The operator, Julie, welcomes participants to the Edison International Second Quarter 2024 Financial Teleconference. Sam Ramraj, Vice President of Investor Relations, introduces the speakers, President and CEO Pedro Pizarro and CFO Maria Rigatti. Materials for the call are available on the company's website. Forward-looking statements will be made and important factors that could affect results are outlined in SEC filings. Pedro Pizarro reports that core EPS for the quarter was $1.23 and year-to-date core EPS is $2.37. The company reaffirms its 2024 core EPS guidance of $4.75 to $5.05 and is confident in a strong outcome for customers in SCE's 2025 General Rate Case.

The GRC funding is crucial for achieving the company's 2025 EPS guidance and delivering a 5% to 7% EPS CAGR through 2028. The author provides four important insights, including an increase in load growth trends, closely aligned rate increases with inflation, improved risk profiles, and a focus on sustainability. The 10-year load growth forecast has increased by 35%, driven by customer requests for load growth projects and policy-driven demand for electric vehicles and building electrification. This growth is happening sooner and at a larger scale than expected.

SCE plans to implement grid upgrades ahead of schedule to accommodate increased load over the next 10 years. This will require significant investments to support economy-wide electrification while maintaining affordability. SCE has a lower system average rate compared to other California utilities and has filed an application to further reduce rates in 2025. The projected rate increases through 2028 are closely aligned with inflation levels and take into account both requested increases in the GRC and full recovery of legacy wildfire costs. The company's operational and financial risk profiles have also improved in recent years.

On Page 5, we reiterate that our physical grid hardening efforts have resulted in an estimated 85% to 88% reduction in wildfire risk compared to pre-2018. We have also been reporting on our $1 billion annual losses tied to AB 1054, which is the threshold for accessing the Wildfire Insurance Fund and our liability cap. We are now showing the potential loss level if we were to hit the liability cap in a single year, which is about $4 billion. This would result in a risk reduction of over 90%. Our physical grid hardening sets us apart from other utilities and has significantly reduced the need for operational measures like power shutoffs. We have completed approximately 5,900 miles of covered conductor in just five and a half years, and by the end of 2025, we expect to have 90% of our total distribution lines in high fire risk areas hardened. On Page 7, we show that SCE has the most hardened miles in high fire risk areas compared to all other California IOUs combined. Additionally, the State of California has made significant improvements in wildfire risk reduction through legislation, regulation, and suppression efforts, including the passing of Assembly Bill 1054 in 2019.

California's wildfire mitigation efforts have become models for other states to follow. The CPUC and other agencies have implemented strict processes for reviewing and approving safety plans. The state has also increased funding and staffing for CAL FIRE, which has the largest aerial firefighting fleet in the world. SCE is also contributing to fire suppression efforts through its Quick Reaction Force partnership with local fire departments. Additionally, SCE is a leader in California's efforts to reduce greenhouse gas emissions and has made significant progress towards its net-zero commitment. The company's 2023 Sustainability Report highlights its accomplishments and goals, including delivering 52% carbon-free power to customers, which is 55% cleaner than the national average.

Edison International (EIX) has reported strong financial performance for the first half of the year, and is on track to deliver solid results for 2024. SCE, a subsidiary of EIX, has had positive regulatory outcomes and is well-positioned to address load growth and capital needs. EIX's equity needs for its capital program are among the lowest in the industry. In the second quarter, EIX reported core EPS of $1.23, a growth of $0.22 from the same quarter last year.

In the second quarter, the company saw an increase in EPS growth due to higher authorized revenue and rates, but also faced higher interest expenses. The regulatory decisions made this year, such as the approval of SCE's CEMA application and rate recovery in the 2022 WMVM proceeding, have strengthened the company's balance sheet. The ongoing regulatory proceedings, including the 2025 GRC, are on track and SCE has reached partial settlements in 12 areas. Only Cal Advocates submitted testimony for the TKM cost recovery application.

SCE faced criticism for their pre-fire mitigation measures leading up to the 2017 fire season, but strongly rebutted these claims. The ALJ extended the schedule for the case and hearings will be held in November or January. SCE has resolved the majority of individual plaintiff claims for the TKM and Woolsey fires and plans to file a cost recovery application for the Woolsey fire in the third quarter. Their capital and rate base forecasts remain consistent with last quarter's disclosures, and they are targeting filing standalone applications in the next few years. CAISO has selected SCE for the North of SONGS to Serrano transmission project.

In 2032, SCE's project will add $245 million to their FERC rate base, continuing their trend of significant transmission spending. The company is confident in achieving their 2024 core EPS guidance and has completed their financing plan for the year. They only need $400 million in equity for the 2025-2028 period, thanks to strong cash flow, efficient financing, and memo account recovery. Affordability and equity will be key for driving adoption of clean energy, and SCE is well-positioned to make investments as customers' dependence on electricity grows. The call is now open for questions.

During a conference call, the operator introduces Michael Lonegan from Evercore ISI who asks about the remaining debates in the GRC and how the company is confident in a positive outcome. Pedro Pizarro responds, stating that while there are still some unresolved issues, the rate base growth is in line with their expectations. Maria Rigatti adds that the proceeding is on track and there is potential for beneficial outcomes for customers. Lonegan also asks about potential investment in the planning period due to faster-than-expected load growth.

The company is currently in the planning phase for a new plan and will need to evaluate customer requests in order to determine when and how much additional spending will be needed. They have built flexibility into their rate case and have the ability to reprioritize capital if needed. The team is constantly reevaluating their plans based on various factors, including an increase in customer demand for electrification, residential, and commercial/industrial loads. They will consider both traditional GRC methods and alternative funding approaches to finance the incremental spending.

The company is actively involved in a high DER proceeding at the Public Utilities Commission and is looking for investment opportunities during the GRC cycle. They are open to potential settlements in the legacy wildfire cost application, but cannot comment on specific details at this time. A settlement or case management statement will be filed on August 7, and a hearing will be scheduled for November or January. The company has a small buyback program focused on share-based compensation, and their capital allocation strategy may be impacted by the potential recovery of legacy wildfire claims.

Maria Rigatti, from SCE, discusses the outstanding debt at the company and their plan to securitize it as they receive recovery. This will improve their credit metrics and allow them to refinance equity content securities with regular debt. The company maintains a 15-17% FFO-to-debt framework. When asked about their full year '24 guidance, Maria expresses confidence and reaffirms it. Regarding potential accelerated CapEx, the company is able to fund additional capital without additional equity, but the specific level is not mentioned.

Maria Rigatti and Nick are discussing the potential impact of capital investments on their financing plan. They have a 15% to 17% FFO-to-debt financing framework and may need to re-prioritize spending or explore other mechanisms for cost recovery if necessary. In response to a question about load growth, Pedro Pizarro clarifies that they are still seeing 2% to 3% in the near-term, but their 10-year forecast has increased by 35%. The team will continue to monitor and provide updates on any significant changes. Steve adds that they will also track and weigh customer requests.

Steve Powell and Pedro Pizarro discuss the new customer demand for specific projects that will require investments in infrastructure and distribution upgrades. They note that this demand is separate from the overall energy consumption growth, but it may still contribute to the 2-3% range. They also mention the CPUC's planned procurement for next generation technologies in California, and Pizarro states that the team is still reviewing the details of this proposal.

The company is evaluating the feasibility of developing new technologies to meet increasing demand. They agree with the PUC's focus on next generation technologies, but want to ensure efficient and effective procurement to manage customer bills. The company will provide more information on the investment opportunity and benefits of the next gen ERP system when they file their application next quarter. The acceleration of the load forecast may impact the attractiveness of the system.

NextGen, a new system being implemented by the company, will improve financial reporting and work management. It is not in competition with load growth, and the company's rate increases are consistent with inflation. The company is also being driven by state requirements for electric vehicle adoption and federal incentives are helping to lower the cost of the transition for consumers.

Both Edison and EEI are focused on preserving IRA benefits regardless of the next administration. California remains committed to transitioning to electric vehicles, and the clean air provisions are another factor to consider. The fact that only Cal Advocates filed testimony on the TKM recovery should not be interpreted as a negative sign, as there are other opportunities for parties to voice their views in the proceedings. It is different from a general rate case.

The speaker, Pedro Pizarro, thanks Anthony Crowdell for his questions and congratulates him on a good quarter. He then thanks all participants and concludes the call.

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