10-Q: Edison International Q1 2026 Earnings Decline Amidst Wildfire Costs

Edison International reported a significant decrease in net income for the first quarter of 2026 compared to the prior year, primarily due to wildfire-related costs and a shift in non-core earnings, despite an increase in SCE's core earnings.

Summary

• Edison International's net income available to common shareholders for the first quarter of 2026 was $531 million, a decrease of $905 million from $1,436 million in the first quarter of 2025.
• This decline was largely driven by Southern California Edison Company's (SCE) net income decrease of $948 million, partially offset by a $43 million decrease in the loss from Edison International Parent and Other.
• SCE's core earnings increased by $15 million to $635 million, while its non-core items shifted from earnings of $947 million in Q1 2025 to a loss of $16 million in Q1 2026.
• Edison International Parent and Other's core loss decreased by $3 million to $89 million, with non-core earnings increasing by $40 million.
• Total capital expenditures for the first three months of 2026 were $1.5 billion, consistent with the same period in 2025.
• SCE's operating revenue increased by $294 million to $4,096 million, primarily due to the 2025 GRC final decision and associated escalation mechanisms.
• Wildfire-related claims, net of recoveries, saw a significant decrease in charges for SCE, moving from a net recovery of $1,355 million in Q1 2025 to a net charge of $3 million in Q1 2026, largely due to the TKM Settlement Agreement in the prior year.
• Interest expense for SCE increased by $210 million, primarily due to the absence of a benefit related to the TKM Settlement Agreement in 2025.
• SCE has $3.3 billion available under its revolving credit facility as of March 31, 2026.
• The company is actively managing wildfire risks through its Wildfire Mitigation Plan (WMP) and Public Safety Power Shutoff (PSPS) programs.
• SCE has recorded $1.3 billion in losses related to Eaton Fire settlements as of March 31, 2026, with expected recoveries from self-insurance, the Wildfire Fund, and FERC rates.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as negative due to the significant year-over-year decline in net income, driven by substantial wildfire-related costs and a shift in non-core earnings, despite some operational positives.

Positives

• SCE's core earnings increased by $15 million to $635 million in Q1 2026 compared to Q1 2025.
• Edison International Parent and Other's core loss decreased by $3 million to $89 million.
• Operating revenue for SCE increased by $294 million to $4,096 million, driven by the 2025 GRC final decision.
• Wildfire-related claims, net of recoveries, for SCE showed a significant reduction in charges compared to the prior year.
• SCE has $3.3 billion in available liquidity under its revolving credit facility as of March 31, 2026.
• SCE's debt to total capitalization ratio was 0.57 to 1 at March 31, 2026, indicating compliance with financial covenants.
• The OEIS issued SCE's safety certification in March 2026, valid until March 2, 2027.
• The CPUC issued a proposed decision in April 2026 approving SCE's application to finance approximately $2.0 billion of costs related to the Woolsey Fire through securitized bonds.

Negatives

• Edison International's net income available to common shareholders decreased by $905 million to $531 million in Q1 2026 compared to Q1 2025.
• SCE's net income decreased by $948 million to $619 million in Q1 2026.
• SCE experienced a non-core loss of $16 million in Q1 2026, compared to non-core earnings of $947 million in Q1 2025.
• Interest expense for SCE increased by $210 million due to the absence of a benefit from the TKM Settlement Agreement in the prior year.
• SCE has recorded $1.3 billion in losses related to Eaton Fire settlements as of March 31, 2026, with probable additional material losses expected.
• Edison International's consolidated debt to total capitalization ratio was 0.65 to 1 at March 31, 2026.
• The company faces ongoing risks and uncertainties related to wildfire liability, regulatory decisions, and potential credit rating downgrades.

Risks

• The ability of SCE to recover its costs through regulated rates, including uninsured wildfire-related costs and costs for wildfire restoration and mitigation efforts.
• Cybersecurity risks to critical IT systems and physical assets.
• Risks associated with the construction, operation, and maintenance of electrical facilities, including safety issues and the potential for utility assets to cause wildfires.
• The impact of customer rate affordability on SCE's strategy execution, load growth, and operating/capital costs.
• The ability to update grid infrastructure to maintain integrity, reliability, and meet electrification needs.
• Challenges in implementing operational and strategic plans, including the WMP, due to project site issues, public opposition, permitting, and contractor performance.
• Regulatory or legislative restrictions that could limit wildfire risk mitigation measures like PSPS and fast curve settings.
• The risk that California Wildfire Legislation may not effectively mitigate significant exposure to liability for damages from catastrophic wildfires.
• The ability to effectively attract, manage, develop, and retain a skilled workforce.
• Decisions and actions by regulatory authorities (CPUC, FERC, NRC, etc.) impacting rates, cost recovery, wildfire mitigation, and liability protections.
• Governmental, statutory, or administrative changes affecting the electricity industry and environmental priorities.
• Potential penalties or disallowances for non-compliance with laws and regulations.
• Extreme weather-related incidents (wildfires, debris flows, flooding, droughts, high winds, extreme heat, earthquakes) causing operational issues and costs.
• Risks associated with the decommissioning of San Onofre, including safety, opposition, permitting, and cost overruns.
• Cost allocation resulting in higher rates and potential customer bypass.
• Actions by credit rating agencies to downgrade credit ratings.
• The ability to borrow funds and access capital markets on reasonable terms.
• Changes in tax laws and regulations.
• Rates of inflation and interest rates impacting authorized revenues and ROE.
• Availability and creditworthiness of counterparties in power and fuel markets.
• Cost of fuel for generating facilities and related transportation.

Future Outlook

The filing does not provide specific forward-looking financial guidance for future periods. However, it details significant capital expenditure plans for 2026-2030, ranging from $37.5 billion to $40.6 billion for SCE, and projected weighted average annual rate base from $50.8 billion to $67.9 billion for the same period. Management's discussion highlights ongoing efforts to manage wildfire risks and implement operational plans, but also acknowledges inherent uncertainties and potential challenges.

Management Comments

• Edison International's earnings decreased $905 million from the first quarter of 2025, resulting from a decrease in SCE's earnings of $948 million, partially offset by a decrease in Edison International Parent and Other's loss of $43 million.
• The increase in SCE's core earnings was primarily due to the adoption of the 2025 GRC final decision, partially offset by the absence of a benefit to interest expense related to cost recoveries authorized under the TKM Settlement Agreement in 2025.
• SCE continues to implement its WMP to reduce the risk of SCE equipment contributing to the ignition of wildfires.
• While SCE has not conclusively determined that its equipment caused the ignition of the Eaton Fire, a viable explanation is that a de-energized idle SCE transmission facility in the preliminary area of origin was associated with the ignition of the fire.
• In light of pending litigation, it is probable that Edison International and SCE will incur additional material losses in connection with the Eaton Fire.
• SCE believes that it is a reasonable operator of its electric system and that its conduct with respect to its transmission facilities in the preliminary area of origin was consistent with the actions of a reasonable utility.

Industry Context

StockSavvy.ai notes that Edison International's Q1 2026 results reflect the ongoing challenges faced by large utility companies in California, particularly concerning wildfire liabilities and regulatory recovery mechanisms. The company's performance is heavily influenced by wildfire-related costs and the effectiveness of legislative and regulatory frameworks designed to mitigate these risks and ensure cost recovery. The significant decrease in net income highlights the financial impact of these events, even as the company continues to invest heavily in infrastructure and wildfire prevention.

Comparison to Industry Standards

• The filing does not provide direct comparisons to specific industry benchmarks or competitor financial results for the current quarter.
• However, the discussion of wildfire liabilities and regulatory recovery mechanisms is highly relevant to other investor-owned utilities operating in high-risk areas in California and other regions prone to natural disasters.
• The company's capital expenditure program of $37.5 billion to $40.6 billion for 2026-2030 is a substantial investment in grid modernization and wildfire mitigation, aligning with industry trends towards enhancing grid resilience and safety.
• The regulatory environment in California, particularly the CPUC's role in approving rates and cost recovery, is a critical factor that differentiates the operational and financial landscape for SCE compared to utilities in less regulated markets.

Legal Proceedings

• Lawsuits related to the 2017/2018 Wildfire/Mudslide Events (Thomas Fire, Koenigstein Fire, Montecito Mudslides, Woolsey Fire) are ongoing, involving individual plaintiffs, subrogation plaintiffs, public entity plaintiffs, and Edison International as a defendant.
• SCE has settled most fire suppression and subrogation claims for the 2017/2018 events, except for one indemnification claim.
• Multiple lawsuits related to the Eaton Fire (January 2025) have been initiated against SCE and Edison International, representing approximately 30,000 individual plaintiffs, subrogation plaintiffs, and public entity plaintiffs.
• A bellwether jury trial in the Eaton Fire litigation is set for January 2027.
• SCE filed a cross-complaint against public and private entities regarding the Eaton Fire, with hearings on motions challenging this cross-complaint set for May and June 2026.
• An inverse condemnation bench trial in the Saddle Ridge Fire litigation is set for October 2026.
• SCE has settled subrogation plaintiff claims and claims by the County of Orange related to the Coastal Fire (May 2022).
• A jury trial in the Fairview Fire (September 2022) individual plaintiff litigation is set for June 2026.
• SCE has settled substantially all claims related to the 2017 Creek Fire, 2020 Bobcat Fire, and 2020 Silverado Fire.

Related Party Transactions

• SCE purchased wildfire liability insurance from EIS (Edison Insurance Services, Inc.), a subsidiary of Edison International, prior to implementing its customer-funded self-insurance program.
• An EIS insurance policy amendment in February 2025 reimbursed SCE for $50 million in claim costs and related legal expenses for a wildfire during the July 1, 2022 - June 30, 2023 policy period.
• Expected insurance recoveries from EIS included in SCE's balance sheets were $118 million at March 31, 2026, and $226 million at December 31, 2025.

Stakeholder Impact

• Shareholders: Experienced a significant decrease in net income and earnings per share compared to the prior year, with ongoing risks related to wildfire liabilities and regulatory outcomes.
• Customers: May face higher rates due to cost recovery mechanisms for wildfire events and infrastructure investments. SCE's operational plans, such as PSPS, directly impact service reliability.
• Creditors: SCE's debt to capitalization ratio remains compliant, but potential credit rating downgrades due to wildfire risks could increase borrowing costs.
• Employees: The company is focused on attracting and retaining a skilled workforce, essential for managing complex operations and wildfire mitigation efforts.
• Regulators (CPUC, FERC, OEIS): Key decisions on rate recovery, wildfire mitigation plans, and safety certifications significantly impact the company's financial health and operational strategies.

Next Steps

• SCE expects to finance approximately $2.0 billion of cost recoveries authorized under the Woolsey Settlement Agreement through the issuance of securitized recovery bonds, with a final CPUC decision expected in May 2026.
• A proposed decision for the 2024 WMCE Filing is expected in the first quarter of 2027.
• A proposed decision for the NextGen ERP Program is anticipated in 2026.
• Construction for the Alberhill System Project is expected to begin in the third quarter of 2026.
• SCE will file an application with the CPUC for review of its costs and expenses related to the Eaton Fire after resolving claims or upon earlier request of the fund administrator.
• Bellwether jury trials for the Eaton Fire litigation are set for January 2027.
• Jury trial in the Fairview Fire individual plaintiff litigation is set for June 2026.
• Damages-only trials for opt-in plaintiff households in the Woolsey Fire litigation are scheduled for August and September 2026.
• A damages and liability trial with Cal OES in the Woolsey Fire litigation is set for October 2026.
• Inverse condemnation bench trial in the Saddle Ridge Fire litigation is set for October 2026.
• Damages-only trials for opt-in plaintiff households in the 2017/2018 Wildfire/Mudslide Events litigation are scheduled for 2026 and 2027.

Key Dates

Recommendation

While Edison International's Q1 2026 results show a significant year-over-year decline in net income, primarily due to wildfire-related costs and a shift in non-core earnings, the company's core operations for SCE remain stable with positive core earnings growth. The substantial capital expenditure plans for grid modernization and wildfire mitigation, coupled with ongoing regulatory proceedings for cost recovery, present both opportunities and risks. The significant wildfire liabilities and the uncertainty surrounding full cost recovery warrant a cautious approach. Given the ongoing legal and regulatory complexities, and the potential for future volatility, a 'hold' recommendation is appropriate, pending greater clarity on wildfire cost recovery and the long-term impact of regulatory decisions.

Keywords

Edison International, Southern California Edison, SCE, 10-Q, Quarterly Report, Wildfire, Eaton Fire, Financial Results, Earnings, Regulatory, Capital Expenditures, Wildfire Mitigation Plan, California Public Utilities Commission, CPUC, Wildfire Fund