10-Q: Edison International Q3 2025 Earnings Surge Amid Wildfire Settlements

Edison International reports a significant increase in Q3 2025 net income, driven by higher core earnings at Southern California Edison and wildfire cost recoveries.

Summary

• Edison International's net income available to common shareholders increased by $316 million to $832 million for Q3 2025, up from $516 million in Q3 2024.
• For the nine months ended September 30, 2025, net income available to common shareholders increased by $1,667 million to $2,611 million, from $944 million in the same period of 2024.
• Southern California Edison (SCE) net income increased by $323 million to $925 million for Q3 2025, and by $1,745 million to $2,935 million for the nine months ended September 30, 2025.
• SCE's core earnings for Q3 2025 increased by $327 million, primarily due to higher revenue from the 2025 General Rate Case (GRC) final decision.
• The 2025 GRC final decision approved a base rate revenue requirement of $9.7 billion for 2025, an increase of $880 million over the adjusted 2024 authorized revenue requirement.
• SCE recorded $300 million in losses related to the Eaton Subrogation Settlement in Q3 2025, with expected recoveries of $279 million from customer-funded self-insurance and $21 million from FERC electric rates.
• The California Public Utilities Commission (CPUC) approved the TKM Settlement Agreement in January 2025, authorizing SCE to recover approximately $1.6 billion of losses related to the 2017/2018 Wildfire/Mudslide Events.
• Senate Bill 254 (SB 254) established a Continuation Account within the Wildfire Insurance Fund, potentially providing up to $18 billion of additional funding, with SCE's share of annual contributions (if triggered) being $143.6 million from 2029-2045.
• SCE's total capital expenditures for the nine months ended September 30, 2025, were $4.7 billion, up from $4.0 billion in the same period of 2024.
• Forecasted total capital expenditures for 2025-2028 are $29.3 billion.
• SCE is seeking a Return on Equity (ROE) of 11.75% for 2026, up from the current 10.33%.

Sentiment

Score: 7

Explanation: Strong financial performance driven by regulatory approvals and cost recoveries, coupled with legislative efforts to manage wildfire risks. However, significant ongoing wildfire liabilities, a credit rating downgrade by S&P, and the Eaton Fire incident introduce notable uncertainties and financial burdens.

Positives

• Edison International's net income available to common shareholders increased by $316 million to $832 million for Q3 2025, and by $1,667 million to $2,611 million for the nine months ended September 30, 2025.
• SCE's net income increased by $323 million to $925 million for Q3 2025, and by $1,745 million to $2,935 million for the nine months ended September 30, 2025.
• The 2025 GRC final decision approved a substantial increase in base rate revenue requirement to $9.7 billion for 2025, an increase of $880 million over 2024, with retroactive effect to January 1, 2025.
• The CPUC approved the TKM Settlement Agreement in January 2025, authorizing SCE to recover approximately $1.6 billion in wildfire-related costs.
• SB 254 established a Continuation Account for the Wildfire Insurance Fund, potentially adding up to $18 billion in funding, enhancing long-term wildfire liability mitigation.
• SCE's customer-funded self-insurance program provides $1.0 billion coverage for 2025 wildfires, reducing direct shareholder exposure.
• Moody's and Fitch reaffirmed SCE's and Edison International Parent's credit ratings with stable outlooks following SB 254.
• SCE successfully monetized investment tax credits of $236 million from the Inflation Reduction Act of 2022, with proceeds expected to be passed back to customers.
• Strong liquidity position with SCE having $305 million cash on hand and approximately $2.1 billion available on its $3.4 billion revolving credit facility as of September 30, 2025.

Negatives

• Edison International Parent and Other's loss increased by $7 million for Q3 2025 and $78 million for the nine months ended September 30, 2025, primarily due to higher interest expense and wildfire claims insured by Edison Insurance Services, Inc. (EIS).
• S&P downgraded SCE's and Edison International Parent's long-term issuer credit ratings to BBBwith a negative outlook following the passage of SB 254.
• The Eaton Fire in January 2025 caused significant damage and fatalities, with concerning circumstantial evidence suggesting SCE's equipment may have been associated with its ignition, leading to $300 million in recorded losses for the Eaton Subrogation Settlement in Q3 2025.
• SCE recorded net charges of $76 million ($39 million after-tax) in Q3 2025 due to impairment of utility property, plant and equipment associated with historical capital expenditures disallowed in the 2025 GRC final decision, mainly related to the rooftop solar photovoltaic program.
• The CPUC denied recovery of $65 million in operations and maintenance expenses and determined that $36 million of requested capital expenditures were not eligible for recovery in the 2021 GRC Wildfire Mitigation Memorandum Account Balances decision.
• Uncertainty remains regarding the full range of losses for the Eaton Fire and other wildfire events, with potential for material losses in excess of accrued amounts.
• The Wild Tree Foundation opposed the Woolsey Settlement Agreement, which could delay or alter its approval.
• The 225 MW utility-owned energy storage project is delayed, with ongoing discussions between SCE and Ameresco, Inc. regarding its in-service status.

Risks

• Significant exposure to legal liability for damages arising from catastrophic wildfires where utility facilities are alleged to be a substantial or contributing cause, despite AB 1054 and SB 254.
• Ability to recover costs through regulated rates, timely or at all, including uninsured wildfire-related and debris flow-related costs, and costs incurred for wildfire restoration efforts and mitigation.
• Actions by credit rating agencies to downgrade Edison International or SCE's credit ratings, which could increase borrowing costs and impact access to bank and capital markets.
• Impact of affordability of customer rates on SCE's ability to execute its strategy, including obtaining regulatory approval for cost recovery for operations, maintenance, and capital investment projects.
• Cybersecurity of critical information technology systems for grid control and business, employee, and customer data, and the physical security of critical assets and personnel.
• Risks associated with the operation and maintenance of electrical facilities, including worker, contractor, and public safety issues, equipment failure, and availability and cost of spare parts.
• Challenges in updating grid infrastructure to maintain system integrity and reliability, and meet electrification needs, including project site identification, public opposition, environmental mitigation, and permitting.
• Regulatory or legislative restrictions that would limit SCE's ability to implement operational measures to mitigate wildfire risk, such as Public Safety Power Shutoffs (PSPS) and fast curve settings.
• Risk that AB 1054, SB 254, or other new California legislation does not effectively mitigate the significant exposure to wildfire-related liability, including the longevity of the Wildfire Insurance Fund.
• Ability to effectively attract, manage, develop, and retain a skilled workforce, including contract workers.
• Unfavorable decisions and other actions by the CPUC, FERC, NRC, the California legislature, and other governmental authorities.
• Potential for penalties or disallowances for non-compliance with applicable laws and regulations, including fines related to wildfires where SCE's equipment is alleged to be associated with ignition.
• Extreme weather-related incidents (including those exacerbated by climate change), such as wildfires, debris flows, flooding, droughts, and extreme heat events, causing safety issues, property damage, outages, and unanticipated costs.
• Risks associated with the decommissioning of San Onofre, including worker and public safety, public opposition, permitting, delays, contractual disputes, and cost overruns.
• Risks associated with cost allocation resulting in higher rates for utility bundled service customers due to possible customer bypass or departure for other electricity providers.
• Changes in tax laws and regulations, or their application, affecting deferred tax assets and liabilities, effective tax rates, and cash flows.
• Changes in rates of inflation and interest rates, and potential future adjustments to SCE's ROE.
• Availability and creditworthiness of counterparties and the resulting effects on liquidity in power and fuel markets.
• Cost of fuel for generating facilities and related transportation, if not recovered through regulated rate cost escalation provisions or balancing accounts.
• Inability to reasonably estimate the full range of losses for certain wildfire events, such as the Eaton Fire, due to complexities in estimating damages and litigation uncertainties.

Future Outlook

Edison International estimates it will be subject to the 15% corporate alternative minimum tax (CAMT) on its consolidated federal tax returns starting in 2026. SCE also expects to be subject to CAMT in 2026. The company expects to pass the proceeds from monetized tax credits, net of transaction fees, back to customers. The One Big Beautiful Bill Act of 2025 (OBBBA) is not expected to impact investment tax credits related to SCE's utility-owned storage projects, and most financial impacts from OBBBA are expected to be passed through to customers under regulated ratemaking requirements. SCE expects to launch its Wildfire Recovery Compensation Program in the fall of 2025. The fund administrator for the Wildfire Insurance Fund will determine by December 31, 2028, if contributions to the Continuation Account are required. SCE expects to file its 2026 annual update with FERC by December 1, 2025, with proposed rates effective January 1, 2026.

Management Comments

• SCE's internal review into the facts and circumstances of the Eaton Fire is complex and ongoing. While SCE has not conclusively determined that its equipment caused the ignition of the Eaton Fire, concerning circumstantial evidence suggests that a de-energized idle SCE transmission facility in the preliminary area of origin may have been associated with the ignition of the fire.
• SCE believes that it is likely that its equipment could be found to have been associated with the ignition of the Eaton Fire and is pursuing settlement of claims through its Wildfire Recovery Compensation Program.
• Based on the information reviewed as of October 28, 2025, SCE believes that it would be able to make a good faith showing that its conduct with respect to its transmission facilities in the preliminary area of origin was consistent with the actions of a reasonable utility.
• Edison International and SCE continue to pursue legislative strategies to address California investor-owned utilities' exposure to wildfire-related liabilities, but cannot predict whether or when there will be a comprehensive economy-wide solution.
• SCE expects to launch its Wildfire Recovery Compensation Program, a program designed to allow eligible individuals and businesses impacted by the Eaton Fire to seek expedited resolution of their claims, in the fall of 2025.
• Edison International intends to maintain its target payout ratio of 45% 55% of SCE's core earnings.

Industry Context

The utility industry in California continues to grapple with significant wildfire risks exacerbated by climate change, leading to substantial liabilities and increased focus on mitigation and cost recovery mechanisms. The establishment of the Wildfire Insurance Fund and its expansion under SB 254 reflects ongoing legislative and regulatory efforts to manage these risks and allocate burdens across stakeholders, including customers and utilities. The emphasis on grid hardening, undergrounding, and covered conductors aligns with broader industry trends towards enhancing grid resilience and safety in high-risk areas. The push for electrification and utility-owned energy storage projects also positions Edison International within the evolving clean energy landscape, though regulatory approvals and cost recovery remain critical.

Comparison to Industry Standards

• NA

Corporate Governance

Legal Proceedings

• Eaton Fire Litigation: Multiple lawsuits initiated against SCE and Edison International, including approximately 500 lawsuits representing 6,500 individual plaintiffs, subrogation lawsuits, and public entity lawsuits. A bellwether jury trial is set for January 2027.
• 2017/2018 Wildfire/Mudslide Events Litigation: Approximately 100 individual plaintiffs' claims and potential claims from public entities (including CAL OES) remain outstanding. Damages-only trials for TKM litigation are set for January, April, and May 2026. A trial for CAL OES and a damages-only trial for an individual plaintiff in the Woolsey Fire litigation are set for March 2026 and July 2026, respectively.
• Saddle Ridge Fire Litigation: Multiple lawsuits filed against SCE. An inverse condemnation bench trial is set for March 2026. SCE has not accrued losses as probability is not determined.
• Fairview Fire Litigation: A jury trial in the individual plaintiff litigation is set for June 2026. SCE has accrued charges for potential losses.
• Coastal Fire Litigation: Individual plaintiffs have filed complaints against SCE. No trials are scheduled as of October 21, 2025. SCE has accrued charges for potential losses.
• 2017 Creek Fire, 2020 Bobcat Fire, 2020 Silverado Fire: Substantially all claims settled, and no additional material losses are expected beyond accrued amounts.

Related Party Transactions

• In July 2022, SCE purchased wildfire liability insurance for $273 million from Edison Insurance Services, Inc. (EIS), a wholly-owned subsidiary of Edison International, for the period to June 30, 2023.
• An EIS wildfire liability insurance policy was amended in February 2025 to reimburse SCE for $50 million in claim costs and related legal expenses for a wildfire occurring during the July 1, 2022, through June 30, 2023, policy period.
• Expected insurance recoveries from previously purchased wildfire-related insurance from EIS included in SCE's condensed consolidated balance sheets were $226 million at September 30, 2025, and $303 million at December 31, 2024.

Stakeholder Impact

• Shareholders: Positive impact from increased net income and core earnings, but potential negative impact from S&P credit rating downgrade and ongoing wildfire liabilities. The stock repurchase program aims to offset dilution.
• Customers: Impacted by increased authorized revenues from the 2025 GRC, cost recoveries for wildfire events, and customer-funded self-insurance. Expected to receive proceeds from monetized tax credits.
• Employees: Executive Retirement Plan amendments affect supplemental retirement benefits. Workforce reductions in 2024 led to severance costs.
• Regulators (CPUC, FERC, OEIS): Actively involved in approving rate cases, cost recovery mechanisms, and investigating wildfire events, influencing the company's financial and operational landscape.
• Creditors: Affected by credit rating changes (S&P downgrade to BBBnegative outlook) which could impact borrowing costs and collateral requirements.
• Wildfire Victims: Impacted by ongoing litigation and the establishment of the Wildfire Recovery Compensation Program and the Wildfire Insurance Fund for claims resolution and reimbursement.

Next Steps

• SCE expects to launch its Wildfire Recovery Compensation Program in the fall of 2025.
• The administrator of the Wildfire Insurance Fund will submit a report to the California legislature and governor by April 1, 2026, evaluating new models for natural catastrophe burden allocation.
• The fund administrator will determine, on or before December 31, 2028, whether annual contributions to the Continuation Account are required.
• SCE expects to file its 2026 annual update with the FERC by December 1, 2025, with proposed rates effective January 1, 2026.
• A proposed decision for SCE's 2026 cost of capital proceeding is expected in Q4 2025.
• A bellwether jury trial for the Eaton Fire litigation has been set for January 2027.
• Damages-only trials for individual plaintiffs in the TKM litigation are set for January, April, and May 2026.
• A trial for CAL OES and a damages-only trial for an individual plaintiff household in the Woolsey Fire litigation are set for March 2026 and July 2026, respectively.
• An inverse condemnation bench trial in the Saddle Ridge Fire litigation has been set for March 2026.
• A jury trial in the Fairview Fire individual plaintiff litigation has been set for June 2026.
• SCE will continue to evaluate the probability of recovery for uninsured wildfire costs based on available evidence and regulatory decisions.
• Edison International and SCE will apply the new FASB standard for income tax disclosures beginning in their annual filing for the year ended December 31, 2025.
• Edison International and SCE are evaluating the impact of new FASB guidance on disaggregated expense disclosures (effective for annual disclosure for year ended December 31, 2027) and credit losses on receivables (effective for annual periods after January 1, 2026).
• Edison International and SCE are evaluating the impact of new FASB guidance on internal-use software (effective for annual periods after January 1, 2028).

Key Dates

Recommendation

While Edison International demonstrated strong Q3 2025 earnings growth driven by favorable regulatory decisions and wildfire cost recoveries, the outlook is mixed. The 2025 GRC approval and the TKM Settlement provide significant financial tailwinds and regulatory clarity. However, the ongoing and substantial liabilities from the Eaton Fire and other wildfire events, coupled with S&P's credit rating downgrade to BBBwith a negative outlook, introduce considerable uncertainty and risk. The long-term effectiveness and funding of the Wildfire Insurance Fund and the outcome of various legal proceedings remain critical factors. Investors should hold, awaiting further clarity on the full financial impact of wildfire liabilities and the sustained credit profile.

Keywords

Edison International, Southern California Edison, Utility, Electricity, California, Wildfire, General Rate Case, CPUC, FERC, SB 254, AB 1054, Wildfire Insurance Fund, Eaton Fire, TKM Settlement, Woolsey Fire, Earnings, Revenue, Capital Expenditures, Rate Base, Credit Rating, Regulatory Assets, Environmental Remediation, Nuclear Decommissioning, Energy Storage, Grid Hardening, Electrification, Climate Change, Risk Mitigation, 10-Q