Edison International · NYSE:EIX
Edison International — Corporate Update (July 2015)
45 slides from Edison International's corporate update, Jul 31, 2015
Slide 1: Business Update July 2015
Business Update July 2015 July 31, 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 Page Updated (U) EIX Shareholder Value 3 SCE Highlights, Regulatory Model 4-5 Capital Expenditures, Rate Base 6-9 System Investment, Growth Drivers Beyond 2017, Grid of the Future 10-13 Distribution Resources Plan 14-16 N Energy Storage, Charge Ready Programs 17-18 U Key
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 – 9% average annual rate base Delivery growth through 2017 • Wires assets represent over 90% of utility plant
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 $2.9 2009 2010 2011 2012 2013 2014 July 31, 2015 6
Slide 8: SCE Historical Rate Base and Core Earnings
SCE Historical Rate Base and Core Earnings ($ 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 $4.68 EPS Note: Recorded rate base, year-end basis. See Earnings Non-GAAP Reconciliations and U
Slide 9: SCE Capital Expenditures Forecast
SCE Capital Expenditures Forecast ($ billions) Distribution Transmission Generation $11.5 – $13.1 billion forecasted $4.6 capital program 2015-2017 $4.4 $4.1 • No change from prior forecast • Growth driven by infrastructure replacement, reliability investments, distribution resources plan investment
Slide 10: SCE Rate Base Forecast
SCE Rate Base Forecast ($ billions) 7-9% average annual rate base growth for 2015-2017 Request • No change from prior forecast Range $28.4 • FERC rate base includes Construction $26.0 Work in Progress (CWIP) and is approximately 23% of SCE’s rate base $23.6 forecast by 2017 • Excludes SONGS regulato
Slide 11: SCE System Investments
SCE System Investments Distribution Transmission • Aging system reaching equilibrium • Large transmission projects: replacement rate – Tehachapi 4-11 – $2.5 billion total project • 2015 GRC request includes ~120% cost; remaining investment $0.4 billion; increase in infrastructure replacement 2016-17
Slide 12: 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 - includes underground cable, poles, switches, and transformers1 Distribution Resources Plan • Accelerate automation and contr
Slide 13: 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 14: New Technology Grid Impacts
New Technology Grid Impacts 1 3 1 2 1 2 Future state based on evolving energy 1 landscape 1 More automated and digital, with more sophisticated 2 voltage control and protection schemes 1 2 Facilitates increasing renewables & two- way power flow 3 Cyber mitigation must be included July 31, 2015 13
Slide 15: 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 16: 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 17: 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 18: Energy Storage
Energy Storage • AB2514 directed CPUC to establish SCE 2014 Existing Storage procurement targets and policies for storage 50 • CPUC final decision in Energy Storage OIR (R.10-12-007) 30 MW – 1,325 MW target for IOUs by 2024 16.40 (580 MW SCE share) 13.68 10 – Three types: transmission (53%), distrib
Slide 19: SCE Charge Ready Program
SCE Charge Ready Program • October 2014, electric vehicle Charge Ready Program application submitted to CPUC (A.14-10- 014) • 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: $22 million pilot program f
Slide 20: SCE Key Regulatory Proceedings
SCE Key Regulatory Proceedings Proceeding Description Next Steps Capital 2015 GRC Application Rate setting for CPUC 3-year cycle 2015 – 17 Proposed and final decision expected in 2015 (A.13-11-003) Cost of Capital Application Capital structure and return on equity Next filing scheduled for April 201
Slide 21: SCE 2015 CPUC General Rate Case
SCE 2015 CPUC General Rate Case November 2013, 2015 GRC Application A.13-11-003 sets 2015 – 2017 base revenue requirement • Includes operating costs and CPUC jurisdictional capital • Excludes fuel and purchased power (and other utility cost-recovery activities), cost of capital, and FERC jurisdictio
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 – 4/1/15) = 4.69% 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) adj
Slide 23: Residential Rate Design OIR
Residential Rate Design OIR • CPUC Order Instituting Ratemaking R.12-06-013 includes comprehensive review of residential rate structure including a future transition to time of use rates • July 2015 CPUC Decision includes: - Transition to 2 tiered rates by 2019 - “Super User Electric Surcharge” for
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: 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 26: 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 27: Appendix
Appendix July 31, 2015 26
Slide 28: 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® 60% Distribution Generation – util
Slide 29: 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 30: SCE Customer Demand Trends
SCE Customer Demand Trends Kilowatt-Hour Sales (millions of kWh) YTD 2015 2014 2013 2012 2011 Residential 12,782 30,115 29,889 30,563 29,631 Commercial 20,104 42,127 40,649 40,541 39,622 Industrial 3,792 8,417 8,472 8,504 8,490 Public authorities 2,264 4,990 5,012 5,196 5,206 Agricultural and other
Slide 31: Wholesale Electricity Prices, May 2014-June 2015
Wholesale Electricity Prices, May 2014-June 2015 (Southern California) Source: Energy Information Administration, July 2015. Data is for SP-15 Nodes July 31, 2015 30
Slide 32: The Future of California Energy Policy
The Future of California Energy Policy January 2015, Governor Brown’s inauguration speech outlined environmental objectives for 2030 which are currently being considered by the legislature (SB 350) • Increase renewables (RPS) to 50% • Reduce petroleum use in cars by 50% • Double efficiency of existi
Slide 33: 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 34: California Renewables Policy
California Renewables Policy • On April 12, 2011, Governor Brown signed SB X 1 2, which codifies a 33% Renewables Actual 2014 Renewable Resources: Portfolio Standard (RPS) for California by 23.4% of SCE’s portfolio 2020 – Allows use of Renewable Energy Credits Small Hydro 2% (RECs) for up to 25% of
Slide 35: 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 36: 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 37: 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 38: Grid Assurance Overview
Grid Assurance™ 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 prolonge
Slide 39: Second Quarter Earnings Summary
Second Quarter Earnings Summary Q2 Q2 SCE Key Core EPS Drivers Variance 2015 2014 Lower revenue3,4 $(0.03) Core Earnings Per Share (EPS)1 - CPUC GRC revenue deferral (0.09) SCE $1.18 $1.11 $0.07 - FERC revenue and other 0.06 EIX Parent & Other (0.02) (0.03) 0.01 Lower O&M5 0.01 Core EPS1 $1.16 $1.08
Slide 40: YTD 2015 Earnings Summary
YTD 2015 Earnings Summary YTD YTD SCE Key Core EPS Drivers Variance 2015 2014 Lower revenue3,4 $(0.02) Core Earnings Per Share (EPS)1 - CPUC GRC revenue deferral (0.16) SCE $2.12 $2.04 $0.08 - FERC revenue and other 0.14 EIX Parent & Other (0.06) (0.06) – Higher depreciation (0.10) Core EPS1 $2.06 $
Slide 41: SCE Results of Operations – Full-Year 2014
SCE Results of Operations – Full-Year 2014 ($ 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 pro
Slide 42: 2015 Financial Assumptions
2015 Financial Assumptions ($ billions) SCE Capital Expenditures SCE Weighted Average Rate Base Distribution $3.1 Distribution $16.0 Transmission 0.8 Transmission 5.4 Generation 0.2 Generation 2.2 Request $4.1 Request $23.6 Range $3.6 Range $23.1 SCE Authorized Cost of Capital Other SCE Items CPUC R
Slide 43: Earnings Non-GAAP Reconciliations
Earnings Non-GAAP Reconciliations ($ millions) Reconciliation of EIX Core Earnings to EIX GAAP Earnings Q2 Q2 YTD YTD Earnings Attributable to Edison International 2015 2014 2015 2014 Core Earnings SCE $384 $362 $689 $666 EIX Parent & Other (6) (10) (17) (20) Core Earnings $378 $352 $672 $646 Non-Co
Slide 44: 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 45: 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