Edison International · NYSE:EIX
Edison International — Corporate Update (November 2016)
48 slides from Edison International's corporate update, Nov 2, 2016
Slide 1: Business Update November 2016
Business Update November 2016 November 2, 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 Page New (N) or Updated (U) from September 2016 Business Update EIX Shareholder Value 3 U SCE Highlights, Regulatory Model 4‐5 Capital Expenditures and Rate Base History and Forecast 6‐8 2018 GRC Overview 9‐10 Distribution and Transmission Capital Expenditure Detail 11‐15 Growth Dr
Slide 4: EIX Strategy Should Produce Superior Value
EIX Strategy Should Produce Superior Value Sustained Earnings and Dividend Positioned for Growth Led by SCE Transformative Change SCE Rate Base Growth Drives Earnings Wires-Focused SCE Strategy • 8.5% average annual rate base • Infrastructure replacement – public growth through 2020 at request level
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 investment • 1.4 million power poles • 725,000 transformers • 103,000 miles of distribution and transmi
Slide 6: SCE Decoupled Regulatory Model
SCE Decoupled Regulatory Model Regulatory Model Key Benefits Decoupling of Regulated • SCE earnings are not affected by variability of retail Revenues from Sales electricity sales • Differences between amounts collected and authorized levels are either billed or refunded to customers • Promotes ener
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 $4.20 Note: Recorded rate base, year-end basis. See SCE Core EPS Non-GAAP Reconciliations an
Slide 8: SCE Capital Expenditure Forecast – Request Level
SCE Capital Expenditure Forecast – Request Level ($ billions) $23.3 Billion Capital Program Traditional Capital Spending: for 2016-2020 Distribution Transmission Generation • Capital expenditure forecast incorporates GRC, FERC and Grid Modernization Capital Spending: Grid Modernization non-GRC CPUC
Slide 9: SCE Rate Base Forecast – Request Level
SCE Rate Base Forecast – Request Level ($ billions) Traditional Grid Modernization 5-year CAGR of 8.5% $35.1 • Incorporates 2015 GRC final decision, $32.4 except “rate-base offset” excluded because $29.6 of write off of regulatory asset related to 2012-2014 incremental tax repairs $26.4 $24.9 • CPUC
Slide 10: 2018 SCE General Rate Case (GRC) Summary
2018 SCE General Rate Case (GRC) Summary • 2018 GRC Application (A. 16-09-001) filed September 1st • Addresses major portion of CPUC jurisdictional revenue requirement for 2018-2020 Includes operating costs and capital investment Excludes CPUC jurisdictional costs such as fuel and purchased powe
Slide 11: 2018 SCE GRC Summary (cont.)
2018 SCE GRC Summary (cont.) Items Carried Over from 2015 GRC New Items from 2018 GRC • Requests continuation of Tax Accounting • Capital expenditures include $2.1 billion of Memorandum Account (TAMA) to adjust proposed grid modernization capital to revenues annually for over and support improved sa
Slide 12: SCE Distribution System Investments
SCE Distribution System Investments Distribution Trends • Continued focus on safety and reliability with 2016 – 2020 Capital Spending Forecast infrastructure replacement representing 46% of total for Distribution1 – Request Level distribution capital spend, but not yet reaching $17.8 Billion equilib
Slide 13: SCE Grid Modernization – Request Level
SCE Grid Modernization – Request Level ($ billions) $2.3 Billion Capital Request for 2016-20201,2 $0.75 Building next generation electric grid will require $0.71 accelerating traditional Transmission and Distribution / Information Technology programs $0.64 and investing in new capabilities • Increas
Slide 14: Energy Storage
Energy Storage Given flexibility counting rules, SCE has already met the CPUC Energy Storage Program Requirements: aggregate 2016 targets • 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 u
Slide 15: 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 16: SCE Large Transmission Projects
SCE Large Transmission Projects Summary of Large Transmission Projects Project Name Total Cost4 Remaining Investment In-Service Date Tehachapi 4-11 $2.5 billion $179 million 2016-2017 West of Devers1,3 $1.1 billion $1.0 billion 2021 Mesa Substation2 $608 million $592 million 2020-2021 Alberhill Syst
Slide 17: 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 Grid Modernization • Accelerate automatio
Slide 18: CPUC Cost of Capital
CPUC Cost of Capital CPUC Adjustment Mechanism 7 Moody’s Baa Utility Index Spot Rate Moving Average (10/1/16 – 10/27/16) = 4.33% 100 basis point +/- Deadband 6 Rate (%) 5 4 Starting Value – 5.00% 3 10/1/12 10/1/13 10/1/14 10/1/15 10/1/16 10/1/17 Return on Equity (ROE) adjustment mechanism extended C
Slide 19: 2016 Earnings Guidance Reaffirmed
2016 Earnings Guidance Reaffirmed 2016 Earnings Per Share Guidance Key Assumptions As of As of • SCE authorized rate base $24.943 billion July 28, 2016 November 1, 2016 Low Mid High Low Mid High • Energy efficiency earnings $0.04 per share (previously $0.05 per share) EIX Basic EPS $3.82 $3.92 $4.02
Slide 20: 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 21: SCE Operational Excellence
SCE Operational Excellence Defining Excellence Measuring Excellence Top Quartile • Employee and public safety • Safety metrics • Cost efficiency • System performance and • Reliability reliability (SAIDI, SAIFI, MAIFI) • Customer service • J.D. Power customer Optimize satisfaction • Capital productiv
Slide 22: Responding to Industry Change
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 and ser
Slide 23: 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 24: Edison Energy: Acquired Businesses Summary
Edison Energy: Acquired Businesses Summary • Hundreds of solar solutions designed and installed across 16 states, SoCore offers commercial and industrial customers, co-operatives, and community programs solar solutions that provide energy cost savings and carbon reduction opportunities • Provides co
Slide 25: Grid Assurance™ Overview
Grid Assurance™ Overview On May 9, 2016, six electric power companies announced the official launch of Grid Assurance, LLC, an independent company providing transmission sparing solutions for critical electric transmission equipment. The company is offering its subscribers a cost-effective way to en
Slide 26: Appendix
Appendix November 2, 2016 25
Slide 27: SCE Tax Memorandum Account
SCE Tax Memorandum Account • 2018 GRC continues tax accounting memorandum account (TAMA) established in 2015 GRC decision, which tracks tax benefits or costs associated with changes in: tax accounting methods tax laws and regulations impacting depreciation or tax repair forecasted tax repairs
Slide 28: SCE Historical Capital Expenditures
SCE Historical Capital Expenditures ($ billions) $3.9 $3.9 $4.0 $3.9 $3.8 $3.5 2010 2011 2012 2013 2014 2015 November 2, 2016 27
Slide 29: Capital Expenditure/Rate Base Detailed Forecast
Capital Expenditure/Rate Base Detailed Forecast ($ in billions) Detailed Capital Expenditures at Request Level – 2016-2020 2016 2017 2018 2019 2020 Total Core Distribution1,2 $2.9 $2.9 $3.2 $3.2 $3.1 $15.3 Mobile Home Park Conversion 0.1 0.1 - - - 0.2 Grid Modernization 0.0 0.2 0.6 0.8 0.7 2.3 Subto
Slide 30: SCE Key Regulatory Proceedings
SCE Key Regulatory Proceedings Proceeding Description Next Steps Key CPUC Proceedings 2018 General Rate Case Set CPUC base revenue requirement, capital Ongoing workshops and data requests; awaiting (A. 16‐09‐001) expenditures and rate base for 2018‐2020 schedule to be set by ALJ; intervenor testimon
Slide 31: 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 distribute • Distribution system at the center of electricity from large central plant the power grid • Very few distributed energy • System designed to m
Slide 32: Grid Modernization Framework
Grid Modernization Framework July 2015 DRP Filing 2018 GRC Application Distribution Automation Installation of more sensors and intelligent switches on the distribution system Advanced Grid Capabilities Substation Automation Automation to monitor and control grid Grid Modernization Installation of n
Slide 33: Grid Modernization Highlights
Grid Modernization 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 and increase operators and flexibility engineers S
Slide 34: CPUC Distributed Energy Resources (DER) Proceedings
CPUC Distributed Energy Resources (DER) Proceedings Scope elements Distribution • Integration of DERs in planning and • Integration Hosting Capacity • Locational Net Benefits operations Resource Plan • Identification of optimal locations and • Data Access • Planning alignment value of DERs (Near ter
Slide 35: SCE Customer Demand Trends
SCE Customer Demand Trends Kilowatt-Hour Sales (millions of kWh) YTD 2016 2015 2014 2013 2012 2011 Residential 22,751 29,959 30,115 29,889 30,563 29,631 Commercial 31,693 42,207 42,127 40,649 40,541 39,622 Industrial 5,469 7,589 8,417 8,472 8,504 8,490 Public authorities 3,543 4,774 4,990 5,012 5,19
Slide 36: California’s Energy Policy
California’s Energy Policy • On October 7, 2015, Governor Brown signed SB 350, which 2015 Renewable Resources: requires that 50 percent of energy sales to customers come 24.3% of SCE’s portfolio from renewable power and a doubling of energy efficiency in existing buildings for California by 2030 Sma
Slide 37: 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 38: System Average Rate Historical Growth
System Average Rate Historical Growth Comparative System Average Rates1 % Delta EIX – 14.9¢ -- Rates reduced due to the ¢/kWh implementation of 1) the SONGS PG&E – 18.2¢ 22% Settlement, including NEIL insurance benefits, 2) lower fuel & purchased 24.0¢ SCE System Average Rate SDG&E – 20.4¢ 37% power
Slide 39: 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 40: SCE Net Metering Rate Structure
SCE Net Metering Rate Structure NEM Rate Developments: Solar Subsidies • NEM allows residential customers to receive full-retail credit (Illustrative) for exported generation and use these credits to offset energy purchased from the electric power company, leading to a 30 cost-shift to non-NEM custo
Slide 41: Residential Solar Installations in SCE Territory
Residential Solar Installations in SCE Territory Monthly Installations and MW Installed 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 • SCE is not expected to hit 5%
Slide 42: SCE Rates and Bills Comparison
SCE Rates and Bills Comparison 2015-16 Average Residential Rates (¢/kWh) Key KeyFactors Factors 16.3 ¢ • SCE’s residential rates are above national 13.0 ¢ average due, in part, to a cleaner fuel mix – cost for low carbon energy are higher than 25% Higher high carbon sources • Average monthly residen
Slide 43: Third Quarter Earnings Summary
Third Quarter Earnings Summary Q3 Q3 Variance Key SCE EPS Drivers 2016 2015 Revenue4,5 $0.25 Basic Earnings Per Share (EPS)1 - CPUC – Timing of GRC 0.13 SCE $1.34 $1.19 $0.15 - CPUC – Escalation 0.08 EIX Parent & Other (0.05) (0.03) (0.02) - CPUC – GRC return on pole loading rate base 0.03 Discontin
Slide 44: YTD 2016 Earnings Summary
YTD 2016 Earnings Summary YTD YTD Variance Key SCE EPS Drivers 2016 2015 Revenue5,6,7 $0.40 Basic Earnings Per Share (EPS)1 - CPUC – Escalation 0.26 SCE $3.18 $3.31 $(0.13) - CPUC – GRC return on pole loading rate base 0.08 EIX Parent & Other (0.22) (0.07) (0.15) - CPUC – Other (0.01) Discontinued O
Slide 45: SCE Results of Operations
SCE Results of Operations ($ 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 46: Earnings Non-GAAP Reconciliations
Earnings Non-GAAP Reconciliations ($ millions) Reconciliation of EIX GAAP Earnings to EIX Core Earnings Earnings Attributable to Edison International Q3 Q3 YTD YTD 2016 2015 2016 2015 SCE $435 $389 $1,037 $1,079 EIX Parent & Other (16) (11) (71) (23) Discontinued Operations – 43 (1) 43 Basic Earning
Slide 47: SCE Core EPS Non-GAAP Reconciliations
SCE Core EPS Non-GAAP Reconciliations Reconciliation of SCE Basic Earnings Per Share to SCE Core Earnings Per Share Earnings Per Share Attributable to SCE 2010 2011 2012 2013 2014 2015 CAGR Basic EPS $3.19 $3.33 $4.81 $2.76 $4.46 $3.06 (1%) Non-Core Items Tax settlement 0.30 — — — — — Health care le
Slide 48: 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
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