EIX Q2 2025: CPUC Decision Supports EPS Guidance Stable Wildfire Fund
- Regulatory Certainty: Management highlighted that recent CPUC decisions in key proceedings (e.g., WMCE and WMVM) provide clarifying cost recovery frameworks, which align the final rate case with their forecast and support EPS guidance for 2025 and beyond.
- Operational Excellence & Technological Innovation: The company’s commitment to investing in advanced grid technologies—such as the AWARE system—and its focus on cost-efficient wildfire mitigation enhance system resilience and improve restoration timelines, supporting a strong operational bull case.
- Prudent Capital Management: Leadership emphasized that no immediate need exists for large upfront equity contributions due to robust wildfire fund capacity and a balanced risk-sharing approach, contributing to steady financial performance and EPS growth expectations in the long term.
- Regulatory and Legislative Uncertainty: Numerous questions highlighted the unclear direction of proposed wildfire fund legislation and related regulatory proceedings, which could lead to unpredictable changes in revenue recovery, additional capital requirements, and potential cost pressures on shareholders.
- Uncertain Outcome of the Eaton Fire Investigation: The discussion acknowledged that the investigation into the Eaton fire could take 12–18 months with unresolved liabilities, leaving open the risk of material loss claims and increased litigation expenses.
- Potential Negative Impact on Capital Structure: Conversations about possible upfront shareholder contributions, securitization, or equity issuance to support the wildfire fund raise concerns over a higher cost of capital and reduced credit quality, potentially diluting shareholder value.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
EPS Guidance | FY 2025 | $5.94 to $6.34 | $5.94 to $6.34 | no change |
Long-Term EPS Growth | FY 2025 | 5% to 7% | 5% to 7% | no change |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Regulatory Environment | Emphasized a balanced view of certainty and uncertainty – Q1 2025 highlighted a constructive regulatory environment and progress on key proceedings ( ), while Q4 2024 focused on the clarity provided by the AB 1054 framework and CPUC leadership ( ). | Q2 2025 provides detailed PD outcomes, with clear revenue guidance and alignment with range forecasts ( ), yet maintains focus on pending decisions and wildfire‐related uncertainties ( ). | Consistent topic across periods with increased quantification in PD outcomes; while regulatory clarity has improved in some areas, wildfire risks and pending decisions continue to introduce uncertainty ( ). |
General Rate Case Developments | Discussion in Q1 2025 and Q4 2024 centered on extensions in the GRC process, revenue recording based on 2024 levels, settled issues, and infrastructure investment plans ( ). | Q2 2025 detailed the proposed decision (PD) approving revenue targets, infrastructure adjustments including grid hardening miles, and outlined near-term oral argument dates ( ). | Ongoing emphasis with more granular PD details in Q2 2025; the sentiment remains positive while acknowledging the need for future adjustments ( ). |
Wildfire Risk Management and Wildfire Fund Processes | Q4 2024 and Q1 2025 focused on grid hardening, vegetation management, and clear processes for claims payment from a wildfire fund with robust fund capacity ( ). | Q2 2025 reaffirms continued investment in wildfire mitigation, including a detailed Wildfire Recovery Compensation Program, and emphasizes the $22 billion claims-paying capacity of the wildfire fund ( ). | Consistent focus with expanded details on fund capacity and proactive community support; while mitigation efforts continue, the underlying challenge of wildfire risk remains a central concern ( ). |
Eaton Fire Investigation and Material Loss Exposure | Both Q4 2024 and Q1 2025 described ongoing investigations into equipment involvement and noted probable material losses, emphasizing detailed expert reviews and potential liability disclosures ( ). | Q2 2025 describes a collaborative investigation with external agencies (LA County Fire Department, CAL FIRE) and acknowledges probable loss exposure that could trigger draws on the wildfire fund ( ). | Steady attention with evolving transparency and collaborative approaches; while investigations continue, uncertainty about final loss amounts persists ( ). |
Capital Management, Financing Discipline, and Capital Structure | Q1 2025 and Q4 2024 included detailed discussions on incremental CapEx (e.g., ERP, AMI programs), disciplined debt issuance, and adherence to the authorized capital structure with strong financing discipline ( ). | This topic was not mentioned in Q2 2025 discussions. | The absence of discussion in Q2 2025 suggests a reduced emphasis on capital management topics this period, possibly shifting focus to regulatory and operational issues ([N/A]). |
Operational Excellence and Technological Innovation | Q1 2025 highlighted initiatives such as the AMI program and grid hardening projects, while Q4 2024 emphasized advanced grid technologies including next-generation ERP and AI-enabled wildfire cameras ( ). | Q2 2025 underlined the Advanced Waveform Anomaly Recognition Engine (AWARE) project and continuous operational enhancements focused on affordability and reliability ( ). | Consistent commitment to leveraging advanced technologies and operational improvements; sentiment remains positive, reinforced by recognition through awards and innovation leadership ( ). |
Credit Rating and Climate Risk Concerns | Q1 2025 discussed credit rating implications tied to probable wildfire losses and regulatory adjustments, and Q4 2024 underscored concerns raised by S&P and broader climate risk impacts on financing ( ). | Q2 2025 stressed potential impacts on cost of capital from wildfire fund payments and presented detailed climate risk projections including sea level rise and increased wildfire ignitions ( ). | Persistent concerns with a heightened focus on measurable climate impacts and their financing implications; the narrative has grown more urgent over time ( ). |
Legislative Uncertainty in Wildfire Fund Regulations and AB 1054 | Q1 2025 noted early-stage legislative discussions and efforts to educate new policymakers on expanding the AB 1054 framework, while Q4 2024 highlighted active stakeholder engagement and assurances tied to Governor Newsom’s leadership ( ). | Q2 2025 incorporated new elements such as a proposed $18 billion legislative fix and broader discussions on enhancing AB 1054, along with proposals for economy-wide solutions beyond the utility sector ( ). | The issue remains central; although ongoing engagement with policymakers persists, increasing legislative proposals in Q2 2025 indicate a more aggressive push for reforms, with sentiment being cautiously optimistic yet aware of uncertainties ( ). |
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Legislative Fix
Q: Is the proposed $18B fix acceptable?
A: Management stressed that the framework should follow the investor‑owned utility model, avoiding any upfront shareholder contributions given the robust fund capacity, and emphasized a full review once the legislative package is finalized. -
Eaton Inquiry
Q: What’s the Eaton investigation timeline and equity need?
A: They indicated the official investigation could take 12–18 months, and reiterated that additional equity issuance isn’t anticipated because the wildfire fund is well‑capitalized. -
Regulatory Rate Case
Q: Does the PD align with current forecast?
A: Management confirmed the proposed decision (PD) is in line with their range‑case forecast, with potential upside capital opportunities to be reviewed after the final decision. -
AB Ten Fifty Four
Q: Will AB ten fifty four remain the risk‑sharing anchor?
A: They affirmed that key prudency elements of AB ten fifty four will persist, though broader wildfire risks may prompt additional measures later on. -
Securitization Impact
Q: How do securitization provisions affect affordability?
A: Management explained that securitization isn’t “free money” – any reduction in shareholder earnings could backfire with higher long‑term customer costs, and they are considering alternative approaches. -
Wildfire Recovery Program
Q: What benefits does the wildfire recovery program offer?
A: The new program is designed to expedite claims for affected communities, reducing legal delays and cost escalations without altering subrogation outcomes significantly. -
Wildfire Liability Disclosure
Q: When will wildfire cost details be disclosed?
A: Management noted disclosures generally occur during quarterly calls, but material updates would be shared off‑cycle if warranted by the situation. -
Fund Allocation Fairness
Q: Will SCE’s contribution be disproportionate?
A: They refrained from specific figures, emphasizing that any allocation will be fair across all utilities and will be assessed within the full legislative package. -
EPS Growth Alignment
Q: Is PD in line with expected EPS growth?
A: Management confirmed that the PD supports their EPS guidance and range-case outlook, with further details to be clarified in the post‑decision update.
Research analysts covering EDISON INTERNATIONAL.