Q3 2024 Earnings Summary
- Load growth is materializing sooner than expected, and Edison International is well-positioned to capitalize on this by reprioritizing capital expenditures and has avenues to obtain more capital support beyond the General Rate Case decision if needed.
- Upcoming Enterprise Resource Planning (ERP) and Advanced Metering Infrastructure (AMI) projects will contribute to capital expenditure plans over the next four years, indicating additional growth opportunities beyond 2028.
- Confidence in the strength of the regulatory environment in California, with expectations of constructive regulatory outcomes that support the financial health of utilities and provide certainty to investors, despite occasional setbacks.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
2024 Core EPS | FY 2024 | $4.75 to $5.05 | $4.80 to $5.00 | no change |
EPS Growth Forecast (CAGR) | Through FY 2028 | 5% to 7% | 5% to 7% | no change |
2025 Core EPS | FY 2025 | no prior guidance | $5.50 to $5.90 | no prior guidance |
2025 Core EPS Upside (TKM Settlement) | FY 2025 | no prior guidance | $0.44 | no prior guidance |
Ongoing Annual Benefit (TKM Settlement) | Beyond FY 2025 | no prior guidance | $0.14 | no prior guidance |
Rate Base Growth | Through FY 2028 | no prior guidance | 6% | no prior guidance |
Capital Investments (CPUC) | Through FY 2028 | no prior guidance | Over $2B | no prior guidance |
Capital Investments (FERC) | Through FY 2028 | no prior guidance | Over $2B | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
EPS Guidance & Growth | Q2: Reaffirmed $4.75-$5.05 for 2024 with strong first-half performance. Q1: Reaffirmed $4.70-$5.05 with confidence in long-term 5%-7% growth. Q4: Introduced new 2024 range of $4.75-$5.05, reaffirming 5%-7% target out to 2028. | Narrowed 2024 EPS guidance to $4.80-$5.00, reaffirmed 2025 at $5.50-$5.90, maintaining 5%-7% CAGR through 2028. | Consistent and optimistic outlook |
Wildfire Liabilities & Cost Recovery | Q2: Resolved 98% of TKM claims, preparing cost recovery applications. Q1: Settled majority of claims, planning Woolsey filing in Q3 2024. Q4: Filed TKM cost recovery for $2.4B, not yet in forecasts. | Highlighted TKM settlement (60% cost recovery) and Woolsey still pending. Sees annual EPS benefit of $0.14 beyond 2025. | Recurring topic with favorable settlements |
Cost-of-Capital Mechanism & Reduced ROE | Q2: Confirmed 10.75% ROE through 2025. Q1: Proposed decision denied suspension of mechanism. Q4: Called mechanism a hedge against rate changes; comfortable with current approach. | Expressed disappointment in CPUC’s 2025 ROE decision but confident in 2025 EPS guidance. | Recurring with a less favorable 2025 ROE |
Affordability Concerns in California | Q2: Highlighted lowest system average rate among CA IOUs, expecting 9% rate reduction in 2025. Q1: Demonstrated cost leadership, focusing on O&M savings. Q4: Building electrification application denied due to affordability pressures. | Emphasized rates at or below local inflation through 2028, projecting total energy bills to drop 40% in real terms by 2045. | Ongoing focus with a positive long-term view |
Accelerated Load Growth | Q2: 2%-3% annual load growth now, >3% post-2028, 10-year forecast up 35%. Q1: Projected 2%-3% annual growth, possibly higher from EV and building electrification. Q4: No mention. | Seeing faster-than-expected demand, exploring CapEx reprioritization (e.g., SP410 mechanism). | Recurring mention, growth timeline accelerated |
General Rate Case & Regulatory Environment | Q2: On track with partial settlements covering 12 areas. Q1: Intervenors’ positions align with 6% rate base growth. Q4: Rate base expansion drives majority of EPS gains. | Expects 2025 GRC decision in first half 2025, partial settlements in place, confident in 5%-7% EPS outlook. | Ongoing progress with constructive outlook |
Transmission & Distribution Infrastructure | Q2: Highlighted faster grid upgrades due to load growth, with $2B in CAISO transmission. Q1: Fourfold increase in transmission expansions needed; 90% hardening of lines in fire-risk areas by 2025. Q4: 85% of capital aimed at distribution, focusing on reliability/resiliency. | Awarded $2B in FERC projects plus a competitive project with LOTUS; CPUC-related CapEx also over $2B, some spending post-2028. | Recurring expansion to meet higher demand |
Equity Issuance & Financing Needs | Q2: Projected total $400M equity needs 2025-2028. Q1: $100M equity per year through 2028. Q4: Prefunded $75M of 2024 equity with junior notes. | Minimal near-term equity beyond $100M/year in plan; could eliminate if balance sheet remains strong. | Recurring with declining equity needs |
Minimal Equity Needs & Balance Sheet Flexibility | Q2: Confirmed limited equity needs, flexible if credit metrics hold. Q1: Strong cash flow, minimal equity, robust credit metrics. Q4: Mostly prefunded equity for 2024, maintaining 15%-17% FFO-to-debt. | Could skip planned $100M issuance if FFO-to-debt stays within 15%-17%; evaluating hybrids post-2026. | Ongoing strategy with stable balance sheet |
Rising O&M Costs | Q2: Noted partial settlements on O&M requests, focusing on reliability. Q1: Cited timing and weather-related changes but no fundamental cost shift. Q4: $0.15-$0.20/share in O&M for reliability, focusing on operational excellence. | Pulled forward O&M to 2024, using reinvestment levers to manage timing and maintain EPS targets. | Recurring but actively managed |
TKM Wildfire Settlement | Q2: 98% claims resolved, cost recovery application in process. Q1: 97% claims settled, confident in CPUC filing. Q4: Filed $2.4B request, final CPUC decision possible by Q1 2025. | Reached 60% cost recovery settlement ($1.6B); potential $0.44 lift to 2025 EPS. | Newly concluded settlement with EPS upside |
Potential Risk to Transmission ROE | Q2: No mention. Q1: No mention. Q4: Comfortable at 10.3% but noted interest rate changes could prompt risk. | No current period mention. | Previously raised but no current update |
NextGen ERP & AMI 2.0 Programs | Q2: ERP app in late 2024, AMI 2.0 in 2025. Q1: Same timeline, $2B capital. Q4: Not in forecasts yet, will file stand-alone apps. | NextGen ERP filing expected Q1 2025, AMI 2.0 towards end of 2025, combined $2B+ CPUC CapEx. | Recurring with detailed filings forthcoming |
Unfavorable Litigation Environment for Wildfire Claims | Q2: No explicit mention of unfavorable environment. Q1: Cited higher losses ($490M), more claims than projected. Q4: Discussed wildfire debt impacts but not overtly unfavorable environment. | No direct mention of unfavorable environment; focusing on settlement progress. | Mention declined; focus shifted to settlements |
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Offsetting ROE Changes in 2025
Q: How will you offset the ROE changes in 2025?
A: We are managing the impact of the ROE decrease by examining financing costs and reinvestment rates. We've found cost benefits across the board, including operational variances. We also have flexibility to adjust the timing and amount of our investments, such as pulling forward O&M costs into 2024 to benefit customers and create headroom in 2025. -
Reducing Equity-Like Instruments
Q: Can you reduce equity or hybrid securities due to improved metrics?
A: With the improved balance sheet from the TKM settlement and memo account recovery, we might not need the $100 million per year of equity planned. We will also consider addressing the hybrids, like preferreds and junior subordinated notes, but those come into play in 2026 and beyond. This could be accretive to our plan. -
Load Growth and CapEx Plans
Q: How are you addressing load growth materializing sooner than expected?
A: We prepared our GRC forecast when we were already seeing accelerated load growth. We have the ability to reprioritize capital to meet pressing needs. If more capital support is needed beyond the GRC decision, we have avenues like the SP410 mechanism or other rate case processes to pursue additional funding. -
GRC Decision Timing and Impact
Q: When do you expect the GRC decision, and what's its impact?
A: We anticipate the GRC decision in the first half of next year. All parties have met deadlines, and we're waiting on the ALJ's proposed decision. While procedural settlements are behind us, we've resolved several items to streamline the remaining issues. The decision will provide clarity on our capital plans and rate trajectory. -
Wildfire Proceedings and Recovery
Q: How might Woolsey wildfire recovery differ from TKM's 60%?
A: Each wildfire case is specific. TKM involved two ignition points with different circumstances. Woolsey is different—a single ignition point linked to our infrastructure, but we believe SCE was fully prudent. Thus, outcomes may differ, and we can't assume the same recovery percentage as TKM. -
Potential Mid-Cycle Cost of Capital Changes
Q: Can you assure investors against mid-cycle cost of capital changes?
A: We were disappointed with the recent decision but view it in the context of California's overall regulatory framework, which has strengthened over the past half-decade. While disagreements occur, the CPUC remains committed to maintaining utilities' financial health. We'll continue to advocate for the California premium in future proceedings. -
Impact of Electricity Prices on Growth Plans
Q: Could higher electricity prices affect your growth plans?
A: The endpoint remains the same due to California's firm commitment to net zero by 2045. While fluctuations in energy prices might affect adoption rates in the short term, we believe electrification is the most affordable and reliable path forward. Our growth plans account for these dynamics. -
Role of Gas in California's Future
Q: How long will natural gas generation be part of California's energy mix?
A: California will need clean firm generation, including resources like next-generation geothermal or gas with carbon capture. Many of these technologies aren't yet mature, so existing natural gas generation serves as an insurance policy. By 2045, we expect only 4% to 5% of electricity will come from gas resources, running significantly less than today. -
Nuclear Decommissioning Trust Estimate
Q: What drove the change in the nuclear decommissioning trust estimate?
A: We update decommissioning costs every three years as part of our regulatory process. Changes like the expected timeline for federal removal of spent fuel impact the estimate, now at $2.3 billion net to Edison. The trust fund is well-funded, and this change doesn't affect our financing plan. -
Transmission CapEx Inclusion in Plan
Q: When will the $2B FERC transmission CapEx be included in your plan?
A: We typically roll projects into our plan when we have clearer details. The FERC transmission projects, awarded in CAISO's 2022-2023 plan, mostly come online post-2028, so spending occurs beyond our current planning horizon. We'll update our plan once timing and spend are better defined.
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