Edison International and Southern California Edison
2019 Annual Report
2019 FINANCIAL HIGHLIGHTS
Dollar amounts in millions, except per-share data
Years ended December 31,
Operating revenue
Basic earnings (loss)(1)
Less: non-core items
2019
2018
2017
$12,347 $12,657 $12,320
$1,284
$(423)
$565
Wildfire-related claims, net of recoveries
(157)
(1,825)
–
Impairment and other
Wildfire insurance fund expense
Re-measurement of deferred taxes
Settlement of 1994-2006 California tax audits
Sale of SoCore Energy and other
Discontinued operations
Total non-core items
Core earnings (1)
Basic earnings (loss) per share (1)
Core earnings per share (1)
Total assets at December 31
Dividends paid per common share
Total shareholder return
Total employees
B U S I N E S S H I G H L I G H T S
Southern California Edison
Rate base (2)
Capital expenditures (3)
Peak demand (megawatts)
Total system sales (kilowatt-hours, in millions)
(133)
(109)
88
–
–
–
9
–
–
54
(46)
34
(448)
–
(466)
–
13
–
(311)
(1,774)
(901)
$1,595
$1,351
$1,466
$3.78 $(1.30)
$1.73
$4.70
$4.15
$4.50
$64,382 $56,715 $52,580
$2.45
$2.42
$2.17
37.6% (6.7)% (9.5)%
12,937
12,574 12,521
$32,592
$29,557 $27,816
$4,815
$4,363 $3,835
22,009
23,766
23,508
84,654
87,143
87,170
(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, and excludes rate base related to wildfire risk mitigation capital expenditures required by California
Assembly Bill 1054.
(3) Capital expenditures for each year include accruals.
ON THE COVER:
An aerial inspection team gets a close-up view of a pole top by using drones — enabling rapid evaluation of hard-to-reach equipment.
LETTER TO SHAREHOLDERS
Clean energy initiatives and wildfire risk mitigation continued to drive our
business in 2019 and there was much progress to celebrate. That said, a
report to shareholders on the past year must begin by expressing our heartfelt
sympathy for victims of the continuing devastation of California’s wildfires.
While not as overwhelming as the two previous years, damage statewide
was again substantial in 2019 with more than 7,800 incidents, the burning of
250,000 acres and three fatalities attributed to wildfires, according to CalFire.
Just as saddening — and a reminder that conditions fanning wildfires are a
global phenomenon — are the heartbreaking stories of destruction we’ve
seen from wildfires in Australia.
Edison International’s senior leadership team. Front row, left to right: Caroline Choi, Senior Vice President, Corporate Affairs; Pedro J. Pizarro,
President and Chief Executive Officer; Jacqueline Trapp, Senior Vice President and Chief Human Resources Officer; Adam S. Umanoff, Executive Vice
President and General Counsel. Back row, left to right: Maria Rigatti, Executive Vice President and Chief Financial Officer; J. Andrew (Drew) Murphy,
Senior Vice President, Strategy and Corporate Development; Kevin M. Payne, President and Chief Executive Officer, Southern California Edison;
Steven D. Powell, Executive Vice President, Operations, SCE.
The nearly 13,000 women and men of Edison
International are committed to enhancing public safety
and mitigating wildfire risk. Our effort reflects Edison’s
highest priority, the safety of our workers and the
public in every task we undertake. In addition to the
day-to-day work our Southern California Edison (SCE)
utility carries out to protect our fellow Californians, last
year we donated $3 million from an Edison Wildfire
Assistance Fund to help six organizations in their work
to mitigate wildfire risk and make our communities
more resilient.
This letter will update you on the significant operational
and public policy advancements that were made with
respect to wildfire mitigation, regulatory certainty
and financial stability in 2019. I will also discuss the
launch of SCE’s Pathway 2045 initiative, a blueprint for
how California’s broader economy and our company
can combat the climate change which catalyzes and
exacerbates wildfires. At its core is the transformation
of our industry through clean energy and electrification,
which will extend well beyond SCE and California and
is a key driver for our competitive activities at Edison
Energy and its customers.
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Edison International and Southern California Edison 2019 Annual Report Edison International and Southern California Edison 2019 Annual Report
F I N A N C I A L P O S I T I O N
While managing the challenges of wildfires and
pursuing clean energy initiatives, Edison International
posted solid core earnings for 2019 of $4.70 per share,
compared to $4.15 per share in 2018 (see the inside
front cover page for a reconciliation of core and GAAP
earnings).
GAAP earnings in 2019 were $3.78 per share,
compared to a net loss of $1.30 per share in 2018.
Meaningful comparison with 2018 is difficult because
we accrued an after-tax charge of $1.8 billion in
2018 in connection with 2017 and 2018 wildfire and
mudslide events. When we reported on 2019, we
increased the low end of the estimated losses for
claims by $232 million to a gross estimate of $4.9
billion; that is subject to further change as more
information becomes available.
Our stock price responded favorably to enactment of
wildfire-related legislation and other factors. Our year-
end price of $75.41 per share represented an increase
of 32.8 percent for the year.
In December, we increased our dividend for the 16th
straight year to an annual rate of $2.55 per share, an
increase of 4.08 percent over the dividend paid out
in 2019.
SCE received approval from the California Public
Utilities Commission (CPUC) to increase the common
equity in its capital structure to 52 percent from 48
percent, bringing SCE more in line with utilities in
California and other jurisdictions.
In 2019, we issued $3.7 billion of long-term debt
across Edison International and SCE and $2.5 billion
of common equity, our first time issuing equity in
more than 25 years. Edison International contributed
$3.3 billion of its financing proceeds to SCE, of which
$1.2 billion was used to help SCE fund its initial $2.4
billion contribution to a new wildfire insurance fund
established by state law. The remainder was used to
fund the increase in SCE’s equity layer associated with
the CPUC-authorized capital structure change.
At year’s end, thanks largely to new state legislation,
we had a solid and improved foundation for maintaining
a healthy balance sheet which promotes investment
grade ratings at Edison International and SCE and
supports our future operations and investments.
W I L D F I R E M I T I G AT I O N
With climate change unleashing unprecedented
weather events that create wildfire risks, we continue
to tackle the critical job of keeping our communities
safe through grid hardening, situational awareness,
enhanced operational practices and, when necessary,
preventive de-energization through Public Safety
Power Shutoffs (PSPS).
More than 25 percent of SCE’s service territory is in
high fire risk areas designated by the state. Long before
the devastating fires of 2017 that ravaged Ventura
and Santa Barbara counties, we were implementing
programs that reduce wildfire risk. As circumstances
change, we continue to evolve our practices.
The focus of SCE’s wildfire mitigation activities is
implementation of our annually updated Wildfire
Mitigation Plan and our Grid Safety and Resiliency
Program. By the end of 2019, we had:
• Replaced more than 500 miles of power lines with
covered conductor to help prevent ignitions caused
by objects that contact distribution power lines or
conductor-to-conductor contact. We plan to have
covered conductor on 4,500 miles of lines by the
end of 2022.
• Installed fast-acting fuses at more than 10,000
locations. These fuses reduce electrical current
when a wire is down.
• Conducted enhanced inspections on 100 percent
of our transmission, distribution and generation
equipment in high fire risk areas, including the
use of infrared cameras to inspect equipment
and identify potential issues that could lead to fire
ignitions. In approximately five months, our team
accomplished work that typically would have
2
been performed over a five-year cycle under
standard requirements.
• Deployed 482 weather stations, increasing our
ability to monitor weather in high fire risk areas
and more accurately predict inclement weather
conditions. We plan to deploy more than 850
such stations.
• Installed 161 high-definition, fire-spotting cameras,
covering 90 percent of high fire risk areas in our
service area. We’ve now reached a saturation point
with these cameras so that installing more would
not provide meaningful benefits.
• Removed thousands of hazard trees that could fall
into power lines and lead to fire ignitions.
In February 2020, we filed our proposed 2020-2022
Wildfire Mitigation Plan with the CPUC. This plan will
advance the maturity of our wildfire capabilities in a
number of dimensions beyond what the company
has done in the past few years.
An important tool to protect public safety is PSPS,
which we utilized 16 times last year. We recognize that
PSPS is a disruptive hardship and strive to minimize its
impact on our customers and communities.
Although the frequency and scope of PSPS events are
expected to lessen as we continue to implement our
wildfire mitigation actions, PSPS must remain available
as a tool to mitigate wildfire risk during severe weather
and high Fire Potential Index periods. Patrols after PSPS
events have found dozens of instances of equipment
damage and tree branches contacting power lines that
could have ignited a fire.
A linchpin of managing PSPS is outreach to impacted
communities and customers. In 2019, we hosted
more than 350 meetings and presentations with
local government and tribal officials, community
organizations and customers to review our wildfire
prevention efforts, detail PSPS protocols and help
customers prepare for potential PSPS events.
We also joined California’s other major utilities in a
public education campaign about the use of PSPS.
We will continue to engage with Gov. Newsom,
California’s Office of Emergency Services, the CPUC,
county governments and essential service providers
to ensure effective and timely communication about
potential PSPS events.
W I L D F I R E P O L I C Y
Alongside our operational work to harden the grid
and make it more resilient, significant advancements
were made in the public policy arena to protect
against wildfires and address liability in a manner
which provides more regulatory certainty and financial
stability for utilities.
Assembly Bill 1054 — and companion legislation —
improve California’s prevention, mitigation and
response efforts to wildfires. They provide a
comprehensive approach to wildfire prevention
and management by addressing such issues as
vegetation management, community resiliency and
safety regulation. Beyond the legislation, the state
has provided more funding for aircraft acquisition for
firefighting; improved evacuation planning; technology
upgrades for fire prevention, preparedness and
response; and public awareness campaigns.
We appreciate the urgency and leadership that Gov.
Newsom brought to all aspects of the wildfire issue, the
advisory work of the Governor’s Wildfire Strike Force,
the work of the Commission on Catastrophic Wildfire
Cost and Recovery created by legislation enacted in
2018 and the actions taken by the California Legislature
to pass AB 1054 and companion measures.
Among the most significant provisions of AB 1054 are:
• Requirements which hold utilities accountable for
mitigating wildfire risks and operating safely. In
receiving its initial safety certification under this
law last July, SCE demonstrated that it is in good
safety standing, has a safety committee of its board
of directors composed of members with relevant
safety experience and has established board-level
reporting to the CPUC on safety issues.
Photos, from left to right:
n Crews work to restore power
after a wildfire n Employees
practice emergency procedures
at the Emergency Operations
Center in Irwindale n SCE is
focused on advancing electrification
with the installation of thousands
of vehicle charging stations
n A worker installs a high-definition
camera to aid in fire-spotting.
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Edison International and Southern California Edison 2019 Annual Report
Edison International and Southern California Edison 2019 Annual Report
• Refinement of the process for investor-owned
utilities to recover catastrophic wildfire costs,
including consideration of factors outside the
utility’s control and a change to the standards for
determining whether a utility operated prudently.
This is a big step toward providing financial certainty
and supporting investment grade credit ratings.
• Establishment of a wildfire insurance fund of up
to $21 billion to pay victims’ claims that exceed
insurance for wildfires that may be caused by utility
equipment. Half of this total is funded by utility
customers statewide through the extension of a
Department of Water Resources bond charge; the
other half is funded by the state’s large investor-
owned utilities. To cover its share, SCE made an
initial contribution of $2.4 billion and will make
annual contributions of $95 million in each of the
next 10 years.
• A requirement that the large investor-owned
utilities make combined capital investments of
$5 billion to mitigate wildfire risk, with authorization
for financing of these mitigation costs but no
equity return. SCE’s share of these costs will be
approximately $1.6 billion.
• A cap on investor-owned utility shareholder liability,
which is about $3 billion for SCE at present.
AB 1054 and companion bills build on steps taken
in 2018 to restore California’s regulatory framework
and the financial stability of utilities. We supported
the legislation and believe careful implementation
and potential future refinements will be critical to
its success.
We remain engaged in various legal cases regarding
wildfire liability. We announced last November that SCE
had reached a settlement regarding claims asserted by
23 public entities impacted by the 2017 Thomas and
Koenigstein fires, the 2018 Montecito debris flows and
the 2018 Woolsey Fire. Under the settlement, SCE has
paid $360 million to the 23 public entities.
The settlement is a compromise with no admission of
wrongdoing or liability. While it does not affect pending
claims by individuals or businesses, we remain open to
engaging with stakeholders to resolve the issues related
to the 2017 and 2018 events.
C L I M AT E C H A N G E O B J E C T I V E S
A N D PAT H WAY 2 0 4 5
While focusing on near-term actions to keep our
customers and communities safe, we also are vigorously
pursuing longer-term solutions that get to the heart
of reducing wildfire and other environmental risks by
combatting climate change.
Core to our strategy is a strong partnership with the
state of California and other stakeholders to help achieve
the state’s ambitious, science-based climate change
goals. That means aligning our climate change objectives
with California’s policies. In 2017, we underscored
this commitment by signing on to the “We Are Still In”
campaign in support of the Paris Climate Agreement.
We are working to achieve SCE’s state-mandated
objectives to deliver 100 percent carbon-free power by
2045. SCE has already met its 2020 requirements to
deliver 33 percent of power from Renewables Portfolio
Standard (RPS)-eligible resources, and currently delivers
approximately 48 percent carbon-free power to its
customers. Approximately 73 percent of this carbon-free
electricity, or 35 percent of SCE’s total delivered power,
comes from RPS-eligible resources.
Beyond delivered power, we believe we have a
responsibility to enable California to achieve its broader,
economywide goals to reduce greenhouse gas emissions
through electrification. We recently built on the Clean
Power and Electrification Pathway that SCE released in
2017 with the unveiling of Pathway 2045. This initiative
provides a blueprint to achieve California’s ambitious
greenhouse gas reduction and carbon neutrality goals
through a transformation in the way energy is produced
and used.
Pathway 2045 has three pillars: 1) the deep
decarbonization of the electric sector, 2) significant
electrification of transportation and buildings, along with
a continued focus on energy efficiency, and 3) the use of
4
low-carbon fuels for sectors that are hard to electrify.
It is not all about us or the electric utility sector; rather,
it’s about the entire California economy. While SCE has
a major role to play, this is a big lift across all sectors.
The electric sector now accounts for only 15 percent
of California’s greenhouse gas emissions. The
transportation sector, fuel refining and fossil fuels
used in space and water heating produce almost
three times as much greenhouse gas emissions as
the electric sector.
Since 2016, we have been especially focused on
advancing the electrification of the transportation
sector with the installation of vehicle charging stations,
first for passenger vehicles and expanding to trucks,
buses, forklifts and other industrial vehicles.
To meet the state’s goals, three-fourths of light-duty
vehicles, two-thirds of medium-duty vehicles and one-
third of heavy-duty vehicles will need to be electric by
2045, as will nearly 70 percent of building space and
water heating. This will result in a 60 percent increase
in grid-served electricity load and require adding
approximately 80 gigawatts of clean energy and 30
gigawatts of energy storage. Thirty additional gigawatts
of generation capacity and 10 gigawatts of storage will
come from distributed energy resources including up
to 50 percent of single-family homes in California that
are projected to have rooftop solar by 2045.
Growth in economywide electrification will cause
electricity bills to increase over time, but our Pathway
2045 white paper finds that the overall cost across
all types of energy for an average household should
decrease by one-third by 2045. This is due to the
inherently greater efficiency of electric technologies
over fossil fuel combustion machines.
To ensure that our grid is ready to support
Pathway 2045 and other strategic objectives like
resiliency and customer choice, we are challenging
ourselves to reimagine the SCE grid to optimally
address the wide spectrum of possible future
needs. This process will help guide our future grid
investment strategies, research and development
of new technologies, engagement with external
stakeholders and policy advocacy.
While the state’s goals look 25 years into the future,
there is immediate urgency for taking policy actions
in areas like clean power supply, reliable and resilient
systems, technology development, customer adoption
of technology and affordability. It is only by addressing
these issues now that California will be in position to
combat climate change and the weather extremes that
have visited such devastation on our communities.
Indeed, we consider achieving Pathway 2045 as
attacking climate change with the full-frontal assault
it requires.
K E Y R E G U L AT O RY P R O C E E D I N G S
We had constructive outcomes and made important
progress in various regulatory proceedings last year.
In May, we received a long-awaited final decision
from the CPUC on SCE’s 2018 General Rate Case,
which funds SCE’s day-to-day operations such as grid
maintenance and upgrades and customer service
functions from 2018 through 2020.
In August, SCE filed its 2021 General Rate Case with
the CPUC. This filing covers the three-year period
from 2021 through 2023. It requests a test-year
revenue requirement of $7.6 billion, an increase of
approximately 13 percent above currently authorized
rates. This follows a three-decade period over which
SCE kept its average rate growth below local inflation.
We do not take this large request lightly but need it
to finance SCE’s core work to improve the reliability
and security of electric service, help California meet its
clean energy goals and reduce the risk of catastrophic
wildfires. We have requested that the CPUC issue
a final decision on this request by the end of 2020.
Over the two rate case cycles, the compound
average growth rate in SCE’s rate base would be
6.6 to 7.5 percent from 2018 to 2023.
Photos, from left to right:
n SCE’s vegetation management
effort removes trees that could fall
onto power lines n California Gov.
Gavin Newsom signs Assembly Bill
1054, which improves California’s
prevention, mitigation and response
to wildfires n SCE held community
meetings to address customers’
wildfire concerns n Field workers
meet for a safety discussion before
starting work n SCE’s Reliability
Operations Center (ROC) harnesses
data from smart meters to give
real-time insights into the health
of the grid.
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Edison International and Southern California Edison 2019 Annual Report
We received an order in SCE’s triennial cost of capital
filing with the CPUC. This order preserved our return
on common equity of 10.3 percent for the next
three years and provided the equity layer increase
mentioned above.
At the Federal Energy Regulatory Commission (FERC),
we received approval for an authorized return on
equity (ROE) of 11.2 percent for the portion of our
business regulated by FERC (about 20 percent) for
the period from Jan. 1, 2018, through Nov. 11, 2019.
We are in settlement discussions to set an ROE for
the period beginning Nov. 12, 2019.
T H E D I G I TA L T R A N S F O R M AT I O N
Multiple advancements continue to converge in the
electric power industry, driving electric utilities to use
digital technologies to transform the way we serve
our customers and communities. SCE is committed to
being a leader in this area.
We’re using machine learning and big data analytics
to improve automated sensing of our electric system
and equipment conditions. We use data such as wind
speed; conductor type, size and length; equipment
manufacturer; equipment attributes; and other factors
to build our predictive risk capability and reduce
wildfire risk more effectively.
We are especially proud of the results we are
achieving with the Reliability Operations Center (ROC)
we established in 2018. The ROC harnesses data from
smart meters once used strictly for billing purposes
to give us real-time insights into the health of the grid.
In some cases, we have been able to de-energize a
downed wire within minutes, whereas previously it
could take an hour or more to identify, assess and
safely address a downed-wire situation. We also can
more quickly detect, and even predict, equipment
failures. In its first full year of operation, the ROC was
credited with preventing more than 500,000 minutes
of power interruption.
Newly digitized technology brings new challenges,
including more potential access points for hackers.
Addressing cybersecurity remains a critical priority.
Cyber and physical security threats to electrical
infrastructure change rapidly. We must be able to
change rapidly, too. SCE is deeply engaged with its
government partners and industry peers to share
information and coordinate defenses.
O P E R AT I O N A L A N D S E R V I C E E XC E L L E N C E
Safety is at the core of our focus on operational and
service excellence. While most of SCE’s safety metrics
fell short of achieving our goals in 2019, serious injuries
to SCE employees decreased by half, and we made
tremendous strides toward achieving the cultural
transformation that will get performance where we
want it.
In 2017, more than 9,000 employees participated in
a Safety Culture Assessment. In 2018, employees in
our high-hazard field jobs participated in training and
workshops. In 2019, all employees participated in
multiple days of workshops, which provided them tools
and techniques for taking ownership of their personal
safety and for sustaining a culture that is a prerequisite
for improving performance.
Nothing is more important than having our women
and men return safely every day to their families and
friends. We will be relentless and unyielding in our
journey to this end.
We also continue efforts to improve our customers’
experience with us through stronger in-person
connections, enhanced web experiences and use of
technology to streamline customer interactions.
SCE made great strides in the complex process of
decommissioning the San Onofre Nuclear Generating
Station (SONGS) that retired in 2013. In July, after
suspending operations for 11 months for a period
of vigorous regulatory, third-party and operational
reviews, and with approval of the Nuclear Regulatory
Commission, SCE restarted the transfer of spent fuel
to dry storage.
Photos, from left to right:
n Edison Energy helps
companies limit risk from
energy price fluctuations
with wind and solar contracts.
n After a period of review, SCE
restarted the transfer of spent
fuel to dry storage at San Onofre
Nuclear Generating Station,
which was retired in 2013.
6
Edison International and Southern California Edison 2019 Annual Report would provide the same basic protections to LGBTQ
employees as are afforded other protected groups.
Our board of directors reflects the diversity of ethnicity,
gender, skills, backgrounds and qualifications needed
to effectively oversee the company’s operations,
risks and long-term strategy. Seven of our 11 board
members are diverse in terms of gender, race, ethnicity
and/or LGBTQ status.
Shortly after I wrote this letter a year ago, Brett White
decided that he would not stand for re-election after 12
years of outstanding service on our board of directors.
Brett’s strategic guidance and leadership were
incredibly valuable, and he has our enduring gratitude.
Last October, we welcomed Carey Smith as a member
of our board of directors. Carey is president and
chief operating officer at Parsons Corp., a disruptive
technology provider for global defense, intelligence
and critical infrastructure markets. Carey brings us a
strong background in cybersecurity and operational
experience in safety-intensive environments.
We also mourned the passing last year of board
director Ellen Tauscher and SCE President Ron Nichols.
Ellen was a vibrant member of the Edison community
who cared deeply about the success of our company
and people. She led an incredible life of achievement
as one of the first women to hold a seat on the New
York Stock Exchange and as a distinguished member of
Congress who went on to become a leader in nuclear
arms nonproliferation.
Ron was a passionate and beloved leader at SCE,
a valued member of our management team and a
trusted friend and confidant. He was a tireless advocate
for SCE’s clean energy and electrification initiatives who
was greatly respected by his Edison colleagues, our
broader industry, policymakers, consumer advocates
and environmental activists.
The Edison community was better for our bonds with
Ellen and Ron. We miss them and remain inspired by
their legacies.
In October, the California Coastal Commission approved
a coastal development permit, clearing the way for
dismantling of plant structures and decontamination
of the site. SCE began dismantling the plant in
February of this year, a work phase that we estimate
will continue through 2028 and marks the start of
the process of returning the site to its landowner,
the U.S. Navy.
E D I S O N E N E R G Y
Our competitive business, Edison Energy, continues
to enhance its status as an energy advisor to market-
leading companies and other organizations, including
12 of the Fortune 50. We updated Edison Energy’s
business plan, with a focus on growth in such key areas
as renewables, technology and transportation and
building electrification.
Edison Energy is helping organizations manage their
energy costs and consumption, reduce their carbon
emissions and navigate the increasingly complex
choices they face for meeting their energy supply and
demand needs. We recently helped Honda Motor
Company negotiate an agreement that limits its risk
from energy price fluctuations while slashing its carbon
emissions by purchasing enough wind and solar energy
to cover more than 60 percent of the power it uses in
North America.
O U R D I V E R S E T E A M A N D B O A R D
Diversity and inclusion in the workforce and leadership
are critical to understanding and meeting the needs of
our customers and communities and is another core
value where we continue to make progress.
In 2016, Edison International joined Paradigm for
Parity, a coalition of organizations working toward
gender parity in senior operating roles by 2030. We’re
also a signatory to the CEO Action for Diversity &
Inclusion, the largest CEO-driven business commitment
to advance diversity and inclusion within the workplace.
Women now comprise 35 percent of our executive
ranks, up from 27 percent three years ago. Fifty-nine
percent of our executives are women or from diverse
racial/ethnic backgrounds, up from 43 percent three
years ago.
We are one of 181 signers of the Business Roundtable’s
Statement on the Purpose of a Corporation, which
includes commitments to support employees by
compensating them fairly; providing important benefits,
training and education; and fostering diversity and
inclusion, dignity and respect. We have been named
one of the Best Places to Work for Disability Inclusion
and for LGBTQ Equality and supported the Human
Rights Campaign Business Coalition for Equality
Act, which advocates for federal legislation that
7
Edison International and Southern California Edison 2019 Annual ReportPedro J. PizarroPresident and Chief Executive OfficerMarch 2, 2020
PATHWAY 2045
G OI NG NE UTRAL
By 2045, California will be powered by 100% carbon-free
electricity. All greenhouse gas emissions (GHGs)
produced by the economy will subsequently be removed
from the atmosphere through carbon sequestration,
also known as carbon sinks.
Going neutral will require planning to keep energy safe,
reliable and affordable for all Californians.
By 2045, California will emit only a quarter of the GHGs we
emit today. The same amount of GHGs will be removed from
the atmosphere, getting us to carbon neutrality.
For more information and to
read the paper, visit
edison.com/pathway2045
2
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450
400
350
300
250
200
150
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0
2017
424 MMT
Electricity
Transportation
Buildings
Industrial
Agriculture
2045
108 MMT
Carbon
Sequestration
-108 MMT
Carbon neutrality will
require electrification
across the state’s
economy by 2045.
DECARBONIZE
ELECTRICITY
ELECTRIFY
TRANSPORTATION
100%
RETAIL
SALES
75%
OF VEHICLES
CO2
ELECTRIFY
BUILDINGS
70%
OF BUILDINGS
USE LOW-
CARBON
FUELS
FOR HARD-TO-
ELECTRIFY
APPLICATIONS
CO2
CO2
CO2
SINK
REMAINING
CARBON
108
MMT
8
Edison International and Southern California Edison 2019 Annual Report
CONTAINING
WILDFIRES
Southern California Edison’s 2020-22 Wildfire Mitigation Plan
builds on the significant progress made in 2019 to help prevent
wildfires and protect the safety of our customers and our
communities. Our plan will advance the maturity of our wildfire
mitigation capabilities in a number of dimensions beyond what
we’ve done in the past. The 2020 plan expands existing programs
and includes deployment and testing of new technologies,
including machine learning and sophisticated risk assessments
that are helping us plan and prioritize our work. We also are
focused on minimizing the impact of Public Safety Power
Shutoffs (PSPS) and helping our customers and communities
with emergency preparedness. Our efforts will complement the
state’s enhanced wildfire efforts, which include additional
funding for forest management and firefighting resources.
WILDFIRE CAMERAS
COVERED CONDUCTOR
161
CAMERAS INSTALLED
THOROUGHLY COVERING
HIGH FIRE RISK AREAS
500+ MILES
INSTALLED
AT LEAST 700 MILES
ADDITIONALLY INSTALLED BY THE END OF 2020
WEATHER STATIONS
INCIDENT MANAGEMENT TEAM
482
WEATHER STATIONS INSTALLED
MORE THAN 850
INSTALLED BY THE END OF 2020
500+
QUALIFIED RESPONSE TEAM MEMBERS,
WHO ARE ON CALL FOR DUTY 24/7
ENHANCED INSPECTIONS
PROTECTIVE DEVICES
CONTINUE ADVANCING INSPECTIONS
TO ADDRESS WILDFIRE RISKS IN 2020
12,000+
FUSES AND REMOTE-CONTROLLED
SECTIONALIZING DEVICES APPLIED TO
INTERRUPT ELECTRICAL CURRENT MORE
QUICKLY & BOOST RELIABILITY BY
SEGMENTING CIRCUITS TO ISOLATE PROBLEMS
9
Edison International and Southern California Edison 2019 Annual Report
LEADING THE TRANSFORMATION OF THE ELECTRIC POWER INDUSTRY
OUR VALUES
Safety I Integrity I Excellence I Respect
Teamwork I Continuous Improvement
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 I We value diversity
We build productive partnerships I We protect the
environment I 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, 2019
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
Exact Name of Registrant
as specified in its charter
EDISON INTERNATIONAL
State or Other Jurisdiction of
Incorporation or Organization
California
1-2313
SOUTHERN CALIFORNIA EDISON COMPANY
California
IRS Employer
Identification Number
95-4137452
95-1240335
EDISON INTERNATIONAL
2244 Walnut Grove Avenue
(P.O. Box 976)
Rosemead, California 91770
(Address of principal executive offices)
(626) 302-2222
SOUTHERN CALIFORNIA EDISON COMPANY
2244 Walnut Grove Avenue
(P.O. Box 800)
Rosemead, California 91770
(Address of principal executive offices)
(626) 302-1212
(Registrant's telephone number, including area code)
(Registrant's telephone number, including area code)
Edison International:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, no par value
Trading Symbol(s)
EIX
Name of each exchange on which registered
NYSE LLC
Southern California Edison Company:
Title of each class
Cumulative Preferred Stock, 4.08% Series
Cumulative Preferred Stock, 4.24% Series
Cumulative Preferred Stock, 4.32% Series
Cumulative Preferred Stock, 4.78% Series
Trading Symbol(s)
SCEpB
SCEpC
SCEpD
SCEpE
Name of each exchange on which registered
NYSE American LLC
NYSE American LLC
NYSE American LLC
NYSE American 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 every Interactive Data File required to be submitted 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 such files).
Edison International
Yes
No
Southern California Edison Company
Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
See the definitions of "large accelerated filer," accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-12 of the Exchange Act. (Check One):
Edison International
Southern California Edison
Company
Large Accelerated Filer
Accelerated Filer
Non-accelerated Filer
Large Accelerated Filer
Accelerated Filer
Non-accelerated Filer
Smaller Reporting
Company
Smaller Reporting
Company
Emerging growth company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Edison International
Southern California Edison 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 28, 2019, the last business day of the most
recently completed second fiscal quarter:
Edison International
Southern California Edison Company Wholly owned by Edison International
Approximately $22.0 billion
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
Common Stock outstanding as of February 20, 2020:
Edison International
Southern California Edison Company
362,570,075 shares
434,888,104 shares (wholly owned by Edison International)
Designated portions of the Proxy Statement relating to registrants' joint 2020 Annual Meeting of Shareholders are incorporated by reference into Part III of this
report.
DOCUMENTS INCORPORATED BY REFERENCE
SEC Form 10-K
Reference Number
Part II, Item 7
TABLE OF CONTENTS
GLOSSARY ..............................................................................................................................
vi
FORWARD-LOOKING STATEMENTS...............................................................................
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.......................................................................................
MANAGEMENT OVERVIEW .......................................................................................
Highlights of Operating Results.......................................................................................
Wildfire Mitigation and Wildfire Insurance Expenses..................................................
2018 General Rate Case....................................................................................................
2020 Cost of Capital Application .....................................................................................
2018 and 2019 FERC Formula Rate ...............................................................................
Southern California Wildfires and Mudslides................................................................
2021 General Rate Case....................................................................................................
Electricity Industry Trends ..............................................................................................
Capital Program................................................................................................................
RESULTS OF OPERATIONS .........................................................................................
Southern California Edison Company ............................................................................
Impact of 2018 GRC ...................................................................................................
Years ended December 31, 2019, 2018 and 2017 .......................................................
Earning Activities........................................................................................................
Cost-Recovery Activities..............................................................................................
Supplemental Operating Revenue Information.........................................................
Income Taxes...............................................................................................................
Edison International Parent and Other ..........................................................................
Loss from Continuing Operations..............................................................................
LIQUIDITY AND CAPITAL RESOURCES..................................................................
Southern California Edison Company ............................................................................
Available Liquidity ......................................................................................................
Capital Investment Plan .............................................................................................
i
1
3
3
3
5
6
6
6
7
10
11
11
13
13
13
14
15
15
16
16
16
16
17
17
18
18
Decommissioning of San Onofre ...............................................................................
SCE Dividends ............................................................................................................
Margin and Collateral Deposits .................................................................................
Regulatory Balancing and Memorandum Accounts .................................................
Edison International Parent and Other ..........................................................................
Net Operating Loss and Tax Credit Carryforwards...................................................
Historical Cash Flows .......................................................................................................
Southern California Edison Company.......................................................................
Edison International Parent and Other .....................................................................
Contractual Obligations and Contingencies...................................................................
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..............................................................................................
Accounting for Contingencies ..........................................................................................
Income Taxes .....................................................................................................................
Nuclear Decommissioning – Asset Retirement Obligation............................................
Pensions and Postretirement Benefits Other than Pensions .........................................
Contributions to the Wildfire Insurance Fund...............................................................
NEW ACCOUNTING GUIDANCE................................................................................
RISK FACTORS ......................................................................................................................
RISKS RELATING TO EDISON INTERNATIONAL.................................................
ii
20
21
22
23
23
24
24
24
28
29
29
30
30
30
30
30
30
31
31
31
32
33
34
35
37
37
38
38
Part I, Item 1A
Part II, Item 7A
Part II, Item 8
RISKS RELATING TO SOUTHERN CALIFORNIA EDISON COMPANY ............
Regulatory and Legislative Risks ....................................................................................
Operating Risks.................................................................................................................
Financing Risks .................................................................................................................
Competitive and Market Risks ........................................................................................
Cybersecurity and Physical Security Risks ....................................................................
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .....
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ........................................
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ..
CONSOLIDATED FINANCIAL STATEMENTS .........................................................
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..
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. Revenue .................................................................................................................
iii
38
38
40
43
43
43
44
44
45
50
50
51
52
54
55
57
57
58
60
61
62
62
74
75
76
80
81
83
Note 8. Income Taxes ........................................................................................................
Note 9. Compensation and Benefit Plans ........................................................................
84
88
Note 10. Investments .........................................................................................................
102
Note 11. Regulatory Assets and Liabilities......................................................................
103
Note 12. Commitments and Contingencies .....................................................................
106
Note 13. Leases ..................................................................................................................
117
Note 14. Equity ..................................................................................................................
120
Note 15. Accumulated Other Comprehensive Loss........................................................
122
Note 16. Other Income ......................................................................................................
122
Note 17. Supplemental Cash Flows Information............................................................
123
Note 18. Related-Party Transactions ...............................................................................
123
Note 19. Quarterly Financial Data (Unaudited).............................................................
124
SELECTED FINANCIAL DATA............................................................................................
126
Part II, Item 6
CONTROLS AND PROCEDURES .......................................................................................
127
Part II, Item 9A
OTHER INFORMATION .......................................................................................................
127
Part II, Item 9B
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE ............................................................
127
Part II, Item 9
BUSINESS.................................................................................................................................
128
Part I, Item 1
CORPORATE STRUCTURE, INDUSTRY AND OTHER INFORMATION............
128
Subsidiaries of Edison International ...............................................................................
128
Regulation of Edison International as a Holding Company .........................................
129
Employees and Labor Relations ......................................................................................
129
Insurance............................................................................................................................
129
SOUTHERN CALIFORNIA EDISON COMPANY......................................................
129
Regulation ..........................................................................................................................
129
Overview of Ratemaking Process ....................................................................................
130
Purchased Power and Fuel Supply ..................................................................................
132
Competition .......................................................................................................................
133
Properties ...........................................................................................................................
134
iv
Seasonality .........................................................................................................................
134
ENVIRONMENTAL CONSIDERATIONS....................................................................
135
Greenhouse Gas Regulation .............................................................................................
135
Environmental Risks.........................................................................................................
136
UNRESOLVED STAFF COMMENTS ..................................................................................
136
Part I, Item 1B
PROPERTIES ..........................................................................................................................
136
Part I, Item 2
LEGAL PROCEEDINGS........................................................................................................
136
Part I, Item 3
Thomas Fire and Koenigstein Fire Litigation ................................................................
136
Montecito Mudslides Litigation .......................................................................................
137
Woolsey Fire Litigation.....................................................................................................
MINE SAFETY DISCLOSURES ...........................................................................................
137
137
Part I, Item 4
INFORMATION ABOUT OUR EXECUTIVE OFFICERS................................................
138
Part I
EXECUTIVE OFFICERS OF EDISON INTERNATIONAL ......................................
138
EXECUTIVE OFFICERS OF SOUTHERN CALIFORNIA EDISON COMPANY..
139
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE............
140
Part III, Item 10
EXECUTIVE COMPENSATION ..........................................................................................
140
Part III, Item 11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS....................................
140
Part III, Item 12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE ....................................................................................................................
141
Part III, Item 13
PRINCIPAL ACCOUNTANT FEES AND SERVICES........................................................
141
Part III, Item 14
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES............................................................................................................................
141
Part II, Item 5
Comparison of Five-Year Cumulative Total Return......................................................
141
FORM 10-K SUMMARY ........................................................................................................
142
Part IV, Item 16
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES .............................................
142
Part IV, Item 15
Exhibit Index .....................................................................................................................
143
Schedules Supplementing Financial Statements ............................................................
146
SIGNATURES ..........................................................................................................................
153
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.
v
GLOSSARY
The following terms and abbreviations appearing in the text of this report have the meanings indicated below.
2017/2018 Wildfire/
Mudslide Events ................
AB 1054.............................
AB 1054 Liability Cap ......
ARO(s) ..............................
Bcf .....................................
BRRBA..............................
CAISO ...............................
CAL FIRE..........................
CCAs .................................
CPUC.................................
CSRP .................................
DERs..................................
Edison Energy....................
Edison Energy Group ........
EME...................................
Electric Service Provider...
ERRA.................................
FERC .................................
FERC 2018 Settlement
Period.................................
FHPMA..............................
Fitch...................................
GAAP ................................
GHG ..................................
GRC...................................
GS&RP ..............................
GWh ..................................
Joint Proxy Statement........
the Thomas Fire, the Koenigstein Fire, the Montecito Mudslides and the Woolsey Fire,
collectively
California Assembly Bill 1054, executed by the Governor of California on July 12, 2019
If the insurance fund allowed under AB 1054 is established, and subject to certain other
conditions, a cap on the aggregate requirement to reimburse the insurance fund over a
trailing three calendar year period equal to 20% of the equity portion of the utility’s
transmission and distribution rate base in the year of the prudency determination
asset retirement obligation(s)
billion cubic feet
Base Revenue Requirement Balancing Account
California Independent System Operator
California Department of Forestry and Fire Protection
Community Choice Aggregators which are cities, counties, and certain other public agencies
with the authority to generate and/or purchase electricity for their local residents and
businesses
California Public Utilities Commission
Customer Service Re-platform, a SCE project to implement a new customer service system
distributed energy resources
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., a wholly-owned subsidiary of Edison International, is a holding
company for subsidiaries engaged in competitive businesses that provide energy services to
commercial and industrial customers
Edison Mission Energy
an entity that offers electric power and ancillary services to retail customers, other than
electrical corporations (like SCE) and CCAs
Energy Resource Recovery Account
Federal Energy Regulatory Commission
January 1, 2018 through November 11, 2019
Fire Hazard Prevention Memorandum Account
Fitch Ratings, Inc.
generally accepted accounting principles
greenhouse gas
general rate case
Grid Safety and Resiliency Program
gigawatt-hours
Koenigstein Fire ................
Edison International's and SCE's definitive Proxy Statement to be filed with the SEC in
connection with Edison International's and SCE's Annual Shareholders' Meeting to be held
on April 23, 2020
a wind-driven fire that originated near Koenigstein Road in the City of Santa Paula in
Ventura County on December 4, 2017
kV ......................................
unit of electrical potential equal to 1000 volts
MD&A............................... Management's Discussion and Analysis of Financial Condition and Results
Montecito Mudslides .........
of Operations in this report
the mudslides and flooding in Montecito, Santa Barbara County, that occurred in
January 2018
Moody's ............................. Moody's Investors Service, Inc.
NEM ..................................
NERC ................................
net energy metering
North American Electric Reliability Corporation
vi
NRC...................................
PABA.................................
Nuclear Regulatory Commission
Portfolio Allocation Balancing Account
Palo Verde..........................
PBOP(s).............................
PCIA ..................................
PG&E ................................
ROE ...................................
RPS ....................................
S&P....................................
San Onofre.........................
SCE....................................
SDG&E..............................
SEC....................................
SED....................................
SoCalGas ...........................
SoCore Energy...................
TAMA................................
Tax Reform........................
Thomas Fire.......................
TOU ...................................
US EPA..............................
VCFD ................................
nuclear electric generating facility located near Phoenix, Arizona in which SCE holds a
15.8% ownership interest
postretirement benefits other than pension(s)
Power Charge Indifference Adjustment
Pacific Gas & Electric Company
return on common equity
Renewables portfolio standard
Standard & Poor's Financial Services LLC
retired nuclear generating facility located in south
San Clemente, California in which SCE holds a 78.21% ownership interest
Southern California Edison Company, a wholly-owned subsidiary of Edison International
San Diego Gas & Electric
U.S. Securities and Exchange Commission
Safety and Enforcement Division of the CPUC
Southern California Gas Company
SoCore Energy LLC, a former subsidiary of Edison Energy Group that was sold in
April 2018
Tax Accounting Memorandum Account
Tax Cuts and Jobs Act signed into law on December 22, 2017
a wind-driven fire that originated in the Anlauf Canyon area Ventura County on December 4,
2017
Time-Of-Use
U.S. Environmental Protection Agency
The Ventura County Fire Department
WEMA............................... Wildfire Expense Memorandum Account
WMP..................................
a wildfire mitigation plan required to be filed every three years under California Assembly
Bill 1054 to describe a utility's plans to construct, operate, and maintain electrical lines and
equipment that will help minimize the risk of catastrophic wildfires caused by such electrical
lines and equipment
Wildfire Insurance Fund....
The insurance fund established pursuant to AB 1054
Woolsey Fire......................
a wind-driven fire that originated in Ventura County in November 2018
vii
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 through regulated rates, including costs related to uninsured wildfire-related and
mudslide-related liabilities, costs incurred to mitigate the risk of utility equipment causing future wildfires and costs
incurred to implement SCE's new customer service system;
• ability of SCE to implement its WMP, including effectively implementing Public Safety Power Shut-Offs when
appropriate;
• ability to obtain sufficient insurance at a reasonable cost, including insurance relating to SCE's nuclear facilities and
wildfire-related claims, and to recover the costs of such insurance or, in the event liabilities exceed insured amounts, the
ability to recover uninsured losses from customers or other parties;
•
risks associated with AB 1054 effectively mitigating the significant risk faced by California investor-owned utilities
related to liability for damages arising from catastrophic wildfires where utility facilities are alleged to be a substantial
cause, including SCE's ability to maintain a valid safety certification, SCE's ability to recover uninsured wildfire-related
costs from the Wildfire Insurance Fund, the longevity of the Wildfire Insurance Fund, and the CPUC's interpretation of
and actions under AB 1054, including their interpretation of the new prudency standard established under AB 1054;
• decisions and other actions by the CPUC, the FERC, the NRC and other regulatory and legislative authorities, including
decisions and actions related to determinations of authorized rates of return or return on equity, the recoverability of
wildfire-related and mudslide-related costs, issuance of SCE's wildfire safety certification, wildfire mitigation efforts, and
delays in regulatory and legislative actions;
• ability of Edison International or SCE to borrow funds and access bank and capital markets on reasonable terms;
•
risks associated with the decommissioning of San Onofre, including those related to public opposition, permitting,
governmental approvals, on-site storage of spent nuclear fuel, delays, contractual disputes, and cost overruns;
• extreme weather-related incidents and other natural disasters (including earthquakes and events caused, or exacerbated, by
climate change, such as wildfires), which could cause, among other things, public safety issues, property damage and
operational issues;
• 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, employee and customer
data;
•
•
•
risks associated with cost allocation resulting in higher rates for utility bundled service customers because of possible
customer bypass or departure for other electricity providers such as CCAs and Electric Service Providers;
risks inherent in 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), changes in the CAISO's transmission plans, and governmental approvals;
risks associated with the operation of transmission and distribution assets and power generating facilities, including public
and employee safety issues, the risk of utility assets causing or contributing to wildfires, failure, availability, efficiency,
and output of equipment and facilities, and availability and cost of spare parts;
1
• actions by credit rating agencies to downgrade Edison International or SCE's credit ratings or to place those ratings on
negative watch or outlook;
• ability of Edison International to develop competitive businesses, manage new business risks, and recover and earn a
return on its investment in newly developed or acquired businesses;
• 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 future taxable income, or changes in tax law, that would limit Edison International's and SCE's realization of
expected net operating loss and tax credit carryover benefits prior to expiration;
• 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, Western Electricity Council, and similar
regulatory bodies in adjoining regions, and changes in California's environmental priorities that lessen the importance the
state places on GHG reduction;
• 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;
• potential for penalties or disallowance for non-compliance with applicable laws and regulations; and
• 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.
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 risks, uncertainties, and other factors that affect Edison International's and SCE's
businesses. Forward-looking statements speak only as of the date they are made and neither Edison International nor SCE are
obligated to publicly update or revise forward-looking statements. Readers should review future reports filed by Edison
International and SCE with the SEC. Edison International and SCE post or provide direct links to (i) certain SCE and other
parties' regulatory filings and documents with the CPUC and the FERC and certain agency rulings and notices in open
proceedings in a section titled "SCE Regulatory Highlights," (ii) certain documents and information related to Southern
California wildfires which may be of interest to investors in a section titled "Southern California Wildfires," and (iii)
presentations, documents and other information that may be of interest to investors in a section titled "Events and
Presentations" at www.edisoninvestor.com in order to publicly disseminate such information.
Except when otherwise stated, references to each of Edison International, SCE, or Edison Energy Group 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 and "Edison International Parent" mean Edison
International on a stand-alone basis, not consolidated with its subsidiaries.
2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The discussion related to the results of operations and changes in financial condition for 2018 compared to 2017 is
incorporated by reference to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations in Edison International's and SCE's combined Annual Report on Form 10-K for the year ended December 31,
2018, which was filed with the SEC in February 2019.
MANAGEMENT OVERVIEW
Highlights of Operating Results
Edison International is the parent holding company of SCE and Edison Energy Group. SCE is an investor-owned public
utility primarily engaged in the business of supplying and delivering electricity to an approximately 50,000 square mile area
of southern California. Edison Energy Group is a holding company for Edison Energy which is engaged in the competitive
business of providing energy services to commercial and industrial customers. Edison Energy's 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 the information contained in this 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
Wildfire-related claims, net of recoveries
Impairment and other
Wildfire insurance fund expense
Re-measurement of deferred taxes
Settlement of 1994 – 2006 California tax audits
Edison International Parent and Other
Goodwill impairment
Sale of SoCore Energy and other
Settlement of 1994 – 2006 California tax audits
Re-measurement of deferred taxes
Discontinued operations
Total non-core items
Core earnings (losses)
SCE
Edison International Parent and Other
Edison International
2019
2018
2019 vs 2018
Change
2017
$
$
1,409
(125)
—
1,284
(310) $
(147)
34
(423)
1,719
$
22
(34)
1,707
1,012
(447)
—
565
(157)
(115)
(109)
88
—
(18)
—
—
—
—
(311)
(1,825)
9
—
—
66
—
(46)
(12)
—
34
(1,774)
1,668
(124)
(109)
88
(66)
(18)
46
12
—
(34)
1,463
—
(448)
—
(33)
—
—
13
—
(433)
—
(901)
1,702
(107)
1,595
$
1,440
(89)
1,351
$
$
262
(18)
244
$
1,493
(27)
1,466
Edison International's earnings are prepared in accordance with GAAP. Management uses core earnings (losses) internally for
financial planning and for analysis of performance. Core earnings (losses) are also used when communicating with investors
and analysts regarding Edison International's earnings results to facilitate comparisons of the company's performance from
period to period. Core earnings (losses) are a non-GAAP financial measure and may not be comparable to those of other
companies. Core earnings (losses) are defined as earnings attributable to Edison International shareholders less non-core
3
items. Non-core items include income or loss from discontinued operations and income or loss from significant discrete items
that management does not consider representative of ongoing earnings, such as write downs, asset impairments and other
income and expense related to changes in law, outcomes in tax, regulatory or legal proceedings, and exit activities, including
sale of certain assets and other activities that are no longer continuing.
Edison International's 2019 earnings increased $1,707 million, driven by an increase in SCE's earnings of $1,719 million and
a decrease in Edison International Parent and Other losses of $22 million, partially offset by $34 million of income from
discontinued operations in 2018. SCE's higher net income consisted of $1,457 million of lower non-core losses and
$262 million of higher core earnings.
The increase in core earnings was due to the adoption of the 2018 GRC final decision in 2019, higher FERC revenue due to
the settlement of SCE's 2018 Formula Rate proceeding and rate base growth, and the timing of regulatory deferral and cost
recovery of incremental wildfire insurance expenses. These increases were partially offset by higher inspection, preventive
maintenance and vegetation management costs that were not deferred as regulatory assets.
Edison International Parent and Other losses from continuing operations for 2019 consisted of $18 million of higher core
losses and $40 million of lower non-core losses. The increase in core losses in 2019 was primarily due to higher interest
expense and lower income tax benefits, partially offset by lower losses from the competitive businesses under Edison Energy
Group.
Consolidated non-core items for 2019 and 2018 for Edison International included:
• Charges of $218 million ($157 million after-tax) in 2019 and $2.5 billion ($1.8 billion after-tax) in 2018 for SCE's
wildfire-related claims, net of expected recoveries from insurance and FERC customers.
• An impairment charge of $170 million ($123 million after-tax) recorded in 2019 for SCE related to disallowed historical
capital expenditures in SCE's 2018 GRC final decision.
• A charge of $152 million ($109 million after-tax) recorded in 2019 from the amortization of SCE's contributions to the
Wildfire Insurance Fund. See "Notes to Consolidated Financial Statements— Note 12. Commitments and Contingencies"
for further information.
•
Income tax benefit of $88 million recorded in 2019 for SCE related to changes in the allocation of deferred tax re-
measurement between customers and shareholders as a result of a CPUC resolution issued in February 2019. The
resolution determined that customers are only entitled to excess deferred taxes which were included when setting rates
and other deferred tax re-measurements belong to shareholders.
• An impairment charge of $25 million ($18 million after-tax) in 2019 for Edison Energy following a goodwill assessment.
• A loss of $56 million ($46 million after-tax) in 2018 for Edison International Parent and Other primarily related to sale of
SoCore Energy in April 2018.
•
Income of $12 million ($9 million after-tax) in 2018 for SCE due to the elimination of the GHG Reduction Funding
Program as a result of the Revised San Onofre Order Instituting Investigation Settlement Agreement among SCE,
SDG&E and various intervening parties, dated January 30, 2018 and modified on August 2, 2018.
• The 2018 settlement of the 1994 – 2006 California tax audits, which resulted in income tax expense of $12 million for
Edison International Parent and Other and income tax benefits of $66 million and $34 million for SCE and discontinued
operations, respectively.
See "Results of Operations" for discussion of SCE and Edison International Parent and Other results of operations.
4
Wildfire Mitigation and Wildfire Insurance Expenses
In response to the increase in wildfire activity, and faster progression of and increased damage from wildfires across SCE's
service territory and throughout California, SCE is currently incurring wildfire mitigation and wildfire insurance related
spending at levels significantly exceeding amounts authorized in its 2018 GRC. Several regulatory mechanisms, including
but not limited to the GS&RP memorandum account, the FHPMA, the WMP memorandum account and the WEMA, exist to
allow SCE to track and seek recovery of these incremental costs. In accordance with the accounting standards applicable to
rate-regulated enterprises, SCE defers costs as regulatory assets that are probable of future recovery from customers and has
recorded regulatory assets for these incremental costs. As of December 31, 2019, SCE has recognized $400 million of
regulatory assets related to incremental wildfire mitigation expenses and $341 million of regulatory assets related to
incremental wildfire insurance expenses. While SCE believes such costs are probable of future recovery, there is no assurance
that SCE will collect all amounts currently deferred as regulatory assets. SCE has recorded a further $754 million of wildfire
mitigation capital expenditures that could be subject to reasonableness review through the GS&RP and separate tracks of the
2021 GRC proceeding.
Grid Safety and Resiliency Program
In September 2018, SCE filed an application with the CPUC requesting approval of a GS&RP to implement additional
wildfire safety measures, including measures to further harden SCE's infrastructure to significantly reduce potential fire
ignition sources, bolster SCE's situational awareness capabilities to more fully assess and respond to potential wildfire
conditions, and enhance SCE's operational practices to further strengthen fire safety measures and system resiliency. In its
GS&RP application, SCE proposed to spend approximately $582 million ($407 million capital) in 2018 dollars between 2018
and 2020 in excess of amounts authorized in SCE's 2018 GRC and requested a balancing account to recover the incremental
costs of implementing the program. In January 2019, the CPUC approved the establishment of an interim memorandum
account to track GS&RP costs while the CPUC considers SCE's application. There is no assurance that SCE will be allowed
to ultimately recover these costs.
In July 2019, SCE and certain parties to SCE's GS&RP proceeding submitted a motion to the CPUC requesting approval of a
settlement agreement. If the CPUC approves the settlement agreement, SCE will be authorized to spend approximately
$526 million ($407 million capital) in 2018 dollars between 2018 and 2020. If approved by the CPUC, SCE will include the
authorized revenue requirement in rates and establish a balancing account to track the difference between actual GS&RP
costs and amounts authorized. If spending is less than authorized, SCE will refund those amounts to customers. If spending is
in excess of forecasted amounts, or in excess of 115% of forecasted amounts for certain activities, SCE will present those
costs for reasonableness review in a later track of the 2021 GRC.
GS&RP capital expenditures for 2019 and 2018 were $370 million and $49 million, respectively. Forecasted GS&RP capital
expenditures for 2020 are $564 million excluding capitalized indirect costs. In 2019, $37 million of expenses were recorded
to the interim memorandum account.
Wildfire Mitigation Plans
Under AB 1054, SCE is required to submit a wildfire mitigation plan to the CPUC annually for review and approval. SCE's
WMPs describe strategies, programs and activities that are in place, being implemented or are under development by SCE,
including associated cost estimates, to proactively address and mitigate the threat of electrical infrastructure-associated
ignitions that could lead to wildfires. Beginning in 2020, each WMP is required to cover at least a three-year period.
SCE filed its 2019 and 2020 WMPs with the CPUC in February 2019 and February 2020, respectively. Many, but not all, of
the programs and activities described in SCE's 2019 and 2020 WMPs are part of SCE's 2018 and 2021 GRC requests or
GS&RP application. As required by the CPUC, SCE's 2020 WMP includes updates in the areas of inspection and
maintenance, vegetation management, system hardening, and situational awareness.
In May 2019, the CPUC approved SCE's 2019 WMP, however, such approval does not authorize the associated spending.
The CPUC decision required SCE to meet certain reporting requirements, capture data, and improve its metrics for evaluating
performance. During 2019 SCE recorded $307 million of expenses in the WMP memorandum account. During 2019, WMP
capital expenditures not authorized in the 2018 GRC or contemplated in the GS&RP proceedings were $335 million.
Forecasted 2020 WMP direct costs not authorized in the 2018 GRC or contemplated in the GS&RP proceedings are $557
million, of which $244 million is capital.
The WMP memorandum account will be subject to a subsequent reasonableness review through separate tracks of the 2021
GRC.
5
Fire Hazard Prevention Memorandum Account
The FHPMA was established to record the costs incurred related to fire hazard prevention in compliance with decisions from
the CPUC. SCE has used the FHPMA to track incremental vegetation management activities to reduce the risk of fires. As of
December 31, 2019, operation and maintenance expenses of $198 million have been recorded to the FHPMA.
The FHPMA is expected to be subject to a subsequent reasonableness review through separate tracks of the 2021 GRC.
Wildfire Expense Memorandum Account
SCE tracks insurance premium costs related to wildfire liability insurance policies as well as other wildfire-related costs in its
WEMA. In July 2019, SCE filed a WEMA application with the CPUC to seek recovery of $478 million in wildfire insurance
premium costs incurred in excess of premiums approved in the 2018 GRC. As of December 31, 2019, SCE has recognized
$341 million of regulatory assets in the WEMA related to incremental wildfire insurance costs.
2018 General Rate Case
In May 2019, the CPUC approved a final decision in SCE's 2018 GRC. The final decision authorized a revenue requirement
of $5.1 billion for 2018 and identified changes to certain balancing accounts, including the expansion of the TAMA to include
the impacts of all differences between forecast and recorded tax expense. The final decision also disallowed certain historical
spending, largely related to specific pole replacements the CPUC determined were performed prematurely.
The final decision allows a post-test year rate making mechanism that escalates capital additions by 2.49% for both 2019 and
2020. It also allows operation and maintenance expenses to be escalated for 2019 and 2020 through the use of various
escalation factors for labor, non-labor and medical expenses. The methodology set forth in the final decision results in a
revenue requirement of $5.5 billion in 2019 and $5.9 billion in 2020.
The revenue requirements in the 2018 GRC final decision are retroactive to January 1, 2018. SCE recorded the prior period
impact of the 2018 GRC final decision in 2019, including an increase to core earnings of $131 million from the application of
the decision to revenue, depreciation expense and income tax expense and a non-core impairment of utility property, plant
and equipment of $170 million ($123 million after-tax) related to disallowed historical capital expenditures. See "Results of
Operations—SCE" and "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies"
for further information.
2020 Cost of Capital Application
In April 2019, SCE filed an application with the CPUC for authority to establish its authorized cost of capital for utility
operations for a three-year term, beginning January 1, 2020. In December 2019, the CPUC issued a final decision increasing
the common equity component of SCE's capital structure from its current authorized level of 48% to 52% in 2020 and
correspondingly reducing its preferred equity component from 9% to 5%. The final decision maintains SCE's CPUC ROE for
the three-year period beginning January 1, 2020 at 10.3%. Under the decision, SCE's annual cost of capital adjustment
mechanism also remains unchanged. Under the final decision, SCE's 2020 authorized cost of long-term debt and preferred
equity are 4.74% and 5.70%, respectively. Based on the approved capital structure and costs, SCE's weighted average return
on rate base for 2020 will be 7.68%.
Based on the revenue requirement approved in SCE's 2018 GRC, SCE’s cost of capital and capital structure approved in the
final decision will result in a projected revenue requirement increase in 2020 of approximately $38 million from revenue
currently included in CPUC electric rates of $5.9 billion.
2018 and 2019 FERC Formula Rate
In December 2019, the FERC approved a settlement on SCE's formula rates for the 2018 Formula Rate case that established
SCE's FERC transmission revenue requirement for the FERC 2018 Settlement Period. The settlement provides for a weighted
average ROE of 11.2%, which includes a previously authorized 50 basis point incentive for CAISO participation and
individual and previously authorized project incentives. Under the settlement, if the FERC issues a final, unappealable ruling
that finds SCE is not eligible for the 50 basis point incentive for CAISO participation, then the ROE for the FERC 2018
Settlement Period will be reduced to 10.7%. Prior to the settlement, SCE had been recognizing revenue during the FERC
2018 Settlement Period based on its expectations of the outcome of the 2018 Formula Rate case. Regulatory assets and
liabilities were adjusted based on the settlement of the 2018 Formula Rate case, which resulted in an increase in net income
of $29 million related to 2018, being recorded in 2019. The transmission revenue requirement and rates that have been billed
to customers for the FERC 2018 Settlement Period were based on a total FERC weighted average ROE of 11.58%, and SCE
expects to refund excess amounts billed to customers during 2020. In the 2019 Formula Rate case, SCE's requested base
6
return on equity, as modified by a partial settlement approved by the FERC, is 11.97% ("FERC Base ROE"). This ROE
request reflects a conventional ROE of 11.12% and an additional ROE of 0.85% to compensate investors for current wildfire
risk. As with SCE's requested ROE in its 2020 CPUC Cost of Capital proceeding, this request reflects the anticipated impact
of AB 1054 on SCE's requested ROE. SCE's total ROE request, inclusive of project incentives and a 0.5% incentive for
CAISO participation, would be approximately 13.25%. The 2019 Formula Rate was implemented in rates in November 2019
and remains subject to hearing and settlement procedures. Amounts billed to customers under the 2019 Formula Rate will be
subject to refund until the 2019 Formula Rate proceeding is ultimately resolved.
In November 2019, the FERC issued a decision in a pending Midcontinent Independent System Operator Transmission
Owners ("MISO TO") proceeding which significantly revised the methodology used to determine MISO TO's just and
reasonable ROE levels by restricting the valuation methodologies that would be recognized by the FERC in establishing a
zone of reasonableness for ROE. The decision also reiterated that authorized ROE, including FERC-authorized project
incentives, could not exceed the established zone of reasonableness. The updated methodology led to an authorized ROE for
MISO TO of 9.88%, compared to their previously authorized ROE of 12.38%. Numerous parties requested rehearing of the
MISO decision on various grounds and, in January 2020, the FERC granted rehearing requests for the limited purpose of
allowing the FERC additional time for consideration of the concerns raised.
In December 2019, the CPUC filed a protest with the FERC alleging that $419 million of costs associated with SCE's
Tehachapi Transmission Project are imprudent and should be disallowed from SCE's FERC rate base because these costs
exceeded the maximum reasonable costs identified by the CPUC when it granted the project’s certificate of public
convenience and necessity. The CPUC requested that the FERC set this issue for hearings and consolidate the protest with the
settlement proceedings of the 2019 Formula Rate case.
Southern California Wildfires and Mudslides
Multiple factors have contributed to increased wildfire activity, and faster progression of and increased damage from
wildfires across SCE's service territory and throughout California. These include the buildup of dry vegetation in areas
severely impacted by years of historic drought, lack of adequate clearing of hazardous fuels by responsible parties, higher
temperatures, lower humidity, and strong Santa Ana winds. At the same time that wildfire risk has been increasing in
Southern California, residential and commercial development has occurred and is occurring in some of the highest-risk areas.
Such factors can increase the likelihood and extent of wildfires. SCE has determined that approximately 27% of its service
territory is in areas identified as high fire risk.
Over the past several years, wind-driven wildfires impacted portions of SCE's service territory, with wildfires in December
2017 and November 2018 causing loss of life, substantial damage to both residential and business properties, and service
outages for SCE customers. In 2019, several wind-driven wildfires originated in Southern California. SCE does not expect
any of these 2019 fires to have a material adverse effect on its financial condition, results of operations or cash flows.
Edison International and SCE recorded a charge of $255 million as of December 31, 2019 for wildfire-related claims, net of
expected insurance recoveries. The 2019 charge consists of an increase in estimated losses for claims related to the
2017/2018 Wildfire/Mudslide Events of $232 million, against which SCE has recorded expected recoveries through FERC
electric rates of $14 million. The resulting charge was $218 million ($157 million after-tax). The fourth quarter 2019 charge
also includes $23 million ($17 million after-tax) of expenses primarily associated with self-insured retention for fires that
occurred in Southern California in 2019.
2017/2018 Wildfire/Mudslide Events
The investigating government agencies, the VCFD and CAL FIRE, have determined that the largest of the 2017 fires
originated on December 4, 2017, in the Anlauf Canyon area of Ventura County (the investigating agencies refer to this fire as
the "Thomas Fire"), followed shortly thereafter by the Koenigstein Fire. While the progression of these two fires remains
under review, the December 4, 2017 fires eventually burned substantial acreage in both Ventura and Santa Barbara Counties.
The largest of the November 2018 fires, known as the Woolsey Fire, originated in Ventura County and burned acreage in both
Ventura and Los Angeles Counties.
In March 2019, the VCFD and CAL FIRE jointly issued separate reports finding that the Thomas Fire and the Koenigstein
Fire were each caused by SCE equipment. At this time, based on available information, SCE has not determined whether its
equipment caused the Thomas Fire. Based on publicly available radar data showing a smoke plume in the Anlauf Canyon
area emerging in advance of the start time of the Thomas Fire indicated in the Thomas Fire report, SCE believes that the
Thomas Fire started at least 12 minutes prior to any issue involving SCE's system and at least 15 minutes prior to the start
time indicated in the report. SCE has previously disclosed that SCE believed its equipment was associated with the ignition
7
of the Koenigstein Fire. SCE is continuing to assess the progression of the Thomas and Koenigstein Fires and the extent of
damages that may be attributable to each fire.
SCE has received a non-final redacted draft of a report from the VCFD subject to a protective order in the litigation related to
the Woolsey fire and, other than the information disclosed in this Form 10-K, is not authorized to release the report or its
contents to the public at this time. The draft report states that the VCFD investigation team determined that electrical
equipment owned and operated by SCE was the cause of the Woolsey Fire. Absent additional evidence, SCE believes that it is
likely that its equipment was associated with the ignition of the Woolsey Fire.
Multiple lawsuits related to the Thomas and Koenigstein Fires and the Woolsey Fire have been initiated against SCE and
Edison International. Some of the Thomas and Koenigstein Fires lawsuits claim that SCE and Edison International have
responsibility for the damages caused by the Montecito Mudslides based on a theory alleging that SCE has responsibility for
the Thomas and/or Koenigstein Fires and that the Thomas and/or Koenigstein Fires proximately caused the Montecito
Mudslides.
SCE's internal review into the facts and circumstances of each of the 2017/2018 Wildfire/Mudslide Events is ongoing, and
SCE expects to obtain and review additional information and materials in the possession of third parties during the course
of its internal reviews and the litigation processes. Final determinations of liability for the Thomas Fire, the Koenigstein Fire,
the Montecito Mudslides and the Woolsey Fire (each a "2017/2018 Wildfire/Mudslide Event," and, collectively, the
"2017/2018 Wildfire/Mudslide Events"), including determinations of whether SCE was negligent, would only be made
during lengthy and complex litigation processes. Even when investigations are still pending or liability is disputed, an
assessment of likely outcomes, including through future settlement of disputed claims, may require a liability to be accrued
under accounting standards. Based on information available to SCE and consideration of the risks associated with litigation,
Edison International and SCE expect to incur a material loss in connection with the 2017/2018 Wildfire/Mudslide Events.
In the fourth quarter of 2018, SCE recorded a liability for estimated losses of $4.7 billion related to the 2017/2018 Wildfire/
Mudslide Events. In the fourth quarter of 2019, SCE paid $360 million to a number of local public entities to resolve those
parties' collective claims arising from the 2017/2018 Wildfire/Mudslide Events (the "Local Public Entity Settlements"). After
the Local Public Entity Settlements, the liability accrued for estimated losses as of December 31, 2019 was reduced by the
$360 million paid in the Local Public Entity Settlements.
Each reporting period, management reviews its loss estimates for remaining alleged and potential claims related to the
2017/2018 Wildfire/Mudslide Events. The process for estimating losses associated with wildfire litigation claims requires
management to exercise significant judgment based on a number of assumptions and subjective factors, including, but not
limited to: estimates of known and expected claims by third parties based on currently available information, opinions of
counsel regarding litigation risk, the status of and developments in the course of litigation, and prior experience litigating and
settling wildfire litigation claims. While the low end of the reasonably estimated range of expected losses for the 2017/2018
Wildfire/Mudslide Events is estimated on an aggregate basis, some of the factors evaluated by management in connection
with its fourth quarter 2019 review contributed to a significant increase in certain loss estimates, while others contributed to a
significant decrease in certain other loss estimates. The net result of management's fourth quarter 2019 review was an
increase in estimated losses of $232 million for total estimated losses of $4.5 billion as of December 31, 2019 for unpaid
claims related to the 2017/2018 Wildfire Mudslide Events. The accrued liability as of December 31, 2019 corresponds to the
lower end of the reasonably estimated range of expected losses that may be incurred in connection with the 2017/2018
Wildfire/Mudslide Events and is subject to change as additional information becomes available.
Edison International and SCE will seek to offset any actual losses realized in connection with the 2017/2018 Wildfire/
Mudslide Events with recoveries from insurance policies in place at the time of the events and, to the extent actual losses
exceed insurance, through electric rates. As of December 31, 2019, Edison International and SCE have remaining expected
recoveries from insurance of $1.7 billion and expected recoveries through FERC electric rates of $149 million on their
consolidated balance sheets related to the 2017/2018 Wildfire/Mudslide Events. SCE believes that, in light of the CPUC's
decision in a cost recovery proceeding involving SDG&E arising from several 2007 wildfires in SDG&E's service area, there
is substantial uncertainty regarding how the CPUC will interpret and apply its prudency standard to an investor-owned utility
in future wildfire cost-recovery proceedings for fires ignited prior to July 12, 2019. Accordingly, while the CPUC has not
made a determination regarding SCE's prudency relative to any of the 2017/2018 Wildfire/Mudslide Events, SCE is unable to
conclude, at this time, that uninsured CPUC-jurisdictional wildfire-related costs are probable of recovery through electric
rates.
Edison International and SCE continue to pursue regulatory and legal strategies, and anticipate pursuing legislative strategies
in the longer term, to address the application of a strict liability standard to wildfire-related property damages without the
guaranteed ability to recover resulting costs in electric rates.
8
2019 Wildfire Legislation
In July 2019, AB 1054 was signed by the Governor of California and became effective immediately. The summary of the
wildfire legislation in this report is based on SCE's interpretation of the legislation and is qualified in its entirety by, and
should be read together with, AB 1054 and companion Assembly Bill 111.
Wildfire Insurance Fund
AB 1054 provided for the Wildfire Insurance Fund to reimburse utilities for payment of third-party damage claims arising
from certain wildfires that exceed, in aggregate in a calendar year, the greater of $1.0 billion or the utility's insurance
coverage. The Wildfire Insurance Fund was established in September 2019 when both SCE and SDG&E made their initial
contributions to the fund. The Wildfire Insurance Fund is available for claims related to wildfires ignited after July 12, 2019
that are determined to have been caused by a utility by the responsible government investigatory agency.
SCE and SDG&E have collectively made their initial contributions totaling approximately $2.7 billion to the Wildfire
Insurance Fund. While PG&E has committed to make an initial contribution of approximately $4.8 billion to the Wildfire
Insurance Fund upon emergence from bankruptcy, its participation in, and contributions to the fund are subject to it resolving
its bankruptcy proceeding and meeting certain other conditions prior to June 30, 2020. SCE, SDG&E and PG&E are also
collectively expected to make aggregate contributions of $3.0 billion to the Wildfire Insurance Fund through annual
contributions to the fund over a 10-year period, of which SCE and SDG&E have made their initial annual contributions
totaling approximately $107 million. If PG&E is unable to participate in the Wildfire Insurance Fund, then SCE and SDG&E
are collectively expected to make aggregate contributions of approximately $1.0 billion to the fund through annual
contributions over the 10-year period. In addition to PG&E's, SCE's and SDG&E's contributions to the Wildfire Insurance
Fund, $13.5 billion is expected to be collected over a 15-year period from their ratepayers through a dedicated rate
component. The amount collected from ratepayers may be directly contributed to the Wildfire Insurance Fund or used to
support the issuance of up to $10.5 billion in bonds by the California Department of Water Resources, the proceeds of which
would be contributed to the fund. In addition to funding contributions to the Wildfire Insurance Fund, the amount collected
from utility ratepayers will pay for, among other things, any interest and financing costs related to any bonds that are issued
by the California Department of Water Resources to support the contributions to the Wildfire Insurance Fund. Based on a
decision adopted by the CPUC in October 2019 in the Order Instituting Rulemaking to Consider Authorization of a Non-
Bypassable Charge to Support the Wildfire Insurance Fund, PG&E's ratepayers will not be required to contribute to the fund
if PG&E does not participate in the Wildfire Insurance Fund. In that case, $7.5 billion will be collected from SCE's and
SDG&E's ratepayers through the dedicated rate component to support a contribution to the Wildfire Insurance Fund.
SCE made an initial contribution of approximately $2.4 billion to the Wildfire Insurance Fund in September 2019 and has
committed to make ten annual contributions of approximately $95 million per year to the fund, by no later than January 1 of
each year. SCE made its first annual contribution to the Wildfire Insurance Fund in December 2019. Edison International
supported SCE's initial contribution to the Wildfire Insurance Fund by raising $1.2 billion from the issuance of Edison
International equity. SCE raised the remaining $1.2 billion from the issuance of long-term debt. SCE's contributions to the
Wildfire Insurance Fund will not be recoverable through electric rates and will be excluded from the measurement of SCE's
CPUC-jurisdictional authorized capital structure. SCE will also not be entitled to cost recovery for any borrowing costs
incurred in connection with its contributions to the Wildfire Insurance Fund.
Participating investor-owned utilities will be reimbursed from the Wildfire Insurance Fund for eligible claims, subject to the
fund administrator's review, and will be required to reimburse the fund for withdrawn amounts that the CPUC disallows
subject, in some instances, to the AB 1054 Liability Cap. A utility will not be eligible for the AB 1054 Liability Cap if it does
not maintain a valid safety certification or its actions or inactions that resulted in the wildfire are found to constitute
conscious or willful disregard of the rights and safety of others. On July 25, 2019, SCE obtained its initial safety certification
that will be valid for twelve months. Based on SCE's 2020 rate base and assuming the equity portion of SCE's capital
structure is 52% (SCE's CPUC authorized capital structure), SCE's requirement to reimburse the Wildfire Insurance Fund for
eligible claims disallowed in 2020 would be capped at approximately $3.0 billion. SCE will not be allowed to recover
borrowing costs incurred to reimburse the fund for amounts that the CPUC disallows. The Wildfire Insurance Fund and,
consequently, the AB 1054 Liability Cap will terminate when the administrator determines that the fund has been exhausted.
AB 1054 Prudency Standard
As a result of the establishment of the Wildfire Insurance Fund, AB 1054 created a new standard that the CPUC must apply
when assessing the prudency of a utility in connection with a request for recovery of wildfire costs for wildfires ignited after
July 12, 2019. Under AB 1054, the CPUC is required to find a utility to be prudent if the utility's conduct related to the
ignition was consistent with actions that a reasonable utility would have undertaken under similar circumstances, at the
9
relevant point in time, and based on the information available at that time. Utilities with a valid safety certification will be
presumed to have acted prudently related to a wildfire ignition unless a party in the cost recovery proceeding creates serious
doubt as to the reasonableness of the utility's conduct, at which time, the burden shifts back to the utility to prove its conduct
was reasonable. If a utility does not have a valid safety certification, it will have the burden to prove, based on a
preponderance of evidence, that its conduct was prudent. The new prudency standard will survive the termination of the
Wildfire Insurance Fund.
Utilities participating in the Wildfire Insurance Fund that are found to be prudent are not required to reimburse the fund for
amounts withdrawn from the fund and can recover wildfire costs through electric rates if the fund has been exhausted.
Capital Expenditure Requirement
Under AB 1054, approximately $1.6 billion spent by SCE on wildfire risk mitigation capital expenditures made after
August 1, 2019 cannot be included in the equity portion of SCE's rate base. SCE can apply for an irrevocable order from the
CPUC to finance these capital expenditures, including through the issuance of securitized bonds, and can recover any
prudently incurred financing costs. SCE expects to finance this capital requirement by issuing securitized bonds.
For further information, see "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting
Policies—Initial and annual contributions to the wildfire insurance fund established pursuant to California Assembly Bill
1054," "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern
California Wildfires and Mudslides" and "Legal Proceedings."
2021 General Rate Case
In August 2019, SCE filed its 2021 GRC application for the three-year period 2021-2023. Following amendments and other
revisions to the application in November 2019 and February 2020, SCE’s 2021 revenue requirement is $7.6 billion. SCE's
request excludes the revenue requirement associated with the approximately $1.6 billion in wildfire risk mitigation capital
expenditures that SCE will exclude from the equity portion of rate base as required under AB 1054.
In the amendment of February 2020, SCE removed its CSRP implementation costs from the 2021 GRC. SCE will continue to
track the cost of the CSRP program in a memorandum account previously approved in the 2018 GRC and review of the
CSRP implementation costs will be deferred to a future application to the CPUC.
The 2021 revenue requirement represents an increase of $1.1 billion over the 2020 revenue requirement authorized in the
2018 GRC and updated for anticipated post test-year ratemaking changes. Including the impact of anticipated lower kilowatt-
hour sales in 2021 and one-time memorandum account recoveries, this represents an 11.4% increase over 2020 rates. SCE's
2021 GRC request also includes proposed revenue requirement increases of $423 million in 2022 and $514 million in 2023.
The updated revenue requirements were requested based on the ROE and capital structure authorized at the time of the initial
filing. A new capital structure has since been authorized. See "—2020 Cost of Capital Application."
SCE's requested increase to its revenue requirement in the 2021 GRC application is largely due to SCE's efforts to reduce
wildfire risk. Certain of SCE's key wildfire mitigation forecast expenditures are subject to significant potential volatility. As a
result, SCE has proposed establishing two-way balancing accounts for wildfire mitigation-related enhanced vegetation
management, inspection activities and grid hardening, as well as for insurance premiums.
The capital programs requested in SCE's 2021 GRC include the infrastructure and programs necessary to implement
California's ambitious public policy goals, including wildfire mitigation, de-carbonization of the economy through
electrification and integration of distributed energy resources across a rapidly modernizing grid. See "—Capital Program" for
further details.
The schedule established in the proceeding includes CPUC issuance of a proposed decision in the fourth quarter of 2020, or
during the first quarter of 2021. If the final decision is issued in 2021, SCE will, consistent with CPUC practice in prior
GRCs, request the CPUC to issue an order directing that the authorized revenue requirement changes be effective January 1,
2021.
Historically, the CPUC has set an annual revenue requirement for the base year and then set the remaining two years by a
methodology established in the GRC proceeding. In January 2020, the CPUC approved a change from a triennial GRC cycle
to a quadrennial GRC cycle for large energy utilities such as SCE. SCE is required to file an amendment to its application for
the three-year period 2021 – 2023 to add an attrition year for 2024. The timing of the amendment is subject to further
direction from the CPUC.
10
Electricity Industry Trends
In addition to responding to the "new normal" of increased wildfire-activity in California, the electric power industry is also
undergoing transformative change driven by technological advances, such as customer-owned generation, electric vehicles
and energy storage, which are altering the nature of energy generation and delivery. California is committed to reducing its
GHG emissions, improving local air quality and supporting continued economic growth. The state set goals to reduce GHG
emissions by 40% from 1990 levels by 2030 and 80% from the same baseline by 2050. Additionally, the state is aiming to be
carbon neutral by 2045. State and local air quality plans call for substantial improvements, such as reducing smog-causing
nitrogen oxides 90% below 2010 levels by 2032 in the most polluted areas of the state. While these policy goals cannot be
achieved by the electric sector alone, the electric grid is a critical enabler of the adoption of new energy technologies that
support California's climate change and GHG reduction objectives. Therefore, California has set RPS targets which require
California retail sellers of electricity to provide 60% of energy sales from renewable resources by 2030. California also
requires sellers of electricity to deliver 100% of retail sales from carbon free sources by 2045. In 2019 approximately 48% of
SCE's customer deliveries came from carbon-free resources. SCE's climate change objectives align with California's
requirements, and SCE anticipates it will meet its own objectives, and therefore California's requirements, through 2045.
The grid is also key to enabling more customer choices with respect to new energy technologies, including fostering the
adoption of electric vehicles. Edison International believes that California's 2045 goals can be achieved most economically
through emissions reductions from using clean electricity serving 100% of retail sales, electrifying 75% of vehicles and 70%
of buildings and using low-carbon fuels for technologies that are not yet viable for electrification. Edison International
expects to lead the transformation of the industry by building a modernized and more reliable grid, focusing on opportunities
in clean energy and efficient electrification, and enabling customers' technology choices.
SCE plans to enable the adoption of new energy technologies that mitigate wildfire risk and benefit customers of the electric
grid while also helping California achieve its environmental goals. SCE expects to achieve these objectives through
improving the safety and reliability of the transmission and distribution network and helping customers make cleaner energy
choices including enabling increased penetration of DERs, electric transportation, building electrification and energy
efficiency programs. SCE's ongoing focus to drive operational and service excellence is intended to allow it to achieve these
objectives safely while controlling costs and customer rates. SCE's focus on the transmission and distribution of electricity
aligns with California's policy supporting competitive power procurement markets. For more information on the grid
development, see "Liquidity and Capital Resources—Capital Investment Plan—Grid Development—Wildfire Mitigation"
and "Liquidity and Capital Resources—Capital Investment Plan—Grid Development—Transportation Electrification."
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 and large commercial
and industrial customers will continue to pursue cost reduction and sustainability goals. Edison Energy provides energy
services and managed portfolio solutions to commercial and industrial customers who may be impacted by these changes.
Edison Energy 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.
To better engage in this broader transformation and provide a view of developments outside of SCE, Edison International has
made several minority investments in emerging companies in areas related to the technology changes that are driving industry
transformation and may make additional investments in the future. These investments are not financially material to Edison
International.
Capital Program
Total capital expenditures (including accruals) were $4.8 billion in 2019 and $4.4 billion in 2018. SCE's year-end rate base
was $32.6 billion at December 31, 2019 compared to $29.6 billion at December 31, 2018. Under AB 1054, approximately
$1.6 billion of wildfire risk mitigation capital expenditures cannot be included in the equity portion of SCE's rate base and
instead can be recovered through issuance of securitized bonds. The year-end rate base of $32.6 billion at December 31, 2019
excludes $252 million wildfire risk mitigation capital expenditures as required by AB 1054.
Based on the 2021 GRC request, SCE forecasts capital expenditures for 2020 – 2023 to be approximately $19.4 billion to
$21.2 billion. SCE's capital expenditure forecast for 2020 reflects planned CPUC jurisdictional spending as informed by the
2018 GRC final decision, spending associated with SCE's wildfire mitigation-related capital expenditures under the GS&RP
and WMP, and current expectations of FERC- jurisdictional spending. SCE's capital expenditure forecast for 2021 – 2023
reflects the requested CPUC jurisdictional spending included in the 2021 GRC application, approved non-GRC CPUC capital
spending, and current expectations of FERC- jurisdictional capital spending. SCE's forecasted capital expenditures for 2020 –
2021 include approximately $300 million of capital spending on the CSRP project. Total forecasted capital expenditures for
11
the CSRP project are approximately $540 million from inception through 2021. In the 2018 GRC, SCE provided a cost
estimate to the CPUC of $209 million in capital expenditures for the CSRP program. In February 2020, SCE filed an update
with the CPUC to exclude CSRP program expenditures from rate base and capital expenditures of the 2021 GRC application
and to continue to track the cost of the CSRP program in a memorandum account previously approved in the 2018 GRC.
Forecasted expenditures for FERC-jurisdictional capital projects are subject to change due to timeliness of permitting,
licensing, regulatory approvals and contractor bids. Capital spending in 2021, 2022 and 2023 will be dependent upon the
amount approved in a 2021 GRC final decision.
Based on management judgment using historical precedent of previously authorized amounts and potential permitting delays
and other operational considerations, a range case has been provided reflecting a 10% reduction on the total capital forecast
for 2021 – 2023 and a 10% reduction on FERC capital spending and non-GRC programs for 2020.
The following table sets forth a summary of capital expenditures for 2019 actual spend and a forecast for 2020 – 2023 on the
basis described above:
(in billions)
Traditional capital expenditures
Distribution
Transmission
Generation
Subtotal
Wildfire mitigation-related capital expenditures
Total capital expenditures
Total capital expenditures using range case
discussed above
* Not applicable
2019
2020
2021
2022
2023
Total
2020 – 2023
$
3.1 $
0.8
0.2
4.1
0.7
3.2 $
0.7
0.2
4.1
0.9
3.4 $
0.8
0.2
4.4
1.0
3.3 $
0.8
0.2
4.3
3.2 $
0.6
0.2
4.0
1.1
1.4
$
4.8 $
5.0 $
5.4 $
5.4 $
5.4 $
* $
4.8 $
4.9 $
4.9 $
4.8 $
13.1
2.9
0.8
16.8
4.4
21.2
19.4
SCE's authorized CPUC-jurisdictional rate base is determined through the GRC and other regulatory proceedings.
Differences between actual and CPUC-authorized capital expenditures are addressed in subsequent GRC or other regulatory
proceedings. FERC-jurisdictional rate base is generally determined based on actual capital expenditures.
Reflected below is SCE's weighted average annual rate base for 2019 – 2023 incorporating CPUC capital expenditures
authorized in the 2018 GRC final decision, expected FERC capital expenditures and capital expenditures included in the
2021 GRC application. The table below does not reflect the $1.6 billion of wildfire risk mitigation capital expenditures to be
excluded from the equity portion of SCE's rate base under AB 1054. The table below does not reflect rate base associated
with non-GRC projects or programs that have not yet been approved by the CPUC, including CSRP, with the exception of
GS&RP spend incurred before August 1, 2019. In addition, a third-party holds an option to invest up to $400 million in the
West of Devers Transmission project at the estimated in-service date of 2021. The rate base in the table below is reduced to
reflect this option.
(in billions)
2019
2020
2021
2022
2023
Rate base for expected capital expenditures
Rate base for expected capital expenditures (using range case
described above)
$
30.8 $
33.4 $
35.9 $
38.2 $
41.0
* $
33.3 $
35.1 $
37.0 $
39.2
* Not applicable
For additional information, see "Liquidity and Capital Resources—Capital Investment Plan."
12
RESULTS OF OPERATIONS
SCE
SCE's results of operations are derived mainly through two sources:
• Earning activities – representing revenue authorized by the CPUC and the 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 revenue 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.
Impact of 2018 GRC
The 2018 GRC final decision determines the amount of revenue that SCE is authorized to collect from customers to recover
anticipated costs, including return on rate base. The 2018 GRC final decision approved an authorized revenue requirement of
$5.1 billion for 2018, the first year ("Test Year") of the three-year GRC period, and authorized annual increases under a set
escalation mechanism based on labor, non-labor and medical expenses.
In the absence of a 2018 GRC final decision, SCE recognized revenue in 2018 and the first quarter of 2019 based on the 2017
authorized revenue requirement, adjusted for items SCE determined to be probable of occurring, primarily the July 2017 cost
of capital decision and Tax Reform. Adjustments were also made to 2017 authorized revenue to reflect changes in authorized
tax benefits for certain balancing accounts.
As indicated in the table below, authorized revenue in the 2018 GRC final decision is less than the amount recognized in
2018:
(in millions)
Authorized revenue
Cost of service:
Operation and maintenance
Depreciation
Property and payroll taxes
Income taxes
Authorized return
Total authorized revenue
$
2017
Authorized
Revenue
Adjustments
2018 Revenue
Recognized in
Form 10-K
2018
Test Year
Authorized
Revenue
Adjustment
to 2018
Revenue
Recorded in
2019
$
5,640
$
(235)
$
5,405
$
5,116
$
1,931
1,575
285
257
1,592
5,640
$
(11)
59
9
(287)
(5)
(235)
1,920
1,634
294
(30)
1,587
$
5,405
$
1,582
1,579
315
(19)
1,659
5,116
$
(289) 1
(338) 2
(55) 3
21
11
72
(289)
1 The change in authorized revenue in the Test Year is comprised of $129 million in earnings activities and $160 million in cost recovery
activities.
2 Authorized revenue for operation and maintenance costs decreased due to:
•
•
$178 million reduction for earnings activities primarily from SCE's initiatives to improve operational efficiency, which has
resulted in lower forecasted costs than included in the 2017 authorized amounts.
$160 million reduction in cost-recovery activities, which do not impact earnings, primarily for medical and employee benefit costs.
3 Authorized revenue for depreciation decreased as a result of lower authorized depreciation rates.
13
After the application of escalation factors to the Test Year, the CPUC authorized SCE to collect $5.5 billion from customers
in 2019. During the second quarter of 2019, SCE recorded a reduction of revenue of $265 million to reflect $289 million of
lower authorized revenue related to 2018 and $24 million of higher authorized revenue in 2019. The 2018 GRC final decision
is retroactive to January 1, 2018 and the reduction of revenue contributed to a refund to customers of $554 million, which
SCE recorded as a regulatory liability. SCE expects to refund these amounts to customers through December 2020.
Years ended December 31, 2019, 2018 and 2017
The following table is a summary of SCE's results of operations for the periods indicated:
(in millions)
2019
Cost-
Recovery
Activities
Earning
Activities
Total
Consolidated
Earning
Activities
2018
Cost-
Recovery
Activities
Total
Consolidated
Earning
Activities
2017
Cost-
Recovery
Activities
Total
Consolidated
Operating revenue
$ 6,678 $ 5,628 $
12,306 $ 6,560 $ 6,051 $
12,611 $ 6,611 $ 5,643 $
12,254
Purchased power and fuel
Operation and maintenance1
Wildfire-related claims, net of
insurance recoveries
Wildfire insurance fund expense
Depreciation and amortization
Property and other taxes
Impairment and other
Other operating income
Total operating expenses
Operating income (loss)
Interest expense
Other income
Income (loss) before income taxes
Income tax benefit
Net income (loss)
Preferred and preference stock
dividend requirements
Net income (loss) available for
common stock
Net income (loss) available for
common stock
Less: Non-core items
Wildfire insurance fund expense
Wildfire-related claims, net of
recoveries
Impairment and other
Re-measurement of deferred taxes
Settlement of California tax audits
Core earnings2
—
2,073
255
152
1,727
396
159
(4)
4,758
1,920
(738)
119
1,301
(229)
1,530
121
4,839
863
—
—
1
—
—
—
4,839
2,936
255
152
—
1,972
2,669
—
1,728
1,867
396
159
(4)
392
(12)
(7)
5,406
730
—
—
—
—
—
(75)
(1)
76
—
—
1,845
(739)
195
1,301
(229)
1,530
(321)
(671)
107
(885)
(696)
(189)
121
121
(85)
(2)
87
—
—
—
—
1,867
2,032
5,406
2,702
2,669
—
392
(12)
(7)
(406)
(673)
194
(885)
(696)
(189)
—
1,898
4,873
824
—
—
372
716
(8)
5,010
1,601
(588)
93
1,106
(30)
1,136
—
—
—
—
—
—
5,697
(54)
(1)
55
—
—
—
—
121
124
4,873
2,722
—
—
2,032
372
716
(8)
10,707
1,547
(589)
148
1,106
(30)
1,136
124
5,703
10,461
6,881
6,136
13,017
$ 1,409 $
— $
1,409 $
(310) $
— $
(310) $ 1,012 $
— $
1,012
$
1,409
$
(310)
$
1,012
(109)
(157)
(115)
88
—
(1,825)
9
—
66
—
—
(448)
(33)
—
$
1,702
$
1,440
$
1,493
1 See use of non-GAAP financial measures in "Management Overview—Highlights of Operating Results."
14
Earning Activities
2019 vs 2018
Earning activities were primarily affected by the following:
• Higher operating revenue of $118 million is primarily due to:
• An increase in CPUC-related revenue of $100 million primarily due to the adoption of the 2018 GRC final decision,
including the application of the decision retroactively to January 1, 2018, as discussed above.
• An increase of $38 million in FERC-related revenue primarily due to the settlement of SCE's 2018 Formula Rate
proceeding, rate base growth and higher operating costs subject to balancing account treatment, partially offset by
lower recoveries from FERC customers for wildfire-related claims in 2019 as compared to 2018.
• A decrease in other operating revenue of $20 million primarily due to rate adjustments implemented in the second
quarter of 2019.
• Higher operation and maintenance expenses of $101 million primarily due to expenses related to wildfire mitigation
activity that were not deferred as regulatory assets. Activities driving higher expenses included higher inspection,
preventive maintenance and vegetation management costs in non-high fire risk areas. SCE has not recorded regulatory
assets for $119 million of 2019 wildfire mitigation costs as there is no current precedent for recovery of these costs, but
SCE is seeking recovery of these costs through a separate track of the 2021 GRC. Those costs were partially offset by the
impact of the adoption of the 2018 GRC final decision primarily due to a change in capitalization rates and the timing of
regulatory deferral and cost recovery of incremental wildfire insurance expenses.
• Charges of $255 million and $2.7 billion recorded in 2019 and 2018, respectively, for wildfire-related claims, net of
expected insurance recoveries.
• Expense of $152 million for insurance protection from the Wildfire Insurance Fund following SCE's election to
participate in and contribute to the fund. See "Management Overview—Southern California Wildfires and Mudslides" for
further information.
• Lower depreciation and amortization expense of $140 million primarily related to the change in depreciation rates and the
impact of disallowed historical capital expenditures from the adoption of the 2018 GRC final decision.
• Higher impairment and other of $171 million primarily related to the disallowed historical capital expenditures in SCE's
2018 GRC final decision, as discussed above.
• Higher interest expense of $67 million primarily due to increased borrowings.
• Higher other income of $12 million primarily due to interest income from various balancing accounts.
• Lower income tax benefits of $467 million primarily due to the following:
• Lower tax benefit of $612 million due to higher pre-tax income.
• Lower tax benefit of $66 million due to the 2018 settlement of the 1994 – 2006 California tax audit.
• Higher tax benefit of $211 million primarily due to the changes in the allocation of deferred tax re-measurement
between customers and shareholders as a result of a CPUC resolution issued in February 2019, the adoption of
the 2018 GRC final decision and tax benefit on property-related items.
Cost-Recovery Activities
2019 vs 2018
Cost-recovery activities were primarily affected by the following:
• Lower purchased power and fuel costs of $567 million primarily driven by lower load related to customer departures to
CCAs and cooler weather, partially offset by lower congestion revenue right credits, higher contract termination charges
and the absence of settlement funds received in 2018 related to the California energy crisis.
15
• Higher operation and maintenance expenses of $133 million primarily driven by the authorization to recover 2018
wildfire insurance costs that had been deferred as regulatory assets and higher transmission access charges, partially offset
by lower employee-related expenses subject to balancing account treatment and lower spending on public programs.
• Lower other income of $11 million primarily driven by lower net periodic benefit income related to the non-service cost
components for SCE's other post-retirement benefit plans. See "Notes to Consolidated Financial Statements—Note 9.
Compensation and Benefit Plans" for further information.
Supplemental Operating Revenue Information
SCE's retail billed and unbilled revenue (excluding wholesale sales) was $11.4 billion, $11.7 billion and $11.4 billion for
2019, 2018 and 2017, respectively.
The 2019 revenue decrease is primarily related to lower load related to customer departures to CCAs and cooler weather,
partially offset by higher CPUC revenue due to the adoption of the 2018 GRC final decision. See "—Cost-Recovery
Activities" and "—Earnings Activities" for further details.
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").
Income Taxes
SCE's income tax provision decreased by $467 million in 2019 compared to 2018. The effective tax rates were (17.6)% and
(78.6)% for 2019 and 2018, respectively. SCE's effective tax rate is below the federal statutory rate of 21% for 2019 and 2018
primarily due to the CPUC's ratemaking treatment for the current tax benefit arising from certain property-related and other
temporary differences, which reverse over time. The accounting treatment for these temporary differences results in recording
regulatory assets and liabilities for amounts that would otherwise be recorded to deferred income tax expense. The effective
tax rate decrease in 2019 is primarily due to impact of higher pre-tax income and absence of the 2018 settlement of the 1994
– 2006 California tax audit in 2018, partially offset by higher tax benefits on property-related items recorded as a result of
2018 GRC final decision and the changes in the allocation of excess deferred tax re-measurement between customers and
shareholders as a result of a CPUC resolution issued in February 2019.
See "Notes to Consolidated Financial Statements—Note 8. Income Taxes" for a reconciliation of the federal statutory rate to
the effective income tax rates.
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 subsidiaries
Corporate expenses and other subsidiaries
Total Edison International Parent and Other
Years ended December 31,
2019
2018
2017
$
$
(24)
(101)
(125)
$
$
(78)
(69)
(147)
$
$
(26)
(421)
(447)
The loss from continuing operations of Edison International Parent and Other decreased $22 million in 2019 compared to
2018 primarily due to an after-tax loss of $50 million in 2018 related to the sale of SoCore Energy, partially offset by higher
interest expense as a result of increased borrowings in 2019.
16
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 and equity contributions from Edison International,
obligations to preferred and preference shareholders, and the outcome of tax and regulatory matters.
During 2019 SCE, along with Edison International Parent, engaged in a financing program to enable SCE to make an initial
contribution of $2.4 billion to the Wildfire Insurance Fund in September 2019, fund a significant increase in wildfire
mitigation expenditures, and increase the equity portion of SCE's capital structure to 52% by year-end 2020 based on SCE's
current 37-month backwards looking compliance period. The increase in the equity portion of SCE's capital structure was
authorized in the 2020 Cost of Capital proceeding in December 2019. See "Management Overview—2020 Cost of Capital
Application."
The 2019 financing program included $3.3 billion of equity contributions from Edison International Parent to SCE, as well as
SCE issuing $2.3 billion of first and refunding mortgage bonds. Additionally, in February 2019, SCE borrowed $750 million
under a term loan which was repaid in full in April 2019.
In the next 12 months, SCE expects to continue to fund its cash requirements through operating cash flows, bank and capital
market financings, and equity contributions from Edison International Parent, as needed, while continuing to increase the
equity portion of its capital structure. SCE also expects to repurchase or redeem preferred or preference stock to reduce the
preferred equity component of the capital structure to 5% in line with the capital structure authorized in the 2020 Cost of
Capital proceeding. See "Management Overview—2020 Cost of Capital Application." SCE also has availability under its
credit facility to fund cash requirements.
SCE's long-term issuer credit ratings remain at investment grade levels. In the third quarter of 2019, the major credit agencies
changed SCE's outlook from negative to stable due to the passage of AB 1054 and the establishment of the Wildfire Insurance
Fund, which provided the AB 1054 Liability Cap and the new standard that the CPUC must apply when assessing the
prudency of a utility in wildfire-related cost recovery proceedings. For further information, see "Management Overview—
Southern California Wildfires and Mudslides." The following table summarizes SCE's current, long-term issuer credit ratings
and outlook from the major credit rating agencies:
Credit Rating
Outlook
Moody's
Baa2
Stable
Fitch
BBB-
Stable
S&P
BBB
Stable
SCE's credit ratings may be further affected if, among other things, regulators fail to successfully implement AB 1054 in a
consistent and credit supportive manner or the Wildfire Insurance Fund is depleted by claims from catastrophic wildfires.
Credit rating downgrades increase the cost and may impact the availability of short-term and long-term borrowings, including
commercial paper, credit facilities, bond financings or other borrowings. In addition, some of SCE's power procurement
contracts would require SCE to pay related liabilities or post additional collateral if SCE's credit rating were to fall below
investment grade. Incremental collateral requirements for power procurement contracts resulting from a potential downgrade
of SCE's credit rating to below investment grade are $44 million as of December 31, 2019. In addition, if SCE's credit rating
falls below investment grade, it may be required to post up to $50 million in collateral in connection with its environmental
remediation obligations, within 120 days of the end of the fiscal year in which the downgrade occurs. Furthermore, if SCE
was downgraded below investment grade, counterparties may also institute new collateral requirements for future
transactions. For further details, see "— Margin and Collateral Deposits."
17
Available Liquidity
At December 31, 2019, SCE had approximately $2.3 billion available under its $3.0 billion credit facility. In June 2019, SCE
extended its credit facility through May 2024, pursuant to an option to extend, and may extend its credit facility for one
additional year with the lenders' approval.
SCE may finance balancing account undercollections and working capital requirements to support operations and capital
expenditures with commercial paper, its credit facility or other borrowings, subject to availability in the bank and capital
markets. SCE expects to finance approximately $1.6 billion of wildfire mitigation capital expenses by issuing securitized
bonds. Prior to issuance of such bonds, other debt instruments may be used to temporarily finance the expenditures.
As necessary, SCE will utilize its available liquidity, capital market financings, other borrowings or parent company equity
contributions in order to meet its obligations as they become due, including any potential costs related to the 2017/2018
Wildfire/Mudslide Events. For further information, see "Management Overview—Southern California Wildfires
and Mudslides."
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, 2019, SCE's debt to total capitalization ratio was 0.47 to 1.
At December 31, 2019, SCE was in compliance with all financial covenants that affect access to capital.
Capital Investment Plan
Major Transmission Projects
A summary of SCE's most significant transmission and substation construction projects during the next three 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 System2
Riverside Transmission Reliability3
Eldorado-Lugo-Mohave Upgrade
Project
Lifecycle Phase
Construction
Construction
Licensing
Licensing
Licensing
Direct
Expenditures
(in millions)1
$840
Inception to
Date
(in millions)1
$484
646
486
451
246
373
41
11
93
Scheduled In-
Service Date
2021
2022
—2
2024
2021
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 forecast discussed in "Management Overview—Capital Program."
2
Includes the original estimated project cost for Alberhill. In January 2020, SCE submitted a supplemental analysis to the
CPUC which included alternative projects as well as an update to the original project cost. SCE is unable to predict the
timing of a final CPUC decision, the corresponding in-service date, and what the final project costs will be for the Alberhill
System Project.
3 While the Riverside Transmission Reliability Project total cost is currently estimated to be $451 million, the CPUC issued a
proposed decision, which if adopted would increase the project cost to $584 million. See discussion in "Riverside
Transmission Reliability" below for further information.
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. During 2018, SCE started construction
on the 220-kV transmission line. Construction is on plan and SCE expects to complete construction in 2021.
18
Mesa Substation
The Mesa Substation Project consists of replacing the existing 220-kV Mesa Substation with a new 500/220-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
the project largely consistent with SCE's proposal and rejected alternative project configurations proposed by CPUC staff.
Construction on the initial phase of construction (a new 220- kV substation) commenced in October 2017. In October 2019,
SCE achieved first energization of the new substation. The remaining phases of construction are anticipated to be put out for
competitive bid and SCE expects that costs associated with the project may change as a result of the competitive bidding
process. SCE anticipates project completion in the first quarter of 2022.
Alberhill System
The Alberhill System Project would consist 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 System Project area and to increase electrical system
reliability and resiliency. In April 2018 and July 2018, the CPUC issued a proposed decision and an alternate proposed
decision, both denying SCE's ability to construct the Alberhill System Project based on a perceived lack of need. SCE filed
comments on both proposed decisions requesting that the CPUC grant the certificate of public convenience and necessity for
the Alberhill System Project. In August 2018, the CPUC issued a decision that did not deny or approve the Alberhill System
Project but directed SCE to submit supplemental information on the Alberhill System Project including but not limited to a
load forecast and cost benefit analysis of several alternatives to the proposed project. Ongoing capital spending has been
deferred as a result of the CPUC request for additional information. In January 2020, SCE submitted a supplemental analysis
to the CPUC for the Alberhill System Project including several alternatives to the proposed project as well as an update to the
original project cost. A final decision on the Alberhill System Project is pending based on the supplemental analysis. Given
the uncertainty associated with the resolution of the permitting process, potential revisions to the project have not been
reflected in total direct expenditures. SCE continues to believe a system solution is needed for the project area but is unable
to predict the timing of a final CPUC decision in connection with the Alberhill System Project proceeding.
Approximately 48% of the Alberhill System Project costs spent to date would be subject to recovery through CPUC revenue
and 52% through FERC revenue. In October 2017, SCE obtained approval from the FERC for abandoned plant treatment for
the Alberhill System Project, which allows SCE to seek recovery of 100% of all prudently incurred costs after the approval
date and 50% of prudently incurred costs prior to the approval date. Excluding land costs, which may be recovered through
sale to a third party, SCE has incurred approximately $46 million of capital expenditures, including overhead costs, as of
December 31, 2019, of which approximately $34 million may not be recoverable if the project is cancelled.
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
was originally developed, SCE informed the CPUC in August 2016 that it supports revisions to the proposed Project. In
October 2018, the CPUC issued an environmental report that identified a new route alternative, as the environmentally
preferred project and proposed an additional underground section of the proposed 220-kV power line. In January 2020, SCE
received a proposed decision from the CPUC that would approve the project consistent with the environmental report. If
adopted, the cost of the revised project is estimated to be $584 million.
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 fiber optics on the transmission lines to
19
provide communications between existing SCE substations. A final CPUC decision is anticipated during 2020. In April 2019,
as directed by the CPUC, SCE filed an amended application for a certificate of public convenience and necessity with the
CPUC, which included total project costs of $257 million. A subsequent change to the project work scope reduced the project
total cost to $246 million, a decrease of $11 million as compared to the estimate provided in the amended application.
Grid Development - Wildfire Mitigation
See "Management Overview—Wildfire Mitigation and Wildfire Insurance Expenses."
Grid Development - Transportation Electrification
Medium- and Heavy-Duty Vehicle Transportation Electrification
In January 2017, SCE filed an application with the CPUC requesting approval of transportation electrification programs to
accelerate the adoption of electric transportation, which is critical to California's climate change and GHG reduction
objectives. The application proposed a five-year program to fund medium- and heavy-duty vehicle charging infrastructure
that follows the model developed for SCE's Charge Ready program, as well as six pilot projects to be considered on an
accelerated basis. In January 2018, the CPUC issued a final decision approving five pilot projects with a budget of
$16 million ($10 million capital) in 2016 dollars. In May 2018, the CPUC issued a final decision approving the five-year
program, with certain modifications, to install charging infrastructure to support the electrification of 8,490 medium- and
heavy-duty electric vehicles at 870 sites, which must be fully contracted for by 2024. The final decision includes an approved
five-year budget of $356 million ($242 million capital) in nominal dollars. SCE expects to propose additional programs and
pilots in the future. SCE's 2020 capital plan contemplates $4 million of medium- and heavy-duty vehicle transportation
electrification spending.
Charge Ready Program
In January 2016, the CPUC approved SCE's $22 million Charge Ready Program Pilot, which allows SCE to install light-duty
electric vehicle charging infrastructure, provide rebates to offset the cost of qualified customer-owned charging stations, and
implement a supporting marketing, education and outreach campaign. As of December 31, 2019, SCE had executed
agreements and reserved funding for 81 sites to deploy 1,301 charge ports under this pilot. The results of this pilot helped
shape Charge Ready 2, the second phase of the Charge Ready program.
In June 2018, SCE filed an application to obtain approval for Charge Ready 2. In the application, SCE requested approval for
$760 million ($561 million capital) in 2018 dollars to install infrastructure and provide rebates to support 48,000 new electric
vehicle charging ports as part of a four-year program that will also include a marketing, education and outreach campaign. In
December 2018, the CPUC approved $22 million in bridge funding to continue the Charge Ready Program Pilot while the
Charge Ready 2 application remains pending. As of December 31, 2019, with this additional funding, SCE had executed
agreements and reserved funding for 66 additional sites to deploy 1,463 additional charge ports. SCE's 2020 capital plan
contemplates $8 million of bridge Charge Ready Program Pilot spending.
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. SCE has engaged a decommissioning general
contractor to undertake a significant scope of decommissioning activities for Units 1, 2 and 3 at San Onofre. The
decommissioning of San Onofre is expected to take many years.
Decommissioning of San Onofre Unit 1 began in 1999 and the transfer of spent nuclear fuel from Unit 1 to dry cask storage
in the Independent Spent Fuel Storage Installation ("ISFSI") was completed in 2005. Major decommissioning work for Unit 1
has been completed except for reactor vessel disposal and certain underground work. Some spent nuclear fuel from Units 2
and 3 also was transferred to the ISFSI between 2007 and 2012. Radiological decommissioning of San Onofre 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.
The transfer of the remaining spent nuclear fuel from Units 2 and 3 to the ISFSI began in 2018. The spent fuel transfer
operations were suspended on August 3, 2018 due to an incident that occurred when an SCE contractor was loading a spent
fuel canister into the ISFSI. The incident did not result in any harm to the public or workers and the canister was
subsequently safely loaded into the ISFSI. In May 2019, after an extensive review, the NRC determined that fuel loading can
be safely resumed at San Onofre. SCE commenced fuel transfer operations at San Onofre in July 2019. In October 2019, the
California Coastal Commission approved SCE's application for the Coastal Development Permit, the principle discretionary
permit required to start major decommissioning activities at San Onofre. SCE plans on commencing major decommissioning
activities in 2020 in accordance with the terms of the permit, subject to any court rulings in a proceeding brought in
20
December 2019 to challenge the California Coastal Commission's issuance of the permit.
In December 2018, SCE updated its decommissioning cost estimate for decommissioning activities to be completed at San
Onofre Units 2 and 3 to $3.4 billion (SCE share is $2.5 billion) in 2017 dollars. The decommissioning cost estimate includes
costs through the respective expected decommissioning completion dates, currently estimated to be in 2051 for San Onofre
Units 2 and 3. 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 will provide for either interim or permanent off-site storage of spent nuclear fuel
enabling the removal and transport of spent fuel canisters from the San Onofre site, as to which there can be no assurance.
The cost estimate is subject to change as decommissioning proceeds and such changes may be material. The CPUC will
conduct a reasonableness review for costs for each year. SCE's share of the San Onofre decommissioning costs recorded
during 2019 were $172 million.
SCE had nuclear decommissioning trust funds for San Onofre Units 2 and 3 of $2.8 billion as of December 31, 2019. Based
upon the resolution of a number of uncertainties, including the cost and timing of nuclear waste disposal, the time it will take
to obtain required permits, cost of removal of property, site remediation costs, the financial performance of the nuclear
decommissioning trust fund investments, as well as the resolution of a number of other assumptions and estimates, additional
contributions to the nuclear decommissioning trust funds may be required. If additional contributions to the nuclear
decommissioning trust funds become necessary, SCE will seek recovery of such additional funds through electric rates and
any such recovery will be subject to a reasonableness review by the CPUC. Cost increases resulting from contractual disputes
or significant permitting delays, among other things, could cause SCE to materially overrun the decommissioning cost
estimate and could materially impact the sufficiency of trust funds.
SCE Dividends
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. In addition, the CPUC regulates SCE's capital structure which limits the dividends it may pay to its
shareholders.
Prior to January 1, 2020, under SCE's interpretation of CPUC regulations and capital structure decisions, the common equity
component of SCE's capital structure was required to remain at or above 48% on a weighted average basis over the 37-month
period that SCE's capital structure was in effect for ratemaking purposes and SCE was required to file an application for a
waiver of the 48% equity ratio condition discussed above if an adverse financial event reduces its spot equity ratio below
47%. Effective January 1, 2020, the common equity component of SCE's authorized capital structure was increased from
48% to 52%. For further information, see "Management Overview—2020 Cost of Capital Application." Under AB 1054, the
impact of SCE's contributions to the Wildfire Insurance Fund are excluded from the measurement of SCE's CPUC-
jurisdictional authorized capital structure. For further information, see "Management Overview—Southern California
Wildfires and Mudslides."
On February 28, 2019, SCE submitted an application to the CPUC for waiver of compliance with this equity ratio
requirement, describing that while the charge accrued in connection with the 2017/2018 Wildfire/Mudslide Events caused its
equity ratio to fall below 47% on a spot basis as of December 31, 2018, SCE remains in compliance with the 48% equity
ratio over the applicable 37-month average basis. In its application, SCE requested a limited waiver to exclude wildfire-
related charges and wildfire-related debt issuances from its equity ratio calculations until a determination regarding cost
recovery is made. The CPUC has ruled that while the application is pending resolution, SCE must notify the CPUC if an
adverse financial event reduces SCE's spot equity ratio by more than one percent from the level most recently filed with the
CPUC in the proceeding. The last spot equity ratio SCE filed with the CPUC in the proceeding was 45.2% as of
December 31, 2018. Under the CPUC's rules, SCE will not be deemed to be in violation of the equity ratio requirement, and
therefore may continue to issue debt and dividends, while the waiver application is pending resolution. For further
information, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies
—Southern California Wildfires and Mudslides." At December 31, 2019, without excluding the $2.0 billion after-tax
wildfire-related charges incurred in 2018 and 2019, SCE's 37-month average common equity component of total
capitalization was 48.5% and the maximum additional dividend that SCE could pay to Edison International under this
limitation was $179 million, resulting in a restriction on net assets of approximately $17.6 billion. If the wildfire-related
charges were excluded at December 31, 2019, SCE's 37-month average common equity component of total capitalization
would have been 49.6%.
21
As a California corporation, SCE's ability to pay dividends is also governed by the California General Corporation Law.
California law requires that for a dividend to be declared: (a) retained earnings must equal or exceed the proposed dividend,
or (b) immediately after the dividend is made, the value of the corporation's assets must exceed the value of its liabilities plus
amounts required to be paid, if any, in order to liquidate stock senior to the shares receiving the dividend. Additionally, a
California corporation may not declare a dividend if it is, or as a result of the dividend would be, likely to be unable to meet
its liabilities as they mature. Prior to declaring dividends, SCE's Board of Directors evaluates available information, including
when applicable, information pertaining to the 2017/2018 Wildfire/Mudslide Events, to ensure that the California law
requirements for the declarations are met. On February 27, 2020, SCE declared a dividend to Edison International of
$269 million.
The timing and amount of future dividends are also dependent on a number of other factors including SCE's requirements to
fund other obligations and capital expenditures, its ability to access the capital markets, and generate operating cash flows
and earnings. If SCE incurs significant costs related to catastrophic wildfires, including the 2017/2018 Wildfire/Mudslide
Events, and is unable to recover such costs through insurance, the Wildfire Insurance Fund (for fires after July 12, 2019), or
from customers or access capital markets on reasonable terms, SCE may be limited in its ability to pay future dividends to
Edison International and its preferred and preference shareholders.
Margin and Collateral Deposits
Certain derivative instruments, power and energy procurement contracts and other contractual arrangements contain
collateral requirements. In addition, certain environmental remediation obligations require financial assurance that may be in
the form of collateral postings. Future collateral requirements may differ from the requirements at December 31, 2019 due to
the addition of incremental power and energy procurement contracts with collateral requirements, if any, the impact of
changes in wholesale power and natural gas prices on SCE's contractual obligations, and the impact of SCE's credit ratings
falling below investment grade.
The table below provides the amount of collateral posted by SCE to its counterparties as well as the potential collateral that
would have been required as of December 31, 2019 if SCE's credit rating had been downgraded to below investment grade
as of that date. The table below also provides the potential collateral that could be required due to adverse changes in
wholesale power and natural gas prices over the remaining lives of existing power and energy procurement contracts.
(in millions)
Collateral posted as of December 31, 20191
Incremental collateral requirements for purchased power and fuel contracts resulting from a
potential downgrade of SCE's credit rating to below investment grade2
Incremental collateral requirements for purchased power and fuel contracts resulting from
adverse market price movement3
Posted and potential collateral requirements
$
$
178
44
27
249
1 Net collateral provided to counterparties and other brokers consisted of $154 million in letters of credit and surety
bonds and $24 million of cash collateral which was reflected in "Other current assets" on the consolidated balance
sheets.
2
3
If SCE's credit rating fell below investment grade, existing purchased power and fuel contracts would require
$44 million of incremental collateral. Counterparties may also institute new collateral requirements, applicable to future
transactions, at the time of a downgrade. Furthermore, SCE may also be required to post up to $50 million in collateral
in connection with its environmental remediation obligations, within 120 days of the end of the fiscal year in which the
downgrade occurs.
Incremental collateral requirements were based on potential changes in SCE's forward positions as of December 31,
2019 due to adverse market price movements over the remaining lives of the existing power and fuel contracts using a
95% confidence level.
22
Regulatory Balancing and Memorandum Accounts
SCE's cash flows are affected by regulatory balancing and memorandum accounts overcollections or undercollections.
Overcollections and undercollections 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 accounts. Undercollections or overcollections in
these balancing and memorandum accounts impact cash flows and can change rapidly. Undercollections and overcollections
generally accrue interest based on a three-month commercial paper rate published by the Federal Reserve.
As of December 31, 2019, SCE had net overcollections of $365 million for regulatory balancing and memorandum accounts,
primarily consisting of overcollections related to public purpose-related and energy efficiency program costs and BRRBA,
offset by undercollections related to wildfire risk related costs and PABA. Overcollections related to public purpose-related
programs may decrease as costs are incurred to fund programs established by the CPUC. Overcollections related to BRRBA
are expected to decrease as refunds are provided to customers in 2020. SCE is currently incurring wildfire-related spending at
levels significantly exceeding amounts authorized in the 2018 GRC and has recognized regulatory assets for certain of these
costs. Total spending on wildfire mitigation is expected to continue at higher levels in 2020 and beyond. Undercollections
related to PABA are expected to decrease through the implementation of the annual ERRA and PABA review proceeding in
2020. See "Notes to Consolidated Financial Statements—Note 11. Regulatory Assets and Liabilities" for further information.
Edison International Parent and Other
In the next 12 months, Edison International expects to fund its net cash requirements through capital market and bank
financings, including by issuing additional debt and equity, as needed.
In June 2019, Edison International Parent extended its credit facility through May 2024, pursuant to an option to extend, and
may extend the credit facility for one additional year with the lenders' approval. At December 31, 2019, Edison International
Parent's entire $1.5 billion credit facility was available for borrowing.
During 2019, Edison International Parent engaged in a financing program to support SCE's initial contribution to the Wildfire
Insurance Fund in September 2019, fund SCE's wildfire mitigation expenditures, and increase the equity portion of SCE's
capital structure. This included issuing 2.8 million shares of common stock for net proceeds of $198 million through the ATM
program and issuing 32.2 million shares of common stock for net proceeds of $2.2 billion in an underwritten offering during
2019. For further details, see "Notes to Consolidated Financial Statements—Note 14. Equity." Edison International Parent
also issued $1.4 billion of senior notes during 2019. The proceeds of these financing activities allowed Edison International
to contribute $3.3 billion to SCE as equity contributions and repay a $1.0 billion term loan. The term loan was borrowed in
April 2019 and the proceeds of the term loan were contributed to SCE largely to enable repayment of SCE's February 2019
term loan. Edison International Parent's term loan was repaid in full in December 2019.
At December 31, 2019, the current portion of Edison International Parent’s long-term debt included senior notes of
$400 million due in April 2020.
Edison International Parent and Other's liquidity and its ability to pay operating expenses, satisfy debt obligations and pay
dividends to common shareholders are dependent on access to the bank and capital markets, dividends from SCE, realization
of tax benefits and its ability to meet California law requirements for the declaration of dividends. Prior to declaring
dividends, Edison International's Board of Directors evaluates available information, including when applicable, information
pertaining to the 2017/2018 Wildfire/Mudslide Events, to ensure that the California law requirements for the declarations are
met. For information on the California law requirements on the declaration of dividends, see "—SCE—SCE Dividends."
Edison International intends to maintain its target payout ratio of 45% – 55% of SCE's core earnings, subject to the factors
identified above.
Edison International may finance its ongoing cash requirements, including common stock dividends, working capital
requirements, payment of obligations, and capital investments, including capital contributions to subsidiaries, with short-term
or other financings, subject to availability in the bank and capital markets.
A 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 0.70 to 1. At December 31, 2019, Edison International Parent's
consolidated debt to total capitalization ratio was 0.55 to 1.
At December 31, 2019, Edison International Parent was in compliance with all financial covenants that affect access to
capital.
23
Edison International Parent's long-term issuer credit ratings remain at investment grade levels after downgrade actions taken
by the major credit rating agencies in 2018 and early 2019. In the third quarter of 2019, the major credit agencies changed
Edison International Parent's outlook from negative to stable, due to the passage of AB 1054 and the establishment of the
Wildfire Insurance Fund, which provided the AB 1054 Liability Cap and the new standard that the CPUC must apply when
assessing the prudency of a utility in wildfire-related cost recovery proceedings. The following table summarizes Edison
International Parent's current, long-term issuer credit ratings and outlook from the major credit rating agencies:
Credit Rating
Outlook
Moody's
Baa3
Stable
Fitch
BBB-
Stable
S&P
BBB
Stable
Edison International Parent's credit ratings may be further affected if, among other things, regulators fail to successfully
implement AB 1054 in a consistent and credit supportive manner or the Wildfire Insurance Fund is depleted by claims from
catastrophic wildfires. Credit rating downgrades increase the cost and may impact the availability of short-term and long-
term borrowings, including commercial paper, credit facilities, note financings or other borrowings.
Net Operating Loss and Tax Credit Carryforwards
Edison International has approximately $1.3 billion of tax effected net operating loss and tax credit carryforwards at
December 31, 2019 (after offsetting $212 million of unrecognized tax benefits and $212 million of Capistrano Wind net
operating loss and tax credit carryforwards), which are available to offset future consolidated tax liabilities. See "Notes to
Consolidated Financial Statements—Note 8. Income Taxes" for further information regarding taxes payable to Capistrano
Wind. Forecast monetization has been delayed, mainly due to anticipated future payment of wildfire claims and the
contribution to the Wildfire Insurance Fund as described in AB 1054. Edison International expects to utilize its net
operating loss and tax credit carryforwards through 2027.
Historical Cash Flows
SCE
(in millions)
Net cash (used in) provided by operating activities
Net cash provided by financing activities
Net cash used in investing activities
Net increase (decrease) in cash, cash equivalents, and restricted cash
2019
2018
2017
$
$
(91)
4,771
(4,678)
2
$
$
3,191
$
616
(4,300)
(493)
$
3,735
243
(3,503)
475
24
Net Cash (Used in) 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 2019, 2018 and 2017:
(in millions)
Net income (loss)
Non-cash items1
Subtotal
Contributions to Wildfire Insurance Fund
Changes in cash flow resulting from working
capital2
Regulatory assets and liabilities, net
Other noncurrent assets and liabilities, net3
Net cash (used in) provided by operating activities
Years ended December 31,
2018
2017
2019
$
$
1,530 $
1,782
3,312
(2,457)
298
(1,278)
34
(91) $
(189) $
1,291
1,102
—
(313)
(92)
2,494
3,191 $
1,136
3,058
4,194
—
(148)
4
(315)
3,735
Change in cash flows
2019/2018
2018/2017
2,210
(2,457)
611
(1,186)
(2,460)
(3,282) $
(3,092)
—
(165)
(96)
2,809
(544)
$
1 Non-cash items include depreciation and amortization, allowance for equity during construction, impairment and other, Wildfire
Insurance Fund amortization expense, deferred income taxes and other.
2 Changes in working capital items include receivables, inventory, amortization of prepaid expenses, accounts payable, tax receivables
and payables, and other current assets and liabilities.
3
Includes changes in liabilities for wildfire-related claims and wildfire-related insurance receivables. Also includes nuclear
decommissioning trusts. See "Nuclear Decommissioning Activities" below for further information.
Net cash provided by operating activities was impacted by the following:
Net income and non-cash items increased in 2019 by $2.2 billion from 2018. Net Income in 2019 increased by $1.7 billion
primarily due to a $2.3 billion reduction in charges for wildfire-related claims, net of expected recoveries from insurance and
FERC customers in 2019 as compared to 2018, the adoption of the 2018 GRC final decision in 2019, higher FERC revenue
due to the settlement of SCE's 2018 Formula Rate proceeding and rate base growth in 2019, and the timing of regulatory
deferral and cost recovery of incremental wildfire insurance expenses. These increases were partially offset by higher
inspection, preventive maintenance and vegetation management costs that were not deferred as regulatory assets. Non-cash
items included depreciation and amortization of $1.8 billion and $1.9 billion in 2019 and 2018, respectively, changes in
deferred income taxes of $(243) million and $(552) million in 2019 and 2018, respectively, an impairment charge of
$170 million recorded in 2019 related to disallowed historical capital expenditures in SCE's 2018 GRC decision and Wildfire
Insurance Fund amortization expense of $152 million recorded in 2019.
Net cash used in operating activities was also impacted by cash outflow of $2.5 billion related to SCE's contributions to the
Wildfire Insurance Fund in 2019. See "Notes to Consolidated Financial Statements—Note 12. Commitment and
Contingencies" for further information.
Net cash inflow (outflow) for working capital was $298 million and $(313) million in 2019 and 2018, respectively. The net
cash for each period was primarily related to timing of disbursements of $237 million and $(15) million in 2019 and 2018,
respectively, and changes in receivables from customers of $(73) million and $(288) million in 2019 and 2018, respectively.
Net cash for working capital also included insurance premium payments of $(471) million and $(197) million in 2019 and
2018, respectively, primarily for wildfire-related coverage, partially offset by net tax refunds of $164 million and $57 million
in 2019 and 2018, respectively.
Net cash provided by regulatory assets and liabilities, including changes in net under collections of balancing accounts, was
$(1,278) million and $(92) million in 2019 and 2018, 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:
25
2019
• BRRBA overcollections decreased by $300 million primarily due to refunds of prior overcollections (including
incremental tax benefits) and current year undercollection due to rate changes delayed beyond January 1, 2019, offset by
additional overcollection of distribution revenue to be refunded to customers over an 18-month period, starting in July
2019, as part of SCE's 2018 GRC final decision.
•
PABA was established in May 2019 to determine and pro-ratably recover from responsible bundled service and departing
load customers the "above-market" costs of all generation resources that are eligible for cost recovery. Net
undercollections for ERRA, PABA and the New System Generation Balancing Account decreased by $142 million
primarily due to recovery of prior ERRA undercollections and overcollections of generation revenue occurring in 2019
and 2018 that are being refunded over an 18-month period, starting in July 2019, as part of SCE's 2018 GRC final
decision. The cash inflow was partially offset by lower sales than forecasted in rates, higher than forecasted energy prices
experienced in 2019, charges from CPUC-authorized contract terminations and refunds of prior overcollections from the
New System Generation Balancing Account.
• Lower cash due to elimination of approximately $360 million in a regulatory liability that was established in 2018 to
record adjustments associated with the delay in the 2018 GRC decision. In May 2019, the CPUC approved the final
decision in SCE's 2018 GRC, resulting in 2019 and 2018 overcollections being refunded to customers through BRRBA
and PABA, as discussed above.
• Additional undercollections of $596 million related to wildfire-related expenses that are probable of future recovery from
customers, including wildfire risk mitigation costs, insurance premiums and service restoration and damage repair costs.
See "Notes to Consolidated Financial Statements—Note 11. Regulatory Assets and Liabilities" for further information.
• Higher cash due to $115 million of overcollections related to the timing of GHG auction revenue, low carbon fuel
standard credit sales, and the related refunds and rebates to eligible customers.
• Additional cash outflow due to refund of prior year overcollection of recovery of certain employee benefit related costs
and reversal of TAMA overcollection as a result of adoption of the 2018 GRC final decision.
2018
• BRRBA overcollections increased by $428 million primarily due to a $263 million reclassification of 2017 incremental
tax benefits from TAMA to BRRBA (to be refunded in 2019) and higher sales than forecasted in rates, partially offset by a
refund of 2016 incremental tax benefits.
• Higher cash from increased regulatory liabilities of approximately $365 million primarily due to the delay in the 2018
GRC decision. During 2018, the amounts billed to customers were largely based on the 2017 authorized GRC revenue
requirement, however, the amount of revenue recognized has been adjusted mainly for the July 2017 cost of capital
decision and Tax Reform pending the outcome of the 2018 GRC and therefore, a regulatory liability has been established
to record any associated adjustments.
• Net undercollections for ERRA and the new system generation program were $741 million and $267 million at
December 31, 2018 and 2017, respectively. Net undercollections increased $474 million during 2018 primarily due to an
increase in costs due to higher than forecasted power and gas prices experienced in 2018 and higher load requirements
than forecasted in rates, partially offset by an increase in cash due to recovery of prior year undercollections.
• TAMA overcollections decreased by $287 million primarily due to a $263 million reclassification from TAMA to BRRBA
to refund customers as discussed above.
• Undercollections of $128 million related to the establishment, in the fourth quarter of 2018, of a WEMA to track wildfire-
related costs including insurance premiums in excess of the amounts that will be ultimately approved in the 2018 GRC
decision.
Cash flows provided by other noncurrent assets and liabilities were primarily related to an increase of $232 million and
$4.7 billion in liabilities for the 2017/2018 Wildfire/Mudslide Events related claims in 2019 and 2018, respectively, partially
offset by the Local Public Entity Settlements payment of $360 million reduced by the subsequent insurance recovery of
$290 million in 2019, and an increase of $2.0 billion in insurance receivables in 2018. Also includes net earnings from
nuclear decommissioning trust investments ($67 million and $41 million in 2019 and 2018, respectively) and SCE's
payments of decommissioning costs ($172 million and $140 million in 2019 and 2018, respectively). See "Nuclear
Decommissioning Activities" below for further discussion.
26
Net Cash Provided by Financing Activities
The following table summarizes cash provided by financing activities for 2019, 2018 and 2017. Issuances of debt and
preference stock and capital contribution from Edison International Parent are discussed in "Notes to Consolidated Financial
Statements—Note 5. Debt and Credit Agreements" and "—Note 14. Equity."
(in millions)
2019
2018
2017
Issuances of first and refunding mortgage bonds, net of (discount)
premium and issuance costs
$
2,306
$
2,692
$
Issuance of term loan
Repayment of term loan
Remarketing and issuances of pollution control bonds, net of issuance
costs
Long-term debt matured or repurchased
Capital contributions from Edison International Parent
Issuances of preference stock, net of issuance costs
Redemptions of preference stock
Short-term debt (repayments), net of borrowings and discount
Payments of common stock dividends to Edison International
Payments of preferred and preference stock dividends
Other
Net cash provided by financing activities
$
Net Cash Used in Investing Activities
750
(750)
—
(82)
3,250
—
—
(171)
(400)
(121)
(11)
4,771
$
—
—
—
(639)
—
—
—
(520)
(788)
(121)
(8)
616
$
1,011
300
—
134
(882)
—
462
(475)
469
(573)
(124)
(79)
243
Cash flows used in investing activities are primarily due to capital expenditures and funding of nuclear decommissioning
trusts. Capital expenditures were $4.9 billion, $4.5 billion and $3.8 billion for 2019, 2018 and 2017, respectively, primarily
related to transmission and generation investments. SCE had a net redemption of nuclear decommissioning trust investments
of $106 million and $109 million in 2019 and 2018, respectively. See "Nuclear Decommissioning Activities" below for
further discussion.
Nuclear Decommissioning Activities
SCE's statements of cash flows includes nuclear decommissioning activities, which are reflected in the following line items:
(in millions)
2019
2018
2017
Net cash used in operating activities:
Net earnings from nuclear decommissioning trust investments
SCE's decommissioning costs
Net cash provided by investing activities:
Proceeds from sale of investments
Purchases of investments
Net cash impact
$
$
67
(172)
4,389
(4,283)
1
$
$
41
(140)
4,340
(4,231)
10
$
$
55
(236)
5,239
(5,042)
16
Net cash used in operating activities relates to interest and dividends less administrative expenses, taxes and SCE's
decommissioning costs. Investing activities represent the purchase and sale of investments within the nuclear
decommissioning trusts, including the reinvestment of earnings from nuclear decommissioning trust investments.
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 10. Investments" for further information. The net cash impact reflects timing of
decommissioning payments ($172 million and $140 million in 2019 and 2018, respectively) and reimbursements to SCE
from the nuclear decommissioning trust ($173 million and $150 million in 2019 and 2018, respectively).
27
Edison International Parent and Other
The table below sets forth condensed historical cash flow from operations for Edison International Parent and Other,
including intercompany eliminations.
(in millions)
Net cash used in operating activities
Net cash provided by (used in) financing activities
Net cash provided by (used in) investing activities
Net (decrease) increase in cash, cash equivalents and restricted cash
Net Cash Used in Operating Activities
2019
2018
2017
$
$
(216)
132
—
(84)
$
$
(14)
(534)
61
(487)
$
$
(138)
764
(83)
543
Net cash used in operating activities increased in 2019 by $202 million from 2018 due to:
• Outflows of $137 million and $92 million from operating activities in 2019 and 2018, respectively, due to payments and
receipts relating to interest and operating costs.
• An outflow of $79 million in 2019 primarily related to $164 million of intercompany tax-allocation payments offset by
$85 million of federal and state income tax refunds. An inflow of $78 million in 2018 primarily related to federal income
tax refunds.
Net Cash Provided by (Used in) Financing Activities
Net cash provided by (used in) financing activities were as follows:
(in millions)
2019
2018
2017
Dividends paid to Edison International common shareholders
$
Dividends received from SCE
Capital contribution to SCE
Receipt from (payment for) stock-based compensation
Issuance of common stock
Long-term debt issuance, net of discount and issuance costs
Long-term debt repayments
Issuance of term loan
Repayments of term loan
Short-term debt (repayments), net of borrowings and discount
Other
(810)
400
(3,250)
12
2,391
1,390
—
1,000
(1,000)
(1)
—
Net cash provided by (used in) financing activities
$
132
$
Net Cash Provided by Investing Activities
$
$
(788)
788
—
(10)
—
545
(15)
—
—
(1,091)
37
(534)
$
(707)
573
—
(140)
—
788
(403)
—
—
615
38
764
Net cash provided by investing activities includes a cash inflow of $78 million from the sale of SoCore Energy in 2018 offset
by Edison Energy Group's capital expenditures primarily for commercial solar installations in 2018.
28
Contractual Obligations and Contingencies
Contractual Obligations
As of December 31, 2019, Edison International Parent and Other and SCE's contractual obligations for the years 2020
through 2024 and thereafter are estimated below.
(in millions)
SCE:
Long-term debt maturities and interest1
Power purchase agreements2
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
Other operating lease obligations
Total Edison International Parent and Other5
Total Edison International6,7
$
27,185
36,021
219
452
63,877
3,773
5
3,778
Total
Less than
1 year
1 to 3 years
3 to 5 years
More than
5 years
$
745
$
2,796
37
77
$
2,659
5,506
$
2,103
4,617
54
95
33
91
3,655
8,314
6,844
508
1
509
907
2
909
1,050
2
1,052
7,896
$
67,655
$
4,164
$
9,223
$
$
46,372
21,678
23,102
95
189
45,064
1,308
—
1,308
1 For additional details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements." Amount
includes interest payments totaling $11.9 billion and $623 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 finance leases.
For further discussion, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies" and "—
Note 13. Leases."
3 At December 31, 2019, SCE's other operating lease payments were primarily related to vehicles, office space and other
equipment. For further discussion, see "Notes to Consolidated Financial Statements—Note 13. Leases."
4 For additional details, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies." At
December 31, 2019, other commitments were primarily related to maintaining reliability and expanding SCE's transmission and
distribution system and nuclear fuel supply contracts.
5 At December 31, 2019, Edison International Parent and Other and SCE had estimated contributions to the pension and PBOP
plans. SCE estimated contributions are $48 million, $42 million, $40 million, $41 million and $44 million in 2020, 2021, 2022,
2023 and 2024, respectively, which are excluded from the table above. Edison International Parent and Other estimated
contributions are $18 million, $21 million, $19 million, $17 million and $23 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 9. Compensation and Benefit Plans" for further information.
6 At December 31, 2019, Edison International and SCE had a total net liability recorded for uncertain tax positions of
$370 million and $282 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," respectively.
29
Contingencies
SCE has contingencies related to wildfire and mudslide events, wildfire insurance, Nuclear Insurance, Spent Nuclear Fuel
and the Tehachapi Transmission Project, which are discussed in "Notes to Consolidated Financial Statements—Note 12.
Commitments and Contingencies—Contingencies."
Environmental Remediation
For a discussion of SCE's environmental remediation liabilities, see "Notes to Consolidated Financial Statements—Note 12.
Commitments and Contingencies—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 II, Trust III, Trust IV, Trust V and Trust VI that issued $400 million (aggregate liquidation preference) of 5.10%,
$275 million (aggregate liquidation preference) of 5.75%, $325 million (aggregate liquidation preference) of 5.375%,
$300 million (aggregate liquidation preference) of 5.45% and $475 million (aggregate liquidation preference) of 5.00%, 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 Considerations."
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 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 2019, 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, if the market interest rates were changed while leaving all other assumptions the
same:
(in millions)
Edison International:
December 31, 2019
December 31, 2018
SCE:
December 31, 2019
December 31, 2018
Commodity Price Risk
Carrying Value
Fair Value
10% Increase
10% Decrease
$
$
$
$
18,343
14,711
15,211
12,971
$
$
20,137
14,844
16,892
13,180
$
$
19,413
14,188
16,213
12,556
20,913
15,556
17,619
13,858
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 and congestion revenue rights ("CRRs"). The transactions are pre-approved by the CPUC or executed in
compliance with CPUC-approved procurement plans.
30
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 the fair value of derivative instruments
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."
The fair value of outstanding derivative instruments used to mitigate exposure to commodity price risk was a net asset of
$86 million and $167 million at December 31, 2019 and 2018, respectively.
The following table summarizes the increase or decrease to the fair values of the net asset of derivative instruments included
in the consolidated balance sheets, 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,
2019
2018
$
$
25
(25)
12
(12)
23
(23)
2
(2)
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 of counterparties based on credit ratings 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. Based on SCE's policies and risk
exposures related to credit, SCE does not anticipate a material adverse effect on their financial statements as a result of
counterparty nonperformance. At December 31, 2019, SCE's power and gas trading counterparty credit risk exposure was
$91 million, 98% of which is associated with entities that have an investment grade rating of A or higher. SCE assigns a
credit rating to counterparties based on the lower of a counterparty's S&P or Moody's rating.
For more information related to credit risks, see "Notes to Consolidated Financial Statements—Note 6. Derivative
Instruments."
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 penalties or grant 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
31
future or amounts collected in excess of costs incurred and refundable to customers. In addition, SCE recognizes revenue and
regulatory assets from alternative revenue programs, which enables the utility to adjust future rates in response to past
activities or completed events, if certain criteria are met, even for programs that do not qualify for recognition of "traditional"
regulatory assets and liabilities.
Accounting principles for rate-regulated enterprises also require recognition of an impairment loss if it becomes probable that
the regulated utility will abandon a plant investment, or if it becomes probable that the cost of a recently completed plant will
be disallowed, either directly or indirectly, for ratemaking purposes and a reasonable estimate of the amount of the
disallowance can be made.
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 also considers whether any
plant investments are probable of abandonment or disallowance.
Effect if Different Assumptions Used. Significant management judgment is required to evaluate the anticipated recovery of
regulatory assets and plant investments, 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,
plant investments and/or liabilities would have to be written off against current period earnings. At December 31, 2019, the
consolidated balance sheets included regulatory assets of $7.1 billion and regulatory liabilities of $9.4 billion. If different
judgments were reached on recovery of costs and timing of income recognition, SCE's earnings may vary from the amounts
reported.
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 an accrual 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 12. Commitments and Contingencies."
Application to Southern California Wildfires
As discussed in "Management Overview," over the past several years, wind-driven wildfires and mudslides impacted portions
of SCE's service territory, with wildfires in December 2017 and November 2018 and mudslides in January 2018 causing loss
of life, substantial damage to both residential and business properties, and service outages for SCE customers.
Any potential liability of SCE for damages related to the 2017/2018 Wildfire/Mudslide Events depends on a number of
factors, including whether SCE is determined to have substantially caused, or contributed to, the damages and whether parties
seeking recovery of damages will be required to show negligence in addition to causation. Investigations into the causes of
the 2017/2018 Wildfire/Mudslide Events are ongoing and final determinations of liability, including determinations of
whether SCE was negligent, would only be made during lengthy and complex litigation processes.
Management judgment was required to assess whether a loss contingency was probable and reasonably estimable. Based on
SCE's internal review into the facts and circumstances of each of the 2017/2018 Wildfire/Mudslide Events and consideration
of the risks associated with litigation, Edison International and SCE expect to incur a material loss in connection with the
2017/2018 Wildfire/Mudslide Events and have accrued charges, before recoveries and taxes, of $232 million and $4.7 billion
32
for the years ended 2019 and 2018, respectively. Edison International and SCE recorded expected recoveries from insurance
of $2.0 billion for 2017/2018 Wildfire/Mudslide Events during 2018. Edison International and SCE also recorded expected
recoveries through FERC electric rates of $14 million and $135 million for the years ended 2019 and 2018, respectively. The
net charges to earnings recorded were $157 million and $1.8 billion after-tax for the years ended 2019 and 2018, respectively.
These charges correspond to the lower end of the reasonably estimated range of expected losses that may be incurred in
connection with the 2017/2018 Wildfire/Mudslide Events and is subject to change as additional information becomes
available. Edison International and SCE currently believe that it is reasonably possible that the amount of the actual loss will
be greater than the amount accrued. However, Edison International and SCE are currently unable to reasonably estimate an
upper end of the range of expected losses given the uncertainty as to the legal and factual determinations to be made during
litigation, including uncertainty as to the contributing causes of the 2017/2018 Wildfire/Mudslide Events, the complexities
associated with fires that merge, whether inverse condemnation will be held applicable to SCE with respect to damages
caused by the Montecito Mudslides, and the preliminary nature of the litigation processes. Edison International and SCE
record a receivable for insurance recoveries when recovery of a recorded loss is determined to be probable. Edison
International and SCE will seek to offset any actual losses realized with recoveries from insurance policies in place at the
time of the events and, to the extent actual losses exceed insurance, through electric rates.
Recovery of uninsured costs through electric rates is subject to approval by regulators. Under accounting standards for rate-
regulated enterprises, SCE defers costs as regulatory assets when it concludes that such costs are probable of future recovery
in electric rates. SCE utilizes objectively determinable evidence to form its view on probability of future recovery. The only
directly comparable precedent in which a California investor-owned utility has sought recovery for uninsured wildfire-related
costs is SDG&E's requests for cost recovery related to 2007 wildfire activity, where FERC allowed recovery of all FERC-
jurisdictional wildfire-related costs while the CPUC rejected recovery of all CPUC-jurisdictional wildfire-related costs based
on a determination that SDG&E did not meet the CPUC's prudency standard. As a result, while SCE does not agree with the
CPUC's decision, it believes that the CPUC's interpretation and application of the prudency standard to SDG&E creates
substantial uncertainty regarding how that standard will be applied to an investor-owned utility in future wildfire cost-
recovery proceedings for fires ignited prior to July 12, 2019. Through the operation of its FERC Formula Rate and based
upon the precedent established in SDG&E's recovery of FERC-jurisdictional wildfire-related costs, SCE believes it is
probable it will recover its FERC-jurisdictional wildfire and mudslide related costs and has recorded regulatory assets of
$149 million, the FERC portion of the $4.9 billion charges accrued. The CPUC and FERC may reach different conclusions
than SCE's current determination of probable outcomes.
Over the course of the various investigations and litigation processes associated with each of the 2017/2018 Wildfire/
Mudslide Events, new facts may emerge as to the cause, extent and magnitude of potential damages. The amount of the
expected loss and recorded receivables are subject to change based on new or additional information.
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. Certain estimates and assumptions are required to determine whether deferred tax assets can and will be
utilized 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 Internal Revenue Service, 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. In determining whether it is more likely than not that all or some portion of net
operating loss and tax credit carryforwards can be utilized, management analyzes the trend of U.S. GAAP earnings and then
estimates the impact of future taxable income, reversing temporary differences and available prudent and feasible tax
planning strategies.
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,
33
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 evaluate uncertain tax positions at the end of each reporting period and make
adjustments when warranted based on changes in fact or law.
Effect if Different Assumptions Used. Should a change in facts or circumstances lead to a change in judgment about the
ultimate realizability of a deferred tax asset, Edison International and SCE would record or adjust the related valuation
allowance in the period that the change in facts and circumstances occurs, along with a corresponding increase or decrease in
the provision for income taxes.
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. San Onofre Units 1, 2 and 3 decommissioning cost estimates are updated in each
Nuclear Decommissioning Cost Triennial Proceeding ("NDCTP") and when there are material changes to the timing or
amount of estimated future cash flows. Palo Verde decommissioning cost estimates are updated by the operating agent,
Arizona Public Services, every three years and when there are material changes to the timing or amount of estimated future
cash flows. SCE estimates that it will spend approximately $7.1 billion undiscounted through 2079 to decommission its
nuclear facilities.
The current ARO estimates for San Onofre and Palo Verde are based on:
• 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.
The liability to decommission SCE's nuclear power facilities is based on a 2017 decommissioning study that was filed as
part of the 2018 NDCTP for San Onofre Units 1, 2, and 3, with revisions to the cost estimate in 2018 for San Onofre Units
2 and 3 and a 2016 decommissioning study for Palo Verde, with revisions to the cost estimate in 2017. SCE revised the
ARO for San Onofre Units 2 and 3 due to increases in decommissioning cost estimates in 2018, related to the impact of
operational uncertainties, and in 2017, related to changes to onboarding the general contractor at San Onofre.
• 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 2.2% 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. Initial decommissioning activities at San Onofre Unit 1 started in 1999 and at Units 2 and 3 in 2013.
Cost estimates for San Onofre Units are currently based on completion of decommissioning activities by 2051.
• Spent Fuel Dry Storage Costs. Cost estimates are based on an assumption that the U.S. Department of Energy will begin
to take spent fuel from the nuclear industry in 2028 and will remove the last spent fuel from the San Onofre and Palo
Verde sites by 2049 and 2078, 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.
See "Liquidity and Capital Resources—SCE—Decommissioning of San Onofre" for further discussion of the plans for
decommissioning of San Onofre.
Effect if Different Assumptions Used. The ARO for decommissioning SCE's nuclear facilities was $2.8 billion as of
December 31, 2019, based on the decommissioning studies performed and the subsequent cost estimate updates. 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 spent fuel transfer operations for San Onofre Units 2 and 3 were
34
suspended on August 3, 2018 due to an incident that occurred when an SCE contractor was loading a spent fuel canister into
the ISFSI. The incident did not result in any harm to the public or workers and the canister was subsequently safely loaded
into the ISFSI. In May 2019, after an extensive review, the NRC determined that fuel loading can be safely resumed at San
Onofre. SCE commenced fuel transfer operations at San Onofre in July 2019. In October 2019, the California Coastal
Commission approved SCE's application for the Coastal Development Permit, the principle discretionary permit required to
start major decommissioning activities at San Onofre. SCE plans on commencing major decommissioning activities in 2020
in accordance with the terms of the permit, subject to any court rulings in a proceeding brought in December 2019 to
challenge the California Coastal Commission's issuance of the permit.
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, 2019
601
$
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.
Pensions and Postretirement Benefits Other than Pensions
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 their postretirement plans.
Key Assumptions of Approach Used. Pension and other postretirement benefit 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, 2019, Edison International's and SCE's pension plans had a $4.1 billion and $3.7 billion benefit
obligation, respectively, and total 2019 expense for these plans was $70 million and $64 million, respectively. As of
December 31, 2019, the benefit obligation for both Edison International's and SCE's PBOP plans were $2.1 billion, and total
2019 expense for Edison International's and SCE's plans were $7 million. 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, 2019, this cumulative
difference amounted to a regulatory asset of $110 million, meaning that the ratemaking method has recognized less in
expense than the accounting method since implementation of authoritative guidance for employers' accounting for pensions
in 1987.
35
Edison International and SCE used the following critical assumptions to determine expense for pension and other
postretirement benefit for 2019:
(in millions)
Discount rate1
Expected long-term return on plan assets2
Assumed health care cost trend rates3
Pension
Plans
Postretirement
Benefits Other
than Pensions
4.19%
6.50%
*
4.35%
5.30%
6.75%
* 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 by matching
the timing and amount of expected future benefit payments to the corresponding yields from the Aon-
Hewitt AA Only Bond Universe yield curve on the measurement date.
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 5.3% 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 19.2%, 8.0%
and 9.6% for the one-year, five-year and ten-year periods ended December 31, 2019, respectively. Actual
time-weighted, annualized returns on the PBOP plan assets were 19.0%, 6.8% and 8.8% 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 2029 and beyond.
As of December 31, 2019, Edison International and SCE had unrecognized pension costs of $181 million and $104 million,
respectively, and unrecognized PBOP gains of $414 million and $416 million, respectively. The unrecognized pension costs
and PBOP gains 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 or gains, $87 million of SCE's pension costs and $416 million of SCE's PBOP gains are recorded as regulatory assets
and regulatory liabilities, respectively, and are expected to be recovered or refunded 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%
$
$
(383)
(289)
$
465
345
$
(343)
(287)
417
343
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 $32 million and $30 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
$21 million.
36
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
$
225
10
$
(184)
(8)
$
224
10
(183)
(8)
Contributions to the Wildfire Insurance Fund
Nature of Estimates Required. At December 31, 2019, Edison International and SCE have a $2.8 billion long-term asset and
a $323 million current asset reflected as "Wildfire Insurance Fund contributions" in the consolidated balance sheets for the
initial $2.4 billion contribution made during the third quarter of 2019 and the present value of annual contributions SCE
committed to make to the Wildfire Insurance Fund, reduced by amortization. At December 31, 2019, a long-term liability of
$785 million has been reflected in "Other deferred credits and other long-term liabilities" for the present value of unpaid
contribution amounts. Contributions were discounted to the present value at the date SCE committed to participate in the
Wildfire Insurance Fund using US treasury interest rates.
Management concluded it would be most appropriate to account for the contributions to the Wildfire Insurance Fund similar
to prepaid insurance, ratably allocating the expense to periods based on an estimated period of coverage.
Key Assumptions and Approach Used. The Wildfire Insurance Fund does not have a defined life. Instead, the Wildfire
Insurance Fund will terminate when the administrator determines that the fund has been exhausted. Management estimates
that the Wildfire Insurance Fund will provide insurance coverage for a period of 10 years. The determination of the correct
period in which to record an expense in relation to contributions to the Wildfire Insurance Fund depends, among other
factors, on management's assessment of: the future occurrence and magnitude of wildfires; the involvement of SCE, or other
electrical corporations, in the ignition of those fires; the probable future outcomes of CPUC cost recovery proceedings for
wildfire claims, which may require reimbursement of the fund by electrical corporations; the participation of PG&E in the
fund; and the use of the contributions by the administrator of the Wildfire Insurance Fund. Further information regarding
these factors may become available due to the actions of the fund administrator, or other entities, which could require
management to reassess the period of coverage. In estimating the period of coverage, Edison International and SCE used
Monte Carlo simulations based on five years (2014 – 2018) of historical data from wildfires caused by electrical utility
equipment to estimate expected loss. The details of the operation of the Wildfire Insurance Fund and estimates related to
claims by SCE, PG&E and SDG&E against the fund have been applied to the expected loss simulations to estimate the
period of coverage of the fund. The most sensitive inputs to the estimated period of coverage are the expected frequency of
wildfire events caused by investor-owned utility electrical equipment and the estimated costs associated with those forecasted
events. These inputs are most affected by the historical data used in estimating expected losses. Using a 12-year period of
historical data, with an average annual statewide gross claims of $5.0 billion, compared to $11.7 billion for the five year
historical data, would increase the period of coverage to 20 years.
Effect if Different Assumptions Used. Changes in the estimated life of the insurance fund could have a material impact on
the expense recognition.
NEW ACCOUNTING GUIDANCE
New accounting guidance is discussed in "Notes to Consolidated Financial Statements—Note 1. Summary of Significant
Accounting Policies—New Accounting Guidance."
37
RISK FACTORS
RISKS RELATING TO EDISON INTERNATIONAL
Edison International's liquidity and ability to pay dividends depends on its ability to borrow funds, access to bank and
capital markets, monetization of tax benefits held by Edison International, and SCE's ability to pay dividends and tax
allocation payments to Edison International.
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 SCE's ability to make upstream distributions. If SCE does not make upstream distributions to
Edison International and Edison International is unable to access the bank and capital markets on reasonable terms, Edison
International may be unable to continue to pay dividends to its shareholders or meet its financial obligations.
Prior to paying dividends to Edison International, SCE has financial and regulatory obligations that must be satisfied,
including, among others, debt service and preferred and preference stock dividends. Further, SCE and Edison International
cannot pay dividends if California law requirements for the declaration of dividends are not met. For information on CPUC
and California law requirements related to the declaration of dividends, see "Liquidity and Capital Resources—SCE—SCE
Dividends" in the MD&A. SCE may also owe tax-allocation payments to Edison International under applicable tax-allocation
agreements.
Edison International's ability to obtain financing, as well as its ability to refinance debt and make scheduled payments of
principal and interest, are dependent on numerous factors, including its levels of indebtedness, maintenance of acceptable
credit ratings, financial performance, liquidity and cash flow, and other market conditions. In addition, the factors affecting
SCE's business will impact Edison International's ability to obtain financing. Edison International's inability to borrow funds
from time to time could have a material effect on Edison International's liquidity and operations.
See "Risks Relating to Southern California Edison Company" below for further discussion.
Edison International's business activities are concentrated in one industry and in one region.
Edison International business activities are concentrated in the electric utility industry. Its principal subsidiary, SCE, serves
customers only in southern and central California. As a result, Edison International's future performance may be affected by
events and economic factors unique to California or by regional regulation, legislation or judicial decisions. For example,
California courts have applied strict liability to investor-owned utilities in wildfire and other litigation matters. See
"Management Overview—Southern California Wildfires and Mudslides" in the MD&A.
RISKS RELATING TO SOUTHERN CALIFORNIA EDISON COMPANY
Regulatory and Legislative Risks
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, SCE is incurring costs to strengthen its wildfire mitigation and prevention efforts before it is clear
whether such costs will be recoverable from customers. Also, to the extent SCE is required to pay uninsured wildfire-related
damages, as expected, recovery of such costs may be denied if the CPUC determines that SCE was not prudent. In addition,
while SCE supports California's environmental goals, it may be prevented from fully executing on its strategy to support such
goals by regulatory delay or lack of approval of cost-recovery for the costs of such strategic actions from the relevant
regulatory agencies.
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
38
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—2021 General
Rate Case" and "Management Overview—2018 and 2019 FERC Formula Rate" in the MD&A.
SCE is subject to extensive regulation and the risk of adverse regulatory and legislative decisions, delays in regulatory or
legislative 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 in addition
to the local and state agencies that require permits. 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, including environmental
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 fines, penalties or
disallowances on SCE, SCE may be prevented from executing its strategy and its 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.
Edison International and SCE continue to pursue regulatory and legal strategies, and anticipate pursuing legislative strategies
on the longer term, to address the application of a strict liability standard to wildfire-related property damages without the
guaranteed ability to recover resulting costs in electric rates. To the extent the Wildfire Insurance Fund and other provisions
of AB 1054 do not effectively mitigate the significant risk faced by California investor-owned utilities related to liability for
damages arising from catastrophic wildfires where utility facilities are a substantial cause, not achieving a more
comprehensive solution could have a detrimental effect on SCE's business and financial condition. The effectiveness of AB
1054 to mitigate the wildfire-related risk faced by SCE is conditioned in part on the performance of various entities newly
formed under AB 1054 and related legislation to, among other things, administer the Wildfire Insurance Fund, issue safety
certifications, oversee and enforce compliance with wildfire safety standards, and develop metrics to reduce risk and measure
compliance with risk reduction. In addition, CPUC approval is required to recover the costs SCE is incurring to strengthen its
wildfire mitigation and prevention efforts described in its 2019 and 2020 WMPs, including costs being incurred for its
GS&RP. See "Management Overview—Southern California Wildfires and Mudslides" and "Management Overview—
Wildfire Mitigation and Wildfire Insurance Expenses" in the MD&A.
In addition, existing regulations may be revised or re-interpreted 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 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, including as a result of gas supply constraints. 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.
39
Operating Risks
Damage claims against SCE for wildfire-related losses may materially affect SCE's financial condition and results of
operations.
Prolonged drought conditions and shifting weather patterns in California resulting from climate change as well as increased
tree mortality rates have increased the duration of the wildfire season and the risk of severe wildfire events. Severe wildfires
and increased urban development in high fire risk areas in California have given rise to large damage claims against
California utilities for fire-related losses alleged to be the result of utility practices and/or the failure of electric and other
utility equipment. Catastrophic wildfires can occur in SCE's service territory even if SCE effectively implements its WMPs.
California courts have previously found utilities to be strictly liable for property damage, regardless of fault, by applying the
theory of inverse condemnation when a utility's facilities were determined to be a substantial cause of a wildfire that caused
the property damage. The rationale generally stated by these courts for applying this theory to investor-owned utilities is that
property losses resulting from a public improvement, such as the distribution of electricity, can be spread across the larger
community that benefited from such improvement. However, in November 2017, the CPUC issued a decision denying an
investor-owned utility's request to include in its rates uninsured wildfire-related costs arising from several 2007 fires, finding
that the investor-owned utility did not prudently manage and operate its facilities prior to or at the outset of the 2007
wildfires. An inability to recover uninsured wildfire-related costs could materially affect SCE's business, financial condition
and results of operations. For example, if SCE is found liable for damages related to catastrophic wildfires, including the
2017/2018 Wildfire/Mudslide Events, and is unable to, or believes that it will be unable to, recover those damages through
insurance, the Wildfire Insurance Fund (which is only available for fires ignited after July 12, 2019) or electric rates, or
access the bank and capital markets on reasonable terms, SCE may not have sufficient cash or equity to pay dividends or may
be restricted from declaring such dividends because it does not meet CPUC or California law requirements related to the
declaration of dividends. For information on the California law requirements on the declaration of dividends, see "Liquidity
and Capital Resources—SCE—SCE Dividends" in the MD&A. See "Management Overview—Southern California Wildfires
and Mudslides" in the MD&A.
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 in connection with SCE's ordinary operations. Edison International, SCE and its contractors may experience coverage
reductions and/or increased wildfire insurance costs in future years. No assurance can be given that losses will not exceed the
limits of SCE's or its contractors' insurance coverage. SCE may not be able to recover uninsured losses and increases in the
cost of insurance in electric rates. Losses which are not fully insured or cannot be recovered through the Wildfire Insurance
Fund or electric 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 12. Commitments
and Contingencies—Contingencies—Southern California Wildfires and Mudslides."
SCE may not effectively implement its Wildfire Mitigation Plans.
SCE will face a higher likelihood of catastrophic wildfires in its service territory if it cannot effectively implement its WMPs.
For example, SCE may not be able to effectively implement its WMPs if it experiences unanticipated difficulties relative to
sourcing, engaging, training and retaining contract workers it needs to fulfill its mitigation obligations under the WMPs. In
addition, if SCE does not have an approved WMP, SCE will not be issued a safety certification from the CPUC and will
consequently not benefit from the presumption of prudency or the AB 1054 Liability Cap.
The CPUC may assess penalties on SCE if it finds that SCE fails to substantially comply with its WMP. In addition, SCE
may be subject to regulatory fines and penalties, claims for damages and reputational harm if it places excessive reliance on
Public Safety Power Shut-Offs to mitigate wildfire risks.
For more information on AB 1054, see "Notes to Consolidated Financial Statements—Note 12. Commitments and
Contingencies—Contingencies—Southern California Wildfires and Mudslides—Recovery of Wildfire-Related Costs—2019
Wildfire Legislation."
40
SCE will not benefit from all of the features of AB 1054 if the Wildfire Insurance Fund is exhausted.
Catastrophic wildfires could rapidly exhaust the Wildfire Insurance Fund and SCE will not be reimbursed by the Wildfire
Insurance Fund or benefit from the AB 1054 Liability Cap if the fund has been exhausted as a result of damage claims
previously incurred by SCE or the other participating utilities.
In addition, because PG&E's participation in, and contributions to, the Wildfire Insurance Fund are subject to it emerging
from bankruptcy and meeting certain other conditions prior to June 30, 2020, the Wildfire Insurance Fund may be smaller
than is currently anticipated. If PG&E does not participate in the Wildfire Insurance Fund, it will not be entitled to seek
reimbursement from the fund.
For more information on AB 1054, see "Notes to Consolidated Financial Statements—Note 12. Commitments and
Contingencies—Contingencies—Southern California Wildfires and Mudslides—Recovery of Wildfire-Related Costs—2019
Wildfire Legislation."
There are inherent risks associated with owning and decommissioning nuclear power generating facilities and obtaining
cost reimbursement, including, among other things, insufficiency of nuclear decommissioning trust funds, costs
exceeding current estimates, execution risks, potential harmful effects on the environment and human health and the
hazards 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 funds decommissioning costs with assets that are currently held in nuclear decommissioning trusts. Based on current
decommissioning cost estimates, SCE believes that further contributions to the nuclear decommissioning trusts' assets may be
required to pay the costs of decommissioning. If additional contributions to the nuclear decommissioning trust funds become
necessary, recovery of any such additional funds through electric rates is subject to the CPUC's review and approval.
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. Decommissioning costs ultimately incurred
could exceed the current estimates and cost increases resulting from contractual disputes or significant permitting delays,
among other things, could cause SCE to materially overrun current decommissioning cost estimates and could materially
impact the sufficiency of trust funds. See "Liquidity and Capital Resources—Decommissioning of San Onofre" in the
MD&A.
Even though 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 $13.9 billion for Palo Verde and $560 million for San Onofre. SCE and other owners of San
Onofre and Palo Verde have purchased the maximum private primary insurance available of $450 million per site. In the case
of San Onofre, the balance is covered by a US Government indemnity. In the case of Palo Verde, the balance is covered by a
loss sharing program among nuclear reactor licensees. There is no assurance that the CPUC would allow SCE to recover the
required contribution made pursuant to this loss sharing program in the case of one or more nuclear incidents with claims that
exceeded $450 million at a nuclear reactor which is participating in the program. If this public liability limit of $13.9 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 12. Commitments and
Contingencies—Contingencies—Nuclear Insurance."
SCE's anticipated new customer service system is subject to implementation and cost-recovery risks that could materially
affect SCE's business and financial condition.
SCE is currently testing a new customer service system that it anticipates implementing in 2021. If the customer service
system does not function as intended upon implementation, SCE could experience, among other things, delayed or inaccurate
customer bills that lead to over- or under- collections and other customer service concerns or degradation. Further, the
process of implementing new technologies like the new customer service system represents opportunity for cybersecurity
attacks on our information systems, which could lead to sensitive confidential personal and other data being compromised.
Customer service degradation or the compromise of sensitive confidential personal and other data could result in violations of
applicable privacy and other laws, material financial loss to SCE or to its customers, customer dissatisfaction, loss of
confidence in SCE's security measures, and significant litigation and/or regulatory 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.
41
The expected cost of the new customer service system is significantly higher than SCE had originally projected. If the CPUC
determines that any costs incurred by SCE to design, build, test and implement the customer service system were not
reasonably or prudently incurred, SCE will not be able to recover such costs through electric rates.
Climate change exacerbated 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, earthquakes and events caused, or exacerbated, by
climate change, such as wildfires and mudslides, can disrupt the generation and transmission of electricity, and can seriously
damage the infrastructure necessary to deliver power to SCE's customers. Climate change has caused, and exacerbated,
extreme weather events and wildfires in southern California, and wildfires could cause, among other things, public safety
issues, property damage and operational issues. Weather-related incidents and other natural disasters can lead to lost revenue
and increased expense, including higher maintenance and repair costs, which SCE may not be able to recover from its
customers. These incidents can also result in regulatory penalties and disallowances, particularly if SCE encounters
difficulties in restoring power to its customers on a timely basis or if fire-related losses are found to be the result of utility
practices and/or the failure of electric and other utility equipment. In addition, these occurrences could lead to significant
claims for damages, including for loss of life and property damage. For example, the 2017/2018 Wildfire/Mudslide Events
resulted in, among other things, loss of life, property damage and loss of service. 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. For more information on the impact of the
2017/2018 Wildfire/Mudslide Events on SCE and Edison International, see "Notes to Consolidated Financial Statements—
Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides."
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. In addition, the risks associated with the
operation of transmission and distribution assets and power generating facilities include public and employee safety issues
and the risk of utility assets causing or contributing to wildfires.
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
$100,000 per violation per day (capped at a maximum of $8 million), pursuant to the CPUC's jurisdiction for violations of
safety rules found in statutes, regulations, and the CPUC's General Orders. The CPUC also can issue fines greater than
$8 million outside of the citation program. Such penalties and liabilities could be significant and materially affect SCE's
liquidity and results of operations.
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.
SCE's distribution of water and propane gas on Catalina Island involves inherent risks of damage to private property and
the environment and injury to employees and the general public.
SCE owns and operates the water distribution system on Catalina Island, California and a propane gas distribution system
that serves the City of Avalon on Catalina Island, California. Production, storage, treatment and distribution of water for
human use and the transportation, storage, distribution and use of gas can be dangerous, and can cause damage to private
property and the environment and injury to employees and the general public if equipment fails or does not perform as
anticipated. For example, the risks of operating a water distribution system include the potential for burst pipes and water
42
contamination and the risks of operating gas distribution system include the potential for gas leaks, fire or explosion. In
addition, SCE may have to pay fines, penalties and remediation costs if it does not comply with laws and regulations in the
operation of the water and gas distribution systems. An inability to recover costs associated with any such damages or injuries
or any fines, penalties or remediation costs, from insurance or through rate payers, could materially affect SCE's business,
financial condition and results of operations.
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. In
addition, the actions of other California investor-owned utilities and legal, regulatory and legislative decisions impacting
investor-owned utilities can affect market conditions and therefore, SCE's ability to obtain financing. 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
SCE's inability to effectively and timely respond to the changes that the electricity industry is undergoing, as a result of
increased competition, technological advances, and changes to the regulatory environment, could materially impact SCE's
business model, financial condition and results of operations.
Customers and third parties are increasingly deploying DERs, such as solar generation, energy storage, energy efficiency and
demand response technologies. California's environmental policy objectives are accelerating the pace and scope of industry
change. This change 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. In addition, enabling California's clean energy
economy goals will require sustained investments in grid modernization, renewable integration projects, energy efficiency
programs, energy storage options and electric vehicle infrastructures. If SCE is unable to effectively adapt to these changes,
its business model, its ability to execute on its strategy, and ultimately its financial condition and results of operations could
be materially impacted.
Customer-owned generation and load departures to CCAs or Electric Service Providers each reduce the amount of electricity
that 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, some customers in
California who generate their own power are not currently required to pay all transmission and distribution charges and non-
bypassable charges, subject to limitations, which results in increased utility rates for those customers who do not own their
generation. If regulations aren't changed such that customers pay their share of transmission and distribution charges and non-
bypassable charges or the demand for electricity reduces so significantly that SCE is no longer effectively able to recover
such charges from its customers, SCE's business, financial condition and results of operations will be materially impacted.
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."
Cybersecurity and Physical Security Risks
SCE's systems and network infrastructure are targets for physical and cyber attacks, intrusions or other catastrophic
events that could result in their failure or reduced functionality.
Regulators such as NERC and U.S. Government agencies, including the Departments of Defense, Homeland Security and
Energy, have increasingly stressed 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 highly
sophisticated and dynamic.
SCE's operations require the continuous availability of critical information technology systems, sensitive customer data and
network infrastructure and information, all of which are targets for malicious actors. New cyber and physical threats arise as
43
SCE moves from an analog to a digital electric grid. For example, SCE's grid modernization efforts and the move to a
network-connected grid increases the number of "threat surfaces" and potential vulnerabilities that an adversary can target.
SCE depends on a wide array of vendors to provide it with services and equipment. Malicious actors may attack vendors to
disrupt the services they provide to SCE, or to use those vendors as a cyber conduit to attack SCE. Additionally, the
equipment and material provided by SCE's vendors may contain cyber vulnerabilities.
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 cybersecurity breach. Though SCE
actively monitors developments in this area and is involved in various industry groups and government initiatives, no security
measures can completely shield its 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 and operational 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, material financial loss to SCE or to its customers, loss of confidence
in SCE's security measures, customer dissatisfaction, and significant litigation and/or regulatory 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.
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
44
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Edison International
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Edison International and its subsidiaries (the “Company”)
as of December 31, 2019 and 2018, and the related consolidated statements of income, of comprehensive income, of changes
in equity and of cash flows for each of the three years in the period ended December 31, 2019, including the related notes and
schedules of condensed financial information of parent as of December 31, 2019 and 2018 and for each of the three years in
the period ended December 31, 2019 and of valuation and qualifying accounts for each of the three years in the period ended
December 31, 2019 appearing under Item 15 (collectively referred to as the “consolidated financial statements”). We also
have audited the Company's internal control over financial reporting as of December 31, 2019, based on criteria established
in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the
United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for
leases in 2019.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, 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 the Company's consolidated financial statements and on the Company's internal control over
financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in
all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. 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.
Definition and Limitations of Internal Control over Financial Reporting
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
45
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.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective,
or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Contingent Liability - Southern California Wildfires and Mudslides
As described in Note 12 to the consolidated financial statements, the Thomas Fire, the Koenigstein Fire, the Montecito
Mudslides and the Woolsey Fire (collectively, the "2017/2018 Wildfire/Mudslide Events") within the Company’s service
territory caused substantial damage to both residential and business properties in the Santa Barbara, Ventura, and Los Angeles
Counties. Based on information available to management and consideration of the risks associated with litigation,
management expects to incur a material loss in connection with the 2017/2018 Wildfire/Mudslide Events. The Company is
named as a defendant in multiple lawsuits filed related to both the wildfires and mudslides. Final determination of liability for
the 2017/2018 Wildfire/Mudslide Events, including determinations of whether the Company was negligent, would only be
made during lengthy and complex litigation processes. Even when investigations are still pending or liability is disputed, an
assessment of likely outcomes, including through future settlement of disputed claims, may require a liability to be accrued
under accounting standards. As of December 31, 2019, management has estimated liabilities of $4.5 billion, remaining
expected recoveries from insurance of $1.7 billion and expected recoveries through FERC electric rates of $149 million on
the consolidated balance sheet related to the 2017/2018 Wildfire/Mudslide Events. The accrued liability corresponds to the
lower end of the reasonably estimated range of expected potential losses that may be incurred in connection with the
2017/2018 Wildfire/Mudslide Events and is subject to change as additional information becomes available. Each reporting
period, management reviews its loss estimates for remaining alleged and potential claims related to the 2017/2018 Wildfire
Mudslide Events. The process for estimating losses associated with wildfire litigation claims requires management to
exercise significant judgment based on a number of assumptions and subjective factors, including, but not limited to:
estimates of known and expected claims by third parties based on currently available information, opinions of counsel
regarding litigation risk, the status of and developments in the course of litigation, and prior experience litigating and settling
wildfire litigation claims. While the low end of the reasonably estimated range of expected losses for the 2017/2018 Wildfire/
Mudslide Events is estimated on an aggregate basis, some of the factors evaluated by management in connection with its
fourth quarter 2019 review contributed to a significant increase in certain loss estimates, while others contributed to a
significant decrease in certain other loss estimates. The net result of management's fourth quarter 2019 review was an
increase in estimated losses of $232 million for total estimated losses of $4.5 billion as of December 31, 2019 for unpaid
claims related to the 2017/2018 Wildfire/Mudslide Events. Additional information is expected to become available from
multiple external sources, during the course of litigation and settlement discussions, and from the Company's ongoing
internal review, including, among other things, information regarding the extent of damages that may be attributable to any
fire determined to have been substantially caused by the Company's equipment, information that may be obtained from the
equipment in California Department of Forestry and Fire Protection’s possession, and information pertaining to fire
progression, suppression activities, damages alleged by plaintiffs and insurance claims made by third parties.
The principal considerations for our determination that performing procedures relating to the 2017/2018 Wildfire/Mudslide
Events contingent liability is a critical audit matter are there was significant judgment by management when determining the
probability of a loss being incurred and the estimate of the low end of a reasonably estimated range of expected potential loss
for these contingencies, including but not limited to assumptions and subjective factors based on currently available
information and assessments, opinions regarding litigation risk, and prior experience with litigating and settling other wildfire
46
cases. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating
management's conclusion related to these loss contingencies.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to
management’s evaluation of loss contingencies associated with wildfires and mudslides. These procedures also included,
among others, obtaining and evaluating the letters of audit inquiry with internal and external legal counsel, assessing the
reasonableness of management’s assessment regarding whether it is reasonably possible or probable and reasonably estimable
that a loss has been incurred, evaluating the assumptions and methods used by management in developing the low end of the
reasonably estimated range of expected potential losses, including currently available information and assessments, opinions
regarding litigation risk, and prior experience with litigating and settling other wildfire cases. When assessing the
assumptions related to the reasonably estimated range of expected potential losses, the assumptions used were evaluated for
reasonableness considering (i) past wildfire litigation history, and (ii) third-party source data.
Recoverability of Regulatory Assets That Are Not Currently Reflected In Rates
As described in Notes 1 and 11 to the consolidated financial statements, the Company'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"). Management 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 accounting 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. As disclosed by management, 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 of the Company or
other rate-regulated entities, and other factors that would indicate that the regulator will treat an incurred cost as allowable for
ratemaking purposes. As of December 31, 2019, $868 million recorded in wildfire-related memorandum accounts represent
wildfire-related costs that are probable of future recovery from customers.
The principal consideration for our determination that performing procedures relating to the Company's recoverability of
regulatory assets that are not currently reflected in rates is a critical audit matter is there was significant judgment by
management in determining the costs probable of recovery and reported as an asset on the balance sheet. This in turn led to a
high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s assessment
of the recoverability of regulatory assets not currently reflected in rates.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to
the Company's regulatory accounting process, including controls over management’s assessment of the probability of
recovering regulatory assets not currently reflected in rates. These procedures also included, among others, obtaining the
Company's correspondence with regulators, evaluating management's assessment regarding the probability of recovery of the
regulatory assets at the balance sheet date, evaluating the accounting and disclosure implications, and calculating regulatory
assets balances based on provisions outlined in the rate orders. This evidence included reference to historical precedence of
similar items and accounting treatment utilized by comparable companies under similar regulatory jurisdictions as well as
evaluating progress in discussions between management and the regulator.
Wildfire Insurance Fund Coverage Period
As described in Notes 1 and 12 to the consolidated financial statements, the Company accounted for the contributions to the
Wildfire Insurance Fund similar to prepaid insurance. No period of coverage was provided in Assembly Bill 1054, therefore
expense is being allocated to periods ratably based on an estimated period of coverage. As of December 31, 2019, the
Company has a $2.8 billion long-term asset and a $323 million current asset reflected as "Wildfire Insurance Fund
contributions" in the consolidated balance sheets, for an initial $2.4 billion contribution made during the third quarter of 2019
and the present value of annual contributions SCE committed to make to the Wildfire Insurance Fund, reduced by
amortization. A period of 10 years is being used to amortize the asset. In estimating the period of coverage management used
Monte Carlo simulations based on five years (2014 – 2018) of historical data from wildfires assumed to be caused by
electrical utility equipment to estimate expected loss. The details of the operation of the Wildfire Insurance Fund and
estimates related to claims from the fund, have been applied to the expected loss simulations to estimate the period of
47
coverage of the fund. As disclosed by management, the most sensitive inputs to the estimated period of coverage are the
expected frequency of wildfire events caused by investor-owned utility electrical equipment and the estimated costs
associated with those forecasted events.
The principal consideration for our determination that performing procedures relating to the wildfire insurance fund coverage
period is a critical audit matter is there was significant judgment by management in estimating the period of coverage from
the wildfire insurance fund. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing
procedures and evaluating management's estimated coverage period of the wildfire fund and the significant inputs, including
the expected frequency of wildfire events caused by electrical utility equipment and the estimated costs associated with those
forecasted events. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist
in performing these procedures and evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to
management's estimate regarding the estimated coverage period of the wildfire insurance fund. These procedures also
included, among others, testing management’s process for developing the wildfire insurance fund coverage period estimate;
evaluating the appropriateness of the Monte Carlo simulation models; testing the completeness, accuracy, and relevance of
underlying data used in the models; and evaluating the significant inputs used by management, including the expected
frequency of wildfire events caused by electrical equipment and the estimated costs associated with those forecasted events.
Evaluating management's inputs related to the expected frequency of wildfire events and the estimated costs associated with
the forecasted events involved evaluating whether the inputs used by management were reasonable considering (i) the
historical frequency and severity of wildfire events in the State of California, (ii) the historical costs associated with wildfire
events in the State of California, and (iii) the current wildfire risk in the State of California. Professionals with specialized
skill and knowledge were used to assist in the evaluation of the Company’s Monte Carlo simulation models.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
February 27, 2020
We have served as the Company's auditor since 2002.
48
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Southern California Edison Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Southern California Edison Company and its subsidiaries
(the "Company") as of December 31, 2019 and 2018, and the related consolidated statements of income, of comprehensive
income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2019, including
the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended
December 31, 2019 appearing under Item 15 (collectively referred to as the "consolidated financial statements"). In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as
of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for
leases in 2019.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express
an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were
we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain
an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our
audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
February 27, 2020
We have served as the Company's auditor since 2002.
49
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Income
Edison International
(in millions, except per share amounts)
Total operating revenue
Purchased power and fuel
Operation and maintenance
Wildfire-related claims, net of insurance recoveries
Wildfire insurance fund expense
Depreciation and amortization
Property and other taxes
Impairment and other
Other operating income
Total operating expenses
Operating income (loss)
Interest expense
Other income
Income (loss) from continuing operations before income taxes
Income tax (benefit) expense
Income (loss) from continuing operations
Income from discontinued operations, net of tax
Net income (loss)
Preferred and preference stock dividend requirements of SCE
Other noncontrolling interests
Net income (loss) attributable to Edison International common shareholders $
Amounts attributable to Edison International common shareholders:
Income (loss) from continuing operations, net of tax
$
1,284
Income from discontinued operations, net of tax
Net income (loss) attributable to Edison International common shareholders $
Basic earnings (loss) per common share attributable to Edison International
—
1,284
common shareholders:
Weighted average shares of common stock outstanding
Continuing operations
Discontinued operations
Total
Diluted earnings (loss) 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
340
3.78
—
3.78
341
3.77
—
3.77
$
$
$
$
Years ended December 31,
2019
2018
2017
$
12,347
$
12,657
$
12,320
4,839
3,018
255
152
1,730
399
184
(5)
10,572
1,775
(841)
193
1,127
(278)
1,405
—
1,405
121
—
1,284
5,406
2,797
2,669
—
1,871
395
78
(7)
13,209
(552)
(734)
197
(1,089)
(739)
(350)
34
(316)
121
(14)
(423)
(457)
34
(423)
326
(1.40)
0.10
(1.30)
326
(1.40)
0.10
(1.30)
$
$
$
$
$
$
$
4,873
2,844
—
—
2,041
377
738
(9)
10,864
1,456
(639)
132
949
281
668
—
668
124
(21)
565
565
—
565
326
1.73
—
1.73
328
1.72
—
1.72
$
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
50
Consolidated Statements of Comprehensive Income
Edison International
(in millions)
Net income (loss)
Other comprehensive (loss) income, net of tax:
Pension and postretirement benefits other than pensions:
Net (loss) income arising during period plus amortization of net loss included in
net income
Other
Other comprehensive (loss) income, net of tax
Comprehensive income (loss)
Less: Comprehensive income attributable to noncontrolling interests
Comprehensive income (loss) attributable to Edison International
Years ended December 31,
2019
2018
2017
$ 1,405
$
(316)
$
668
(9)
—
(9)
1,396
121
$ 1,275
$
(3)
(4)
(7)
(323)
107
(430)
$
10
—
10
678
103
575
The accompanying notes are an integral part of these consolidated financial statements.
51
Consolidated Balance Sheets
(in millions)
ASSETS
Cash and cash equivalents
Receivables, less allowances of $50 and $52 for uncollectible accounts at respective dates
Accrued unbilled revenue
Inventory
Income tax receivables
Prepaid expenses
Derivative assets
Regulatory assets
Wildfire Insurance Fund contributions
Other current assets
Total current assets
Nuclear decommissioning trusts
Other investments
Total investments
Utility property, plant and equipment, less accumulated depreciation and amortization of
$9,958 and $9,566 at respective dates
Nonutility property, plant and equipment, less accumulated depreciation of $86 and $82 at
respective dates
Total property, plant and equipment
Regulatory assets
Wildfire Insurance Fund contributions
Operating lease right-of-use assets
Other long-term assets
Total long-term assets
Edison International
December 31,
2019
2018
$
68
788
488
364
118
214
81
1,009
323
107
3,560
4,562
64
4,626
$
144
730
482
282
191
148
171
1,133
—
78
3,359
4,120
63
4,183
44,198
41,269
87
44,285
6,088
2,767
693
2,363
11,911
79
41,348
5,380
—
—
2,445
7,825
Total assets
$
64,382
$
56,715
The accompanying notes are an integral part of these consolidated financial statements.
52
Consolidated Balance Sheets
(in millions, except share amounts)
LIABILITIES AND EQUITY
Short-term debt
Current portion of long-term debt
Accounts payable
Customer deposits
Regulatory liabilities
Current portion of operating lease liabilities
Other current liabilities
Total current liabilities
Long-term debt
Deferred income taxes and credits
Pensions and benefits
Asset retirement obligations
Regulatory liabilities
Operating lease liabilities
Wildfire-related claims
Other deferred credits and other long-term liabilities
Total deferred credits and other liabilities
Total liabilities
Commitments and contingencies (Note 12)
Common stock, no par value (800,000,000 shares authorized; 361,985,133 and 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 SCE
Total equity
$
Edison International
December 31,
2019
2018
550
479
1,752
302
972
80
1,388
5,523
17,864
5,078
674
3,029
8,385
613
4,568
3,152
25,499
48,886
4,990
(69)
8,382
13,303
2,193
15,496
$
720
79
1,511
299
1,532
—
1,254
5,395
14,632
4,576
869
3,031
8,329
—
4,669
2,562
24,036
44,063
2,545
(50)
7,964
10,459
2,193
12,652
Total liabilities and equity
$
64,382
$
56,715
The accompanying notes are an integral part of these consolidated financial statements.
53
Consolidated Statements of Cash Flows
Edison International
(in millions)
Cash flows from operating activities:
Net income (loss)
Less: Income from discontinued operations
Income (loss) from continuing operations
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization
Allowance for equity during construction
Impairment and other
Deferred income taxes
Wildfire Insurance Fund amortization expense
Other
Nuclear decommissioning trusts
Contributions to Wildfire Insurance Fund
Changes in operating assets and liabilities:
Receivables
Inventory
Accounts payable
Tax receivables and payables
Other current assets and liabilities
Regulatory assets and liabilities, net
Wildfire-related insurance receivable
Wildfire-related claims
Other noncurrent assets and liabilities
Net cash (used in) provided by operating activities
Cash flows from financing activities:
Long-term debt issued or remarketed, net of premium, discount and issuance costs
of $4, $63 and $2 for the respective years
Long-term debt repaid
Term loan issued
Term loan repaid
Common stock issued
Preference stock issued, net
Preference stock redeemed
Short-term debt financing, net
Payments for stock-based compensation
Receipts from stock option exercises
Dividends and distribution to noncontrolling interests
Dividends paid
Other
Net cash 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
Proceeds from sale of SoCore Energy, net of cash acquired by buyer
Other
Net cash used in investing activities
Net (decrease) increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year
Years ended December 31,
2018
2017
2019
$
$
1,405
—
1,405
$
(316)
34
(350)
1,803
(101)
184
(284)
152
29
(106)
(2,457)
(76)
(83)
288
88
(13)
(1,278)
285
(101)
(42)
(307)
3,696
(82)
1,750
(1,750)
2,391
—
—
(172)
(64)
58
(121)
(810)
7
4,903
(4,877)
4,389
(4,283)
—
93
(4,678)
(82)
152
70
$
1,940
(104)
78
(527)
—
35
(109)
—
(39)
(49)
(31)
32
(79)
(92)
(2,000)
4,669
(197)
3,177
3,237
(654)
—
—
—
—
—
(1,611)
(46)
26
(121)
(788)
39
82
(4,509)
4,340
(4,231)
78
83
(4,239)
(980)
1,132
152
$
$
668
—
668
2,115
(87)
738
498
—
34
(197)
—
6
(12)
50
(250)
7
4
—
—
23
3,597
2,233
(1,285)
—
—
—
462
(475)
1,084
(393)
215
(125)
(707)
(2)
1,007
(3,844)
5,239
(5,042)
—
61
(3,586)
1,018
114
1,132
The accompanying notes are an integral part of these consolidated financial statements.
54
Consolidated Statements of Changes in Equity
Edison International
(in millions, except per share amounts)
Equity Attributable to Common Shareholders
Noncontrolling Interests
Common
Stock
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Subtotal
Other
Preferred
and
Preference
Stock
Total
Equity
Balance at December 31, 2016
$ 2,505
$
(53) $ 9,544
$ 11,996
$ — $
2,191
$ 14,187
Net income (loss)
Other comprehensive income
Contribution from tax equity investor
Common stock dividends declared ($2.2325
per share)
Dividends to noncontrolling interests ($1.02
- $1.195 per share for preferred stock;
$62.50 - $143.75 per share for preference
stock)
Stock-based compensation
Noncash stock-based compensation
Issuance of preference stock
Redemption of preference stock
Balance at December 31, 2017
Net (loss) income
Other comprehensive loss
Cumulative effect of accounting changes
Contribution from tax equity investor
Common stock dividends declared ($2.4275
per share)
Dividends to noncontrolling interests ($1.02
- $1.195 per share for preferred stock;
$62.50 - $143.75 per share for preference
stock)
Stock-based compensation
Noncash stock-based compensation
Deconsolidation of SoCore Energy
—
—
—
—
—
—
21
—
—
$ 2,526
$
—
—
—
—
—
—
—
19
—
—
10
—
—
—
—
—
—
(2)
(5)
—
565
—
—
565
10
—
(727)
(727)
—
(179)
—
—
(179)
21
—
(15)
$ 11,671
$
—
—
—
(43) $ 9,188
(15)
—
10
—
(2)
5
—
—
(791)
(791)
—
—
—
—
—
(20)
—
—
—
(20)
19
—
(18)
—
20
—
—
—
—
—
—
2
124
—
—
—
(124)
—
—
462
(460)
671
10
20
(727)
(124)
(179)
21
462
(475)
$
2,193
$ 13,866
—
—
24
—
—
—
—
(15)
—
—
—
—
(2)
5
24
(791)
(121)
(121)
—
—
—
(20)
19
(15)
(423)
(423)
(11)
121
(313)
Balance at December 31, 2018
$ 2,545
$
(50) $ 7,964
$ 10,459
$ — $
2,193
$ 12,652
Net income
Other comprehensive loss
Cumulative effect of accounting change
(Note 1)
Common stock issued, net of issuance cost
(Note 14)
Common stock dividends declared ($2.4750
per share)
Dividends to noncontrolling interests ($1.02
- $1.195 per share for preferred stock;
$62.50 - $143.75 per share for preference
stock)
Stock-based compensation
Noncash stock-based compensation
—
—
—
2,421
—
—
—
24
—
(9)
(10)
—
—
—
—
—
1,284
1,284
—
10
—
(9)
—
2,421
(849)
(849)
—
(27)
—
—
(27)
24
—
—
—
—
—
—
—
—
121
—
—
—
—
(121)
—
—
1,405
(9)
—
2,421
(849)
(121)
(27)
24
Balance at December 31, 2019
$ 4,990
$
(69) $ 8,382
$ 13,303
$ — $
2,193
$ 15,496
The accompanying notes are an integral part of these consolidated financial statements.
55
(This page has been left blank intentionally.)
56
Consolidated Statements of Income
Southern California Edison Company
(in millions)
Operating revenue
Purchased power and fuel
Operation and maintenance
Wildfire-related claims, net of insurance recoveries
Wildfire insurance fund expense
Depreciation and amortization
Property and other taxes
Impairment and other
Other operating income
Total operating expenses
Operating income (loss)
Interest expense
Other income
Income (loss) before taxes
Income tax benefit
Net income (loss)
Less: Preferred and preference stock dividend requirements
Net income (loss) available for common stock
Consolidated Statements of Comprehensive Income
Years ended December 31,
2019
2018
2017
$
12,306
$ 12,611
$
12,254
4,839
2,936
255
152
1,728
396
159
(4)
10,461
1,845
(739)
195
1,301
(229)
1,530
121
$
1,409
$
5,406
2,702
2,669
—
1,867
392
(12)
(7)
13,017
(406)
(673)
194
(885)
(696)
(189)
121
(310)
4,873
2,722
—
—
2,032
372
716
(8)
10,707
1,547
(589)
148
1,106
(30)
1,136
124
$
1,012
(in millions)
Net income (loss)
Other comprehensive (loss) income, net of tax:
Pension and postretirement benefits other than pensions:
Net (loss) income arising during period plus amortization of net loss included in
net income
Other
Other comprehensive (loss) income, net of tax
Comprehensive income (loss)
Years ended December 31,
2018
2017
$
(189) $ 1,136
2019
$ 1,530
(11)
—
(11)
$ 1,519
$
1
1
(5)
(4)
—
1
(193) $ 1,137
The accompanying notes are an integral part of these consolidated financial statements.
57
Consolidated Balance Sheets
Southern California Edison Company
(in millions)
ASSETS
Cash and cash equivalents
Receivables, less allowances of $49 and $51 for uncollectible accounts at respective dates
Accrued unbilled revenue
Inventory
Income tax receivables
Prepaid expenses
Derivative assets
Regulatory assets
Wildfire Insurance Fund contributions
Other current assets
Total current assets
Nuclear decommissioning trusts
Other investments
Total investments
Utility property, plant and equipment, less accumulated depreciation and amortization of
$9,958 and $9,566 at respective dates
Nonutility property, plant and equipment, less accumulated depreciation of $80 and $77 at
respective dates
Total property, plant and equipment
Regulatory assets
Wildfire Insurance Fund contributions
Operating lease right-of-use assets
Long-term insurance receivables due from affiliate
Other long-term assets
Total long-term assets
$
December 31,
2019
2018
24
777
488
364
148
213
81
1,009
323
103
3,530
4,562
46
4,608
$
21
711
482
282
312
144
171
1,133
—
69
3,325
4,120
45
4,165
44,198
41,269
83
44,281
6,088
2,767
689
803
1,507
11,854
75
41,344
5,380
—
—
1,000
1,360
7,740
Total assets
$
64,273
$
56,574
The accompanying notes are an integral part of these consolidated financial statements.
58
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
Customer deposits
Regulatory liabilities
Current portion of operating lease liabilities
Other current liabilities
Total current liabilities
Long-term debt
Deferred income taxes and credits
Pensions and benefits
Asset retirement obligations
Regulatory liabilities
Operating lease liabilities
Wildfire-related claims
Other deferred credits and other long-term liabilities
Total deferred credits and other liabilities
Total liabilities
Commitments and contingencies (Note 12)
Preferred and preference stock
Common stock, no par value (560,000,000 shares authorized; 434,888,104 shares issued and
outstanding at respective dates)
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total equity
December 31,
2019
2018
$
550
79
1,779
302
972
79
1,298
5,059
15,132
6,451
237
3,029
8,385
610
4,568
2,975
26,255
46,446
$
720
79
1,519
299
1,532
—
997
5,146
12,892
5,898
433
3,031
8,329
—
4,669
2,391
24,751
42,789
2,245
2,245
2,168
3,939
(39)
9,514
2,168
680
(23)
8,715
17,827
13,785
Total liabilities and equity
$
64,273
$
56,574
The accompanying notes are an integral part of these consolidated financial statements.
59
Consolidated Statements of Cash Flows
(in millions)
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile to net cash provided by operating activities:
Southern California Edison Company
Years ended December 31,
2018
2017
2019
$
1,530
$
(189)
$
1,136
Depreciation and amortization
Allowance for equity during construction
Impairment and other
Deferred income taxes
Wildfire Insurance Fund amortization expense
Other
Nuclear decommissioning trusts
Contributions to Wildfire Insurance Fund
Changes in operating assets and liabilities:
Receivables
Inventory
Accounts payable
Tax receivables and payables
Other current assets and liabilities
Regulatory assets and liabilities, net
Wildfire-related insurance receivable
Wildfire-related claims
Other noncurrent assets and liabilities
Net cash (used in) provided by operating activities
Cash flows from financing activities:
Long-term debt issued or remarketed, net of premium, discount and issuance
costs of $6, $(58) and $10 for the respective years
Long-term debt repaid
Term loan issued
Term loan repaid
Capital contributions from Edison International Parent
Preference stock issued, net
Preference stock redeemed
Short-term debt financing, net
Payments for stock-based compensation
Receipts from stock option exercises
Dividends paid
Other
Net cash 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
Other
Net cash used in investing activities
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year
$
1,798
(101)
159
(243)
152
17
(106)
(2,457)
(89)
(83)
307
178
(15)
(1,278)
285
(101)
(44)
(91)
2,306
(82)
750
(750)
3,250
—
—
(171)
(40)
22
(521)
7
4,771
(4,876)
4,389
(4,283)
92
(4,678)
2
22
24
$
1,931
(104)
(12)
(552)
—
28
(109)
—
(45)
(50)
(43)
(84)
(91)
(92)
(2,000)
4,669
(66)
3,191
2,692
(639)
—
—
—
—
—
(520)
(22)
12
(909)
2
616
(4,491)
4,340
(4,231)
82
(4,300)
(493)
515
22
2,101
(87)
716
304
—
24
(197)
—
5
(11)
50
(234)
42
4
—
—
(118)
3,735
1,445
(882)
—
—
—
462
(475)
469
(86)
48
(697)
(41)
243
(3,756)
5,239
(5,042)
56
(3,503)
475
40
515
$
The accompanying notes are an integral part of these consolidated financial statements.
60
Consolidated Statements of Changes in Equity
Southern California Edison Company
(in millions, except per share amounts)
Preferred
and
Preference
Stock
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Total
Equity
Balance at December 31, 2016
$
2,245
$
2,168
$
657
$
(20) $
9,433
$
Net income
Other comprehensive income
Dividends declared on common stock
($1.8051 per share)
Dividends declared on preferred stock ($1.02
- $1.195 per share) and preference stock
($62.50 - $143.75 per share)
Stock-based compensation
Noncash stock-based compensation
Issuance of preference stock
Redemption of preference stock
—
—
—
—
—
—
475
(475)
—
—
—
—
—
—
—
—
—
—
—
—
—
12
(13)
15
—
1
—
—
—
—
—
—
1,136
—
14,483
1,136
1
(785)
(785)
(124)
(38)
—
—
(15)
(124)
(38)
12
462
(475)
Balance at December 31, 2017
$
2,245
$
2,168
$
671
$
(19) $
9,607
$
14,672
Net loss
Other comprehensive income
Cumulative effect of accounting change
Dividends declared on common stock
($1.3245 per share)
Dividends declared on preferred stock ($1.02
- $1.195 per share) and preference stock
($62.50 - $143.75 per share)
Stock-based compensation
Noncash stock-based compensation
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
9
—
1
(5)
—
—
—
—
(189)
—
5
(576)
(121)
(11)
—
Balance at December 31, 2018
$
2,245
$
2,168
$
680
$
(23) $
8,715
$
Net income
Other comprehensive loss
Cumulative effect of accounting change
(Note 1)
Capital contribution from Edison
International Parent (Note 14)
Dividends declared on common stock
($1.3797 per share)
Dividends declared on preferred stock ($1.02
- $1.195 per share) and preference stock
($62.50 - $143.75 per share)
Stock-based compensation
Noncash stock-based compensation
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,250
—
—
(3)
12
—
(11)
(5)
—
—
—
—
—
1,530
—
5
—
(600)
(121)
(15)
—
(189)
1
—
(576)
(121)
(11)
9
13,785
1,530
(11)
—
3,250
(600)
(121)
(18)
12
Balance at December 31, 2019
$
2,245
$
2,168
$
3,939
$
(39) $
9,514
$
17,827
The accompanying notes are an integral part of these consolidated financial statements.
61
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") and Edison Energy
Group, Inc. ("Edison Energy Group"). SCE is an investor-owned public utility primarily engaged in the business of supplying
and delivering electricity to an approximately 50,000 square mile area of southern California. Edison Energy Group is a
holding company for Edison Energy, LLC ("Edison Energy") which is engaged in the competitive business of providing
energy services to commercial and industrial customers. Edison Energy's business activities are currently not material to
report as a separate business segment. These combined notes to the consolidated financial statements apply to both Edison
International and SCE unless otherwise described. Edison International's consolidated financial statements include the
accounts of Edison International, SCE and other wholly owned and controlled subsidiaries. References to Edison
International refer to the consolidated group of Edison International and its subsidiaries. References to "Edison International
Parent and Other" refer to Edison International Parent and its competitive subsidiaries and "Edison International Parent" refer
to Edison International on a stand-alone basis, not consolidated with its subsidiaries. SCE's consolidated financial statements
include the accounts of SCE 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. In
addition, SCE recognizes revenue and regulatory assets from alternative revenue programs, which enables the utility to adjust
future rates in response to past activities or completed events, if certain criteria are met, even for programs that do not qualify
for recognition of "traditional" regulatory assets and liabilities. SCE assesses, at the end of each reporting period, whether
regulatory assets are probable of future recovery. See Note 11 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. Certain prior year amounts have been
conformed to the current year's presentation.
Sale of SoCore Energy
On February 28, 2018, Edison International agreed to sell SoCore Energy LLC ("SoCore Energy"), a subsidiary of Edison
Energy Group, to a third party, subject to the completion of closing conditions, which were satisfied on April 16, 2018. As a
result, Edison International recognized a pre-tax loss of $62 million ($50 million after-tax) for the year ended December 31,
2018 and the assets and liabilities of SoCore Energy were not reflected in the consolidated Edison International balance sheet
as of December 31, 2018.
62
Cash, Cash Equivalents and Restricted Cash
Cash equivalents include 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,
2019
2018
2019
2018
$
31
$
116
$
— $
1
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:
Edison International
SCE
December 31,
(in millions)
Book balances reclassified to accounts payable
2019
2018
2019
2018
$
75
$
65
$
74
$
65
The following table sets forth the cash, cash equivalents and restricted cash included in the consolidated statements of cash
flows:
(in millions)
Edison International:
Cash and cash equivalents
Short-term restricted cash1
Total cash, cash equivalents, and restricted cash
SCE:
Cash and cash equivalents
Short-term restricted cash1
Total cash, cash equivalents, and restricted cash
December 31,
2019
December 31,
2018
$
$
$
$
68
2
70
24
—
24
$
$
$
$
144
8
152
21
1
22
1 Reflected in "Other current assets" on Edison International's and SCE's consolidated balance sheets.
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 weighted average cost.
Emission Allowances and Energy Credits
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 held for use of $50 million and $38 million at December 31, 2019 and 2018, respectively. GHG
emission obligations were $50 million and $30 million at December 31, 2019 and 2018, respectively, and are classified as
"Other current liabilities" on the consolidated balance sheets.
63
SCE is allocated low carbon fuel standard ("LCFS") credits which it sells to market participants. Proceeds from the sales, net
of program costs, are recorded in a balancing account to be refunded to eligible customers. SCE's net proceeds from the sale
of these LCFS credits were $184 million and $103 million and are classified as "Regulatory liabilities" on the consolidated
balance sheets at December 31, 2019 and 2018, respectively.
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 capitalization 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 in the 2018 General Rate Case ("GRC") 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 56 years
20 years to 65 years
45 years to 65 years
5 years to 60 years
Weighted Average
Useful Lives
36 years
48 years
54 years
25 years
Depreciation of utility property, plant and equipment is computed on a straight-line, remaining-life basis. SCE's depreciation
expense was $1.7 billion, $1.7 billion and $1.6 billion for 2019, 2018 and 2017, respectively. Depreciation expense stated as
a percent of average original cost of depreciable utility plant was, on a composite basis, 3.6%, 3.7% and 3.8% for 2019, 2018
and 2017, respectively. The original costs of retired property are charged to accumulated depreciation. See Note 2 for further
information.
Nuclear fuel for the Palo Verde Nuclear Generating Station ("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.
Palo Verde nuclear fuel is amortized using the units of production method.
Allowance for funds used during construction ("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 $101 million, $104 million and $87 million in 2019, 2018 and 2017, respectively, and is reflected in
"Other income." AFUDC debt was $63 million, $44 million and $28 million in 2019, 2018 and 2017, 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
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.
Accounting principles for rate-regulated enterprises also require recognition of an impairment loss if it becomes probable that
the regulated utility will abandon a plant investment, or if it becomes probable that the cost of a recently completed plant will
be disallowed, either directly or indirectly, for ratemaking purposes and a reasonable estimate of the amount of the
disallowance can be made.
64
Initial and annual contributions to the wildfire insurance fund established pursuant to California Assembly Bill 1054 (the
"Wildfire Insurance Fund" and "AB 1054")
Edison International and SCE accounted for the contributions to the Wildfire Insurance Fund similarly to prepaid insurance.
No period of coverage was provided in AB 1054, therefore expense is being allocated to periods ratably based on an
estimated period of coverage. At December 31, 2019, Edison International and SCE have a $2.8 billion long-term asset and a
$323 million current asset reflected as "Wildfire Insurance Fund contributions" in the consolidated balance sheets for the
initial $2.4 billion contribution made during the third quarter of 2019 and the present value of annual contributions SCE
committed to make to the Wildfire Insurance Fund, reduced by amortization. At December 31, 2019, a long-term liability of
$785 million has been reflected in "Other deferred credits and other long-term liabilities" for the present value of unpaid
contribution amounts. Contributions were discounted to the present value at the date SCE committed to participate in the
Wildfire Insurance Fund using US treasury interest rates.
A period of 10 years is being used to amortize the asset. All expenses related to the contributions are being reflected in
"Operation and maintenance" in the consolidated statements of income. Changes in the estimated period of coverage
provided by the Wildfire Insurance Fund could lead to material changes in future expense recognition. In estimating the
period of coverage Edison International and SCE used Monte Carlo simulations based on five years (2014 – 2018) of
historical data from wildfires caused by electrical utility equipment to estimate expected losses. The details of the operation
of the Wildfire Insurance Fund and estimates related to claims by SCE, Pacific Gas & Electric Company ("PG&E") and San
Diego Gas & Electric ("SDG&E") against the fund have been applied to the expected loss simulations to estimate the period
of coverage of the fund. The most sensitive inputs to the estimated period of coverage are the expected frequency of wildfire
events caused by investor-owned utility electrical equipment and the estimated costs associated with those forecasted events.
Edison International and SCE evaluate all inputs annually, or upon claims being made from the fund for catastrophic
wildfires, and the expected life of the insurance fund will be adjusted as required.
Edison International and SCE will assess the Wildfire Insurance Fund contribution assets for impairment in the event that a
participating utility's electrical equipment is found to be the substantial cause of a catastrophic wildfire, based on the ability
of SCE to benefit from the coverage provided by the Wildfire Insurance Fund in an amount equal to the recorded assets.
Goodwill
Edison International assesses goodwill through an annual goodwill impairment test, at the reporting unit level as of October 1
of each year. Edison International updates its goodwill impairment test 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. In assessing
goodwill for impairment, Edison International may perform a qualitative assessment to determine whether a quantitative
assessment is necessary. In performing a qualitative assessment, Edison International assesses, among other things,
macroeconomic conditions, industry and market considerations, overall financial performance, cost factors and entity-specific
events. If, after assessing these qualitative factors, Edison International determines that it is more likely than not that the fair
value of a reporting unit is less than its carrying amount, then Edison International performs the two-step goodwill
impairment test ("quantitative assessment").
In October 2019 and 2018, Edison International qualitatively determined that it was more likely than not that the carrying
value of the Edison Energy reporting unit exceeded the fair value, therefore, Edison International performed quantitative
assessments. The fair value of the Edison Energy reporting unit was estimated using the income approach, which utilizes a
discounted cash flow analysis based on the earnings expected to be generated in the future. This determination requires
significant assumptions and estimates in forecasting future cash flows and establishing a market discount rate and a terminal
value. The most critical assumption affecting the estimate of the Edison Energy reporting unit's fair value was a reduction in
forecasted growth. During the fourth quarter of 2019 and 2018, Edison International recorded an impairment of its Edison
Energy reporting unit goodwill totaling $25 million ($18 million after-tax) and $19 million ($13 million after-tax),
respectively. At December 31, 2019 and 2018, Edison International has $34 million and $59 million of goodwill, all of which
is related to its Edison Energy reporting unit. Goodwill constitutes the majority of Edison International's $57 million
investment in Edison Energy. During the second quarter of 2017, Edison International recorded an impairment of SoCore
Energy's goodwill totaling $17 million ($10 million after-tax). SoCore Energy was sold in April 2018, as discussed above.
65
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.
SCE has not recorded an ARO 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:
(in millions)
Beginning balance
Accretion1
Revisions
Liabilities settled
Ending balance
December 31,
2019
2018
$
$
3,031
166
4
(172)
3,029
$
$
2,892
169
110
(140)
3,031
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.
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.
The ARO for decommissioning SCE's San Onofre Nuclear Generating Station ("San Onofre") and Palo Verde nuclear power
facilities is $2.8 billion as of December 31, 2019. The liability to decommission SCE's nuclear power facilities is based on a
2017 decommissioning study that was filed as part of the 2018 NDCTP for San Onofre Units 1, 2, and 3, with revisions to the
cost estimate in 2018 for San Onofre Units 2 and 3 and a 2016 decommissioning study for Palo Verde, with revisions to the
cost estimate in 2017. SCE revised the ARO for San Onofre Units 2 and 3 due to increases in decommissioning cost estimates
in 2018, related to the impact of operational uncertainties, and in 2017, related to changes to onboarding the general
contractor at San Onofre.
SCE 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 information, see Note 11.
Decommissioning of San Onofre Unit 1 began in 1999 and the transfer of spent nuclear fuel from Unit 1 to dry cask storage
in the Independent Spent Fuel Storage Installation ("ISFSI") was completed in 2005. Major decommissioning work for Unit 1
has been completed except for reactor vessel disposal and certain underground work. Some spent nuclear fuel from Units 2
and 3 also was transferred to the ISFSI between 2007 and 2012. Radiological decommissioning of San Onofre Units 2 and 3
began in June 2013 with SCE filing a certification of permanent cessation of power operations at San Onofre with the
Nuclear Regulatory Commission. The transfer of the remaining spent nuclear fuel from Units 2 and 3 to the ISFSI began in
2018. However, the spent fuel transfer operations were suspended on August 3, 2018 due to an incident that occurred when
an SCE contractor was loading a spent fuel canister into the ISFSI. The incident did not result in any harm to the public or
workers and the canister was subsequently safely loaded into the ISFSI. In May 2019, after an extensive review, the NRC
determined that fuel loading can be safely resumed at San Onofre. SCE commenced fuel transfer operations at San Onofre in
July 2019. In October 2019, the California Coastal Commission approved SCE's application for the Coastal Development
Permit, the principle discretionary permit required to start major decommissioning activities at San Onofre. SCE plans on
commencing major decommissioning activities in 2020 in accordance with the terms of the permit, subject to any court
rulings in a proceeding brought in December 2019 to challenge the California Coastal Commission's issuance of the permit.
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.
Due to regulatory recovery of SCE's nuclear decommissioning expense, prudently incurred costs for nuclear
decommissioning activities do not affect SCE's earnings. Amortization of the ARO asset (included within the unamortized
66
nuclear investment) and accretion of the ARO liability are deferred as decreases to the ARO regulatory liability account,
resulting in no impact on earnings.
SCE has collected in rates amounts for the future decommissioning of its nuclear assets and has placed those amounts in
independent trusts. Amounts collected in rates in excess of the ARO liability 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
$7.1 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 2.2% 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 3.8% dependent on asset class. 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, subject to a reasonableness review. See Note 10 for further information.
SCE's nuclear decommissioning trust investments primarily consist of fixed income investments that are classified as
available-for-sale and equity investments. Due to regulatory mechanisms, investment earnings and realized gains and losses
have no impact on earnings. Unrealized gains and losses on decommissioning trust funds, including other-than-temporary
impairment, 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 fixed income 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 carrying value 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 $142 million and $153 million at December 31, 2019 and 2018, respectively, reflected as long-term "Regulatory
assets" in the consolidated balance sheets. In addition, Edison International and SCE had debt issuance costs related to
issuances of long-term debt of $121 million and $106 million at December 31, 2019, respectively, and $102 million and
$93 million at December 31, 2018, 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)
2019
2018
2017
2019
Edison International
Years ended December 31,
SCE
2018
2017
Amortization of deferred financing
costs charged to interest expense
Revenue Recognition
$
30
$
30
$
30
$
26
$
26
$
27
Revenue is recognized by Edison International and SCE when a performance obligation to transfer control of the promised
goods is satisfied or when services are rendered to customers. This typically occurs when electricity is delivered to
customers, which includes amounts for services rendered but unbilled at the end of a reporting period.
SCE's Revenue from Contracts with Customers
Provision of Electricity
SCE principally generates revenue through supplying and delivering electricity to its customers. Rates charged to customers
are based on tariff rates, approved by the CPUC and FERC. Starting with SCE's 2021 GRC, revenue will be authorized
through quadrennial GRC proceedings, which are intended to provide SCE a reasonable opportunity to recover its costs and
earn a return on its CPUC-jurisdictional rate base. The CPUC sets an annual revenue requirement for the base year and the
remaining three years are set by a methodology established in the GRC proceeding. Revenue was previously authorized by
the CPUC in triennial GRC proceedings. As described above, SCE also earns revenue, with no return, to recover costs for
power procurement and other activities.
67
Revenue is authorized by the FERC through a formula rate which is intended to provide SCE a reasonable opportunity to
recover transmission capital and operating costs that are prudently incurred, including a return on its FERC-jurisdictional rate
base. Under the operation of the formula rate, transmission revenue is updated to actual cost of service annually.
For SCE's electricity sales for both residential and non-residential customers, SCE satisfies the performance obligation of
delivering electricity over time as the customers simultaneously receive and consume the delivered electricity.
Energy sales are typically on a month-to-month implied contract for transmission, distribution and generation services.
Revenue is recognized over time as the energy is supplied and delivered to customers and the respective revenue is billed and
paid on a monthly basis.
CPUC and FERC 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 by the relevant regulatory agencies. As a result, the volume of
electricity sold to customers and specific customer classes does not have a direct impact on SCE's financial results. See
Note 7 for further information on SCE's revenue.
Sales and Use Taxes
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. SCE's franchise fees billed to customers were $122 million, $133 million and $133 million for the years
ended December 31, 2019, 2018 and 2017, respectively. When SCE acts as an agent for sales and use tax, 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.
SCE's Alternative Revenue Programs
The CPUC and FERC have authorized additional, alternative revenue programs which adjust billings for the effects of broad
external factors or compensate SCE for demand-side management initiatives and provide for incentive awards if SCE
achieves certain objectives. These alternative revenue programs allow SCE to recover costs that SCE has been authorized to
pass on to customers, including costs to purchase electricity and natural gas, and to fund public purpose, demand response,
and customer energy efficiency programs. In general, revenue is recognized for these alternative revenue programs at the
time the costs are incurred and, for incentive-based programs, at the time the awards are approved by the CPUC. SCE begins
recognizing revenues for these programs when a program has been established by an order from either the CPUC or FERC
that allows for automatic adjustment of future rates, the amount of revenue for the period is objectively determinable and
probable of recovery and the revenue will be collected within 24 months following the end of the annual period.
Regulatory Proceedings
2018 General Rate Case
In the absence of a 2018 GRC final decision, SCE recognized revenue in 2018 and the first quarter of 2019 based on the 2017
authorized revenue requirement, adjusted for items SCE determined to be probable of occurring, primarily the July 2017 cost
of capital decision and the Tax Cuts and Jobs Act ("Tax Reform"). Adjustments were also made to 2017 authorized revenue to
reflect changes in authorized tax benefits for certain balancing accounts. See Note 11 for further information.
In May 2019, the CPUC approved a final decision in SCE's 2018 GRC. The final decision authorized a revenue requirement
of $5.1 billion for 2018 and identified changes to certain balancing accounts, including the expansion of the TAMA to include
the impacts of all differences between forecast and recorded tax expense. The final decision also disallowed certain historical
spending, largely related to specific pole replacements the CPUC determined were performed prematurely.
The final decision allows a post-test year rate making mechanism that escalates capital additions by 2.49% for both 2019 and
2020. It also allows operation and maintenance expenses to be escalated for 2019 and 2020 through the use of various
escalation factors for labor, non-labor and medical expenses. The methodology set forth in the final decision results in a
revenue requirement of $5.5 billion in 2019 and $5.9 billion in 2020.
68
The revenue requirements in the 2018 GRC final decision are retroactive to January 1, 2018. SCE recorded the prior period
impact of the 2018 GRC final decision in 2019 including:
• An increase to earnings of $131 million from the application of the decision to revenue, depreciation expense and
income tax expense. Depreciation expense decreased as a result of lower authorized depreciation rates. An increase in the
authorized revenue requirement for income tax expense offsets income tax expense recognized during 2018 and the first
quarter of 2019. The reduction of revenue of $265 million reflected $289 million of lower authorized revenue related to
2018 and $24 million of higher authorized revenue in 2019. The reduction in revenue contributed to a refund to
customers of $554 million, which SCE recorded as a regulatory liability. SCE expects to refund these amounts to
customers through December 2020.
• An impairment of utility property, plant and equipment of $170 million ($123 million after-tax) related to disallowed
historical capital expenditures, primarily the write-off of specific pole replacements the CPUC determined were
performed prematurely.
2018 and 2019 FERC Formula Rate
In December 2019, the FERC approved a settlement on SCE's formula rates for the 2018 Formula Rate case that established
SCE's FERC transmission revenue requirement for January 1, 2018 through November 11, 2019 (the "FERC 2018 Settlement
Period"). Prior to the settlement, SCE had been recognizing revenue during the FERC 2018 Settlement Period based on its
expectations of the probable outcome of the 2018 Formula Rate case. Regulatory assets and liabilities were adjusted based on
the settlement of the 2018 Formula Rate case, which resulted in an increase in net income of $29 million related to 2018,
being recorded in 2019. The 2019 Formula Rate remains subject to hearing and settlement procedures and amounts billed to
customers under the 2019 Formula Rate will be subject to refund until the 2019 Formula Rate proceeding is ultimately
resolved. Pending resolution of the 2019 Formula Rate case, SCE is recognizing revenue based on the return on equity
established in the 2020 Cost of Capital decision of the CPUC.
Power Purchase Agreements
SCE enters into power purchase agreements ("PPAs") in the normal course of business. A power purchase agreement may be
considered a variable interest in a variable interest entity ("VIE"). If SCE is the primary beneficiary in the VIE, SCE should
consolidate the VIE. None of SCE's PPAs resulted in consolidation of a VIE at December 31, 2019 and 2018. See Note 3 for
further discussion of PPAs that are considered variable interests.
A PPA may also contain a lease for accounting purposes. See "Leases" below and Note 12 and Note 13 for further discussion
of SCE's PPAs, including agreements that are classified as operating and finance leases for accounting purposes.
A PPA that does not contain a lease may be classified as a derivative which is recorded at fair value on the consolidated
balance sheets. These PPAs may be eligible for an election to designate as a normal purchase and sale, which is accounted for
on an accrual basis as an executory contract. See Note 6 for further information on derivative instruments.
PPAs 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.
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.
69
Leases
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. An entity controls the use when it has a right to obtain substantially all of the benefits
from the use of the identified asset and has the right to direct the use of the asset. SCE determines if an arrangement is a lease
at contract inception. For all classes of underlying assets, SCE includes both the lease and non-lease components as a single
component and accounts for it as a lease. Lease liabilities are recognized based on the present value of the lease payments
over the lease term at the commencement date. SCE calculates and uses the rate implicit in the lease if the information is
readily available or if not available, SCE uses its incremental borrowing rate in determining the present value of lease
payments. Incremental borrowing rates are comprised of underlying risk-free rates and secured credit spreads relative to first
mortgage bonds with like tenors of lease term durations. Lease right-of-use ("ROU") assets are based on the liability, subject
to adjustments, such as lease incentives. The ROU assets also include any lease payments made at or before the
commencement date. SCE excludes variable lease payments in measuring lease assets and lease liabilities, other than those
that depend on an index or a rate or are in substance fixed payments. SCE's lease terms include options to extend or terminate
the lease when it is reasonably certain that such options will be exercised. Operating leases are included in "Operating lease
right-of-use assets," "Current portion of operating lease liabilities" and "Operating lease liabilities" on the consolidated
balance sheets. Finance leases are included in "Utility property, plant and equipment," "Other current liabilities" and "Other
deferred credits and other long-term liabilities" on the consolidated balance sheets.
SCE enters into power purchase agreements that may contain leases. This occurs when a power purchase agreement
designates a specific power plant, SCE obtains substantially all of the economic benefits from the use of the plant and has the
right to direct the use of the plant. Leases that commenced before January 1, 2019 were not reassessed as SCE elected the
package of practical expedients (see "Accounting Guidance Adopted" below for more information). Prior to January 1, 2019,
a power purchase agreement contained a lease when SCE purchased substantially all of the output from a specific plant and
did not otherwise meet a fixed price per unit of output exception. SCE also enters into a number of agreements to lease
property and equipment in the normal course of business, primarily related to vehicles, office space and other equipment. See
Note 13 for further discussion of SCE's contracts that are classified as operating and finance leases.
Edison International Parent and Other's leases primarily relate to Edison Energy Group. The leases for Edison International
Parent and Other are immaterial to Edison International.
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. For equity awards that are settled in common stock, Edison
International either issues new common stock, or uses a third party to purchase shares from the market and deliver such
shares for the settlement of the awards. The performance shares granted during 2017 to 2018 that are earned, have been or
will be settled solely in cash. The performance shares granted in 2019 that are earned, will be settled in common stock. Stock
options, deferred stock units and restricted stock units are settled in common stock. However, for awards that are otherwise
settled entirely in common stock, Edison International substitutes cash awards to the extent necessary to satisfy applicable tax
withholding obligations or government levies.
Stock-based compensation expense is recognized, net of estimated forfeitures, on a straight-line basis over the requisite
service period based on estimated fair values. For equity awards paid in common stock, fair value is determined at the grant
date. However, with respect to the portion of the performance shares payable in common stock that are subject to market and
financial performance conditions 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. Awards paid in cash are
classified as share-based liability awards and fair value is remeasured at each reporting date with the related compensation
cost adjusted. For awards granted to retirement-eligible participants, stock compensation expense is recognized on a prorated
basis over the initial year. For awards granted to participants who become eligible for retirement during the requisite service
period, stock compensation expense is recognized over the period between the date of grant and the date the participant first
becomes eligible for retirement. Edison International and SCE estimate the number of awards that are expected to vest rather
than account for forfeitures when they occur. 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. See Note 9 for further information.
70
SCE Dividends
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. In addition, the CPUC regulates SCE's capital structure which limits the dividends it may pay to its
shareholders.
Prior to January 1, 2020, under SCE's interpretation of CPUC regulations and capital structure decisions, the common equity
component of SCE's capital structure was required to remain at or above 48% on a weighted average basis over the 37-month
period that SCE's capital structure was in effect for ratemaking purposes and SCE was required to file an application for a
waiver of the 48% equity ratio condition discussed above if an adverse financial event reduces its spot equity ratio below
47%. Effective January 1, 2020, the common equity component of SCE's authorized capital structure was increased from
48% to 52%. Under AB 1054, the impact of SCE's contributions to the Wildfire Insurance Fund are excluded from the
measurement of SCE's CPUC-jurisdictional authorized capital structure. For further information, see Note 12.
On February 28, 2019, SCE submitted an application to the CPUC for waiver of compliance with this equity ratio
requirement, describing that while the charge accrued in connection with the 2017/2018 Wildfire/Mudslide Events caused its
equity ratio to fall below 47% on a spot basis as of December 31, 2018, SCE remains in compliance with the 48% equity
ratio over the applicable 37-month average basis. In its application, SCE requested a limited waiver to exclude wildfire-
related charges and wildfire-related debt issuances from its equity ratio calculations until a determination regarding cost
recovery is made. The CPUC has ruled that while the application is pending resolution, SCE must notify the CPUC if an
adverse financial event reduces SCE's spot equity ratio by more than one percent from the level most recently filed with the
CPUC in the proceeding. The last spot equity ratio SCE filed with the CPUC in the proceeding was 45.2% as of
December 31, 2018. Under the CPUC's rules, SCE will not be deemed to be in violation of the equity ratio requirement, and
therefore may continue to issue debt and dividends, while the waiver application is pending resolution. For further
information, see Note 12. At December 31, 2019, without excluding the $2.0 billion after-tax wildfire-related charges
incurred in 2018 and 2019, SCE's 37-month average common equity component of total capitalization was 48.5% and the
maximum additional dividend that SCE could pay to Edison International under this limitation was $179 million, resulting in
a restriction on net assets of approximately $17.6 billion. If the wildfire-related charges were excluded at December 31, 2019,
SCE's 37-month average common equity component of total capitalization would have been 49.6%.
As a California corporation, SCE's ability to pay dividends is also governed by the California General Corporation Law.
California law requires that for a dividend to be declared: (a) retained earnings must equal or exceed the proposed dividend,
or (b) immediately after the dividend is made, the value of the corporation's assets must exceed the value of its liabilities plus
amounts required to be paid, if any, in order to liquidate stock senior to the shares receiving the dividend. Additionally, a
California corporation may not declare a dividend if it is, or as a result of the dividend would be, likely to be unable to meet
its liabilities as they mature. Prior to declaring dividends, SCE's Board of Directors evaluates available information, including
when applicable, information pertaining to the 2017/2018 Wildfire/Mudslide Events, to ensure that the California law
requirements for the declarations are met. On February 27, 2020, SCE declared a dividend to Edison International of
$269 million.
The timing and amount of future dividends are also dependent on a number of other factors including SCE's requirements to
fund other obligations and capital expenditures, its ability to access the capital markets, and generate operating cash flows
and earnings. If SCE incurs significant costs related to catastrophic wildfires, including the 2017/2018 Wildfire/Mudslide
Events, and is unable to recover such costs through insurance, the Wildfire Insurance Fund (for fires after July 12, 2019), or
from customers or access capital markets on reasonable terms, SCE may be limited in its ability to pay future dividends to
Edison International and its preferred and preference shareholders.
71
Earnings Per Share
Edison International computes earnings per common share ("EPS") using the two-class method, which is an earnings
allocation formula that determines EPS for each class of common stock and participating security. Edison International's
participating securities are stock-based compensation awards, payable in common shares, which earn dividend equivalents on
an equal basis with common shares once the awards are vested. See Note 9 and Note 14 for further information.
EPS attributable to Edison International common shareholders was computed as follows:
(in millions, except per share amounts)
Basic earnings (loss) per share – continuing operations:
Income (loss) from continuing operations attributable to common
shareholders
Participating securities dividends
Income (loss) from continuing operations available to common
shareholders
Weighted average common shares outstanding
Basic earnings (loss) per share – continuing operations
Diluted earnings (loss) per share – continuing operations:
Income (loss) from continuing operations attributable to common
shareholders
Participating securities dividends
Income (loss) from continuing operations available to common
shareholders
Income impact of assumed conversions
Income (loss) from continuing operations available to common
shareholders and assumed conversions
Weighted average common shares outstanding
Incremental shares from assumed conversions1
Adjusted weighted average shares – diluted
Years ended December 31,
2019
2018
2017
$
1,284
$
—
1,284
340
3.78
1,284
—
1,284
—
1,284
340
1
341
3.77
$
$
(457)
—
(457)
326
(1.40)
(457)
—
(457)
—
(457)
326
—
326
(1.40)
$
565
—
565
326
1.73
565
—
565
—
565
326
2
328
1.72
Diluted earnings (loss) per share – continuing operations
$
1 Due to the loss reported for the year ended December 31, 2018, incremental shares were not included as the effect would be
antidilutive.
In addition to the participating securities discussed above, Edison International also may award stock options, which are
payable in common shares and are included in the diluted earnings per share calculation. Stock option awards to purchase
4,511,802, 8,852,706 and 1,334,451 shares of common stock for the years ended December 31, 2019, 2018 and 2017,
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. In December 2017, Tax Reform was signed into law. This comprehensive
reform of tax law reduces the federal corporate income tax rate from 35% to 21% which resulted in the re-measurement of
deferred taxes using the new tax rate. See Note 8 for further information.
Income tax expense includes the current tax liability from operations and the change in deferred income taxes during the year.
Interest income, interest expense and penalties associated with income taxes are reflected in "Income tax expense" on the
consolidated statements of income.
72
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.
New Accounting Guidance
Accounting Guidance Adopted
On January 1, 2019, Edison International and SCE adopted accounting standards updates that require lessees to recognize a
lease on the balance sheet as a ROU asset and related lease liability and classify the lease as either operating or finance.
Edison International and SCE adopted this guidance using the modified retrospective approach for leases that existed as of
the adoption date and elected the optional transition method not to restate periods prior to the adoption date. Edison
International and SCE also elected the package of practical expedients not to reassess prior conclusions related to contracts
containing leases, lease classification and initial direct costs, and the practical expedient not to reassess existing land
easements. Adoption of this standard increased ROU assets and lease liabilities on the consolidated balance sheets by
$956 million and $951 million as of January 1, 2019 for Edison International and SCE, respectively. The standard did not
materially impact the consolidated statements of income for Edison International or SCE. See "Leases" above and Note 13
for further information.
In February 2018, the Financial Accounting Standards Board ("FASB") issued an accounting standards update to provide
entities an election to reclassify stranded tax effects resulting from Tax Reform from accumulated other comprehensive
income to retained earnings. Stranded tax effects originated in December 2017 when deferred taxes were re-measured at the
lower federal corporate tax rate with the impact included in operating income, while the tax effects of items within
accumulated other comprehensive income were not similarly adjusted. Edison International and SCE adopted this guidance
on January 1, 2019 and reclassified stranded tax effects of $10 million and $5 million, respectively, from accumulated other
comprehensive loss to retained earnings. See Note 15 for further information.
In August 2018, the FASB issued an accounting standards update to remove, modify, and add certain disclosure requirements
related to fair value measurement. Edison International and SCE adopted this guidance effective January 1, 2019. The
adoption of this guidance did not have a material impact on Edison International's and SCE's disclosures. See Note 4 for
further information.
Accounting Guidance Not Yet Adopted
In June 2016, the FASB issued an accounting standards update to require the use of the current expected credit loss model to
measure impairment of financial instruments and the use of an allowance to record estimated credit losses on available-for-
sale debt securities. The guidance, as later amended, allows entities to irrevocably elect the fair value option for any financial
instrument previously measured on an amortized costs basis. Edison International and SCE do not believe the adoption of the
standard will have a material impact on financial position or results of operations. Edison International and SCE will apply a
prospective adoption approach to available-for-sale debt securities and a modified retrospective approach to all other
financial assets. Edison International and SCE will not elect the fair value option. Edison International and SCE will adopt
this guidance effective January 1, 2020.
In January 2017, the FASB issued an accounting standards update to simplify the accounting for goodwill impairment by
changing the procedural steps to apply the goodwill impairment test. After the adoption of this accounting standards update,
goodwill impairment will be measured as 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 goodwill impairment tests
beginning in 2020.
In August 2018, the FASB issued an accounting standards update which aligns the requirement for capitalizing
implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing costs
incurred to develop or obtain internal use software. The guidance also clarified presentation requirements for reporting
implementation costs in the financial statements. Edison International and SCE do not believe the adoption of the standard
will have a material impact on financial position or results of operations and will apply this guidance prospectively, effective
January 1, 2020.
In August 2018, the FASB issued an accounting standards update to remove, modify, and add certain disclosure requirements
related to employer-sponsored defined benefit pension or other postretirement plans. The guidance is effective January 1,
2021 with early adoption permitted. Edison International and SCE are currently evaluating the impact of the guidance and do
not expect the adoption of this standard will materially affect disclosures.
73
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,
2019
2018
$
26,929
14,720
3,664
4,583
(9,958)
39,938
4,131
129
25,026
13,800
3,598
4,398
(9,566)
37,256
3,883
130
Total utility property, plant and equipment
$
44,198
$
41,269
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, primarily ranging
from 5 to 7 years and commencing upon operational use. Capitalized software costs, included in general plant and other
above, were $1.0 billion and $1.0 billion at December 31, 2019 and 2018, respectively, and accumulated amortization was
$0.4 billion and $0.5 billion, at December 31, 2019 and 2018, respectively. Amortization expense for capitalized software
was $190 million, $198 million and $233 million in 2019, 2018 and 2017, respectively. At December 31, 2019, amortization
expense is estimated to be $191 million, $163 million, $116 million, $76 million and $27 million for 2020 through 2024,
respectively.
Jointly Owned Utility Projects
SCE owns undivided interests in transmission and 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.
The following is SCE's investment in each asset as of December 31, 2019:
(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
$
$
257 $
248
94 $
80
35 $
72
— $
—
316
256
2,065
2,570 $
61
235 $
1,586
1,693 $
129
129 $
669
1,241
80%
50%
16%
In addition, SCE has ownership interests in jointly owned power poles with other companies.
74
Note 3. Variable Interest Entities
A VIE is defined as a legal entity that meets one of two conditions: (1) the equity owners do not have sufficient equity at risk,
or (2) the holders of the equity investment at risk, as a group, lack any of the following three characteristics: decision-making
rights, the obligation to absorb losses, or the right to receive the expected residual returns of the entity. The primary
beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most
significantly impact the entity's economic performance and the obligation to absorb losses or the right to receive benefits
from the entity that could potentially be significant to the VIE. The primary beneficiary is required to consolidate the VIE.
Commercial and operating activities are generally the factors that most significantly impact the economic performance of
such VIEs. Commercial and operating activities include construction, operation and maintenance, fuel procurement, dispatch
and compliance with regulatory and contractual requirements.
Variable Interest in VIEs that are not Consolidated
Power Purchase Agreements
SCE has 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 qualifying facilities ("QF") 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
involvement with VIEs result from amounts due under the PPAs. Under these contracts, SCE recovers the costs incurred
through demonstration of compliance with its CPUC-approved long-term power procurement plans. SCE has no residual
interest in the entities and has not provided or guaranteed any debt or equity support, liquidity arrangements, performance
guarantees or other commitments associated with these contracts other than the purchase commitments described in Note 12.
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 4,497 megawatts ("MW") and 3,602 MW at December 31,
2019 and 2018, respectively, and the amounts that SCE paid to these projects were $833 million and $762 million for the
years ended December 31, 2019 and 2018, respectively. These amounts are recoverable in customer rates, subject to
reasonableness review.
Unconsolidated Trusts of SCE
SCE Trust II, Trust III, Trust IV, Trust V and Trust VI were formed in 2013, 2014, 2015, 2016 and 2017, respectively, for the
exclusive purpose of issuing the 5.10%, 5.75%, 5.375%, 5.45% and 5.00% trust preference securities, respectively ("trust
securities"). The trusts are VIEs. SCE has concluded that it is not the primary beneficiary of these VIEs as it does not have
the obligation to absorb the expected losses or the right to receive the expected residual returns of the trusts. SCE Trust II,
Trust III, Trust IV, Trust V and Trust VI issued to the public trust securities in the face amounts of $400 million, $275 million,
$325 million, $300 million and $475 million (cumulative, liquidation amounts of $25 per share), respectively, and $10,000 of
common stock each to SCE. The trusts invested the proceeds of these trust securities in Series G, Series H, Series J, Series K
and Series L Preference Stock issued by SCE in the principal amounts of $400 million, $275 million, $325 million,
$300 million and $475 million (cumulative, $2,500 per share liquidation values), respectively, which have substantially the
same payment terms as the respective trust securities.
The Series G, Series H, Series J, Series K and Series L Preference Stock and the corresponding trust securities do not have a
maturity date. Upon any redemption of any shares of the Series G, Series H, Series J, Series K or Series L Preference Stock, a
corresponding dollar amount of trust securities will be redeemed by the applicable trust (see Note 14 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.
SCE formed Trust I, a VIE, in 2012 for the exclusive purpose of issuing 5.625% trust preference securities. SCE Trust I
issued trust securities in the face amounts of $475 million to the public and $10,000 of common stock to SCE. SCE Trust I
invested the proceeds of these trust securities in Series F Preference Stock issued by SCE in the principal amount of
$475 million. In July 2017, all of the outstanding Series F Preference Stock was redeemed, and accordingly, SCE Trust I
75
redeemed $475 million of trust securities from the public and $10,000 of common stock from SCE. As a result in September
2017, SCE Trust I was terminated.
The Trust II, Trust III, Trust IV, Trust V and Trust VI balance sheets as of December 31, 2019 and 2018, consisted of
investments of $400 million, $275 million, $325 million, $300 million and $475 million in the Series G, Series H, Series J,
Series K and Series L Preference Stock, respectively, $400 million, $275 million, $325 million, $300 million and
$475 million of trust securities, respectively, and $10,000 each of common stock.
The following table provides a summary of the trusts' income statements:
Trust I
Trust II
Trust III
Trust IV
Trust V
Trust VI
Years ended December 31,
$
$
$
*
*
*
*
14
14
$
$
$
20
20
20
20
20
20
$
$
$
16
16
16
16
16
16
$
$
$
17
17
17
17
17
17
$
$
$
16
16
16
16
16
16
24
24
24
24
12
12
$
(in millions)
2019
Dividend income
Dividend distributions
2018
Dividend income
Dividend distributions
2017
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, 2019 and 2018, nonperformance risk was not material for Edison International and
SCE.
Assets and liabilities are categorized into a three-level fair value hierarchy based on valuation inputs used to determine fair
value.
Level 1 – The fair value of Edison International's and SCE's Level 1 assets and liabilities is determined using unadjusted
quoted prices in active markets that are available at the measurement date for identical assets and liabilities. This level
includes exchange-traded equity securities, U.S. treasury securities, mutual funds and money market funds.
Level 2 – Edison International's and SCE's Level 2 assets and liabilities include fixed income securities, primarily consisting
of U.S. government and agency bonds, municipal bonds and corporate bonds, and over-the-counter derivatives. The fair value
of fixed income securities is determined using a market approach by obtaining quoted prices for similar assets and liabilities
in active markets and inputs that are observable, either directly or indirectly, for substantially the full term of the instrument.
The fair value of SCE's over-the-counter derivative contracts is determined using an income approach. SCE uses standard
pricing models to determine the net present value of estimated future cash flows. Inputs to the pricing models include forward
published or posted clearing prices from an exchange (Intercontinental Exchange) for similar instruments and discount rates.
A primary price source that best represents trade activity for each market is used to develop observable forward market prices
in determining the fair value of these positions. Broker quotes, prices from exchanges or comparison to executed trades are
used to validate and corroborate the primary price source. These price quotations reflect mid-market prices (average of bid
and ask) and are obtained from sources believed to provide the most liquid market for the commodity.
76
Level 3 – The fair value of SCE's Level 3 assets and liabilities is determined using the income approach through various
models and techniques that require significant unobservable inputs. This level includes derivative contracts that trade
infrequently such as congestion revenue rights ("CRRs"). Edison International Parent and Other does not have any Level 3
assets and liabilities.
Assumptions are made in order to value derivative contracts in which observable inputs are not available. In circumstances
where fair value cannot be verified with observable market transactions, it is possible that a different valuation model could
produce a materially different estimate of fair value. Modeling methodologies, inputs, and techniques are reviewed and
assessed as markets continue to develop and more pricing information becomes available and the fair value is adjusted when
it is concluded that a change in inputs or techniques would result in a new valuation that better reflects the fair value of those
derivative contracts. See Note 6 for a discussion of derivative instruments.
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
December 31, 2019
Level 1
Level 2
Level 3
Netting
and
Collateral1
Total
$
$
(15)
—
87
18
1,765
2,762
146
4,673
4,778
1
1
4,777
—
—
—
—
(15)
(15)
(15)
— $
$
— $
4
1,765
738
98
2,601
2,605
—
—
$
19
14
—
2,024
48
2,072
2,105
11
11
83
—
—
—
—
—
83
5
5
$
2,605
$
2,094
$
78
$
77
December 31, 2018
Level 1
Level 2
Level 3
Netting
and
Collateral1
Total
$
— $
(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
$
— $
9
1,382
1,001
120
2,503
2,512
—
—
$
32
21
—
1,665
95
1,760
1,813
13
13
141
—
—
—
—
—
141
—
—
173
30
1,382
2,666
215
4,263
4,466
6
6
—
—
—
—
—
—
(7)
(7)
7
$
2,512
$
1,800
$
141
$
$
4,460
1 Represents the netting of assets and liabilities under master netting agreements and cash collateral.
2 Approximately 72% and 71% of SCE's equity investments were located in the United States at December 31, 2019 and 2018,
respectively.
3
Includes corporate bonds, which were diversified and included collateralized mortgage obligations and other asset backed securities of
$46 million and $67 million at December 31, 2019 and 2018, respectively.
4 Excludes net payables of $111 million and $143 million at December 31, 2019 and 2018, respectively, 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 $31 million and
$115 million at December 31, 2019 and 2018, 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 assets at beginning of period
Total realized/unrealized (losses) gains:
Included in regulatory assets and liabilities1
Fair value of net assets at end of period2
Change during the period in unrealized gains and losses related to assets and liabilities
held at the end of the period
December 31,
2019
2018
141
$
(63)
78
62
$
101
40
141
138
$
$
1 Due to regulatory mechanisms, SCE's realized and unrealized gains and losses are recorded as regulatory assets and liabilities.
2 There were no material transfers into or out of Level 3 during 2019 and 2018.
78
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
Assets
Liabilities
Valuation Technique
Unobservable Input
Range
Weighted
Average
Congestion revenue rights
December 31, 2019
$
83
$
December 31, 2018
141
Level 3 Fair Value Uncertainty
5
—
Auction prices
Auction prices
CAISO CRR auction
clearing prices
CAISO CRR auction
clearing prices
$(3.59) - $25.32
$1.97
$(7.41) - $41.52
$1.62
For CRRs, increases or decreases in CAISO auction price would result in higher or lower fair value, respectively.
Nuclear Decommissioning Trusts
SCE's nuclear decommissioning trust investments include equity securities, U.S. treasury securities and other fixed income
securities. Equity and treasury securities are classified as Level 1 as fair value is determined by observable market prices in
active or highly liquid and transparent markets. The remaining fixed income securities are classified as Level 2. 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. There are no securities classified as Level 3 in the nuclear decommissioning trusts.
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
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.
Nonrecurring Fair Value Measurements
Edison International assesses goodwill at the reporting unit level. The fair value of the Edison Energy reporting unit is
classified as Level 3 and is estimated using the income approach. During the fourth quarter of 2019 and 2018, Edison
International evaluated the recoverability of goodwill and recorded impairment charges of Edison Energy's goodwill totaling
$25 million ($18 million after-tax) and $19 million ($13 million after-tax), respectively. See Note 1 for further details.
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
December 31, 2019
December 31, 2018
Carrying
Value1
Fair
Value2
Carrying
Value1
Fair
Value2
$
$
18,343
15,211
$
20,137
16,892
$
14,711
12,971
14,844
13,180
1 Carrying value is net of debt issuance costs.
2 The fair value of Edison International's and SCE's long-term debt is classified as Level 2.
79
Note 5. Debt and Credit Agreements
Long-Term Debt
The following table summarizes long-term debt (rates and terms are as of December 31, 2019) of Edison International and
SCE:
(in millions)
Edison International Parent and Other:
Debentures and notes:
2020 – 2028 (2.125% to 5.750%)
Current portion of long-term debt
Unamortized debt discount/premium and issuance costs, net
Total Edison International Parent and Other
SCE:
First and refunding mortgage bonds:
2021 – 2049 (1.845% to 6.05%)
Pollution-control bonds:
2028 – 2035 (1.875% to 5.00%)
Debentures and notes:
2029 – 2053 (5.06% to 6.65%)
Current portion of long-term debt
Unamortized debt discount/premium and issuance costs, net
Total SCE
Total Edison International
December 31,
2019
2018
$
$
$
3,150
(400)
(18)
2,732
1,750
—
(10)
1,740
14,272
12,050
752
752
306
(79)
(119)
15,132
17,864
$
306
(79)
(137)
12,892
14,632
Edison International and SCE long-term debt maturities over the next five years are as follows:
(in millions)
2020
2021
2022
2023
2024
Liens and Security Interests
Edison
International
SCE
$
479
$
1,029
1,064
1,300
500
79
1,029
364
900
—
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 to be less than or equal to 0.65 to 1. At December 31, 2019, SCE was
in compliance with this debt covenant and all other financial covenants that affect access to capital.
80
Credit Agreements and Short-Term Debt
The following table summarizes the status of the credit facilities at December 31, 2019:
(in millions)
Commitment
Outstanding borrowings (excluding discount)
Outstanding letters of credit
Amount available
Edison
International
Parent
$
$
1,500
$
—
—
1,500
$
SCE
3,000
(550)
(152)
2,298
In February 2019, SCE borrowed $750 million under a Term Loan Agreement due in February 2020 ("February 2019 SCE
Term Loan"), with a variable interest rate based on the London Interbank Offered Rate plus 70 basis points. The proceeds
were used to repay SCE's commercial paper borrowings and for general corporate purposes. As noted below, the February
2019 SCE Term Loan was fully repaid in April 2019.
In April 2019, Edison International Parent borrowed $1.0 billion under a Term Loan Agreement due in April 2020 ("April
2019 Edison International Parent Term Loan"), with a variable interest rate based on the London Interbank Offered Rate plus
90 basis points. Of the proceeds, $750 million was contributed to SCE and SCE used this contribution to repay the February
2019 SCE Term Loan as discussed above. The remainder of the proceeds were used for general corporate and working capital
purposes. The April 2019 Edison International Parent Term Loan was fully repaid in December 2019.
In June 2019, SCE and Edison International Parent amended the maturity date of their multi-year revolving credit facilities of
$3.0 billion and $1.5 billion, respectively. The facilities now mature in May 2024, with an option to extend for an additional
year, which may be exercised upon agreement between SCE or Edison International Parent and their respective lenders.
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, 2019, SCE's commercial paper, net of discount, was $550 million at a weighted average interest rate of
2.24%. At December 31, 2019, letters of credit issued under SCE's credit facility aggregated $152 million and are scheduled
to expire in twelve months or less. At December 31, 2018, the outstanding commercial paper, net of discount, was
$720 million at a weighted average interest rate of 3.23%.
At December 31, 2019 and December 31, 2018, Edison International Parent had no outstanding commercial paper.
Debt Financing Subsequent to December 31, 2019
In January 2020, SCE issued $100 million of 2.85% first and refunding mortgage bonds due in 2029 and $500 million of
3.65% first and refunding mortgage bonds due in 2050. The proceeds were primarily used to repay SCE's commercial
paper borrowings.
Note 6. Derivative Instruments
Derivative financial instruments are used to manage exposure to commodity price risk. These risks are managed in part by
entering into forward commodity transactions, including options, swaps and futures. To mitigate credit risk from
counterparties in the event of nonperformance, master netting agreements are used whenever possible and counterparties may
be required to pledge collateral depending on the creditworthiness of each counterparty and the risk associated with the
transaction.
Commodity Price Risk
Commodity price risk represents the potential impact that can be caused by a change in the market value of a particular
commodity. SCE's electricity price exposure arises from energy purchased from and sold to wholesale markets as a result of
differences between SCE's load requirements and the amount of energy delivered from its generating facilities and PPAs.
SCE's natural gas price exposure arises from natural gas purchased for the Mountainview power plant and peaker plants, QF
contracts where pricing is based on a monthly natural gas index and PPAs in which SCE has agreed to provide the natural gas
needed for generation, referred to as tolling arrangements.
81
Credit and Default Risk
Credit and default risk represent the potential impact that can be caused if a counterparty were to default on its contractual
obligations and SCE would be exposed to spot markets for buying replacement power or selling excess power. In addition,
SCE would be exposed to the risk of non-payment of accounts receivable, primarily related to the sales of excess power and
realized gains on derivative instruments.
Certain power and gas contracts contain master netting agreements or similar agreements, which generally allow
counterparties subject to the agreement to offset amounts when certain criteria are met, such as in the event of default. The
objective of netting is to reduce credit exposure. Additionally, to reduce SCE's risk exposures counterparties may be required
to pledge collateral depending on the creditworthiness of each counterparty and the risk associated with the transaction.
Certain power and gas contracts contain a provision that requires SCE to maintain an investment grade rating from 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
$1 million and $4 million as of December 31, 2019 and 2018, respectively, for which SCE has posted no collateral and
$17 million 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, 2019, SCE would
be required to post $2 million of additional collateral of which $1 million is related to outstanding payables.
Fair Value of Derivative Instruments
SCE presents its derivative assets and liabilities on a net basis on its consolidated balance sheets when subject to master
netting agreements or similar agreements. Derivative positions are also offset against margin and cash collateral deposits. In
addition, SCE has provided collateral in the form of letters of credit. Collateral requirements can vary depending upon the
level of unsecured credit extended by counterparties, changes in market prices relative to contractual commitments and other
factors. See Note 4 for a discussion of fair value of derivative instruments. The following table summarizes the gross and net
fair values of SCE's commodity derivative instruments:
(in millions)
Short-Term Long-Term1
Subtotal
Short-Term Long-Term
Subtotal
Net Asset
December 31, 2019
Derivative Assets
Derivative Liabilities
Commodity derivative contracts
Gross amounts recognized
Gross amounts offset in the
consolidated balance
sheets
Cash collateral posted2
Net amounts presented in the
consolidated balance sheets
$
94
$
8
$
102
$
14
$
2
$
16
$
(13)
—
(2)
—
(15)
—
(13)
—
(2)
—
(15)
—
$
81
$
6
$
87
$
1
$
— $
1
$
86
—
—
86
1
2
Included in "Other long-term assets" in the consolidated balance sheets.
At December 31, 2019, SCE posted $24 million of cash collateral that is not offset against derivative liabilities and is reflected in
"Other current assets" on the consolidated balance sheets.
82
(in millions)
Short-Term Long-Term
Subtotal
Short-Term Long-Term
Subtotal
Net Asset
December 31, 2018
Derivative Assets
Derivative Liabilities
Commodity derivative contracts
Gross amounts recognized
Gross amounts offset in the
consolidated balance
sheets
Cash collateral posted
Net amounts presented in the
consolidated balance sheets
$
171
$
2
$
173
$
13
$
— $
13
$
160
—
—
—
—
—
—
—
(7)
—
—
—
(7)
—
7
$
171
$
2
$
173
$
6
$
— $
6
$
167
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 purchased power costs recovered from customers. As a result, realized gains and losses do not
affect earnings, but may temporarily affect cash flows. Due to expected future recovery from customers, unrealized gains and
losses are recorded as regulatory assets and liabilities and therefore also do not affect earnings. The remaining effects of
derivative activities and related regulatory offsets are reported in cash flows from operating activities in the consolidated
statements of cash flows.
The following table summarizes the components of SCE's economic hedging activity:
(in millions)
Realized (losses) gains
Unrealized (losses) gains
Notional Volumes of Derivative Instruments
Years ended December 31,
2019
2018
2017
$
$
(7)
(74)
$
26
82
(14)
106
The following table summarizes the notional volumes of derivatives used for SCE economic hedging activities:
Commodity
Electricity options, swaps and forwards
Natural gas options, swaps and forwards
Congestion revenue rights
Note 7. Revenue
Unit of
Measure
GWh
Bcf
GWh
Economic Hedges
December 31,
2019
2018
3,155
43
48,170
2,786
20
54,453
• 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.
83
The following table is a summary of SCE's revenue:
Years ended December 31,
2019
Cost-
Recovery
Activities
Earning
Activities
Total
Consolidated
Earning
Activities
2018
Cost-
Recovery
Activities
Total
Consolidated
Earning
Activities
2017
Cost-
Recovery
Activities
Total
Consolidated
$
6,512 $
4,655 $
11,167 $
6,519 $
5,611 $
12,130
166
973
1,139
41
440
481
*
*
*
*
*
*
(in millions)
Revenues from contracts with
customers1,2
Alternative revenue programs
and other operating
revenue
Total operating revenue
$
6,678 $
5,628 $
12,306 $
6,560 $
6,051 $
12,611 $
6,611 $
5,643 $
12,254
* SCE adopted new accounting guidance as of January 1, 2018. Prior period amounts have not been adjusted under the modified
retrospective method.
1
In the absence of a 2018 GRC decision, SCE recorded CPUC revenue in 2018 and the first quarter of 2019 based on the 2017
authorized revenue requirements adjusted for the July 2017 cost of capital decision and Tax Reform. SCE recorded the impact of the
2018 GRC final decision in the second quarter of 2019, including a $265 million reduction in revenue. These revenue adjustments are
included in "Revenues from contracts with customers." For further information, see Note 1.
2 At December 31, 2019 and 2018, SCE's receivables related to contracts from customers were both $1.1 billion, which included accrued
unbilled revenue of $488 million and $482 million, respectively.
Note 8.
Income Taxes
Current and Deferred Taxes
The components of income tax (benefit) expense by location of taxing jurisdiction are:
(in millions)
Current:
Federal
State
Deferred:
Federal
State
Total continuing operations
Discontinued operations1
Total
Edison International
2019
2018
2017
2019
Years ended December 31,
SCE
2018
2017
$
$
— $
6
6
(243)
(41)
(284)
(278)
—
(278)
$
(57)
(155)
(212)
(386)
(141)
(527)
(739)
(34)
(773)
$
$
(221)
4
(217)
570
(72)
498
281
—
281
$
$
— $
14
14
(206)
(37)
(243)
(229)
—
(229)
$
(51)
(93)
(144)
(354)
(198)
(552)
(696)
—
(696)
$
$
(253)
(81)
(334)
265
39
304
(30)
—
(30)
1 In the fourth quarter of 2018, Edison International and SCE recognized tax benefits related to a settlement with the California Franchise
Tax Board for tax years 1994 – 2006. See further discussion in Tax Disputes below.
84
The components of net accumulated deferred income tax liability are:
(in millions)
Deferred tax assets:
Property
Wildfire-related1
Nuclear decommissioning trust assets in excess of
nuclear ARO liability
Loss and credit carryforwards2
Regulatory asset
Pension and postretirement benefits other than
pensions, net
Other
Sub-total
Less: valuation allowance3
Total
Deferred tax liabilities:
Property
Regulatory liability
Nuclear decommissioning trust assets
Other
Total
Accumulated deferred income tax liability, net4
$
Edison International
SCE
December 31,
2019
2018
2019
2018
$
$
478
847
$
399
709
449
1,515
739
170
408
4,606
35
4,571
8,244
570
449
320
9,583
5,012
$
323
1,375
798
171
188
3,963
36
3,927
7,685
367
323
57
8,432
4,505
$
435
847
449
253
739
40
416
3,179
—
3,179
8,234
570
449
310
9,563
6,384
$
$
388
709
323
154
798
46
184
2,602
—
2,602
7,685
367
323
54
8,429
5,827
1 Relates to accrued estimated losses for wildfire-related claims, net of expected recoveries from insurance and FERC customers, and
contributions to the Wildfire Insurance Fund. For further information, see Note 12 and Note 1.
2 As of December 31, 2019, deferred tax assets for net operating loss and tax credit carryforwards are reduced by unrecognized tax
benefits of $212 million and $130 million for Edison International and SCE, respectively.
3 As of December 31, 2019, Edison International has recorded a valuation allowance of $30 million for non-California state net operating
loss carryforwards, and $5 million for California capital losses generated from sale of SoCore Energy in 2018, which are estimated to
expire before being utilized.
4
Included in "Deferred income taxes and credits" on the consolidated balance sheets.
Net Operating Loss and Tax Credit Carryforwards
The amounts of net operating loss and tax credit carryforwards (after-tax) are as follows:
(in millions)
Expire between 2029 to 2037
Expire between 2021 to 2024
No expiration date1
Total
Edison International
SCE
December 31, 2019
Loss
Carryforwards
Credit
Carryforwards
Loss
Carryforwards
Credit
Carryforwards
$
$
1,024
$
29
182
1,235
$
482
—
10
492
$
$
229
24
100
353
$
$
30
—
—
30
1 Under the Tax Reform, net operating losses generated after December 31, 2017 can carryforward indefinitely.
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 $212 million related to Capistrano Wind for both 2019 and 2018. Under a tax allocation
85
agreement, Edison International has recorded a corresponding 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 (loss) from continuing
operations before income taxes
Provision for income tax at federal
statutory rate of 21% for 2019 and
2018, and 35% for 20171
Increase in income tax from:
Items presented with related state
income tax, net:
State tax, net of federal benefit
Property-related
Change related to uncertain tax
positions2
Revised San Onofre Settlement
Agreement3
Share-based compensation4
Deferred tax re-measurement5
2018 GRC Final Decision
Other
Total income tax (benefit) expense
from continuing operations
Effective tax rate
Edison International
2019
2018
2017
2019
Years ended December 31,
SCE
2018
2017
$ 1,127
$ (1,089)
$
949
$ 1,301
$
(885)
$ 1,106
237
(229)
332
273
(186)
387
(22)
(303)
—
—
(4)
(88)
(80)
(18)
(168)
(275)
(66)
—
(2)
—
—
1
2
(439)
(18)
25
(55)
466
—
(32)
(13)
(303)
—
—
(3)
(88)
(80)
(15)
(155)
(275)
(71)
—
(1)
—
—
(8)
8
(439)
(13)
25
(11)
33
—
(20)
$
(278)
(24.7)%
$
(739)
(67.9)%
$
281
29.6%
$
(229)
(17.6)%
$
(696)
(78.6)%
$
(30)
(2.7)%
1 Tax Reform reduced the federal corporate income tax rate from 35% to 21%, effective January 1, 2018.
2 In 2018, Edison International and SCE recognized tax benefits related to a settlement with the California Franchise Tax Board for tax
years 1994 – 2006. See further discussion in Tax Disputes below.
3 Includes the write-off of an unrecovered tax regulatory asset related to the Revised San Onofre Order Instituting Investigation Settlement
Agreement among SCE, SDG&E and various intervening parties, dated January 30, 2018 and modified on August 2, 2018 ("Revised San
Onofre Settlement Agreement").
4
5
Includes state taxes of $(11) million for Edison International and $(2) million for SCE for the year ended December 31, 2017.
In 2017, Edison International and SCE recorded a charge to earnings related to the re-measurement of deferred taxes resulting from Tax
Reform. This charge was updated in 2019 to conform to a CPUC resolution which finalized the re-measurement amounts belonging to
shareholders and those amounts are charged to earnings.
The CPUC requires flow-through ratemaking treatment for the current tax benefit arising from certain property-related and
other temporary differences which reverse over time. Flow-through items reduce current authorized revenue requirements in
SCE's rate cases and result in a regulatory asset for recovery of deferred income taxes in future periods. The difference
between the authorized amounts as determined in SCE's rate cases, adjusted for balancing and memorandum account
activities, and the recorded flow-through items also result in increases or decreases in regulatory assets with a corresponding
impact on the effective tax rate to the extent that recorded deferred amounts are expected to be recovered in future rates. For
further information, see Note 11.
2017 Tax Reform
In December 2017, Tax Reform was signed into law. This comprehensive reform of tax law reduces the federal corporate
income tax rate from 35% to 21% and is generally effective beginning January 1, 2018. GAAP requires deferred tax assets and
liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled.
Thus, at December 31, 2017, Edison International and SCE's deferred taxes were re-measured based upon the new tax rate.
86
While the re-measurement of deferred taxes at Edison International Parent and Other were recorded to earnings, the re-
measurement of deferred taxes at SCE was allocated between customers and shareholders. Customer amounts were recorded
to regulatory assets and liabilities while shareholder-funded activities were charged to earnings.
In the absence of regulatory guidance at the time, SCE used judgment to interpret prior CPUC decisions when determining
which re-measurement amounts belong to customers and shareholders. In February of 2019, the CPUC issued a final
resolution holding that customers are only entitled to the re-measurement of deferred taxes that were included when setting
rates (i.e. included in rate base) and that all other deferred tax re-measurements belong to shareholders. As a result of the
resolution, SCE recorded an income tax benefit of approximately $88 million in the year 2019.
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 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:
Edison International
SCE
December 31,
(in millions)
Balance at January 1,
2019
2018
2017
2019
2018
2017
$
338
$
432
$
471
$
249
$
331
$
371
Tax positions taken during the current
year:
Increases
Tax positions taken during a prior year:
Increases
Decreases1
Settlements with taxing authorities2
Balance at December 31,
$
46
6
(20)
—
370
$
41
—
(108)
(27)
338
$
51
—
(7)
(83)
432
47
6
(20)
—
$
282
$
42
51
—
(121)
(3)
249
$
—
(13)
(78)
331
1 Decrease in 2018 was related to re-measurement as a result of a settlement with the California Franchise Tax Board for tax years 1994 –
2006.
2
In 2018, Edison International reached a settlement with the California Franchise Tax Board for tax years 1994 – 2006. In 2017, Edison
International settled all open tax positions with the IRS for taxable years 2007 – 2012.
As of December 31, 2019, if recognized, $192 million of unrecognized tax benefits would impact Edison International's
effective tax rate and $104 million of the unrecognized tax benefits would impact SCE's effective tax rate.
Tax Disputes
Tax years that remain open for examination by the IRS and the California Franchise Tax Board are 2016 – 2018 and 2010 –
2018, respectively. Edison International has settled all open tax positions with the IRS for taxable years prior to 2013.
In the fourth quarter of 2018, Edison International recorded the impacts of a settlement reached with the California Franchise
Tax Board for tax years 1994 – 2006 that resulted in a $65 million refund of tax and interest. This refund was received in the
second quarter of 2019. Tax years 2007 – 2009 are currently under protest with the California Franchise Tax Board.
87
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
2019
Years ended December 31,
2018
2019
2018
$
56
$
37
$
29
$
6
The net after-tax interest and penalties recognized in income tax expense (benefit) for continuing and discontinued operations
are:
(in millions)
2019
2018
2017
2019
Edison International
December 31,
SCE
2018
2017
Net after-tax interest and penalties
tax expense (benefit)
$
4
$
(62)
$
6
$
3
$
(25)
$
4
Note 9. Compensation and Benefit Plans
Employee Savings Plan
The 401(k) defined contribution savings plan is designed to supplement employees' retirement income. The employer
contributions were as follows:
(in millions)
2019
2018
2017
Edison
International
SCE
Years ended December 31,
$
$
82
74
70
81
74
69
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 $54 million
and $37 million, respectively, for the year ending December 31, 2020. 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 11 for further information.
88
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 loss (gain)1
Benefits paid
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 2:
Long-term assets
Current liabilities
Long-term liabilities
Amounts recognized in accumulated other comprehensive loss
consist of:
Prior service cost
Net loss2
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
Weighted average assumptions used to determine obligations at end
of year:
Discount rate
Rate of compensation increase
Edison International
SCE
Years ended December 31,
2019
2018
2019
2018
$
$
$
$
$
$
$
$
$
3,880
114
155
240
(250)
4,139
3,321
611
73
(250)
3,755
(384)
$
$
$
$
— $
(19)
(365)
(384)
$
$
$
$
(1)
95
94
87
181
3,968
4,139
3,968
3,755
4,179
126
141
(280)
(286)
3,880
3,616
(86)
77
(286)
3,321
(559)
2
(29)
(532)
(559)
(1)
83
82
271
353
3,753
3,880
3,753
3,321
$
$
$
$
$
$
$
$
$
3,431
110
138
199
(216)
3,662
3,124
576
57
(216)
3,541
(121)
$
$
$
$
— $
(2)
(119)
(121)
$
— $
17
17
87
104
3,529
$
$
3,662
3,529
3,541
3,702
121
124
(273)
(243)
3,431
3,390
(86)
52
(232)
3,124
(307)
—
(5)
(302)
(307)
—
17
17
271
288
3,342
3,431
3,342
3,124
3.11%
4.10%
4.19%
4.10%
3.11%
4.10%
4.19%
4.10%
1 For Edison International and SCE, respectively, the 2019 actuarial losses are primarily related to $401 million and $373 million in losses
from a decrease in the discount rate (from 4.19% as of December 31, 2018 to 3.11% as of December 31, 2019), partially offset by
$157 million and $177 million in gains from other economic assumption changes. The 2018 actuarial gains are primarily related to
$277 million and $261 million in gains from an increase in discount rate (from 3.46% as of December 31, 2017 to 4.19% as of
December 31, 2018), respectively.
89
(in millions)
Service cost
Non-service cost
Interest cost
2 The SCE liability excludes a long-term payable due to Edison International Parent of $133 million and $117 million at December 31,
2019 and 2018, respectively, related to certain SCE postretirement benefit obligations transferred to Edison International Parent. SCE's
accumulated other comprehensive loss of $17 million at December 31, 2019 and 2018, excludes net losses of $37 million and
$21 million related to these benefits, respectively.
Net periodic pension expense components for continuing operations are:
Edison International
SCE
Years ended December 31,
2019
2018
2017
2019
2018
2017
$
114
$
126
$
138
$
111
$
123
$
133
Expected return on plan assets
Settlement costs
Amortization of prior service cost
Amortization of net loss1
Regulatory adjustment (deferred)
Total non-service benefit
Total expense recognized
$
155
(205)
—
2
7
(3)
(44)
70
$
140
(228)
—
3
9
15
(61)
65
$
164
(212)
6
3
21
(28)
(46)
92
$
143
(194)
—
2
5
(3)
(47)
64
$
128
(214)
—
3
6
15
(62)
61
$
149
(199)
—
3
17
(28)
(58)
75
1
Includes the amount of net loss reclassified from accumulated other comprehensive loss. The amount reclassified for Edison
International was $7 million, $9 million and $10 million for the years ended December 31, 2019, 2018 and 2017, respectively. The
amount reclassified for SCE was $5 million, $6 million and $6 million for the years ended December 31, 2019, 2018 and 2017.
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
Settlement charges
Amortization of net loss
Total recognized in other
comprehensive loss
Total recognized in expense and
other comprehensive loss
2019
2018
2017
2019
2018
2017
$
$
19
—
(7)
12
82
$
$
5
—
(9)
(4)
— $
(6)
(10)
(16)
$
61
$
76
$
21
—
(5)
16
80
$
$
5
—
(6)
(1)
$
60
$
3
—
(6)
(3)
72
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 2020 for continuing operations are as follows:
(in millions)
Unrecognized net loss to be amortized1
Unrecognized prior service cost to be amortized
Edison
International
SCE
$
$
11
2
8
2
1 The amount of net loss expected to be reclassified from accumulated other comprehensive loss for Edison International and SCE is
$11 million and $8 million, respectively.
90
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,
2019
2018
2017
4.19%
4.10%
6.50%
3.46%
4.10%
6.50%
3.94%
4.00%
6.50%
The following benefit payments, which reflect expected future service, are expected to be paid:
(in millions)
2020
2021
2022
2023
2024
2025 – 2029
Edison
International
SCE
Years ended December 31,
$
$
336
332
320
309
306
302
295
288
280
272
1,383
1,224
Postretirement Benefits Other Than Pensions ("PBOP(s)")
Employees hired prior to December 31, 2017 who are retiring at or after age 55 with at least 10 years of service may be
eligible for postretirement medical, dental, and vision 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 Plan benefits with respect
to its employees and former employees that exceed the participants' share of contributions. A participating employer may
terminate the PBOP Plan benefits with respect to its employees and former employees, as may SCE (as PBOP Plan sponsor),
and, accordingly, the participants' PBOP Plan benefits are not vested benefits.
The expected contributions (substantially all of which are expected to be made by SCE) for PBOP benefits are $11 million for
the year ended December 31, 2020. 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 three voluntary employees' beneficiary association trusts ("VEBA Trusts") that can only be used to pay for retiree
health care benefits of SCE and its subsidiaries. Once funded into the VEBA Trusts, neither SCE nor Edison International can
subsequently 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 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.
91
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
Actuarial loss (gain)1
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:
Long-term assets
Current liabilities
Long-term liabilities
Amounts recognized in accumulated other comprehensive loss
consist of:
Net loss
Amounts recognized as a regulatory liability
Total not yet recognized as income
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,
2019
2018
2019
2018
$
$
$
$
$
$
$
$
1,986
30
77
70
29
(109)
2,083
2,133
401
11
29
(109)
2,465
382
393
(11)
—
382
2
(416)
(414)
$
$
$
$
$
$
$
$
2,337
37
80
(382)
28
(114)
1,986
2,330
(123)
13
28
(115)
2,133
147
159
(12)
—
147
1
(185)
(184)
$
$
$
$
$
$
$
$
1,977
30
77
70
29
(109)
2,074
2,133
401
10
29
(109)
2,464
390
402
(12)
—
390
—
(416)
(416)
$
$
$
$
$
$
$
$
2,325
37
80
(379)
28
(114)
1,977
2,330
(123)
12
28
(114)
2,133
156
168
(12)
—
156
—
(185)
(185)
3.32%
4.35%
3.32%
4.35%
6.50%
5.00%
2029
6.75%
5.00%
2029
6.50%
5.00%
2029
6.75%
5.00%
2029
1 For Edison International and SCE, respectively, the 2018 actuarial gains are primarily related to $195 million and $194 million in gains
from an increase in the discount rate (from 3.70% as of December 31, 2017 to 4.35% as of December 31, 2018) and $137 million and
$135 million in experience gains.
92
Net periodic PBOP expense components for continuing operations are:
(in millions)
Service cost
Non-service cost
Interest cost
Expected return on plan assets
Special termination benefits
Amortization of prior service credit
Amortization of net loss
Regulatory adjustment (deferred)
Total non-service benefit
Total expense
Edison International
SCE
Years ended December 31,
2019
2018
2017
2019
2018
2017
$
30
$
37
$
31
$
30
$
37
$
31
77
(111)
—
(1)
(17)
29
(23)
$
7
$
80
(121)
—
(1)
—
24
(18)
19
$
86
(110)
1
(3)
—
—
(26)
5
$
77
(111)
—
(1)
(17)
29
(23)
7
$
80
(122)
—
(1)
—
24
(19)
18
$
85
(110)
1
(2)
—
—
(26)
5
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 2020 for continuing operations
are as follows:
(in millions)
Unrecognized net gain to be amortized
Unrecognized prior service credit to be amortized
Edison
International
SCE
$
$
(17)
(1)
(17)
(1)
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,
2019
2018
2017
4.35%
5.30%
6.75%
5.00%
2029
3.70%
5.30%
6.75%
5.00%
2029
4.29%
5.30%
7.00%
5.00%
2022
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, 2019 $
Effect on annual aggregate service and interest costs
$
225
10
$
(184)
(8)
$
224
10
(183)
(8)
93
The following benefit payments (net of plan participants' contributions) are expected to be paid:
(in millions)
2020
2021
2022
2023
2024
2025 – 2029
Plan Assets
Edison
International
SCE
Years ended December 31,
$
$
87
90
92
94
97
512
87
89
92
94
96
509
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 2019 pension
plan assets were 23% for U.S. equities, 17% for non-U.S. equities, 48% for fixed income and 12% for opportunistic and/or
alternative investments. Target allocations for 2019 PBOP plan assets (except for Represented VEBA which is 85% for fixed
income, 5% for opportunistic/private equities and 10% for U.S. and non-U.S. equities) are 58% for U.S. and non-U.S. equities,
29% for fixed income and 13% for opportunistic and/or alternative 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.
94
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 4% premium above public equity,
reflecting a premium for higher volatility and lower liquidity. For fixed income, the risk premium is based on 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. No investment is classified as Level 3 as of
December 31, 2019 and 2018. 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 9 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.
95
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, 2019 by asset class and level within the fair value hierarchy:
Level 1
Level 2
NAV1
Total
$
992
$
— $
1,138
(in millions)
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
Combined net plan assets available for benefits
SCE's share of net plan assets
(in millions)
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
Combined net plan assets available for benefits
SCE's share of net plan assets
$
146
547
—
—
—
—
133
7
—
$
110
473
—
—
—
—
112
2
—
7
572
—
—
—
—
—
79
—
—
693
471
130
—
—
—
6
582
—
—
—
—
—
73
—
—
426
434
236
2
—
—
$
833
$
1,650
$
1,294
$
$
Level 1
Level 2
NAV1
Total
$
937
$
— $
1,047
$
697
$
1,598
$
1,098
$
$
554
572
693
471
130
133
7
79
3,777
(22)
3,755
3,541
479
582
426
434
236
114
2
73
3,393
(72)
3,321
3,124
The following table sets forth the Master Trust investments that were accounted for at fair value as of December 31, 2018 by
asset class and level within the fair value hierarchy:
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, 2019 and 2018, respectively, performance for actively managed separate
accounts is primarily benchmarked against the Russell Indexes (40%) and (43%) and Morgan Stanley Capital International (MSCI)
index (60%) and (57%).
4 Corporate bonds are diversified. At December 31, 2019 and 2018, respectively, this category includes $45 million and $60 million
for collateralized mortgage obligations and other asset backed securities.
96
5 At December 31, 2019 and 2018, respectively, the common/collective assets were invested in equity index funds that seek to track
performance of the Standard and Poor's 500 Index (35% and 43%) and Russell 1000 indexes (17% and 14%). In addition, at
December 31, 2019 and 2018, respectively, 28% and 21% of the assets in this category are in index funds which seek to track
performance in the MSCI All Country World Index exUS and 12% and 15% of this category are in non-index U.S. equity fund,
which is actively managed.
6 At December 31, 2019 and 2018, respectively, 51% and 50% are invested in private equity funds with investment strategies that
include branded consumer products, clean technology and California geographic focus companies, 17% and 1% are invested in
ABS including distressed mortgages and commercial and residential loans, 19% and 16% are invested in publicly traded fixed
income securities, and 8% and 30% are invested in a broad range of financial assets in all global markets.
7 At both December 31, 2019 and 2018, other investment entities were invested in (1) emerging market equity securities and (2)
domestic mortgage backed securities. In addition, other investment entities were also invested in a hedge fund that invests through
liquid instruments in a global diversified portfolio of equity, fixed income, interest rate, foreign currency and commodities markets
at December 31, 2018.
8 Level 1 registered investment companies primarily consisted of a global equity mutual fund which seeks to outperform the MSCI
World Total Return Index.
At December 31, 2019 and 2018, respectively, approximately 56% and 61% 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, 2019 by asset class and level within the fair value hierarchy:
(in millions)
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
SCE's share of net plan assets
Level 1
Level 2
NAV1
Total
$
$
386
242
—
—
—
66
—
2
63
2
885
—
—
—
17
101
$
— $
—
—
652
68
—
—
—
$
696
$
1,068
$
720
$
449
244
885
652
68
66
17
103
2,484
(19)
2,465
$
2,464
97
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, 2018 by asset class and level within the fair value hierarchy:
(in millions)
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
Level 1
Level 2
NAV1
Total
$
— $
$
$
322
204
—
—
—
38
22
5
49
—
832
—
—
—
—
99
$
591
$
980
$
584
—
—
495
89
—
—
—
371
204
832
495
89
38
22
104
2,155
(22)
2,133
$
$
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 (68% and
67%) and the MSCI All Country World Index (32% and 33%) for 2019 and 2018, respectively.
4 Corporate notes and bonds are diversified and include approximately $49 million and $59 million for commercial collateralized
mortgage obligations and other asset backed securities at December 31, 2019 and 2018, respectively.
5 At both December 31, 2019 and 2018, 74% of the common/collective assets are invested in index funds which seek to track performance
in the MSCI All Country World Index Investable Market Index and 19% are invested in a non-index U.S. equity fund which is actively
managed. The remaining assets in this category are primarily invested in emerging market fund.
6 At December 31, 2019 and 2018, respectively, 55% and 48% 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. 28% and
17% of the remaining partnerships category are invested in asset backed securities including distressed mortgages, distressed companies
and commercial and residential loans and debt and equity of banks. 15% and 34% are invested in a broad range of financial assets in all
global markets.
7 At both December 31, 2019 and 2018, registered investment companies were primarily invested in (1) a money market fund,
(2) exchange rate trade funds which seek to track performance of MSCI Emerging Market Index, Russell 2000 Index and international
small cap equities.
8 Other includes $66 million and $58 million of municipal securities at December 31, 2019 and 2018, respectively.
At December 31, 2019 and 2018, respectively, approximately 65% and 64% 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 approximately 71 million shares.
As of December 31, 2019, Edison International had approximately 26 million shares remaining available for new award grants
under its stock-based compensation plans.
98
The following table summarizes total expense and tax benefits 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
$
Edison International
2019
2018
2017
2019
Years ended December 31,
$
13
$
11
$
14
$
8
6
2
29
10
1
7
2
21
$
6
$
2
6
1
23
72
2017
$
SCE
2018
$
6
1
4
—
11
7
4
3
—
14
8
2
3
—
13
15
$
6
$
3
$
1 Reflected in "Operation and maintenance" on Edison International's and SCE's consolidated statements of income.
Stock Options
Under the 2007 Performance Incentive Plan, Edison International has granted stock options at exercise prices equal to the
closing price at the grant date. 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 in equal annual increments, except for awards granted to retirement-
eligible participants, which vest on an accelerated basis.
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,
2019
5.5
1.6% - 2.3%
3.3% - 4.0%
3.9%
2018
5.7
2.6% - 3.0%
3.6% - 4.3%
3.8%
2017
5.7
2.1% - 2.3%
2.7% - 3.8%
2.7%
21.7% - 24.1%
20.9% - 21.9%
17.8% - 20.9%
21.8%
20.9%
17.9%
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 2019. The volatility period used was 66 months, 68 months and 68 months at December 31, 2019, 2018 and 2017,
respectively.
99
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, 2018
8,833,610
$
Granted
Forfeited or expired
Exercised1
Outstanding at December 31, 2019
Vested and expected to vest at December 31, 2019
Exercisable at December 31, 2019
SCE:
Outstanding at December 31, 2018
Granted
Forfeited or expired
Exercised1
Affiliate transfers, net
Outstanding at December 31, 2019
Vested and expected to vest at December 31, 2019
1,928,314
(201,643)
(1,281,604)
9,278,677
9,151,143
5,378,183
5,037,185
1,047,247
(182,822)
(878,084)
(88,824)
4,934,702
4,871,685
$
$
Exercisable at December 31, 2019
2,945,726
$
59.81
62.79
67.38
45.26
62.27
62.27
60.32
57.84
62.91
66.83
44.67
53.14
61.01
60.98
58.28
6.28
6.25
4.91
6.05
6.01
4.62
$
$
$
$
125
84
73
52
1 Edison International and SCE recognized tax benefits of $7 million and $5 million, respectively, from stock options exercised in 2019.
At December 31, 2019, total unrecognized compensation cost related to stock options and the weighted average period the
cost is expected to be recognized are as follows:
Unrecognized compensation cost, net of expected forfeitures (in millions)
Weighted average period (in years)
Supplemental Data on Stock Options
Edison
International
18
$
2.4
SCE
$
9
2.4
Edison International
SCE
Years ended December 31,
(in millions, except per award amounts)
2019
2018
2017
2019
2018
2017
Stock options:
Weighted average grant date fair
value per option granted
Fair value of options vested
Value of options exercised
Performance Shares
$
8.80
$
8.21
$
10.65
$
8.83
$
8.22
$
10.63
14
27
14
10
11
126
7
19
7
7
5
29
A target number of contingent performance shares were awarded to executives in March 2019, 2018 and 2017 and vest at
December 31, 2021, 2020 and 2019, 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
100
from each year's grants could range from zero to twice the target number (plus additional units credited as dividend
equivalents).
The fair value of market condition performance shares is determined using a Monte Carlo simulation valuation model for the
total shareholder return. The fair value of financial performance condition performance shares is determined (i) at grant as the
target number of shares (which Edison International determined to be the probable outcome) valued at the closing price on the
grant date of Edison International common stock and (ii) subsequently using Edison International's earnings per share
compared to pre-established targets.
The following is a summary of the status of Edison International's nonvested performance shares:
Edison International:
Nonvested at December 31, 2018
Granted
Forfeited
Vested1
Nonvested at December 31, 2019
SCE:
Nonvested at December 31, 2018
Granted
Forfeited
Vested1
Affiliate transfers, net
Equity Awards
Liability Awards
Weighted
Average
Fair
Value
Shares
Weighted
Average
Fair
Value
Shares
— $ — 193,438
$ 42.81
124,183
(4,340)
—
119,843
$ 66.03
—
(38,439)
(41,813)
113,186
$ 67.30
— $ — 101,858
$ 42.96
67,512
(4,340)
—
—
—
(21,641)
(21,035)
(783)
58,399
$ 67.34
Nonvested at December 31, 2019
63,172
$ 66.27
1 Relates to performance shares that will be paid in 2020 as performance targets were met at December 31, 2019.
Restricted Stock Units
Restricted stock units were awarded to executives in March 2019, 2018 and 2017 and vest and become payable on January 3,
2022, January 4, 2021 and January 2, 2020, 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, which vest on an accelerated basis.
The following is a summary of the status of Edison International's nonvested restricted stock units:
Edison International
SCE
Nonvested at December 31, 2018
Granted
Forfeited
Vested
Affiliate transfers, net
Nonvested at December 31, 2019
Restricted
Stock Units
Weighted
Average
Grant Date
Fair Value
291,786
$
135,168
(10,456)
(104,816)
—
68.11
62.80
65.82
67.43
—
311,682
$
66.11
Restricted
Stock Units
Weighted
Average
Grant Date
Fair Value
147,826
$
73,937
(9,564)
(52,028)
(186)
159,985
68.08
62.93
65.53
67.15
—
$
66.16
The fair value for each restricted stock unit awarded is determined as the closing price of Edison International common stock
on the grant date.
101
Note 10. 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
—
2057
2067
2068
One-year
32
2,447
$
$
Amortized Cost
Fair Value
December 31,
2019
2018
2019
2018
N/A
822
996
597
N/A $
1,765
$
665
1,193
573
70
2,501
$
970
1,115
679
33
4,562
$
1,381
767
1,288
611
73
4,120
1 Short-term investments include $41 million and $71 million of repurchase agreements payable by financial institutions which earn
interest, are fully secured by U.S. Treasury securities and mature by January 2, 2020 and January 2, 2019 as of December 31, 2019 and
2018, 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 $1.8 billion and $1.4 billion at December 31, 2019 and 2018, respectively, and
other-than-temporary impairments were $160 million and $170 million at the respective periods.
Trust assets are used to pay income taxes. Deferred tax liabilities related to net unrealized gains at December 31, 2019 were
$449 million. Accordingly, the fair value of trust assets available to pay future decommissioning costs, net of deferred income
taxes, totaled $4.1 billion at December 31, 2019.
The following table summarizes the gains and losses for the trust investments:
(in millions)
Gross realized gains
Gross realized losses
Net unrealized gains (losses) for equity securities
December 31,
2019
2018
2017
$
87 $
(2)
343
134 $
(27)
(233)
244
(23)
142
Due to regulatory mechanisms, changes in assets of the trusts from income or loss items have no impact on operating revenue
or earnings.
102
Note 11. 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
7.61% in both 2019 and 2018, respectively. The CPUC 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.
Regulatory Assets
SCE's regulatory assets included on the consolidated balance sheets are:
(in millions)
Current:
Regulatory balancing and memorandum accounts
Power contracts1
Other
Total current
Long-term:
Deferred income taxes, net of liabilities
Pension and other postretirement benefits
Power contracts1
Unamortized investments, net of accumulated amortization2
Unamortized loss on reacquired debt
Regulatory balancing and memorandum accounts
Environmental remediation
Other
Total long-term
Total regulatory assets
$
December 31,
2019
2018
$
798
189
22
1,009
4,026
87
434
119
142
981
237
62
814
305
14
1,133
3,589
271
700
118
153
360
134
55
6,088
7,097
$
5,380
6,513
$
1
In 2018, SCE amended the termination date of two power purchase agreements. As a result of this amendment, SCE is required to make
early termination payments totaling $206 million by 2021. The unpaid portion of $29 million and $206 million were reflected as a
regulatory asset in the consolidated balance sheets as of December 31, 2019 and 2018, respectively.
2 Relates to a regulatory asset that earns a rate of return. See below for further information.
In accordance with the accounting standards applicable to rate-regulated enterprises, SCE defers costs as regulatory assets that
are probable of future recovery from customers and has recorded regulatory assets for these incremental costs at December 31,
2019. While SCE believes such costs are probable of future recovery, there is no assurance that SCE will collect all amounts
currently deferred as regulatory assets.
SCE's regulatory assets related to power contracts primarily represent derivative contracts that were designated as normal
purchases and normal sales contracts. The liabilities for these power contracts are amortized over the remaining contract
terms, approximately 2 to 5 years. For further information, see Note 1.
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. For further information, see Note 8.
103
SCE's regulatory assets related to pension and other post-retirement plans represent the unfunded net loss and prior service
costs of the plans. This amount is being recovered through rates charged to customers. See "Pension Plans and Postretirement
Benefits Other than Pensions" discussion in Note 9.
SCE has long-term unamortized investments which include nuclear assets related to Palo Verde and the beyond the meter
program. Nuclear assets related to Palo Verde and the beyond the meter program are expected to be recovered by 2044 and
2027, respectively, and both earned returns of 7.61% in 2019 and 2018.
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 40 years or the life of the new issuance if the debt is refunded or
refinanced.
SCE's regulatory assets related to environmental remediation represent a portion of the costs incurred at certain sites that SCE
is allowed to recover through customer rates. See "Environmental Remediation" discussed in Note 12.
Regulatory Liabilities
SCE's regulatory liabilities included on the consolidated balance sheets are:
(in millions)
Current:
December 31,
2019
2018
Regulatory balancing and memorandum accounts
$
883
$
1,080
Energy derivatives
2018 GRC1
Other
Total current
Long-term:
Costs of removal
Re-measurement of deferred taxes
Recoveries in excess of ARO liabilities
Regulatory balancing and memorandum accounts
Other postretirement benefits
Other1
Total long-term
Total regulatory liabilities
80
—
9
972
2,674
2,424
1,569
1,261
416
41
8,385
9,357
$
158
274
20
1,532
2,769
2,776
1,130
1,344
185
125
8,329
9,861
$
1 During 2018, SCE recorded CPUC revenue based on the 2017 authorized revenue requirement adjusted for the July 2017 cost of capital
decision and Tax Reform pending the outcome of the 2018 GRC. SCE recorded regulatory liabilities primarily associated with these
adjustments. In May 2019, these regulatory liabilities were reversed due to the adoption of 2018 GRC final decision. For further
information, see Note 1.
SCE's regulatory liabilities related to energy derivatives are primarily an offset to unrealized gains on derivatives.
SCE's regulatory liabilities related to costs of removal represent differences between asset removal costs recorded and
amounts collected in rates for those costs.
As a result of Tax Reform, SCE's deferred tax assets and liabilities were re-measured at December 31, 2017, resulting in an
increase in regulatory liabilities. In February 2019, the CPUC issued a final resolution holding that customers are only entitled
to re-measurement of deferred taxes that were included when setting rates (i.e. included in rate base), and that all other
deferred tax re-measurements belong to shareholders. As a result of the resolution, SCE recorded an income tax benefit of
approximately $88 million in the year 2019. For further information, see Note 8.
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
104
investments. See Note 10 for further discussion.
Net Regulatory Balancing and Memorandum Accounts
Balancing accounts track amounts that the CPUC or FERC have authorized for recovery. 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. Memorandum accounts are authorized
to track costs for potential future recovery.
Regulatory balancing and memorandum 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 and memorandum accounts that do
not have the right of offset are presented gross in the consolidated balance sheets. Under and over collections in balancing
accounts and amounts recorded in memorandum accounts typically accrue interest based on a three-month commercial paper
rate published by the Federal Reserve.
The following table summarizes the significant components of regulatory balancing and memorandum accounts included in
the above tables of regulatory assets and liabilities:
(in millions)
Asset (liability)
Energy resource recovery account1
Portfolio allocation balancing account1
New system generation balancing account1
Public purpose programs and energy efficiency programs
Base revenue requirement balancing account
Tax accounting memorandum account and pole loading balancing account
DOE litigation memorandum account
Greenhouse gas auction revenue and low carbon fuel standard revenue
FERC balancing accounts
Wildfire-related memorandum accounts2
Other
Liability
December 31,
2019
2018
$
$
$
(23)
537
85
(1,235)
(328)
17
(35)
(196)
(127)
868
72
(365)
$
815
—
(74)
(1,200)
(628)
28
(69)
(81)
(180)
272
(133)
(1,250)
1 SCE's cost-recovery mechanism for its fuel and purchased power-related costs is facilitated in three main balancing accounts, the Energy
Resource Recovery Account ("ERRA"), the Portfolio Allocation Balancing Account ("PABA") and the New System Generation
Balancing Account ("NSGBA"). In May 2019, the CPUC approved a PABA to determine and pro-ratably recover from responsible
bundled service and departing load customers the "above-market" costs of all generation resources that are eligible for cost recovery. The
ERRA and PABA balancing accounts are subject to a trigger mechanism that allows SCE to request an expeditious rate change if the
sum of the ERRA balance and the bundled service customers' pro-rata share of the PABA balance either exceeds 5% of SCE's prior year
generation rate revenue or exceeds 4% of SCE's prior year generation rate revenue and SCE does not expect the overcollection or
undercollection to fall below 4% within 120 days. For 2020, the 4% and 5% trigger amounts are approximately $200 million and
$250 million, respectively. SCE will begin recovering the combined ERRA, PABA and NSGBA undercollection from customers in rates
beginning in April 2020, which will be fully recovered in April 2021.
2 The wildfire-related memorandum accounts regulatory assets represent wildfire-related costs that are probable of future recovery from
customers, subject to a reasonableness review. The Fire Hazard Prevention Memorandum Account ("FHPMA") is used to track costs
related to fire safety and to implement fire prevention corrective action measures in extreme and very high fire threat areas. The
Catastrophic Event Memorandum Account ("CEMA") is used to track costs related to restoring service and damage repair, upon
declaration of disasters by state or federal authorities. During 2018, the CPUC approved the establishment of the Wildfire Expense
Memorandum Account ("WEMA") to track incremental wildfire insurance costs and uninsured wildfire-related financing, legal and
claims costs. In March 2019, the CPUC approved a fire risk mitigation memorandum account to track costs related to the reduction of
fire risk that are incremental to the amount in SCE's any other revenue requirement. In June 2019, the CPUC approved a wildfire
mitigation plan memorandum account to track costs incurred to implement SCE's Wildfire Mitigation Plan that are not currently
reflected in SCE's revenue requirements.
105
Note 12. Commitments and Contingencies
Power Purchase Agreements
SCE entered into various agreements to purchase power, electric capacity and other energy products. At December 31, 2019,
the undiscounted future expected minimum payments for the SCE PPAs (primarily related to renewable energy contracts),
which were approved by the CPUC and met other critical contract provisions (including completion of major milestones for
construction), were as follows:
(in millions)
2020
2021 1
2022
2023
2024
Thereafter
Total future commitments2
Total
$
2,796
2,777
2,729
2,457
2,160
23,102
$ 36,021
1
Includes $242 million related to certain lease contracts to be recorded as short-term lease expense in
2021.
2 Certain power purchase agreements are treated as operating or finance leases. For further discussion,
see Note 13. Includes a lease contract that has not yet commenced with future lease payments of
$135 million. The lease is expected to commence during the third quarter of 2020.
Additionally, as of December 31, 2019, SCE has executed contracts (including capacity reduction contracts) that have not met
the critical contract provisions that would increase contractual obligations by $25 million in 2020, $106 million in 2021,
$102 million in 2022, $102 million in 2023, $69 million in 2024 and $897 million thereafter, if all critical contract provisions
are completed.
Costs incurred for PPAs were $3.7 billion in 2019, $3.8 billion in 2018 and $3.6 billion in 2017, which include costs
associated with contracts with terms of less than one year.
Other Commitments
The following summarizes the estimated minimum future commitments for SCE's other commitments:
(in millions)
2020
2021
2022
2023
2024
Thereafter
Total
Other contractual obligations
$
77
$
48
$
47
$
46
$
45
$
189
$
452
Costs incurred for other commitments were $110 million in 2019, $124 million in 2018 and $75 million in 2017. Other
commitments include fuel supply contracts for Palo Verde which require payment only if the fuel is made available for
purchase. Also included are commitments related to maintaining reliability and expanding SCE's transmission and distribution
system.
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 agreed to provide indemnifications through contracts entered into in the normal course of
business. These are primarily indemnifications against adverse litigation outcomes in connection with underwriting
agreements, and indemnities for specified environmental liabilities and income taxes with respect to assets sold or other
contractual arrangements. Edison International's and SCE's obligations under these agreements may or may not be limited in
terms of time and/or amount, and in some instances Edison International and SCE may have recourse against third parties.
Edison International and SCE have not recorded a liability related to these indemnities. The overall maximum amount of the
obligations under these indemnifications cannot be reasonably estimated.
106
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.
Southern California Wildfires and Mudslides
Multiple factors have contributed to increased wildfire activity, and faster progression of and increased damage from wildfires
across SCE's service territory and throughout California. These include the buildup of dry vegetation in areas severely
impacted by years of historic drought, lack of adequate clearing of hazardous fuels by responsible parties, higher temperatures,
lower humidity, and strong Santa Ana winds. At the same time that wildfire risk has been increasing in Southern California,
residential and commercial development has occurred and is occurring in some of the highest-risk areas. Such factors can
increase the likelihood and extent of wildfires. SCE has determined that approximately 27% of its service territory is in areas
identified as high fire risk.
Over the past several years, wind-driven wildfires impacted portions of SCE's service territory, with wildfires in December
2017 and November 2018 causing loss of life, substantial damage to both residential and business properties, and service
outages for SCE customers. The investigating government agencies, the Ventura County Fire Department ("VCFD") and
California Department of Forestry and Fire Protection ("CAL FIRE"), have determined that the largest of the 2017 fires
originated on December 4, 2017, in the Anlauf Canyon area of Ventura County (the investigating agencies refer to this fire as
the "Thomas Fire"), followed shortly thereafter by a second fire that originated near Koenigstein Road in the City of Santa
Paula (the "Koenigstein Fire"). While the progression of these two fires remains under review, the December 4, 2017 fires
eventually burned substantial acreage in both Ventura and Santa Barbara Counties. According to CAL FIRE, the Thomas and
Koenigstein Fires, collectively, burned over 280,000 acres, destroyed or damaged an estimated 1,343 structures and resulted in
two confirmed fatalities. The largest of the November 2018 fires, known as the "Woolsey Fire", originated in Ventura County
and burned acreage in both Ventura and Los Angeles Counties. According to CAL FIRE, the Woolsey Fire burned almost
100,000 acres, destroyed an estimated 1,643 structures, damaged an estimated 364 structures and resulted in three confirmed
fatalities. Two additional fatalities have been associated with the Woolsey Fire.
As described below, multiple lawsuits related to the Thomas and Koenigstein Fires and the Woolsey Fire have been initiated
against SCE and Edison International. Some of the Thomas and Koenigstein Fires lawsuits claim that SCE and Edison
International have responsibility for the damages caused by mudslides and flooding in Montecito and surrounding areas in
January 2018 (the "Montecito Mudslides") based on a theory alleging that SCE has responsibility for the Thomas and/or
Koenigstein Fires and that the Thomas and/or Koenigstein Fires proximately caused the Montecito Mudslides. According to
Santa Barbara County initial reports, the Montecito Mudslides destroyed an estimated 135 structures, damaged an estimated
324 structures, and resulted in 21 confirmed fatalities, with two additional fatalities presumed.
In 2019, several wind-driven wildfires, including the "Saddle Ridge Fire," originated in Southern California (the "2019
Fires"). Based on currently available information and without considering insurance recoveries, it is reasonably possible that
SCE will incur a material loss in connection with the Saddle Ridge Fire, but the range of possible losses that could be incurred
cannot be estimated at this time. Edison International and SCE expect that any losses incurred will be covered by insurance,
subject to a self-insured retention and co-insurance, and that the amount of any such loss after insurance recoveries will not be
material. After expected insurance recoveries, SCE does not expect any of the 2019 Fires to have a material adverse effect on
its financial condition, results of operations or cash flows. At December 31, 2019, SCE recorded self-insured retention
expenses totaling $23 million ($17 million after-tax) primarily associated with the 2019 Fires. SCE has not recorded a charge
for potential liabilities relating to the Saddle Ridge Fire because, based on currently available information, it has not
determined that a loss is probable.
Liability Overview
The extent of liability for wildfire-related damages in actions against utilities depends on a number of factors, including
whether the utility substantially caused or contributed to the damages and whether parties seeking recovery of damages will be
required to show negligence in addition to causation. California courts have previously found utilities to be strictly liable for
property damage along with associated interest and attorneys' fees, regardless of fault, by applying the theory of inverse
condemnation when a utility's facilities were determined to be a substantial cause of a wildfire that caused the property
damage. If inverse condemnation is held to be inapplicable to SCE in connection with a wildfire, SCE still could be held liable
for property damages and associated interest if the property damages were found to have been proximately caused by SCE's
negligence. If SCE were to be found negligent, SCE could also be held liable for, among other things, fire suppression costs,
business interruption losses, evacuation costs, clean-up costs, medical expenses, and personal injury/wrongful death claims.
107
Additionally, SCE could potentially be subject to fines for alleged violations of CPUC rules and state laws in connection with
the ignition of a wildfire.
Final determinations of liability for the Thomas Fire, the Koenigstein Fire, the Montecito Mudslides and the Woolsey Fire
(each a "2017/2018 Wildfire/Mudslide Event," and, collectively, the "2017/2018 Wildfire/Mudslide Events"), including
determinations of whether SCE was negligent, would only be made during lengthy and complex litigation processes. Even
when investigations are still pending or liability is disputed, an assessment of likely outcomes, including through future
settlement of disputed claims, may require a liability to be accrued under accounting standards. Based on information
available to SCE and consideration of the risks associated with litigation, Edison International and SCE expect to incur a
material loss in connection with the 2017/2018 Wildfire/Mudslide Events.
As of December 31, 2019, Edison International and SCE have estimated liabilities of $4.5 billion, remaining expected
recoveries from insurance of $1.7 billion and expected recoveries through FERC electric rates of $149 million on their
consolidated balance sheets related to the 2017/2018 Wildfire/Mudslide Events. The accrued liability corresponds to the lower
end of the reasonably estimated range of expected potential losses that may be incurred in connection with the 2017/2018
Wildfire/Mudslide Events and is subject to change as additional information becomes available. Edison International and SCE
will seek to offset any actual losses realized with recoveries from insurance policies in place at the time of the events and, to
the extent actual losses exceed insurance, through electric rates. The CPUC and FERC may not allow SCE to recover
uninsured losses through electric rates if it is determined that such losses were not reasonably or prudently incurred. See "Loss
Estimates for Third Party Claims and Potential Recoveries from Insurance and through Electric Rates" below for additional
information.
External Investigations and Internal Review
The VCFD and CAL FIRE have jointly issued reports concerning their findings regarding the causes of the Thomas Fire and
the Koenigstein Fire. The reports did not address the causes of the Montecito Mudslides. SCE has also received a non-final
redacted draft of a report from the VCFD regarding Woolsey Fire (the "Redacted Woolsey Report"). SCE received the
Redacted Woolsey Report subject to a protective order in the litigation related to the Woolsey fire and, other than the
information disclosed in this Form 10-K, is not authorized to release the report or its contents to the public at this time. Based
on a filing made by Ventura County in the Woolsey Fire litigation, SCE anticipates that the VCFD will release the final non-
redacted report from the VCFD regarding the Woolsey Fire on or about April 1, 2020. The VCFD and CAL FIRE findings do
not determine legal causation of or assign legal liability for the Thomas, Koenigstein or Woolsey Fires; final determinations of
legal causation and liability would only be made during lengthy and complex litigation.
The SED is also conducting investigations to assess SCE's compliance with applicable rules and regulations in areas impacted
by the Thomas, Koenigstein and Woolsey Fires. SCE cannot predict when the SED's investigations will be completed.
Edison International and SCE understand that the California Attorney General's Office has completed its investigation of the
Thomas Fire without pursuing criminal charges. Edison International and SCE are aware of an ongoing investigation by the
California Attorney General's Office of the Woolsey Fire for the purpose of determining whether any criminal violations have
occurred. SCE could be subject to material fines, penalties, or restitution if it is determined that it failed to comply with
applicable laws and regulations. SCE is not aware of any basis for felony liability with regards to the Thomas Fire, the
Koenigstein Fire or the Woolsey Fire.
SCE's internal review into the facts and circumstances of each of the 2017/2018 Wildfire/Mudslide Events is complex and
time consuming. SCE expects to obtain and review additional information and materials in the possession of third parties
during the course of its internal reviews and the litigation processes.
Thomas Fire
On March 13, 2019, the VCFD and CAL FIRE jointly issued a report concluding, after ruling out other possible causes, that
the Thomas Fire was started by SCE power lines coming into contact during high winds, resulting in molten metal falling to
the ground. However, the report does not state that their investigation found molten metal on the ground. At this time, based
on available information, SCE has not determined whether its equipment caused the Thomas Fire. Based on publicly available
radar data showing a smoke plume in the Anlauf Canyon area emerging in advance of the report's indicated start time, SCE
believes that the Thomas Fire started at least 12 minutes prior to any issue involving SCE's system and at least 15 minutes
prior to the start time indicated in the report. SCE is continuing to assess the progression of the Thomas Fire and the extent of
damages that may be attributable to that fire.
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Koenigstein Fire
On March 20, 2019, the VCFD and CAL FIRE jointly issued a report finding that the Koenigstein Fire was caused when an
energized SCE electrical wire separated and fell to the ground along with molten metal particles and ignited the dry vegetation
below. As previously disclosed, SCE believes that its equipment was associated with the ignition of the Koenigstein Fire. SCE
is continuing to assess the progression of the Koenigstein Fire and the extent of damages that may be attributable to that fire.
Montecito Mudslides
SCE's internal review includes inquiry into whether the Thomas and/or Koenigstein Fires proximately caused or contributed to
the Montecito Mudslides, whether, and to what extent, the Thomas and/or Koenigstein Fires were responsible for the damages
in the Montecito area and other factors that potentially contributed to the losses that resulted from the Montecito Mudslides.
Many other factors, including, but not limited to, weather conditions and insufficiently or improperly designed and maintained
debris basins, roads, bridges and other channel crossings, could have proximately caused, contributed to or exacerbated the
losses that resulted from the Montecito Mudslides.
At this time, based on available information, SCE has not been able to determine whether the Thomas Fire or the Koenigstein
Fire, or both, were responsible for the damages in the Montecito area. In the event that SCE is determined to have caused the
fire that spread to the Montecito area, SCE cannot predict whether, if fully litigated, the courts would conclude that the
Montecito Mudslides were caused or contributed to by the Thomas and/or Koenigstein Fires or that SCE would be liable for
some or all of the damages caused by the Montecito Mudslides.
Woolsey Fire
SCE's internal review into the facts and circumstances of the Woolsey Fire is ongoing. SCE has reported to the CPUC that
there was an outage on SCE's electric system in the vicinity of where the Woolsey Fire reportedly began on November 8,
2018. SCE is aware of witnesses who saw fire in the vicinity of SCE's equipment at the time the fire was first reported. While
SCE did not find evidence of downed electrical wires on the ground in the suspected area of origin, it observed a pole support
wire in proximity to an electrical wire that was energized prior to the outage.
The Redacted Woolsey Report states that the VCFD investigation team determined that electrical equipment owned and
operated by SCE was the cause of the Woolsey Fire. Absent additional evidence, SCE believes that it is likely that its
equipment was associated with the ignition of the Woolsey Fire. SCE expects to obtain and review additional information and
materials in the possession of CAL FIRE and others during the course of its internal review and the Woolsey Fire litigation
process, including SCE equipment that has been retained by CAL FIRE.
Wildfire-related Litigation
Multiple lawsuits related to the 2017/2018 Wildfire/Mudslide Events naming SCE as a defendant have been filed by three
categories of plaintiffs: individual plaintiffs, subrogation plaintiffs and public entity plaintiffs. A number of the lawsuits also
name Edison International as a defendant and some of the lawsuits were filed as purported class actions. The lawsuits, which
have been filed in the superior courts of Ventura, Santa Barbara and Los Angeles Counties in the case of the Thomas and
Koenigstein Fires and the Montecito Mudslides, and in Ventura and Los Angeles Counties in the case of the Woolsey Fire,
allege, among other things, negligence, inverse condemnation, trespass, private nuisance, personal injury, wrongful death, and
violations of the California Public Utilities and Health and Safety Codes. SCE expects to be the subject of additional lawsuits
related to the 2017/2018 Wildfire/Mudslide Events. The litigation could take a number of years to be resolved because of the
complexity of the matters and number of plaintiffs.
The Thomas and Koenigstein Fires and Montecito Mudslides lawsuits are being coordinated in the Los Angeles Superior
Court. The Woolsey Fire lawsuits have also been coordinated in the Los Angeles Superior Court. On October 4, 2018, the
Superior Court denied Edison International's and SCE's challenge to the application of inverse condemnation to SCE with
respect to the Thomas and Koenigstein Fires and, on February 26, 2019, the California Supreme Court denied SCE's petition
to review the Superior Court's decision. In January 2019, SCE filed a cross-complaint against certain local public entities
alleging that failures by these entities, such as failure to adequately plan for flood hazards and build and maintain adequate
debris basins, roads, bridges and other channel crossings, among other things, caused, contributed to or exacerbated the losses
that resulted from the Montecito Mudslides. These cross-claims in the Montecito Mudslides litigation were not released as part
of the Local Public Entity Settlements.
Additionally, in September 2018, a derivative lawsuit for breach of fiduciary duties and unjust enrichment was filed in the Los
Angeles Superior Court against certain current and former members of the Boards of Directors of Edison International and
SCE. Edison International and SCE are identified as nominal defendants in the action. The derivative lawsuit generally alleges
that the individual defendants violated their fiduciary duties by causing or allowing SCE to operate in an unsafe manner in
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violation of relevant regulations, resulting in substantial liability and damage from the Thomas and Koenigstein Fires and the
Montecito Mudslides. The lawsuit is currently stayed.
In November 2018, a purported class action lawsuit alleging securities fraud and related claims was filed in federal court
against Edison International, SCE and certain current and former officers of Edison International and SCE. The plaintiff
alleges that Edison International and SCE made false and/or misleading statements in filings with the Securities and Exchange
Commission by failing to disclose that SCE had allegedly failed to maintain its electric transmission and distribution networks
in compliance with safety regulations, and that those alleged safety violations led to fires that occurred in 2017 and 2018,
including the Thomas Fire and the Woolsey Fire.
In January 2019, two separate derivative lawsuits alleging breach of fiduciary duties, securities fraud, misleading proxy
statements, unjust enrichment, and related claims were filed in federal court against certain current and former members of the
Boards of Directors and certain current and former officers of Edison International and SCE. Edison International and SCE are
named as nominal defendants in those actions. The derivative lawsuits generally allege that the individual defendants breached
their fiduciary duties and made misleading statements or allowed misleading statements to be made (i) between March 21,
2014 and August 10, 2015, with respect to certain ex parte communications between SCE and CPUC decision-makers
concerning the settlement of the San Onofre Order Instituting Investigation proceeding (the "San Onofre OII") and (ii) from
February 23, 2016 to the present, concerning compliance with applicable laws and regulations concerning electric system
maintenance and operations related to wildfire risks. The lawsuits generally allege that these breaches of duty and
misstatements led to substantial liability and damage resulting from the disclosure of SCE's ex parte communications in
connection with the San Onofre OII settlement, and from the 2017/2018 Wildfire/Mudslide Events.
Loss Estimates for Third Party Claims and Potential Recoveries from Insurance and through Electric Rates
At December 31, 2019 and December 31, 2018, Edison International's and SCE's balance sheets include accrued liabilities
(established at the lower end of the reasonably estimated range of expected losses) of $4.5 billion and $4.7 billion,
respectively, for the 2017/2018 Wildfire/Mudslide Events.
The following table presents changes in estimated losses (estimated at the lower end of the reasonably estimated range of
expected losses) for the 2017/2018 Wildfire/Mudslide Events since December 31, 2018:
(in millions)
Balance at December 31, 2018
Accrued losses
Payments
Balance at December 31, 2019
$
$
4,669
232
(360)
4,541
In total, SCE has accrued estimated losses of $4.9 billion and paid $360 million in settlements and recovered $290 million
from its insurance carriers through December 31, 2019 in relation to the 2017/2018 Wildfire/Mudslide Events.
For the years-ended December 31, 2019 and 2018, the income statements include charges for the estimated losses (established
at the lower end of the reasonably estimated range of expected losses), net of expected recoveries from insurance and FERC
customers, related to the 2017/2018 Wildfire/Mudslide Events as follows:
(in millions)
Charge for wildfire-related claims
Expected insurance recoveries
Expected revenue from FERC customers
Total pre-tax charge
Income tax benefit
Total after-tax charge
Year ended December 31,
2019
2018
$
232
—
(14)
218
(61)
157
$
4,669
(2,000)
(135)
2,534
(709)
1,825
$
$
In the fourth quarter of 2018, SCE recorded a liability for estimated losses of $4.7 billion related to the 2017/2018 Wildfire/
Mudslide Events. In the fourth quarter of 2019, SCE paid $360 million to a number of local public entities to resolve those
parties' collective claims arising from the 2017/2018 Wildfire/Mudslide Events (the “Local Public Entity Settlements”). After
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the Local Public Entity Settlements, the liability accrued for estimated losses as of December 31, 2019 was reduced by the
$360 million paid in the Local Public Entity Settlements.
Each reporting period, management reviews its loss estimates for remaining alleged and potential claims related to the
2017/2018 Wildfire/Mudslide Events. The process for estimating losses associated with wildfire litigation claims requires
management to exercise significant judgment based on a number of assumptions and subjective factors, including, but not
limited to: estimates of known and expected claims by third parties based on currently available information, opinions of
counsel regarding litigation risk, the status of and developments in the course of litigation, and prior experience litigating and
settling wildfire litigation claims. While the low end of the reasonably estimated range of expected losses for the 2017/2018
Wildfire/Mudslide Events is estimated on an aggregate basis, some of the factors evaluated by management in connection with
its fourth quarter 2019 review contributed to a significant increase in certain loss estimates, while others contributed to a
significant decrease in certain other loss estimates. The net result of management's fourth quarter 2019 review was an increase
in estimated losses of $232 million for total estimated losses of $4.5 billion as of December 31, 2019 for unpaid claims related
to the 2017/2018 Wildfire Mudslide Events. As additional information becomes available, management's estimates and
assumptions regarding the causes and financial impact of the 2017/2018 Wildfire/Mudslide Events may change further. Such
additional information is expected to become available from multiple external sources during the course of litigation and
settlement discussions and from SCE's ongoing internal review, including, among other things, information regarding the
extent of damages that may be attributable to any fire determined to have been substantially caused by SCE's equipment,
information that may be obtained from the equipment in CAL FIRE's possession, and information pertaining to fire
progression, suppression activities, damages alleged by plaintiffs and insurance claims made by third parties.
As described above, the accrued liability as of December 31, 2019 corresponds to the lower end of the reasonably estimated
range of expected losses that may be incurred in connection with the 2017/2018 Wildfire/Mudslide Events and is subject to
change as additional information becomes available. Edison International and SCE currently believe that it is reasonably
possible that the amount of the actual loss will be greater than the amount accrued. However, Edison International and SCE
are currently unable to reasonably estimate an upper end of the range of expected losses given the uncertainty as to the legal
and factual determinations to be made during litigation, including uncertainty as to the contributing causes of the 2017/2018
Wildfire/Mudslide Events, the complexities associated with fires that merge, whether inverse condemnation will be held
applicable to SCE with respect to damages caused by the Montecito Mudslides, and the preliminary nature of the litigation
processes.
For events that occurred in 2017 and early 2018, principally the Thomas and Koenigstein Fires and Montecito Mudslides, SCE
had $1.0 billion of wildfire-specific insurance coverage, subject to a self-insured retention of $10 million per occurrence. For
the Woolsey Fire, SCE had an additional $1.0 billion of wildfire-specific insurance coverage, subject to a self-insured
retention of $10 million per occurrence. Edison International and SCE record a receivable for insurance recoveries when
recovery of a recorded loss is determined to be probable. The following table presents changes in expected insurance
recoveries associated with the estimated losses for the 2017/2018 Wildfire/Mudslide Events since December 31, 2018:
(in millions)
Balance at December 31, 2018
Insurance recoveries1
Balance at December 31, 2019
$
$
2,000
(290)
1,710
1 Additional insurance recoveries of $55 million were received in February 2020.
SCE will seek to recover uninsured costs resulting from the 2017/2018 Wildfire/Mudslide Events through electric rates. The
amount of the receivable is subject to change based on additional information. Recovery of these costs is subject to approval
by regulators. Under accounting standards for rate-regulated enterprises, SCE defers costs as regulatory assets when it
concludes that such costs are probable of future recovery in electric rates. SCE utilizes objectively determinable evidence to
form its view on probability of future recovery. The only directly comparable precedent in which a California investor-owned
utility has sought recovery for uninsured wildfire-related costs is SDG&E's requests for cost recovery related to 2007 wildfire
activity, where FERC allowed recovery of all FERC-jurisdictional wildfire-related costs while the CPUC rejected recovery of
all CPUC-jurisdictional wildfire-related costs based on a determination that SDG&E did not meet the CPUC's prudency
standard. As a result, while SCE does not agree with the CPUC's decision, it believes that the CPUC's interpretation and
application of the prudency standard to SDG&E creates substantial uncertainty regarding how that standard will be applied to
an investor-owned utility in future wildfire cost-recovery proceedings for fires ignited prior to July 12, 2019. SCE will
continue to evaluate the probability of recovery based on available evidence, including judicial, legislative and regulatory
decisions, including any CPUC decisions illustrating the interpretation and/or application of the prudency standard when
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making determinations regarding recovery of uninsured wildfire-related costs. While the CPUC has not made a determination
regarding SCE's prudency relative to any of the 2017/2018 Wildfire/Mudslide Events, SCE is unable to conclude, at this time,
that uninsured CPUC-jurisdictional wildfire-related costs are probable of recovery through electric rates. SCE would record a
regulatory asset at the time it obtains sufficient information to support a conclusion that recovery is probable. SCE will seek
recovery of the CPUC portion of any uninsured wildfire-related costs through its WEMA or its CEMA. In July 2019, SCE
filed a CEMA application with the CPUC to seek recovery of, among other things, approximately $6 million in costs incurred
to restore service to customers and to repair, replace and restore buildings and SCE's facilities damaged or destroyed as a
result of the Thomas and Koenigstein Fires. SCE continues to incur costs for reconstructing its system and restoring service to
structures that were damaged or destroyed by these two fires and plans to file additional applications with the CPUC to
recover such costs. See "Recovery of Wildfire-Related Costs" below.
Through the operation of its FERC Formula Rate, and based upon the precedent established in SDG&E's recovery of FERC-
jurisdictional wildfire-related costs, SCE believes it is probable it will recover its FERC-jurisdictional wildfire and mudslide
related costs and has recorded regulatory assets of $149 million within the FERC balancing account, the FERC portion of the
estimated losses accrued.
Current Wildfire Insurance Coverage
SCE has approximately $1.2 billion of wildfire-specific insurance coverage for events that may occur during the period June
1, 2019 through June 30, 2020, subject to up to $115 million of co-insurance and $50 million of self-insured retention, which
results in net coverage of approximately $1.0 billion. Various coverage limitations within the policies that make up SCE's
wildfire insurance coverage could result in additional material self-insured costs in the event of multiple wildfire occurrences
during a policy period or with a single wildfire with damages in excess of the policy limits.
SCE's cost of obtaining wildfire insurance coverage has increased significantly as a result of, among other things, the number
of recent and significant wildfire events throughout California and the application of inverse condemnation to investor-owned
utilities. As such, SCE may not be able to obtain sufficient wildfire insurance, at a reasonable cost, in the future.
SCE's wildfire insurance expense in 2019, prior to any regulatory deferrals, totaled approximately $400 million. In February
2019, the CPUC approved recovery of $107 million of the costs incurred by SCE to obtain a 12-month, $300 million wildfire
insurance policy in December 2017. As a result of this decision, SCE recovered these insurance premiums during 2019. As of
December 31, 2019, SCE had regulatory assets of approximately $341 million related to wildfire insurance costs and believes
that such amounts are probable of recovery. While SCE believes that amounts deferred are probable of recovery, there is no
assurance that SCE will be allowed to recover costs that have been incurred, or costs incurred in the future for additional
wildfire insurance, in electric rates.
SCE tracks insurance premium costs related to wildfire liability insurance policies as well as other wildfire-related costs in its
WEMA. In July 2019, SCE filed a WEMA application with the CPUC to seek recovery of $478 million in wildfire insurance
premium costs incurred in excess of premiums approved in the 2018 GRC. The application also seeks recovery of the
corresponding financing costs.
Recovery of Wildfire-Related Costs
Pre-AB 1054 Cost Recovery
California courts have previously found investor-owned utilities to be strictly liable for property damage, regardless of fault,
by applying the theory of inverse condemnation when a utility's facilities were determined to be a substantial cause of a
wildfire that caused the property damage. The rationale stated by these courts for applying this theory to investor-owned
utilities is that property damages resulting from a public improvement, such as the distribution of electricity, can be spread
across the larger community that benefited from such improvement through recovery of uninsured wildfire-related costs in
electric rates. However, in November 2017, the CPUC issued a decision denying SDG&E's request to include in its rates
uninsured wildfire-related costs arising from several 2007 wildfires, finding that SDG&E did not meet the prudency standard
because it did not prudently manage and operate its facilities prior to or at the outset of the 2007 wildfires. In July 2018, the
CPUC denied both SDG&E's application for rehearing on its cost recovery request and a joint application for rehearing filed
by SCE and PG&E limited to the applicability of inverse condemnation principles in the same proceeding. The California
Court of Appeal, the California Supreme Court and the United States Supreme Court have denied SDG&E's petitions for
review of the CPUC's denial of SDG&E's application.
Edison International and SCE continue to pursue regulatory and legal strategies, and anticipate pursuing legislative strategies
in the longer term, to address the application of a strict liability standard to wildfire-related property damages without the
guaranteed ability to recover resulting costs in electric rates.
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2019 Wildfire Legislation
In July 2019, AB 1054 was signed by the Governor of California and became effective immediately. The summary of the
wildfire legislation below is based on SCE's interpretation of AB 1054. A lawsuit challenging the validity of AB 1054 was
filed in federal court on July 19, 2019. Edison International and SCE are unable to predict the outcome of this lawsuit.
Wildfire Insurance Fund
AB 1054 provided for the Wildfire Insurance Fund to reimburse utilities for payment of third-party damage claims arising
from certain wildfires that exceed, in aggregate in a calendar year, the greater of $1.0 billion or the utility's insurance
coverage. The Wildfire Insurance Fund was established in September 2019 when both SCE and SDG&E made their initial
contributions to the fund. The Wildfire Insurance Fund is available for claims related to wildfires ignited after July 12, 2019
that are determined to have been caused by a utility by the responsible government investigatory agency.
SCE and SDG&E have collectively made their initial contributions totaling approximately $2.7 billion to the Wildfire
Insurance Fund. While PG&E has committed to make an initial contribution of approximately $4.8 billion to the Wildfire
Insurance Fund upon emergence from bankruptcy, its participation in, and contributions to, the fund are subject to it resolving
its bankruptcy proceeding and meeting certain other conditions prior to June 30, 2020. SCE, SDG&E and PG&E are also
collectively expected to make aggregate contributions of $3.0 billion to the Wildfire Insurance Fund through annual
contributions to the fund over a 10-year period, of which SCE and SDG&E have made their initial annual contributions
totaling approximately $107 million. If PG&E is unable to participate in the Wildfire Insurance Fund, then SCE and SDG&E
are collectively expected to make aggregate contributions of approximately $1.0 billion to the fund, through annual
contributions over the 10-year period. In addition to PG&E's, SCE's and SDG&E's contributions to the Wildfire Insurance
Fund, $13.5 billion is expected to be collected over a 15-year period from their ratepayers through a dedicated rate component.
The amount collected from ratepayers may be directly contributed to the Wildfire Insurance Fund or used to support the
issuance of up to $10.5 billion in bonds by the California Department of Water Resources, the proceeds of which would be
contributed to the fund. In addition to funding contributions to the Wildfire Insurance Fund, the amount collected from utility
ratepayers will pay for, among other things, any interest and financing costs related to any bonds that are issued by the
California Department of Water Resources to support the contributions to the Wildfire Insurance Fund. Based on a decision
adopted by the CPUC in October 2019 in the Order Instituting Rulemaking to Consider Authorization of a Non-Bypassable
Charge to Support the Wildfire Insurance Fund, PG&E's ratepayers will not be required to contribute to the fund if PG&E does
not participate in the Wildfire Insurance Fund. In that case, $7.5 billion will be collected from SCE's and SDG&E's ratepayers
through the dedicated rate component to support a contribution to the Wildfire Insurance Fund.
SCE made an initial contribution of approximately $2.4 billion to the Wildfire Insurance Fund in September 2019 and has
committed to make ten annual contributions of approximately $95 million per year to the fund, by no later than January 1 of
each year. SCE made its first annual contribution to the Wildfire Insurance Fund in December 2019. Edison International
supported SCE's initial contribution to the Wildfire Insurance Fund by raising $1.2 billion from the issuance of Edison
International equity. SCE raised the remaining $1.2 billion from the issuance of long-term debt. SCE's contributions to the
Wildfire Insurance Fund will not be recoverable through electric rates and will be excluded from the measurement of SCE's
CPUC-jurisdictional authorized capital structure. SCE will also not be entitled to cost recovery for any borrowing costs
incurred in connection with its contributions to the Wildfire Insurance Fund. See Note 1 for information on the accounting
impact of SCE's contributions to the Wildfire Insurance Fund.
Participating investor-owned utilities will be reimbursed from the Wildfire Insurance Fund for eligible claims, subject to the
fund administrator's review, and will be required to reimburse the fund for withdrawn amounts that the CPUC disallows,
subject, in some instances, to the AB 1054 Liability Cap (as defined below). If the utility has maintained a valid safety
certification and its actions or inactions that resulted in the wildfire are not found to constitute conscious or willful disregard
of the rights and safety of others, the aggregate requirement to reimburse the fund over a trailing three calendar year period is
capped at 20% of the equity portion of the utility's transmission and distribution rate base in the year of the prudency
determination ("AB 1054 Liability Cap"). Based on SCE’s 2020 rate base and assuming the equity portion of SCE's capital
structure is 52% (SCE's CPUC authorized capital structure), SCE's requirement to reimburse the Wildfire Insurance Fund for
eligible claims disallowed in 2020 would be capped at approximately $3.0 billion.
SCE will not be allowed to recover borrowing costs incurred to reimburse the fund for amounts that the CPUC disallows. The
Wildfire Insurance Fund, and consequently the AB 1054 Liability Cap, will terminate when the administrator determines that
the fund has been exhausted.
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AB 1054 Prudency Standard
As a result of the establishment of the Wildfire Insurance Fund, AB 1054 created a new standard that the CPUC must apply
when assessing the prudency of a utility in connection with a request for recovery of wildfire costs for wildfires ignited after
July 12, 2019. Under AB 1054, the CPUC is required to find a utility to be prudent if the utility's conduct related to the
ignition was consistent with actions that a reasonable utility would have undertaken under similar circumstances, at the
relevant point in time, and based on the information available at that time. Prudent conduct under the AB 1054 standard is not
limited to the optimum practice, method, or act to the exclusion of others, but rather encompasses a spectrum of possible
practices, methods, or acts consistent with utility system needs, the interest of the ratepayers, and the requirements of
governmental agencies. AB 1054 also provides that the CPUC may determine that wildfire costs may be recoverable, in whole
or in part, by taking into account factors within and outside the utility's control, including humidity, temperature, and winds.
Further, utilities with a valid safety certification will be presumed to have acted prudently related to a wildfire ignition unless a
party in the cost recovery proceeding creates serious doubt as to the reasonableness of the utility's conduct, at which time, the
burden shifts back to the utility to prove its conduct was reasonable. If a utility does not have a valid safety certification, it will
have the burden to prove, based on a preponderance of evidence, that its conduct was prudent. The new prudency standard will
survive the termination of the Wildfire Insurance Fund.
Utilities participating in the Wildfire Insurance Fund that are found to be prudent are not required to reimburse the fund for
amounts withdrawn from the fund and can recover wildfire costs through electric rates if the fund has been exhausted.
Capital Expenditure Requirement
Under AB 1054, approximately $1.6 billion spent by SCE on wildfire risk mitigation capital expenditures made after August 1,
2019, cannot be included in the equity portion of SCE's rate base. SCE can apply for an irrevocable order from the CPUC to
finance these capital expenditures, including through the issuance of securitized bonds, and can recover any prudently incurred
financing costs. SCE expects to finance this capital requirement by issuing securitized bonds.
Wildfire Mitigation Plan and Safety Certification
Under AB 1054, SCE is required to submit a wildfire mitigation plan to the CPUC annually for review and approval.
Beginning in 2020, each such plan is required to cover at least a three-year period. SCE filed its 2020 Wildfire Mitigation Plan
in February 2020.
Under AB 1054, SCE can obtain an annual safety certification upon the submission of certain required safety information,
including an approved wildfire mitigation plan. On July 25, 2019, SCE obtained its initial safety certification that will be valid
for twelve months.
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, 2019, SCE's recorded estimated minimum liability to remediate its 22 identified material sites (sites with a
liability balance as of December 31, 2019, in which the upper end of the range of the costs is at least $1 million) was
$238 million, including $177 million related to San Onofre. In addition to these sites, SCE also has 15 immaterial sites with a
liability balance at December 31, 2019 for which the total minimum recorded liability was $4 million. Of the $242 million
total environmental remediation liability for SCE, $237 million has been recorded as a regulatory asset. SCE expects to
recover $41 million through an incentive mechanism that allows SCE to recover 90% of its environmental remediation costs at
certain sites (SCE may request to include additional sites in this mechanism), and $196 million through proceedings that allow
SCE to recover up to 100% of the costs incurred at certain sites through customer rates. SCE's identified sites include several
sites for which there is a lack of currently available information, including the nature and magnitude of contamination, and the
extent, if any, that SCE may be held responsible for contributing to any costs incurred for remediating these sites. Thus, no
reasonable estimate of cleanup costs can be made for these sites.
The ultimate costs to clean up SCE's identified sites may vary from its recorded liability due to numerous uncertainties
inherent in the estimation process, such as: the extent and nature of contamination; the scarcity of reliable data for identified
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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 $91 million and $7 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
5 years are expected to range from $5 million to $15 million. Costs incurred for years ended December 31, 2019, 2018 and
2017 were $9 million, $8 million and $9 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 $13.9 billion for Palo Verde and $560 million for San
Onofre. As of January 1, 2019, 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"). In the case
of San Onofre, the balance is covered by a US Government indemnity. In the case of Palo Verde, 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, which
is participating in the loss sharing program, results in claims and/or costs which exceed the primary insurance at that plant site,
all participating 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 Palo Verde, or while radioactive material is in transit to or from San Onofre or Palo
Verde. 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 Nuclear Electric Insurance Limited
("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.
SCE withdrew from participation in the secondary insurance pool for San Onofre for offsite liability insurance effective
January 5, 2018. Based on its ownership interests in Palo Verde, SCE could be required to pay a maximum of approximately
$65 million per nuclear incident for future incidents. However, it would have to pay no more than approximately $10 million
per future incident in any one year. SCE could be required to pay a maximum of approximately $255 million per nuclear
incident and a maximum of $38 million per year per incident for liabilities arising from events prior to January 5, 2018,
although SCE is not aware of any such events. 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.
SCE is a member of NEIL, a mutual insurance company owned by entities with nuclear facilities. NEIL provides insurance for
nuclear property damage, including damages caused by acts of terrorism up to specified limits, and for accidental outages for
active facilities. The amount of nuclear property damage insurance purchased for San Onofre and Palo Verde exceeds the
minimum federal requirement of $50 million and $1.1 billion, respectively. These policies include coverage for
decontamination liability. 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 NEIL losses at any nuclear facility covered by the arrangement were to exceed the accumulated funds for these insurance
programs, SCE could be assessed retrospective premium adjustments of up to approximately $52 million per year. Insurance
premiums are charged to operating expense.
115
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 (SCE share $124 million, which included reimbursement for
approximately $2 million in legal and other costs), 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. In August 2018,
the CPUC approved SCE's proposal to return the SCE share of the award to customers based on the amount that customers
actually contributed for fuel storage costs; resulting in approximately $106 million of the SCE share being returned to
customers and the remaining $17 million being returned to shareholders. Of the $106 million, $72 million was applied against
the remaining San Onofre Regulatory Asset in accordance with the Revised San Onofre Settlement Agreement.
The April 2016 settlement also provided for a claim submission/audit process for expenses incurred from 2014 – 2016, where
SCE may 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 made 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 (SCE share was approximately $34 million). SCE accepted the DOE's determination, and the
government paid the 2014 – 2015 claim under the terms of the settlement. In October 2017, SCE filed a claim covering
damages for 2016 for approximately $58 million. In May 2018, the DOE approved reimbursement of approximately
$45 million (SCE share was approximately $35 million) of SCE's 2016 damages, disallowing recovery of approximately
$13 million. SCE accepted the DOE's determination, and the government paid the 2016 claim under the terms of the
settlement. The damages awards are subject to CPUC review as to how the amounts will be refunded among customers,
shareholders, or to offset other costs.
In November 2019, SCE filed a new complaint against the DOE to recover damages incurred from January 1, 2017 through
July 31, 2018.
Tehachapi Transmission Project
The Tehachapi Transmission 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.
In December 2019, the CPUC filed a protest alleging that $419 million of costs associated with the Tehachapi Transmission
Project are imprudent and should be disallowed from SCE's FERC rate base because these costs exceeded the maximum
reasonable cost identified by the CPUC when it granted the project's certificate of public convenience and necessity. The
CPUC requested that FERC set this issue for hearings.
116
Note 13. Leases
Leases as Lessee
SCE enters into various agreements to purchase power, electric capacity and other energy products that may be accounted for
as leases when SCE has dispatch rights that determine when and how a plant runs. Prior to January 1, 2019, a power purchase
agreement contained a lease when SCE purchased substantially all of the output from a specific plant and did not otherwise
meet a fixed price unit of output exception. SCE also leases property and equipment primarily related to vehicles, office
space and other equipment. The terms of the contracts included in the table below are primarily 10 to 20 years for PPA leases,
5 to 72 years for office leases, and 5 to 12 years for the remaining other operating leases.
The following table summarizes SCE's lease payments for operating and finance leases as of December 31, 2019:
(in millions)
2020
2021
2022
2023
2024
Thereafter
Total lease payments
Amount representing interest4
Lease liabilities
PPA Operating
Leases1,2
Other Operating
Leases3
PPA Finance
Leases1
$
$
70
48
48
47
47
489
749
220
529
$
$
37
30
24
19
14
95
219
59
160
$
$
1
1
1
2
2
8
15
6
9
At December 31, 2018, SCE's future minimum lease payments under non-cancellable leases were as follows:
(in millions)
2019
2020
2021
2022
2023
Thereafter
PPA Operating
Leases1
Other Operating
Leases3
PPA Capital
Leases1
$
$
148
124
103
79
47
536
42
31
27
22
17
101
240
$
$
$
5
6
6
6
5
66
94
25
33
36
Total lease payments
$
1,037
$
Amount representing executory costs
Amount representing interest
Net commitments
1 Excludes expected purchases from most renewable energy contracts, which do not meet the
definition of a lease payment since renewable power generation is contingent on external factors.
2 During the second quarter of 2019, SCE amended three power contracts that resulted in a
$161 million reduction in ROU assets and lease liabilities as these contracts no longer qualify as
leases.
3 Excludes escalation clauses based on consumer price or other indices and residual value guarantees
that are not considered probable at the commencement date of the lease.
4 Lease payments are discounted to their present value using SCE's incremental borrowing rates.
117
Supplemental balance sheet information related to SCE's leases was as follows:
(in millions)
Operating leases:
Operating lease ROU assets
Current portion of operating lease liabilities
Operating lease liabilities
Total operating lease liabilities
Finance leases included in:
Utility property, plant and equipment, gross
Accumulated depreciation
Utility property, plant and equipment, net
Other current liabilities
Other long-term liabilities
Total finance lease liabilities
December 31, 2019
$
$
$
$
689
79
610
689
14
(5)
9
1
8
9
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 for operating leases and interest and amortization expense for finance leases.
The following table summarizes the components of SCE's lease expense:
(in millions)
PPA leases:
Operating lease cost
Finance lease cost
Variable lease cost1
Total PPA lease cost
Other operating leases cost
Total lease cost
Year ended
December 31, 2019
$
$
118
1
2,087
2,206
46
2,252
1
Includes lease costs from renewable energy contracts where payments are based on contingent external
factors such as wind, hydro and solar power generation.
For the year ended 2018 and 2017, operating lease expense for PPAs was $2.3 billion and $2.3 billion, respectively (including
contingent rents of $2.1 billion and 1.8 billion, respectively), contingent rents for capital leases were $104 million and
$99 million, respectively, and operating lease expense for other leases was $57 million and $59 million, respectively.
118
Other information related to leases was as follows:
(in millions, except lease term and discount rate)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Year ended
December 31, 2019
PPA leases
Other leases
Financing cash flows from PPA finance leases
$
ROU assets obtained in exchange for lease obligations:
Other operating leases
Weighted average remaining lease term (in years):
Operating leases
PPA leases
Other leases
PPA Finance leases
Weighted average discount rate:
Operating leases
PPA leases
Other leases
PPA Finance leases
118
44
1
34
16.05
12.73
11.51
4.46%
3.88%
8.76%
Leases as Lessor
SCE also enters into operating leases to rent certain land and facilities as a lessor. These leases primarily have terms that
range from 15 to 65 years. During the year ended December 31, 2019, SCE recognized $18 million in lease income, which is
included in operating revenue on the consolidated statements of income. At December 31, 2019, the undiscounted cash flow
expected to be received from lease payments for the remaining years is as follows:
(in millions)
2020
2021
2022
2023
2024
Thereafter
Total
$
$
11
10
10
9
8
148
196
119
Note 14. Equity
Common Stock Issuances
In May 2019, Edison International filed a prospectus supplement and executed several distribution agreements with certain
sales agents to establish an ATM program under which it may sell shares of its common stock having an aggregate sales price
of up to $1.5 billion. In the fourth quarter of 2019, Edison International issued 2.8 million shares through the ATM program
and received proceeds of $198 million, net of fees and offering expenses of $2 million. The proceeds from the sales were
used for equity contributions to SCE and for general corporate and working capital purposes. As of December 31, 2019,
shares of common stock having an aggregate offering price of $1.3 billion remained available to be sold under the ATM
program. Edison International has no obligation to sell the remaining available shares.
In July 2019, Edison International issued 32.2 million shares of common stock and received proceeds of approximately
$2.2 billion, net of fees and offering expenses of $52 million in an underwritten offering. The proceeds were contributed to
SCE in a series of equity investments in August and September shown below and for general corporate purposes.
Beginning in July 2019, Edison International settled the ongoing common stock requirements of various internal programs
through issuance of new common stock. In the year ended December 31, 2019, 0.6 million shares of new common stock were
purchased by employees through the 401(k) defined contribution savings plan for net cash receipts of $41 million, 0.4 million
shares of common stock were issued as stock compensation awards for net cash receipts of $22 million and 0.1 million shares
of new common stock were issued in lieu of distributing $8 million to shareholders opting to receive dividend payments in
the form of additional common stock.
Equity Contributions
In 2019, Edison International Parent made the following equity contributions to SCE:
Date of contribution
Amounts (in millions)
April 26, 2019
June 21, 2019
August 2, 2019
August 30, 2019
September 9, 2019
December 12, 2019
Total
$
$
750
450
1,200
200
450
200
3,250
The proceeds from the Edison International Parent equity contribution in 2019 were used to support the initial contribution to
the Wildfire Insurance Fund of $2.4 billion, to support SCE's capital program, to increase SCE's equity level, to repay
commercial paper borrowings and for general corporate purposes, including the repayment of the February 2019 SCE Term
Loan discussed in Note 5.
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. See Note 1 for further information on
dividend restrictions. 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,
2019, 2018 and 2017. 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.
120
$
16
30
41
33
350
400
275
325
300
475
16
30
41
33
350
400
275
325
300
475
Preferred stock and preference stock are:
(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:
Shares
Outstanding
Redemption
Price
Dividends
Declared
per Share
December 31,
2019
2018
650,000
$
1,200,000
1,653,429
1,296,769
$
25.50
25.80
28.75
25.80
$
1.020
1.060
1.080
1.195
6.25% Series E (cumulative)
5.10% Series G (cumulative)
5.75% Series H (cumulative)
5.375% Series J (cumulative)
5.45% Series K (cumulative)
5.00% Series L (cumulative)
350,000
160,004
110,004
130,004
120,004
190,004
1,000.00
2,500.00
2,500.00
2,500.00
2,500.00
2,500.00
62.500
127.500
143.750
134.375
136.250
125.000
SCE's preferred and preference stock
Less issuance costs
Edison International's preferred and preference stock
of utility
2,245
(52)
2,245
(52)
$
2,193
$
2,193
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 G, H, J, K and L preference stock, issued in 2013, 2014, 2015, 2016 and 2017, respectively, may be
redeemed at par, in whole, but not in part, at any time prior to March 15, 2018, March 15, 2024, September 15, 2025,
March 15, 2026 and June 26, 2022, respectively, if certain changes in tax or investment company law or interpretation (or
applicable rating agency equity credit criteria for Series L only) occur and certain other conditions are satisfied. On or after
March 15, 2018, March 15, 2024, September 15, 2025, March 15, 2026 and June 26, 2022, SCE may redeem the Series G, H,
J, K and L 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 G, H, J, K and L preference stock were issued to SCE Trust II, SCE Trust III, SCE Trust IV,
SCE Trust V and SCE Trust VI, respectively, special purpose entities formed to issue trust securities as discussed in Note 3.
121
Note 15. Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss, net of tax, consist of:
(in millions)
Beginning balance
Pension and PBOP – net loss:
Other comprehensive loss before reclassifications
Reclassified from accumulated other comprehensive loss1
Other2
Change
Ending balance
Edison International
SCE
Years ended December 31,
2019
2018
2019
2018
$
(50) $
(43) $
(23) $
(14)
5
(10)
(19)
(69) $
(9)
6
(4)
(7)
(50) $
(14)
3
(5)
(16)
(39) $
$
(19)
(3)
4
(5)
(4)
(23)
1 These items are included in the computation of net periodic pension and PBOP expenses. See Note 9 for additional information.
2 Edison International and SCE recognized cumulative effect adjustments to the opening balance of retained earnings and
accumulated other comprehensive loss on January 1, 2019 and 2018 related to the adoption of the accounting standards update on
the reclassification of stranded tax effects resulting from Tax Reform in 2019 and the measurement of financial instruments in
2018. See Note 1 for further information on the reclassification of stranded tax effects.
Note 16. Other Income
Other income net of expenses is as follows:
(in millions)
SCE other income and (expenses):
Equity allowance for funds used during construction
Increase in cash surrender value of life insurance policies and life
insurance benefits
Interest income
Net periodic benefit income – non-service components
Civic, political and related activities and donations
Other
Total SCE other income
Other income of Edison International Parent and Other:
Net periodic benefit costs – non-service components
Other
Years ended December 31,
2018
2017
2019
$
101
$
104
$
39
37
70
(46)
(6)
195
(3)
1
36
24
81
(44)
(7)
194
(2)
5
87
42
7
51
(34)
(5)
148
(14)
(2)
132
Total Edison International other income
$
193
$
197
$
122
Note 17. Supplemental Cash Flows Information
Supplemental cash flows information is:
(in millions)
Cash payments (receipts):
Edison International
SCE
Years ended December 31,
2019
2018
2017
2019
2018
2017
Interest, net of amounts capitalized
$
705
$
Income taxes, net
Non-cash financing and investing activities:
Dividends declared but not paid:
Common stock
Preferred and preference stock
(85)
231
12
595
(135)
200
12
$
548
$
1
197
12
$
615
(164)
552
(57)
$
509
2
200
12
—
12
212
12
SCE's accrued capital expenditures at December 31, 2019, 2018 and 2017 were $643 million, $594 million and $652 million,
respectively. Accrued capital expenditures will be included as an investing activity in the consolidated statements of cash
flow in the period paid.
Note 18. 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 performed by Edison International or SCE employees, such as payroll and
employee benefit programs, 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 revenue, 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.
For the years ended December 31, 2019, 2018 and 2017, SCE purchased wildfire liability insurance for premiums of
$260 million, $22 million and $144 million respectively, from Edison Insurance Services, Inc. ("EIS"), a wholly-owned
subsidiary of Edison International. EIS fully reinsured the exposure for these policies through the commercial reinsurance
market, with reinsurance limits and premiums equal to those of the insurance purchased by SCE. The related-party
transactions included in SCE's consolidated balance sheets for wildfire-related insurance purchased from EIS were as
follows:
(in millions)
Long-term insurance receivables due from affiliate
Prepaid insurance1
Current payables due to affiliate2
1 Reflected in "Prepaid expenses" on SCE's consolidated balance sheets.
2 Reflected in "Accounts payable" on SCE's consolidated balance sheets.
December 31,
2019
2018
$
803
$
1,000
10
—
13
4
The amortization expense for wildfire-related insurance premiums paid to EIS were $173 million, $140 million and
$13 million for the years ended December 31, 2019, 2018 and 2017 respectively.
123
Note 19. Quarterly Financial Data (Unaudited)
Edison International's quarterly financial data is as follows:
(in millions, except per share amounts)
Operating revenue
Operating income
Income from continuing operations
Income from discontinued operations, net
Net income attributable to common shareholders
Basic earnings per share:
Continuing operations
Discontinued operations
Total
Diluted earnings per share:
Continuing operations
Discontinued operations
Total
Dividends declared per share
(in millions, except per share amounts)
Operating revenue
Operating (loss) income1
(Loss) income from continuing operations
Income from discontinued operations, net
Net (loss) income attributable to common shareholders
Basic (loss) earnings per share:
Continuing operations
Discontinued operations
Total
Diluted (loss) earnings per share:
Continuing operations
Discontinued operations
Total
Dividends declared per share
2019
Fourth
Third
Second
First
$
2,970
$
3,741
$
2,812
$
2,824
287
173
—
143
0.40
—
0.40
0.40
—
0.40
$
$
$
$
636
502
—
471
1.36
—
1.36
1.35
—
1.35
$
$
$
$
500
422
—
392
1.20
—
1.20
1.20
—
1.20
$
$
$
$
352
308
—
278
0.85
—
0.85
0.85
—
0.85
0.6375
0.6125
0.6125
0.6125
2018
Fourth
Third
Second
First
3,009
(2,041)
(1,434)
34
(1,430)
(4.49)
0.10
(4.39)
(4.49)
0.10
(4.39)
0.6125
$
$
$
$
$
4,269
739
544
—
513
1.57
—
1.57
1.57
—
1.57
0.6050
$
$
$
$
$
2,815
420
298
—
276
0.85
—
0.85
0.84
—
0.84
0.6050
$
$
$
$
$
2,564
330
242
—
218
0.67
—
0.67
0.67
—
0.67
0.6050
$
$
$
$
$
$
$
$
$
1
In the fourth quarter of 2018, SCE recorded a charge of $2.5 billion for wildfire-related claims, net of expected recoveries from
insurance and FERC customers.
124
SCE's quarterly financial data is as follows:
(in millions)
Operating revenue
Operating income
Net income
Net income available for common stock
Common dividends declared
(in millions)
Operating revenue
Operating (loss) income1
Net (loss) income
Net (loss) income available for common stock
Common dividends declared
$
$
2019
Fourth
Third
Second
First
2,958
325
224
194
200
$
3,732
649
534
503
200
$
2,800
513
449
419
—
$
2,816
358
323
293
200
2018
Fourth
Third
Second
First
2,994
(2,013)
(1,399)
(1,429)
—
$
4,260
$
2,803
$
2,554
754
567
536
264
439
327
297
100
414
316
286
212
1
In the fourth quarter of 2018, SCE recorded a charge of $2.5 billion for wildfire-related claims, net of expected recoveries from
insurance and FERC customers.
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.
125
SELECTED FINANCIAL DATA
Selected Financial Data: 2015 – 2019
(in millions, except per share amounts)
2019
2018
2017
2016
2015
Edison International
Operating revenue1
Operating expenses2
Income (loss) from continuing operations
Income from discontinued operations, net of tax
Net income (loss)
Net income (loss) attributable to common
shareholders
Weighted average shares of common stock
outstanding
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 assets3, 4
Long-term debt excluding current portion
Preferred and preference stock of utility
Common shareholders' equity
Southern California Edison Company
Operating revenue1
Operating expenses2
Net income (loss)
Net income (loss) available for common stock
Total assets4
Long-term debt excluding current portion
Preferred and preference stock
Common shareholder's equity
Capital structure5:
Common shareholder's equity
Preferred and preference stock
Long-term debt
$ 12,347
$ 12,657
$ 12,320
$ 11,869
$ 11,524
10,572
1,405
—
1,405
1,284
340
3.78
—
3.78
3.77
—
3.77
2.4750
$
$
$
$
13,209
(350)
34
(316)
(423)
326
(1.40)
0.10
(1.30)
(1.40)
0.10
(1.30)
2.4275
$
$
$
$
10,864
668
—
668
565
326
1.73
—
1.73
1.72
—
1.72
$
$
$
$
9,807
1,413
12
1,425
1,311
326
3.99
0.03
4.02
3.94
0.03
3.97
$
$
$
$
9,542
1,082
35
1,117
1,020
326
3.02
0.11
3.13
2.99
0.11
3.10
$
$
$
$
2.2325
1.9825
1.7325
$ 64,382
$ 56,715
$ 52,580
$ 51,319
$ 50,229
17,864
2,193
13,303
14,632
2,193
10,459
11,642
2,193
11,671
10,175
2,191
11,996
10,883
2,020
11,368
$ 12,306
$ 12,611
$ 12,254
$ 11,830
$ 11,485
10,461
1,530
1,409
$ 64,273
15,132
2,245
15,582
13,017
(189)
(310)
$ 56,574
12,892
2,245
11,540
10,707
1,136
1,012
9,648
1,499
1,376
9,436
1,111
998
$ 51,515
$ 50,891
$ 49,795
10,428
2,245
12,427
9,754
2,245
12,238
10,460
2,070
11,602
47.3%
6.8%
45.9%
43.3%
8.4%
48.3%
49.5%
9.0%
41.5%
50.5%
9.3%
40.2%
48.1%
8.6%
43.3%
1 Effective January 1, 2018, Edison International and SCE adopted an accounting standards update on revenue recognition, using the
modified retrospective method. As a result, prior period amounts were not adjusted to reflect the adoption of this standard.
2 Expenses for the years ended December 31, 2017, 2016 and 2015 were updated to reflect the implementation of the accounting standard
update for net periodic benefit costs related to the defined benefit pension and other postretirement plans.
3 Includes assets from continuing and discontinued operations.
4 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.
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5 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.
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 those 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, 2019, 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, 2019. Edison International's internal control over financial reporting as of December 31, 2019
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
2019 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.
127
BUSINESS
CORPORATE STRUCTURE, INDUSTRY AND OTHER INFORMATION
Edison International was incorporated in 1987 as the parent holding company of SCE, a California public utility incorporated
in 1909. Edison International also owns Edison Energy which is engaged in the competitive business of providing energy
services to commercial and industrial customers.
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. SCE's total number of customers by class were as follows:
(in thousands)
Residential
Commercial
Industrial
Public authorities
Agricultural and other
Total
2019
2018
2017
4,499
4,478
4,448
575
10
46
21
572
10
46
21
569
10
46
22
5,151
5,127
5,095
In 2019, SCE's total operating revenue of $12.3 billion was derived as follows: 43.1% commercial customers, 38.8%
residential customers, 4.3% industrial customers, 4.4% public authorities, 2.4% agricultural and other, and 7.0% other
operating revenue.
CPUC and FERC rates decouple authorized revenue from the volume of electricity sales and the price of energy procured so
that SCE has the opportunity to receive revenue equal to amounts authorized by the relevant regulatory agencies. As a result,
the volume of electricity sold to customers does not have a direct impact on SCE's financial results. See "SCE—Overview of
Ratemaking Process—CPUC" and "—FERC" for further information.
Edison Energy Group – Energy Service Provider
Edison Energy Group is a holding company for Edison Energy which is engaged in the competitive business of providing
energy services to commercial and industrial customers to help them improve managing their energy costs and reaching their
sustainability goals. In April 2018, Edison Energy Group sold its subsidiary SoCore Energy, which was engaged in providing
distributed solar solutions.
To date, investments in Edison Energy Group are below 1% of the total consolidated assets and operating revenue, and
therefore are not material to be reported as a business segment.
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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 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
affiliates and (2) causing or abetting a utility's violation of the rules, including providing preferential treatment to its
affiliates.
Employees and Labor Relations
At December 31, 2019, Edison International and its consolidated subsidiaries had an aggregate of 12,937 full-time
employees, 12,720 of which were full-time employees at SCE or its subsidiaries.
Approximately 4,000 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, 2022.
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
wildfires. For further information on nuclear and wildfire insurance, see "Notes to Consolidated Financial Statements—
Note 12. Commitments and Contingencies—Contingencies."
SCE
Regulation
CPUC
The CPUC has the authority to regulate, among other things, retail rates, utility distribution-level equipment and assets,
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 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 for 50% of SCE's retail electricity to be from
qualifying renewable resources by 2030 and is conducting informational studies on achieving higher percentages from
qualifying renewable resources.
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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 and physical security programs that cover SCE's information technology and operational
technology systems, including 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.
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.
Other Regulatory Agencies
The construction, planning and project site identification of SCE's transmission lines and substation facilities require the
compliance with various laws and approval of many governmental agencies in addition to the CPUC and FERC. These
include various state regulatory agencies depending on the project location; the CAISO, the US EPA, 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; the South Coast Air Quality
Management District; and the California Water Quality Control Board. 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 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. Starting with SCE's 2021 GRC, revenue will be authorized through quadrennial GRC
proceedings where 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 three years will be set by a methodology established in the GRC proceeding,
which has generally, among other items, included annual allowances for escalation in operation and maintenance costs and
additional changes in capital-related investments. Beginning with SCE's 2025 GRC, by May 15 in the year preceding each
GRC application filing date, SCE is required to file a Risk Assessment and Mitigation Phase ("RAMP") application with the
CPUC to provide information about SCE's assessment of its key safety risks and its proposed programs and spending for
mitigating those risks. The information developed during the RAMP informs SCE's proposed projects and funding requests in
the subsequent phase of the GRC.
SCE's 2018 GRC, a triennial proceeding, authorized revenue requirements for 2018, 2019 and 2020 were $5.1 billion,
$5.5 billion and $5.9 billion, respectively. For further discussion of the 2018 GRC, see "Management Overview—2018
General Rate Case" in the MD&A.
SCE's first RAMP application was timely filed in November 2018 for its 2021 GRC. In August 2019, SCE filed its 2021
GRC Application, which covers 2021 – 2023 in addition to a review of wildfire mitigation spending incremental to amounts
authorized in SCE's 2018 GRC incurred from 2018 – 2020. SCE will be required to file an amendment to its 2021 GRC
application to expand the filing to include 2024. For further discussion of the 2021 GRC, see "Management Overview – 2021
General Rate Case" in the MD&A.
The CPUC regulates SCE's cost of capital, including its capital structure and authorized rates of return. As of January 1,
2020, SCE's authorized capital structure is 43% long-term debt, 5% preferred equity and 52% common equity. SCE's 2020
authorized cost of capital consists of long-term debt of 4.74%, cost of preferred equity of 5.70% and return on common
130
equity of 10.3%. For further discussion of the Cost of Capital, see "Management Overview—2020 Cost of Capital
Application" 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 cost-recovery mechanism for its fuel and purchased power-related costs is facilitated in three main balancing accounts,
the ERRA, the PABA, and the NSGBA. For all three accounts, 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 and
the PABA. The trigger mechanism requires SCE to request an expeditious rate change if the sum of the ERRA balance and
the bundled service customers' pro-rata share of the PABA balance exceeds 4% of SCE's prior year generation rate revenue
and SCE does not expect the aggregate overcollection or undercollection to fall below 5% of SCE's prior year generation rate
revenue within 120 days. For 2020, SCE estimates the 4% and 5% trigger amounts to be approximately $200 million and
$250 million, respectively. At December 31, 2019, the ERRA was overcollected by approximately $23 million, the PABA
was undercollected by approximately $537 million, and the NSGBA was undercollected by $85 million. SCE anticipates
incorporating these year-end balances into customer rates beginning in April 2020.
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. A CPUC finding
that SCE was unreasonable or imprudent with respect to its utility-owned generation outages and contract administration
activities, 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 revenue 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, for the FERC 2018 Settlement Period was 11.2%.
In the 2019 Formula Rate case, SCE has requested a new FERC ROE of approximately 13.25%, inclusive of projects and
incentives, effective as of November 12, 2019. The 2019 Formula Rate remains subject to hearing and settlement procedures
and amounts billed to customers under the 2019 Formula Rate will be subject to refund until the 2019 Formula Rate
proceeding is ultimately resolved. Once approved, the FERC weighted average ROE can vary based on the mix of project
costs that have different incentives. For further information on the FERC formula rates, related transmission revenue
requirements and rate changes, see "Management Overview——2018 and 2019 FERC Formula Rate" 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.
131
SCE has a two-tier residential rate structure with a separate High Usage Charge ("HUC") for customers consuming more than
400% of average usage. The first tier is priced at below-average cost and is intended to cover the customer's essential
electricity needs. The second tier is priced at 25% more than the first tier, and the HUC rate is set at more than twice the rate
of the first tier. The CPUC has ordered a transition from tiered to TOU rates for most residential customers unless they opt to
stay on the tiered rate structure. SCE anticipates starting that transition in the fourth quarter of 2020. To recover a portion of
the fixed costs of serving no- or low-usage residential customers, SCE assesses both fixed charges of less than $1 per month,
and a minimum charge of $10 per month ($5 for low-income customers). For information on residential rates for customers
with renewable generation systems, see "—Competition" below.
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. Approximately 19% of the needed power in 2019 was provided by SCE's own generating facilities.
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 operate in response to wholesale market signals related to
power prices and reliability needs. The physical natural gas purchased by SCE is sourced in competitive interstate markets
and at the "citygate" trading point on the SoCalGas local distribution company system. SoCalGas is the primary provider of
intrastate 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. As a result, there continue
to be limitations on the use and capability of the facility. To date, SCE has found that increased gas storage-use restrictions
combined with SoCalGas pipeline maintenance constraints increased the cost of electricity for customers but did not impact
grid reliability. However, there is no certainty that these restrictions or pipeline constraints will not impact grid reliability in
the future. Price increases faced by customers would not affect SCE's earnings because SCE expects recovery of these costs
through the ERRA balancing account or other CPUC approved procurement plans. However, these higher prices may impact
cash flow due to the timing of those recoveries. 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 an Order Instituting Investigation 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, and 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. The
CPUC's Resource Adequacy program imposes resource adequacy requirements on load-serving entities like SCE that are
designed to provide sufficient resources to the CAISO to ensure the safe and reliable operation of the grid in real time. The
CPUC is considering a central procurement structure for local resource adequacy that would transfer the responsibility for
procuring local resource adequacy from load-serving entities to a central procurement entity. There are various central
procurement models and central procurement entities being considered, including the investor-owned utilities such as SCE.
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Competition
SCE faces retail competition in the sale of electricity to the extent that federal and California laws permit other sources to
provide electricity and related services to retail customers within SCE's service area. While retail competition impacts
customer rates it does not generally impact SCE's earnings activities. The increased retail competition is from governmental
entities formed by cities, counties, and certain other public agencies to generate and/or purchase electricity for their local
residents and businesses, known as CCAs. While California law provides only limited opportunities for customers in SCE's
service area to choose to purchase power directly from an Electric Service Provider, a limited, phased-in expansion of
customer choice ("Direct Access") for nonresidential customers was authorized beginning in 2009, and an additional limited
expansion of Direct Access was authorized in 2018. When a customer who previously took bundled service from SCE
converts to taking retail electricity service from an Electric Service Provider or a CCA, SCE remains that customer's
transmission and distribution provider. Other forms of departing load include customer generation, and load that departs SCE
service entirely to take electricity service from a publicly owned utility or a tribal utility.
California law requires bundled service customers remain financially indifferent to departing load customers and to the mass
return of departing load customers in the event of an Electric Service Provider or CCA's failure or other service termination.
The CPUC is conducting a rulemaking proceeding to review, revise, and consider alternatives to the PCIA methodology,
which determines the charges that are applied to departing load customers (including those who take service from CCAs) and
is intended to maintain bundled service customer indifference to previously authorized procurement costs. In October 2018,
the CPUC issued a final decision revising the PCIA methodology in a manner that effectively addressed the cost shifts to
remaining bundled service customers. In October 2019, the CPUC issued a final decision implementing a PCIA true-up
process to ensure that remaining bundled service and departing load customers are treated equitably. The CPUC is expected
to provide guidance on utility portfolio optimization, and pre-payment of PCIA charges for Direct Access customers and
CCAs serving departing load customers in 2020.
In February 2018, the CPUC issued a resolution to address cost shifting to bundled service customers associated with utilities'
short-term resource adequacy purchases for CCAs in their launch or expansion year. The Resolution requires new and
expanding CCAs to submit implementation plans by January 1 in order to serve customers in the following year and also
requires new and expanding CCAs to participate in the CPUC's year-ahead resource adequacy program prior to beginning
service. In May 2018, the CPUC issued a final decision to adopt a financial security requirement for CCAs, which is intended
to cover the re-entry fees imposed on CCA customers for incremental procurement and administrative costs if they are
involuntarily returned en masse to the utility's procurement service. The CPUC has not yet authorized SCE and other
investor-owned utilities to implement this decision in its tariffs.
As of year-end 2019, SCE had six CCAs serving customers in its service territory that represent less than 20% of SCE's total
service load. One CCA significantly expanded in 2019 and approximately six new or expanded CCAs have been approved by
the CPUC to serve customers in 2020. Based on recent load statistics, SCE anticipates that Direct Access and CCA load will
be approximately 35% of its total service load by the end of 2020.
Customer-owned power generation and storage alternatives, such as roof-top solar facilities and battery systems, are
increasingly used by SCE's customers as a result of technological developments, federal and state subsidies, and declining
costs of such alternatives. Beginning in 2020, and subject to certain exceptions, California will require all newly built homes
to be solar-powered.
California legislation passed in 1995 encouraged private residential and commercial investment in renewable energy
resources by requiring SCE and other investor-owned utilities to offer a 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 12-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 some non-bypassable, standby and departing load charges and interconnection fees.
Electric Service Providers and CCAs are not required by law to offer NEM rates.
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 also continue to be exempted from standby and departing load charges but are required
to pay a $75 interconnection fee and to select a TOU retail rate.
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The effect of these types of competition on SCE generally is to reduce the amount of electricity purchased by retail
customers. Customers who use alternative electricity sources typically continue to utilize and pay for SCE's transmission and
distribution services, however, NEM customers utilize, but do not pay the full cost for, those services. While changes in
volume or rates generally do not impact SCE's earnings activities, decreased retail electricity sales by SCE has the effect of
increasing utility rates because the costs of the distribution grid are not currently borne by all customers that benefit from its
use. 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. 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
has ownership interests in generating and energy storage facilities, primarily located in California, that generate approximately
7,000 megawatts of net physical capacity, of which SCE's pro-rata share is approximately 3,000 megawatts.
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.
SCE owns and operates hydroelectric plants and related reservoirs, the majority of which 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 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. If, in the future, SCE
decides to, or is forced to, decommission one or more hydroelectric projects, the costs related to the decommissioning will be
substantial. SCE does not currently recover decommissioning costs for hydroelectric projects in rates but plans to request
recovery of anticipated decommissioning costs for hydroelectric projects in a future applications to the CPUC.
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. However, as discussed above, SCE earnings are not affected by changes in
retail electricity sales. See "Overview of Ratemaking Process" above.
134
ENVIRONMENTAL CONSIDERATIONS
Greenhouse Gas Regulation
Edison International recognizes that its industry and the global economy are in the midst of a profound transformation toward
a low-carbon future as a response to climate change. SCE plans to be a key enabler of the adoption of new energy
technologies that benefit customers of the electric grid. See "Management Overview—Electricity Industry Trends" in the
MD&A.
Approximately 19% of power delivered to SCE's customers in 2019 came from utility-owned generation. In 2019, the
sources of utility-owned generation were largely carbon-free, with approximately 8% nuclear, 6% large hydroelectric, less
than 1% small hydroelectric, and less than 1% solar generation. Approximately 5% were natural gas sources. Since 2010,
SCE has reported its annual GHG emissions from utility-owned generation each year to the US EPA by March 31 of the
following year. SCE's 2019 GHG emissions from utility-owned generation are estimated to be approximately 1,290,000
metric tons.
Federal Regulation
In June 2019, the US EPA adopted the Affordable Clean Energy Rule, which establishes GHG emissions guidelines for states
to use to develop plans to address GHG emissions from existing coal-fired power plants. Litigation filed in August 2019, by
California and 28 public entities to block the implementation of the Affordable Clean Energy Rule is pending. SCE does not
expect the impact of the Affordable Clean Energy Rule to be material because it does not own or purchase power from coal-
fired generating facilities.
California Regulation
California is committed to reducing its GHG emissions, improving local air quality and supporting continued economic
growth. California’s major initiatives for reducing GHG emissions include a law that targets the reduction of GHG emissions
across the entire state economy to 40% below 1990 levels by 2030, an Executive Order that targets the reduction of GHG
emissions across the entire state economy to 80% below 1990 levels by 2050, and a California cap-and-trade program
established by the California Air Resources Board ("CARB"). Other major policy measures include the Low Carbon Fuel
Standard program established by CARB.
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 cap-and-trade
obligations by participating in verified offset programs, such as reforestation, that have recognized effects on reducing
atmospheric GHGs.
California has adopted RPS targets which require California retail sellers of electricity to provide certain percentages of
energy sales from renewable resources defined in the statute, including 33% of retail sales by December 2020; 44% of retail
sales by December 2024, 52% of retail sales by December 2027, and 60% of retail sales by December 2030. Approximately
36% of SCE's supply portfolio in 2018 came from renewable sources eligible under California's RPS. SCE estimates that
approximately 38% of its supply portfolio in 2019 came from renewable sources eligible under California's RPS, of which
35% was delivered to customers and 3% was sold for resale. As such, SCE has already met California's 2020 RPS target.
Separate from RPS targets, California also requires all retail electricity sales to be from carbon-free resources (such as
hydroelectric energy) by 2045. In 2019 approximately 48% of SCE's customer deliveries came from carbon-free resources.
California also supports climate action to meet the December 2015 Paris Agreement. SCE's climate change objectives align
with California’s requirements, and SCE anticipates it will meet its own objectives, and therefore California’s requirements,
through 2045.
Additionally, the CPUC and the California Energy Commission adopted GHG emission performance standards that apply to
California investor-owned and publicly owned utilities' long-term arrangements for the purchase of electricity. The standards
prohibit these entities, including SCE, from owning or entering into long-term financial commitments with generators, such
as coal plants, that emit more GHG than a combined-cycle natural gas turbine generator.
Edison International supports these California environmental initiatives and has undertaken analysis which, consistent with
third-party analysis, shows that electrification across multiple sectors, including transportation and industrial sectors, is
among the most cost-effective ways to achieve California's goals. Edison International and SCE believe that these initiatives
135
will lead to increased electrification across the economy and SCE is investing in grid technologies and charging infrastructure
to support California's goals.
Environmental Risks
Severe droughts and windstorms contributed to the devastating wildfires that swept through parts of California in 2017 and
2018, demonstrating the serious threat that weather extremes caused by climate change pose to California's communities and
the environment. See "Management Overview—Southern California Wildfires and Mudslides" in the MD&A. Severe
weather events, including drought, increasingly severe windstorms and rising sea-levels, pose risks to SCE's infrastructure
and SCE and Edison International are investing in building a more resilient grid to reduce climate- and weather-related
vulnerabilities. See "Management Overview—Wildfire Mitigation and Wildfire Insurance Expenses" in the MD&A.
For more information on risks related to climate change, environmental regulation, and SCE's business strategy, see "Risk
Factors—Risks Relating to Southern California Edison Company—Operating Risks."
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—SCE—Properties."
LEGAL PROCEEDINGS
Thomas Fire and Koenigstein Fire Litigation
In December 2017, wind-driven wildfires impacted portions of SCE's service territory, causing loss of life, substantial
damage to both residential and business properties, and service outages for SCE customers. The VCFD and CAL FIRE have
determined that the largest of the 2017 fires originated on December 4, 2017, in the Anlauf Canyon area of Ventura County
(the investigating agencies refer to this fire as the "Thomas Fire"), followed shortly thereafter by the Koenigstein Fire.
According to CAL FIRE, the Thomas and Koenigstein Fires burned over 280,000 acres, destroyed or damages an estimated
1,343 structures and resulted in two fatalities.
As of February 24, 2020, SCE was aware of at least 328 lawsuits, representing approximately 4,845 plaintiffs, related to the
Thomas and Koenigstein Fires naming SCE as a defendant. One Hundred Forty-two of these lawsuits also name Edison
International as a defendant based on its ownership and alleged control of SCE. At least four of the lawsuits were filed as
purported class actions. The lawsuits, which have been filed in the superior courts of Ventura, Santa Barbara and Los Angeles
Counties allege, among other things, negligence, inverse condemnation, trespass, private nuisance, and violations of the
public utilities and health and safety codes. The lawsuits have been coordinated in the Los Angeles Superior Court. Three
categories of plaintiffs have filed lawsuits against SCE and Edison International relating to the Thomas Fire, Koenigstein Fire
and Montecito Mudslides: individual plaintiffs, subrogation plaintiffs and public entity plaintiffs. An initial jury trial for a
limited number of plaintiffs, sometimes referred to as a bellwether jury trial, on certain fire only matters is scheduled for
June 15, 2020.
In November 2019, SCE and Edison International reached a settlement with certain local public entity plaintiffs in the
Thomas Fire, Koenigstein Fire and Montecito Mudslides litigation under which SCE paid those local public entity plaintiffs
parties an aggregate of $150 million and, other than as set forth below, the plaintiffs released SCE and Edison International
from all claims and potential claims in the Thomas Fire, Koenigstein Fire and Montecito Mudslides litigation and/or related
to or arising from the Thomas Fire, Koenigstein Fire or Montecito Mudslides. Certain of the local public entity plaintiffs will
retain the right to pursue certain indemnity claims against SCE and Edison International. Edison International and SCE did
not admit liability as part of the settlement.
For further information, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—
Contingencies—Southern California Wildfires and Mudslides."
136
Montecito Mudslides Litigation
In January 2018, torrential rains in Santa Barbara County produced mudslides and flooding in Montecito and surrounding
areas. According to Santa Barbara County initial reports, the Montecito Mudslides destroyed an estimated 135 structures,
damaged an estimated 324 structures, and resulted in at least 21 fatalities, with two additional fatalities presumed.
Eighty-one of the 328 lawsuits mentioned under "Thomas Fire and Koenigstein Fire Litigation" above allege that SCE has
responsibility for the Thomas and/or Koenigstein Fires and that the Thomas and/or Koenigstein Fires proximately caused the
Montecito Mudslides, resulting in the plaintiffs' claimed damages. Forty of the 81 Montecito Mudslides lawsuits also name
Edison International as a defendant based on its ownership and alleged control of SCE. In addition to other causes of action,
some of the Montecito Mudslides lawsuits also allege personal injury and wrongful death. The Thomas and Koenigstein Fires
lawsuits and the Montecito Mudslides lawsuits have been coordinated in the Los Angeles Superior Court. Three categories of
plaintiffs have filed lawsuits against SCE and Edison International relating to the Thomas Fire, Koenigstein Fire and
Montecito Mudslides: individual plaintiffs, subrogation plaintiffs and public entity plaintiffs. An initial jury trial for a limited
number of plaintiffs, sometimes referred to as a bellwether jury trial, is scheduled for October 12, 2020.
In November 2019, SCE and Edison International reached a settlement with certain local public entity plaintiffs in the
Thomas Fire, Koenigstein Fire and Montecito Mudslides litigation under which SCE paid those local public entity plaintiffs
parties an aggregate of $150 million and, other than as set forth below, the plaintiffs released SCE and Edison International
from all claims and potential claims in the Thomas Fire, Koenigstein Fire and Montecito Mudslides litigation and/or related
to or arising from the Thomas Fire, Koenigstein Fire or Montecito Mudslides. SCE and Edison International did not release
their cross-claims against the public entity plaintiffs in the Montecito Mudslides litigation, and certain of the public entity
plaintiffs will retain the right to pursue certain indemnity claims against SCE and Edison International. Edison International
and SCE did not admit liability as part of the settlement.
For further information, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—
Contingencies—Southern California Wildfires and Mudslides."
Woolsey Fire Litigation
In November 2018, wind-driven wildfires impacted portions of SCE's service territory and caused substantial damage to both
residential and business properties and service outages for SCE customers. The largest of these fires, known as the Woolsey
Fire, originated in Ventura County and burned acreage located in both Ventura and Los Angeles Counties. According to CAL
FIRE, the Woolsey Fire burned almost 100,000 acres, destroyed an estimated 1,643 structures, damaged an estimated 364
structures and resulted in three fatalities. Two additional fatalities have also been associated with the Woolsey Fire.
As of February 24, 2020, SCE was aware of at least 193 lawsuits, representing approximately 3,605 plaintiffs, related to the
Woolsey Fire naming SCE as a defendant. One Hundred Twenty-nine of these lawsuits also name Edison International as a
defendant based on its ownership and alleged control of SCE. At least two of the lawsuits were filed as purported class
actions. The lawsuits, which have been filed in the superior courts of Ventura and Los Angeles Counties allege, among other
things, negligence, inverse condemnation, personal injury, wrongful death, trespass, private nuisance, and violations of the
public utilities and health and safety codes. The Woolsey Fire lawsuits have been coordinated in the Los Angeles Superior
Court. Three categories of plaintiffs have filed lawsuits against SCE and Edison International relating to the Woolsey Fire:
individual plaintiffs, subrogation plaintiffs and public entity plaintiffs.
In November 2019, SCE and Edison International reached a settlement with certain local public entity plaintiffs in the
Woolsey Fire litigation under which SCE paid the local public entity plaintiffs an aggregate of $210 million and those local
public entity plaintiffs released SCE and Edison International from all claims and potential claims in the Woolsey Fire
litigation and/or related to or arising from the Woolsey Fire. Edison International and SCE did not admit liability as part of
the settlement.
For further information, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—
Contingencies—Southern California Wildfires and Mudslides."
MINE SAFETY DISCLOSURE
Not applicable.
137
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Executive Officers of Edison International
Executive Officer
Pedro J. Pizarro
Maria Rigatti
Adam S. Umanoff
Caroline Choi
J. Andrew Murphy
Jacqueline Trapp
Kevin M. Payne
Steven D. Powell
Age at
February 20, 2020
54
56
60
51
59
52
59
41
Company Position
President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
Executive Vice President and General Counsel
Senior Vice President, Corporate Affairs
Senior Vice President, Strategy and Corporate Development
Senior Vice President, Human Resources
President and Chief Executive Officer, SCE
Executive Vice President, Operations, SCE
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
Mr. 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
Company Position
Chief Executive Officer, Edison International
President, Edison International
President, SCE
Effective Dates
September 2016 to present
June 2016 to present
October 2014 to June 2016
Maria Rigatti
Executive Vice President and Chief Financial Officer, Edison International
Senior Vice President and Chief Financial Officer, SCE
September 2016 to present
July 2014 to September 2016
Adam S. Umanoff
Executive Vice President and General Counsel, Edison International
January 2015 to present
Caroline Choi
Senior Vice President, Corporate Affairs, Edison International and SCE
Senior Vice President, Regulatory Affairs, SCE
Vice President Energy & Environmental Policy, SCE
February 2019 to present
June 2016 to February 2019
January 2012 to June 2016
J. Andrew Murphy
Senior Vice President, Strategy and Corporate Development, Edison
International
Senior Managing Director, Macquarie Infrastructure and Real Assets1
September 2015 to present
January 2012 to August 2015
Jacqueline Trapp
Senior Vice President, Human Resources Edison International and SCE
Vice President, Human Resources, SCE
Director, Executive Talent and Rewards, Edison International
February 2018 to present
June 2016 to February 2018
July 2012 to June 2016
Kevin M. Payne
President and Chief Executive Officer, SCE
Chief Executive Officer, SCE
Senior Vice President, Customer Service, SCE
June 2019 to present
June 2016 to June 2019
March 2014 to June 2016
Steven D. Powell
Executive Vice President, Operations, SCE
Senior Vice President, Strategy, Planning and Operational Performance, SCE
Vice President, Strategy & Integrated Planning, SCE
Director, Organizational Performance, SCE
September 2019 to present
August 2018 to September 2019
February 2016 to August 2018
January 2015 to February 2016
1 Macquarie Infrastructure and Real Assets is a global infrastructure management company and is not a parent, affiliate or subsidiary of
Edison International.
138
Executive Officers of Southern California Edison Company
Executive Officer
Kevin M. Payne
Steven D. Powell
William M. Petmecky III
Russell C. Swartz
Jill C. Anderson
Philip R. Herrington
Kevin E. Walker
Age at
February 20, 2020
Company Position
59
41
50
68
39
57
56
President and Chief Executive Officer
Executive Vice President, Operations
Senior Vice President and Chief Financial Officer
Senior Vice President and General Counsel
Senior Vice President, Strategic Planning & Power Supply
Senior Vice President, Transmission and Distribution
Senior Vice President, Customer Service & Nuclear
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
Ms. Anderson, Mr. Herrington and Mr. Walker, 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
Steven D. Powell
Company Position
President and Chief Executive Officer, SCE
Chief Executive Officer, SCE
Senior Vice President, Customer Service, SCE
Effective Dates
June 2019 to present
June 2016 to June 2019
March 2014 to June 2016
Executive Vice President, Operations, SCE
Senior Vice President, Strategy, Planning and Operational
Performance, SCE
Vice President, Strategy & Integrated Planning, SCE
Director, Organizational Performance, SCE
September 2019 to present
August 2018 to September 2019
February 2016 to August 2018
January 2015 to February 2016
William M. Petmecky III
Senior Vice President and Chief Financial Officer, SCE
Vice President and Treasurer, SCE
September 2016 to present
September 2014 to September 2016
Russell C. Swartz
Senior Vice President and General Counsel, SCE
February 2011 to present
Jill C. Anderson
Senior Vice President, Strategic Planning and Power Supply, SCE
Vice President, Customer Programs and Services, SCE
Executive Vice President, Chief Commercial Officer, New York
Power Authority1
Senior Vice President, Business Development, New York Power
Authority1
September 2019 to present
January 2018 to September 2019
January 2016 to January 2018
March 2013 to December 2015
Philip R. Herrington
Senior Vice President, Transmission and Distribution, SCE
Vice President, Power Production, SCE
President, US Competitive Generation/Market Business Lead, The
AES Corporation2
September 2017 to present
August 2015 to September 2017
July 2013 to July 2015
Kevin E. Walker
Senior Vice President, Customer Service & Nuclear, SCE
Senior Vice President, Customer and Operational Services, SCE
Senior Vice President, Power Supply, SCE
Strategy Advisor, Power and Utilities, Ernst & Young3
Chief Operating Officer, Iberdrola USA4
June 2019 to present
October 2018 to June 2019
December 2017 to September 2018
June 2017 to December 2017
November 2009 to May 2016
1 New York Power Authority is the largest state power organization in the United States, and is not a parent, affiliate or subsidiary of SCE.
2 AES Corporation is an investor-owned power generation and utility company, and is not a parent, affiliate or subsidiary of SCE.
3 Ernst & Young is an accounting and professional services firm, and is not a parent, affiliate or subsidiary of SCE.
4 Iberdrola USA, an energy company, is now known as Avengrid, Inc. Avengrid, Inc. is not a parent, affiliate or subsidiary of SCE.
139
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information concerning executive officers of Edison International is set forth above under "Executive Officers of Edison
International." Information concerning executive officers of SCE is set forth above under "Executive Officers of Southern
California Edison Company." Other information responding to this section will appear in Edison International's and SCE's
Joint 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, 2019 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, 2019.
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)
9,873,3531
62.27
25,550,0602
1 This amount includes 9,278,677 shares covered by outstanding stock options, 332,775 shares covered by outstanding restricted stock
unit awards, 137,825 shares covered by outstanding deferred stock unit awards, and 124,075 shares covered by outstanding
performance share awards and payable in Edison International common stock (calculated at 100% of the target number of shares
subject to each performance share award; the actual payout for each award will be zero to twice the target number of shares for the
award, depending on performance), with the outstanding shares covered by outstanding restricted stock unit, deferred stock unit, and
performance share awards including the crediting of dividend equivalents through December 31, 2019. 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, 2019. 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 71,031,524. 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.
140
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," "Our Corporate Governance—Applicability of Stock Exchange Rules to SCE" and "Our Corporate
Governance—Director Independence", and is incorporated herein by this reference.
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
Edison International Common Stock is traded on the New York Stock Exchange under the symbol "EIX."
There are restrictions on the ability of SCE 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—SCE—SCE Dividends," and in "Notes to Consolidated Financial Statements—Note 1. Summary of Significant
Accounting Policies—SCE Dividends." The number of common stockholders of record of Edison International was 29,483
on February 20, 2020. In addition, Edison International cannot pay dividends if it does not meet California law requirements
on retained earnings and solvency.
Southern California Edison Company
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. There are
restrictions on SCE's ability to pay dividends to Edison International and to its preferred shareholders. Such restrictions are
discussed in the MD&A under the heading "Liquidity and Capital Resources—SCE—SCE Dividends," and in "Notes to
Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—SCE Dividends."
Comparison of Five-Year Cumulative Total Return
Edison International
S & P 500 Index
Philadelphia Utility Index
2014
2015
2016
2017
2018
2019
$ 100
$ 93
$ 116
$ 105
$ 98
$ 135
$ 100
$ 101
$ 113
$ 138
$ 132
$ 174
$ 100
$ 94
$ 110
$ 124
$ 129
$ 163
Note: Assumes $100 invested on December 31, 2014 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.
141
FORM 10-K SUMMARY
None.
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
Edison International
The following documents may be found in this report at the indicated page numbers under the headings "Financial Statements
and Supplementary Data—Reports of Independent Registered Accounting Firm" and "Exhibits and Financial Statement
Schedules—Schedules Supplementing Financial Statements" in the Table of Contents of this report.
Report of Independent Registered Public Accounting Firm - Edison International
Schedule I – Condensed Financial Information of Edison International Parent
Schedule II – Valuation and Qualifying Accounts of Edison International
Schedules III through V, inclusive, for Edison International are omitted as not required or not applicable.
Southern California Edison Company
The following documents may be found in this report at the indicated page numbers under the headings "Financial Statements
and Supplementary Data—Reports of Independent Registered Accounting Firm" and "Exhibits and Financial Statement
Schedules—Schedules Supplementing Financial Statements" in the Table of Contents of this report.
Report of Independent Registered Public Accounting Firm - SCE
Schedule II – Valuation and Qualifying Accounts of SCE
Schedules I and III through V, inclusive, for SCE are omitted as not required or not applicable.
(a) (3) Exhibits
142
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 effective October 25, 2018 (File No. 1-9936, filed as Exhibit No. 3.1
to Edison International's Form 10-Q for the quarter ended September 30, 2018)*
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 SCE's Form 10-Q for the quarter ended June 30, 2017)*
Bylaws of Southern California Edison Company, as amended effective October 25, 2018 (File No. 1-9936, filed
as Exhibit No. 3.2 to SCE's Form 10-Q for the quarter ended September 30, 2018)*
Edison International
4.1
4.2
Edison International - Description of Registered Securities
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
4.3
4.4
4.5
Southern California Edison Company - Description of Registered Securities
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 SCE'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, filed as
Exhibit 4.3 to SCE's Form 10-K for the year ended December 31, 2017)*
Edison International and Southern California Edison Company
10.1**
10.2**
10.3**
10.4**
10.4.1**
10.4.2**
10.5**
10.5.1**
10.6**
Edison International 2008 Director Deferred Compensation Plan, as amended June 19, 2014 (File No. 1-9936,
filed as Exhibit No. 10.2 for the quarter ended June 30, 2014)*
Edison International Executive Deferred Compensation Plan, as amended and restated effective June 19, 2014 (as
amended) (File No. 1-9936, filed as Exhibit No. 10.7 to Edison International's Form 10-Q for the quarter ended
March 31, 2018)*
Edison International 2008 Executive Deferred Compensation Plan, as amended and restated effective
December 9, 2015 (as amended) (File No. 1-9936, filed as Exhibit No. 10.2 for the quarter ended September 30,
2018)*
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)*
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)*
Southern California Edison Company Executive Retirement Plan, as amended effective June 19, 2014 (File No.
1-9936, filed as Exhibit 10.7 to Edison International and SCE's Form 10-Q for the quarter ended June 30, 2014)*
Edison International 2008 Executive Retirement Plan, as amended and restated effective August 24, 2016 (as
amended) (File No. 1-9936, filed as Exhibit 10.2 to Edison International and SCE's Form 10-Q for the quarter
ended June 30, 2019)*
Edison International Executive Incentive Compensation Plan, as amended and restated effective February 27,
2019 (File No. 1-9936, filed as Exhibit 10.4 to Edison International's Form 10-Q for the year ended March 31,
2019)*
143
Exhibit
Number
10.7**
10.8**
10.8.1**
10.8.2**
10.8.3**
10.8.4**
10.8.5**
10.8.6**
10.8.7**
10.8.8**
10.8.9**
Description
Edison International 2008 Executive Disability Plan, as amended and restated effective April 2, 2018 (File No.
1-9936, filed as Exhibit No. 10.4 to Edison International and SCE's Form 10-Q for the quarter ended March 31,
2018)*
Edison International 2007 Performance Incentive Plan as amended and restated effective May 2, 2016 (File No.
1-9936, filed as Exhibit 10.1 to Edison International's Form 8-K dated April 28, 2016 and filed April 29, 2016)*
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)*
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)*
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)*
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)*
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)*
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)*
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)*
Edison International 2017 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, 2017)*
10.8.10**
Edison International 2018 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, 2018)*
10.8.11**
Edison International 2019 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, 2019)*
10.9**
10.10**
10.11**
10.12**
10.13
10.14
10.14.1
10.14.2
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)*
Edison International 2008 Executive Severance Plan, as amended and restated effective April 2, 2018 (File
No. 1-9936, filed as Exhibit 10.5 to Edison International's Form 10-Q for the quarter ended March 31, 2018)*
Edison International and Southern California Edison Company Director Compensation Schedule, as adopted
December 6, 2018 (File No. 1-9936, filed as Exhibit 10.11 to Edison International and SCE's Form 10-K for the
year ended December 31, 2018)*
Edison International Director Matching Gifts Program, as revised effective January 1, 2019 (File No. 1-9936,
filed as Exhibit 10.1 to Edison International's Form 10-Q for the quarter ended September 30, 2019)*
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)*
144
Exhibit
Number
10.14.3
10.14.4
10.15**
10.16
10.17
21
23.1
23.2
24.1
24.2
31.1
31.2
32.1
32.2
101.1
101.2
Description
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 quarter ended June 30, 2005)*
Second Amended and Restated Credit Agreement dated as of May 17, 2018 among Edison International, the
several banks and other financial institutions from time to time parties thereto, the several agents parties thereto
and JPMorgan Chase Bank, N.A., as administrative agent for the lenders. (File No. 1-9936, filed as Exhibit 10.1
to Edison International’s Form 8-K dated and filed May 18, 2018)*
Second Amended and Restated Credit Agreement dated as of May 17, 2018 among SCE, the several banks and
other financial institutions from time to time parties thereto, the several agents parties thereto and JPMorgan
Chase Bank, N.A., as administrative agent for the lenders. (File No. 1-2313, filed as Exhibit 10.2 to Southern
California Edison Company's Form 8-K dated and filed May 18, 2018)*
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, 2019, filed on February 27, 2020, formatted in Inline XBRL: (i) the Consolidated Statements of
Income; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets;
(iv) the Consolidated Statements of Cash Flows; (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, 2019, filed on February 27, 2020, formatted in Inline XBRL: (i) the Consolidated
Statements of Income; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance
Sheets; (iv) the Consolidated Statements of Cash Flows; (v) Consolidated Statements of Changes in Equity and
(vi) the Notes to Consolidated Financial Statements
104
The cover page of this report formatted in Inline XBRL (included as Exhibit 101)
________________________________________
*
Incorporated by reference pursuant to Rule 12b-32.
** Indicates a management contract or compensatory plan or arrangement, as required by Item 15(a)(3).
Edison International and SCE will furnish a copy of any exhibit listed in the accompanying Exhibit Index upon written request
and upon payment to Edison International or SCE of their reasonable expenses of furnishing such exhibit, which shall be limited
to photocopying charges and, if mailed to the requesting party, the cost of first-class postage.
145
SCHEDULES SUPPLEMENTING FINANCIAL STATEMENTS
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:
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,
2019
2018
$
$
15
260
275
97
52
149
16,530
12,521
608
76
516
78
$
17,489
$
13,264
400
481
881
2,733
572
13,303
—
498
498
1,740
567
10,459
$
17,489
$
13,264
146
EDISON INTERNATIONAL
SCHEDULE I – CONDENSED FINANCIAL INFORMATION OF PARENT
CONDENSED STATEMENTS OF INCOME
For the Years Ended December 31, 2019, 2018 and 2017
(in millions)
Interest income from affiliates
Operating, interest and other expenses
Loss before equity in earnings (loss) of subsidiaries
Equity in earnings (loss) of subsidiaries
Income (loss) before income taxes
Income tax (benefit) expense
Income (loss) from continuing operations
Income from discontinued operations, net of tax
Net income (loss)
$
2019
2018
2017
$
5
$
— $
150
(145)
1,385
1,240
(44)
1,284
—
1,284
$
98
(98)
(376)
(474)
(17)
(457)
34
(423)
$
—
92
(92)
739
647
82
565
—
565
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended December 31, 2019, 2018 and 2017
(in millions)
Net income (loss)
Other comprehensive (loss) income, net of tax
Comprehensive income (loss)
2019
2018
2017
$
$
1,284
(9)
1,275
$
$
(423)
(7)
(430)
$
$
565
10
575
147
EDISON INTERNATIONAL
SCHEDULE I – CONDENSED FINANCIAL INFORMATION OF PARENT
CONDENSED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2019, 2018 and 2017
(in millions)
Net cash provided by operating activities
Cash flows from financing activities:
Long-term debt issued
Long-term debt issuance costs
Long-term debt repaid
Term loan issued
Term loan repaid
Common stock issued
Payable due to affiliates
Short-term debt financing, net
Payments for stock-based compensation
Receipts for stock-based compensation
Dividends paid
Net cash provided by (used in) financing activities
Capital contributions to affiliate
Dividends from affiliate
Net cash (used in) provided by investing activities:
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Note 1. Basis of Presentation
2019
2018
2017
$
181
$
785
$
462
1,399
(9)
—
1,000
(1,000)
2,391
5
(1)
(27)
39
(810)
2,987
(3,258)
8
(3,250)
(82)
97
549
(4)
—
—
—
—
13
(1,141)
(24)
14
(788)
(1,381)
(10)
179
169
(427)
524
$
15
$
97
$
798
(5)
(400)
—
—
—
8
600
(260)
144
(707)
178
(122)
—
(122)
518
6
524
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 Parent's 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 $400 million, $788 million and $573 million in 2019, 2018
and 2017, respectively.
Dividend Restrictions
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. In addition, the CPUC regulates SCE's capital structure which limits the dividends it may pay to its
shareholders.
Prior to January 1, 2020, under SCE's interpretation of CPUC regulations and capital structure decisions, the common equity
component of SCE's capital structure was required to remain at or above 48% on a weighted average basis over the 37-month
period that SCE's capital structure was in effect for ratemaking purposes and SCE was required to file an application for a
waiver of the 48% equity ratio condition discussed above if an adverse financial event reduces its spot equity ratio below
47%. Effective January 1, 2020, the common equity component of SCE's authorized capital structure was increased from
148
48% to 52%. Under AB 1054, the impact of SCE's contributions to the Wildfire Insurance Fund are excluded from the
measurement of SCE's CPUC-jurisdictional authorized capital structure.
On February 28, 2019, SCE submitted an application to the CPUC for waiver of compliance with this equity ratio
requirement, describing that while the charge accrued in connection with the 2017/2018 Wildfire/Mudslide Events caused its
equity ratio to fall below 47% on a spot basis as of December 31, 2018, SCE remains in compliance with the 48% equity
ratio over the applicable 37-month average basis. In its application, SCE requested a limited waiver to exclude wildfire-
related charges and wildfire-related debt issuances from its equity ratio calculations until a determination regarding cost
recovery is made. The CPUC has ruled that while the application is pending resolution, SCE must notify the CPUC if an
adverse financial event reduces SCE's spot equity ratio by more than one percent from the level most recently filed with the
CPUC in the proceeding. The last spot equity ratio SCE filed with the CPUC in the proceeding was 45.2% as of
December 31, 2018. Under the CPUC's rules, SCE will not be deemed to be in violation of the equity ratio requirement, and
therefore may continue to issue debt and dividends, while the waiver application is pending resolution. For further
information, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies
—Southern California Wildfires and Mudslides." At December 31, 2019, without excluding the $2.0 billion after-tax
wildfire-related charges incurred in 2018 and 2019, SCE's 37-month average common equity component of total
capitalization was 48.5% and the maximum additional dividend that SCE could pay to Edison International under this
limitation was $179 million, resulting in a restriction on net assets of approximately $17.6 billion. If the wildfire-related
charges were excluded at December 31, 2019, SCE's 37-month average common equity component of total capitalization
would have been 49.6%. See "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting
Policies—SCE Dividends."
Note 2. Debt and Equity Financing
Long-Term Debt
In June 2019, Edison International Parent issued $600 million of 5.75% senior notes due June 15, 2027. Of the proceeds of
the senior note offering, $450 million was contributed to SCE with the remainder to be used for general corporate and
working capital purposes.
In November 2019, Edison International Parent issued $300 million of 3.125% senior notes due 2022 and $500 million of
3.550% senior notes due 2024. A portion of the proceeds of the November 2019 offering was used to repay a borrowing
under a term loan agreement due in April 2020, a portion is used to repay at maturity some or all of Edison International
Parent's outstanding 2.125% senior notes due 2020, and the remainder for general corporate purposes.
In addition, at December 31, 2019 and 2018, Edison International Parent had $400 million of 2.125% senior notes due in
2020, $400 million of 2.40% senior notes due in 2022, $400 million of 2.95% senior notes due in 2023 and $550 million of
4.125% senior notes due in 2028.
Credit Agreements and Short-Term Debt
The following table summarizes the status of the credit facility at December 31, 2019:
(in millions)
Commitment
Outstanding borrowings
Amount available
$
$
1,500
—
1,500
In April 2019, Edison International Parent borrowed $1.0 billion under a term loan agreement due in April 2020, with a
variable interest rate based on the London Interbank Offered Rate plus 90 basis points. Of the proceeds of the term loan,
$750 million was contributed to SCE with the remainder used for general corporate and working capital purposes. The term
loan was fully repaid in December 2019.
In June 2019, Edison International Parent amended the maturity date of its multi-year revolving credit facility of
$1.5 billion. The facility now matures in May 2024, with an option to extend for an additional year, which may be exercised
upon agreement between Edison International Parent and its lenders.
At December 31, 2019 and December 31, 2018, Edison International Parent had no outstanding commercial paper.
149
The debt covenant in Edison International's credit facility requires a consolidated debt to total capitalization ratio of less than
or equal to 0.70 to 1. At December 31, 2019, Edison International's consolidated debt to total capitalization ratio was 0.55
to 1.
Equity
In May 2019, Edison International filed a prospectus supplement and executed several distribution agreements with certain
sales agents to establish an ATM program under which it may sell shares of its common stock having an aggregate sales price
of up to $1.5 billion. In the fourth quarter of 2019, Edison International issued 2.8 million shares through the ATM program
and received proceeds of $198 million, net of fees and offering expenses of $2 million. The proceeds from the sales were
used for equity contributions to SCE and for general corporate and working capital purposes. As of December 31, 2019,
shares of common stock having an aggregate offering price of $1.3 billion remained available to be sold under the ATM
program. Edison International has no obligation to sell the remaining available shares.
In July 2019, Edison International issued 32.2 million shares of common stock and received proceeds of approximately
$2.2 billion, net of fees and offering expenses of $52 million in an underwritten offering. Of the proceeds, $1.9 billion was
contributed to SCE. The remaining was used for general corporate purposes.
Beginning in July 2019, Edison International settled the ongoing common stock requirements of various internal programs
through issuance of new common stock. In the year ended December 31, 2019, 0.6 million shares of new common stock were
purchased by employees through the 401(k) defined contribution savings plan for net cash receipts of $41 million, 0.4 million
shares of common stock were issued as stock compensation awards for net cash receipts of $22 million and 0.1 million shares
of new common stock were issued in lieu of distributing $8 million to shareholders opting to receive dividend payments in
the form of additional common stock.
Note 3. Related-Party Transactions
Edison International's Parent expense from services provided by SCE was $2 million in 2019, $2 million in 2018 and
$3 million in 2017. Edison International's Parent interest expense from loans due to affiliates was $5 million in 2019, 2018
and 2017. Edison International Parent had current related-party receivables of $272 million and $41 million and current
related-party payables of $198 million and $249 million at December 31, 2019 and 2018, respectively. Edison International
Parent had long-term related-party receivables of $73 million at both December 31, 2019 and 2018, and long-term related-
party payables of $213 million at both December 31, 2019 and 2018.
Note 4. Contingencies
For a discussion of material contingencies see "Notes to Consolidated Financial Statements—Note 8. Income Taxes" and "—
Note 12. Commitments and Contingencies."
150
EDISON INTERNATIONAL
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
(in millions)
For the Year ended December 31, 2019
Allowance for uncollectible accounts
Customers
All others
Total allowance for uncollectible amounts
Tax valuation allowance
For the Year ended December 31, 2018
Allowance for uncollectible accounts
Customers
All others
Total allowance for uncollectible amounts
Tax valuation allowance
For the Year ended December 31, 2017
Allowance for uncollectible accounts
Customers
All others
Total allowance for uncollectible amounts
Tax valuation allowance
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
$
$
$
$
$
$
$
$
$
32.0
19.5
51.5
36.0
36.6
17.3
53.9
28.0
41.2
20.6
61.8
24.0
$
$
$
$
$
$
$
$
$
22.2
10.0
32.2
$
$
— $
— $
—
— $
— $
18.4
$
15.6
34.0 a $
$
1.0
19.0
16.2
35.2
$
$
— $
— $
—
— $
8.0 b $
23.6
$
14.0
37.6 a $
— $
12.9
13.5
26.4
$
$
— $
— $
—
— $
4.0 b $
17.5
$
16.8
34.3 a $
— $
35.8
13.9
49.7
35.0
32.0
19.5
51.5
36.0
36.6
17.3
53.9
28.0
b During 2018, Edison International recorded an additional valuation allowance of $4 million for non-California state net operating loss
carryforwards and $4 million for California capital losses generated from the April 2018 sale of SoCore Energy, which are estimated to
expire before being utilized. The additional valuation allowance in 2017 was a result of Tax Reform.
151
SOUTHERN CALIFORNIA EDISON COMPANY
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
(in millions)
For the Year ended December 31, 2019
Allowance for uncollectible accounts
Customers
All others
Total allowance for uncollectible accounts
For the Year ended December 31, 2018
Allowance for uncollectible accounts
Customers
All others
Total allowance for uncollectible accounts
For the Year ended December 31, 2017
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
$
$
$
$
$
$
31.6
19.5
51.1
36.0
17.3
53.3
40.5
20.6
61.1
$
$
$
$
$
$
22.0
10.0
32.0
18.9
16.2
35.1
12.9
13.5
26.4
$
$
$
$
$
$
— $
—
— $
18.1
$
15.6
33.7 a $
35.5
13.9
49.4
— $
—
— $
23.3
$
14.0
37.3 a $
31.6
19.5
51.1
— $
—
— $
17.4
$
16.8
34.2 a $
36.0
17.3
53.3
152
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/ Aaron D. Moss
Aaron D. Moss
Vice President and Controller
(Duly Authorized Officer and
Principal Accounting Officer)
Aaron D. Moss
Vice President and Controller
(Duly Authorized Officer and
Principal Accounting Officer)
Date: February 27, 2020
Date: February 27, 2020
153
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
/s/ Aaron D. Moss
Aaron D. Moss
/s/ Aaron D. Moss
Aaron D. Moss
D. Directors (Edison International and
Southern California Edison Company,
unless otherwise noted)
Jeanne Beliveau-Dunn*
Michael C. Camuñez*
Vanessa C.L. Chang*
James T. Morris*
Timothy T. O'Toole*
Kevin Payne (SCE only)*
Pedro J. Pizarro*
Carey A. Smith*
Linda G. Stuntz*
Title
President, Chief Executive Officer and Director
(Edison International)
President and Chief Executive Officer and 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
Director
William P. Sullivan*
Chair of the Edison International Board and Director
Peter J. Taylor*
Keith Trent*
Director
Director
*By:
/s/ Aaron D. Moss
*By:
/s/ Aaron D. Moss
Aaron D. Moss
Vice President and Controller
(Attorney-in-fact for EIX Directors and Officers)
Aaron D. Moss
Vice President and Controller
(Attorney-in-fact for SCE Directors and Officers)
Date: February 27, 2020
Date: February 27, 2020
154
Edison International and Southern California Edison 2019 Annual Report
BOARD OF DIRECTORS
William P. Sullivan 2, 4
Chair of the Board
Retired Chief Executive Officer
Agilent Technologies
Director since 2015
Jeanne Beliveau-Dunn 1, 3
Chief Executive Officer and President
Claridad LLC
Director since 2019
Michael C. Camuñez 1, 4
President and Chief Executive Officer
Monarch Global Strategies LLC
Director since 2017
Vanessa C.L. Chang 2, 4
Retired Director
EL & EL Investments
Director since 2007
James T. Morris 1, 2
Chairman, President and
Chief Executive Officer
Pacific Life Insurance Co.
Director since 2016
Timothy T. O’Toole 2, 3
Retired Chief Executive Officer
FirstGroup plc
Director since 2017
Kevin M. Payne
President and Chief Executive Officer
Southern California Edison
Director of SCE since 2016
Pedro J. Pizarro
President and
Chief Executive Officer
Edison International
Director of EIX since 2016
Director of SCE since 2014
Carey A. Smith 2, 3
President and
Chief Operating Officer
Parsons Corporation
Director since 2019
Linda G. Stuntz 3, 4
Retired Partner
Stuntz, Davis & Staffier, P.C.
Director since 2014
Peter J. Taylor 1, 3
President
ECMC Foundation
Director since 2011
Keith Trent 1, 3
Retired Executive Vice President
Duke Energy Corporation
Director since 2018
1 Audit and Finance Committee
2 Compensation and Executive
Personnel Committee
3 Safety and Operations Committee
4 Nominating/Corporate Governance
Committee
EDISON INTERNATIONAL
Pedro J. Pizarro
President and
Chief Executive Officer
Maria Rigatti
Executive Vice President and
Chief Financial Officer
Adam S. Umanoff
Executive Vice President and
General Counsel
Caroline Choi
Senior Vice President
Corporate Affairs
J. Andrew Murphy
Senior Vice President
Strategy & Corporate
Development
Jacqueline Trapp
Senior Vice President and
Chief Human Resources Officer
Robert C. Boada
Vice President and Treasurer
Alisa Do
Vice President
Corporate Secretary
Beth M. Foley
Vice President
Corporate Communications
David J. Heller
Vice President
Enterprise Risk Management &
Insurance and General Auditor
Michael D. Montoya
Vice President and
Chief Ethics & Compliance Officer
Aaron D. Moss
Vice President and
Corporate Controller
Sam Ramraj
Vice President
Investor Relations
Andrea L. Wood
Vice President
Tax
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EDISON ENERGY
Oded J. Rhone
President and
Chief Executive Officer
Edison International and Southern California Edison 2019 Annual Report
SOUTHERN CALIFORNIA EDISON
Kevin M. Payne
President and
Chief Executive Officer
Steven D. Powell
Executive Vice President
Operations
Jill C. Anderson
Senior Vice President
Strategic Planning and Power Supply
Caroline Choi
Senior Vice President
Corporate Affairs
Philip R. Herrington
Senior Vice President
Transmission & Distribution
Todd L. Inlander
Senior Vice President and
Chief Information Officer
Carla J. Peterman
Senior Vice President
Regulatory Affairs
William M. Petmecky III
Senior Vice President and
Chief Financial Officer
Russell C. Swartz
Senior Vice President and
General Counsel
Jacqueline Trapp
Senior Vice President and
Chief Human Resources Officer
Kevin E. Walker
Senior Vice President
Customer Service and Nuclear
Douglas R. Bauder
Vice President
Decommissioning and
Chief Nuclear Officer
Alisa Do
Vice President
Corporate Secretary
Gregory M. Ferree
Vice President
Distribution
Beth M. Foley
Vice President
Corporate Communications
Paul J. Grigaux
Vice President
Asset Management,
Strategy & Engineering
Albert Ma
Vice President
Information Technology,
Enterprise Services
Michael Marelli
Vice President
Business Customer Division
Andrew S. Martinez
Vice President
Safety, Security &
Business Resiliency
Michael D. Montoya
Vice President and
Chief Ethics and Compliance Officer
Aaron D. Moss
Vice President and
Corporate Controller
James W. Niemiec
Vice President
Operational Services
Erik Takayesu
Vice President
Transmission, Substations
& Operations
J. Christopher Thompson
Vice President
Local Public Affairs
Marc L. Ulrich
Vice President
Customer Service Operations
William V. Walsh
Vice President
Energy Procurement
& Management
Andrea L. Wood
Vice President
Tax
Daniel S. Wood
Vice President
Operational Finance
Natalia L. Woodward
Vice President and
Treasurer
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Inquiries may also
be directed to:
EQ Shareowner Services
1110 Centre Point Curve, Suite 101
Mendota Heights, MN 55120-4100
Fax:
(651) 450-4033
EQ Shareowner Services
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 EQ Shareowner
Services upon request.
EDISON INTERNATIONAL
Annual Meeting
The annual meeting of shareholders
will be held on Thursday, April 23,
2020, at 9:00 a.m., Pacific Time, at the
Southern California Edison Energy
Education Center, 6090 N. Irwindale
Avenue, Irwindale, California 91702.
Corporate Governance
Practices
A description of Edison International’s
corporate governance practices is
available on our website 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 II, SCE Trust III, SCE
Trust IV, SCE Trust V, and SCE Trust VI,
subsidiaries of SCE, have issued Trust
Preference Securities which are listed
on the New York Stock Exchange.
Transfer Agent and Registrar
Equiniti Trust Company (EQ), 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
EQ 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.
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2244 Walnut Grove Avenue
Rosemead, CA 91770
www.edison.com