10-Q: Edison International and Southern California Edison Report Third Quarter 2024 Results

Edison International's third quarter 2024 earnings increased $361 million compared to the same period in 2023, driven by improved performance at Southern California Edison.

Summary

• Edison International's net income available to common shareholders for the third quarter of 2024 was $516 million, compared to $155 million for the third quarter of 2023.
• SCE's net income available to common stock for the third quarter was $602 million, up from $239 million in the prior year.
• Core earnings for Edison International were $582 million for the third quarter of 2024, compared to $531 million for the third quarter of 2023.
• SCE's core earnings increased to $667 million in the third quarter of 2024 from $613 million in the third quarter of 2023, primarily due to higher revenue authorized in Track 4 and an increase in the authorized rate of return resulting from the cost of capital adjustment mechanism.
• Edison International Parent and Other reported a net loss attributable to common shareholders of $86 million for the third quarter of 2024, consistent with the prior year.
• For the nine months ended September 30, 2024, Edison International's net income available to common shareholders was $944 million, compared to $819 million for the same period in 2023.
• SCE's net income available to common stock for the nine months ended September 30, 2024, was $1,190 million, compared to $1,029 million for the same period in 2023.
• Core earnings for Edison International for the nine months ended September 30, 2024, were $1,495 million, compared to $1,335 million for the same period in 2023.
• SCE's core earnings for the nine months ended September 30, 2024, increased to $1,739 million from $1,578 million in the prior year, primarily due to higher revenue authorized in Track 4, an increase in the authorized rate of return, and recognition of previously unrecognized return on rate base related to emergency restoration related capital expenditures.
• Edison International Parent and Other reported a net loss attributable to common shareholders of $246 million for the nine months ended September 30, 2024, compared to $210 million for the same period in 2023.
• SCE has accrued estimated losses of $9.9 billion related to the 2017/2018 Wildfire/Mudslide Events claims.
• SCE is seeking CPUC-jurisdictional rate recovery of $5.4 billion of prudently incurred losses related to the Woolsey Fire.
• SCE forecasts total capital expenditures ranging from $32.2 billion to $37.5 billion for 2024-2028.
• The CPUC approved SCE's request for interim rate recovery of $210 million, subject to refund, associated with 2022 operations and maintenance and capital expenditures above levels authorized in wildfire mitigation accounts and the vegetation management balancing account.

Sentiment

Score: 7

Explanation: The document presents a mixed sentiment. While earnings have improved, significant risks related to wildfires and regulatory challenges remain. The company is actively managing these risks and investing in infrastructure, but the financial impact of potential liabilities is a concern.

Positives

• SCE's core earnings increased due to higher revenue authorized in Track 4 and an increase in the authorized rate of return.
• The CPUC approved SCE's request for interim rate recovery of $210 million, subject to refund, associated with 2022 operations and maintenance and capital expenditures above levels authorized in wildfire mitigation accounts and the vegetation management balancing account.
• SCE expects to construct transmission projects requiring capital investment of at least $2.0 billion beyond 2028.
• The CPUC issued a decision in the 2025 GRC proceeding authorizing the self-insurance framework to continue through at least 2028, supporting a self-insurance fund of up to $1.0 billion per policy year.

Negatives

• SCE is unable to conclude, at this time, that uninsured CPUC-jurisdictional wildfire-related costs related to the 2017/2018 Wildfire/Mudslide Events are probable of recovery through electric rates.
• SCE may incur a material loss in excess of amounts accrued in connection with the remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events.
• SCE's credit ratings may be affected if regulators fail to successfully implement AB 1054 or the Wildfire Insurance Fund is depleted.
• The CPUC's decision in a cost recovery proceeding involving SDG&E arising from several 2007 wildfires in SDG&E's service area is the only directly comparable precedent available, SCE believes that there is substantial uncertainty regarding how the CPUC will interpret and apply its prudency standard to an investor-owned utility in wildfire claims related cost-recovery proceedings for fires ignited prior to the adoption of AB 1054 on July 12, 2019.

Risks

• The ability of SCE to recover its costs through regulated rates, including uninsured wildfire-related costs, is a risk.
• Extreme weather-related incidents and other natural disasters could cause worker and public safety issues, property damage, and operational issues.
• Risks associated with the decommissioning of San Onofre, including those related to worker and public safety, public opposition, and cost overruns, exist.
• Actions by credit rating agencies to downgrade Edison International or SCE's credit ratings could increase borrowing costs.
• Changes in tax laws and regulations could affect recorded deferred tax assets and liabilities, effective tax rates, and cash flows.

Future Outlook

SCE forecasts total capital expenditures ranging from $32.2 billion to $37.5 billion for 2024-2028, and weighted average annual rate base from $43.0 billion to $60.6 billion for 2024-2028.

Industry Context

The report reflects the ongoing challenges and opportunities facing investor-owned utilities in California, particularly regarding wildfire risk mitigation and cost recovery in a complex regulatory environment.

Comparison to Industry Standards

• The document mentions a cost recovery proceeding involving SDG&E arising from several 2007 wildfires in SDG&E's service area as the only directly comparable precedent available.
• The CPUC's prudency standard is a key factor in determining cost recovery for wildfire-related expenses, as illustrated by the SDG&E case.
• The document references the CAISO's transmission plans and the need for new resources in California by 2032, indicating a focus on grid modernization and renewable energy integration, which aligns with broader industry trends.

Legal Proceedings

• Multiple lawsuits related to the 2017/2018 Wildfire/Mudslide Events naming SCE as a defendant have been filed by individual plaintiffs, subrogation plaintiffs and public entity plaintiffs.
• SCE is seeking CPUC-jurisdictional rate recovery of prudently incurred losses related to the Thomas Fire, the Koenigstein Fire and the Montecito Mudslides.
• SCE is seeking CPUC-jurisdictional rate recovery of $5.4 billion of prudently incurred losses related to the Woolsey 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.

Stakeholder Impact

• The affordability of customer rates impacts SCE's ability to execute its strategy.
• The outcome of regulatory proceedings will affect the recoverability of wildfire-related costs and the rates paid by customers.
• Wildfire mitigation efforts and PSPS activations impact customers and communities.

Next Steps

• SCE expects to file its 2025 annual update with the FERC by December 1, 2024, with the proposed rates effective January 1, 2025.
• SCE intends to file its updated decommissioning cost estimate with the CPUC before the end of 2024.
• A final decision for the total authorized revenue requirement for 2021 GRC Wildfire Mitigation Memorandum Account Balances is expected in the second quarter of 2025 according to the CPUC adopted schedule.
• The CPUC adopted a schedule with a proposed decision expected in the third quarter of 2025 for Multi-year Wildfire Mitigation and Catastrophic Events Filing ("WMCE Filing").

Key Dates

Keywords

Edison International, Southern California Edison, SCE, Wildfires, Rate recovery, Core earnings, Capital expenditures, Regulatory proceedings, Transmission projects, Decommissioning, San Onofre, CPUC, FERC, AB 1054, 10-Q