The operator introduces the Edison International Third Quarter 2023 Financial Teleconference and hands it over to Mr. Sam Ramraj, Vice President of Investor Relations. Pedro Pizarro, President and CEO, and Maria Rigatti, Executive Vice President and CFO, will be speaking on the call. The presentation materials are available on the company's website. Forward-looking statements will be made and important factors that could affect results are outlined. Pedro reports that Edison International has reported strong core earnings per share for the third quarter and first nine months of the year and reaffirms their 2023 core EPS guidance and commitment to delivering 5-7% core EPS growth through 2025.

In this paragraph, the company reaffirms its EPS growth guidance for 2025 through 2028 and discusses four key topics. These include an update on the legacy wildfires and the increase in the best estimate for resolving remaining claims. The company also discusses SCE's industry-leading wildfire mitigation practices and regulatory updates. Finally, Edison's projections on the grid expansion required for electrification and the clean energy transition are mentioned. The increase in the best estimate is primarily due to settlements being resolved at higher levels and more refined information about the types of claims being presented. The company is committed to resolving all outstanding claims in a reasonable and prudent manner and a deadline has been set for Woolsey claimants to submit their claims by February 2024.

SCE will continue to update on the cost recovery application for the Woolsey Fire, which will cover over $4 billion in eligible claims and legal costs. The company has made significant progress in reducing its risk of losses from catastrophic wildfires and has implemented a multi-layered wildfire mitigation strategy. SCE has also filed a cost recovery application for $2.4 billion for the Thomas, Koenig, and Montecito (TKM) fires and has provided evidence that the damages were a result of extraordinary environmental conditions and factors beyond their control. The company is also sharing its mitigation strategies with other utilities across the country.

The Commission estimates that customers could save $4.9 billion by making a reasonable decision regarding SCE debt. SCE has filed a motion for the CPUC to approve a settlement on Track 4 of its 2021 GRC, and the cost of capital mechanism has triggered, resulting in an increase to SCE's return on equity. The company has received recognition for its strong corporate governance.

The speaker is proud of their team's accomplishment and the recognition of 17 other utilities as trend setters. They have published numerous white papers on the clean energy transition and their latest analysis shows that the electric grid needs to expand faster than ever before to achieve net-zero greenhouse gas emissions by 2045. This means a significant increase in electrical demand and the need for new grid projects at unprecedented rates. However, the average household is expected to save 40% on energy expenses due to reduced fossil fuel spending and increased efficiency of electric vehicles and appliances. Bold actions are needed to improve energy infrastructure planning and operation.

Edison is committed to helping California reach its goal of mitigating climate change and sees their Countdown to 2045 plan as a model for other states and nations. Maria Rigatti, during the financial report, highlighted third quarter results, discussed 2023 EPS guidance, and provided insight into long-term core EPS growth expectations. SCE's third quarter earnings saw a decrease due to a CPUC final decision on a customer service project. EIX is confident in reaffirming their full year core EPS guidance and has updated their capital forecast to include the GRC Track 4 settlement agreement and future investment opportunities. Their capital plan supports 6-8% rate base growth from 2023 to 2028.

SCE, an electric-only utility, benefits from strong regulatory mechanisms and competitive ROEs. The rate base growth is high quality and lower risk as it is driven by crucial grid infrastructure for California's transition to a carbon-free economy. SCE expects a 25% larger distribution system by 2045. The utility will file an application to monetize its contracts with wireless providers, generating $20 million in annual revenue and financially benefiting customers. EIX also announced a $750 million tender offer for its preferred stock.

The company plans to fund the repurchase offer with debt issuances, which will reduce their debt and interest rates. This will also result in financial benefits in the near and long term, and the company is confident in meeting their 2023 core EPS guidance. The company has also made progress in their 2023 financing plan and has received positive responses from investors. On the regulatory front, the company is expecting a decision on SCE's 2022 CEMA application by the end of the year, which could potentially put them at the top end of their guidance range.

The speaker is providing details on GRC Track 4, which would authorize 98% of SCE's requested revenue requirements and 99% of its requested rate base. This would result in a $0.12 increase in incremental rate base EPS in 2024. The cost of capital mechanism triggered a 70-basis point ROE increase, benefiting 2025 EPS by $0.39. The speaker is confident in achieving their 2025 and 2028 EPS growth targets, and there may be opportunities for additional growth. The call is now open for questions.

In this paragraph, Anthony Crowdell and Maria Rigatti discuss the cost of capital and the use of proceeds from the reset. Maria explains that the cost of capital mechanism is driven by interest rates and is part of the three-year cost of capital cycle. She also mentions that they plan to finance SCE at a 5.3% interest rate and EIX at a 6.1% interest rate, which they have already executed in 2023. They will continue to monitor interest rates for the rest of the period until 2025.

The cost of capital mechanism in California protects against volatility in interest rates and the company has given assumptions for interest rates in the coming years. These assumptions are based on longer-term forecasts and are supported by the hedge provided by the cost of capital mechanism. The company also plans to use the proceeds from the mechanism to accelerate their operational excellence program and drive efficiencies. This will provide a strong foundation for the company's future.

Maria Rigatti explains the different components of the cost of capital mechanism and mentions that the intervenors' comments are due tomorrow, after which the energy division will decide whether to pass on the decision to the commission. She also clarifies that the additional increase in costs is mostly related to the Woolsey incident and that by February, there should be more certainty on the total amount of claims. Pedro Pizarro adds that the deadline for filing claims will provide more certainty on the scope of the incident. Shar Pourreza asks about the timeline for seeing benefits from the monetization of telecom infrastructure leases and the potential coupling with wildfire claims recovery.

Maria Rigatti discusses the potential impact of increased claims figures on the company's credit metrics and the tower attachment sale. She states that the company is confident it can meet its targets for FFO to debt, despite some fluctuations due to the increase in reserves. The company has filed for cost recovery applications and expects a 40-50 basis point improvement in credit metrics for every $1 billion recovered. The tower attachment sale application will be filed tomorrow and the company will align its marketing schedule with the regulatory approval process.

The company wants to get regulatory approval before signing any purchase and sale agreements to reduce uncertainty for everyone involved. Depending on the path the commission takes, the transaction could close sometime between the middle of next year and 2025. The increasing value of claims will not affect the timing of claims recoveries with the CPUC. The company plans to use the $0.39 of earnings from cost of capital mechanisms to fund customer-focused CapEx, which could include improving processes, customer service, and support services.

The speaker acknowledges that the increasing wildfire losses are concerning and that they are constantly reevaluating and adjusting their estimates. They hope to have a better understanding of the claims by February, but caution that it may still take time to get all the details.

The team is committed to a fair outcome for those impacted by the fires, while also considering the impact on customers. They are working through the process as quickly as possible to create certainty and plan to file for recovery of interest expenses associated with claims payments. They are also making progress in resolving individual plaintiff claims. They have lowered their rate base projections for future years.

Gregg Orrill from UBS asks about the changes in guidance and the $0.10 increase in AFUDC. Maria Rigatti explains that the changes are related to a shift in the utility-owned storage project and a transmission project being pushed back one year. She also mentions that there is a temporary financing for the preferred tender before potentially using sub-note financing.

The speaker clarifies that the decision to sell the telecom assets was made after careful analysis and that the timing is due to the completion of this analysis. The assets are considered attractive and the sale will benefit both customers and shareholders. The sale will also help alleviate affordability concerns for customers and accelerate the benefits in the near future.

The speaker addresses a question about the allocation of resources for customers and shareholders. They mention a potential offsetting of equity and the possibility of a slowdown in electric vehicle demand. They note that there has been significant growth in EVs in their service territory and that this trend has continued. They also mention broader articles in the press discussing a potential national slowdown in EV demand.

The speaker discusses the strong support for electric vehicles in the IRA and the potential impact of higher interest rates on the market. They also mention the lower total cost of ownership for EVs and the impact on infrastructure planning. The other speaker adds that there has been significant growth in EV adoption in California and they have been planning for it.

The company has incorporated long-term planning for electrification load growth into their distribution and load forecast. This has informed their plans for the 2025-2028 general rate case, where a significant portion of the load growth program is driven by electrification. The company is focused on both planning and building the necessary infrastructure to support this growth, particularly in the medium- and heavy-duty vehicle charging sector. They are exploring innovative solutions such as mobile batteries and substations to meet the demands of this chunkier load. The company is confident in their ability to meet current and future growth and has included requests for mobile equipment in their general rate case.

Pedro Pizarro thanks David Arcaro for his question and explains that each rate case is specific to the company and situation. He mentions that PG&E has faced challenges in getting CapEx and rate base approved in their rate case, but their focus on undergrounding is different from SCE's focus on covered conductor. However, there are some common elements and Southern California has filed comments on the escalation mechanism in PG&E's rate case.

The alternative proposed decision in the rate case only provided 25% of the escalation requested, which was a concern for the company. However, each rate case is unique and cannot be compared to others. The decrease in CapEx for the next few years is mainly due to the schedule for utility owned stores and a transmission project being pushed back. The overall CapEx target for 2028 remains the same.

During a conference call, Maria Rigatti, the Chief Financial Officer of a company, responds to a question from Paul Zimbardo about the Track 4 GRC benefit and the cost of capital trigger. She clarifies that the $0.12 year-over-year increase mentioned in the prepared remarks is a component of the expected earnings per share growth. She also explains that the cost of capital mechanism is related to interest rates and that the company has completed its financing plan for 2023. Rigatti emphasizes the benefit of the cost of capital mechanism as a hedge against interest rate movements beyond what is included in their forecast. She also mentions that the company is always looking for opportunities to reduce costs for the benefit of their customers and operations. They have four years ahead of them to manage the business and potentially accelerate benefits.

The company is focused on providing long-term benefits for customers and is working on a plan to accelerate lock-in benefits. They will share more details in the future. The cost of capital mechanism is designed to handle situations like the current one and the company expects a mechanical approach from the CPUC. The call has now ended.

This summary was generated with AI and may contain some inaccuracies.