Edison International · NYSE:EIX
Edison International — Corporate Update (October 2017)
50 slides from Edison International's corporate update, Oct 31, 2017
Slide 1: Business Update October 2017
Business Update October 2017 October 31, 2017
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 Updated (U) from July 2017 Business Update EIX Shareholder Value 3 U SCE Highlights, SCE Long-Term Growth Drivers, Regulatory Model 4-6 Capital Expenditures and Rate Base History and Forecast 7-9 U 2018 GRC Intervenor Testimony 10 U Key Regulatory Proceedings 11 U CPUC Cost of
Slide 4: EIX Strategy Should Produce Superior Value
EIX Strategy Should Produce Superior Value Sustained Earnings and Dividend Electric-Led Clean Energy Future Growth Led by SCE SCE Rate Base Growth Drives Earnings EIX Vision • 8.3% average annual rate base • Lead transformation of the electric growth through 2020 at request level power industry • SC
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 • 729,000 transformers • 119,000 miles of distribution and transmi
Slide 6: SCE Long-Term Growth Drivers
SCE Long-Term Growth Drivers Description Timeframe/Regulatory Process Sustained level of infrastructure investment • Ongoing - current and future GRCs Infrastructure required until equilibrium replacement rates Reliability achieved and then maintained Accelerate circuit upgrades, automation, • Today
Slide 7: SCE Decoupled Regulatory Framework
SCE Decoupled Regulatory Framework Regulatory Mechanism Key Benefits Decoupling of Revenues from • Earnings not affected by variability of retail electricity sales Sales • Differences between amounts collected and authorized levels either billed or refunded • Promotes energy conservation • Stabilize
Slide 8: SCE Historical Rate Base and Core Earnings
SCE Historical Rate Base and Core Earnings ($ billions) 2011 – 2016 CAGR Rate Base 7% Core Earnings 5% $25.9 $24.6 $23.3 $21.0 $21.1 $18.8 2011 2012 2013 2014 2015 2016 Core EPS $3.33 $4.10 $3.88 $4.68 $4.20 $4.22 Note: Recorded rate base, year-end basis. See SCE Core EPS Non-GAAP Reconciliations an
Slide 9: SCE Capital Expenditure Forecast – Request Level
SCE Capital Expenditure Forecast – Request Level ($ billions) $18.5 Billion Capital Program Traditional Capital Spending: for 2017-2020 Distribution Transmission Generation • Capital expenditure forecast incorporates GRC, FERC and Grid Modernization Capital Spending: non-GRC CPUC spending Grid Moder
Slide 10: SCE Rate Base Forecast – Request Level
SCE Rate Base Forecast – Request Level ($ billions) 4-year CAGR of 8.3% Traditional Grid Modernization CPUC $34.3 • Rate base based on request levels from $31.7 2018 GRC Rebuttal Testimony $29.2 FERC $26.1 $24.9 • FERC rate base is approximately 20% of SCE’s rate base by 2020; includes Construction
Slide 11: General Rate Case Update – Intervenor Testimony
General Rate Case Update – Intervenor Testimony ORA submitted testimony on April 7, 2017 – Key elements • Proposed no Grid Modernization capital expenditures and ~90% of traditional capital expenditures Proposed Revenue Requirement Increases1 • Other items similar to ORA’s 2015 GRC testimony, includ
Slide 12: 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; intervenor and (A. 16-09-001) expenditures and rate base for 2018-2020 rebuttal testimony submitted; Briefs and
Slide 13: CPUC Cost of Capital
CPUC Cost of Capital 7 CPUC Adjustment Mechanism Moody’s Baa Utility Index Spot Rate Moving Average (10/1/16 – 09/30/17) = 4.50% 100 basis point +/- Deadband 6 Rate (%) 5 4 Starting Value – 5.00% ROE fixed at ROE fixed at 10.45%, for 2017 10.30%, for 2018 independent of independent of trigger mechan
Slide 14: SCE Distribution System Investments
SCE Distribution System Investments Distribution Trends • Continued focus on safety and reliability with 2017 – 2020 Capital Spending Forecast infrastructure replacement representing 44% of total for Distribution1 – Request Level distribution capital spend, but not yet reaching $14.1 Billion equilib
Slide 15: Energy Storage
Energy Storage Given counting rules, SCE has already met the aggregate CPUC Energy Storage Program Requirements: 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 up to 290 MW
Slide 16: SCE Transportation Electrification Proposals
SCE Transportation Electrification Proposals On January 20, 2017, SCE filed with the CPUC a wide-ranging plan to increase electrification of cars, buses, medium- and heavy-duty trucks and industrial vehicles and equipment • SCE proposed 6 near-term, priority-review projects and 2 longer-term, standa
Slide 17: Transportation Electrification Overview
Transportation Electrification Overview California’s goals to reduce total GHG emissions by 40 percent from 1990 levels by 2030 is 42% from current levels • Recent Governor Order set a 2050 target of 80% below 1990 levels 2015 California GHG Emissions Many of California's policies to date focused on
Slide 18: SCE Large Transmission Projects
SCE Large Transmission Projects Summary of Large Transmission Projects Remaining Investment Project Name Total Cost4 In-Service Date (as of Sept. 2017) West of Devers1,3 $1.1 billion $1.0 billion 2021 Mesa Substation1 $608 million $565 million 2022 Alberhill System2 $397 million $360 million 2021 Ri
Slide 19: SCE Operational Excellence
SCE Operational Excellence Defining Excellence Measuring Excellence Top Quartile • Employee and public safety • Safety metrics • Reliability • System performance and • Customer service reliability (SAIDI, SAIFI, MAIFI) • Cost efficiency • J.D. Power customer Optimize satisfaction • Capital productiv
Slide 20: Responding to Industry Change
Responding to Industry Change Long-Term Industry Trends Strategy • The technology landscape is evolving at SCE Strategy an unprecedented pace, with innovation • Clean the power system by accelerating driving advances in cost and capabilities of the de-carbonization of electricity supply distributed
Slide 21: Edison Energy Group Summary
Edison Energy Group Summary Edison Energy SoCore Energy • Edison Energy is an advisory and services • Provider of distributed solar solutions company with the capabilities to develop and focused on the following segments: integrate an array of energy solutions to help Commercial & Industrial comme
Slide 22: 2017 EIX Earnings Per Share Guidance
2017 EIX Earnings Per Share Guidance 2017 Earnings Per Share Guidance Key Assumptions As of As of • SCE authorized rate base $26.1 billion July 27, 2017 October 30, 2017 • Authorized CPUC capital structure - 48% Low Mid High Low Mid High equity and 10.45% ROE EIX Basic EPS $4.13 $4.23 $4.33 $4.27 $4
Slide 23: EIX Annual Dividends Per Share
EIX Annual Dividends Per Share Thirteen Years of Dividend Growth $2.17 $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 2017 Target dividend growth at a higher than industry average growth rate within its t
Slide 24: Appendix
Appendix October 31, 2017 23
Slide 25: 2018 SCE General Rate Case (GRC)
2018 SCE General Rate Case (GRC) • 2018 GRC Application (A. 16-09-001) filed September 1, 2016 • Addresses CPUC jurisdictional revenue requirement for 2018-2020 Includes operating costs and capital investment Excludes CPUC jurisdictional costs such as fuel and purchased power, cost of capital an
Slide 26: 2018 SCE GRC (cont.)
2018 SCE GRC (cont.) Items Carried Over from 2015 GRC New Items from 2018 GRC • Requests continuation of Tax Accounting • Capital expenditures of $1.8 billion for grid Memorandum Account (TAMA) adjusting modernization capital to support improved revenues annually for over and safety and reliability
Slide 27: EIX and SCE Tax Reform
EIX and SCE Tax Reform Key Reform Impact on Comments Considerations Customer / Shareholder • Permanent increase in customer rates (top concern) No interest deductibility Negative Negative • Costs passed through but lowers tax shield Negative at EIX • Lower customer rates Lower tax rate (15%-20%) Pos
Slide 28: SCE Historical Capital Expenditures
SCE Historical Capital Expenditures ($ billions) $3.9 $4.0 $3.9 $3.5 $3.5 2012 2013 2014 2015 2016 October 31, 2017 27
Slide 29: Capital Expenditure/Rate Base Detailed Forecast
Capital Expenditure/Rate Base Detailed Forecast ($ in billions) Detailed Capital Expenditures at Request Level – 2016-2020 2016 2017 2018 2019 2020 Total (Actual) Core Distribution1,2 $2.9 $2.9 $3.2 $3.2 $3.1 $15.2 Mobile Home Pilot Program - 0.1 - - - 0.1 Grid Modernization3 - - 0.5 0.7 0.6 1.8 Sub
Slide 30: Distribution Power Grid of the Future
Distribution Power Grid of the Future Current State Future State One-Way Electricity Flow Variable, Two-Way Electricity Flow • System designed to distribute electricity • Distribution system at the center of the from large central generating plants power grid • Increasing penetration of distributed
Slide 31: Grid Modernization Highlights
Grid Modernization Highlights Devices that provide Devices that provide stable voltage and power quality more flexibility during outage events Future circuit designs integrate State of the art Distributed operating tools Energy Resources for utility and increase operators and flexibility engineers S
Slide 32: SCE Grid Modernization – Request Level
SCE Grid Modernization – Request Level1 ($ billions) $1.8 Billion Capital Request for 2018-20202 Building next generation electric grid requires accelerating $0.65 traditional Transmission and Distribution / Information $0.61 Technology programs and investing in new capabilities • Increased capacity
Slide 33: Distributed Energy Resources (DER) Proceedings
Distributed Energy Resources (DER) Proceedings 2017 Activities • DER Hosting Capacity analysis • Locational Net Benefits Distribution •Integration of DERs in distribution planning and operations • DER forecasting and Resource Plan (DRP) •Development of tools and methodologies, distribution planning
Slide 34: SCE Customer Demand Trends
SCE Customer Demand Trends Kilowatt-Hour Sales (millions of kWh) 2016 2015 2014 2013 2012 Residential 29,141 29,959 30,115 29,889 30,563 Commercial 41,565 42,207 42,127 40,649 40,541 Industrial 7,056 7,589 8,417 8,472 8,504 Public authorities 4,645 4,774 4,990 5,012 5,196 Agricultural and other 1,77
Slide 35: California’s Energy Policy
California’s Energy Policy • On October 7, 2015, Governor Brown signed SB 350, which requires that 2016 Renewable Resources: 50 percent of energy sales to customers come from renewable 28.2% of SCE’s portfolio power and a doubling of energy efficiency in existing buildings for California by 2030 Sma
Slide 36: SCE 2017 Bundled Revenue Requirement
SCE 2017 Bundled Revenue Requirement 2017 Bundled Revenue Requirement $millions ¢/kWh Fuel & Purchased Power – includes CDWR Bond Charge 5,130 7.1 Fuel & Purchased Power (45%) Distribution – poles, wires, substations, service centers; Edison 4,386 6.1 SmartConnect® Distribution Generation – owned ge
Slide 37: System Average Rate Historical Growth
System Average Rate Historical Growth ¢/kWh Comparative System Rates reduced due to the implementation of 1) Average Rates the SONGS Settlement, including NEIL insurance CAGR % Delta benefits, 2) lower fuel & purchased power 20-yr 10-yr 5-yr EIX – 15.7¢ -- costs, and 3) a lower 2015 GRC revenue ('97
Slide 38: Community Choice Aggregation (CCA) Overview
Community Choice Aggregation (CCA) Overview • An Order Instituting Rulemaking (OIR R.17-06- 026) was opened on June 29, 2017 to review, revise, and consider alternatives to the “Power Charge Indifference Adjustment” or PCIA While not an impact on earnings, for every 1% of departing load, $6 millio
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 (TOU) rates • July 2015 CPUC Decision D.15-07-001 includes: Transition to 2 tiered rates by 2019 “Super User Elec
Slide 40: SCE Net Metering Rate Structure
SCE Net Metering Rate Structure NEM Rate Developments: • NEM allowed residential customers to receive full-retail rate credit for exported generation and use these credits to offset energy Solar Subsidies purchased from the electric power company, leading to a cost-shift (Illustrative) to non-NEM cu
Slide 41: Residential Solar Installations in SCE Territory
Residential Solar Installations in SCE Territory Monthly Installations and MW Installed Key Dates 7000 40 July 1, 2017 • Official start of NEM successor 6000 35 tariff; customers are subject to: Mandatory Time-Of-Use rate Number of Residential Installations 5000 30 Non-bypassable charges Appli
Slide 42: SCE Rates and Bills Comparison
SCE Rates and Bills Comparison 2016-17 Average Residential Rates (¢/kWh) Key KeyFactors Factors 16.2 ₵ • SCE’s residential rates are above national 13.0 ₵ average due, in part, to a cleaner fuel mix. 25% Higher Costs for low carbon energy are higher than those of high-carbon sources • Average monthl
Slide 43: Third Quarter Earnings Summary
Third Quarter Earnings Summary Q3 Q3 Variance Key SCE EPS Drivers 2017 2016(*) Revenue 1,2 $ 0.18 Basic Earnings Per Share (EPS) - CPUC - Escalation 0.11 SCE $ 1.43 $ 1.34 $ 0.09 - CPUC - Other 0.05 - Other operating revenue 0.02 EIX Parent & Other 0.01 (0.05) 0.06 Higher O&M (0.01) Discontinued Ope
Slide 44: Year to Date Earnings Summary
Year to Date Earnings Summary YTD YTD Key SCE EPS Drivers 2017 2016(*) Variance Revenue 2,3,4 $ 0.31 Basic Earnings Per Share (EPS) - CPUC - Escalation 0.33 SCE $ 3.44 $ 3.21 $ 0.23 - CPUC - Other 0.02 - FERC revenue (0.06) EIX Parent & Other (0.03) (0.20) 0.17 - Other operating revenue 0.02 Lower O
Slide 45: SCE Annual Results of Operations
SCE Annual 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 rea
Slide 46: 2016 Retrospectively Adjusted EPS by Quarter
2016 Retrospectively Adjusted EPS by Quarter 20161 Q4 Q3 Q2 Q1 Earnings (loss) per share attributable to Edison International Continuing Operations SCE $4.22 $1.01 $1.34 $0.98 $0.90 Edison International Parent & Other (0.23) (0.04) (0.05) (0.11) (0.04) Discontinued Operations 0.03 0.04 (0.01) Ed
Slide 47: MHI Award Accounting
MHI Award Accounting ($ millions) • On March 13, 2017, a decision was received MHI Arbitration Decision Calculation from the International Chamber of Commerce International Court (ICC) Total Liability Under Contract $137.5 regarding the MHI Arbitration Additional Interest (to be paid by MHI) 33.7 •
Slide 48: Earnings Non-GAAP Reconciliations
Earnings Non-GAAP Reconciliations ($ millions) Reconciliation of EIX GAAP Earnings to EIX Core Earnings Earnings Attributable to Edison International Q3 Q3 YTD YTD 2017 2016 2017 2016 SCE $465 $435 $1,121 $1,048 EIX Parent & Other 5 (14) (11) (65) Discontinued Operations − − − (1) Basic Earnings $47
Slide 49: 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 2011 2012 2013 2014 2015 2016 CAGR Basic EPS $3.33 $4.81 $2.76 $4.46 $3.06 $4.22 5% Non-Core Items Regulatory and tax items — 0.71 — — — — Write
Slide 50: 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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