8-K: Edison International Updates Outlook, Boosts Grid Investment

Edison International reaffirms its 2025-2028 core EPS growth target and outlines significant capital investments in grid modernization and wildfire mitigation, while reducing equity needs.

Summary

• Edison International (EIX) and Southern California Edison (SCE) provided a business update on October 28, 2025.
• The company reaffirmed its 2025-2028 Core EPS CAGR target of 5-7% (off a $5.84 baseline) and narrowed its 2025 Core EPS guidance to $5.95-$6.20.
• A refreshed 4-year capital plan for 2025-2028 totals $28-$29 billion, focused on grid reliability, resilience, and advancing California's clean energy goals.
• A 7-8% rate base Compound Annual Growth Rate (CAGR) is projected from 2024-2028, with no equity needs anticipated for the 2025-2028 financing plan.
• A settlement agreement for Woolsey wildfire cost recovery was reached, authorizing 35% cost recovery (~$2.0 billion WEMA recovery) and 85% of restoration costs (~$70 million CEMA recovery), pending CPUC approval.
• The TKM settlement was approved, authorizing ~$1.6 billion in recovery, with securitized bonds targeted by the end of 2025.
• SCE's 2025 General Rate Case (GRC) decision approved approximately $9.7 billion in base revenue and significant capital investment, supporting the 4-year capital plan.
• California Senate Bill 254 (SB 254), passed in September 2025, creates an $18 billion Wildfire Continuation Account, funded 50/50 by customers and IOUs, enhancing financial stability and liability frameworks.
• As of September 30, 2025, SCE has completed 91% of its planned distribution line hardening in high fire risk areas (HFRA).
• Electricity demand is projected to nearly double by 2045, primarily driven by economy-wide electrification.
• The average SCE household is expected to see over 10% energy savings by the early 2030s and approximately 40% by 2045 due to electrification.
• SCE maintains the lowest system average rate of 29.3 cents per kWh among major California Investor-Owned Utilities (IOUs).

Sentiment

Score: 8

Explanation: The filing presents a strong financial outlook with reaffirmed long-term EPS growth, significant capital investment plans, and improved financial stability due to wildfire liability reforms and settlements. The reduction in equity needs and commitment to investment-grade credit ratings are highly positive. While there's a slight dip in the 2025 EPS midpoint due to refinancing costs, the overall strategic direction and financial health appear robust, despite ongoing wildfire risks and regulatory complexities.

Positives

• Reaffirmed 5-7% Core EPS CAGR for 2025-2028, indicating stable long-term earnings growth.
• No equity needs projected for the 2025-2028 financing plan, reducing potential shareholder dilution.
• Woolsey cost recovery settlement (35% WEMA, 85% CEMA) is expected to improve credit metrics by up to 90bps FFO-to-Debt and provide an annualized interest expense benefit of ~$0.18/share.
• TKM settlement approved, with ~$1.6 billion securitization expected by year-end 2025, providing significant liquidity.
• SB 254 creates an $18 billion Wildfire Continuation Account, enhancing IOU financial stability and providing a clearer liability framework for future wildfires.
• Strong capital plan of $28-$29 billion (2025-2028) drives substantial investment in grid modernization and clean energy.
• Projected 7-8% rate base CAGR (2024-2028) supports consistent revenue growth.
• SCE has completed 91% of planned distribution line hardening in high fire risk areas, demonstrating effective wildfire mitigation.
• Significant load growth projected (40-50% by 2035, nearly doubling by 2045) due to electrification, supporting future revenue streams.
• Expected average SCE household energy savings of over 10% by early 2030s and approximately 40% by 2045, benefiting customers.
• SCE has the lowest system average rate (29.3 cents per kWh) among major California IOUs, enhancing customer affordability and competitiveness.
• Edison International has a solid track record of 21 consecutive years of dividend growth.
• Target dividend payout of 45-55% of SCE core earnings provides a clear return strategy for investors.

Negatives

• The narrowed 2025 Core EPS guidance midpoint is slightly lower due to approximately $0.10 of one-time costs associated with the expected early refinancing of EIX preferred equity.
• The GRC final decision authorized rate base aligned with the low end of prior guidance, indicating some capital expenditure reductions.
• SB 254 prohibits the inclusion of approximately $500-700 million of related capital spending (2026-2028) in SCE's equity rate base, leading to a loss of equity return on these expenditures.
• SCE's rate increases outpaced local inflation from 2019-2024 (~12% vs. ~4%), largely driven by external events.

Risks

• Ability of SCE to recover its 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.
• Cybersecurity of Edison International's and SCE's critical information technology systems 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, the risk of utility assets causing or contributing to wildfires, and equipment failure.
• Impact of affordability of customer rates on SCE's ability to execute its strategy, including obtaining regulatory approval or cost recovery for expenses and capital projects.
• Ability of SCE to update its grid infrastructure to maintain system integrity and reliability, and meet electrification needs.
• Ability of SCE to implement its operational and strategic plans, including its Wildfire Mitigation Plan, due to challenges related to project site identification, public opposition, environmental mitigation, construction, permitting, and governmental approvals.
• Risks of 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).
• Ability of SCE to obtain safety certifications from the Office of Energy Infrastructure Safety (OEIS).
• Risk that California Assembly Bill 1054 (AB 1054), California Senate Bill 254 (SB 254) or other new California legislation does not effectively mitigate the significant exposure faced by California investor-owned utilities related to liability for damages arising from catastrophic wildfires.
• Ability of Edison International and SCE to effectively attract, manage, develop and retain a skilled workforce.
• Decisions and other actions by the CPUC, the Federal Energy Regulatory Commission (FERC), the United States Nuclear Regulatory Commission, the California legislature and other governmental authorities.
• Governmental, statutory, regulatory, or administrative changes or initiatives affecting the electricity industry, including market structure rules and changes in environmental priorities.
• Potential for penalties or disallowances for non-compliance with applicable laws and regulations, including fines related to wildfires.
• Extreme weather-related incidents (including events caused or exacerbated by climate change) and other natural disasters, which could cause worker and public safety issues, property damage, outages, and unanticipated costs.
• Risks associated with the decommissioning of San Onofre, including those related to worker and public safety, public opposition, permitting, and cost overruns.
• Risks associated with cost allocation resulting in higher rates for utility bundled service customers because of possible customer bypass or departure for other electricity providers.
• Actions by credit rating agencies to downgrade Edison International or SCE's credit ratings or to place those ratings on negative watch or negative outlook.

Future Outlook

Edison International reaffirms its 2025-2028 Core EPS CAGR of 5-7% and projects a 7-8% rate base CAGR, driven by a $28-$29 billion capital plan focused on grid modernization, wildfire mitigation, and enabling California's aggressive climate goals. The company anticipates significant load growth, nearly doubling by 2045, primarily due to economy-wide electrification, which is expected to lead to substantial energy cost savings for customers. No equity needs are projected for the 2025-2028 financing plan, supported by expected securitization proceeds from wildfire settlements. The company is awaiting regulatory decisions on its 2026 cost of capital application and the Woolsey settlement, which are expected to further strengthen its financial position.

Management Comments

• Edison International leads the transformation of the electric power industry.
• EIX is directly contributing to California's clean energy transition by taking steps to reach net zero.
• SCE is seeing proof points and results from its substantial wildfire mitigation efforts.
• SCE delivers on California's energy goals while managing affordability—despite higher policy-driven cost burdens.
• EIX and SCE are committed to investment grade credit ratings.
• We are confident in our 5-7% CAGR, keeping the same baseline of $5.84 for 2025 (original guidance midpoint + TKM ongoing interest benefit). This translates to $6.74-$7.14 for 2028, which is inclusive of the ongoing Woolsey interest benefit.
• Our FFO-to-debt metric has substantially strengthened from the TKM and Woolsey cost recoveries.
• Our core EPS growth guidance incorporates a range of potential outcomes around the current 10.33% [ROE].

Industry Context

The filing highlights Edison International's pivotal role in California's energy transition, aligning with aggressive state climate goals for decarbonization, electrification of transportation and buildings, and use of low-carbon fuels. The company's substantial investments in grid hardening and wildfire mitigation reflect a broader industry trend among California utilities to address increasing climate-driven risks. Regulatory mechanisms like AB 1054 and SB 254 demonstrate state support for utility financial stability in managing catastrophic wildfire liabilities, a critical context for California's investor-owned utilities. SCE's focus on affordability and its lowest system average rate among major California IOUs positions it favorably within a highly regulated and cost-sensitive market.

Comparison to Industry Standards

• SCE has the lowest system average rate (29.3 cents per kWh) among major California IOUs (PG&E: 34.8 cents per kWh, SDG&E: 35.1 cents per kWh).
• Edison International has one of the strongest electrification profiles in the industry, leading the largest U.S. IOU EV charging programs with over $850 million of approved funding plus over $1 billion of incentives.
• CAL FIRE's fleet is the largest civil aerial firefighting fleet in the world, supporting wildfire suppression efforts in California.
• SCE serves a significantly larger area with lower customer density (~105 customers per sq. mile) compared to municipal utilities like LADWP (~3,200 customers per sq. mile), while maintaining competitive rates despite funding broader public mandates.

Legal Proceedings

• Woolsey (A.24-10-002) cost recovery settlement agreement filed, pending CPUC approval.
• TKM (A.23-08-013) cost recovery settlement approved.

Stakeholder Impact

• Shareholders: Reaffirmed EPS growth, dividend growth, no equity dilution, improved credit metrics, and reduced wildfire liability risk are positive.
• Customers: Significant investments in grid reliability and safety (wildfire mitigation), expected energy cost savings from electrification, and SCE maintaining the lowest system average rate among major California IOUs. However, customers contribute to the Wildfire Insurance Fund and the new Continuation Account.
• Employees: Continued investment in infrastructure and strategic plans implies stable or growing employment opportunities.
• Creditors: Improved credit metrics (FFO-to-Debt benefit from settlements), commitment to investment-grade ratings, and manageable long-term debt maturities are positive.
• Regulatory Authorities: Compliance with AB 1054 and SB 254, ongoing regulatory proceedings (GRC, Cost of Capital), and safety certifications.

Next Steps

• Awaiting proposed decision for Woolsey Cost Recovery settlement.
• Awaiting proposed decision for 2026 Cost of Capital proceeding (expected November 2025).
• Targeting issuance of securitized bonds for TKM settlement by end of 2025.
• Following CPUC approval of Woolsey settlement, a separate application to issue securitized bonds is expected to take 6 months for CPUC approval, with proceeds anticipated by mid-2026.
• Meet and confer by November 5 for NextGen ERP application.
• Plan to file AMI 2.0 application in Q1 2026.
• CEA's report on natural catastrophe resiliency study due to Legislature and Governor by April 1, 2026.
• File 2029 GRC and 2029 CoC applications.
• File 2024 WMCE application.

Key Dates

Recommendation

The filing demonstrates a strong and stable outlook for Edison International, underpinned by significant planned capital investments ($28-$29 billion) in grid modernization and clean energy transition, which are expected to drive a robust 7-8% rate base CAGR and a reaffirmed 5-7% Core EPS CAGR through 2028. The resolution of legacy wildfire liabilities through approved and pending settlements (TKM and Woolsey) significantly de-risks the company, improves credit metrics (up to 90bps FFO-to-Debt benefit), and eliminates the need for equity issuance through 2028. California's constructive regulatory environment, including the new SB 254 Wildfire Continuation Account, further enhances financial stability. With 21 consecutive years of dividend growth, a target payout of 45-55% of SCE core earnings, and a commitment to investment-grade credit ratings, EIX presents a compelling investment opportunity for long-term growth and income in a critical utility sector.

Keywords

Edison International, Southern California Edison, EIX, SCE, Utility, Electric Power, Wildfire Mitigation, Electrification, Clean Energy, Rate Base, EPS Guidance, Capital Expenditures, Regulatory Affairs, California, CPUC, AB 1054, SB 254, Wildfire Insurance Fund, Grid Modernization, Sustainability, Dividend Growth, Credit Ratings