10-Q: Edison International Reports Q1 2025 Earnings, Impacted by Wildfire Recoveries and Eaton Fire Investigation

Edison International's first quarter 2025 earnings significantly increased due to cost recoveries from the TKM Settlement Agreement, offset by expenses related to the ongoing Eaton Fire investigation.

Summary

• Edison International's Q1 2025 net income available to shareholders was $1.436 billion, a significant increase of $1.447 billion compared to a loss of $11 million in Q1 2024.
• SCE's net income increased by $1.502 billion, driven by higher core earnings of $107 million and higher non-core earnings of $1.395 billion.
• Edison International Parent and Other's loss increased by $55 million due to higher core and non-core losses.
• SCE recorded cost recoveries of $1.6 billion through CPUC electric rates authorized under the TKM Settlement Agreement.
• An investigation is underway regarding the Eaton Fire, which caused significant damage and fatalities; SCE believes its equipment could have been associated with the ignition.
• SCE forecasts total capital expenditures between $26.6 billion and $31.5 billion for 2025-2028.
• SCE's 2025 CPUC-authorized ROE is 10.33%, and the weighted average return on rate base is 7.66%.
• SCE has filed an application with the CPUC seeking an ROE of 11.75% beginning in 2026.
• SCE expects to securitize approximately $1.6 billion of cost recoveries authorized under the TKM Settlement Agreement.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While earnings are up significantly due to specific settlements, the ongoing wildfire risks, the Eaton Fire investigation, and regulatory uncertainties create a cautious outlook. The company is managing these risks, but the potential for material losses remains.

Positives

• Significant increase in Edison International's Q1 2025 earnings driven by SCE's improved performance.
• SCE is recovering costs related to the 2017/2018 Wildfire/Mudslide Events through the TKM Settlement Agreement.
• SCE has customer-funded self-insurance coverage available for wildfires ignited between January 1, 2025, and December 31, 2025, subject to a shareholder contribution of up to $12.5 million.
• SCE is implementing its WMP to reduce the risk of SCE equipment contributing to the ignition of wildfires.

Negatives

• The Eaton Fire caused significant damage and fatalities, and SCE believes its equipment could have been associated with the ignition.
• Edison International Parent and Other's loss increased due to expenses from wildfire claims insured by EIS and higher interest expense.
• SCE is recognizing revenue based on the 2024 authorized revenue requirement until a 2025 GRC decision is issued.
• SCE may incur material losses in excess of amounts accrued in connection with the remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events and Other Wildfire Events.

Risks

• The ongoing investigation into the Eaton Fire and potential liability for damages.
• The potential for catastrophic wildfire activity in SCE's service area.
• Regulatory uncertainty regarding the recovery of wildfire-related costs.
• The impact of climate change on weather conditions and wildfire risk.
• Credit rating downgrades could increase borrowing costs and impact the availability of financing.
• Risks associated with the decommissioning of San Onofre, including those related to worker and public safety, public opposition, permitting, governmental approvals, on-site storage of spent nuclear fuel and other radioactive material, delays, contractual disputes, and cost overruns.

Future Outlook

SCE forecasts total capital expenditures from $26.6 billion to $31.5 billion for 2025-2028 and weighted average annual rate base from $48.1 billion to $60.6 billion for 2025-2028.

Management Comments

• SCE believes that the CPUC's determination regarding the reasonableness of a utility's ignition-related conduct should be based on an evaluation of the reasonableness of the utility's overall policies, systems, and practices.
• Based on the information it has reviewed as of April 29, 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.

Industry Context

The report highlights the increasing challenges faced by California utilities due to climate change and the associated wildfire risks. The regulatory environment, particularly AB 1054, plays a crucial role in determining the financial impact of these events on utilities like Edison International and SCE. The comparison to SDG&E's past experience with wildfire cost recovery provides a relevant benchmark for assessing SCE's potential outcomes.

Comparison to Industry Standards

• The report references PG&E's reimbursement from the Wildfire Insurance Fund for losses related to the 2021 Dixie Fire, providing a benchmark for SCE's potential recoveries from the fund.
• The report mentions SDG&E's requests for cost recovery related to 2007 wildfire activity, where the FERC allowed recovery of all FERC-jurisdictional wildfire claims related costs while the CPUC rejected recovery of all CPUC-jurisdictional wildfire claims related costs based on a determination that SDG&E did not meet the CPUC's prudency standard, providing a precedent for SCE's potential outcomes.

Legal Proceedings

• Multiple lawsuits related to the 2017/2018 Wildfire/Mudslide Events and the Eaton Fire have been initiated against SCE and Edison International.
• The SED is conducting investigations with respect to the Eaton Fire and the Creek Fire.

Related Party Transactions

• SCE purchased wildfire liability insurance from EIS, a wholly-owned subsidiary of Edison International, for premiums of $273 million for the period to June 30, 2023.
• One of the EIS wildfire liability insurance policies 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.

Stakeholder Impact

• Shareholders: Earnings are up, but wildfire risks and regulatory uncertainties remain.
• Customers: Rates may be affected by wildfire-related costs and capital investments.
• Employees: The company is focused on attracting, managing, developing, and retaining a skilled workforce.
• Communities: SCE is implementing its WMP to reduce the risk of SCE equipment contributing to the ignition of wildfires.

Next Steps

• SCE will continue its investigation into the Eaton Fire.
• SCE will request approval from the CPUC to finance $1.6 billion of cost recoveries through the issuance of securitized bonds in the second quarter of 2025.
• SCE will continue to implement its WMP to reduce the risk of SCE equipment contributing to the ignition of wildfires.
• A damages only trial for one individual plaintiff household is currently scheduled for June 2025 in the Creek Fire litigation.
• A trial in the Silverado Fire litigation has been set for May 2025.
• One damages only trial for one individual plaintiff household is currently scheduled for September 2025 in the Coastal Fire litigation.
• A jury trial for a bellwether individual plaintiff in the Saddle Ridge Fire litigation has been set for November 2025.

Key Dates

Keywords

Edison International, Southern California Edison, SCE, Earnings, Wildfires, Eaton Fire, TKM Settlement Agreement, Regulatory, CPUC, ROE, Capital Expenditures, AB 1054, Insurance, Litigation