In comments filed with the CPUC in July
2016, SCE asserted that the Settlement Agreement continues to meet this standard and therefore should not be disturbed. A
number of the parties to the OII, however, have requested that the CPUC either modify the San Onofre OII Settlement
Agreement or vacate its previous approval of the settlement and reinstate the OII for further proceedings.
94
In a December 2016 joint ruling, the Assigned Commissioner and the Assigned ALJ expressed concerns about the extent to
which the failure to timely report ex parte communications had impacted the settlement negotiations and directed SCE to meet
and confer with the other parties in the OII to consider changing the terms of the San Onofre OII Settlement Agreement. The
ruling set out a schedule requiring that at least two meet and confer sessions be held in the first quarter of 2017 and requiring
the parties to submit a joint status report to the CPUC by April 28, 2017 if no modifications have been agreed to by some or all
of the parties as a result of the meet and confer process. SCE has recorded a regulatory asset to reflect the expected recoveries
under the San Onofre OII Settlement Agreement. At December 31, 2016, $857 million remains to be collected.
Challenges related to the Settlement of San Onofre CPUC Proceedings
A federal lawsuit challenging the CPUC's authority to permit rate recovery of San Onofre costs and an application to the
CPUC for rehearing of its decision approving the San Onofre OII Settlement Agreement were filed in November and
December 2014, respectively. In April 2015, the federal lawsuit was dismissed with prejudice and the plaintiffs in that case
appealed the dismissal to the Ninth Circuit in May 2015. The Ninth Circuit cancelled the oral argument that had been
scheduled for February 9, 2017 and ordered the parties to notify the Ninth Circuit of the status of the San Onofre OII by
May 1, 2017 and periodically thereafter.
In July 2015, a purported securities class action lawsuit was filed in federal court against Edison International, its then Chief
Executive Officer and its then Chief Financial Officer. The complaint was later amended to include SCE's former President as
a defendant. The lawsuit alleges that the defendants violated the securities laws by failing to disclose that Edison International
had ex parte contacts with CPUC decision-makers regarding the San Onofre OII that were either unreported or more extensive
than initially reported. The complaint purports to be filed on behalf of a class of persons who acquired Edison International
common stock between March 21, 2014 and June 24, 2015. In September 2016, the Court granted defendants' motion to
dismiss the complaint, with an opportunity for plaintiff to amend the complaint. Plaintiff filed an amended complaint and
defendants again moved to dismiss the complaint in October 2016.
Also in July 2015, a federal shareholder derivative lawsuit was filed against members of the Edison International Board of
Directors for breach of fiduciary duty and other claims. The federal derivative lawsuit is based on similar allegations to the
federal class action securities lawsuit and seeks monetary damages, including punitive damages, and various corporate
governance reforms. An additional federal shareholder derivative lawsuit making essentially the same allegations was filed in
August 2015 and was subsequently consolidated with the July 2015 federal derivative lawsuit. In September 2016, the Court
granted defendants' motion to dismiss the complaint, with an opportunity for plaintiff to amend the complaint. Plaintiff did not
file an amended complaint by the required date.
In October 2015, a shareholder derivative lawsuit was filed in California state court against members of the Edison
International Board of Directors for breach of fiduciary duty and other claims, making similar allegations to those in the
federal derivative lawsuits discussed above. The California state court action is currently on hold in light of the pending
federal suits discussed above.
In November 2015, a purported securities class action lawsuit was filed in federal court against Edison International, its then
Chief Executive Officer and its Treasurer by an Edison International employee, alleging claims under the Employee
Retirement Income Security Act ("ERISA"). The complaint purports to be filed on behalf of a class of Edison International
employees who were participants in the Edison 401(k) Savings Plan and invested in the Edison International Stock Fund
between March 27, 2014 and June 24, 2015. The complaint alleges that defendants breached their fiduciary duties because
they knew or should have known that investment in the Edison International Stock Fund was imprudent because the price of
Edison International common stock was artificially inflated due to Edison International's alleged failure to disclose certain ex
parte communications with CPUC decision-makers related to the San Onofre OII. In July 2016, the federal court granted the
defendants' motion to dismiss the lawsuit with an opportunity for the plaintiff to amend her complaint. Plaintiff filed an
amended complaint in July 2016 that dismissed Edison International as a named defendant, and the remaining defendants filed
a motion to dismiss in August 2016. Defendants' motion was heard by the court in November 2016 and a decision is pending.
Edison International and SCE cannot predict the outcome of these proceedings.
MHI Claims
SCE is also pursuing claims against Mitsubishi Heavy Industries, Ltd. and a related company ("MHI"), which designed and
supplied the replacement steam generators. MHI warranted the replacement steam generators for an initial period of 20 years
from acceptance and is contractually obligated to repair or replace defective items with dispatch and to pay specified damages
for certain repairs. MHI's stated liability under the purchase agreement is limited to $138 million and excludes consequential
damages, defined to include "the cost of replacement power;" however, limitations in the contract are subject to applicable
exceptions both in the contract and under law. SCE has advised MHI that it believes one or more of such exceptions apply and
95
that MHI's liability is not limited to $138 million. MHI has advised SCE that it disagrees. In October 2013, SCE sent MHI a
formal request for binding arbitration under the auspices of the International Chamber of Commerce in accordance with the
purchase contract seeking damages for all losses. In the request for arbitration, SCE alleges contract and tort claims and seeks
at least $4 billion in damages on behalf of itself and its customers and in its capacity as Operating Agent for San Onofre. MHI
has denied any liability and has asserted counterclaims for $41 million, for which SCE has denied any liability. Each of the
other San Onofre owners sued MHI, alleging claims arising from MHI's supplying the faulty steam generators. These litigation
claims have been stayed pending the arbitration. The other co-owners (San Diego Gas & Electric and Riverside) have been
added as additional claimants in the arbitration. The arbitration is being conducted pursuant to a confidentiality order issued by
the arbitration panel. Hearings concluded on April 29, 2016. A decision is expected to be issued in the first quarter of 2017.
SCE, on behalf of itself and the other San Onofre co-owners, has submitted seven invoices to MHI totaling $149 million for
steam generator repair costs incurred through April 30, 2013. MHI paid the first invoice of $45 million, while reserving its
right to challenge it and subsequently rejected a portion of the first invoice and has not paid further invoices, claiming further
documentation is required, which SCE disputes. SCE recorded its share of the invoice paid (approximately $35 million) as a
reduction of repair and inspection costs in 2012.
Under the San Onofre OII Settlement Agreement, recoveries from MHI (including amounts paid by MHI under the first
invoice), if any, will first be applied to reimburse costs incurred in pursuing such recoveries, including litigation costs. To the
extent SCE's share of recoveries from MHI exceed such costs, they will be allocated 50% to customers and 50% to SCE.
The first $282 million of SCE's customers' portion of such recoveries from MHI will be distributed to customers via a credit to
a sub-account of SCE's BRRBA, reducing revenue requirements from customers. Amounts in excess of the first $282 million
distributable to SCE customers will reduce SCE's regulatory asset represented by the unamortized balance of investment in
San Onofre base plant, reducing the revenue requirement needed to amortize such investment. The amortization period,
however, will be unaffected. Any additional amounts received after the regulatory asset is recovered will be applied to the
BRRBA.
The San Onofre OII Settlement Agreement provides the utilities with the discretion to resolve the MHI dispute without CPUC
approval, but the utilities are obligated to use their best efforts to inform the CPUC of any settlement or other resolution of
these disputes to the extent this is possible without compromising any aspect of the resolution. SCE and SDG&E have also
agreed to allow the CPUC to review the documentation of any final resolution of the MHI dispute and the litigation costs
incurred in pursuing claims against MHI to ensure they are not exorbitant in relation to the recovery obtained. There is no
assurance that there will be any recovery from MHI or that, if there is a recovery, it will equal or exceed the litigation costs
incurred to pursue the recovery.
Long Beach Service Interruptions
In July 2015, SCE's customers who are served via the network portion of SCE's electric system in Long Beach, California
experienced service interruptions due to multiple underground vault fires and underground cable failures. No personal injuries
were reported in connection with these events. SCE expects to incur penalties as a result of these events. Although resolution
will be subject to settlement discussions with SED and CPUC review and approval, SCE has recorded a liability for the
estimated loss.
Environmental Remediation
SCE records its environmental remediation 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 December 31, 2016, SCE's recorded estimated minimum liability to remediate its 19 identified material sites (sites with a
liability balance as of December 31, 2016, in which the upper end of the range of the costs is at least $1 million) was
$128 million, including $77 million related to San Onofre. In addition to these sites, SCE also has 18 immaterial sites with a
liability balance at December 31, 2016 for which the total minimum recorded liability was $3 million. Of the $131 million
total environmental remediation liability for SCE, $126 million has been recorded as a regulatory asset. SCE expects to
recover $46 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) and $80 million through a mechanism that allows SCE to recover
100% of the costs incurred at certain sites through customer rates. SCE's identified sites include several sites for which there is
96
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 $168 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 30 years. Remediation costs for each of the next
four years are expected to range from $8 million to $20 million. Costs incurred for years ended December 31, 2016, 2015 and
2014 were $4 million, $5 million and $4 million, respectively.
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
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 $13.4 billion. As of January 1, 2017, SCE and other owners
of San Onofre and Palo Verde have purchased the maximum private primary insurance available ($450 million) through a
Facility Form issued by American Nuclear Insurers ("ANI"). The balance is covered by a loss sharing program among nuclear
reactor licensees. If a nuclear incident at any licensed reactor in the United States results in claims and/or costs which exceed
the primary insurance at that plant site, all nuclear reactor licensees could be required to contribute their share of the liability
in the form of a deferred premium.
The ANI Facility Form coverage includes broad liability protection for bodily injury or offsite property damage caused by the
nuclear energy hazard at San Onofre, or while in transit to or from San Onofre. The Facility Form, however, includes several
exclusions. First, it excludes onsite property damage to the nuclear facility itself and onsite cleanup costs, but as discussed
below SCE maintains separate NEIL property damage coverage for such events. Second, tort claims of onsite workers are
excluded, but SCE also maintains an ANI Master Worker Form policy that provides coverage for non-licensee workers. This
program provides a shared industry aggregate limit of $450 million. Industry losses covered by this program could reduce
limits available to SCE. Third, offsite environmental costs arising out of government orders or directives, including those
issued under the Comprehensive Environmental Response, Compensation and Liability Act, also known as CERCLA, are
excluded, with minor exceptions from clearly identifiable accidents.
Based on its ownership interests, SCE could be required to pay a maximum of approximately $255 million per nuclear
incident. However, it would have to pay no more than approximately $38 million per incident in any one year. If the public
liability limit above is insufficient, federal law contemplates that additional funds may be appropriated by Congress. This
could include an additional assessment on all licensed reactor operators as a measure for raising further federal revenue.
NEIL, a mutual insurance company owned by entities with nuclear facilities, issues nuclear property damage and accidental
outage insurance policies. The amount of nuclear property insurance purchased for San Onofre and Palo Verde exceeds the
minimum federal requirement of $1.06 billion. These policies include coverage for decontamination liability. Property damage
insurance also covers damages caused by acts of terrorism up to specified limits. Additional outage insurance covers part of
replacement power expenses during an accident-related nuclear unit outage. The accidental outage insurance at San Onofre
has been canceled as a result of the permanent retirement, but that insurance continues to be in effect at Palo Verde.
If 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 $52 million per year. Insurance
premiums are charged to operating expense.
97
Wildfire Insurance
Severe wildfires in California have given rise to large damage claims against California utilities for fire-related losses alleged
to be the result of the failure of electric and other utility equipment. Invoking a California Court of Appeal decision, plaintiffs
pursuing these claims have relied on the doctrine of inverse condemnation, which can impose strict liability (including liability
for a claimant's attorneys' fees) for property damage. Drought conditions in California have also increased the duration of the
wildfire season and the risk of severe wildfire events. SCE has approximately $1 billion of insurance coverage for wildfire
liabilities for the period ending on May 31, 2017. SCE has a self-insured retention of $10 million per wildfire occurrence. SCE
or its contractors may experience coverage reductions and/or increased insurance costs in future years. No assurance can be
given that future losses will not exceed the limits of SCE's or its contractors' insurance coverage.
Spent Nuclear Fuel
Under federal law, the DOE is responsible for the selection and construction of a facility for the permanent disposal of spent
nuclear fuel and high-level radioactive waste. The DOE has not met its contractual obligation to accept spent nuclear fuel.
Extended delays by the DOE have led to the construction of costly alternatives and associated siting and environmental issues.
Currently, both San Onofre and Palo Verde have interim storage for spent nuclear fuel on site sufficient for their current
license period.
In June 2010, the United States Court of Federal Claims issued a decision granting SCE and the San Onofre co-owners
damages of approximately $142 million (SCE share $112 million) to recover costs incurred through December 31, 2005 for
the DOE's failure to meet its obligation to begin accepting spent nuclear fuel from San Onofre. SCE received payment from
the federal government in the amount of the damage award. In April 2016, SCE, as operating agent, settled a lawsuit on behalf
of the San Onofre owners against the DOE for $162 million, including reimbursement for legal costs (SCE share
$124 million) to compensate for damages caused by the DOE's failure to meet its obligation to begin accepting spent nuclear
fuel for the period from January 1, 2006 to December 31, 2013. The settlement also provides for a claim submission/audit
process for expenses incurred from 2014 – 2016, where SCE will submit a claim for damages caused by the DOE failure to
accept spent nuclear fuel each year, followed by a government audit and payment of the claim. This process will make
additional legal action to recover damages incurred in 2014 – 2016 unnecessary. The first such claim covering damages for
2014 – 2015 was filed on September 30, 2016 for approximately $56 million. In February 2017, the DOE reviewed the
2014 – 2015 claim submission and reduced the original request to approximately $43 million primarily due to DOE allocation
limits. SCE has 30 days to review and accept the DOE's determination. SCE will make the claim submission for 2016
damages in the third quarter of 2017. All damages recovered by SCE are subject to CPUC review as to how these amounts
would be distributed among customers, shareholders, or to offset fuel decommissioning or storage costs.
Note 12. Preferred and Preference Stock of Utility
SCE's authorized shares are: $100 cumulative preferred – 12 million shares, $25 cumulative preferred – 24 million shares and
preference with no par value – 50 million shares. SCE's outstanding shares are not subject to mandatory redemption. There
are no dividends in arrears for the preferred or preference shares. Shares of SCE's preferred stock have liquidation and
dividend preferences over shares of SCE's common stock and preference stock. All cumulative preferred shares are
redeemable. When preferred shares are redeemed, the premiums paid, if any, are charged to common equity. No preferred
shares were issued or redeemed in the years ended December 31, 2016, 2015 and 2014. There is no sinking fund requirement
for redemptions or repurchases of preferred shares.
Shares of SCE's preference stock rank junior to all of the preferred stock and senior to all common stock. Shares of SCE's
preference stock are not convertible into shares of any other class or series of SCE's capital stock or any other security. There
is no sinking fund requirement for redemptions or repurchases of preference shares.
98
Preferred stock and preference stock is:
(in millions, except shares and per-share amounts)
Cumulative preferred stock
$25 par value:
4.08% Series
4.24% Series
4.32% Series
4.78% Series
Preference stock
No par value:
6.50% Series D (cumulative)
6.25% Series E (cumulative)
5.625% Series F (cumulative)
5.10% Series G (cumulative)
5.75% Series H (cumulative)
5.375% Series J (cumulative)
5.45% Series K (cumulative)
SCE's preferred and preference stock
Less issuance costs
Edison International's preferred and preference stock of utility
Shares
Outstanding
Redemption
Price
December 31,
2016
2015
650,000
$
1,200,000
1,653,429
1,296,769
$
25.50
25.80
28.75
25.80
1,250,000
350,000
190,004
160,004
110,004
130,004
120,004
100.00
1,000.00
2,500.00
2,500.00
2,500.00
2,500.00
2,500.00
$
16
30
41
33
—
350
475
400
275
325
300
16
30
41
33
125
350
475
400
275
325
—
2,245
(54)
2,191
$
2,070
(50)
2,020
$
Shares of Series E preference stock issued in 2012 may be redeemed at par, in whole or in part, on or after February 1, 2022.
Shares of Series F, G, H, J and K preference stock, issued in 2012, 2013, 2014, 2015 and 2016, respectively, may be
redeemed at par, in whole, but not in part, at any time prior to June 15, 2017, March 15, 2018, March 15, 2024,
September 15, 2025 and March 15, 2026, respectively, if certain changes in tax or investment company laws occur. On or
after June 15, 2017, March 15, 2018, March 15, 2024, September 15, 2025 and March 15, 2026, SCE may redeem the Series
F, G, H, J and K shares, respectively, at par, in whole or in part. For shares of Series H, J and K preference stock, distributions
will accrue and be payable at a floating rate from and including March 15, 2024, September 15, 2025 and March 15, 2026,
respectively. Shares of Series F, G, H, J and K preference stock were issued to SCE Trust I, SCE Trust II, SCE Trust III, SCE
Trust IV and SCE Trust V, respectively, special purpose entities formed to issue trust securities as discussed in Note 3. The
proceeds from the sale of the shares of Series K were used to redeem $125 million of the Company's Series D preference
stock and for general corporate purposes. Preference shares are not subject to mandatory redemption.
At December 31, 2016, declared dividends related to SCE's preferred and preference stock were $12 million.
Note 13. Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss, net of tax, consist of:
(in millions)
Beginning balance
Pension and PBOP – net gain (loss):
Other comprehensive (loss) income before
reclassifications
Reclassified from accumulated other comprehensive loss1
Other
Change
Ending balance
Edison International
SCE
Years ended December 31,
2016
2015
2016
2015
$
(56) $
(58) $
(22) $
(28)
(4)
6
1
3
(53) $
(8)
10
—
2
(56) $
(2)
3
1
2
(20) $
1
5
—
6
(22)
$
1 These items are included in the computation of net periodic pension and PBOP expense. See Note 8 for additional information.
99
Note 14. Interest and Other Income and Other Expenses
Interest and other income and other expenses are as follows:
(in millions)
SCE interest and other income:
Equity allowance for funds used during construction
Increase in cash surrender value of life insurance policies and life insurance
benefits
Interest income
Other
Total SCE interest and other income
Other income of Edison International Parent and Other1
Total Edison International interest and other income
SCE other expenses:
Civic, political and related activities and donations
Other
Total SCE other expenses
Other expense of Edison International Parent and Other
Total Edison International other expenses
Years ended December 31,
2015
2014
2016
$
$
$
$
74
39
3
7
123
—
123
(32)
(12)
(44)
—
(44)
$
$
$
$
87
26
4
6
123
51
174
(35)
(24)
(59)
—
(59)
$
$
$
$
65
36
5
16
122
25
147
(35)
(44)
(79)
(1)
(80)
1 Reflects Edison Capital's income related to the sale of affordable housing projects for the year ended December 31, 2015.
Note 15. Discontinued Operations
EME Chapter 11 Bankruptcy
In December 2012, EME and certain of its wholly-owned subsidiaries filed voluntary petitions for relief under Chapter 11 of
the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Illinois, Eastern Division. The Amended
Plan of Reorganization, including the EME Settlement Agreement, was completed on April 1, 2014 with the sale of
substantially all of EME's assets to NRG Energy, Inc. and the transactions called for in the EME Settlement Agreement,
including an initial cash payment to the Reorganization Trust of $225 million in April 2014.
In August 2014, Edison International entered into an amendment of the EME Settlement Agreement that finalized the
remaining matters related to the EME Settlement including setting the amount of the two installment payments. Edison
International made an installment payment of $204 million in September 2015 and made the remaining $214 million payment
in September 2016.
Income from discontinued operations, net of tax, was $12 million (pre-tax income of $1 million), $35 million (pre-tax income
of $15 million) and $185 million (pre-tax loss of $525 million) for the years ended December 31, 2016, 2015 and 2014,
respectively. The 2016 and 2015 income was primarily related to the resolution of tax issues related to EME. The 2015
income also included insurance recoveries. Results from discontinued operations in 2014 consisted of a pre-tax loss of
$525 million primarily related to liabilities assumed in connection with the EME Settlement Agreement, including the
payments to the Reorganization Trust discussed above, and income tax benefits of $710 million related to the EME net
operating loss and other credit carryforwards.
100
Note 16. Supplemental Cash Flows Information
Supplemental cash flows information for continuing operations is:
Edison International
SCE
Years ended December 31,
2016
2015
2014
2016
2015
2014
504
18
$
512
$
1
504
32
$
475
78
$
478
144
$
487
(88)
(in millions)
Cash payments (receipts) for interest and taxes:
Interest, net of amounts capitalized
Tax payments (refunds), net
Non-cash financing and investing activities:
Dividends declared but not paid:
Common stock
Preferred and preference stock
Details of debt exchange:
$
$
Pollution-control bonds redeemed (2.875%)
Pollution-control bonds issued (1.875%)
—
—
(203)
203
—
—
177
12
$
156
14
$
136
18
$ — $ — $
12
—
—
14
(203)
203
147
18
—
—
Notes issued under EME Settlement Agreement
$ — $ — $
418
$ — $ — $ —
SCE's accrued capital expenditures at December 31, 2016, 2015 and 2014 were $540 million, $543 million, and $837 million,
respectively. Accrued capital expenditures will be included as an investing activity in the consolidated statements of cash
flow in the period paid.
During 2015, SCE amended a power contract classified as a capital lease, which resulted in a reduction in the lease obligation
and asset by $147 million.
Note 17. Related-Party Transactions
Edison International and SCE provide and receive various services to and from its subsidiaries and affiliates. Services
provided to Edison International by SCE are priced at fully loaded cost (i.e., direct cost of good or service and allocation of
overhead cost). Specified administrative services such as payroll, employee benefit programs, all performed by Edison
International or SCE employees, are shared among all affiliates of Edison International. Costs are allocated based on one of
the following formulas: percentage of time worked, equity in investment and advances, number of employees, or multi-factor
(operating revenues, operating expenses, total assets and number of employees). Edison International allocates various
corporate administrative and general costs to SCE and other subsidiaries using established allocation factors.
101
Note 18. Quarterly Financial Data (Unaudited)
Edison International's quarterly financial data is as follows:
(in millions, except per-share amounts)
Total
Fourth
2016
Third
Second
First
Operating revenue
$ 11,869
$
2,884
$
3,767
$
2,777
$
2,440
Operating income
Income from continuing operations1
Income (loss) from discontinued operations, net
Net income attributable to common shareholders1
Basic earnings (loss) per share1:
Continuing operations
Discontinued operations
Total
Diluted earnings (loss) per share1:
Continuing operations
Discontinued operations
Total
Dividends declared per share
Common stock prices:
High
Low
Close
2,092
1,413
12
1,311
3.99
0.03
4.02
3.94
0.03
3.97
1.9825
78.72
57.97
71.99
$
$
$
$
$
566
347
13
329
0.97
0.04
1.01
0.96
0.04
1.00
0.5425
73.81
67.44
71.99
$
$
$
$
$
695
451
—
421
1.29
—
1.29
1.27
—
1.27
0.4800
78.72
71.31
72.25
$
$
$
$
$
381
310
(2)
280
0.87
(0.01)
0.86
0.86
(0.01)
0.85
0.4800
77.71
67.71
77.67
$
$
$
$
$
448
305
1
281
0.86
—
0.86
0.85
—
0.85
0.4800
72.34
57.97
71.89
$
$
$
$
$
1 Edison International adopted an accounting standard related to share-based payments during the fourth quarter of 2016, effective
January 1, 2016. See Note 1 for further information. The table above reflects the adoption of this standard on January 1, 2016. Net
income from continuing operations, as previously reported, was $449 million for the third quarter of 2016, $306 million for the second
quarter of 2016 and $295 million for the first quarter of 2016. Net income attributable to common shareholders, as previously reported,
was $419 million for the third quarter of 2016, $276 million for the second quarter of 2016 and $271 million for the first quarter of
2016. Basic EPS for continuing operations, as previously reported, was $1.29 for the third quarter of 2016, $0.86 for the second quarter
of 2016 and $0.83 for the first quarter of 2016. Diluted EPS for continuing operations, as previously reported, was $1.27 for the third
quarter of 2016, $0.85 for the second quarter of 2016 and $0.82 for the first quarter of 2016.
102
(in millions, except per-share amounts)
Operating revenue
Operating income
Income (loss) from continuing operations1
Income (loss) from discontinued operations, net
Net income (loss) attributable to common shareholders
Basic earnings (loss) per share:
Continuing operations
Discontinued operations
Total
Diluted earnings (loss) per share:
Continuing operations
Discontinued operations
Total
Dividends declared per share
Common stock prices:
High
Low
Close
Total
$ 11,524
2,008
1,082
35
1,020
$
$
$
$
$
3.02
0.11
3.13
2.99
0.11
3.10
1.7325
69.59
55.18
59.21
$
$
$
$
$
$
Fourth
2,341
340
(47)
(8)
(79)
(0.22)
(0.02)
(0.24)
(0.22)
(0.02)
(0.24)
0.4800
66.29
57.51
59.21
$
$
$
$
$
$
2015
Third
3,763
608
405
43
421
1.16
0.13
1.29
1.15
0.13
1.28
0.4175
63.18
55.52
63.07
Second
First
$
$
$
$
$
$
2,908
524
406
—
379
1.16
—
1.16
1.15
—
1.15
0.4175
64.55
55.18
55.58
$
$
$
$
$
$
2,512
538
318
—
299
0.92
—
0.92
0.91
—
0.91
0.4175
69.59
61.02
62.47
1 In the fourth quarter of 2015, as result of the 2015 GRC Decision, SCE recorded a $382 million write-down of regulatory assets
previously recorded for recovery of deferred income taxes from 2012 – 2014 incremental tax repair deductions.
SCE's quarterly financial data is as follows:
(in millions)
Operating revenue
Operating income
Net income1
Net income available for common stock1
Common dividends declared
Total
$ 11,830
2,217
1,499
1,376
701
$
Fourth
2,874
594
359
328
191
$
2016
Third
3,752
721
466
435
170
Second
First
$
2,768
429
349
318
170
$
2,435
472
325
295
170
1 SCE adopted an accounting standard related to share-based payments during the fourth quarter of 2016, effective January 1, 2016. See
Note 1 for further information. The table above reflects the adoption of this standard on January 1, 2016. Net income, as previously
reported, was $466 million for the third quarter of 2016, $346 million for the second quarter of 2016 and $317 million for the first
quarter of 2016. Net income available for common stock, as previously reported, was $435 million for the third quarter of 2016,
$315 million for the second quarter of 2016 and $287 million for the first quarter of 2016.
(in millions)
Operating revenue
Operating income
Net income1
Net income available for common stock
Common dividends declared
Total
Fourth
2015
Third
Second
First
$ 11,485
$
2,319
$
3,757
$
2,901
$
2,508
2,080
1,111
998
611
366
(51)
(80)
170
626
417
389
147
536
412
384
147
550
333
305
147
1
In the fourth quarter of 2015, as result of the 2015 GRC Decision, SCE recorded a $382 million write-down of regulatory assets
previously recorded for recovery of deferred income taxes from 2012 – 2014 incremental tax repair deductions.
Due to the seasonal nature of Edison International and SCE's business, a significant amount of revenue and earnings are
recorded in the third quarter of each year. As a result of rounding, the total of the four quarters does not always equal the
amount for the year.
103
SELECTED FINANCIAL DATA
Selected Financial Data: 2012 – 2016
(in millions, except per-share amounts)
Edison International
Operating revenue
Operating expenses
Income from continuing operations
Income (loss) from discontinued operations,
net of tax
Net income (loss)
Net income (loss) attributable to common
shareholders
Weighted-average shares of common stock
outstanding (in millions)
Basic earnings (loss) per share:
Continuing operations
Discontinued operations
Total
Diluted earnings (loss) per share:
Continuing operations
Discontinued operations
Total
Dividends declared per share
Total assets1, 2
Long-term debt excluding current portion
Capital lease obligations excluding current portion
Preferred and preference stock of utility
Common shareholders' equity
Southern California Edison Company
Operating revenue
Operating expenses
Net income
Net income available for common stock
Total assets2
Long-term debt excluding current portion
Capital lease obligations excluding current portion
Preferred and preference stock
Common shareholder's equity
Capital structure3:
Common shareholder's equity
Preferred and preference stock
Long-term debt
2016
2015
2014
2013
2012
$ 11,869
$ 11,524
$ 13,413
$ 12,581
$ 11,862
9,777
1,413
12
1,425
1,311
326
3.99
0.03
4.02
3.94
0.03
3.97
$
$
$
$
9,516
1,082
35
1,117
1,020
326
3.02
0.11
3.13
2.99
0.11
3.10
$
$
$
$
10,941
1,536
185
1,721
1,612
326
4.38
0.57
4.95
4.33
0.56
4.89
$
$
$
$
10,866
979
36
1,015
915
326
2.70
0.11
2.81
2.67
0.11
2.78
$
$
$
$
1.9825
1.7325
1.4825
1.3675
9,577
1,594
(1,686)
(92)
(183)
326
4.61
(5.17)
(0.56)
4.55
(5.11)
(0.56)
1.3125
$
$
$
$
$ 51,319
$ 50,229
$ 49,734
$ 46,225
$ 44,394
10,175
10,883
6
2,191
11,996
7
2,020
11,368
10,234
196
2,022
10,960
9,825
203
1,753
9,938
9,231
210
1,759
9,432
$ 11,830
$ 11,485
$ 13,380
$ 12,562
$ 11,851
9,613
1,499
1,376
9,405
1,111
998
10,851
1,565
1,453
10,811
1,000
900
9,572
1,660
1,569
$ 50,891
$ 49,795
$ 49,456
$ 45,786
$ 44,034
9,754
6
2,245
12,238
10,460
7
2,070
11,602
9,624
196
2,070
9,422
203
1,795
11,212
10,343
50.5%
9.3%
40.2%
48.1%
8.6%
43.3%
49.0%
9.0%
42.0%
48.0%
8.3%
43.7%
8,828
210
1,795
9,948
48.4%
8.7%
42.9%
1 Total assets includes assets from continuing and discontinued operations.
2 Effective December 31, 2015, Edison International and SCE adopted an accounting standard, retrospectively, that requires all deferred
income tax assets and liabilities be presented as noncurrent in the consolidated balance sheet.
3 This capital structure is based on the financial statements as reported under generally accepted accounting principles and does not factor
in the adjustments required to calculate CPUC ratemaking capital structure.
104
The selected financial data was derived from Edison International's and SCE's audited financial statements and is qualified in
its entirety by the more detailed information and financial statements, including notes to these financial statements, included
in this annual report. References to Edison International refer to the consolidated group of Edison International and its
subsidiaries.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Based on an evaluation of Edison International's and SCE's disclosure controls and procedures, as defined in Rules 13a-15(e)
and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of December 31, 2016, Edison
International's and SCE's respective principal executive officers and principal financial officers have concluded that such
controls and procedures are effective to ensure that information required to be disclosed by Edison International and SCE in
reports that the companies file or submit under the Exchange Act is recorded, processed, summarized, and reported within the
time periods specified in the SEC rules and forms. In addition, Edison International's and SCE's respective principal
executive officers and principal financial officers have concluded that such controls and procedures were effective in
ensuring that information required to be disclosed by Edison International and SCE in the reports that Edison International
and SCE file or submit under the Exchange Act is accumulated and communicated to Edison International's and SCE's
management, including Edison International's and SCE's respective principal executive officers and principal financial
officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management's Report on Internal Control Over Financial Reporting
Edison International's and SCE's respective management are responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f), for Edison
International and its subsidiaries and SCE, respectively. Under the supervision and with the participation of their respective
principal executive officer and principal financial officer, Edison International's and SCE's management conducted an
evaluation of the effectiveness of their respective internal controls over financial reporting based on the framework set forth
in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on their evaluations under the COSO framework, Edison International's and SCE's respective
management concluded that Edison International's and SCE's respective internal controls over financial reporting were
effective as of December 31, 2016. Edison International's internal control over financial reporting as of December 31, 2016
has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report
on the financial statements included in this report, which is incorporated herein by this reference. This annual report does not
include an attestation report of SCE's independent registered public accounting firm regarding internal control over financial
reporting. Management's report for SCE is not subject to attestation by the independent registered public accounting firm.
Changes in Internal Control Over Financial Reporting
There were no changes in Edison International's or SCE's internal control over financial reporting during the fourth quarter of
2016 that have materially affected, or are reasonably likely to materially affect, Edison International's or SCE's internal
control over financial reporting.
Jointly Owned Utility Plant
Edison International's and SCE's respective scope of evaluation of internal control over financial reporting includes their
Jointly Owned Utility Projects.
OTHER INFORMATION
None.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
105
BUSINESS
CORPORATE STRUCTURE, INDUSTRY AND OTHER INFORMATION
Edison International was incorporated in 1987 as the parent holding company of SCE, a California public utility. Edison
International also owns and holds interests in subsidiaries through the Edison Energy Group that are engaged in competitive
businesses.
The principal executive offices of Edison International and SCE are located at 2244 Walnut Grove Avenue, P.O. Box 976,
Rosemead, California 91770, and the telephone numbers are (626) 302-2222 for Edison International and (626) 302-1212 for
SCE.
This is a combined Annual Report on Form 10-K for Edison International and SCE. Edison International and SCE make
available at www.edisoninvestor.com: Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, Proxy Statements and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act, as soon as reasonably practicable after Edison International and SCE electronically file such
material with, or furnishes it to, the SEC. Such reports are also available on the SEC's internet website at www.sec.gov. The
information contained on, or connected to, the Edison investor website is not incorporated by reference into this report.
Subsidiaries of Edison International
SCE – Public Utility
SCE is an investor-owned public utility primarily engaged in the business of supplying and delivering electricity through
SCE's electrical infrastructure to an approximately 50,000 square-mile area of southern California. SCE serves approximately
5 million customers in its service area. In 2016, SCE's total operating revenue of $11.8 billion was derived as follows: 42.0%
commercial customers, 39.6% residential customers, 3.9% industrial customers, 4.9% public authorities, 2.2% agricultural
and other, and 7.4% other operating revenue.
Edison Energy Group – Energy Service Provider
Edison Energy Group is a holding company for subsidiaries engaged in pursuing competitive business opportunities across
energy services and distributed solar to commercial and industrial customers. Energy services are provided through its
subsidiary, Edison Energy, LLC, to help commercial and industrial customers improve managing of their energy costs and
risks in dealing with increasingly complex tariff and technology choices. Solar energy solutions are provided through Edison
Energy Group's subsidiary SoCore Energy and take the form of behind the meter sales of power under power purchase
agreements or the sale of distributed generation systems directly to the customer (build/transfer contracts) SoCore Energy has
also developed ground mounted solar projects selling power to rural cooperatives or to subscribers in community solar
programs. As of December 31, 2016, SoCore Energy had constructed and achieved commercial operations for 94 MW of
rooftop solar systems in 21 states. Edison Energy Group, through its subsidiary Edison Transmission, LLC, is one of the eight
founders of Grid AssuranceTM, a limited liability company developing grid resiliency offerings for domestic utilities.
To date, investments in Edison Energy Group are below 1% of the total consolidated assets and, therefore, not material to be
reported as a business segment.
Regulation of Edison International as a Holding Company
As a public utility holding company, Edison International is subject to the Public Utility Holding Company Act. The Public
Utility Holding Company Act primarily obligates Edison International and its utility subsidiaries to provide access to their
books and records to the FERC and the CPUC for ratemaking purposes.
Edison International is not a public utility and its capital structure is not regulated by the CPUC. The 1988 CPUC decision
authorizing SCE to reorganize into a holding company structure, however, imposed certain obligations on Edison
International and its affiliates. These obligations include a requirement that SCE's dividend policy shall continue to be
established by SCE's Board of Directors as though SCE were a stand-alone utility company, and that the capital requirements
of SCE, as deemed to be necessary to meet SCE's electricity service obligations, shall receive first priority from the Boards of
Directors of Edison International and SCE. The CPUC has also promulgated Affiliate Transaction Rules, which, among other
requirements, prohibit holding companies from (1) being used as a conduit to provide non-public information to a utility's
affiliate and (2) causing or abetting a utility's violation of the rules, including providing preferential treatment to affiliates.
106
Employees and Labor Relations
At December 31, 2016, Edison International and its consolidated subsidiaries had an aggregate of 12,390 full-time
employees, 11,947 of which were full-time employees at SCE.
Approximately 3,900 of SCE's full-time employees are covered by collective bargaining agreements with the International
Brotherhood of Electrical Workers ("IBEW"). The IBEW collective bargaining agreements expire on December 31, 2019.
Insurance
Edison International maintains a property and casualty insurance program for itself and its subsidiaries and excess liability
insurance covering liabilities to third parties for bodily injury or property damage resulting from operations. These policies
are subject to specific retentions, sub-limits and deductibles, which are comparable to those carried by other utility companies
of similar size. SCE also has separate insurance programs for nuclear property and liability, workers compensation and solar
rooftop construction. For further information on nuclear and wildfire insurance, see "Notes to Consolidated Financial
Statements—Note 11. Commitments and Contingencies—Contingencies."
SCE
Regulation
CPUC
The CPUC has the authority to regulate, among other things, retail rates, energy purchases on behalf of retail customers, SCE
capital structure, rate of return, issuance of securities, disposition of utility assets and facilities, oversight of nuclear
decommissioning funding and costs, and aspects of the transmission system planning, site identification and construction,
including safety and environmental mitigation.
FERC
The FERC has the authority to regulate wholesale rates as well as other matters, including unbundled transmission service
pricing, rate of return, accounting practices, and licensing of hydroelectric projects. The FERC also has jurisdiction over a
portion of the retail rates and associated rate design.
CAISO
Major transmission projects required for reliability and accessing renewable resources are recommended by the California
Independent System Operator ("CAISO") through a regular transmission planning process that highlights the need for and
key issues associated with each project. Much of SCE’s current transmission investment program is for transmission projects
that facilitate access to renewable energy resources in desert and mountain regions east and north of its load center to meet
the 33% renewable mandate by 2020. The CAISO will similarly be initiating long-term transmission planning to meet the
2030 mandate for SCE to deliver 50% of its energy from qualifying renewable resources.
NERC
The FERC assigned administrative responsibility to the NERC to establish and enforce reliability standards and critical
infrastructure protection standards, which protect the bulk power system against potential disruptions from cyber and
physical security breaches. The critical infrastructure protection standards focus on controlling access to critical physical and
cyber security assets, including supervisory control and data acquisition systems for the electric grid. Compliance with these
standards is mandatory. The maximum penalty that may be levied for violating a NERC reliability or critical infrastructure
protection standard is $1 million per violation, per day.
SCE has a formal cyber security program that covers SCE's information technology systems as well as customer data.
Program staff is engaged with industry groups as well as public-private initiatives to reduce risk and to strengthen the security
and reliability of SCE's systems and infrastructure. The program is also engaged in the protection of SCE's customer
information.
Nuclear Power Plant Regulation
The NRC has jurisdiction with respect to the safety of San Onofre and Palo Verde Nuclear Generating Stations. The NRC
regulates commercial nuclear power plants through licensing, oversight and inspection, performance assessment, and
enforcement of its requirements. In June 2013, SCE decided to permanently retire and decommission San Onofre. For further
information, see "Liquidity and Capital Resources—SCE—Decommissioning of San Onofre" in the MD&A.
107
Other Regulatory Agencies
The construction, planning and project site identification of SCE's transmission lines and substation facilities require the
approval of many governmental agencies and compliance with various laws in addition to the CPUC and FERC. These
include various state regulatory agencies depending on the project location; the CAISO, and other environmental, land
management and resource agencies such as the Bureau of Land Management, the U.S. Forest Service, the California
Department of Fish and Game, and the California Coastal Commission; and regional water quality control boards. In
addition, to the extent that SCE transmission line projects pass through lands owned or controlled by Native American tribes,
consent and approval from the affected tribes and the Bureau of Indian Affairs are also necessary for the project to proceed.
Overview of Ratemaking Process
CPUC
Revenue authorized by the CPUC through triennial GRC proceedings is intended to provide SCE a reasonable opportunity to
recover its costs and earn a return on its net investments in generation and distribution assets and general plant (also referred
to as "rate base") on a forecast basis. The CPUC sets an annual revenue requirement for the base year which is made up of the
operation and maintenance costs, depreciation, taxes and a return consistent with the authorized cost of capital (discussed
below). In the GRC proceedings, the CPUC also generally approves the level of capital spending on a forecast basis.
Following the base year, the revenue requirements for the remaining two years are set by a methodology established in the
GRC proceeding, which generally, among other items, includes annual allowances for escalation in operation and
maintenance costs and additional changes in capital-related investments. The CPUC is conducting a triennial safety model
assessment proceeding ("S-MAP") to evaluate the utility models used to prioritize safety risks, examine the utilities'
assessment of their key risks and their proposed mitigation programs, and develop requirements for annual reporting of risk
spending and mitigation results. The risk assessment approach developed in the S-MAP will be incorporated into SCE's
triennial GRC through a Risk Assessment and Mitigation Phase (RAMP), which will be initiated by November 15 in the year
preceding each GRC application filing date. SCE's first RAMP will be filed in November 2018 for its 2021 GRC. The
purpose of the RAMP is to provide information about the utility's assessment of its key safety risks and its proposed
programs for mitigating those risks. The information developed during the RAMP will inform the utility's recommended
projects and funding requests in the subsequent phase of the GRC.
SCE's 2015 GRC authorized revenue requirements for 2016 and 2017 are $5.391 billion, and $5.663 billion, respectively. In
September 2016, SCE filed its 2018 GRC Application, which covers 2018 – 2020. For further discussion of the 2018 GRC,
see "Management Overview—Regulatory Proceedings—2018 General Rate Case" in the MD&A.
The CPUC regulates SCE's cost of capital, including its capital structure and authorized rates of return. SCE's authorized
capital structure is 43% long-term debt, 9% preferred equity and 48% common equity. SCE's currently authorized cost of
capital consists of: cost of long-term debt of 5.49%, cost of preferred equity of 5.79% and return on common equity of
10.45%. In February 2017, SCE and the other Investor-Owned Utilities agreed with ORA and TURN to postpone the filing of
new cost of capital applications from April 2017 to April 2019, reset the respective Investor-Owned Utilities' authorized costs
of long-term debt and preferred stock, and reduce the Investor-Owned Utilities respective return on common equity, subject
to CPUC approval. For more information, see "Management Overview—Regulatory Proceedings—Cost of Capital" in the
MD&A.
SCE's authorized return on investment is established by multiplying an authorized rate of return, determined in separate cost
of capital proceedings, by SCE's authorized CPUC rate base.
CPUC rates decouple authorized revenue from the volume of electricity sales and the price of energy procured so that SCE
receives revenue equal to amounts authorized. Differences between amounts collected and authorized levels are either
collected from or refunded to customers, and, therefore, such differences do not impact operating revenue. Accordingly, SCE
is neither benefited nor burdened by the volumetric or price risk related to retail electricity sales.
Cost recovery balancing accounts (also referred to as cost-recovery mechanisms) are used to track and recover SCE's
decoupled costs of fuel and purchased-power, as well as certain operation and maintenance expenses, including energy
efficiency and demand-side management program costs. SCE earns no return on these activities and although differences
between forecasted and actual costs do not impact earnings, such differences do impact cash flows and can change rapidly.
SCE has other capital-related balancing accounts on which it earns a return, such as the pole loading balancing account.
SCE's balancing account for fuel and power procurement-related costs is referred to as the ERRA. SCE sets rates based on an
annual forecast of the costs that it expects to incur during the subsequent year. In addition, the CPUC has established a
"trigger" mechanism for the ERRA. The trigger mechanisms allows for an expeditious rate change if the balancing account
108
over- or under-collection exceeds 5% of SCE's prior year generation rate revenue. For 2017, the trigger amount is
approximately $229 million. At December 31, 2016, SCE's overcollection in the ERRA was approximately $20 million,
which is being refunded to customers in rates beginning on January 1, 2017.
The majority of procurement-related costs eligible for recovery through cost-recovery rates are pre-approved by the CPUC
through specific decisions and a procurement plan with predefined standards that establish the eligibility for cost recovery. If
such costs are subsequently found to be non-compliant with this procurement plan, then this could negatively impact SCE's
earnings and cash flows. In addition, the CPUC retrospectively reviews outages associated with utility-owned generation and
SCE's power procurement contract administration activities through the annual ERRA review proceeding. If SCE is found to
be unreasonable or imprudent with respect to its utility-owned generation outages and contract administration activities, then
this could negatively impact SCE's earnings and cash flows.
FERC
Transmission capital and operating costs that are prudently incurred, including a return on its net investment in transmission
assets (also referred to as "rate base"), are recovered through revenues authorized by the FERC. Since 2012, SCE has used a
formula rate to determine SCE's FERC transmission revenue requirement, including its construction work in progress
("CWIP") revenue requirement. Under operation of the formula rate, transmission revenue will be updated to actual cost of
service annually. The transmission revenue requirement and rates are updated each December, to reflect a forecast of costs for
the upcoming rate period, as well as a true up of the transmission revenue to actual costs incurred by SCE in the prior
calendar year on its formula rate. The FERC weighted average ROE, including project and other incentives, is comparable to
the CPUC ROE of 10.45% and can vary based on the mix of project costs that have different incentives. For further
information on the current FERC formula rates, related transmission revenue requirements and rate changes, see
"Management Overview—Regulatory Proceedings—FERC Formula Rates" in the MD&A.
Retail Rates Structure and Residential Rate Design
To develop retail rates, the authorized revenue requirements are allocated among all customer classes (residential,
commercial, industrial, agricultural and street lighting) on a functional basis (i.e., generation, distribution, transmission, etc.).
Specific rate components are designed to recover the authorized revenue allocated to each customer class.
SCE has a two-tier residential rate structure with a separate Super User Electric (SUE) surcharge for customers consuming
more than 400% of average usage. The first tier is priced at below-average cost. The second tier is priced at a higher rate per
kilowatt hour, and the surcharge rate is set at more than twice the rate of Tier 1. During 2014 – 2015, the CPUC approved
increases to Tier 1 and 2 rates, permitted reductions over time to the number of tiers, and set a multi-tier road map to smaller
rate differentials between the tiers. By 2019, the price differential between the first and second tiers will be 25%, with the
separate SUE surcharge. The CPUC has also ordered a transition beginning in 2019 from tiered to time-of-use (TOU) rates
for most residential customers unless they opt to stay on the tiered rate structure. The CPUC also permits SCE to recover a
larger portion of its fixed costs of serving no- or low-usage residential customers through a minimum charge of $10 per
month minimum bill ($5 for low-income customers) rather than through energy charges that vary with usage. For information
on residential rates for customers with renewable generation systems, see "—Competition" below.
Energy Efficiency Incentive Mechanism
Prior to September 2013, the mechanism used an incentive calculation that is based on actual energy efficiency expenditures.
In September 2013, the CPUC adopted an energy efficiency incentive mechanism called the Energy Savings and
Performance Incentive Mechanism ("ESPI"). The ESPI applies starting with the 2013 – 2014 energy efficiency program cycle
and continue for subsequent cycles, until further notice. The ESPI is comprised of performance/savings rewards and
management fees based on actual energy efficiency expenditures and does not contain any provisions for penalties. The
proposed ESPI schedule anticipates payments of the incentive rewards occurring between one and two years after the relevant
program year. For further information on the energy efficiency awards, see "Management Overview—Regulatory
Proceedings—Energy Efficiency Incentive Mechanism" in the MD&A.
Purchased Power and Fuel Supply
SCE obtains the power, energy, and local grid support needed to serve its customers primarily from purchases from external
parties. Less than 20% of the needed power is provided by SCE's own generating facilities.
109
Natural Gas Supply
SCE requires natural gas to meet contractual obligations for power tolling agreements (power contracts in which SCE has
agreed to provide or pay for the natural gas used to generate electricity). SCE also requires natural gas to fuel its
Mountainview and peaker plants, which are generation units that are designed to operate in response to changes in demand
for power. The physical natural gas purchased by SCE is sourced in competitive interstate markets. SoCalGas provides the
in-state pipeline transportation service to the gas-fueled generation stations that SCE controls. In 2015 – 2016, SoCalGas
experienced a significant natural gas fuel leak at its Aliso Canyon underground gas storage facility and the facility has not
been returned to service. To date, SCE has found that increased gas-use restrictions increased the cost of electricity for
customers but did not impact grid reliability. There is no certainty that these restrictions will not impact grid reliability in the
future. However, the price increase would not affect SCE's earnings because decoupled costs of fuel and purchased-power are
recovered from customers through balancing accounts. For more information on cost-recovery mechanisms, see "—Overview
of Ratemaking Process" above. SCE is actively monitoring legislative and regulatory processes that are addressing pipeline
and electric grid operations impacted by the Aliso Canyon leak, including the OII issued by the CPUC in February 2017 to
consider the feasibility of minimizing or eliminating the use of the Aliso Canyon facility. SCE has also made additional
procurement efforts to alleviate the impact of the partial closure of Aliso Canyon, including acceleration of existing contracts
for new capacity, energy storage procurement from third-parties, contracting for design, build, transfer of utility-owned
storage, additional demand response procurement, and additional energy efficiency procurement.
CAISO Wholesale Energy Market
The CAISO operates a wholesale energy market primarily in California through which competing electricity generators offer
their electricity output to market participants, including electricity retailers. The CAISO schedules power in hourly
increments with hourly prices through a day-ahead market in California and schedules power in fifteen-minute and five-
minute increments with fifteen-minute and five-minute prices through two real-time markets that cover California and
portions of six neighboring states through the Energy Imbalance Market. Both markets optimize energy procurement,
ancillary service procurement, unit commitment and congestion management. SCE participates in the day-ahead and real-
time markets for the sale of its own generation and generation under contract purchases for its load requirements.
Competition
SCE faces retail competition in the sale of electricity to the extent that federal and California laws permit other entities to
provide electricity and related services to customers within SCE's service area. While California law provides only limited
opportunities for customers in SCE's service area to choose to purchase power directly from an energy service provider other
than SCE, a limited, phased-in expansion of customer choice (direct access) for nonresidential customers was permitted
beginning in 2009. SCE also faces competition from community choice aggregators ("CCAs"). As of year-end 2016, SCE had
only one CCA in its service territory (City of Lancaster) but there are several more cities and counties that are exploring the
possibility of becoming CCAs in SCE's service territory. Competition between SCE and other electricity providers is
conducted mainly on the basis of price.
SCE also faces increased usage of customer-owned power generation and storage alternatives, such as roof-top solar facilities
and battery systems, becoming available to its customers as a result of technological developments, federal and state
subsidies, and declining costs of such alternatives.
California legislation passed in 1995 encouraged private residential and commercial investment in renewable energy
resources by requiring SCE to offer a net energy metering ("NEM") billing option to customers who install eligible power
generation systems to supply all or part of their energy needs. NEM customers are interconnected to SCE's grid and credited
for the net difference between the electricity SCE supplied to them through the grid and the electricity the customer exported
to SCE over a twelve month period. SCE is required to credit the NEM customer for most of the power they sell back to SCE
at the retail rate. Through the credit they receive, NEM customers effectively avoid paying certain grid-related costs. NEM
customers are also exempted from non-bypassable, standby and departing load charges and interconnection fees.
In January 2016, the CPUC issued a decision implementing AB 327, a rate reform bill enacted in 2013 that instructed the
CPUC to develop new standard rates for customers with renewable generation systems. The changes that the CPUC decision
made to the existing NEM tariff do not significantly impact the NEM subsidy. Specifically, the decision requires customers
that take service on SCE’s NEM tariff after June 2017 to continue to be compensated at the retail rate, minus certain non-
bypassable charges. NEM customers will also continue to be exempted from standby and departing load charges, but will be
required to pay a $75 interconnection fee and to select a Time-of-Use ("TOU") retail rate. The CPUC will consider making
additional adjustments to the NEM tariff when it adopts default TOU rates in 2019.
110
The effect of these types of competition on SCE generally is to reduce the amount of electricity purchased by customers.
However customers, except for NEM customers, who use alternative electricity providers, typically continue to utilize and
pay for SCE's transmission and distribution services. See "Risk Factors—Risks Relating to Southern California Edison
Company—Competitive and Market Risks."
In the area of transmission infrastructure, SCE has experienced increased competition from independent transmission
providers under the FERC's transmission planning requirements rules, effective in 2011, that removed the incumbent public
utility transmission owners' federally-based right of first refusal to construct certain new transmission facilities and mandated
regional and interregional transmission planning. Regional entities, such as independent system operators, have processes for
regional and interregional transmission planning and the competitive solicitation and selection of developers (including
incumbent utilities) to build and own certain types of new transmission projects. In 2014, the FERC approved the CAISO's
process for regional planning and competitive solicitations and the CAISO's interregional planning process. The CAISO has
held competitive solicitations pursuant to these rules and independent service providers were selected.
Properties
SCE supplies electricity to its customers through extensive transmission and distribution networks. Its transmission facilities,
which include sub-transmission facilities and are located primarily in California but also in Nevada and Arizona, deliver
power from generating sources to the distribution network and consist of lines ranging from 33 kV to 500 kV and substations.
SCE's distribution system, which takes power from substations to customers, includes over 53,000 line miles of overhead
lines, 38,000 line miles of underground lines and approximately 800 substations, all of which are located in California. SCE
owns the generating facilities listed in the following table:
Generating Facility
Location
(in CA, unless
otherwise noted)
Fuel Type
Operator
SCE's
Ownership
Interest (%)
Net Physical
Capacity
(in MW)
Hydroelectric Plants (33)
Pebbly Beach Generating Station
(including battery storage)
Various
Hydroelectric
Catalina Island Diesel/Liquid
Petroleum Gas
Mountainview Units 3 and 4
Peaker Plants (3)
Enhanced Peaker Plants (2)
(gas turbine and battery storage)
Redlands
Various
Various
Natural Gas
Natural Gas
Natural gas
Palo Verde Nuclear Generating
Phoenix, AZ
Nuclear
Station
Solar PV Plants (25)
Fuel Cells (2)
Mira Loma Energy Storage
Energy Storage Projects (4)
Total
Various
Various
Mira Loma
Various
Photovoltaic
Natural Gas
Electricity
Electricity
SCE
SCE
SCE
SCE
SCE
APS
SCE
SCE
SCE
SCE
SCE's
Capacity
pro rata share
(in MW)
1,153
11 1
1,050
147
591
91
2
20
1,153
11 1
1,050
147
91
2
20
12.4
6,323.4
12.4
3,175.4
98 2
98 2
15.8%
3,739
100%
100%
100%
100%
100%
100%
100%
100%
100%
1 Pebbly Beach Generating Station consists of 11 MW of diesel generators and liquid petroleum gas micro-turbines supported by 1 MW of
battery storage capacity.
2 Enhanced peaker plants consist of 98 MW of gas turbine supported by 20 MW of battery storage capacity.
Certain of SCE's substations, and portions of its transmission, distribution and communication systems are located on lands
owned by the federal, state or local governments under licenses, permits, easements or leases, or on public streets or highways
pursuant to franchises. Certain of the documents evidencing such rights obligate SCE, under specified circumstances and at its
expense, to relocate such transmission, distribution, and communication facilities located on lands owned or controlled by
federal, state, or local governments.
The majority of SCE's hydroelectric plants and related reservoirs are located in whole or in part on U.S.-owned lands and are
subject to FERC licenses. Slightly over half of these plants have FERC licenses that expire at various times between 2021 and
2046. FERC licenses impose numerous restrictions and obligations on SCE, including the right of the United States to acquire
projects upon payment of specified compensation. When existing licenses expire, the FERC has the authority to issue new
licenses to third parties that have filed competing license applications, but only if their license application is superior to SCE's
111
and then only upon payment of specified compensation to SCE. New licenses issued to SCE are expected to contain more
restrictions and obligations than the expired licenses because laws enacted since the existing licenses were issued require the
FERC to give environmental objectives greater consideration in the licensing process. In addition, SCE expects additional
opposition to new licenses by environmental stakeholder groups. Substantially all of SCE's properties are subject to the lien of
a trust indenture securing first and refunding mortgage bonds. See "Notes to Consolidated Financial Statements—Note 5. Debt
and Credit Agreements."
Seasonality
Due to warm weather during the summer months and SCE's rate design, operating revenue during the third quarter of each
year is generally higher than the other quarters.
ENVIRONMENTAL REGULATION OF EDISON INTERNATIONAL AND SUBSIDIARIES
Edison International's subsidiaries are subject to regulation by federal, state, and local authorities in the United States relating
to energy and the environment. These regulations impose restrictions on the operation of existing facilities, as well as the cost
of mitigating the environmental impacts of past operations. For more information on environmental risks, see "Risk Factors
—Risks Relating to Southern California Edison Company—Environmental Risks."
Edison International and SCE continue to monitor legislative and regulatory developments and to evaluate possible strategies
to meet the various environmental mandates. Additional information about environmental matters affecting Edison
International and its subsidiaries, is included in "Notes to Consolidated Financial Statements—Note 11. Commitments and
Contingencies—Contingencies—Environmental Remediation."
Greenhouse Gas Regulation
There have been a number of federal and state legislative and regulatory initiatives to reduce GHG emissions. Any climate
change regulation or other legal obligation that would require substantial reductions in GHG emissions or that would impose
additional costs or charges for the emission of GHGs could significantly increase the cost of generating electricity from fossil
fuels, as well as the cost of purchased power. However the same regulations could potentially present opportunities to
improve SCE's systems to enable the grid's role in the adoption of new energy technologies. These regulations could also
contribute to the introduction of new types of electric loads as a result of the replacement of fossil fuel use in other sectors of
the economy by electrification in order to achieve statewide GHG emission reductions.
Federal Legislative/Regulatory Developments
In August 2015, the US EPA issued final rules governing GHG emission standards for existing fossil-fuel power
plants. Known as the Clean Power Plan, the rules establish state-specific goals and guidelines for the reduction of GHG
emissions from existing sources, including heat rate efficiency improvements at coal plants, displacement of coal-fired
electric generation with increased utilization of natural gas combined cycle unit generation, and expanding deployment of
renewable resources. The Clean Power Plan requires states to impose standards of performance limits for existing fossil fuel-
fired electric generating units, or equivalent statewide intensity-based or mass-based CO2 binding goals or limits. States were
required either to submit state plans to the US EPA by the Fall of 2016 identifying how they will comply with the rules, or to
submit interim plans, along with a request for a two-year extension. Final plans for all states are due by the Fall of 2018. SCE
is participating in the stakeholder efforts to develop the California state plan. Both the timing and the substance of the Clean
Power Plan are subject to ongoing judicial challenges and in February 2016, the US Supreme Court blocked the
implementation of the Clean Power Plan pending the completion of the judicial challenges. This action has delayed the
imposition of the deadlines for the state plans discussed above. Comments made by the new federal administration indicate
that further delay, or even full rescission of the Clean Power Plan is likely. SCE cannot predict the ultimate disposition of the
challenges to this regulation and therefore, cannot determine any potential compliance costs or market risks associated with
its possible implementation.
Since 2010, the US EPA's Final Mandatory GHG Reporting Rule has required all sources within specified categories,
including electric generation facilities, to monitor emissions, and to submit annual reports to the US EPA by March 31 of
each year. SCE's 2016 GHG emissions from utility-owned generation are estimated to be approximately 2.0 million metric
tons.
Regional Initiatives and State Legislation
Regional initiatives and state legislation also require reductions of GHG emissions and to the extent those requirements are
more stringent than federal requirements, utilities and generators will likely be required to satisfy the regional and state
requirements in addition to the federal standards.
112
SCE's operations in California are subject to several laws governing GHG emissions. The first law, the California Global
Warming Solutions Act of 2006 (also referred to as AB 32), establishes a comprehensive program to reduce GHG emissions.
AB 32 required the California Air Resources Board ("CARB") to develop regulations that would reduce California's GHG
emissions to 1990 levels by 2020. The CARB regulations became effective in 2012 and established a California cap-and-
trade program. In the California cap-and-trade program, all covered GHG emitters, including SCE, are subject to a "cap" on
their emissions designed to encourage entities to reduce emissions from their operations. Covered entities must remit a
compliance instrument for each ton of carbon dioxide equivalent gas emitted and can do so buying state-issued emission
allowances at auction or purchasing them in the secondary allowance market. GHG emitters can also meet up to 8% of their
AB 32 cap-and-trade obligations by participating in verified offset programs, such as reforestation, that have recognized
effects on reducing atmospheric GHGs.
Subsequently, SB 1368 required the CPUC and the California Energy Commission to adopt GHG emission performance
standards that apply to California investor-owned and publicly owned utilities' long-term arrangements for the purchase of
electricity. The standards that have been adopted prohibit these entities, including SCE, from entering into long-term financial
commitments with generators that emit more than 1,100 pounds of CO2 per megawatt-hour, which is the performance of a
combined-cycle natural gas turbine generator.
In 2011, California enacted a law to require California retail sellers of electricity to deliver 33% of their customers' electricity
requirements from renewable resources, as defined in the statute. The CPUC set delivery quantity requirements applicable to
SCE that incrementally increase to 33% over several periods between January 2011 and December 2020. In October 2015,
California enacted SB 350, which increases the amount of electricity from renewable resources that California retail sellers
must deliver after 2020 to 40% of retail sales by December 2024, 45% of retail sales by December 2027, and 50% of retail
sales by December 2030.
SCE's delivery of eligible renewable resources to customers was approximately 21% of its total energy portfolio for the
compliance period 2011 – 2013, which met SCE's goal for that period. SCE expects to meet its compliance goal of
approximately 23% as weighted for the 2014 – 2016 compliance period.
Most recently, in 2016, California enacted SB 32, which requires the reduction of GHG emissions across the entire California
economy to 40% below 1990 levels by 2030. Edison International expects this newest law will likely expand the focus of
reductions from the generation of electricity to other large sources of GHG emissions such as the transportation and industrial
sectors. Edison International believes that this change in focus will likely lead to increased electrification of these sectors. AB
197, also enacted in 2016 as a companion bill to SB 32, prioritized direct emission reductions, established joint-legislative
oversight committee on climate change, and highlighted the increasing California legislative focus on disadvantaged
community impacts of climate change.
UNRESOLVED STAFF COMMENTS
None.
PROPERTIES
As a holding company, Edison International does not directly own any significant properties other than the stock of its
subsidiaries. The principal properties of SCE are described above under "Business—Southern California Edison Company—
Properties."
LEGAL PROCEEDINGS
None.
113
EXECUTIVE OFFICERS OF EDISON INTERNATIONAL
Executive Officer
Pedro J. Pizarro
Maria Rigatti
Adam S. Umanoff
Janet T. Clayton
J. Andrew Murphy
Gaddi H. Vasquez
Jacqueline Trapp
Kevin M. Payne
Ronald O. Nichols
Ronald L. Litzinger
Age at
December 31, 2016
Company Position
51
53
57
62
55
61
49
56
63
57
President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
Executive Vice President and General Counsel
Senior Vice President, Corporate Communications
Senior Vice President, Strategic Planning
Senior Vice President, Government Affairs
Vice President, Human Resources
Chief Executive Officer, SCE
President, SCE
President, Edison Energy Group, Inc.
As set forth in Article IV of Edison International's and the relevant subsidiary's Bylaws, the elected officers of Edison
International and its subsidiaries are chosen annually by, and serve at the pleasure of, Edison International and the relevant
subsidiary's Board of Directors and hold their respective offices until their resignation, removal, other disqualification from
service, or until their respective successors are elected. All of the officers of Edison International and its subsidiaries have
been actively engaged in the business of Edison International and its subsidiaries for more than five years, except for
Mssrs. Umanoff, Nichols, and Murphy, and have served in their present positions for the periods stated below. Additionally,
those officers who have had other or additional principal positions in the past five years had the following business
experience during that period:
Executive Officers
Pedro J. Pizarro
Maria Rigatti
Adam S. Umanoff
Janet T. Clayton
J. Andrew Murphy
Gaddi H. Vasquez
Jacqueline Trapp
Kevin M. Payne
Ronald O. Nichols
Ronald L. Litzinger
Company Position
Chief Executive Officer, Edison International
President, Edison International
President, SCE
President, EME1
Executive Vice President, Chief Financial Officer
Senior Vice President and Chief Financial Officer, SCE
President, Edison Mission Reorganization Trust (EME Reorg Trust)2
Senior Vice President, Chief Financial Officer, EME1
Executive Vice President and General Counsel
Edison International
Partner, Akin Gump Strauss Hauer & Feld3
Senior Vice President, Corporate Communications,
Edison International
Senior Vice President, Corporate Communications, SCE
Senior Vice President, Strategic Planning, Edison International
Senior Managing Director, Macquarie Infrastructure and Real Assets4
Executive Vice President, Strategy and M&A, NRG Energy, Inc.5
Senior Vice President, Government Affairs, Edison International and
SCE
Senior Vice President, Public Affairs, SCE
Vice President, Human Resources, Edison International and SCE
Director, Executive Talent and Rewards, Edison International
Director, Executive Development, Edison International
Chief Executive Officer, SCE
Senior Vice President, Customer Service, SCE
Vice President, Engineering and Technical Services, SCE
President, SCE
Senior Vice President, Regulatory Affairs, SCE
General Manager/Chief Executive Officer, Los Angeles Department of
Water and Power6
President, Edison Energy Group, Inc.
Executive Vice President, Edison International
President, SCE
Effective Dates
September 2016 to present
June 2016 to present
October 2014 to June 2016
January 2011 to March 2014
September 2016 to present
July 2014 to September 2016
April 2014 to June 2014
March 2011 to March 2014
January 2015 to present
May 2011 to December 2014
April 2011 to present
April 2013 to present
September 2015 to present
January 2012 to August 2015
August 2011 to November 2012
May 2013 to present
July 2009 to May 2013
June 2016 to present
July 2012 to June 2016
June 2010 to July 2012
June 2016 to present
March 2014 to June 2016
September 2011 to February
2014
June 2016 to present
April 2014 to June 2016
January 2011 to February 2014
March 2016 to present
October 2014 to March 2016
January 2011 to September 2014
114
1 EME is a wholly-owned subsidiary of Edison International and an affiliate of SCE. EME filed for bankruptcy on December 17, 2012.
2 EME Reorg Trust was an entity formed as part of the EME bankruptcy to hold creditors' interests after the sale of EME's assets to NRG
and is not a parent, affiliate or subsidiary of SCE.
3 Akin Gump Strauss Hauer & Feld is a global law firm and is not a parent, affiliate or subsidiary of Edison International.
4 Macquarie Infrastructure and Real Assets is a global infrastructure management company and is not a parent, affiliate or subsidiary of
Edison International.
5 NRG Energy, Inc. is an integrated energy company and is not a parent, affiliate or subsidiary of Edison International.
6 Los Angeles Department of Water and Power is a municipal water and power utility company and is not a parent, affiliate or subsidiary
of Edison International.
EXECUTIVE OFFICERS OF SOUTHERN CALIFORNIA EDISON COMPANY
Executive Officer
Kevin M. Payne
Ronald O. Nichols
William M. Petmecky III
Russell C. Swartz
Peter T. Dietrich1
Stuart R. Hemphill
Caroline Choi
Age at
December 31, 2016
56
63
47
65
52
53
48
Company Position
Chief Executive Officer
President
Senior Vice President and Chief Financial Officer
Senior Vice President and General Counsel
Senior Vice President, Transmission and Distribution
Senior Vice President, Customer and Operational Services
Senior Vice President, Regulatory Affairs
1 Mr. Dietrich left SCE effective January 21, 2017.
As set forth in Article IV of SCE's Bylaws, the elected officers of SCE are chosen annually by, and serve at the pleasure of,
SCE's Board of Directors and hold their respective offices until their resignation, removal, other disqualification from
service, or until their respective successors are elected. All of the above officers have been actively engaged in the business
of SCE, its parent company Edison International, and/or one of SCE's subsidiaries or other affiliates for more than five
years, except for Ronald O. Nichols, and have served in their present positions for the periods stated below. Additionally,
those officers who have had other or additional principal positions in the past five years had the following business
experience during that period:
Executive Officer
Kevin M. Payne
Ronald O. Nichols
Company Position
Chief Executive Officer, SCE
Senior Vice President, Customer Service, SCE
Vice President, Engineering and Technical Services, SCE
President, SCE
Senior Vice President, Regulatory Affairs, SCE
General Manager/Chief Executive Officer, Los Angeles Department of
Water and Power1
Effective Dates
June 2016 to present
March 2014 to June 2016
September 2011 to March 2014
June 2016 to present
April 2014 to June 2016
January 2011 to February 2014
William M. Petmecky
III
Russell C. Swartz
Peter T. Dietrich
Senior Vice President and Chief Financial Officer, SCE
Vice President and Treasurer, SCE
Vice President and Treasurer, EME2
Senior Vice President and General Counsel, SCE
Senior Vice President, Transmission and Distribution, SCE
Chief Nuclear Officer, SCE
Senior Vice President, SCE
September 2016 to present
September 2014 to September 2016
September 2011 to March 2014
February 2011 to present
December 2013 to January 2017
December 2010 to December 2013
November 2010 to December 2013
Stuart R. Hemphill
Caroline Choi
Senior Vice President, Customer and Operational Services, SCE
Senior Vice President, Power Supply and Operational Services, SCE
Senior Vice President, Power Supply, SCE
Senior Vice President, Regulatory Affairs, SCE
Vice President Integrated Planning and Environmental Affairs, SCE
June 2016 to present
July 2014 to June 2016
January 2011 to July 2014
June 2016 to present
January 2012 to June 2016
1 Los Angeles Department of Water and Power is a municipal water and power utility company and is not a parent, affiliate or
subsidiary of SCE.
2 EME is a wholly-owned subsidiary of Edison International and an affiliate of SCE. EME filed for bankruptcy on December 17, 2012.
115
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information concerning executive officers of Edison International is set forth above under "Executive Officers of Edison
International." Other information responding to this section will appear in Edison International's and SCE's definitive Proxy
Statement under the headings "Item 1: Election of Directors," and is incorporated herein by this reference.
The Edison International Employee Code of Conduct is applicable to all officers and employees of Edison International and
its subsidiaries. The Code is available on Edison International's Internet website at www.edisoninvestor.com at "Corporate
Governance." Any amendments or waivers of Code provisions for the Company's principal executive officer, principal
financial officer, principal accounting officer or controller, or persons performing similar functions, will be posted on Edison
International's Internet website at www.edisoninvestor.com.
EXECUTIVE COMPENSATION
Information responding to this section will appear in the Joint Proxy Statement under the headings "Compensation
Discussion and Analysis," "Compensation Committee Interlocks and Insider Participation," "Executive Compensation"
"Director Compensation" and "Compensation Committee Report," and is incorporated herein by this reference.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Information responding to this section will appear in the Joint Proxy Statement under the heading "Our Stock Ownership," and
is incorporated herein by this reference.
Equity Compensation Plans
All of Edison International's equity compensation plans that were in effect as of December 31, 2016 have been approved by
security holders. The following table sets forth, for each of Edison International's equity compensation plans, the number of
shares of Edison International Common Stock subject to outstanding options, warrants and rights to acquire such stock, the
weighted-average exercise price of those outstanding options, warrants and rights, and the number of shares remaining
available for future award grants as of December 31, 2016.
Plan Category
Equity compensation plans approved by
security holders
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(a)
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
Number of securities remaining
for future issuance under equity
compensation plans (excluding
securities reflected in column
(a)(c)
12,112,9051
$50.26
31,986,8992
1 This amount includes 11,544,501 shares covered by outstanding stock options, 364,921 shares covered by outstanding restricted stock
unit awards, and 203,483 shares covered by outstanding deferred stock unit awards, with the outstanding shares covered by
outstanding restricted stock unit and deferred stock unit awards including the crediting of dividend equivalents through December 31,
2016. The weighted-average exercise price of awards outstanding under equity compensation plans approved by security holders
reflected in column (b) above is calculated based on the outstanding stock options under these plans as the other forms of awards
outstanding have no exercise price. Awards payable solely in cash are not reflected in this table.
2 This amount is the aggregate number of shares available for new awards under the Edison International 2007 Performance Incentive
Plan as of December 31, 2016, and includes shares that have become available from the Edison International Equity Compensation
Plan and the Edison International 2000 Equity Plan (together, the "Prior Plans"). However, no additional awards may be granted under
the Prior Plans. The maximum number of shares of Edison International Common Stock that may be issued or transferred pursuant to
awards under the Edison International 2007 Performance Incentive Plan is 66,000,000 shares, plus the number of any shares subject to
awards issued under the Prior Plans and outstanding as of April 26, 2007 that expire, cancel or terminate without being exercised or
shares being issued. Shares available under the Edison International 2007 Performance Incentive Plan may generally, subject to certain
limits set forth in the plan, be used for any type of award authorized under that plan, including stock options, restricted stock,
performance shares, restricted or deferred units, and stock bonuses.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information responding to this section will appear in the Joint Proxy Statement under the headings "Certain Relationships and
Related Transactions," and "Our Corporate Governance—Is SCE subject to the same corporate governance stock exchange
rules as EIX?", "—How does the Board determine which directors are independent?", "—Which directors has the Board
determined are independent to serve on the Board?" and "Where can I find the Company's corporate governance documents?"
and is incorporated herein by this reference.
116
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information responding to this section will appear in the Joint Proxy Statement under the heading "Independent Auditor
Fees," and is incorporated herein by this reference.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
Edison International Common Stock is traded on the New York Stock Exchange under the symbol "EIX."
Market information responding to this section is included in "Notes to Consolidated Financial Statements—Note 18.
Quarterly Financial Data (Unaudited)." There are restrictions on the ability of Edison International's subsidiaries to transfer
funds to Edison International that materially limit the ability of Edison International to pay cash dividends. Such restrictions
are discussed in the MD&A under the heading "Liquidity and Capital Resources—Edison International Parent and Other,"
and in "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—SCE Dividend
Restrictions." The number of common stockholders of record of Edison International was 35,375 on February 17, 2017.
Purchases of Equity Securities by Edison International and Affiliated Purchasers
The following table contains information about all purchases of Edison International Common Stock made by or on behalf of
Edison International in the fourth quarter of 2016.
Period
October 1, 2016 to October 31, 2016
November 1, 2016 to November 30, 2016
December 1, 2016 to December 31, 2016
(a) Total
Number of
Shares
(or Units)
Purchased1
536,660
323,807
335,279
Total
1,195,746
$
(b) Average
Price Paid per
Share (or Unit)1
71.70
$
70.36
71.43
71.26
(c) Total
Number of Shares
(or Units)
Purchased
as Part of
Publicly
Announced
Plans or
Programs
(d) Maximum
Number (or
Approximate
Dollar Value)
of Shares
(or Units) that May
Yet Be Purchased
Under the Plans or
Programs
—
—
—
—
—
—
—
—
1 The shares were purchased by agents acting on Edison International's behalf for delivery to plan participants to fulfill requirements in
connection with Edison International's: (i) 401(k) Savings Plan; (ii) Dividend Reinvestment and Direct Stock Purchase Plan; and
(iii) long-term incentive compensation plans. The shares were purchased in open-market transactions pursuant to plan terms or
participant elections. The shares were never registered in Edison International's name and none of the shares purchased were retired as a
result of the transactions.
Purchases of Equity Securities by Southern California Edison and Affiliated Purchasers
Information with respect to frequency and amount of cash dividends is included in "Notes to the Consolidated Financial
Statements—Note 18. Quarterly Financial Data (Unaudited)." As a result of the formation of a holding company described
under the heading "Business" above, all of the issued and outstanding common stock of SCE is owned by Edison
International and there is no market for such stock.
Information on securities authorized for issuance under equity compensation plans, is not applicable because SCE has no
compensation plans under which equity securities of SCE are authorized for issuance.
117
Comparison of Five-Year Cumulative Total Return
Edison International
S & P 500 Index
Philadelphia Utility Index
2011
2012
2013
2014
2015
2016
$ 100
$ 112
$ 119
$ 172
$ 160
$ 200
100
100
116
99
154
110
175
142
177
133
198
157
Note: Assumes $100 invested on December 31, 2011 in stock or index including reinvestment of dividends. Performance of the Philadelphia Utility Index is
regularly reviewed by management and the Board of Directors in understanding Edison International's relative performance and is used in conjunction with
elements of Edison International's compensation program.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements
See Consolidated Financial Statements listed in the Table of Contents of this report.
(a)(2) Report of Independent Registered Public Accounting Firm and Schedules Supplementing Financial Statements
The following documents may be found in this report at the indicated page numbers under the headings "Financial Statements
and Supplementary Data" and "Exhibits and Financial Statement Schedules" in the Table of Contents of this report.
Reports of Independent Registered Public Accounting Firm
Schedule I – Condensed Financial Information of Edison International Parent
Schedule II – Valuation and Qualifying Accounts of Edison International and SCE
Schedule I for SCE and Schedules III through V, inclusive, for both Edison International and SCE are omitted as not required
or not applicable.
(a)(3) Exhibits
See "Exhibit Index" in this report.
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.
118
EDISON INTERNATIONAL
SCHEDULE I – CONDENSED FINANCIAL INFORMATION OF PARENT
CONDENSED BALANCE SHEETS
(in millions)
Assets:
Cash and cash equivalents
Other current assets
Total current assets
Investments in subsidiaries
Deferred income taxes
Other long-term assets
Total assets
Liabilities and equity:
Short-term debt
Current portion of long-term debt
Other current liabilities
Total current liabilities
Long-term debt
Other long-term liabilities
Total equity
Total liabilities and equity
December 31,
2016
2015
$
6
$
261
267
7
259
266
13,459
12,696
$
$
646
108
14,480
539
400
484
1,423
397
664
$
$
626
110
13,698
646
214
368
1,228
398
704
11,996
11,368
$
14,480
$
13,698
119
EDISON INTERNATIONAL
SCHEDULE I – CONDENSED FINANCIAL INFORMATION OF PARENT
CONDENSED STATEMENTS OF INCOME
For the Years Ended December 31, 2016, 2015 and 2014
(in millions)
Interest income from affiliates
Operating expenses and interest expense
Loss before equity in earnings of subsidiaries
Equity in earnings of subsidiaries
Income before income taxes
Income tax benefit
Income from continuing operations
Income from discontinued operations, net of tax
2016
2015
2014
$
6
$
3
$
3
86
(80)
1,337
1,257
(42)
1,299
12
78
(75)
1,025
950
(35)
985
35
94
(91)
1,482
1,391
(36)
1,427
185
Net income
$
1,311
$
1,020
$
1,612
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended December 31, 2016, 2015 and 2014
(in millions)
Net income
Other comprehensive income (loss), net of tax
Comprehensive income
2016
2015
2014
$
$
1,311
3
1,314
$
$
1,020
2
1,022
$
$
1,612
(45)
1,567
120
EDISON INTERNATIONAL
SCHEDULE I – CONDENSED FINANCIAL INFORMATION OF PARENT
CONDENSED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2016, 2015 and 2014
(in millions)
Net cash provided by (used in) operating activities
Cash flows from financing activities:
Long-term debt issued
Long-term debt issuance costs
Payable due to affiliates
Short-term debt financing, net
Settlements of stock-based compensation, net
Dividends paid
Net cash (used in) provided by financing activities
Capital contributions to affiliate
Loans to affiliate
Net cash used in investing activities:
Net decrease in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Note 1. Basis of Presentation
2016
2015
2014
$
493
$
641
$
(73)
400
(3)
34
(108)
(44)
(626)
(347)
(147)
—
(147)
(1)
7
—
—
54
26
(42)
(544)
(506)
(30)
(106)
(136)
(1)
8
$
6
$
7
$
—
—
66
584
(24)
(463)
163
(35)
(60)
(95)
(5)
13
8
The accompanying condensed financial statements of Edison International Parent should be read in conjunction with the
consolidated financial statements and notes thereto of Edison International and subsidiaries ("Registrant") included in this
Form 10-K. Edison International's Parent significant accounting policies are consistent with those of the Registrant, SCE and
other wholly owned and controlled subsidiaries.
Dividends Received
Edison International Parent received cash dividends from SCE of $701 million, $758 million and $378 million in 2016, 2015
and 2014, respectively.
Dividend Restrictions
The CPUC regulates SCE's capital structure which limits the dividends it may pay Edison International. SCE may make
distributions to Edison International as long as the common equity component of SCE's capital structure remains at or above
the 48% on a 13-month weighted average basis. At December 31, 2016, SCE's 13-month weighted-average common equity
component of total capitalization was 50.4% and the maximum additional dividend that SCE could pay to Edison
International under this limitation was approximately $585 million, resulting in a restriction on SCE's net assets of
$13.9 billion.
Note 2. Debt and Credit Agreements
Long-Term Debt
During the first quarter of 2016, Edison International Parent issued $400 million of 2.95% senior notes due in 2023. The
proceeds from these bonds were used to repay commercial paper borrowings and for general corporate purposes. In addition,
at December 31, 2016 and 2015, Edison International Parent had 3.75% senior notes outstanding of $400 million, which
matures in 2017.
121
Credit Agreements and Short-Term Debt
During the third quarter of 2016, Edison International Parent amended the credit facility to extend the maturity date for the
$1.25 billion credit facility to July 2021. At December 31, 2016, the outstanding commercial paper was $538 million at a
weighted-average interest rate of 0.97%. This short-term debt was supported by the $1.25 billion multi-year revolving credit
facility. At December 31, 2015, the outstanding commercial paper was $646 million at a weighted-average interest rate of
0.78%.
The following table summarizes the status of the credit facility at December 31, 2016:
(in millions)
Commitment
Outstanding borrowings
Amount available
$
$
1,250
(538)
712
The debt covenant in Edison International's credit facility requires a consolidated debt to total capitalization ratio of less than
or equal to 0.65 to 1. At December 31, 2016, Edison International's consolidated debt to total capitalization ratio was 0.47
to 1.
Note 3. Related-Party Transactions
Edison International's Parent expense from services provided by SCE was $3 million annually in 2016, 2015 and 2014.
Edison International's Parent interest expense from loans due to affiliates was $3 million in 2016, $6 million in 2015 and
$1 million in 2014. Edison International Parent had current related-party receivables of $262 million and $252 million and
current related-party payables of $221 million and $149 million at December 31, 2016 and 2015, respectively. Edison
International Parent had long-term related-party receivables of $103 million and $105 million at December 31, 2016 and
2015, respectively, and long-term related-party payables of $243 million and $213 million at December 31, 2016 and 2015,
respectively.
Note 4. Contingencies
For a discussion of material contingencies see "Notes to Consolidated Financial Statements—Note 7. Income Taxes,"
"—Note 11. Commitments and Contingencies."
122
EDISON INTERNATIONAL
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
(in millions)
For the Year ended December 31, 2016
Allowance for uncollectible accounts
Customers
All others
Total allowance for uncollectible amounts
Tax valuation allowance
For the Year ended December 31, 2015
Allowance for uncollectible accounts
Customers
All others
Total allowance for uncollectible amounts
Tax valuation allowance
For the Year ended December 31, 2014
Allowance for uncollectible accounts
Customers
All others
Additions
Balance at
Beginning
of
Period
Charged to
Costs and
Expenses
Charged to
Other
Accounts
Deductions
Balance at
End of
Period
$
$
$
$
$
$
$
$
$
$
$
$
$
$
46.2
15.5
61.7
32.0
48.9
23.3
72.2
29.0
52.2
17.8
17.7
15.9
33.6
$
$
— $
— $
—
— $
— $
22.7
$
10.8
33.5 a $
8.0 d $
23.9
18.0
41.9
3.0
24.1
19.7
43.8
$
$
$
$
$
— $
— $
—
— $
— $
26.6
$
25.8
52.4 a $
— $
— $
27.4
$
—
14.2
41.6 a $
— $
— $ 1,351.0 c $
41.2
20.6
61.8
24.0
46.2
15.5
61.7
32.0
48.9
23.3
72.2
29.0
Total allowance for uncollectible amounts
Tax valuation allowance
a Accounts written off, net.
$
70.0
$
$ 1,380.0 b $
b Edison International recorded deferred tax assets of $2.2 billion related to net operating losses and tax carryforwards that pertain to
Edison International's consolidated or combined federal and state tax returns, including approximately $1.6 billion related to EME.
Edison International continues to consolidate EME for federal and certain combined state tax returns. EME's Plan of Reorganization,
filed in December 2013 ("December Plan of Reorganization"), provides for the transfer of EIX's ownership interest to the creditors,
which would result in a tax deconsolidation of EME. Under federal and state tax regulations, the tax deconsolidation of EME would
reduce the amounts of net operating loss and tax credits carryforwards that Edison International would be eligible to use in future
periods. As a result of the EME's December Plan of Reorganization, which would result in a tax deconsolidation of EME, Edison
International has recorded a $1.380 billion valuation allowance based on the estimated amount of such benefits as calculated under the
applicable federal and state tax regulations as of December 31, 2013. The deferred income tax benefits recognized by Edison
International less the valuation allowance for amounts that would no longer be available upon tax deconsolidation of EME was
approximately $220 million.
c On April 1, 2014, under the Amended Plan of Reorganization, EME emerged from bankruptcy free of liabilities but remained an
indirect wholly-owned subsidiary of Edison International, which will continue to be consolidated with Edison International for income
tax purposes. Edison International anticipates realization of the federal and California tax benefits before they expire. Therefore, the
valuation allowance on federal and California tax benefits that Edison International recorded in 2013 was released in 2014. The
remaining valuation allowance is related to non California state tax benefits.
d
In 2016, Edison International determined that $8 million of the assets subject to a valuation allowance, had no expectation of recovery
and were written off.
123
SOUTHERN CALIFORNIA EDISON COMPANY
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
(in millions)
For the Year ended December 31, 2016
For the Year ended
Customers
All others
Total allowance for uncollectible accounts
For the Year ended December 31, 2015
Allowance for uncollectible accounts
Customers
All others
Total allowance for uncollectible accounts
For the Year ended December 31, 2014
Allowance for uncollectible accounts
Customers
All others
Total allowance for uncollectible accounts
a Accounts written off, net.
Additions
Balance at
Beginning
of
Period
Charged to
Costs and
Expenses
Charged to
Other
Accounts
Deductions
Balance at
End of
Period
$
$
$
$
$
$
46.2
15.5
61.7
48.9
18.7
67.6
52.2
13.3
65.5
$
$
$
$
$
$
17.0
15.9
32.9
23.9
18.0
41.9
24.1
19.6
43.7
$
$
$
$
$
$
— $
—
— $
22.7
$
10.8
33.5 a $
40.5
20.6
61.1
— $
—
— $
26.6
$
21.2
47.8 a $
46.2
15.5
61.7
— $
—
— $
27.4
$
14.2
41.6 a $
48.9
18.7
67.6
124
SIGNATURES
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.
EDISON INTERNATIONAL
SOUTHERN CALIFORNIA EDISON COMPANY
By:
/s/ Aaron D. Moss
By:
/s/ Connie J. Erickson
Aaron D. Moss
Vice President and Controller
(Duly Authorized Officer and
Principal Accounting Officer)
Connie J. Erickson
Vice President and Controller
(Duly Authorized Officer and
Principal Accounting Officer)
Date: February 21, 2017
Date: February 21, 2017
125
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrants and in the capacities and on the date indicated.
Signature
A. Principal Executive Officers
Pedro J. Pizarro*
Kevin Payne*
B. Principal Financial Officers
Maria Rigatti*
William M. Petmecky III*
C. Principal Accounting Officers
Aaron D. Moss
Connie J. Erickson
D. Directors (Edison International and
Southern California Edison Company,
unless otherwise noted)
Jagjeet S. Bindra*
Vanessa C.L. Chang*
Louis Hernandez, Jr.*
James T. Morris*
Pedro J. Pizarro*
Kevin Payne (SCE only)*
Richard T. Schlosberg, III*
Linda G. Stuntz*
William P. Sullivan*
Ellen O. Tauscher*
Peter J. Taylor*
Brett White*
Title
President,
Chief Executive Officer and Director
(Edison International)
Chief Executive Officer and SCE Director
(Southern California Edison Company)
Executive Vice President and Chief Financial Officer
(Edison International)
Senior Vice President and Chief Financial Officer
(Southern California Edison Company)
Vice President and Controller
(Edison International)
Vice President and Controller
(Southern California Edison Company)
Director
Director
Director
Director
Director
Director
Director
Director
Chair of the Board and Director
Director
Director
Director
*By:
/s/ Aaron D. Moss
*By:
/s/ Connie J. Erickson
Aaron D. Moss
Vice President and Controller
(Attorney-in-fact for EIX Directors and Officers)
Connie J. Erickson
Vice President and Controller
(Attorney-in-fact for SCE Directors and Officers)
Date: February 21, 2017
Date: February 21, 2017
126
EXHIBIT INDEX
Exhibit
Number
Description
Edison International
3.1
3.2
Certificate of Restated Articles of Incorporation of Edison International, effective December 19, 2006 (File
No. 1-9936, filed as Exhibit 3.1 to Edison International's Form 10-K for the year ended December 31, 2006)*
Bylaws of Edison International, as amended October 27, 2016 (File No. 1-9936, filed as Exhibit 3.1 to Edison
International's Form 10-Q dated November 1, 2016 and filed November 1, 2016)*
Southern California Edison Company
3.3
3.4
Restated Articles of Incorporation of Southern California Edison Company, effective March 2, 2006, together
with all Certificates of Determination of Preference Stock issued since March 2, 2006 (File No. 1-2313 filed as
Exhibit 3.1 to Southern California Edison Company's Form 10-Q for the quarter ended March 31, 2016)*
Bylaws of Southern California Edison Company, as amended October 27, 2016 (File No. 1-2313, filed as
Exhibit 3.2 to Southern California Edison Company's Form 10-Q dated November 1, 2016 and filed November 1,
2016)*
Edison International
4.1
Senior Indenture, dated September 10, 2010 (File No. 1-9936, filed as Exhibit 4.1 to Edison International's
Form 10-Q for the quarter ended September 30, 2010)*
Southern California Edison Company
4.2
4.3
Southern California Edison Company First Mortgage Bond Trust Indenture, dated as of October 1, 1923 (File
No. 1-2313, filed as Exhibit 4.2 to Southern California Edison Company's Form 10-K for the year ended
December 31, 2010)*
Southern California Edison Company Indenture, dated as of January 15, 1993 (File No. 1-2313, Form 8-K dated
January 28, 1993)*
Edison International
10.1**
10.2**
10.3**
10.3.1**
10.3.2**
10.4**
10.5**
10.6**
10.6.1**
10.7**
10.8**
10.8.1**
Edison International Director Deferred Compensation Plan as amended effective June 19, 2014 (File No. 1-9936,
filed as Exhibit 10.3 for the quarter ended June 30, 2014)*
Edison International 2008 Director Deferred Compensation Plan, as amended and restated effective June 19, 2014
(File No. 1-9936, filed as Exhibit No. 10.2 for the quarter ended June 30, 2014)*
Director Grantor Trust Agreement, dated August 1995 (File No. 1-9936, filed as Exhibit 10.10 to Edison
International's Form 10-K for the year ended December 31, 1995)*
Director Grantor Trust Agreement Amendment 2002-1, effective May 14, 2002 (File No. 1-9936, filed as
Exhibit 10.4 to Edison International's Form 10-Q for the quarter ended June 30, 2002)*
Executive and Director Grantor Trust Agreements Amendment 2008-1 (File No. 1-9936, filed as Exhibit
No. 10.6.2 to Edison International's Form 10-K for the year ended December 31, 2008)*
Edison International Executive Deferred Compensation Plan, as amended and restated effective June 19, 2014
(File No. 1-9936, filed as Exhibit 10.4 for the quarter ended June 30, 2014)*
Edison International 2008 Executive Deferred Compensation Plan, as amended and restated effective
December 9, 2015* (File No. 1-9936, filed as Exhibit No. 10.5 to Edison International's Form 10-K for the year
ended December 31, 2015)*
Executive Grantor Trust Agreement, dated August 1995 (File No. 1-9936, filed as Exhibit 10.12 to Edison
International's Form 10-K for the year ended December 31, 1995)*
Executive Grantor Trust Agreement Amendment 2002-1, effective May 14, 2002 (File No. 1-9936, filed as
Exhibit 10.3 to Edison International's Form 10-Q for the quarter ended June 30, 2002)*
Southern California Edison Company Executive Supplemental Benefit Program, as amended effective August 24,
2016 (File No. 1-9936, filed as Exhibit No. 10.3 for the quarter ended September 30, 2016)*
Southern California Edison Company Executive Retirement Plan, as amended effective June 19, 2014 (File No.
1-9936, filed as Exhibit 10.7 for the quarter ended June 30, 2014)*
Edison International 2008 Executive Retirement Plan, as amended and restated effective August 24, 2016 (File
No. 1-9936, filed as Exhibit No. 10.1 to Edison International's Form 10-Q for the quarter ended September 30,
2016)*
127
Exhibit
Number
10.9**
10.10**
10.11**
10.11.1**
10.12**
10.13**
Description
Edison International Executive Incentive Compensation Plan, as amended and restated effective August 24, 2016
(File No. 1-9936, filed as Exhibit No. 10.2 to Edison International's Form 10-Q for the quarter ended September
30, 2016)*
Edison International 2008 Executive Disability Plan, as amended and restated effective January 1, 2016 (File No.
1-9936, filed as Exhibit No. 10.2 to Edison International's Form 10-Q for the quarter ended March 31, 2016)*
Edison International 2008 Executive Survivor Benefit Plan, as amended and restated effective June 19, 2014 (File
No. 1-9936, filed as Exhibit No. 10.10 to Edison International's Form 10-Q for the quarter ended June 30, 2014)*
Termination of Edison International 2008 Executive Survivor Benefit Plan, adopted on December 9, 2015* (File
No. 1-9936, filed as Exhibit No. 10.11.1 to Edison International's Form 10-K for the year ended December 31,
2015)*
Retirement Plan for Directors, as amended and restated effective December 31, 2008 (File No. 1-9936 filed as
Exhibit No. 10.17 to Edison International's Form 10-K for the year ended December 31, 2008)*
Equity Compensation Plan as restated effective January 1, 1998 (File No. 1-9936, filed as Exhibit 10.1 to Edison
International's Form 10-Q for the quarter ended June 30, 1998)*
10.13.1**
Equity Compensation Plan Amendment No. 1, effective May 18, 2000 (File No. 1-9936, filed as Exhibit 10.4 to
Edison International's Form 10-Q for the quarter ended June 30, 2000)*
10.13.2** Amendment of Equity Compensation Plans, adopted October 25, 2006 (File No. 1-9936, filed as Exhibit 10.52 to
Edison International's Form 10-K for the year ended December 31, 2006)*
10.14**
10.15**
10.15.1**
2000 Equity Plan, effective May 18, 2000 (File No. 1-9936, filed as Exhibit 10.1 to Edison International's
Form 10-Q for the quarter ended June 30, 2000)*
Edison International 2007 Performance Incentive Plan as amended and restated effective May 2, 2016 (File
No. 1-9936, filed as Exhibit 10.1 to the Edison International Form 10-Q for the quarter ended June 30, 2016)*
Edison International 2008 Long-Term Incentives Terms and Conditions (File No. 1-9936, filed as Exhibit 10.2 to
Edison International's Form 10-Q for the quarter ended March 31, 2008)*
10.15.2**
Edison International 2009 Long-Term Incentives Terms and Conditions (File No. 1-9936, filed as Exhibit 10.2 to
Edison International's Form 10-Q for the quarter ended March 31, 2009)*
10.15.3**
Edison International 2010 Long-Term Incentives Terms and Conditions (File No. 1-9936, filed as Exhibit 10.2 to
Edison International's Form 10-Q for the quarter ended March 31, 2010)*
10.15.4**
Edison International 2011 Long-Term Incentives Terms and Conditions (File No. 1-9936, filed as Exhibit 10.2 to
Edison International's Form 10-Q for the quarter ended March 31, 2011)*
10.15.5**
Edison International 2012 Long-Term Incentives Terms and Conditions (File No. 1-9936, filed as Exhibit 10.2 to
Edison International's Form 10-Q for the quarter ended March 31, 2012)*
10.15.6**
Edison International 2013 Long-Term Incentives Terms and Conditions (File No. 1-9936, filed as Exhibit 10.2 to
Edison International's Form 10-Q for the quarter ended March 31, 2013)*
10.15.7**
Edison International 2014 Long-Term Incentives Terms and Conditions (File, No. 1-9936, filed as Exhibit 10.3 to
Edison International's Form 10-Q for the quarter ended March 31, 2014)*
10.15.8**
10.15.9**
10.16**
10.16.1**
Edison International 2015 Long-Term Incentives Terms and Conditions (File, No. 1-9936, filed as Exhibit 10.2 to
Edison International's Form 10-Q for the quarter ended March 31, 2015)*
Edison International 2016 Long-Term Incentives Terms and Conditions (File, No. 1-9936, filed as Exhibit 10.4 to
Edison International's Form 10-Q for the quarter ended March 31, 2016)*
Terms and conditions for 2006 long-term compensation awards under the Equity Compensation Plan and 2000
Equity Plan (File No. 1-9936, filed as Exhibit 10.29 to Edison International's Form 10-K for the year ended
December 31, 2005)*
Terms and conditions for 2007 long-term compensation awards under the Equity Compensation Plan and the 2007
Performance Incentive Plan (File No. 1-9936, filed as Exhibit 10.1 to Edison International's Form 10-Q for the
quarter ended March 31, 2007)*
10.17**
Director Nonqualified Stock Option Terms and Conditions under the 2007 Performance Incentive Plan
(File 1-9936, filed as Exhibit 10.2 to Edison International's Form 10-Q for the quarter ended March 31, 2007)*
128
Exhibit
Number
10.18**
Description
Edison International and Edison Mission Energy Affiliate Option Exchange Offer Summary of Deferred
Compensation Alternatives, dated July 3, 2000 (File No. 1-13434, filed as Exhibit 10.94 to the Edison Mission
Energy's Form 10-K for the year ended December 31, 2001)*
10.18.1**
Edison International and Edison Mission Energy Affiliate Option Exchange Offer Circular, dated July 3, 2000
(File No. 1-13434, filed as Exhibit 10.93 to the Edison Mission Energy's Form 10-K for the year ended
December 31, 2001)*
10.19**
10.20**
10.21**
10.22**
10.23
10.23.1
10.23.2
10.23.3
10.23.4
10.23.5
10.24**
10.25**
10.26**
Edison International 2008 Executive Severance Plan, as amended and restated effective August 24, 2016 (File No.
1-9936, filed as Exhibit 10.5 for the quarter ended September 30, 2016)*
Edison International and Southern California Edison Company Director Compensation Schedule, as adopted
August 25, 2016 (File No. 1-9936, filed as Exhibit 10.4 to Edison International's Form 10-Q for the quarter ended
September 30, 2016)*
Edison International Director Matching Gifts Program, as adopted June 24, 2010 (File No. 1-9936, filed as
Exhibit 10.1 to Edison International's Form 10-Q for the quarter ended June 30, 2010*
Edison International Director Nonqualified Stock Options 2005 Terms and Conditions (File No. 1-9936, filed as
Exhibit 99.3 to Edison International's Form 8-K dated May 19, 2005, and filed on May 25, 2005)*
Amended and Restated Agreement for the Allocation of Income Tax Liabilities and Benefits among Edison
International, Southern California Edison Company and The Mission Group dated September 10, 1996 (File
No. 1-9936, filed as Exhibit 10.3 to Edison International's Form 10-Q for the quarter ended September 30, 2002)*
Amended and Restated Tax-Allocation Agreement among The Mission Group and its first-tier subsidiaries dated
September 10, 1996 (File No. 1-9936, filed as Exhibit 10.3.1 to Edison International's Form 10-Q for the quarter
ended September 30, 2002)*
Amended and Restated Tax-Allocation Agreement between Edison Capital and Edison Funding Company
(formerly Mission First Financial and Mission Funding Company) dated May 1, 1995 (File No. 1-9936, filed as
Exhibit 10.3.2 to Edison International's Form 10-Q for the quarter ended September 30, 2002)*
Amended and Restated Tax-Allocation Agreement between Mission Energy Holding Company and Edison
Mission Energy dated February 13, 2012 (File No. 333-68630, filed as Exhibit 10.11 to Edison Mission Energy's
Form 10-K for the year ended December 31, 2011)*
Modification No. 1 to the Amended and Restated Tax-Allocation Agreement between Mission Energy Holding
Company and Edison Mission Energy dated February 13, 2012 (File No. 333-68630, filed as Exhibit 10.1 to
Edison Mission Energy's Form 8-K dated November 15, 2012 and filed November 21, 2012)*
Amended and Restated Administrative Agreement Re Tax Allocation Payments, dated February 13, 2012, among
Edison International and subsidiary parties. (File No. 333-68630, filed as Exhibit 10.12 to Edison Mission
Energy's Form 10-K for the year ended December 31, 2011)*
Form of Indemnity Agreement between Edison International and its Directors and any officer, employee or other
agent designated by the Board of Directors (File No. 1-9936, filed as Exhibit 10.5 to Edison International's
Form 10-Q for the period ended June 30, 2005, and filed on August 9, 2005)*
Edison International 2016 Executive Annual Incentive Program (File No. 1-9936, filed as Exhibit 10.3 to Edison
International's Form 10-Q for the quarter ended March 31, 2016)*
Section 409A and Other Conforming Amendments to Terms and Conditions (File No. 1-9936, filed as Exhibit
No. 10.37 to Edison International's Form 10-K for the year ended December 31, 2008)*
10.26.1**
Section 409A Amendments to Director Terms and Conditions (File No. 1-9936, filed as Exhibit No. 10.37.1 to
Edison International's Form 10-K for the year ended December 31, 2008)*
10.27
10.28
10.29
Amended and Restated Credit Agreement, dated as of July 14, 2015 among Edison International and the Lenders
named therein (File 1-9936, filed as Exhibit 10.1 to Edison International's Form 8-K dated July 14, 2015 and filed
July 17, 2015)*
Amended and Restated Credit Agreement, dated as of July 14, 2015, among Southern California Edison Company
and the Lenders named therein (File 1-2313, filed as Exhibit 10.2 to Southern California Edison Company's Form
8-K dated July 14, 2015 and filed July 17, 2015)*
Term Loan Credit Agreement, dated as of January 13, 2017, among Southern California Edison Company, the
several banks and other financial institutions from time to time parties thereto, and Wells Fargo Bank, N.A., as
administrative agent for the lenders (File 1-2313, filed as Exhibit 10.1 to Southern California Edison Company's
Form 8-K dated January 13, 2017 and filed January 13, 2017)*
129
Exhibit
Number
10.30
21
23.1
23.2
24.1
24.2
31.1
31.2
32.1
32.2
101.1
101.2
Description
Amended and Restated Settlement Agreement between Southern California Edison Company, San Diego Gas &
Electric Company, the Office of Ratepayer Advocates, The Utility Reform Network, Friends of the Earth, and the
Coalition of California Utility Employees, dated September 23, 2014 (File No. 1-9936, filed as Exhibit 10.1 to
Edison International's Form 10-Q for the quarter ended September 30, 2014)*
Subsidiaries of the Registrants
Consent of Independent Registered Public Accounting Firm (Edison International)
Consent of Independent Registered Public Accounting Firm (Southern California Edison Company)
Powers of Attorney of Edison International and Southern California Edison Company
Certified copies of Resolutions of Boards of Edison International and Southern California Edison Company
Directors Authorizing Execution of SEC Reports
Certifications of the Chief Executive Officer and Chief Financial Officer of Edison International pursuant to
Section 302 of the Sarbanes-Oxley Act
Certifications of the Chief Executive Officer and Chief Financial Officer of Southern California Edison Company
pursuant to Section 302 of the Sarbanes-Oxley Act
Certifications of the Chief Executive Officer and the Chief Financial Officer of Edison International required by
Section 906 of the Sarbanes-Oxley Act
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
Financial statements from the annual report on Form 10-K of Edison International for the year ended
December 31, 2016, filed on February 21, 2017, formatted in 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; (v) Consolidated Statements of Changes in Equity and (vi) the Notes to
Consolidated Financial Statements
Financial statements from the annual report on Form 10-K of Southern California Edison Company for the year
ended December 31, 2016, filed on February 21, 2017, formatted in 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; (v) Consolidated Statements of Changes in Equity and (vi) the
Notes to Consolidated Financial Statements
________________________________________
*
Incorporated by reference pursuant to Rule 12b-32.
** Indicates a management contract or compensatory plan or arrangement, as required by Item 15(a)(3).
130
Edison International and Southern California Edison 2016 Annual Report
Linda G. Stuntz 3,4
Partner
Stuntz, Davis & Staffier, P.C.
Director since 2014
Ellen O. Tauscher 1,3
Strategic Advisor
Baker, Donelson, Bearman,
Caldwell & Berkowitz
Director since 2013
Peter J. Taylor 1,2
President
ECMC Foundation
Director since 2011
Brett White 2,4
Chairman and
Chief Executive Officer
Cushman & Wakefield
Director since 2007
1 Audit Committee
2 Compensation and Executive
Personnel Committee
3 Finance, Operations &
Safety Oversight Committee
4 Nominating/Corporate Governance
Committee
Board of Directors
William P. Sullivan 3,4
Chair of the Board
Retired Chief Executive Officer
Agilent Technologies
Director since 2015
Pedro J. Pizarro
President and Chief Executive Officer
Edison International
Director of EIX Since 2016
Director of SCE since 2014
Jagjeet S. Bindra 3,4
Retired President
Chevron Global Manufacturing
Director since 2010
Vanessa C.L. Chang 1,2
Director
EL & EL Investments
Director since 2007
Louis Hernandez, Jr. 1,3
Chairman and
Chief Executive Officer
Avid Technology, Inc.
Director since 2016
James T. Morris 1,2
Chairman, President and
Chief Executive Officer
Pacific Life Insurance Co.
Director since 2016
Richard T. Schlosberg, III 2,4
Retired President and
Chief Executive Officer
The David and Lucile Packard
Foundation
Director since 2002
Edison International
Pedro J. Pizarro
President and
Chief Executive Officer
Maria C. Rigatti
Executive Vice President and
Chief Financial Officer
Adam S. Umanoff
Executive Vice President and
General Counsel
Janet T. Clayton
Senior Vice President
Corporate Communications
J. Andrew Murphy
Senior Vice President
Strategic Planning
Gaddi H. Vasquez
Senior Vice President
Government Affairs
Robert C. Boada
Vice President and Treasurer
Scott S. Cunningham
Vice President
Investor Relations
David J. Heller
Vice President, Risk Management
and Insurance, and General Auditor
Barbara E. Mathews
Vice President
Associate General Counsel,
Chief Governance Officer and
Corporate Secretary
Michael D. Montoya
Vice President and
Chief Ethics and
Compliance Officer
Aaron D. Moss
Vice President and
Controller
Oded J. Rhone
Vice President
Strategic Planning
Jacqueline Trapp
Vice President
Human Resources
Andrea L. Wood
Vice President
Tax
Edison International and Southern California Edison 2016 Annual Report
Southern California Edison
Edison Energy Group
Ronald L. Litzinger
President
Edison Energy Group
Lloyd J. MacNeil
General Counsel
Edison Energy Group
Mark C. Clarke
Vice President
Chief Financial Officer
Edison Energy Group
Robert L. Scheuermann
President
SoCore Energy LLC
Allan J. Schurr
President
Edison Energy, LLC
Steven D. Eisenberg
Senior Vice President
Commercial Operations
Edison Energy, LLC
Duncan McIntyre
President
Altenex, LLC
Justin McMaster
President
Delta Energy Services, LLC
Daniel Weeden
President
ENERActive Solutions, LLC
Kevin M. Payne
Chief Executive Officer
Ronald O. Nichols
President
Caroline Choi
Senior Vice President
Regulatory Affairs
Janet T. Clayton
Senior Vice President
Corporate Communications
Stuart R. Hemphill
Senior Vice President
Customer & Operational Services
Todd L. Inlander
Senior Vice President and
Chief Information Officer
William M. Petmecky, III
Senior Vice President and
Chief Financial Officer
Russell C. Swartz
Senior Vice President and
General Counsel
Gaddi H. Vasquez
Senior Vice President
Government Affairs
Douglas R. Bauder
Vice President
Operational Services
Lisa D. Cagnolatti
Vice President
Customer Service Operations
Colin E. Cushnie
Vice President
Energy Procurement & Management
Chris C. Dominski
Vice President
Operational Finance
Connie J. Erickson
Vice President and Controller
Gregory M. Ferree
Vice President
Distribution
Paul J. Grigaux
Vice President
Transmission, Substations
and Operations
Philip Herrington
Vice President
Generation
Michael Marelli
Vice President
Business Customer Division
Andrew S. Martinez
Vice President
Safety, Security and
Business Resiliency
Nestor Martinez
Vice President
Engineering & Technical Services
Barbara E. Mathews
Vice President
Associate General Counsel,
Chief Governance Officer and
Corporate Secretary
Michael D. Montoya
Vice President and
Chief Ethics and Compliance Officer
Thomas J. Palmisano
Vice President
Decommissioning and
Chief Nuclear Officer
Steven D. Powell
Vice President
Strategy, Integrated Planning and
Performance
J. Christopher Thompson
Vice President
Local Public Affairs
Jacqueline Trapp
Vice President
Human Resources
Marc L. Ulrich
Vice President
Customer Programs & Services
Andrea L. Wood
Vice President
Tax
Daniel Wood
Vice President and
Treasurer
2016 FINANCIAL HIGHLIGHTS
Dollar amounts in millions, except per-share data
Years ended December 31,
Operating revenue
Basic earnings (1)
Less: non-core items
2016
2015
2014
$11,869
$1,311
$11,524 $13,413
$1,612
$1,020
Write -down, impairment and other charges
Discontinued operations
Other items
Total non-core items
Core earnings (1)
Basic earnings per share (1)
Core earnings per share (1)
Total assets at December 31
Dividends paid per common share
Total shareholder return
Total employees
–
(382) (72)
12
185
5
2
17
(316) 115
$1,294
$1,497
$4.02 $3.13
$4.95
$3.97
$4.59
$4.10
$51,319
$50,229
$49,734
$1.92
$1.42
$1.67
24.9% (6.9)% 45.0%
12,390
12,768 13,690
35
31
$1,336
BUSINESS HIGHLIGHTS
Southern California Edison
Rate base (2)
Capital expenditures (2)
Peak demand (megawatts)
Total system sales (kilowatt-hours, in millions)
$25,923
$3,527
23,091
85,977
$24,596
$3,867
23,079
87,544
$23,254
$3,967
23,055
88,986
(1) Edison International’s earnings are prepared in accordance with generally accepted accounting principles (GAAP) used in the
United States. Management uses core earnings and core earnings per share (EPS) internally for financial planning and for analysis
of performance. Core earnings and core EPS are also used when communicating with analysts and investors regarding our
earnings results to facilitate comparisons of the Company’s performance from period to period. Core earnings and core EPS are
non-GAAP financial measures and may not be comparable to those of other companies. Core earnings and core EPS are defined
as basic earnings and basic EPS excluding income or loss from discontinued operations and income or loss from significant
discrete items that management does not consider representative of ongoing earnings. Basic earnings refer to net income
attributable to Edison International shareholders.
(2) Represents year-end rate base at December 31, which includes capital expenditures related to certain FERC-approved
projects during the construction phase. Capital expenditures for each year include accruals.
Inquiries may also be directed to:
Wells Fargo Shareowner Services
1110 Centre Point Curve, Suite 101
Mendota Heights, MN 55120-4100
Fax:
(651) 450-4033
Wells Fargo Shareowner ServicesSM
www.shareowneronline.com
Investor Relations
www.edisoninvestor.com
Email: invrel@sce.com
Phone: (877) 379-9515
Online account information:
www.shareowneronline.com
Dividend Reinvestment and
Direct Stock Purchase Plan
A prospectus and enrollment forms
for Edison International’s common
stock Dividend Reinvestment and
Direct Stock Purchase Plan are available
from Wells Fargo Shareowner
Services upon request
Edison International
Annual Meeting
The annual meeting of shareholders
will be held on Thursday, April 27,
2017, at 9:00 a.m., Pacific Time, at
the Hilton Los Angeles San Gabriel
Hotel, 225 West Valley Boulevard,
San Gabriel, California 91776.
Corporate Governance Practices
A description of Edison International’s
corporate governance practices is
available on our Web site at
www.edisoninvestor.com. The Edison
International Board Nominating/
Corporate Governance Committee
periodically reviews the Company’s
corporate governance practices and
makes recommendations to the
Company’s Board that the practices
be updated from time to time.
Stock Listing and Trading Information
Common Stock: The New York Stock
Exchange uses the ticker symbol EIX;
daily newspapers list the stock as
EdisonInt.
SCE’s 4.08%, 4.24%, 4.32% and
4.78% Series of $25 par value
cumulative preferred stock are listed
on the NYSE MKT stock exchange.
Shares of SCE’s preference stock are
not listed on an exchange. SCE Trust I,
SCE Trust II, SCE Trust III, SCE Trust
IV, and SCE Trust V, subsidiaries of
SCE, have issued Trust Preference
Securities which are listed on the
New York Stock Exchange.
Transfer Agent and Registrar
Wells Fargo Bank, N.A., which maintains
shareholder records, is the transfer
agent and registrar for Edison
International’s common stock and
Southern California Edison Company’s
preferred and preference stock.
Shareholders may call Wells Fargo
Shareowner Services, (800) 347-8625,
between 7 a.m. and 7 p.m. (Central
Time), Monday through Friday, to
speak with a representative (or to
use the interactive voice response
unit 24 hours a day, seven days a
week) regarding:
n stock transfer and name-change
requirements;
n address changes, including dividend
payment addresses;
n electronic deposit of dividends;
n taxpayer identification number
submissions or changes;
n duplicate 1099 and W-9 forms;
n notices of, and replacement of
destroyed stock certificates and
dividend checks;
n Edison International’s Dividend
Reinvestment and Direct
Stock Purchase Plan, including
enrollments, purchases,
withdrawals, terminations, transfers,
sales, duplicate statements and
direct debit of optional cash for
dividend reinvestment; and
n requests for access to online
account information.
Energy for What’s Ahead
Edison International and Southern California Edison
2016 Annual Report
2244 Walnut Grove Avenue
Rosemead, CA 91770
www.edison.com
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