Edison International - Q3 2023
November 1, 2023
Executive Summary
- Q3 2023 GAAP EPS was $0.40 and Core EPS was $1.38; operating revenue was $4.70B and operating income was $492M, with core EPS down $0.10 YoY due to higher interest expense and prior-year CSRP true-up.
- EIX recorded a $475M increase in estimated wildfire/mudslide losses, leading to a net charge of $448M ($323M after-tax); guidance for 2023 Core EPS was reaffirmed at $4.55–$4.85.
- Regulatory catalysts: CPUC cost of capital mechanism triggered, increasing SCE’s ROE to 10.75% in 2024–2025 (benefiting 2025 EPS by ~$0.39); Track 4 settlement would authorize 98% of requested revenue and 99% of rate base, adding ~$0.12 to 2024 rate base EPS over 2023.
- Strategic execution: SCE surpassed 5,200 miles of covered conductor and estimates an 85% reduction in catastrophic wildfire loss risk; capital plan remains $38–$43B (2023–2028) supporting ~6–8% rate base growth.
What Went Well and What Went Wrong
What Went Well
- “We are confident in reaffirming our 2023 core EPS guidance range of $4.55 to $4.85” (CEO Pedro Pizarro), underpinned by year-to-date performance and a robust Q4 outlook.
- Wildfire mitigation progress: >5,200 miles of covered conductor installed; modeled risk of catastrophic wildfire losses reduced by ~85% vs pre-2018 levels.
- Regulatory momentum: ROE uplift to 10.75% in 2024–2025 via CCM (~$0.39 EPS benefit in 2025) and Track 4 settlement providing revenue/rate base clarity and ~$0.12 incremental 2024 rate base EPS over 2023.
What Went Wrong
- Best estimate of 2017/2018 losses increased by $475M, net charge $448M ($323M after-tax), driven by higher-than-expected settlement levels and refined claim information (majority attributable to Woolsey).
- Core EPS down YoY ($1.38 vs $1.48) primarily from higher interest expense and absence of the prior-year CSRP true-up; EIX Parent & Other loss widened on higher holding company interest expense.
- Operating revenue fell YoY ($4.70B vs $5.23B), though sequential revenue improved; interest expense remained a headwind to earnings.
Transcript
Operator (participant)
Good afternoon, and welcome to the Edison International third quarter 2023 financial teleconference. My name is Sue, and I will be your operator today. When we get to the question and answer session, if you have a question, press star one on your phone. Today's call is being recorded. I would now like to turn the call over to Mr. Sam Ramraj, Vice President of Investor Relations. Mr. Ramraj, you may begin your conference.
Sam Ramraj (VP of Investor Relations)
Thank you, Sue, and welcome everyone. Our speakers today are President and Chief Executive Officer Pedro Pizarro and Executive Vice President and Chief Financial Officer Maria Rigatti. Also on the call are other members of the management team. Materials supporting today's call are available at www.edisoninvestor.com. These include a Form 10-Q, prepared remarks from Pedro and Maria, and the teleconference presentation. Tomorrow, we will distribute our regular business update presentation.
During this call, we will make forward-looking statements about the outlook for Edison International and its subsidiaries. Actual results could differ materially from current expectations. Important factors that could cause different results are set forth in our SEC filings. Please read these carefully. The presentation includes certain outlook assumptions as well as reconciliation of non-GAAP measures to the nearest GAAP measure. During the question and answer session, please limit yourself to one question and one follow-up. I will now turn the call over to Pedro.
Pedro J. Pizarro (President and CEO)
All right, thanks, Sam, and good afternoon, everybody. Edison International reported core earnings per share of $1.38 for the third quarter and $3.48 for the first nine months of the year. We are pleased with our performance year to date, and combined with the outlook for the fourth quarter, we are confident in reaffirming our 2023 core EPS guidance range of $4.55-$4.85. I would also like to reaffirm our ongoing commitment to delivering 5%-7% core EPS growth through 2025, which does not factor in several potential upsides. We also reaffirm our EPS growth guidance of 5%-7% for 2025-2028. My comments today cover four key topics. First, an update on the legacy wildfires relating to a change in the best estimate.
Second, how SCE's industry-leading wildfire mitigation practices differentiate the company as climate change-driven wildfire risk affects utilities across the nation. Third, several SCE regulatory updates, and then finally, Edison's updated projections on the dramatic grid expansion required to enable economy-wide electrification and the clean energy transition. Starting with SCE's legacy wildfires, as shown on page 3, the process to resolve claims and estimate the final outcome is complex and challenging, and each quarter, SCE evaluates the estimated cost for resolving the remaining claims. The utility has made substantial progress settling claims and moving toward recovering these costs. However, this quarter's evaluation required SCE to increase the best estimate by $475 million, driven primarily by settlements being resolved at higher levels than originally estimated and assuming that trend will continue.
SCE also now has more refined information about the types of claims being presented as it works through the mediation process. The majority, about two-thirds of the increase, is attributable to Woolsey. The impact of this increase on you, our shareholders, is not lost on us. As shareholders ourselves, we understand the importance of putting this issue behind us. Resolving all outstanding claims is crucial, and SCE is firmly committed to completing this in a reasonable and prudent manner that will ultimately support cost recovery. A positive step in this process is that recently, a deadline was set for Woolsey claimants in the settlement protocol to notify SCE of their complete claims by February 2024. After then, SCE will have increased clarity on the remaining value of claims and the utility's ability to swiftly resolve them.
As always, we will continue to update you each quarter, including SCE's expectation for when it will file the cost recovery application for the Woolsey Fire. The Woolsey application will cover more than $4 billion of eligible claims payments, plus financing and legal costs. We recognize that utilities across the country are facing new challenges from wildfires, which were initially viewed as specific to California, but have expanded to become an international issue. Against this backdrop, SCE has made tremendous progress since 2018, reducing its risk of losses from catastrophic wildfires by 85%. SCE has differentiated itself through its multilayered wildfire mitigation strategy. This is anchored by grid hardening and includes enhanced vegetation management, asset inspections, and other programs.
SCE has replaced more than 5,200 miles of distribution lines with covered conductor, and in fact, by year-end, SCE will have physically hardened over 75% of its distribution miles in high fire risk areas. Risk mitigation beyond covered conductor includes one of the largest private weather station networks in the country and enhanced protective settings known as Fast Curve settings. With their deep experience and achievements, my SCE colleagues are sharing mitigation strategies with utilities across the country. Moving to the regulatory front, I'd like to provide three updates. First, in August, SCE delivered on its commitment to file its TKM cost recovery application, requesting recovery of $2.4 billion. SCE provided a compelling case that it prudently designed, managed, and operated its equipment and that the associated costs were reasonably incurred.
The evidence provided shows that the damages resulted from extraordinary environmental conditions and other factors beyond SCE's control. Expert testimony estimates that a reasonable decision could save customers as much as $4.9 billion by avoiding excess financing costs for SCE debt issued over the next 10 years, making it more affordable to achieve economy-wide electrification. As for next steps, the commission will issue a scoping memo that will set the procedural schedule. Second, in September, SCE filed an unopposed motion for the CPUC to approve a settlement on Track 4 of its 2021 GRC, which sets the revenue requirement for 2024. Reaching this agreement with intervenors is a successful outcome for the utility and its customers, and SCE has sought CPUC approval by the end of the year. Maria will provide additional details in her remarks.
Third, at the end of September, the cost of capital mechanism triggered, resulting in a 70 basis point increase to SCE's return on equity, effective January 1, 2024. SCE filed a Tier 2 Advice Letter on October 13 to implement the update to its ROE, along with the costs of debt and preferred equity. The response period for intervenors ends tomorrow, after which the CPUC's Energy Division can approve it or refer it to the full CPUC. Consistent with our usual practice, we will provide 2024 earnings guidance on our fourth quarter earnings call. I would like to reiterate that our EPS growth through 2025 is achievable at SCE's currently authorized ROE, and this increase is one of the upsides I mentioned earlier in my remarks. I now want to share a recent achievement and recognition of our company's strong corporate governance.
The Center for Political Accountability and Zicklin Center for Business Ethics Research recently published their annual index, which is the marquee measurement of corporate political transparency and accountability. For the second consecutive year, Edison International received a perfect score, and we were recognized as a corporate leader for the tenth consecutive year. I am very proud of our team for this accomplishment and our continued commitment to integrity and transparency. And now, putting my current Edison Electric Institute chair hat on, I am also proud to say that 17 other utilities were also identified as trendsetters, which are S&P 500 companies with CPA Zicklin Index scores, indicating robust disclosure and oversight. Edison has been a thought leader on the clean energy transition for many years and has published numerous white papers about how California can achieve it. In September, we published Countdown to 2045, our latest analysis.
This updates the earlier Pathway to 2045 work, reflecting new laws and policies, technology advances, and customer adoption, while leveraging the latest modeling in climate science. We conclude that for California to achieve its net zero greenhouse gas emission goals in just over two decades, the electric grid must expand faster than ever before to levels higher than we previously estimated. Page four shows some top-line findings on how the state gets to carbon neutrality. We forecast an 80% increase in electrical demand by 2045, due in part to 90% of vehicles and 95% of buildings going electric. To serve all this load, the grid will need to expand to handle three times the clean energy flowing today. This means new transmission and distribution grid projects will need to be added at four times and 10 times their historical rates, respectively.
Importantly, though, the average household is going to save about 40% on their overall annual energy expenses by 2045 due to reduced fossil fuel spending and the greater efficiency of electric vehicles and appliances. This unprecedented pace of grid build-out needed to electrify the economy requires bold actions to improve how the state's entire energy infrastructure is planned and operated. At Edison, we are deeply committed to helping California reach its ambitious goal to mitigate the impacts of climate change and seize the set of approaches outlined in Countdown to 2045 as a model for other states and nations. With that, let me turn it over to Maria for her financial report.
Maria Rigatti (EVP and CFO)
Thanks, Pedro, and good afternoon, everyone. In my comments today, I will cover third quarter results, discuss our 2023 EPS guidance, and provide additional insight into our long-term core EPS growth expectations. Starting with third quarter of 2023, EIX reported core EPS of $1.38. As you can see from the year-over-year quarterly variance analysis shown on page 5, SCE's third quarter earnings saw a $0.03 decrease. Recall that during this period last year, SCE received a CPUC final decision on its Customer Service replatform project and recorded a $0.09 true-up. This results in an unfavorable year-over-year comparison for this quarter. I will highlight two additional key variances. SCE's earnings were driven by an increase in revenue due to the GRC escalation mechanism, partially offset by higher interest expense....
At EIX Parent and Other, there was a negative variance of $0.07, primarily due to higher holding company interest expense. Overall, we are pleased with our performance in the first nine months of the year, and combined with our outlook for the Q4, we are confident in reaffirming our full-year core EPS guidance of $4.55-$4.85. I'll cover this in more detail in a few minutes. On page 6, we've updated the capital forecast to incorporate the GRC Track Four settlement agreements and assumptions about the timing for certain projects. The key message here is that we continue to see $38 billion-$43 billion of capital investment opportunities from 2023 through 2028. Turning to page 7, our capital plan supports approximately 6%-8% rate base growth from 2023 through 2028.
Let me emphasize that SCE is an electric-only transmission and distribution-focused utility, which benefits from several strong regulatory mechanisms and competitive ROEs. So we see this rate base growth as high quality and lower risk, since it is driven by the crucial grid infrastructure needed to facilitate California's leading role in transitioning to a carbon-free economy. As outlined in our Countdown to 2045 analysis, unprecedented grid expansion is needed to keep pace with long-term, system-wide resource capacity growth. For a sense of scale, because of the upgrades and additions needed for distribution circuits, substations, transformers, and conductors, SCE expects to have a 25% larger distribution system by 2045. This significant expansion in the grid makes us confident in the long-term investment opportunity here in California.
Before I discuss our outlook for 2023 and beyond, I'd like to point out two key opportunities we have identified that would add certainty around our future financing needs and financial outlook. First, SCE will be filing an application with the CPUC tomorrow that would allow the utility to monetize its current portfolio of contracts with wireless providers and future contracting opportunities on its transmission infrastructure. The utility currently has more than 850 leases of space on transmission towers and other structures that wireless providers use to attach their equipment. SCE is making this filing prior to the marketing of these assets to shorten the timeline leading to final regulatory approval. The contracts the utility expects to monetize generate nearly $20 million in annual revenue.
This transaction will financially benefit customers, and for shareholders, this is an efficient form of financing that can reduce the need for equity in the future. We will keep you updated as the transaction progresses. Second, EIX recently announced a $750 million tender offer for its outstanding preferred stock. This offer would be funded with debt issuances, such as Junior Subordinated Notes, or JSNs. By funding the repurchase with JSNs, we will replace the equity content of the preferred stock. Overall, the transaction will simultaneously de-lever the balance sheet and reduce our interest rate exposure. Let me underscore that this transaction creates near and long-term financial benefits. In 2023, we would recognize Core EPS of about $0.02 for every $100 million of preferred stock tendered.
In 2026 and beyond, we will have locked in lower after-tax financing costs compared to the expected reset rates for the preferred stock. These two opportunities build on our track record of successfully identifying ways to manage the business even more efficiently and executing to create additional value. As shown on page 8, we are reaffirming our 2023 Core EPS guidance range of $4.55-$4.85. Based on our year-to-date performance and outlook for the rest of the year, we are confident in delivering on this target. Recall that this guidance includes $0.14 related to SCE's 2022 CEMA application. The CPUC recently extended the proceeding statutory deadline to April 2024, but there still is a possibility of a final decision by year-end.
Together with the tender offer, these two items could put us at the top end of our guidance range. However, if the CEMA final decision occurs in 2024, we will realize those earnings in that year. Page 9 gives you an update on our accomplishments to date in regard to our 2023 financing plan. The financing transactions so far this year have been in line with our expectations and supported by strong investor response. As I mentioned a moment ago, we've opportunistically added a new component to our plan with the tender offer and look forward to executing another successful transaction. On the regulatory front, I'd like to expand on a couple of Pedro's earlier points. First, to provide some detail on GRC Track 4, the agreement with interveners would authorize 98% of SCE's requested revenue requirement and 99% of its requested rate base.
The key takeaway here is that once approved by the CPUC, the agreement will provide clarity on 2024 revenue and translate to $0.12 in incremental rate base EPS over 2023. Consistent with our typical practice, we will provide 2024 earnings guidance on our fourth quarter earnings call. Second, as shown on page 10, the cost of capital mechanism triggered a 70 basis point ROE increase, resulting in 2024 and 2025 CPUC ROEs of 10.75%. This benefits 2025 EPS by approximately $0.39. The mechanism provides a hedge against future increases in interest rates above the levels embedded in our 2025 guidance of $5.50-$5.90. In terms of operational drivers, we are confident that we will deliver results within the range shown in the modeling considerations.
SCE is also evaluating opportunities to reinvest a portion of the $0.39 to accelerate initiatives that would benefit safety, quality, and affordability for customers. This investment would enable the utility to capture savings sooner, thereby providing a strong base for long-term customer benefits. I will share more on this front over time. I want to reiterate the high confidence we have in our ability to achieve our 2025 and 2028 EPS growth targets. In addition to our strong rate base growth, we also see upside opportunities. We are looking forward to delivering our targeted EPS growth, which sets the foundation for an attractive total return proposition. That concludes my remarks, and with that, I'll hand it back to Sam.
Speaker 13
Sue, can you please open the call for questions? As a reminder, we request you to limit yourself to one question and one follow-up, so everyone in line has the opportunity to ask questions.
Operator (participant)
Thank you. If you would like to ask a question, please press star one on your phone. One moment for the first question, please. Our first question is from Anthony Crowdell with Mizuho. You may go ahead.
Anthony Crowdell (Managing Director, Equity Research)
Hey, good afternoon. Good afternoon, Pedro. Good afternoon, Maria.
Maria Rigatti (EVP and CFO)
Hey, Anthony, how are you?
Anthony Crowdell (Managing Director, Equity Research)
Just, I guess, a follow-up. Good. Follow-up on the last slide, Maria, slide 10, or if Pedro wants to take it, on the cost of capital. Just first, I mean, you gave some, some insight into the use of proceeds, on, on the reset. Just curious if the Senate Bill 410 plays into where you would, deploy the proceeds, and then also if you go through the procedurally, what happens after November second? And then I have one follow-up.
Maria Rigatti (EVP and CFO)
Sure. So, maybe let's think a little bit about the $0.39 and the ROE shift. And I think about it in two different ways. And basically, if you think about the cost of capital mechanism, it's really driven by interest rates, and it's a mechanism that has been embedded in the cost of capital proceeding for, you know, more than a decade now. And it's part of the reason, it's part, and that's the reason for that is because we have this three-year cost of capital cycle. And when I think about that driver, and I think about the cost of capital mechanism, I have to think about interest rates. And I think about interest rates in two different components. There's the 2021-2025 period and then the 2025-2028 period.
I just want to highlight that the assumption that we've given you around the 2021-2025 period, we've said that we're going to finance, SCE will finance at a 5.3% interest rate, and that EIX will finance at a 6.1% interest rate. And if you look at the plan that we've had for this year and the information that's in the slides, we've actually executed our plan in 2023, right at those levels. In fact, EIX, slightly below those levels. Then I look forward to the rest of the period between now and 2025. And basically, I think about the cost of capital mechanism as providing a hedge against future increases in interest rates.
So it's one of those really good regulatory constructs that we have here in California, that really protects against the kind of very recent volatility that we've seen in rates. And then if I think about the longer term, if I think about 2025 through 2028, we've also given you some assumptions around interest rates. We said that SCE would finance at 4.6%, and EIX would finance at 5%. When I look at that, I look at our normal process. You know, how do we develop those assumptions? We basically look to that, we look for longer term fundamental forecasts. And yes, those longer term fundamental forecasts, the more recent vintages, they're higher in the front end, but again, that's captured by the hedge that's provided by the cost of capital mechanism.
Longer term, the current vintage, prior vintages, they're actually converging, and so we think that we're still in a good place on a longer-term basis. Of course, spreads play a role, too, and since we first gave you our assumptions around interest rates about, you know, a year ago, we've actually seen our spreads narrow. Hoping for more of that, but certainly we've seen some benefit in that direction as well. So that's a component of the CCM and how we think about the use of proceeds. I think the other piece that I referenced is we have a lot of confidence in the operational drivers that we shared with you already. But as we see the CCM trigger, we do want to look at the opportunities that we might have to deploy some of that and accelerate benefits in our operational excellence program.
Because you know that we have been working on operational excellence and driving efficiencies for many, many years, and it's not a single-year effort, it's a multiyear effort. And so as we see opportunities to deploy more initiatives and do that more quickly, we will definitely take a look at it because it basically provides an even stronger foundation going forward. So I think those are the different components of the CCM and how we're thinking about it.
Anthony Crowdell (Managing Director, Equity Research)
Great. And then post-November second, interveners file, I guess, tomorrow, and then post-November second, I guess, do we wait for comments from the energy division or, or, or just if you just took us through the year, year-end?
Maria Rigatti (EVP and CFO)
Sure. So, comments are due tomorrow. Tomorrow is the deadline from interveners. Once that deadline is passed, the energy division would still consider whether or not they would disposition the decision or if they would pass it on to the commission. So we will know, you know, relatively shortly. Remember, though, that the cost of capital mechanism, it's very formulaic. It's there's not a lot of. It's only math in terms of, you know, how it would get implemented, so I do think that's an important element of the, of the, of the mechanism.
Anthony Crowdell (Managing Director, Equity Research)
Great. And then just lastly, if I went to slide three, I appreciate the clarity. It is my understanding correct, if I think about the additional increase, I think two-thirds related to Woolsey, and by February, I think, where the deadline is due for claims, again, it may be, you may change that 6.4, but by February, we should have much more certainty on the total, you know, amount of claims here.
Speaker 13
Yeah, that's right, Anthony, because that gives a deadline there for filing claims, so that provides a certainty around the scope here. So looking forward to reaching that timeline.
Anthony Crowdell (Managing Director, Equity Research)
Great. Thanks for all the clarity.
Speaker 13
You bet. Thanks, Anthony.
Operator (participant)
Thank you. The next question is from Shahriar Pourreza with Guggenheim Securities. You may go ahead.
Pedro J. Pizarro (President and CEO)
Hey, Shar.
Shahriar Pourreza (Managing Director, Equity Research)
Hey, guys. Hey, Pedro. Just, Pedro, just on the monetization of the telecom infrastructure leases, $20 million in revenue, and obviously potentially coupling that with the wildfire claims recovery, what time frame are you embedding and plan to start seeing EPS and credit metric benefits? And do the increased claims figures present a drag versus some of the benefits from the equity content of the sale?
Maria Rigatti (EVP and CFO)
Hey, Shar, it's Maria.
Shahriar Pourreza (Managing Director, Equity Research)
Hey.
Maria Rigatti (EVP and CFO)
So I'm going to take that in two pieces. So maybe a little bit on our credit metrics. So you know, our, our framework is 15%-17% FFO to debt. We've laid out our capital plan and our financing plan, including the $100 million or approximately through the drip, and through the internal programs. And, you know, we are comfortable that we can hit our targets of the 15%-17% FFO to debt. Obviously, with additional amounts related to the increase in the reserve and is a little bit of fluctuation in, in the metrics, but we are comfortable that we will be able to still meet our objectives when it comes to our credit metrics. That, of course, is related to the recovery, the cost recovery applications that we filed.
So we've already filed the TKM application. You know, we will file the Woolsey application, and we provided some metrics in the slides this time around, where for every $1 billion of cost recovery, that's about a 40-50 basis point improvement in our credit metrics. So it's a very material number, and so, you know, we're focused on demonstrating our prudence. We're focused on the long-term customer benefits that having a good decision will create, and we're also focused on the financial benefits and the balance sheet strength that will ensue. So I think that that's all, you know, an important element. When it comes to the tower attachment sale, in terms of sort of timing of what to look at, so we're filing our application tomorrow.
The reason we're filing it tomorrow is so that we can get a little bit more clarity on precisely what the regulatory process will be. We think we qualify for a somewhat streamlined regulatory approval process, but you know, in the alternative, we just want to get ahead of the time frame. So we are going to align our marketing schedule with the regulatory approval. So we'd like to have the regulatory approval just before we sign any purchase and sale agreements, because that'll, of course, reduce uncertainty for everyone. And depending on which path the commission goes down, we would expect, you know, potentially middle of next year until sometime into 2025 to see a transaction close. So that's the sort of time frame we're looking at for that.
Shahriar Pourreza (Managing Director, Equity Research)
Got it. And the increasing value of the claims, does that present any challenges to the timing of the claims recoveries with the CPC?
Maria Rigatti (EVP and CFO)
No. Sorry.
Pedro J. Pizarro (President and CEO)
I'll say, no. Remember, Shar, that in our TKM filing, the cost recovery application filing, we proposed a procedure for introducing amounts that have been settled after the filing date. And so, you know, it's been contemplated there'll be some number of settlements coming in that we'd be doing, and it'll be on the numbers that we had initially filed. So the increase in claims would just fit into that final trial procedure that we proposed.
Shahriar Pourreza (Managing Director, Equity Research)
Okay, perfect. That was good. And then just lastly, you obviously noted $0.39 of upside from the cost of capital mechanisms and the opportunity to sort of deploy it into customer-focused CapEx. I guess, how long would it take you to deploy the incremental CapEx that the $0.39 of earnings would support? And I guess, what mechanisms would you utilize to minimize that lag? Thanks, guys.
Maria Rigatti (EVP and CFO)
Yeah. So, we would be looking at a whole range of things in our, in terms of deploying that $0.39, and that could range from everywhere, you know, further pushing forward on, on our initiatives in the field to, improve the, the processes there. And so that would allow us to get capital efficiencies as well as O&M efficiencies. We're going to keep looking at other opportunities in customer service and, enhancing or improving the customer experience. We also have things that we want to do with support services and, you know, places in finance and regulatory affairs as examples. So we're looking at that.
And as I said earlier, for us, operational excellence, cost efficiencies, really, driving effectiveness in the business. It's not a single year effort, like, we are doing this on a multi-year basis, and so we're going to be building on successes that we have next year into 2025. So I think the plan is still developing, but we would expect to see that 25, 26, 27.
Shahriar Pourreza (Managing Director, Equity Research)
Okay, perfect. Thank you, guys. I appreciate it.
Pedro J. Pizarro (President and CEO)
Thanks, Shar.
Operator (participant)
Thank you. Our next question is from Angie Storozynski with Seaport. You may go ahead.
Pedro J. Pizarro (President and CEO)
Good morning, Angie.
Angie Storozynski (Managing Director, Equity Research)
Hello. Thanks for letting me ask the question. So the first, again, I mean, those wildfire loss increases are very substantial. It just almost feels like it's, it's a moving target, right? We're almost in the ninth inning, and, and, you know, every other quarter, we have these very big increases. It's somewhat surprising, at least from, from our vantage point, to see it this late into the process. And again, I, I'm, I'm clearly hopeful that by February, we will have a full picture, but it just feels like, you know, there's, there is more of those increases to come. Would you disagree?
Pedro J. Pizarro (President and CEO)
Oh, so listen, Angie, and you, you heard it in my comments. We know this is something that our shareholders are certainly taking notice of, and, you know, we, we are too, as management and, and as shareholders. The reality is that every quarter we test again, we reevaluate, and this quarter, a number of you know factors changed. As, as I mentioned in my comments, it, it all adds down or boils down to, we're seeing settlements coming in higher than expected. And so that now becomes the new best estimate. I think you're right. You know, we're certainly looking forward to February, and at least knowing what the claims finally are going to be for Woolsey. I do want to caution, that that's the deadline for claims filing.
It might still take some time beyond the deadline to get all the details behind specific claims and really dig into those. That is, it's a process, as you've seen over the last several years. So, you know, we'll continue to work at it, and, you know, our team is very focused on, you know, having a fair outcome as we go through all of this litigation. It's got to be, you know, fair to people who were impacted by the fires, but it also has to be fair to our customers. And so we want to make sure that we do it as quickly as we can, but taking the time needed to have a good, thoughtful process and be able to demonstrate the prudence of our actions to the PUC.
Maria Rigatti (EVP and CFO)
Angie, maybe if I could just offer up one more thing, and I think Pedro kind of touched on it in his last comment. It is a, you know, a process that we have to go through, and we have to do an evaluation. The most important part of this process is getting through it and creating the certainty that comes with completion, because that's when we will be able to fully, you know, we have a true-up mechanism in the TKM application, but when we're done with all these processes, we'll be able to go and get, you know, a final resolution also with the commission. So from our perspective, it's getting through the claims and getting through the claims as quickly as we possibly can because that completion will create the certainty.
Angie Storozynski (Managing Director, Equity Research)
Okay, but in the meantime, the total number of claims, you know, or financing of claims grows, and the cost of capital, you know, mechanism doesn't really help me here, right? Because those are not currently eligible for recovery, so the rising interest expense on those doesn't, isn't trued up. Is that, I mean, that's how-
Maria Rigatti (EVP and CFO)
Yeah, so we will, in our cost recovery application, file for recovery of the interest expenses associated with claims financing the claims payments. And the other aspect as well is that we are, and just to highlight another couple of numbers for you, about 85% complete with all of our individual plaintiff claims resolutions. So we are moving through the pile, if you will, you know, expeditiously.
Angie Storozynski (Managing Director, Equity Research)
Okay. And then changing topics. So, you lowered your rate base projections, well, 2023, 2024, 2025. And you are pointing out obviously upsides to the CapEx investment rate base, mostly beyond 2025. So maybe some more details behind that. And then secondly, in your guidance, I've noticed some changes in the components, one of which is the 10% increase in the AFUDC just since the last quarter, and if you could just provide more color.
Maria Rigatti (EVP and CFO)
Sure. And actually, it turns out that your two questions are very much related. So the capital that you're seeing moving around is, particularly in the very near term, it's just a shift in the utility-owned storage project and the timing of those payments. So what you're seeing, related to your second question, you know, shifts between rate base, earnings, and AFUDC on the slide that has modeling considerations. It's really a shift between those two buckets. So utility-owned storage was in rate base before. Now it's in construction work in progress longer. And so you just see the two numbers. If you add them back together, they'll be the same as they were last quarter. So that's one piece of it.
The other piece that's going on in our capital program is we have shifted one of the transmission projects that we are still going through the permitting process on, but that's just shifted out each year. It's shifted out just one year, and so you're seeing a little bit of that impact. But that's why overall, for the period 2023 through 2028, the capital program is still the same as it was last quarter.
Angie Storozynski (Managing Director, Equity Research)
Okay, thank you.
Maria Rigatti (EVP and CFO)
Thanks.
Pedro J. Pizarro (President and CEO)
Thanks, Angie.
Operator (participant)
Thank you. The next question is from Gregg Orrill with UBS. You may go ahead.
Pedro J. Pizarro (President and CEO)
Hey, Greg.
Gregg Orrill (Executive Director, Equity Research)
Hi. Sorry for a detail-oriented question. Is there a temporary financing for the preferred tender before you get to the potential sub-note financing?
Maria Rigatti (EVP and CFO)
So Gregg, this is Maria. We can address it in different ways. I think, in the offering documents, we note how we, we will finance, the tender, and we can do that either by, a JSN or some other, you know, equity content security. You know, right after the, the offering, we could have some sort of bridge, you know, using some other securities, you know, temporarily. But I think, you know, our objective overall is, and then we've made it clear in the offering documents, is that we will replace the equity content of the preferred stock.
Gregg Orrill (Executive Director, Equity Research)
Okay, thank you.
Maria Rigatti (EVP and CFO)
Thanks, Greg.
Operator (participant)
Thank you. The next question is from Ryan Levine with Citi. You may go ahead.
Ryan Levine (Equity Research Analyst)
Hi, everybody.
Maria Rigatti (EVP and CFO)
Hi, Ryan.
Ryan Levine (Equity Research Analyst)
Just to clarify, one question more for Maria in terms of clarification of why now for the telecom asset sale, and can you walk through the mechanics of how you think in your remarks you suggested an offsetting to the equity content? You know, how does that work, and given that the benefits so largely go to customers?
Maria Rigatti (EVP and CFO)
Sure. So a couple of things. So why now? I think, you know, we have been, and we've gotten questions before about are we looking at different things in our portfolio that might, we might consider selling, and so we have been doing that. And so the why now is that we've completed our analysis, and we think that these are attractive assets that, you know, folks who are in this business day in and day out will also find attractive. And so that's why- that's the why now. I think that when you look at, the overall portfolio that we have, the other thing that helps to drive this is that, you know, these are good assets. Customers do share in the benefit of this, whether we sell them or not.
It, you'll see in our filing tomorrow that, you know, round numbers, you can think about this as, you know, 15% of the value is for customers, and about 85% of the value is for, the company or shareholders. By taking this action now, we actually, during a time of, you know, affordability concerns and constraints for customers, will be able to accelerate those benefits into the near term. So another element of the why now. And I think that the comment I just made probably answered the question about, you know, what part is for customers and what part is for shareholders. Was there something else in there, Ryan?
Steve Powell (President and CEO)
In terms of the, I think in your prepared remarks, you suggested kind of offsetting equity.
Maria Rigatti (EVP and CFO)
Yep.
Steve Powell (President and CEO)
Maybe that's the 85%.
Maria Rigatti (EVP and CFO)
Yep. So, when you think about our equity program, we've said that, you know, about $100 million a year or so because we're going to be using our internal programs. Obviously, as I mentioned earlier, this, you know, depending on the regulatory path, if the commission goes down, we could see something in, you know, middle of 2024, maybe into 2025, at which point we can, we can look at the proceeds and determine what that, you know, there's an opportunity there to offset some of the equity that we would otherwise issue under our internal program.
Steve Powell (President and CEO)
Okay, great. Thanks.
Operator (participant)
Thank you. The next question is from Michael Lonegan with Evercore ISI. You may go ahead.
Michael Lonegan (Senior Analyst, Utilities)
Michael. Hi, thanks for taking my question. So, you know, there's been some concerns about electric vehicle demand slowing. You know, we recently saw Panasonic cut its battery production. Obviously, there's a high, you know, EV adoption rate in your service territory. You have an investment program that, you know, supports the load growth associated with EVs. I was wondering if you could share your thoughts on, you know, the risks within your planning period, whether there could be a slowdown or any, any color you could provide on that.
Pedro J. Pizarro (President and CEO)
Yeah, maybe I'll start, and Steve Powell, you might have some additional thoughts on this, too. You know, first, you're right, and we, we've seen, I think, really significant pickup of EVs in our territory and really across California. That, that's continued through the latest reporting period that I saw. I know I've seen some broader articles in the press that, you know, you're probably referring to as well, in terms of could there be a slowdown at a national level.
There are a number of things that come together here, and I think one of the important elements is the strong support that there is in the IRA, right, for continuing not only the $7,500 tax credit for new electric vehicles, but also the introduction of the $4,000 used electric vehicle tax credit, which is something that, by the way, Edison really helped advance in Washington since it's patterned after something we had here already in California. So look, I think like with any market, you're going to see ups and downs, and, you know, I have to guess that things like, you know, higher interest rate environment, you know, making vehicle loans a little more expensive, probably puts a bit of a temporary damper on that.
But the long-term trend, I think, is pretty clear here in terms of the value of electric vehicles to consumers and the role that EV deployment will play in reducing greenhouse gases. And certainly, our Countdown to 2045 white paper makes clear how valuable that is for GHG reduction. But also, I just, you know, say that when you take a look at the total cost of ownership for electric vehicles today, it's already certainly for the lower cost EV models, the total cost of ownership is lower than it is for similar combustion engine vehicles. You asked also about the impact it could have on our infrastructure build out and our planning, and I think right now we're seeing significant growth still, and that's been baked into our rate case.
But you know, we're following the customer on this. So, Steve, let me turn it over to you in case you have thoughts around impacts on the distribution system or from that growth.
Steve Powell (President and CEO)
Sure. So, obviously, we've seen significant growth in, in EV adoption in California over the last number of years. In 2019, about 6% of new vehicle sales were electric. You know, right now, we're hitting about 25% of new vehicle sales in the state being electric. And so that's, we've seen the ramp up, and we see that continuing. We've been planning for this for quite some time. So in our distribution long-term planning forecasts, this has been baked into our, to our load forecast, which then feeds our, our plans around the distribution grid, and that's what informed, the, the plans in our 2025-2028 General Rate Case, where a big portion of our load growth program in there is driven from electrification load growth.
And so that's what our teams are focused on, both not just planning it out, but then starting to build the circuits and the infrastructure to support it. Aside from the light-duty side, we see a lot of growth in our territory from medium and heavy-duty vehicle charging, particularly in pockets that range from, you know, the, the transportation segments down by the ports all the way out to the warehouses, further inland. And that's where our teams are really looking at different solutions so that we can meet the demands, because those, those demands come in large chunks, and they come quickly.
So we're looking at everything from how do we accelerate the infrastructure development ahead of that demand to temporary bridge solutions in places like mobile batteries and mobile substations that can help us get through while we have to build out more circuits and substations to enable it. So, we're certainly able to meet the growth that we're seeing right now, and we've planned and are planning for the growth that's coming ahead.
Pedro J. Pizarro (President and CEO)
Yeah, and I think the last point that Steve made is really critical, that innovation in the general rate case to include the request for mobile equipment, temporary equipment, is a, it's a great step because particularly when we think about medium and heavy duty fleet deployment, that's a technical term here, chunkier, right? Than when you're looking at passenger vehicles being spread out over neighborhoods. And so that's where, you know, Steve and the team have been working and have to make sure we can meet that load.
Steve Powell (President and CEO)
So Michael, maybe more than you want it, but it's a topic that's near and dear to us.
Michael Lonegan (Senior Analyst, Utilities)
Yeah, yeah, of course. No, thank you. Thank you very much. I'll, I'll see you at EI.
Pedro J. Pizarro (President and CEO)
Okay, terrific. Thanks.
Operator (participant)
Thank you. The next question is from David Arcaro with Morgan Stanley. You may go ahead.
Pedro J. Pizarro (President and CEO)
Hi, David.
David Arcaro (Executive Director, Equity Research)
Hey, how are you doing? Thanks so much for taking my questions.
Pedro J. Pizarro (President and CEO)
Yeah.
David Arcaro (Executive Director, Equity Research)
You know, I was just curious to get your perspective on PG&E's rate case. They've had just some challenges getting CapEx and rate base approved in its rate case. You know, it's not done yet, but just wondering if there's anything you would take away or read across, you know, to your GRC as you go forward. Any changes in your thinking or strategy there, or any perspectives that might come into play as you go through the process?
Pedro J. Pizarro (President and CEO)
Yeah, David, thanks for the question, and, give you maybe a quick, quick answer here. I think it starts with, you know, acknowledging that each of these rate cases is very situation specific and company specific. So I know that our colleagues at PG&E, for example, have had a big emphasis in their rate case on the, the amount of undergrounding, based on their territory and the fact that they have so much more forest land in our high fire risk areas as compared to SCE, which has more, more grasslands and where, you know, the ambitions have been, in the past, more from, elements that can be addressed through covered conductors.
So you've seen us in the 25-28 rate case application, continue completing the build-out of covered conductor with another 250 miles proposed, complemented by around 600 miles of undergrounding. You know, very different needs in our territory than in PG&E's territory. So hard to abstract out, you know, strong parallels or from the PG&E case for ours, given that difference. At the same time, there are some elements that are common, and in fact, you saw that Southern California Edison filed comments in the PG&E rate case, particularly focused on the topic of the escalation mechanism in there.
The fact that the alternative proposed decision relied on essentially a 25%—provided only 25% of the escalation requested, that, you know, it's something that we thought needed to be called out. And so we provided comment saying that in order to be fully compensatory, rates have to include, right, the full, full allowable costs, and escalation is an important part of that cost structure. So that's certainly one that we've watched more closely, and like I said, our team intervened in the rate case because it's a topic that would be of common interest across all utilities. But, you know, beyond that, though, we've just watching the case and recognize that there's some significant differences in the situations for the two companies. Maria, anything you would add?
Maria Rigatti (EVP and CFO)
Yeah, and just to kind of underscore Pedro's comment about everything is very situation specific and every rate case is different. Even that last example on the escalator, we actually have a different escalation mechanism. So I think it's like, as I said, as Pedro said, rather, there's really not a read-through across to the different general rate cases in our view.
David Arcaro (Executive Director, Equity Research)
Got it. Got it. Thanks. I appreciate that perspective. And then also wanted to check on the CapEx outlook. It was decreased for this year and next year. Was that also related to the storage project?
Maria Rigatti (EVP and CFO)
Yeah. So David, it's entirely well, not entirely, but one piece of it is related to particularly 2023 and 2024. That's related to, you know, the schedule around the utility-owned storage. So, you know, more dollars will be spent in 2024 versus 2023. And then the other piece that I mentioned earlier was that we have, you know, some slightly different schedules around one of our transmission, a larger transmission project that we're supposed to start in the very near future. That's moved out essentially a year as well. So still all captured within the period through 2028, and we're still at that $38 billion-$43 billion of CapEx.
David Arcaro (Executive Director, Equity Research)
Okay, perfect. Thanks for that.
Maria Rigatti (EVP and CFO)
Thank you.
David Arcaro (Executive Director, Equity Research)
I'll pass it on. Appreciate it.
Operator (participant)
Thank you. Our next question is from Paul Zimbardo with Bank of America. You may go ahead.
Maria Rigatti (EVP and CFO)
Hey, Paul.
Paul Zimbardo (Equity Research Analyst, Utilities)
Hi, good afternoon, team. The first one, I just want to clarify something in the prepared remarks around the Track 4 GRC benefit. You mentioned $0.12 year-over-year into 2024. Is that correct? That's just a component of kind of what you would expect in terms of, like, the rate base, earnings per share growth?
Maria Rigatti (EVP and CFO)
That's right. That was just to reflect the rate base map. Yep.
Paul Zimbardo (Equity Research Analyst, Utilities)
Okay. Got it. And then the other, just assuming that the cost to capital trigger is in force, that $0.39, should we think about it as kind of above the earnings growth range through 2025? Because I think at the midpoint, that'd be like $6.09 versus the $5.90. Or should we think about within the range with some of those reinvestments that you discussed?
Maria Rigatti (EVP and CFO)
Yeah. So, I don't want to sort of recap everything I said earlier, but I'll just, you know, take a few points. What I was saying in response, I think it was Anthony who asked the question first off, was that we have the Cost of Capital Mechanism. It's related to interest rates. We have done a really good job completing our financing plan for 2023, hitting the marks that we have shared with you around our interest rate assumptions. The CCM, again, driven by interest rates, and I'll say the more recent volatility, you know, underscores the benefit of the CCM. We see that as a hedge against interest rate movements beyond what's embedded in our forecast going forward. That's a piece of it.
Second part of it is that we do, year in and year out, look for opportunities to reduce costs for the benefit of the customer and, of course, for the benefit of our overall operation. We are managing the business every day. If we see an opportunity to accelerate benefits, you know, we have 4 years, 4 or 5 years ahead of us. If we see an opportunity to accelerate lock-in benefits so that we can provide an even surer foundation for customer benefit going forward, we are going to do that. The plan is in the works, and as I said during the prepared remarks, we'll certainly share more with you on a go-forward basis.
Pedro J. Pizarro (President and CEO)
Paul, I would add just more broadly on the cost of capital mechanisms. I think I saw a report of yours, where you had some questions about, you know, the mechanism, or I think you may have been speculating on potential outcomes. I want to be really clear here. This kind of situation is precisely what this mechanism was built to deal with, right? When we've had the kinds of interest rate movements that have happened here, it's not an extraordinary case in the sense of what the issue we had last year. We think it's very much part and parcel of what the mechanism was designed to cover and to provide, you know, appropriate cost recovery.
So that's why you heard Maria say earlier when she was responding to Anthony's similar question, that we would expect this to be a fairly mechanical approach at the CPUC or by the energy division, given that the mechanism is very strong, very clearly articulated, and the conditions that exist now are precisely the conditions that the mechanism was meant to account for.
Paul Zimbardo (Equity Research Analyst, Utilities)
Okay, great. Thank you very much, team.
Maria Rigatti (EVP and CFO)
Thanks, Paul.
Operator (participant)
Thank you. That was our last question. I will now turn the call back over to Mr. Sam Ramraj.
Sam Ramraj (VP of Investor Relations)
Well, thank you everyone for joining us. This concludes the conference call. Have a good rest of the day. You may now disconnect.