Edison International · NYSE:EIX
Edison International — Corporate Update (November 2015)
51 slides from Edison International's corporate update, Nov 19, 2015
Slide 1: Business Update November 2015
Business Update November 2015 November 19, 2015
Slide 2: Forward-Looking Statements
Forward-Looking Statements Statements contained in this presentation about future performance, including, without limitation, operating results, asset and rate base growth, capital expenditures, financial outlook, and other statements that are not purely historical, are forward-looking statements. T
Slide 3: Table of Contents
Table of Contents New (N) or Updated (U) Page from October 28 Business Update EIX Shareholder Value 3 SCE Highlights, Regulatory Model 4‐5 Capital Expenditures, Rate Base 6‐7 General Rate Case, Capital Expenditures and Rate Base Outlook 8‐11 N,U 2015 Guidance 12 N Growth Drivers Beyond 2017, Grid of
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 • 7-8% average annual rate base Delivery growth through 2017 based on GRC • Wires assets represent over 90% of pr
Slide 5: SCE Highlights
SCE Highlights One of the nation’s largest electric utilities • Nearly 14 million residents in service territory • 5 million customer accounts • 50,000 square-mile service area Significant infrastructure investments • 1.4 million power poles • 700,000 transformers • 103,000 miles of distribution and
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 Capital Expenditures
SCE Historical Capital Expenditures ($ billions) $3.9 $3.9 $4.0 $3.8 $3.5 $2.9 2009 2010 2011 2012 2013 2014 November 19, 2015 6
Slide 8: SCE Historical Rate Base and Core Earnings
SCE Historical Rate Base and Core Earnings ($ billions) 2009 – 2014 CAGR Rate Base 9% $23.3 Core Earnings 12% $21.0 $21.1 $18.8 $16.8 $15.0 2009 2010 2011 2012 2013 2014 Core $2.68 $3.01 $3.33 $4.10 $3.88 $4.68 EPS Note: Recorded rate base, year-end basis. See Earnings Non-GAAP Reconciliations and U
Slide 9: SCE 2015-2017 Capital Expenditure Forecast
SCE 2015-2017 Capital Expenditure Forecast ($ billions) $11.6 – $11.8 Billion Capital Program for Distribution Transmission Generation 2015-2017 • Incorporates CPUC 2015 GRC final $4.1 decision and delays in FERC spending of $3.9 $3.8 approximately $50 million in 2015 and $350 million in 2016 relate
Slide 10: SCE 2015-2017 Rate Base Forecast
SCE 2015-2017 Rate Base Forecast ($ billions) 7-8% Average Annual Rate Base Growth for 2015-2017 Outlook • Incorporates 2015 GRC final decision, Range except “rate base offset” $26.7 • GRC “rate base offset” excluded because of $24.8 write off of regulatory asset related to $23.0 2012-2014 increment
Slide 11: SCE Distribution System Investments
SCE Distribution System Investments Distribution Trends 2015 – 2017 GRC Final Decision • Aging system reaching equilibrium Expenditures for Distribution Assets1 replacement rate $8.5 Billion • 2015 GRC includes 94% increase in infrastructure replacement Load • Distribution spending will be sustained
Slide 12: 2015 Core and Basic Earnings Guidance
2015 Core and Basic Earnings Guidance ($ per share) 2015 Earnings Guidance Key Assumptions (core) As of October 27, 2015 As of November 9, 2015 • Revenues based on GRC final decision Low Mid High Low Mid High • Weighted-average 2015 rate base of SCE $3.97 $3.97 $23.0 billion (see Rate Base Forecast)
Slide 13: 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 14: Distribution Grid of the Future
Distribution 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 grid • Very few distributed energy • System designed to serve variable
Slide 15: 21st Century Grid Highlights
21st Century Grid Highlights Future state based on evolving energy landscape 2 More automation 1 4 1 enhances interaction of grid with customer devices & DER. Sophisticated 3 2 automation schemes 1 now possible 4 1 2 Prediction of DER performance facilitates increasing renewables & two- 4 way power
Slide 16: SCE Distribution Resources Plan
SCE Distribution Resources Plan AB 327 required IOU submissions of Distribution Resources Plans (DRP) on July 1, 2015 to integrate increasing penetration of Distributed Energy Resources (DERs). Key provisions of the DRP filing include: • Methodology/tools for identifying optimal locations for DERs (
Slide 17: SCE Grid Modernization Road Map
SCE Grid Modernization Road Map SCE’s July 1, 2015 DRP supports the Commission’s proposed phased approach, which would be implemented over future General Rate Case (GRC) cycles 2015 - 2017 2018 - 2020 2021 + Cycle GRC Implement foundational Expand automation and Continue grid modernization, Technolo
Slide 18: SCE DRP Capital Expenditure Estimates
SCE DRP Capital Expenditure Estimates Time Period Capital Expenditures CPUC Approval Mechanism 2015-2017 Distribution Automation $40-70 million • Proposed memorandum account to record Substation Automation $30-60 million associated revenue Communications Systems $7-15 million requirement until Techn
Slide 19: Energy Storage
Energy Storage SCE 2015 Storage Portfolio • AB2514 directed CPUC to establish procurement 150 targets and policies for storage • CPUC Energy Storage OIR (R.10-12-007) 100 MW established: 50 – 1,325 MW target for IOUs by 2024 50 30 (580 MW SCE share; spread as biennial targets 10 during 2014-2020) 0
Slide 20: SCE Charge Ready Program
SCE Charge Ready Program • Electric vehicle Charge Ready Program application submitted to CPUC (A.14-10-014) in October 2014 • Pro-active, two-phased program over five years to support installation of up to 30,000 EV charging stations to be included in rate base – Phase 1: pilot program for 1,500 ch
Slide 21: SCE Key Regulatory Proceedings
SCE Key Regulatory Proceedings Proceeding Description Next Steps Key SCE Proceedings 2015 GRC Application Rate setting for CPUC 3‐year cycle 2015 – 17 Final decision received November 5, 2015 (A.13‐11‐003) Cost of Capital Application Capital structure and return on equity Settlement for 1 year exten
Slide 22: CPUC and FERC Cost of Capital
CPUC and FERC Cost of Capital CPUC Adjustment Mechanism 7 Moody’s Baa Utility Index Spot Rate Moving Average (10/1/14 – 9/30/15) = 4.82% 100 basis point +/- Deadband 6 Rate (%) 5 Starting Value – 5.00% 4 3 10/1/12 10/1/13 10/1/14 10/1/15 10/1/16 CPUC – 48% common equity and Return on Equity (ROE) ad
Slide 23: Residential Rate Design OIR
Residential Rate Design OIR • 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 Surcharge”
Slide 24: SCE Residential Net Metering Rate Structure
SCE Residential Net Metering Rate Structure SCE’s Rate Developments: Solar Subsidies • Residential solar customer generation offsets total retail rate via Net (Illustrative) Energy Metering (NEM) structure 30 • Through tiered rate flattening, Residential Rate OIR decision will reduce subsidy paid by
Slide 25: NEM Successor Tariff Proposal
NEM Successor Tariff Proposal On August 3rd, SCE filed its proposal for a successor to the current NEM tariff and alternative offerings to grow residential distributed generation in disadvantaged communities SCE’s proposal includes the following key elements: • Elimination of netting and decoupling
Slide 26: 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 27: EIX Annual Dividends Per Share
EIX Annual Dividends Per Share $1.67 Eleven Years of Dividend Growth $1.42 $1.35 $1.28 $1.30 $1.24 $1.26 $1.22 $1.16 $1.08 $1.00 $0.80 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 EIX targets a payout ratio of 45 – 55% of SCE core earnings and plans to return to target payout ratio in
Slide 28: Appendix
Appendix November 19, 2015 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 • 2015 authorized revenue requireme
Slide 30: Resolution of GRC Open Items
Resolution of GRC Open Items Proposed Decision Final Decision Rate Base Rate Base • $344 million tax repair adjustment • Adjustment revised to amortize over 27 years • $180 million exclusion of customer deposits - see “Tax Repair Ratemaking and Accounting” • $73 million pole loading reduction • $180
Slide 31: Tax Repair Ratemaking and Accounting
Tax Repair Ratemaking and Accounting Tax Repair Ratemaking • In SCE’s 2015 GRC final decision, the CPUC adopted a rate base offset associated with forecasted tax repair deductions during 2012-2014 – In 2015, the CPUC rate base offset is $324 million1 and amortizes on a straight line basis over 27 ye
Slide 32: SCE 2014 Bundled Revenue Requirement
SCE 2014 Bundled Revenue Requirement 2014 Bundled Revenue Requirement $millions ¢/kWh Fuel & Purchased Power – includes CDWR Bond Charge 5,071 6.9 Fuel & Purchased Power (41%) Distribution – poles, wires, substations, service centers; Edison 3,867 5.3 SmartConnect® Distribution Generation – utility
Slide 33: 2016 Forecast System Average Rate
2016 Forecast System Average Rate (¢/kWh) 5.30 16.3¢ 0.2¢ 0.4¢ (0.3¢) 0.3¢ (0.7¢) 4.00 15.0¢ (1.2¢) Current 2015 2015 ERRA 2015 GRC Expiration of Other CPUC 1 2016 FERC 2016 ERRA March 2016 SAR Settlement Prior Refunds Changes SAR SCE’s system average rate is expected to decline from 16.3¢/kWh to 15
Slide 34: SCE Rates and Bills Comparison
SCE Rates and Bills Comparison 2014 Average Residential Rates Key Factors (¢/kWh) • SCE’s residential rates are above national 16.4¢ average due, in part, to a cleaner fuel mix – 12.9¢ cost for renewables are higher than high carbon sources 27% Higher • Average monthly residential bills are lower th
Slide 35: SCE Customer Demand Trends
SCE Customer Demand Trends Kilowatt-Hour Sales (millions of kWh) YTD 2015 2014 2013 2012 2011 Residential 22,924 30,115 29,889 30,563 29,631 Commercial 32,344 42,127 40,649 40,541 39,622 Industrial 5,840 8,417 8,472 8,504 8,490 Public authorities 3,639 4,990 5,012 5,196 5,206 Agricultural and other
Slide 36: Wholesale Electricity Prices, May 2014-Sep 2015
Wholesale Electricity Prices, May 2014-Sep 2015 (Southern California) $80 $70 $60 $50 $40 $30 $20 $10 $0 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Source: Energy Information Administration, October 2015. Data is for SP-15 Nodes November 19, 2015 35
Slide 37: California's Energy Policy
California’s Energy Policy • On October 7, 2015, Governor Brown signed SB 350, Actual 2014 Renewable Resources: which requires that 50 percent of energy sales to 23.4% of SCE’s portfolio customers come from renewable power and a doubling of energy efficiency in existing buildings for Small Hydro 2%
Slide 38: 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 Reduction Programs (~16% reduction) High GWP • Cap and trade program basics: Gases – State-wide cap in 2013 – decreases over time 7% Cap & Trade – Complianc
Slide 39: SCE Energy Efficiency Programs
SCE Energy Efficiency Programs Energy efficiency programs updated for 2013 – 2015 • 2015 budget of $333 million • Savings targets of 983 GWh and 160.1 MW for 2015 – Reduced goals reflect CPUC-identified potential for energy efficiency Energy efficiency earnings incentive mechanism modified • CPUC ap
Slide 40: EIX is Responding to Industry Change
EIX is Responding to Industry Change Long-Term Industry Trends Strategy • Public policy prioritizing environmental SCE Strategy sustainability • Invest in, build, and operate the next • Innovation facilitating conservation and generation electric grid self-generation • Operational and service excell
Slide 41: Edison Energy Focus: Commercial & Industrial
Edison Energy Focus: Commercial & Industrial Changing Customer Needs The Opportunity: Trusted Advisor • Create energy services that help simplify and optimize energy needs for commercial & industrial customers: – Help customers better value energy optimization, paving the way for greater third party
Slide 42: Grid Assurance Overview
Grid AssuranceTM Overview On June 10th, eight electric utilities and energy companies announced a MOU to pursue the development of Grid Assurance, a limited liability company that plans to offer subscribers cost- effective solutions for enhancing grid resiliency and protecting customers from prolong
Slide 43: Third Quarter Earnings Summary
Third Quarter Earnings Summary Q3 Q3 SCE Key Core EPS Drivers Variance 2015 2014 Core Earnings Per Share (EPS)1 Lower revenue3 ($0.40) - Lower GRC revenue – tax repairs4 (0.20) SCE $1.19 $1.54 ($0.35) - Lower GRC revenue – other4 (0.22) EIX Parent & Other (0.03) (0.02) (0.01) - FERC revenue and othe
Slide 44: Key Drivers of Q3 2015 Core EPS
Key Drivers of Q3 2015 Core EPS ($ per share) $1.52 0.02 (0.20) (0.03) (0.02) $1.16 (0.12) (0.01) Q3 2014 Core EPS Lower Revenue 1 Higher O&M Higher Depreciation Lower Net Financing Higher Income Taxes 1 EIX Parent & Other Q3 2015 Core EPS Costs Lower revenues reflect 2015 GRC Proposed Decision Note
Slide 45: YTD 2015 Earnings Summary
YTD 2015 Earnings Summary YTD YTD SCE Key Core EPS Drivers Variance 2015 2014 Core Earnings Per Share (EPS)1 Lower revenue3 ($0.43) - Lower GRC revenue – tax repairs4 (0.36) SCE $3.31 $3.58 ($0.27) - Lower GRC revenue – other4 (0.22) EIX Parent & Other (0.09) (0.08) ($0.01) - FERC revenue and other
Slide 46: Key Drivers of YTD 2015 Core EPS
Key Drivers of YTD 2015 Core EPS ($ per share) $3.50 (0.07) 0.08 (0.02) (0.11) (0.08) (0.04) $3.22 (0.03) (0.01) YTD 2014 Core Lower Revenue1 Higher O&M Higher Lower Net Higher Income Property Taxes Generator EIX Parent & YTD 2015 Core EPS Depreciation Financing Costs Taxes 1 and Other Settlements O
Slide 47: SCE Results of Operations
SCE Results of Operations ($ millions) • Utility earning activities – revenue authorized by CPUC and FERC to provide reasonable cost recovery and return on investment • Utility cost-recovery activities – CPUC- and FERC-authorized balancing accounts to recover specific project or program costs, subje
Slide 48: Earnings Non-GAAP Reconciliations
Earnings Non-GAAP Reconciliations ($ millions) Reconciliation of EIX Core Earnings to EIX GAAP Earnings Q3 Q3 YTD YTD Earnings Attributable to Edison International 2015 2014 2015 2014 Core Earnings SCE $389 $503 $1,079 $1,168 EIX Parent & Other (12) (7) (30) (26) Core Earnings $377 $496 $1,049 $1,14
Slide 49: Earnings Per Share Non-GAAP Reconciliations
Earnings Per Share Non-GAAP Reconciliations ($ per share) Reconciliation of EIX Core Earnings Per Share to EIX GAAP Earnings Per Share Q3 Q3 YTD 2015 YTD 2014 2015 2014 Core Earnings Per Share (EPS)1 SCE $1.19 $1.54 $3.31 $3.58 EIX Parent & Other (0.03) (0.02) (0.09) (0.08) Core EPS1 $1.16 $1.52 $3.
Slide 50: 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 2009 2010 2011 2012 2013 2014 CAGR Core EPS $2.68 $3.01 $3.33 $4.10 $3.88 $4.68 12% Non-Core Items Tax settlement 0.94 0.30 — — — — Health care l
Slide 51: 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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