Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
---------------------------------------
Commission File Number 1-9936
EDISON INTERNATIONAL
(Exact name of registrant as specified in its charter)
California 95-4137452
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2244 Walnut Grove Avenue (818) 302-2222
Rosemead, California 91770 (Registrant's telephone
(Address of principal (Zip Code) number, including area code)
executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- ----------------------
Common Stock New York and Pacific
(also listed on London
Exchange)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of registrant's voting stock held by
non-affiliates was approximately $9,129,054,724.50 on or about March 21,
1997, based upon prices reported on the New York Stock Exchange. As of
March 21, 1997, there were 419,726,654 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents listed below have been incorporated
by reference into the parts of this report so indicated.
(1) Designated portions of the Annual Report
to Shareholders for the year ended
December 31, 1996. . . . . . . . . . . . . . . . . . Parts I, II and IV
(2) Designated portions of the Joint Proxy
Statement relating to registrant's 1997
Annual Meeting of Shareholders . . . . . . . . . Part III
PAGE
TABLE OF CONTENTS
Item Page
- ---- ----
Part I
1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Business of Edison International . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Competitive Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Regulation of Edison International. . . . . . . . . . . . . . . . . . . . . . . 5
Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Business of SCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Regulation of SCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Rate Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Fuel Supply and Purchased Power Costs . . . . . . . . . . . . . . . . . . . . . 13
Business of The Nonutility Companies . . . . . . . . . . . . . . . . . . . . . . . . 14
2. Properties of SCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Existing Utility Generating Facilities. . . . . . . . . . . . . . . . . . . . . 17
SCE Construction Program and Capital Expenditures . . . . . . . . . . . . . . . 19
Nuclear Power Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
PMNC Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
QF Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Environmental Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
San Onofre Personal Injury Litigation . . . . . . . . . . . . . . . . . . . . . 24
Employment Discrimination Litigation. . . . . . . . . . . . . . . . . . . . . . 26
Oil Pipeline Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . 27
Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . 27
Part II
5. Market for Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7. Management's Discussion and Analysis of Results of
Operations and Financial Condition. . . . . . . . . . . . . . . . . . . . . . . 36
8. Financial Statements and Supplementary Data. . . . . . . . . . . . . . . . . . . . . 36
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . 36
Part III
10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . 36
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
12. Security Ownership of Certain Beneficial Owners and
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . 36
Part IV
14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Report of Independent Public Accountants on Supplemental
Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Supplemental Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
PAGE
PART I
Item 1. Business
Business of Edison International
Edison International was incorporated on April 20, 1987, under the laws
of the State of California for the purpose of becoming the parent holding
company of Southern California Edison Company ("SCE"), a California public
utility corporation. As of December 31, 1996, Edison International owned
all of the issued and outstanding common stock of SCE and of other
subsidiaries engaged in nonutility businesses (the "Nonutility
Companies"). These Nonutility Companies are: Edison Mission Energy,
engaged in developing, owning and operating independent power facilities;
Edison Capital, a provider of capital and financial services for energy
and infrastructure projects; Mission Land, in the business of managing and
selling existing real estate projects; Edison Source, providing energy and
environmental services to businesses; Edison EV, supporting the emerging
electric vehicle market; and Edison Select, providing consumer products
and services.
Edison International is engaged in the business of holding for investment
the stock of its subsidiaries. For the year ended December 31, 1996, SCE
and the Nonutility Companies accounted for 87% and 13%, respectively, of
the net income of Edison International. At year end 1996, SCE had 12,057
full-time employees. At year-end 1996, Edison International had 16 full-
time employees, Edison Mission Energy had 940 full-time employees, and
Edison Capital had 70 full-time employees, Edison Source had 50 full-time
employees, Edison EV had 17 full-time employees, and Edison Select had 10
full-time employees.
The principal executive offices of Edison International are located at
2244 Walnut Grove Avenue, Rosemead, California 91770, and its telephone
number is (818) 302-2222.
Competitive Environment
SCE currently operates in a highly regulated environment in which it has
an obligation to provide electric service to customers in return for an
exclusive franchise within its service territory. This regulatory
environment is changing. The generation sector has experienced
competition from nonutility power producers and regulators are
restructuring California's electric utility industry.
On September 23, 1996, the State of California enacted legislation to
provide a transition to a competitive market structure. The legislation
substantially adopts the CPUC's December 1995 restructuring decision
(discussed below) by addressing stranded-cost recovery for utilities,
providing a certain cost recovery time period for the transition costs
associated with utility-owned generation-related assets. Transition costs
related to power-purchase contracts would be recovered through the terms
of their contracts while most of the remaining transition costs would be
recovered through 2001. The legislation also includes provisions to
finance a portion of the stranded costs that residential and small
commercial customers would have paid between 1998 and 2001, thereby
allowing SCE to give a rate reduction of at least 10% to these customers,
beginning January 1, 1998. The financing would occur with securities
issued by the California Infrastructure and Economic Development Bank, or
an entity approved by the Bank. The legislation includes a rate freeze
for all other customers, including large commercial and industrial
customers, as well as provisions for continued funding for energy
conservation, low-income programs and renewable resources. Despite the
rate freeze, SCE expects to be able to recover its revenue requirement
based on cost-of-service regulation during the 1998-2001 transition
period. In addition, the legislation mandates the implementation of
a non-bypassable competition transition charge (CTC) that provides
page 1
utilities the opportunity to recover costs made uneconomic by electric
utility restructuring. Finally, the legislation contains provisions for
the recovery (through 2006) of reasonable employee-related transition
costs incurred and projected for retraining, severance, early retirement,
outplacement and related expenses for utility workers. In light of the
legislation, the CPUC has indicated that it need not prepare an
environmental impact report in connection with its December 1995
restructuring policy decision.
In December 1995, the CPUC issued its decision on restructuring
California's electric utility industry. The transition to a new market
structure, which is expected to provide competition and customer choice,
would begin January 1, 1998, with all consumers participating by 2003
(changed to 2002 by the recently enacted legislation). Key elements of
the CPUC decision include:
o Creation of an independent power exchange (PX) to manage electric
supply and demand. California's investor-owned utilities would be
required to purchase from and sell to the PX all of their power
during the transition period, while other generators could
voluntarily participate.
o Creation of an independent system operator (ISO) to have
operational control of the utilities' transmission facilities and,
therefore, control the scheduling and dispatch of all electricity
on the state's power grid.
o Availability of customer choice through time-of-use rates, direct
customer access to generation providers with transmission
arrangements through the system operator, and customer-arranged
"contracts for differences" to manage price fluctuations from the
PX.
o Recovery of costs to transition to a competitive market (utility
investments, obligations incurred to serve customers under the
existing framework and reasonable employee-related costs) through
a non-bypassable charge, applied to all customers, called the CTC.
o CPUC-established incentives to encourage voluntary divestiture
(through spin-off or sale to an unaffiliated entity) of at least
50% of utilities' gas-fueled generation to address market power
issues.
o Performance-based ratemaking (PBR) for those utility services not
subject to competition.
In April 1996, SCE, Pacific Gas & Electric Company and San Diego Gas &
Electric Company filed a proposal with the FERC regarding the creation of
the PX and the ISO. On November 26, 1996, the FERC conditionally accepted
the proposal and directed the three utilities to file more specific
information by March 31, 1997. In July 1996, the three utilities jointly
filed an application with the CPUC requesting approval to establish a
restructuring trust which would obtain loans up to $250 million for the
development of the ISO and PX through January 1, 1998. The loans would
be backed by utility guarantees; SCE's share would be 45%. Once the ISO
and PX are formed, they will repay the trust's loans and recover funds
from future ISO and PX customers. In August 1996, the CPUC issued an
interim order establishing the restructuring trust and the funding level
of $250 million which will be used to build the hardware and software
systems for the ISO and PX.
Recovery of costs to transition to a competitive market would be
implemented through a non-bypassable CTC. This charge would apply to all
customers who were using or began using utility services on or after the
December 20, 1995, decision date. In August 1996, in compliance with the
CPUC's restructuring decision, SCE filed its application to estimate its
page 2
1998 transition costs. In October 1996, SCE amended its transition cost
filing to reflect the effects of the legislation enacted in September
1996. Under the rate freeze codified in the legislation, the CTC will be
determined residually (i.e., after subtracting other cost components for
the PX, transmission and distribution (T&D), nuclear decommissioning and
public benefit programs). Nevertheless, the CPUC directed that the
amended application provide estimates of SCE's potential transition costs
from 1998 through 2030. SCE provided two estimates between approximately
$13.1 billion (1998 net present value), assuming the fossil plants have
a market value equal to their net book value, and $13.8 billion (1998 net
present value), assuming the fossil plants have no market value. These
estimates are based on incurred costs, and forecasts of future costs and
assumed market prices. However, changes in the assumed market prices
could materially affect these estimates. The potential transition
cost estimates are comprised of: $7.5 billion from SCE's qualifying
facility contracts, which are the direct result of legislative and
regulatory mandates; and $5.6 billion to $6.3 billion from costs
pertaining to certain generating plants and regulatory commitments
consisting of costs incurred (whose recovery has been deferred by the
CPUC) to provide service to customers. Such commitments include the
recovery of income tax benefits previously flowed-through to customers,
postretirement benefit transition costs, accelerated recovery of San
Onofre and Palo Verde and certain other costs. An update to the CTC was
filed by SCE on February 14, 1997, to reflect approval by the CPUC of
settlements regarding ratemaking of SCE's share of the Palo Verde Nuclear
Generating Station and the buyout of a power purchase agreement with
Portland General Electric, as well as other minor data updates. No
substantive changes in the total CTC estimates were included.
On November 27, 1996, SCE filed an application with the CPUC to
voluntarily divest, by auction, all of its oil- and gas-fueled generation
assets. This application builds on SCE's March 1996 plan which outlined
how SCE proposed to divest 50% of these assets. Under the new proposal,
SCE would continue to operate and maintain the divested power plants for
at least two years following their sale, as mandated by the recent
restructuring legislation. In addition, SCE would offer workforce
transition programs to those employees who may be impacted by divestiture-
related job reductions. SCE's proposal is contingent on the overall
electric industry restructuring implementation process continuing on a
satisfactory path. CPUC approval of the oil-and gas-fueled generation
divestiture was requested for late 1997.
In September 1996, the CPUC adopted a non-generation T&D PBR mechanism for
SCE which began on January 1, 1997. According to the CPUC decision,
beginning in 1998, the transmission portion controlled by the ISO is to
be separated from non-generation PBR and subject to ratemaking under the
rules of the FERC. The distribution-only PBR will extend through December
2001. Key elements of the non-generation PBR include: T&D rates indexed
for inflation based on the Consumer Price Index less a productivity
factor; elimination of the kilowatt-hour sales adjustment; adjustments for
cost changes that are not within SCE's control; a cost of capital trigger
mechanism based on changes in a bond index; standards for service
reliability and safety; and a net revenue-sharing mechanism that
determines how customers and shareholders will share gains and losses from
T&D operations. In July 1996, SCE filed a PBR proposal for its
hydroelectric plants and a proposed structure for performance-based local
reliability contracts for certain fossil-fueled plants. If approved, the
hydro PBR would be in effect for three years and the initial terms of the
local reliability contracts, which are subject to FERC approval, would be
in effect for up to three years, both beginning January 1, 1998. A final
CPUC decision on hydro PBR is expected by year-end 1997.
In July 1996, SCE filed a proposal with the CPUC related to the conceptual
aspects of separating the costs associated with generation, transmission,
distribution, public benefit programs and the CTC. The filing was in
response to CPUC and FERC directives which require electric services, such
page 3
as T&D, to be functionally separate and available to all customers on a
nondiscriminatory basis without cost-shifting among customers. On
December 6, 1996, SCE filed a more comprehensive plan for the functional
unbundling of SCE's rates for electric service, beginning on January 1,
1998. In response to CPUC and FERC orders, as well as the new
restructuring legislation, this filing addressed the implementation-level
detail for the functional unbundling of rates in separate charges for
energy, transmission, distribution, the CTC, public benefit programs and
nuclear decommissioning. The filing also included proposals for
establishing new regulatory proceedings to replace current proceedings
that will no longer be necessary during the rate freeze period.
Although depreciation-related differences could result from applying a
regulatory prescribed depreciation method (straight-line, remaining-life
method) rather than a method that would have been applied absent the
regulatory process, SCE believes that the depreciable lives of its
generation-related assets would not vary significantly from that of an
unregulated enterprise, as the CPUC bases depreciable lives on periodic
studies that reflect the physical useful lives of the assets. SCE also
believes that any depreciation-related differences would be recovered
through the CTC.
If events occur during the restructuring process that result in all or a
portion of the CTC being improbable of recovery, SCE could have write-offs
associated with these costs if they are not recovered through another
regulatory mechanism. At this time, SCE cannot predict what other
revisions will ultimately be made during the restructuring process in
subsequent proceedings or implementation phases, or the effect, after the
transition period, that competition will have on its results of operations
or financial position.
Subsequent Event
If the CPUC's restructuring is implemented as outlined, SCE would be
allowed to recover its CTC (subject to a lower return on equity) and
believes it should be allowed to continue to apply accounting standards
that recognize the economic effects of rate regulation for its generation-
related assets during the 1998-2001 transition period. However, in
response to a request by the staff of the Securities and Exchange
Commission (SEC), in December 1996, SCE submitted its views on the
continued applicability of regulatory accounting standards for its
generation-related assets. In its submittal, SCE and its independent
accountants jointly concluded that, based on their current analysis, SCE
will continue to meet the criteria for applying these accounting standards
through the 1998-2001 transition period. In its February 1997 response,
the SEC staff expressed continuing concern with SCE's conclusion and
indicated that they wanted to meet further with SCE and the other major
California electric utilities to resolve this matter. SCE and its
independent accountants continue to believe that SCE meets such criteria
and met with the SEC staff in March 1997 and presented additional and
clarifying information seeking to convince the SEC staff of the merits of
SCE's position. Following the meeting, the SEC staff submitted additional
questions to SCE and the other major California electric utilities. The
companies are preparing responses for submittal to the SEC staff. The
authority to require SCE to discontinue applying regulatory accounting
standards rests with the SEC. If SCE is required to discontinue the
application of these accounting standards for its generation-related
assets, it would have to write off generation-related regulatory assets,
which at December 31, 1996, totaled approximately $600 million on an
after-tax basis, primarily for the recovery of income tax benefits
previously flowed-through to customers, the Palo Verde phase-in plan and
unamortized loss on reacquired debt.
SCE believes that a proper application of regulatory accounting standards
will result in it no longer meeting the criteria to apply these accounting
standards to all of its non-hydroelectric generation-related assets after
page 4
the end of the 1998-2001 transition period. If SCE continues the
application of these accounting standards during the transition period,
but during the transition period events occur that result in SCE no longer
meeting the criteria for applying such standards, SCE may be required to
write off the remaining balance of its recorded generation-related
regulatory assets existing at that time.
If a non-cash write-off is required, SCE believes that it should not
affect the stranded-cost recovery plans set forth in the CPUC's December
1995 restructuring decision and legislation enacted by the State of
California in September 1996.
Unbundling of Distribution Services
On October 25, 1996, the CPUC issued an Order directing SCE to submit
comments on, and cost estimates for, providing metering, billing, and
related customer services. The CPUC issued the Order in connection with
its ongoing investigation of the policies governing the restructuring of
California's electric services industry. The purpose of this aspect of
the CPUC's investigation is to determine the extent to which, if at all,
nonutility energy service providers should be allowed to offer metering,
billing, and related customer services, which currently are provided
exclusively by SCE as part of its franchise service obligation. Such
"unbundling" would expose SCE to competition in the provision of these
services and create the potential for stranded costs. SCE submitted
comments in compliance with the CPUC's Order on December 20, 1996. SCE
submitted further comments on January 21, 1997 and February 7, 1997. The
CPUC held a full-panel hearing on these matters on January 15, 1997,
following which the Administrative Law Judge issued a proposed decision
recommending that the CPUC "unbundle" metering and billing services in
early 1998. SCE filed opening comments on the proposed Decision on March
6, 1997; on March 11, SCE submitted reply comments. The CPUC is expected
to issue a decision setting forth its proposed policies in the second
quarter of 1997. The CPUC is not bound by the proposed decision: they may
accept it in whole or part, or may reject it and consider the matter
further. Due to the uncertainty surrounding any future policies the CPUC
may adopt with respect to unbundling, SCE is unable to provide an estimate
of the potential financial impact of such policies.
Automated Meter Reading Proposal
SCE is developing a pilot automated meter reading (AMR) network capable
of reading 20-50,000 meters at the cost of $12 million. The installation
is underway and should be completed in 1997. If successful, SCE expects
to proceed with full-scale deployment to 85 percent (3.6 million) of its
customers. The full project would start in late 1997 and take four years
to complete at an estimated capital cost of $350 million. The AMR system
would allow SCE to read meters from a remote location and enable customers
to respond to hourly price signals envisioned by electric restructuring
beginning in January 1, 1998. Some of these costs would be offset by
savings in operations and maintenance expenses, due to the reduction of
manual meter reading. The net cost is expected to be approximately $75
million. On December 20, 1996, as part of its comments on unbundling (see
above), SCE presented its AMR proposal to the CPUC. In the comments, SCE
proposed the net cost of the project would be included in rates after the
rate freeze required by Assembly Bill 1890 in 2002. As previously noted,
SCE is expecting a CPUC decision concerning the unbundling of revenue
cycle services and its AMR proposal in the second quarter of 1997.
Regulation of Edison International
Edison International and its subsidiaries are exempt from all provisions,
except Section 9(a)(2), of the Public Utility Holding Company Act of 1935
("Holding Company Act") on the basis that Edison International and SCE
are incorporated in the same state and their business is predominately
intrastate in character and carried on substantially in the state of
page 5
incorporation. It is necessary for Edison International to file an annual
exemption statement with the Securities and Exchange Commission ("SEC"),
and the exemption may be revoked by the SEC upon a finding that the
exemption may be detrimental to the public interest or the interest of
investors or consumers. Edison International has no intention of becoming
a registered holding company under the Holding Company Act.
Edison International is not a public utility under the laws of the State
of California and is not subject to regulation as such by the CPUC. See
"Business of Southern California Edison Company--Regulation of SCE" below
for a description of the regulation of SCE by the CPUC. However, the
CPUC decision authorizing SCE to reorganize into a holding company
structure contains certain conditions, which, among other things, ensure
the CPUC access to books and records of Edison International and its
affiliates which relate to transactions with SCE; require Edison
International and its subsidiaries to employ accounting and other
procedures and controls to ensure full review by the CPUC and to protect
against subsidization of nonutility activities by SCE's customers; require
that all transfers of market, technological or similar data from SCE to
Edison International or its affiliates be made at market value; preclude
SCE from guaranteeing any obligations of Edison International without
prior written consent from the CPUC; provide for royalty payments to be
paid by Edison International or its subsidiaries in connection with the
transfer of product rights, patents, copyrights or similar legal rights
from SCE; and prevent Edison International and its subsidiaries from
providing certain facilities and equipment to SCE except through
competitive bidding. In addition, the decision provides that SCE shall
maintain a balanced capital structure in accordance with prior CPUC
decisions, that SCE's dividend policy shall continue to be established by
SCE's Board of Directors as though SCE were a comparable stand-alone
utility company, and that the capital requirements of SCE, as determined
to be necessary to meet SCE's service obligations, shall be given first
priority by the Boards of Directors of Edison International and SCE.
Environmental Matters
Legislative and regulatory activities in the areas of air and water
pollution, waste management, hazardous chemical use, noise abatement, land
use, aesthetics and nuclear control continue to result in the imposition
of numerous restrictions on Edison International's operation of existing
facilities, on the timing, cost, location, design, construction and
operation by Edison International of new facilities, and on the cost of
mitigating the effect of past operations on the environment. These
activities substantially affect future planning and will continue to
require modifications of Edison International's existing facilities and
operating procedures. Edison International is unable to predict the
extent to which additional regulations may affect its operations and
capital expenditure requirements.
The Clean Air Act provides the statutory framework to implement a program
for achieving national ambient air quality standards in areas exceeding
such standards and provides for maintenance of air quality in areas
already meeting such standards. The Clean Air Act was amended in 1990,
giving the South Coast Air Quality Management District ("SCAQMD") 20 years
to achieve the federal air quality standards for ozone. The SCAQMD's 1997
Air Quality Management Plan ("AQMP") Update, adopted in November 1996,
demonstrates a commitment to attain the federal ozone air quality standard
by 2010. Consistent with the requirements of the AQMP and the Clean Air
Act Amendments of 1990 ("CAAA"), the SCAQMD adopted rules to reduce
emissions of oxides of nitrogen ("NOx") from combustion turbines, internal
combustion engines, industrial coolers and utility boilers. On October
15, 1993, the SCAQMD adopted the Regional Clean Air Incentives Market
("RECLAIM") which replaces most of the previous rule requirements with a
market mechanism for NOx emission trading (trading credits). RECLAIM
will, however, require SCE to significantly reduce NOx emissions through
retrofit or purchase of trading credits on all basin generation by 2003.
page 6
In Ventura County, a NOx rule was adopted requiring more than an 88% NOx
reduction by June 1996 at all utility boilers. SCE has installed the
required NOx controls in Ventura County.
The CAAA does not require any significant additional emissions control
expenditures that are identifiable at this time. The amendments call for
a five-year study of the sources and causes of regional haze in the
southwestern U.S. Also, the Environmental Protection Agency ("EPA") and
SCE will conclude a cooperative tracer study of SO2 emissions from the
Mohave Coal Generating Station in late 1997 or mid- to late- 1998. This
study is evaluating potential impact from Mohave emissions on haze within
Grand Canyon National Park. The extent to which these studies may require
sulfur dioxide emissions reductions at the Mohave plant is not known. The
acid rain provisions of the amended Clean Air Act also put an annual limit
on sulfur dioxide emissions allowed from power plants. SCE has received
more sulfur dioxide allowances than it requires for its projected
operations. As a result of a petition by Mohave County in the State of
Arizona, the Nevada Department of Environmental Protection ("NDEP")
studied the impact of the plume from the Mohave plant on the Mohave area
air quality. The regulatory outcome required SCE to meet a new lower
opacity limit in early 1994. The NDEP reviewed SCE's performance relative
to the opacity limit again in 1995 and determined to retain the current
standard. Until more definitive information on tracer study results are
available, SCE expects to meet all the present regulations through
improved operations at the plant.
The CAAA also requires the EPA to carry out a three-year study of risk to
public health from emissions of toxic air contaminants from power plants,
and to regulate such emissions only if required. The study has not been
completed by EPA to date.
Regulations under the Clean Water Act require permits for the discharge
of certain pollutants into waters of the U.S. Under this act, the EPA
issues effluent limitation guidelines, pretreatment standards and new
source performance standards for the control of certain pollutants.
Individual states may impose even more stringent limitations. In order
to comply with guidelines and standards applicable to steam electric power
plants, SCE incurs additional expenses and capital expenditures. SCE
presently has discharge permits for all applicable facilities.
The Safe Drinking Water and Toxic Enforcement Act prohibits the exposure
to individuals of chemicals known to the State of California to cause
cancer or reproductive harm and the discharge of such listed chemicals
into potential sources of drinking water. Additional chemicals are
continuously being put on the state's list, requiring constant monitoring.
The State of California has adopted a policy discouraging the use of fresh
water for plant cooling purposes at inland locations. Such a policy, when
taken in conjunction with existing federal and state water quality
regulations and coastal zone land use restrictions, could substantially
increase the difficulty of siting new generating plants anywhere in
California.
The Resource Conservation and Recovery Act ("RCRA") provides the statutory
authority for the EPA to implement a regulatory program for the safe
treatment, recycling, storage and disposal of solid and hazardous wastes.
There is an unresolved issue regarding the degree to which coal wastes
should be regulated under RCRA. Increased regulation may result in an
increase in expenses related to the operation of Mohave.
The Toxic Substances Control Act and accompanying regulations govern the
manufacturing, processing, distribution in commerce, use and disposal of
polychlorinated biphenyls, a toxic substance used in certain electrical
equipment ("PCB waste"). Current costs for disposal of PCB waste are
immaterial.
page 7
Edison International records its environmental liabilities when site
assessments and/or remedial actions are probable and a range of reasonably
likely cleanup costs can be estimated. Edison International reviews its
sites and measures the liability quarterly, by assessing a range of
reasonably likely costs for each identified site using currently available
information, including existing technology, presently enacted laws and
regulations, experience gained at similar sites, and the probable level
of involvement and financial condition of other potentially responsible
parties. These estimates include costs for site investigations,
remediation, operations and maintenance, monitoring and site closure.
Unless there is a probable amount, Edison International records the lower
end of this reasonably likely range of costs (classified as other long-
term liabilities at undiscounted amounts). While Edison International has
numerous insurance policies that it believes may provide coverage for some
of these liabilities, it does not recognize recoveries in its financial
statements until they are realized.
Edison International's recorded estimated minimum liability to remediate
its 56 identified sites (55 at SCE and 1 at Edison Mission Energy) was
$114 million at December 31, 1996. The ultimate costs to clean up Edison
International's identified sites may vary from its recorded liability due
to numerous uncertainties inherent in the estimation process, such as:
the extent and nature of contamination; the scarcity of reliable data for
identified sites; the varying costs of alternative cleanup methods;
developments resulting from investigatory studies; the possibility of
identifying additional sites; and the time periods over which site
remediation is expected to occur. Edison International believes that, due
to these uncertainties, it is reasonably possible that cleanup costs could
exceed its recorded liability by up to $211 million. The upper limit of
this range of costs was estimated using assumptions least favorable to
Edison International among a range of reasonably possible outcomes.
The CPUC allows SCE to recover environmental-cleanup costs at 35 of its
sites, representing $101 million of Edison International's recorded
liability, through an incentive mechanism (SCE may request to include
additional sites). Under this mechanism, SCE will recover 90% of cleanup
costs through customer rates; shareholders fund the remaining 10%, with
the opportunity to recover these costs through insurance and other third-
party recoveries. SCE has successfully settled insurance claims with all
responsible carriers. Costs incurred at SCE's remaining 20 sites are
expected to be recovered through customer rates. SCE has recorded a
regulatory asset of $104 million for its estimated minimum environmental-
cleanup costs expected to be recovered through customer rates.
Edison International's identified sites include several sites for which
there is a lack of currently available information, including the nature
and magnitude of contamination and the extent, if any, that Edison
International may be held responsible for contributing to any costs
incurred for remediating these sites. Thus, no reasonable estimate of
cleanup costs can be made for these sites at this time.
Edison International expects to clean up its identified sites over a
period of up to 30 years. Remediation costs in each of the next several
years are expected to range from $4 million to $8 million. Recorded costs
for 1996 were $7 million.
Based on currently available information, Edison International believes
it is unlikely that it will incur amounts in excess of the upper limit of
the estimated range and, based upon the CPUC's regulatory treatment of
environmental-cleanup costs, Edison International believes that costs
ultimately recorded will not have a material adverse effect on its results
of operations or financial position. There can be no assurance, however,
that future developments, including additional information about existing
sites or the identification of new sites, will not require material
revisions to such estimates.
page 8
Edison International's capital expenditures for environmental protection
for the years 1997 through 2001 are projected to be $900 million. These
expenditures are mainly for aesthetics treatment, including undergrounding
certain transmission and distribution lines.
Business of SCE
SCE was incorporated under California law in 1909. SCE is a public
utility primarily engaged in the business of supplying electric energy to
a 50,000 square-mile area of central and southern California, excluding
the City of Los Angeles and certain other cities. This area includes some
800 cities and communities and a population of more than 11 million
people. SCE had 12,057 full-time employees at year-end 1996. During
1996, 39% of SCE's total operating revenue was derived from residential
customers, 37% from commercial customers, 12% from industrial customers,
7% from public authorities, 4% from agricultural and other customers and
1% from resale customers. SCE comprises the major portion of the assets
and revenues of Edison International, its parent holding company.
Regulation of SCE
SCE's retail operations are subject to regulation by the CPUC. The CPUC
has the authority to regulate, among other things, retail rates, issuances
of securities and accounting practices. SCE's wholesale operations are
subject to regulation by the FERC. The FERC has the authority to regulate
wholesale rates as well as other matters, including transmission service
pricing, accounting practices and licensing of hydroelectric projects.
SCE is subject to the jurisdiction of the Nuclear Regulatory Commission
("NRC") with respect to its nuclear power plants. NRC regulations govern
the granting of licenses for the construction and operation of nuclear
power plants and subject those power plants to continuing review and
regulation.
The construction, planning and siting of SCE's power plants within
California are subject to the jurisdiction of the California Energy
Commission and the CPUC. SCE is subject to rules and regulations of the
California Air Resources Board and local air pollution control districts
with respect to the emission of pollutants into the atmosphere, the
regulatory requirements of the California State Water Resources Control
Board and regional boards with respect to the discharge of pollutants into
waters of the state and the requirements of the California Department of
Toxic Substances Control with respect to handling and disposal of
hazardous materials and wastes. SCE is also subject to regulation by the
EPA, which administers certain federal statutes relating to environmental
matters. Other federal, state and local laws and regulations relating to
environmental protection, land use and water rights also affect SCE.
The California Coastal Commission has continuing jurisdiction over the
coastal permit for San Onofre Units 2 and 3. Although the units are
operating, the permit's mitigation requirements have not yet been
fulfilled. California Coastal Commission jurisdiction may continue for
several years due to implementation and oversight of permit mitigation
conditions, including restoration of wetlands and construction of an
artificial reef for kelp.
The Department of Energy has regulatory authority over certain aspects of
SCE's operations and business relating to energy conservation, solar
energy development, power plant fuel use and disposal, coal conversion,
electric sales for export, public utility regulatory policy and natural
gas pricing.
page 9
Rate Matters
CPUC Retail Ratemaking
The rates for electricity provided by SCE to its retail customers comprise
several major components established by the CPUC to compensate SCE for
basic business and operational costs, fuel and purchased-power costs, and
the costs of adding major new facilities.
Basic business and operational costs are recovered through base rates,
which are determined in general rate case proceedings held before the CPUC
every three years. CPUC decisions on SCE's PBR proposals (discussed under
Competitive Environment) and the ongoing electric industry restructuring
(discussed above) could affect the need for future general rate case
proceedings. During a general rate case, the CPUC critically reviews
SCE's operations and general costs to provide service (excluding energy
costs and, in certain instances, major plant additions). The CPUC then
determines the revenue requirement to cover those costs, including items
such as depreciation, taxes, operation, maintenance, and administrative
and general expenses. The revenue requirement is forecasted on the basis
of a specified test year. Following the revenue requirement phase of a
general rate case, SCE and the CPUC proceed to a rate design phase which
allocates revenue requirements and establishes rate levels for customers.
SCE's fuel, purchased-power and energy-related costs of providing electric
service are recovered through a balancing account mechanism called the
Energy Cost Adjustment Clause ("ECAC"). Under the ECAC balancing account
procedure, actual fuel, purchased-power and energy-related revenue and
costs are compared and the difference is recorded as either an
undercollection or overcollection. The amount recorded in the balancing
account is periodically amortized through rate changes which return
overcollections to customers by reducing rates or collect undercollections
from customers by increasing rates. The costs recorded in the ECAC
balancing account are subject to reasonableness reviews by the CPUC. The
reasonableness of execution and the ongoing administration of all
purchased-power contracts including contracts with QFs is also reviewed
in ECAC proceedings by the CPUC. During recent ECAC periods, in excess
of $2.5 billion in costs arising from such contracts has annually been
submitted for CPUC review. The CPUC has not yet completed its review of
all of SCE's energy and fuel related costs for the period April 1, 1990,
to the present. Certain incentive provisions are included in the ECAC
that can affect the amount of fuel and energy-related costs actually
recovered. SCE is required to make an ECAC filing for each calendar year,
and must also make a second filing for a mid-year adjustment if it would
result in an ECAC rate change exceeding 5% of total annual revenue.
The CPUC has also adopted a Nuclear Unit Incentive Procedure ("NUIP")
which provides for a sharing of additional energy costs or savings between
SCE and its ratepayers when operation of any of the units of San Onofre
or Palo Verde Units is outside a specified range (55% to 80% of each
unit's capacity factor). The NUIP ended for San Onofre Units 2 and 3 at
the end of fuel cycle number seven which occurred on May 23, 1995, and
September 26, 1995, respectively. The CPUC also modified the NUIP for
Palo Verde Units 1, 2 and 3. The NUIP for Palo Verde will continue
through December 31, 2001, for purposes of calculating a reward only. The
current NUIP period, which would have included the average of Fuel Cycles
6 and 7, was adjusted for Palo Verde to include only Fuel Cycle 6. If any
of the three Palo Verde units operate above an 80% Gross Capacity Factor
(GCF) for a subsequent fuel cycle within the period, the NUIP reward will
be calculated based on the difference between the additional variable cost
and the market price (or replacement power cost until the market becomes
operational) for the output above an 80% GCF. Any NUIP reward based upon
a fuel cycle not completed by December 31, 2001 will be calculated on a
pro-rata basis ending November 1, 2001.
page 10
The Electric Revenue Adjustment Mechanism reflects the difference between
the recorded and authorized level of base rate revenue. The CPUC adopted
this mechanism primarily to minimize the effect on earnings of
fluctuations in retail kilowatt-hour sales.
Energy Cost Adjustment Clause ("ECAC")
A CPUC decision related to SCE's 1996 authorized revenue for fuel and
purchased power was issued on February 23, 1996. At issue was the
treatment of a $237 million overcollection in ECAC. The CPUC ordered a
one-time credit applied to customer bills in 1996. SCE's 1996
CPUC-authorized revenue, including the effects of other rate actions, was
reduced by $338 million or 4.4%. SCE was required to credit customer
bills in June 1996 and did refund the $237 million overcollection referred
to above.
1992 Annual ECAC Application
SCE filed its testimony in the QF reasonableness phase of SCE's 1992 ECAC
proceeding on September 1, 1992. On January 16, 1996, the CPUC's Office
of Ratepayer Advocates ("ORA") released its report on QF reasonableness
for both the 1992 record period and as to issues that had been reserved
from the 1991 ECAC proceeding. The report recommends: (1) disallowances
of $8,678,458 for the 1992 record period and $8,039,177 for the 1991
record period attributable to alleged deficiencies in how SCE administers
the firm capacity payment provisions in its agreements with QFs; (2)
disallowances of $5,904,143 for the 1992 record period and $5,007,701 for
the 1991 record period regarding QF sales of energy that exceed the
nameplate ratings specified by the QF in Interim Standard Offer No. 4
(ISO4) contracts and negotiated contracts containing similar payment
provisions; and (3) disallowances of $21,150 for the 1992 record period
and $21,751 for the 1991 record period relating to purchases of as-
available capacity from QFs in excess of the nameplate ratings specified
by the QF in ISO4 and similar contracts. The report requests that such
disallowances be assessed on a continuing basis until SCE ends its
challenged practices in these areas. No schedule has been set for further
testimony or hearings on these issues.
1994 Annual ECAC Application
In May 1994, SCE filed its testimony in the non-Qualifying Facilities
phase of the 1994 Energy Cost Adjustment Clause proceeding. In May 1995,
the ORA filed its report on the reasonableness of SCE's gas supply costs
for both the 1993 and 1994 record periods. The report recommends a
disallowance of $13.3 million for excessive costs incurred from November
1993 through March 1994 associated with SCE's Canadian gas purchase and
supply contracts. The report requests that the CPUC defer finding SCE's
Canadian supply and transportation agreements reasonable for the duration
of their terms and that the costs under these contracts be reviewed on a
yearly basis. In October 1996, the ALJ consolidated the hearings for gas
reasonableness issues in A. 95-05-049 covering the period April 1, 1994
through March 31, 1995 with the 1994 Application. ORA has recommended a
disallowance of $37.5 million for excessive costs for the 1995 record
period. If formation of these contracts is not found reasonable by the
CPUC, any costs found unreasonable would be disallowed in subsequent
record periods. An adverse ruling by the CPUC on contract reasonableness
could also affect SCE's future recovery of any termination costs
associated with these contracts. SCE and ORA have filed several rounds
of testimony on this issue. Hearings began in January 1997 and concluded
in February 1997. A decision is expected in late 1997.
1995 Annual ECAC Application
SCE filed its Reasonableness of Operations testimony on May 26, 1996. The
non-QF report addresses power purchases and exchanges, and the operation
of hydro, coal, gas and nuclear resources for the period April 1, 1994,
page 11
through March 31, 1995. In May 1996, the ORA issued its reasonableness
report on several reasonableness issues. The Report recommends a
$6,623,936 disallowance for replacement fuel expenses associated with 64
outage days due to the Palo Verde Nuclear Generating Station Unit 2 steam
generator tube rupture in 1993. In February 1997, SCE filed its rebuttal
testimony addressing these issues. No schedule has been set for the
reasonableness phase.
On October 4, 1996, the ORA issued its report on SCE's Canadian gas
procurement contracts discussed above. The report recommends a $37.6
million disallowance for the period April 1994 through March 1995. On
October 17, 1996, the ALJ consolidated the gas reasonableness issues into
the 1994 ECAC proceeding. SCE filed rebuttal testimony on December 31,
1996. Hearings on this matter began in January 1997 and concluded in
February 1997. A decision is expected in late 1997.
Mohave Generating Station
A 1994 CPUC decision stated that SCE was liable for expenditures related
to a 1985 accident at the Mohave Generating Station. In July 1996, the
CPUC approved a settlement agreement between SCE and the ORA which
resulted in a $39 million (including interest) refund to SCE's customers.
The refund, which had been previously reserved, was completed by year-end
1996.
FERC Stranded Cost/Open Access Transmission Decision
In April 1996, the FERC issued its decision on stranded cost recovery and
open access transmission effective July 1996. The FERC issued an order
reaffirming its basic determinations, clarifying certain terms, and making
several changes in March 1997. The decision requires all electric
utilities subject to the FERC's jurisdiction to file transmission tariffs
which provide competitors with increased access to transmission facilities
for wholesale transactions and also establishes information requirements
for the transmission utility. The April 1996 decision, affirmed in the
March 1997 decision, also provides utilities with the recovery of stranded
costs, which are prior-service costs incurred under the current regulatory
framework. In addition to providing recovery of stranded costs associated
with existing wholesale customers, the FERC directed that it would have
primary jurisdiction over the recovery of stranded costs associated with
retail-turned-wholesale customers (e.g., a new municipal electric system),
although the FERC did clarify that it does not intend to prevent or
interfere with the authority of a state and that it has discretion to
defer to a state stranded cost calculation method. Also in the March 1997
decision, the FERC expanded its authority on stranded cost recovery
associated with retail-turned-wholesale customers to include municipal
annexations. Retail stranded costs resulting from a state-authorized
retail direct-access program are the responsibility of the states and the
FERC would only address recovery of these costs if the state has no
authority to do so. However, the FERC clarified that it will not
entertain such requests if a state regulatory authority has addressed such
costs, regardless of whether the state regulatory authority has allowed
full recovery, partial recovery, or no recovery. In compliance with the
April 1996 FERC decision, SCE filed a revised open access tariff with the
FERC in July 1996. The tariff became effective, on an interim basis,
subject to refund, as of its filing date. The FERC accepted SCE's
compliance filing in February 1997. SCE will revise its tariff to reflect
the few revisions set forth in the March 1997 order.
Palo Verde Ratemaking Proposal
On December 20, 1996, the CPUC issued a final decision on SCE's proposal
for a new rate mechanism for its 15.8% share of the three units at Palo
Verde. The decision adopts the Palo Verde All-Party Settlement filed with
the CPUC on November 15, 1996. The settlement was based on a Memorandum
of Understanding signed by all of the active parties to the Palo Verde
page 12
proceeding. Under the settlement, SCE has the opportunity to recover its
remaining investment (approximately $1.2 billion) in Palo Verde beginning
January 1, 1997, and ending December 31, 2001, earning a reduced rate of
return on rate base of 7.35% instead of the current 9.49%. Also, SCE will
utilize a balancing account to pass through Palo Verde's incremental
operating costs (considered reasonable so long as they do not exceed 30%
of a baseline forecast and the site's gross annual capacity factor does
not go below 55%) to ratepayers. Beginning January 1, 1998, this
balancing account will become part of the CTC mechanism. If SCE's actual
costs are less than the forecast, the difference will benefit ratepayers
as a credit to the CTC mechanism. After 2001, SCE's ratepayers will
receive 50% of the benefits derived from the operation of Palo Verde.
Workforce Reductions
During 1996, Edison International offered a voluntary retirement program
to certain eligible employees. Approximately 3,000 employees (2,200 non-
represented and 800 represented employees) accepted the terms of this
program. After allowance for the effects of pension settlement gains,
Edison International's net expense for this program was $7 million.
Proposed New Accounting Standard
During 1996, the Financial Accounting Standards Board issued an exposure
draft, that would establish accounting standards for the recognition and
measurement of closure and removal obligations. The exposure draft would
require the estimated present value of an obligation to be recorded as a
liability, along with a corresponding increase in the plant or regulatory
asset accounts when the obligation is incurred. If the exposure draft is
approved in its present form, it would affect SCE's accounting practices
for decommissioning of its nuclear power plants, obligations for coal mine
reclamation costs, and any other activities related to the closure or
removal of long-lived assets. SCE does not expect that the accounting
changes proposed in the exposure draft, even after deregulation, would
have an adverse effect on its results of operations due to its current and
expected future ability to recover these costs through customer rates.
Fuel Supply and Purchased Power Costs
Fuel and purchased-power costs were approximately $3.3 billion in 1996,
a 4.4% increase over 1995.
SCE's sources of energy during 1996 were: purchased power 45%; natural
gas 15%; nuclear 21%; coal 12%; and hydro 7%.
Average fuel costs, expressed in cents per kilowatt-hour, for the year
ended December 31, 1996, were: oil, 7.67 cents; natural gas, 2.94 cents;
nuclear, 0.48 cents; and coal, 1.37 cents.
Natural Gas Supply
Twelve of SCE's major steam electric generating plants are designed to
burn oil or natural gas as the primary boiler fuel. In 1990, SCE adopted
an all-gas strategy to comply with air quality goals by eliminating
burning oil in all but very extreme conditions. In August 1991, the CPUC
adopted regulations which made SCE fully responsible for all natural gas
procurement activities previously performed by local distribution
companies.
To implement its all-gas strategy, SCE acquired a balanced portfolio of
gas supply and transportation arrangements. Traditionally, natural gas
needs in southern California were met from gas production in the southwest
region of the country. To diversify its gas supply, SCE entered into four
15-year natural gas supply agreements with major producers in western
Canada. These contracts, totaling 200,000,000 cubic feet per day, have
market-sensitive pricing arrangements. This represents about 55% of SCE's
page 13
current average annual supply needs. The rest of SCE's gas supply is
acquired under short-term contracts from Texas, New Mexico and the Rocky
Mountain region.
Firm transportation arrangements provide the necessary long-term
reliability for supply deliverability. To transport Canadian supplies,
SCE contracted for 200,000,000 cubic feet per day of firm transportation
arrangements on the Pacific Gas Transmission and Pacific Gas & Electric
Expansion Project connecting southern California to the low-cost gas
producing regions of western Canada. SCE has a 30-year commitment to this
project, construction of which was completed in late 1993. In addition,
SCE has a 15-year commitment with El Paso Natural Gas to transport
200,000,000 cubic feet per day (option to step down to 130,000,000 cubic
feet per day in 1997) from the southwestern U.S.
Nuclear Fuel Supply
SCE has contractual arrangements covering 100% of the projected nuclear
fuel requirements for San Onofre through the years indicated below:
Units
2 & 3
-----
Uranium concentrates(1). . . . . . . . . . . . . . . . . . .2003
Conversion . . . . . . . . . . . . . . . . . . . . . . . . .2003
Enrichment . . . . . . . . . . . . . . . . . . . . . . . . .2003
Fabrication. . . . . . . . . . . . . . . . . . . . . . . . .2005
Spent fuel storage(2). . . . . . . . . . . . . . . . . 2006/2006
_______________
(1) Assumes the San Onofre participants meet their supply obligations in
a timely manner.
(2) Assumes full utilization of expanded on-site storage capacity and
normal operation of the units, including interpool transfers and
maintaining full-core reserve. To supplement existing spent fuel
storage, a contingency plan is being developed to construct additional
on-site storage capacity with initial operation scheduled for no later
than 2005. The Nuclear Waste Policy Act of 1982 requires that the DOE
provide for the disposal of utility spent nuclear fuel beginning in
1998. The DOE has stated that it will not be able to meet the 1998
date to start accepting spent nuclear fuel and has requested
stakeholder input as to the best course of action to accommodate the
delay.
Participants in Palo Verde have purchased uranium concentrates sufficient
to meet projected requirements through 1997. Independent of arrangements
made by other participants, SCE will furnish its share of uranium
concentrates requirements through at least 1997 from existing contracts.
Contracts cover requirements to provide conversion and fabrication through
2016, and enrichment through 2002.
Palo Verde on-site spent fuel storage capacity will accommodate needs
through 1999 while maintaining full-core offload reserve. Planned
modifications will extend storage capacities with full-core reserve
through 2004 for Units 1 and 2 and through 2005 for Unit 3.
Business of The Nonutility Companies
The activities of the Nonutility Companies are described below. For
Edison International's business segment information for each of the years
ended December 31, 1996, 1995 and 1994, see Note 12 of "Notes to
Consolidated Financial Statements" contained in the 1996 Annual Report to
Shareholders incorporated by reference in this report.
Edison Mission Energy. Edison Mission Energy (EME), primarily through its
subsidiary corporations, is engaged in the business of developing, owning,
page 14
and operating cogeneration, small power, geothermal, and other principally
energy-related projects. At December 31, 1996, EME subsidiaries held
interests in 28 domestic and 24 international operating power production
facilities with an aggregate power production capability of 7,549 MW, of
which 4,706 MW are attributable to EME's interests. These operating
facilities are located in California, Florida, Nevada, New Jersey, New
York, Pennsylvania, Virginia, Washington, West Virginia, Australia, Spain
and the United Kingdom. In addition, facilities aggregating more than
1,742 MW, of which EME's anticipated share is approximately, 743 MW, are
in the construction stage. EME owns interests in oil and gas producing
operations and related facilities in Canada and various U.S. locations.
On March 4, 1997, EME entered into an agreement to sell its ownership
interest in B.C. Star Partners (B.C. Star) to Remington Energy Ltd. for
approximately $71 million. B.C. Star, an oil and gas partnership between
Texaco Canada Petroleum Inc. and Mission Energy Canada Corporation,
wholly-owned subsidiary of EME, operates 11 producing properties in
Canada. The transaction is expected to close on or about April 30, 1997.
EME expects to record an after-tax gain upon the closing of the
transaction in the second quarter of 1997.
EME's activity in the Asia Pacific region commenced in December 1992 with
the acquisition of a 51% interest in the Loy Yang B Power Station,
Australia's first electric privatization effort. The remaining 49% of the
power station is owned by the State of Victoria. The first of two 500-mw
units at Loy Yang B began commercial operations in October 1993. Unit 2
commenced commercial operations in October 1996. An EME affiliate
provides operations and maintenance services for both units. In April
1995, EME and its partners, Mitsui & Co. Ltd., General Electric
Corporation and P.T. Batu Hitam Perkasa, an Indonesian limited liability
company, commenced constrution of the $2.5 billion Paiton project, a
1,230-mw coal-fired power plant in East Java, Indonesia. The project will
consist of two units, each of which is expected to have a capacity of
615 MW. Construction of the plant continues on schedule, with commercial
operation expected in early 1999. In January 1996, EME purchased an
additional 7.5% interest in the Paiton project from General Electric
Corporation, thereby increasing its ownership interest to 40%. Kwinana
is a $108 million 116 MW gas-fired cogeneration project located at the
British Petroleum Kwinana refinery near Perth, Australia. The project,
which is 100% owned by EME, began commercial operations in December 1996.
The project supplies electricity to Western Power (formerly the State
Electricity Commission of Western Australia) and both electricity and
steam to the British Petroleum Kwinana refinery. Additional projects
under development in the Asia Pacific region include projects located in
the Philippines and Thailand.
EME's operating projects in the European region are the First Hydro
project located in North Wales, the Roosecote project in northwest
England, the Derwent project located in Derby, England and the Iberian
Hy-Power projects (which consist of 18 small, hydroelectric facilities)
in Spain. Iberian Hy-Power I was acquired in December 1992, and Iberian
Hy-Power II was acquired in August 1993. In January 1996, EME purchased
the remaining equity stake in Iberian Hy-Power Amsterdam, B.V., increasing
its ownership percentage to approximately 100%(minority interests are
owned in three of the projects by third parties). In December 1995, First
Hydro Finance Plc ("First Hydro Finance"), an indirect subsidiary of EME,
purchased all of the outstanding shares of First Hydro Company ("First
Hydro", formerly First Hydro Limited) for approximately $1 billion (653
million pounds sterling). First Hydro's principal assets consist of two
pumped storage electric power stations located in North Wales at Dinorwig
and Ffestiniog, which have a combined capacity of 2,088 MW. The Dinorwig
station, which was commissioned in 1983, comprises six units totaling
1,728 MW. The Ffestiniog station was commissioned in 1963 and comprises
four units totaling 360 MW. First Hydro is an independent generating
company with three main sources of revenues: (i) selling power into the
electricity trading market or "pool" in England and Wales, (ii) providing
page 15
system support services to The National Grid Company Plc, and (iii)
selling its installed capacity forward by entering into "contracts for
differences" with large electricity suppliers. In June 1995, EME (49%
ownership) and its partner, ISAB S.p.A. (51% ownership), signed a twenty-
year power purchase contract with ENEL S.p.A., Italy's state electricity
corporation, pursuant to which ENEL S.p.A. will purchase 507 MW of output
from the 512 MW ISAB power project, which is located near Siracusa in
Sicily, Italy. The project will employ gasification technology to convert
heavy oil residues from the ISAB refinery in Priolo Gargallo into clean-
burning syngas that will be used to generate electricity in a combustion
turbine. The approximately 2 trillion Italian lira (US $1.3 billion)
project financial closing was completed in April 1996, with construction
commencing in July 1996. Commercial operation is expected in late 1999.
In February 1995, EME (80% ownership) signed a shareholders agreement
to develop the $180 million Doga Enerji A.S. project in Esenyurt, near
Istanbul, Turkey. The 180-mw combined cycle gas-fired cogeneration
facility is expected to commence commercial operations in 1998.
At December 31, 1996, EME had total consolidated assets of $5 billion and
for the year then ended, had consolidated operating revenue of
$843,618,000 and consolidated net income of $92,065,000.
Currently, most of EME's domestic operating power production facilities
have QF status under Public Utility Regulatory Policies Act ("PURPA") and
the regulations promulgated thereunder. QF status exempts the projects
from the application of the Holding Company Act, many provisions of the
Federal Power Act, and state laws and regulations respecting rates and
financial or organizational regulation of electric utilities. EME,
through wholly-owned subsidiaries, also has ownership interests in three
operating power projects that have received exempt wholesale generator
status as defined in the Holding Company Act. In addition, some EME
subsidiaries have made fuel-related investments and a limited number of
non-energy related investments.
While QF status entitles projects to the benefits of PURPA, each project
must still comply with other federal, state and local laws, including
those regarding siting, construction, operation, licensing and pollution
abatement.
Edison Capital. Edison Capital participates in investment opportunities
involving leveraged leasing, project financing, affordable housing and
cash management. Its investments include interests in nuclear power,
cogeneration, waste-to-energy, hydroelectric, electric transportation and
affordable housing facilities. Since its inception in 1987, Edison
Capital has invested in 168 projects.
In 1996, Edison Capital strengthened its presence in the global energy and
infrastructure markets. The Company plans to use its capital and
financial structuring skills to help meet the significant demand for
capital to facilitate the development and privatization of energy and
infrastructure projects and systems. To pursue opportunities in Europe,
the Company opened an office in London. Edison Capital also closed an
$80 million investment in the $1 billion AIG/GE Capital Latin American
Infrastructure Fund.
During 1996, Edison Capital invested $122 million in new affordable
housing projects and has committed to invest nearly $133 million in
projects to be completed in the next two years. In addition, the Company
expanded its participation in this business segment by arranging and
selling an interest in a number of affordable housing projects for $36
million in December 1996.
Edison Capital significantly expanded its highly successful affordable
housing business nationwide in 1996. The Company acquired East Coast
Capital, a leading, privately-held, low-income housing tax credit
page 16
syndicator based in Boston. With this acquisition, Edison Capital
established a strong origination and underwriting position in the
Midwestern and Eastern affordable housing markets. Between them, Edison
Capital and East Coast Capital have closed more than $1 billion of equity
investments in affordable housing developments during the past eight
years, ranking the two companies as industry leaders.
At December 31, 1996, Edison Capital had total consolidated assets of $1.4
billion and, for the year then ended, consolidated operating revenue of
$48.7 million and consolidated net income of $40.5 million.
Mission Land Company. Mission Land Company is engaged, directly and
through its subsidiaries, in the business of developing, owning and
managing industrial parks and other real property investments. Mission
Land owns and manages commercial and industrial buildings in industrial
parks located in California. Mission Land Company and its subsidiaries
also have interests in industrial, residential and commercial real estate
in Texas, Arizona, Indiana and Illinois. Edison International is exiting
the real estate business in an orderly fashion over time.
At December 31, 1996, Mission Land Company had total consolidated assets
of $257 million and for the year then ended, consolidated operating
revenue of $63 million and consolidated net loss of $13.5 million. Since
deciding to exit the real estate business in late 1991, Mission Land
Company has substantially reduced assets through asset sales, reduced debt
significantly, improved operating income through higher occupancy rates
and lowered operating costs and increased real estate reserves. As a
result, Mission Land Company believes it has improved its ability to
systematically exit the real estate business in a self-sustaining way.
However, Mission Land Company may experience additional losses if the real
estate market deteriorates.
Edison Source. Edison Source, formed in November 1995, is a retail
provider of energy services and energy marketing. Energy services
activities include the development, construction, financing, and operation
and maintenance of energy efficiency, infrastructure, and environmental
technology projects. Edison Source expects to implement and finance
projects through Edison International affiliated companies and a network
of third party service providers. Energy marketing activities will
include the retail and wholesale brokering and marketing of electricity
and natural gas. Edison Source is a start-up company which did not incur
any revenue or expense in 1995.
Edison EV. Edison EV, formed in November 1995, is engaged in the business
of providing services related to electric vehicles, including the
distribution and installation of electric vehicle charging equipment.
Edison EV is currently the authorized distributor of Delco Electronics
Corporation's MAGNE CHARGETM inductive charging systems for California and
Arizona. In addition, Edison EV has formed marketing alliances with
General Motors Corporation to provide charging equipment for GM's EV1
(launched in December 1996) and Chevrolet's electric S-10 pickup truck (to
be launched in April 1997) as well as American Honda Motor Co., Inc. to
provide charging equipment for the EV PLUS (which will be available for
lease in Honda showrooms in May 1997).
At December 31, 1996, Edison EV had total consolidated assets of
$1,823,073 and for the year then ended, consolidated operating revenue of
$874,564 and consolidated net losses of $1,654,885.
Item 2. Properties of SCE
Existing Utility Generating Facilities
SCE owns and operates 12 oil- and gas-fueled electric generating plants,
one diesel-fueled generating plant, 38 hydroelectric plants and an
undivided 75.05% interest (1,614 MW net) in Units 2 and 3 at San Onofre.
page 17
These plants are located in central and southern California. Palo Verde
(15.8% SCE-owned, 579 MW net) is located near Phoenix, Arizona. SCE owns
a 48% undivided interest (754 MW) in Units 4 and 5 at the Four Corners
Generating Station ("Four Corners Project"), a coal-fueled steam electric
generating plant in New Mexico. Palo Verde and the Four Corners Project
are operated by other utilities. SCE operates and owns a 56% undivided
interest (885 MW) in Mohave, which consists of two coal-fueled steam
electric generating units in Clark County, Nevada. At year-end 1996, the
existing SCE-owned generating capacity (summer effective rating) was
comprised of approximately 65% gas, 15% nuclear, 11% coal, 8%
hydroelectric and 1% oil.
San Onofre, the Four Corners Project, certain of SCE's substations and
portions of its transmission, distribution and communication systems are
located on lands of the United States or others under (with minor
exceptions) licenses, permits, easements or leases or on public streets
or highways pursuant to franchises. Certain of such documents obligate
SCE, under specified circumstances and at its expense, to relocate
transmission, distribution and communication facilities located on lands
owned or controlled by federal, state or local governments.
With certain exceptions, major and certain minor hydroelectric projects
with related reservoirs, currently having an effective operating capacity
of 1,156 MW and located in whole or in part on lands of the U.S., are
owned and operated by SCE under governmental licenses which expire at
various times between 1997 and 2026. Such licenses impose numerous
restrictions and obligations on SCE, including the right of the United
States to acquire the project upon payment of specified compensation.
When existing licenses expire, FERC has the authority to issue new
licenses to third parties, but only if their license application is
superior to SCE's and then only upon payment of specified compensation to
SCE. Any new licenses issued to SCE are expected to be issued under terms
and conditions less favorable than those of the expired licenses. SCE's
applications for the relicensing of certain hydroelectric projects
referred to above with an aggregate effective operating capacity of 59.1
MW are pending. Annual licenses issued for all SCE projects, whose
licenses have expired and are undergoing relicensing, will be renewed
until the new licenses are issued.
In 1996, SCE's peak demand was 18,207 MW, set on August 14, 1996. Total
area system operating capacity of 21,602 MW was available to SCE at the
time of the 1996 peak. SCE's record peak demand of 18,413 MW occurred on
August 17, 1992.
Substantially all of SCE's properties are subject to the lien of a trust
indenture securing First and Refunding Mortgage Bonds ("Trust Indenture"),
of which approximately $3.7 billion principal amount was outstanding at
December 31, 1996. Such lien and SCE's title to its properties are
subject to the terms of franchises, licenses, easements, leases, permits,
contracts and other instruments under which properties are held or
operated, certain statutes and governmental regulations, liens for taxes
and assessments, and liens of the trustees under the Trust Indenture. In
addition, such lien and SCE's title to its properties are subject to
certain other liens, prior rights and other encumbrances, none of which,
with minor or unsubstantial exceptions, affects SCE's right to use such
properties in its business, unless the matters with respect to SCE's
interest in the Four Corners Project and the related easement and lease
referred to below may be so considered.
SCE's rights in the Four Corners Project, which is located on land of The
Navajo Nation of Indians under an easement from the United States and a
lease from The Navajo Nation, may be subject to possible defects. These
defects include possible conflicting grants or encumbrances not
ascertainable because of the absence of, or inadequacies in, the
applicable recording law and the record systems of the Bureau of Indian
Affairs and The Navajo Nation, the possible inability of SCE to resort to
page 18
legal process to enforce its rights against The Navajo Nation without
Congressional consent, possible impairment or termination under certain
circumstances of the easement and lease by The Navajo Nation, Congress or
the Secretary of the Interior and the possible invalidity of the Trust
Indenture lien against SCE's interest in the easement, lease and
improvements on the Four Corners Project.
SCE Construction Program and Capital Expenditures
Cash required by SCE for its capital expenditures totaled $616 million in
1996, $773 million in 1995, and $982 million in 1994. Construction
expenditures for the 1997-2001 period are forecasted at $3.4 billion.
In addition to cash required for construction expenditures for the next
five years as discussed above, $1.8 billion is needed to meet requirements
for long-term debt maturities and sinking fund redemption requirements.
SCE's estimates of cash available for operations for the five years
through 2001 assume, among other things, the receipt of adequate and
timely rate relief and the realization of its assumptions regarding cost
increases, including the cost of capital. SCE's estimates and underlying
assumptions are subject to continuous review and periodic revision.
The timing, type and amount of all additional long-term financing are also
influenced by market conditions, rate relief and other factors, including
limitations imposed by SCE's Articles of Incorporation and Trust
Indenture.
Nuclear Power Matters
SCE's nuclear facilities have been reliable sources of inexpensive, non-
polluting power for SCE's customers for more than a decade. Throughout
the operating life of these facilities, SCE's customers have supported
the revenue requirements of SCE's capital investment in these facilities
and for their incremental costs through traditional cost-of-service
ratemaking.
On January 10, 1996, the CPUC's decision for SCE's Test Year 1995 GRC
rejected a settlement agreement proposed by SCE, San Diego Gas & Electric
(SDG&E) and ORA in its original form, but proposed modifications to
certain terms related and granted SCE the opportunity to accept the
portion of the settlement agreement related to San Onofre Units 2 and 3
with the proposed modifications. The CPUC gave SCE 25 days to prepare a
detailed proposal consistent with the policy adopted in its Decision. On
February 5, 1996, SCE filed a revised San Onofre Unit 2 and 3 proposal in
which it accepted the modifications to certain settlement agreement terms
as proposed by the CPUC. The CPUC adopted the revised proposal on
April 10, 1996. Under this Proposal, SCE would have recovered its
remaining investment in San Onofre Units 2 and 3 at a reduced rate of
return (7.35% compared to the current 9.55%), but on an accelerated basis
during the eight-year period from the effective date in 1996 through
December 31, 2003. Under AB 1890, however, the recovery of the San Onofre
remaining investment must be completed by December 31, 2001. In addition,
the traditional cost-of-service ratemaking for San Onofre Units 2 and 3
was superseded by incremental cost incentive pricing (ICIP), in which
SCE's customers would pay a preset price for each kilowatt-hour of energy
generated at San Onofre during the eight-year period. AB 1890 expressly
allowed continuation of ICIP pricing through December 31, 2003, the end
of the eight-year period. SCE was compensated for the incremental costs
required for the continued operation of San Onofre Units 2 and 3 only with
revenues earned through the ICIP. However, SCE also retained the ability
to request recovery of the cost of fuel consumed for generation of
replacement energy for periods in which San Onofre is not generating power
through future ECAC filings. SCE would also continue to collect funds for
decommissioning expenses through traditional ratemaking treatment.
page 19
In the restructuring decision, the CPUC ordered SCE to file an application
by March 29, 1996, requesting a new rate mechanism for its share of the
Palo Verde units to be effective January 1, 1997. On February 29, 1996,
SCE filed its Palo Verde Proposal Application requesting adoption of a new
rate mechanism for Palo Verde consistent with the San Onofre Units 2 and
3 rate mechanism. On November 15, 1996, SCE, ORA and TURN, entered into
a settlement agreement regarding SCE's Palo Verde Proposal Application.
The settlement retained SCE's proposal to recover its remaining investment
in the Palo Verde units by December 31, 2001 at a reduced rate of return
(7.35% compared to the current 9.55%) consistent with Assembly Bill 1890,
but modified SCE's proposed Palo Verde rate mechanism. Instead of
receiving a preset price for each kilowatt-hour of energy generated during
that period, as proposed, the settling parties agreed that SCE would
recover its share of Palo Verde incremental operating costs, except if
those costs exceed 95% of the levels forecast by SCE in its application
by more than 30% in any given year. In that case, SCE must demonstrate
that the aggregate amount of the costs exceeding the forecast in that year
are reasonable. In addition, if the annual Palo Verde site Gross Capacity
Factor (GCF) is less than 55% in a calendar year, SCE will bear the burden
of proof to demonstrate that the site's operations causing the GCF to fall
below 55% were reasonable in that year. If operations are determined to
be unreasonable by the CPUC, SCE's replacement power purchases associated
with that period of Palo Verde operations below 55% GCF may be disallowed.
The CPUC approved the settlement agreement on December 20, 1996.
Beginning in 2002, power from Palo Verde Units 1, 2 and 3 will be sold at
the then-current market prices with 50% of the benefits of such operation
given to customers. Likewise, beginning in 2004, power from San Onofre
Units 2 and 3 will be sold at the then-current market prices with 50% of
the benefits of such operation given to customers.
San Onofre Nuclear Generating Station
In August 1992, the CPUC approved a settlement agreement between SCE and
the CPUC's ORA to discontinue operation of Unit 1 at the end of its then-
current fuel cycle. As part of the agreement, SCE recovered its remaining
investment over a four-year period ending August 1996, earning an 8.98%
rate of return on rate base. In November 1992, SCE discontinued operation
of Unit 1.
The Units 2 and 3 steam generators have performed relatively well through
the first 15 years of operation, with low rates of ongoing tube
degradation. During the most recent Unit 2 refueling and inspection
outage, however, an increased rate of degradation was identified,
resulting in removing 1.8% of the tubes from service. The cumulative
total of Unit 2's tubes removed from service is now 5.5%, well below the
maximum 10% allowed in the steam generator design before the rating
capacity of the unit must be reduced. As a result of the increased
degradation, a mid-cycle inspection outage will be conducted in 1998 for
Unit 2. Depending on the results of a forthcoming refueling and
inspection outage for Unit 3, a mid-cycle inspection outage may be
required in 1998 for that unit also.
Palo Verde Nuclear Generating Station
On March 14, 1993, Arizona Public Service Company ("APS"), the operating
agent for Palo Verde, manually shut down Unit 2 as a result of a steam
generator tube leak. Unit 2 remained shut down and began its scheduled
refueling outage on March 19, 1993.
APS performed an extensive inspection of the Unit 2 steam generators prior
to the unit's return to service on September 1, 1993. APS determined that
intergranular attack/intergranular stress corrosion cracking was a major
contributor to the tube leak. Subsequent inspections have revealed
similar, though less severe, corrosion in the Unit 1 and Unit 3 steam
generators. APS has taken, and indicates it will continue to take,
page 20
remedial actions that it believes have slowed the rate of steam generator
tube degradation in all three units.
Based on latest available data, APS estimates that the Unit 1 and Unit 3
steam generators should operate for the 40 year licensed operating life
of those units, although APS continues to monitor the situation. APS has
disclosed that it believes it will be economically desirable to replace
the Unit 2 steam generators, which have been most affected by tube
cracking, in five to ten years. APS has indicated to the participants
that it believes that replacement of the Unit 2 steam generators would
cost between $100 million and $150 million. SCE estimates that this cost
could be higher, such that its share of this cost would be between $16
million and $30 million plus replacement power costs. Unanimous approval
of the Palo Verde participants is required for capital improvements,
including steam generator replacement. SCE is evaluating APS' analyses,
conducting its own review, and has not yet decided whether it supports
replacement of the steam generators.
Nuclear Facility Decommissioning
With the exception of San Onofre Unit 1, SCE plans to decommission its
nuclear generating facilities at the end of each facility's operating
license by a prompt removal method authorized by the NRC. Currently, San
Onofre Unit 1, which shut down in 1992, is expected to be stored until
decommissioning begins at the other San Onofre units. Decommissioning is
estimated to cost $2.0 billion in current-year dollars based on site-
specific studies performed in 1993 for San Onofre and 1992 for Palo Verde.
This estimate considers the total cost of decommissioning and dismantling
the plant, including labor, material, burial and other costs. The site
specific studies are updated approximately every three years. Changes in
the estimated costs, timing of decommissioning, or the assumptions
underlying these estimates could cause material revisions to the estimated
total cost to decommission in the near term. Decommissioning is scheduled
to begin in 2013 at San Onofre and 2024 at Palo Verde.
Decommissioning costs, which are recovered through customer rates, are
recorded as a component of depreciation expense. Decommissioning expense
was $148 million in 1996, $151 million in 1995 and $122 million in 1994.
The accumulated provision for decommissioning was $949 million at December
31, 1996, and $823 million at December 31, 1995. The estimated costs to
decommission San Onofre Unit 1 ($263 million) are recorded as a liability.
Decommissioning funds collected in rates are placed in independent trusts
which, together with accumulated earnings, will be utilized solely for
decommissioning.
Nuclear Facility Depreciation
In October 1994, the CPUC authorized SCE to accelerate recovery of its
nuclear plant investments by $75 million per year through 2011, with a
corresponding deceleration in recovery of its transmission and
distribution assets through revised depreciation estimates over their
remaining useful lives. Recovery of the San Onofre and Palo Verde nuclear
plant investment has been further accelerated by the 1995 GRC decision,
industry restructuring, legislation, and the Commission's decision
adopting the Palo Verde Settlement.
Nuclear Insurance
Federal law limits public liability claims from a nuclear incident to $8.9
billion. SCE and other owners of San Onofre and Palo Verde have purchased
the maximum private primary insurance available ($200 million). The
balance is covered by the industry's retrospective rating plan that uses
deferred premium charges to every reactor licensee if a nuclear incident
at any licensed reactor in the U.S. results in claims and/or costs which
page 21
exceed the primary insurance at that plant site. Federal regulations
require this secondary level of financial protection. The Nuclear
Regulatory Commission exempted San Onofre Unit 1 from this secondary
level, effective June 1994. The maximum deferred premium for each nuclear
incident is $79 million per reactor, but not more than $10 million per
reactor may be charged in any one year for each incident. Based on its
ownership interests, SCE could be required to pay a maximum of $158
million per nuclear incident. However, it would have to pay no more than
$20 million per incident in any one year. Such premium amounts include
a 5% surcharge if additional funds are needed to satisfy public liability
claims and are subject to periodic adjustment for inflation. If the
public liability limit above is insufficient, federal regulations may
impose further revenue-raising measures to pay claims, including a
possible additional assessment on all licensed reactor operators.
Property damage insurance covers losses up to $500 million, including
decontamination costs, at San Onofre and Palo Verde. Decontamination
liability and property damage coverage exceeding the primary $500 million
has also been purchased in amounts greater than federal requirements.
Additional insurance covers part of replacement power expenses during an
accident-related nuclear unit outage. These policies are issued primarily
by mutual insurance companies owned by utilities with nuclear facilities.
If losses at any nuclear facility covered by these arrangements were to
exceed the accumulated funds for these insurance programs, SCE could be
assessed retrospective premium adjustments of up to $34 million per year.
Insurance premiums are charged to operating expense.
Item 3. Legal Proceedings
Edison Mission Energy
PMNC Litigation
In February 1997, a civil action was commenced in the Superior Court of
the State of California, Orange County, entitled The Parsons Corporation
and PMNC v. Brooklyn Navy Yard Cogeneration Partners, L.P., Mission Energy
New York, Inc. and B-41 Associates, L.P., Case No. 774980, in which
plaintiffs assert general monetary claims under the Construction Turnkey
Agreement in the amount of $136.8 million. In addition to defending this
action, Brooklyn Navy Yard has also filed an action entitled Brooklyn Navy
Yard Cogeneration Partners, L.P. v. PMNC, Parsons Main of New York, Inc.,
Nab Construction Corporation, L.K. Comstock & Co., Inc. and The Parsons
Corporation in the Supreme Court of the State of New York, Kings County,
Index No. 5966/97 asserting general monetary claims in excess of $13
million under the Construction Turnkey Agreement. EME believes that the
outcome of this litigation will not have a material adverse effect on its
consolidated financial position or results of operations.
Southern California Edison Company
QF Litigation
On May 20, 1993, four geothermal QFs filed a lawsuit against SCE in Los
Angeles County Superior Court, claiming that SCE underpaid, and continues
to underpay, the plaintiffs for energy. SCE denied the allegations in its
response to the complaint. The action was brought on behalf of Vulcan/BN
Geothermal Power Company, Elmore L.P., Del Ranch L.P., and Leathers L.P.,
each of which was partially owned by a subsidiary of Edison Mission Energy
(a subsidiary of Edison International) at the time of filing. In April
1996, Edison Mission Energy's 50% share in these projects was sold to
CalEnergy. In October 1994, plaintiffs submitted an amended complaint to
the court to add causes of action for unfair competition and restraint of
trade. In July 1995, after several motions to strike had been heard by
the court, the plaintiffs served a fourth amended complaint, which omitted
the previous claims based on alleged restraint of trade. The plaintiffs
page 22
allege in the fourth amended complaint that past underpayments have
totaled at least $21 million. In other court filings, plaintiffs contend
that additional contract payments owing from the beginning of the alleged
underpayments through the end of the contract term could total
approximately $60 million. Plaintiffs also seek unspecified punitive
damages and an injunction to enjoin SCE from "future" unfair competition.
After SCE's motion to strike portions of the fourth amended complaint was
denied, SCE filed an answer to the fourth amended complaint which denies
its material allegations.
On May 1, 1996, the parties entered into an agreement for a settlement of
all claims in dispute. Pursuant to the agreement, the specific terms of
which are confidential, a settlement amount has been paid and the parties
have entered into mutual general releases, with respect to the period
before January 1, 1996. The Company intends to seek recovery of this
payment through rates. The Company has also agreed, subject to CPUC
approval, to increase payments to plaintiffs for specified levels of
energy deliveries for the period after December 31, 1995. Plaintiffs have
reserved the right to continue the litigation with respect to the period
after December 31, 1995, if CPUC approval is not obtained. On August 8,
1996, the Company filed its application with the CPUC for approval of the
settlement as it pertains to the period after 1995. On December 20, 1996,
the ORA filed a protest to the application. In its protest, the ORA
requests that the CPUC not grant the application or, in the alternative,
that the CPUC conduct hearings on the application. On January 17, 1997,
the Company filed a reply to the ORA's request. On February 27, 1997, a
prehearing conference was held, at which time SCE's application was set
for hearing to commence on April 23, 1997.
Between January 1994 and October 1994, SCE was named as a defendant in a
series of eight lawsuits brought by independent power producers of wind
generation. Seven of the lawsuits were filed in Los Angeles County
Superior Court and one was filed in Kern County Superior Court. The
lawsuits allege SCE incorrectly interpreted contracts with the plaintiffs
by limiting fixed energy payments to a single 10-year period rather than
beginning a new 10-year period of fixed energy payments for each stage of
development. In its responses to the complaints, SCE denied the
plaintiffs' allegations. In each of the lawsuits, the plaintiffs seek
declaratory relief regarding the proper interpretation of the contracts.
Plaintiffs allege a combined total of approximately $189 million in
damages, which includes consequential damages claimed in seven of the
eight lawsuits. On March 1, 1995, the court in the lead Los Angeles
Superior Court case granted the plaintiffs' motion seeking summary
adjudication that the contract language in question is not reasonably
susceptible to SCE's position that there is only a single, 10-year period
of fixed payments. Following the March 1 ruling, a ninth lawsuit was
filed in the Los Angeles Superior Court raising claims similar to those
alleged in the first eight. SCE subsequently responded to the complaint
in the new lawsuit by denying its material allegations. On April 5, 1995,
SCE filed a petition for Writ of Mandate, Prohibition or Other Appropriate
Relief, requesting that the Court of Appeal of the State of California,
Second Appellate District issue a writ directing the Los Angeles Superior
Court to vacate its March 1 order granting summary adjudication. In a
decision filed August 9, 1995, the Court of Appeal issued a writ directing
that the order be overturned, and a new order be entered denying the
motion. In light of the Court of Appeal decision in the lead Los Angeles
case, a summary adjudication motion in the Kern County case was withdrawn.
Furthermore, pursuant to stipulation of the parties, the Kern County case
was ordered on April 3, 1996, to be coordinated with the Los Angeles cases
so that it too will be tried in Los Angeles. On March 25, 1996, pursuant
to a court-approved stipulation, all but one of the cases were
consolidated for trial in Los Angeles Superior Court. Trial on the
consolidated cases is set to begin on March 11, 1997. No trial date has
been set in the ninth unconsolidated case.
page 23
Environmental Litigation
Electric and Magnetic Fields ("EMF")
SCE is involved in three lawsuits alleging that various plaintiffs
developed cancer as a result of exposure to EMF from SCE facilities. SCE
denied the material allegations in its responses to each of these
lawsuits.
The first lawsuit was filed in Orange County Superior Court and served on
SCE in June 1994. There are five named plaintiffs and six named
defendants, including SCE. Three of the five plaintiffs are presently or
were formerly employed by Grubb & Ellis, a real estate brokerage firm with
offices located in a commercial building known as the Koll Center in
Newport Beach. Two of the named plaintiffs are spouses of the other
plaintiffs. Grubb & Ellis and the owners and developers of the Koll
Center are also named as defendants in the lawsuit. This lawsuit alleges,
among other things, that the three plaintiffs employed by Grubb & Ellis
developed various forms of cancer as a result of exposure to EMF from
electrical facilities owned by SCE and/or the other defendants located on
Koll Center property. No specific damage amounts are alleged in the
complaint, but supplemental documentation prepared by the plaintiffs
indicates that plaintiffs allege compensatory damages of approximately $8
million, plus unspecified punitive damages. In December 1995, the court
granted SCE's motion for summary judgment and dismissed the case.
Plaintiffs have filed a Notice of Appeal. Briefs have been submitted but
no date for oral argument has been set.
A second lawsuit was filed in Orange County Superior Court and served on
SCE in January 1995. This lawsuit arises out of the same fact situation
as the June 1994 lawsuit described above and involves the same defendants.
There are four named plaintiffs, two of whom were formerly employed by
Grubb & Ellis and now allegedly have various forms of cancer. The other
two plaintiffs are the spouses of those two individuals. No specific
damage amounts are alleged in the complaint, but supplemental
documentation prepared by the plaintiffs indicates that plaintiffs will
allege compensatory damages of approximately $13.5 million, plus
unspecified punitive damages. On April 18, 1995, Grubb & Ellis filed a
cross-complaint against the other co-defendants, requesting
indemnification and declaratory relief concerning the rights and
responsibilities of the parties. This case has been stayed pending
appellate review of the trial judge's sanction order against the
plaintiffs' attorneys. The Court of Appeals has heard oral argument on
this issue, but no decision has been issued.
A third case was filed in Orange County Superior Court and served on SCE
in March 1995. The plaintiff alleges, among other things, that he
developed cancer as a result of EMF emitted from SCE distribution lines
which he alleges were not constructed in accordance with CPUC standards.
No specific damage amounts are alleged in the complaint but supplemental
documentation prepared by the plaintiff indicates that plaintiff will
allege compensatory damages of approximately $5.5 million, plus
unspecified punitive damages. No trial date has been set in this case.
San Onofre Personal Injury Litigation
An SCE engineer employed at San Onofre died in 1991 from cancer of the
abdomen. On February 6, 1995, his children sued SCE and SDG&E, as well
as Combustion Engineering, the manufacturer of the fuel rods for the
plant, in the U.S. District court for the Southern District of California.
Plaintiffs alleged that the former employee's illness resulted from, and
was aggravated by, exposure to radiation at San Onofre, including contact
with radioactive fuel particles released from failed fuel rods.
Plaintiffs sought unspecified compensatory and punitive damages. On April
3, 1995, the court granted the defendants' motion to dismiss 14 of the
plaintiffs' claims. SCE's April 20, 1995, answer to the complaint denied
page 24
all material allegations. On October 10, 1995, the court granted
plaintiffs' motion to include the Institute of Nuclear Power Operations
(an organization dedicated to achieving excellence in nuclear power
operations) as a defendant in the suit. On December 7, 1995, the court
granted SCE's motion for summary judgment on the sole outstanding claim
against it, basing the ruling on the worker's compensation system being
the exclusive remedy for the claim. Plaintiffs have appealed this ruling
to the Ninth Circuit Court of Appeals. All trial court proceedings have
been stayed pending the ruling of the Court of Appeals. The impact to
SCE, if any, from further proceedings in this case against the remaining
defendants cannot be determined at this time.
On July 5, 1995, a former SCE reactor operator and his wife sued SCE and
SDG&E in the U.S. District court for the Southern District of California.
Plaintiffs also named Combustion Engineering, the manufacturer of the fuel
rods for the plant, and the Institute of Nuclear Power Operations as
defendants. The former employee died of leukemia shortly after the
complaint was filed. Plaintiffs allege that the former operator's illness
resulted from, and was aggravated by, exposure to radiation at San Onofre,
including contact with radioactive fuel particles released from failed
fuel rods. Plaintiffs seek unspecified compensatory and punitive damages.
On November 22, 1995, the complaint was amended to allege wrongful death
and added the former employee's two children as plaintiffs. On December
22, 1995, SCE filed a motion to dismiss or, in the alternative, for
summary judgment based on worker's compensation exclusivity. On March 25,
1996, the court granted SCE's motion for summary judgment. Plaintiffs
have appealed this ruling to the Ninth Circuit Court of Appeals. All
trial court proceedings have been stayed pending the ruling of the Court
of Appeals in this case and in the case described in the above paragraph.
The impact to SCE, if any, from further proceedings in this case against
the remaining defendants cannot be determined at this time.
On August 31, 1995, the wife and daughter of a former San Onofre security
supervisor sued SCE and SDG&E in the U.S. District court for the Southern
District of California. Plaintiffs also named Combustion Engineering, the
manufacturer of fuel rods for the plant, and the Institute of Nuclear
Power Operations as defendants. The security officer worked for a
contractor in 1982, worked for SCE as a temporary employee (1982-1984),
and later worked as an SCE security supervisor (1984-1994). The officer
died of leukemia in 1994. Plaintiffs allege that the former officer's
illness resulted from, and was aggravated by, his exposure to radiation
at San Onofre, including contact with radioactive fuel particles released
from failed fuel rods. Plaintiffs seek unspecified compensatory and
punitive damages. SCE's November 13, 1995, answer to the complaint denied
all material allegations. All trial court proceedings have been stayed
pending the rulings of the Court of Appeals in the cases described in the
above two paragraphs.
On November 17, 1995, an SCE employee and his wife sued SCE in the U.S.
District Court for the Southern District of California. Plaintiffs also
named Combustion Engineering, the manufacturer of the fuel rods for the
San Onofre plant. The employee worked for SCE at San Onofre from 1981 to
1990. Plaintiffs alleged that the employee transported radioactive
byproducts on his person, clothing and/or tools to his home where his wife
was then exposed to radiation that caused her leukemia. Plaintiffs seek
unspecified compensatory and punitive damages. SCE's December 19, 1995,
partial answer to the complaint denied all material non-employment related
allegations. SCE's motion to dismiss the employee's employment related
allegations based on worker's compensation exclusivity was granted on
March 19, 1996. The employee's wife died on August 15, 1996. On
September 20, 1996, the complaint was amended to allege wrongful death and
to add the employee's two children as plaintiffs. The trial is expected
to begin in August 1997.
On November 28, 1995, a former contract worker at San Onofre, her husband,
and her son, sued SCE in the U.S. District Court for the Southern District
page 25
of California. Plaintiffs also named Combustion Engineering, the
manufacturer of the fuel rods for the San Onofre plant. Plaintiffs allege
that the former contract worker transported radioactive byproducts on her
person and clothing to her home where her son was then exposed to
radiation that caused his leukemia. Plaintiffs seek unspecified
compensatory and punitive damages. SCE's January 2, 1996, answer denied
all material allegations. On August 12, 1996, the Court dismissed the
claims of the former worker and her husband with prejudice. The case is
expected to go to trial in late 1997.
Employment Discrimination Litigation
On September 21, 1994, nine African-American employees filed a lawsuit
against Edison International and SCE on behalf of a class of African-
American employees, alleging racial discrimination in job advancement,
pay, training and evaluation. The lawsuit was filed in the United States
District Court for the Central District of California. The plaintiffs
sought injunctive relief, as well as an unspecified amount of compensatory
and punitive damages, attorneys' fees, costs and interest. Edison
International and SCE responded by denying the material allegations of the
complaint and asserting several affirmative defenses.
Simultaneous with discovery, the parties entered into settlement
discussions. The parties agreed to include the Equal Employment
Opportunity Commission (EEOC) in their settlement discussions after that
agency indicated its intent to intervene in the lawsuit in support of the
plaintiffs. The parties and EEOC agreed upon settlement terms and
submitted a proposed Consent Decree to the court for approval. After
certain issues raised by the court were addressed through a modification
of the proposed Decree, the court granted preliminary approval of the
modified Consent Decree on August 5, 1996, ordered that notice be given
to the class members, and scheduled a final fairness hearing on September
26, 1996.
Fifteen individuals and an organization filed timely objections to the
proposed Consent Decree and a motion to intervene in the lawsuit.
Thirteen individuals filed timely requests to be excluded from the
monetary provisions of the proposed Decree. On September 25, 1996, the
court denied the motion to intervene. After the hearing on September 26,
at which the court heard oral argument from the objectors, the court on
September 30, 1996, overruled the objections and granted final approval
of the Consent Decree.
The Decree provides that a settlement fund of $8.15 million for back pay
claims and $3.1 million for emotional distress claims be established, and
it contains an expedited claim review process for class members who make
claims to the settlement fund. The Decree also provides for improvements
in the Company's internal claims resolution process, expansion of career
development and skills training programs, expansion of diversity training
programs, and improvements in other human resources systems. The Decree
has a seven-year term, with the possibility of early termination after
five years.
On October 25, 1996, the organization and individuals who sought to
intervene and/or object to the Consent Decree served notice of appeal from
the court's orders denying intervention and approving the Consent Decree.
The Court of Appeals ordered that the appellants file their opening brief
by March 12, 1997, and that appellees file any responsive brief by
April 11, 1997. Appellants have moved for an extension of time to file
their opening brief, but that motion has not been ruled upon and
appellants have not yet filed their brief.
Oil Pipeline Litigation
On November 1, 1996, plaintiff, a crude oil pipeline company, filed a
lawsuit against SCE and the City of Los Angeles (the "City") in the United
States District Court for the Central District of California claiming that
page 26
SCE and the City had interfered with its attempt to construct a proposed
132-mile oil pipeline ("Pacific Pipeline") designed to transport oil from
the San Joaquin Valley and Santa Barbara to the Los Angeles refineries.
Plaintiff alleges, among other things, that SCE and the City wrongfully
initiated administrative and other legal proceedings in an attempt to
derail and obstruct the construction of the Pacific Pipeline. Plaintiff
alleges that these acts constitute unfair competition, tortious
interference with economic advantage and violate state and federal
antitrust laws. Plaintiff further claims that because of the alleged
delays, it could suffer losses in excess of $300 million. Additionally,
plaintiff seeks treble and punitive damages.
The deadling for filing a response to the complaint has been continued
pending the outcome of a motion by plaintiff filed in a related lawsuit
seeking to dismiss the City of Los Angeles' complaint therein against the
U.S. Forest Service and plaintiff. SCE intends to deny the substantive
allegations of the complaint.
Item 4. Submission of Matters to a Vote of Security Holders
Inapplicable.
Pursuant to Form 10-K's General Instruction ("General Instruction") G(3),
the following information is included as an additional item in Part I:
Executive Officers (1) of the Registrant
Edison International
Age at December
Executive Officer 31, 1996 Company Position Effective Date
- ----------------- --------------- ---------------- --------------
John E. Bryson 53 Chairman of the Board and October 1, 1990
Chief Executive Officer
Bryant C. Danner 59 Executive Vice President June 1, 1995
and General Counsel
Alan J. Fohrer 46 Executive Vice President and September 1, 1996
Chief Financial Officer
William J. Heller 40 Senior Vice President, January 1, 1996
Strategic Planning and New
Business Development
Robert G. Foster 49 Senior Vice President, November 21, 1996
Public Affairs
Richard K. Bushey 56 Vice President and July 21, 1988
Controller
Theodore F. Craver, Jr. 45 Vice President and September 1, 1996
Treasurer
Lillian R. Gorman 43 Vice President, July 22, 1996
Human Resources
Thomas J. Higgins 51 Vice President, January 1, 1996
Corporate Communications
Beverly P. Ryder 46 Corporate Secretary and January 1, 1996
Special Assistant to the
Chairman/CEO
page 27
__________
(1) The Executive Officers of Edison International include the Chairman of
the Board and Chief Executive Officer, the elected Vice Presidents and
the Secretary of Edison International and SCE as well as the Chief
Executive Officers and Presidents, Executive Vice Presidents and Senior
Vice Presidents of Edison Mission Energy, Edison Capital, Mission Land
Company, Edison Source and Edison EV (collectively "The Nonutility
Companies") all of whom may be deemed policy makers of Edison
International.
On July 22, 1996, Emiko Banfield became Vice President of Shared
Services for SCE and Lillian R. Gorman was elected Vice President of
Human Resources. Theodore F. Craver, Jr. was elected Vice President
and Treasurer on September 1, 1996.
None of Edison International's elected executive officers are related to
each other by blood or marriage. As set forth in Article IV of Edison
International's Bylaws, the elected officers of Edison International are
chosen annually by and serve at the pleasure of Edison International's
Board of Directors and hold their respective offices until their
resignation, removal, other disqualification from service, or until their
respective successors are elected. Each of the elected executive officers
of Edison International holds an identical position at SCE except William
J. Heller, who is not an officer with SCE. Each of the elected executive
officers of Edison International has been actively engaged in the business
of SCE for more than five years except Bryant C. Danner, William J.
Heller, Theodore F. Craver, Jr., Lillian R. Gorman, Thomas J. Higgins, and
Beverly P. Ryder. Those officers who have not held their present position
with Edison International and/or SCE for the past five years had the
following business experience during that period:
Bryant C. Danner Senior Vice President and July 1992 to May 1995
General Counsel of Edison
International and SCE
Partner, Law Firm of January 1970 to June 1992
Latham & Watkins(1)(5)
Alan J. Fohrer Executive Vice President, February 1996 to August 1996
Chief Financial Officer and
Treasurer of SCE
Executive Vice President and May 1995 to January 1996
Chief Financial Officer of SCE
Executive Vice President, Chief May 1995 to August 1996
Financial Officer and Treasurer of
Edison International
Senior Vice President, Chief Financial January 1993 to April 1995
Officer and Treasurer of Edison
International
Senior Vice President and Chief January 1993 to April 1995
Financial Officer of SCE
Vice President, Chief Financial April 1991 to January 1993
Officer and Treasurer of Edison
International and SCE
William J. Heller Partner, Management Consulting August 1982 to December 1995
firm of McKinsey and Company(2)(5)
Robert G. Foster Vice President, Public Affairs of January 1996 to October 1996
Edison International
Vice President, Public Affairs of SCE November 1993 to October 1996
Regional Vice President of SCE January 1988 to October 1993
Theodore F. Craver, Jr. Executive Vice President and September 1990 to August 1996
Corporate Officer, First Interstate
Bancorp
page 28
Lillian R. Gorman Executive Vice President and Human October 1990 to July 1996
Resources Director, First Interstate
Bancorp
Thomas J. Higgins Vice President, Corporate Communications April 1995 to January 1996
of SCE
President, The Laurel January 1994 to December 1994
Company(3)(5)
Senior Vice President of Blue October 1990 to December 1993
Cross/Blue Shield of Maryland(5)
Beverly P. Ryder Special Assistant to the Chairman May 1995 to December 1995
of Edison International and SCE
Director, Strategic Alliances, October 1993 to April 1995
EnvestSCE(4)
General Manager, Customer Solutions June 1992 to September 1993
of SCE
Vice President, Corporate Asset April 1985 to June 1992
Funding, Citibank, N.A.(5)
______________
(1) Prior to leaving the law firm of Latham & Watkins, Bryant C. Danner
was in the firm's environmental department.
(2) Prior to leaving McKinsey and Company, William J. Heller served as
associate/engagement manager in Houston, Texas, senior engagement
manager/principal in London, England and principal/head of McKinsey's
Los Angeles energy practice beginning in 1991.
(3) As President of The Laurel Company, Thomas J. Higgins provided advice
on planning and financing for mergers and acquisitions for clients in
the managed health care business.
(4) This entity is a division of SCE.
(5) This entity is not a parent, subsidiary or other affiliate of Edison
International.
SCE
Age at
December Effective
Executive Officer(1) 31, 1996 Company Position(2) Date
John E. Bryson 53 Chairman of the Board, October 1, 1990
Chief Executive Officer
and Director
Stephen E. Frank 55 President, Chief Operating June 19, 1995
Officer and Director
Bryant C. Danner 59 Executive Vice President June 1, 1995
and General Counsel
Alan J. Fohrer 46 Executive Vice President, September 1, 1996
Chief Financial Officer
Harold B. Ray 56 Executive Vice President, June 1, 1995
Generation Business Unit
Vikram S. Budhraja 49 Senior Vice President, June 1, 1995
Power Grid Business Unit
Robert G. Foster 49 Senior Vice President, November 21, 1996
Public Affairs
Emiko Banfield 50 Vice President, July 22, 1996
Shared Services
page 29
Pamela A. Bass 49 Vice President, June 1, 1996
Customer Solutions Business Unit
Richard K. Bushey 56 Vice President and January 1, 1984
Controller
Theodore F. Craver, Jr. 45 Vice President and Treasurer September 1, 1996
John R. Fielder 51 Vice President, Regulatory February 1, 1992
Policy and Affairs
Bruce C. Foster 44 Vice President, San Francisco January 1, 1995
Regulatory Affairs
Lillian R. Gorman 43 Vice President, July 22, 1996
Human Resources
Lawrence D. Hamlin 52 Vice President, February 1, 1992
Power Production
Thomas J. Higgins 51 Vice President, Corporate April 1, 1995
Communications
R. W. Krieger 48 Vice President, Nuclear June 17, 1993
Generation
J. Michael Mendez 55 Vice President, February 10, 1997
Labor Relations
Dwight E. Nunn 54 Vice President, Nuclear December 18, 1995
Engineering and Technical
Services
Frank J. Quevedo 52 Vice President, June 1, 1996
Equal Opportunity
Richard M. Rosenblum 46 Vice President, January 1, 1996
Distribution Business Unit
Beverly P. Ryder 46 Corporate Secretary and January 1, 1996
Special Assistant to the
Chairman/CEO
______________
(1) Ron Daniels, Vice President of Special Projects, retired on April 1,
1996. On June 1, 1996, Owens F. Alexander left his position as SCE
Vice President of Customer Solutions, to become Senior Vice President
for Edison Source.
On June 1, 1996, Pamela A. Bass became Vice President of Customer
Solutions Business Unit and Frank J. Quevedo was elected Vice
President of Equal Opportunity. On July 22, 1996, Emiko Banfield
became Vice President of Shared Services, and Lillian R. Gorman was
elected Vice President of Human Resources. Theodore F. Craver, Jr.
was elected Vice President and Treasurer on September 1, 1996. On
November 21, 1996, Robert G. Foster was elected Senior Vice President
of Public Affairs. On February 10, 1997, J. Michael Mendez became
Vice President of Labor Relations.
(2) Executive officers Bryson, Danner, Fohrer, Robert Foster, Bushey,
Craver, Gorman, Higgins, and Ryder hold the same positions with Edison
International. Edison International is the parent holding company of
SCE.
None of SCE's executive officers are related to each other by blood or
marriage. As set forth in Article IV of SCE's Bylaws, the officers of SCE
are chosen annually by and serve at the pleasure of SCE's Board of
page 30
Directors and hold their respective offices until their resignation,
removal, other disqualification from service, or until their respective
successors are elected. All of the executive officers have been actively
engaged in the business of SCE for more than five years except for Stephen
E. Frank, Bryant C. Danner, Theodore F. Craver, Jr., Bruce C. Foster,
Lillian R. Gorman, Thomas J. Higgins, Dwight E. Nunn, Frank J. Quevedo and
Beverly P. Ryder. Those officers who have not held their present position
for the past five years had the following business experience:
Stephen E. Frank President and Chief Operating Officer, August 1990 to January 1995
Florida Power and Light Company(4)
Bryant C. Danner Senior Vice President and July 1992 to May 1995
General Counsel of Edison
International and SCE
Partner with the Law Firm January 1970 to June 1992
of Latham & Watkins(1)(4)
Alan J. Fohrer Executive Vice President, Chief February 1996 to August 1996
Financial Officer and Treasurer
of SCE
Executive Vice President and May 1995 to January 1996
Chief Financial Officer of SCE
Executive Vice President, Chief May 1995 to August 1996
Financial Officer and Treasurer
of Edison International
Senior Vice President, Chief January 1993 to April 1995
Financial Officer and Treasurer
of Edison International
Senior Vice President and Chief January 1993 to April 1995
Financial Officer of SCE
Vice President, Chief Financial April 1991 to January 1993
Officer and Treasurer of Edison
International and SCE
Harold B. Ray Senior Vice President, Power Systems June 1990 to May 1995
Robert G. Foster Vice President, Public Affairs November 1993 to January 1996
Regional Vice President, Sacramento January 1988 to October 1993
Office
Vikram S. Budhraja Vice President, Planning and June 1993 to May 1995
Technology
Vice President, System Planning and February 1992 to May 1993
Operations
Emiko Banfield Vice President, Human Resources January 1996 to July 1996
Manager of Procurement and Material May 1994 to December 1995
Management
Manager of Transportation Services December 1991 to May 1994
Pamela A. Bass Vice President, Shared Services January 1996 to May 1996
Division Vice President, ENvest(3) August 1993 to December 1995
Division Vice President, Customer January 1992 to August 1993
Services
Theodore F. Craver, Jr. Executive Vice President and Corporate September 1990 to August 1996
Treasurer, First Interstate Bancorp
Bruce C. Foster Regional Vice President, San Francisco January 1992 to December 1994
Office
Lillian R. Gorman Executive Vice President and Human October 1990 to July 1996
Resources Director, First Interstate
Bancorp
Thomas J. Higgins Vice President, Corporate Communications April 1995 to January 1996
President, The Laurel Company(2)(4) January 1994 to December 1994
Senior Vice President of Blue October 1990 to December 1993
Cross/Blue Shield of Maryland(4)
page31
R. W. Krieger Station Manager, San Onofre August 1990 to May 1993
J. Michael Mendez Vice President, Regional Leadership February 1993 to January 1996
Vice President, Human Resources August 1991 to January 1993
Dwight E. Nunn Vice President, Tennessee Valley April 1990 to December 1995
Authority(4)
Frank J. Quevedo Director of Equal Opportunity January 1996 to May 1996
Manager of Equal Opportunity July 1992 to December 1995
Director, Corporate Relations, June 1986 to June 1992
Hunt-Wesson, Inc.
Richard M. Rosenblum Vice President, Engineering and June 1993 to December 1995
Technical Services
Manager of Nuclear Regulatory June 1989 to May 1993
Affairs
Beverly P. Ryder Special Assistant to the Chairman May 1995 to December 1995
of Edison International and SCE
Director, Strategic Alliances, October 1993 to April 1995
EnvestSCE(3)
General Manager, Customer Solutions June 1992 to September 1993
Vice President, Corporate Asset April 1985 to June 1992
Funding, Citibank, N.A.(4)
______________
(1) Prior to leaving the law firm of Latham & Watkins, Mr. Danner was in
the firm's environmental department.
(2) As President of The Laurel Company, Thomas J. Higgins provided advice
on planning and financing for mergers and acquisitions for clients in
the managed health care business.
(3) This entity is a division of SCE.
(4) This entity is not a parent, subsidiary or other affiliate of SCE.
The Nonutility Companies
Age at December
Executive Officer 31, 1996 Company Position(1) Effective Date
- ----------------- --------------- ------------------- --------------
John E. Bryson 53 Chairman of the Board, May 20, 1993
Edison Mission Energy
Alan J. Fohrer 46 Vice Chairman of the Board, May 20, 1993
Edison Mission Energy
President and Chief Executive March 17, 1997
Officer, Edison Source(2)
Edward R. Muller 44 President and Chief Executive August 23, 1993
Officer, Edison Mission Energy
Robert M. Edgell 49 Executive Vice President, April 1, 1988
Edison Mission Energy
James V. Iaco Jr. 52 Senior Vice President and January 17, 1994
Chief Financial Officer,
Edison Mission Energy
S. Daniel Melita 45 Senior Vice President, November 1, 1993
Edison Mission Energy
page 32
Georgia R. Nelson 46 Senior Vice President, January 1, 1996
Edison Mission Energy
S. Linn Williams 50 Senior Vice President and November 11, 1994
General Counsel, Edison
Mission Energy
Thomas R. McDaniel 47 President and Chief Executive March 1, 1992
Officer, Edison Capital
President and Chief Executive September 1, 1987
Officer, Mission Land Company
Lawrence W. Yu 43 Executive Vice President October 1, 1993
Chief Operating Officer,
Edison Capital
Charles W. Johnson 50 Executive Vice President, August 7, 1992
Mission Land Company
Ashraf T. Dajani 51 Senior Vice President, September 1, 1995
Edison Capital
Richard E. Lucey 49 Senior Vice President and Chief March 1, 1997
Financial Officer, Edison Capital
Diane O. Wittenberg 51 President and Chief Executive December 29, 1995
Officer, Edison EV
Owens F. Alexander 47 Senior Vice President, June 1, 1996
Edison Source
______________
(1) On June 1, 1996, Owens Alexander left his position as Vice President
Customer Solutions of SCE to become Senior Vice President of Edison
Source.
(2) On January 26, 1996, C. Alex Miller was elected President and Chief
Executive Officer of Edison Source and on March 16, 1997, he
resigned. Effective March 17, 1997, Alan J. Fohrer was elected
interim President and Chief Executive Officer of Edison Source.
None of the Nonutility Companies' executive officers are related to each
other by blood or marriage. As set forth in Article IV of their
respective Bylaws, the officers of the Nonutility Companies are chosen
annually by and serve at the pleasure of the respective Boards of
Directors and hold their respective offices until their resignation,
removal, other disqualification from service, or until their respective
successors are elected. All of the executive officers have been actively
engaged in the business of the respective Nonutility Companies and/or
Edison International and SCE for more than five years except for Edward
R. Muller, S. Linn Williams, James V. Iaco, Jr., S. Daniel Melita, Charles
W. Johnson, Ashraf T. Dajani and Richard E. Lucey. Those officers who
have not held their present position for the past five years had the
following business experience:
Alan J. Fohrer Executive Vice President and February 1996 to August 1996
Chief Financial Officer and
Treasurer of SCE
Executive Vice President and May 1995 to January 1996
Chief Financial Officer of SCE
Executive Vice President, Chief May 1996 to August 1996
Financial Officer and Treasurer
of Edison International
Senior Vice President, Chief January 1993 to May 1995
Financial Officer and Treasurer
of Edison International
Senior Vice President and Chief January 1993 to May 1995
Financial Officer of SCE
page 33
Vice President, Chief Financial April 1991 to January 1993
Officer and Treasurer of Edison
International and SCE
Edward R. Muller Vice President, Chief October 1992 to August 1993
Financial Officer, General
Counsel and Secretary,
Whittaker Corporation(1)(12)
Vice President, Chief March 1988 to September 1992
Administrative Officer,
General Counsel and Secretary,
Whittaker Corporation(12)
Vice President, Secretary and October 1991 to August 1993
General Counsel of Biowhittaker,
Inc.(2)(12)
James V. Iaco, Jr. President, James V. Iaco, Jr. & September 1993 to December 1993
Associations,(3)(12)
Senior Vice President October 1992 to September 1993
and Chief Financial Officer of
Phoenix Distributors, Inc.,(4)(12)
Independent Business Consultant(5) November 1991 to September 1992
S. Daniel Melita Vice President, Edison Mission Energy(6) August 1992 to October 1993
Vice President, International Operations October 1989 to August 1992
of EBASCO Constructors, Inc.,
EBASCO Overseas Corporation(7)(12)
Georgia R. Nelson Senior Vice President, Performance June 1995 to December 1995
Support of SCE
Vice President, Performance Support June 1993 to May 1995
of SCE
Vice President of SCE March 1993 to June 1993
Special Assistant to the Chairman of SCE February 1992 to March 1993
S. Linn Williams Partner of the Law Firm of Jones, October 1993 to October 1994
Day, Reavis & Pogue(12)
Partner of the Law Firm of Gibson, April 1992 to September 1993
Dunn & Crutcher(12)
Thomas R. McDaniel President and Chief Executive Officer, August 1987 to March 1997
Edison Capital
Lawrence W. Yu Senior Vice President of July 1991 to September 1993
Edison Capital
Charles W. Johnson President, Glenfed Development Corp.(8)(12) September 1990 to March 1997
Ashraf T. Dajani Senior Vice President and Chief November 1992 to August 1995
Operating Officer, Burns & Roe
Enterprises, Inc.(9)(12)
Vice President and General Manager, January 1987 to August 1992
Burns & Roe Enterprises, Inc.
Chief Financial Officer, Burns & Roe June 1991 to August 1992
Enterprises, Inc.
President, Burns & Roe Environmental April 1989 to August 1995
Services, Inc.(10)(12)
Richard E. Lucey President and Chief Executive Officer, April 1990 to February 1997
NYNEX Credit Company(11)(12)
Diane O. Wittenberg Division Vice President, October 1994 to December 1995
Electric Transportation of SCE
Manager of Electric Transportation of SCE June 1991 to September 1994
Owens F. Alexander, Jr. Vice President, Customer Solutions of SCE January 1996 to May 1996
Vice President, Marketing of SCE January 1995 to December 1995
Vice President, Market Services of SCE April 1994 to December 1994
South Central Bell and BellSouth
Telecommunications in Atlanta, Georgia
Marketing Group Quality Director September 1991 to February 1994
page 34
______________
(1) During the period Edward R. Muller served as an officer of Whittaker
Corporation, the Company was involved in various aerospace, chemical
and biotechnology businesses.
(2) During the period Edward R. Muller served as an officer of
Biowhittaker, Inc., the company was engaged in the development,
manufacture, and marketing of cell culture, endotoxin detection and
clinical diagnostic testing products.
(3) As President of James V. Iaco & Associates, James V. Iaco, Jr.
provided consultant services specializing in mergers and
acquisitions, restructurings, finance, crisis management and other
management services.
(4) James V. Iaco, Jr. completed the disposition of subsidiaries of
Phoenix Distributors, Inc., one of the largest independent industrial
gas and welding supply distributors in the United States. Mr. Iaco
acted as the Company's chief financial officer, completing the
refinancing and restructuring of the remaining operations of the
Company.
(5) James V. Iaco, Jr. served as an independent business consultant
primarily engaged as the chief operating officer of a major developer
of time-share resort properties.
(6) As Director of International Business Development, S. Daniel Melita
planned and implemented international marketing and sales strategies
for all business units and was responsible for selecting team
partners and establishing joint venture companies.
(7) As Vice President, International Operations of EBASCO Constructors,
Inc./EBASCO Overseas Corporation, S. Daniel Melita was responsible
for all overseas activities including operations and business
development, consulting construction management and lump sum turn key
construction.
(8) As President of Glenfed, Charles W. Johnson directed all real estate
operations and business combinations which included direct
development, joint ventures and syndications.
(9) During the period Ashraf T. Dajani served as Senior Vice President
and Chief Operating Officer of Burns & Roe Enterprises, Inc., the
company was involved in engineering, procurement and construction
management in the power, infrastructure and defense industries.
(10) During the period Ashraf T. Dajani served as President of Burns & Roe
Environmental Services, Inc., the company was involved in providing
consulting services to the hazardous waste remediation industry both
federal and state.
(11) During the period that Richard E. Lucey served as an officer and
director of NYNEX Credit Company, the company was involved in general
equipment financing including the medium- and large-ticket leveraged
leasing and middle-market leasing businesses.
(12) This entity is not a parent, subsidiary or other affiliate of Edison
International.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Information responding to Item 5 is included in Edison International's
Annual Report to Shareholders for the year ended December 31, 1996,
("Annual Report") under "Quarterly Financial Data" on page 47 and under
"Shareholder Information" on page 51, and is incorporated by reference
pursuant to General Instruction G(2). The number of Common Stock
shareholders of record was 102,160 on March 27, 1997. Additional
information concerning the market for Edison International's Common Stock
is set forth on the cover page hereof.
page 35
Item 6. Selected Financial Data
Information responding to Item 6 is included in the Annual Report under
"Selected Financial and Operating Data: 1992-1996" on page 50, and is
incorporated herein by reference pursuant to General Instruction G(2).
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Information responding to Item 7 is included in the Annual Report under
"Management's Discussion and Analysis" on pages 23 through 29 and is
incorporated herein by reference pursuant to General Instruction G(2).
Item 8. Financial Statements and Supplementary Data
Certain information responding to Item 8 is set forth after Item 14 in
Part IV. Other information responding to Item 8 is included in the Annual
Report on pages 31, 32, 33, 34, and 35 through 47 and is incorporated
herein by reference pursuant to General Instruction G(2).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning executive officers of Edison International is set
forth in Part I in accordance with General Instruction G(3), pursuant to
Instruction 3 to Item 401(b) of Regulation S-K. Other information
responding to Item 10 is included in the Joint Proxy Statement ("Proxy
Statement") filed with the Commission in connection with Edison
International's Annual Meeting to be held on April 17, 1997, under the
heading, "Election of Directors of Edison International and SCE" on pages
2 through 6 and "Section 16(a) Beneficial Ownership Reporting Compliance"
on page 22, and is incorporated herein by reference pursuant to General
Instruction G(3).
Item 11. Executive Compensation
Information responding to Item 11 is included in the Proxy Statement
beginning with the section under the heading "Executive Compensation Table
- - Edison International and SCE" on pages 9 through 21, and is incorporated
herein by reference pursuant to General Instruction G(3).
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information responding to Item 12 is included in the Proxy Statement under
the headings "Stock Ownership of Directors and Executive Officers of
Edison International and SCE" on pages 7 through 10 and "Stock Ownership
of Certain Shareholders" on page 25, and is incorporated herein by
reference pursuant to General Instruction G(3).
Item 13. Certain Relationships and Related Transactions
Information responding to Item 13 is included in the Proxy Statement under
the heading "Certain Additional Affiliations and Transactions of Nominees
and Executive Officers" on pages 22 through 25, and is incorporated herein
by reference pursuant to General Instruction G(3).
page 36
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements
The following items contained in the 1996 Annual Report to Shareholders
are found on pages 23 through 47, and are incorporated by reference in
this report.
Management's Discussion and Analysis of Results of Operations and
Financial Condition
Responsibility for Financial Reporting
Report of Independent Public Accountants
Consolidated Statements of Income -- Years Ended December 31, 1996, 1995
and 1994
Consolidated Balance Sheets -- December 31, 1996, and 1995
Consolidated Statements of Cash Flows -- Years Ended December 31, 1996,
1995 and 1994
Consolidated Statements of Retained Earnings -- Years Ended December 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements
(2) Report of Independent Public Accountants and Schedules
Supplementing Financial Statements
The following documents may be found in this report at the indicated page
numbers.
Page
----
Report of Independent Public Accountants on Supplemental
Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . 38
Schedule I--Condensed Financial Information of Parent. . . . . 39
Schedule II--Valuation and Qualifying Accounts for the
Years Ended December 31, 1996, 1995 and 1994 . . . . . . . . 41
Schedules I through V, inclusive, except those referred to above, are
omitted as not required or not applicable.
(3) Exhibits
See Exhibit Index on page 45 of this report.
(b) Reports on Form 8-K
January 18, 1996
Item 5: Other Events: Announcement of 1995 4th Quarter
Earnings
October 3, 1996
Item 5: Other Events: Governor Wilson Signs Assembly
Bill 1890
November 21, 1996
Item 5: Other Events: Adoption of Rights Agreement
December 5, 1996
Item 5: Other Events: Divestiture of 12 natural gas and
oil-fueled power plants
February 28, 1997
Item 5: Other Events: December 31, 1996 Audited Financial
Statements
page 37
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL SCHEDULES
To Edison International:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in the 1996 Annual Report
to Shareholders of Edison International incorporated by reference in this
Form 10-K, and have issued our report thereon dated January 31, 1997. Our
audits of the consolidated financial statements were made for the purpose
of forming an opinion on those basic consolidated financial statements
taken as a whole. The supplemental schedules listed in Part IV of this
Form 10-K, which are the responsibility of Edison International's
management, are presented for purposes of complying with the Securities
and Exchange Commission's rules and regulations, and are not part of the
basic consolidated financial statements. These supplemental schedules
have been subjected to the auditing procedures applied in the audits of
the basic consolidated financial statements and, in our opinion, fairly
state in all material respects the financial data required to be set forth
therein in relation to the basic consolidated financial statements taken
as a whole.
ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Los Angeles, California
January 31, 1997 (except with respect
to the "Subsequent Event" discussed under
"Competitive Environment" in Part I, Item 1,
as to which the date is February 21, 1997)
page 38
Edison International
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF PARENT
CONDENSED BALANCE SHEETS
December 31,
---------------------------
1996 1995
---------- ----------
(In thousands)
Assets:
Cash and equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,689 $ 30,040
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,820 137,101
---------- ----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 160,509 167,141
Investments in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 6,552,631 6,630,537
Accumulated deferred income taxes -- net. . . . . . . . . . . . . . . . . . - 950
Other deferred debits . . . . . . . . . . . . . . . . . . . . . . . . . . . 209 25,056
---------- ----------
Total assets $6,713,349 $6,823,684
========== ==========
Liabilities and Shareholders' Equity:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,877 $ 6,412
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 313,029 455,623
---------- ----------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . 314,906 462,035
Other deferred credits. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,211 1,981
Common shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . 6,397,232 6,359,668
---------- ----------
Total liabilities and shareholders' equity . . . . . . . . . . . . . . . $6,713,349 $6,823,684
========== ==========
CONDENSED STATEMENTS OF INCOME
For the Years Ended December 31, 1996, 1995, and 1994
1996 1995 1994
-------- -------- --------
(In thousands, except per-share amounts)
Operating revenue and other income.. . . . . . . . . . . . . . . . $ 29,539 $ 19,408 $18,765
Operating expenses and interest expense. . . . . . . . . . . . . . 42,908 26,741 24,305
------- -------- -------
Loss before equity in earnings of subsidiaries. . . . . . . . . (13,369) (7,333) (5,540)
.
Equity in earnings of subsidiaries . . . . . . . . . . . . . . . . 730,117 746,469 686,227
-------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 716,748 $739,136 $680,687
======== ======== ========
Weighted-average shares of common stock outstanding. . . . . . . . 437,335 446,159 447,799
Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . $ 1.64 $ 1.66 $ 1.52
======== ======== ========
page 39
Edison International
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF PARENT (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1995, and 1994
1996 1995 1994
------- -------- --------
(In thousands)
Cash Flows From Operating Activities . . . . . . . . . . . . . . . $ 58,901 $ (24,935) $ 7,326
--------- --------- --------
Cash Flows From Financing Activities . . . . . . . . . . . . . . . (54,150) 299,703 75,000
--------- --------- ---------
Cash Flows From Investing Activities . . . . . . . . . . . . . . . (102) (333,058) -
--------- --------- ---------
Increase (Decrease) in cash and equivalents. . . . . . . . . . . . 4,649 (58,290) 82,326
Cash and equivalents at beginning of period. . . . . . . . . . . . 30,040 88,330 6,004
--------- --------- ---------
Cash and Equivalents at the End of Period . . . . . . . . . . . $ 36,689 $ 30,040 $ 88,330
========= ========= =========
Cash dividends received from Southern California
Edison Company. . . . . . . . . . . . . . . . . . . . . . . . . $ 765,199 $ 521,720 $ 548,837
========= ========= =========
page 40
Edison International
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1996
Additions
------------------------
Balance at Charged to Charged to Balance
Beginning of Costs and Other at End
Description Period Expenses Accounts Deductions of Period
----------- ----------- ---------- ---------- ---------- ----------
(In thousands)
Group A:
Geothermal projects reserves . . . $127,089 $8,500 $11,000(a) $124,587 $22,002
Projects in development stage . . . 52,153 16,956(b) -- 9,015 60,094
Uncollectible accounts
Customers. . . . . . . . . . . . 22,712 21,831 - 20,077(c) 24,466
All other. . . . . . . . . . . . 13,013 15,376 - 4,200(c) 24,189
-------- ------ ------- -------- --------
Total $214,967 $62,663 $11,000 $157,879 $130,751
======== ======= ======= ======== ========
Group B:
DOE Decontamination
and Decommissioning $ 52,742 $ -- $ 1,468(d) $ 5,421(e) $ 48,789
Purchase Power Settlement -- -- 107,700(f) 107,700
Pension and benefits 196,662 8,547 21,869(g) 46,151(h) 180,927
Insurance, casualty and
other 94,788 59,123 -- 67,402(i) 86,509
-------- -------- -------- -------- --------
Total $344,192 $67,670 $131,037 $118,974 $423,925
======== ======== ======== ======== ========
________________
(a) Charged to operating revenue.
(b) Includes Environmental Reserve of $3.0 million.
(c) Accounts written off, net.
(d) Represents revision to estimate based on actual billings.
(e) Represents amounts paid.
(f) Represents payments to be made under agreement to terminate a
purchase-power contract.
(g) Primarily represents transfers from the accrued paid absence allowance
account for required additions to the comprehensive disability
plan accounts.
(h) Includes pension payments to retired employees, amounts paid to active
employees during periods of illness and the funding of certain
pension benefits.
(i) Amounts charged to operations that were not covered by insurance.
page 41
Edison International
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1995
Additions
------------------------
Balance at Charged to Charged to Balance
Beginning of Costs and Other at End
Description Period Expenses Accounts Deductions of Period
----------- ----------- ---------- ---------- ---------- ----------
(In thousands)
Group A:
Nonrecognition of
geothermal earnings. . . . . . . $ 40,094 $ -- $34,595(a) $ -- $ 74,689
Geothermal projects . . . . . . . . 52,400 -- -- -- 52,400
Projects in development stage . . . 24,114 29,305 -- 1,266(b) 52,153
Uncollectible accounts --
Customers. . . . . . . . . . . . 21,609 22,279 -- 21,176(c) 22,712
All other. . . . . . . . . . . . 34,079 801 -- 21,867(c) 13,013
-------- --------- ------- -------- --------
Total. . . . . . . . . . . . . $172,296 $ 52,385 $34,595 $ 44,309 $214,967
======== ======== ======= ======== ========
Group B:
DOE Decontamination
and Decommissioning. . . . . . . $ 56,485 $ -- $ 1,531(d) $ 5,274(e) $ 52,742
Pension and benefits. . . . . . . . 174,851 42,805 23,676(f) 44,670(g) 196,662
Insurance, casualty and
other. . . . . . . . . . . . . . 79,727 74,751 -- 59,690(h) 94,788
-------- -------- ------- -------- --------
Total. . . . . . . . . . . . . $311,063 $117,556 $25,207 $109,634 $344,192
======== ======== ======= ======== ========
________________
(a) Charged to operating revenue.
(b) Accounts written off.
(c) Accounts written off, net.
(d) Represents new estimate based on actual billings.
(e) Represents amounts paid.
(f) Primarily represents transfers from the accrued paid absence allowance
account for required additions to the comprehensive disability plan
accounts.
(g) Includes pension payments to retired employees, amounts paid to active
employees during periods of illness and the funding of certain pension
benefits.
(h) Amounts charged to operations that were not covered by insurance.
page 42
Edison International
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1994
Additions
------------------------
Balance at Charged to Charged to Balance
Beginning of Costs and Other at End
Description Period Expenses Accounts Deductions of Period
----------- ----------- ---------- ---------- ---------- ----------
(In thousands)
Group A:
Nonrecognition of
geothermal earnings. . . . . . . $ 14,627 $ -- $25,467(a) $ -- $ 40,094
Geothermal projects . . . . . . . . 52,400 -- -- -- 52,400
Projects in development stage . . . 18,934 8,548 -- 3,368(b) 24,114
Uncollectible accounts --
Customers. . . . . . . . . . . . 16,391 27,240 -- 22,022(c) 21,609
All other. . . . . . . . . . . . 41,542 1,428 -- 8,891(c) 34,079
-------- --------- ------- -------- --------
Total. . . . . . . . . . . . . $143,894 $ 37,216 $25,467 $ 34,281 $172,296
======== ======== ======= ======== ========
Group B:
DOE Decontamination
and Decommissioning. . . . . . . $ 67,128 $ -- $ (452)(d) $ 10,191(e) $ 56,485
Pension and benefits. . . . . . . . 131,764 147,037 23,931(f) 127,881(g) 174,851
Insurance, casualty and
other. . . . . . . . . . . . . . 67,703 67,197 -- 55,173(h) 79,727
-------- -------- ------- -------- --------
Total. . . . . . . . . . . . . $266,595 $214,234 $23,479 $193,245 $311,063
======== ======== ======= ======== ========
________________
(a) Charged to operating revenue.
(b) Accounts written off.
(c) Accounts written off, net.
(d) Represents new estimate based on actual billings.
(e) Represents amounts paid.
(f) Primarily represents transfers from the accrued paid absence allowance
account for required additions to the comprehensive disability plan
accounts.
(g) Includes pension payments to retired employees, amounts paid to active
employees during periods of illness and the funding of certain pension
benefits.
(h) Amounts charged to operations that were not covered by insurance.
page 43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Edison International
By Timothy W. Rogers
------------------------------
Timothy W. Rogers
Attorney
Date: March 27, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Principal Executive Officer:
John E. Bryson* Chairman of the Board, March 27, 1997
Chief Executive Officer
and Director
Principal Financial Officer:
Alan J. Fohrer* Executive Vice President,
Chief Financial Officer March 27, 1997
Controller or Principal
Accounting Officer:
Richard K. Bushey* Vice President and March 27, 1997
Controller
Board of Directors:
Howard P. Allen* Director March 27, 1997
Winston H. Chen* Director March 27, 1997
Stephen E. Frank* Director March 27, 1997
Camilla C. Frost* Director March 27, 1997
Joan C. Hanley* Director March 27, 1997
Carl F. Huntsinger* Director March 27, 1997
Charles D. Miller* Director March 27, 1997
Luis G. Nogales* Director March 27, 1997
Ronald L. Olson* Director March 27, 1997
J. J. Pinola* Director March 27, 1997
James M. Rosser* Director March 27, 1997
E. L. Shannon, Jr.* Director March 27, 1997
Robert H. Smith* Director March 27, 1997
Thomas C. Sutton* Director March 27, 1997
Daniel M. Tellep* Director March 27, 1997
James D. Watkins* Director March 27, 1997
Edward Zapanta* Director March 27, 1997
*By Timothy W. Rogers
- -----------------------------------------
Timothy W. Rogers, Attorney-in-Fact
page 44
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
3.1 Restated Articles of Incorporation as amended through April
25, 1988 (Registration No. 33-19541)*
3.2 Certificate of Amendment of Restated Articles of
Incorporation of SCEcorp (Registration No 33-37381)*
3.3 Certificate of Ownership
3.4 Bylaws as adopted by the Board of Directors on February 15,
1996
4.1 Trust Indenture, dated as of October 1, 1923 (Registration
No. 2-1369)*
4.2 Supplemental Indenture, dated as of March 1,1927
(Registration No. 2-1369)*
4.3 Second Supplemental Indenture, dated as of April 25, 1935
(Registration No. 2-1472)*
4.4 Third Supplemental Indenture, dated as of June 24, 1935
(Registration No. 2-1602)*
4.5 Fourth Supplemental Indenture, dated as of September 1,
1935 (Registration No. 2-4522)*
4.6 Fifth Supplemental Indenture, dated as of August 15, 1939
(Registration No. 2-4522)*
4.7 Sixth Supplemental Indenture, dated as of September 1, 1940
(Registration No. 2-4522)*
4.8 Seventh Supplemental Indenture, dated as of January 15,
1948 (Registration No. 2-7369)*
4.9 Eighth Supplemental Indenture, dated as of August 15, 1948
(Registration No. 2-7610)*
4.10 Ninth Supplemental Indenture, dated as of February 15, 1951
(Registration No. 2-8781)*
4.11 Tenth Supplemental Indenture, dated as of August 15, 1951
(Registration No. 2-7968)*
4.12 Eleventh Supplemental Indenture, dated as of August 15,
1953 (Registration No. 2-10396)*
4.13 Twelfth Supplemental Indenture, dated as of August 15, 1954
(Registration No. 2-11049)*
4.14 Thirteenth Supplemental Indenture, dated as of April 15,
1956 (Registration No. 2-12341)*
4.15 Fourteenth Supplemental Indenture, dated as of February 15,
1957 (Registration No. 2-13030)*
4.16 Fifteenth Supplemental Indenture, dated as of July 1, 1957
(Registration No. 2-13418)*
4.17 Sixteenth Supplemental Indenture, dated as of August 15,
1957 (Registration No. 2-13516)*
4.18 Seventeenth Supplemental Indenture, dated as of August 15,
1958 (Registration No. 2-14285)*
4.19 Eighteenth Supplemental Indenture, dated as of January 15,
1960 (Registration No. 2-15906)*
4.20 Nineteenth Supplemental Indenture, dated as of August 15,
1960 (Registration No. 2-16820)*
4.21 Twentieth Supplemental Indenture, dated as of April 1, 1961
(Registration No. 2-17668)*
4.22 Twenty-First Supplemental Indenture, dated as of May 1,
1962 (Registration No. 2-20221)*
4.23 Twenty-Second Supplemental Indenture, dated as of
October 15, 1962 (Registration No. 2-20791)*
4.24 Twenty-Third Supplemental Indenture, dated as of May 15,
1963 (Registration No. 2-21346)*
page 45
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
4.25 Twenty-Fourth Supplemental Indenture, dated as of
February 15, 1964 (Registration No. 2-22056)*
4.26 Twenty-Fifth Supplemental Indenture, dated as of
February 1, 1965 (Registration No. 2-23082)*
4.27 Twenty-Sixth Supplemental Indenture, dated as of May 1,
1966 (Registration No. 2-24835)*
4.28 Twenty-Seventh Supplemental Indenture, dated as of
August 15, 1966 (Registration No. 2-25314)*
4.29 Twenty-Eighth Supplemental Indenture, dated as of May 1,
1967 (Registration No. 2-26323)*
4.30 Twenty-Ninth Supplemental Indenture, dated as of
February 1, 1968 (Registration No. 2-28000)*
4.31 Thirtieth Supplemental Indenture, dated as of January 15,
1969 (Registration No. 2-31044)*
4.32 Thirty-First Supplemental Indenture, dated as of October 1,
1969 (Registration No. 2-34839)*
4.33 Thirty-Second Supplemental Indenture, dated as of
December 1, 1970 (Registration No. 2-38713)*
4.34 Thirty-Third Supplemental Indenture, dated as of
September 15, 1971 (Registration No. 2-41527)*
4.35 Thirty-Fourth Supplemental Indenture, dated as of
August 15, 1972 (Registration No. 2-45046)*
4.36 Thirty-Fifth Supplemental Indenture, dated as of
February 1, 1974 (Registration No. 2-50039)*
4.37 Thirty-Sixth Supplemental Indenture, dated as of July 1,
1974 (Registration No. 2-59199)*
4.38 Thirty-Seventh Supplemental Indenture, dated as of
November 1, 1974 (Registration No. 2-52160)*
4.39 Thirty-Eighth Supplemental Indenture, dated as of March 1,
1975 (Registration No. 2-52776)*
4.40 Thirty-Ninth Supplemental Indenture, dated as of March 15,
1976 (Registration No. 2-55463)*
4.41 Fortieth Supplemental Indenture, dated as of July 1, 1977
(Registration No. 2-59199)*
4.42 Forty-First Supplemental Indenture, dated as of November 1,
1978 (Registration No. 2-62609)*
4.43 Forty-Second Supplemental Indenture, dated as of June 15,
1979 (File No.1-2313)*
4.44 Forty-Third Supplemental Indenture, dated as of
September 15, 1979 (File No. 1-2313)*
4.45 Forty-Fourth Supplemental Indenture, dated as of October 1,
1979 (Registration No. 2-65493)*
4.46 Forty-Fifth Supplemental Indenture, dated as of April 1,
1980 (Registration No. 2-66896)*
4.47 Forty-Sixth Supplemental Indenture, dated as of
November 15, 1980 (Registration No. 2-69609)*
4.48 Forty-Seventh Supplemental Indenture, dated as of May 15,
1981 (Registration No. 2-71948)*
4.49 Forty-Eighth Supplemental Indenture, dated as of August 1,
1981 (File No. 1-2313)*
page 46
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
4.50 Forty-Ninth Supplemental Indenture, dated as of December 1,
1981 (Registration No. 2-74339)*
4.51 Fiftieth Supplemental Indenture, dated as of January 16,
1982 (File No. 1-2313)*
4.52 Fifty-First Supplemental Indenture, dated as of April 15,
1982 (Registration No. 2-76626)*
4.53 Fifty-Second Supplemental Indenture, dated as of
November 1, 1982 (Registration No. 2-79672)*
4.54 Fifty-Third Supplemental Indenture, dated as of November 1,
1982 (File No. 1-2313)*
4.55 Fifty-Fourth Supplemental Indenture, dated as of January 1,
1983 (File No. 1-2313)*
4.56 Fifty-Fifth Supplemental Indenture, dated as of May 1, 1983
(File No. 1-2313)*
4.57 Fifty-Sixth Supplemental Indenture, dated as of December 1,
1984 (Registration No. 2-94512)*
4.58 Fifty-Seventh Supplemental Indenture, dated as of March 15,
1985 (Registration No. 2-96181)*
4.59 Fifty-Eighth Supplemental Indenture, dated as of October 1,
1985 (File No. 1-2313)*
4.60 Fifty-Ninth Supplemental Indenture, dated as of October 15,
1985 (File No. 1-2313)*
4.61 Sixtieth Supplemental Indenture, dated as of March 1, 1986
(File No. 1-2313)*
4.62 Sixty-First Supplemental Indenture, dated as of March 15,
1986 (File No. 1-2313)*
4.63 Sixty-Second Supplemental Indenture, dated as of April 15,
1986 (File No. 1-2313)*
4.64 Sixty-Third Supplemental Indenture, dated as of April 15,
1986 (File No. 1-2313)*
4.65 Sixty-Fourth Supplemental Indenture, dated as of July 1,
1986 (File No. 1-2313)*
4.66 Sixty-Fifth Supplemental Indenture, dated as of
September 1, 1986 (File No. 1-2313)*
4.67 Sixty-Sixth Supplemental Indenture, dated as of
September 1, 1986 (File No. 1-2313)*
4.68 Sixty-Seventh Supplemental Indenture, dated as of
December 1, 1986 (File No. 1-2313)*
4.69 Sixty-Eighth Supplemental Indenture, dated as of July 1,
1987 (Registration No. 33-19541)*
4.70 Sixty-Ninth Supplemental Indenture, dated as of October 15,
1987 (Registration No. 33-19541)*
4.71 Seventieth Supplemental Indenture, dated as of November 1,
1987 (File No. 1-2313)*
4.72 Seventy-First Supplemental Indenture, dated as of February
15, 1988 (File No. 1-2313)*
4.73 Seventy-Second Supplemental Indenture, dated as of April
15, 1988 (File No. 1-2313)*
4.74 Seventy-Third Supplemental Indenture, dated as of July 1,
1988 (File No. 1-2313)*
page 47
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
4.75 Seventy-Fourth Supplemental Indenture, dated as of August
15, 1988 (File No. 1-2313)*
4.76 Seventy-Fifth Supplemental Indenture, dated as of September
15, 1988 (File No. 1-2313)*
4.77 Seventy-Sixth Supplemental Indenture, dated as of January
15, 1989 (File No. 1-2313)*
4.78 Seventy-Seventh Supplemental Indenture, dated as of May 1,
1990 (File No. 1-2313)*
4.79 Seventy-Eighth Supplemental Indenture, dated as of June 15,
1990 (File No. 1-2313)*
4.80 Seventy-Ninth Supplemental Indenture, dated as of August
15, 1990 (File No. 1-2313)*
4.81 Eightieth Supplemental Indenture, dated as of December 1,
1990 (File No. 1-2313)*
4.82 Eighty-First Supplemental Indenture, dated as of April 1,
1991 (File No. 1-2313)*
4.83 Eighty-Second Supplemental Indenture, dated as of May 1,
1991 (File No. 1-2313)*
4.84 Eighty-Third Supplemental Indenture, dated as of June 1,
1991 (File No. 1-2313)*
4.85 Eighty-Fourth Supplemental Indenture, dated as of December
1, 1991 (File No. 1-2313)*
4.86 Eighty-Fifth Supplemental Indenture, dated as of February
1, 1992 (File No. 1-2313)*
4.87 Eighty-Sixth Supplemental Indenture, dated as of April 1,
1992 (File No. 1-2313)*
4.88 Eighty-Seventh Supplemental Indenture, dated as of July 1,
1992 (File No. 1-2313)*
4.89 Eighty-Eight Supplemental Indenture, dated as of July 15,
1992 (File No. 1-2313)*
4.90 Eighty-Ninth Supplemental Indenture, dated as of December
1, 1992 (File No. 1-2313)*
4.91 Ninetieth Supplemental Indenture, dated as of January 15,
1993 (File No. 1-2313)*
4.92 Ninety-First Supplemental Indenture, dated as of March 1,
1993 (File No. 1-2313)*
4.93 Ninety-Second Supplemental Indenture, dated as of June 1,
1993*
4.94 Ninety-Third Supplemental Indenture, dated as of June 15,
1993 (File No. 1-2313)*
4.95 Ninety-Fourth Supplemental Indenture, dated as of July 15,
1993 (File No. 1-2313)*
4.96 Ninety-Fifth Supplemental Indenture, dated as of September
1, 1993 (File No. 1-2313)*
4.97 Ninety-Sixth Supplemental Indenture, dated as of October
1, 1993 (File No. 1-2313)*
4.98 Adoption of Rights Agreement (File No. 1-2313)*
page 48
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
10.1 1981 Deferred Compensation Agreement (File No. 1-2313)*
10.2 1985 Deferred Compensation Agreement for Executives
(File No. 1-2313)*
10.3 1985 Deferred Compensation Agreement for Directors
(File No. 1-2313)*
10.4 Director Deferred Compensation Plan (File No. 1-9936)*
10.5 Director Grantor Trust Agreement (File No. 1-9936)*
10.6 Executive Deferred Compensation Plan (File No. 1-9936)*
10.7 Executive Grantor Trust Agreement (File No. 1-9936)*
10.8 Executive Supplemental Benefit Program (File No. 1-2313)*
10.9 Executive Retirement Plan (File No. 1-2313)*
10.10 Employment Agreement with Howard P. Allen
(File No. 1-2313)*
10.11 1995 Executive Incentive Compensation Plan (File No. 1-9936)*
10.12 1996 Executive Incentive Compensation Plan
10.13 Executive Disability and Survivor Benefit Program
(File No. 1-9936)*
10.14 Retirement Plan for Directors
10.15 Director Incentive Compensation Plan
10.16 Officer Long-Term Incentive Compensation Plan
10.16.1 Form of Agreement for 1989-1995 Awards under the Officer
Long-Term Incentive Compensation Plan (File No. 1-9936)*
10.16.2 Form of Agreement for 1996 Awards under the Officer Long-Term
Incentive Compensation Plan
10.17 Estate and Financial Planning Program (File No. 1-9936)*
10.18 Consulting Agreement with Howard P. Allen (File No. 1-9936)*
10.19 Employment Agreement with Bryant C. Danner (File No. 1-9936)*
10.20 Employment Agreement with Stephen E. Frank (File No. 1-9936)*
10.21 Letter Agreement with Edward R. Muller (File No. 1-2313)*
11. Computation of Primary and Fully Diluted Earnings Per Share
12. Computation of Ratios of Earnings to Fixed Charges
13. Selected portions of the Annual Report to Shareholders
for year ended December 31, 1996
21. Subsidiaries of the Registrant
23. Consent of Independent Public Accountants - Arthur Andersen
LLP
24.1 Power of Attorney
24.2 Certified copy of Resolution of Board of Directors
Authorizing Signature
27. Financial Data Schedule
____________
* Incorporated by reference pursuant to Rule 12b-32.
EXHIBIT 10.12
EDISON INTERNATIONAL AND
SOUTHERN CALIFORNIA EDISON COMPANY
1996 EXECUTIVE INCENTIVE COMPENSATION PLAN
As Adopted December 13, 1995
WHEREAS, it has been determined that it is in the best interest of the
Edison International and Southern California Edison Company (SCE) to offer
and maintain competitive executive compensation programs designed to
attract and retain qualified executives; and
WHEREAS, it has been determined that providing financial incentives to
executives that reinforce and recognize corporate, organizational and
individual performance and accomplishments will enhance the financial and
operational performance of Edison International and SCE; and
WHEREAS, it has been determined that an incentive compensation program
would encourage the attainment of short-term corporate goals and
objectives;
NOW, THEREFORE, the 1996 Executive Incentive Compensation Plan has been
established by the Compensation and Executive Personnel Committee of the
Boards of Directors effective January 1, 1996, and made available to
eligible executives of the Edison International and SCE subject to the
following terms and conditions:
1. Definitions. When capitalized herein, the following terms are defined
as indicated:
"Base Salary" is defined to be the annual salary of the Participant on the
last day of the year worked by the Participant.
"Board" means the Board of Directors of the Company.
"Chairman" means the Chairman of the Board and Chief Executive Officer of
the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Edison International and/or Southern California Edison
Company.
"Committee" means the Compensation and Executive Personnel Committees of
the Boards.
page 1
"Participant" means the Chairman, president, executive vice presidents,
senior vice presidents, elected vice presidents, and senior managers whose
participation in this Plan has been approved by the Chairman.
"Plan" means the Edison International and Southern California Edison
Company 1996 Executive Incentive Compensation Plan.
2. Eligibility. To be eligible for the full amount of any incentive
award, an individual must have been a participant for the entire calendar
year. Pro-rata awards may be distributed to participants who are
discharged for reasons other than incompetence, misconduct or fraud, or
who resigned, retired or became disabled during the calendar year, or who
were participants for less than the full year. A pro-rata award may be
made to a participant's designated beneficiary in the event of death of
a participant during a calendar year prior to an award being made.
3. Company Performance Goals. The Chairman will furnish recommended
Company achievement goals to the Committee, out of which the Committee
will, in consultation with the Chairman, select those areas of achievement
upon which they wish the Company to focus particular attention and
identify performance goals for the year.
The performance goals must represent relatively optimistic, but reasonably
attainable goals the accomplishment of which will contribute significantly
to the attainment of Company objectives.
4. Individual Incentive Award Levels. Company, organizational and
individual performance relative to the pre-established goals will
determine the award a Participant can receive.
Although most performance goals will be stated in terms of results to be
achieved during the calendar year, it is important that long-range goals
and objectives be included. These long-range goals and objectives will
have payoffs later than the year in question, but short-term sub-goals may
be established for the calendar year.
If the Committee determines individual and Company performance goals have
been substantially met, Participants will be eligible for individual
incentive awards at the following target award percentages:
70% of Base Salary for the Chairman;
60% of Base Salary for the President;
60% of Base Salary for the Executive Vice Presidents;
45% of Base Salary for the Senior Vice Presidents;
35% of Base Salary for the elected Vice Presidents; and
25-30% of Base Salary for the Senior Managers.
Stretch-maximum awards of up to 150% of target may be earned on the basis
of performance in excess of targets. All awards shall be made in the
discretion of the Committee on the basis of its assessment of corporate
and individual performance.
5. Approval and Payment of Individual Awards. During the first quarter
of the year following the completion of the calendar year, the Chairman
will assess the degree to which individual and corporate goals and
objectives have been achieved and will develop suggested incentive awards
for eligible Participants other than the Chairman. The Committee will
receive a report from the Chairman as to overall Company performance, will
deliberate on the Chairman's recommendations, will develop an incentive
award for the Chairman, and make its determination as to the approval of
the recommended awards for officers. Awards to non-officers shall be
determined and approved by the Chairman. All decisions of the Committee
and the Chairman regarding individual incentive awards will be final and
conclusive.
Incentive award payments will be made as soon as practical following the
Committee's approval. Payment will be made in cash except to the extent
the Participant has previously elected to defer payment of some or all of
the award pursuant to the terms of a deferred compensation plan of the
Company or to the extent the Committee elects to defer some or all of the
award. Awards (cash or deferred) made will be subject to any income or
payroll tax withholding or other deductions as may required by Federal,
State or local law.
Awards under this Plan will not be considered to be salary or other
compensation for the purpose of computing benefits to which the
Participant may be entitled under any pension plan, stock bonus plan,
including but not limited to the SCE Retirement Plan, SCE Stock Savings
Plus Plan, or other plan or arrangement of the Company for the benefit of
its employees if such plan or arrangement is a plan qualified under
Section 401(a) of the Code and is a trust exempt from Federal income tax
under Section 501(a) of the Code.
Awards owed to participants under this Plan shall constitute an unsecured
general obligation of the Company, and no special fund or trust shall be
created, nor shall any notes or securities be issued with respect to any
awards.
6. Plan Modifications and Adjustments. In order to ensure the incentive
features of the Plan, avoid distortion in its operation and compensate for
or reflect extraordinary changes which may have occurred during the
calendar year, the Committee may make adjustments to the Plan's
performance goals and percentage allocations before, during or after the
end of the calendar year to the extent it determines appropriate in its
sole discretion. Adjustments to the Plan shall be conclusive and binding
upon all parties concerned. The Plan may be modified or terminated by the
Committee at any time.
7. Plan Administration. This Plan and any officer awards under it are
to be approved by the Committee. The Chairman shall approve any non-
officer awards. Administration of the Plan is otherwise delegated to
management under the direction of
page 3
the Chairman. The responsible vice president is authorized to approve
ministerial amendments to the Plan, to interpret Plan provisions, and to
approve changes as may be required by law or regulation. Neither the
Company nor any member of the Committee or the Board shall be liable to
any person for any action taken or omitted in connection with the
interpretation and administration of the Plan.
8. Successors and Assigns. This Plan shall be binding upon and inure to
the benefit of the heirs, legal representatives, successors and assigns
of the Company and Participant. Notwithstanding the foregoing, any right
to receive payment hereunder is hereby expressly declared to be personal,
nonassignable and nontransferable, except by will, intestacy, or as
otherwise required by law, and in the event of any attempted assignment,
alienation or transfer of such rights contrary to the provisions hereof,
the Company shall have no further liability for payments hereunder.
9. Beneficiaries. In the event of the death of a Participant during a
calendar year prior to the making of any individual incentive award, a
pro-rata award may be made at the discretion of the Committee. Any such
payment will be made to the Participant's most recently designated
beneficiary or beneficiaries under the Long-Term Incentive Compensation
Plan of the Company. If no such designated beneficiary or beneficiaries
survive the Participant, or if a designated beneficiary should die before
the award has been paid, any award will be paid in one lump-sum payment
to his or her estate as soon as practicable following the Participant's
or the designated beneficiary's death.
10. Capacity. If any person entitled to payments under this Plan is
incapacitated and unable to use such payments in his or her own best
interest, the Company may direct that payments (or any portion) be made
to that person's legal guardian or conservator, or that person's spouse,
as an alternative to the payment to the person unable to use the payments.
Court-appointed guardianship or conservatorship may be required by the
Company before payment is made. The Company shall have no obligation to
supervise the use of such payments.
11. No Right of Employment. Nothing contained herein shall be construed
as conferring upon the Participant the right to continue in the employ of
the Company as an Officer or Manager of the Company or in any other
capacity.
12. Severability and Controlling Law. The various provisions of this
Plan are severable in their entirety. Any determination of invalidity or
unenforceability of any one provision will have no effect on the
continuing force and effect of the remaining provisions. This Plan shall
be governed by the laws of the State of California.
EDISON INTERNATIONAL
SOUTHERN CALIFORNIA EDISON COMPANY
Emiko Banfield
-------------------------------
Emiko Banfield, Vice President
EXHIBIT 10.14
EDISON INTERNATIONAL
SOUTHERN CALIFORNIA EDISON COMPANY
RETIREMENT PLAN FOR DIRECTORS
As Amended February 15, 1996
I. GENERAL
1.1 Purpose
The purpose of this Plan is to provide recognition and retirement
compensation to eligible members of the Edison International and Southern
California Edison Company Boards of Directors ("Boards") to facilitate the
companies' ability to attract, retain, and reward members of the Boards.
1.2 Eligibility
Eligibility in this Plan is limited to members of the Boards who have at
least five years of total service (which need not be continuous service)
as directors, and who retire or resign from the Boards in good standing
or die while in service and in good standing. This Plan covers periods
of service both as an employee director and as an outside director. For
purposes of this Plan, a year of service will be determined on a calendar
year basis and a full year of service will be credited for any fractional
year served.
II. AMOUNT OF ANNUAL BENEFIT
2.1 Benefit
The Plan pays an annual retirement benefit equal to the annual retainer
in effect at the time of the eligible director's retirement, resignation,
or death. The retirement benefit will be paid quarterly in advance in
equal installments for the period described in Section 3.1(a). No
additional amount will be paid for service on any of the committees of the
Boards, nor will interest be paid.
2.2 Benefit of Directors in Service Before 1996
If a director has Board service prior to 1996, the Plan will pay an annual
retirement benefit determined by multiplying the director's years of
service before and after January 1, 1996 by the applicable compensation
base and dividing the sum of the products by the director's total years
of service. For service before 1996, the compensation base will be the
annual retainer plus eight times the regular monthly meeting fee in effect
at the time of the eligible director's retirement, resignation or death.
For service after 1995, the compensation base will be the annual retainer
in effect at the time of the eligible director's retirement, resignation
or death.
page 1
III. DURATION OF PAYMENTS
3.1 Benefit Period
(a) The Plan benefit will be paid to the retired director or his/her
surviving spouse for the number of years equal to the director's total
years of service on the Boards.
(b) A break in service on the Board of Southern California Edison Company
which was required to allow the director to render a period of
distinguished and uninterrupted government service which was completed
before 1982 and which was followed by reelection to that Board will be
recognized under this Plan as a period of service on that Board.
(c) A year of simultaneous service on the Boards of Edison International
and Southern California Edison Company will be counted as one year for
computation of the Plan's benefit period.
3.2 Commencement of Payments
The first quarterly installment of Plan Benefits will be paid on the first
day of the calendar quarter following the director's retirement as a
director, or the 65th anniversary of the director's birth, whichever
occurs later.
3.3 Survivor Benefits
(a) If the director dies without leaving a surviving spouse, a lump sum
of any benefit payments remaining will be calculated and paid to the
estate of the director.
(b) If the director dies leaving a surviving spouse before retiring from
the Boards, benefit payments to that spouse will begin on the first day
of the calendar quarter following the date of the director's death, or the
65th anniversary of the director's birth, whichever occurs later.
(c) If the director dies leaving a surviving spouse after benefit
payments have begun, benefit payments will continue and be paid to that
spouse.
(d) If the director dies leaving a surviving spouse after retirement from
the Boards but before benefit payments have begun, benefit payments to
that spouse will begin on the first day of the calendar quarter following
the 65th anniversary of the director's birth.
3.4 Termination of Benefit Payments
Once begun, benefit payments to a retired director or his/her surviving
spouse will continue until the earlier of the
o completion of payments for the Benefit Period, or
page 2
o date of death of the later to die of the director or the surviving
spouse. Upon said death, a lump sum of any remaining benefit payments
will be calculated and paid to that person's estate.
V. ADMINISTRATION
(a) This Plan is non-contributory, non-qualified and unfunded, and
represents an unsecured general obligation of each Company. No special
fund or trust will be created, nor will any notes or securities be issued
with respect to any retirement benefits.
(b) The Chair of each Company's Compensation and Executive Personnel
Committee, or the Vice President of Human Resources of Southern California
Edison Company, will have full and final authority to interpret this Plan,
and to make determinations advisable for the administration of this Plan,
to approve ministerial changes, and to approve changes as may be required
by law or regulation. All such decisions and determinations will be final
and binding upon all parties.
(c) If any person entitled to payments under this Plan is, in the opinion
of the Committees or their designee, incapacitated and unable to use such
payments in his/her own best interest, the Committees or their designee
may direct that payments (or any portion) be made to the person's spouse
or legal guardian, as an alternative to the payment to the person unable
to use the payments. The Committees or their designee will have no
obligation to supervise the use of such payments.
(d) This Plan will be governed by the laws of the State of California.
EDISON INTERNATIONAL AND
SOUTHERN CALIFORNIA EDISON COMPANY
Beverly P. Ryder
----------------------------------------
Beverly P. Ryder, Secretary
EXHIBIT 10.15
EDISON INTERNATIONAL
DIRECTOR INCENTIVE COMPENSATION PLAN
As Amended and Restated February 15, 1996
I. GENERAL
1.1 Purpose
The purpose of the Director Incentive Compensation Plan ("Plan") is to
foster and promote the long-term financial success of Edison International
and its affiliates by attracting and retaining outstanding nonemployee
directors by enabling them to participate in the corporation's growth
through automatic, nondiscretionary awards of stock ("Awards").
1.2 Eligibility
Eligibility in this Plan shall be limited to members of the Board of
Directors of Edison International or, an Edison International affiliate,
who at the time the Award is made are not employees or officers of Edison
International or an Edison International affiliate.
1.3 Shares Subject to the Plan
Shares of stock covered by Awards under the Plan may be, in whole or
in part, authorized and unissued shares of Edison International's common
stock, or previously issued shares of common stock reacquired by Edison
International including shares purchased on the open market, or such other
shares as may be substituted pursuant to Section 3.3 ("Common Stock").
The maximum number of shares of Common Stock which may be issued for all
purposes under the Plan shall be 196,800 (subject to adjustment pursuant
to Section 3.3).
II. STOCK AWARDS
2.1 Award Formula
Effective with a Director's election on April 16, 1992, and on each
subsequent date a Director is elected or reelected to the Board of
Directors of Edison International at an annual meeting of the
stockholders, such Director will automatically be granted
500 shares of fully vested Common Stock, at no cost to the Director. Each
stock certificate evidencing an Award shall be registered in the name of
the Director and delivered to him or her on that date, or as soon
thereafter as practicable. Directors serving on more than one Board will
receive only one Award per year under the Plan.
2.2 Award Limitation
Subject to the limitations of Section 3.2, the award formula may be
modified from time to time by the Board of Directors, with respect to
pricing, timing and amount, but such formula will not be modified to
provide an Award in excess of 1000 shares of Common Stock per Director per
year.
III. ADMINISTRATION
3.1 Administration of the Plan
The Plan shall be self-effectuating. Administrative determinations
necessary or advisable for the administration or interpretation of the
Plan in order to carry out its provisions and purposes shall be made by
Edison International.
3.2 Amendment, Suspension and Termination of Plan
The Board of Directors may suspend or terminate the Plan or any portion
thereof at any time and may amend the Plan from time to time in such
respects as the Board of Directors may deem advisable; provided, however,
the Plan shall not be amended more than once every six months, other than
to comport with changes in the Internal Revenue Code of 1986, as amended,
or the rules promulgated thereunder; and provided further, the Plan shall
not be amended, without shareholder approval to the extent required by law
or the rules of any exchange upon which the Common Stock is listed, (a)
to materially increase the number of shares of Common Stock which may be
issued under the Plan, except as provided in Section 3.3, (b) to
materially modify the requirements as to eligibility for participation in
the Plan, or (c) to materially increase the benefits accruing to Directors
under the Plan. No such amendment, suspension or termination shall make
any change that would disqualify the Plan, or any other Plan of Edison
International intended to be so qualified, from the exemption provided by
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended.
3.3 Capital Adjustments
In the event of a stock dividend or stock split, combination or other
reduction in the number of issued shares of Common Stock, a merger,
consolidation, reorganization, recapitalization, sale or exchange of
substantially all assets or dissolution of Edison International, the Board
of Directors shall, in order to prevent the dilution or enlargement of
rights under the Plan, make such adjustments in the number
page 2
and type of shares authorized and the number and type of shares that may
be awarded under this Plan as may be determined to be appropriate and
equitable.
IV. MISCELLANEOUS
4.1 Rights of Directors
Nothing in the Plan shall confer upon any Director any right to serve
as a Director for any period of time or to continue his or her present or
any other rate of compensation.
4.2 Plan Not Exclusive
The adoption of the Plan shall not preclude the adoption by appropriate
means of a stock option or other incentive plan for Directors.
4.3 Requirements of Law; Governing Law
The granting of Awards and issuance of shares of Common Stock shall be
subject to all applicable rules and regulations, and to such approvals by
any governmental agencies or national securities exchanges as may be
required. The Plan shall be construed in accordance with and governed by
the laws of the State of California.
4.4 Term of Plan
This Plan shall become effective upon its approval by the stockholders
of Edison International at their annual meeting on April 16, 1992, and
shall continue in effect until terminated by the Edison International
Board of Directors or the Edison International stockholders.
EDISON INTERNATIONAL
Beverly P. Ryder
---------------------------------
Beverly P. Ryder
Secretary
EXHIBIT 10.16
EDISON INTERNATIONAL
OFFICER LONG-TERM INCENTIVE COMPENSATION PLAN
Amended and Restated as of February 15, 1996
WHEREAS, the 1987 Long-Term Incentive Compensation Plan (the "1987 Plan")
was approved by the shareholders of Southern California Edison Company
effective January 15, 1987;
WHEREAS, SCEcorp assumed sponsorship of the 1987 Plan with the formation
of the holding company approved by the shareholders of Southern California
Edison Company on April 21, 1988; and
WHEREAS, it is deemed desirable to amend and restate the Plan as the
Edison International Officer Long-Term Incentive Compensation Plan;
NOW, THEREFORE, the Edison International Officer Long-Term Incentive
Compensation Plan is restated subject to the following terms and
conditions:
1. Purpose.
The purpose of the Edison International Officer Long-Term Incentive
Compensation Plan is to improve the long-term financial and operational
performance of Edison International and its affiliates by providing
eligible Participants a financial incentive which reinforces and
recognizes long-term corporate, organizational and individual performance
and accomplishments. The Plan is intended to promote the interests of
Edison International and its shareholders by encouraging eligible
Participants to acquire stock or increase their proprietary interest in
Edison International.
2. Definitions.
Whenever the following terms are used in this Plan, they will have the
meanings specified below unless the context clearly indicates the
contrary:
"Board of Directors" or "Board" means the Board of Directors of Edison
International.
"Cash Equivalent" means a stock-based award payable in cash only granted
pursuant to Section 14.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation and Executive Personnel Committee of
the Board of Directors excluding those members ineligible to administer
this Plan as determined under Section 4.
page 1
"Common Stock" means the common shares of Edison International.
"Company" means Edison International or the Edison International affiliate
employing the Participant.
"Dividend Equivalent" means the additional amount of cash or Common Stock
as described in Section 12.
"Eligible Person" or "Participant" means an officer of the Company whose
participation has been approved by the Committee, including without
limitation, executive officers under Section 16 of the Securities Exchange
Act of 1934, as amended, but excluding those persons participating in the
Edison International Management Long-Term Incentive Compensation Plan.
"Fair Market Value" means the average of the highest and lowest sale
prices for the Common Stock as reported in the western edition of The Wall
Street Journal for the New York Stock Exchange Composite Transactions for
the date as of which such determination is made.
"Former Rule 16b-3" means Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended,
and effective until May 1, 1991.
"Holder" means a person holding an Incentive Award.
"Incentive Award" means any award which may be made under the Plan by the
Committee.
"Incentive Stock Option" means an option as defined under Section 422A of
the Code granted pursuant to Section 7 of the Plan.
"Nonqualified Stock Option" means an option, other than an Incentive Stock
Option, granted pursuant to Section 6 of the Plan.
"Option" means either a Nonqualified Stock Option or Incentive Stock
Option.
"Performance Award" means an award granted pursuant to Section 10 which
may be based on stock value, book value, or other specific performance
criteria.
"Plan" means the Officer Long-Term Incentive Compensation Plan as set
forth herein, which may be amended from time-to-time.
"Restricted Stock" means Common Stock granted or awarded pursuant to
Section 8 of the Plan, which is nontransferable and subject to substantial
risk of forfeiture until restrictions lapse.
page 2
"Rule 16b-3" means Rule 16b-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended, and
effective May 1, 1991.
"Stock Appreciation Equivalent" means an award based on Common Stock
appreciation or other specific performance criteria which is granted
pursuant to Section 11.
"Stock Appreciation Right" or "Right" means a right granted pursuant to
Section 9 of the Plan.
"Stock Payment" means a payment pursuant to Section 13 in shares of Common
Stock to replace all or any portion of the compensation (other than base
salary) that would otherwise become payable to a Participant in cash.
3. Aggregate Awards Under Plan.
Pursuant to the terms of the Plan, and subject to the provisions of this
Section 3 and Section 16 of the Plan, the aggregate number of shares of
Common Stock that may be issued or transferred pursuant to Incentive
Awards, and the total aggregate value of Incentive Awards other than
Dividend Equivalents which are payable in a form other than Common Stock,
will not exceed 1.5 million shares, or the fair market value of such
shares as determined on the dates of payment of the Incentive Awards. On
an annual basis, as long as any Incentive Awards are outstanding and have
not been paid, Dividend Equivalents payable in cash will not exceed the
annual dividend payable on 1.5 million shares of Common Stock.
The shares to be delivered under the Plan will be made available, at the
discretion of the Board or Committee, either from authorized but unissued
shares of Common Stock or from previously issued shares of Common Stock
reacquired by Edison International including shares purchased on the open
market.
If any Incentive Award expires, is forfeited, is canceled, or otherwise
terminates for any reason other than upon exercise or payment, the shares
of Common Stock (provided the Participant receives no benefit of
ownership) or equivalent value that could have been delivered will not be
charged against the limitations provided above and may again be made
subject to Incentive Awards. However, shares subject to Stock
Appreciation Rights settled in cash will not be charged against the share
limitations provided above, but only against the fair market value
limitation.
4. Administration.
The Plan will be administered by the Committee, which will consist of
those directors on the Compensation Committee of the Board who, (i) as
long as Former Rule 16b-3 is elected to apply to this Plan, are not
eligible to receive Incentive Awards under the Plan at the time he or she
exercises discretion in administering the Plan, and have not been eligible
for selection for at least one year prior thereto to receive Incentive
Awards or
page 3
Common Stock pursuant to the Plan, or any other plan of Edison
International or any of its affiliates entitling the Participants therein
to acquire Common Stock, Stock Appreciation Rights, or Options of Edison
International or any of its affiliates, other than plans permitted by
Former Rule 16b-3, or, (ii) from the time Rule 16b-3 is elected to apply
to this Plan, during the one year prior to service as an administrator of
the Plan, or during such service, have not been granted or awarded
Incentive Awards or Common Stock pursuant to the Plan or any other plan
of Edison International or any of its affiliates, other than plans
permitted by Rule 16b-3. To the extent the members of the Compensation
Committee of the Board satisfying the above criteria are fewer than three
in number and Former Rule 16b-3 is elected to apply to this Plan, the
Board shall appoint additional directors until at least three members are
qualified to administer this Plan. From the time Rule 16-3b is elected
to apply to the Plan, the Board shall ensure at least two members are
qualified to administer the Plan.
The Committee has, and may exercise, such powers and authority of the
Board as may be necessary or appropriate for the Committee to carry out
its functions as described in the Plan. The Committee has sole authority
in its discretion to determine the Officers to whom, and the time or times
at which, Incentive Awards may be granted, the nature of the Incentive
Award, the number of shares of Common Stock or the amount of cash that
makes up each Incentive Award, the pricing and amount of any Incentive
Award, the objectives, goals and performance criteria (which need not be
identical) utilized to measure the value of Incentive Awards, the form of
payment (cash or Common Stock or a combination thereof) payable upon the
event or events giving rise to payment of an Incentive Award, the vesting
schedule of any Incentive Award, the term of any Incentive Award, and such
other terms and conditions applicable to each individual Incentive Award
as the Committee shall determine. The Committee may grant at any time new
Incentive Awards to a Participant who has previously received Incentive
Awards whether such prior Incentive Awards are still outstanding, have
previously been exercised in whole or in part, or are canceled in
connection with the issuance of new Incentive Awards. The purchase price
or initial value of the Incentive Awards may be established by the
Committee without regard to the existing Incentive Awards or such other
grants. Further, the Committee may, with the consent of a Participant,
amend the terms of any existing Incentive Award previously granted to
include or amend any provisions which could be incorporated in such an
Incentive Award at the time of such amendment.
The Committee has the sole authority to interpret the Plan, to determine
the terms and provisions of the Incentive Award agreements, and to make
all determinations necessary or advisable for the administration of the
Plan. The Committee has authority to prescribe, amend, and rescind rules
and regulations relating to the Plan. All interpretations,
determinations, and actions by the Committee will be final, conclusive,
and binding upon all parties. Any action of the Committee with respect
to the administration of the Plan shall be taken pursuant to a majority
vote or by the unanimous written consent of its members. The Committee
may delegate to one or more agents such nondiscretionary administrative
duties as it may deem advisable.
page 4
No member of the Board or the Committee or agent or designee thereof will
be liable for any action or determination made in good faith by the Board
or the Committee with respect to the Plan or any transaction arising under
the Plan.
5. Eligibility and Date of Grant.
The Committee has authority, in its sole discretion, to determine and
designate from time-to-time those Eligible Persons who are to be granted
Incentive Awards, the type of Incentive Awards to be granted, the times
at which Incentive Awards will be granted, the prices of Incentive Awards
(which may be any lawful consideration determined by the Committee), the
amount of any Incentive Award, and the number of shares of Common Stock
or the amount of cash subject to each Incentive Award.
Each Incentive Award will be evidenced by a written instrument signed by
Edison International and the Participant and may include any other terms
and conditions consistent with the Plan as the Committee may in its
discretion determine. The date of grant of an Incentive Award will be the
date of the Agreement between the Company and the Participant.
6. Nonqualified Stock Options.
The Committee may approve the grant of Nonqualified Stock Options to
Eligible Persons, subject to the following terms and conditions:
(a) The purchase price of Common Stock under each Nonqualified Stock
Option may not be less than one hundred percent of the Fair Market Value
of the Common Stock on the date the Nonqualified Stock Option is granted.
(b) No Nonqualified Stock Option may be exercised after ten years and one
day from the date of grant.
(c) Upon the exercise of a Nonqualified Stock Option, the purchase price
will be payable in full in cash and/or its equivalent, such as Common
Stock, acceptable to Edison International. Any shares so assigned and
delivered to Edison International in payment or partial payment of the
purchase price will be valued at their Fair Market Value on the exercise
date.
(d) No fractional shares will be issued pursuant to the exercise of a
Nonqualified Stock Option. Only cash payments will be made in lieu of
fractional shares.
7. Incentive Stock Options.
The Committee may approve the grant of Incentive Stock Options to Eligible
Persons, subject to the following terms and conditions:
(a) The purchase price of each share of Common Stock under an Incentive
Stock Option will be at least equal to the Fair Market Value of a share
of the Common Stock on the date of grant; provided, however, that if a
Participant, at the time an Incentive Stock Option is granted, owns stock
representing more than ten (10%) percent of the
total combined voting power of all classes of stock of Edison
International (as defined in Section 425(e) or (d) of the Code), then the
exercise price of each share of Common Stock subject to such Incentive
Stock Option shall be at least one hundred and ten (110%) percent of the
Fair Market Value of such share of Common Stock, as determined in the
manner stated in this paragraph.
(b) No Incentive Stock Option may be exercised after ten (10) years from
the date of the grant. Each Incentive Stock Option granted under this
Plan shall also be subject to earlier termination as provided in this
Plan.
(c) Upon the exercise of an Incentive Stock Option, the purchase price
will be payable in full in cash and/or its equivalent, such as Common
Stock, acceptable to Edison International. Any shares so assigned and
delivered to Edison International in payment or partial payment of the
purchase price will be valued at their Fair Market Value on the exercise
date.
(d) The Fair Market Value (determined at the time the Incentive Stock
Option is granted) of the shares of Common Stock for which any Participant
may be granted Incentive Stock Options that are first exercisable during
any one calendar year (including Incentive Stock Options under all plans
of the Company) will not in the aggregate exceed One Hundred Thousand
($100,000) Dollars.
(e) No fractional share will be issued pursuant to the exercise of an
Incentive Stock Option. Only cash payments will be made in lieu of
fractional shares.
8. Restricted Stock.
The Committee may approve the grant or award of Restricted Stock to
Eligible Persons subject to the conditions of this Section 8.
(a) All shares of Restricted Stock granted or awarded pursuant to the
Plan (including any shares of Restricted Stock received by the Holder as
a result of stock dividends, stock splits, or any other forms of
adjustment) will be subject to the following restrictions:
(i) The shares may not be sold, transferred, or otherwise alienated
or hypothecated until the restrictions are removed or expire.
(ii) The Committee may require the Holder to enter into an escrow
agreement providing that the certificates representing Restricted Stock
granted or awarded pursuant to the Plan will remain in the physical
custody of an escrow holder or Edison International until all restrictions
are removed or expire.
(iii) Each certificate representing Restricted Stock granted or
awarded pursuant to the Plan will bear a legend making appropriate
reference to the restrictions imposed on the Restricted Stock.
page 6
(iv) The Committee may impose restrictions on any shares granted or
awarded as it may deem advisable, including, without limitation,
restrictions designed to facilitate exemption from or compliance with the
Securities Exchange Act of 1934, as amended, with requirements of any
stock exchange upon which such shares or shares of the same class are then
listed, and with any blue sky or other securities laws applicable to such
shares.
(b) The restrictions imposed under subparagraph (a) above upon Restricted
Stock will lapse in accordance with a schedule or other conditions as
determined by the Committee, subject to the provisions of Sections 18 and
19.
(c) Upon acceptance of the Restricted Stock offer, the purchase price,
if any, established by the Committee will be payable in full in cash
and/or its equivalent, such as Common Stock, acceptable to Edison
International.
(d) Subject to the provisions of subparagraph (a) above and Section 19,
the Holder will have all rights of a shareholder with respect to the
Restricted Stock granted or awarded, including the right to vote the
shares and receive all dividends and other distributions paid or made with
respect thereto.
9. Stock Appreciation Rights.
The Committee may approve the grant of Rights related or unrelated to
Options to Eligible Persons, subject to the following terms and
conditions:
(a) A Stock Appreciation Right may be granted:
(i) at any time if unrelated to an option;
(ii) either at the time of grant, or at any time thereafter during the
option term if related to a Nonqualified Stock Option;
(iii) only at the time of grant if related to an Incentive Stock
Option.
(b) A Stock Appreciation Right grant in connection with an Option will
entitle the Holder of the related Option, upon exercise of the Stock
Appreciation Right, to surrender such Option, or any portion thereof to
the extent unexercised, with respect to the number of shares as to which
such Stock Appreciation Right is exercised, and to receive payment of an
amount computed pursuant to Section 9(d). Such Option will, to the extent
surrendered, then cease to be exercisable.
(c) Subject to Section 9(g), a Stock Appreciation Right granted in
connection with an Option hereunder will be exercisable at such time or
times, and only to the extent that a related Option is exercisable, and
will not be transferable except to the extent that such related Option may
be transferable.
page 7
(d) Upon the exercise of a Stock Appreciation Right related to an Option,
the Holder will be entitled to receive payment of an amount determined by
multiplying:
(i) The difference obtained by subtracting the purchase price of a
share of Common Stock specified in the related Option from the
Fair Market Value of a share of Common Stock on the date of
exercise of such Stock Appreciation Right, by
(ii) The number of shares to which such Stock Appreciation Right has
been exercised.
(e) The Committee may grant Stock Appreciation Rights unrelated to
Options to Eligible Persons. Section 9(d) shall be used to determine the
amount payable at exercise of such Stock Appreciation Right(s) if Fair
Market Value is not used, except that Fair Market Value shall not be used
if the Committee specified in the award that book value or another measure
as deemed appropriate by the Committee was to be used. In applying the
formula in Section 9(d), the initial share value specified in the Stock
Appreciation Right award shall be used in lieu of the price "specified in
the related Option."
(f) Payment of the amount determined under Section 9(d) or (e) may be
made solely in whole shares of Common Stock in a number determined at
their Fair Market Value on the date of exercise of the Stock Appreciation
Right or alternatively, at the sole discretion of the Committee, solely
in cash or in a combination of cash and shares as the Committee deems
advisable. If the Committee decides to make full payment in shares of
Common Stock, and the amount payable results in a fractional share, no
fractional share will be issued. Payment for the fractional share will
be made in cash only.
(g) The Committee may, at the time a Stock Appreciation Right is granted,
impose such conditions on the exercise of the Stock Appreciation Right as
may be required to satisfy the requirements of Former Rule 16b-3 and/or
Rule 16b-3, as applicable (or any other comparable provisions in effect
at the time or times in question). Without limiting the generality of the
foregoing, the Committee may determine that a Stock Appreciation Right
may be exercised only during the period beginning on the third business
day and ending on the twelfth business day following the publication of
Edison International's quarterly and annual summarized financial data.
10. Performance Awards.
The Committee may approve Performance Awards to Eligible Persons. Such
awards may be based on Common Stock performance over a period determined
in advance by the Committee or any other measures as determined
appropriate by the Committee. Payment will be in cash unless replaced by
a Stock Payment in full or in part as determined by the Committee.
page 8
11. Stock Appreciation Equivalents.
The Committee may approve Stock Appreciation Equivalents to Eligible
Persons. Such awards may be based on Common Stock performance over a
period determined in advance by the Committee, or any other measures as
determined appropriate by the Committee. Payment will be in cash unless
replaced by a Stock Payment in full or in part as determined by the
Committee.
12. Dividend Equivalents.
The Committee may approve Dividend Equivalents based on the dividends
declared on the Common Stock on record dates during the period between the
date an Incentive Award is granted and the date such Incentive Award is
exercised or paid. Dividend Equivalents may be awarded separately or in
connection with Incentive Awards payable, whether payable in cash or
Common Stock. Subject to Sections 3 and 16, such Dividend Equivalents
shall be converted to cash or additional shares by such formula and at
such time as may be determined by the Committee.
13. Stock Payments.
The Committee may approve Stock Payments of Common Stock to Eligible
Persons for all or any portion of the compensation (other than base
salary) that would otherwise become payable to a Participant in cash.
Notwithstanding anything to the contrary contained in this Plan, if the
written instrument signed by Edison International and the Holder
evidencing any Incentive Award states that the Incentive Award(s) will be
paid in cash, the Committee may not make a Stock Payment in lieu thereof,
and the Incentive Award(s) will be redeemable or exercisable by the Holder
only for cash.
14. Cash Equivalents.
The Committee may grant any Incentive Award permitted under the Plan which
is otherwise payable in stock in the form of a cash equivalent award.
15. Deferral of Payment.
The Committee may approve the deferral of any payments which may become
due under the Plan. Such deferrals shall be subject to any conditions,
restrictions or requirements as the Committee may determine.
16. Adjustment Provisions.
Subject to the provisions of this Section 16 below, if the outstanding
shares of Common Stock are increased, decreased, or exchanged for a
different number or kind of shares or other securities, or if additional
shares or new or different shares or other securities are distributed with
respect to such shares of Common Stock or other securities, through
merger, consolidation, sale of all or substantially all of the property
of Edison International, reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or
other distribution with respect to such shares of Common Stock or other
securities, an appropriate and proportionate adjustment may be made in (i)
the maximum number and kind of shares provided in Section 3 of the Plan,
(ii) the
page 9
number and kind of shares or other securities subject to the then
outstanding Incentive Awards, and (iii) the price for each share or other
unit of any other securities subject to the then outstanding Incentive
Awards without change in the aggregate purchase price or value as to which
Incentive Awards remain exercisable or subject to restrictions.
Despite the foregoing, upon dissolution or liquidation of Edison
International, or upon a reorganization, merger, or consolidation of
Edison International with one or more corporations as a result of which
Edison International is not the surviving corporation, or upon the sale
of all or substantially all the property of Edison International, all
Options, Stock Appreciation Rights, and other Incentive Awards then
outstanding under the Plan will be fully vested and exercisable and all
restrictions on Restricted Stock will immediately cease, unless provisions
are made in connection with such transaction for the continuance of the
Plan and the assumption of or the substitution for such Incentive Awards
of new Options, Stock Appreciation Rights, or other Incentive Awards, or
Restricted Stock covering the stock of a successor employer corporation,
or a parent or subsidiary thereof, with appropriate adjustments as to the
number and kind of shares and prices.
Any adjustments pursuant to this Section will be made by the Committee,
whose determination as to what adjustments will be made and the extent
thereof will be final, binding, and conclusive. No fractional interest
will be issued under the Plan on account of any such adjustments. Only
cash payments will be made in lieu of fractional shares.
17. General Provisions.
(a) With respect to any share of Common Stock issued or transferred under
any provision of the Plan, such shares may be issued or transferred
subject to such conditions, in addition to those specifically provided in
the Plan, as the Committee may direct.
(b) Nothing in the Plan or in any instrument executed pursuant to the
Plan will confer upon any Holder any right to continue in the employ of
the Company or affect the right of the Company to terminate the employment
of any Holder at any time with or without cause.
(c) No shares of Common Stock will be issued or transferred pursuant to
an Incentive Award unless and until all then applicable requirements
imposed by federal and state securities and other laws, rules, and
regulations and by any regulatory agencies having jurisdiction, and by any
stock exchanges upon which the Common Stock may be listed, have been fully
met. As a condition precedent to the issue of shares pursuant to the
grant or exercise of an Incentive Award, Edison International may require
the Holder to take any reasonable action to meet such requirements.
(d) No Holder (individually or as a member of a group) and no beneficiary
or other person claiming under or through such Holder will have any right,
title, or interest in or to any shares of Common Stock allocated or
reserved under the Plan or subject to any
Incentive Award except as to such shares of Common Stock, if any, that
have been issued or transferred to such Holder.
(e) Edison International may make such provisions as it deems appropriate
to withhold any taxes which it determines it is required to withhold in
connection with any Incentive Award. Subject to this Section 17(e),
however, and without in anyway limiting the generality of Section 9, the
Committee, in its sole discretion and subject to such rules as the
Committee may adopt, may permit Participants to elect (i) cash settlement
of any Incentive Award, or (ii) to apply a portion of the shares of Common
Stock they are otherwise entitled to receive pursuant to an Incentive
Award, or shares of Common Stock already owned, to satisfy the tax
withholding obligation arising from the receipt, vesting, or exercise of
any Incentive Award, as applicable.
(f) No Incentive Award and no right under the Plan, contingent or
otherwise, will be assignable or subject to any encumbrance, pledge, or
charge of any nature, or otherwise transferable (meaning, without
limitation, that such Incentive Award or right is exercisable during the
Holder's lifetime only by him or her or by his or her guardian or legal
representative) except that, under such rules and regulations as Edison
International may establish pursuant to the terms of the Plan, a
beneficiary may be designated with respect to an Incentive Award in the
event of death of a Holder of such Incentive Award, and from the time Rule
16b-3 is elected to apply to this Plan, Incentive Awards may be
transferred pursuant to a qualified domestic relations order as defined
by the Code or Title I of the Employee Retirement Income Security Act, or
the regulations promulgated thereunder. If such beneficiary is the
executor or administrator of the estate of the Holder of such Incentive
Award, any rights with respect to such Incentive Award may be transferred
to the person or persons or entity (including a trust) entitled thereto
under the will of the Holder of such Incentive Award, or, in the case of
intestacy, under the laws relating to intestacy.
(g) Notwithstanding Section 17(f), the Committee may, to the extent
permitted by applicable law and Former Rule 16b-3 and/or Rule 16b-3, as
applicable, permit a Holder to assign the rights to exercise Options or
Rights to a trust or to exercise options or rights in favor of a trust,
provided that, in the case of Incentive Stock Options, such exercise in
favor of a trust shall be permitted only if and to the extent that such
exercise is not deemed to be a transfer to or exercise by someone other
than the Holder in contravention of Section 422A(b)(5) of the Code.
(h) Whenever a Holder is entitled to receive cash in lieu of a fractional
share, recognizing that such payment may be deemed a sale of the
underlying Common Stock under Section 16 of the Securities Exchange Act
of 1934, as amended, the Holder may alternatively elect, at least six
months in advance of the payment date, to receive the cash payment or to
forfeit his or her rights to such cash payment. This election will be
evidenced in the Incentive Award agreement.
(i) This Plan shall be governed by the laws of the State of California.
18. Amendment and Termination of the Plan.
The Board of Directors or the Committee will have the power, in its
discretion, to amend, suspend, or terminate the Plan at any time. No such
amendment will, without approval of the shareholders of Edison
International to the extent required by law or the rules of any exchange
upon which the Common Stock is listed, and except as provided in Section
16 of the Plan:
(a) Materially modify the requirements as to eligibility for
participation in the Plan;
(b) Materially increase the benefits accruing to Eligible Persons under
the Plan; or
(c) Materially increase the number of securities which may be issued
under the Plan.
The Committee may, with the consent of a Holder, make such modifications
in the terms and conditions of any Incentive Award as it deems advisable
or cancel the Incentive Award (with or without consideration). No
amendment, suspension, or termination of the Plan will, without the
consent of the Holder, alter, terminate, impair, or adversely affect any
right or obligation under any Incentive Award previously granted under the
Plan.
19. Termination of Employment.
(a) A Stock Appreciation Right or an Option held by a person who was an
employee at the time such Right or Option was granted will expire
immediately if and when the Holder ceases to be an employee, except as
follows:
(i) If the employment of a Participant is terminated by the Company
other than for cause, then the Stock Appreciation Rights and
Options will expire six months thereafter unless the terms of the
Incentive Award agreement specify otherwise. For purposes of
this provision, termination "for cause" shall include, but shall
not be limited to, termination because of dishonesty, criminal
offense, or violation of work rule, and shall be determined by,
and in the sole discretion of, the Company. During the six-month
period, the Stock Appreciation Rights and Options may be
exercised in accordance with their terms, but only to the extent
exercisable on the date of termination of employment.
(ii) If a Participant dies or becomes permanently and totally disabled
while employed by the Company, the Stock Appreciation Rights and
Options of the Participant will expire three years after the date
of death or permanent and total disability unless the terms of
the Incentive Award agreement specify otherwise. If the
Participant dies or becomes permanently and totally disabled
within the six-month period referred to in subparagraph (a)
above, the Stock Appreciation Rights and Options will expire six
months after the date of death or permanent and total disability,
unless the terms of the Incentive Award agreement specify
otherwise.
(b) In the event a Holder of other Incentive Awards ceases to be an
employee, all such Incentive Awards will terminate except in the case of
retirement, death, or permanent and total disability. To be eligible for
the full amount of any such Incentive Award, an individual must have been
a Participant for the entire period to which the Incentive Award applies.
Pro-rata awards may be distributed to Participants who are discharged or
who terminate their employment for reasons other than incompetence,
misconduct or fraud, or who retired or became disabled during the
incentive period, or who were Participants for less than the full
incentive period. A pro-rata award may be made to a Participant's
designated beneficiary in the event of death of a Participant during an
incentive period prior to an award being made.
(c) The Committee may in its sole discretion determine, with respect to
an Incentive Award, that any Holder who is on a leave of absence for any
reason will be considered as still in the employ of the Company, provided
that rights to such Incentive Award during an unpaid leave of absence will
be limited to the extent to which such right was earned or vested at the
commencement of such leave of absence.
(d) The Committee may vary the strict requirements of this Section 19 by
agreement at the time of grant, or on a case-by-case basis thereafter, as
it deems appropriate and in the best interests of Edison International.
The Committee may accelerate the vesting of all, or a portion of any
Incentive Award, and may extend the above-described exercise periods to
as long as the term provided in the original Incentive Award agreement.
20. Effective Date of Plan and Duration of Plan.
This Plan as amended and restated will become effective on the date
specified by the Board of Directors of Edison International, subject,
however, to approval by the stockholders of Edison International at their
next annual meeting or at any adjournment thereof, within twelve (12)
months following the date of its adoption by the Board of Directors.
Unless previously terminated by the Board of Directors, the Plan will
terminate April 16, 2002.
EDISON INTERNATIONAL
Beverly P. Ryder
-----------------------------
Beverly P. Ryder
Secretary
EXHIBIT 10.16.2
EDISON INTERNATIONAL
OFFICER AND MANAGEMENT LONG-TERM INCENTIVE COMPENSATION PLANS
1996 AWARD AGREEMENT
This award is made by Edison International to NAME, ("Employee") as of
January 2, 1996 pursuant to the Officer or Management Long-Term Incentive
Compensation Plan and subject to the conditions contained in the 1996
Statement of Terms and Conditions which is incorporated herein by
reference and receipt of which is acknowledged by Employee. Edison
International hereby grants to Employee, as a matter of separate agreement
and not in lieu of salary or any other compensation for services, the
right and option to purchase the following:
XXXX shares of authorized Edison International
Common Stock, coupled with dividend equivalents,
at an exercise price of $0000 per share.
------------------------------------------------
XXX Shares if Edison Mission Energy XXXX Shares of Edison Capital phantom
phantom stock having a base price of $0000 stock having a base price of $0000 per
per share and the following exercise prices: share and the following exercise prices:
-------------------------------------------- -----------------------------------------
Period Price $ Period Price $ Period Price $ Period Price $
------ ------- ------ ------- ------ ------- ------ -------
1997 2002 1997 2002
1998 2002 1998 2002
1999 2004 1999 2004
2000 2005 2000 2005
2001 2006 2001 2006
IN WITNESS WHEREOF, Edison International and Employee have caused this
instrument to be executed as of the day and year first written above.
Edison International Employee
By:---------------------------- By: ----------------------------
page 1
Edison International Officer and Management Long-Term
Incentive Compensation Plans
1996 Statement of Terms and Conditions
1996 Award Grants made under the Edison International Officer and
Management Long-Term Incentive Compensation Plans ("Plans") are subject
to the following terms and conditions:
1. PRICE
(a) The exercise price for the option to purchase Edison International
Common Stock stated in the Award Grant is the average of the high and low
sales prices of Edison International Stock as reported in the Western
Edition of The Wall Street Journal for the New York Stock Exchange
Composite Transactions for the date of grant.
(b) The exercise prices stated in the Award Grant for Edison Mission
Energy and Edison Capital phantom stock options are derived from
escalating base prices as described in Section 5.
2. VESTING
(a) Subject to the provisions of Section 3, only vested options may be
exercised. The initial vesting date will be January 2nd of the year
following the date of the Award Grant, or six months after the date of the
Award Grant, whichever date is later. The options will vest as follows:
o On the initial vesting date, the options will vest as to 33-1/3% of the
covered shares.
o On January 2nd of the following year, the options will vest as to an
additional 33-1/3% of the covered shares.
o On January 2nd of the third year following the date of the Award Grant,
the options will be fully vested.
(b) The vested options will be exercisable by the Employee, subject to the
provisions of Section 3, in whole or in part, in any subsequent period but
not later than the first business day of the 10th year following the date
of the Award Grant, or, in the case of Edison Mission Energy or Edison
Capital phantom stock options, not later than the end of the final 60-day
exercise period.
(c) If an Employee is removed from a position entitling him/her to
benefits under the Plan, retires, dies or is permanently and totally
disabled during the three-year vesting period, the options will vest and
be exercisable to the extent of 1/36th of the aggregate number of shares
originally covered by the options for each full month of service during
the vesting period. Notwithstanding the foregoing, the options of an
officer who has served as a member of the Southern California Edison
Company Management Committee will be fully vested and exercisable upon
his/her retirement, death or permanent and total disability.
(d) Upon termination of an Employee for any reason other than those
specified in Subsection (c), only those options which have vested on or
before the anniversary date of the Award Grant preceding the date of
termination may be exercised, and those options, together with any earned
dividend equivalents, will be forfeited unless exercised within 180 days
following the date of termination, or in the case of Edison Mission Energy
or Edison Capital phantom stock options, the first 60-day exercise period
following the date of termination.
(e) Notwithstanding the foregoing, the options and earned dividend
equivalents may vest in accordance with Section 15 of the Plan as a result
of certain events, including liquidation of Edison International or
merger, reorganization or consolidation of Edison International as a
result of which Edison International is not the surviving corporation.
page 2
3. OPTION EXERCISE
(a) The Employee may exercise an option by providing written notice to
Edison International on the form prescribed by Edison International for
this purpose specifying the number of options to be exercised, and
accompanied by full payment of the exercise price. A sample notice is
attached as Exhibit 1. Payment must be in cash, or its equivalent, such
as Edison International Stock, acceptable to Edison International. A
"cashless" exercise will be accommodated for all Edison Mission Energy and
Edison Capital phantom options, and may be accommodated for Edison
International stock options at the discretion of Edison International.
Until payment is accepted, the Employee will have no rights in the
optioned stock. If Edison International stock options are exercised, the
Employee may elect to apply any earned dividend equivalents related to the
shares for which the options are being exercised to the exercise price for
such shares.
(b) Edison International stock options may be exercised at any time after
they have vested through the first business day of the 10th year following
the date of the Award Grant. Edison Mission Energy and Edison Capital
phantom options may be exercised after they have vested, but only during
an annually specified 60-day period following the fiscal year-end and the
completion of an independently reviewed valuation report which indicates
a share value for the fiscal year higher than the applicable Edison
Mission Energy or Edison Capital phantom stock option exercise price for
that period. The final 60-day Edison Mission Energy or Edison Capital
exercise period will commence no later than the end of the second quarter
of the 10th year following the date of the Award Grant. Edison Mission
Energy and Edison Capital phantom stock options are payable in cash to the
Employee upon exercise to the extent the actual value of an Edison Mission
Energy or Edison Capital share exceeds the applicable exercise price.
(c) The Employee agrees that any securities acquired by him/her hereunder
are being acquired for his/her own account for investment and not with a
view to or for sale in connection with any distribution thereof and that
he/she understands that such securities may not be sold, transferred,
pledged, hypothecated, alienated, or otherwise assigned or disposed of
without either registration under the Securities Act of 1933 or compliance
with the exemption provided by Rule 144 or another applicable exemption
under such act.
(d) In accordance with Section 17(d) of the Plan, the Employee will have
no right or claim to any specific funds, property or assets of Edison
International as a result of the Award Grant.
4. EDISON INTERNATIONAL OPTION DIVIDEND EQUIVALENTS
(a) An Edison International dividend equivalent account will be
established on behalf of the Employee if Edison International stock
options have been granted pursuant to the Award Grant. This account may
be credited with all or a portion of the dividends payable after the date
of grant on the number of shares of stock covered by such Edison
International stock options depending upon Edison International's
performance during the first three years of the option period as provided
in Subsection (b). No amount will be credited prior to January 2nd of the
third year following the date of grant. No dividend equivalent will
accrue to any option exercised during that period regardless of Edison
International performance. Dividend equivalents credited after that date,
if any, will accumulate in this account without interest and will vest and
become payable upon the exercise of the option to purchase the
corresponding shares of Edison International Stock.
(b) Dividend equivalents related to Edison International stock options are
subject to a performance measure based on the percentile ranking of Edison
International's total shareholder return ("TSR") compared to the TSR for
each stock in the Dow Jones Electric Utilities Group Index. The
percentile ranking will be measured at the completion of the three-year
period following the date of grant. If Edison International's average
ranking is in the 60th percentile or higher for the 3-year period, 100%
of the dividend equivalents will be earned from the date of grant through
the date the options are exercised. If Edison International's average
ranking is in the 25th percentile, 25% of the dividend equivalents will
be
page 3
earned. No dividend equivalents will be earned for performance below the
25th percentile, and a pro rata amount will be earned for performance
between the 25th and 60th percentiles.
Dividend equivalents related to unexercised Edison International stock
options that were not earned due to the limitations of this Subsection (b)
may be earned back as of the end of each of the last five years of the
option period if it is determined at that point that the Edison
International cumulative average TSR percentile ranking equals or exceeds
the 60th percentile.
5. EDISON MISSION ENERGY AND EDISON CAPITAL PHANTOM STOCK OPTIONS
(a) The Edison Mission Energy phantom stock options are performance units
under the Plans based on 10 million shares of artificial or "phantom"
Edison Mission Energy stock created for this purpose only. The Edison
Mission Energy phantom stock option exercise prices in the Award Grant
were derived from the base price of a share of Edison Mission Energy
phantom stock by applying a 12% appreciation factor, compounded annually
for the term of the Award Grant. Following the end of each calendar year
during the term of the Award Grant, the actual Edison Mission Energy share
value will be computed. If the actual Edison Mission Energy share value
exceeds the Edison Mission Energy phantom stock option exercise price for
that period, any portion of the vested Edison Mission Energy phantom stock
options may be exercised by the Employee in accordance with Section 3 and
the difference will be paid in cash to the Employee.
(b) The Edison Capital phantom stock options are performance units under
the Plans based on 5 million shares of artificial or "phantom" Edison
Capital stock created for this purpose only. The Edison Capital phantom
stock option exercise prices stated in the Award Grant were derived from
the base price of a share of Edison Capital stock by applying a 10%
appreciation factor, compounded annually for the term of the Award Grant.
Following the end of each calendar year during the term of the Award
Grant, the actual Edison Capital share value will be computed. If the
actual Edison Capital share value exceeds the Edison Capital phantom stock
option exercise price for that period, any portion of the vested Edison
Capital phantom stock option may be exercised by the Employee in
accordance with Section 3 and the difference will be paid in cash to the
Employee.
6. TRANSFER AND BENEFICIARY
The options will not be transferable by the Employee. During the lifetime
of the Employee, the options will be exercisable only by him/her. The
Employee may designate a beneficiary who, upon the death of the Employee,
will be entitled to exercise the then vested portion of the options during
the remaining term of the Award Grant subject to the conditions of the
Plan and the Award Grant.
7. TERMINATION OF OPTIONS
As set forth in Section 2(d), in the event of termination of the
employment of the Employee for any cause, other than retirement, permanent
and total disability or death of the Employee, the options will terminate
180 days from the date on which such employment terminated, or in the case
of Edison Mission Energy or Edison Capital stock options, at the end of
the first 60-day exercise period following the employment termination
date. In addition, the options may be terminated if Edison International
elects to substitute cash awards as provided under Section 11.
8. TAXES
Edison International will have the right to retain and withhold the amount
of taxes required by any government to be withheld or otherwise deducted
and remitted with respect to the exercise of any Edison International,
Edison Mission Energy or Edison Capital option, the receipt of cash, or
the receipt or application by the Employee of any dividend equivalents
under the Award Grant. In its discretion, Edison International may
require the Employee to reimburse Edison International for any such taxes
required to be withheld by Edison International and may withhold any
distribution in whole or in part until Edison International is so
reimbursed. In lieu thereof, Edison International will have the right to
withhold from any other cash amounts due from Edison International to the
Employee an amount equal to such taxes required to be withheld by Edison
International to reimburse Edison International for any such taxes or to
page 4
retain and withhold a number of shares of Edison International Stock
having a market value equal to the taxes and cancel (in whole or in part)
the shares in order to reimburse Edison International for the taxes.
Each recipient of an Edison International Option must attach a statement
to his/her federal and state tax returns for the year in which the Edison
International Option was granted containing certain information about the
option. A sample statement is attached as Exhibit 2.
9. CONTINUED EMPLOYMENT
(a) In consideration of the granting of such options to him/her, the
Employee agrees that he/she will remain in the continuous service of
Edison International or an Edison International affiliate as an officer
or employee during the term of the Award Grant. In the event employment
is terminated, except as a result of death, disability, or retirement
under the Southern California Edison Company Retirement Plan, or a
successor plan, whether voluntarily or otherwise, the restrictions of
Section 2(d) will apply.
(b) Nothing in the Award Grant or this Statement of Terms and Conditions
will be deemed to confer on the Employee any right to continue in the
employ of Edison International or an Edison International affiliate or
interfere in any way with the right of the employer to terminate his/her
employment at any time.
10. NOTICE OF DISPOSITION OF SHARES
Employee agrees that if he/she should dispose of any shares of stock
acquired on the exercise of the Edison International stock options,
including a disposition by sale, exchange, gift or transfer of legal title
within six months from the date such shares are transferred to the
Employee, the Employee will notify Edison International promptly of such
disposition.
11. AMENDMENT
The Award Grant will be subject to the terms of the Plan as amended.
Edison International reserves the right to substitute cash awards
substantially equivalent in value to the options and dividend equivalents.
The options and dividend equivalents which are the subject of the Award
Grant may not otherwise be restricted or limited by any Plan amendment or
termination approved after the date of the Award Grant without the
Employee's written consent.
12. FORCE AND EFFECT
The various provisions of the Award Grant are severable in their entirety.
Any determination of invalidity or unenforceability of any one provision
will have no effect on the continuing force and effect of the remaining
provisions.
13. GOVERNING LAW
This Award Grant will be construed under the laws of the State of
California.
14. NOTICE.
Unless waived by Edison International, any notice required under or
relating to the Award Grant will be in writing, with postage prepaid,
addressed to: Edison International, Attn: Corporate Secretary, P.O. Box
800, Rosemead, CA 91770
Emiko Banfield
- -------------------------------
Emiko Banfield
Vice President, Human Resources
page 5
EXHIBIT 1
Date_________________
Corporate Secretary
Edison International
P.O. Box 800
Rosemead, CA 91770
Dear Sir or Madam:
I hereby elect to exercise an option to purchase _____________ shares,
no par value, of the Common Stock of Edison International under and
pursuant to the Officer or Management Long-Term Incentive Compensation
Plan Award Grant dated ___________________. Delivered herewith is my
check in the amount of $_______________in full payment of the exercise
price.
I elect/do not elect to apply any corresponding dividend equivalents
to the exercise price.
The name(s) to be on the stock certificate or certificates and the address
and Social Security Number of such person is as follows:
Name:
Address:
Social Security Number:
AND/OR
I hereby elect to exercise my option on _________ shares of ____ (specify
Edison Mission Energy or Edison Capital) phantom stock pursuant to the
Officer or Management Long-Term Incentive Compensation Plan Award Grant
dated________________.
Very truly yours,
cc: Executive Compensation Manager
Approved:___________________________
Corporate Secretary
page 6
EXHIBIT 2
STATEMENT PURSUANT TO INCOME TAX
REGULATION SECTION 1.61-15(c)
This statement is attached to my income tax return in compliance with
the requirements of Income Tax Regulation Section 1.61-15(c) relative to a
nonqualified stock option I received on _____________, 19__.
(1) Name and address of the taxpayer:
John Q. Doe
1234 Your Street
Anywhere, CA 90000
(2) Description of Securities subject to the option:
On ____________, 19__, I was granted a nonqualified stock option
covering shares of Edison International common stock.
(3) Period during which the option is exercisable:
The option vests and becomes exercisable as to one-third of the covered
shares on _______________, 19__, ______________, 19__ and ______________,
19__, respectively. To the extent vested, the option may be exercised at
any time through January 2, 20__.
(4) Whether the option had an ascertainable market value:
The option did not have a readily ascertainable fair market value on
the date of the grant.
(5) Whether the option was granted as compensation:
The option was granted as compensation and is subject to Reg. Section
1.61-15(a).
Respectfully Submitted,
EXHIBIT 11
Edison International
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(UNAUDITED)
Year Ended December 31,
----------------------------------------------
1996 1995 1994
-------- -------- --------
(In thousands, except per-share amounts)
Consolidated net income $716,748 $739,136 $680,687
Primary weighted average shares 437,335 446,159 447,799
Fully diluted weighted average shares 439,299 448,062 447,799
Primary earnings per share $ 1.64 $ 1.66 $ 1.52
Fully diluted earnings per share $ 1.63 $ 1.65 $ 1.52
EXHIBIT 12
EDISON INTERNATIONAL
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Thousands of Dollars)
Year Ended December 31,
---------------------------
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
EARNINGS BEFORE INCOME
TAXES AND FIXED CHARGES:
Income before interest
expense(1) $1,326,008 $1,325,569 $1,203,577 $1,282,776 $1,346,636 $1,399,650
Add:
Taxes on income(2) 435,853 466,006 353,706 444,635 491,477 505,785
Rentals(3) 7,539 4,460 3,463 3,512 4,018 3,269
Allocable portion of interest
on long-term Contracts for
the purchase of power(4) 1,925 1,908 1,890 1,870 1,848 1,824
Spent nuclear fuel interest(7) 1,683 1,339 487 68 - -
Interest on partnership
indebtedness(5) 45,996 38,070 41,091 30,591 34,681 31,356
Amortization of previously
capitalized fixed charges 32,845 24,170 6,760 3,414 2,417 2,232
---------- ---------- ---------- --------- --------- ---------
Total earnings before
income taxes and fixed
charges (A) $1,851,849 $1,861,522 $1,610,974 $1,766,866 $1,881,077 $1,944,116
========== ========== ========== ========== ========== ==========
FIXED CHARGES:
Interest and amortization $ 581,165 $ 544,593 $523,808 $561,265 $ 560,641 $ 635,407
Rentals(3) 7,539 4,460 3,463 3,512 4,018 3,269
Capitalized interest(6) 24,053 35,115 73,808 48,996 59,885 57,803
Allocable portion of interest
on long-term contracts for
the purchase of power(4) 1,925 1,908 1,890 1,870 1,848 1,824
Spent nuclear fuel interest(7) 1,683 1,339 487 68 - -
Interest on partnership
indebtedness(5) 45,996 38,070 41,091 30,591 34,681 31,356
Subsidiary preferred and
preference stock dividend
requirements- pre-tax basis 68,435 68,911 63,261 67,480 78,017 81,011
---------- ---------- ---------- ---------- ---------- ----------
Total fixed charges(B) $ 730,796 $ 694,396 $ 707,808 $ 713,782 $ 739,090 $ 810,670
========== ========== ========== ========== ========== ==========
RATIO OF EARNINGS TO
FIXED CHARGES(A)/(B): 2.53* 2.68 2.28 2.48 2.55 2.40
========== ========== ========== ========== ========== ==========
(1) Includes allowance for funds used during construction and accrual of unbilled revenue.
(2) Includes allocation of federal income and state franchise taxes to other income.
(3) Rentals include the interest factor relating to certain significant rentals plus one-third of all
remaining annual rentals.
(4) Allocable portion of interest included in annual minimum debt service requirement of supplier.
(5) Includes the allocable portion of interest on project indebtedness of fifty-percent partnership
investments by other wholly-owned subsidiaries of Edison International.
(6) Includes the fixed charges associated with Nuclear Fuel and capitalized interest of fifty-percent owned
partnerships.
(7) Represents interest on spent nuclear fuel disposal obligation.
* Reflects restatement of The Mission Group financial statements.
EXHIBIT 13
EDISON INTERNATIONAL
SELECTED PORTIONS OF
1996 ANNUAL REPORT TO SHAREHOLDERS
PAGE
EDISON INTERNATIONAL AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF REPORTS OF OPERATIONS AND
FINANCIAL CONDITION
In the following Management's Discussion and Analysis of Results of
Operations and Financial Condition and elsewhere in this annual report,
the words "estimates," "expects," "anticipates," "believes," and other
similar expressions, are intended to identify forward-looking information
that involves risks and uncertainties. Actual results or outcomes could
differ materially as a result of such important factors as the outcome of
state and federal regulatory proceedings affecting the restructuring of
the electric utility industry, the impacts of new laws and regulations
relating to restructuring and other matters, the effects of increased
competition in the electric utility business, and changes in prices of
electricity and costs for fuel.
Results of Operations
Earnings
Edison International's 1996 earnings per share were $1.64, compared with
$1.66 in 1995 and $1.52 in 1994. Southern California Edison (SCE)
contributed $1.42 per share, compared with $1.44 in 1995 and $1.34 in
1994. Edison Mission Energy (EME), Edison Capital and Mission Land
Company contributed, on a combined basis, 27 cents in 1996 compared with
23 cents in 1995 and 19 cents in 1994. Edison International's earnings
include special charges of 6 cents in 1996 (a 4 cent net charge at SCE
for workforce management costs and reserves, a 2 cent charge at EME for
operating reserves, and a 3 cent charge for real estate reserves at
Mission Land, partially offset by a 3 cent gain on the sale of four
geothermal projects at EME) and 3 cents in 1995 for SCE's workforce
management charges. The decline in net income in 1996 was offset by a
common stock repurchase program. The reduced number of outstanding shares
resulted in a 3 cent per-share benefit in 1996 compared with 1995.
During 1996, Edison International formed three new businesses, Edison
Source, Edison EV and Edison Select. Expenses associated with the start-
up of these new businesses, together with the parent company's interest
payments on $350 million in borrowings, related to EME's acquisition of
First Hydro and its ongoing share repurchase program, were responsible for
5 cents per share of expenses (after tax) compared to 1 cent in 1995.
1996 vs. 1995
Excluding special charges, SCE's 1996 earnings were $1.46, down 1 cent
from 1995. The decrease is mainly attributable to a reduction in
authorized rates of return and operating expenses, partially offset by
improved operating performance. The combined 1996 earnings of EME, Edison
Capital and Mission Land, excluding special charges, were 29 cents per
share, 6 cents higher than 1995. The increase is primarily attributable
to earnings from EME's First Hydro project in the United Kingdom. First
Hydro was acquired in December 1995.
1995 vs. 1994
SCE's 1995 earnings before nonrecurring charges were $1.44, up 10 cents
over 1994, primarily due to a higher authorized return on common equity
for 1995, partially offset by the effect of the 1995 general rate case
settlement. SCE recorded workforce management costs of 3 cents per share
in 1995 compared with 4 cents in 1994. The nonutilities' 1995 earnings
were 23 cents, up 4 cents from 1994, reflecting improved results from
EME's energy projects and increased investment activity at Edison Capital.
The parent company incurred expenses (after-tax) of 1 cent per share in
both 1995 and 1994.
page 1
Operating Revenue
Electric utility revenue decreased 4% from 1995, as increased sales volume
was offset by lower average rates. The lower rates are attributable to
the California Public Utilities Commission's (CPUC) decision to lower
SCE's 1996 authorized revenue by 4.4%. Additionally, during 1996 SCE
issued a one-time bill credit of $237 million to ratepayers as part of a
CPUC-ordered refund of energy-cost balancing account overcollections.
Electric utility revenue in 1995 increased slightly over 1994, as a 2.6%
authorized rate increase was partially offset by a decrease in sales
volume to resale cities and milder weather in 1995. Over 98% of SCE's
operating revenue is from retail sales. Retail rates are regulated by the
CPUC and wholesale rates are regulated by the Federal Energy Regulatory
Commission (FERC).
Due to warm weather during the summer months, electric utility revenue
during the third quarter of each year is materially higher than the other
quarters.
The changes in electric utility revenue resulted from:
In millions Year ended December 31, 1996 1995 1994
- ----------- ----------------------- -------- ------ ------
Electric utility revenue -
Rate changes $ (522) $ 168 $ 112
Sales volume changes 206 (129) 308
Other 26 35 (18)
------- ------ ------
Total $ (290) $ 74 $ 402
======= ====== ======
In March 1995, SCE announced its intention to freeze average rates for
residential, small business and agricultural customers through 1996, and
announced a five-year goal to reduce system average rates by 25% on an
inflation-adjusted basis (from 10.7 cents per kilowatt-hour to below 10
cents per kilowatt-hour). In February 1996, the CPUC approved a system-
wide rate reduction which will drop the average price per kilowatt-hour
from 10.7 cents to 10.1 cents. Legislation enacted in September 1996
provides for, among other things, at least a 10% rate reduction for
residential and small commercial customers beginning in 1998 (see
Competitive Environment).
Revenue from diversified operations increased substantially during 1996
due to an increase in EME's electric revenue from its First Hydro, Iberian
Hy-Power and Loy Yang B Unit 2 projects. Revenue from diversified
operations decreased 3% in 1995 from 1994. The 1995 decline was mainly
due to a decrease at Mission Land, as it sold several of its real estate
holdings in 1994. The decline was partially offset by an increase in
electric revenue at EME's First Hydro and Roosecote projects. Roosecote
was out of service for four months in 1994 due to transformer failure and
scheduled maintenance.
Operating Expenses
Fuel expense increased 11% in 1996, compared to the same period in 1995,
primarily due to higher gas prices and changes in the fuel mix. EME's
fuel expense increased due to the inclusion of fuel costs related to First
Hydro (a pumped storage facility), Loy Yang B Unit 2 and Kwinana. Fuel
expense decreased 23% in 1995 from 1994, as hydro generation was up
significantly in 1995 due to greater rainfall, resulting in lower gas
purchases. In addition, the San Onofre Nuclear Generating Station units
were out of service a total of five months in 1995 for refueling and
maintenance, causing a decrease in nuclear fuel expense. The decline at
SCE was partially offset by an increase at EME, as its Roosecote project
operated for a full year in 1995 after experiencing transformer failure
and scheduled maintenance for four months in 1994.
page 2
Purchased-power expense increased slightly in 1996 and 1995, due to an
increase in power purchased under federally mandated contracts. SCE is
required under federal law to purchase power from certain nonutility
generators even though energy prices under these contracts are generally
higher than other sources. In 1996, SCE paid about $1.7 billion
(including energy and capacity payments) more for these power purchases
than the cost of power available from other sources. The CPUC has
mandated the prices for these contracts.
Provisions for regulatory adjustment clauses decreased substantially in
1996, compared to 1995. The decrease is mainly due to the energy-cost
balancing account-related refund discussed above, lower base rate revenue
and undercollections related to the accelerated recovery of SCE's
remaining investment in San Onofre Units 2 and 3 (see discussion in Note
1 to the Consolidated Financial Statements). The provisions increased in
1995 over 1994, as CPUC-authorized fuel and purchased-power cost estimates
exceeded SCE's actual energy costs. SCE's actual energy costs were lower
than estimated in 1995 due to the increase in hydro generation and lower
gas prices.
Other operating expenses increased 10% in 1996 when compared with 1995,
as increased operating costs at EME's First Hydro, Iberian Hy-Power and
Loy Yang B Unit 2 projects offset cost reductions and improved operating
efficiencies at SCE. Other operating expenses decreased in 1995 when
compared to 1994, primarily due to operating efficiencies at SCE. These
decreases were partially offset by an increase at EME from its acquisition
of First Hydro.
Maintenance expense decreased 8% in 1996, due to lower overall costs at
SCE's generation, transmission and distribution operating facilities.
Maintenance expense increased 8% in 1995, due to higher expenses related
to the scheduled refueling and maintenance outages at San Onofre Units 2
and 3.
Depreciation and decommissioning expense increased 16% in 1996 due to
higher depreciation rates, the accelerated recovery of San Onofre Units
2 and 3, and increases at EME related to its First Hydro, Loy Yang B Unit
2 and Iberian Hy-Power projects.
Income taxes increased 7% during 1996, mainly due to an increase in the
deferred tax provision related to the accelerated recovery of San Onofre
Units 2 and 3 and increased earnings at EME from its First Hydro project.
Earnings from First Hydro are subject to a higher effective tax rate than
the federal statutory rate.
Other Income and Deductions
The provision for rate phase-in plan reflects a CPUC-authorized, 10-year
rate phase-in plan, which deferred the collection of revenue during the
first four years of operation for the Palo Verde Nuclear Generating
Station. The deferred revenue (including interest) is being collected
evenly over the final six years of each unit's plan. The plan ended in
February 1996 and September 1996 for Units 1 and 2, respectively. The
plan ends in January 1998 for Unit 3. The provision is a non-cash offset
to the collection of deferred revenue.
Minority interest expense increased 46% during 1996, primarily from higher
pre-tax income at EME's Loy Yang B project.
Other nonoperating income decreased in 1996, due to additional accruals
for SCE's regulatory matters, partially offset by EME's gain on the sale
of four geothermal facilities. Other nonoperating income decreased in
1995, as CPUC-authorized incentive awards were below 1994 levels.
page 3
Interest and Other Expenses
Interest on long-term debt increased 12% in 1996, reflecting EME's
increased ownership in Iberian Hy-Power and First Hydro.
Other interest expense increased 11% during 1996, due to a $350 million
borrowing by Edison International (holding company) for the acquisition
of First Hydro and for its ongoing share repurchase program.
Capitalized interest decreased during 1996, primarily due to the
completion of construction activity at EME's Loy Yang B Unit 2 project.
Loy Yang B is a 51% owned, 1,000-megawatt coal-fired power plant near
Melbourne, Australia. Unit 2 began commercial operation on October 1,
1996.
Financial Condition
Edison International's liquidity is primarily affected by debt maturities,
dividend payments, capital expenditures, and investments in partnerships
and unconsolidated subsidiaries. Capital resources include cash from
operations and external financings.
In June 1994, Edison International lowered its quarterly common stock
dividend by 30%, due to the uncertainty of future earnings levels arising
from the changing nature of California's electric utility regulation.
Currently, Edison International's board of directors has authorized the
repurchase of up to $800 million of its common stock. Edison
International has repurchased 27.4 million shares ($497 million) through
January 31, 1997, funded by dividends from its subsidiaries and its lines
of credit.
Edison International's cash flow coverage of dividends for 1996 was 5.0
times compared to 4.7 times in 1995 and 3.7 times in 1994. Edison
International's dividend payout ratio for 1996 was 61%.
Cash Flows from Operating Activities
Net cash provided by operating activities totaled $2.2 billion in 1996 and
$2.1 billion in both 1995 and 1994. Cash from operations exceeded capital
requirements for all years presented.
Cash Flows from Financing Activities
At December 31, 1996, Edison International and its subsidiaries had $1.8
billion of borrowing capacity available under lines of credit totaling
$2.1 billion. SCE had available lines of credit of $1.1 billion, with
$600 million for short-term debt and $500 million for the long-term
refinancing of its variable-rate pollution-control bonds. The parent
company has lines of credit totaling $350 million, with $185 million of
borrowing capacity available. The nonutility companies had available
lines of credit of $700 million, with $575 million of borrowing capacity
available to finance general cash requirements. Edison International's
unsecured lines of credit are at negotiated or bank index rates with
various expiration dates; the majority have five-year terms.
SCE's short-term debt is used to finance fuel inventories, balancing
account undercollections and general cash requirements. EME uses
available credit lines mainly for construction projects until long-term
construction or project loans are secured. Long-term debt is used mainly
to finance capital expenditures. SCE's external financings are influenced
by market conditions and other factors, including limitations imposed by
its articles of incorporation and trust indenture. As of December 31,
1996, SCE could issue approximately $7.9 billion of additional first and
refunding mortgage bonds and $4.5 billion of preferred stock at current
interest and dividend rates.
page 4
EME owns, through a wholly owned subsidiary, 50% of the Brooklyn Navy Yard
project, but funded all of the required equity during construction. The
estimated total cost is $485 million, of which $442 million had been spent
through December 31, 1996. In December 1995, a tax-exempt bond financing
for the project in the amount of $254 million was obtained through the New
York City Industrial Development Agency (NYCIDA). EME has guaranteed the
obligations of the project pursuant to the financing, as well as an
indemnity agreement on behalf of NYCIDA in the amount of $40 million. In
the fourth quarter of 1996, EME executed a new energy sales agreement with
Consolidated Edison Company of New York, which has contracted to buy most
of the project's power and steam, and began selling power and steam under
that agreement. The contractor has recently asserted general monetary
claims under the turnkey agreement against Brooklyn Navy Yard and has
served a complaint for damages in the amount of $136.8 million against
Brooklyn Navy Yard. Brooklyn Navy Yard intends to vigorously defend this
action and to assert general monetary claims against the contractor. EME
believes that the outcome of this litigation will not have a material
adverse effect on its consolidated results of operations or financial
position.
EME has firm commitments to make equity and other contributions to its
projects of $408 million, primarily for the Paiton project in Indonesia
and the ISAB project in Italy. EME also has contingent obligations to
make additional contributions of $461 million, primarily for a guarantee
as a condition of obtaining a $254 million tax-exempt financing for the
Brooklyn Navy Yard project (further discussed in Note 10 to the
Consolidated Financial Statements), and equity support guarantees related
to Paiton.
EME may incur additional obligations to make equity and other
contributions to projects in the future. EME believes it will have
sufficient liquidity to meet these equity requirements from cash provided
by operating activities, proceeds from the repayment of loans to energy
projects, funds available from EME's revolving line of credit and
additional corporate borrowings.
California law prohibits SCE from incurring or guaranteeing debt for its
nonutility affiliates. Additionally, the CPUC regulates SCE's capital
structure, limiting the dividends it may pay Edison International. At
December 31, 1996, SCE had the capacity to pay $112 million in additional
dividends to Edison International and continue to maintain its authorized
capital structure. These restrictions are not expected to affect Edison
International's ability to meet its cash obligations.
Cash Flows from Investing Activities
The primary uses of cash for investing activities are additions to
property and plant, the nonutilities' investments in partnerships and
unconsolidated subsidiaries, and funding of nuclear decommissioning
trusts. Decommissioning costs are accrued and recovered in rates over the
term of each nuclear generating facility's operating license through
charges to depreciation expense. SCE estimates that it will spend
approximately $12.7 billion between 2013-2070 to decommission its nuclear
facilities. This estimate is based on SCE's current-dollar
decommissioning costs ($2.0 billion), escalated using a 6.65% annual rate.
These costs are expected to be funded from independent decommissioning
trusts which receive SCE contributions of approximately $100 million per
year until decommissioning begins.
Cash used for the nonutility subsidiaries' investing activities was $409
million in 1996, $1.2 billion in 1995 and $291 million in 1994. The 1995
increase was due to the acquisition of First Hydro.
Edison International's risk management policy allows the use of derivative
financial instruments to mitigate risk. Changes in interest rates,
electricity pool pricing and fluctuations in foreign currency exchange
rates can have a significant impact on EME's results of operations. EME
page 5
attempts to mitigate the risk of interest rate fluctuations by arranging
for fixed rate or variable rate financing with interest rate swaps or
other hedging mechanisms for the majority of its project financings. As
a result of interest rate hedging mechanisms, interest expense increased
$6 million in 1996, $7 million in 1995 and $8 million in 1994. The
maturity dates of several of EME's interest rate swap agreements do not
correspond to the term of the underlying debt. EME does not believe that
interest rate fluctuations will have a material adverse effect on results
of operations or financial position.
Projects in the United Kingdom sell their energy and capacity through a
centralized electricity pool, which establishes a half-hourly clearing
price for electric energy and capacity. The pool price is extremely
volatile, and can vary by a factor of ten or more over the course of a few
hours due to large differentials in demand according to the time of day.
First Hydro mitigates a portion of the market risk of the pool by entering
into contracts for differences (electricity rate swap agreements), related
to either the selling or purchase price of power, whereby a contract
specifies a price at which the electricity will be traded, and the parties
to the agreements make payments, calculated based on the difference
between the price in the contract and the half hourly clearing price for
the element of power under contract. These contracts act as a means of
stabilizing production revenue or purchasing costs by removing an element
of First Hydros net exposure to pool price volatility. First Hydro's
electric revenue decreased by $5 million and $29 million, respectively,
for the year ended December 31, 1996, and 1995, as a result of electricity
rate swap agreements.
As EME continues to expand into foreign markets, fluctuations in foreign
currency exchange rates will continue to affect the amount of its equity
contributions to, distributions from, and results of operations for, its
foreign projects. At times, EME has hedged a portion of its current
exposure to fluctuations in foreign exchange rates where it deems
appropriate through financial derivatives, offsetting obligations
denominated in foreign currencies, and indexing underlying project
agreements to U.S. dollars or other indices reasonably expected to
correlate with foreign exchange movements. Various statistical
forecasting techniques are used to help assess foreign exchange risk and
the probabilities of various outcomes. There can be no assurance,
however, that fluctuations in exchange rates will be fully offset by
hedges or that currency movements and the relationship between certain
macro economic variables will behave in a manner that is consistent with
historical or forecasted relationships.
Projected Capital Requirements
Edison International's projected construction expenditures for the next
five years are: 1997-$855 million; 1998-$636 million; 1999-$664 million;
2000-$647 million; and 2001-$650 million.
Long-term debt maturities and sinking fund requirements for the next five
years are: 1997-$573 million; 1998-$560 million; 1999-$459 million; 2000-
$405 million; and 2001-$500 million.
Regulatory Matters
SCE's 1997 CPUC-authorized rates remain unchanged from 1996 levels due to
recently enacted legislation which requires that system average rates
remain frozen at the June 10, 1996, level of 10.1 cent per kilowatt-hour
(see discussion in Competitive Environment).
The CPUC's 1997 cost-of-capital decision authorized SCE's equity ratio to
remain at 48%. SCE's return on common equity also remains at 11.6%.
SCE's return on rate base was lowered from 9.55% to 9.49%. This decision,
excluding the effects of other rate actions, would reduce 1997 earnings
by approximately 1 cent per share.
page 6
A 1994 CPUC decision stated that SCE was liable for expenditures related
to a 1985 accident at the Mohave Generating Station. In July 1996, the
CPUC approved a settlement agreement between SCE and the Office of
Ratepayer Advocates (ORA) which resulted in a $39 million (including
interest) refund to SCE's customers. The refund, which had been
previously reserved, was completed by year-end 1996.
In May 1994, SCE filed its testimony in the non-Qualifying Facilities
phase of the 1994 Energy Cost Adjustment Clause proceeding. In May 1995,
the ORA filed its report on the reasonableness of SCE's gas supply costs
for both the 1993 and 1994 record periods. The report recommends a
disallowance of $13.3 million for excessive costs incurred from November
1993 through March 1994 associated with SCE's Canadian gas purchase and
supply contracts. The report requests that the CPUC defer finding SCE's
Canadian supply and transportation agreements reasonable for the duration
of their terms and that the costs under these contracts be reviewed on a
yearly basis. In October 1996, the ORA issued its report for the 1995
record period recommending a $37.6 million disallowance for excessive
costs incurred from April 1994 through March 1995. Both proposed
disallowances have been consolidated into one proceeding. SCE and the ORA
have filed several rounds of testimony on this issue. Hearings began in
January 1997 and are expected to conclude in February 1997. A decision
is expected in late 1997.
On December 23, 1996, the CPUC issued a final decision on SCE's proposal
for a new rate mechanism for its 15.8% share of the three units at Palo
Verde. The decision adopts the Palo Verde All-Party Settlement filed with
the CPUC on November 15, 1996. The settlement was based on a Memorandum
of Understanding signed by all of the active parties to the Palo Verde
proceeding. Under the settlement, SCE has the opportunity to recover its
remaining investment (approximately $1.2 billion) in Palo Verde beginning
January 1, 1997, and ending December 31, 2001, earning a reduced rate of
return on rate base of 7.35% instead of the current 9.49%. Also, SCE will
utilize a balancing account to pass through Palo Verde's incremental
operating costs (considered reasonable as long as they do not exceed 30%
of a baseline forecast and the site's gross annual capacity factor does
not go below 55%) to ratepayers. Beginning January 1, 1998, this
balancing account will become part of the competition transition charge
(CTC) mechanism. If SCE's actual costs are less than the forecast, the
difference will benefit ratepayers as a credit to the CTC mechanism. The
existing nuclear unit incentive procedure will continue only for purposes
of calculating a reward for performance of any unit above an 80% capacity
factor for a fuel cycle. After 2001, SCE's ratepayers will receive 50%
of the benefits derived from the operation of Palo Verde. The decision is
projected to reduce SCE's 1997 earnings by approximately 5 cents per
share.
Competitive Environment
SCE currently operates in a highly regulated environment in which it has
an obligation to provide electric service to customers in return for an
exclusive franchise within its service territory. This regulatory
environment is changing. The generation sector has experienced
competition from nonutility power producers and regulators are
restructuring California's electric utility industry.
On September 23, 1996, the State of California enacted legislation to
provide a transition to a competitive market structure. The legislation
substantially adopts the CPUC's December 1995 restructuring decision
(discussed below) by addressing stranded-cost recovery for utilities,
providing a certain cost recovery time period for the transition costs
associated with utility-owned generation-related assets. Transition costs
related to power-purchase contracts would be recovered through the terms
of their contracts while most of the remaining transition costs would be
recovered through 2001. The legislation also includes provisions to
finance a portion of the stranded costs that residential and small
commercial customers would have paid between 1998 and 2001, thereby
page 7
allowing SCE to give a rate reduction of at least 10% to these customers,
beginning January 1, 1998. The financing would occur with securities
issued by the California Infrastructure and Economic Development Bank, or
an entity approved by the Bank. The legislation includes a rate freeze
for all other customers, including large commercial and industrial
customers, as well as provisions for continued funding for energy
conservation, low-income programs and renewable resources. Despite the
rate freeze, SCE expects to be able to recover its revenue requirement
based on cost-of-service regulation during the 1998-2001 transition
period. In addition, the legislation mandates the implementation of a
non-bypassable CTC that provides utilities the opportunity to recover
costs made uneconomic by electric utility restructuring. Finally, the
legislation contains provisions for the recovery (through 2006) of
reasonable employee-related transition costs incurred and projected for
retraining, severance, early retirement, outplacement and related expenses
for utility workers. In light of the legislation, the CPUC is reassessing
the need to prepare an environmental impact report.
In December 1995, the CPUC issued its decision on restructuring
California's electric utility industry. The transition to a new market
structure, which is expected to provide competition and customer choice,
would begin January 1, 1998, with all consumers participating by 2003
(changed to 2002 by the recently enacted legislation). Key elements of the
CPUC decision include:
o Creation of an independent power exchange (PX) to manage electric
supply and demand. California's investor-owned utilities would be
required to purchase from and sell to the exchange all of their power
during the transition period, while other generators could voluntarily
participate.
o Creation of an independent system operator (ISO) to have operational
control of the utilities' transmission facilities and, therefore,
control the scheduling and dispatch of all electricity on the state's
power grid.
o Availability of customer choice through time-of-use rates, direct
customer access to generation providers with transmission arrangements
through the system operator, and customer-arranged "contracts for
differences" to manage price fluctuations from the PX.
o Recovery of costs to transition to a competitive market (utility
investments, obligations incurred to serve customers under the existing
framework and reasonable employee-related costs) through a non-
bypassable charge, applied to all customers, called the CTC.
o CPUC-established incentives to encourage voluntary divestiture (through
spin-off or sale to an unaffiliated entity) of at least 50% of
utilities' gas-fueled generation to address market power issues.
o Performance-based ratemaking (PBR) for those utility services not
subject to competition.
In April 1996, SCE, Pacific Gas & Electric Company and San Diego Gas &
Electric Company filed a proposal with the FERC regarding the creation of
the PX and the ISO. On November 26, 1996, the FERC conditionally accepted
the proposal and directed the three utilities to file more specific
information by March 31, 1997. In July 1996, the three utilities jointly
filed an application with the CPUC requesting approval to establish a
restructuring trust which would obtain loans up to $250 million for the
development of the ISO and PX through January 1, 1998. The loans would
be backed by utility guarantees; SCE's share would be 45%. Once the ISO
and PX are formed, they will repay the trust's loans and recover funds
from future ISO and PX customers. In August 1996, the CPUC issued an
interim order establishing the restructuring trust and the funding level
of $250 million which will be used to build the hardware and software
systems for the ISO and PX.
page 8
Recovery of costs to transition to a competitive market would be
implemented through a non-bypassable CTC. This charge would apply to all
customers who were using or began using utility services on or after the
December 20, 1995, decision date. In August 1996, in compliance with the
CPUC's restructuring decision, SCE filed its application to estimate its
1998 transition costs. In October 1996, SCE amended its transition cost
filing to reflect the effects of the legislation enacted in September
1996. Under the rate freeze codified in the legislation, the CTC will be
determined residually (i.e., after subtracting other cost components for
the PX, transmission and distribution (T&D), nuclear decommissioning and
public benefit programs). Nevertheless, the CPUC directed that the
amended application provide estimates of SCE's potential transition costs
from 1998 through 2030. SCE provided two estimates between approximately
$13.1 billion (1998 net present value), assuming the fossil plants have
a market value equal to the net book value, and $13.8 billion (1998 net
present value), assuming the fossil plants have no market value. These
estimates are based on incurred costs, and forecasts of future costs and
assumed market prices. However, changes in the assumed market prices
could materially affect these estimates. The potential transition costs
are comprised of: $7.5 billion from SCE's qualifying facility contracts,
which are the direct result of legislative and regulatory mandates; and
$5.6 billion to $6.3 billion from costs pertaining to certain generating
plants and regulatory commitments consisting of costs incurred (whose
recovery has been deferred by the CPUC) to provide service to
customers. Such commitments include the recovery of income tax benefits
previously flowed-through to customers, postretirement benefit transitio
costs, accelerated recovery of San Onofre (as discussed in Note 1 to the
Consolidated Financial Statements) and Palo Verde, nuclear decommissioning
and certain other costs.
On November 27, 1996, SCE filed an application with the CPUC to
voluntarily divest, by auction, all of its oil- and gas-fueled generation
assets. This application builds on SCE's March 1996 plan which outlined
how SCE proposed to divest 50% of these assets. Under the new proposal,
SCE would continue to operate and maintain the divested power plants for
at least two years following their sale, as mandated by the recent
restructuring legislation. In addition, SCE would offer workforce
transition programs to those employees who may be impacted by divestiture-
related job reductions. SCE's proposal is contingent on the overall
electric industry restructuring implementation process continuing on a
satisfactory path. CPUC approval of the oil- and gas-fueled generation
divestiture was requested for late 1997.
In September 1996, the CPUC adopted a non-generation T&D PBR mechanism for
SCE which began on January 1, 1997. According to the CPUC decision,
beginning in 1998, the transmission portion is to be separated from non-
generation PBR and subject to ratemaking under the rules of the FERC. The
distribution-only PBR will extend through December 2001. Key elements of
the non-generation PBR include: T&D rates indexed for inflation based on
the Consumer Price Index less a productivity factor; elimination of the
kilowatt-hour sales adjustment; adjustments for cost changes that are not
within SCE's control; a cost of capital trigger mechanism based on changes
in a bond index; standards for service reliability and safety; and a net
revenue-sharing mechanism that determines how customers and shareholders
will share gains and losses from T&D operations. In July 1996, SCE filed
a PBR proposal for its hydroelectric plants and a proposed structure for
performance-based local reliability contracts for certain fossil-fueled
plants. If approved, the hydro PBR would be in effect for three years
and the initial terms of the local reliability contracts, which are
subject to FERC approval, would be in effect for up to three years, both
beginning January 1, 1998. A final CPUC decision on hydro PBR is expected
by year-end 1997.
In July 1996, SCE filed a proposal with the CPUC related to the conceptual
aspects of separating the costs associated with generation, transmission,
distribution, public benefit programs and the CTC. The filing was in
page 9
response to CPUC and FERC directives which require electric services, such
as T&D, to be functionally separate and available to all customers on a
nondiscriminatory basis without cost-shifting among customers. On
December 6, 1996, SCE filed a more comprehensive plan for the functional
unbundling of SCE's rates for electric service, beginning on January 1,
1998. In response to CPUC and FERC orders, as well as the new
restructuring legislation, this filing addressed the implementation-level
detail for the functional unbundling of rates in separate charges for
energy, transmission, distribution, the CTC, public benefit programs and
nuclear decommissioning. The filing also included proposals for
establishing new regulatory proceedings to replace current proceedings
that will no longer be necessary during the rate freeze period.
Although depreciation-related differences could result from applying a
regulatory prescribed depreciation method (straight-line, remaining-life
method) rather than a method that would have been applied absent the
regulatory process, SCE believes that the depreciable lives of its
generation-related assets would not vary significantly from that of an
unregulated enterprise, as the CPUC bases depreciable lives on periodic
studies that reflect the physical useful lives of the assets. SCE also
believes that any depreciation-related differences would be recovered
through the CTC.
If events occur during the restructuring process that result in all or a
portion of the CTC being improbable of recovery, SCE could have write-offs
associated with these costs if they are not recovered through another
regulatory mechanism. At this time, SCE cannot predict what other
revisions will ultimately be made during the restructuring process in
subsequent proceedings or implementation phases, or the effect, after the
transition period, that competition will have on its results of operations
or financial position.
Subsequent Event
If the CPUC's restructuring is implemented as outlined, SCE would be
allowed to recover its CTC (subject to a lower return on equity) and
believes it should be allowed to continue to apply accounting standards
that recognize the economic effects of rate regulation for its generation-
related assets during the 1998-2001 transition period. However, in
response to a request by the staff of the Securities and Exchange
Commission (SEC), in December 1996 SCE submitted its views on the
continued applicability of regulatory accounting standards for its
generation-related assets. In its submittal, SCE and its independent
accountants jointly concluded that, based on their current analysis, SCE
will continue to meet the criteria for applying these accounting standards
through the 1998-2001 transition period. In its February 1997 response,
the SEC staff expressed continuing concern with SCE's conclusion and
indicated that they wanted to meet further with SCE and the other major
California electric utilities to resolve this matter. SCE and its
independent accountants continue to believe that SCE meets such criteria
and plan to meet with the SEC staff to present additional and clarifying
information seeking to convince the SEC staff of the merits of SCE's
position. The authority to require SCE to discontinue applying regulatory
accounting standards rests with the SEC. If SCE is required to
discontinue the application of these accounting standards for its
generation-related assets, it would have to write off generation-related
regulatory assets, which at December 31, 1996 totaled approximately $600
million on an after-tax basis, primarily for the recovery of income tax
benefits previously flowed-through to customers, the Palo Verde phase-in
plan and unamortized loss on reacquired debt.
SCE believes that a proper application of regulatory accounting standards
will result in it no longer meeting the criteria to apply these accounting
standards to all of its non-hydroelectric generation-related assets after
the end of the 1998-2001 transition period. If SCE continues the
application of these accounting standards during the transition period,
page 10
but during the transition period events occur that result in SCE no longer
meeting the criteria for applying such standards, SCE may be required to
write off the remaining balance of its recorded generation-related
regulatory assets existing at that time.
If a non-cash write-off is required, SCE believes that it should not
affect the stranded-cost recovery plans set forth in the CPUC's December
1995 restructuring decision and legislation enacted by the State of
California in September 1996.
FERC Stranded Cost/Open Access Transmission Decision
In April 1996, the FERC issued its decision on stranded cost recovery and
open access transmission, effective July 1996. The decision requires all
electric utilities subject to the FERC's jurisdiction to file transmission
tariffs which provide competitors with increased access to transmission
facilities for wholesale transactions and also establishes information
requirements for the transmission utility. The decision also provides
utilities with the recovery of stranded costs, which are prior-service
costs incurred under the current regulatory framework. In addition to
providing recovery of stranded costs associated with existing wholesale
customers, the FERC directed that it would have primary jurisdiction over
the recovery of stranded costs associated with retail-turned-wholesale
customers, such as the formation of a new municipal electric system.
Retail stranded costs resulting from a state-authorized retail direct-
access program are the responsibility of the states and the FERC would
only address recovery of these costs if the state has no authority to do
so. In compliance with the April 1996 FERC decision, SCE filed a revised
open access tariff with the FERC in July 1996. The tariff became
effective on an interim basis, subject to refund, as of its filing date.
Several wholesale customers have filed protests with the FERC on the
transmission rate levels, and a ruling from the FERC setting the rates to
be decided at formal hearings is anticipated in early 1997.
Environmental Protection
Edison International is subject to numerous environmental laws and
regulations, which require it to incur substantial costs to operate
existing facilities, construct and operate new facilities, and mitigate
or remove the effect of past operations on the environment.
As further discussed in Note 10 to the Consolidated Financial Statements,
Edison International records its environmental liabilities when site
assessments and/or remedial actions are probable and a range of reasonably
likely cleanup costs can be estimated. Edison International reviews its
sites and measures the liability quarterly, by assessing a range of
reasonably likely costs for each identified site. Unless there is a
probable amount, Edison International records the lower end of this range
of costs.
Edison International's recorded estimated minimum liability to remediate
its 56 identified sites (55 at SCE and 1 at EME) was $114 million at
December 31, 1996. One of SCE's sites, a former pole-treating facility,
is considered a federal Superfund site and represents 71% of Edison
International's recorded liability. The ultimate costs to clean up Edison
International's identified sites may vary from its recorded liability due
to numerous uncertainties inherent in the estimation process. Edison
International believes that, due to these uncertainties, it is reasonably
possible that cleanup costs could exceed its recorded liability by up to
$211 million. The upper limit of this range of costs was estimated using
assumptions least favorable to Edison International among a range of
reasonably possible outcomes.
The CPUC allows SCE to recover environmental-cleanup costs at 35 of its
sites, representing $101 million of Edison International's recorded
liability, through an incentive mechanism. Under this mechanism, SCE will
page 11
recover 90% of cleanup costs through customer rates; shareholders fund the
remaining 10%, with the opportunity to recover these costs from insurance
carriers and other third parties. SCE has successfully settled insurance
claims with a number of its carriers. Costs incurred at SCE's remaining
20 sites are expected to be recovered through customer rates. SCE has
recorded a regulatory asset of $104 million for its estimated minimum
environmental-cleanup costs expected to be recovered through customer
rates.
Edison International's identified sites include several sites for which
there is a lack of currently available information, including the nature
and magnitude of contamination, and the extent, if any, that Edison
International may be held responsible for contributing to any costs
incurred for remediating these sites. Thus, no reasonable estimate of
cleanup costs can now be made for these sites.
Edison International expects to clean up its identified sites over a
period of up to 30 years. Remediation costs in each of the next several
years are expected to range from $4 million to $8 million. Recorded costs
for 1996 were $7 million.
Based on currently available information, Edison International believes
it is unlikely that it will incur amounts in excess of the upper limit of
the estimated range and, based upon the CPUC's regulatory treatment of
environmental-cleanup costs, Edison International believes that costs
ultimately recorded will not have a material adverse effect on its results
of operations or financial position. There can be no assurance, however,
that future developments, including additional information about existing
sites or the identification of new sites, will not require material
revisions to such estimates.
The 1990 federal Clean Air Act requires power producers to have emissions
allowances to emit sulfur dioxide. Power companies receive emissions
allowances from the federal government and may bank or sell excess
allowances. SCE expects to have excess allowances under Phase II of the
Clean Air Act (2000 and later). The act also calls for a study to
determine if additional regulations are needed to reduce regional haze in
the southwestern U.S. In addition, another study is in progress to
determine the specific impact of air contaminant emissions from the Mohave
Coal Generating Station on visibility in Grand Canyon National Park. The
potential effect of these studies on sulfur dioxide emissions regulations
for Mohave is unknown.
Edison International's projected capital expenditures to protect the
environment are $900 million for the 1997-2001 period, mainly for
aesthetics treatment, including undergrounding certain transmission and
distribution lines.
The possibility that exposure to electric and magnetic fields (EMF)
emanating from power lines, household appliances and other electric
sources may result in adverse health effects is receiving increased
attention. The scientific community has not yet reached a consensus on
the nature of any health effects of EMF. However, the CPUC has issued a
decision which provides for a rate-recoverable research and public
education program conducted by California electric utilities, and
authorizes these utilities to take no-cost or low-cost steps to reduce EMF
in new electric facilities. SCE is unable to predict when or if the
scientific community will be able to reach a consensus on any health
effects of EMF, or the effect that such a consensus, if reached, could
have on future electric operations.
Palo Verde Steam Tube Rupture
In 1993, a steam generator tube ruptured at Palo Verde Unit 2; additional
cracking was found in other tubes. Arizona Public Service Company (APS),
page 12
the operating agent for Palo Verde, has taken, and will continue to take,
remedial actions that it believes have slowed the rate of steam generator
tube degradation in all three units. APS believes that the steam
generators in only one of the units will have to be replaced within five
to ten years. Based on APS' 100% share estimate, SCE estimates its share
of the costs to be between $22 million and $24 million, plus replacement
power costs. SCE is evaluating APS' analyses, conducting its own review,
and has not yet decided whether it supports replacement of the steam
generators.
Workforce Reductions
During 1996, Edison International offered a voluntary retirement program
to certain eligible employees. Approximately 3,000 employees (2,200 non-
represented and 800 represented employees) accepted the terms of this
program. After allowance for the effects of pension settlement gains at
SCE, Edison International's net expense for this program was $7 million.
Proposed New Accounting Standard
During 1996, the Financial Accounting Standards Board issued an exposure
draft that would establish accounting standards for the recognition and
measurement of closure and removal obligations. The exposure draft would
require the estimated present value of an obligation to be recorded as a
liability, along with a corresponding increase in the plant or regulatory
asset accounts when the obligation is incurred. If the exposure draft is
approved in its present form, it would affect SCE's accounting practices
for the decommissioning of its nuclear power plants, obligations for coal
mine reclamation costs and any other activities related to the closure or
removal of long-lived assets. SCE does not expect that the accounting
changes proposed in the exposure draft would have an adverse effect on its
results of operations even after deregulation due to its current and
expected future ability to recover these costs through customer rates.
The nonutility subsidiaries are currently reviewing what impact the
exposure draft may have on their results of operations and financial
position.
The management of Edison International is responsible for the integrity
and objectivity of the accompanying financial statements. The statements
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis and are based, in part, on
management estimates and judgment.
Edison International and its subsidiaries maintain systems of internal
control to provide reasonable, but not absolute, assurance that assets are
safeguarded, transactions are executed in accordance with management's
authorization and the accounting records may be relied upon for the
preparation of the financial statements. There are limits inherent in all
systems of internal control, the design of which involves management's
judgment and the recognition that the costs of such systems should not
exceed the benefits to be derived. Edison International believes its
systems of internal control achieve this appropriate balance. These
systems are augmented by internal audit programs through which the
adequacy and effectiveness of internal controls and policies and
procedures are monitored, evaluated and reported to management. Actions
are taken to correct deficiencies as they are identified.
Edison International's independent public accountants, Arthur Andersen
LLP, are engaged to audit the financial statements in accordance with
generally accepted auditing standards and to express an informed opinion
on the fairness, in all material respects, of Edison International's
reported results of operations, cash flows and financial position.
As a further measure to assure the ongoing objectivity of financial
information, the audit committee of the board of directors, which is
page 13
composed of outside directors, meets periodically, both jointly and
separately, with management, the independent public accountants and
internal auditors, who have unrestricted access to the committee. The
committee recommends annually to the board of directors the appointment
of a firm of independent public accountants to conduct audits of its
financial statements; considers the independence of such firm and the
overall adequacy of the audit scope and Edison International's systems of
internal control; reviews financial reporting issues; and is advised of
management's actions regarding financial reporting and internal control
matters.
Edison International and its subsidiaries maintain high standards in
selecting, training and developing personnel to assure that their
operations are conducted in conformity with applicable laws and are
committed to maintaining the highest standards of personal and corporate
conduct. Management maintains programs to encourage and assess compliance
with these standards.
Richard K. Bushey John E. Bryson
Richard K. Bushey John E. Bryson
Vice President and Controller Chairman of the Board and
Chief Executive Officer
January 31, 1997
page 14
To the Shareholders and the Board of Directors, Edison International:
We have audited the accompanying consolidated balance sheets of Edison
International (a California corporation) and its subsidiaries as of
December 31, 1996, and 1995, and the related consolidated statements of
income, retained earnings and cash flows for each of the three years in
the period ended December 31, 1996. These financial statements are the
responsibility of Edison International's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Edison International
and its subsidiaries as of December 31, 1996, and 1995, and the results
of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Arthur Andersen LLP
Los Angeles, California
January 31, 1997 (except with respect to the "Subsequent Event" discussed
under "Electric Utility Industry Restructuring" in Note 2, as to which the
date is February 21, 1997).
page 15
Consolidated Statements of Income
In millions, except per-share amounts Year ended December 31, 1996 1995 1994
- ------------------------------------- ----------------------- ------ ------ ------
Electric utility revenue $7,583 $7,873 $7,799
Diversified operations 962 532 546
------ ------ ------
Total operating revenue 8,545 8,405 8,345
------ ------ ------
Fuel 768 694 896
Purchased power 2,706 2,582 2,563
Provisions for regulatory adjustment clauses-net (226) 230 55
Other operating expenses 1,555 1,411 1,563
Maintenance 331 359 332
Depreciation and decommissioning 1,173 1,014 945
Income taxes 563 528 481
Property and other taxes 197 210 211
------ ------ ------
Total operating expenses 7,067 7,028 7,046
------ ------ ------
Operating income 1,478 1,377 1,299
------ ------ ------
Provision for rate phase-in plan (84) (122) (137)
Allowance for equity funds used during construction 16 19 14
Interest income 63 65 41
Minority interest (70) (48) (46)
Other nonoperating income-net (13) 41 97
------ ------ ------
Total other income (deductions)-net (88) (45) (31)
------ ------ ------
Income before interest and other expenses 1,390 1,332 1,268
------ ------ ------
Interest on long-term debt 604 539 527
Other interest expense 90 81 79
Allowance for borrowed funds used during construction (10) (14) (14)
Capitalized interest (58) (60) (46)
Dividends on subsidiary preferred securities 47 47 41
------ ------ ------
Total interest and other expenses-net 673 593 587
------ ------ ------
Net income $ 717 $ 739 $ 681
====== ====== ======
Weighted-average shares of common stock outstanding 437 446 448
Earnings per share $ 1.64 $ 1.66 $ 1.52
Consolidated Statements of Retained Earnings
In millions, except per-share amounts Year ended December 31, 1996 1995 1994
- ------------------------------------- ----------------------- ------ ------ ------
Balance at beginning of year $3,700 $3,452 $3,266
Net income 717 739 681
Dividends declared on common stock (435) (446) (495)
Stock repurchase and retirement (229) (45) -
------ ------ ------
Balance at end of year $3,753 $3,700 $3,452
====== ====== ======
Dividends declared per common share $1.00 $1.00 $1.105
The accompanying notes are an integral part of these financial statements.
page 16
Consolidated Balance Sheets
In millions December 31, 1996 1995
- ----------- ------------ ------- -------
Assets
Utility plant, at original cost $20,400 $19,850
Less - accumulated provision for depreciation and decommissioning 9,431 8,569
------- -------
10,969 11,281
Construction work in progress 557 728
Nuclear fuel, at amortized cost 177 139
------- -------
Total utility plant 11,703 12,148
------- -------
Nonutility property - less accumulated provision for depreciation
of $203 and $134 at respective dates 3,570 3,141
Nuclear decommissioning trusts 1,486 1,260
Investments in partnerships and unconsolidated subsidiaries 1,372 1,190
Investments in leveraged leases 584 574
Other investments 104 66
------- -------
Total other property and investments 7,116 6,231
------- -------
Cash and equivalents 897 507
Receivables, including unbilled revenue, less allowances of $26
and $24 for uncollectible accounts at respective dates 1,095 1,055
Fuel inventory 72 115
Materials and supplies, at average cost 154 151
Accumulated deferred income taxes-net 240 477
Prepayments and other current assets 114 126
------- -------
Total current assets 2,572 2,431
------- -------
Unamortized debt issuance and reacquisition expense 347 350
Rate phase-in plan 51 130
Unamortized nuclear plant - net - 67
Income tax-related deferred charges 1,741 1,724
Other deferred charges 1,029 865
------- -------
Total deferred charges 3,168 3,136
------- -------
Total assets $24,559 $23,946
======= =======
The accompanying notes are an integral part of these financial statements.
page 17
In millions, except share amounts December 31, 1996 1995
- --------------------------------- ------------ ---- ----
Capitalization and Liabilities
Common shareholders' equity:
Common stock (424,524,178 and 443,607,674 shares
outstanding at respective dates) $ 2,547 $ 2,660
Cumulative translation adjustments-net 64 15
Unrealized gain in equity investments-net 33 18
Retained earnings 3,753 3,700
------- -------
6,397 6,393
Preferred securities of subsidiaries:
Not subject to mandatory redemption 284 284
Subject to mandatory redemption 425 425
Long-term debt 7,475 7,195
------- -------
Total capitalization 14,581 14,297
------- -------
Other long-term liabilities 424 344
------- -------
Current portion of long-term debt 592 40
Short-term debt 397 710
Accounts payable 438 420
Accrued taxes 530 557
Accrued interest 131 101
Dividends payable 109 113
Regulatory balancing accounts - net 182 338
Deferred unbilled revenue and other current liabilities 1,059 973
------- -------
Total current liabilities 3,438 3,252
------- -------
Accumulated deferred income taxes-net 4,283 4,352
Accumulated deferred investment tax credits 372 405
Customer advances and other deferred credits 754 666
------- -------
Total deferred credits 5,409 5,423
------- -------
Minority interest 707 630
------- -------
Commitments and contingencies (Notes 2, 8, 9 and 10)
Total capitalization and liabilities $24,559 $23,946
======= =======
The accompanying notes are an integral part of these financial statements.
page 18
Consolidated Statements of Cash Flows
In millions Year ended December 31, 1996 1995 1994
- ----------- ----------------------- ---- ---- ----
Cash flows from operating activities:
Net income $ 717 $ 739 $ 681
Adjustments for non-cash items:
Depreciation and decommissioning 1,173 1,014 945
Amortization 96 73 134
Rate phase-in plan 79 111 123
Deferred income taxes and investment tax credits 91 (166) 22
Equity in income from partnerships and unconsolidated
subsidiaries (158) (115) (130)
Other long-term liabilities 80 33 44
Other-net (94) -- (79)
Changes in working capital:
Receivables 68 (27) (98)
Regulatory balancing accounts (156) 282 (2)
Fuel inventory, materials and supplies 39 (19) (21)
Prepayments and other current assets 13 (17) 14
Accrued interest and taxes 3 19 121
Accounts payable and other current liabilities 70 13 97
Distributions from partnerships and unconsolidated subsidiaries 176 178 205
------- ------- -------
Net cash provided by operating activities 2,197 2,118 2,056
------- ------- -------
Cash flows from financing activities:
Long-term debt issued 1,365 1,496 314
Long-term debt repayments (1,315) (960) (507)
Preferred securities issued 414 63 88
Preferred securities redemptions -- (75) --
Common stock repurchases (344) (70) --
Short-term debt financing-net (312) (46) 141
Dividends paid (440) (447) (549)
Other-net 45 31 (31)
------ ------ ------
Net cash used by financing activities (587) (8) (544)
Cash flows from investing activities:
Additions to property and plant (744) (969) (1,137)
Purchase of nonutility power stations -- (1,015) --
Funding of nuclear decommissioning trusts (148) (151) (130)
Investments in partnerships and unconsolidated subsidiaries (333) (45) (201)
Unrealized gain in equity investments-net 15 8 10
Other-net (10) 35 59
------- ------- -------
Net cash used by investing activities (1,220) (2,137) (1,399)
------- ------- -------
Net increase (decrease) in cash and equivalents 390 (27) 113
Cash and equivalents, beginning of year 507 534 421
------- ------- -------
Cash and equivalents, end of year $ 897 $ 507 $ 534
======= ======= =======
Cash payments for interest and taxes:
Interest $ 486 $ 463 $ 470
Taxes 447 642 320
Non-cash investing and financing activities:
Obligation to fund investments in partnerships and unconsolidated
subsidiaries 237 466 29
Additions to property and plant funded by the minority owner of
consoldiated subsidiaries 33 77 95
Goodwill related to purchase of nonutility power stations -- 312 --
The accompanying notes are an integral part of these financial statements.
page 19
Note 1. Summary of Significant
Accounting Policies
The consolidated financial statements include Edison International and its
wholly owned subsidiaries: Southern California Edison Company (SCE), a
rate-regulated electric utility which produces and supplies electric
energy for its 4.2 million customers in Central and Southern California;
Edison Mission Energy (EME), a market leader in the development, ownership
and operation of independent power facilities; Edison Capital, a leading
provider of capital and financial services; Edison Source, a provider of
integrated energy solutions; Edison EV, a provider of charging products
and services for electric vehicles; and Edison Select, a consumer product
and services company. The latter three subsidiaries were formed in 1996.
EME and Edison Capital have domestic and international projects, primarily
in Europe. Edison International's subsidiaries use the equity method to
account for significant investments in partnerships and subsidiaries in
which they own 50% or less. In 1994, EME began reporting its share in the
Loy Yang B project under the full consolidation method (with minority
interest), previously reported under the proportional consolidation
method. Intercompany transactions have been eliminated, except EME's
profits from energy sales to SCE, which are allowed in utility rates.
SCE's accounting policies conform with generally accepted accounting
principles (GAAP), including the accounting principles for rate-regulated
enterprises which reflect the rate-making policies of the California
Public Utilities Commission (CPUC) and the Federal Energy Regulatory
Commission (FERC).
SCE currently operates in a highly regulated environment in which it has
an obligation to provide electric service to customers in return for an
exclusive franchise within its service territory. This regulatory
environment is changing, as further discussed in Note 2 to the
Consolidated Financial Statements. EME operates predominantly in one
industry segment: independent, electric power generation. EME's projects
generally sell power to a limited number of electric utilities pursuant
to long-term (15 to 30 years) contracts. EME's plants are located in
different geographic areas in order to mitigate the effects of regional
markets, economic down-turns or unusual weather conditions.
Financial statements prepared in compliance with GAAP require management
to make estimates and assumptions that affect the amounts reported in the
financial statements and disclosure of contingencies. Actual results
could differ from those estimates. Certain significant estimates related
to electric utility industry restructuring, decommissioning and
contingencies, are further discussed in Notes 2, 9 and 10, respectively.
Certain prior-year amounts were reclassified to conform to the December
31, 1996, financial statement presentation.
Debt Issuance and Reacquisition Expense
Debt premium, discount and issuance expenses are amortized over the life
of each issue. Under CPUC rate-making procedures, debt reacquisition
expenses are amortized over the remaining life of the reacquired debt or,
if refinanced, the life of the new debt.
Financial Instruments
Edison International enters into interest rate swap and cap agreements to
manage its interest rate exposure. Interest rate differentials and
premiums for interest rate caps to be paid or received are recorded as
page 20
adjustments to interest expense. EME enters into electricity rate swap
agreements to manage its exposure to market (pool) price volatility.
Related price differentials to be paid or received are recorded as
adjustments to diversified revenue.
Fuel Inventory
Fuel inventory is valued under the last-in, first-out method for fuel oil
and natural gas, and under the first-in, first-out method for coal.
Investments
Cash equivalents include tax-exempt investments ($376 million at December
31, 1996, and $313 million at December 31, 1995), and time deposits and
other investments ($320 million at December 31, 1996, and $134 million at
December 31, 1995) with maturities of three months or less.
Net unrealized gains (losses) in equity investments are recorded as a
separate component of shareholders' equity under "Unrealized gain (loss)
in equity investments-net." Unrealized gains and losses on
decommissioning trust funds are recorded in the accumulated provision for
decommissioning.
All investments are classified as available-for-sale.
Nuclear
The CPUC authorized rate phase-in plans to defer the collection of $200
million in revenue for each unit at the Palo Verde Nuclear Generating
Station during the first four years of operation and recover the deferred
revenue (including interest) evenly over the following six years. The
phase-in plans ended in February 1996 and September 1996 for Units 1 and
2, respectively. The plan ends in January 1998 for Unit 3.
Decommissioning costs are accrued and recovered in rates over the term of
each nuclear facility's operating license through charges to
decommissioning expense (see Note 9).
Under the Energy Policy Act of 1992, SCE is liable for its share of the
estimated costs to decommission three federal nuclear enrichment
facilities (based on purchases). These costs, which will be paid over 15
years, are recorded as a fuel cost and recovered through customer rates.
In August 1992, the CPUC approved a settlement agreement between SCE and
the CPUC's Office (formerly Division) of Ratepayer Advocates (ORA) to
discontinue operation of San Onofre Nuclear Generating Station Unit 1 at
the end of its then-current fuel cycle because operation of the unit was
no longer cost-effective. In November 1992, SCE discontinued operation
of Unit 1. As part of the agreement, SCE recovered its remaining
investment over a four-year period ending August 1996, earning an 8.98%
rate of return on rate base.
In October 1994, the CPUC authorized accelerated recovery of SCE's nuclear
plant investments by $75 million per year, with a corresponding
deceleration in recovery of its transmission and distribution assets
through revised depreciation estimates over their remaining useful lives.
In April 1996, the CPUC authorized, and SCE began accelerating, the
recovery of its remaining investment of $2.6 billion in San Onofre Units
2 and 3. The accelerated recovery will continue through December 2001
(the original end date of 2003 was changed by legislation enacted in
September 1996), earning a 7.35% fixed rate of return (compared to the
page 21
current 9.49%). Future operating costs, including nuclear fuel and
nuclear fuel financing costs and incremental capital expenditures at San
Onofre Units 2 and 3, are subject to an incentive pricing plan whereby SCE
receives about 4 cents per kilowatt-hour through 2003. Any differences
between these costs and the incentive price will flow through to the
shareholders. Beginning in 2004, SCE will be required to share equally
with ratepayers the benefits received from operation of the units.
Prior to January 1, 1997, the cost of nuclear fuel for Palo Verde,
including disposal, was amortized to fuel expense on the basis of
generation. Under CPUC rate-making procedures in effect for Palo Verde
prior to January 1, 1997, nuclear-fuel financing costs were capitalized
until the fuel was placed into production.
Property and Plant
Utility plant additions, including replacements and betterments, are
capitalized. Such costs include direct material and labor, construction
overhead and an allowance for funds used during construction (AFUDC).
AFUDC represents the estimated cost of debt and equity funds that finance
utility plant construction. AFUDC is capitalized during plant
construction and reported in current earnings. AFUDC is recovered in
rates through depreciation expense over the useful life of the related
asset.
Depreciation of utility plant is computed on a straight-line, remaining-
life basis. Replaced or retired property and removal costs less salvage
are charged to the accumulated provision for depreciation. Depreciation
expense stated as a percent of average original cost of depreciable
utility plant was 4.2% for 1996, and 3.6% for both 1995 and 1994.
Nonutility property is capitalized at cost, including interest incurred
on borrowed funds that finance construction. Depreciation of nonutility
properties is primarily computed on a straight-line basis over their
estimated useful lives. Depreciation expense stated as a percent of
average original cost of depreciable nonutility property was, on a
composite basis, 3.9% for 1996, 3.8% for 1995 and 5.2% for 1994.
Regulatory Balancing Accounts
The differences between CPUC-authorized and actual base-rate revenue from
kilowatt-hour sales and CPUC-authorized and actual energy costs are
accumulated in balancing accounts until they are refunded to, or
recovered from, utility customers through authorized rate adjustments
(with interest). Income tax effects on balancing account changes are
deferred.
Research, Development and Demonstration (RD&D)
SCE capitalizes RD&D costs that are expected to result in plant
construction. If construction does not occur, these costs are charged to
expense. RD&D expenses are recorded in a balancing account and, at the
end of the rate-case cycle, any authorized but unspent RD&D funds are
refunded to customers. RD&D expenses were $21 million in 1996, $28
million in 1995 and $63 million in 1994.
Revenue
Electric utility revenue includes amounts for services rendered but
unbilled at the end of each year.
page 22
Stock-Based Compensation
Edison International measures compensation expense relative to stock-based
compensation by the intrinsic-value method.
Note 2. Regulatory Matters
Electric Utility Industry Restructuring
On September 23, 1996, the State of California enacted legislation to
provide a transition to a competitive market structure. The legislation
substantially adopts the CPUC's December 1995 restructuring decision
(discussed below) by addressing stranded-cost recovery for utilities,
providing a certain cost recovery time period for the transition costs
associated with utility-owned generation-related assets. Transition costs
related to power-purchase contracts would be recovered through the terms
of their contracts while most of the remaining transition costs would be
recovered through 2001. The legislation also includes provisions to
finance a portion of the stranded costs that residential and small
commercial customers would have paid between 1998 and 2001, thereby
allowing SCE to give a rate reduction of at least 10% to these customers,
beginning January 1, 1998. The financing would occur with securities
issued by the California Infrastructure and Economic Development Bank, or
an entity approved by the Bank. The legislation includes a rate freeze
for all other customers, including large commercial and industrial
customers, as well as provisions for continued funding for energy
conservation, low-income programs and renewable resources. Despite the
rate freeze, SCE expects to be able to recover its revenue requirement
based on cost-of-service regulation during the 1998-2001 transition
period. In addition, the legislation mandates the implementation of a
non-bypassable competition transition charge (CTC) that provides utilities
the opportunity to recover costs made uneconomic by electric utility
restructuring. Finally, the legislation contains provisions for the
recovery (through 2006) of reasonable employee-related transition costs
incurred and projected for retraining, severance, early retirement,
outplacement and related expenses for utility workers. In light of the
legislation, the CPUC is reassessing the need to prepare an environmental
impact report.
In December 1995, the CPUC issued its decision on restructuring
California's electric utility industry. The transition to a new market
structure, which is expected to provide competition and customer choice,
would begin January 1, 1998, with all consumers participating by 2003
(changed to 2002 by the recently enacted legislation). Key elements of
the CPUC decision include:
o Creation of an independent power exchange (PX) to manage electric
supply and demand. California's investor-owned utilities would be
required to purchase from and sell to the exchange all of their power
during the transition period, while other generators could voluntarily
participate.
o Creation of an independent system operator (ISO) to have operational
control of the utilities' transmission facilities and, therefore,
control the scheduling and dispatch of all electricity on the state's
power grid.
o Availability of customer choice through time-of-use rates, direct
customer access to generation providers with transmission arrangements
through the system operator, and customer-arranged "contracts for
differences" to manage price fluctuations from the PX.
page 23
o Recovery of costs to transition to a competitive market (utility
investments, obligations incurred to serve customers under the existing
framework and reasonable employee-related costs) through a non-
bypassable charge, applied to all customers, called the CTC.
o CPUC-established incentives to encourage voluntary divestiture (through
spin-off or sale to an unaffiliated entity) of at least 50% of
utilities' gas-fueled generation to address market power issues.
o Performance-based ratemaking (PBR) for those utility services not
subject to competition.
In April 1996, SCE, Pacific Gas & Electric Company and San Diego Gas &
Electric Company filed a proposal with the FERC regarding the creation of
the PX and the ISO. On November 26, 1996, the FERC conditionally accepted
the proposal and directed the three utilities to file more specific
information by March 31, 1997. In July 1996, the three utilities jointly
filed an application with the CPUC requesting approval to establish a
restructuring trust which would obtain loans up to $250 million for the
development of the ISO and PX through January 1, 1998. The loans would
be backed by utility guarantees; SCE's share would be 45%. Once the ISO
and PX are formed, they will repay the trust's loans and recover funds
from future ISO and PX customers. In August 1996, the CPUC issued an
interim order establishing the restructuring trust and the funding level
of $250 million which will be used to build the hardware and software
systems for the ISO and PX.
Recovery of costs to transition to a competitive market would be
implemented through a non-bypassable CTC. This charge would apply to all
customers who were using or began using utility services on or after the
December 20, 1995, decision date. In August 1996, in compliance with the
CPUC's restructuring decision, SCE filed its application to estimate its
1998 transition costs. In October 1996, SCE amended its transition cost
filing to reflect the effects of the legislation enacted in September
1996. Under the rate freeze codified in the legislation, the CTC will be
determined residually (i.e., after subtracting other cost components for
the PX, transmission and distribution (T&D), nuclear decommissioning and
public benefit programs). Nevertheless, the CPUC directed that the
amended application provide estimates of SCE's potential transition costs
from 1998 through 2030. SCE provided two estimates between approximately
$13.1 billion (1998 net present value), assuming the fossil plants have
a market value equal to their net book value, and $13.8 billion (1998 net
present value), assuming the fossil plants have no market value. These
estimates are based on incurred costs, and forecasts of future costs and
assumed market prices. However, changes in the assumed market prices
could materially affect these estimates. The potential transition costs
are comprised of: $7.5 billion from SCE's qualifying facility contracts,
which are the direct result of legislative and regulatory mandates; and
$5.6 billion to $6.3 billion from costs pertaining to certain generating
plants and regulatory commitments consisting of costs incurred (whose
recovery has been deferred by the CPUC) to provide service to customers.
Such commitments include the recovery of income tax benefits previously
flowed-through to customers, postretirement benefit transition costs,
accelerated recovery of San Onofre (as discussed in Note 1) and Palo
Verde, nuclear decommissioning and certain other costs.
On November 27, 1996, SCE filed an application with the CPUC to
voluntarily divest, by auction, all of its oil- and gas-fueled generation
assets. This application builds on SCE's March 1996 plan which outlined
how SCE proposed to divest 50% of these assets. Under the new proposal,
SCE would continue to operate and maintain the divested power plants for
page 24
at least two years following their sale, as mandated by the recent
restructuring legislation. In addition, SCE would offer workforce
transition programs to those employees who may be impacted by divestiture-
related job reductions. SCE's proposal is contingent on the overall
electric industry restructuring implementation process continuing on a
satisfactory path. CPUC approval of the oil-and gas-fueled generation
divestiture was requested for late 1997.
In September 1996, the CPUC adopted a non-generation T&D PBR mechanism for
SCE which began on January 1, 1997. According to the CPUC decision,
beginning in 1998, the transmission portion is to be separated from non-
generation PBR and subject to ratemaking under the rules of the FERC. The
distribution-only PBR will extend through December 2001. Key elements of
the non-generation PBR include: T&D rates indexed for inflation based on
the Consumer Price Index less a productivity factor; elimination of the
kilowatt-hour sales adjustment; adjustments for cost changes that are not
within SCE's control; a cost of capital trigger mechanism based on changes
in a bond index; standards for service reliability and safety; and a net
revenue-sharing mechanism that determines how customers and shareholders
will share gains and losses from T&D operations. In July 1996, SCE filed
a PBR proposal for its hydroelectric plants and a proposed structure for
performance-based local reliability contracts for certain fossil-fueled
plants. If approved, the hydro PBR would be in effect for three years
and the initial terms of the local reliability contacts, which are subject
to FERC approval, would be in effect for up to three years, both beginning
January 1, 1998. A final CPUC decision on hydro PBR is expected by year-
end 1997.
In July 1996, SCE filed a proposal with the CPUC related to the conceptual
aspects of separating the costs associated with generation, transmission,
distribution, public benefit programs and the CTC. The filing was in
response to CPUC and FERC directives which require electric services, such
as T&D, to be functionally separate and available to all customers on a
nondiscriminatory basis without cost-shifting among customers. On
December 6, 1996, SCE filed a more comprehensive plan for the functional
unbundling of SCE's rates for electric service, beginning on January 1,
1998. In response to CPUC and FERC orders, as well as the new
restructuring legislation, this filing addressed the implementation-level
detail for the functional unbundling of rates in separate charges for
energy, transmission, distribution, the CTC, public benefit programs and
nuclear decommissioning. The filing also included proposals for
establishing new regulatory proceedings to replace current proceedings
that will no longer be necessary during the rate freeze period.
Although depreciation-related differences could result from applying a
regulatory prescribed depreciation method (straight-line, remaining-life
method) rather than a method that would have been applied absent the
regulatory process, SCE believes that the depreciable lives of its
generation-related assets would not vary significantly from that of an
unregulated enterprise, as the CPUC bases depreciable lives on periodic
studies that reflect the physical useful lives of the assets. SCE also
believes that any depreciation-related differences would be recovered
through the CTC.
If events occur during the restructuring process that result in all or a
portion of the CTC being improbable of recovery, SCE could have write-offs
associated with these costs if they are not recovered through another
regulatory mechanism. At this time, SCE cannot predict what other
revisions will ultimately be made during the restructuring process in
subsequent proceedings or implementation phases, or the effect, after the
transition period, that competition will have on its results of operations
or financial position.
page 25
Subsequent Event
If the CPUC's restructuring is implemented as outlined, SCE would be
allowed to recover its CTC (subject to a lower return on equity) and
believes it should be allowed to continue to apply accounting standards
that recognize the economic effects of rate regulation for its generation-
related assets during the 1998-2001 transition period. However, in
response to a request by the staff of the Securities and Exchange
Commission (SEC), in December 1996 SCE submitted its views on the
continued applicability of regulatory accounting standards for its
generation-related assets. In its submittal, SCE and its independent
accountants jointly concluded that, based on their current analysis, SCE
will continue to meet the criteria for applying these accounting standards
through the 1998-2001 transition period. In its February 1997 response,
the SEC staff expressed continuing concern with SCE's conclusion and
indicated that they wanted to meet further with SCE and the other major
California electric utilities to resolve this matter. SCE and its
independent accountants continue to believe that SCE meets such criteria
and plan to meet with the SEC staff to present additional and clarifying
information seeking to convince the SEC staff of the merits of SCE's
position. The authority to require SCE to discontinue applying regulatory
accounting standards rests with the SEC. If SCE is required to
discontinue the application of these accounting standards for its
generation-related assets, it would have to write-off generation-related
regulatory assets, which at December 31, 1996 totaled approximately $600
million on an after-tax basis, primarily for the recovery of income tax
benefits previously flowed-through to customers, the Palo Verde phase-in
plan and unamortized loss on reacquired debt.
SCE believes that a proper application of regulatory accounting standards
will result in it no longer meeting the criteria to apply these accounting
standards to all of its non-hydroelectric generation-related assets after
the end of the 1998-2001 transition period. If SCE continues the
application of these accounting standards during the transition period,
but during the transition period events occur that result in SCE no longer
meeting the criteria for applying such standards, SCE may be required to
write-off the remaining balance of its recorded generation-related
regulatory assets existing at that time.
If a non-cash write-off is required, SCE believes that it should not
affect the stranded-cost recovery plans set forth in the CPUC's December
1995 restructuring decision and legislation enacted by the State of
California in September 1996.
FERC Stranded Cost/Open Access Transmission Decision
In April 1996, the FERC issued its decision on stranded cost recovery and
open access transmission, effective July 1996. The decision requires all
electric utilities subject to the FERC's jurisdiction to file transmission
tariffs which provide competitors with increased access to transmission
facilities for wholesale transactions and also establishes information
requirements for the transmission utility. The decision also provides
utilities with the recovery of stranded costs, which are prior-service
costs incurred under the current regulatory framework. In addition to
providing recovery of stranded costs associated with existing wholesale
customers, the FERC directed that it would have primary jurisdiction over
the recovery of stranded costs associated with retail-turned-wholesale
customers, such as the formation of a new municipal electric system.
Retail stranded costs resulting from a state-authorized retail direct-
access program are the responsibility of the states and the FERC would
only address recovery of these costs if the state has no authority to do
page 26
so. In compliance with the April 1996 FERC decision, SCE filed a revised
open access tariff with the FERC in July 1996. The tariff became
effective on an interim basis, subject to refund, as of its filing date.
Several wholesale customers have filed protests with the FERC on the
transmission rate levels, and a ruling from the FERC setting the rates to
be decided at formal hearings is anticipated in early 1997.
Mohave Generating Station
A 1994 CPUC decision stated that SCE was liable for expenditures related
to a 1985 accident at the Mohave Generating Station. In July 1996, the
CPUC approved a settlement agreement between SCE and the ORA which
resulted in a $39 million (including interest) refund to SCE's customers.
The refund, which had been previously reserved, was completed by year-end
1996.
Canadian Gas Contracts
In May 1994, SCE filed its testimony in the non-Qualifying Facilities
phase of the 1994 Energy Cost Adjustment Clause proceeding. In May 1995,
the ORA filed its report on the reasonableness of SCE's gas supply costs
for both the 1993 and 1994 record periods. The report recommends a
disallowance of $13.3 million for excessive costs incurred from November
1993 through March 1994 associated with SCE's Canadian gas purchase and
supply contracts. The report requests that the CPUC defer finding SCE's
Canadian supply and transportation agreements reasonable for the duration
of their terms and that the costs under these contracts be reviewed on a
yearly basis. In October 1996, the ORA issued its report for the 1995
record period recommending a $37.6 million disallowance for excessive
costs incurred from April 1994 through March 1995. Both proposed
disallowances have been consolidated into one proceeding. SCE and the ORA
have filed several rounds of testimony on this issue. Hearings began in
January 1997 and are expected to conclude in February 1997. A decision
is expected in late 1997.
Palo Verde Rate-making Mechanism
On December 23, 1996, the CPUC issued a final decision on SCE's proposal
for a new rate mechanism for its 15.8% share of the three units at Palo
Verde. The decision adopts the Palo Verde All-Party Settlement filed with
the CPUC on November 15, 1996. The settlement was based on a Memorandum
of Understanding signed by all of the active parties to the Palo Verde
proceeding. Under the settlement, SCE has the opportunity to recover its
remaining investment (approximately $1.2 billion) in Palo Verde beginning
January 1, 1997, and ending December 31, 2001, earning a reduced rate of
return on rate base of 7.35% instead of the current 9.49%. Also, SCE will
utilize a balancing account to pass through Palo Verde's incremental
operating costs (considered reasonable as long as they do not exceed 30%
of a baseline forecast and the site's gross annual capacity factor does
not go below 55%) to ratepayers. Beginning January 1, 1998, this
balancing account will become part of the CTC mechanism. If SCE's actual
costs are less than the forecast, the difference will benefit ratepayers
as a credit to the CTC mechanism. The existing nuclear unit incentive
procedure will continue only for purposes of calculating a reward for
performance of any unit above an 80% capacity factor for a fuel cycle.
After 2001, SCE's ratepayers will receive 50% of the benefits derived from
the operation of Palo Verde.
page 27
Note 3. Financial Instruments
Long-Term Debt
California law prohibits SCE from incurring or guaranteeing debt for its
nonutility affiliates.
Almost all SCE properties are subject to a trust indenture lien.
SCE has pledged first and refunding mortgage bonds as security for
borrowed funds obtained from pollution-control bonds issued by government
agencies. SCE uses these proceeds to finance construction of pollution-
control facilities. Bondholders have limited discretion in redeeming
certain pollution-control bonds, and SCE has arranged with securities
dealers to remarket or purchase them if necessary.
Long-term debt maturities and sinking-fund requirements for the next five
years are: 1997-$573 million; 1998-$560 million; 1999-$459 million; 2000-
$405 million; and 2001-$500 million.
Long-term debt consisted of:
In millions December 31, 1996 1995
- ------------ ---------------- ------ -----
First and refunding mortgage bonds:
1997-2000 (5.45% to 7.5%) $1,025 $1,025
2001-2005 (5.625% to 6.25%) 450 450
2017-2026 (6.9% to 8.875%) 1,250 1,637
Pollution-control bonds:
1999-2027 (5.4% to 7.2% and variable) 1,204 1,205
Funds held by trustees (2) (2)
Debentures and notes:
1997-2026 (5% to 20% and variable) 3,891 2,717
Subordinated debentures:
2044 (8.375%) 100 100
Commercial paper for nuclear fuel 112 70
Capital lease obligation 91 97
Current portion of capital lease obligation (19) (15)
Long-term debt due within one year (573) (25)
Unamortized debt discount-net (54) (64)
------ ------
Total $7,475 $7,195
======= ======
Short-Term Debt
Short-term debt consisted of:
In millions December 31, 1996 1995
- ------------ ---------------- ------ ------
Commercial paper $ 470 $ 508
Other short-term debt 167 350
Amount reclassified as long-term (237) (145)
Unamortized discount (3) (3)
------ ------
Total $ 397 $ 710
====== ======
Weighted-average interest rate 5.6% 5.9%
At December 31, 1996, Edison International and its subsidiaries had $1.8
billion of borrowing capacity available under lines of credit totaling
$2.1 billion. SCE had available lines of credit of $1.1 billion, with
$600 million for short-term debt and $500 million for the long-term
page 28
refinancing of its variable-rate pollution-control bonds. The nonutility
subsidiaries had lines of credit of $700 million, with $575 million
ofborrowing capacity available to finance general cash requirements. The
holding company has lines of credit totaling $350 million. At December
31, 1996, $165 million was used in support of EME's 1995 acquisition of
First Hydro and Edison International's ongoing share repurchase program.
Edison International's unsecured revolving lines of credit are at
negotiated or bank index rates with various expiration dates; the majority
have five-year terms.
Other Financial Instruments
Edison International's risk management policy allows the use of derivative
financial instruments to manage financial exposure on its investments,
fluctuations in interest rates, foreign exchange rates and energy prices,
but prohibits the use of these instruments for speculative or trading
purposes.
Projects in the United Kingdom (U.K.) sell their energy and capacity
through a centralized electricity pool which establishes a half-hourly
clearing price. The half-hourly price is extremely volatile, and can vary
by a factor of ten or more over the course of a few hours due to large
differentials in demand according to the time of day. First Hydro
attempts to mitigate the market risk of the pool by entering into
electricity rate swap agreements, related to either the selling or
purchase price of power, whereby payments are made when pool selling
prices rise above the price specified in the contract. These contracts
attempt to stabilize production revenue or purchasing costs by removing
one element of net exposure to pool price volatility. The Roosecote
project has avoided the pool price volatility by entering into a long-term
power-sales contract which provides for contract pricing.
Interest rate swaps and caps are used to reduce the potential impact of
interest rate fluctuations on floating rate long-term debt. SCE's
interest rate swap agreement requires the parties to pledge collateral
according to bond rating and market interest rate changes. At December
31, 1996, SCE had pledged $16 million as collateral due to a decline in
market interest rates. SCE is exposed to credit loss in the event of
nonperformance by counterparties to these agreements, but does not expect
the counterparties to fail to meet their obligations.
Edison International is subject to concentrations of credit risk as the
result of elements involved in EME's financial instruments and power-sales
contracts. Credit risk relates to the risk of loss that EME would incur
as a result of nonperformance by counterparties (major financial
institutions and domestic and foreign utilities) pursuant to the terms of
their contractual obligations. EME attempts to mitigate this risk by
contracting with counterparties that have a strong capacity to meet their
contractual obligations and by monitoring their credit quality. In
addition, EME attempts to secure long-term power-sales contracts for its
projects that are expected to result in adequate cash flow under a wide
range of economic and operating circumstances. To accomplish this, EME
attempts to structure its long-term contracts so that fluctuations in fuel
costs will produce similar fluctuations in electric energy and/or steam
revenue by entering into long-term fuel supply and transportation
agreements. Accordingly, EME does not anticipate a material impact to its
results of operations or financial condition as a result of counterparty
nonperformance.
page 29
Edison International had the following derivative financial instruments
at December 31, 1996, and 1995, except where noted:
Contract Amount/Terms Purpose
- --------------------- ---------------------------------------
Interest rate swaps:
$196 million expires 2008 fix interest rate exposure at 5.585%
$100 million expires 1999 convert fixed-rate debt of 7.75% and
$100 million expires 2002 8.125% to a floating rate capped at 9.0%
$45 million expires 1999 convert fixed-rate debt of 9.875%
preferred securities due 2024 to a floating rate
$75 million expired August 1996 fix interest rate exposure at 7.98%
$50 million expires 1999 fix interest rate exposure at 8.095%
10.9 billion Spanish pesetas (12/31/96) convert floating-rate debt to fixed rates
(U.S. $84 million) ranging from 8.4% to 11.38%
expires 1998-2003
45 million pounds (12/31/96) convert floating-rate debt to a fixed
(U.S. $77 million) rate of 12.4%
51 million pounds (12/31/95)
(U.S. $79 million) debt due 2005
expires 1997
A$42 million (12/31/96) convert floating-rate debt to a fixed
(U.S. $33 million) rate of 10.98%
A$34 million (12/31/95)
(U.S. $25 million) expires 2007
Interest rate caps:
$30 million expires 1997 fix interest rate exposure at 6%
debt due 2027 over the variable term of the debt
A$58 million (12/31/95) fix interest rate exposure at 11.25%
(U.S. $43 million)
expired November 1996
U.K. electricity rate swaps:
1,735 MW (12/31/96) fix market electricity sales rates
1,500 MW (12/31/95)
various expirations through 2000
416 MW (12/31/96) fix market electricity purchase rates
expires March 1997
page 30
Fair values of financial instruments were:
December 31,
---------------------------------------------------
1996 1995
--------------------- ----------------------
Cost Fair Cost Fair
Instrument (in millions) Basis Value Basis Value
- ------------------------ -------- ----- -------- -----
Financial assets:
Decommissioning trusts $1,217 $1,485 $1,069 $1,260
Electricity rate swaps - 27 - 22
Equity investments 11 68 9 41
Financial liabilities:
DOE decommissioning and
decontamination fees 54 45 58 49
Interest rate swaps and caps - 34 - 28
Long-term debt 7,475 7,712 7,195 7,531
Preferred securities subject to
mandatory redemption 425 445 425 448
Financial assets are carried at their fair value, which is based on quoted
market prices. Financial liabilities are recorded at cost. Financial
liabilities' fair values are based on: termination costs for interest rate
swaps; brokers' quotes for long-term debt, preferred stock and caps;
discounted future cash flows for U.S. Department of Energy (DOE)
decommissioning and decontamination fees; and discounted future cash flows
for the difference between contract prices and forecasted market prices
for electricity rate swaps. Amounts reported for cash equivalents and
short-term debt approximate fair value, due to their short maturities.
Gross unrealized holding gains on financial assets were:
In millions December 31, 1996 1995
- ----------- -------------- ---- ----
Decommissioning trusts:
Municipal bonds $ 79 $ 52
Stocks 138 122
U.S. government issues 39 11
Short-term and other 12 6
---- ----
268 191
Equity investments 57 32
---- ----
Total $325 $223
==== ====
There were no unrealized holding losses on financial assets for the years
presented.
Note 4. Equity
The CPUC regulates SCE's capital structure, limiting the dividends it may
pay Edison International. At December 31, 1996, SCE had the capacity to
pay $112 million in additional dividends to Edison International and
continue to maintain its authorized capital structure. These restrictions
are not expected to affect Edison International's ability to meet its cash
obligations.
page 31
Edison International's authorized common stock is 800 million shares with
no par value.
During 1996, Edison International purchased on the open market and retired
19,216,627 shares ($344 million) of common stock.
Under Edison International's long-term incentive compensation plan, it
issued 133,131 shares ($2.4 million) in 1996 and 20,900 shares ($0.4
million) in 1995. No shares were issued in 1994.
SCE's authorized shares of preferred and preference stock are: $25
cumulative preferred-24 million; $100 cumulative preferred-12 million; and
preference-50 million. All cumulative preferred stocks are redeemable.
Mandatorily redeemable preferred stocks are subject to sinking-fund
provisions. When preferred shares are redeemed, the premiums paid are
charged to common equity. There are no preferred stock redemption
requirements for the next five years.
EME is a general partner and also owns, indirectly, the limited partner's
share of Mission Capital L.P., which was formed solely for the purpose of
holding parent company debentures. Mission Capital L.P. has 6 million
authorized shares of cumulative preferred securities with a liquidation
preference that obligates EME.
There are no preferred stock redemption requirements for the next five
years.
Edison International subsidiaries' cumulative preferred securities
consisted of:
Dollars in millions, December 31, 1996
except per-share ---------------------------- December 31,
amounts Shares Redemption ------------------
- -------------------- Outstanding Price 1996 1995
------------ ----------- ---- ----
Not subject to mandatory redemption:
$25 par value preferred stock:
4.08% Series 1,000,000 $ 25.50 $ 25 $ 25
4.24 1,200,000 25.80 30 30
4.32 1,653,429 28.75 41 41
4.78 1,296,769 25.80 33 33
5.80 2,200,000 25.25 55 55
7.36 4,000,000 25.00 100 100
---- ----
Total $284 $284
==== ====
Subject to mandatory redemption:
$25 par value preferred securities:
8.50% Series 2,500,000 $ 25.00 $ 63 $ 63
9.875 3,500,000 25.00 87 87
$100 par value preferred stock:
6.05% Series 750,000 100.00 75 75
6.45 1,000,000 100.00 100 100
7.23 1,000,000 100.00 100 100
---- ----
Total $425 $425
==== ====
In 1995, 750,000 shares of Series 7.58% preferred stock were redeemed and
2.5 million shares of Series 8.50% preferred securities were issued. In
1994, 3.5 million shares of Series 9.875% preferred securities were
issued.
page 32
Note 5. Income Taxes
Edison International's subsidiaries will be included in its consolidated
federal income tax and combined state franchise tax returns. Under income
tax allocation agreements, each subsidiary calculates its own tax
liability.
Income tax expense includes the current tax liability from operations and
the change in deferred income taxes during the year. Investment tax
credits are amortized over the lives of the related properties.
The components of the net accumulated deferred income tax liability were:
In millions December 31, 1996 1995
- ----------- ------------ ------ ------
Deferred tax assets:
Property-related $ 247 $ 276
Investment tax credits 206 222
Regulatory balancing accounts 205 166
Decommissioning-related 208 73
Other 660 602
------ ------
Total $1,526 $1,339
Deferred tax liabilities:
Property-related $4,345 $4,346
Leveraged leases 534 508
Other 690 360
------ ------
Total $5,569 $5,214
------ ------
Accumulated deferred income taxes-net $4,043 $3,875
====== ======
Classification of accumulated deferred income taxes:
Included in deferred credits $4,283 $4,352
Included in current assets 240 477
page 33
The current and deferred components of income tax expense were:
In millions Year ended December 31, 1996 1995 1994
- ----------- ----------------------- ---- ---- ----
Current:
Federal $364 $514 $319
State 108 150 110
---- ---- ----
472 664 429
---- ---- ----
Deferred-federal and state:
Accrued charges (14) 1 (25)
Asset basis adjustment (25) 12 --
Deferred alternative minimum tax credit -- -- 45
Depreciation 71 72 93
Investment and energy tax credits-net (37) (26) (23)
Leveraged leases 26 38 72
Loss carryforwards (41) (37) (37)
Nonutility special charges 9 (21) (14)
Pension reserves 45 (3) (8)
Rate phase-in plan (31) (46) (51)
Regulatory balancing accounts 34 (118) (7)
State tax privilege year 18 (9) (12)
Other (21) (35) (17)
---- ----- ----
34 (172) 16
---- ----- ----
Total income tax expense $506 $492 $445
==== ==== ====
Classification of income taxes:
Included in operating income $563 $528 $481
Included in other income (57) (36) (36)
The composite federal and state statutory income tax rate was 41.045% for
all years presented.
The federal statutory income tax rate is reconciled to the effective tax
rate below:
Year ended December 31, 1996 1995 1994
- ----------------------- ---- ---- ----
Federal statutory rate 35.0% 35.0% 35.0%
Capitalized software (0.8) (0.8) (2.0)
Depreciation and other 7.3 5.1 5.6
Housing credits (3.6) (2.7) (2.2)
Investment and energy tax credits (2.7) (2.3) (2.2)
State tax-net of federal deduction 6.2 5.6 5.3
---- ---- ----
Effective tax rate 41.4% 39.9% 39.5%
==== ==== ====
Note 6. Employee Benefit Plans
Stock Option Plans
Under Edison International's Long-term Incentive Compensation Plan, 8.2
million shares of common stock were reserved for potential issuance under
various stock compensation programs to directors, officers and senior
managers of Edison International and its affiliates. Under these
programs, there are currently outstanding to officers and senior managers,
options on 3.6 million shares of Edison International common stock. There
page 34
were 4.5 million, 5.4 million, 6.3 million and 6.5 million shares reserved
for future grant at December 31, 1996, 1995, 1994 and 1993, respectively.
Each option may be exercised to purchase one share of Edison International
common stock, and is exercisable at a price equivalent to the fair market
value of the underlying stock at the date of grant. Edison International
stock options include a dividend equivalent feature. Generally, for
options issued before 1994, amounts equal to dividends accrue on the
options at the same time and at the same rate as would be payable on the
number of shares of Edison International common stock covered by the
options. The amounts accumulate without interest. The optionee has no
right to payment of these dividend equivalents until the underlying stock
options are exercised. For Edison International stock options issued
subsequent to 1993, dividend equivalents are subject to reduction unless
certain shareholder return performance criteria are met.
Edison International stock options have a 10-year term with one-third of
the total award vesting after each of the first three years of the award
term. The options are not transferable, except by will or domestic
relations order. If an optionee retires, dies or is permanently and
totally disabled during the three-year vesting period, the unvested
options will vest and be exercisable to the extent of 1/36 of the grant
for each full month of service during the vesting period. Unvested
options of any person who has served in the past on the Edison
International or SCE Management Committee will vest and be exercisable
upon the member's retirement, death or permanent and total disability.
Upon retirement, death or permanent and total disability, the vested
options may continue to be exercised within their original terms by the
recipient or beneficiary. If an optionee is terminated other than by
retirement, death or permanent and total disability, options which had
vested as of the prior anniversary date of the grant are forfeited unless
exercised within 180 days of the date of termination. All unvested
options are forfeited on the date of termination.
Compensation expense recorded under the stock-compensation program was $9
million, $4 million and $(3) million for 1996, 1995 and 1994,
respectively. A decline during 1994 in the market value of the underlying
shares optioned resulted in the recapture of previously recognized
expense.
Stock-based compensation expense under the fair-value method of accounting
would have resulted in pro forma net income and earnings-per-share
approximating the following amounts:
In millions, except per-share amounts 1996 1995
- ------------------------------------- ---- ----
Pro forma net income $ 714 $ 737
Pro forma earnings-per-share $1.63 $1.65
The fair value for each option granted during 1996 and 1995, reflecting
the basis for the above pro forma disclosures, was determined on the date
of grant using the Black-Scholes option-pricing model. The following
assumptions were used in determining fair value through the model:
1996 1995
---- ----
Expected life 7.0 years 8.0 years
Risk-free interest rate 5.51% 7.93%
Expected volatility 17% 17%
The recognition of dividend equivalents results in no dividends assumed
for purposes of fair-value determination. The application of fair-value
page 35
accounting in arriving at the pro forma disclosures above is not an
indication of future income statement effects. The pro forma disclosures
do not reflect the effect of fair-value accounting on stock-based
compensation awards granted prior to 1995.
A summary of the status of Edison International's stock options is as
follows:
Weighted-Average
------------------------------------------------
Share Exercise Exercise Fair Value Remaining
Options Price Price at Grant Life
- ----------------------------------------------------------------------------------------------------------
Outstanding,
Dec. 31, 1993 1,390,634 $16.00- $24.44 $20.47 7.4 years
Granted 408,800 20.19- 21.94 20.20 $8.07
Expired (7,712) 21.94- 23.28 22.25
Forfeited (25,631) 20.19- 23.28 21.41
Exercised -- -- --
---------
Outstanding,
Dec. 31, 1994 1,766,091 $16.00- $24.44 $20.41 6.9 years
Granted 910,100 14.56- 17.44 14.77 $6.92
Expired (9,930) 20.19- 23.28 21.91
Forfeited (9,120) 14.56- 21.94 19.74
Exercised (20,900) 17.38- 17.75 17.64
---------
Outstanding,
Dec. 31, 1995 2,636,241 $14.56- $24.44 $18.69 7.0 years
Granted 1,091,850 15.81- 18.31 17.57 $6.27
Expired (18,394) 14.56- 23.28 20.08
Forfeited (21,810) 14.56- 20.19 16.24
Exercised (133,131) 14.56- 23.28 18.19
---------
Outstanding,
Dec. 31, 1996 3,554,756 $14.56- $24.44 $18.68 7.0 years
The number of options exercisable and their weighted-average exercise
prices at December 31, 1996, 1995 and 1994 were 1,760,766 at $20.54;
1,240,425 at $21.08 and 1,044,224 at $20.02, respectively.
Phantom Stock Options
"Phantom stock" option performance awards have been developed for two
affiliate companies, EME and Edison Capital, as part of the Edison
International long-term incentive compensation program for senior
management. Each phantom stock option may be exercised to realize any
appreciation in the deemed value of one hypothetical share of EME or
Edison Capital stock over exercise prices. Exercise prices for EME and
Edison Capital phantom stock are escalated on an annually-compounded basis
over the grant price by 12% and 10%, respectively. The deemed values of
the phantom stock are recalculated annually as determined by a formula
linked to the value of its portfolio of investments, less general and
administrative costs. The options have a 10-year term with one-third of
the total award vesting in each of the first three years of the award
term.
Compensation expense recorded with respect to phantom stock options was
$17 million in 1996 and $1 million in 1995. There was no related
compensation expense in 1994, the year the phantom stock option program
commenced.
page 36
Pension Plan
Edison International has a noncontributory, defined-benefit pension plan
that covers employees meeting minimum service requirements. Benefits are
based on years of accredited service and average base pay. Edison
International funds the plan on a level-premium actuarial method. These
funds are accumulated in an independent trust. Annual contributions meet
minimum legal funding requirements and do not exceed the maximum amounts
deductible for income taxes. Prior service costs from pension plan
amendments are funded over 30 years. Plan assets are primarily common
stocks, corporate and government bonds, and short-term investments. In
1996, SCE recorded pension gains from a special voluntary early retirement
program.
The plan's funded status was:
In millions December 31, 1996 1995
- ------------ ------------ ----- ----
Actuarial present value of benefit obligation:
Vested benefits $1,679 $1,703
Nonvested benefits 73 214
------ ------
Accumulated benefit obligation 1,752 1,917
Value of projected future compensation levels 267 487
------ ------
Projected benefit obligation 2,019 2,404
------ ------
Fair value of plan assets 2,171 2,636
------ ------
Projected benefit obligation less than plan assets (152) (232)
Unrecognized net gain 294 327
Unrecognized prior service cost (199) (6)
Unrecognized net obligation
(17-year amortization) (45) (51)
------ ------
Pension liability (asset) $(102) $ 38
====== ======
Discount rate 7.75% 7.25%
Rate of increase in future compensation 5.0% 5.0%
Expected long-term rate of return on assets 8.0% 8.0%
Edison International's utility operations recognize pension expense
calculated under the actuarial method used for ratemaking.
The components of pension expense were:
In millions Year ended December 31, 1996 1995 1994
- ----------- ----------------------- ---- ---- ----
Service cost for benefits earned $51 $59 $69
Interest cost on projected benefit obligation 180 157 149
Actual return on plan assets (345) (457) (28)
Net amortization and deferral 146 270 (141)
----- ----- -----
Pension expense under accounting standards 32 29 49
Special termination benefits 1 3 15
Regulatory adjustment-deferred 22 23 2
----- ----- -----
Net pension expense recognized 55 55 66
Settlement gain (121) -- --
----- ----- -----
Total expense (gain) $ (66) $ 55 $ 66
===== ===== =====
page 37
Postretirement Benefits Other Than Pensions
Employees retiring at or after age 55 with at least 10 years of service
(or those eligible under the 1996 special voluntary early retirement
program), are eligible for postretirement health and dental care, life
insurance and other benefits. Health and dental care benefits are subject
to deductibles, copayment provisions and other limitations.
Edison International is amortizing its obligation related to prior service
over 20 years. SCE funds its share of these benefits (by contributions
to independent trusts) up to tax-deductible limits, in accordance with
rate-making practices. In 1996, SCE recorded special termination expenses
due to a special voluntary early retirement program. Any difference
between recognized expense and amounts authorized for rate recovery is not
expected to be material (except for the impact of the early retirement
program) and will be charged to earnings.
Trust assets are primarily common stocks, corporate and government bonds,
and short-term investments.
The funded status of these benefits is reconciled to the recorded
liability below:
In millions December 31, 1996 1995
- ----------- ------------ ---- ----
Actuarial present value of benefit obligation:
Retirees $ 933 $ 403
Employees eligible to retire 35 103
Other employees 394 564
------ ------
Accumulated benefit obligation $1,362 $1,070
====== ======
Fair value of plan assets $ 617 $ 400
====== ======
Plan assets less than accumulated benefit
obligation $ 745 $ 670
Unrecognized transition obligation (432) (460)
Unrecognized net gain (loss) (236) (203)
------ ------
Recorded liability $ 77 $ 7
------ ------
Discount rate 7.75% 7.5%
Expected long-term rate of return on assets 8.5 % 8.5%
The components of postretirement benefits other than pensions expense
were:
In millions Year ended December 31, 1996 1995 1994
- ----------- ----------------------- ----- ----- -----
Service cost for benefits earned $33 $ 36 $30
Interest cost on benefit obligation 91 78 73
Actual return on plan assets (43) (28) (20)
Amortization of loss 6 1 --
Amortization of transition obligation 27 27 36
--- --- ---
Net expense 114 114 119
Amortization of prior funding -- -- 2
Special termination expense 72 -- --
---- ---- ----
Total expense $186 $114 $121
==== ==== ====
page 39
The assumed rate of future increases in the per-capita cost of health care
benefits is 8.25% for 1997, gradually decreasing to 5% for 2004 and
beyond. Increasing the health care cost trend rate by one percentage
point would increase the accumulated obligation as of December 31, 1996,
by $206 million and annual aggregate service and interest costs by $24
million.
Employee Savings Plan
Edison International has a 401(k) defined contribution savings plan
designed to supplement employees' retirement income. The plan received
employer contributions of $25 million in 1996, $20 million in 1995 and $21
million in 1994.
Note 7. Jointly-Owned Utility Projects
SCE owns interests in several generating stations and transmission systems
for which each participant provides its own financing. SCE's share of
expenses for each project is included in the consolidated statements of
income.
The investment in each project, as included in the consolidated balance
sheet as of December 31, 1996, was:
Plant in Accumulated Under Ownership
In millions Service Depreciation Construction Interest
- ----------- --------- ------------ ------------ ---------
Transmission systems:
Eldorado $29 $ 8 $ 2 60%
Pacific Intertie 227 72 12 50
Generating stations:
Four Corners (coal)
Units 4 and 5 458 236 2 48
Mohave (coal) 300 142 8 56
Palo Verde (nuclear) 1,596 425 6 16
San Onofre (nuclear) 4,186 1,836 28 75
----- ----- ----
Total $6,796 $2,719 $58
====== ====== ====
Note 8. Leases
Leveraged Leases
Edison Capital is the lessor in several leveraged-lease agreements with
terms of 13 to 30 years. All operating, maintenance, insurance and
decommissioning costs are the responsibility of the lessees. The total
cost of these facilities was $1.8 billion and $1.9 billion at December 31,
1996, and 1995, respectively.
The equity investment in these facilities is 20% of the purchase price.
The remainder is nonrecourse debt secured by first liens on the leased
property. The lenders have accepted their security interests as their
only remedy if the lessee defaults.
page 40
The net investment in leveraged leases consisted of:
In millions December 31, 1996 1995
- ----------- ------------ ---- ----
Rentals receivable (net of principal and
interest on nonrecourse debt) $ 830 $ 833
Unearned income (303) (317)
----- -----
Investment in leveraged leases 527 516
Estimated residual value 58 58
Deferred income taxes (534) (508)
------ ------
Net investment in leveraged leases $ 51 $ 66
====== ======
Lease Commitments
Edison International has operating leases, primarily for vehicles (with
varying terms, provisions and expiration dates) and a capital lease ($91
million) for a nonutility power-production facility.
Estimated remaining commitments for noncancelable leases at December 31,
1996, were:
Operating Capital
In millions Leases Lease
- ----------- --------- -------
Year ended December 31,
1997 $ 25 $ 29
1998 21 28
1999 16 28
2000 14 28
2001 9 --
Thereafter 33 1
---- ----
Total future commitments $118 114
====
Amount representing interest (9.65%) (23)
----
Net commitments $ 91
====
Note 9. Commitments
Nuclear Decommissioning
SCE plans to decommission its nuclear generating facilities at the end of
each facility's operating license by a prompt removal method authorized
by the Nuclear Regulatory Commission. Decommissioning is estimated to
cost $2 billion in current-year dollars, based on site-specific studies
performed in 1993 for San Onofre and 1992 for Palo Verde. Changes in the
estimated costs, timing of decommissioning, or the assumptions underlying
these estimates could cause material revisions to the estimated total cost
to decommission in the near term. Decommissioning is scheduled to begin
in 2013 at San Onofre and 2024 at Palo Verde. San Onofre Unit 1, which
shut down in 1992, is expected to be secured until decommissioning begins
at the other San Onofre units.
Decommissioning costs, which are recovered through customer rates, are
recorded as a component of depreciation expense. Decommissioning expense
was $148 million in 1996, $151 million in 1995 and $122 million in 1994.
page 41
The accumulated provision for decommissioning was $949 million at December
31, 1996, and $823 million at December 31, 1995. The estimated costs to
decommission San Onofre Unit 1 ($263 million) are recorded as a liability.
Decommissioning funds collected in rates are placed in independent trusts,
which, together with accumulated earnings, will be utilized solely for
decommissioning.
Trust investments include:
December 31,
Maturity ---------------
In millions Dates 1996 1995
- ----------- --------- ---- ----
Municipal bonds 1999-2021 $ 400 $ 348
Stocks -- 549 390
U.S. government issues 1998-2024 212 145
Short-term and other 1996-2024 56 186
------ ------
Trust fund balance (at cost) $1,217 $1,069
====== ======
Trust fund earnings (based on specific identification) increase the trust
fund balance and the accumulated provision for decommissioning. Net
earnings were $49 million in 1996, $51 million in 1995 and $26 million in
1994. Proceeds from the sale of securities (which are reinvested) were
$1.0 billion in 1996 and in 1995, and $1.1 billion in 1994. Approximately
89% of the trust fund contributions were tax-deductible.
The Financial Accounting Standards Board has issued an exposure draft
related to accounting practices for removal costs, including
decommissioning of nuclear power plants. The exposure draft would require
SCE to report its estimated decommissioning costs as a liability, rather
than recognizing these costs over the term of each facility's operating
license (current industry practice). SCE does not believe that the
changes proposed in the exposure draft would have an adverse effect on its
results of operations even after deregulation due to its current and
expected future ability to recover these costs through customer rates.
Other Commitments
SCE and EME have fuel supply contracts which require payment only if the
fuel is made available for purchase.
SCE has power-purchase contracts with certain qualifying facilities
(cogenerators and small power producers) and other utilities. The
qualifying facility contracts provide for capacity payments if a facility
meets certain performance obligations and energy payments based on actual
power supplied to SCE. There are no requirements to make debt-service
payments.
SCE has unconditional purchase obligations for part of a power plant's
generating output, as well as firm transmission service from another
utility. Minimum payments are based, in part, on the debt-service
requirements of the provider, whether or not the plant or transmission
line is operable. The purchased-power contract is not expected to provide
more than 5% of current operating capacity. SCE's minimum commitment
under both contracts is approximately $205 million through 2017.
page 42
Certain commitments for the years 1997 through 2001 are estimated below:
In millions 1997 1998 1999 2000 2001
- ----------- ---- ---- ---- ---- ----
Projected construction $855 $636 $664 $647 $650
expenditures
Fuel supply contracts 358 325 319 340 336
Purchased-power
capacity payments 696 699 701 702 695
Unconditional purchase
obligations 9 10 10 10 10
EME has firm commitments to make equity and other contributions to its
projects of $408 million, primarily for the Paiton project in Indonesia
and the ISAB project in Italy. EME also has contingent obligations to
make additional contributions of $461 million, primarily for a guarantee
as a condition of obtaining a $254 million tax-exempt financing for the
Brooklyn Navy Yard project (discussed further in Note 10), and equity
support guarantees related to Paiton.
Note 10. Contingencies
In addition to the matters disclosed in these notes, Edison International
is involved in legal, tax and regulatory proceedings before various courts
and governmental agencies regarding matters arising in the ordinary course
of business. Edison International believes the outcome of these
proceedings will not materially affect its results of operations or
liquidity.
Brooklyn Navy Yard Project
EME owns, through a wholly owned subsidiary, 50% of the Brooklyn Navy Yard
project, but funded all of the required equity during construction. The
estimated total cost is $485 million, of which $442 million had been spent
through December 31, 1996. In December 1995, a tax-exempt bond financing
for the project in the amount of $254 million was obtained through the New
York City Industrial Development Agency (NYCIDA). EME has guaranteed the
obligations of the project pursuant to the financing, as well as an
indemnity agreement on behalf of NYCIDA in the amount of $40 million. In
the fourth quarter of 1996, EME executed a new energy sales agreement with
Consolidated Edison Company of New York, which has contracted to buy most
of the project's power and steam, and began selling power and steam under
that agreement. The contractor has recently asserted general monetary
claims under the turnkey agreement against Brooklyn Navy Yard and has
served a complaint for damages in the amount of $136.8 million against
Brooklyn Navy Yard. Brooklyn Navy Yard intends to vigorously defend this
action and to assert general monetary claims against the contractor. EME
believes that the outcome of this litigation will not have a material
adverse effect on its consolidated results of operations or financial
position.
Environmental Protection
Edison International is subject to numerous environmental laws and
regulations, which require it to incur substantial costs to operate
existing facilities, construct and operate new facilities, and mitigate
or remove the effect of past operations on the environment.
Edison International records its environmental liabilities when site
assessments and/or remedial actions are probable and a range of reasonably
likely cleanup costs can be estimated. Edison International reviews its
page 43
sites and measures the liability quarterly, by assessing a range of
reasonably likely costs for each identified site using currently available
information, including existing technology, presently enacted laws and
regulations, experience gained at similar sites, and the probable level
of involvement and financial condition of other potentially responsible
parties. These estimates include costs for site investigations,
remediation, operations and maintenance, monitoring and site closure.
Unless there is a probable amount, Edison International records the lower
end of this reasonably likely range of costs (classified as other long-
term liabilities at undiscounted amounts). While Edison International has
numerous insurance policies that it believes may provide coverage for some
of these liabilities, it does not recognize recoveries in its financial
statements until they are realized.
Edison International's recorded estimated minimum liability to remediate
its 56 identified sites (55 at SCE and 1 at EME) was $114 million at
December 31, 1996. The ultimate costs to clean up Edison International's
identified sites may vary from its recorded liability due to numerous
uncertainties inherent in the estimation process, such as: the extent and
nature of contamination; the scarcity of reliable data for identified
sites; the varying costs of alternative cleanup methods; developments
resulting from investigatory studies; the possibility of identifying
additional sites; and the time periods over which site remediation is
expected to occur. Edison International believes that, due to these
uncertainties, it is reasonably possible that cleanup costs could exceed
its recorded liability by up to $211 million. The upper limit of this
range of costs was estimated using assumptions least favorable to Edison
International among a range of reasonably possible outcomes.
The CPUC allows SCE to recover environmental-cleanup costs at 35 of its
sites, representing $101 million of Edison International's recorded
liability, through an incentive mechanism. SCE may request to include
additional sites. Under this mechanism, SCE will recover 90% of cleanup
costs through customer rates; shareholders fund the remaining 10%, with
the opportunity to recover these costs through insurance carriers and
other third parties. SCE has successfully settled insurance claims with
a number of its carriers. Costs incurred at SCE's remaining 20 sites are
expected to be recovered through customer rates. SCE has recorded a
regulatory asset of $104 million for its estimated minimum environmental-
cleanup costs expected to be recovered through customer rates.
Edison International's identified sites include several sites for which
there is a lack of currently available information, including the nature
and magnitude of contamination and the extent, if any, that Edison
International may be held responsible for contributing to any costs
incurred for remediating these sites. Thus, no reasonable estimate of
cleanup costs can now be made for these sites.
Edison International expects to clean up its identified sites over a
period of up to 30 years. Remediation costs in each of the next several
years are expected to range from $4 million to $8 million. Recorded costs
for 1996 were $7 million.
In 1994, SCE utilized an estimating technique to quantify its potential
liability for environmental cleanup in an effort to obtain a reasonably
possible objective and reliable estimate of environmental cleanup. During
1995, EME completed a similar review of some of its sites where known
contamination and potential liability exist and does not believe a
material liability exists as of December 31, 1996.
page 44
Based on currently available information, Edison International believes
it unlikely that it will incur amounts in excess of the upper limit of the
estimated range and, based upon the CPUC's regulatory treatment of
environmental-cleanup costs, Edison International believes that costs
ultimately recorded will not have a material adverse effect on its results
of operations or financial position. There can be no assurance, however,
that future developments, including additional information about existing
sites or the identification of new sites, will not require material
revisions to such estimates.
Nuclear Insurance
Federal law limits public liability claims from a nuclear incident to $8.9
billion. SCE and other owners of San Onofre and Palo Verde have purchased
the maximum private primary insurance available ($200 million). The
balance is covered by the industry's retrospective rating plan that uses
deferred premium charges to every reactor licensee if a nuclear incident
at any licensed reactor in the U.S. results in claims and/or costs which
exceed the primary insurance at that plant site. Federal regulations
require this secondary level of financial protection. The Nuclear
Regulatory Commission exempted San Onofre Unit 1 from this secondary
level, effective June 1994. The maximum deferred premium for each nuclear
incident is $79 million per reactor, but not more than $10 million per
reactor may be charged in any one year for each incident. Based on its
ownership interests, SCE could be required to pay a maximum of $158
million per nuclear incident. However, it would have to pay no more than
$20 million per incident in any one year. Such amounts include a 5%
surcharge if additional funds are needed to satisfy public liability
claims and are subject to adjustment for inflation. If the public
liability limit above is insufficient, federal regulations may impose
further revenue-raising measures to pay claims, including a possible
additional assessment on all licensed reactor operators.
Property damage insurance covers losses up to $500 million, including
decontamination costs, at San Onofre and Palo Verde. Decontamination
liability and property damage coverage exceeding the primary $500 million
has also been purchased in amounts greater than federal requirements.
Additional insurance covers part of replacement power expenses during an
accident-related nuclear unit outage. These policies are issued primarily
by mutual insurance companies owned by utilities with nuclear facilities.
If losses at any nuclear facility covered by the arrangement were to
exceed the accumulated funds for these insurance programs, SCE could be
assessed retrospective premium adjustments of up to $34 million per year.
Insurance premiums are charged to operating expense.
Note 11. Investments in Partnerships and
Unconsolidated Subsidiaries
Edison International's nonutility subsidiaries have equity interests in
energy generation projects and real estate investment partnerships.
Summarized financial information of these investments was:
In millions Year ended December 31, 1996 1995 1994
- ----------- ----------------------- ---- ---- ----
Revenue $ 40 $1,400 $1,256
Expenses 60 1,121 969
----- ------ ------
Net income/(loss) $ (22) $ 279 $ 287
====== ====== ======
page 45
In millions December 31, 1996 1995
- ----------- ------------ ---- ----
Current assets $ 26 $ 643
Other assets 680 4,818
----- ------
Total assets $ 706 $5,461
----- ------
Current liabilities $ 89 $ 490
Other liabilities 405 3,164
Equity 212 1,807
----- ------
Total liabilities and equity $ 706 $5,461
===== ======
Note 12. Business Segments
Edison International's business segments include electric utility
operations (SCE) and six nonutility segments: unregulated power
generation (EME); financial investments (Edison Capital); real estate
holdings (Mission Land Company); integrated energy solutions (Edison
Source); electric vehicle charging operations (Edison EV); and consumer
products and services (Edison Select). Other than EME, the nonutility
segments are not individually significant and are combined for reporting
purposes.
Edison International's business segment information was:
Unregulated
Power Generation Edison
Electric ------------------- Inter-
In millions Utility Domestic Foreign Other national
- ----------- --------- -------- ------- -------- --------
1996
Operating revenue $7,583 $ 170 $ 674 $ 118 $ 8,545
Operating income 1,711 75 292 (37)(a) 2,041(b)
Depreciation and
decommissioning 1,064 15 75 19 1,173
Assets 17,737 949 4,204 1,669 24,559
Additions to
property and plant 616 4 116 8 744
1995
Operating revenue $7,873 $ 177 $ 290 $ 65 $8,405
Operating income 1,709 73 131 (8)(a) 1,905(b)
Depreciation and
decommissioning 954 10 36 14 1,014
Assets 18,155 842 3,532 1,417 23,946
Additions to
property and plant 773 4 1,231(c) 3 2,011
1994
Operating revenue $ 7,799 $ 170 $ 211 $ 165 $ 8,345
Operating income 1,602 96 85 (3)(a) 1,780(b)
Depreciation and
decommissioning 891 9 31 14 945
Assets 18,076 974 1,869 1,471 22,390
Additions to
property and plant 982 11 136 8 1,137
Corporate items and eliminations are not material.
(a) Excludes reported tax benefits of $80 million in 1996, $44 million in
1995 and $34 million in 1994.
page 46
(b) Excludes income taxes of $563 million in 1996, $528 million in 1995
and $481 million in 1994.
(c) Includes $1,042 million from EME's acquisition of First Hydro.
Quarterly Financial Data
Unaudited
1996
In millions, ---------------------------------------------------
except per-share amounts Total Fourth Third Second First
- ------------------------ ------- ------- ------- ------- -------
Operating revenue $ 8,545 $ 2,195 $ 2,568 $ 1,814 $ 1,968
Operating income 1,478 328 468 332 350
Net income 717 117 277 156 167
Per share:
Earnings 1.64 .27 .63 .35 .38
Dividends declared 1.00 .25 .25 .25 .25
Common stock prices:
High $20 3/8 $20 3/8 $18 1/4 $17 5/8 $18 5/8
Low 15 1/8 17 3/4 15 1/8 15 3/8 16 5/8
Close 19 7/8 19 7/8 17 7/8 17 5/8 17 1/8
1995
In millions, ----------------------------------------------------
except per-share amounts Total Fourth Third Second First
- ------------------------ ------- ------ ------- ------- ------
Operating revenue $ 8,405 $ 2,052 $ 2,670 $ 1,861 $1,822
Operating income 1,377 301 448 310 318
Net income 739 138 288 160 153
Per share:
Earnings 1.66 .31 .65 .36 .34
Dividends declared 1.00 .25 .25 .25 .25
Common stock prices:
High $ 18 $ 18 $ 18 $ 18 $16 7/8
Low 14 3/8 14 7/8 16 3/8 15 3/8 14 3/8
Close 17 5/8 17 5/8 17 3/4 17 1/8 15 5/8
EXHIBIT 21
EDISON INTERNATIONAL
[00 through 10 are Dun & Bradstreet heirarchy (tier level) indicators]
HOLDING COMPANY
1. NAME, STATE OF ORGANIZATION, LOCATION AND NATURE OF BUSINESS OF
CLAIMANT AND EVERY SUBSIDIARY THEREOF, OTHER THAN ANY EXEMPT
WHOLESALE GENERATOR (EWG) OR FOREIGN UTILITY COMPANY IN WHICH
CLAIMANT DIRECTLY OR INDIRECTLY HOLDS AN INTEREST.
EDISON INTERNATIONAL (formerly SCEcorp) is a corporation organized under
the laws of the State of California and having its principal place of
business at 2244 Walnut Grove Avenue (P.O. Box 999), Rosemead, California
91770. It was organized principally to acquire and hold securities of
other corporations for investment purposes. Edison International has the
following subsidiaries:
UTILITY SUBSIDIARIES
01 SOUTHERN CALIFORNIA EDISON COMPANY ("SCE") is a California
corporation having its principal place of business at 2244 Walnut
Grove Avenue (P.O. Box 800), Rosemead, California 91770. SCE is a
public utility primarily engaged in the business of supplying
electric energy to portions of central and southern California,
excluding the City of Los Angeles and certain other cities. Its
subsidiaries have the same principal place of business as Southern
California Edison Company:
02 CALIFORNIA ELECTRIC POWER COMPANY is an inactive California
corporation that remains from a 1964 merger with SCE.
02 CONSERVATION FINANCING CORPORATION is an inactive California
corporation that was originally formed to carry out residential
conservation financing programs.
02 ENERGY SERVICES, INC. is a California corporation engaged in the
business of assisting SCE in optimizing the use of its resources
for the benefit of its ratepayers by marketing SCE's
capabilities, facilities, products, information, and copyrighted
materials to third parties. Energy Services, Inc. does not
engage in any activities that would constitute owning or
operating facilities used for the generation, transmission, or
distribution of electric energy for sale.
02 MONO POWER COMPANY is an inactive California corporation that has
been engaged in the business of exploring for and developing fuel
resources.
03 THE BEAR CREEK URANIUM COMPANY is an inactive California
partnership between Mono Power Company (50%) and Union Pacific
Resources (50%) that has been engaged in reclamation of an
integrated uranium mining and milling complex in Wyoming.
02 SCE CAPITAL COMPANY is a Delaware corporation that acts as a
funding vehicle for financing of fuels, balancing accounts and
other corporate purposes of SCE.
02 SOUTHERN STATES REALTY is a California corporation engaged in
providing real estate and consulting services to SCE and third
parties.
page 1
01 EDISON ENTERPRISES is a California corporation having its principal
place of business at 2244 Walnut Grove Avenue, Rosemead, California
91770, which was organized to own the stock and coordinate the
activities of energy-related nonutility companies. The subsidiaries
of Edison Enterprises are as follows:
02 EDISON TRANSENERGY is a California corporation engaged in the
business of providing energy transportation development services.
NONUTILITY SUBSIDIARIES
01 THE MISSION GROUP is a California corporation having its principal
place of business at 18101 Von Karman Avenue, Suite 1700, Irvine,
California 92612-1046, which was organized to own the stock and
coordinate the activities of nonutility companies. The subsidiaries
of The Mission Group are as follows:
02 EDISON EV is a California corporation having its principal place
of business at 515 South Figueroa Street, Suite 950, Los Angeles,
California 90071. It is engaged in the business of providing
services related to electric vehicles, including the distribution
and installation of electric vehicle charging equipment.
02 EDISON SOURCE is a California corporation having its principal
place of business at 13191 Crossroads Parkway North, City of
Industry, California 91746. It is engaged in the business of
integrated energy services and wholesale power marketing.
02 EDISON SELECT (formerly Edison Spectrum) is a California
corporation having its principal place of business 13191
Crossroads Parkway North, City of Industry, California 91746.
It is engaged in the business of providing consumer products and
services.
02 EDISON ENERGY (inactive)
02 EDISON CAPITAL (formerly Mission First Financial) is a California
corporation having its principal place of business at 18101 Von
Karman Avenue, Suite 1700, Irvine, California 92612-1046. It is
engaged in the business of leveraged-leasing transactions and
other project financings, either directly or through
subsidiaries. Edison Capital owns a group of subsidiaries and
has interests in various partnerships through its subsidiaries.
The subsidiaries and partnerships of Edison Capital are listed
below. Unless otherwise indicated, all entities are
corporations, are organized under the laws of the State of
California, and have the same principal place of business as
Edison Capital.
03 BURLINGTON APARTMENTS, INC.
04 Burlington Arboretum L.P. (partnership) 94.6%
03 Edison Capital Europe Limited
03 EDISON FUNDING COMPANY (formerly Mission Funding Company)
04 EDISON CAPITAL LATIN AMERICAN INVESTMENTS HOLDINGS COMPANY (Delaware
corporation)
04 EDISON FUNDING OMICRON
05 Olive Court Apartments L.P. (partnership) 0.1%
05 Ontario Senior Housing L.P. (Ontario Plaza) (partnership) 0.1%
04 EDISON INTEGRATED ENERGY SERVICES (formerly Mission Integrated
Energy Services)
04 EDISON CAPITAL HOUSING INVESTMENTS (formerly Edison Housing
Investments and Mission Housing Investments)
05 Admiralty Heights Associates II 1995 L.P. (Kent Manor)
(commitment) 99%
05 AE Associates L.P. (Avenida Espana) (partnership) 99%
05 Alma Place Associates L.P. (commitment) 99%
05 Altamont Hotel Associates L.P. (partnership) 99%
PAGE 2
05 Argyle Redevelopment Partnership, Ltd. (Colorado partnership) 99%
05 Avalon Courtyard L.P. (Carson Senior Housing) (partnership) 3%
05 Bartlett Hill Associates L.P. (partnership) 70%; 100% w/ MBHCo.
05 Beacon Manor Associates L.P. (commitment) 99%
05 Bodega Hills Investors L.P. (commitment) 99%
05 Bush Hotel L.P. (commitment) 99%
05 Cedarshores L.P. (partnership) 99%
05 Centertown Associates Ltd. (partnership) 99%
05 Centro Partners L.P. (El Centro) (partnership) 99%
05 Cochrane Village Apartments L.P. (commitment) 99%
05 Community House Apartments (commitment) 99%
05 Cottonwood Affordable Housing L.P. (commitment) 99%
05 Coyote Springs Apartments Associates L.P. (partnership) 99%
05 Cypress Cove Associates (partnership) 99%
05 Delta Plaza Apartments (partnership) 99%
05 Double X Associates 1995 L.P. (Terrace Manor) (commitment) 99%
05 EAH Larkspur Creekside Associates L.P. (partnership) 99%
05 EAST COAST CAPITAL, INC.
05 East Cotati Avenue Partners L.P. (partnership) 99%
05 EC ASSET SERVICES, INC.
05 EC PROPERTIES, INC.
06 Corporations for Affordable Housing L.P. (partnership) 1%
07 Arbor Lane Associates Phase II L.P. (Timberwood)
(partnership) 99%
07 Arroyo Vista Associates L.P. (partnership) 99%
07 Artloft Associates L.P. (partnership) 35.6%
07 Caleb Affordable Housing Associates L.P. (Ledges/Pinebrook)
(partnership) 99%
07 The Carlin L.P. (partnership) 99%
07 Diamond Phase III Venture L.P. (partnership) 99%
07 Fairmount Hotel Urban Renewal Associates L.P. (partnership)
99%
07 Mackenzie Park Associates L.P. (partnership) 99%
07 Parkside Associates L.P. (Parkside Garden) (partnership) 99%
07 Pines Housing L.P. (partnership) 99%
07 Pines Housing II, L.P. (partnership) 99%
07 Smyrna Gardens Associates L.P. (partnership) 99%
07 Tioga Gardens L.P. (partnership) 99%
07 Walden Pond, Ltd. L.P. (Hamlet) (partnership) 99%
06 Corporations for Affordable Housing L.P. II (partnership) 1%
07 2601 North Board Street Associates L.P. (Station House)
(partnership) 99%
07 Artloft Associates L.P. (partnership) 53.43%
07 Brookline Housing Associates LLC (Bridgewater) (partnership)
99%
07 EDA L.P. (Eagle's Nest) (partnership) 99%
07 Edgewood Manor Associates II L.P. (partnership) 99%
07 Gateway Housing L.P. (partnership) 99%
07 Homestead Village Associates L.P. (partnership) 99%
07 Junction City Apartments L.P. (Green Park) (partnership) 99%
07 Liberty House Associates L.P. (partnership) 99%
07 Maple Ridge Development Associates L.P. (partnership) 99%
07 Parsonage Cottage Senior Residence L.P. (partnership) 99%
07 Rittenhouse School L.P. (partnership) 99%
07 Silver City Housing L.P. (partnership) 99%
07 South 55th Street, L.P. (partnership) 99%
07 W. M. Housing Associates L.P. (Williamsport Manor)
(partnership) 99%
07 Winnsboro Apartments L.P. (Deer Wood) (partnership) 99%
05 EC PROPERTIES III, INC.
06 Corporations for Affordable Housing L.P. III (partnership)
1%
07 Park Vista (partnership) 99%
PAGE 3
07 Piedmont Housing Associates (partnership) 99%
07 Salem-Lafayette Urban Renewal Associates, L.P.
(partnership) 99%
07 Stevenson Housing Associates (partnerhip) 99%
05 EC-SLP, INC.
05 EDISON CAPITAL HOUSING FLORIDA
06 Affordable/Citrus Glenn Phase II,Ltd. (Citrus Glenn Apts. Phase
II) (commitment) 99%
06 Timber Sound, Ltd. (commitment) 99%
05 EDISON CAPITAL HOUSING NEW JERSEY
06 El Barrio Academy Urban Renewal Associates, L.P. (partnership)
99%
06 Pellettieri Homes Urban Renewal Associates, L.P. (partnership)
99%
05 EDISON CAPITAL HOUSING PENNSYLVANIA
06 McFarland Press Associates (partnership) 99%
06 Villa Maria Housing Partnership (partnership) 99%
05 EDISON HOUSING GEORGIA
06 HMB-Atlanta I L.P. (Spring Branch) (partnership) 99%
05 EDISON HOUSING NORTH CAROLINA
06 MAS-WT, L.P. (Washington Terrace) (partnership) 99%
05 EDISON HOUSING OREGON, INC.
05 EDISON HOUSING SOUTH CAROLINA
06 Vista Properties LLC (Vista View) (partnership) 99%
05 Edmundson Associates L.P. (Willows) (partnership) 99%
05 EHI DEVELOPMENT FUND (formerly MHI Development Fund)
05 EHI DEVELOPMENT COMPANY (formerly MHI Development Company)
05 Elizabeth West & East L.P. (commitment) 99%
05 Farm (The) Associates L.P. (partnership) 99%
05 Fifth & Wilshire (commitment) 99%
05 Flagstaff Affordable Housing II, L.P. (Forest View Apts.)
(partnership) 99%
05 Florence Apartments LLC (partnership) 99%
05 Gilroy Redwood Associates L.P. (Redwoods) (partnership) 99%
05 Ginzton Associates L.P. (partnership) 99%
05 Grandy Lake 1996 L.P. (commitment) 99%
05 Grossman Apartments Investors L.P. (partnership) 99%
05 Hamilton Place Apartments L.P. (Larkin Place) (partnership) 99%
05 Hamilton Place Senior Living L.P. (partnership) 99%
05 Hearthstone Group 3 L.P. (Evergreen Court) (commitment) 99%
05 Heartland-Wisconsin Rapids Timber Trails LLC (partnership) 99%
05 Heather Glen Associates L.P. (partnership) 99%
05 Holy Family Associates L.P. (partnership) 99%
05 Kennedy Lofts Associates L.P. (Massachusetts partnership) 97%
05 Lackawana Housing Associates LLC (Goodwill Neighborhood
Residences) (partnership) 99%
05 Las Brisas Apartments L.P. (commitment) 99%
05 LINC-Bristol Associates I, L.P. (City Gardens) (partnership) 99%
05 Mar Associates L.P. (partnership) 99%
05 Mercy Housing California IV L.P. (Vista Grande) (partnership) 99%
05 Mercy Housing California IX L.P. (Sycamore) (commitment) 99%
05 Merrill Road Associates L.P. (partnership) 99%
05 MH I L.P. (partnership) 1%
06 California Park Apartments L.P. (partnership) 1% of 99%
05 MH II L.P. (partnership) 1%
06 5363 Dent Avenue Associates L.P. (partnership) 1% of 99%
05 MH III L.P. (partnership) 1%
06 DeRose Housing Associates L.P. (partnership) 1% of 99%
05 MH IV L.P. (partnership) 1%
06 MPT Apartments L.P. (MacArthur Park) (partnership) 1% of 99%
05 MH V L.P. (partnership) 1%
06 Centennial Place L.P. (partnership) 1% of 99%
05 MHIFED 94 COMPANY
PAGE 4
05 MHIFED 94 L.P. (Delaware partnership) 1%GP; 99%LP to NYNEX
06 Berry Avenue Associates L.P. (partnership) 1% of 99%
06 Carlton Way Apartments L.P. (partnership) 1% of 99%
06 CDR Senior Housing Associates (Casa del Rio) (partnership) 1%
of 99%
06 Corona Ely/Ranch Associates L.P. (partnership) 1% of 99%
06 Fairview Village Associates L.P. (partnership) 1% of 99%
06 Fell Street Housing Associates L.P. (partnership) 1% of 99%
06 Hope West Apartments L.P. (partnership) 1% of 99%
06 Morrone Gardens Associates L.P. (partnership) 1% of 99%
06 Pajaro Court Associates L.P. (partnership) 1% of 99%
06 Tierra Linda Associates L.P. (partnership) 1% of 99%
06 Tlaquepaque Housing Associates L.P. (partnership) 1% of 99%
05 MHIFED 95 COMPANY
05 MHIFED 95 L.P. (Delaware partnership) 1%GP; 99%LP to NYNEX
06 Avalon Courtyard L.P. (Carson Senior Housing) (partnership) 1%
of 95%
06 Hollywood El Centro L.P. (partnership) 1% of 99%
06 La Brea/Franklin L.P. (partnership) 1% of 99%
06 Larkin Pine L.P. (partnership) 1% of 99%
06 Mercy Housing California III L.P. (3rd & Reed) (partnership) 1%
of 99%
06 Pinole Grove Associates L.P. (partnership) 1% of 99%
06 Second Street Center L.P. (Santa Monica) (partnership) 1% of
99%
06 Solinas Village Partners L.P. (partnership) 1% of 99%
06 Three Oaks Housing L.P. (partnership) 1% of 99%
06 1101 Howard Street Associates L.P. (partnership) 1% of 99%
05 MHIFED 95C COMPANY
06 MHIFED 95C L.P. (Delaware partnership) 99%LP
07 Park Place Terrace L.P. (partnership) 99% of 99%
05 MHIFED 95C L.P. (Delaware partnership) 1%GP
06 Park Place Terrace L.P. (partnership) 1% of 99%
05 MHIFED 96 COMPANY
05 MHIFED 96 L.P. (Delaware partnership) 5%GP; 95%LP to Cargill
06 Lavell Village Associates L.P. (partnership) 5% of 99%
06 North Town Housing Partners L.P. (Villa del Norte Village)
(partnership) 5% of 99%
06 Poco Way Associates L.P. (partnership) 5% of 99%
06 Seasons Affordable Senior Housing L.P. (partnership) 5% of 99%
05 MHIFED 96A COMPANY
05 MHIFED 96A L.P. (Delaware partnership) 1%GP; 99%LP to NYNEX
06 Good Samaritan Associates L.P. (partnership) 1% of 99%
06 Reseda Village L.P. (partnership) 1% of 99%
06 Oxnard Housing Associates L.P. (partnership) 1% of 99%
06 Metro Senior Associates L.P. (partnership) 1% of 99%
06 Round Walk Village Apartments L.P. (partnership) 1% of 99%
06 Santa Alicia Partnership (partnership) 1% of 99%
06 Vine Street Court L.P. (partnership) 1% of 99%
06 Vine Street Court L.P. II (partnership) 1% of 99%
05 MHIFED 97 COMPANY
06 MHIFED 97 L.P. (Delaware partnership) 99%LP
05 MHIFED 97 L.P. (Delaware partnership) 1%GP
05 MHICAL 94 COMPANY
06 MHICAL 94 L.P. (Delaware partnership) 99%LP
07 Mayacamas Village Associates L.P. (partnership) 99% of 99%
07 Rincon De Los Esteros Associates L.P. (partnership) 99% of
99%
07 West Capital Courtyard L.P. (partnership) 99% of 99%
07 Winfield Hill Associates L.P. (partnership) 99% of 99%
05 MHICAL 94 L.P. (Delaware partnership) 1%GP
06 Mayacamas Village Associates L.P. (partnership) 1% of 99%
06 Rincon De Los Esteros Associates L.P. (partnership) 1% of 99%
06 West Capital Courtyard L.P. (partnership) 1% of 99%
06 Winfield Hill Associates L.P. (partnership) 1% of 99%
PAGE 5
05 MHICAL 95 COMPANY
06 MHICAL 95 L.P. (Delaware partnership) 99%LP
07 Abby Associates L.P. (Windmere) (partnership) 99% of 99%
07 Antelope Associates L.P. (partnership) 99% of 99%
07 Baker Park Associates L.P. (partnership) 99% of 99%
07 Bracher Associates L.P. (partnership) 99% of 99%
07 Catalonia Associates L.P. (partnership) 99% of 99%
07 Colina Vista L.P. (partnership) 99% of 99%
07 Florin Woods Associates L.P. (partnership) 99% of 99%
07 Mercy Housing California VI L.P. (205 Jones) (partnership)
99% of 99%
07 Pinmore Associates L.P. (partnership) 99% of 99%
07 Sunset Creek Partners L.P. (partnership) 99% of 99%
05 MHICAL 95 L.P. (Delaware partnership) 1%GP
06 Abby Associates L.P. (Windmere) (partnership) 1% of 99%
06 Antelope Associates L.P. (partnership) 1% of 99%
06 Baker Park Associates L.P. (partnership) 1% of 99%
06 Bracher Associates L.P. (partnership) 1% of 99%
06 Catalonia Associates L.P. (partnership) 1% of 99%
06 Colina Vista L.P. (partnership) 1% of 99%
06 Florin Woods Associates L.P. (partnership) 1% of 99%
06 Mercy Housing California VI L.P. (205 Jones) (partnership) 1%
of 99%
06 Pinmore Associates L.P. (partnership) 1% of 99%
06 Sunset Creek Partners L.P. (partnership) 1% of 99%
05 MHICAL 96 COMPANY
06 MHICAL 96 L.P. (Delaware partnership) 99%LP
07 C-Court L.P. (Cawelti Court) (partnership) 99% of 99%
07 Greenway Village Associates L.P. (partnership) 99% of 99%
07 Huff Avenue Associates L.P. (partnership) 99% of 99%
07 Kennedy Court Partners L.P. (partnership) 99% of 99%
07 Klamath Associates L.P. (partnership) 99% of 99%
07 Sky Parkway Housing Associates L.P. (partnership) 99% of 99%
07 Strobridge Housing Associates L.P. (partnership) 99% of 99%
07 Westgate Townhomes Associates L.P. (partnership) 99% of 99%
07 1010 SVN Associates L.P. (partnership) 99% of 99%
05 MHICAL 96 L.P. (Delaware partnership) 1%GP
06 C-Court L.P. (Cawelti Court) (partnership) 1% of 99%
06 Greenway Village Associates L.P. (partnership) 1% of 99%
06 Huff Avenue Associates L.P. (partnership) 1% of 99%
06 Kennedy Court Partners L.P. (partnership) 1% of 99%
06 Klamath Associates L.P. (partnership) 1% of 99%
06 Sky Parkway Housing Associates L.P. (partnership) 1% of 99%
06 Strobridge Housing Associates L.P. (partnership) 1% of 99%
06 Westgate Townhomes Associates L.P. (partnership) 1% of 99%
06 1010 SVN Associates L.P. (partnership) 1% of 99%
05 MHICAL 97 COMPANY
05 MHICAL 97 L.P.
05 Mid-Peninsula Century Village Associates L.P. (Century Village)
(partnership) 99%
05 Mid-Peninsula Sharmon Palms Associates L.P. (Sharmon Palms)
(partnership) 99%
05 Mission Capp L.P. (partnership) 99%
05 MISSION HOUSING ALPHA
06 Lee Park Investors L.P. (Pennsylvania partnership) 99%
05 MISSION HOUSING BETA
06 Richmond City Center Associates L.P. (partnership) 99%
05 MISSION HOUSING DELTA
06 MH I L.P. (partnership) 99%
07 California Park Apartments L.P. (partnership) 99% of 99%
06 MH II L.P. (partnership) 99%
07 5363 Dent Avenue Associates L.P. (partnership) 99% of 99%
06 MH III L.P. (partnership) 99%
07 DeRose Housing Associates L.P. (partnership) 99% of 99%
PAGE 6
06 MH IV L.P. (partnership) 99%
07 MPT Apartments L.P. (MacArthur Park) (partnership) 99% of 99%
06 MH V L.P. (partnership) 99%
07 Centennial Place L.P. (partnership) 99% of 99%
05 MISSION HOUSING DENVER
06 Mercantile Square L.P. (partnership) 99%
06 North Park Village LLC (partnership) 99%
05 MISSION HOUSING EPSILON
06 Riverside/Liebrandt Partners L.P. (La Playa) (partnership) 99%
05 MISSION HOUSING GAMMA
06 Del Carlo Court Associates L.P. (partnership) 99%
05 MISSION HOUSING HOLDINGS (formerly MHIFED 95B Company)
06 Mission Housing Partnership 1996 L.P. 99%LP (formerly MHIFED
95B L.P.) (Delaware partnership)
07 La Terraza Associates L.P. (Carlsbad Villas at Camino Real)
(partnership) 99% of 99%
05 Mission Housing Partnership 1996 L.P. 1%GP (formerly MHIFED 95B
L.P.) (Delaware partnership)
06 La Terraza Associates L.P. (Carlsbad Villas at Camino Real)
(partnership) 1% of 99%
05 MISSION HOUSING THETA
06 Mission Housing Investors Partnership 5%GP; 95%LP to GECC
07 Forest Winds Associates L.P. (partnership) 5% of 99%
07 Glen Eden Associates L.P. (partnership) 5% of 99%
07 Gray's Meadows Investors L.P. (partnership) 5% of 99%
07 Prince Bozzuto L.P. (Fairground Commons) (Maryland
partnership) 5% of 99%
07 Rancho Park Associates L.P. (partnership) 5% of 99%
07 Rustic Gardens Associates L.P. (partnership) 5% of 99%
07 Sea Ranch Apartments L.P. (partnership) 5% of 99%
07 Springdale Kresson Associates L.P. (Jewish Federation) (New
Jersey partnership) 5% of 99%
07 1028 Howard Street Associates L.P. (partnership) 5% of 99%
05 MISSION HOUSING ZETA
06 Fremont Building L.P. (Crescent Arms) (partnership) 99%
05 MISSION SA COMPANY
05 Morgan Hill Ranch Housing L.P. (commitment) 99%
05 Mountain View Townhomes L.P. (commitment) 99%
05 Neary Lagoon Partners L.P. (partnership) 99%
05 New Harbor Vista Apartments (commitment) 99%
05 Northwood Manor Associates L.P. (commitment) 99%
05 Oak Forest Associates L.P. (commitment) 99%
05 Oceanside Gardens L.P. (partnership) 99%
05 Ohlone Housing Associates L.P. (partnership) 99%
05 Olive Court Apartments L.P. (partnership) 98.9%
05 Ontario Senior Housing L.P. (Ontario Plaza) (partnership) 98.9%
05 Open Doors Associates L.P. (West Valley) (partnership) 99%
05 Palmer House L.P. (partnership) 99%
05 Paradise Road Partners L.P. (Gateway Village) (partnership) 99%
05 Pier A Historic Rehabilitation at Battery Park (commitment) 99%
05 Pilot Grove L.P. (Massachusetts partnership) 99%
05 Post Office Plaza L.P. (Ohio partnership) 99%
05 River Walk Apartments Homes L.P. (partnership) 99%
05 Rosebloom Associates L.P. (Oakshade) (partnership) 99%
05 San Diego Golden Villa Partners L.P. (commitment) 99%
05 San Juan Commons 1996 L.P. (commitment) 99%
05 San Pablo Senior Housing Associates L.P. (partnership) 99%
05 San Pedro Gardens Associates L.P. (partnership) 99%
05 Santa Alicia Gardens Townhomes L.P. (The Gardens) (partnership)
99%
05 Santa Paulan Senior Apartments Associates L.P.(partnership) 99%
05 South Beach Housing Associates L.P. (Steamboat) (partnership) 99%
05 South Winery Associates L.P. (The Winery Apartments) (commitment)
99%
05 Stoney Creek Associates L.P. (partnership) 99%
PAGE 7
05 Studebaker Building L.P. (partnership) 99%
05 Sultana Acres Associates L.P. (partnership) 99%
05 Sunshine Terrace L.P. (commitment) 99%
05 Tabor Grand L.P. (Colorado partnership) 99%
05 The Josephinum Associates L.P. (Washington partnership) 99%
05 Thomson Rental Housing, L.P. (Washington Place) (partnership) 99%
05 Tuscany Associates L.P. (Tuscany Villa) (partnership) 99%
05 University Park Properties L.P. (commitment)99%
05 Upland Senior Housing L.P. (Coy D. Estes) (partnership) 99%
05 Vista Verde Apartments LLC (partnership) 99%
05 Washington Creek Associates L.P. (partnership) 99%
05 Westport Village Homes Associates L.P. (partnership) 99%
05 Wheeler Manor Associates L.P. (partnership) 99%
05 Woodland Arms Apartments, Ltd. (commitment) 99%
05 YWCA Villa Nueva Partners L.P. (partnership) 99%
05 16th & Church Street Associates L.P. (partnership) 99%
05 1856 Wells Court Partners, L.P. (Wells Court) (partnership) 99%
05 210 Washington Avenue Associates (Renaissance Plaza) (Connecticut
partnership) 99%
05 2814 Fifth Street Associates L.P. (Land Park Woods) (partnership)
99%
04 MISSION FIRST ASSET INVESTMENT
04 MISSION FUNDING BETA
04 MISSION FUNDING EPSILON
05 Edison Capital (Bermuda) Investments, Ltd. (formerly Mission
(Bermuda) Investments Pi, Ltd.) (Bermuda corporation)
Address: Clarendon House, 2 Church Street,
Hamilton HM CX, Bermuda
05 GEM Energy Company (New York partnership)
05 MISSION FUNDING ALPHA
06 MISSION FUNDING MU
07 EPZ Mission Funding Mu Trust (equity interest in foreign
utility company) [see 4.01]
05 MISSION FUNDING DELTA
06 MISSION FUNDING NU
07 EPZ Mission Funding Nu Trust (equity interest in foreign
utility company) [see 4.02]
05 Mission Investments, Inc. (U.S. Virgin Islands corporation)
Address: ABN Trustcompany, Guardian Building, Havensight,
2nd Floor, St. Thomas, U.S. Virgin Islands
05 Mission (Bermuda) Investments, Ltd. (Bermuda corporation)
Address: Clarendon House, 2 Church Street,
Hamilton HM CX, Bermuda
04 MISSION FUNDING GAMMA
04 MISSION FUNDING KAPPA
05 ABB Funding Partners, L.P. (partnership)
04 MISSION FUNDING THETA
05 MAS-WT, L.P. (Washington Terrace) (partnership) 0.01%
04 MISSION FUNDING ZETA
05 Huntington L.P. (New York partnership) 50%
03 EDISON MORTGAGE COMPANY
03 MISSION BARTLETT HILL COMPANY
04 Bartlett Hill Associates L.P. (partnership) 30% [29%LP, 1%GP]; 100%
w/ EHI
03 MISSION INTERNATIONAL CAPITAL, INC.
03 RENEWABLE ENERGY CAPITAL COMPANY
02 MISSION LAND COMPANY is a California corporation having its
principal place of business at 3281 East Guasti Road, Suite 550,
Ontario, California 91761. It is engaged, directly and through its
subsidiaries, in the business of owning, managing and selling
industrial parks and other real property investments. The
subsidiaries and partnerships of Mission Land Company are listed
below. Unless otherwise indicated, all entities are corporations,
are organized under the laws of the State of California, and have
the same principal place of business as Mission Land Company.
03 ASSOCIATED SOUTHERN INVESTMENT COMPANY
04 Calabasas Park Company (partnership) (inactive) 79%GP
05 Central Valley/Calabasas L.P. (partnership) [in dissolution] 50%LP
03 CALABASAS PALATINO, INC.
04 Central Valley/Calabasas L.P. (partnership) [in dissolution] 50%GP
03 Carol Stream Developers G.P. (Illinois partnership) 60%GP
03 Centrelake Partners, L.P. (limited partnership) 98%GP
03 Corona Partners L.P. (limited partnership) 99%LP
03 IRWINDALE LAND COMPANY
04 Mission-Koll I (limited partnership) 4%GP
03 MISSION AIRPORT PARK DEVELOPMENT CO.
04 Carol Stream Developers G.P. (Illinois partnership) 40%GP
04 Centrelake Partners, L.P. (limited partnership) 2%LP
04 Corona Partners L.P. (limited partnership) 1%GP
04 Mission-Nexus II, L.P. (limited partnership) 50%GP
04 Mission Vacaville L.P. (limited partnership) (formerly Mission-
Messenger Vacaville G.P.) 1%GP
03 MISSION INDUSTRIAL CONSTRUCTORS, INC. (inactive)
03 Mission-Koll I (limited partnership) 96%LP
03 Mission-Nexus II, L.P. (limited partnership) 50%LP
03 Mission-Oceangate (partnership) (formerly Mission Comstock Crosser
Hickey) 75%GP
03 MISSION/ONTARIO, INC.
03 MISSION SOUTH BAY COMPANY (inactive)
04 Mission-Oceangate (partnership) (formerly Mission Comstock, Crosser
Hickey G.P.) 25%GP
03 MISSION TEXAS PROPERTY HOLDINGS, INC.
03 Mission Vacaville L.P. (limited partnership) (formerly Mission-
Messenger Vacaville G.P.) 99%LP
03 Mission-701 Minnesota (limited partnership) (equity) 70.3%LP
02 MISSION POWER ENGINEERING COMPANY is a California corporation having
its principal place of business at 18101 Von Karman Avenue, Suite
1700, Irvine, California 92612-1046. It is currently an inactive
company. The subsidiaries of Mission Power Engineering Company are
listed below. Unless otherwise indicated, all entities are
corporations, are organized under the laws of the State of
California, and have the same principal place of business as Mission
Power Engineering Company.
03 ASSOCIATED SOUTHERN ENGINEERING COMPANY (inactive)
02 EDISON MISSION ENERGY (formerly Mission Energy Company) is a
California corporation having its principal place of business at
18101 Von Karman Avenue, Suite 1700, Irvine, California 92612-1046.
Edison Mission Energy owns the stock of a group of corporations
which, primarily through partnerships with non-affiliated entities,
are engaged in the business of developing, owning and/or operating
cogeneration, geothermal and other energy or energy-related projects
pursuant to the Public Utility Regulatory Policies Act of 1978.
Edison Mission Energy, through wholly owned subsidiaries, also has
ownership interests in a number of independent power projects in
operation or under development that either have been reviewed by the
Commission's staff for compliance with the Act or are or will be
exempt wholesale generators under the Energy Policy Act of 1992. In
addition, some Edison Mission Energy subsidiaries have made fuel-
related investments and a limited number of non-energy related
investments. The subsidiaries and partnerships of Edison Mission
Energy are listed below. Unless otherwise indicated, all entities
are corporations, are organized under the laws of the State of
California and have the same principal place of business as Edison
Mission Energy.
PAGE 9
DOMESTIC:
03 AGUILA ENERGY COMPANY (LP)
04 American Bituminous Power Partners, L.P. (Delaware limited
partnership) 49.5%; 50% with Pleasant Valley
05 American Kiln Partners, L.P. (Delaware limited partnership)
03 ANACAPA ENERGY COMPANY (GP)
04 Salinas River Cogeneration Company (partnership) 50%
03 ARROWHEAD ENERGY COMPANY
04 Crown Energy, L.P. (New Jersey partnership) 50%LP; 100% w/
Mission/Eagle and Thorofare
05 Crown Vista Urban Renewal Corporation (New Jersey corporation)
50%; 100% with Vista Energy
03 BALBOA ENERGY COMPANY (GP)
04 Smithtown Cogeneration, L.P. (Delaware partnership) 50%; 100%
w/Kingspark
03 BERGEN POINT ENERGY COMPANY (GP)
04 TEVCO/Mission Bayonne Partnership (Delaware G.P.) 50%
03 BLUE RIDGE ENERGY COMPANY (GP)
04 Bretton Woods Cogeneration, L.P. (Delaware limited partnership) 50%;
100% w/Bretton Woods
03 BRETTON WOODS ENERGY COMPANY (GP & LP)
04 Bretton Woods Cogeneration, L.P. (Delaware L.P.) 50%; 100% w/Blue
Ridge
03 CAMINO ENERGY COMPANY (GP)
04 Watson Cogeneration Company (general partnership) 49%
03 CAPISTRANO COGENERATION COMPANY (GP)
04 James River Cogeneration Company (North Carolina partnership) 50%
03 CENTERPORT ENERGY COMPANY (GP & LP)
04 Riverhead Cogeneration I, L.P. (Delaware partnership) 50%; 100%
w/Ridgecrest
03 CHESAPEAKE BAY ENERGY COMPANY (formerly Woodland Energy Company) (GP)
04 Delaware Clean Energy Project (Delaware general partnership) 50%
03 CHESTER ENERGY COMPANY (no partners; option Chesapeake,VA)
03 CLAYVILLE ENERGY COMPANY
04 Oconee Energy, L.P. (Delaware L.P.) 50%; 100% w/Coronado
03 COLONIAL ENERGY COMPANY (formerly Hentland Energy Company) (inactive)
03 CORONADO ENERGY COMPANY
04 Oconee Energy, L.P. (Delaware L.P.) 50%; 100% w/Clayville
03 CRESCENT VALLEY ENERGY COMPANY (GP)
04 Beowawe Geothermal Power Company (general partnership) 50%
03 DEL MAR ENERGY COMPANY (GP)
04 Mid-Set Cogeneration Company (partnership) 50%
03 DELAWARE ENERGY CONSERVERS, INC. (Delaware corporation) (inactive)
03 DESERT SUNRISE ENERGY COMPANY (Nevada corporation) (inactive)
03 DEVEREAUX ENERGY COMPANY (LP)
04 Auburndale Power Partners, L.P. (Delaware L.P.) 49%; 50% w/El Dorado
03 EASTERN SIERRA ENERGY COMPANY (GP & LP)
04 Saguaro Power Company, L.P. (partnership) 50%
03 EAST MAINE ENERGY COMPANY (inactive) [dissolving]
03 EDISON MISSION ENERGY FUNDING CORP. (Delaware corporation) 1%
03 EDISON MISSION OPERATION & MAINTENANCE, INC. (formerly Mission
Operation and Maintenance, Incorporated) (no partnership)
04 Mission Operations de Mexico, S.A. de C.V. 95%
03 EL DORADO ENERGY COMPANY (GP)
04 Auburndale Power Partners, L.P. (Delaware L.P.) 1%; 50% w/ Devereaux
03 EMP, INC. (Oregon corporation) (GP & LP)
04 GEO East Mesa Limited Partnership (partnership) 50%
05 GEO East Mesa Electric Co. (Nevada corp.) (McCabe Plant) 100%
03 FOUR COUNTIES GAS COMPANY (inactive)
03 HANOVER ENERGY COMPANY
04 Chickahominy River Energy Corp. (Virginia corporation) (GP & LP)
PAGE 10
05 Commonwealth Atlantic L.P. (Delaware partnership) [see 4.03] 50%
03 HOLTSVILLE ENERGY COMPANY (GP & LP) (formerly Brookhaven Energy
Company)
04 Brookhaven Cogeneration, L.P. (Delaware partnership) 50%; 100%
w/Madera
03 INDIAN BAY ENERGY COMPANY (GP & LP)
04 Riverhead Cogeneration III, L.P. (Delaware partnership) 50%; 100%
w/Santa Ana
03 JEFFERSON ENERGY COMPANY (GP & LP) (inactive)
03 KINGS CANYON ENERGY COMPANY (inactive)
03 KINGSPARK ENERGY COMPANY (GP & LP)
04 Smithtown Cogeneration, L.P. (Delaware partnership) 50%; 100%
w/Balboa
03 LAGUNA ENERGY COMPANY (inactive) (former interest in Ambit)
03 LA JOLLA ENERGY COMPANY (inactive) (used for Belridge)
03 LAKE GROVE ENERGY COMPANY (former Mid-County subsidiary) (inactive)
03 LAKEVIEW ENERGY COMPANY
04 Georgia Peaker, L.P. (Delaware L.P.) 50%; 100% w/Silver Springs
03 LEHIGH RIVER ENERGY COMPANY (GP)
04 TEVCO/Mission Assets Partnership (Delaware G.P.) 50%
05 Continental Energy Associates, L.P. (Mass. partnership) 22.5%
03 LONGVIEW COGENERATION COMPANY (formerly Columbia River Cogeneration
Company, formerly Cabrillo Energy Company) (held for Weyerhauser)
03 MADERA ENERGY COMPANY (GP)
04 Brookhaven Cogeneration, L.P. (Delaware partnership) 50%; 100%
w/Holtsville
03 MADISON ENERGY COMPANY (formerly Sunshine Generators, Inc.) (LP)
04 Gordonsville Energy, L.P. (Delaware partnership) [see 4.04] 49%; 50%
w/Rapidan
03 Mission Capital, L.P. (Delaware L.P.) 3%; MIPS partnership
03 MISSION/EAGLE ENERGY COMPANY
04 Crown Energy, L.P. (New Jersey partnership) 2%GP; 100% w/ Arrowhead
and Thorofare
05 Crown Vista Urban Renewal Corporation (New Jersey corporation)
50%; 100% with Vista Energy
03 Mission Energy Canada Corporation (British Columbia company)
04 B.C. Star Partners (British Columbia partnership) 50%
04 The Mission Interface Partnership (Province of Ontario G.P.) 50%
03 MISSION ENERGY CONSTRUCTION SERVICES, INC. (formerly Glenwood Springs
Property, Inc.)
03 MISSION ENERGY FUEL COMPANY
04 MISSION ENERGY OIL AND GAS COMPANY
05 Four Star Oil & Gas Company (partnership) 46.85% (owns Lost Hills
Cogeneration Facility)
04 MISSION ENERGY PETROLEUM COMPANY (Gas contracts w/ Tex. Gas Mktg)
04 POCONO FUELS COMPANY (inactive)
04 SOUTHERN SIERRA GAS COMPANY
05 TM Star Fuel Company (general partnership) 50%
03 MISSION ENERGY HOLDINGS, INC.
04 Mission Capital, L.P. (Delaware L.P.) 97%; MIPS partnership
03 MISSION ENERGY HOLDINGS INTERNATIONAL, INC. (formerly Patapsco Energy
Company) [holds all the issued and outstanding stock of MEC
International B.V.--see INTERNATIONAL section]
03 MISSION ENERGY INDONESIA (formerly Chula Energy Company)
03 MISSION ENERGY MEXICO (inactive) formerly the branch office in Mexico
(no partnership)
03 MISSION ENERGY NEW YORK, INC. (formerly Allegheny Energy Company) (GP
& LP)
04 Brooklyn Navy Yard Cogeneration Partners, L.P. (Delaware
partnership) [see 4.05] 50%
03 MISSION ENERGY WALES COMPANY (formerly San Jacinto Energy Company)
04 Mission Hydro L.P. (UK limited partnership) 30%
05 First Hydro Holdings Company 99%
06 First Hydro Finance plc
07 First Hydro Company [see 4.14]
PAGE 11
03 MISSION ENERGY WESTSIDE, INC. (formerly Sun Coast Energy Company)
03 Mission Operations de Mexico, S.A. de C.V. 5%
03 ISSION TRIPLE CYCLE SYSTEMS COMPANY (GP)
04 Triple Cycle Partnership (Texas G.P.) 50%
03 NORTH JACKSON ENERGY COMPANY (inactive) [held for Akso Salt Proj]
03 NORTHERN SIERRA ENERGY COMPANY (GP)
04 Sobel Cogeneration Company (general partnership) 50%
03 ORTEGA ENERGY COMPANY (Mid-County Cogen gas contracts)
03 PANTHER TIMBER COMPANY (GP)
04 American Kiln Partners, L.P. (Delaware limited partnership) 2%
03 PARADISE ENERGY COMPANY
04 Vista Energy, L.P. (New Jersey limited partnership) 50%LP; 100% with
Vista Energy Company
05 Crown Vista Urban Renewal Corporation (New Jersey corporation)
50%; 100% w/Crown Energy
03 PLEASANT VALLEY ENERGY COMPANY (GP)
04 American Bituminous Power Partners, L.P. (Delaware limited
partnership) 0.5%; 50% w/Aguila
05 American Kiln Partners, L.P. (Delaware Limited Partnership)
03 PRINCE GEORGE ENERGY COMPANY (LP)
04 Hopewell Cogeneration Limited Partnership (Delaware limited
partnership) 24.75%
04 Hopewell Cogeneration Inc. (Delaware corporation) 25%
05 Hopewell Cogeneration Limited Partnership (Delaware limited
partnership) 1%
03 QUARTZ PEAK ENERGY COMPANY (LP)
04 Nevada Sun-Peak L.P. (Nevada partnership) [see 4.06] 50%
03 RAPIDAN ENERGY COMPANY (GP)
04 Gordonsville Energy, L.P. (Delaware partnership) [see 4.04] 1%; 50%
w/Madison
03 REEVES BAY ENERGY COMPANY (GP & LP)
04 North Shore Energy L.P. (Delaware partnership) 50%; 100% w/Santa
Clara
05 Northville Energy Corporation (New York corporation) 100%
03 RIDGECREST ENERGY COMPANY (GP)
04 Riverhead Cogeneration I, L.P. (Delaware partnership) 50%; 100%
w/Centerport
03 RIO ESCONDIDO ENERGY COMPANY
03 RIVERPORT ENERGY COMPANY (GP & LP)
04 Riverhead Cogeneration II, L.P. (Delaware partnership) 50%; 100%
w/San Pedro
03 SAN GABRIEL ENERGY COMPANY (inactive) (McKenzie gas contracts)
03 SAN JOAQUIN ENERGY COMPANY (GP)
04 Midway-Sunset Cogeneration Company, L.P. (partnership) 50%
03 SAN JUAN ENERGY COMPANY (GP)
04 March Point Cogeneration Company (partnership) 50%
03 SAN PEDRO ENERGY COMPANY (GP)
04 Riverhead Cogeneration II, L.P. (Delaware partnership) 50%; 100%
w/Riverport
03 SANTA ANA ENERGY COMPANY (GP)
04 Riverhead Cogeneration III, L.P. (Delaware partnership) 50%; 100%
w/Indian Bay
03 SANTA CLARA ENERGY COMPANY (GP)
04 North Shore Energy, L.P. (Delaware partnership) 50%; 100% w/Reeves
Bay
05 Northville Energy Corporation (New York corporation) 100%
03 SILVERADO ENERGY COMPANY (GP)
04 Coalinga Cogeneration Company (partnership) 50%
03 SILVER SPRINGS ENERGY COMPANY
04 Georgia Peaker, L.P. (Delaware limited partnership) 50%; 100%
w/Lakeview
03 SONOMA GEOTHERMAL COMPANY (GP & LP)
04 Geothermal Energy Partners Ltd. (partnership) (Aidlin) 5%LP
03 SOUTH COAST ENERGY COMPANY (GP)
04 Harbor Cogeneration Company (partnership) 30%
03 SOUTHERN SIERRA ENERGY COMPANY (GP)
PAGE 12
04 Kern River Cogeneration Company (general partnership) 50%
03 THOROFARE ENERGY COMPANY
04 Crown Energy, L.P. (New Jersey partnership) 48%; 100% w/ Arrowhead
and Mission/Eagle
05 Crown Vista Urban Renewal Corporation (New Jersey corporation)
50%; 100% w/ Vista Energy
03 VIEJO ENERGY COMPANY (GP)
04 Sargent Canyon Cogeneration Company (partnership) 50%
03 VISTA ENERGY COMPANY (New Jersey corporation) (GP & LP)
04 Vista Energy, L.P. (New Jersey limited partnership) 50%GP; 100% w/
Paradise
05 Crown Vista Urban Renewal Corporation (New Jersey corporation)
50%; 100% w/Crown Energy
03 WESTERN SIERRA ENERGY COMPANY (GP)
04 Sycamore Cogeneration Company (general partnership) 50%
INTERNATIONAL:
04 MEC International B.V. (Netherlands corporation) (Holding Company
100% owned by MEC Holdings International, Inc. (California corp.))
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
05 Edison Mission Energy Asia Company (formerly Asia Power
Development Company) (Cayman Island) 99%
Branch Offices Address:
391-B Orchard Road, Ngee Ann City, Tower B,
14th Floor, #14-08/10, Singapore 238874
06 Mission China Holdings Company (Cayman Island) 99%
Address: 391-B Orchard Road, Ngee Ann City, Tower B,
14th Floor, #14-08/10, Singapore 238874
06 Mission Ningbo Holdings Company (Cayman Island) 99%
Address: 391-B Orchard Road, Ngee Ann City, Tower B,
14th Floor, #14-08/10, Singapore 238874
05 Edison Mission Energy Asia Pte Ltd. (formerly Mission Energy Asia
Pte Ltd.) (Singapore private company limited by shares) 100%
(EME's Regional Asia Pacific Headquarters)
Address: 391-B Orchard Road, Ngee Ann City, Tower B,
14th Floor, #14-08/10, Singapore 238874
06 Edison Mission Energy Asia Pacific Pte Ltd. (Singapore
corporation) 100% (formed to hold employees who frequently
travel to Thailand)
Address: 391-B Orchard Road, Ngee Ann City, Tower B,
14th Floor, #14-08/10, Singapore 238874
06 Edison Mission Energy Fuel Company Pte Ltd. (Singapore
corporation) 100% (formed to supply coal and other fuel to
power projects)
Address: 391-B Orchard Road, Ngee Ann City, Tower B,
14th Floor, #14-08/10, Singapore 238874
06 P.T. Mission Operation and Maintenance Indonesia (Indonesian
company) 99%
Address: Jl. Gen. A Yani No. 54
Probolinggo, East Java, Indonesia
05 Edison Mission Energy Holdings Pty Ltd (formerly Mission Energy
Holdings Pty. Ltd.) (Australian corporation) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
06 Edison Mission Operation & Maintenance Kwinana Pty Ltd
(formerly Mission Operations (Kwinana) Pty Ltd) (Australia)
100% (Operator of Kwinana Project)
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
06 Edison Mission Operation & Maintenance Loy Yang Pty Ltd
(formerly Mission Energy Management Australia Pty. Ltd.)
(Australian corporation) 100%
Address: P.O. Box 1792, Traralgon, Victoria 3844,Australia
06 Mission Energy Development Australia Pty. Ltd. (Australian
corporation) 100%
PAGE 13
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
06 Mission Energy Holdings Superannuation Fund Pty Ltd.
(retirement fund required by Australia law) 100%
06 Mission Energy (Kwinana) Pty Ltd (Australia) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
07 Kwinana Power Partnership (Australian G.P.) 1%
Address: Level 23, St. Martins Tower
44 St George's Terrace, Perth WA 6000
05 Edison Mission Energy International B.V. (formerly MEC Mission
B.V.) (Netherlands company) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
05 Hydro Energy B.V. (Netherlands limited liability company)
(formerly Continfin Management B.V.) 10%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Edison Mission Energy Espana (formerly Energias Hidraulicas,
S.A.) (Spain corporation) (equity)
Address: Paseo de Gracia 18, Planta 4, 08007,
Barcelona, Spain
07 Saltos del Porma, S.A. 0.01%
Address: Paseo de Gracia 18, Planta 4, 08007,
Barcelona, Spain
06 Iberica de Energias, S.A. (Spain corp) 100% (equity) [see 4.07]
Address: Paseo de Gracia 18, Planta 4, 08007,
Barcelona, Spain
07 Electrometalurgica del Ebro, S.A. ("EMESA") (Spain
corporation) (equity) [see 4.08] 91%
Address: Paseo de Gracia 18, Planta 4, 08007,
Barcelona, Spain
08 Monasterio de Rueda, S.L. (Spain) 100%
Address: Paseo de Gracia 18, Planta 4, 08007,
Barcelona, Spain
05 Iberian Hy-Power Amsterdam B.V. (Netherlands limited liability
company) 100%
Address: Strawinskylaan 1725, Amsterdam, NOORD-HOLL 1077 XX
06 Aprohiso S.A. (Spain corporation) (inactive) 100%
Address: Paseo de Gracia 18, Planta 4, 08007,
Barcelona, Spain
06 Hidroelectrica de Olvera, S.A. (Spain corporation) [see 4.09]
100%
Address: Paseo de Gracia 18, Planta 4, 08007,
Barcelona, Spain
06 Hidroelectrica del Sossis, S.A. (Spain corporation) [see 4.10]
100%
Address: Paseo de Gracia 18, Planta 4, 08007,
Barcelona, Spain
07 Saltos del Porma, S.A. 0.01%
06 Hydro Energy B.V. (Netherlands company) 90%
07 Edison Mission Energy Espana (formerly Energias Hidraulicas,
S.A.) (Spain corporation)
08 Saltos del Porma, S.A. 0.01%
07 Iberica de Energias, S.A. (Spain corporation) 100% [see 4.07]
08 Electrometalurgica del Ebro, S.A. ("EMESA") (Spain
corporation) [see 4.08] 91%
09 Monasterio de Rueda, S.L. (Spain) 100%
06 Saltos del Porma, S.A. 99.98%
Address: Paseo de Gracia 18, Planta 4, 08007,
Barcelona, Spain
05 Latrobe Power Pty. Ltd. (Australian corporation) 50%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
PAGE 14
06 Mission Victoria Partnership (Australian partnership) 52.31%
(100% w/ Traralgon PPL 46.69% and MEVALP 1%)
07 Latrobe Power Partnership (Australian partnership) 99%
08 Loy Yang B Joint Venture (Australian joint venture) [see
4.11] 51%; 49% to outside partner
05 Loy Yang Holdings Pty. Ltd. (Australian corporation) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
06 Edison Mission Energy Australia Ltd. (formerly Mission Energy
Australia Ltd.) (Australian public company) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
07 Latrobe Power Partnership (Australian partnership) 1%
08 Loy Yang B Joint Venture (Australian J.V.) [see 4.11]
06 Latrobe Power Pty. Ltd. (Australian corporation) 50%
07 Mission Victoria Partnership (Australian partnership)
08 Latrobe Power Partnership (Australian partnership)
09 Loy Yang B Joint Venture (Australian J.V.) [see 4.11]
06 Mission Energy Ventures Australia Pty. Ltd. (Australian
company) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
07 Mission Victoria Partnership (Australian partnership) 1%
08 Latrobe Power Partnership (Australian partnership)
09 Loy Yang B Joint Venture (Australian J.V.) [see 4.11]
06 Traralgon Power Pty. Ltd. (Australian corporation) 50%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
07 Mission Victoria Partnership (Australian partnership) 46.69%
08 Latrobe Power Partnership (Australian partnership)
09 Loy Yang B Joint Venture (Australian J.V.) [see 4.11]
05 MEC Colombia B.V. (Netherlands company) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
05 MEC Esenyurt B.V. (Netherlands company) (Doga Project) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Doga Enerji Uretim Sanayi ve Ticaret Anomin Sirketi (Turkish
corporation) 80%
Address: Merkez Man, Mahallesi Caddesi 11/8,
Esenyurt, Istanbul, Turkey
05 MEC IES B.V. (formerly MEC ESA B.V.) (Netherlands company) (ISAB
Project) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 ISAB Energy Services s.r.l. 49% (services co ISAB Project)
05 MEC India B.V. (Netherlands company) (Jojobera Project) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Edison Mission Energy Power (Mauritius corporation) (formerly
Mission Energy, formerly Mission Energy Jojobera) (Branch
office in India)
Address: Louis Leconte Street, Curepipe, Mauritius
05 MEC Indo Coal B.V. (Netherlands company) (Adaro Project) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 P. T. Adaro Indonesia 10%
Address: Suite 704, World Trade Centre, Jl. Jend.
Sudirman Kav. 31, Jakarta 12920 Indonesia
05 MEC Indonesia B.V. (Netherlands company) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 P. T. Paiton Energy Company (Indonesia company) (equity)
(Paiton Project) [see 4.12] 40%
Address: Mid Plaza 2, 15th Floor, Jl. Jend.
Sudirman Kav. 10-11, Jakarta 10220 Indonesia
05 MEC International Holdings B.V. (Netherlands corp) 100%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
PAGE 15
06 Edison Mission Energy Asia Company (formerly Asia Power
Development Company) (Cayman Island) (inactive) 1%
07 Mission China Holdings Company (Cayman Island) (inactive)
07 Mission Ningbo Holdings Company (Cayman Island) (inactive)
06 Edison Mission Energy International B.V. (formerly MEC Mission
B.V.) (Netherlands company) 1%
06 MEC Colombia B.V. (Netherlands company) 1%
06 MEC Esenyurt B.V. (Netherlands company) (Doga Project) 1%
07 Doga Enerji Uretim Sanayi ve Ticaret A.S. (Turkish
corporation)
06 MEC IES B.V. (Netherlands company) (ISAB Project) 1%
07 ISAB Energy Services s.r.l.
06 MEC India B.V. (Netherlands company) 1%
07 Edison Mission Energy Power (Mauritius corporation)
(formerly Mission Energy, formerly Mission Energy Jojobera)
06 MEC Indo Coal B.V. (Netherlands company) (Adaro Project) 1%
07 P. T. Adaro Indonesia 10%
06 MEC Indonesia B.V. (Netherlands company) 1%
07 P. T. Paiton Energy Company (Indonesia company) (equity)
(Paiton Project) [see 4.12] 40%
06 MEC Laguna Power B.V. (Netherlands company) (Thailand Project)
1%
07 Gulf Power Generation Co. Ltd. (Bangkok corporation) 40%
06 MEC Perth B.V. (Netherlands company) (Kwinana Project) 1%
07 Kwinana Power Partnership (Australian G.P.) [See 4.17]
06 MEC Priolo B.V. (Netherlands company) (ISAB Project) 1%
07 ISAB Energy, s.r.l. (Italian J.V. company) (equity) [see
4.13] 1% of 49% (quota, not shares)
06 MEC San Pascual B.V. (Netherlands company) 1%
07 San Pascual Cogeneration Company International B.V.
06 MEC Turkey B.V. (Netherlands company) 1%
06 MEC Wales B.V. (formerly MEC Global Services B.V.) (Netherlands
Company) 1%
07 First Hydro Holdings Company
08 First Hydro Finance plc
09 First Hydro Company [see 4.14]
07 Mission Hydro Limited Partnership (UK limited partnership)
08 First Hydro Holdings Company
09 First Hydro Finance plc
10 First Hydro Company [see 4.14]
06 Mission Energy Italia s.r.l. 1% (Office in Italy)
06 P.T. Mission Operation & Maintenance Indonesia (Indonesian
company) 1%
05 MEC Laguna Power B.V. (Netherlands co) (Malaya Project) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Gulf Power Generation Co. Ltd. (Bangkok corporation) 40%
Address: 888/101 Mahatun Plaza Tower, 10th Floor, Ploenchit,
Lumphini, Patumwan, Bangkok 10330
05 MEC Perth B.V. (Netherlands company) (Kwinana Project) 99%
06 Kwinana Power Partnership (Australian G.P.) 99% [See 4.17]
Address: Level 23, St. Martins Tower
44 St George's Terrace, Perth WA 6000
05 MEC Priolo B.V. (Netherlands company) (ISAB Project) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 ISAB Energy, s.r.l. (Italian J.V. company) (equity) [see 4.13]
99% of 49% (quota, not shares)
Address: Corso Gelone No. 103, Siracusa, Sicily, Italy
05 MEC San Pascual B.V. (Netherlands company) 99%
Address: Croeselaan 18, 3521 GT Utrecht, The Netherlands
06 San Pascual Cogeneration Company International B.V. 50%
Address: Croeselaan 18, 3521 GT Utrecht, The Netherlands
05 MEC Turkey B.V. (Netherlands company) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
05 MEC Wales B.V. (formerly MEC Global Services, B.V.)(Netherlands
company) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
PAGE 16
06 First Hydro Holdings Company 1%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
07 First Hydro Finance plc 99%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
08 First Hydro Company [see 4.14]
Address: Bala House, St. David's Park
Ewloe, Dlwyd, Wales CH5 3XJ
06 Mission Hydro Limited Partnership 69%LP
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
07 First Hydro Holdings Company 99%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
08 First Hydro Finance plc 99%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
09 First Hydro Company [see 4.14]
Address: Bala House, St. David's Park
Ewloe, Dlwyd, Wales CH5 3XJ
05 Mission Energy Company (UK) Limited (United Kingdom private
limited company) 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Derwent Cogeneration Limited (United Kingdom private limited
liability company) (equity) [see 4.15] 33%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Edison Mission Energy Limited (formerly Mission Energy Limited)
(UK private limited company)
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Edison Mission Operation & Maintenance Limited (a United
Kingdom corporation)
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Mission Energy Services Limited (UK private limited company)
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Mission Hydro (UK) Limited
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
07 First Hydro Holdings Company 1%
08 First Hydro Finance plc 1%
09 First Hydro Company [see 4.14]
07 Mission Hydro Limited Partnership 1%GP
08 First Hydro Holdings Company 99%
09 First Hydro Finance plc
10 First Hydro Company [see 4.14]
06 Mission (No. 2) Limited (UK private limited company) (formerly
Mowlem Power Ltd.)
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Pride Hold Limited (United Kingdom corporation) 99%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
07 Lakeland Power Ltd. (United Kingdom private limited liability
company) [see 4.16] 80%
Address: Roosecote Power Station, Barrow-In-Furness,
Cumbria, England LA13 OPX
07 Lakeland Power Development Company (UK corporation) 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
05 Mission Energy Italia s.r.l. 90% Representative Office in Italy
Address: Villa Brasini, Via Flaminia 497, 00191 Rome Italy
PAGE 17
05 Pride Hold Limited (United Kingdom corporation) 1%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Lakeland Power Ltd. (United Kingdom private limited liability
company) [see 4.16]
Address: Roosecote Power Station, Barrow-In-Furness,
Cumbria, England LA13 OPX
06 Lakeland Power Development Company (UK corporation)
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
05 Traralgon Power Pty. Ltd. (Australian corporation) 50%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
06 Mission Victoria Partnership (Australian partnership) 46.69%
07 Latrobe Power Partnership (Australian partnership)
08 Loy Yang B Joint Venture (Australian J.V.) [see 4.11]
PAGE 18