8-KMaterial AgreementsFinancial EventsExhibits & Filings

EDISON INTERNATIONAL 8-K Report, Material Agreement (Jan 31, 2018)

Filed January 31, 2018For Securities:EIX

Summary

Edison International, through its subsidiary Southern California Edison (SCE), has entered into a Revised Settlement Agreement regarding the San Onofre Nuclear Generating Station (San Onofre) Units 2 and 3. This agreement, if approved by the California Public Utilities Commission (CPUC), aims to resolve all outstanding issues in the associated investigation proceeding and dismiss a federal lawsuit challenging the CPUC's authority on cost recovery. The Revised Settlement Agreement modifies a prior agreement from 2014, impacting how San Onofre-related costs are recovered from customers and the utilities. The key financial implications involve a significant pre-tax charge of approximately $716 million (after-tax charge of $448 million) primarily related to disallowances and write-offs of previously recognized regulatory assets. While this settlement reduces the obligation for a GHG Reduction Program and allows SCE to retain proceeds from selling nuclear fuel, it also involves SCE paying San Diego Gas & Electric (SDG&E) amounts it would have received under the prior agreement. Despite the charge, SCE expects its capital structure to remain above the CPUC-mandated 48% threshold, though future dividend payments may be influenced by other factors.

Key Highlights

  • 1Entry into a Revised Settlement Agreement for San Onofre Nuclear Generating Station (San Onofre) Units 2 and 3, subject to CPUC approval.
  • 2Agreement resolves issues in the OII proceeding and aims to dismiss a federal lawsuit challenging CPUC authority on rate recovery.
  • 3Significant pre-tax charge of approximately $716 million (after-tax charge of $448 million) is expected due to San Onofre cost disallowances and reversals of regulatory assets/liabilities.
  • 4SCE will cease rate recovery of San Onofre costs once remaining regulatory assets reach $775 million, with an estimated Cessation Date of December 19, 2017, or April 21, 2018, depending on CPUC approval of a DOE litigation proceeds application.
  • 5SCE will pay SDG&E approximately $151 million (present value of $143 million accrual) as compensation for amounts SDG&E would have received under the prior settlement.
  • 6Utility obligation for the GHG Reduction Program is reduced from $25 million to $12.5 million.
  • 7SCE retains the right to sell its nuclear fuel inventory and retain those proceeds, a change from the prior settlement.

Frequently Asked Questions

The primary purpose is to resolve all outstanding issues related to the San Onofre Nuclear Generating Station (San Onofre) Units 2 and 3 in the ongoing CPUC investigation (OII) and to dismiss a related federal lawsuit. It modifies a previous settlement agreement from 2014 concerning the recovery of San Onofre costs.

The company anticipates a significant pre-tax charge of approximately $716 million ($448 million after-tax). This charge primarily arises from the disallowance of certain San Onofre-related costs, requiring the write-off of regulatory assets and reversal of regulatory liabilities.

Yes, if the Revised Settlement Agreement is approved, utilities will refund to customers any San Onofre-related amounts recovered in rates after the 'Cessation Date,' which is the date when combined remaining San Onofre regulatory assets reach $775 million. The estimated Cessation Date is around late 2017 or early 2018.

Despite the significant accounting charge, SCE expects its capital structure to remain at or above the CPUC-mandated 48% on a weighted average basis. However, the timing and amount of future dividends depend on various factors, including other obligations, capital expenditures, access to capital markets, and operating cash flows and earnings.