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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended   March 31, 2022

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                        to

Commission
File Number

   

Exact Name of Registrant
as specified in its charter

State or Other Jurisdiction of
Incorporation or Organization

   

IRS Employer
Identification Number

1-9936

EDISON INTERNATIONAL

California

95-4137452

1-2313

SOUTHERN CALIFORNIA EDISON COMPANY

California

95-1240335

EDISON INTERNATIONAL

SOUTHERN CALIFORNIA EDISON COMPANY

2244 Walnut Grove Avenue

2244 Walnut Grove Avenue

(P.O. Box 976)

(P.O. Box 800)

Rosemead, California 91770

Rosemead, California 91770

(Address of principal executive offices)

(Address of principal executive offices)

(626) 302-2222

(626) 302-1212

(Registrant's telephone number, including area code)

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Edison International:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

EIX

NYSE LLC

Southern California Edison Company: None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Edison International

Yes  No 

Southern California Edison Company

Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Edison International

Yes  No 

Southern California Edison Company

Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-12 of the Exchange Act.

Edison International

   

Large Accelerated Filer

   

Accelerated Filer

   

Non-accelerated Filer

   

Smaller Reporting Company

   

Emerging growth company

Southern California Edison Company

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller Reporting Company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Edison International

Southern California Edison Company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Edison International

Yes  No 

Southern California Edison Company

Yes No 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

Common Stock outstanding as of April 26, 2022:

Edison International

381,200,257 Shares

Southern California Edison Company

434,888,104 Shares

TABLE OF CONTENTS

SEC Form 10-Q

Reference Number

GLOSSARY

iii

FORWARD-LOOKING STATEMENTS

1

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

4

Part I, Item 2

MANAGEMENT OVERVIEW

4

Highlights of Operating Results

4

Cost of Capital Applications

5

Capital Program

5

Southern California Wildfires and Mudslides

7

RESULTS OF OPERATIONS

8

Southern California Edison Company

8

Three months ended March 31, 2022 versus March 31, 2021

9

Earning Activities

9

Cost-Recovery Activities

10

Supplemental Operating Revenue Information

11

Income Taxes

11

Edison International Parent and Other

11

Loss from Operations

11

LIQUIDITY AND CAPITAL RESOURCES

12

Southern California Edison Company

12

Available Liquidity

12

Regulatory Proceedings

13

SCE Dividends

13

Margin and Collateral Deposits

13

Edison International Parent and Other

14

Historical Cash Flows

15

Southern California Edison Company

15

Edison International Parent and Other

18

Contingencies

19

MARKET RISK EXPOSURES

19

Commodity Price Risk

19

Credit Risk

19

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

20

NEW ACCOUNTING GUIDANCE

20

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

20

Part I, Item 3

i

FINANCIAL STATEMENTS

22

Part I, Item 1

Edison International Consolidated Statements of Income

22

Edison International Consolidated Statements of Comprehensive Income

23

Edison International Consolidated Balance Sheets

24

Edison International Consolidated Statements of Cash Flows

26

SCE Consolidated Statements of Income

27

SCE Consolidated Statements of Comprehensive Income

27

SCE Consolidated Balance Sheets

28

SCE Consolidated Statements of Cash Flows

30

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

31

Note 1. Summary of Significant Accounting Policies

31

Note 2. Consolidated Statements of Changes in Equity

34

Note 3. Variable Interest Entities

35

Note 4. Fair Value Measurements

37

Note 5. Debt and Credit Agreements

40

Note 6. Derivative Instruments

41

Note 7. Revenue

44

Note 8. Income Taxes

45

Note 9. Compensation and Benefit Plans

46

Note 10. Investments

47

Note 11. Regulatory Assets and Liabilities

48

Note 12. Commitments and Contingencies

50

Note 13. Equity

59

Note 14. Accumulated Other Comprehensive Loss

60

Note 15. Other Income

60

Note 16. Supplemental Cash Flows Information

60

Note 17. Related-Party Transactions

61

CONTROLS AND PROCEDURES

62

Part I, Item 4

Disclosure Controls and Procedures

62

Changes in Internal Control Over Financial Reporting

62

Jointly Owned Utility Plant

62

LEGAL PROCEEDINGS

62

Part II, Item 1

2017/2018 Wildfire/Mudslide Events

62

Environmental Proceedings

63

EXHIBITS

64

Part II, Item 6

SIGNATURES

65

This is a combined Form 10-Q separately filed by Edison International and Southern California Edison Company. Information contained herein relating to an individual company is filed by such company on its own behalf.

ii

GLOSSARY

The following terms and abbreviations appearing in the text of this report have the meanings indicated below.

2017/2018 Wildfire/Mudslide Events

    

the Thomas Fire, the Koenigstein Fire, the Montecito Mudslides and the Woolsey Fire, collectively

2021 Form 10-K

Edison International's and SCE's combined Annual Report on Form 10-K for the year ended December 31, 2021

AB 1054

California Assembly Bill 1054, executed by the governor of California on July 12, 2019

AB 1054 Excluded Capital Expenditures

 

approximately $1.6 billion in wildfire risk mitigation capital expenditures that SCE will exclude from the equity portion of SCE's rate base as required under AB 1054

AB 1054 Liability Cap

a cap on the aggregate requirement to reimburse the Wildfire Insurance Fund over a trailing three calendar year period which applies if certain conditions are met and is equal to 20% of the equity portion of the utility's transmission and distribution rate base, excluding general plant and intangibles, in the year of the applicable prudency determination

ARO(s)

asset retirement obligation(s)

BRRBA

 

Base Revenue Requirement Balancing Account

CAISO

 

California Independent System Operator

Capital Structure Compliance Period

January 1, 2020 to December 31, 2022, the current compliance period for SCE's CPUC authorized capital structure

CAPP

California Arrearage Payment Program

CCAs

 

community choice aggregators which are cities, counties, and certain other public agencies with the authority to generate and/or purchase electricity for their local residents and businesses

CCC

California Coastal Commission

CDP

Coastal Development Permit

CEMA

Catastrophic Event Memorandum Accounts

COVID-19

Coronavirus disease 2019

CPUC

California Public Utilities Commission

CSRP

Customer Service Re-platform, a SCE project to implement a new customer service system

Edison Energy

 

Edison Energy, LLC, an indirect wholly-owned subsidiary of Edison International, is engaged in the competitive business of providing integrated decarbonization and energy solutions to commercial, institutional and industrial customers

EIS

Edison Insurance Services, Inc., a wholly-owned subsidiary of Edison International

Electric Service Provider

 

an entity that offers electric power and ancillary services to retail customers, other than electrical corporations (like SCE) and CCAs

ERRA

 

Energy Resource Recovery Account

FERC

 

Federal Energy Regulatory Commission

FHPMA

 

Fire Hazard Prevention Memorandum Account

Fitch

Fitch Ratings, Inc.

GAAP

generally accepted accounting principles

GHG

greenhouse gas

GRC

general rate case

GS&RP

    

Grid Safety and Resiliency Program

Koenigstein Fire

a wind-driven fire that originated near Koenigstein Road in the City of Santa Paula in Ventura County, California, on December 4, 2017

Local Public Entity Settlements

settlements entered into in the fourth quarter of 2019 under which SCE paid $360 million to a number of local public entities to resolve those parties' collective claims arising from the 2017/2018 Wildfire/Mudslide Events

MD&A

Management's Discussion and Analysis of Financial Condition and Results of Operations

iii

Montecito Mudslides

the debris flows and flooding in Montecito, Santa Barbara County, California, that occurred in January 2018

Moody's

Moody's Investors Service, Inc.

NERC

North American Electric Reliability Corporation

NRC

Nuclear Regulatory Commission

OEIS

Office of Energy Infrastructure Safety of the California Natural Resources Agency

PABA

Portfolio Allocation Balancing Account

Palo Verde

nuclear electric generating facility located near Phoenix, Arizona in which SCE holds a 15.8% ownership interest

PBOP(s)

postretirement benefits other than pension(s)

PG&E

Pacific Gas & Electric Company

PSPS

Public Safety Power Shutoff(s)

ROE

return on common equity

RPS

California's Renewables Portfolio Standard

S&P

Standard & Poor's Financial Services LLC

San Onofre

retired nuclear generating facility located in south San Clemente, California in which SCE holds a 78.21% ownership interest

SCE

Southern California Edison Company, a wholly-owned subsidiary of Edison International

SCE Recovery Funding LLC

a bankruptcy remote, wholly owned special purpose subsidiary, consolidated by SCE

SDG&E

San Diego Gas & Electric

SEC

U.S. Securities and Exchange Commission

SED

Safety and Enforcement Division of the CPUC

SED Agreement

An agreement dated October 21, 2021 between SCE and the SED

Thomas Fire

a wind-driven fire that originated in the Anlauf Canyon area of Ventura County, California, on December 4, 2017

TKM

collectively, the Thomas Fire, the Koenigstein Fire and the Montecito Mudslides

TKM Subrogation Plaintiffs

the plaintiffs party to the TKM Subrogation Settlement, representing all the insurance subrogation plaintiffs in the TKM litigation at the time of the settlement

TKM Subrogation Settlement

a settlement entered into by Edison International and SCE in September 2020 in the TKM litigation to which the TKM Subrogation Plaintiffs are party

WCCP

Wildfire Covered Conductor Program

WEMA

Wildfire Expense Memorandum Account

WMP

a wildfire mitigation plan required to be filed under AB 1054 to describe a utility's plans to construct, operate, and maintain electrical lines and equipment that will help minimize the risk of catastrophic wildfires caused by such electrical lines and equipment

Wildfire Insurance Fund

the insurance fund established under AB 1054

Woolsey Fire

a wind-driven fire that originated in Ventura County in November 2018

Woolsey Subrogation Plaintiffs

the plaintiffs party to the Woolsey Subrogation Settlement, representing all the insurance subrogation plaintiffs in the Woolsey Fire litigation at the time of the settlement

Woolsey Subrogation Settlement

a settlement entered into by Edison International and SCE in January 2021 in the Woolsey litigation to which the Woolsey Subrogation Plaintiffs are party

iv

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect Edison International's and SCE's current expectations and projections about future events based on Edison International's and SCE's knowledge of present facts and circumstances and assumptions about future events and include any statements that do not directly relate to a historical or current fact. Other information distributed by Edison International and SCE that is incorporated in this report, or that refers to or incorporates this report, may also contain forward-looking statements. In this report and elsewhere, the words "expects," "believes," "anticipates," "estimates," "projects," "intends," "plans," "probable," "may," "will," "could," "would," "should," and variations of such words and similar expressions, or discussions of strategy or plans, are intended to identify forward-looking statements. Such statements necessarily involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Some of the risks, uncertainties and other important factors that could cause results to differ from those currently expected, or that otherwise could impact Edison International and SCE, include, but are not limited to the:

ability of SCE to recover its costs through regulated rates, including uninsured wildfire-related and debris flow-related costs, costs incurred to mitigate the risk of utility equipment causing future wildfires, costs incurred to implement SCE's new customer service system, costs incurred as a result of the COVID-19 pandemic, and increased labor and materials costs due to supply chain constraints and inflation;
ability of SCE to implement its WMP and capital program;
risks of regulatory or legislative restrictions that would limit SCE's ability to implement PSPS when conditions warrant or would otherwise limit SCE's operational PSPS practices;
risks associated with implementing PSPS, including regulatory fines and penalties, claims for damages and reputational harm;
ability of SCE to maintain a valid safety certification;
ability to obtain sufficient insurance at a reasonable cost, including insurance relating to SCE's nuclear facilities and wildfire-related claims, and to recover the costs of such insurance or, in the event liabilities exceed insured amounts, the ability to recover uninsured losses from customers or other parties;
extreme weather-related incidents (including events caused, or exacerbated, by climate change, such as wildfires, debris flows, droughts, high wind events and extreme heat events) and other natural disasters (such as earthquakes), which could cause, among other things, public safety issues, property damage, operational issues (such as rotating outages and issues due to damaged infrastructure), PSPS activations and unanticipated costs;
risk that AB 1054 does not effectively mitigate the significant exposure faced by California investor-owned utilities related to liability for damages arising from catastrophic wildfires where utility facilities are alleged to be a substantial cause, including the longevity of the Wildfire Insurance Fund and the CPUC's interpretation of and actions under AB 1054, including its interpretation of the prudency standard established under AB 1054;
ability of Edison International and SCE to effectively attract, manage, develop and retain a skilled workforce, including its contract workers;
decisions and other actions by the CPUC, the FERC, the NRC and other governmental authorities, including decisions and actions related to nationwide or statewide crisis, determinations of authorized rates of return or return on equity, the recoverability of wildfire-related and debris flow-related costs, issuance of SCE's wildfire safety certification, wildfire mitigation efforts, approval and implementation of electrification programs, and delays in executive, regulatory and legislative actions;

1

cost and availability of labor, equipment and materials, including as a result of supply chain constraints;
ability of Edison International or SCE to borrow funds and access bank and capital markets on reasonable terms;
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, delays, contractual disputes, and cost overruns;
pandemics, such as COVID-19, and other events that cause regional, statewide, national or global disruption, which could impact, among other things, Edison International's and SCE's business, operations, cash flows, liquidity and/or financial results and cause Edison International and SCE to incur unanticipated costs;
physical security of Edison International's and SCE's critical assets and personnel and the cybersecurity of Edison International's and SCE's critical information technology systems for grid control, and business, employee and customer data;
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 such as CCAs and Electric Service Providers;
risks inherent in SCE's capital investment program, including those related to project site identification, public opposition, environmental mitigation, construction, permitting, changes in the CAISO's transmission plans, and governmental approvals;
risks associated with the operation of electrical facilities, including worker and public safety issues, the risk of utility assets causing or contributing to wildfires, failure, availability, efficiency, and output of equipment and facilities, and availability and cost of spare parts;
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;
changes in tax laws and regulations, at both the state and federal levels, or changes in the application of those laws, that could affect recorded deferred tax assets and liabilities and effective tax rate;
changes in future taxable income, or changes in tax law, that would limit Edison International's and SCE's realization of expected net operating loss and tax credit carryover benefits prior to expiration;
changes in the fair value of investments and other assets;
changes in interest rates and rates of inflation, including escalation rates (which may be adjusted by public utility regulators);
governmental, statutory, regulatory, or administrative changes or initiatives affecting the electricity industry, including the market structure rules applicable to each market adopted by the NERC, CAISO, Western Electricity Council, and similar regulatory bodies in adjoining regions, and changes in the United States' and California's environmental priorities that lessen the importance the state places on GHG reduction;
availability and creditworthiness of counterparties and the resulting effects on liquidity in the power and fuel markets and/or the ability of counterparties to pay amounts owed in excess of collateral provided in support of their obligations;
potential for penalties or disallowance for non-compliance with applicable laws and regulations, including fines, penalties and disallowances related to wildfires where SCE's equipment is alleged to be associated with ignition; and

2

cost of fuel for generating facilities and related transportation, which could be impacted by, among other things, disruption of natural gas storage facilities, to the extent not recovered through regulated rate cost escalation provisions or balancing accounts.

Additional information about risks and uncertainties, including more detail about the factors described in this report, is contained throughout this report and in the 2021 Form 10-K, including the "Risk Factors" section. Readers are urged to read this entire report, including information incorporated by reference, as well as the 2021 Form 10-K, and carefully consider the risks, uncertainties, and other factors that affect Edison International's and SCE's businesses. Forward-looking statements speak only as of the date they are made and neither Edison International nor SCE are obligated to publicly update or revise forward-looking statements. Readers should review future reports filed by Edison International and SCE with the SEC. Edison International and SCE post or provide direct links to (i) certain SCE and other parties' regulatory filings and documents with the CPUC and the FERC and certain agency rulings and notices in open proceedings in a section titled "SCE Regulatory Highlights," (ii) certain documents and information related to Southern California wildfires which may be of interest to investors in a section titled "Southern California Wildfires," and (iii) presentations, documents and information that may be of interest to investors in a section titled "Presentations and Updates" at www.edisoninvestor.com in order to publicly disseminate such information. The reports, presentations, documents and information contained on, or connected to, the Edison investor website are not deemed part of, and are not incorporated by reference into, this report.

The MD&A for the three months ended March 31, 2022 discusses material changes in the consolidated financial condition, results of operations and other developments of Edison International and SCE since December 31, 2021 and as compared to the three months ended March 31, 2021. This discussion presumes that the reader has read or has access to Edison International's and SCE's MD&A for the calendar year 2021 (the "2021 MD&A"), which was included in the 2021 Form 10-K.

Except when otherwise stated, references to each of Edison International or SCE mean each such company with its subsidiaries on a consolidated basis. References to "Edison International Parent and Other" mean Edison International Parent and its subsidiaries other than SCE and its subsidiaries and "Edison International Parent" mean Edison International on a stand-alone basis, not consolidated with its subsidiaries. Unless otherwise described, all the information contained in this report relates to both filers.

3

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT OVERVIEW

Highlights of Operating Results

Edison International is the ultimate parent holding company of SCE and Edison Energy. SCE is an investor-owned public utility primarily engaged in the business of supplying and delivering electricity to an approximately 50,000 square mile area of southern California. Edison Energy is engaged in the competitive business of providing integrated decarbonization and energy solutions to commercial, institutional and industrial customers. Edison Energy's business activities are currently not material to report as a separate business segment.

Three months ended

March 31, 

(in millions)

    

2022

    

2021

    

 Change

Net income (loss) attributable to Edison International

 

  

 

  

 

  

SCE

$

147

$

296

$

(149)

Edison International Parent and Other

 

(63)

 

(37)

 

(26)

Edison International

 

84

 

259

 

(175)

Less: Non-core items

 

  

 

  

 

  

SCE

 

 

 

  

2017/2018 Wildfire/Mudslide Events claims and expenses, net of recoveries

(285)

(4)

(281)

Wildfire Insurance Fund expense

 

(38)

 

(38)

 

Total non-core items

 

(323)

 

(42)

 

(281)

Core earnings (losses)

 

  

 

  

 

  

SCE

 

470

 

338

 

132

Edison International Parent and Other

 

(63)

 

(37)

 

(26)

Edison International

$

407

$

301

$

106

Edison International's earnings are prepared in accordance with GAAP. Management uses core earnings (losses) internally for financial planning and for analysis of performance. Core earnings (losses) are also used when communicating with investors and analysts regarding Edison International's earnings results to facilitate comparisons of the company's performance from period to period. Core earnings (losses) are a non-GAAP financial measure and may not be comparable to those of other companies. Core earnings (losses) are defined as earnings attributable to Edison International shareholders less non-core items. Non-core items include income or loss from discontinued operations and income or loss from significant discrete items that management does not consider representative of ongoing earnings, such as write downs, asset impairments and other income and expense related to changes in law, outcomes in tax, regulatory or legal proceedings, and exit activities, including sale of certain assets and other activities that are no longer continuing.

Edison International's first quarter 2022 earnings decreased $175 million from the first quarter of 2021, resulting from a decrease in SCE's earnings of $149 million and an increase in Edison International Parent and Other's losses of $26 million. SCE's lower net income consisted of $281 million of higher non-core losses and $132 million of higher core earnings.

The increase in SCE's core earnings was primarily due to the adoption of the 2021 GRC final decision in the third quarter of 2021, partially offset by interest expense from increased borrowings.

The increase in Edison International Parent and Other's core losses was primarily due to higher preferred dividends.

4

Consolidated non-core items for the three months ended March 31, 2022 and 2021 primarily included:

Charges of $396 million ($285 million after-tax) recorded in 2022 and $5 million ($4 million after-tax) recorded in 2021 for 2017/2018 Wildfire/Mudslide Events claims and expenses, net of expected recoveries from FERC customers. See "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies" for further information.
Charges of $53 million ($38 million after-tax) recorded in both 2022 and 2021 from the amortization of SCE's contributions to the Wildfire Insurance Fund. See "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies" for further information.

See "Results of Operations" for discussion of SCE's and Edison International Parent and Other's results of operations.

Cost of Capital Applications

As discussed in the 2021 Form 10-K, in August 2021, SCE filed an application with the CPUC for authority to establish its authorized cost of capital for utility operations for 2022 and to reset the related annual cost of capital mechanism that can adjust authorized cost of capital between SCE's cost of capital proceedings based on changes in Moody's utility bond rate index (see "Business—SCE—Overview of Ratemaking Process" in the 2021 Form 10-K for further information on the adjustment mechanism). In December 2021, the CPUC set an initial phase for the proceeding to determine whether extraordinary circumstances warrant a departure from the cost of capital mechanism for 2022 and, if so, whether the CPUC should leave the cost of capital components at pre-2022 levels for the year 2022 or open a second phase to consider alternative proposals. The outcome of the proceeding is uncertain. In the absence of a decision SCE is currently recording revenue using the pre-2022 cost of capital, subject to refund. If the CPUC ultimately finds that the cost of capital mechanism adjustment should have been implemented effective January 1, 2022, revenue recorded in the first quarter would be reduced by approximately $43 million.

On April 20, 2022, SCE filed its application with the CPUC for authority to establish its authorized cost of capital for utility operations for a three-year term beginning in 2023 and to reset the related annual cost of capital adjustment mechanism. In its application, SCE seeks a return on common equity (ROE) of 10.53% (compared to its last authorized ROE of 10.30%), a cost of long-term debt of 4.27%, and a cost of preferred equity of 5.72%. SCE also seeks to maintain its current authorized capital structure, after CPUC-allowed exclusions, of 52% common equity, 43% long-term debt, and 5% preferred equity. Based on the capital structure and cost factors discussed above, SCE's weighted average return on rate base would be 7.60% for 2023. Additionally SCE has proposed that memorandum and balancing accounts required to be amortized over periods of greater than twelve months should accrue carrying charges at SCE's weighted average cost of capital rather than commercial paper interest rates, which are only applicable to short-term borrowing. If approved, based on SCE's 2021 GRC, including the post-test year ratemaking mechanism, this application would increase SCE's revenue requirements for 2023 by approximately $13 million compared to the cost of capital currently in rates.

Capital Program

Total capital expenditures (including accruals) were $1.3 billion and $1.1 billion for the first three months ended March 31, 2022 and 2021, respectively.

SCE's capital expenditure forecast reflects planned CPUC-jurisdictional spending including WCCP and other programs outlined in SCE's WMP that are above amounts authorized in the 2021 GRC, CPUC-approved utility owned storage expenditures and planned FERC capital expenditures.

Potential capital spending variability associated with future regulatory requests based on management judgment, potential for permitting delays and other operational considerations is reflected in the range case below. The completion of projects, the timing of expenditures, and the associated cost recovery may be affected by permitting requirements and delays, construction

5

schedules, availability of labor, equipment and materials, financing, legal and regulatory approvals and developments, community requests or protests, weather and other unforeseen conditions.

SCE's 2022 – 2023 forecast for major capital expenditures is set forth in the table below:

Total

(in billions)

    

2022

    

2023

    

2022 – 2023

Traditional capital expenditures

 

  

 

  

 

  

Distribution1

$

4.5

$

3.7

$

8.2

Transmission

 

0.5

0.6

 

1.1

Generation

 

0.1

0.2

 

0.3

Subtotal

 

5.1

 

4.5

 

9.6

Wildfire mitigation-related capital expenditures

 

1.1

 

1.1

 

2.2

Total capital expenditures

$

6.2

$

5.6

$

11.8

Total capital expenditures using range case discussed above

$

6.0

$

5.2

$

11.2

1Includes forecast expenditures for utility owned storage described below.

SCE expects to make additional CPUC capital expenditures, the recovery of which will be subject to future regulatory approval. This includes expenditures from track 4 of the 2021 GRC, the 2025 GRC and non-GRC programs including the Building Electrification Program. These capital expenditures and expected FERC capital expenditures, excluded from the table above, are expected to be in a range of approximately $10.4 billion to $12.5 billion between 2024 and 2025.

In October 2021, SCE contracted with Ameresco, Inc. ("Ameresco") for the construction of utility owned energy storage projects at three sites in SCE's service territory with an aggregate capacity of 537.5 MW and an in-service date of August 1, 2022. In April 2022, SCE received a force majeure event notice from Ameresco in which Ameresco asserts that both manufacturing delays related to COVID-19 shut-downs in China and new shipping restrictions imposed by Chinese governmental authorities are currently impacting the supply of batteries from China necessary for timely completion of the projects. SCE is evaluating the force majeure event notice. If there is a valid force majeure event under the contracts with Ameresco, subject to certain conditions, the project schedule and any related trigger of liquidated damages may be extended and the contract price may be increased to account for the impact of the force majeure event. Ameresco has advised SCE that, subject to the ongoing impact of the events asserted in the force majeure notice, up to 300 MW of capacity could be in-service in August 2022. SCE currently expects these storage projects to result in $1.0 billion of capital expenditures. In December 2021, the CPUC approved recovery of these expenditures and establishment of a balancing account for the associated revenue requirement, which have been reflected in rates beginning in the first quarter of 2022. Authorized revenue requirements will be included in the annual ERRA review proceeding and can only be disallowed upon a finding that SCE failed to prudently administer the contracts.

Reflected below is SCE's weighted average annual rate base for 2022 – 2023 incorporating authorized CPUC-jurisdictional expenditures including utility owned storage, planned FERC capital expenditures, and planned non-GRC projects or programs.

(in billions)

    

2022

    

2023

Rate base for expected capital expenditures

$

38.7

$

42.1

Rate base for expected capital expenditures using range case discussed above

$

38.5

$

41.5

Including programs outlined in SCE's WMP subject to future cost recovery proceedings, rate base associated with wildfire restoration capital expenditures subject to future CEMA applications, and planned expenditures from track 4 of the 2021 GRC and the 2025 GRC, SCE's weighted average annual rate base is expected to be between $43.4 billion and $44.8 billion in 2024 and between $46.6 billion and $49.4 billion in 2025.

6

Southern California Wildfires and Mudslides

As discussed in the 2021 Form 10-K, multiple lawsuits and investigations related to the 2017/2018 Wildfire/Mudslide Events have been initiated against SCE and Edison International. As of March 31, 2022, in addition to the Local Public Entity Settlement, the TKM Subrogation Settlement and the Woolsey Subrogation Settlement, SCE had entered into settlements with approximately 7,000 individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation. In addition, while SCE and the SED executed the SED Agreement in October 2021, SCE's obligations under the SED Agreement will only commence after CPUC approval of the SED Agreement is final and non-appealable. Based on information available to SCE and consideration of the risks associated with litigation, Edison International and SCE expect to incur a material loss in connection with the remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events.

Each reporting period, management reviews its loss estimates for remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events. As a result of management's first quarter 2022 review, including a review of large damage claims presented by a small number of plaintiffs and new lawsuits filed in the Woolsey Fire litigation, a $416 million increase in estimated losses for the 2017/2018 Wildfire/Mudslide Events as of March 31, 2022 was recorded. As a result, Edison International and SCE also recorded expected recoveries through FERC electric rates of $26 million against the charge, and the resulting net charge to earnings was $390 million ($281 million after-tax).

Estimated losses for the 2017/2018 Wildfire/Mudslide Events litigation are based on a number of assumptions and are subject to change as additional information becomes available. Actual losses incurred may be higher or lower than estimated based on several factors, including the uncertainty in estimating damages that have been or may be alleged. For instance, SCE will receive additional information with respect to damages claimed, particularly with respect to plaintiffs in the Woolsey litigation, as milestones in the litigation are met. Other factors that can cause actual losses incurred to be higher or lower than estimated include the ability to reach settlements through the ongoing claims mediation processes, uncertainties related to the litigation processes, uncertainty as to the legal and factual determinations to be made during litigation, including uncertainty as to the contributing causes of the 2017/2018 Wildfire/Mudslide Events, the complexities associated with fires that merge and whether inverse condemnation will be held applicable to SCE with respect to damages caused by the Montecito Mudslides, and the uncertainty as to how these factors impact future settlements.

Through March 31, 2022, Edison International and SCE have recorded total pre-tax charges of $7.9 billion, expected recoveries from insurance of $2.0 billion and expected recoveries through FERC electric rates of $326 million related to the 2017/2018 Wildfire/Mudslide Events. The after-tax net charges to earnings recorded through March 31, 2022 have been $4.0 billion.

As of March 31, 2022, SCE had paid $6.4 billion under executed settlements and had $137 million to be paid under executed settlements related to the 2017/2018 Wildfire/Mudslide Events. As of the same date, SCE had recovered $2.0 billion through insurance and approximately $170 million through FERC-jurisdictional electric rates.

After giving effect to all payment obligations under settlements entered into through March 31, 2022, Edison International's and SCE's best estimate of expected losses for remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events and for the SED Agreement was $1.3 billion. As of the same date, Edison International and SCE had assets for expected recoveries through FERC electric rates of $155 million on their consolidated balance sheets and had exhausted expected insurance recoveries related to the 2017/2018 Wildfire/Mudslide Events.

SCE will seek rate recovery of prudently-incurred, actual losses realized in connection with the 2017/2018 Wildfire/Mudslide Events in excess of available insurance, other than for CPUC-jurisdictional rate recovery of the $375 million of SED Excluded Losses if the CPUC's approval of the SED Agreement becomes final and non-appealable. Based on Edison International's and SCE's current best estimate of expected losses for the 2017/2018 Wildfire/Mudslide Events, SCE currently expects to seek CPUC-jurisdictional rate recovery of approximately $5.2 billion by filing multiple future applications with the CPUC, the first of which SCE anticipates filing in 2023. These filings may be delayed if proceedings related to the

7

2017/2018 Wildfire/Mudslide Events do not progress as anticipated. SCE believes that, in light of the CPUC's decision in a cost recovery proceeding involving SDG&E arising from several 2007 wildfires in SDG&E's service area, there is substantial uncertainty regarding how the CPUC will interpret and apply its prudency standard to an investor-owned utility in wildfire cost-recovery proceedings for fires ignited prior to July 12, 2019. Accordingly, while the CPUC has not made a determination regarding SCE's prudency relative to any of the 2017/2018 Wildfire/Mudslide Events, SCE is unable to conclude, at this time, that uninsured CPUC-jurisdictional wildfire-related costs are probable of recovery through electric rates.

For further information, see "Business— Southern California Wildfires," "Risk Factors," "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—Initial and annual contributions to the wildfire insurance fund established pursuant to California Assembly Bill 1054" in the 2021 Form 10-K and "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides" in this report.

RESULTS OF OPERATIONS

SCE

SCE's results of operations are derived mainly through two sources:

Earning activities – representing revenue authorized by the CPUC and the FERC, which is intended to provide SCE a reasonable opportunity to recover its costs and earn a return on its net investment in generation, transmission and distribution assets. The annual revenue requirements are comprised of authorized operation and maintenance costs, depreciation, taxes and a return consistent with the capital structure. Also, included in earnings activities are revenue or penalties related to incentive mechanisms, other operating revenue, and regulatory charges or disallowances.
Cost-recovery activities – representing CPUC- and FERC- authorized balancing accounts, which allow for recovery of specific project or program costs, subject to reasonableness review or compliance with upfront standards, as well as non-bypassable rates collected for SCE Recovery Funding LLC. Cost-recovery activities include rates which provide recovery, subject to reasonableness review of, among other things, fuel costs, purchased power costs, public purpose related-program costs (including energy efficiency and demand-side management programs), certain operation and maintenance expenses, and repayment of bonds and financing costs of SCE Recovery Funding LLC. SCE earns no return on these activities.

The following table is a summary of SCE's results of operations for the periods indicated.

8

Three months ended March 31, 2022 versus March 31, 2021

    

Three months ended March 31, 2022

Three months ended March 31, 2021

Cost-

Cost-

Earning

Recovery

Total

Earning

 Recovery

Total

(in millions)

    

 Activities

    

  Activities

    

 Consolidated

  

  

 Activities

    

 Activities

    

 Consolidated

Operating revenue

$

2,267

$

1,694

$

3,961

$

1,767

$

1,186

$

2,953

Purchased power and fuel

1,037

 

1,037

1,013

 

1,013

Operation and maintenance

790

676

 

1,466

618

206

 

824

Wildfire-related claims, net of insurance recoveries

425

 

425

3

 

3

Wildfire Insurance Fund expense

53

 

53

53

 

53

Depreciation and amortization

579

4

 

583

524

 

524

Property and other taxes

116

8

 

124

124

1

 

125

Other operating income

(2)

 

(2)

 

Total operating expenses

 

1,961

 

1,725

3,686

 

1,322

 

1,220

2,542

Operating income (loss)

 

306

 

(31)

275

 

445

 

(34)

411

Interest expense

 

(210)

(3)

(213)

 

(184)

 

(184)

Other income

 

37

34

71

 

38

 

34

72

Income before taxes

 

133

 

133

 

299

 

299

Income tax benefit

 

(40)

(40)

 

(24)

 

(24)

Net income

 

173

 

173

 

323

 

323

Less: Preferred and preference stock dividend requirements

 

26

26

 

27

 

27

Net income available for common stock

$

147

$

$

147

$

296

$

$

296

Net income available for common stock

$

147

$

296

Less: Non-core expense

 

  

 

  

 

(323)

 

  

 

  

 

(42)

Core earnings1

  

 

  

$

470

 

  

 

  

$

338

1See use of non-GAAP financial measures in "Management Overview—Highlights of Operating Results."

Earning Activities

Earning activities were primarily affected by the following:

Higher operating revenue of $500 million primarily due to the following:
An increase of CPUC-related revenue of approximately $180 million from the implementation of the 2021 GRC final decision and the escalation mechanism set forth in the 2021 GRC decision. SCE's results of operations for the three months ended March 31, 2021 were based on the 2020 authorized revenue. SCE received the final 2021 GRC decision in the third quarter of 2021 and the authorized revenue attributable to first quarter of 2021 but recorded subsequently in 2021 was approximately $87 million.
SCE also recognized $401 million of revenue for wildfire-related and drought restoration expenses that had been deferred in 2021 and were authorized for recovery in the GRC track 2 in January 2022 ($241 million included in earnings activities, $160 million included in cost-recovery activities). See "Liquidity and Capital ResourceRegulatory Proceedings2021 General Rate Case" in the 2021 MD&A for more information.
An increase of other CPUC-related revenue of $33 million primarily related to tax balancing account activities (offset in income tax below).
An increase in FERC-related revenue and other operating revenue of $46 million primarily due to $26 million of expected recoveries from customers for the FERC portion of wildfire-related claims (see "Management Overview

9

Southern California Wildfires and Mudslides") and rate base growth including the completion of the West of Devers project in May 2021.
Higher operation and maintenance costs of $172 million primarily due to the following:
Higher expenses of $241 million subject to balancing account treatment including the approval in the GRC track 2 to recover wildfire-related and drought restoration expenses that had been deferred as regulatory assets in 2021 (offset in revenue above).
Higher other expenses of $55 million including inspections and preventive maintenance, higher power plant maintenance costs and higher emergency management costs.
Partially offset by lower expenses of $124 million related to 2021 wildfire insurance and vegetation management costs, which were reported in earnings activities prior to the establishment of balancing accounts approved in the 2021 GRC decision. 2022 costs related to wildfire insurance and vegetation management are reported below in Cost Recovery Activities.
Higher wildfire-related claims and expenses primarily due to a $416 million change in estimated losses related to wildfire claims from the 2017/2018 Wildfire/Mudslide Events in 2022.
Higher depreciation and amortization expense of $55 million primarily due to increased plant balances in 2022 and the change in depreciation rates from the adoption of the 2021 GRC final decision.
Higher interest expense of $26 million primarily due to increased borrowings.
See "Income Taxes" below for the explanation of $16 million increase in income tax benefit.

Cost-Recovery Activities

Operating revenue and the corresponding operating expenses in cost-recovery activities were primarily affected by the following:

Higher purchased power and fuel costs of $24 million primarily due to higher net realized loss on gas hedging activities related to lower gas prices and lower CAISO congestion revenue right credits and settlement credits, partially offset by lower power prices.
Higher operation and maintenance costs of $470 million primarily due to:
Expenses of $195 million in 2022 related to wildfire insurance and vegetation management costs which were reported in cost recovery activities due to the balancing accounts approved in the 2021 GRC decision. 2021 costs related to wildfire insurance and vegetation management are reported above in Earnings Activities.
Authorization to recover $160 million of wildfire-related and drought restoration expenses that had been deferred in 2021 in the GRC track 2. See "Earnings Activities" above.
Higher uncollectible expenses of $114 million primarily due to authorization to recover 2020 and 2021 costs that had been deferred as regulatory assets through the residential uncollectibles balancing account.
Higher property and other taxes of $7 million due to recovery of property taxes associated with AB 1054 Excluded Capital Expenditures financed through securitization.

10

Supplemental Operating Revenue Information

SCE's retail billed and unbilled revenue (excluding wholesale sales) was $3.6 billion and $2.7 billion for the three months ended March 31, 2022 and 2021, respectively.

The increase for the three months ended March 31, 2022 compared to the same period in 2021 is primarily due to the authorization to recover costs related to wildfire-related and drought restoration expenses that had been deferred in 2021 in the GRC track 2, higher CPUC revenue as well as higher cost -recovery activities as part of the 2021 GRC implementation through various balancing accounts and higher FERC revenue due to expected recoveries for the FERC portion of wildfire-related claims. See "—Earnings Activities" and "—Cost-Recovery Activities" for further details.

As a result of the CPUC-authorized decoupling mechanism, SCE earnings are not affected by changes in retail electricity sales.

Income Taxes

SCE's income tax benefit increased by $16 million for the three months ended March 31, 2022, compared to the same period in 2021. The increase was primarily due to lower pre-tax income and lower incremental flow-through tax benefits.

SCE's effective tax rates were (30.1)% and (8.0)% for the three months ended March 31, 2022 and 2021, respectively. SCE's effective tax rate is below the federal statutory rate of 21% primarily due to the CPUC's ratemaking treatment for the current tax benefit arising from certain property-related and other temporary differences, which reverse over time. The accounting treatment for these temporary differences results in recording regulatory assets and liabilities for amounts that would otherwise be recorded to deferred income tax expense.

See "Notes to Consolidated Financial Statements—Note 8. Income Taxes" for a reconciliation of the federal statutory rate to the effective income tax rates.

Edison International Parent and Other

Results of operations for Edison International Parent and Other include amounts from other subsidiaries that are not reportable as segments, as well as intercompany eliminations.

Loss from Operations

The following table summarizes the results of Edison International Parent and Other:

Three months ended March 31, 

(in millions)

    

2022

    

2021

Edison Energy Group and subsidiaries

$

(5)

$

(3)

Corporate expenses and other subsidiaries

 

(32)

 

(30)

Edison International Parent and Other net loss

$

(37)

$

(33)

Preferred stock dividend requirement

26

4

Edison International Parent and Other net loss attributable to common stock

$

(63)

$

(37)

The net loss attributable to common stock from operations of Edison International Parent and Other increased $26 million for the three months ended March 31, 2022 compared to the same period in 2021 primarily due to higher preferred dividend expense as a result of Edison International's preferred equity issuances in 2021.

11

LIQUIDITY AND CAPITAL RESOURCES

SCE

SCE's ability to operate its business, fund capital expenditures, and implement its business strategy is dependent upon its cash flow and access to the bank and capital markets. SCE's overall cash flows fluctuate based on, among other things, its ability to recover its costs in a timely manner from its customers through regulated rates, changes in commodity prices and volumes, collateral requirements, interest obligations, dividend payments to and equity contributions from Edison International, obligations to preference shareholders, and the outcome of tax, regulatory and legal matters.

In the next 12 months, SCE expects to fund its cash requirements through operating cash flows, capital market financings, refinancing of existing debt, and equity contributions from Edison International Parent, as needed. SCE also has availability under its credit facilities to fund cash requirements. SCE expects to issue bonds to finance or refinance eligible sustainable projects. For further information about eligible sustainable projects, see "Liquidity and Capital Resources—SCE" in the 2021 MD&A. SCE also expects to issue additional debt for general corporate purposes and to finance payments for future resolutions of claims related to the 2017/2018 Wildfire/Mudslide Events.

SCE has invested all $1.6 billion of the required AB 1054 Excluded Capital Expenditures. To finance these expenditures, SCE issued securitized bonds in the amounts of $338 million in February 2021 and $533 million in February 2022. SCE expects to securitize the remaining balance of AB 1054 Excluded Capital Expenditures based on the timing of the CPUC approval of those expenditures and related financing costs in SCE's 2021 GRC track 3 proceeding. For further information, see "—Regulatory Proceedings—Wildfire Related Regulatory Proceedings." SCE used the proceeds of the February 2022 securitized bonds to partially repay a $1.2 billion term loan due in May 2022 and expects to extend the remaining balance of $730 million as necessary prior to full settlement from the proceeds of future securitized bonds.

SCE's credit ratings may be affected if, among other things, regulators fail to successfully implement AB 1054 in a consistent and credit supportive manner or the Wildfire Insurance Fund is depleted by claims from catastrophic wildfires. Credit rating downgrades increase the cost and may impact the availability of short-term and long-term borrowings, including commercial paper, credit facilities, bond financings or other borrowings. In addition, some of SCE's power procurement contracts require SCE to pay related liabilities or post additional collateral if SCE's credit rating were to fall below investment grade. Incremental collateral requirements for power procurement contracts and environmental remediation obligations would result from a potential downgrade of SCE's credit rating to below investment grade. For further details, see "—Margin and Collateral Deposits."

Available Liquidity

At March 31, 2022, SCE had cash on hand of $119 million.

At March 31, 2022, SCE had approximately $2.9 billion available under its $3.4 billion revolving credit facility. The aggregate maximum principal amount under the SCE revolving credit facility may be increased up to $4.0 billion, provided that additional lender commitments are obtained. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements." At March 31, 2022, SCE had $295 million outstanding commercial paper, net of discount, at a weighted-average interest rate of 0.82%.

SCE may finance balancing account undercollections and working capital requirements to support operations and capital expenditures with commercial paper, its credit facilities or other borrowings, subject to availability in the bank and capital markets. As necessary, SCE will utilize its available liquidity, capital market financings, other borrowings or parent company contributions to SCE equity in order to meet its obligations as they become due, including costs related to the 2017/2018 Wildfire/Mudslide Events. For further information, see "Management Overview—Southern California Wildfires and Mudslides."

12

Debt Covenant

SCE's credit facilities and term loan require a debt to total capitalization ratio as defined in the applicable agreements of less than or equal to 0.65 to 1. At March 31, 2022, SCE's debt to total capitalization ratio was 0.55 to 1.

At March 31, 2022, SCE was in compliance with all financial covenants that affect access to capital.

Regulatory Proceedings

Wildfire Related Regulatory Proceedings

2021 General Rate Case Wildfire Mitigation Memorandum Account Balances

In March 2021, SCE made its 2021 GRC track 3 filing with the CPUC. In its filing, SCE requested reasonableness review of approximately $1.2 billion of wildfire mitigation costs incurred prior to 2021, consisting of $497 million of incremental operation and maintenance expenses and other costs, and $679 million of incremental capital expenditures. In March 2022, a CPUC order extended the statutory deadline for issuing a proposed decision in the proceeding to the third quarter of 2022.

2020 Emergency Wildfire Restoration

Multiple wildfires occurred during 2020 which caused damage within SCE's service territory and to SCE's Big Creek hydroelectric facility.

In March 2022, SCE filed a CEMA application requesting recovery of $207 million of operation and maintenance expenses incremental to authorized revenue requirements and $312 million of capital expenditures incremental to amounts authorized in the 2021 GRC primarily related to these restoration efforts. SCE has not yet filed for recovery of generation restoration costs, as repairs to hydroelectric generation facilities are not complete.

SCE Dividends

As discussed in the 2021 Form 10-K, the CPUC regulates SCE's capital structure which limits the dividends it may pay to its shareholders. The CPUC issued a decision on SCE's application to the CPUC for waiver of compliance with its equity ratio requirement, that allows SCE to exclude, until May 7, 2022, from its equity ratio calculations (i) net charges accrued in connection with the 2017/2018 Wildfire/Mudslide Events and (ii) debt issued for the purpose of paying claims related to the 2017/2018 Wildfire/Mudslide Events up to an amount equal to the net charges accrued in connection with the 2017/2018 Wildfire/Mudslide Events. In April 2022, SCE filed an application to extend the waiver of compliance with its equity ratio requirement and the permitted exclusion. Under the CPUC's rules, SCE will not be deemed to be in violation of the equity ratio requirement while the waiver application is pending resolution.

Margin and Collateral Deposits

Certain derivative instruments, power and energy procurement contracts and other contractual arrangements contain collateral requirements. In addition, certain environmental remediation obligations require financial assurance that may be in the form of collateral postings. Future collateral requirements may differ from the requirements at March 31, 2022 due to the addition of incremental power and energy procurement contracts with collateral requirements, if any, the impact of changes in wholesale power and natural gas prices on SCE's contractual obligations, and the impact of SCE's credit ratings falling below investment grade.

The table below provides the amount of collateral posted by SCE to its counterparties as well as the potential collateral that would have been required as of March 31, 2022, if SCE's credit rating had been downgraded to below investment grade as of that date. The table below also provides the potential collateral that could be required due to adverse changes in wholesale power and natural gas prices over the remaining lives of existing power and energy procurement contracts.

13

In addition to amounts shown in the table, power and fuel contract counterparties may also institute new collateral requirements, applicable to future transactions to allow SCE to continue trading in power and fuel contracts at the time of a downgrade or upon significant increases in market prices. Furthermore, SCE may also be required to post up to $50 million in collateral in connection with its environmental remediation obligations, within 120 days of the end of the fiscal year in which the downgrade occurs.

(in millions)

    

Collateral posted as of March 31, 20221

$

208

Incremental collateral requirements for purchased power and fuel contracts resulting from a potential downgrade of SCE's credit rating to below investment grade2

 

29

Incremental collateral requirements for purchased power and fuel contracts resulting from adverse market price movement3

 

15

Posted and potential collateral requirements

$

252

1

Net collateral provided to counterparties and other brokers consisted of $208 million in letters of credit and surety bonds.

2

Represents potential collateral requirements for accounts payable and market-to-market valuation at March 31, 2022. Requirement varies throughout the period and is generally lower at the end of the month.

3

Incremental collateral requirements were based on potential changes in SCE's forward positions as of March 31, 2022 due to adverse market price movements over the remaining lives of the existing power contracts using a 95% confidence level.

Edison International Parent and Other

In the next 12 months, Edison International expects to fund its net cash requirements through cash on hand, dividends from SCE, and capital market and bank financings. Edison International may finance its ongoing cash requirements, including dividends, working capital requirements, payment of obligations, and capital investments, including capital contributions to subsidiaries, with short-term or other financings, subject to availability in the bank and capital markets.

At March 31, 2022, Edison International Parent had cash on hand of $64 million.

At March 31, 2022 Edison International Parent did not have any outstanding commercial paper supported by the $1.5 billion revolving credit facility. The aggregate maximum principal amount under the Edison International Parent revolving credit facility may be increased up to $2.0 billion, provided that additional lender commitments are obtained.

In April 2022, Edison International Parent borrowed $600 million under a term loan agreement due in April 2023. For further information see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."

In 2022, Edison International expects to issue securities containing $300 to $400 million of equity content to support SCE's capital investment needs and SCE maintaining the common equity component of its capital structure, after CPUC allowed exclusions, at 52% on a weighted average basis over the Capital Structure Compliance Period. For further information, see "Liquidity and Capital Resources—SCE—SCE Dividends" in the 2021 MD&A.

Edison International Parent and Other's liquidity and its ability to pay operating expenses and pay dividends to common shareholders are dependent on access to the bank and capital markets, dividends from SCE, realization of tax benefits and its ability to meet California law requirements for the declaration of dividends. Prior to declaring dividends, Edison International's Board of Directors evaluates available information to ensure that the California law requirements for the declarations are met. For information on the California law requirements on the declaration of dividends, see "Liquidity and Capital Resources—SCE—SCE Dividends" in the 2021 MD&A. Edison International intends to maintain its target payout ratio of 45% – 55% of SCE's core earnings, subject to the factors identified above.

14

Edison International's ability to declare and pay common dividends may be restricted under the terms of the Series A and Series B Preferred Stock. For further information see "Notes to Consolidated Financial Statements—Note 14. Equity" in the 2021 Form 10-K.

Edison International Parent's credit facility requires a consolidated debt to total capitalization ratio as defined in the applicable agreements of less than or equal to 0.70 to 1. At March 31, 2022, Edison International's consolidated debt to total capitalization ratio was 0.61 to 1.

At March 31, 2022, Edison International Parent was in compliance with all financial covenants that affect access to capital.

Edison International Parent's credit ratings may be affected if, among other things, regulators fail to successfully implement AB 1054 in a consistent and credit supportive manner or the Wildfire Insurance Fund is depleted by claims from catastrophic wildfires. Credit rating downgrades increase the cost and may impact the availability of short-term and long-term borrowings, including commercial paper, credit facilities, note financings or other borrowings.

Historical Cash Flows

SCE

Three months ended March 31, 

(in millions)

    

2022

    

2021

Net cash provided by operating activities

$

827

$

48

Net cash provided by financing activities

 

171

 

1,204

Net cash used in investing activities

 

(1,159)

 

(1,282)

Net decrease in cash, cash equivalents and restricted cash

$

(161)

$

(30)

Net Cash Provided by Operating Activities

The following table summarizes major categories of net cash provided by operating activities as provided in more detail in SCE's consolidated statements of cash flows for the three months ended March 31, 2022 and 2021.

Three months ended March 31, 

Change in cash flows

(in millions)

    

2022

    

2021

    

2022/2021

    

Net income

    

$

173

    

$

323

    

  

Non-cash items1

 

611

 

541

 

  

Subtotal

 

784

864

 

$

(80)

Changes in cash flow resulting from working capital2

 

78

 

(138)

 

216

Regulatory assets and liabilities

 

259

 

(70)

 

329

Wildfire related claims3

(196)

(618)

422

Other noncurrent assets and liabilities4

 

(98)

 

10

 

(108)

Net cash provided by operating activities

$

827

$

48

$

779

1Non-cash items include depreciation and amortization, allowance for equity during construction, deferred income taxes, Wildfire Insurance Fund amortization expenses and other.
2Changes in working capital items include receivables, accrued unbilled revenue, prepaid expenses, inventory, accounts payable, tax receivables and payables, and other current assets and liabilities.
3Amounts related to payments for 2017/2018 Wildfire/Mudslide Events of $717 million and $620 million, for 2022 and 2021, respectively. Amount in 2022 partially offset by an increase in estimated losses of $521 million, including $416 million related to 2017/2018 Wildfire/Mudslide Events.
4Includes changes in wildfire-related insurance receivables. Also includes nuclear decommissioning trusts. See "Nuclear Decommissioning Activities" below for further information.

15

Net cash provided by operating activities was impacted by the following:

Net income and non-cash items decreased in 2022 by $80 million primarily due to higher charges for wildfire-related claims, net of insurance recoveries, and interest expense from increased borrowings, partially offset by higher earnings due to the adoption of the 2021 GRC final decision in the third quarter of 2021.

Net cash inflow (outflow) for working capital was $78 million and $(138) million during the three months ended March 31, 2022 and 2021, respectively. Net cash inflow for working capital in 2022 is primarily due to a net decrease in customer receivables and unbilled revenue of $161 million (mainly due to $185 million of CAPP funds received in January 2022), and net decrease in prepaid insurance of $88 million, partially offset by decrease in payables of $166 million. Net cash outflow for working capital in 2021 is primarily due to a net increase in unbilled revenue and customer receivables of $108 million and decrease in payables of $115 million.

Net cash provided by (used in) regulatory assets and liabilities, including changes in net undercollections recorded in balancing accounts, was $259 million and $(70) million during the three months ended March 31, 2022 and 2021, respectively. SCE has a number of balancing and memorandum accounts, which impact cash flows based on differences between timing of collection of amounts through rates and accrual expenditures. Cash flows were primarily impacted by the following:

2022

Net undercollections of BRRBA increased by $511 million primarily due to $401 million of expense authorized under GRC track 2 for collection in customer rates starting March 2022 over a 36-month period, and current year undercollections due to actual billed prices lower than forecast due to timing, partially offset by recovery of prior year undercollections, including 2021 GRC authorized additional revenue requirement for the first nine months of 2021 to be collected over a 27-month period starting October 2021.
Undercollections decreased by $371 million related to wildfire risk mitigation memorandum and balancing accounts as a result of approval to recover costs in GRC track 2, which was transferred to BRRBA for recovery as mentioned above, partially offset by additional wildfire risk mitigation costs incurred.
Net undercollections for ERRA, PABA and the New System Generation Balancing Account ("NSGBA") decreased by $72 million primarily due to recovery of prior PABA and NSGBA undercollections, partially offset by current year undercollections due to delay in rate change and higher market exposure.
Increased overcollections of $221 million for the public purpose and energy efficiency programs as a result of lower program spending due to timing.
Increase in overcollection of $144 million for excess California Department of Water Resources ("DWR") bond and power charges to be refunded to customers over a 12-month period beginning in June 2022.

2021

Net undercollections of BRRBA were $662 million and $622 million at March 31, 2021 and December 31, 2020, respectively. Net undercollections increased by $40 million primarily due to current year undercollections due to lower sales volume partially offset by recovery of prior year undercollections, including WEMA and GS&RP to be collected over a two-year and one-year period, respectively, starting October 2020.
Undercollections of $38 million were related to wildfire-related expenses that are probable of future recovery from customers, including wildfire risk mitigation costs, insurance premiums, service restoration and damage repair costs

16

Undercollections of $36 million were related to service restoration and damage repair costs that were tracked in CEMA accounts, primarily due to wildfire events incurred in 2018, 2019 and 2020.
Net undercollections for ERRA, PABA and the New System Generation Balancing Account decreased by $100 million primarily due to recovery of prior PABA and NSGBA undercollections, overcollection due to higher than expected load, partially offset by undercollections due to higher open market exposure and higher gas and power price driven by extreme winter conditions in large part of the United States in February 2021.
Net undercollections of $40 million were related to COVID-19-related memorandum and balancing accounts.

Cash flows (used in) provided by other noncurrent assets and liabilities were primarily related to increase in wildfire insurance receivables of $(96) million in 2022 and recoveries of $43 million in 2021. Cash flow for other noncurrent assets and liabilities also includes payments of decommissioning costs ($35 million in 2022 and $61 million in 2021, respectively), partially offset by SCE's net earnings from nuclear decommissioning trust investments ($19 million in 2022 and $23 million in 2021, respectively). See "Nuclear Decommissioning Activities" below for further discussion.

Net Cash Provided by Financing Activities

The following table summarizes cash provided by financing activities for the three months ended March 31, 2022 and 2021. Issuances of debt are discussed in "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."

Three months ended March 31, 

(in millions)

2022

    

2021

Issuances of long-term debt, including premium/discount and net of issuance costs

$

1,713

$

1,223

Long-term debt repaid or repurchased

 

(365)

 

(490)

Short-term debt repaid, net of borrowing

 

(518)

 

(22)

Commercial paper repaid, net of borrowing

(306)

(51)

Capital contributions from Edison International Parent

 

 

900

Payment of common stock dividends to Edison International

 

(325)

 

(325)

Payment of preference stock dividends

 

(32)

 

(32)

Other

 

4

 

1

Net cash provided by financing activities

$

171

$

1,204

Net Cash Used in Investing Activities

Cash flows used in investing activities are primarily due to capital expenditures related to transmission and distribution investments ($1.2 billion and $1.4 billion for the three months ended March 31, 2022 and 2021, respectively). In addition, SCE had a net redemption of nuclear decommissioning trust investments of $34 million and $52 million during the three months ended March 31, 2022 and 2021, respectively. See "Nuclear Decommissioning Activities" below for further discussion.

17

Nuclear Decommissioning Activities

SCE's consolidated statements of cash flows include nuclear decommissioning activities, which are reflected in the following line items:

    

Three months ended March 31, 

(in millions)

    

2022

    

2021

Net cash used in operating activities:

Net earnings from nuclear decommissioning trust investments

$

19

$

23

SCE's decommissioning costs

 

(35)

 

(61)

 

Net cash provided by investing activities:

 

 

 

Proceeds from sale of investments

867

1,270

Purchases of investments

 

(833)

 

(1,218)

 

Net cash impact

$

18

$

14

Net cash used in operating activities relates to interest and dividends less administrative expenses, taxes and SCE's decommissioning costs. Investing activities represent the purchase and sale of investments within the nuclear decommissioning trusts, including the reinvestment of earnings from nuclear decommissioning trust investments. The net cash impact reflects timing of decommissioning payments ($35 million and $61 million in 2022 and 2021, respectively) and reimbursements to SCE from the nuclear decommissioning trust ($53 million and $75 million in 2022 and 2021, respectively).

Edison International Parent and Other

The table below sets forth condensed historical cash flow from operations for Edison International Parent and Other, including intercompany eliminations.

Three months ended March 31,

(in millions)

    

2022

    

2021

Net cash (used in) provided by operating activities

$

(35)

$

24

Net cash provided by financing activities

 

34

 

307

Net cash provided by investing activities

 

2

 

Net increase in cash and cash equivalents

$

1

$

331

Net Cash (Used in) Provided by Operating Activities

Net cash (used in) provided by operating activities was impacted by the following:

$35 million and $39 million cash outflow from operating activities in 2022 and 2021, respectively, primarily due to payments relating to interest and operating costs.
$63 million cash inflow from wildfire insurance recovery received from Edison Insurance Services, Inc. ("EIS"), a wholly-owned subsidiary of Edison International in 2021.

18

Net Cash Provided by Financing Activities

Net cash provided by financing activities was as follows:

Three months ended March 31,

(in millions)

    

2022

    

2021

Dividends paid to Edison International common shareholders

$

(262)

$

(247)

Dividends paid to Edison International preferred shareholders

(46)

Dividends received from SCE

 

325

 

325

Capital contributions to SCE

 

 

(900)

Issuance of common stock

 

4

 

15

Issuance of preferred stock, net of issuance costs

1,237

Commercial paper financing, net

 

 

(129)

Other

 

13

 

6

Net cash provided by financing activities

$

34

$

307

Contingencies

Edison International's and SCE's contingencies are discussed in "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies."

MARKET RISK EXPOSURES

Edison International's and SCE's primary market risks are described in the 2021 Form 10-K. For further discussion of market risk exposures, including commodity price risk, credit risk, and interest rate risk, see "Notes to Consolidated Financial Statements—Note 4. Fair Value Measurements" and "—Note 6. Derivative Instruments."

Commodity Price Risk

SCE records derivative instruments on its consolidated balance sheets as either assets or liabilities measured at fair value unless otherwise exempted from derivative treatment as normal purchases or sales. The fair value of outstanding derivative instruments used to mitigate exposure to commodity price risk was reflected as a net asset of $63 million and $44 million on SCE's consolidated balance sheets at March 31, 2022 and December 31, 2021, respectively. For further discussion of fair value measurements and the fair value hierarchy, see "Notes to Consolidated Financial Statements—Note 4. Fair Value Measurements" and "— Note 6. Derivative Instruments."

Credit Risk

Credit risk exposure from counterparties for power and gas trading activities is measured as the sum of net accounts receivable (accounts receivable less accounts payable) and the current fair value of net derivative assets (derivative assets less derivative liabilities) reflected on the consolidated balance sheets. SCE enters into master agreements which typically provide for a right of set-off. Accordingly, SCE's credit risk exposure from counterparties is based on a net exposure under these arrangements. SCE manages the credit risk on the portfolio of counterparties based on credit ratings and other publicly disclosed information, such as financial statements, regulatory filings and press releases, to guide it in the process of setting credit levels, risk limits and contractual arrangements, including master netting agreements. Based on SCE's policies and risk exposures related to credit, SCE does not anticipate a material adverse effect on their financial statements as a result of counterparty nonperformance. At March 31, 2022, SCE's power and gas trading counterparty credit risk exposure was $69 million, all of which is associated with entities that have an investment grade rating of A or higher. SCE assigns a credit rating to counterparties based on the lower of a counterparty's S&P or Moody's rating.

For more information related to credit risks, see "Notes to Consolidated Financial Statements—Note 6. Derivative Instruments."

19

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

For a discussion of Edison International's and SCE's critical accounting policies, see "Critical Accounting Estimates and Policies" in the 2021 MD&A.

NEW ACCOUNTING GUIDANCE

New accounting guidance is discussed in "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—New Accounting Guidance."

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information responding to this section is included in the MD&A under the heading "Market Risk Exposures" and is incorporated herein by reference.

20

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21

FINANCIAL STATEMENTS

Consolidated Statements of Income

Edison International

Three months ended

March 31, 

(in millions, except per-share amounts, unaudited)

    

2022

    

2021

Total operating revenue

$

3,968

$

2,960

Purchased power and fuel

 

1,037

 

1,013

Operation and maintenance

 

1,487

 

841

Wildfire-related claims, net of insurance recoveries

 

425

 

3

Wildfire Insurance Fund expense

 

53

 

53

Depreciation and amortization

 

583

 

525

Property and other taxes

 

126

 

126

Other operating income

 

(2)

 

Total operating expenses

 

3,709

 

2,561

Operating income

 

259

 

399

Interest expense

 

(246)

 

(217)

Other income

 

68

 

72

Income before income taxes

 

81

 

254

Income tax benefit

 

(55)

 

(36)

Net income

 

136

 

290

Preference stock dividend requirements of SCE

 

26