10-QPeriod: Q1 FY2006

EDISON INTERNATIONAL Quarterly Report for Q1 Ended Mar 31, 2006

Filed May 8, 2006For Securities:EIX

Summary

Edison International's first quarter 2006 results show a net income of $258 million ($0.78 per share), a significant increase from $201 million ($0.61 per share) in the same period of 2005. This improvement was driven by distributions from the U.K. Lakeland project and higher wholesale energy margins from MEHC's Illinois plants, which more than offset increased operating costs at SCE due to system growth and a delay in the General Rate Case decision. The company also saw a notable increase in comprehensive income to $415 million, largely due to unrealized gains on cash flow hedges. Operationally, SCE's revenue increased due to rate changes and higher sales volumes, though purchased power expenses rose significantly due to hedging activities. MEHC experienced a transformer failure at its Homer City facility, impacting generation, but also completed the acquisition of the Wildorado Wind Project and sold a stake in the San Juan Mesa wind project. The company also adopted new accounting standards for stock-based compensation, impacting cash flow classification.

Key Highlights

  • 1Net income for the quarter was $258 million ($0.78 per diluted share), up from $201 million ($0.61 per diluted share) in the prior year's first quarter.
  • 2Comprehensive income significantly increased to $415 million, driven by substantial unrealized gains on cash flow hedges.
  • 3SCE's operating revenue increased by $309 million, primarily due to rate changes and higher sales volumes, though purchased power expenses rose significantly due to hedging activities.
  • 4MEHC reported higher wholesale energy margins, but experienced a transformer failure at its Homer City Unit 3, impacting generation.
  • 5The company adopted new accounting standards for stock-based compensation, impacting cash flow classification and resulting in a $1 million cumulative effect adjustment.
  • 6EME acquired the Wildorado Wind Project and sold a stake in the San Juan Mesa wind project, demonstrating continued activity in its wind business.
  • 7Significant regulatory matters are ongoing, including the 2006 General Rate Case at SCE and various FERC proceedings related to market manipulation and pricing.

Frequently Asked Questions

The increase in net income was primarily driven by distributions received from the U.K. Lakeland project (accounted for as discontinued operations) and higher wholesale energy margins generated by MEHC's Illinois plants, which more than offset increased operating costs at SCE and other factors.

The adoption of the fair value accounting method for stock-based compensation, effective January 1, 2006, resulted in the recognition of expense for all stock-based awards. It also required reclassifying cash flows from tax benefits of stock options from operating to financing activities and led to a $1 million cumulative effect adjustment on net income.

MEHC experienced a transformer failure at its Homer City Unit 3 facility on January 29, 2006, leading to a suspension of operations for that unit. The unit returned to service in May 2006, but the outage increased the forced outage rate and impacted generation for the quarter.

Key regulatory matters include SCE's 2006 General Rate Case proceeding, where a final CPUC decision is expected in the second quarter of 2006. Additionally, there are ongoing FERC refund proceedings related to market manipulation and various other regulatory matters impacting SCE's operations and revenue recovery.