Edison International · NYSE:EIX
Edison International — Corporate Update (May 2017)
48 slides from Edison International's corporate update, May 9, 2017
Slide 1: Business Update May 2017
Business Update May 2017 May 9, 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 New (N) or Updated (U) from Page February 2017 Business Update EIX Shareholder Value 3 SCE Highlights, SCE Long-Term Growth Drivers, Regulatory Model 4-6 U Capital Expenditures and Rate Base History and Forecast 7-9 2018 GRC Overview 10-12 N CPUC Cost of Capital 13 U Key Regulatory
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 • 8.6% average annual rate base • Infrastructure replacement –safety and growth through 2020 at request le
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, • 2017-
Slide 7: SCE Decoupled Regulatory Model
SCE Decoupled Regulatory Model Regulatory Model Key Benefits Decoupling of Regulated • SCE earnings not affected by variability of retail electricity Revenues from Sales sales • Differences between amounts collected and authorized levels either billed or refunded • Promotes energy conservation • Sta
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) $19.3 Billion Capital Program for 2017-2020 Traditional Capital Spending: • Capital expenditure forecast incorporates GRC, FERC and Distribution Transmission Generation non-GRC CPUC spending – unchanged from prior quarter Grid Modernizati
Slide 10: SCE Rate Base Forecast – Request Level
SCE Rate Base Forecast – Request Level ($ billions) 4-year CAGR of 8.6% Traditional Grid Modernization CPUC $34.6 • Rate base based on request levels from $32.0 2018 GRC and 2018 positive true-up from $29.3 authorized to forecast 2017 rate base $26.2 $24.9 FERC • FERC rate base is approximately 19%
Slide 11: 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 12: 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 $2.1 billion for grid Memorandum Account (TAMA) adjusting modernization capital to support improved revenues annually for over and safety and reliability
Slide 13: General Rate Case Update – Intervenor Testimony
General Rate Case Update – Intervenor Testimony ORA submitted testimony on April 7, 2017 – Key elements • Proposed 2018 revenue requirement increase of $14 million above 2017 versus SCE’s request of a $222 million increase over presently authorized base rates • Proposed post test year increases: 2.7
Slide 14: CPUC Cost of Capital
CPUC Cost of Capital 7 CPUC Adjustment Mechanism Moody’s Baa Utility Index Spot Rate Moving Average (10/1/16 – 02/01/2017) = 4.60% 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 mech
Slide 15: 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 ALJ schedule; received ORA testimony; remainin
Slide 16: 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 $14.9 Billion equilib
Slide 17: Energy Storage
Energy Storage Given counting rules, SCE has already met the aggregate 2016 targets CPUC Energy Storage Program Requirements: • Storage Rulemaking (R.10-12-007) established 1,325 MW target for IOUs by 2024 (580 MW SCE share; spread as biennial targets SCE 2017 Storage Portfolio during 2014-20); owne
Slide 18: 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 19: 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 2014 California GHG Emissions Many of California's policies to date focused on
Slide 20: SCE Large Transmission Projects
SCE Large Transmission Projects Summary of Large Transmission Projects Remaining Investment Project Name Total Cost4 In-Service Date (as of March 2017) West of Devers1,3 $1.1 billion $1.01 billion 2021 Mesa Substation1 $608 million $577 million 2022 Alberhill System2 $397 million $360 million 2021 R
Slide 21: 2017 EIX Earnings Per Share Guidance
2017 EIX Earnings Per Share Guidance 2017 Earnings Per Share Guidance Key Assumptions As of Reaffirmed As of • SCE authorized rate base $26.2 billion February 21, 2017 May 1, 2017 • Energy efficiency earnings $0.03 per Low Mid High Low Mid High share EIX Basic EPS $4.04 $4.14 $4.24 $4.04 $4.14 $4.24
Slide 22: 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 23: 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 24: 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 25: 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 $0.80 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Target dividend growth at a higher than industry average growth rate within its t
Slide 26: Appendix
Appendix May 9, 2017 25
Slide 27: EIX and SCE Tax Reform
EIX and SCE Tax Reform Key Reform Impact on Comments Considerations Customer / Shareholder • Permanent increase in customer rates (top concern) No interest deductibility Negative Negative • Costs passed through but lowers tax shield Negative at EIX • Lower customer rates Lower tax rate (15%-20%) Pos
Slide 28: SCE Historical Capital Expenditures
SCE Historical Capital Expenditures ($ billions) $3.9 $4.0 $3.9 $3.5 $3.5 2012 2013 2014 2015 2016 May 9, 2017 27
Slide 29: Capital Expenditure/Rate Base Detailed Forecast
Capital Expenditure/Rate Base Detailed Forecast ($ in billions) Detailed Capital Expenditures at Request Level – 2016-2020 2016 2017 2018 2019 2020 Total (Actual) Core Distribution1,2 $2.9 $3.0 $3.2 $3.2 $3.1 $15.4 Mobile Home Pilot Program - 0.1 - - - 0.1 Grid Modernization - 0.2 0.6 0.8 0.7 2.3 Su
Slide 30: Distribution Power Grid of the Future
Distribution Power Grid of the Future Current State Future State One-Way Electricity Flow Variable, Two-Way Electricity Flow • System designed to distribute • Distribution system at the center of electricity from large central the power grid generating plants • System designed to manage • Very few d
Slide 31: Grid Modernization Highlights
Grid Modernization Highlights Devices that provide Devices that provide stable voltage and power quality more flexibility during outage events Future circuit designs integrate State of the art Distributed operating tools Energy Resources for utility and increase operators and flexibility engineers S
Slide 32: SCE Grid Modernization – Request Level
SCE Grid Modernization – Request Level ($ billions) $2.3 Billion Capital Request for 2017-20201,2 $0.75 $0.71 Building next generation electric grid requires accelerating traditional Transmission and $0.64 Distribution / Information Technology programs and investing in new capabilities • Increased c
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 • Data Access Resource Plan (DRP) •Development of tools and methodologies, • Forecasting and planning ali
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 2016 Preliminary Renewable Resources: requires that 50 percent of energy sales to customers come 28.3% of SCE’s portfolio from renewable power and a doubling of energy efficiency in existing buildings for California
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 Average Rates CAGR % Delta 20-yr 10-yr 5-yr EIX – 15.8¢ -- Rates reduced from implementation of ('97-’17) ('07-'17) ('12-'17) 1) the SONGS Settlement, including NEIL SCE System Average Rate 2.4% 0.7% 0.5% PG&E – 18.8¢ 19% insurance benef
Slide 38: 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 39: SCE Net Metering Rate Structure
SCE Net Metering Rate Structure NEM Rate Developments: • NEM allows 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 cus
Slide 40: Number of Residential Installations
Residential Solar Installations in SCE Territory Monthly Installations and MW Installed 7000 40 Key Dates July 1, 2017 35 • NEM customers will be Number of Residential Installations 6000 required to take service under 30 mandatory Time-of-Use rate • SCE is not expected to hit 5% 5000 NEM cap (2,240M
Slide 41: SCE Rates and Bills Comparison
SCE Rates and Bills Comparison 2016 Average Residential Rates (¢/kWh) Key KeyFactors Factors 16.2 ₵ [2] • SCE’s residential rates are above national 12.6 ₵ [1] average due, in part, to a cleaner fuel mix. 29% Costs for low carbon energy are higher than Higher those of high-carbon sources • Average m
Slide 42: First Quarter Earnings Summary
First Quarter Earnings Summary Q1 Q1 Variance Key SCE EPS Drivers 2017 2016 Revenue3,4 $0.12 Basic Earnings Per Share (EPS)1 - CPUC – Escalation 0.11 SCE $1.07 $0.90 $0.17 - CPUC – Other 0.01 EIX Parent & Other 0.04 (0.04) 0.08 Lower O&M 0.06 Basic EPS $1.11 $0.86 $0.25 Higher depreciation (0.04) Hi
Slide 43: MHI Award Accounting
MHI Award Accounting ($ 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 $137.5 regarding the MHI Arbitration Additional Interest (to be paid by MHI) 33.7 •
Slide 44: SCE Annual Results of Operations
SCE Annual Results of Operations ($ 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 45: 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 $0.90 Edison International Parent & Other (0.23) (0.04) (0.05) (0.11) (0.04) Discontinued Operations 0.03 0.04 (0.01) Ed
Slide 46: Earnings Non-GAAP Reconciliations
Earnings Non-GAAP Reconciliations ($ millions) Reconciliation of EIX GAAP Earnings to EIX Core Earnings Earnings Attributable to Edison International Q1 Q1 2017 2016 SCE $349 $295 EIX Parent & Other 13 (15) Discontinued Operations − 1 Basic Earnings $362 $281 Non-Core Items SCE $– $− EIX Parent & Ot
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 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 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