10-K: SCE Recovery Funding LLC Reports Full Compliance for 2024, Except for One Remittance Issue by BNY Mellon

SCE Recovery Funding LLC's servicer, Southern California Edison Company, reports compliance with servicing criteria for asset-backed securities for the year ended December 31, 2024, while BNY Mellon Trust Company, N.A., as Indenture Trustee, reports a material noncompliance related to remittance timelines.

Summary

• SCE Recovery Funding LLC filed its annual report on Form 10-K for the fiscal year ended December 31, 2024.
• Southern California Edison Company (SCE), as the servicer, asserted compliance with SEC Regulation AB servicing criteria, excluding certain criteria deemed not applicable.
• PricewaterhouseCoopers LLP audited SCE's assertion and issued an opinion that SCE's assertion of compliance was fairly stated in all material respects.
• BNY Mellon Trust Company, N.A., as Indenture Trustee, reported a material instance of noncompliance related to remittance timelines, specifically a delayed distribution on September 3, 2024, for the Consumers 2023 Securitization Funding LLC transaction.
• KPMG LLP audited BNY Mellon's compliance and issued a qualified opinion due to the identified material noncompliance.
• SCE Recovery Funding LLC is a wholly-owned subsidiary of SCE, which in turn is a wholly-owned subsidiary of Edison International.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly negative. While SCE reports compliance, the material noncompliance by BNY Mellon and the resulting qualified opinion from KPMG introduce a negative element. However, the remediation efforts by BNY Mellon mitigate some of the concern.

Positives

• Southern California Edison Company, as servicer, is in compliance in all material respects with the applicable servicing criteria.
• PricewaterhouseCoopers LLP issued an attestation report confirming SCE's compliance.
• SCE Recovery Funding LLC is a wholly-owned subsidiary of SCE, which in turn is a wholly-owned subsidiary of Edison International.

Negatives

• BNY Mellon Trust Company, N.A. reported a material instance of noncompliance with servicing criterion 1122(d)(3)(ii) because amounts due to investors were not remitted in accordance with timeframes set forth in the transaction agreements.
• The first distribution for the Consumers 2023 Securitization Funding LLC transaction due on September 3, 2024 ($82,421,673.75) was remitted one day late by BNY Mellon.

Risks

• The material noncompliance reported by BNY Mellon could potentially impact investor confidence.
• Failure to maintain compliance with servicing criteria could lead to regulatory scrutiny or legal action.

Future Outlook

The document does not contain specific forward-looking statements or guidance for SCE Recovery Funding LLC beyond the reporting period.

Management Comments

• Brendan Bond, Vice President and Treasurer of Southern California Edison Company, certified the servicer's compliance with obligations under the servicing agreements.
• Management of The Bank of New York Mellon is responsible for assessing the Company's compliance with the servicing criteria set forth in Item 1122(d) of Regulation AB.

Industry Context

This filing is typical for asset-backed securities issuers and servicers, providing transparency and assurance to investors regarding compliance with regulatory requirements and servicing standards. The structure with SCE Recovery Funding LLC, SCE as servicer, and BNY Mellon as trustee is a common arrangement in the asset-backed securities market.

Comparison to Industry Standards

• The report follows standard industry practice for asset-backed securities transactions, including independent audits and servicer compliance statements.
• The identified noncompliance by BNY Mellon highlights the importance of robust internal controls and monitoring procedures for trustees and servicers in the asset-backed securities market.
• Comparable companies in the asset-backed securities market, such as other utility companies with similar financing structures, are expected to adhere to similar compliance standards.

Management Changes

Related Party Transactions

• SCE Recovery Funding is a wholly-owned subsidiary of SCE, which is the depositor, sponsor and servicer.

Stakeholder Impact

• The material noncompliance by BNY Mellon could potentially impact investor confidence and returns.
• The compliance of SCE as servicer is important for maintaining the credit rating and value of the asset-backed securities.

Next Steps

• BNY Mellon will continue to implement and monitor its remediation efforts to prevent future remittance delays.
• SCE Recovery Funding LLC and SCE will continue to monitor the performance of BNY Mellon as Indenture Trustee.
• Investors will likely monitor future reports for any further instances of noncompliance.

Key Dates