Edison International · NYSE:EIX
Edison International — Corporate Update (May 2018)
46 slides from Edison International's corporate update, May 2018
Slide 1: Business Update May 2018
Business Update May 2018
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 state
Slide 3: Table of Contents
Table of Contents Page Updated (U) or New (N) from February 2018 Business Update EIX Shareholder Value 3 SCE Highlights, SCE Long-Term Growth Drivers, Regulatory Model 4-6 U California Wildfire Risk Mitigation 7 Capital Expenditures and Rate Base History and Forecast 8-10 2018 General Rate Case 11 K
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 • 9.7% 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 • 725,000 transformers • 118,000 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 Reliability rates 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: California Wildfire Campaign
California Wildfire Campaign Prevention and Hardening the Allocation of risk and mitigation infrastructure liability • Effective fire suppression • Stronger building codes in • Policies around allocation of resources high fire risk areas financial risks, including fire • Effective vegetation • Partn
Slide 9: SCE Historical Rate Base and Core Earnings
SCE Historical Rate Base and Core Earnings ($ billions, except per share data) 2012– 2017 CAGR Rate Base 6% Core Earnings 2% $27.8 $25.9 $24.6 $23.3 $21.0 $21.1 2012 2013 2014 2015 2016 2017 Core EPS $4.10 $3.88 $4.68 $4.20 $4.22 $4.58 Note: Recorded rate base, year-end basis. See SCE Core EPS Non-G
Slide 10: SCE Capital Expenditure Forecast
SCE Capital Expenditure Forecast ($ billions) $13.7 Billion 2018-2020 Capital Program Traditional Capital Spending: Distribution 1 Transmission Generation • Capital expenditure forecast incorporates GRC, FERC and non- Grid Modernization Capital Spending: GRC CPUC spending Grid Modernization 2 GRC
Slide 11: SCE Rate Base Forecast – Request Level
SCE Rate Base Forecast – Request Level ($ billions) Traditional Grid Modernization 3-year CAGR of 9.7% $34.6 CPUC $31.8 • Rate base based on request levels from $29.1 2018 GRC Tax Reform February Update $26.2 FERC • FERC rate base, including Construction Work in Progress (CWIP), is approximately 19%
Slide 12: 2018 SCE General Rate Case (GRC)
2018 SCE General Rate Case (GRC) • 2018 GRC Application (A. 16-09-001) filed September 1, 2016 • Addresses CPUC jurisdictional revenue requirement for 2018-2020 Includes operating costs and capital investment Excludes CPUC jurisdictional costs such as fuel and purchased power, cost of capital an
Slide 13: SCE Key Regulatory Proceedings
SCE Key Regulatory Proceedings Proceeding Description Next Steps Key CPUC Proceedings 2018 General Rate Case Set CPUC base revenue requirement, capital Updated Testimony filed on February 16, 2018; hearing held (A. 16-09-001) expenditures and rate base for 2018-2020 March 19, 2018 Z-Factor Advice Le
Slide 14: CPUC Cost of Capital
CPUC Cost of Capital 7 CPUC Adjustment Mechanism Moody’s Baa Utility Index Spot Rate Moving Average (10/1/17 – 04/30/18) = 4.32% 100 basis point +/- Deadband 6 Rate (%) 5 4 Starting Value – 5.00% ROE fixed at ROE fixed at 10.45% for 2017, 10.30% for 2018, independent of independent of trigger mechan
Slide 15: 2018 Financial Assumptions
2018 Financial Assumptions ($ billions) SCE Capital Expenditures SCE Weighted Average Rate Base Distribution $3.4 Traditional $28.8 Transmission 0.6 Grid Mod 0.3 Generation 0.2 2018 Request $29.1 2018 Plan $4.2 • Based on 2018 forecasted expenditures at • FERC comprises about 20% of total rate base
Slide 16: SCE Distribution System Investments
SCE Distribution System Investments Distribution Trends • Continued focus on safety and reliability with infrastructure replacement representing 45% of total 2018 – 2020 Capital Spending Forecast distribution capital spend, but not yet reaching for Distribution1,2 equilibrium replacement rate $10.9
Slide 17: Energy Storage
Energy Storage CPUC Energy Storage Program Requirements: SCE 2018 Storage Portfolio • Storage Rulemaking (R.10-12-007) established 1,325 MW 250 target for IOUs by 2024 (580 MW SCE share; spread as biennial targets during 2014-20); ownership allowed up to 290 MW for SCE 200 200 • Flexibility to trans
Slide 18: Transportation Electrification Overview
Transportation Electrification Overview Per SB 32, California’s goal to reduce total GHG emissions by 40 percent from 1990 levels by 2030 is 42% from current levels • Governor Order set a 2050 target of 80% below 1990 levels 2015 California GHG Emissions Many of California's policies to date focused
Slide 19: 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 20: SCE Large Transmission Projects
SCE Large Transmission Projects Summary of Large Transmission Projects Remaining Investment Estimated In-Service Project Name Total Cost4 (as of March 31, 2018) Date West of Devers1,2 $848 million $747 million 2021 Mesa Substation1 $646 million $521 million 2022 Alberhill System3 $486 million $448 m
Slide 21: 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 22: 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 23: Edison Energy Summary
Edison Energy Summary Edison Energy • Energy is a significant risk large commercial and industrial customers face. Edison Energy creates competitive advantage for market leaders by Renewables & Supply quantifying this risk and designing the portfolio solution to protect shareholder value threatened
Slide 24: EIX Annual Dividends Per Share
EIX Annual Dividends Per Share Fourteen Years of Dividend Growth 1 $2.42 $2.17 $1.92 $1.67 $1.42 $1.35 $1.26 $1.28 $1.30 $1.22 $1.24 $1.16 $1.08 $1.00 $0.80 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Target dividend growth at a higher than industry average growth rate
Slide 25: Appendix
Appendix May 2, 2018 Energy for What's Ahead* 24
Slide 26: 2018 SCE GRC
2018 SCE GRC Items Carried Over New Items from 2018 Previous Intervenor from 2015 GRC GRC Testimony • Requests continuation of Tax • Capital expenditures of $1.8 • ORA - Proposed no Grid Accounting Memorandum billion for grid modernization Modernization capital Account (TAMA) adjusting capital to su
Slide 27: SCE Historical Capital Expenditures
SCE Historical Capital Expenditures ($ billions) $4.0 $3.9 $3.8 $3.5 $3.5 2013 2014 2015 2016 2017 May 2, 2018 26
Slide 28: Capital Expenditure/Rate Base Detailed Forecast
Capital Expenditure/Rate Base Detailed Forecast ($ in billions) Detailed Capital Expenditures – 2017-2020 2017 2018 2019 2020 Total (Actual) Distribution1,2 $3.1 $3.4 $3.2 $3.0 $12.7 Transmission1 0.5 0.6 0.8 0.9 2.7 Generation1 0.2 0.2 0.2 0.2 0.8 Total Traditional $3.8 $4.2 $4.1 $4.1 $16.3 Grid Mo
Slide 29: Distribution Power Grid of the Future
Distribution Power Grid of the Future Current State Future State One-Way Electricity Flow Variable, Two-Way Electricity Flow • System designed to distribute electricity • Distribution system at the center of the from large central generating plants power grid • Increasing penetration of distributed
Slide 30: Grid Modernization Highlights
Grid Modernization Highlights Devices that provide Devices that provide stable voltage and power quality more flexibility during outage events Future circuit designs integrate State of the art Distributed operating tools Energy Resources for utility and increase operators and flexibility engineers S
Slide 31: SCE Grid Modernization – Request Level
SCE Grid Modernization – Request Level ($ billions) $1.3 Billion Capital Request for 2019-20201,2 $0.65 Building next generation electric grid requires accelerating traditional Transmission and Distribution / Information Technology programs and investing in new capabilities • Upgrade portions of gri
Slide 32: Distributed Energy Resources (DER) Proceedings
Distributed Energy Resources (DER) Proceedings 2018 Activities • DER Hosting Capacity analysis • Locational Net Benefits Distribution •Integration of DERs in distribution planning and operations • DER forecasting and distribution planning Resource Plan (DRP) •Development of tools and methodologies,
Slide 33: SCE Customer Demand Trends
SCE Customer Demand Trends 2013 2014 2015 2016 2017 Kilowatt-Hour Sales (millions of kWh) Residential 29,889 30,115 29,959 29,141 29,765 Commercial 40,649 42,127 42,207 41,565 41,873 Industrial 8,472 8,417 7,589 7,056 6,559 Public authorities 5,012 4,990 4,774 4,645 4,639 Agricultural and other 1,88
Slide 34: California’s Energy Policy
California’s Energy Policy • On October 7, 2015, Governor Brown signed SB 350, which requires that 2017 Renewable Resources: 50 percent of energy sales to customers come from renewable 31.6% of SCE’s portfolio power and a doubling of energy efficiency in existing buildings for California by 2030 Sma
Slide 35: SCE 2018 Bundled Revenue Requirement
SCE 2018 Bundled Revenue Requirement 2018 Bundled Revenue Requirement $ millions ¢/kWh Fuel & Purchased Power – includes CDWR Bond Charge 4,869 7.0 Fuel & Purchased Power (43%) Distribution – poles, wires, substations, service centers; Edison 4,362 6.2 SmartConnect® Distribution Generation – owned g
Slide 36: System Average Rate Historical Growth
System Average Rate Historical Growth ¢/kWh Comparative System Rates reduced due to the implementation of Average Rates 1) the SONGS Settlement, including NEIL CAGR % Delta insurance benefits, 2) lower fuel & 20-yr 10-yr 5-yr EIX – 16.2¢ -- purchased power costs, and 3) a lower 2015 ('98-’18) ('08-'
Slide 37: Community Choice Aggregation (CCA) Overview
Community Choice Aggregation (CCA) Overview • Assembly Bill 1171 permits cities and counties or a Joint Power Authority (JPA) to act as CCAs to purchase and sell electricity on behalf of the utility customers within their jurisdiction • An Order Instituting Rulemaking (OIR R.17-06-026) was opened on
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 In March 2018, nearly 400,000 residential customers migrated to TOU rate structures Remaining reside
Slide 39: Impacts of Abundant Solar Energy (Duck Curve)
Impacts of Abundant Solar Energy (Duck Curve) Proposed Time-of-Use (TOU) Period Changes • SCE has proposed to change its TOU pricing period definition for the first time in over 30 years All non-residential and new residential NEM 2.0 customers are served on mandatory TOU rates • Abundant mid-day
Slide 40: Residential Solar Installations in SCE Territory
Residential Solar Installations in SCE Territory Monthly Installations and MW Installed SCE Net Metering Statistics (3/18) • 262,576 combined residential and non-residential projects – 2,211 7000 40 MW installed • 99.8 % solar projects 35 • 256,387 residential – 1,382 MW 6000 • 6,189 non-residential
Slide 41: SCE Rates and Bills Comparison
SCE Rates and Bills Comparison 2017 Average Residential Rates (¢/kWh) Key KeyFactors Factors 27% 16.4 ₵ Higher • SCE’s residential rates are above national 12.9 ₵ average due, in part, to a cleaner fuel mix, high cost of living in the state, and lower system load factor than the rest of the country.
Slide 42: First Quarter Earnings Summary
First Quarter Earnings Summary Q1 Q1 Variance Key SCE EPS Drivers3 2018 2017 Revenue4 $ Basic Earnings Per Share (EPS)1 - CPUC (0.02) SCE $0.88 $1.07 $(0.19) - FERC revenue 0.02 EIX Parent & Other (0.21) 0.04 (0.25) Higher O&M (0.10) Discontinued Operations Higher net financing costs (0.02)
Slide 43: SCE Annual Results of Operations
SCE Annual Results of Operations ($ 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 44: Earnings Non-GAAP Reconciliations
Earnings Non-GAAP Reconciliations ($ millions) Reconciliation of EIX GAAP Earnings to EIX Core Earnings Q1 Q1 Earnings Attributable to Edison International 2018 2017 SCE $286 $349 EIX Parent & Other (68) 13 Basic Earnings $218 $362 Non-Core Items SCE $ – $ – EIX Parent & Other1,2 (44) – Total Non-Co
Slide 45: EIX Core EPS Non-GAAP Reconciliations
EIX Core EPS Non-GAAP Reconciliations Reconciliation of Edison International Basic Earnings Per Share to Edison International Core Earnings Per Share Earnings Per Share Attributable to Edison International 2015 2016 2017 CAGR Basic EPS 3.13 $4.02 $1.73 (26%) Non-Core Items SCE Write down, impairment
Slide 46: 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