How much of the TKM-related costs will SCE actually recover?

If the CPUC approves the settlement, SCE would recover 60% of the approximately $2.7 billion in WEMA losses and costs (about $1.6 billion) and 85% of restoration costs (about $55 million of $65 million). The remaining roughly $1.1 billion is permanently disallowed to shareholders.

Is the settlement final?

No. It is subject to CPUC approval. Parties to the proceeding have 30 days to comment, and other parties may oppose or take no position. SCE anticipates a proposed decision within 3-6 months after the comment period, followed by a separate application for securitized bond financing.

How will the recovered WEMA amounts be financed and when will SCE receive the cash?

SCE plans to finance the authorized WEMA amounts through securitized bonds, which would require a separate CPUC application expected to take about 6 months. SCE anticipates receiving securitized bond proceeds by the end of 2025, assuming timely approvals.

What is the expected financial benefit to Edison International and its customers?

Management estimates that each $1 billion of cost recovery could improve FFO-to-debt by roughly 40-50 bps and reduce interest expense by about $35 million (about 9 cents per share). Using securitization proceeds to pay down debt and avoiding excess financing costs for future SCE debt could total up to $4.9 billion over ten years, and customer bill impact is estimated at $0.63 per month per $1 billion recovered, offset by avoided financing costs.

Why does the settlement matter for SCE's equity and capital structure?

If approved, SCE would be permanently allowed to exclude after-tax charges to equity from the disallowed or shareholder-funded costs, along with the associated debt, from its CPUC regulatory capital structure. This limits the lasting impact of the disallowances on the authorized equity base used in rate setting.

EIX 8-K: Regulation FD — Aug 29, 2024

01—Abstract

Summary

Summary of the 8-K filed August 29, 2024. Cited figures are marked; the original filing is the authoritative source.

Edison International (EIX) and Southern California Edison (SCE) disclosed in this August 29, 2024 8-K a proposed settlement with the California Public Advocates Office covering cost recovery for the Thomas, Koenigstein and Montecito Mudslide (TKM) events.

If approved by the CPUC, SCE would recover 60% of roughly $2.7 billion^a in wildfire-related losses and costs (about $1.6 billion), with the remaining 40% (about $1.1 billion, including $10 million of CEMA-related disallowance and the WEMA portion) permanently disallowed. The settlement also provides 85% recovery (about $55 million of roughly $65 million) of restoration costs, and SCE agreed to $50 million of shareholder-funded wildfire and public safety system enhancements. For investors, the key positives are the removal of a significant uncertainty around 2017/2018 wildfire and debris flow costs, the permanent exclusion of after-tax equity charges and associated debt from SCE's regulatory capital structure, and management's modeling of roughly 40-50 bps of FFO-to-debt improvement and about $35 million of annual interest savings per $1 billion recovered.

Recovery of the WEMA amounts is expected through securitized bonds, with proceeds potentially not received until the end of 2025, subject to a multi-step CPUC process (comment period, proposed decision in 3-6 months, then a separate securitization application taking roughly 6 months). The settlement is not yet final.

Other parties may oppose or take no position, and the CPUC must approve it. The filing is primarily an informational disclosure furnished alongside an investor presentation, so investors should monitor the CPUC proceeding, the eventual decision, and the securitization timeline, while recognizing that the $1.1 billion^b of permanent disallowances represents a material earnings and equity hit that management has already accounted for in its framing.

02—Key points

Key Highlights

SCE would recover 60% of approximately $2.7 billion in TKM-related losses and costs (about $1.6 billion) if the CPUC approves the settlement with the Public Advocates Office.
Approximately $1.1 billion (about 40%) of WEMA-related costs would be permanently disallowed, including $125 million of uninsured claims SCE previously waived under the 2021 SED Agreement.
SCE would recover about $55 million (85%) of roughly $65 million in restoration costs for the Thomas and Koenigstein fires.
SCE agreed to $50 million of shareholder-funded wildfire and public safety system enhancements.
If approved, after-tax equity charges and associated debt from disallowed or shareholder-funded costs would be permanently excluded from SCE's CPUC regulatory capital structure.
Management models ~40-50 bps FFO-to-debt improvement and ~$35 million lower annual interest expense per $1 billion recovered, with potential avoided excess financing costs of up to $4.9 billion over 10 years.
Securitized bond proceeds are expected by end of 2025 at the earliest, after a 30-day comment period, a proposed decision in 3-6 months, and a further 6-month securitization approval process.

03—Questions

Frequently Asked Questions

How much of the TKM-related costs will SCE actually recover?
If the CPUC approves the settlement, SCE would recover 60% of the approximately $2.7 billion in WEMA losses and costs (about $1.6 billion) and 85% of restoration costs (about $55 million of $65 million). The remaining roughly $1.1 billion is permanently disallowed to shareholders.
Is the settlement final?
No. It is subject to CPUC approval. Parties to the proceeding have 30 days to comment, and other parties may oppose or take no position. SCE anticipates a proposed decision within 3-6 months after the comment period, followed by a separate application for securitized bond financing.
How will the recovered WEMA amounts be financed and when will SCE receive the cash?
SCE plans to finance the authorized WEMA amounts through securitized bonds, which would require a separate CPUC application expected to take about 6 months. SCE anticipates receiving securitized bond proceeds by the end of 2025, assuming timely approvals.
What is the expected financial benefit to Edison International and its customers?
Management estimates that each $1 billion of cost recovery could improve FFO-to-debt by roughly 40-50 bps and reduce interest expense by about $35 million (about 9 cents per share). Using securitization proceeds to pay down debt and avoiding excess financing costs for future SCE debt could total up to $4.9 billion over ten years, and customer bill impact is estimated at $0.63 per month per $1 billion recovered, offset by avoided financing costs.
Why does the settlement matter for SCE's equity and capital structure?
If approved, SCE would be permanently allowed to exclude after-tax charges to equity from the disallowed or shareholder-funded costs, along with the associated debt, from its CPUC regulatory capital structure. This limits the lasting impact of the disallowances on the authorized equity base used in rate setting.

04—Continue

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