Edison International · NYSE:EIX
Edison International — Corporate Update (September 2016)
51 slides from Edison International's corporate update, Sep 2, 2016
Slide 1: Business Update September 2016
Business Update September 2016 September 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 July 2016 Business Update EIX Shareholder Value 3 U SCE Highlights, Regulatory Model 4‐5 Capital Expenditures and Rate Base History and Forecast 6‐8 U 2018 GRC Overview 9‐10 N Distribution and Transmission Capital Expenditure Detail 11‐15 U,N CPUC C
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 • 8.5% average annual rate base Delivery growth through 2020 • Wires assets represent over 90% of utility plant a
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 $4.20 Note: Recorded rate base, year-end basis. See Earnings Non-GAAP Reconciliations and Us
Slide 8: SCE Capital Expenditure Forecast
SCE Capital Expenditure Forecast ($ billions) $23.3 Billion Capital Program Traditional Capital Spending Categories: for 2016-2020 at Request Level Distribution Transmission Generation • Capital expenditure forecast incorporates GRC, FERC and Grid Modernization Capital Spending: Grid Modernization n
Slide 9: SCE Rate Base Forecast
SCE Rate Base Forecast ($ billions) Traditional Rate Base Grid Modernization 5-year CAGR of 8.5% at Request Level $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 $
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 CPUC infrastructure replacement representing 46% of total Expenditures for Distribution Assets1 distribution capital spend, but not yet reaching $17.8 Billion equilibrium replacement
Slide 13: SCE Grid Modernization Forecast
SCE Grid Modernization Forecast ($ 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 • Increased capa
Slide 14: 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 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 Cost Remaining Investment In-Service Date Tehachapi 4-11 $2.5 billion $180 million 2016-2017 West of Devers1,3 $1.1 billion $1.0 billion 2021 Mesa Substation2 $600 million $600 million 2020-2021 Alberhill Syste
Slide 17: CPUC Cost of Capital
CPUC Cost of Capital 7 CPUC Adjustment Mechanism Moody’s Baa Utility Index Spot Rate Moving Average (10/1/15 – 6/30/16) = 5.14% 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 18: 2016 Earnings Guidance Reaffirmed
2016 Earnings Guidance Reaffirmed 2016 Earnings Guidance Key Assumptions As of May 2, 2016 As of July 28, 2016 • Revenues based on GRC final decision Low Mid High Low Mid High • Energy efficiency earnings of $0.05 per EIX Basic EPS $3.82 $3.92 $4.02 $3.82 $3.92 $4.02 share Less: Non-Core Items1 0.01
Slide 19: 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 20: 2016 System Average Rate
2016 System Average Rate (¢/kWh) 0.3¢ 16.2¢ 0.4¢ 0.3¢ (0.3¢) (0.5¢) 15.0¢ 14.9¢ (1.4¢) (0.1¢) Comparative System Average Rates1: % Delta EIX – 14.9¢ -- PG&E – 18.2¢ 22% SDG&E – 20.4¢ 37% 2 2015 SAR 2015 ERRA 2015 GRC Expiration of Other CPUC 2016 FERC 2016 ERRA January 2016 FERC June 2016 Settlement
Slide 21: 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 Modification return on equity to suspend adjustment mechanism through 2017; Filing of 2018 application in April 2017
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 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 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 $0.80 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Target dividend growth at a higher than industry growth rate within its target payout ratio of
Slide 28: Appendix
Appendix September 2, 2016 27
Slide 29: SCE Tax Memorandum Account
SCE Tax Memorandum Account • 2018 GRC continues tax accounting memorandum account (TAMA) established in 2015 GRC decision, which tracks tax benefits or costs associated with changes in: - tax accounting methods - tax laws and regulations impacting depreciation or tax repair - forecasted tax repairs
Slide 30: SCE Historical Capital Expenditures
SCE Historical Capital Expenditures ($ billions) $3.9 $3.9 $4.0 $3.9 $3.8 $3.5 2010 2011 2012 2013 2014 2015 September 2, 2016 29
Slide 31: Capital Expenditure/Rate Base Detailed Forecast
Capital Expenditure/Rate Base Detailed Forecast ($ in billions) Detailed Capital Expenditures – 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 Subtotal Distribution
Slide 32: 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 33: 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 34: 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 35: 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 36: Grid Modernization Road Map
Grid Modernization Road Map SCE is evolving its DRP timeline based on January 2016 scoping memo, July 2016 memorandum account request and the 2018 General Rate Case application 2015 - 2017 2018 - 2020 2021 – 2023 + Cycle GRC Technology Implement foundational Optimize operation of Enhance automation
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 Rates reduced due to the implementation of 1) the SONGS ¢/kWh SCE System Average Rate Settlement, including NEIL insurance Los Angeles Area Inflation benefits, 2) lower fuel & purchased 24.0¢ power costs, and 3) a lower 2015 GRC revenue requirement that includes
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 (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 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 2019 4,000 • Commission to revi
Slide 42: 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 43: SCE Customer Demand Trends
SCE Customer Demand Trends Kilowatt-Hour Sales (millions of kWh) YTD 2016 2015 2014 2013 2012 2011 Residential 12,960 29,959 30,115 29,889 30,563 29,631 Commercial 19,926 42,207 42,127 40,649 40,541 39,622 Industrial 3,618 7,589 8,417 8,472 8,504 8,490 Public authorities 2,230 4,774 4,990 5,012 5,19
Slide 44: 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 2%
Slide 45: California Cap and Trade Program
California Cap and Trade Program • Assembly Bill 32 (2006) – reduces State AB32 Emissions greenhouse gas (GHG) emissions to 1990 levels Reduction Programs by 2020 (~16% reduction) • Cap and trade program basics: High GWP Gases – State-wide cap in 2013 – decreases over time 7% Cap & Trade – Complianc
Slide 46: Second Quarter Earnings Summary
Second Quarter Earnings Summary Q2 Q2 Variance Key SCE EPS Drivers 2016 2015 Revenue4,5,6 $0.10 Basic Earnings Per Share (EPS) - CPUC – Escalation 0.09 SCE $0.97 $1.18 $(0.21) - CPUC – Timing of GRC (0.06) EIX Parent & Other (0.11) (0.02) (0.09) - CPUC – GRC return on pole loading rate base 0.03 Dis
Slide 47: YTD 2016 Earnings Summary
YTD 2016 Earnings Summary YTD YTD Variance Key SCE EPS Drivers 2016 2015 Revenue3,4,5 $0.15 Basic Earnings Per Share (EPS) - CPUC – Escalation 0.17 SCE $1.85 $2.12 $(0.27) - CPUC – Timing of GRC (0.12) EIX Parent & Other (0.17) (0.04) (0.13) - CPUC – GRC return on pole loading rate base 0.05 Discont
Slide 48: SCE Results of Operations
SCE Results of Operations ($ 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 49: Earnings Non-GAAP Reconciliations
Earnings Non-GAAP Reconciliations ($ millions) Reconciliation of EIX GAAP Earnings to EIX Core Earnings Earnings Attributable to Edison International Q2 Q2 YTD YTD 2016 2015 2016 2015 SCE $315 $384 $601 $689 EIX Parent & Other (37) (5) (54) (11) Discontinued operations (2) – (1) – Basic Earnings $27
Slide 50: 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 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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