8-KMaterial AgreementsExhibits & Filings

EDISON INTERNATIONAL 8-K Report, Material Agreement (Sep 24, 2014)

Filed September 24, 2014For Securities:EIX

Summary

Edison International (EIX), through its subsidiary Southern California Edison Company (SCE), has entered into an Amended Settlement Agreement concerning the San Onofre Nuclear Generating Station Units 2 and 3 Order Instituting Investigation (OII) proceeding. This amended agreement, signed on September 23, 2014, modifies the terms of a prior settlement reached in March 2014. The key changes focus on the allocation of potential recoveries from third parties (Mitsubishi Heavy Industries and Nuclear Electric Insurance Limited) and introduce new provisions related to financing, environmental initiatives, and regulatory oversight. For investors, the most significant aspect of this filing is the shift in how potential recoveries from legal actions against the San Onofre steam generator manufacturer (MHI) and its insurer (NEIL) will be shared. The amended agreement generally results in a larger share of recoveries going to ratepayers compared to the original settlement, particularly for recoveries from NEIL. Additionally, the agreement introduces a cost-sharing mechanism for any savings achieved through lower-cost debt financing of regulatory assets and mandates funding for a research program aimed at reducing greenhouse gas emissions. These changes impact the potential financial outcomes for SCE and its ratepayers regarding the San Onofre plant.

Key Highlights

  • 1Edison International's subsidiary, SCE, signed an Amended Settlement Agreement related to the San Onofre Nuclear Generating Station OII proceeding.
  • 2The Amended Settlement Agreement alters the allocation of recoveries from Mitsubishi Heavy Industries (MHI), with 50% going to ratepayers and 50% to SCE (net of legal costs).
  • 3Recoveries from Nuclear Electric Insurance Limited (NEIL) under the outage policy will now be allocated 95% to ratepayers and 5% to SCE (net of legal costs), a significant increase for ratepayers compared to the original agreement.
  • 4A new provision allows for equal sharing between ratepayers and SCE of any savings realized if SCE finances regulatory assets at a cost lower than the authorized rate.
  • 5The agreement includes funding for a University of California Research, Development and Demonstration program to develop greenhouse gas emission reduction technologies, with SCE contributing approximately $4 million per year for five years.
  • 6CPUC oversight has been enhanced, with provisions allowing review of documentation for resolutions of claims against MHI and NEIL, and their associated litigation costs.
  • 7The termination date for the Amended Settlement Agreement has been extended from October 3, 2014, to December 23, 2014.

Frequently Asked Questions

The primary financial impact stems from the reallocation of potential recoveries from third parties. Under the amended agreement, a larger portion of any money recovered from Mitsubishi Heavy Industries and, particularly, from Nuclear Electric Insurance Limited (NEIL), will go to ratepayers rather than SCE. This means SCE's potential upside from these specific recovery efforts is reduced compared to the original settlement, while ratepayers benefit more.

Previously, the allocation of recoveries from MHI depended on the amount recovered, with higher percentages going to SCE on lower recovery amounts. The Amended Settlement Agreement simplifies this, allocating 50% of net recoveries to ratepayers and 50% to SCE, regardless of the recovery amount. This is a shift from the tiered structure of the original agreement.

The changes regarding NEIL recoveries are substantial. Under the original settlement, 82.5% of NEIL recoveries went to ratepayers and 17.5% to SCE. The Amended Settlement Agreement significantly shifts this balance, allocating 95% to ratepayers and only 5% to SCE. This represents a much greater benefit for ratepayers from insurance payouts.

Yes, SCE is now committed to funding a Research, Development and Demonstration program at the University of California aimed at reducing greenhouse gas emissions. SCE's share of this program is approximately $4 million per year for five years. Additionally, any savings achieved by SCE through lower-cost debt financing of regulatory assets will be shared equally with ratepayers, which could represent a reduction in SCE's potential profit from these assets.