10-K: Edison International Reports Increased 2024 Earnings Amid Wildfire Challenges

Edison International's 2024 earnings rose by $87 million, driven by Southern California Edison's improved performance, despite ongoing wildfire-related costs and investigations.

Summary

• Edison International's 2024 net income attributable to shareholders increased to $1.284 billion, up from $1.197 billion in 2023.
• Southern California Edison's (SCE) net income rose by $145 million, with core earnings increasing by $97 million due to higher authorized revenue and rate of return adjustments.
• Edison International Parent and Other experienced a higher loss of $58 million, primarily due to increased interest expenses.
• Non-core items included charges for 2017/2018 Wildfire/Mudslide Events claims ($493 million) and Other Wildfire Events claims ($162 million), offset by a change in the estimated life of the Wildfire Insurance Fund.
• SCE's capital expenditures totaled $5.7 billion in 2024 and are projected to range from $26.6 billion to $31.5 billion for 2025-2028.
• SCE is addressing the Eaton Fire, a significant wildfire in January 2025, and is cooperating with investigations while assessing potential financial impacts.
• The CPUC approved a settlement agreement authorizing SCE to recover 60% of $2.7 billion in losses related to the Thomas Fire, Koenigstein Fire, and Montecito Mudslides.
• SCE filed an application to seek CPUC-jurisdictional rate recovery of $5.4 billion of prudently incurred losses related to the Woolsey Fire.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While earnings are up, there are significant ongoing challenges related to wildfires and regulatory hurdles. The outlook is cautiously optimistic but dependent on external factors.

Positives

• SCE's core earnings increased due to higher authorized revenue and rate of return adjustments.
• The CPUC approved the TKM Settlement Agreement, allowing SCE to recover a significant portion of wildfire-related losses.
• SCE has customer-funded self-insurance coverage available for future wildfires.
• SCE is making progress towards meeting its long-term RPS and carbon-free power goals.

Negatives

• Edison International Parent and Other experienced a higher loss due to increased interest expenses.
• SCE faces potential liabilities related to the Eaton Fire and other wildfires.
• SCE's credit ratings are under negative outlook by S&P, reflecting concerns about wildfire risk.
• SCE may incur material losses in excess of amounts accrued for certain of the Other Wildfire Events.

Risks

• SCE faces risks related to regulatory and legislative decisions, including cost recovery and rate increases.
• SCE's business is subject to extensive regulation and the risk of adverse regulatory and legislative decisions.
• SCE faces potential damage claims for wildfire-related losses.
• Climate change and extreme weather events pose risks to SCE's infrastructure and operations.
• SCE faces cybersecurity and physical security risks to its critical information technology systems and infrastructure.
• 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.

Future Outlook

SCE expects its bundled system average rate will rise at or below a 2.6% compound annual growth rate from 2024 through 2028, which is near the projected rate of local inflation.

Management Comments

• Edison International's vision is to lead the transformation of the electric power industry and the company is focused on opportunities in delivering clean energy, advancing electrification, building a modernized and more reliable grid, and enabling customers' technology choices.
• 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.

Industry Context

The electric power industry is undergoing urgent and fundamental changes to how energy infrastructure is planned and built, driven by state government actions to reduce GHG emissions, new sources of demand, and technological innovations.

Comparison to Industry Standards

• The document references Pacific Gas & Electric (PG&E) seeking reimbursement from the Wildfire Insurance Fund for losses related to the 2021 Dixie Fire.
• The document references San Diego Gas & Electric (SDG&E)'s cost recovery related to 2007 wildfire activity as a comparable precedent.
• The document references Moody's utility bond rate index as a benchmark for potential future adjustments to SCE's ROE.

Legal Proceedings

• Multiple lawsuits related to the Eaton Fire have been initiated against SCE and Edison International.
• Multiple lawsuits and investigations related to the 2017/2018 Wildfire/Mudslide Events have been initiated against SCE and Edison International.

Related Party Transactions

• SCE purchases wildfire liability insurance from EIS, a wholly-owned subsidiary of Edison International.

Stakeholder Impact

• Customers may experience rate increases due to infrastructure investments and wildfire-related costs.
• Employees may be affected by workforce reductions and organizational realignments.
• Shareholders may see continued dividend payments, subject to financial and regulatory factors.

Next Steps

• SCE expects to file its regularly scheduled cost of capital application in March 2025 for rates effective for 2026-2028.
• SCE intends to file an application with the CPUC for approval of the ERP implementation in the first half of 2025.
• Parties to the TKM proceeding may file an application for rehearing through March 10, 2025.

Key Dates