10-K: Southern California Edison's Asset-Backed Securities Servicing Compliance Reviewed, Minor Reporting Issue Identified

Southern California Edison's servicing of asset-backed securities was found to be compliant in all material respects, except for a minor issue with investor reporting calculations.

Summary

• Southern California Edison Company (SCE) underwent an examination of its compliance with servicing criteria for asset-backed securities transactions.
• The examination covered transactions backed by recovery property established under California Public Utilities Commission financing orders, issued by SCE Recovery Funding LLC.
• PricewaterhouseCoopers LLP conducted the examination, focusing on compliance with SEC Regulation AB servicing criteria as of December 31, 2023.
• The audit found that SCE complied with the applicable servicing criteria in all material respects, except for one instance of non-compliance.
• The non-compliance involved certain reports to investors that did not calculate information according to the terms specified in the transaction agreements.
• This issue was related to the 'FRCs Billed' column in monthly certificates, which had data discrepancies.
• The discrepancies did not affect the actual amounts billed, collected, or remitted to the Trustee.
• SCE has since replaced the internal report that caused the discrepancies with a corrected version.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative due to the identified non-compliance, although it was corrected. The overall tone is professional and factual, focusing on compliance and reporting.

Positives

• SCE complied with the majority of the applicable servicing criteria for asset-backed securities.
• The identified non-compliance was limited to a specific reporting issue and did not affect the actual financial transactions.
• SCE took corrective action by replacing the problematic internal report.

Negatives

• A material non-compliance was identified in investor reports, where information was not calculated according to transaction agreements.
• There were data discrepancies in the 'FRCs Billed' column of monthly certificates.

Risks

• The identified non-compliance, while corrected, could raise concerns about the accuracy of SCE's reporting processes.
• Future reporting errors could lead to a loss of investor confidence.
• Continued vigilance is required to ensure ongoing compliance with all servicing criteria.

Management Comments

• Natalia Woodward, Vice President and Treasurer of Southern California Edison Company, certified that the servicer has fulfilled its obligations under the servicing agreements in all material respects.
• Natalia Woodward stated that she has reviewed the report and that it does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

Industry Context

This report is part of the standard regulatory compliance process for companies that issue asset-backed securities. It ensures that the servicing of these securities adheres to established guidelines and protects investor interests. The findings are relevant to the broader financial industry, particularly those involved in securitization and asset management.

Comparison to Industry Standards

• The report follows the standard requirements of SEC Regulation AB for asset-backed securities servicing.
• The audit by PricewaterhouseCoopers LLP is a common practice for ensuring compliance in the financial industry.
• The identified non-compliance, while a concern, is not uncommon in complex financial reporting and is similar to issues found in other companies' compliance reports.
• The Bank of New York Mellon's compliance assessment and attestation by KPMG LLP are also standard practices for trustee and custodial services in the asset-backed securities market.

Management Changes

Related Party Transactions

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

Stakeholder Impact

• The identified reporting issue could raise concerns among investors about the accuracy of financial information.
• The corrective actions taken by SCE should reassure stakeholders of the company's commitment to compliance.
• The report provides transparency to stakeholders regarding the servicing of asset-backed securities.

Next Steps

• SCE will continue to monitor its reporting processes to prevent future discrepancies.
• SCE will ensure ongoing compliance with all servicing criteria.
• The company will likely be subject to further audits and reviews to maintain compliance.

Key Dates

Keywords

asset-backed securities, servicing compliance, Southern California Edison, SEC Regulation AB, PricewaterhouseCoopers, investor reporting, non-compliance, recovery property, SCE Recovery Funding LLC