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F500-2021-226-Edison International

The 135-year-old public utility holding company operates powerhouses like Southern California Edison and Edison Energy. More recently, Southern California Edison debuted an ambitious plan dubbed Reimagining the Grid, detailing how energy infrastructure and management needs to adapt in order meet California’s greenhouse gas reduction goals. In 2020, its revenues grew 10% to some $13.6 billion.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-259-Edison-International

The parent company of Southern California Edison generates and distributes electric power, energy services, and renewable energy.

This year's Fortune 500 marks the 65th running of the list.

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Edison International, a public utility holding company, is the parent company of Southern California Edison (SCE). It generates and distributes electric power, energy services, and renewable energy, serving approximately 15 million people within about 50,000 square miles in California. SCE operates an infrastructure that includes approximately 125,000 circuit miles of distribution and bulk transmission lines and 1.4 million power poles. It has a stated goal of reducing its greenhouse gas emissions by 95% between 2005 and 2045. Edison International's other subsidiary, Trio, was formerly named Edison Energy and is an advisory company that helps other organizations navigate sustainability and clean energy transition goals and requirements.

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Edison International (EIX): Company Profile, Stock Price, News, Rankings

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Edison International

edison international

Good afternoon and welcome to the Edison International Third Quarter 2025 Financial Teleconference. My name is Denise, and I will be your operator today. When we get to the question and answer session, if you have a question, please 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.

Thank you, Denise, 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. Please include a Form 10-Q, prepared remarks from Pedro and Maria, and the teleconference presentation. Tomorrow, we will distribute a regular business update presentation. During this call, we'll 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.

Okay, thanks a lot, Sam. Good afternoon, everybody. Today, Edison International reported third quarter core earnings per share of $2.34 compared to $1.51 a year ago. This comparison is not meaningful because during the quarter, SCE recorded a true-up for the 2025 General Rate Case final decision, which is retroactive to January 1, 2025. Reflecting the year-to-date performance and our outlook for the remainder of the year, including the costs for potential early refinancing activities later this year, we are narrowing our 2025 core EPS guidance range to $5.95-$6.20. We have also refreshed our projections to 2028 and are reaffirming our 5%-7% core EPS growth target. Maria will discuss her guidance and financial performance in more detail.

California's legislative session concluded with the passage of SB 254, the constructive and important step to support IOU customers, address wildfire risk, and boost the financial stability of the state's investor-owned utilities. The bill passed with near unanimous support, and that's a clear signal that policymakers understand the urgency of the issue and the need for durable solutions. SB 254 creates an up to $18 billion continuation account, jointly funded by IOUs and customers, to provide a backstop for wildfires ignited after September 19th, 2025. Importantly, it enhances the existing framework by basing the liability cap on the year of ignition rather than the year of disallowance, providing certainty for stakeholders. It also allows for the securitization of wildfire claims payments for 2025 wildfires ignited between January 1st and September 19th if the initial wildfire fund is exhausted, which would apply to the Eaton Fire if needed.

These provisions are constructive for potential cost recovery and help utilities like SCE continue to invest in safety and reliability while maintaining affordability for customers. We have provided a summary of SB 254 on page three. SB 254 calls for an important second phase, a comprehensive report due in April 2026 that will evaluate long-term reforms to equitably socialize the risks and costs of climate-driven natural disasters. The law recognizes that customers and shareholders continuing to bear the burden of these events is unsustainable. This second phase is important to evaluate the broad scope of potential reforms that are necessary for a sustainable model. As you will see on page four, the 10 points outlined in SB 254 can be grouped into three categories. First, reducing the risk of ignitions and harm from wildfires. Second, affording fair compensation for people affected by wildfires, including avoiding disparate treatment of communities.

Third, allocating the risk and costs of natural catastrophes across stakeholders equitably. We are encouraged by this direction and by the executive order that Governor Newsom signed on September 30 to expedite the state's all-in response. We look forward to continuing to work with legislators and stakeholders to shape a more sustainable and equitable framework. We are confident that we will see meaningful legislative action next year. Turning to the Eaton Fire, the investigations remain ongoing. As we have said before, Southern California Edison is not aware of evidence pointing to another possible source of ignition. Absent additional evidence, Southern California Edison believes that it is likely that its equipment could be found to have been associated with the ignition. During the third quarter, Southern California Edison entered into a settlement with an insurance claimant agreeing to pay $0.52 for each dollar paid to its policyholders.

Note that this is a single data point and does not provide sufficient information to develop an estimate of the total potential losses associated with the Eaton Fire. The wildfire fund administrator has confirmed that Eaton is a covered wildfire for the purposes of accessing the fund. Based on the information we have reviewed thus far, we remain confident that Southern California Edison would make a good faith showing that its conduct with respect to its transmission facilities in the Eaton Canyon area was consistent with actions of a reasonable utility. That said, we continue to take proactive steps to support community members. Shortly, Southern California Edison will launch the Wildfire Recovery Compensation Program for the Eaton Fire. This voluntary program is designed to provide eligible individuals and businesses impacted by the fire direct payments to resolve claims quickly.

This allows communities to focus on recovery earlier while minimizing the overall cost and outflows from the wildfire fund by reducing escalation, interest expense, and legal fees. Moving to the regulatory front, the key message is that we've made significant progress across multiple proceedings this year, further de-risking our financial outlook and bolstering our ability to deliver for customers and investors. Earlier this year, the CPUC approved the TKM settlement, authorizing recovery of approximately $1.6 billion in wildfire-related costs. More recently, SCE reached a settlement agreement with interveners in the Woolsey Fire proceeding, as highlighted on page five. This marks a significant mitone and puts the company one step closer toward fully resolving the 2017 and 2018 legacy events. The agreement would authorize recovery of approximately $2 billion of the $5.6 billion requested, subject to CPUC approval.

This structure supports long-term affordability for customers by reducing excess financing costs and improving credit metrics, specifically up to a 90 basis point benefit to FFO to debt and an annualized interest expense benefit of approximately $0.18 per share. Combined with the TKM settlement, this would result in recovery of 43% or about $3.6 billion of the total costs above insurance and FERC recoveries. We anticipate a final decision from the CPUC toward the end of this year or early next year, and assuming CPUC approval, we expect to receive proceeds from securitization mid-2026. Details of both proceedings can be found on page six. SCE also received a final decision on its 2025 General Rate Case in September, as highlighted on page seven.

The decision authorizes 2025 base revenue of $9.7 billion and supports significant investments in wildfire mitigation, safety, and reliability, and upgrades for increased load growth while incorporating affordability considerations for customers. It also authorizes average revenue increases of about $500 million per year for 2026-2028, subject to adjustment based on inflation. On capital expenditures, the final decision authorizes 91% of SCE's request. Importantly, the commissioners highlighted that these investments in the grid provide long-lasting value to customers, especially given the need to protect against wildfires, advance electrification, and ensure a ready, reliable grid for the clean energy future. On wildfire mitigation, SCE has now deployed more than 6,800 mi of covered conductor.

I'm pleased to share that by the end of the year, SCE will have hardened nearly 90% or more than 14,000 mi of its total distribution lines in high fire risk areas. The General Rate Case authorizes installing another 1,650 mi of covered conductor for wildfire mitigation, as well as 212 mi of targeted undergrounding. Similar to covered conductor, which continues to be an important risk mitigation tool, SCE believes that its targeted undergrounding program will also provide substantial benefits to further safeguard its customers and communities. Public safety power shutoffs remain a critical tool in wildfire prevention. This year's updates include revised criteria and wind speed thresholds, expanded circuit coverage, and broader boundaries around high fire risk areas. Additionally, SCE has now enabled fast curve settings on approximately 93% of its 1,100 distribution circuits in high fire risk areas, further reducing ignition risk and improving system safety.

As we've shared before, SCE's system average rate continues to be the lowest among the major IOUs in the state. Importantly, the utility expects this will grow at an inflation-like level on average through 2028. Incorporating the GRC approval, TKM settlement, and pending Woolsey settlement, we continue to expect that CAGR to be in the range of 2%-3%. In closing, I want to thank our team members for their continued dedication and resilience, and I also want to thank our investors for your support and our customers for the opportunity to serve them. This has been a year of meaningful progress on the legislative front, in the regulatory arena, and in our operational execution. We've taken important steps to resolve legacy wildfire liabilities, strengthen our financial position, and advance the utility's mission to safely deliver reliable, affordable, and clean energy.

We also recognize that this has been a challenging time for so many of the communities we serve, particularly those impacted by wildfires. We remain deeply committed to learning from our experiences and supporting recovery and resilience to rebuild stronger. We are grateful for the opportunity to partner with customers, local leaders, and other stakeholders to build a safer and more sustainable energy future. We look forward to continuing our dialogue with many of you at the EEI Financial Conference in November. We'll see you there, and with that, Maria, let me turn it over to you for your financial report.

Good afternoon, and thanks, Pedro. I will echo your comments that we have made significant progress across multiple proceedings this year, further de-risking our financial outlook and bolstering our ability to deliver for customers and investors. With the GRC final decision in hand, we now have increased certainty and visibility into the work SCE will do to meet customers' needs and have refreshed our projections through 2028. Consequently, we are reaffirming our 5%-7% core EPS growth target, which I will discuss in detail. Starting with third quarter 2025 results, EIX delivered core EPS of $2.34, up from $1.51 a year ago. The year-over-year variance analysis is on page eight. As Pedro noted, this comparison is not meaningful because SCE recorded a true-up of approximately $0.55 for the 2025 GRC final decision, which is retroactive to January 1.

Based on strong year-to-date performance and our outlook for the rest of the year, we are narrowing our 2025 core EPS guidance to $5.95-$6.20, as you will see on page nine. This range now includes the potential for $0.10 per share of costs associated with refinancings tied to the TKM and Woolsey cost recoveries. As previously mentioned, our 2025 guidance does not include the potential earnings associated with the Woolsey settlement. SCE is awaiting a proposed decision on the settlement, and a final decision could be issued later this year or early next. We want to be clear that for measuring our core EPS growth through 2028, the 2025 baseline of $5.84 is unchanged from prior disclosure. Now I would like to discuss our refreshed projections, which we have summarized on page 10.

Additionally, on pages 14 through 17, we put together a comprehensive list of frequently asked questions on guidance-related topics for background and easy reference, which we hope you will find helpful. Please turn to page 11, which lays out our four-year capital plan of $28 billion-$29 billion. This compares to our previous forecast for the same period of $27 billion-$32 billion. The plan incorporates substantial investments in infrastructure replacement, electrification, and system resiliency approved in SCE's GRC. Additionally, the plan now incorporates the utility's next-gen ERP project and other updates across the business, including wildfire mitigation capital that SCE will securitize under SB 254. We also continue to see the need for substantial grid investments beyond our forecast period. We've highlighted on the right side of the page two examples of this, with much of that spending occurring beyond 2028.

Driven by the capital plan, we project rate-based growth of 7%-8%, as shown on page 12. This growth is after incorporating the expected wildfire mitigation capital expenditures that will not earn an equity return under SB 254. Moving on to our long-term core EPS growth target, as shown on page 13, we continue to expect 2028 core EPS of $6.74-$7.14. You will find additional information on this topic on pages 14 and 15. Our confidence in delivering on our commitments is underpinned by the clarity we have from the GRC and our ability to manage our operations for the benefit of all stakeholders. Let me now turn to our financing strategy and balance sheet strength. Over the last several years, we have executed efficient financings to support our target 15%-17% FFO to debt framework.

We have used hybrid securities to generate equity content when needed, avoiding substantial common equity issuance to pre-fund our capital plans. By year-end, Southern California Edison expects to receive approximately $1.6 billion in securitization proceeds from the TKM settlement. Following Woolsey settlement approval, the utility plans to request a financing order to securitize an additional $2 billion. These actions further strengthen our credit metrics and financing flexibility for funding future rate-based and dividend growth. Altogether, this leaves us very well placed among our peers on two key credit metrics. Edison International has one of the strongest consolidated FFO to debt ratios projected by S&P. Also, we have one of the lowest levels of parent company debt as a percentage of total debt. Page 13 details our 2025 through 2028 financing plan. Let me highlight that this plan does not require any equity issuance.

This expectation is supported by the TKM and Woolsey recoveries. Further, as you know, the wildfire fund provides reimbursement for claims paid above an IOU's $1 billion of insurance. Additionally, for fires between January 1, 2025 and September 19, 2025, the recently passed SB 254 allows the utility to issue securitized bonds prior to a reasonableness review to fund claims payments should the initial fund be exhausted. While we currently cannot estimate the probable losses associated with the Eaton fire, the constructive California liquidity and prudency framework means neither equity nor debt would need to be issued in connection with that event. Following the passage of SB 254, the rating agencies issued updates on the company. Moody's affirmed its ratings for both EIX and SCE with a stable outlook. Fitch removed its rating watch negative from both companies, citing SB 254 as a meaningful policy shift.

While S&P downgraded EIX and SCE by one notch, we believe this view does not fully recognize the legislative intent or commentary from the Governor's office. Importantly, S&P still expects our credit metrics to remain within our target, with upside potential from a constructive Woolsey outcome. At the parent company, we are working on how to best address the preferred equity issuances that have upcoming rate resets. We are looking at cost-efficient options for early refinancing, which will bring forward both the costs and the benefits of the transaction. The core benefit is the optimization and clarity of financing costs before the rate reset, which further de-risks our financial outlook. We have considered the potential costs of this optimization in our narrowed 2025 core EPS guidance and see the long-term benefits outweighing the near-term costs. I would like to update you on another positive trend we are seeing: load growth.

As we have laid out on page 18, SCE remains well-positioned to meet the diverse and accelerating demand across its service area. Our team continues to anticipate significant investments in infrastructure upgrades to meet this growing demand, many of which were included in SCE's recent GRC approval. Importantly, our demand forecast is not reliant on a single sector. For one, SCE is at the heart of California's EV adoption, helping the state maintain its national leadership in transportation electrification. In fact, the state recently announced a record 29% of new cars purchased in Q3 2025 were zero-emission vehicles. We're also expecting growth in new housing developments and increases in commercial and industrial consumption. To sum up, we are expecting a near-term load growth CAGR of up to 3%. In the long term, we project electricity sales will nearly double over the next two decades.

I will conclude by saying that the company has made significant progress achieving certainty across numerous regulatory proceedings this year, allowing us to confidently reaffirm our long-term guidance. It underscores our ability to execute on our commitments and deliver for the customers and communities SCE serves and for our investors. That concludes my remarks, and I'll turn it back to Sam.

Denise, 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.

Thank you. If you would like to ask a question, please press star one on your phone. One moment, please, for the first question. The first question is coming from Nicholas Campanella with Barclays. Your line is open.

Hey, good afternoon. Thanks for all the information today.

I just wanted to ask, you brought up the $0.10 for the equity preferred as it relates to the 2025 guide. Can you just kind of confirm, is the $0.10 just a charge for both the 2026 and 2027 maturities, or is that still kind of up for debate? Maybe just expand on what some of your options are for addressing that. Obviously, there's no equity coming to replace this, if I'm reading it correctly. Thanks.

Sure. Right, so just to recap what you said, we have two preferred equity series with a rate reset in March 2026 and then again in March 2027. We issued those back in 2021, and that was to address, you know, sort of the claims that we were paying related to TKM and Woolsey. Now that we have the TKM settlement approved and the securitization coming later this year, as well as the Woolsey settlement pending approval, which will also be securitized, we're taking a look at all of our options at the holding company. We are still evaluating the options, but we think that maybe taking some steps earlier rather than waiting for those March 2026, March 2027 reset dates would be beneficial overall for the company. Anytime we do a refinancing, there will be a write-off of deferred transaction costs, etc., and that's what the $0.10 represents.

That would happen regardless of whether we do it early or whether we did it at the actual reset dates. The options that we're looking at are pretty broad, and we'll have more to come on that.

Okay. I appreciate that. As it relates to Edison, you've launched this kind of Wildfire Recovery Compensation Program. Maybe you can just discuss what the participation level has been in that, and does that allow you to have a view on claims in more of an expedited manner? Is that something that we can maybe expect with the 10-K? I understand that there are very clear new protections in place from SB 254, which are helpful, but just when do you think that we'll have a low-range estimate for what the liability against the fund would be?

Yeah, hey, Nick, let me jump in here. We're not quite where you think we are yet. We haven't launched the program yet. We've announced that it's coming. We went through a process of releasing a draft protocol in September and then opening it up to feedback from the community. As I said in my remarks, we expect to be able to finalize the program and launch it shortly. Regarding when that might lead or if it might lead to an estimate on losses, first, as you point out, we'll need to see what the participation rate is. I think that there's, you know, we're doing everything we can, and we've engaged really the world's best outside experts on this, Ken Feinberg and Camille Biros, who were, among other things, the architects of the 9/11 fund. They've been providing great advice on this. We've gotten good input from the community.

We're considering a number of potential changes beyond what we had released in draft form. I do want to make sure I temper expectations. This is still going to be a long process, and it's only one of the components of potential losses in a complex event like Eaton. You saw that I mentioned in my remarks already that we did the one subro settlement. It was meaningful, but it was only one, and we're not able to estimate even subro losses just from that one data point. Similarly, we'll have to see what kind of participation rate we get, and at some point, does it become material enough that it maybe allows us to start getting our hands around that portion of losses? Of course, there are other kinds of losses in this. A very long way of saying that we're still kind of where we were last quarter.

We don't yet have an estimate of when we'll have an estimate, Nicholas.

Nicholas, maybe just picking up on a couple of the other things you raised, the direct claims program is, of course, a good way to be good stewards of the fund, but you pointed directly to SB 254 protections that were introduced. Building on the protections of AB 1054, there are a couple of things that we think can apply to Eaton and do that in a constructive manner. First, the date at which the liability cap is calculated is the point of ignition. We'll know, we know with clarity what the cap is for Eaton, which is approximately $4 billion based on our current rate base. The second piece relates to the securitization that I mentioned earlier.

For fires that occur between January 1 and the effective date of the legislation, to the extent there is a need to go above the fund, and again, we don't know what the estimate is for Eaton, the company can securitize those claims before going in for a reasonableness review with the CPUC. That outcome is good for customers because it minimizes costs and interest expense. It's also good for the utility because it wouldn't need to issue any debt at that point or equity to fund the claims payments.

Very fair, and I appreciate the clarification there. Thank you.

Thank you. The next question comes from Gregg Orrill with UBS. Your line is open.

Hi. Thank you for the update on guidance. Just a clarification, is there a part within the growth rate range that you feel you're trending toward now, you know, the upper half or the lower half or whatever, or maybe things that I know you've provided some disclosure on what would take you within that range, but any other thoughts on that would be helpful?

Greg, we are very comfortable and confident in the 5%-7% EPS growth. Obviously, we run a lot of scenarios when we take a look at that, and there are many variables that can change either because it's a four-year period or because this is a complex business. I would just say that we did incorporate a lot of new information into our outlook. We have the GRC in hand. We had multiple regulatory proceedings over the past year, around recovery of memo accounts that also contribute to capital. We had the TKM settlement. We have the securitization that's coming up, the Woolsey settlement that's pending approval.

With all of that, we put that together in the mix, and I think the three key takeaways for me are not just reaffirming the 5%-7% EPS CAGR, but also that we have significantly more clarity around that forecast, and we have a stronger balance sheet. We are still 5%-7% is where we are, but I think there's a lot more behind that that is very positive.

The next question comes from Shar Pourreza with Wells Fargo. Your line is open.

Oh, I appreciate it. Thank you very much. Thank you very much. Pedro, I know there's obviously clearly some improvement in the wildfire constructs from phase one, even though they kind of kicked the can down the road on some of the key items there. I guess in terms of phase two process, what do you see as viable for eliminating, you know, EIX's liability, and what will be the data points that you anticipate going into the legislative session? Like, is this going to be a public process? Is this going to be a private process? How do we track it? Thanks.

Yeah, no, thanks Shar. Good set of questions. As I mentioned in my remarks, we are very encouraged by the legislature not only having taken the steps that Maria recapped just now on phase one, but setting up this phase two process. It's still being shaped, but the California Earthquake Authority, as the lead entity here, has been pretty articulate already in some key parts of the process. They've given the timeline right for submission of abstracts across the various topics. That's November 3, the deadline for those abstracts. They have a deadline of December 12 for the full papers that parties can submit. They have said already that they plan to make all of those submissions, both the abstracts and the papers, public as they come in.

I think that's really helpful because it will give really nice transparency to everybody in terms of what various stakeholders are submitting and how they're thinking about things. For our part, we continue to work very closely with our colleagues at the other investor-owned utilities, and we'll also be looking to engage with a broader set of stakeholders as we develop our ideas or compare notes with their ideas. We also understand that CEA will have, perhaps still being defined a little bit, some process for open discussions, meetings, et cetera, between the submission of papers and the April 1 deadline for the final report.

It was also encouraging, they had touched on this very briefly in my remarks, but it's very encouraging to see Governor Newsom turn to the various agencies with this executive order and essentially give out homework assignments for the expectations on how each agency would be contributing to specific items within the 10 areas that were outlined by SB 254 that I covered in my remarks as well. It's really nice to see not only the CEA putting out their process, but the governor then turning to the agencies and, for some of the agencies that he can direct, actually gave them direction. For the agencies that are more constitutional where he can only provide advice or suggestions, he suggested focus areas for each of those.

We'll see what comes out in the report, although we're encouraged, frankly, by this responsibility, the leadership of it, having been placed by SB 254 in the hands of the California Earthquake Authority. You know, very professional entity. They have a solid understanding of broad natural catastrophes and risks, starting with their original mission around earthquakes. As you know, they've been the wildfire fund administrator since the inception of the fund through AB 1054 in 2019. They also have deep experience now in terms of the wildfire topic. That gives us a lot of comfort that there's good professional management, and they have the ability, and we understand that they're in the process of engaging outside help as well. I end up going a little long-winded here. Hopefully, I won't quite go into 18 innings like the Dodgers, go Dodgers. Maybe I'll give you one more point on this.

Maria is laughing right now. I wish we had video so you could see her. As we turn to the legislation and the outcome of the report itself, we expect that there's a potential here for taking action across the economy. This is not just about utility connections to wildfire, right? Everything from reducing the exposure that the state has by, you know, we would hope to see a strengthening of building codes and standards, and frankly, strengthening of the implementation of building codes and standards, because today's codes and standards are actually rather strong. Reviewing those and then making sure that they're being implemented effectively statewide. Reduction in the overall exposure to losses, right, by looking at what are potentially some fair caps and specific kinds of claims or fees involved in the process.

Of course, looking at how does California equitably allocate the ultimate cost of natural catastrophes like wildfires. It was very encouraging to see the legislature acknowledge right up front in the preamble of SB 254 that the current process of essentially making utility customers and utility shareholders the insurers of a catastrophe is simply not sustainable. When you take out a horrible, heartbreaking fire like Eaton, and you know, we still haven't concluded what happened here, but you heard me say it's likely that the equipment could be found to have been associated. Even if the spark did come indeed from our SCE equipment, the catastrophe was about so much more. You know, the extreme weather, the 100 mile an hour winds, the grounding of firefighting aircraft, the homes that unfortunately were beautiful, great neighborhoods, but were not ready for this high fire risk.

The lack of evacuation notices in the areas, you know, that covered all but one of the fatalities. You add all of that up, and we simply can't have utility customers or shareholders continuing to be the insurers of this catastrophic risk, and we're encouraged that the legislature seems to recognize that in setting up 254. Sorry for the PhD dissertation there, but this, you hit on such an important topic, Shar.

No, it's helpful. Just, you know, Pedro, really lastly for me quickly, I mean, obviously 2026 seems to be a pretty big inflection year for the California utilities, and I know one of your peers in the state is talking a little bit more on capital allocation depending on what could be the outcome of phase two, i.e., you know, buybacks, dividends, returning more to shareholders, looking at how they're deploying capital in the state. I guess, how do you, where do you stand around that, given how binary 2026 could be?

I'll turn to Maria in a second here, but let me just start by saying, above all, and this is really an important part of the messaging for Edison International and I think for our peers as well, this is ultimately much more about customer cost than anything else, right? The weakening of financial health, which you mentioned, some options here, one of our peers has mentioned here, but ultimately, this is really about how do we maintain healthy balance sheets and importantly healthy credit ratings because the cost of debt is borne by customers. As we engage with legislators, we are laser-focused on that customer impact as being the reason, or one of the key reasons, in addition, obviously, to public safety, to reforming how the state addresses its catastrophic risk. Maria, you want to talk?

Sure. I think, first, I'd say, Shar, you know, we've always taken a very measured and efficient approach to how we capitalize the business. You've seen that over the course of the last five or six years where we went down the path of using hybrid securities as opposed to issuing common equity at times when it would have been more value-destructive perhaps to do the latter. I think the other thing to say is we find ourselves in a somewhat different position. We have no equity issuances in our forecast at this point. We are looking at cost-efficient opportunities to take care of the holding company hybrids. We'll be going down that path. Also, frankly, we have been returning capital to shareholders for the past several decades with an increasing dividend. We're still targeting our 45%-55% payout ratio.

We have a lot of confidence in our forecast, and so we have a lot of confidence in that. I think you'd find our company in a slightly different position.

Got it. That's super helpful. Thank you so much, guys. See you in a couple of weeks. Appreciate it.

Thank you. The next question comes from Anthony Crowdell with Mizuho. Your line is open.

Hey, good afternoon. I just wanted to follow up on Nick's question earlier on the $0.10 related to the preferred equity. It seemed that it's your, I don't know if you're calling it earlier or expected earlier financing. Was it not contemplated in the 2026 and 2027, 2028 forecast when you previously issued that financing on their maturity? Meaning that if you waited till when they actually matured, it was getting absorbed into the 2026 and 2027 guidance, whereas now by pulling it forward, it's hurting 2025, but yet 2026 and 2027 are not going up.

Frankly, Anthony, we were taking a look at a lot of options before as well. The fact is that with the TKM settlement earlier this year and the securitization and the Woolsey settlement pending and a subsequent securitization there as well, we find ourselves maybe with more options. Some of those options introduced, you know, potentially having to write off the deferred financing costs. Yes, if we were going to go down the path of refinancing in any event, you would get them in the year in which the event occurred, but if we were just going to continue them on, then there wouldn't have been anything there to write off.

It does very much tie to the success we've had around some of the regulatory proceedings this year, the certainty that we've gotten from them, and the ability to introduce these additional options when we consider the preferreds at the holding company.

Great. Thanks so much for taking my question.

Thank you. The next question comes from Paul Zimbardo with Jefferies. Your line is open.

Hi, good afternoon. Thank you, team. The first one I was going to ask, I know you had one of the comments, and I appreciate the frequently asked questions. How would you describe the linearity beyond 2025 of the EPS trajectory? I know it's been a little bit lumpy in the past, but thinking without rate cases in between, it'd be a little bit more linear. If you could give some color on that, it'd be appreciated.

Sure. We will be giving our 2026 guidance on the Q4 call. That's our typical practice. I can share a little bit more with you about, you know, the process that we have and really what's underscoring our very strong confidence in the 5%-7% growth rate. I think about the General Rate Case as the frame for the entire four-year process. Now that we have that final decision in hand, we know the total amount of work that we have to accomplish over that four-year period. Frankly, annually, we always go through a very detailed planning process to develop the work plan and, you know, how we will execute on each piece of the process. We have to consider a lot of different things. We have to consider resources. We have to consider operational priorities, timing of the work.

All of those can introduce some amount of input and structure around our guidance on a go-forward basis. We are looking at that right now. We have the General Rate Case in hand, but our detailed planning process has not started, or it's just recently started underway now that we have the General Rate Case decision in hand. We will be providing more of that detail in response to your question on the Q4 call. It certainly underscores our confidence in the overall 5%-7% EPS CAGR.

Okay. Great. The other one I had was just on the credit profile. I think the commentary was solidly within that SFO to debt range. Just with the benefit of kind of the enhanced recovery getting on the legacy fires, is it fair to think you're trending towards the upper half of that range over time?

We are certainly comfortable in our range, and we are looking at our various financing options. We will come back to you once we decide on those. We will still always be comfortably in our 15%-17% range.

Thank you. The next question comes from Carly Davenport with Goldman Sachs. Your line is open.

Hey, good afternoon. Thank you for taking the questions. Pedro, maybe going back to some of your comments earlier on customer cost, just wanted to ask on the cost of capital filing in that context of customer affordability and the rhetoric in California. Just curious your latest temperature on the outcome there, relative to what you have baked into the financial plan that you've laid out here.

Yeah, I'll start. Maria may have more there. You know, we're still in that process. You've seen our filings, the range that we provided, which is higher than the current 10.33%, you know, 10.75%-11.75%. That's based on our outside experts' testimony of looking at the overall risks that SCE is encountered with right now and trying to have fair compensation on that. We'll let the process finish its way through, and hopefully, we'll have a decision by the end of the year as has been typical with cost of capital proceedings. Maria, anything you would add there though?

Yeah, Carly, I completely agree with Pedro. We made a very strong showing. The proposed decision, based on the schedule, is due in November. We are watching for it. All of the procedural aspects of the proceeding are completed. In terms of your question about, you know, how does it roll into our forecast, like many other variables, we run a range of scenarios around the current ROE. We have a number of things baked in, and we test a wide range of outcomes. I think that's how it really fits into the range of 5%-7% EPS CAGR through 2028.

Got it. Okay, very clear. Thank you. Maybe just one on the updated capital plan here. It looks like the FERC piece come down a little bit on the margin. Just curious what's driving that, and your current views on the upside opportunities for FERC investment, as you manage some of the moving pieces at the state level.

Sure. The FERC piece came down very slightly over the four-year period. A lot of that just has to do with timing of when the work will be done. There is nothing really to read into that. On your second question, could you just please repeat that one more time?

Yeah, just as you think about managing the broader capital plan in the context of maybe the supportiveness of California of some of these investments at a CPUC level, to what degree FERC could be a lever to lean into a little bit more there on the upside?

Carly, you know, one way to think about it is it's a pretty good delineation between which investments are CPUC jurisdictional and which ones are FERC jurisdictional. The CPUC jurisdictional are the ones that we just got approval for in the SCE General Rate Case. In addition, we have other proceedings underway like the NextGen proceeding or the NextGen ERP or the Smart Meter proceeding, AMI 2.0. Maybe it might help us, Steven Powell, the CEO of SCE, just touch a bit on a broad transmission plan of Cal ISO and how that feeds the potential for FERC level investment over the next few years.

Yeah, so, you know, the independent system operator, CAISO, has put out or puts out 20-year plans to show the long-term opportunities for transmission investment in the state. The most recent one pointed to $45 billion to upwards of $55 billion of potential investment in projects over a 20-year period. They then translate that down to 10-year plans that get rolled out each year. You have seen over the last number of years us get quite a number of incumbent projects, as well as bid and win a competitive project. As I look forward, the load growth that we're seeing, especially in the 10-20 year period, is going to continue to drive the CAISO process to create more transmission opportunities.

We want to continue to position ourselves to be the right incumbent provider to build on the existing network, which is oftentimes the most effective way to get the reliability projects as well as the policy projects built, but also continue to position ourselves for those competitive projects where there's new lines that need to be established. We've shown our ability to go in and win projects, and we expect to continue to participate in competitive opportunities in the CAISO portfolio going forward.

Thank you. The next question comes from David Paz with Wolfe Research. Your line is open.

Hey, good afternoon. This is somewhat related, but regarding the SB 254 CapEx that's ineligible for an equity return, do you anticipate backfilling that roughly? I think it's $2 billion, $2.3 billion of CapEx that's not in your 2025-2030 plan with other programs. Is that with the NextGen and with the other things, or should we anticipate there being something else?

Maybe let's clarify a little bit what's in the CapEx plan that's in the investor materials today, as well as what's in the rate base. If you recall under SB 254, the CapEx that we're talking about is wildfire mitigation that is approved post 11/26, so this next upcoming year. In our capital plan, we have included all of the CapEx that we expect to spend through 2028 that is going to be subject to that. We have about $500 million-$700 million of CapEx on the CapEx slides that are related to the SB 254 capital. When you move over to our rate base slides, we are not including that when we convert CapEx into rate base. You can use the rate base slides as sort of the foundation for your modeling in terms of the amounts on which we can earn an equity return.

The balance of what is under SB 254, so the rest of that CapEx, would be spent then after this rate case cycle. As we go into the 2029 rate case cycle, we'll be taking a look at how that all factors in. The numbers that we provided in the materials today should be pretty clean in terms of how you would use them to look at our growth rate.

Okay, that makes sense. Just so I understand for modeling purposes, that remains there. Not what's in your slides today, but the rest. What should we anticipate that being spread out over the 2029-2032 General Rate Case or upfront? Is it just based on the language or your interpretation of SB 254?

Yeah, we would expect that CapEx to be spent after 2029. We don't have that GRC filed yet. We'll be working on that as we go through it. Whenever we do have that available in terms of that piece of the forecast, certainly we would make it clear as to what pieces are in rate base and what pieces are not.

Edison International (EIX) Q3 2025 Earnings Call Transcript

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