Edison International — 2024 Q1

Nick, I appreciate the question. Look, I'll just start by pointing you to our disclosures, right? We've said all along that every quarter, we go back in, we test whether there's a need to change research and adjust them so that we are providing our best estimate of the best estimate, right? We really want to make sure we're doing this down the middle of the road by the buck per cap. And so we did pass a pretty important milestone, as you said, with that Woolsey event. And so we now have the benefit of analyzing what came in, and we saw the factors that we commented on both less drop-off in overall claims and higher expectation of awards.

And maybe, Nick, just one other thing to underscore Pedro's comment about completion, driving final certainty. I'll point out two numbers that we've already said today on the call, individual plaintiffs are the largest component of what's going on here. 97% of the TKM individual plaintiffs have been settled and 86% of the Woolsey individual plaintiffs have been settled. So that's really what's driving us to also comment that we're on track for a Q3 filing for Woolsey Cost recovering.

Sure. I think the latest report that I've seen from S&P actually has is just over 14% FFO to debt. So inside or above their downward rational range, 15% to 17% FFO to debt is still our objective. The financing plan that we provided last quarter and that we have, again, in the materials for this quarter is consistent with moving into that range over the next several years. We're making good progress on that as we continue to get claims put behind us but also as we continue to recover those minimal accounts, $4 billion over the last three years, $2 billion more through 2025. That, plus the growing rate base and the ability to earn on that and depreciation, et cetera, that's really moving us through that. And we tested a lot of different scenarios, and that's how we came up with $100 million of equity every year through 2028.

Yes. So the process that we went through with the deadline in February, I think as we noted, a couple of times in the past is when people put their information in, sometimes they put in 100% what we've asked for, sometimes they put in less than what we've asked for, and sometimes they ask for extensions. In this case, a number of plaintiffs did receive extensions. We know some things about their claims, we've been able to group them, but we will get more information as they get to their claims deadlines, which are over the next couple of months.

Sure. So we are expecting that the next-gen ERP application late 2024 and that the AMI, the smart meter application would be in 2025. Across the two of them, a couple of billion dollars in capital. As we think about financing for those additional or incremental capital requirements, we're really going to -- obviously, SCE will always finance in accordance with its authorized capital structure. And we'll see where we are in terms of our credit metrics. As I said, we're growing strongly into our credit metric range. And as long as we can stay in that range, we'll be minimizing the amount of equity that would otherwise be required for those incremental capital opportunities.

Yes. Maybe I'll start on that one, and Steve Powell might have thoughts as well. So you've seen that the Cal ISO is really over the last few years, fully engaged in the long-term planning process. I think they recognize along with other parties in the state that in order to help the state achieve its net zero goals by 2045, it's a lot of work to be done. And our own countdown to 2045 white paper last fall had a pretty significant investment need statewide for the wires to make all of this work. So we estimate that the rate of transmission [evasions] will need to be 4x what they've been historically.

Yes. So the CAISO runs its annual transmission planning process each year. And so you can look to each year having that plan come out. And the most recent plan that was released for the '23-'24 cycle, most of the projects are up in Northern California, although there was about $90 million of incumbent projects for SCE to build in our territory. So each of those plans will identify additional opportunities for us, we'll evaluate if we participate in future competitive solicitations on those. In the longer term, the CAISO also does a 20-year outlook.

I'll answer your question quickly, and then I'll follow up with the real message I want you to walk away with. The quick answer is, I think the latest stuff I have seen published suggest that it seems to be an average or maybe even a little bit below average risk season. That's not the real message I want you to walk away with, we know that in the years ahead, with climate change, we're going to see increased, not decreased climate-driven wildfire risk conditions, but are adapting for tomorrow, white paper a couple of years ago pointed to something like a 20% increase in climate-driven wildfire risk through 2050.

And [PJ], even with all of the risk reduction, we're constantly vigilant. So just to underscore that point, we're continuing not just to do more and more grid hardening but also refining our models, looking at new technologies. I think that's some of what you can see when you look at the S&P report as well is just that ongoing attention that we are paying to every aspect of mitigating the risk.

And using new technologies at it, right? So it was nice since you said, Maria, to have S&P recognized that. Think about PSPS. That has been an important tool, but now it only accounts for something like 10% of our overall risk reduction. And we continue to look for ways to refine that and minimize the potential impact to customers.

Yes. So through EEI, we're really engaged on that, a number of Capital Hill visits. Look, you're right, it's kind of hard to get a national budget past these days, right? So it is a challenging environment in capital hill. On the other hand, this is not a single state issue anymore. It's multiple states, they're red, blue and everything in between, alright? And so I think there's increasing recognition that there is a challenge here that needs a national solution still framing that up. And -- but I will point to the fact that there's examples for other risks across the economy where there is a national level solution. Think about managing nuclear operating risk and the Price-Anderson Act, as an example. Steve, I know you've been engaged in a number of these capital Hill discussions as well. Anything you'd add?

I'd just say right now, we've been really focused on education about how the risk is evolving and the mitigations that the industry is taking to manage the physical risk itself. In terms of the financial risk, I think there's -- I know that different states are approaching it in different ways. We'll look for ways that you can combine what's being done at the state level with potentially complementary efforts at the federal level. Some of the things that I know there's interesting on the Hill is in things like being able to remove timber. And there's lots of tactical things around permitting and allowing utilities to effectively do streamline the process to get their work done in high-fire areas. In terms of more of the financial solution, again, I think that's there's a lot of work to be done even just to shape what the ask is and it will take some time, but it's most likely to be some combination of state solutions with potential at the federal level.

Right now, the deadlines are all over the next couple of months, but we'll keep you posted.

Yes. So a lot of that sometimes has to do with exactly when in each quarter, you're booking the cost. So some of it is just timing differences year-over-year. That can be driven by weather in years where there is worse weather than not, you're going to do less work and then in another year, you can do more work. So I think our cost structure is not changing per se. In fact, our focus is on how to actually streamline all of those processes and reduce the cost over time. So nothing to read in to that.

So maybe a couple of angles on that. One is, and I think you heard us say this earlier, Ryan, our team continues to look constantly for how do we refine, improve, how do we use new technologies, et cetera. So maybe part of your question comes from a place of -- I'll make it up a little bit and you tell me if this is the kind of thing you're thinking about. To the extent that you have technologies that end up being deployed on a more mass scale across multiple states, I think in theory, conceptually, got my lead to maybe some streamlining of those costs. If you have greater adoption, you're driving greater scale. But I think from an SCE perspective, the team there is very focused on constantly turning the crank, refining our view of the risk, refining the view of the models, underlying description of that risk and then prioritizing and reprioritizing the capital and O&M commitments that we make towards further reducing that risk.

Yes, Ryan. And maybe as I think about the experience we've been through and the focus we have on both balancing affordability as we make sure we're mitigating the wildfire risk, it starts for any utility going down the path of making the right decisions around the risk mitigations you deploy. So for example, for us, on our grid hardening side, covered conductor is a very cost-effective way for us to address the risk that we face. It may look different for different utilities. As you get into things like inspection, to the things we've done around combining our aerial and our ground inspection, so we're having to go out fewer times to do the inspections.

Maybe, Steve, one final thought I would add is it's not just about what we and the industry are doing along with technology partners, but it's also about the government's role in this. And we -- you might know I co-chaired the electricity subsector recording and Council, which is the CEO-led group that really the partnership between the industry and the federal government on matters of physical and cyber security and resiliency. And so DOE is our sponsoring agency for our sector, and they've been a really good partner in engaging around how do we think about technologies, how do we get access to federal resources.

Thank you for joining us. This concludes the conference call. Have a good rest of the day. You may now disconnect.