Edison International · NYSE:EIX
Edison International — Corporate Update (May 2016)
47 slides from Edison International's corporate update, May 3, 2016
Slide 1: Business Update May 2016
Business Update May 2016 May 3, 2016
Slide 2: Forward-Looking Statements
Forward-Looking Statements Statements contained in this presentation about future performance, including, without limitation, operating results, capital expenditures, rate base growth, dividend policy, financial outlook, and other statements that are not purely historical, are forward-looking statem
Slide 3: Table of Contents
Table of Contents New (N) or Updated (U) from Page February 2016 Business Update EIX Shareholder Value 3 SCE Highlights, Regulatory Model 4‐5 Capital Expenditures and Rate Base History and Outlook 6‐10 U CPUC Cost of Capital 11 U 2016 Guidance 12 U Growth Drivers Beyond 2017, Power Grid of the Futur
Slide 4: EIX Strategy Should Produce Superior Value
EIX Strategy Should Produce Superior Value Sustainable Positioned for Earnings and Dividend Growth Transformative Change Rate Base and Core Earnings Growth SCE Focus on Lower-Risk Energy • 7% average annual rate base growth Delivery through 2017 • Wires assets represent over 90% of utility plant as
Slide 5: SCE Highlights
SCE Highlights One of the nation’s largest electric utilities • 15 million residents in service territory • 5 million customer accounts • 50,000 square-mile service area Significant infrastructure investments • 1.4 million power poles • 725,000 transformers • 103,000 miles of distribution and transm
Slide 6: SCE Decoupled Regulatory Model
SCE Decoupled Regulatory Model Regulatory Model Key Benefits Decoupling of Regulated • SCE earnings are not affected by changes in retail electricity Revenues from Sales sales • Differences between amounts collected and authorized levels are either billed or refunded to customers • Promotes energy c
Slide 7: SCE Historical Rate Base and Core Earnings
SCE Historical Rate Base and Core Earnings ($ billions) 2010 – 2015 CAGR Rate Base 8% Core Earnings 7% $24.6 $23.3 $21.0 $21.1 $18.8 $16.8 2010 2011 2012 2013 2014 2015 Core EPS $3.01 $3.33 $4.10 $3.88 $4.68 $4.20 Note: Recorded rate base, year-end basis. See Earnings Non-GAAP Reconciliations and Us
Slide 8: SCE Capital Expenditure Forecast Unchanged
SCE Capital Expenditure Forecast Unchanged ($ billions) $8.0 – $8.3 Billion Capital Program for Distribution Transmission Generation 2016-2017 • Reflects CPUC 2015 GRC decision $4.1 $4.2 $3.9 • Includes up to 115% of capital spending for the pole loading and deteriorated poles program for 2016 and 2
Slide 9: SCE Distribution System Investments
SCE Distribution System Investments Distribution Trends 2016 – 2017 CPUC • 2015 GRC includes 94% increase in Expenditures for Distribution Assets1 infrastructure replacement, but power grid $5.9 Billion not yet reaching equilibrium replacement rate Load • Distribution power grid requires more Other
Slide 10: SCE Large Transmission Projects
SCE Large Transmission Projects Large Transmission Projects Tehachapi 4-11 • $2.5 billion total project cost; remaining investment $250 million • 2016-17 in service date West of Devers • $1.1 billion total project cost; remaining investment $1.0 billion • 2021 in service date; majority of capital sp
Slide 11: SCE Rate Base Forecast Unchanged
SCE Rate Base Forecast Unchanged ($ billions) 7% Average Annual Rate Base Growth for 2015-2017 Outlook • Incorporates 2015 GRC final decision with Range bonus depreciation provision, except “rate $26.8 base offset” excluded because of write off $25.1 of regulatory asset related to 2012-2014 $23.3 in
Slide 12: CPUC Cost of Capital
CPUC Cost of Capital 7 CPUC Adjustment Mechanism Moody’s Baa Utility Index Spot Rate Moving Average (10/1/15 – 3/31/16) = 5.41% 100 basis point +/- Deadband 6 Rate (%) 5 4 Starting Value – 5.00% ROE set at 10.45%, independent of trigger mechanism 3 10/1/12 10/1/13 10/1/14 10/1/15 10/1/16 10/1/17 Ret
Slide 13: 2016 Core and Basic Earnings Guidance
2016 Core and Basic Earnings Guidance 2016 Earnings Guidance Key Assumptions (core) As of February 23, 2016 As of May 2, 2016 • Revenues based on GRC final decision Low Mid High Low Mid High • Weighted-average 2016 rate base of SCE $4.09 $4.09 $25.1 billion (see Rate Base Forecast) EIX Parent & Othe
Slide 14: SCE Growth Drivers Beyond 2017
SCE Growth Drivers Beyond 2017 Infrastructure Reliability Investment • Sustained level of infrastructure investment required until equilibrium replacement rates are achieved and then maintained - includes underground cable, poles, switches, and transformers1 Distribution Resources Plan • Accelerate
Slide 15: Distribution Power Grid of the Future
Distribution Power Grid of the Future Current State Future State One-Way Electricity Flow Variable, Two-Way Electricity Flow • System designed to generate • Distribution system at the center of electricity from large central plant the power grid • Very few distributed energy • System designed to ser
Slide 16: Smart Grid Highlights
Smart Grid Highlights Devices that provide Devices that provide stable voltage and power quality more flexibility during outage events Future circuit designs integrate State of the art Distributed operating tools Energy Resources for utility & increase operators and flexibility engineers Smart meter
Slide 17: CPUC Distributed Energy Resources (DER) Proceedings
CPUC Distributed Energy Resources (DER) Proceedings Scope elements • Integration of DERs in planning and • Integration Hosting Capacity Distribution operations • Locational Net Benefits • Data Access Resource Plan • Identification of optimal locations and • Planning alignment value of DERs • Power G
Slide 18: Smart Grid Modernization Road Map
Smart Grid Modernization Road Map SCE is evolving its DRP timeline based on January 2016 scoping memo and development of the 2018 General Rate Case 2015 - 2017 2018 - 2020 2021 – 2023 + Cycle GRC Technology Implement foundational Optimize operation of Enhance automation and information technology, D
Slide 19: July 2015 SCE DRP Capital Expenditure Estimates
July 2015 SCE DRP Capital Expenditure Estimates CPUC Approval Time Period Capital Expenditures Mechanism 2016-2017 Distribution Automation $40-70 million • Proposed memorandum account to record Substation Automation $30-60 million associated revenue Communications Systems $7-15 million requirement u
Slide 20: SCE Key Regulatory Proceedings
SCE Key Regulatory Proceedings Proceeding Description Next Steps Key SCE Proceedings Cost of Capital CPUC capital structure, cost of capital, and CPUC approved the Joint Petition for return on equity Modification to suspend adjustment mechanism through 2017 in February 2016 Distribution Resources Pl
Slide 21: SCE 2016 Bundled Revenue Requirement
SCE 2016 Bundled Revenue Requirement 2016 Bundled Revenue Requirement $millions ¢/kWh Fuel & Purchased Power – includes CDWR Bond Charge 4,928 6.7 Fuel & Purchased Power (43%) Distribution – poles, wires, substations, service centers; Edison 4,185 5.7 SmartConnect® Distribution Generation – owned ge
Slide 22: SCE Operational Excellence
SCE Operational Excellence Defining Excellence Measuring Excellence Top Quartile • Employee and public safety • Safety metrics • Cost efficiency • System reliability (SAIDI, • Reliability SAIFI, MAIFI) • Customer service • J.D. Power customer satisfaction Optimize • O&M cost per customer • Capital p
Slide 23: EIX is Responding to Industry Change
EIX is Responding to Industry Change Long-Term Industry Trends Strategy • Public policy and large commercial SCE Strategy customers prioritizing sustainability • Invest in, build, and operate the next objectives generation electric power grid • Innovation facilitating conservation and • Operational
Slide 24: Edison Energy Focus: Commercial & Industrial
Edison Energy Focus: Commercial & Industrial Changing Customer Needs The Opportunity: Trusted Advisor and Solution Integrator • Create energy services that help simplify and optimize energy needs for large commercial & industrial customers: – Help customers better assess and capture the value of ene
Slide 25: Edison Energy: Acquired Businesses Summary
Edison Energy: Acquired Businesses Summary • Hundreds of solar solutions designed and installed across 16 states, SoCore offers multisite retailers, REITs and industrial companies portfolio-wide solar solutions that provide energy cost savings and carbon reduction opportunities • Provides comprehens
Slide 26: Grid Assurance™ Overview
Grid Assurance™ Overview On June 10, 2015, certain electric power companies announced efforts to launch a new business focused on improving the resiliency of the transmission system. The company, Grid Assurance, LLC, will offer its subscribers a cost-effective way to enhance grid resiliency and prot
Slide 27: EIX Annual Dividends Per Share
EIX Annual Dividends Per Share Twelve Years of Dividend Growth $1.92 $1.67 $1.42 $1.30 $1.35 $1.24 $1.26 $1.28 $1.22 $1.16 $1.08 $1.00 $0.80 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Target dividend growth at a higher than industry growth rate within its target payout ratio of
Slide 28: Appendix
Appendix May 3, 2016 27
Slide 29: 2015 General Rate Case Final Decision
2015 General Rate Case Final Decision On November 5, 2015, the CPUC issued a final decision supportive of SCE strategy to increase infrastructure reliability and safety investment while mitigating customer rate impacts through productivity and operating efficiency ($ billions) GRC Final Decision 201
Slide 30: SCE Tax Memorandum Account
SCE Tax Memorandum Account • 2015 GRC decision established tax accounting memorandum account (TAMA), which tracks 2015 – 2017 tax benefits or costs associated with following events: - changes in tax accounting methods - changes in tax laws and regulations impacting depreciation or tax repair - chang
Slide 31: SCE Historical Capital Expenditures
SCE Historical Capital Expenditures ($ billions) $3.9 $3.9 $4.0 $3.9 $3.8 $3.5 2010 2011 2012 2013 2014 2015 May 3, 2016 30
Slide 32: Energy Storage
Energy Storage • CPUC Energy Storage Program: – Storage Rulemaking (R.10-12-007) established 1,325 MW target for IOUs by 2024 (580 MW SCE share; spread as biennial targets during 2014-20) – Ownership allowed up to 50% of total target (290 MW SCE share) – Flexibility to transfer across categories, re
Slide 33: SCE Charge Ready Program
SCE Charge Ready Program • Electric vehicle Charge Ready Program Phase 1 pilot approved by CPUC January 2016 − Authorizes spend of $22 million on pilot implementation for charger installations and Market Education Programs ($12 million rate base) − Advice letter approval to spend funds granted April
Slide 34: Residential Rate Design OIR Decision
Residential Rate Design OIR Decision • CPUC Order Instituting Ratemaking R.12-06-013 comprehensively reviewed residential rate structure including a future transition to time of use rates • July 2015 CPUC Decision D.15-07-001 includes: - Transition to 2 tiered rates by 2019 - “Super User Electric Su
Slide 35: SCE Net Metering Rate Structure
SCE Net Metering Rate Structure NEM Rate Developments: Solar Subsidies (Illustrative) • NEM allows residential customers to receive full-retail credit for exported generation and use these credits to offset energy 30 purchased from the electric power company, leading to a cost-shift to non-NEM custo
Slide 36: Residential Solar Installations in SCE Territory
Residential Solar Installations in SCE Territory 7,000 60 Key Dates 6,000 July 1, 2017 50 • NEM customers will be required to take service under Number of Residential Installations 5,000 mandatory Time-of-Use rate MW Installed 40 2019 4,000 • Commission to revisit NEM Successor Tariff 30 3,000 20 2,
Slide 37: 2016 System Average Rate
2016 System Average Rate (¢/kWh) 0.3¢ 16.2¢ 0.4¢ 0.3¢ (0.3¢) (0.5¢) 4.00 15.0¢ (1.4¢) Comparative System Average Rates1: EIX – 15.0¢ PG&E – 18.2¢ SDG&E – 20.4¢ 2015 SAR 2015 ERRA 2015 GRC Expiration of Other CPUC 2 2016 FERC 2016 ERRA 2016 SAR Settlement Prior Refunds Changes SCE’s system average ra
Slide 38: SCE Rates and Bills Comparison
SCE Rates and Bills Comparison 2015 Average Residential Rates (¢/kWh) Key KeyFactors Factors 16.5 ¢ • SCE’s residential rates are above national average due, in part, to a cleaner fuel mix – 13.1¢ cost for renewables are higher than high 26% carbon sources Higher • Average monthly residential bills
Slide 39: SCE Customer Demand Trends
SCE Customer Demand Trends Kilowatt-Hour Sales (millions of kWh) YTD 2016 2015 2014 2013 2012 2011 Residential 6,472 29,959 30,115 29,889 30,563 29,631 Commercial 9,391 42,207 42,127 40,649 40,541 39,622 Industrial 1,736 7,589 8,417 8,472 8,504 8,490 Public authorities 1,053 4,774 4,990 5,012 5,196
Slide 40: California's Energy Policy
California’s Energy Policy • On October 7, 2015, Governor Brown signed SB 350, Actual 2015 Renewable Resources: which requires that 50 percent of energy sales to 24.3% of SCE’s portfolio customers come from renewable power and a doubling of energy efficiency in existing buildings for Small Hydro 1%
Slide 41: California Cap and Trade Program
California Cap and Trade Program • Assembly Bill 32 (2006) – reduces State greenhouse gas (GHG) emissions to 1990 levels AB32 Emissions by 2020 (~16% reduction) Reduction Programs • Cap and trade program basics: High GWP – State-wide cap in 2013 – decreases over time Gases 7% – Compliance met throug
Slide 42: First Quarter Earnings Summary
First Quarter Earnings Summary Q1 Q1 Variance Key SCE Core EPS Drivers 2016 2015 Core Earnings Per Share (EPS)1 Revenue3,4 $0.04 - CPUC – Timing of GRC (0.06) SCE $0.88 $0.93 $(0.05) - CPUC – Escalation 0.08 EIX Parent & Other (0.06) (0.03) (0.03) - FERC revenue 0.02 Core EPS1 $0.82 $0.90 $(0.08) Hi
Slide 43: SCE Results of Operations
SCE Results of Operations ($ millions) • Earning activities – revenue authorized by CPUC and FERC to provide reasonable cost recovery and return on investment • Cost-recovery activities – CPUC- and FERC-authorized balancing accounts to recover specific project or program costs, subject to reasonable
Slide 44: SCE Rate Base Forecast Unchanged Reconciliations
SCE Rate Base Forecast Unchanged Reconciliations ($ billions) 2015 2016 2017 Prior Outlook – November 2015 $23.0 $24.8 $26.7 Bonus Depreciation CPUC (0.0) (0.2) (0.4) FERC (0.0) (0.1) (0.3) Subtotal Bonus Depreciation (0.0) (0.3) (0.7) Incremental Pole Loading Rate Base 0.3 0.6 0.7 FERC 0.0 0.0 0.1
Slide 45: SCE Core EPS Non-GAAP Reconciliations
SCE Core EPS Non-GAAP Reconciliations Reconciliation of SCE Core Earnings Per Share to SCE Basic Earnings Per Share Earnings Per Share Attributable to SCE 2010 2011 2012 2013 2014 2015 CAGR Core EPS $3.01 $3.33 $4.10 $3.88 $4.68 $4.20 7% Non-Core Items Tax settlement 0.30 — — — — — Health care legis
Slide 46: Earnings Non-GAAP Reconciliations
Earnings Non-GAAP Reconciliations ($ millions) Reconciliation of EIX Core Earnings to EIX GAAP Earnings Earnings Attributable to Edison International Q1 Q1 2016 2015 Core Earnings SCE $287 $305 EIX Parent & Other (19) (11) Core Earnings $268 $294 Non-Core Items SCE $ – $ – EIX Parent & Other 2 5 Dis
Slide 47: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures Edison International's earnings are prepared in accordance with generally accepted accounting principles used in the United States. Management uses core earnings internally for financial planning and for analysis of performance. Core earnings are also used when com