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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, 1997
---------------------------------------
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 (626) 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
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 $11,044,875,684.40 on or about
March 23, 1998, based upon prices reported on the New York Stock Exchange.
As of 1998, there were 368,929,897 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, 1997 . . . . . . . . . . . . . . . .Parts I, II and IV
(2) Designated portions of the Joint Proxy
Statement relating to registrant's 1998
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 . . . . . . . . . . . . 1
Environmental Matters. . . . . . . . . . . . . . . . . . . 3
Business of SCE . . . . . . . . . . . . . . . . . . . . . . . 5
Competitive Environment. . . . . . . . . . . . . . . . . . 6
Regulation of SCE. . . . . . . . . . . . . . . . . . . . . 12
Rate Matters . . . . . . . . . . . . . . . . . . . . . . . 13
Fuel Supply and Purchased Power Costs . . . . . . . . . . . 17
Year 2000 Issue. . . . . . . . . . . . . . . . . . . . . . 18
Business of the Nonutility Companies. . . . . . . . . . . . . 19
2. Properties of SCE . . . . . . . . . . . . . . . . . . . . . . 23
Existing Utility Generating Facilities . . . . . . . . . . 23
SCE Construction Program and Capital Expenditures. . . . . 24
Nuclear Power Matters . . . . . . . . . . . . . . . . . . . 25
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 28
Tradename Litigation . . . . . . . . . . . . . . . . . . . 28
PMNC Litigation . . . . . . . . . . . . . . . . . . . . . . 28
Qualifying Facilities Litigation . . . . . . . . . . . . . 28
Wind Generators' Litigation . . . . . . . . . . . . . . . . 29
Geothermal Generators' Litigation . . . . . . . . . . . . . 30
Electric and Magnetic Fields (EMF) Litigation . . . . . . . 31
San Onofre Personal Injury Litigation . . . . . . . . . . . 32
Oil Pipeline Litigation . . . . . . . . . . . . . . . . . . 34
False Claims Act Litigation . . . . . . . . . . . . . . . . 34
Mohave Generating Station Environmental Litigation . . . . 34
4. Submission of Matters to a Vote of Security Holders . . . . . 35
Executive Officers of the Registrant . . . . . . . . . . . . . 35
Part II
5. Market for Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . 40
6. Selected Financial Data . . . . . . . . . . . . . . . . . . . 40
7. Management's Discussion and Analysis of Results of
Operations and Financial Condition . . . . . . . . . . . . 40
8. Financial Statements and Supplementary Data . . . . . . . . . 40
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . 40
Part III
10. Directors and Executive Officers of the Registrant . . . . . . 40
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . 40
12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . . . 40
13. Certain Relationships and Related Transactions . . . . . . . . 41
Part IV
14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . 41
Report of Independent Public Accountants on Supplemental
Schedules . . . . . . . . . . . . . . . . . . . . . . . . . 42
Supplemental Schedules . . . . . . . . . . . . . . . . . . 43
Signatures . . . . . . . . . . . . . . . . . . . . . . . . 48
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . 49
PAGE
PART I
In this form 10-K, Edison International uses the words estimates, expects,
anticipates, believes, and other similar expressions that 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 further actions by state and federal
regulatory bodies setting rates and implementing the restructuring of the
electric utility industry; the effects of new laws and regulations
relating to restructuring and other matters; the effects of increased
competition in the electric utility business, including the beginning of
direct customer access to retail energy suppliers and the unbundling of
revenue cycle services such as metering and billing; changes in prices of
electricity and fuel costs; changes in market interest or currency
exchange rates; foreign currency devaluations; new or increased
environmental liabilities; and other unforeseen events.
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, 1997, Edison International owned
all of the issued and outstanding common stock of SCE and of other
subsidiaries engaged in nonutility businesses (Nonutility Companies).
These Nonutility Companies are: Edison Mission Energy (EME), which is
engaged in developing, acquiring, owning and operating electric power
generation facilities worldwide; Edison Capital, a provider of capital
and financial services for energy and infrastructure projects; Mission
Land Company (Mission Land), which is in the business of managing and
selling real estate projects; and Edison Enterprises, which provides
integrated energy services, electric charging, utility outsourcing, and
consumer products and services.
Edison International is engaged in the business of holding for investment
the stock of its subsidiaries. At year-end 1997, SCE had 12,642 full-time
employees. At year-end 1997, Edison International had 20 full-time
employees, Edison Mission Energy had 1,140 full-time employees, Edison
Capital had 85 full-time employees, and Edison Enterprises had 218 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 (626) 302-2222.
Competitive Environment
SCE currently operates in a highly regulated environment in which it has
an obligation to deliver 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. (See "Business of
SCE--Competitive Environment" below for a description of these changes.)
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
page 1
incorporated in the same state and their business is predominately
intrastate in character and carried on substantially in the state of
incorporation. It is necessary for Edison International to file an annual
exemption statement with the 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 California
Public Utilities Commission (CPUC). (See "Business of SCE--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.
On December 16, 1997, the CPUC adopted a decision which established new
rules governing the relationship between California's natural gas local
distribution companies, electric utilities and certain of their
affiliates. While SCE and its affiliates have been subject to affiliate
transaction rules since the establishment of its holding company structure
in 1988, these new rules are more detailed and restrictive. On December
31, 1997, SCE filed a preliminary Compliance Plan which set forth SCE's
implementation of the new affiliate transaction rules. This preliminary
Compliance Plan was supplemented by an additional filing made on January
30, 1998. A CPUC resolution is expected on SCE's Compliance Plan during
the second quarter of 1998.
For purposes of an electric utility, such as SCE, these new rules apply to
all utility transactions with affiliates engaging in the provision of a
product that uses electricity or the provision of services that relate to
the use of electricity. Edison International is not subject to these new
affiliate transaction rules and will continue to be subject to the prior
rules. The new affiliate transaction rules are structured to address what
the CPUC perceives as market power and cross-subsidization concerns
arising out of the new competitive electricity market in California.
These new rules are categorized into nondiscrimination standards,
disclosure and information standards, and separation standards. In
addition, the new rules set forth requirements and restrictions on the
utility's offering of certain products and services.
Edison International believes that the implementation of these new
affiliate transaction rules will not materially affect its results of
operation or financial position.
page 2
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 (CAA) 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 CAA as amended in 1990, and as implemented within the South Coast Air
Quality Management District (SCAQMD) and other districts within California
required SCE to reduce emissions of oxides of nitrogen from its generating
stations. SCE is selling all of its oil- and gas-fueled generating
stations within the SCAQMD, the Mohave Desert Air Quality Management
District, Ventura County Air Pollution Control District, and the Santa
Barbara County Air Pollution Control District, with an expected sale
closure date for 11 of the 12 generating stations being sold by March 31,
1998 (the twelfth plant is expected to be sold in 1998). It is expected
that after the generating stations' sale closure dates, under operations
and maintenance contracts with the individual owners, SCE will operate
those facilities that are kept in operation as active generating stations.
SCE operations of the stations it gains contracts for, will be under the
direction and expense of the new owners. SCE will be responsible for
maintaining the environmental permits of the plants. However, the new
owners, not SCE, will be responsible for the purchase and installation of
emissions control equipment, and sufficient trading credits required for
the plants under the Regional Clean Air Incentives Market within the
SCAQMD.
The CAA does not require any significant additional emissions control
expenditures that are identifiable at this time. The Environmental
Protection Agency (EPA) plans to issue its final rulemaking regarding
regional haze regulations in late 1998. Also, the EPA and SCE will
conclude a cooperative tracer study of sulfur dioxide emissions from the
Mohave Generating Station (Mohave) in mid- to late-1998. The study is
evaluating potential impact from Mohave emissions on haze within the Grand
Canyon National Park. The extent to which these two activities may
require sulfur dioxide or particulate emissions reductions at the Mohave
is not known. The acid rain provisions of the amended CAA 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. Until more definite information on tracer study
results are available, SCE expects to meet all the present regulations
through improved operations at the plant.
On February 19, 1998, the Sierra Club and the Grand Canyon Trust filed
suit against SCE and the other co-owners of Mohave in the U.S. District
Court of Nevada alleging violations over the last five years of the CAA,
the Nevada State Implementation Plan, and applicable air quality permits
relating to opacity and sulfur dioxide emission limits. SCE, on behalf of
the co-owners, will provide a timely response in defense of the suit.
page 3
The CAA also requires the EPA to carry out a three-year study of risk to
public health from the emissions of toxic air contaminants from electric
utility steam generating plants, and to regulate such emissions only if
required. The study has not been finalized by the 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 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 the 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.
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 discounted 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.
In connection with the issuance of the San Onofre Nuclear Generating
Station Units 2 and 3 operating permits, SCE reached an agreement with the
California Coastal Commission in 1991 to restore certain marine mitigation
sites. The restorations include two sites: designated wetlands and the
construction of an artificial reef for kelp off the California coast.
After SCE requested certain modifications to the agreement, the California
Coastal Commission issued a final ruling in April 1997 to reduce the scope
of remediations. SCE elected to pay for the costs of marine mitigation in
lieu of placing the funds into a trust. Recovery of these costs is
occurring through the San Onofre incentive pricing plan.
Edison International's recorded estimated minimum liability to remediate
its 51 identified sites (50 at SCE and one at EME) is $178 million, which
includes $75 million for the two sites discussed above. The ultimate
costs to clean up Edison International's identified sites may vary from
page 4
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
$246 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 41 of its
sites, representing $91 million of its 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 from insurance carriers and other third parties. SCE
has successfully settled insurance claims with all responsible carriers.
Costs incurred at SCE's remaining sites are expected to be recovered
through customer rates. SCE has recorded a regulatory asset of $153
million for its estimated minimum environmental-cleanup costs expected to
be recovered through customer rates. This amount includes $60 million of
marine mitigation costs remaining to be recovered through the San Onofre
incentive pricing plan.
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 $10 million. Recorded
costs for 1997 were $10 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 materially affect 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.
Edison International's projected capital expenditures to protect the
environment are $820 million for the 1998-2002 period 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 12,642 full-time employees at year-end 1997. During
1997, 38% of SCE's total operating revenue was derived from residential
customers, 38% 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 revenue of Edison International, its parent holding company.
page 5
Competitive Environment
As previously discussed, SCE's regulatory environment is undergoing
change. The following is a discussion of the changes affecting SCE in its
transition to a new market structure.
California Electric Utility Restructuring
Restructuring Decision - The CPUC's December 1995 decision on
restructuring California's electric utility industry started the
transition to a new market structure, which is expected to provide
competition and customer choice and is scheduled to begin March 31, 1998.
Key elements of the CPUC's restructuring decision included: creation of
an independent power exchange (PX) and independent system operator (ISO);
availability of direct customer access and customer choice; performance-
based ratemaking (PBR) for those utility services not subject to
competition; voluntary divestiture of at least 50% of utilities' gas-
fueled generation, and implementation of the competition transition charge
(CTC).
Restructuring Legislation - In September 1996, the State of California
enacted legislation to provide a transition to a competitive market
structure. The legislation substantially adopted the CPUC December 1995
restructuring decision by addressing stranded-cost recovery for utilities
and 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 included provisions to
finance a portion of the stranded costs that residential and small
commercial customers would have paid between 1998 and 2001, which would
allow SCE to reduce rates by 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 (Bank), or an
entity approved by the Bank. The legislation included 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 during the 1998-2001
transition period. In addition, the legislation mandated the
implementation of the CTC that provides utilities the opportunity to
recover costs made uneconomic by electric utility restructuring. Finally,
the legislation contained provisions for the recovery (through 2006) of
reasonable employee-related transition costs, incurred and projected, for
retraining, severance, early retirement, outplacement and related
expenses.
Rate Reduction Notes - In May 1997, SCE filed an application with the CPUC
requesting approval of the issuance of an aggregate amount of up to $3
billion of rate reduction notes in one or more series or classes and a 10%
rate reduction for the period from January 1, 1998, through March 31,
2002. At the same time, SCE filed an application with the Bank for
approval to issue the notes. Residential and small commercial customers
will repay the notes over the expected 10-year term through non-bypassable
charges based on electricity consumption. In December 1997, after
receiving approval from both the CPUC and the Bank, a limited liability
company created by SCE issued approximately $2.5 billion of these notes.
Rate-setting - In December 1996, SCE filed a more comprehensive plan
(elaborating on its July 1996 filing related to the conceptual aspects of
separating costs as requested by CPUC and Federal Energy Regulatory
page 6
Commission (FERC) directives) for the functional unbundling of its rates
for electric service, beginning 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 into separate charges for energy, transmission, distribution, the
CTC, public benefit programs and nuclear decommissioning. The
transmission component of this rate unbundling process was addressed at
the FERC through a March 1997 filing. In December 1997, the FERC approved
these rates, subject to refund, to be effective on the date the ISO begins
operation. (See "Transmission Owners Tariff and Wholesale Distribution
Access Tariff" below for further discussion.) CPUC hearings on SCE's rate
unbundling (also known as rate-setting) plan were concluded in April 1997.
In August 1997, the CPUC issued a decision which adopted the methodology
for determining CTC residually (see "CTC" discussion) and adopted SCE's
revenue requirement components for public benefit programs and nuclear
decommissioning. The decision also adjusted SCE's proposed distribution
revenue requirement by reallocating $76 million of it annually to other
functions such as generation and transmission. Under the decision, SCE
will be able to recover most of the reallocated amount through market
revenue, other rate-making mechanisms after petitioning the CPUC to modify
its prior decisions, or another review process later in its divestiture
proceeding.
PX and ISO - In April 1996, SCE, Pacific Gas and Electric Company (PG&E)
and San Diego Gas & Electric Company (SDG&E) filed a proposal with the
FERC regarding the creation of the PX and the ISO. In November 1996, the
FERC conditionally accepted the proposal and directed the three utilities,
the ISO, and the PX to file more specific information. The filing was
made in March 1997, and included SCE's proposed transmission revenue
requirement. On October 29, 1997, the FERC gave conditional, interim
authorization for operation of the PX and ISO, which are new independent
non-profit California corporations, to begin on January 1, 1998. Prior to
the start of the ISO and PX, the chief executive officers of the PX, ISO
and the three utilities are required to certify that all the conditions
were in place to ensure reliable electric power operations. In addition,
the FERC stated it would closely monitor the PX and ISO, require further
studies and make modifications, where necessary. A comprehensive review
will be performed by the FERC after three years of operation of the PX and
ISO. On December 22, 1997, the PX and ISO governing boards announced a
delay in the planned start-up of the PX and ISO due to insufficient
testing of operational, settlement and billing systems. The PX and ISO
are now expected to begin operation by March 31, 1998.
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 are backed by utility guarantees;
SCE's share was 45%, or $113 million. In August 1996, the CPUC issued an
interim order establishing the restructuring trust and the funding level
of $250 million, which has been used to build the hardware and software
systems for the ISO and PX. The ISO and PX will repay the trust's loans
and recover funds from future ISO and PX customers. In November 1997,
the CPUC approved a petition jointly filed by the three utilities which
requested an increase in the loan guarantees from $250 million to $300
million; SCE's share of this new total is $135 million. In December 1997,
the CPUC approved a remaining issue with respect to the petition which
requested that the one-time restructuring implementation charge, to be
paid to the PX by the utilities, be deemed a non-bypassable charge to be
recovered from all retail customers. The amount of the PX charge is
approximately $101 million, plus interest; SCE's share is 45%, or $45.5
million.
Direct Customer Access - In May 1997, the CPUC issued a decision
describing how all California investor-owned utility customers will be
able to choose who will provide them with electric generation service
beginning January 1, 1998. On December 30, 1997, the CPUC issued a
page 7
decision delaying direct access until March 31, 1998, due to operational
delays in the startup of the PX and ISO. When the PX and ISO become
operational, customers will be able to choose to remain utility customers
with bundled electric service from SCE (which will purchase its power
through the PX), or choose direct access, which means the customer can
contract directly with either independent power producers or retail
electric service providers such as power brokers, marketers and
aggregators. Additionally, all investor-owned utility customers must pay
the CTC whether or not they choose to buy power through SCE. Electric
utilities will continue to provide the core distribution service of
delivering energy through their distribution systems regardless of a
customer's choice of electricity supplier. The CPUC will continue to
regulate the prices and service obligations related to distribution
services. If the new competitive market cannot accommodate the volume of
direct access transactions, the CPUC could implement a contingency plan.
However, the CPUC indicated that it believes it is likely that interest in
and migration to direct access will be gradual.
Revenue Cycle Services - A decision issued by the CPUC in May 1997,
introduces customer choice to metering, billing and related services
(revenue cycle services) that are now provided by California's investor-
owned utilities. Under this revenue cycle services unbundling decision,
beginning in January 1998, direct access customers may choose to have
either SCE or their electric generation service provider render
consolidated (energy and distribution) bills, or they may choose to have
separate billings from each service provider. However, not all electric
generation service providers will necessarily offer each billing option.
In addition, beginning in January 1998, customers with maximum demand
above 20 kW (primarily industrial and large commercial) can choose SCE or
any other supplier to provide their metering service. All other customers
will have this option beginning in January 1999. Since direct access was
delayed, options described in the CPUC decision as becoming available
January 1, 1998, will not be available until the PX and ISO become
operational. In determining whether any credit should be provided by the
utility to firms providing customers with revenue cycle services, and the
amount of any such credit, the CPUC has indicated that it is appropriate
to net the cost incurred by the utility and the cost avoided by the
utility as a result of such services being provided by the other firm
rather than by the utility. The unbundling of revenue cycle services will
expose SCE to the possible loss of revenue, higher stranded costs and a
reduction in revenue security.
PBR - In 1993, SCE filed for a PBR mechanism to determine most of its
revenue (excluding fuel). The filing was subsequently divided between
transmission and distribution (T&D) and power generation.
In September 1996, the CPUC adopted a non-generation or T&D PBR mechanism
for SCE which began on January 1, 1997. According to the CPUC, beginning
in 1998 (coincident with the initiation of the competitive market), 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.
With the CPUC's 1995 restructuring decision and the passage of
restructuring legislation in 1996, the majority of power generation
ratemaking (primarily fossil-fueled and nuclear) was assigned to other
mechanisms. In April 1997, a CPUC interim order determined that the
proposed structure of the fossil-fueled plants' must-run contracts were
under the FERC's jurisdiction. On October 31, 1997, SCE filed must-run
page 8
tariff schedules with the FERC covering its six ISO-designated must-run
plants. In the meantime, SCE is pursuing the divestiture of these plants
(see "Divestiture" discussion) and might not ever itself provide service
under these FERC tariff schedules.
In December 1997, the CPUC adopted a PBR-type rate-making mechanism for
SCE's hydroelectric plants. The mechanism sets the hydroelectric revenue
requirement in 1998 and establishes a formula for extending it through the
duration of the electric industry restructuring transition period, or
until market valuation of the hydroelectric facilities, whichever occurs
first. The mechanism provides that power sales revenue from hydroelectric
facilities in excess of the hydroelectric revenue requirement be credited
against the costs to transition to a competitive market (see "CTC"
discussion).
The CPUC has announced its intention to unbundle SCE's cost of capital by
major utility function and has directed SCE to file an application by May
8, 1998. This proceeding could result in a change in late 1998 or early
1999 to the cost of capital included within the PBR cost of capital
trigger mechanism.
Divestiture - In November 1996, SCE filed an application with the CPUC to
voluntarily divest, by auction, all 12 of its oil- and gas-fueled
generating plants. This application built upon SCE's March 1996 plan
which outlined how SCE proposed to divest 50% of these assets. SCE would
continue to operate and maintain the divested power plants for at least
two years following their sale, as mandated by the restructuring
legislation enacted in September 1996. In addition, SCE would offer
workforce transition programs to those employees who may be impacted by
divestiture-related job reductions. In September 1997, the CPUC approved
SCE's proposal to auction the 12 plants.
On December 1, 1997, SCE filed a compliance filing with the CPUC stating
that it agreed to sell ten plants. On December 16, 1997, the CPUC
approved the sale of the ten plants. On February 6, 1998, SCE filed a
compliance filing with the CPUC for the sale of an eleventh plant. CPUC
approval of the sale is expected before March 31, 1998. The total sales
price of the eleven plants is $1.1 billion or 2.16 times their combined
book value of $531 million. Net proceeds of the sales will be used to
reduce stranded costs, which otherwise were expected to be collected
through the CTC mechanism. The transfer of ownership of the eleven plants
is expected to occur concurrently with the start of the new competitive
market, which the PX and ISO expect to occur on March 31, 1998. The
process of selling the single remaining plant is still underway.
CTC - Recovery of costs to transition to a competitive market is being
implemented through a non-bypassable CTC. This charge applies to all
customers who were using or began using utility services on or after the
CPUC's 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 energy from the PX, 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, 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 composed of:
$7.5 billion from SCE's qualifying facility (QF) contracts, which are the
direct result of prior legislative and regulatory mandates; and $5.6
page 9
billion to $6.3 billion from costs pertaining to certain generating plants
(successful completion of the sale of SCE's gas-fired generating plants
would reduce this estimate of transition costs for SCE-owned generation to
less than $5 billion) 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 Units 2 and 3 and the
Palo Verde Nuclear Generating Station units, and certain other costs. In
February 1997, SCE filed an update to the CTC filing to reflect approval
by the CPUC of settlements regarding ratemaking for SCE's share of Palo
Verde and the buyout of a power purchase agreement, as well as other minor
data updates. No substantive changes in the total CTC estimates were
included. This issue has been separated into two phases; Phase 1
addresses the rate-making issues and Phase 2 the quantification issues.
A decision on Phase 1 was issued in June 1997, which, among other things,
required the establishment of a transition cost balancing account and
annual transition cost proceedings, set a market rate forecast for 1998
transition costs, and required that generation-related regulatory assets
be amortized ratably over a 48-month period. Hearings on Phase 2 were
held in May and June 1997 and a final decision was issued on November 19,
1997. The Phase 2 decision established the calculation methodologies and
procedures for SCE to collect its transition costs from 1998 through the
end of the rate freeze. The Phase 2 decision also reduced SCE's authorized
rate of return on certain assets eligible for transition cost recovery
(primarily fossil- and hydroelectric- generation related assets) beginning
July 1997, five months earlier than anticipated. The decision, excluding
the effects of other rate actions, had a negative impact on 1997 earnings
of approximately 4 cents per share. SCE has filed an application for rehearing
on the 1997 rate of return issue.
Utility Rate Reduction and Reform Act Initiative - On November 24, 1997,
individuals representing The Utility Reform Network (TURN), Public Media
Center and the Coalition Against Utility Taxes filed a voter initiative
with the California Attorney General. The proposed initiative, which was
amended by the proponents on December 9, 1997, seeks among other things
to: (i) impose an additional 10 percent rate reduction; (ii) block
stranded cost recovery of nuclear investments; (iii) restrict stranded
cost recovery of non-nuclear investments unless the CPUC finds that the
utility would be deprived of the opportunity to earn a fair rate of
return; and (iv) prohibit the collection of any charges pursuant to a
financing order for the purpose of making payments on rate reduction
notes, or if the financing order is found enforceable by a court, require
the utility to offset such charges with an equal credit to customers. On
February 11, 1998, the California Secretary of State circulated a copy of
the title and summary prepared for the proposed initiative by the
California Attorney General's Office, which included a summary of estimate
of the fiscal impacts on state and local governments if the initiative
were to pass. That estimate concluded that the net impact on state
government revenues would be annual revenue reductions of approximately
$100 million per fiscal year from 1998-2002. The estimate also referred
to potential state liability for debt service on the rate reduction notes.
The earliest that the initiative could be placed on a statewide ballot is
November 3, 1998. SCE is unable to predict the outcome of this matter
but, if the initiative were to qualify for the ballot, be voted into law
and upheld by courts, it could have a material effect on its results of
operations.
Accounting for Generation-Related Assets - If the CPUC's electric industry
restructuring plan is implemented as outlined above, SCE would be allowed
to recover its CTC through non-bypassable charges to its distribution
customers (although its investment in certain generation assets would be
subject to a lower authorized rate of return).
page 10
From November 1996 to July 1997, SCE and the other major California
electric utilities were engaged in discussions with the Securities and
Exchange Commission (SEC) staff regarding the proper application of
regulatory accounting standards in light of the electric industry
restructuring legislation enacted by the State of California in September
1996 and the CPUC's electric industry restructuring plan. This issue was
placed on the agenda of the Financial Accounting Standards Board's
Emerging Issues Task Force (EITF) during April 1997 and a final consensus
was reached at the July EITF meeting. During the third quarter of 1997,
SCE implemented the EITF consensus and discontinued application of
accounting principles for rate-regulated enterprises for its investment in
generation facilities.
However, implementation of the EITF consensus did not require SCE to write
off any of its generation-related assets, including regulatory assets of
approximately $600 million at December 31, 1997. SCE has retained these
assets on its balance sheet because the legislation and restructuring plan
referred to above make probable their recovery through a non-bypassable
CTC to distribution customers. These regulatory assets relate primarily
to the recovery of accelerated income tax benefits previously flowed
through to customers, purchased power contract termination payments,
unamortized losses on reacquired debt, and the recovery of amounts
deferred under the Palo Verde rate phase-in plan. The consensus reached
by the EITF also permits the recording of new generation-related
regulatory assets during the transition period that are probable of
recovery through the CTC mechanism.
If during the transition period events were to occur that made the
recovery of these generation-related regulatory assets no longer probable,
SCE would be required to write off the remaining balance of such assets as
a one-time, non-cash charge against earnings. If such a write-off were to
be required, SCE believes that it should not affect the recovery of
stranded costs provided for in the legislation and restructuring plan.
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 additional
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.
Transmission Owners Tariff and Wholesale Distribution Access Tariff - On
March 31, 1997, SCE, PG&E and SDG&E jointly filed with the FERC a pro
forma Transmission Owners Tariff (T.O. Tariff). The pro forma T.O. Tariff
was filed in conjunction with the ISO and PX tariffs, also filed on that
date. Together, these tariffs set forth the rate design and terms and
conditions for transmission service provided over SCE's facilities over
which the ISO will have operational control. Additionally, on March 31,
1997, SCE filed an individual T.O. Tariff, its proposed revenue
requirement for the facilities being turned over to the operational
control of the ISO, and a Wholesale Distribution Access Tariff (WDAT).
The SCE T.O. Tariff, excluding appendices, is identical to the pro forma
T.O. Tariff, and also contains appendices setting forth SCE's proposed
page 11
Transmission Access Charges. FERC accepted the SCE T.O. Tariff rates and
WDAT for filing, subject to refund, on December 17, 1997.
FERC Restructuring Decision - In April 1996, the FERC issued its decision
on stranded-cost recovery and open access transmission, effective July
1996. The decision, reaffirmed by the FERC in its March and November 1997
orders, 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 opportunity to recover stranded
costs associated with existing wholesale customers, retail-turned-
wholesale customers and retail wheeling when the state regulatory body
does not have authority to address retail stranded costs. Even though the
CPUC is currently addressing stranded-cost recovery through the CTC
proceedings, the FERC has also asserted primary jurisdiction over the
recovery of stranded costs associated with retial-turned-wholesale
customers, such as a new municipal electric system or a municipal
annexation. However, FERC did clarify that it does not intend to prevent
or interfere with a state's authority and that it has discretion to defer
to a state stranded-cost-calculation method. In January 1997, the FERC
accepted the open access transmission tariff SCE filed in compliance with
the April 1996 decision. The rates included in the tariff are being
collected subject to refund. In May 1997, SCE filed a revised open access
tariff to reflect the few revisions set forth in the March 1997 order.
The open access transmission tariff will be terminated on the date the ISO
begins operation.
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.
page 12
The Department of Energy (DOE) 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.
Rate Matters
CPUC Retail Ratemaking
The CPUC regulates the charges for services provided by SCE to its retail
customers. As discussed in the section on Competitive Environment, the
nature in which the CPUC regulates SCE is changing. The CPUC has issued
final decisions regarding direct access, transition cost recovery and rate
unbundling in the restructuring of the electric industry. These decisions
impact cost recovery and rate regulation beginning in January 1998, and
implement new ratemaking mechanisms replacing the Electric Revenue
Adjustment Mechanism, Energy Cost Adjustment Clause (ECAC) and base rates
mechanism (collectively, the "pre-restructuring ratemaking mechanisms")
described in prior annual and quarterly reports filed with the SEC.
Total rates for all customers are frozen at June 10, 1996, levels,
although residential and small commercial customers received a 10%
reduction from their June 10, 1996, rate levels beginning January 1, 1998.
These rate levels will remain in effect for the remainder of the
transition period. Under these frozen rates, individual rate components
(distribution, transmission, nuclear decommissioning and public purpose
programs) are determined according to CPUC or FERC authorized mechanisms,
with the generation rate determined residually by subtracting these other
components from the total rate.
Distribution Rates
Distribution cost recovery is through a distribution PBR mechanism
currently authorized through December 2001. Key elements of the
distribution PBR include: distribution rates indexed for inflation based
on the Consumer Price Index less a productivity factor; 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
distribution operations. (See "California Electric Utility Restructuring-
PBR" section for additional discussion.)
Transmission Rates
Upon the commencement of the ISO and PX, transmission cost recovery will
be under FERC authority. Until commencement of the ISO and PX,
transmission cost recovery will be combined with distribution cost
recovery through a T&D PBR. (See "California Electric Utility
Restructuring--Rate-setting" and "FERC Restructuring Decision" above for
additional discussion.)
Nuclear Decommissioning and Public Purpose Program Rates
Recovery of SCE's nuclear decommissioning costs and legislatively mandated
public purpose program funding is through rates set to recover 100% of
these costs. Public purpose programs include cost effective energy
efficiency, research, renewable technology development, and low income
programs.
Generation Rates
Effective with the commencement of ISO and PX operations, generation costs
will be subject to recovery through the market price and the CTC.
page 13
Revenue available to recover the uneconomic generation costs subject to
recovery through the CTC will be determined residually by subtracting the
other rate components from total rates. This residual revenue will be
first allocated to recovery of FERC-authorized ISO charges for
transmission support and for purchases from the PX, and then to recovery
of transition costs. Transition costs associated with QF and interutility
contracts and the acceleration of sunk cost recovery will be subject to
annual reasonableness review by the CPUC. Transition cost recovery for
most utility generation assets will terminate by March 31, 2002, or when
these costs are fully collected. (See "CTC" above for additional
discussion.)
1991 Annual ECAC Application
In 1991, SCE issued its QF reasonableness testimony for the period April
1, 1990, through March 31, 1991. The Office of Ratepayer Advocates' (ORA)
report on QF reasonableness issues was issued in 1993. In its report, the
ORA recommended that the CPUC disallow $1.5 million in power purchase
expenses incurred as a result of purchases during the record period under
a QF contract with Mojave Cogeneration Company, a nonutility generator.
The ORA further alleged that ratepayers may be harmed in the amount of
$31.6 million (1993 net present value) over the contract's 20-year life.
SCE filed its rebuttal testimony on the contract in 1994. SCE and the ORA
subsequently reached a settlement where SCE agreed to a one-time reduction
to its ECAC balancing account of $14 million plus interest from January 1,
1996, to resolve the unreasonable action allegations by the ORA for 1991
and all subsequent record periods through the contract's 20-year life. On
October 30, 1996, the CPUC issued a decision which would approve the
settlement, subject to SCE and the ORA accepting certain conditions
concerning the manner in which the $14 million payment would be reflected
in rates. After reviewing the decision, SCE declined to accept the
condition proposed by the CPUC. Hearings on the ORA's disallowance
recommendations regarding the Mojave Cogeneration contract were held in
June 1997. During the hearings, the ORA presented testimony to update its
assessment of ratepayer harm, which it now assesses to be $45 million
(1997 net present value) over the contract's life. On November 26, 1997,
the assigned Administrative Law Judge (ALJ) issued a proposed decision
(which is not binding on the CPUC) which would adopt ORA's imprudence
allegations. On January 13, 1998, the assigned ALJ issued an order
setting aside the proposed decision in order to accommodate SCE's request
for an oral argument to a quorum of the Commissioners. Oral arguments
were heard on February 4, 1998, at which time SCE requested an alternate
proposed decision be issued. On March 11, 1998, the Assigned Commissioner
issued an alternate proposed decision which recommends a disallowance of
$46,000 for the record period and expected disallowances of $16.3 million
over the life of the Mojave Cogeneration contract. The matter is
currently scheduled for consideration at the CPUC's March 26, 1998
meeting.
1992 Annual ECAC Application
SCE filed its QF reasonableness testimony in September 1992. In January
1996, the ORA released its report on QF reasonableness for the 1992 record
period as well as for that portion of the 1991 record period concerning
capacity truncation and energy deliveries at forecast rates. On February
17, 1998, the ORA submitted surrebuttal testimony. Hearings on the matter
began on March 9 and concluded on March 17, 1998, subject to SCE's right
to recall certain witnesses in rebuttal to ORA's witnesses. If SCE elects
to recall such witnesses, the hearing will resume on April 1, 1998. An
adverse decision for SCE on either or both issues could, under certain
circumstances, have a material impact on SCE's financial position if the
decision were extended to subsequent record periods. The ORA's
surrebuttal testimony recommends a disallowance of $17.5 million
associated with firm capacity truncation, $17.4 million for forecasted
energy payments at forecast rates, and $43,000 for as-available capacity
payments at forecast rates. These amounts encompass the 1991 and
page 14
1992 periods, and exclude certain projects which have been deferred in
this proceeding.
1993 Annual ECAC Application
SCE filed its QF reasonableness testimony on September 1, 1993. On March
2, 1998, the ORA filed a combined report covering the QF reasonableness
phases of SCE's ECAC applications for 1993-1995. In the report, the ORA
recommends a disallowance of $5.6 million related to SCE's administration
of a contract with the Arbutus wind project. No other reasonableness
issues were identified in the report. SCE's rebuttal testimony is due on
June 4, 1998, and hearings are scheduled for early August 1998.
1994 Annual ECAC Application
SCE filed its QF reasonableness testimony and non-QF Reasonableness of
Operations Report on May 27, 1994. The QF testimony reflects the
reasonableness of execution of two new QF contracts and the reasonableness
of SCE's administration of 393 QF contracts. The non-QF Report addresses
power purchases and exchanges, and the operation of hydroelectric, coal,
gas and nuclear resources for the period April 1, 1993, through March 31,
1994. The 1993, 1994 and 1995 QF issues will be joined for hearing.
The non-QF issues were bifurcated with the gas procurement issues being
separated from the other non-QF issues. On August 2, 1996, the CPUC
issued a decision finding that SCE's non-QF, non-gas procurement
activities were reasonable.
The ORA recommended a $13.3 million disallowance for costs incurred from
November 1993 through March 1994 associated with SCE's Canadian gas supply
and transportation contracts.
On October 17, 1996, the ALJ granted the ORA's motion to consolidate the
1994 and 1995 record periods for the limited purpose of addressing the gas
reasonableness issues. Hearings on these issues began January 21, 1997,
and were concluded on February 20, 1997.
However, briefing was suspended by the ALJ at the request of the parties
to facilitate settlement discussions. On July 11, 1997, the ORA and SCE
executed a Settlement Agreement.
The basic elements of the Settlement include: (1) a $39 million
disallowance for Canadian gas costs incurred through December 31, 1996;
(2) a disallowance of $257,000 per month, per contract, for each of SCE's
four supply contracts for Canadian gas costs beginning after January 1,
1997, and continuing until each of the commodity contracts are terminated
(one supply agreement was terminated on May 1, 1997, and the remaining
three supply agreements were terminated on July 1, 1997); (3) a cost
sharing mechanism in lieu of reasonableness review, whereby shareholders
would absorb at least 20% of the termination or restructuring costs
associated with the Canadian supply and transportation contracts and at
least 5% of the termination or restructuring costs associated with the El
Paso transportation contract which the CPUC has already found reasonable
(a portion of these termination or restructuring costs associated with the
cost sharing mechanisms would be flowed through to ratepayers through the
Energy Deferred Refund Account); and (4) agreement that all other costs
incurred under these contracts, including the termination, buy-down and/or
buy-out costs are reasonable and should be determined to be reasonable by
the CPUC.
page 15
On December 3, 1997, the CPUC issued a decision approving the Settlement
between SCE and the ORA. On March 12, 1998, the CPUC issued a decision
ordering SCE to refund $65 million. The Settlement has been fully
reflected in SCE's financial statements.
A discussion of the ORA's report in the QF reasonableness phase of this
ECAC is set forth above in the discussion of the 1993 ECAC Application.
1995 Annual ECAC Application
SCE filed its reasonableness of operations testimony on May 26, 1996. The
QF reasonableness testimony reflects the reasonableness of settlement
agreements with six QFs, the reasonableness of the Biogen Power I
termination agreement, and the reasonableness of the SCE's administration
of 414 QF contracts for the period April 1, 1994, through March 31, 1995.
The 1993, 1994 and 1995 QF issues will be joined for hearing.
The non-QF report addresses power purchases and exchanges, and the
operation of hydroelectric, coal, gas and nuclear resources for the period
April 1, 1994, through March 31, 1995. In May 1996, the ORA issued its
reasonableness report on several non-QF reasonableness issues. The report
recommended a $6.6 million disallowance for replacement fuel expenses
associated with 64 outage days due to the Palo Verde Unit 2 steam
generator tube rupture in 1993, and that the issue of $5.2 million of
nuclear fuel expenses associated with the NUEXCO Trading Corp. bankruptcy
be held open for review. In written response to data requests, the ORA
indicated it has withdrawn its concerns over the nuclear fuel expenses.
Additionally, SCE and the ORA executed a stipulation on December 18, 1997,
resolving the Palo Verde issue by agreeing to a disallowance of $318,540
plus interest which is the replacement fuel expense associated with six
outage days. A motion requesting approval of the SCE/ORA stipulation was
filed with the CPUC in December 1997. The CPUC issued its decision
approving the stipulation on February 19, 1998.
On October 4, 1996, the ORA issued its report on SCE's Canadian gas
procurement contracts discussed above. The report recommended 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. The reasonableness of the Canadian gas
procurement and transportation costs for the record period was resolved by
the ORA/SCE settlement discussed above in the 1994 Annual ECAC
Application. The Settlement has been fully reflected in SCE's financial
statements.
A discussion of the ORA's report in the QF reasonableness phase of this
ECAC is set forth above in the discussion of the 1993 ECAC Application.
1996 Annual ECAC Application
SCE filed its testimony on May 3, 1996, requesting a finding that its fuel
and purchased power costs, including purchases from QFs recorded during
the period April 1, 1995, through March 31, 1996, were reasonable. The QF
reasonableness testimony supports the reasonableness of SCE's
administration of 396 QF contracts, including the restructuring or buyout
of certain contracts. The non-QF testimony supports the reasonableness of
other power purchases and exchanges, and the operation of hydroelectric,
coal, gas and nuclear resources.
SCE requested and obtained an expedited finding of reasonableness by the
CPUC for an agreement it signed with Portland General Electric (PGE),
terminating a long-term power purchase contract. On December 9, 1996, the
CPUC issued a decision finding the termination of the agreement
reasonable. Additionally, as the final part in the approval process, PGE
page 16
and SCE filed notices of cancellation of the agreement with the FERC to be
effective December 31, 1996. The FERC has accepted the notices of
cancellation.
Review by the ORA of the non-QF operations has been consolidated with its
review in the 1997 Annual ECAC Application. The ORA's report was issued'
on August 18, 1997. (See "1997 Annual ECAC Application" below.) No date
has been scheduled for the ORA's report on QF reasonableness.
1997 Annual ECAC Application
On May 30, 1997, SCE filed its annual reasonableness report requesting
that the CPUC find reasonable its fuel and purchased-power costs,
including purchases from QFs recorded during the period of April 1, 1996,
through March 31, 1997. The QF testimony supports the reasonableness of
the SCE's administration of its QF contracts, including two QF
settlements. The non-QF testimony supports the reasonableness of other
power purchases and exchanges, fuel costs and the operation of hydro,
coal, gas and nuclear resources.
The ORA's review of the non-QF operations and costs has been consolidated
with its review of the non-QF operations and costs in the 1996 ECAC
Application. The ORA filed its report on August 18, 1997. In its report,
the ORA recommended, among other things, (1) a disallowance of $360,000
associated with an outage at the coal-fired Four Corners Generating
Station and (2) a $200,000 adjustment to the costs recorded in SCE's
Catastrophic Events Memorandum Account. Hearings took place in January
1998. A CPUC decision is expected by July 1998. No date has been
scheduled for the ORA's report on QF reasonableness.
Palo Verde
In January 1997, the CPUC authorized a further acceleration of the
recovery of its remaining investment of $1.2 billion in Palo Verde Units
1, 2 and 3. The accelerated recovery will continue through December 2001,
earning a 7.35% fixed rate of return. The accelerated plant recovery, as
well as future operating costs, including nuclear fuel and nuclear fuel
financing costs, and incremental capital expenditures, are subject to
balancing account treatment through 2001. Beginning January 1, 1998, the
balancing account became part of 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. Beginning in 2002, SCE will be required to share equally with
ratepayers the net benefits received from operation of Palo Verde.
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 $3.7 billion in 1997, an
11.9% increase over 1996.
page 17
SCE's sources of energy during 1997 were: purchased power 49%; natural gas
16%; nuclear 17%; coal 12%; and hydro 6%.
Average fuel costs, expressed in cents per kilowatt-hour, for the year
ended December 31, 1997, were: oil, 8.53 cents; natural gas, 3.39 cents;
nuclear, 0.48 cents; and coal, 1.32 cents.
Natural Gas Supply
As a result of the sale of 11 of its 12 gas-fired generating stations, SCE
has terminated four long-term natural gas supply and three long-term gas
transportation contracts which had been used to import gas from Canada.
In addition, SCE has exercised the option under its 15-year gas
transportation commitment with El Paso Natural Gas Company to reduce its
capacity obligation from 200 million to 130 million cubic feet per day.
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. The Nuclear Waste Policy Act of
1982 requires that the DOE provide for the disposal of utility
spent nuclear fuel beginning January 31, 1998. The DOE defaulted
on its obligation to begin acceptance of spent nuclear fuel from
San Onofre. Dry cask storage either on-site or at another location
will be required to permit continued operations beyond the date
indicated above.
Participants at Palo Verde have contractual agreements for uranium
concentrates to meet projected requirements through 2000. Independent of
arrangements made by other participants, SCE will furnish its share of
uranium concentrates requirement through at least 1998 from existing
contracts. Contracts cover requirements to provide conversion through
2000, enrichment through 2002, and fabrication through 2016.
Palo Verde on-site spent fuel storage capacity will accommodate needs
through 2002 for Units 1 and 2, and through 2003 for Unit 3.
Year 2000 Issue
Many of SCE's existing computer systems identify a year by using only two
digits instead of four. If not corrected, these programs could fail or
create erroneous results when encountering dates in 2000 or later. This
situation has been referred to generally as the Year 2000 Issue.
SCE has developed plans and is addressing the programming changes that it
has determined are necessary in order for its computer systems to function
properly beginning in 2000. Remediation of SCE's key financial systems
for the Year 2000 Issue was completed in 1997. SCE's informational and
page 18
operational systems have been assessed, and detailed plans have been
developed to address modifications required to be completed, tested and
operational by December 31, 1999. Preliminary estimates of the costs to
complete these modifications, including the cost of new hardware and
software application modifications, range from $55 million to $80 million,
about half of which are expected to be capital costs. Current rate levels
for providing electric service should be sufficient to provide funding for
these modifications. Remediation of existing critical systems is expected
to be 75% complete by the end of 1998. SCE expects its Year 2000 date
conversion project to be completed on a timely basis, with no material
adverse impact to its results of operations or financial position.
SCE's Year 2000 date conversion project includes an assessment of critical
interfaces with the computer systems of others and it does not expect a
material adverse effect on its operating and business functions from the
Year 2000 Issue.
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, 1997, 1996 and 1995, see Note 12 of Notes to
Consolidated Financial Statements contained in Edison International's 1997
Annual Report to Shareholders incorporated by reference in this report.
Edison Mission Energy: EME, primarily through its subsidiary
corporations, is engaged in the business of developing, acquiring, owning,
and operating electric power generation facilities worldwide. At December
31, 1997, EME subsidiaries held interests in 27 domestic and 24
international operating power production facilities with an aggregate
power production capability of 7,418 MW, of which 5,180 MW are
attributable to EME's interests. These operating facilities are located
in California, Florida, Nevada, New Jersey, New York, Virginia,
Washington, West Virginia, Australia, Spain and the United Kingdom. In
addition, facilities aggregating more than 1,922 MW, of which EME's
anticipated share is approximately 887 MW, are in the construction stage.
EME owns interests in oil and gas producing operations and related
facilities in various U.S. locations. During the second quarter of 1997,
EME completed the sale of its ownership interest in B.C. Star Partners for
approximately $71 million. EME recorded an after-tax gain of
approximately $14 million on the sale.
EME's activity in the Asia Pacific region commenced in December 1992 with
the acquisition of a 51% interest of the 1,000-MW Loy Yang B Power Station
(Loy Yang B) from the State Government of Victoria (State), Australia's
first electric privatization effort. In May 1997, a subsidiary of EME
acquired the State's 49% interest in Loy Yang B. 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 construction 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, with commercial operation expected in the first half of 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%.
page 19
Construction on the two-unit Paiton project is approximately 85% complete.
The tariff is higher in the early years and steps down over time, and the
tariff for the Paiton project includes infrastructure to be used in common
by other units at the Paiton complex. The plant's output is fully
contracted with the state-owned electricity company for payment in United
States (U.S.) dollars. The projected rate of growth of the Indonesian
economy and the exchange rate of Indonesian Rupiah into U.S. dollars have
deteriorated significantly since the Paiton project was contracted,
approved and financed with substantial finance and insurance support from
the Export-Import Bank of the United States, The Export-Import Bank of
Japan, the U.S. Overseas Private Investment Corporation and the Ministry
of International Trade and Industry of Japan. The Paiton project's senior
debt ratings have been reduced from investment grade to speculative grade
based on the rating agencies' perceived increased risk that the state-
owned electricity company might not be able to honor the electricity sales
contract with Paiton. A Presidential decree has deemed some power plants,
but not including the Paiton project, subject to review, postponement or
cancellation. EME continues to monitor the situation closely.
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, EME purchased
all of the outstanding shares of First Hydro Company (First Hydro) for
approximately $1 billion (653 million pounds sterling). First Hydro's
principal assets are 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 revenue: (i)
selling power into the electricity trading market or "pool" in England and
Wales, (ii) providing 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 (U.S. $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
page 20
Istanbul, Turkey. The 180-MW combined-cycle, gas-fired cogeneration
facility is expected to commence commercial operations in 1999. In April
1997, EME completed financing and commenced construction of the Doga
project.
At December 31, 1997, EME had total consolidated assets of $5 billion and
for the year then ended, had consolidated operating revenue of $975
million and consolidated net income of $115 million.
Currently, most of EME's domestic operating power production facilities
have QF status under the 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 four
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.
EME competes with many other companies, including multinational
development groups, equipment suppliers and other independent power
producers (including affiliates of utilities), in selling electric power
and steam, and with electric utilities in obtaining the right to install
new generating capacity. Over the past decade, obtaining a power sales
contract with a utility has generally become a progressively more
difficult, expensive and competitive process. Many power sales contracts
are now awarded by competitive bidding, which both increases the costs of
obtaining such contracts and decreases the chances of obtaining such
contracts. As a result of competition, it may be difficult to obtain a
power sales agreement for a proposed project, and the prices offered in
new power sales agreements for both electric capacity and energy may be
less than the prices in prior agreements. EME evaluates each potential
project in an effort to determine when the probability of success is high
enough to justify expenditures in developing a proposal or bid for the
project.
Amendments to the Holding Company Act made by the Energy Policy Act have
increased the number of competitors in the domestic independent power
industry by reducing certain restrictions applicable to projects that are
not QFs under PURPA. The offering of unbundled retail distribution
service in certain states, through legislation or regulatory order, could
also lead to increased competition in the independent power market.
Edison Capital: Edison Capital, primarily through its subsidiary
corporations, is a provider of capital and financial services for energy
and infrastructure projects domestically and abroad. Its investments
include interests in nuclear power, cogeneration, electric transmission,
waste-to-energy, hydroelectric, transportation, telecommunications, and
affordable housing facilities. Since its inception in 1987, Edison
Capital has invested in approximately 300 projects.
In 1997, Edison Capital strengthened its presence in global energy and
infrastructure markets by investing $356 million in the Netherlands, South
Australia, and Latin America. Edison Capital acquired an interest in the
new Eems Power Station, operated by EPON, the largest power generation
company in the Netherlands. The investment in this cross-border lease
transaction is approximately $188 million. Edison Capital also acquired
an interest in the electric power transmission system for South Australia,
investing $161 million in a cross-border lease of the system.
page 21
Edison Capital's participation in the $1 billion AIG/GE Capital Latin
American Infrastructure Fund has been very active since its formation in
1996. The fund has committed to investments in energy, telecommunications
and transportation projects in Bolivia, Brazil, Mexico, Trinidad and
Argentina. Edison Capital has also co-invested with the Latin Fund in a
methanol production facility in Trinidad. Edison Capital also has entered
into investment commitments for infrastructure projects in Scotland and
Bolivia.
In 1997, Edison Capital continued to expand its affordable housing
portfolio with the investment of a record of $164 million in 63 projects.
Edison Capital placed 41 projects in service, also a record high, and 70%
more than in 1996, and has committed $217 million to 83 new projects to be
placed in service in 1998 and 1999. The strength of Edison Capital's
affordable housing portfolio was proven with the closing of five
syndications of housing commitments to four major institutional investors.
At year's end, Edison Capital's portfolio included 279 projects, totaling
20,714 units of housing.
Edison Capital also acquired the John Stewart Company, a leading
diversified management company specializing in affordable housing. By
acquiring the John Stewart Company, Edison Capital will be able to expand
the services it offers and draw upon the John Stewart Company's expertise
to enhance Edison Capital's leadership in the affordable housing market.
At December 31, 1997, Edison Capital had total consolidated assets of $1.8
billion and, for the year then ended, consolidated revenue of $138 million
and net income of $60.8 million.
Edison Capital competes regularly with other equity investors in the
highly structured transaction market. These firms include money center
banks, major finance and lease companies, affiliates of various public
utilities and other Fortune 500 firms. Prior to the permanent extension
of the low-income housing tax credits in 1993, competition in the
affordable housing market was limited to several major corporations and
public tax credit funds. Since the tax credits were permanently extended
by Congress, competition for projects with tax credits increased
significantly. Edison Capital plans to maintain market share by providing
value added services to sponsors, working closely with both sponsors and
lenders to facilitate the financing of projects, providing development
loans to sponsors, and possibly developing projects on a limited basis.
Mission Land Company: Mission Land is engaged, directly and through its
subsidiaries, in the business of developing, owning and managing
industrial parks and other real property investments. In 1997, Mission
Land continued to implement its plan to exit the real estate business in
an orderly manner and to recover a substantial amount of the outstanding
investment. Real estate assets have been reduced substantially from peak
levels in 1992. Mission Land is in the final stages of executing its plan
to sell off most of its remaining assets. At December 31, 1997, Mission
Land had total consolidated assets of $148 million and, for the year then
ended, consolidated operating revenue of $106 million and net income of
$0.9 million.
Edison Enterprises: Edison Enterprises was organized to own the stock and
coordinate the activities of Edison International's retail products and
services business. Consolidation of the retail business under Edison
Enterprises will enable them to take advantage of shared staff resources
and realize economies of scale as they expand into new markets. The
current Edison Enterprises wholly owned subsidiaries are Edison EV, Edison
Select, Edison Source, and Edison Utility Services.
Edison EV: Edison EV is engaged in the business of providing services
related to electric vehicles, including the distribution and installation
of electric vehicle charging equipment. Edison EV has supplemented its
existing alliances with General Motors and Saturn Corporation by forming
page 22
ties to American Honda Motor Company, Toyota Motor Sales, Ford Motor
Company, and to additional electric vehicle charging manufacturers, to
serve electric vehicle customers nationwide.
Edison Select: Edison Select is engaged in the business of providing home
services to consumers and currently markets electrical, appliance, and
computer repair services under the Edison OnCall name, as well as
providing security services through Edison Security Services. By the end
of 1997, Edison Select had signed up more than 60,000 customers for these
new retail products and services.
Edison Source: Edison Source is engaged in the business of integrated
energy outsourcing and retail energy sales. Integrated energy outsourcing
services include the energy efficient retrofit, operation, and maintenance
of refrigeration, heating, ventilating, air conditioning, lighting and
other electrical systems equipment. Retail energy services include
EarthSource, one of the first renewable energy products available to
residential and small business customers in California's new electricity
marketplace.
Edison Utility Services: Edison Utility Services, formed in December of
1997, will offer a diverse range of services to electric utilities in the
U.S. and Canada, including billing, outage management, and transmission
and distribution outsourcing.
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.
SCE has signed agreements to sell 11 of its 12 oil- and gas-fueled
generating plants, and expects those sales to close by March 31, 1998.
SCE is also seeking to sell the twelfth plant. Any of the sold plants
which remain in operation will continue to be operated by SCE for at least
two years following the sale.
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, a coal-fueled steam electric generating plant in New
Mexico. Palo Verde and Four Corners 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 1997, 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, Four Corners, 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
page 23
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 1997, SCE's peak demand was 19,118 MW, set on September 4, 1997. Total
area system operating capacity of 21,511 MW was available to SCE at the
time of the 1997 peak.
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 $2.8 billion principal amount was outstanding at
December 31, 1997. 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 Four Corners 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
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 $685 million in
1997, $616 million in 1996 and $773 million in 1995. Construction
expenditures for the 1998-2002 period are forecasted at $3.9 billion.
In addition to cash required for construction expenditures for the next
five years as discussed above, $2.8 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 2002 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.
page 24
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 General
Rate Case (GRC) rejected a settlement agreement proposed by SCE, SDG&E and
the 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 SCE's 1995 GRC 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 of
7.35%, but on an accelerated basis during the eight-year period from the
effective date in 1996 through December 31, 2003. Under Assembly Bill
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 an
incentive pricing plan, 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. Assembly Bill 1890 allowed continuation of the incentive
pricing plan 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 revenue earned through the
incentive pricing plan. 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.
On July 16, 1997, the CPUC approved SCE's request to transfer the recorded
net investment in San Onofre Units 2 and 3 step-up transformers to San
Onofre Units 2 and 3 sunk costs for recovery by December 31, 2001, at a
reduced rate of return of 7.35%.
On August 21, 1997, the CPUC approved SDG&E and SCE's Joint Petition to
Modify, requesting continued recovery of certain corporate administrative
and general costs allocable to San Onofre Units 2 and 3, at rates of 0.28 cent
and 0.21 cent per kWh, respectively, for the period January 1, 1998 through
December 31, 2003.
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
of 7.35% consistent with AB 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
page 25
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 1992, the CPUC approved a settlement agreement between SCE and the ORA
to discontinue operation of Unit 1 at the end of its then-current fuel
cycle. 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.
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. However, during the Unit 2 scheduled refueling and
inspection outage, which was completed in Spring 1997, an increased rate
of degradation was identified, which resulted in the removal of more tubes
from service than had been expected. The steam generator design allows
for the removal of up to 10% of the tubes before the rating
capacity of the unit must be reduced. As a result of the increased
degradation, a mid-cycle outage was conducted in February 1998 for Unit 2.
The results of that outage are still being evaluated.
During Unit 3's refueling outage, which was completed in July 1997,
inspections of structural supports for steam generator tubes identified
several areas where the thickness of the supports had been reduced,
apparently by erosion during normal plant operation. As a result, a mid-
cycle outage is planned for early 1998. However, during Unit 2's Spring
1997 outage and the February 1998 mid-cycle outage, similar tube supports
showed no signs of such erosion.
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,
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
page 26
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. In December 1997, the Palo Verde
participants unanimously agreed to purchase two spare steam generators at
a cost of approximately $82 million; however, SCE has not yet decided
whether it supports replacement of the Unit 2 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 $2.1 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 accrued and recovered through non-
bypassable customer rates over the terms of each nuclear facility's
operating license, are recorded as a component of depreciation expense.
Decommissioning expense was $154 million in 1997, $148 million in 1996 and
$151 million in 1995. The accumulated provision for decommissioning
was $1.1 billion at December 31, 1997, and $949 million at December 31,
1996. The estimated costs to decommission San Onofre Unit 1 ($280 million
in 1993 dollars) 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 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 NRC 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
page 27
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 $28 million per year.
Insurance premiums are charged to operating expense.
Item 3. Legal Proceedings
Edison International
Tradename Litigation
On September 30, 1997, an action was filed against Edison International in
the United States District Court for the Southern District of New York
alleging trademark infringement under the Lanham Act and related state
causes of action for unfair competition. The complaint requested
injunctive relief restraining Edison International from using various
tradenames and trademarks utilizing the "Edison" name and sought to
recover unspecified damages in profits from Edison International allegedly
arising from infringing activities. On November 19, 1997, Edison
International filed and served its answer to the complaint denying all of
the substantive allegations and asserting affirmative defenses. After an
initial status conference, the court stayed discovery in this matter to
allow the parties to discuss a resolution of the matter. Such discussions
are continuing and the stay of discovery has been extended by agreement of
the parties.
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., 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,
asserting general monetary claims in excess of $13 million under the
construction turnkey agreement. Edison International believes that the
outcome of this litigation will not have a material adverse effect on its
financial position or results of operations.
Southern California Edison Company
Qualifying Facilities 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 EME (a subsidiary of
Edison International) at the time of filing. In April 1996, EME'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 allege in the fourth
amended complaint that past underpayments have totaled at least $21
million. In other court filings, plaintiffs contend that additional
page 28
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. SCE intends to seek recovery of this payment
through rates. SCE 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, SCE 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, SCE 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 start on April 23, 1997.
This hearing date was subsequently vacated by the assigned administrative
law judge due to ongoing discussions to resolve issues raised by the ORA's
protest. As a result of those discussions, SCE and the ORA entered into
a stipulation and agreement (Stipulation) effective July 11, 1997. In the
Stipulation, the ORA agrees to withdraw its protest and support SCE's
application in return for SCE's agreement that the cost recovery issues
presented in the application may be transferred for a decision in SCE's
1992 ECAC proceeding, where related issues are currently pending. The
Stipulation further provides for SCE and the ORA to file a joint motion
for approval of the Stipulation. The motion was filed on September 25,
1997. In light of the Stipulation, plaintiffs and SCE have entered into
two amendments to the May 1, 1996, settlement agreement. The first
amendment provides for the post-1995 portion of the settlement to become
effective through 1997 upon CPUC approval consistent with the Stipulation.
The second amendment resulted in plaintiffs dismissing the lawsuit without
prejudice pending final CPUC resolution of the issues raised by SCE's
application. On December 16, 1997, the CPUC issued a decision which
approves the application subject to the terms of the Stipulation. In
light of this decision, SCE has supplemented its testimony in the 1992
ECAC proceeding to support its request to recover its costs of settlement.
Hearings in the 1992 ECAC began on March 9, 1998, and are scheduled to
conclude on approximately March 20, 1998.
Wind Generators' Litigation
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
page 29
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.
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.
Shortly thereafter, on April 3, 1996, pursuant to stipulation of the
parties, the Kern County case was ordered to be coordinated with the Los
Angeles cases so that it too will be tried in Los Angeles. Trial of the
consolidated cases, beginning with the lead case, commenced on March 10,
1997. The consolidated cases are to be tried one after another in
bifurcated fashion with the liability phase of each and all of the cases
to be tried before commencement of the damages phase, if applicable.
Testimony and arguments in the liability phase of the lead case concluded
on May 20, 1997. On July 7, 1997, the court issued a tentative decision
which effectively would resolve all liability issues in the lead case in
SCE's favor. A proposed Statement of Decision consistent with the
conclusions in the tentative decision was submitted by SCE and argument on
the same took place at a hearing on October 31, 1997. The hearing was not
concluded at that time and further argument took place on November 17,
1997. On December 22, 1997, the judge ruled on the objections raised at
the two hearings and ordered SCE to prepare a proposed Statement of
Decision incorporating her ruling. SCE submitted this document to the
court on January 13, 1998. At a hearing on February 4, 1998, the court,
after considering additional objections to parts of the proposed order,
directed SCE to prepare a further, revised order which would not
materially change the court's previous, tentative rulings. This final
statement of decision was filed on February 6, 1998. In addition, on
February 20, 1998, the court entered a judgment against the lead
Plaintiff. The court also scheduled another status and trial setting
conference for April 2, 1998.
Geothermal Generators' Litigation
On June 9, 1997, SCE filed a complaint in Los Angeles Superior Court
against another independent power producer of geothermal generation and
five of its affiliated entities (collectively the "Defendants"). SCE
alleges that in order to avoid power production plant shutdowns caused by
excessive noncondensable gas in the geothermal field brine, the Defendants
routinely vented highly toxic hydrogen sulfide gas from unmonitored
release points beginning in 1990 and continuing through at least 1994, in
violation of applicable federal, state and local environmental law.
According to SCE, these violations constituted material breaches by the
Defendants of their obligations under their contracts and applicable law.
The complaint seeks termination of the contracts and damages for excess
power purchase payments made to the Defendants. The Defendants' motion to
transfer venue to Inyo County Superior Court was granted on August 31,
1997.
On December 19, 1997, SCE filed a second amended complaint in response to
which the Defendants filed a motion to strike, which was argued and taken
under submission by the court on March 13, 1998. The Defendants also
filed a motion for summary judgment, set for hearing on March 19, 1998,
asserting that SCE's claims are time-barred or were released in connection
with the settlement of prior litigation among some of the Defendants and
two of SCE's affiliates, Mission Power Engineering, and The Mission Group
(the Mission Parties). SCE asserts that the earlier settlement does not
bar the claims it is prosecuting in this matter and that these claims are
page 30
not time-barred. SCE has filed its opposition to the motion for summary
judgment and will shortly file a supplemental opposition to address
certain additional matters raised by the Defendants. SCE has also filed
a cross motion for summary adjudication with respect to the issues raised
in Defendants' summary judgment motion. No hearing date has been
scheduled for SCE's motion for summary adjudication. In addition, the
Defendants have filed a motion to stay SCE's case pending resolution
of certain technical issues by the Great Basin Air Quality Management
District under the doctrine of primary jurisdiction. The motion was heard
for hearing on March 13, 1998, and the matter was taken under submission
at that time.
The Defendants have also asserted various claims against SCE and the
Mission Parties in a cross-complaint filed in the action commenced by SCE
as well as in a separate action filed against SCE by three of the
Defendants in Inyo County Superior Court. Following a hearing on November
20, 1997, the court consolidated these actions for all purposes and
ordered the Defendants to file a second amended cross-complaint.
The second amended cross-complaint asserts nineteen causes of action
against SCE, three of which are also asserted against the Mission Parties.
Included are claims for declaratory relief; breach of the implied covenant
of good faith and fair dealing; inducing breach of employee agreements;
breach of contract; disparagement, and slander per se; injunctive relief
and restitution for unfair business practices; anticipatory breach of
contract; violation of Public Utilities Code Sections 453, 707 and 2106;
and negligent and intentional misrepresentation. Several of these claims
are premised on the theory that SCE has incorrectly interpreted the cross-
complainants' contracts as providing for only a single "fixed price"
period in view of the fact that the cross-complainants developed their
projects in phases. This theory has also been asserted by other
independent power producers in litigation pending in Los Angeles Superior
Court. (See, "Wind Generation Litigation" above.) SCE filed a demurrer
to, and a motion to strike, in response to the second amended cross-
complaint, both of which were argued on March 13, 1998, and taken under
submission by the court.
Based on the common issues asserted in the Wind Generation Litigation and
the Defendants' second amended cross-complaint, SCE filed a petition to
coordinate the consolidated actions pending in Inyo County Superior Court
with the Wind Generation Litigation pending in Los Angeles Superior Court.
In connection with the petition to coordinate, SCE has also applied for a
stay of all proceedings in Inyo County. Both the petition to coordinate
and the application for stay will be decided by the judge presiding in the
Wind Generation Litigation. A hearing has been scheduled with respect to
both SCE's petition to coordinate and the application for stay on March
30, 1998.
Discovery is at a very preliminary stage, and it is reasonable to
anticipate that there will be further amendments to the pleadings. The
materiality of net final judgments against SCE in these actions would be
largely dependent on the extent to which any damages or additional
payments which might result therefrom are recoverable through rates.
Electric and Magnetic Fields (EMF) Litigation
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
page 31
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. Although stayed for a time pending
appellate review of sanctions imposed against plaintiffs' attorneys by the
trial court, the case has been remanded back to the trial court following
the Court of Appeal's decision modifying the sanctions order. To date, no
further proceedings have been scheduled.
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' 15 claims. SCE's April 20, 1995, answer to the complaint
denied 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. Oral argument on the appeal took
place on December 4, 1997, and the matter is now under submission. All
trial court proceedings have been stayed pending the ruling of the Court
of Appeals. The impact on SCE, if any, from further proceedings in this
case against the remaining defendants cannot be determined at this time.
page 32
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. Oral
argument on the appeal took place on December 4, 1997, and the matter is
now under submission. 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 on 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. SCE's motion for
summary judgment was denied on April 9, 1997. The trial in this case took
place over approximately 22 days between January and March 1998 and
resulted in a jury verdict for both defendants. It is not known whether
plaintiffs will move for a new trial and/or appeal.
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
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
page 33
claims of the former worker and her husband with prejudice. This case is
expected to go to trial in mid-1998, after completion of the trial court
proceedings in the case described in the preceding paragraph.
On November 20, 1997, a former contract worker at San Onofre and his wife
sued SCE in the Superior Court of California, County of San Diego. The
contract worker was an ironworker at San Onofre during a portion of 1995.
The suit alleges that SCE allowed dangerous conditions to exist at San
Onofre, causing him to sustain unspecified personal injuries. His wife
alleges loss of consortium and other general damages. The case has been
removed to the U.S. District Court for the Southern District of
California. SCE filed a motion on January 6, 1998, asking that the case
be converted to a Price-Anderson cause of action.
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
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.
On June 30, 1997, SCE filed an answer to the complaint denying the
substantive allegations and raising appropriate defenses. Plaintiff and
SCE reached a settlement of this dispute for nonmonetary compensation. An
agreement to dismiss the lawsuit was filed with the court on February 8,
1998.
False Claims Act Litigation
In September 1997, SCE became aware of a complaint filed in the Southern
District of the U.S. District Court of California by a San Onofre
employee, acting at his own initiative on behalf of the United States
under the False Claims Act, against SCE and SDG&E. The complaint alleges
that SCE and SDG&E have submitted fraudulent claims to the United States
government, the State of California and their customers resulting in $491
million in overpayments ($383 million of which is attributed to SCE). The
employee alleges that SCE and SDG&E provided the CPUC with data which
inflated projected costs at San Onofre while minimizing projected revenue,
resulting in the CPUC setting inflated rates. The amount sought in this
complaint is subject to trebling, plus civil penalties of $10,000 per
false claim submitted for payment (for an unspecified number of claims).
SCE and SDG&E filed separate motions to dismiss this lawsuit on November
6, 1997. The employee responded to both motions on December 20, 1997.
SCE and SDG&E replied to the employee's response on January 13, 1998.
Oral argument on the motion to dismiss was heard on January 20, 1998, and
the court has the matter under submission.
Mohave Generating Station Environmental Litigation
On February 19, 1998, the Sierra Club and the Grand Canyon Trust filed
suit against SCE. Mohave is operated by SCE, and SCE is one of several
co-owners. The lawsuit alleges that Mohave has been violating various
provisions of the Clean Air Act, the Nevada state implementation plan,
and applicable pollution permits relating to opacity and sulfur dioxide
emission limits over the last five years. The plaintiffs seek declaratory
and injunctive relief as well as civil penalties. Under the Clean Air
Act, the maximum civil penalty obtainable is $25,000 per day of violation.
page 34
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, 1997 Company Position Effective Date
- ----------------- --------------- ---------------- --------------
John E. Bryson 54 Chairman of the Board, Chief October 1, 1990
Executive Officer and Director
Bryant C. Danner 60 Executive Vice President June 1, 1995
and General Counsel
Alan J. Fohrer 47 Executive Vice President and September 1, 1996
Chief Financial Officer
Theodore F. Craver, Jr. 46 Senior Vice President and February 18, 1998
Treasurer
William J. Heller 41 Senior Vice President, January 1, 1996
Strategic Planning and New
Business Development
Robert G. Foster 50 Senior Vice President, November 21, 1996
Public Affairs
Richard K. Bushey 57 Vice President and July 21, 1988
Controller
Thomas J. Higgins 52 Vice President, January 1, 1996
Corporate Communications
Beverly P. Ryder 47 Corporate Secretary January 1, 1996
__________
(1) Executive Officers are defined by Rule 3b-7 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended.
Pursuant to this rule, the Executive Officers of Edison International
include certain elected officers of Edison International and its
subsidiaries SCE, Edison Mission Energy, Edison Capital, and Edison
Enterprises, all of whom may be deemed significant policy makers of
Edison International.
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 of SCE. Each of the elected executive officers of Edison
International has been actively engaged in the business of Edison
International for more than five years except Theodore F. Craver,
Jr., William J. Heller, and Thomas J. Higgins. 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:
page 35
Bryant C. Danner Senior Vice President and July 1992 to May 1995
General Counsel of Edison
International and SCE
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
Theodore F. Craver, Jr. Vice President and Treasurer of Edison September 1996 to February 1998
International and SCE
Executive Vice President and September 1990 to August 1996
Corporate Officer, First Interstate
Bancorp(4)
William J. Heller Partner, Management Consulting August 1982 to December 1995
firm of McKinsey and Company(1)(4)
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
Thomas J. Higgins Vice President, Corporate Communications April 1995 to January 1996
of SCE
President, The Laurel January 1994 to December 1994
Company(2)(4)
Senior Vice President of Blue October 1990 to December 1993
Cross/Blue Shield of Maryland(4)
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
______________
(1) 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.
(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 Edison
International.
page 36
SCE
Age at
December Effective
Executive Officer(1) 31, 1997 Company Position Date
- ----------------- -------- ---------------- ---------
John E. Bryson 54 Chairman of the Board, October 1, 1990
Chief Executive Officer
and Director
Stephen E. Frank 56 President, Chief Operating June 19, 1995
Officer and Director
Bryant C. Danner 60 Executive Vice President June 1, 1995
and General Counsel
Alan J. Fohrer 47 Executive Vice President and September 1, 1996
Chief Financial Officer
Harold B. Ray 57 Executive Vice President, June 1, 1995
Generation Business Unit
Theodore F. Craver, Jr. 46 Senior Vice President and Treasurer February 18, 1998
John R. Fielder 52 Senior Vice President, Regulatory February 18, 1998
Policy and Affairs
Robert G. Foster 50 Senior Vice President, November 21, 1996
Public Affairs
Richard M. Rosenblum 47 Senior Vice President, February 18, 1998
T&D Wires Business Unit
Pamela A. Bass 50 Vice President, Customer June 1, 1996
Solutions Business Unit
Richard K. Bushey 57 Vice President and Controller January 1, 1984
Bruce C. Foster 45 Vice President, San Francisco January 1, 1995
Regulatory Affairs
Thomas J. Higgins 52 Vice President, Corporate April 1, 1995
Communications
Beverly P. Ryder 47 Corporate Secretary January 1, 1996
______________
(1) Executive 0fficers, Bryson, Danner, Fohrer, Craver, Robert Foster,
Bushey, 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
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, Theodore F. Craver, Jr., Bruce C. Foster, Thomas J. Higgins, 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(1)
Bryant C. Danner Senior Vice President and July 1992 to May 1995
General Counsel of Edison
International and SCE
page 37
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
Theodore F. Craver, Jr. Vice President and Treasurer, SCE September 1996 to February 1998
Executive Vice President and Corporate September 1990 to August 1996
Treasurer, First Interstate Bancorp(1)
John R. Fielder Vice President, Regulatory Policy February 1992 to January 1998
and Public Affairs
Robert G. Foster Vice President, Public Affairs November 1993 to January 1996
Regional Vice President, Sacramento January 1988 to October 1993
Office
Richard M. Rosenblum Vice President, Distribution January 1996 to January 1998
Business Unit
Vice President, Nuclear Engineering June 1993 to December 1995
and Technical Services
Manager of Nuclear Regulatory Affairs June 1989 to May 1993
Bruce C. Foster Regional Vice President, San Francisco January 1992 to December 1994
Office
Thomas J. Higgins Vice President, Corporate Communications April 1995 to January 1996
President, The Laurel Company(1)(2) January 1994 to December 1994
Senior Vice President of Blue October 1990 to December 1993
Cross/Blue Shield of Maryland(3)
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
______________
(1) This entity is not a parent, subsidiary or other affiliate of SCE.
(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.
The Nonutility Companies
Age at December
Executive Officer 31, 1997 Company Position Effective Date
- ----------------- --------------- ---------------- --------------
Alan J. Fohrer 47 Vice Chairman of the Board, May 20, 1993
Edison Mission Energy
Edward R. Muller 45 President and Chief Executive August 23, 1993
Officer, Edison Mission Energy
Robert M. Edgell 50 Executive Vice President, April 1, 1988
Edison Mission Energy
page 38
Thomas R. McDaniel 48 President and Chief Executive March 1, 1992
Officer, Edison Capital
President and Chief Executive September 1, 1987
Officer, Mission Land Company
Stephen E. Pazian 48 President and Chief Executive June 19, 1997
Officer, Edison Enterprises
Chairman and Chief Executive June 19, 1997
Officer, Edison Source and
Edison Select
Chairman, Edison EV May 1, 1997
______________
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 or SCE for more than five years except for Edward R.
Muller and Stephen E. Pazian. 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
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)(3)
Vice President, Secretary and October 1991 to August 1993
General Counsel of Biowhittaker,
Inc.(2)(3)
Thomas R. McDaniel President and Chief Executive Officer, August 1987 to March 1992
Edison Capital
Stephen E. Pazian President and Chief Executive May 1997 to June 1997
Officer, Edison Source
President, Ameritech Security Monitoring(3) January 1996 to April 1997
President and Chief Executive Officer, April 1989 to December 1995
BellSouth MobileComm(3)
______________
(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) This entity is not a parent, subsidiary or other affiliate of Edison
International.
page 39
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, 1997,
("Annual Report") under "Quarterly Financial Data" on page 33 and under
"Shareholder Information" on page 57, and is incorporated by reference
pursuant to General Instruction G(2). The number of Common Stock
shareholders of record was 104,567 on March 23, 1998. Additional
information concerning the market for Edison International's Common Stock
is set forth on the cover page hereof.
Item 6. Selected Financial Data
Information responding to Item 6 is included in the Annual Report under
"Selected Financial and Operating Data: 1993-1997" on page 56, 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 33 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 page 33 under "Quarterly Financial Data," and on pages 35, 36,
37, 38, and 39 through 53 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 16, 1998, under the
heading, "Election of Directors of Edison International and SCE" on pages
3 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 20, 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
page 40
of Certain Shareholders" on page 31, 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 Relationships and Transactions of Nominees and
Executive Officers" on pages 22 through 25, and is incorporated herein by
reference pursuant to General Instruction G(3).
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements
The following items contained in the Annual Report are found on pages 23
through 53, 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, 1997,
1996 and 1995
Consolidated Balance Sheets -- December 31, 1997, and 1996
Consolidated Statements of Cash Flows -- Years Ended December 31, 1997,
1996 and 1995
Consolidated Statements of Retained Earnings -- Years Ended December
31, 1997, 1996 and 1995
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 42
Schedule I--Condensed Financial
Information of Parent 43
Schedule II--Valuation and Qualifying Accounts for the
Years Ended December 31, 1997, 1996 and 1995 45
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 49 of this report.
(b) Reports on Form 8-K
December 8, 1997
Item 5: Other Events: Sale of Southern California Edison
Company's 10 Gas-fired Generating Plants
December 17, 1997
Item 5: Other Events: Rate Reduction Bonds Sold
February 13, 1998
Item 5: Other Events: Sale of Southern California Edison
Company's Long Beach Gas-fired
Generating Plant
page 41
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 1997 Annual Report
to Shareholders of Edison International incorporated by reference in this
Form 10-K, and have issued our report thereon dated January 30, 1998. 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 30, 1998
page 42
Edison International
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF PARENT
CONDENSED BALANCE SHEETS
December 31,
----------------------------
1997 1996
---------- ----------
(In thousands)
Assets:
Cash and equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 273,603 $ 34,689
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,969 125,820
---------- ----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 411,572 160,509
Investments in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 5,128,793 6,552,631
Other deferred debits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344 209
---------- ----------
Total assets $5,540,709 $6,713,349
========== ==========
Liabilities and Shareholders' Equity:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,536 $ 1,877
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 99,020 313,029
---------- ----------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 101,556 314,906
Other deferred credits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,296 1,211
Common shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . 5,436,857 6,397,232
---------- ----------
Total liabilities and shareholders' equity . . . . . . . . . . . . . . . . $5,540,709 $6,713,349
========== ==========
CONDENSED STATEMENTS OF INCOME
For the Years Ended December 31, 1997, 1996, and 1995
1997 1996 1995
-------- -------- --------
(In thousands, except per-share amounts)
Operating revenue and other income. . . . . . . . . . . . . . . $ 38,648 $ 29,539 $ 19,408
Operating expenses and interest expense . . . . . . . . . . . . 65,262 42,908 26,741
. . . . . . . . . . . . . . . . . . . . . . . . . . . . -------- -------- --------
Loss before equity in earnings of subsidiaries. . . . . . . . (26,614) (13,369) (7,333)
Equity in earnings of subsidiaries. . . . . . . . . . . . . . . 726,470 730,117 746,469
. . . . . . . . . . . . . . . . . . . . . . . . . . . . -------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . . . $699,856 $716,748 $739,136
. . . . . . . . . . . . . . . . . . . . . . . . . . . . ======== ======== ========
Weighted-average shares of common stock outstanding . . . . . . 400,396 437,335 446,159
Basic earnings per share. . . . . . . . . . . . . . . . . . . . $ 1.75 $ 1.64 $ 1.66
Diluted earnings per share. . . . . . . . . . . . . . . . . . . $ 1.73 $ 1.63 $ 1.65
page 43
Edison International
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF PARENT (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997, 1996, and 1995
1997 1996 1995
------- --------- ---------
(In thousands)
Cash Flows From Operating Activities $(19,894) $ 58,901 $(24,935)
-------- -------- --------
Cash Flows From Financing Activities 258,920 (54,150) 299,703
-------- -------- --------
Cash Flows From Investing Activities (112) (102) (333,058)
-------- -------- --------
Increase (Decrease) in cash and equivalents 238,914 4,649 ( 58,290)
Cash and equivalents at beginning of period 34,689 30,040 88,330
-------- -------- --------
Cash and Equivalents at the End of Period $273,603 $ 34,689 $ 30,040
======== ======== ========
Cash dividends received from Southern California
Edison Company $841,230 $765,199 $521,720
======== ======== ========
page 44
Edison International
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1997
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 $ 22,002 $ -- $ -- $ -- $ 22,002
Projects in development stage 60,094 -- -- -- 60,094
Uncollectible accounts
Customers 24,466 20,826 -- 20,767 24,525
All other 24,189 24,570 -- 661 48,098
-------- -------- ------- -------- --------
Total $130,751 $ 45,396 $ -- $ 21,428(a) $154,719
======== ======== ======= ======== ========
Group B:
DOE Decontamination
and Decommissioning $ 48,789 $ -- $ 1,089(b) $ 5,542(c) $ 44,336
Purchased-power settlements 107,700 -- 67,320(d) 29,380(e) 145,640
Pension and benefits 180,927 102,193 17,624(f) 89,544(g) 211,200
Insurance, casualty and
other 86,509 63,541 -- 65,797(h) 84,253
-------- -------- ------- -------- --------
Total $423,925 $165,734 $86,033 $190,263 $485,429
======== ======== ======= ======== ========
________________
(a) Accounts written off, net.
(b) Represents revision to estimate based on actual billings.
(c) Represents amounts paid
(d) Represents payments to be made under agreement to terminate a purchased-
power contract.
(e) Represents the amortization of the liability established for purchased-
power contract settlement agreements.
(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 45
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
Purchased-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 purchased-
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 46
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 47
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 Kenneth S. Stewart
------------------------------
Kenneth S. Stewart
Assistant General Counsel
Date: March 24, 1998
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 24, 1998
Chief Executive Officer
and Director
Principal Financial Officer:
Alan J. Fohrer* Executive Vice President,
Chief Financial Officer March 24, 1998
Controller or Principal
Accounting Officer:
Richard K. Bushey* Vice President and March 24, 1998
Controller
Board of Directors:
Winston H. Chen* Director March 24, 1998
Warren Christopher* Director March 24, 1998
Stephen E. Frank* Director March 24, 1998
Camilla C. Frost* Director March 24, 1998
Joan C. Hanley* Director March 24, 1998
Carl F. Huntsinger* Director March 24, 1998
Charles D. Miller* Director March 24, 1998
Luis G. Nogales* Director March 24, 1998
Ronald L. Olson* Director March 24, 1998
J. J. Pinola* Director March 24, 1998
James M. Rosser* Director March 24, 1998
E. L. Shannon, Jr.* Director March 24, 1998
Robert H. Smith* Director March 24, 1998
Thomas C. Sutton* Director March 24, 1998
Daniel M. Tellep* Director March 24, 1998
James D. Watkins* Director March 24, 1998
Edward Zapanta* Director March 24, 1998
*By Kenneth S. Stewart
- -----------------------------------------
Kenneth S. Stewart
Assistant General Counsel
page 48
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 Bylaws as adopted by the Board of Directors on January 1, 1998
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 49
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 50
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 51
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 52
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 1996 Executive Incentive Compensation Plan (File No. 1-9936)*
10.12 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 (File No. 1-9936)*
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 (File No. 1-9936)*
10.16.3 Form of Agreement for 1997 Awards under the Officer and
Management Long-Term Incentive Compensation Plans
10.17 Estate and Financial Planning Program (File No. 1-9936)*
10.18 Consulting Arrangement with Howard P. Allen
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)*
10.22 Election Terms for Warren Christopher
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, 1997
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.
PAGE
EXHIBIT 3.3
To Holders of the Company's Bylaws:
Effective January 1, 1998, Article III, Section 6, was amended
to specify the months in which regular Board meetings will be
held.
BEVERLY P. RYDER
Corporate Secretary
BYLAWS
OF
EDISON INTERNATIONAL
AS AMENDED TO AND INCLUDING
JANUARY 1, 1998
PAGE
INDEX
Page
ARTICLE I -- PRINCIPAL OFFICE
Section 1. Principal Office 1
ARTICLE II -- SHAREHOLDERS
Section 1. Meeting Locations 1
Section 2. Annual Meetings 1
Section 3. Special Meetings 2
Section 4. Notice of Annual or Special Meeting 2
Section 5. Quorum 3
Section 6. Adjourned Meeting and Notice Thereof 4
Section 7. Voting 4
Section 8. Record Date 6
Section 9. Consent of Absentees 7
Section 10. Action Without Meeting 7
Section 11. Proxies 7
Section 12. Inspectors of Election 8
ARTICLE III -- DIRECTORS
Section 1. Powers 8
Section 2. Number of Directors 9
Section 3. Election and Term of Office 10
Section 4. Vacancies 10
Section 5. Place of Meeting 11
Section 6. Regular Meetings 11
Section 7. Special Meetings 11
Section 8. Quorum 12
Section 9. Participation in Meetings by Conference
Telephone 12
Section 10. Waiver of Notice 12
Section 11. Adjournment 12
Section 12. Fees and Compensation 13
Section 13. Action Without Meeting 13
Section 14. Rights of Inspection 13
Section 15. Committees 13
PAGE
ARTICLE IV -- OFFICERS
Section 1. Officers 14
Section 2. Election 14
Section 3. Eligibility of Chairman or President 15
Section 4. Removal and Resignation 15
Section 5. Appointment of Other Officer 15
Section 6. Vacancies 15
Section 7. Salaries 15
Section 8. Furnish Security for Faithfulness 16
Section 9. Chairman's Duties; Succession to Such Duties in
Chairman's Absence or Disability 16
Section 10. President's Duties 16
Section 11. Chief Financial Officer 16
Section 12. Vice President's Duties 17
Section 13. General Counsel's Duties 17
Section 14. Associate General Counsel's and Assistant General
Counsel's Duties 17
Section 15. Controller's Duties 17
Section 16. Assistant Controllers' Duties 17
Section 17. Treasurer's Duties 17
Section 18. Assistant Treasurers' Duties 18
Section 19. Secretary's Duties 18
Section 20. Assistant Secretaries' Duties 19
Section 21. Secretary Pro Tempore 19
Section 22. Election of Acting Treasurer or Acting
Secretary 19
Section 23. Performance of Duties 19
ARTICLE V -- OTHER PROVISIONS
Section 1. Inspection of Corporate Records 20
Section 2. Inspection of Bylaws 21
Section 3. Contracts and Other Instruments, Loans, Notes
and Deposits of Funds 21
Section 4. Certificates of Stock 22
Section 5. Transfer Agent, Transfer Clerk and Registrar 22
Section 6. Representation of Shares of Other Corporations 22
PAGE
ARTICLE V -- OTHER PROVISIONS (Cont.)
Section 7. Stock Purchase Plans 23
Section 8. Fiscal Year and Subdivisions 23
Section 9. Construction and Definitions 23
ARTICLE VI -- INDEMNIFICATION
Section 1. Indemnification of Directors and Officers 24
Section 2. Indemnification of Employees and Agents 25
Section 3. Right of Directors and Officers to Bring Suit 26
Section 4. Successful Defense 26
Section 5. Non-Exclusivity of Rights 26
Section 6. Insurance 26
Section 7. Expenses as a Witness 27
Section 8. Indemnity Agreements 27
Section 9. Separability 27
Section 10. Effect of Repeal or Modification 27
ARTICLE VII -- EMERGENCY PROVISIONS
Section 1. General 27
Section 2. Unavailable Directors 28
Section 3. Authorized Number of Directors 28
Section 4. Quorum 28
Section 5. Creation of Emergency Committee 28
Section 6. Constitution of Emergency Committee 29
Section 7. Powers of Emergency Committee 29
Section 8. Directors Becoming Available 29
Section 9. Election of Board of Directors 29
Section 10. Termination of Emergency Committee 30
ARTICLE VIII -- AMENDMENTS
Section 1. Amendments 30
PAGE
BYLAWS
Bylaws for the regulation, except as otherwise provided
by statute or its Articles of Incorporation
of
EDISON INTERNATIONAL
AS AMENDED TO AND INCLUDING
JANUARY 1, 1998
ARTICLE I -- PRINCIPAL OFFICE
Section 1. Principal Office.
The principal office of the Corporation is hereby fixed and
located at 2244 Walnut Grove Avenue, in the City of Rosemead, County of
Los Angeles, State of California. The Board of Directors is hereby
granted full power and authority to change said principal office from one
location to another.
ARTICLE II -- SHAREHOLDERS
Section 1. Meeting Locations.
All meetings of shareholders shall be held at the principal
office of the corporation or at such other place or places within or
without the State of California as may be designated by the Board of
Directors (the "Board"). In the event such places shall prove inadequate
in capacity for any meeting of shareholders, an adjournment may be taken
to and the meeting held at such other place of adequate capacity as may be
designated by the officer of the corporation presiding at such meeting.
Section 2. Annual Meetings.
The annual meeting of shareholders shall be held on the third
Thursday of the month of April of each year at 10:00 a.m. on said day to
elect directors to hold office for the year next ensuing and until their
successors shall be elected, and to consider and act upon such other
matters as may lawfully be presented to such meeting; provided, however,
that should said day fall upon a legal holiday, then any such annual
meeting of shareholders shall be held at the same time and place on the
next day thereafter ensuing which is not a legal holiday.
PAGE 1
ARTICLE II
Section 3. Special Meetings.
Special meetings of the shareholders may be called at any time
by the Board, the Chairman of the Board, the President, or upon written
request of any three members of the Board, or by the holders of shares
entitled to cast not less than ten percent of the votes at such meeting.
Upon request in writing to the Chairman of the Board, the President, any
Vice President or the Secretary by any person (other than the Board)
entitled to call a special meeting of shareholders, the officer forthwith
shall cause notice to be given to the shareholders entitled to vote that
a meeting will be held at a time requested by the person or persons
calling the meeting, not less than thirty-five nor more than sixty days
after the receipt of the request. If the notice is not given within
twenty days after receipt of the request, the persons entitled to call the
meeting may give the notice.
Section 4. Notice of Annual or Special Meeting.
Written notice of each annual or special meeting of shareholders
shall be given not less than ten (or if sent by third-class mail, thirty)
nor more than sixty days before the date of the meeting to each
shareholder entitled to vote thereat. Such notice shall state the place,
date, and hour of the meeting and (i) in the case of a special meeting,
the general nature of the business to be transacted, and no other business
may be transacted, or (ii) in the case of an annual meeting, those matters
which the Board, at the time of the mailing of the notice, intends to
present for action by the shareholders, but, subject to the provisions of
applicable law and these Bylaws, any proper matter may be presented at an
annual meeting for such action. The notice of any special or annual
meeting at which directors are to be elected shall include the names of
nominees intended at the time of the notice to be presented by the Board
for election. For any matter to be presented by a shareholder at an
annual meeting held after December 31, 1993, including the nomination of
any person (other than a person nominated by or at the direction of the
Board) for election to the Board, written notice must be received by the
Secretary of the corporation from the shareholder not less than sixty nor
more than one hundred twenty days prior to the date of the annual meeting
specified in these Bylaws and to which the shareholder's notice relates;
provided however, that in the event the annual meeting to which the
shareholder's written notice relates is to be held on a date which is more
than thirty days earlier than the date of the annual meeting specified in
these Bylaws, the notice from a shareholder must be received by the
Secretary not later than the close of business on the tenth day following
the date on which public disclosure of the date of the annual meeting was
made or given to the shareholders. The shareholder's notice to the
Secretary shall set forth (a) a brief description of each matter to be
presented at the annual meeting by the shareholder; (b) the name and
address, as they appear on the corporation's books, of the shareholder;
(c) the class and number of shares of the corporation which are
beneficially owned by the shareholder; and (d) any material interest of
the shareholder in the matters to be presented. Any shareholder who
intends to nominate a candidate for election as a director shall also set
forth in such a notice (i) the name, age, business address and residence
address of each nominee that he or she intends to nominate at the meeting,
(ii) the principal occupation or employment of each nominee, (iii) the
number of shares of capital stock of the corporation beneficially owned by
each nominee, and (iv) any other information concerning the nominee that
would be required under the rules of the Securities and Exchange
ARTICLE II
Commission in a proxy statement soliciting proxies for the election of the
nominee. The notice shall also include a consent, signed by the
shareholder's nominees, to serve as a director of the corporation if
elected. Notwithstanding anything in these Bylaws to the contrary, and
subject to the provisions of any applicable law, no business shall be
conducted at a special or annual meeting except in accordance with the
procedures set forth in this Section 4.
Notice of a shareholders' meeting shall be given either
personally or by first-class mail (or, if the outstanding shares of the
corporation are held of record by 500 or more persons on the record date
for the meeting, by third-class mail) or by other means of written
communication, addressed to the shareholder at the address of such
shareholder appearing on the books of the corporation or given by the
shareholder to the corporation for the purpose of notice; or, if no such
address appears or is given, at the place where the principal office of
the corporation is located or by publication at least once in a newspaper
of general circulation in the county in which the principal office is
located. Notice by mail shall be deemed to have been given at the time a
written notice is deposited in the United States mails, postage prepaid.
Any other written notice shall be deemed to have been given at the time it
is personally delivered to the recipient or is delivered to a common
carrier for transmission, or actually transmitted by the person giving the
notice by electronic means, to the recipient.
Section 5. Quorum.
A majority of the shares entitled to vote, represented in person
or by proxy, shall constitute a quorum at any meeting of shareholders.
The affirmative vote of a majority of the shares represented and voting at
a duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute at least a majority of the required quorum)
shall be the act of the shareholders, unless the vote of a greater number
or voting by classes is required by law or the Articles; provided,
however, that the shareholders present at a duly called or held meeting at
which a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to have less than a
quorum, if any action taken (other than adjournment) is approved by at
least a majority of the shares required to constitute a quorum.
PAGE 3
ARTICLE II
Section 6. Adjourned Meeting and Notice Thereof.
Any shareholders' meeting, whether or not a quorum is present,
may be adjourned from time to time by the vote of a majority of the
shares, the holders of which are either present in person or represented
by proxy thereat, but in the absence of a quorum (except as provided in
Section 5 of this Article) no other business may be transacted at such
meeting.
It shall not be necessary to give any notice of the time and
place of the adjourned meeting or of the business to be transacted
thereat, other than by announcement at the meeting at which such
adjournment is taken. At the adjourned meeting, the corporation may
transact any business which might have been transacted at the original
meeting. However, when any shareholders' meeting is adjourned for more
than forty-five days or, if after adjournment a new record date is fixed
for the adjourned meeting, notice of the adjourned meeting shall be given
as in the case of an original meeting.
Section 7. Voting.
The shareholders entitled to notice of any meeting or to vote at
any such meeting shall be only persons in whose name shares stand on the
stock records of the corporation on the record date determined in
accordance with Section 8 of this Article.
Voting shall in all cases be subject to the provisions of Chapter
7 of the California General Corporation Law, and to the following
provisions:
(a) Subject to clause (g), shares held by an administrator,
executor, guardian, conservator or custodian may be voted by such holder
either in person or by proxy, without a transfer of such shares into the
holder's name; and shares standing in the name of a trustee may be voted
by the trustee, either in person or by proxy, but no trustee shall be
entitled to vote shares held by such trustee without a transfer of such
shares into the trustee's name.
(b) Shares standing in the name of a receiver may be voted by
such receiver; and shares held by or under the control of a receiver may
be voted by such receiver without the transfer thereof into the receiver's
name if authority to do so is contained in the order of the court by which
such receiver was appointed.
PAGE 4
ARTICLE II
(c) Subject to the provisions of Section 705 of the California
General Corporation Law and except where otherwise agreed in writing
between the parties, a shareholder whose shares are pledged shall be
entitled to vote such shares until the shares have been transferred into
the name of the pledgee, and thereafter the pledgee shall be entitled to
vote the shares so transferred.
(d) Shares standing in the name of a minor may be voted and the
corporation may treat all rights incident thereto as exercisable by the
minor, in person or by proxy, whether or not the corporation has notice,
actual or constructive, of the non-age unless a guardian of the minor's
property has been appointed and written notice of such appointment given
to the corporation.
(e) Shares standing in the name of another corporation,
domestic or foreign, may be voted by such officer, agent or proxyholder as
the bylaws of such other corporation may prescribe or, in the absence of
such provision, as the Board of Directors of such other corporation may
determine or, in the absence of such determination, by the chairman
of the board, president or any vice president of such other corporation,
or by any other person authorized to do so by the chairman of the board,
president or any vice president of such other corporation. Shares which
are purported to be voted or any proxy purported to be executed in the
name of a corporation (whether or not any title of the person signing is
indicated) shall be presumed to be voted or the proxy executed in
accordance with the provisions of this subdivision, unless the contrary is
shown.
(f) Shares of the corporation owned by any of its subsidiaries
shall not be entitled to vote on any matter.
(g) Shares of the corporation held by the corporation in a
fiduciary capacity, and shares of the corporation held in a fiduciary
capacity by any of its subsidiaries, shall not be entitled to vote on any
matter, except to the extent that the settlor or beneficial owner
possesses and exercises a right to vote or to give the corporation binding
instructions as to how to vote such shares.
(h) If shares stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, husband and wife as community property, tenants by the
entirety, voting trustees, persons entitled to vote under a shareholder
voting agreement or otherwise, or if two or more persons (including
proxyholders) have the same fiduciary relationship respecting the same
shares, unless the secretary of the corporation is given written notice to
the contrary and is furnished with a copy of the instrument or order
appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect:
PAGE 5
ARTICLE II
(i) If only one votes, such act binds all;
(ii) If more than one vote, the act of the majority so voting
binds all;
(iii) If more than one vote, but the vote is evenly split on any
particular matter, each faction may vote the securities in
question proportionately.
If the instrument so filed or the registration of the shares shows that
any such tenancy is held in unequal interests, a majority or even split
for the purpose of this section shall be a majority or even split in
interest.
No shareholder of any class of stock of this corporation shall
be entitled to cumulate votes at any election of directors of this
corporation.
Elections for directors need not be by ballot; provided, however,
that all elections for directors must be by ballot upon demand made by a
shareholder at the meeting and before the voting begins.
In any election of directors, the candidates receiving the
highest number of votes of the shares entitled to be voted for them up to
the number of directors to be elected by such shares are elected.
Section 8. Record Date.
The Board may fix, in advance, a record date for the
determination of the shareholders entitled to notice of any meeting or to
vote or entitled to receive payment of any dividend or other distribution,
or any allotment of rights, or to exercise rights in respect of any other
lawful action. The record date so fixed shall be not more than sixty days
nor less than ten days prior to the date of the meeting nor more than
sixty days prior to any other action. When a record date is so fixed, only
shareholders of record at the close of business on that date are entitled
to notice of and to vote at the meeting or to receive the dividend,
distribution, or allotment of rights, or to exercise the rights, as the
case may be, notwithstanding any transfer of shares on the books of the
corporation after the record date, except as otherwise provided by law or
these Bylaws. A determination of shareholders of record entitled to
notice of or to vote at a meeting of shareholders shall apply to any
adjournment of the meeting unless the Board fixes a new record date for
the adjourned meeting. The Board shall fix a new record date if the
meeting is adjourned for more than forty-five days.
If no record date is fixed by the Board, the record date for
determining shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the
PAGE 6
ARTICLE II
meeting is held. The record date for determining shareholders for any
purpose other than as set forth in this Section 8 or Section 10 of this
Article shall be at the close of business on the day on which the Board
adopts the resolution relating thereto, or the sixtieth day prior to the
date of such other action, whichever is later.
Section 9. Consent of Absentees.
The transactions of any meeting of shareholders, however called
and noticed, and wherever held, are as valid as though had at a meeting
duly held after regular call and notice, if a quorum is present either in
person or by proxy, and if, either before or after the meeting, each of
the persons entitled to vote, not present in person or by proxy, signs a
written waiver of notice or a consent to the holding of the meeting or an
approval of the minutes thereof. All such waivers, consents or approvals
shall be filed with the corporate records or made a part of the minutes of
the meeting. Neither the business to be transacted at nor the purpose of
any regular or special meeting of shareholders need be specified in any
written waiver of notice, consent to the holding of the meeting or
approval of the minutes thereof, except as provided in Section 601 (f) of
the California General Corporation Law.
Section 10. Action Without Meeting.
Subject to Section 603 of the California General Corporation Law,
any action which, under any provision of the California General
Corporation Law, may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice if a
consent in writing, setting forth the action so taken, shall be signed by
the holders of outstanding shares having not less than the minimum number
of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and
voted. Unless a record date for voting purposes be fixed as provided in
Section 8 of this Article, the record date for determining shareholders
entitled to give consent pursuant to this Section 10, when no prior action
by the Board has been taken, shall be the day on which the first written
consent is given.
Section 11. Proxies.
Every person entitled to vote shares has the right to do so
either in person or by one or more persons, not to exceed three,
authorized by a written proxy executed by such shareholder and filed with
the Secretary. Subject to the following sentence, any proxy duly executed
continues in full force and effect until revoked by the person executing
it prior to the vote pursuant thereto by a writing delivered to the
corporation stating that the proxy is revoked or by a subsequent proxy
executed by the person executing the prior proxy and presented to the
meeting, or by attendance at the meeting and voting in person by the
person executing the proxy; provided, however, that a proxy is not revoked
PAGE 7
ARTICLE III
by the death or incapacity of the maker unless, before the vote is
counted, written notice of such death or incapacity is received by this
corporation. No proxy shall be valid after the expiration of eleven
months from the date of its execution unless otherwise provided in the
proxy.
Section 12. Inspectors of Election.
In advance of any meeting of shareholders, the Board may appoint
any persons other than nominees as inspectors of election to act at such
meeting and any adjournment thereof. If inspectors of election are not so
appointed, or if any persons so appointed fail to appear or refuse to act,
the chairman of any such meeting may, and on the request of any
shareholder or shareholder's proxy shall, make such appointments at the
meeting. The number of inspectors shall be either one or three. If
appointed at a meeting on the request of one or more shareholders or
proxies, the majority of shares present shall determine whether one or
three inspectors are to be appointed.
The duties of such inspectors shall be as prescribed by Section
707 (b) of the California General Corporation Law and shall include:
determining the number of shares outstanding and the voting power of each,
the shares represented at the meeting, the existence of a quorum, and the
authenticity, validity and effect of proxies; receiving votes, ballots or
consents; hearing and determining all challenges and questions in any way
arising in connection with the right to vote; counting and tabulating all
votes or consents; determining when the polls shall close; determining the
result; and doing such acts as may be proper to conduct the election or
vote with fairness to all shareholders. If there are three inspectors of
election, the decision, act or certificate of a majority is effective in
all respects as the decision, act or certificate of all. Any report or
certificate made by the inspectors of election is prima facie evidence of
the facts stated therein.
ARTICLE III -- DIRECTORS
Section 1. Powers.
Subject to limitations of the Articles, of these Bylaws and of
the California General Corporation Law relating to action required to be
approved by the shareholders or by the outstanding shares, the business
and affairs of the corporation shall be managed and all corporate powers
shall be exercised by or under the direction of the Board. The Board may
delegate the management of the day-to-day operation of the business of the
corporation provided that the business and affairs of the corporation
PAGE 8
ARTICLE III
shall be managed and all corporate powers shall be exercised under the
ultimate direction of the Board. Without prejudice to such general
powers, but subject to the same limitations, it is hereby expressly
declared that the Board shall have the following powers in addition to the
other powers enumerated in these Bylaws:
(a) To select and remove all the other officers, agents and
employees of the corporation, prescribe the powers and duties for them as
may not be inconsistent with law, with the Articles or these Bylaws, fix
their compensation and require from them security for faithful service.
(b) To conduct, manage and control the affairs and business of
the corporation and to make such rules and regulations therefor not
inconsistent with law, or with the Articles or these Bylaws, as they may
deem best.
(c) To adopt, make and use a corporate seal, and to prescribe
the forms of certificates of stock, and to alter the form of such seal and
of such certificates from time to time as in their judgment they may deem
best.
(d) To authorize the issuance of shares of stock of the
corporation from time to time, upon such terms and for such consideration
as may be lawful.
(e) To borrow money and incur indebtedness for the purposes of
the corporation, and to cause to be executed and delivered therefor, in
the corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations or other evidences of debt and
securities therefor.
Section 2. Number of Directors.
The authorized number of directors shall be not less than fifteen
nor more than twenty until changed by amendment of the Articles or by a
Bylaw duly adopted by the shareholders. The exact number of directors
shall be fixed, within the limits specified, by the Board by adoption of
a resolution or by the shareholders in the same manner provided in these
Bylaws for the amendment thereof.
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ARTICLE III
Section 3. Election and Term of Office.
The directors shall be elected at each annual meeting of the
shareholders, but if any such annual meeting is not held or the directors
are not elected thereat, the directors may be elected at any special
meeting of shareholders held for that purpose. Each director shall hold
office until the next annual meeting and until a successor has been
elected and qualified.
Section 4. Vacancies.
Any director may resign effective upon giving written notice to
the Chairman of the Board, the President, the Secretary or the Board,
unless the notice specifies a later time for the effectiveness of such
resignation. If the resignation is effective at a future time, a
successor may be elected to take office when the resignation becomes
effective.
Vacancies in the Board, except those existing as a result of a
removal of a director, may be filled by a majority of the remaining
directors, though less than a quorum, or by a sole remaining director, and
each director so elected shall hold office until the next annual meeting
and until such director's successor has been elected and qualified.
Vacancies existing as a result of a removal of a director may be filled by
the shareholders as provided by law.
A vacancy or vacancies in the Board shall be deemed to exist in
case of the death, resignation or removal of any director, or if the
authorized number of directors be increased, or if the shareholders fail,
at any annual or special meeting of shareholders at which any director or
directors are elected, to elect the full authorized number of directors to
be voted for at that meeting.
The Board may declare vacant the office of a director who has
been declared of unsound mind by an order of court or convicted of a
felony.
The shareholders may elect a director or directors at any time
to fill any vacancy or vacancies not filled by the directors. Any such
election by written consent other than to fill a vacancy created by
removal requires the consent of a majority of the outstanding shares
entitled to vote. If the Board accepts the resignation of a director
tendered to take effect at a future time, the Board or the shareholders
shall have power to elect a successor to take office when the resignation
is to become effective.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of the director's
term of office.
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ARTICLE III
Section 5. Place of Meeting.
Regular or special meetings of the Board shall be held at any
place within or without the State of California which has been designated
from time to time by the Board or as provided in these Bylaws. In the
absence of such designation, regular meetings shall be held at the
principal office of the corporation.
Section 6. Regular Meetings.
Promptly following each annual meeting of shareholders the Board
shall hold a regular meeting for the purpose of organization, election of
officers and the transaction of other business.
Regular meetings of the Board shall be held at the principal
office of the corporation without notice on the third Thursday of the
months of February, April, May, July and September, and on the second
Thursday in December, at the hour of 9:00 a.m. or as soon thereafter as
the regular meeting of the Board of Directors of Southern California
Edison Company is adjourned, and on the third Thursday in March, at the
hour of 8:00 a.m. or as soon thereafter as the regular meeting of the
Board of Directors of Southern California Edison Company is adjourned.
Call and notice of all regular meetings of the Board are not required.
Section 7. Special Meetings.
Special meetings of the Board for any purpose or purposes may be
called at any time by the Chairman of the Board, the President, any Vice
President, the Secretary or by any two directors.
Special meetings of the Board shall be held upon four days'
written notice or forty-eight hours' notice given personally or by
telephone, telegraph, telex, facsimile, electronic mail or other similar
means of communication. Any such notice shall be addressed or delivered
to each director at such director's address as it is shown upon the
records of the corporation or as may have been given to the corporation by
the director for purposes of notice or, if such address is not shown on
such records or is not readily ascertainable, at the place in which the
meetings of the directors are regularly held. The notice need not specify
the purpose of such special meeting.
Notice by mail shall be deemed to have been given at the time a
written notice is deposited in the United States mail, postage prepaid.
Any other written notice shall be deemed to have been given at the time it
is personally delivered to the recipient or is delivered to a common
carrier for transmission, or actually transmitted by the person giving the
PAGE 11
ARTICLE III
notice by electronic means to the recipient. Oral notice shall be deemed
to have been given at the time it is communicated, in person or by
telephone, radio or other similar means to the recipient or to a person at
the office of the recipient who the person giving the notice has reason to
believe will promptly communicate it to the recipient.
Section 8. Quorum.
One-third of the number of authorized directors constitutes a
quorum of the Board for the transaction of business, except to adjourn as
provided in Section ll of this Article. Every act or decision done or
made by a majority of the directors present at a meeting duly held at
which a quorum is present shall be regarded as the act of the Board,
unless a greater number is required by law or by the Articles; provided,
however, that a meeting at which a quorum is initially present may
continue to transact business notwithstanding the withdrawal of directors,
if any action taken is approved by at least a majority of the required
quorum for such meeting.
Section 9. Participation in Meetings by Conference Telephone.
Members of the Board may participate in a meeting through use of
conference telephone or similar communications equipment, so long as all
members participating in such meeting can hear one another. Such
participation constitutes presence in person at such meeting.
Section 10. Waiver of Notice.
The transactions of any meeting of the Board, however called and
noticed or wherever held, are as valid as though had at a meeting duly
held after regular call and notice if a quorum is present and if, either
before or after the meeting, each of the directors not present signs a
written waiver of notice, a consent to holding such meeting or an approval
of the minutes thereof. All such waivers, consents or approvals shall be
filed with the corporate records or made a part of the minutes of the
meeting.
Section 11. Adjournment.
A majority of the directors present, whether or not a quorum is
present, may adjourn any directors' meeting to another time and place.
Notice of the time and place of holding an adjourned meeting need not be
given to absent directors if the time and place is fixed at the meeting
adjourned. If the meeting is adjourned for more than twenty-four hours,
notice of any adjournment to another time or place shall be given prior to
the time of the adjourned meeting to the directors who were not present at
the time of the adjournment.
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ARTICLE III
Section 12. Fees and Compensation.
Directors and members of committees may receive such
compensation, if any, for their services, and such reimbursement for
expenses, as may be fixed or determined by the Board.
Section 13. Action Without Meeting.
Any action required or permitted to be taken by the Board may be
taken without a meeting if all members of the Board shall individually or
collectively consent in writing to such action. Such written consent or
consents shall have the same force and effect as a unanimous vote of the
Board and shall be filed with the minutes of the proceedings of the Board.
Section 14. Rights of Inspection.
Every director shall have the absolute right at any reasonable
time to inspect and copy all books, records and documents of every kind
and to inspect the physical properties of the corporation and also of its
subsidiary corporations, domestic or foreign. Such inspection by a
director may be made in person or by agent or attorney and includes the
right to copy and make extracts.
Section 15. Committees.
The Board may appoint one or more committees, each consisting of
two or more directors, to serve at the pleasure of the Board. The Board
may delegate to such committees any or all of the authority of the Board
except with respect to:
(a) The approval of any action for which the California General
Corporation Law also requires shareholders' approval or approval of the
outstanding shares;
(b) The filling of vacancies on the Board or in any committee;
(c) The fixing of compensation of the directors for serving on
the Board or on any committee;
(d) The amendment or repeal of Bylaws or the adoption of new
Bylaws;
(e) The amendment or repeal of any resolution of the Board
which by its express terms is not so amendable or repealable;
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ARTICLE IV
(f) A distribution to the shareholders of the corporation
except at a rate or in a periodic amount or within a price range
determined by the Board; or
(g) The appointment of other committees of the Board or the
members thereof.
Any such committee, or any member or alternate member thereof,
must be appointed by resolution adopted by a majority of the exact number
of authorized directors as specified in Section 2 of this Article. The
Board shall have the power to prescribe the manner and timing of giving of
notice of regular or special meetings of any committee and the manner in
which proceedings of any committee shall be conducted. In the absence of
any such prescription, such committee shall have the power to prescribe
the manner in which its proceedings shall be conducted. Unless the Board
or such committee shall otherwise provide, the regular and special
meetings and other actions of any such committee shall be governed by the
provisions of this Article applicable to meetings and actions of the
Board. Minutes shall be kept of each meeting of each committee.
ARTICLE IV -- OFFICERS
Section 1. Officers.
The officers of the corporation shall be a Chairman of the Board,
a President, a Chief Financial Officer, one or more Vice Presidents, a
General Counsel and a Secretary. The corporation may also have, at the
discretion of the Board, one or more Associate General Counsel, one or
more Assistant General Counsel, a Controller, one or more Assistant
Controllers, a Treasurer, one or more Assistant Treasurers and one or more
Assistant Secretaries, and such other officers as may be elected or
appointed in accordance with Section 5 of this Article. The Board, the
Chairman of the Board or the President may confer a special title upon any
Vice President not specified herein.
Section 2. Election.
The officers of the corporation, except such officers as may be
elected or appointed in accordance with the provisions of Section 5 or
Section 6 of this Article, shall be chosen annually by, and shall serve at
the pleasure of the Board, and shall hold their respective offices until
their resignation, removal, or other disqualification from service, or
until their respective successors shall be elected.
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ARTICLE IV
Section 3. Eligibility of Chairman or President.
No person shall be eligible for the office of Chairman of the
Board or President unless such person is a member of the Board of the
corporation; any other officer may or may not be a director.
Section 4. Removal and Resignation.
Any officer may be removed, either with or without cause, by the
Board at any time or by any officer upon whom such power or removal may be
conferred by the Board. Any such removal shall be without prejudice to
the rights, if any, of the officer under any contract of employment of the
officer.
Any officer may resign at any time by giving written notice to
the corporation, but without prejudice to the rights, if any, of the
corporation under any contract to which the officer is a party. Any such
resignation shall take effect at the date of the receipt of such notice or
at any later time specified therein and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make
it effective.
Section 5. Appointment of Other Officers.
The Board may appoint such other officers as the business of the
corporation may require, each of whom shall hold office for such period,
have such authority, and perform such duties as are provided in the Bylaws
or as the Board may from time to time determine.
Section 6. Vacancies.
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled at any time deemed
appropriate by the Board in the manner prescribed in these Bylaws for
regular election or appointment to such office.
Section 7. Salaries.
The salaries of the Chairman of the Board, President, Chief
Financial Officer, Vice Presidents, General Counsel, Controller, Treasurer
and Secretary of the corporation shall be fixed by the Board. Salaries of
all other officers shall be as approved from time to time by the chief
executive officer.
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ARTICLE IV
Section 8. Furnish Security for Faithfulness.
Any officer or employee shall, if required by the Board, furnish
to the corporation security for faithfulness to the extent and of the
character that may be required.
Section 9. Chairman's Duties; Succession to Such Duties in Chairman's
Absence or Disability.
The Chairman of the Board shall be the chief executive officer
of the corporation and shall preside at all meetings of the shareholders
and of the Board. Subject to the Board, the Chairman of the Board shall
have charge of the business of the corporation. The Chairman of the Board
shall keep the Board fully informed, and shall freely consult them
concerning the business of the corporation.
In the absence or disability of the Chairman of the Board, the
President shall act as the chief executive officer of the corporation; in
the absence or disability of the Chairman of the Board and the President,
the next in order of election by the Board of the Vice Presidents shall
act as chief executive officer of the corporation.
In the absence or disability of the Chairman of the Board, the
President shall act as Chairman of the Board at meetings of the Board; in
the absence or disability of the Chairman of the Board and the President,
the next, in order of election by the Board, of the Vice Presidents who is
a member of the Board shall act as Chairman of the Board at any such
meeting of the Board; in the absence or disability of the Chairman of the
Board, the President, and such Vice Presidents who are members of the
Board, the Board shall designate a temporary Chairman to preside at any
such meeting of the Board.
Section 10. President's Duties.
The President shall perform such other duties as the Chairman of
the Board shall delegate or assign to such officer.
Section 11. Chief Financial Officer.
The Chief Financial Officer of the corporation shall be the chief
consulting officer in all matters of financial import and shall have
control over all financial matters concerning the corporation. If the
corporation does not have a currently elected and acting Controller, the
Chief Financial Officer shall also be the Chief Accounting Officer of the
corporation.
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ARTICLE IV
Section 12. Vice Presidents' Duties.
The Vice Presidents shall perform such other duties as the chief
executive officer shall designate.
Section 13. General Counsel's Duties.
The General Counsel shall be the chief consulting officer of the
corporation in all legal matters and, subject to the chief executive
officer, shall have control over all matters of legal import concerning
the corporation.
Section 14. Associate General Counsel's and Assistant General Counsel's
Duties.
The Associate General Counsel shall perform such of the duties
of the General Counsel as the General Counsel shall designate, and in the
absence or disability of the General Counsel, the Associate General
Counsel, in order of election to that office by the Board at its latest
organizational meeting, shall perform the duties of the General Counsel.
The Assistant General Counsel shall perform such duties as the General
Counsel shall designate.
Section 15. Controller's Duties.
The Controller shall be the chief accounting officer of the
Corporation and, subject to the Chief Financial Officer, shall have
control over all accounting matters concerning the Corporation and shall
perform such other duties as the Chief Executive Officer shall designate.
Section 16. Assistant Controllers' Duties.
The Assistant Controllers shall perform such of the duties of the
Controller as the Controller shall designate, and in the absence or
disability of the Controller, the Assistant Controllers, in order of
election to that office by the Board at its latest organizational meeting,
shall perform the duties of the Controller.
Section 17. Treasurer's Duties.
It shall be the duty of the Treasurer to keep in custody or
control all money, stocks, bonds, evidences of debt, securities and other
items of value that may belong to, or be in the possession or control of,
the corporation, and to dispose of the same in such manner as the Board or
the chief executive officer may direct, and to perform all acts incident
to the position of Treasurer.
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ARTICLE IV
Section 18. Assistant Treasurers' Duties.
The Assistant Treasurers shall perform such of the duties of the
Treasurer as the Treasurer shall designate, and in the absence or
disability of the Treasurer, the Assistant Treasurers, in order of
election to that office by the Board at its latest organizational meeting,
shall perform the duties of the Treasurer, unless action is taken by the
Board as contemplated in Article IV, Section 22.
Section 19. Secretary's Duties.
The Secretary shall keep or cause to be kept full and complete
records of the proceedings of shareholders, the Board and its committees
at all meetings, and shall affix the corporate seal and attest by signing
copies of any part thereof when required.
The Secretary shall keep, or cause to be kept, a copy of the
Bylaws of the corporation at the principal office in accordance with
Section 213 of the California General Corporation Law.
The Secretary shall be the custodian of the corporate seal and
shall affix it to such instruments as may be required.
The Secretary shall keep on hand a supply of blank stock
certificates of such forms as the Board may adopt.
The Secretary shall serve or cause to be served by publication
or otherwise, as may be required, all notices of meetings and of other
corporate acts that may by law or otherwise be required to be served, and
shall make or cause to be made and filed in the principal office of the
corporation, the necessary certificate or proofs thereof.
An affidavit of mailing of any notice of a shareholders' meeting
or of any report, in accordance with the provisions of Section 60l (b) of
the California General Corporation Law, executed by the Secretary shall be
prima facie evidence of the fact that such notice or report had been duly
given.
The Secretary may, with the Chairman of the Board, the President,
or a Vice President, sign certificates of ownership of stock in the
corporation, and shall cause all certificates so signed to be delivered to
those entitled thereto.
The Secretary shall keep all records required by the California
General Corporation Law.
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ARTICLE IV
The Secretary shall generally perform the duties usual to the
office of secretary of corporations, and such other duties as the chief
executive officer shall designate.
Section 20. Assistant Secretaries' Duties.
Assistant Secretaries shall perform such of the duties of the
Secretary as the Secretary shall designate, and in the absence or
disability of the Secretary, the Assistant Secretaries, in the order of
election to that office by the Board at its latest organizational meeting,
shall perform the duties of the Secretary, unless action is taken by the
Board as contemplated in Article IV, Sections 21 and 22 of these Bylaws.
Section 21. Secretary Pro Tempore.
At any meeting of the Board or of the shareholders from which the
Secretary is absent, a Secretary pro tempore may be appointed and act.
Section 22. Election of Acting Treasurer or Acting Secretary.
The Board may elect an Acting Treasurer, who shall perform all
the duties of the Treasurer during the absence or disability of the
Treasurer, and who shall hold office only for such a term as shall be
determined by the Board.
The Board may elect an Acting Secretary, who shall perform all
the duties of the Secretary during the absence or disability of the
Secretary, and who shall hold office only for such a term as shall be
determined by the Board.
Whenever the Board shall elect either an Acting Treasurer or
Acting Secretary, or both, the officers of the corporation as set forth in
Article IV, Section 1 of these Bylaws, shall include as if therein
specifically set out, an Acting Treasurer or an Acting Secretary, or both.
Section 23. Performance of Duties.
Officers shall perform the duties of their respective offices as
stated in these Bylaws, and such additional duties as the Board shall
designate.
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ARTICLE V
ARTICLE V -- OTHER PROVISIONS
Section 1. Inspection of Corporate Records.
(a) A shareholder or shareholders holding at least five percent
in the aggregate of the outstanding voting shares of the corporation or
who hold at least one percent of such voting shares and have filed a
Schedule 14B with the United States Securities and Exchange Commission
relating to the election of directors of the corporation shall have an
absolute right to do either or both of the following:
(i) Inspect and copy the record of shareholders' names
and addresses and shareholdings during usual
business hours upon five business days' prior
written demand upon the corporation; or
(ii) Obtain from the transfer agent, if any, for the
corporation, upon five business days' prior written
demand and upon the tender of its usual charges for
such a list (the amount of which charges shall be
stated to the shareholder by the transfer agent upon
request), a list of the shareholders' names and
addresses who are entitled to vote for the election
of directors and their shareholdings, as of the most
recent record date for which it has been compiled or
as of a date specified by the shareholder subsequent
to the date of demand.
(b) The record of shareholders shall also be open to inspection
and copying by any shareholder or holder of a voting trust certificate at
any time during usual business hours upon written demand on the
corporation, for a purpose reasonably related to such holder's interest as
a shareholder or holder of a voting trust certificate.
(c) The accounting books and records and minutes of proceedings
of the shareholders and the Board and committees of the Board shall be
open to inspection upon written demand on the corporation of any
shareholder or holder of a voting trust certificate at any reasonable time
during usual business hours, for a purpose reasonably related to such
holder's interests as a shareholder or as a holder of such voting trust
certificate.
(d) Any such inspection and copying under this Article may be
made in person or by agent or attorney.
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ARTICLE V
Section 2. Inspection of Bylaws.
The corporation shall keep in its principle office the original
or a copy of these Bylaws as amended to date, which shall be open to
inspection by shareholders at all reasonable times during office hours.
Section 3. Contracts and Other Instruments, Loans, Notes and Deposits
of Funds.
The Chairman of the Board, the President, or a Vice President,
either alone or with the Secretary or an Assistant Secretary, or the
Secretary alone, shall execute in the name of the corporation such written
instruments as may be authorized by the Board and, without special
direction of the Board, such instruments as transactions of the ordinary
business of the corporation may require and, such officers without the
special direction of the Board may authenticate, attest or countersign any
such instruments when deemed appropriate. The Board may authorize any
person, persons, entity, entities, attorney, attorneys, attorney-in-fact,
attorneys-in-fact, agent or agents, to enter into any contract or execute
and deliver any instrument in the name of and on behalf of the
corporation, and such authority may be general or confined to specific
instances.
No loans shall be contracted on behalf of the corporation and no
evidences of such indebtedness shall be issued in its name unless
authorized by the Board as it may direct. Such authority may be general
or confined to specific instances.
All checks, drafts, or other similar orders for the payment of
money, notes, or other such evidences of indebtedness issued in the name
of the corporation shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as the Board or chief
executive officer may direct.
Unless authorized by the Board or these Bylaws, no officer,
agent, employee or any other person or persons shall have any power or
authority to bind the corporation by any contract or engagement or to
pledge its credit or to render it liable for any purpose or amount.
All funds of the corporation not otherwise employed shall be
deposited from time to time to the credit of the corporation in such
banks, trust companies, or other depositories as the Board may direct.
PAGE 21
ARTICLE V
Section 4. Certificates of Stock.
Every holder of shares of the corporation shall be entitled to
have a certificate signed in the name of the corporation by the Chairman
of the Board, the President, or a Vice President and by the Treasurer or
an Assistant Treasurer or the Secretary or an Assistant Secretary,
certifying the number of shares and the class or series of shares owned by
the shareholder. Any or all of the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the
same effect as if such person were an officer, transfer agent or registrar
at the date of issue.
Certificates for shares may be used prior to full payment under
such restrictions and for such purposes as the Board may provide;
provided, however, that on any certificate issued to represent any partly
paid shares, the total amount of the consideration to be paid therefor and
the amount paid thereon shall be stated.
Except as provided in this Section, no new certificate for shares
shall be issued in lieu of an old one unless the latter is surrendered and
canceled at the same time. The Board may, however, if any certificate for
shares is alleged to have been lost, stolen or destroyed, authorize the
issuance of a new certificate in lieu thereof, and the corporation may
require that the corporation be given a bond or other adequate security
sufficient to indemnify it against any claim that may be made against it
(including expense or liability) on account of the alleged loss, theft or
destruction of such certificate or the issuance of such new certificate.
Section 5. Transfer Agent, Transfer Clerk and Registrar.
The Board may, from time to time, appoint transfer agents,
transfer clerks, and stock registrars to transfer and register the
certificates of the capital stock of the corporation, and may provide that
no certificate of capital stock shall be valid without the signature of
the stock transfer agent or transfer clerk, and stock registrar.
Section 6. Representation of Shares of Other Corporations.
The chief executive officer or any other officer or officers
authorized by the Board or the chief executive officer are each authorized
to vote, represent and exercise on behalf of the corporation all rights
incident to any and all shares of any other corporation or corporations
standing in the name of the corporation. The authority herein granted may
be exercised either by any such officer in person or by any other person
authorized so to do by proxy or power of attorney duly executed by said
officer.
PAGE 22
ARTICLE V
Section 7. Stock Purchase Plans.
The corporation may adopt and carry out a stock purchase plan or
agreement or stock option plan or agreement providing for the issue and
sale for such consideration as may be fixed of its unissued shares, or of
issued shares acquired, to one or more of the employees or directors of
the corporation or of a subsidiary or to a trustee on their behalf and for
the payment for such shares in installments or at one time, and may
provide for such shares in installments or at one time, and may provide
for aiding any such persons in paying for such shares by compensation for
services rendered, promissory notes or otherwise.
Any such stock purchase plan or agreement or stock option plan
or agreement may include, among other features, the fixing of eligibility
for participation therein, the class and price of shares to be issued or
sold under the plan or agreement, the number of shares which may be
subscribed for, the method of payment therefor, the reservation of title
until full payment therefor, the effect of the termination of employment
and option or obligation on the part of the corporation to repurchase the
shares upon termination of employment, restrictions upon transfer of the
shares, the time limits of and termination of the plan, and any other
matters, not in violation of applicable law, as may be included in the
plan as approved or authorized by the Board or any committee of the Board.
Section 8. Fiscal Year and Subdivisions.
The calendar year shall be the corporate fiscal year of the
corporation. For the purpose of paying dividends, for making reports and
for the convenient transaction of the business of the corporation, the
Board may divide the fiscal year into appropriate subdivisions.
Section 9. Construction and Definitions.
Unless the context otherwise requires, the general provisions,
rules of construction and definitions contained in the General Provisions
of the California Corporations Code and in the California General
Corporation Law shall govern the construction of these Bylaws.
PAGE 23
ARTICLE VI
ARTICLE VI -- INDEMNIFICATION
Section 1. Indemnification of Directors and Officers.
Each person who was or is a party or is threatened to be made a
party to or is involved in any threatened, pending or completed action,
suit or proceeding, formal or informal, whether brought in the name of the
corporation or otherwise and whether of a civil, criminal, administrative
or investigative nature (hereinafter a "proceeding"), by reason of the
fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the corporation or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is an alleged
action or inaction in an official capacity or in any other capacity while
serving as a director or officer, shall, subject to the terms of any
agreement between the corporation and such person, be indemnified and held
harmless by the corporation to the fullest extent permissible under
California law and the corporation's Articles of Incorporation, against
all costs, charges, expenses, liabilities and losses (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid
or to be paid in settlement) reasonably incurred or suffered by such
person in connection therewith, and such indemnification shall continue as
to a person who has ceased to be a director or officer and shall inure to
the benefit of his or her heirs, executors and administrators; provided,
however, that (A) the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of the corporation; (B) the corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) other than a proceeding by or in the name of
the corporation to procure a judgment in its favor only if any settlement
of such a proceeding is approved in writing by the corporation; (C) that
no such person shall be indemnified (i) except to the extent that the
aggregate of losses to be indemnified exceeds the amount of such losses
for which the director or officer is paid pursuant to any directors' and
officers' liability insurance policy maintained by the corporation; (ii)
on account of any suit in which judgment is rendered against such person
for an accounting of profits made from the purchase or sale by such person
of securities of the corporation pursuant to the provisions of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state or local statutory law; (iii) if
a court of competent jurisdiction finally determines that any
indemnification hereunder is unlawful; and (iv) as to circumstances in
which indemnity is expressly prohibited by Section 317 of the General
Corporation Law of California (the "Law"); and (D) that no such person
shall be indemnified with regard to any action brought by or in the right
of the corporation for breach of duty to the corporation and its
shareholders (a) for acts or omissions involving intentional misconduct or
knowing and culpable violation of law; (b) for acts or omissions that the
director or officer believes to be contrary to the best interests of the
corporation or its shareholders or that involve the absence of good faith
on the part of the director or officer; (c) for any transaction from which
the director or officer derived an improper personal benefit; (d) for acts
or omissions that show a reckless disregard for the director's or
PAGE 24
ARTICLE VI
officer's duty to the corporation or its shareholders in circumstances in
which the director or officer was aware, or should have been aware, in the
ordinary course of performing his or her duties, of a risk of serious
injury to the corporation or its shareholders; (e) for acts or omissions
that constitute an unexcused pattern of inattention that amounts to an
abdication of the director's or officer's duties to the corporation or its
shareholders; and (f) for costs, charges, expenses, liabilities and losses
arising under Section 310 or 316 of the Law. The right to indemnification
conferred in this Article shall include the right to be paid by the
corporation expenses incurred in defending any proceeding in advance of
its final disposition; provided, however, that if the Law permits the
payment of such expenses incurred by a director or officer in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, such advances shall be
made only upon delivery to the corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts to the
corporation if it shall be ultimately determined that such person is not
entitled to be indemnified.
Section 2. Indemnification of Employees and Agents.
A person who was or is a party or is threatened to be made a
party to or is involved in any proceeding by reason of the fact that he or
she is or was an employee or agent of the corporation or is or was serving
at the request of the corporation as an employee or agent of another
enterprise, including service with respect to employee benefit plans,
whether the basis of such action is an alleged action or inaction in an
official capacity or in any other capacity while serving as an employee or
agent, may, subject to the terms of any agreement between the corporation
and such person, be indemnified and held harmless by the corporation to
the fullest extent permitted by California law and the corporation's
Articles of Incorporation, against all costs, charges, expenses,
liabilities and losses, (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in connection
therewith.
PAGE 25
ARTICLE VI
Section 3. Right of Directors and Officers to Bring Suit.
If a claim under Section 1 of this Article is not paid in full
by the corporation within 30 days after a written claim has been received
by the corporation, the claimant may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall also be entitled to be
paid the expense of prosecuting such claim. Neither the failure of the
corporation (including its Board, independent legal counsel, or its
shareholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is permissible in the
circumstances because he or she has met the applicable standard of
conduct, if any, nor an actual determination by the corporation (including
its Board, independent legal counsel, or its shareholders) that the
claimant has not met the applicable standard of conduct, shall be a
defense to the action or create a presumption for the purpose of an action
that the claimant has not met the applicable standard of conduct.
Section 4. Successful Defense.
Notwithstanding any other provision of this Article, to the
extent that a director or officer has been successful on the merits or
otherwise (including the dismissal of an action without prejudice or the
settlement of a proceeding or action without admission of liability) in
defense of any proceeding referred to in Section 1 or in defense of any
claim, issue or matter therein, he or she shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred in
connection therewith.
Section 5. Non-Exclusivity of Rights.
The right to indemnification provided by this Article shall not
be exclusive of any other right which any person may have or hereafter
acquire under any statute, bylaw, agreement, vote of shareholders or
disinterested directors or otherwise.
Section 6. Insurance.
The corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not
the corporation would have the power to indemnify such person against such
expense, liability or loss under the Law.
PAGE 26
ARTICLE VI
Section 7. Expenses as a Witness.
To the extent that any director, officer, employee or agent of
the corporation is by reason of such position, or a position with another
entity at the request of the corporation, a witness in any action, suit or
proceeding, he or she shall be indemnified against all costs and expenses
actually and reasonably incurred by him or her on his or her behalf in
connection therewith.
Section 8. Indemnity Agreements.
The corporation may enter into agreements with any director,
officer, employee or agent of the corporation providing for
indemnification to the fullest extent permissible under the Law and the
corporation's Articles of Incorporation.
Section 9. Separability.
Each and every paragraph, sentence, term and provision of this
Article is separate and distinct so that if any paragraph, sentence, term
or provision hereof shall be held to be invalid or unenforceable for any
reason, such invalidity or unenforceability shall not affect the validity
or enforceability of any other paragraph, sentence, term or provision
hereof. To the extent required, any paragraph, sentence, term or
provision of this Article may be modified by a court of competent
jurisdiction to preserve its validity and to provide the claimant with,
subject to the limitations set forth in this Article and any agreement
between the corporation and claimant, the broadest possible
indemnification permitted under applicable law.
Section 10. Effect of Repeal or Modification.
Any repeal or modification of this Article shall not adversely
affect any right of indemnification of a director or officer existing at
the time of such repeal or modification with respect to any action or
omission occurring prior to such repeal or modification.
ARTICLE VII -- EMERGENCY PROVISIONS
Section 1. General.
The provisions of this Article shall be operative only during a
national emergency declared by the President of the United States or the
person performing the President's functions, or in the event of a nuclear,
atomic or other attack on the United States or a disaster making it
ARTICLE VII
impossible or impracticable for the corporation to conduct its business
without recourse to the provisions of this Article. Said provisions in
such event shall override all other Bylaws of the corporation in conflict
with any provisions of this Article, and shall remain operative so long as
it remains impossible or impracticable to continue the business of the
corporation otherwise, but thereafter shall be inoperative; provided that
all actions taken in good faith pursuant to such provisions shall
thereafter remain in full force and effect unless and until revoked by
action taken pursuant to the provisions of the Bylaws other than those
contained in this Article.
Section 2. Unavailable Directors.
All directors of the corporation who are not available to perform
their duties as directors by reason of physical or mental incapacity or
for any other reason or who are unwilling to perform their duties or whose
whereabouts are unknown shall automatically cease to be directors, with
like effect as if such persons had resigned as directors, so long as such
unavailability continues.
Section 3. Authorized Number of Directors.
The authorized number of directors shall be the number of
directors remaining after eliminating those who have ceased to be
directors pursuant to Section 2, or the minimum number required by law,
whichever number is greater.
Section 4. Quorum.
The number of directors necessary to constitute a quorum shall
be one-third of the authorized number of directors as specified in the
foregoing Section, or such other minimum number as, pursuant to the law or
lawful decree then in force, it is possible for the Bylaws of a
corporation to specify.
Section 5. Creation of Emergency Committee.
In the event the number of directors remaining after eliminating
those who have ceased to be directors pursuant to Section 2 is less than
the minimum number of authorized directors required by law, then until the
appointment of additional directors to make up such required minimum, all
the powers and authorities which the Board could by law delegate,
including all powers and authorities which the Board could delegate to a
committee, shall be automatically vested in an emergency committee, and
the emergency committee shall thereafter manage the affairs of the
corporation pursuant to such powers and authorities and shall have all
other powers and authorities as may by law or lawful decree be conferred
on any person or body of persons during a period of emergency.
PAGE 28
ARTICLE VII
Section 6. Constitution of Emergency Committee.
The emergency committee shall consist of all the directors
remaining after eliminating those who have ceased to be directors pursuant
to Section 2, provided that such remaining directors are not less than
three in number. In the event such remaining directors are less than
three in number the emergency committee shall consist of three persons,
who shall be the remaining director or directors and either one or two
officers or employees of the corporation, as the remaining director or
directors may in writing designate. If there is no remaining director,
the emergency committee shall consist of the three most senior officers of
the corporation who are available to serve, and if and to the extent that
officers are not available, the most senior employees of the corporation.
Seniority shall be determined in accordance with any designation of
seniority in the minutes of the proceedings of the Board, and in the
absence of such designation, shall be determined by rate of remuneration.
In the event that there are no remaining directors and no officers or
employees of the corporation available, the emergency committee shall
consist of three persons designated in writing by the shareholder owning
the largest number of shares of record as of the date of the last record
date.
Section 7. Powers of Emergency Committee.
The emergency committee, once appointed, shall govern its own
procedures and shall have power to increase the number of members thereof
beyond the original number, and in the event of a vacancy or vacancies
therein, arising at any time, the remaining member or members of the
emergency committee shall have the power to fill such vacancy or
vacancies. In the event at any time after its appointment all members of
the emergency committee shall die or resign or become unavailable to act
for any reason whatsoever, a new emergency committee shall be appointed in
accordance with the foregoing provisions of this Article.
Section 8. Directors Becoming Available.
Any person who has ceased to be a director pursuant to the
provisions of Section 2 and who thereafter becomes available to serve as
a director shall automatically become a member of the emergency committee.
Section 9. Election of Board of Directors.
The emergency committee shall, as soon after its appointment as
is practicable, take all requisite action to secure the election of a
PAGE 29
ARTICLE VIII
board of directors, and upon such election all the powers and authorities
of the emergency committee shall cease.
Section 10. Termination of Emergency Committee.
In the event, after the appointment of an emergency committee,
a sufficient number of persons who ceased to be directors pursuant to
Section 2 become available to serve as directors, so that if they had not
ceased to be directors as aforesaid, there would be enough directors to
constitute the minimum number of directors required by law, then all such
persons shall automatically be deemed to be reappointed as directors and
the powers and authorities of the emergency committee shall be at an end.
ARTICLE VIII -- AMENDMENTS
Section 1. Amendments.
These Bylaws may be amended or repealed either by approval of the
outstanding shares or by the approval of the Board; provided, however,
that a Bylaw specifying or changing a fixed number of directors or the
maximum or minimum number or changing from a fixed to a variable Board or
vice versa may only be adopted by approval of the outstanding shares. The
exact number of directors within the maximum and minimum number specified
in these Bylaws may be amended by the Board alone.
EXHIBIT 10.12
EDISON INTERNATIONAL
EXECUTIVE INCENTIVE COMPENSATION PLAN
Effective January 1, 1997
WHEREAS, it has been determined that it is in the best interest of Edison
International and its affiliates to offer and maintain competitive
executive compensation programs designed to attract and retain qualified
executives;
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 its affiliates; 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 Edison International Executive Incentive Compensation
Plan has been established by the Compensation and Executive Personnel
Committee of the Board of Directors effective January 1, 1997, and made
available to eligible executives of Edison International and its
participating affiliates 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 a Company.
"CEO" means the chief executive officer of a Company.
"Chairman" means the Chairman of the Board and Chief Executive Officer of
Edison International.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Edison International or a participating affiliate.
"Committee" means the Compensation and Executive Personnel Committee of
the Edison International Board of Directors.
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 Committee, Chairman
or Board.
"Plan" means the Edison International 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. In the event of the death
of a Participant during the calendar year, a pro-rata award may be made
at the discretion of the Committee, the Board, or CEO having the authority
to approve the Participant's award had the death not occurred.
3. Company Performance Goals. Each CEO will furnish recommended Company
performance goals to the Chairman. In consultation with the Chairman, the
Committee will select specific 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 strategic 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. The Committee will
establish target award levels for the year as a percentage of base salary
at the time performance goals are set. If the Committee determines
individual and Company performance goals have been substantially met,
Participants will be eligible for individual incentive awards at the
target award levels established by the Committee. Stretch-maximum awards
may be established by the Committee and earned on the basis of performance
in excess of targets. All awards are discretionary and will be based on
the assessment of corporate and individual performance by the Committee
or the CEO.
5. Approval and Payment of Individual Awards. During the first quarter
of the year following the completion of the calendar year, the Chairman,
in consultation with each CEO, will assess the degree to which individual
and corporate goals and objectives have been achieved. Incentive award
recommendations for eligible officers will be developed. The Committee
will receive a report from the Chairman as to overall Company performance,
will deliberate on management recommendations, and will approve, or
recommend for approval by the applicable Board, the officer awards.
Awards to non-officers will be determined and approved by the CEO of each
Company, or his/her designee. All decisions of the Committee, the
Chairman and the CEOs regarding individual incentive awards will be final
and conclusive.
Incentive award payments will be made as soon as practical following the
appropriate approval. Payment will be made in cash except to the extent
an eligible Participant has
page 2
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 or Board elects to defer payment of some or all of
the award. Awards 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 qualified Company retirement plan,
including but not limited to the SCE Retirement Plan, the SCE Stock
Savings Plus Plan, or any 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 may be considered
compensation for nonqualified plan purposes depending on the terms and
conditions of the particular nonqualified plan.
Awards payable to Participants under this Plan shall constitute an
unsecured general obligation of the Company, and no special fund or trust
will be created, nor will 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 Company
performance goals or other Plan terms and conditions 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 made pursuant
to it are to be approved by the Committee, or the Board of the
participating affiliate after review by the Committee. Each CEO, or
his/her delegate, shall approve any non-officer awards. Administration
of the Plan is otherwise delegated to the Edison International Vice
President of Human Resources and designees acting under his/her direction.
Such 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. No Company, Board, Committee or individual
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
page 3
assignment, alienation or transfer of such rights contrary to the
provisions hereof, the Company shall have no further liability for
payments hereunder.
9. Beneficiaries. Any award approved following the death of a
Participant 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 beneficiary has been designated by the
Participant, or if no beneficiary survives the Participant, or if a
designated beneficiary should die after surviving the Participant but
before the award has been paid, any award approved will be paid in a lump-
sum payment to the Participant's estate as soon as practicable.
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
Lillian R. Gorman
--------------------------
Lillian R. Gorman
Vice President
EXHIBIT 10.14
EDISON INTERNATIONAL
SOUTHERN CALIFORNIA EDISON COMPANY
RETIREMENT PLAN FOR DIRECTORS
As Amended May 15, 1997
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
page 1
compensation base will be the annual retainer in effect at the time of the
eligible director's retirement, resignation or death.
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 Edison International or
Southern California Edison Company which was required to allow the
director to render a period of uninterrupted high-level government
service, and which was followed by reelection to that Board within 12
months after the completion of such government service, 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.
page 2
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
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 10.16
EDISON INTERNATIONAL
OFFICER LONG-TERM INCENTIVE COMPENSATION PLAN
Amended and Restated as of January 1, 1997
WHEREAS, the Officer Long-Term Incentive Compensation Plan was approved
by the shareholders of SCEcorp on April 16, 1992 and was amended and
restated as the Edison International Officer Long-Term Incentive
Compensation Plan ("Plan") on February 15, 1996; and
WHEREAS, it is deemed appropriate to amend and restate the Plan to reflect
certain Security and Exchange Commission rule changes, and Plan amendments
addressing administration and change of control;
NOW, THEREFORE, the 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.
"Common Stock" means the common shares of Edison International.
page 1
"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.
"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.
"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 August 15, 1996.
page 2
"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 3 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 3 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 and Executive Personnel Committee of
the Board who qualify as Non-Employee Directors under Rule 16b-3. 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
page 3
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.
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 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.
page 4
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
page 5
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.
(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
page 6
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.
(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."
page 7
(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 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.
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.
page 8
Notwithstanding anything to the contrary contained in this Plan, if the
written instrument 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 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,
page 9
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.
Notwithstanding the foregoing, if a reorganization, merger, consolidation,
or other corporate transaction is consummated following and related to the
occurrence of a Distribution Date, as that term is defined in the Rights
Agreement approved by the Edison International Board of Directors on
November 20, 1996, as a result of which Edison International is not the
surviving corporation, all Options, Stock Appreciation Rights, and other
Incentive Awards then outstanding under the Plan will fully vest and all
restrictions on Restricted Stock will immediately cease. This Plan may
not be terminated, nor may any Incentive Award be cashed out, modified or
terminated without the consent of the holder, by Edison International or
its successor in interest during the subsequent period necessary to allow
Incentive Awards to remain exercisable for at least two years following
the close of the transaction, or where applicable, through the first
exercise period occurring at least two years after the close of the
transaction. During such subsequent period, valuation procedures and
exercise periods will occur on a basis consistent with past practice.
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
page 10
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 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 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:
page 11
(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
page 12
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
Lillian R. Gorman
-------------------------------
Lillian R. Gorman
Vice President
EXHIBIT 10.16.3
EDISON INTERNATIONAL
OFFICER AND MANAGEMENT LONG-TERM INCENTIVE COMPENSATION PLANS
1997 AWARD AGREEMENT
This award is made by Edison International to "NAME" ("Employee"), as of
January 2, 1997, pursuant to the Officer or Management Long-Term Incentive
Compensation Plan. 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:
"EIX" shares of authorized Edison
International Common Stock, coupled with
dividend equivalents, at an exercise price
of $19.75 per share.
"EME" shares of Edison Mission Energy "EC" shares of Edison Capital phantom
phantom stock having a base price of stock having a base price of $105.7676 per
$120.5499 per share and the following share and the following projected exercise
projected exercise prices based on the prices based on the current cost of
current cost of capital: capital:
- ---------------------------------------------- ---------------------------------------------
Period Price $ Period Price $ Period Price $ Period Price $
- ------ ------- ------ ------- ------ ------- ------ --------
1998 135.0159 2003 237.9441 1998 113.9969 2003 165.5692
1999 151.2178 2004 266.4974 1999 122.8317 2004 178.4008
2000 169.3639 2005 298.4771 2000 132.3511 2005 192.2268
2001 189.6876 2006 334.2944 2001 142.6083 2006 207.1244
2002 212.4501 2007 374.4097 2002 153.6605 2007 223.1766
- ----------------------------------------------- ---------------------------------------------
This award is made subject to the conditions contained in the 1997
Statement of Terms and Conditions which is incorporated herein by
reference and receipt of which is acknowledged by Employee. Employee
hereby consents to the amendment of the terms and conditions of any prior
phantom stock award to incorporate the repricing mechanism described in
Section 5 of the 1997 Statement of Terms and Conditions.
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:_______________________________ _______________________________
Edison International Officer and Management Long-Term Incentive
Compensation Plans
1997 Statement of Terms and Conditions
1997 awards made under the Edison International Officer and Management
Long-Term Incentive Compensation Plans are subject to the following terms
and conditions:
1. PRICE
(a) The exercise price for the option to purchase Edison International
Common Stock (EIX Stock) stated in the Award Certificate is the average
of the high and low sales prices of EIX Stock as reported in the Western
Edition of The Wall Street Journal for the New York Stock Exchange
Composite Transactions for the date of the award.
(b) The annual exercise price for each affiliate phantom option (Affiliate
Option) will be the base price stated in the Award Certificate escalated
by an annual compound appreciation rate linked to the affiliate's cost of
capital plus an overhead allowance. Upon any significant subsequent
change in the affiliate's cost of capital, the Affiliate Option exercise
price for that year may be redetermined and prospectively indexed
reflecting the affiliate's revised appreciation rate.
2. VESTING
(a) Subject to the provisions of Section 3, options may only be exercised
to the extent vested. The initial vesting date will be January 2nd of the
year following the date of the award, or six months after the date of the
award, 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, the
options will be fully vested.
(b) The vested portions of the options will accumulate to the extent not
exercised, and 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, or, in the case of Affiliate 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
stated in the Award Certificate 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 that portion of the options which has
vested as of the prior vesting date may be exercised, and that portion,
together with any earned dividend equivalents, will be forfeited unless
exercised within 180 days following the date of termination, or in the
case of Affiliate 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 16 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.
Upon a change of control of Edison International following the occurrence
page 1
of a Distribution Date, as that term is defined in the Rights Agreement
approved by the Edison International Board of Directors on November 20,
1996, the options will vest and will remain exercisable for at least two
years following the Distribution Date, or in the case of Affiliate
Options, through the first exercise period occurring at least two years
after such date. During that period, (i) the Plan may not be terminated,
(ii) individual awards may not be cashed out, terminated, or modified
without the Employee's consent, and (iii) valuation procedures and
exercise periods will occur on a basis consistent with past practice.
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 shares to be purchased, and
accompanied by full payment of the exercise price for the shares. A
sample notice is attached as Exhibit 1. Payment must be in cash, or its
equivalent, such as EIX Stock, acceptable to Edison International. A
"cashless" exercise will be accommodated for all Affiliate Options, and
may be accommodated for Edison International Options at the discretion of
Edison International. Until payment is accepted, the Employee will have
no rights in the optioned stock. If Edison International 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 Options may be exercised at any time after they
have vested through the first business day of the 10th calendar year
following the date of the award. Affiliate 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 Affiliate Option exercise price for that
period. The final 60-day Affiliate Option exercise period will commence
no later than the end of the second quarter of the 10th calendar year
following the date of the award. Subject to Section 8, Affiliate Options
are payable in cash upon exercise to the extent the actual value of an
affiliate 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.
4. EDISON INTERNATIONAL OPTION DIVIDEND EQUIVALENTS
(a) An Edison International Dividend Equivalent Account will be
established on behalf of the Employee if Edison International Options have
been granted pursuant to the award. This account may be credited with all
or a portion of the dividends payable after the date of the award on the
number of shares of stock covered by such Edison International 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
the award. 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 EIX Stock.
(b) Dividend equivalents related to Edison International 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 first three
years of the option term . 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 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 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. AFFILIATE OPTION PERFORMANCE UNITS
The Affiliate Options are performance units under the Plan based on shares
of artificial or "phantom" stock created for this purpose only. The
Affiliate Option exercise prices were derived by applying a compound
annual appreciation rate, based on the affiliate's cost of capital and an
allowance for corporate overhead, to the base price of a share. Following
the end of each calendar year during the option term, new affiliate share
prices will be computed. If a change in the affiliate's cost of capital
has occurred that significantly affects the new share price valuation, the
Affiliate Option exercise prices may be redetermined (i) for that year to
reflect the same intrinsic value result (gain or loss) that would have
existed using the previous cost of capital, and (ii) for subsequent years
by applying the revised appreciation rate. If the affiliate share value
exceeds the exercise price for that period, any portion of the vested
Affiliate 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 subject to the provisions of the Plan and these terms
and conditions.
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 Affiliate 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 or
Affiliate option, the receipt of cash, or the receipt or application of
any dividend equivalents to the exercise price. 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 retain and withhold a number of shares of EIX 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.
page 3
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. 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 Certificate 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 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 options and dividend equivalents are 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 may not otherwise be
restricted or limited by any Plan amendment or termination approved after
the date of the award without the Employee's written consent.
12. FORCE AND EFFECT
The various provisions herein 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
The terms and conditions of the options and dividend equivalents 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 options and dividend equivalents must be in writing, with
postage prepaid, addressed to: Edison International, Attn: Corporate
Secretary, P.O. Box 800, Rosemead, CA 91770
Lillian R Gorman
_________________________
Lillian R. Gorman
Vice President, Human Resources
page 4
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 _______________ (specify Officer or Management) Long-Term
Incentive Compensation Plan Award Certificate 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 an option to purchase _________ shares of
____ (specify Affiliate name) phantom stock pursuant to the __________
(specify Officer or Management) Long-Term Incentive Compensation Plan
Award Certificate dated________________.
Very truly yours,
cc: Executive Compensation Manager
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 10.18
RESOLUTION OF THE BOARD OF DIRECTORS OF
EDISON INTERNATIONAL
Adopted May 15, 1996
RE: DIRECTOR RESIGNATION
WHEREAS, Howard P. Allen has tendered his resignation as a
director of this corporation after a long and distinguished career as an
employee and director; and
WHEREAS, the Board of Directors of this corporation desires that
Mr. Allen remain available to the corporation for advice and consultation;
NOW, THEREFORE, BE IT RESOLVED, that Mr. Allen's resignation is
accepted with regret and that the terms and conditions of the consulting
arrangement set forth in the attached Schedule A are approved.
BE IT FURTHER RESOLVED, that the Chief Executive Officer is
authorized to execute any agreement or other document, or take any other
action deemed necessary or appropriate in his discretion, to implement the
intent of this resolution.
SCHEDULE A
Terms and Conditions of Howard P. Allen
Consulting Arrangement
Term: May 15, 1997 - May 14, 2002
Compensation: Amounts equal to those that would otherwise have been
payable to Mr. Allen as a director through April 16, 1998 (his normal
retirement date from the Board), will be deposited in his account in the
Director Deferred Compensation Plan.
Affected corporate and Board benefit plan payments will commence in
accordance with the terms of the plans as if Mr. Allen retired from the
Board on April 16, 1998.
APPROVED:
John E. Bryson
- ------------------------------------------
John E. Bryson
Chairman of the Board
Bryant C. Danner
- ------------------------------------------
Bryant C. Danner
Executive Vice President and General Counsel
EXHIBIT 10.22
RESOLUTION OF THE BOARD OF DIRECTORS OF
EDISON INTERNATIONAL
Adopted May 15, 1997
RE: ELECTION AND COMMITTEE APPOINTMENTS OF NEW DIRECTOR
WHEREAS, the Nominating Committee of the Board of Directors of
this corporation has nominated Warren Christopher to be re-elected as a
director of this corporation;
WHEREAS, Howard P. Allen has submitted his resignation as a
director of this corporation effective immediately following this regular
meeting of the Board of Directors, and he serves as Chairman of the
Executive Committee and as a member of the Finance Committee of the Board
of Directors of this corporation;
WHEREAS, pursuant to Article III, Section 2 of the Bylaws of this
corporation, the exact number of Directors is fixed at 18, and the
addition of Mr. Christopher will increase the number of Directors to 19,
until Mr. Allen's resignation is effective;
WHEREAS, the charter of the Executive Committee of the Board of
Directors of this corporation provides that any vacancy created by any
member ceasing to be a director shall be filled by the Board of Directors
of this corporation and the Board shall designate one Committee member to
be chairman; and
WHEREAS, the charter of the Finance Committee of the Board of
Directors of this corporation provides that any vacancy created by any
member ceasing to be a director shall be filled by the Board of Directors
of this corporation or left unfilled at the Board's discretion, and the
Board desires to fill such vacancy;
NOW, THEREFORE, BE IT RESOLVED, that pursuant to Article III,
Section 2 of the Bylaws, the exact number of Directors is fixed at 19 for
this regular meeting of this Board of Directors, and the exact number of
Directors is fixed at 18 immediately following this regular meeting of
this Board of Directors;
BE IT FURTHER RESOLVED, that Warren Christopher is elected a
director of this corporation, effective immediately, including for this
regular meeting of the Board of Directors, subject to the terms and
conditions set forth on the attached Schedule A.
BE IT FURTHER RESOLVED, that Mr. Christopher is hereby appointed
a member and Chairman of the Executive Committee, and a member of the
Finance Committee of the Board of Directors of this corporation effective
immediately following this regular meeting of the Board of Directors.
APPROVED:
John E Bryson
- -------------------------------------------
John E. Bryson
Chairman of the Board
Bryant C. Danner
- ------------------------------------------
Bryant C. Danner
Executive Vice President and General Counsel
SCHEDULE A
Warren Christopher
Election Terms and Conditions
o Except as provided below, all regular director compensation and
benefits shall apply.
o Age restrictions applicable to nominees for director will be waived as
to Mr. Christopher until the annual meeting of shareholders in April,
2002.
o Retirement benefits and deferred compensation attributable to prior
Board service will continue to be paid. Any retirement benefits or
deferred compensation attributable to later periods will be payable in
accordance with the terms of the plans upon Mr. Christopher's
subsequent retirement from the board.
o A 500 share grant of Edison International stock will be awarded upon
initial election to the Boards of Edison International and Southern
California Edison Company.
PAGE
EXHIBIT 11
Edison International
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(UNAUDITED)
Year Ended December 31,
----------------------------------------------
1997 1996 1995
-------- -------- --------
(In thousands, except per-share amounts)
Consolidated net income $699,856 $716,748 $739,136
Primary weighted average shares 400,396 437,335 446,159
Fully diluted weighted average shares 404,808 439,299 448,062
Primary earnings per share $ 1.75 $ 1.64 $ 1.66
Fully diluted earnings per share $ 1.73 $ 1.63 $ 1.65
PAGE
EXHIBIT 12
EDISON INTERNATIONAL
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Thousands of Dollars)
Year Ended December 31,
---------------------------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
EARNINGS BEFORE INCOME
TAXES AND FIXED CHARGES:
Income before interest
expense(1) $1,325,569 $1,203,577 $1,282,776 $1,346,636 $1,399,650 $1,450,957
Add:
Taxes on income(2) 466,006 353,706 444,635 491,477 505,785 498,729
Rentals(3) 4,460 3,463 3,512 4,018 3,269 2,639
Allocable portion of interest
on long-term Contracts for
the purchase of power(4) 1,908 1,890 1,870 1,848 1,824 1,797
Spent nuclear fuel interest(7) 1,339 487 68 - - -
Interest on partnership
indebtedness(5) 38,070 41,091 30,591 34,681 31,356 34,938
Amortization of previously
capitalized fixed charges 24,170 6,760 3,414 2,417 2,232 7,025
---------- ---------- ---------- --------- --------- ---------
Total earnings before
income taxes and fixed
charges (A) $1,861,522 $1,610,974 $1,766,866 $1,881,077 $1,944,116 $1,996,085
========== ========== ========== ========== ========== ==========
FIXED CHARGES:
Interest and amortization $ 544,593 $ 523,808 $561,265 $560,641 $ 635,407 $ 708,446
Rentals(3) 4,460 3,463 3,512 4,018 3,269 2,639
Capitalized interest(6) 35,115 73,808 48,996 59,885 57,803 14,937
Allocable portion of interest
on long-term contracts for
the purchase of power(4) 1,908 1,890 1,870 1,848 1,824 1,797
Spent nuclear fuel interest(7) 1,339 487 68 - - -
Interest on partnership
indebtedness(5) 38,070 41,091 30,591 34,681 31,356 34,938
Subsidiary preferred and
preference stock dividend
requirements- pre-tax basis 68,911 63,261 67,480 78,017 81,011 73,052
---------- ---------- ---------- ---------- ---------- ----------
Total fixed charges(B) $ 694,396 $ 707,808 $ 713,782 $ 739,090 $ 810,670 $ 835,809
========== ========== ========== ========== ========== ==========
RATION OF EARNINGS TO
FIXED CHARGES(A)/(B): 2.68 2.28 2.48 2.55 2.40 2.39
========== ========== ========== ========== ========== ==========
(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.
EDISON INTERNATIONAL AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS 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 further actions by state
and federal regulatory bodies setting rates and implementing the
restructuring of the electric utility industry; the effects of new laws and
regulations relating to restructuring and other matters; the effects of
increased competition in the electric utility business, including the
beginning of direct customer access to retail energy suppliers and the
unbundling of revenue cycle services such as metering and billing; changes in
prices of electricity and fuel costs; changes in market interest or currency
exchange rates; foreign currency devaluation; new or increased environmental
liabilities; and other unforeseen events.
RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
EARNINGS
Edison International's 1997 basic earnings per share were $1.75, compared
with $1.64 in 1996 and $1.66 in 1995. Southern California Edison (SCE)
earned $1.44 in 1997, compared with $1.42 in 1996 and $1.44 in 1995. Edison
Mission Energy (EME), Edison Capital and Mission Land Company had combined
earnings of 44 CENTS, up from 27 CENTS in 1996 and 23 CENTS in 1995. Edison
International's earnings include special charges of 7 CENTS in 1996 (a 4 CENTS
net charge at SCE for workforce management costs and reserves, and a 3 CENTS
charge at Mission Land for real estate reserves) and 3 CENTS in 1995 for SCE's
workforce management expenses. Edison Enterprises (Edison International's
retail arm comprised of Edison Source, Edison EV, Edison Select and Edison
Utility Services) and the Edison International parent company had combined
expenses of 13 CENTS in 1997, compared with 5 CENTS in 1996 and 1 CENT in
1995.
Edison International initiated a share repurchase program in 1995 to
increase shareholder value. Its Board of Directors has authorized
repurchases of up to $2.3 billion in outstanding shares. In 1997, over 48
million shares were repurchased for $1.2 billion. From the inception of the
program through year-end 1997, Edison International has repurchased over 72
million shares for $1.6 billion.
1997 VS. 1996
SCE's 1997 earnings of $1.44 per share were 2 CENTS lower than 1996
(excluding 1996 special charges noted above). The decrease is mainly due to
lower earnings from an extended refueling outage at the San Onofre Nuclear
Generating Station. The decline was almost completely offset by higher sales,
lower non-nuclear operating expenses and the effect of Edison International's
share repurchase program. EME and Edison Capital had combined earnings of
44 CENTS in 1997, up 14 CENTS over 1996. EME contributed a record $115 million
to earnings in 1997, compared with $92 million in 1996, an increase of 25%.
The increase is primarily due to higher earnings from EME's foreign projects,
partially due to lower tax rates. Edison Capital contributed a record $61
million to earnings in 1997, up 50% over the prior-year earnings of $41
million. Edison Capital's earnings benefited substantially from two
cross-border lease investments and a record high level of affordable housing
investments. Edison Capital and EME together contributed 25% of Edison
International's total earnings, up from 18% in 1996. Continued start-up costs
at Edison Enterprises, combined with interest expense at the Edison
International parent company, were 8 CENTS per share more in 1997 than 1996.
The reduced number of outstanding shares benefited Edison
International's earnings per share by 15 CENTS in 1997, when compared with
1996.
1996 VS. 1995
Excluding special charges, SCE's 1996 earnings per share were $1.46, down
1 CENTS from 1995. The decrease is mainly attributable to a reduction in
authorized rates of return and authorized operating expenses, partially
offset by improved operating performance.
The combined 1996 earnings of EME, Edison Capital and Mission Land,
excluding nonrecurring items, were 30 CENTS, 7 CENTS higher than in 1995. The
increase is primarily due to higher earnings from EME's First Hydro project
in the United Kingdom, which was acquired in December 1995.
Continued start-up costs at Edison Enterprises, combined with interest
expense at the Edison International parent company, were 4 CENTS per share
more in 1996 than 1995.
The reduced number of outstanding shares benefited Edison
International's earnings per share by 3 CENTS in 1996 versus 1995.
OPERATING REVENUE
Electric utility revenue increased 5% over 1996, due to an increase in sales
volume and customer refunds in 1996. There were no comparable refunds in
1997. The increase in volume is mainly attributable to the overall increase
in retail sales among residential and commercial customers. Operating revenue
in 1996 decreased 4% from 1995, as increased sales volume was offset by lower
average rates. The lower rates were attributable to the California Public
Utilities Commission's (CPUC) decision to lower SCE's 1996 authorized revenue
by 4.4%. Additionally, during 1996, SCE's customers received a one-time bill
credit totaling $237 million as part of a CPUC-ordered refund of energy cost
balancing account overcollections. In 1997, over 98% of SCE's operating
revenue was 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, operating revenue during
the third quarter of each year is significantly higher than the other
quarters.
The changes in electric utility revenue resulted from:
IN MILLIONS YEAR ENDED DECEMBER 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------------
Electric utility revenue --
Rate changes (including refunds) $ 173 $(522) $ 168
Sales volume changes 193 206 (129)
Other 4 26 35
----- ----- -----
Total $ 370 $(290) $ 74
----- ----- -----
----- ----- -----
Legislation enacted in September 1996 provided for, among other
things, at least a 10% rate reduction (financed through the issuance of rate
reduction notes) for residential and small commercial customers in 1998 and
other rates to remain frozen at the June
23
EDISON INTERNATIONAL AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
10, 1996, level (system average of 10.1 CENTS per kilowatt-hour). See
discussion in Competitive Environment.
Revenue from diversified operations increased 33% in 1997 primarily
due to the start-up of EME's Loy Yang B Unit 2 and Kwinana projects. These
facilities began commercial operations during the fourth quarter of 1996. In
addition, revenue from diversified operations increased, due to higher energy
sales from EME's First Hydro project combined with substantial increases at
Edison Capital from its cross-border lease investments and Mission Land from
the sale of $63 million in real estate during the second quarter. 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.
OPERATING EXPENSES
Fuel expense increased 40% in 1997. The increase is due to a $174 million
gas contract termination payment during the third quarter, combined with
higher gas prices and the extended refueling outages at San Onofre. San
Onofre Unit 2 was shut down during the entire first quarter of 1997, Unit 3
was shut down 80 days of the second quarter and both units had a combined
outage time of 30 days during the third quarter, which resulted in an
overall increase in gas-powered generation for the year. There were no
comparable outages in 1996. EME's fuel expense also increased in 1997 due to
the start-up of the Kwinana project in the fourth quarter of 1996 and higher
pumping costs at the First Hydro project (a pumped-storage facility which
pumps water at night for storage in reservoirs and then allows it to flow
back to generate electricity when it is needed during the day) due to
increased generation and higher prices. Fuel expense increased 11% in 1996,
compared to 1995, due to higher gas prices and changes in the fuel mix. EME's
1996 fuel expense increased due to Loy Yang B Unit 2, Kwinana and the
inclusion of pumping costs related to First Hydro.
Purchased-power expense increased slightly in 1997 and 1996, due to
increases in spot market purchases and increases 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 1997, SCE paid
about $1.6 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 1997, due to undercollections in the energy cost balancing account as
actual energy costs (including the gas termination payments discussed above)
exceeded CPUC-authorized fuel and purchased-power cost estimates. In
addition, there were undercollections associated with SCE's direct access
activities (see discussion in Competitive Environment--Direct Customer
Access), research and development activities and San Onofre. These
undercollections were offset by overcollections related to actual base-rate
revenue from kilowatt-hour sales exceeding CPUC-authorized estimates and the
final settlement of SCE's Canadian supply and transportation contracts (see
discussion in Regulatory Matters). The provisions for regulatory adjustment
clauses also decreased in 1996 from 1995 due to lower than authorized
base-rate revenue, undercollections related to the accelerated recovery of
SCE's remaining investment in San Onofre Units 2 and 3 and the $237 million
refund to ratepayers during 1996 for prior energy cost balancing account
overcollections.
Other operating expenses increased 15% in 1997, primarily due to
start-up expenses at Edison Enterprises and increased administrative costs at
EME, Edison Capital and Mission Land. 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 and higher
administrative costs offset cost reductions and strong operating performance
at SCE.
Maintenance expense increased 23% in 1997, due to increased
maintenance costs for the scheduled refueling outages at the San Onofre units
and SCE's transmission and distribution operating facilities.
Depreciation and decommissioning expense increased 16% in 1997. The
increase is due to increases in plant assets and the accelerated recovery of
the Palo Verde Nuclear Generating Station units effective January 1997.
Depreciation and decommissioning expense increased 16% in 1996, compared to
1995, due to higher depreciation rates, the accelerated recovery of San
Onofre Units 2 and 3 starting in April 1996, and increases at EME related to
its Loy Yang B Unit 2 and Kwinana projects.
Property and other taxes decreased 32% in 1997, due to a
reclassification of SCE's payroll taxes to operation and maintenance expense.
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 units. The deferred revenue (including
interest) was collected evenly over the final six years of each unit's plan.
The plan ended in February 1996, September 1996 and January 1998 for Units
1, 2 and 3, respectively. The provision is a non-cash offset to the
collection of deferred revenue.
Interest and dividend income increased 35% in 1997, due to increases
in interest earned on SCE's balancing accounts and increases in dividend
income from SCE's equity investments.
Minority interest decreased in 1997, due to EME's May 1997 acquisition
of the remaining 49% ownership interest in the Loy Yang B project. Minority
interest increased 46% during 1996, primarily from higher pre-tax income at
EME's Loy Yang B Unit 2.
Other nonoperating income decreased substantially in 1997, due to
additional accruals for regulatory matters associated with the restructuring
of California's electric utility industry. Other nonoperating income also
decreased in 1996, compared to 1995, due to regulatory accruals in 1996.
INTEREST AND OTHER EXPENSES
Interest on long-term debt decreased in 1997, due to the early retirement of
$400 million of first and refunding mortgage bonds in July 1997, partially
offset by additional interest expense associated with the issuance of
approximately $2.5 billion in rate reduction notes in December 1997 (see
discussion in Cash Flows from
24
EDISON INTERNATIONAL AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Financing Activities). Interest on long-term debt increased 12% in 1996
compared with 1995, reflecting EME's increased ownership in Iberian Hy-Power
and First Hydro.
Other interest expense increased substantially in 1997, due to higher
levels of short-term debt used to retire first and refunding mortgage bonds,
discussed above. 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.
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.
Edison International's Board of Directors has authorized the
repurchase of up to $2.3 billion of its outstanding shares of common stock.
Edison International has repurchased 76.9 million shares ($1.7 billion)
between January 1995 and January 30, 1998, funded by dividends from its
subsidiaries and its lines of credit.
Edison International's cash flow coverage of dividends for 1997 was
5.2 times compared to 5.0 times in 1996 and 4.7 times in 1995. Edison
International's dividend payout ratio for 1997 was 57%.
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by operating activities totaled $2.1 billion in 1997, $2.2
billion in 1996 and $2.1 billion in 1995. Cash from operations exceeded
capital requirements for all years presented.
CASH FLOWS FROM FINANCING ACTIVITIES
At December 31, 1997, Edison International and its subsidiaries had $3.1
billion of borrowing capacity available under lines of credit totaling $3.6
billion. SCE had available lines of credit of $1.8 billion, with $1.3 billion
for general purpose short-term debt and $500 million for the long-term
refinancing of its variable-rate pollution-control bonds. The parent company
had available lines of credit totaling $1.0 billion. The nonutility
companies had lines of credit of $800 million 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, 1997, SCE could issue
approximately $10.4 billion of additional first and refunding mortgage bonds
and $5.3 billion of preferred stock at current interest and dividend rates.
EME owns, through a wholly owned subsidiary, 50% of the Brooklyn Navy
Yard project. On December 17, 1997, the Brooklyn Navy Yard project
partnership completed a $407 million permanent, nonrecourse financing for the
project.
In February 1997, the contractor asserted general monetary claims
under the turnkey agreement against Brooklyn Navy Yard Cogeneration Partners,
L.P. (BNY) for damages in the amount of $137 million. In addition to
defending this action, BNY has filed an action against the contractor in New
York State Court asserting general monetary claims in excess of $13 million
arising out of the turnkey agreement. EME agreed to indemnify the
partnership and its partner from all claims and costs arising from or in
connection with the contractor litigation, which indemnity has been assigned
to the lenders. Edison International believes that the outcome of this
litigation will not materially affect its results of operations or financial
position.
In April 1997, EME completed financing and commenced construction of
the Doga project, a 180-megawatt, gas-powered power plant near Istanbul,
Turkey. A wholly owned subsidiary of EME owns 80% of this project. In
connection with the financing, EME has guaranteed $21 million in equity
contributions and will continue making equity contributions until commercial
operation begins, which is scheduled for 1999.
In May 1997, Edison Capital closed its largest infrastructure
transaction in recent years by entering into a cross-border lease transaction
in the Eems Power Station located in the Netherlands. This transaction was
valued at $188 million. The Eems Power Station is a new, five unit (335 MW
each) gas-fired, combined-cycle power plant. It is operated by EPON, the
largest power generating company in the Netherlands. Edison Capital also
acquired an interest in the electric power transmission system in South
Australia. This cross-border lease transaction was valued at $161 million.
EME has firm commitments of $295 million to make equity and other
contributions, primarily for the Paiton project in Indonesia, the ISAB
project in Italy, and the Doga project in Turkey. EME also has contingent
obligations to make additional contributions of $181 million, primarily for
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
and funds available from EME's revolving line of credit.
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, 1997, SCE had the capacity to pay $1.4 billion in additional
dividends and continue to maintain its authorized capital structure. These
restrictions are not expected to affect Edison International's ability to
meet its cash obligations.
In December 1997, SCE Funding LLC, a special purpose entity (SPE), of
which SCE is the sole member, issued approximately $2.5 billion of rate
reduction notes to Bankers Trust Company of California, as certificate
trustee for the California Infrastructure and Economic Development Bank
Special Purpose Trust SCE-1 (Trust), which is a special purpose entity
established by the State of California. The terms of the rate reduction
notes generally mirror the terms of the pass-through certificates issued by
the Trust, which are known as rate reduction certificates. The proceeds of
the rate
25
EDISON INTERNATIONAL AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
reduction notes were used by the SPE to purchase from SCE an enforceable
right known as transition property. Transition property is a current
property right created pursuant to the restructuring legislation and a
financing order of the CPUC and consists generally of the right to be paid a
specified amount from a non-bypassable tariff levied on residential and small
commercial customers. Notwithstanding the legal sale of the transition
property by SCE to the SPE, the amounts reflected as assets on SCE's balance
sheet have not been reduced by the amount of the transition property sold to
the SPE, and the liabilities of the SPE for the rate reduction notes are for
accounting purposes reflected as long-term liabilities on the consolidated
balance sheet of SCE. SCE used the proceeds from the sale of the transition
property to retire debt and equity securities.
The rate reduction notes have maturities ranging from one to 10 years,
and bear interest at rates ranging from 5.98% to 6.42%. The rate reduction
notes are secured solely by the transition property and certain other assets
of the SPE, and there is no recourse to SCE or Edison International.
Although the SPE is consolidated with SCE in the financial statements,
as required by generally accepted accounting principles, the SPE is legally
separate from SCE, the assets of the SPE are not available to creditors of
SCE or Edison International, and the transition property is legally not an
asset of SCE or Edison International.
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 ($2.1 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
$375 million in 1997, $409 million in 1996 and $1.2 billion in 1995.
MARKET RISK EXPOSURES
Edison International's primary market risk exposures arise from fluctuations
in energy prices, interest rates and foreign exchange rates. Edison
International's risk management policy allows the use of derivative financial
instruments to manage its financial exposures, but prohibits the use of these
instruments for speculative or trading purposes.
SCE has hedged a portion of its exposure to increases in natural gas
prices. Increases in natural gas prices tend to increase the price of
electricity purchased from the power exchange(PX). SCE's exposure is also
limited by regulatory mechanisms that protect SCE from much of the risk
arising from high electricity prices.
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 has mitigated 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 $21 million in 1997, $6 million in 1996 and $7
million in 1995. 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 its results of operations or financial position.
Projects in the United Kingdom sell their electrical energy and
capacity through a centralized electricity pool, which establishes a
half-hourly clearing price for electrical energy. 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, where 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 can be sold in two structures: one-way
contracts, where a specified monthly amount is received in advance and
difference payments are made when the pool price is above the price specified
in the contract, and two-way contracts, where the counterparty pays First
Hydro when the pool price is below the contract price instead of a specified
monthly amount. These contracts act as a means of stabilizing production
revenue or purchasing costs by removing an element of First Hydro's net
exposure to pool price volatility. First Hydro's electric revenue increased
by $37 million and decreased by $5 million for the year ended December 31,
1997, and 1996, respectively, as a result of electricity rate swap agreements.
Loy Yang B sells its electrical energy through a centralized
electricity pool, which provides for a system of generator bidding, central
dispatch and a settlements system based on a clearing market for each
half-hour of every day. The Victorian Power Exchange, operator and
administrator of the pool, determines a system marginal price each half-hour.
To mitigate the exposure to price volatility of the electricity traded in
the pool, Loy Yang B has entered into a number of financial hedges. From May
8, 1997, to December 31, 2000, approximately 53% to 64% of the plant output
sold is hedged under vesting contracts, with the remainder of the plant
capacity hedged under the state hedge described below. Vesting contracts
were put into place by the State of Victoria, between each generator and each
distributor, prior to the privatization of electric power distributors in
order to provide more predictable pricing for those electricity customers
that were unable to choose their electricity retailer. Vesting contracts set
base strike prices at which the electricity will be traded, and the parties
to the agreement make payments, calculated based on the difference between
the price in the contract and the half-hourly pool clearing price for the
element of power under contract. These contracts can be sold as one-way or
two-way contracts which are structured similar to the electricity rate swap
agreements described above. These contracts are accounted for as electricity
rate swap agreements. The
26
EDISON INTERNATIONAL AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
state hedge is a long-term contractual arrangement based upon a fixed price
commencing May 8, 1997, and terminating October 31, 2016. The State
guarantees the State Electricity Commission of Victoria's obligations under
the state hedge. Loy Yang B's electric revenue was increased by $59 million
for the year ended December 31, 1997, as a result of hedging contract
arrangements. As EME continues to expand into foreign markets, fluctuations
in foreign currency exchange rates can affect the amount of its equity
contributions to, distributions from, and results of operations of 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 macroeconomic variables will behave in a manner that is
consistent with historical or forecasted relationships.
Construction on the two-unit Paiton project is approximately 85%
complete, and commercial operation is expected in the first half of 1999.
The tariff is higher in the early years and steps down over time, and the
tariff for the Paiton project includes infrastructure to be used in common by
other units at the Paiton complex. The plant's output is fully contracted
with the state-owned electricity company for payment in U.S. dollars. The
projected rate of growth of the Indonesian economy and the exchange rate of
Indonesian Rupiah into U.S. dollars have deteriorated significantly since the
Paiton project was contracted, approved and financed with substantial finance
and insurance support from the Export-Import Bank of the United States, The
Export-Import Bank of Japan, the U.S. Overseas Private Investment Corporation
and the Ministry of International Trade and Industry of Japan. The Paiton
project's senior debt ratings have been reduced from investment grade to
speculative grade based on the rating agencies' perceived increased risk that
the state-owned electricity company might not be able to honor the
electricity sales contract with Paiton. A Presidential decree has deemed
some power plants, but not including the Paiton project, subject to review,
postponement or cancellation. EME continues to monitor the situation closely.
A 10% increase in market interest rates would result in a $29 million
increase in the fair value of Edison International's interest rate hedge
agreements. A 10% decrease in market interest rates would result in a $30
million decline in the fair market value of interest rate hedge agreements.
A 10% increase in pool prices would result in a $97 million decrease in the
fair value of electricity rate swap agreements. A 10% decrease in pool
prices would result in a $97 million increase in the fair value of
electricity rate swaps. A 10% increase in natural gas prices would result in
a $26 million increase in the fair market value of gas call options. A 10%
decrease in natural gas prices would result in a $17 million decline in the
fair market value of gas call options. A 10% change in market rates is
expected to have an immaterial effect on Edison International's other
financial instruments.
PROJECTED CAPITAL REQUIREMENTS
Edison International's projected construction expenditures for the next five
years are: 1998--$1.1 billion; 1999--$807 million; 2000--$763 million;
2001--$721 million; and 2002--$671 million.
Long-term debt maturities and sinking fund requirements for the next
five years are: 1998--$848 million; 1999--$670 million; 2000--$719 million;
2001--$728 million; and 2002--$635 million.
Preferred stock redemption requirements for the next five years are:
1998 through 2001--zero and 2002--$105 million.
REGULATORY MATTERS
- -------------------------------------------------------------------------------
Legislation enacted in September 1996 provided for, among other things, a 10%
rate reduction for residential and small commercial customers in 1998 and
other rates to remain frozen at the June 10, 1996, level (system average of
10.1 CENTS per kilowatt-hour). See further discussion in Competitive
Environment -- Restructuring Legislation.
In 1998, SCE's revenue will be affected by various mechanisms
depending on the utility operation. Revenue related to distribution
operations will be determined through a performance-based rate-making
mechanism (PBR) (see discussion in Competitive Environment -- PBR) and the
distribution assets will have the opportunity to earn a CPUC-authorized 9.49%
return. Until the independent system operator (ISO) begins operation,
transmission revenue will be determined by the same mechanism as distribution
operations. After that time, transmission revenue will be determined through
FERC-authorized rates and transmission assets will earn a 9.43% return.
These rates are subject to refund. See discussions in the Competitive
Environment -- Rate-setting and FERC Restructuring Decision sections.
Revenue from generation-related operations will be determined through
the competition transition charge (CTC) mechanism, nuclear rate-making
agreements and the competitive market in 1998. Revenue related to fossil and
hydroelectric generation operations will be recovered from two sources. The
portion that is made uneconomic by electric industry restructuring will be
determined through the CTC mechanism. The portion that is economic will be
recovered through the PX mechanism. In 1998, fossil and hydroelectric
generation assets will earn a 7.22% return. A more detailed discussion is in
Competitive Environment -- CTC.
The CPUC has authorized revised rate-making plans for SCE's nuclear
facilities, which call for the accelerated recovery of its nuclear
investments in exchange for a lower authorized rate of return. SCE's nuclear
assets are earning an annual rate of return of 7.35%. In addition, the San
Onofre plan authorizes a fixed rate of approximately 4 CENTS per
kilowatt-hour generated for operating costs including incremental capital
costs, and nuclear fuel and nuclear fuel financing costs. The San Onofre
plan commenced in April 1996, and ends in December 2001 for the accelerated
recovery portion and in December 2003 for the incentive pricing portion.
Palo Verde's operating costs, including incremental capital costs, and
nuclear fuel and nuclear fuel financing costs, are subject to balancing
account treatment. The Palo Verde plan commenced in January 1997 and ends in
December 2001. Beginning January 1,
28
EDISON INTERNATIONAL AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
1998, both the San Onofre and Palo Verde rate-making plans became part of the
CTC mechanism.
The changes in revenue from the regulatory mechanisms discussed above,
excluding the effects of other rate actions, are expected to have a minimal
impact on 1998 earnings. However, the issuance of the rate reduction notes
in December 1997, which enables the repurchase of debt and equity, will have
a negative impact on 1998 earnings of approximately $97 million. The impact
on earnings per share will be mitigated due to the repurchase of common stock
from the rate reduction note proceeds.
In 1994, SCE filed its testimony in the non-Qualifying Facilities (QF)
phase of the 1994 Energy Cost Adjustment Clause proceeding. In 1995, the
CPUC's Office of Ratepayer Advocates (ORA) filed its report on the
reasonableness of SCE's gas supply costs for both the 1993 and 1994 record
periods. The report recommended a disallowance of $13 million for excessive
costs incurred from November 1993 through March 1994 associated with SCE's
Canadian gas purchase and supply contracts. The report requested 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 1996, the ORA issued its report
for the 1995 record period recommending a $38 million disallowance for
excessive costs incurred from April 1994 through March 1995. Both
proposed disallowances were later consolidated into one proceeding. On
December 3, 1997, the CPUC approved a settlement agreement between SCE and
the ORA on this and any future issues, which will result in a $61 million
(including interest) refund to SCE's customers. This refund is fully
reflected in the financial statements and will be made in first quarter 1998.
In 1991, SCE filed its testimony in the QF phase of the 1991 Energy
Cost Adjustment Clause proceeding. In 1993, the ORA filed its report on the
reasonableness of SCE's QF contracts and alleged that SCE had imprudently
renegotiated a QF contract with the Mojave Cogeneration Company. The report
recommended a disallowance of $32 million (1993 net present value) over the
contract's 20-year life. Subsequently, SCE and the ORA reached a settlement
where SCE agreed to a one-time reduction to its energy cost adjustment clause
balancing account of $14 million plus interest. In October 1996, the CPUC
approved the settlement agreement, subject to SCE and the ORA accepting
certain conditions concerning the way the $14 million payment would be
reflected in rates. After reviewing the decision, SCE declined to accept the
condition proposed by the CPUC and in November 1996 filed an application for
rehearing. In February 1997, the CPUC denied SCE's application. Because SCE
and the ORA were unable to finalize their settlement, hearings on the ORA's
disallowance recommendations were held in June 1997. During the hearings,
the ORA presented testimony to update its assessment of ratepayer harm, which
it now estimates to be $45 million (1997 net present value) over the
contract's life. In November 1997, a CPUC administrative law judge (ALJ)
issued a proposed decision which would adopt the ORA's $45 million
disallowance. In January 1998, the CPUC withdrew the ALJ's proposed decision
pending oral arguments. Oral arguments were heard on February 4, 1998, at
which time SCE requested an alternate proposed decision be issued. SCE
expects this matter to be returned to the CPUC's agenda in the near future
and a final decision to be issued during second quarter 1998. SCE cannot
predict the final outcome of this matter but does not believe it will
materially affect its results of operations.
COMPETITIVE ENVIRONMENT
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SCE currently operates in a highly regulated environment in which it has an
obligation to deliver 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.
CALIFORNIA ELECTRIC UTILITY RESTRUCTURING
- -------------------------------------------------------------------------------
RESTRUCTURING LEGISLATION -- In September 1996, the State of California
enacted legislation to provide a transition to a competitive market
structure. The legislation substantially adopted the CPUC's December 1995
restructuring decision by addressing stranded-cost recovery for utilities and
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 included provisions to finance
a portion of the stranded costs that residential and small commercial
customers would have paid between 1998 and 2001, which would allow SCE to
reduce rates by 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 included 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 during the 1998-2001 transition period. In
addition, the legislation mandated the implementation of the CTC that
provides utilities the opportunity to recover costs made uneconomic by
electric utility restructuring. Finally, the legislation contained
provisions for the recovery (through 2006) of reasonable employee-related
transition costs, incurred and projected, for retraining, severance, early
retirement, outplacement and related expenses.
RATE REDUCTION NOTES -- In May 1997, SCE filed an application with the CPUC
requesting approval of the issuance of an aggregate amount of up to $3
billion of rate reduction notes in one or more series or classes and a 10%
rate reduction for the period from January 1, 1998, through March 31, 2002.
At the same time, SCE filed an application with the California Infrastructure
and Economic Development Bank for approval to issue the notes. Residential
and small commercial customers will repay the notes over the expected
10-year term through non-bypassable charges based on electricity consumption.
In December 1997, after receiving approval from both the CPUC and the
Infrastructure Bank, a limited liability company created by SCE issued
approximately $2.5 billion of these notes. For further details, see the
discussion in Cash Flows from Financing Activities.
28
EDISON INTERNATIONAL AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
CPUC RESTRUCTURING DECISION -- The CPUC's December 1995 decision on
restructuring California's electric utility industry started the transition
to a new market structure, which is expected to provide competition and
customer choice and is scheduled to begin March 31, 1998. Key elements of
the CPUC's restructuring decision included: creation of the PX and ISO;
availability of direct customer access and customer choice; PBR for those
utility services not subject to competition; voluntary divestiture of at
least 50% of utilities' gas-fueled generation, and implementation of the CTC.
RATE-SETTING -- In December 1996, SCE filed a more comprehensive plan
(elaborating on its July 1996 filing related to the conceptual aspects of
separating costs as requested by CPUC and FERC directives) for the functional
unbundling of its rates for electric service, beginning 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 into separate charges for energy,
transmission, distribution, the CTC, public benefit programs and nuclear
decommissioning. The transmission component of this rate unbundling process
was addressed at the FERC through a March 1997 filing. In December 1997, the
FERC approved these rates, subject to refund, to be effective on the date the
ISO begins operation. CPUC hearings on SCE's rate unbundling (also known as
rate-setting) plan were concluded in April 1997. In August 1997, the CPUC
issued a decision which adopted the methodology for determining CTC
residually (see CTC discussion below) and adopted SCE's revenue requirement
components for public benefit programs and nuclear decommissioning. The
decision also adjusted SCE's proposed distribution revenue requirement by
reallocating $76 million of the amount annually to other functions such as
generation and transmission. Under the decision, SCE will be able to recover
most of the reallocated amount through market revenue, other rate-making
mechanisms after petitioning the CPUC to modify its prior decisions, or
another review process later in its divestiture proceeding.
PX AND ISO -- 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. In November 1996, the FERC conditionally
accepted the proposal and directed the three utilities, the ISO, and the PX
to file more specific information. The filing was made in March 1997, and
included SCE's proposed transmission revenue requirement. On October 29,
1997, the FERC gave conditional, interim authorization for operation of the
PX and ISO to begin on January 1, 1998. The FERC stated it would closely
monitor the PX and ISO, require further studies and make modifications, where
necessary. A comprehensive review will be performed by the FERC after three
years of operation of the PX and ISO. On December 22, 1997, the PX and ISO
governing boards announced a delay in the planned start-up of the PX and ISO
due to insufficient testing of operational, settlement and billing systems.
The PX and ISO are now expected to begin operation by March 31, 1998.
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 are backed by utility guarantees; SCE's share was
45%, or $113 million. In August 1996, the CPUC issued an interim order
establishing the restructuring trust and the funding level of $250 million,
which has been used to build the hardware and software systems for the ISO
and PX. The ISO and PX will repay the trust's loans and recover funds from
future ISO and PX customers. In November 1997, the CPUC approved a petition
jointly filed by the three utilities which requested an increase in the loan
guarantees from $250 million to $300 million; SCE's share of this new total
is $135 million. In December 1997, the CPUC approved a remaining item with
respect to the petition which requested that the one-time restructuring
implementation charge, to be paid to the PX by the utilities, be deemed a
non-bypassable charge to be recovered from all retail customers. The amount
of the PX charge is $85 million; SCE's share is 45%, or $38 million.
DIRECT CUSTOMER ACCESS -- In May 1997, the CPUC issued a decision describing
how all California investor-owned-utility customers will be able to choose
who will provide them with electric generation service beginning January 1,
1998. On December 30, 1997, the CPUC issued a decision delaying direct
access until March 31, 1998, due to operational delays in the start-up of the
PX and ISO. On this date, customers will be able to choose to remain utility
customers with bundled electric service from SCE (which will purchase its
power through the PX), or choose direct access, which means the customer can
contract directly with either independent power producers or retail electric
service providers such as power brokers, marketers and aggregators.
Additionally, all investor-owned-utility customers must pay the CTC whether
or not they choose to buy power through SCE. Electric utilities will
continue to provide the core distribution service of delivering energy
through its distribution system regardless of a customer's choice of
electricity supplier. The CPUC will continue to regulate the prices and
service obligations related to distribution services. If the new competitive
market cannot accommodate the volume of direct access transactions, the CPUC
could implement a contingency plan. However, the CPUC believes it is likely
that interest in and migration to direct access will be gradual.
REVENUE CYCLE SERVICES -- A decision issued by the CPUC in May 1997,
introduces customer choice to metering, billing and related services
(referred to as revenue cycle services) that are now provided by California's
investor-owned utilities. Under this revenue cycle services unbundling
decision, beginning in January 1998, direct access customers may choose to
have either SCE or their electric generation service provider render
consolidated (energy and distribution) bills, or they may choose to have
separate billings from each service provider. However, not all electric
generation service providers will necessarily offer each billing option. In
addition, beginning in January 1998, customers with maximum demand above 20
kW (primarily industrial and large commercial) can choose SCE or any other
supplier to provide their metering service. All other customers will have
this option beginning in January 1999. In determining whether any credit
should be provided by the utility to firms providing customers with revenue
cycle services, and the amount of any such credit, the CPUC has indicated
that it is appro-
29
EDISON INTERNATIONAL AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
priate to net the cost incurred by the utility and the cost avoided by the
utility as a result of such services being provided by the other firm rather
than by the utility. The unbundling of revenue cycle services will expose SCE
to the possible loss of revenue, higher stranded costs and a reduction in
revenue security.
PBR -- In 1993, SCE filed for a PBR mechanism to determine most of its
revenue (excluding fuel). The filing was subsequently divided between
transmission and distribution (T&D) and power generation.
In September 1996, the CPUC adopted a non-generation or T&D PBR
mechanism for SCE which began on January 1, 1997. According to the CPUC,
beginning in 1998 (coincident with the initiation of the competitive market),
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.
With the CPUC's 1995 restructuring decision and the passage of
restructuring legislation in 1996, the majority of power generation
ratemaking (primarily fossil-fueled and nuclear) was assigned to other
mechanisms. In April 1997, a CPUC interim order determined that the proposed
structure of the fossil-fueled plants' must-run contracts were under the
FERC's jurisdiction. On October 31, 1997, SCE filed must-run tariff
schedules with the FERC covering its six ISO-designated must-run plants. In
the meantime, SCE is pursuing the divestiture of these plants (see
Divestiture discussion below) and might not ever itself provide service under
these FERC tariff schedules.
In December 1997, the CPUC adopted a PBR-type ratemaking mechanism for
SCE's hydroelectric plants. The mechanism sets the hydroelectric revenue
requirement in 1998 and establishes a formula for extending it through the
duration of the electric industry restructuring transition period, or until
market valuation of the hydroelectric facilities, whichever occurs first.
The mechanism provides that power sales revenue from hydroelectric facilities
in excess of the hydroelectric revenue requirement be credited against the
costs to transition to a competitive market (see CTC discussion below).
DIVESTITURE -- In November 1996, SCE filed an application with the CPUC to
voluntarily divest, by auction, all 12 of its oil- and gas-fueled generation
plants. 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 restructuring legislation
enacted in September 1996. 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. In
September 1997, the CPUC approved SCE's proposal to auction the 12 plants.
On December 1, 1997, SCE filed a compliance filing with the CPUC
stating that it had sold 10 plants. On December 16, 1997, the CPUC approved
the sale of the 10 plants. On February 6, 1998, SCE filed a compliance
filing with the CPUC regarding the sale of an 11th plant. CPUC approval of
the sale is expected before March 31, 1998. The total sales price of the 11
plants is $1.1 billion, or 2.16 times their combined book value of $531
million. Net proceeds of the sales will be used to reduce stranded costs,
which otherwise were expected to be collected through the CTC mechanism. The
transfer of ownership of the 11 plants is expected to occur shortly before
the start of the new competitive market, which the PX and ISO currently
expect to occur on March 31, 1998. The sale and CPUC approval of the single
remaining plant is expected to be completed in early 1998.
CTC -- Recovery of costs to transition to a competitive market is being
implemented through a non-bypassable CTC. This charge applies to all
customers who were using or began using utility services on or after the
CPUC's 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, 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, 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 QF contracts,
which are the direct result of prior legislative and regulatory mandates; and
$5.6 billion to $6.3 billion from costs pertaining to certain generating
plants (successful completion of the sale of SCE's gas-fired generating
plants would reduce this estimate of transition costs for SCE-owned
generation to less than $5 billion) 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 Units 2 and 3 and the
Palo Verde units (as discussed in Regulatory Matters), and certain other
costs. In February 1997, SCE filed an update to the CTC filing to reflect
approval by the CPUC of settlements regarding ratemaking for SCE's share of
Palo Verde and the buyout of a power purchase agreement, as well as other
minor data updates. No substantive changes in the total CTC estimates were
included. This issue has been separated into two phases; Phase 1 addresses
the rate-making issues and Phase 2 the quantification issues.
30
EDISON INTERNATIONAL AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
A decision on Phase 1 was issued in June 1997, which, among other
things, required the establishment of a transition cost balancing account and
annual transition cost proceedings, set a market rate forecast for 1998
transition costs, and required that generation-related regulatory assets be
amortized ratably over a 48-month period. Hearings on Phase 2 were held in
May and June 1997 and a final decision was issued on November 19, 1997. The
Phase 2 decision established the calculation methodologies and procedures for
SCE to collect its transition costs from 1998 through the end of the rate
freeze. The Phase 2 decision also reduced SCE's authorized rate of return on
certain assets eligible for transition cost recovery (primarily fossil- and
hydroelectric-generation related assets) beginning July 1997, five months
earlier than anticipated. The decision, excluding the effects of other rate
actions, had a negative impact on 1997 earnings of approximately 4CENTS per
share. SCE has filed an application for rehearing on the 1997 rate of return
issue.
ACCOUNTING FOR GENERATION-RELATED ASSETS -- If the CPUC's electric industry
restructuring plan is implemented as outlined above, SCE would be allowed to
recover its CTC through non-bypassable charges to its distribution customers
(although its investment in certain generation assets would be subject to a
lower authorized rate of return).
As previously reported, from November 1996 to July 1997, SCE and the
other major California electric utilities were engaged in discussions with
the Securities and Exchange Commission staff regarding the proper application
of regulatory accounting standards in light of the electric industry
restructuring legislation enacted by the State of California in September
1996 and the CPUC's electric industry restructuring plan. This issue was
placed on the agenda of the Financial Accounting Standards Board's Emerging
Issues Task Force (EITF) during April 1997 and a final consensus was reached
at the July EITF meeting. During the third quarter of 1997, SCE implemented
the EITF consensus and discontinued application of accounting principles for
rate-regulated enterprises for its investment in generation facilities.
However, implementation of the EITF consensus did not require SCE to
write off any of its generation-related assets, including regulatory assets
of approximately $600 million at December 31, 1997. SCE has retained these
assets on its balance sheet because the legislation and restructuring plan
referred to above make probable their recovery through a non-bypassable CTC
to distribution customers. These regulatory assets relate primarily to the
recovery of accelerated income tax benefits previously flowed through to
customers, purchased power contract termination payments, unamortized losses
on reacquired debt, and the recovery of amounts deferred under the Palo Verde
rate phase-in plan. The consensus reached by the EITF also permits the
recording of new generation-related regulatory assets during the transition
period that are probable of recovery through the CTC mechanism.
If during the transition period events were to occur that made the
recovery of these generation-related regulatory assets no longer probable,
SCE would be required to write off the remaining balance of such assets as a
one-time, non-cash charge against earnings. If such a write-off were to be
required, SCE believes that it should not affect the recovery of stranded
costs provided for in the legislation and restructuring plan.
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 additional
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.
FERC RESTRUCTURING DECISION
In April 1996, the FERC issued its decision on stranded-cost recovery and
open access transmission, effective July 1996. The decision, reaffirmed by
the FERC in its March and November 1997 orders, 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
opportunity to recover stranded costs associated with existing wholesale
customers, retail-turned-wholesale customers and retail wheeling when the
state regulatory body does not have authority to address retail stranded
costs. Even though the CPUC is currently addressing stranded-cost recovery
through the CTC proceedings, the FERC has also asserted primary jurisdiction
over the recovery of stranded costs associated with retail-turned-wholesale
customers, such as a new municipal electric system or a municipal annexation.
However, the FERC did clarify that it does not intend to prevent or interfere
with a state's authority and that it has discretion to defer to a state
stranded-cost-calculation method. In January 1997, the FERC accepted the
open access transmission tariff SCE filed in compliance with the April 1996
decision. The rates included in the tariff are being collected subject to
refund. In May 1997, SCE filed a revised open access tariff to reflect the
few revisions set forth in the March 1997 order. The open access
transmission tariff will be terminated on the date the ISO begins operation.
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
31
EDISON INTERNATIONAL AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
identified site. Unless there is a probable amount, Edison International
records the lower end of this range of costs.
In connection with the issuance of the San Onofre Units 2 and 3
operating permits, SCE reached agreement with the California Coastal
Commission in 1991 to restore certain marine mitigation sites. The
restorations include two sites: designated wetlands and the construction of
an artificial kelp reef off the California coast. After SCE requested
certain modifications to the agreement, the Coastal Commission issued a final
ruling in April 1997 to reduce the scope of remediations. SCE elected to pay
for the costs of marine mitigation in lieu of placing the funds into a trust.
Rate recovery of these costs is occurring through the San Onofre incentive
pricing plan.
Edison International's recorded estimated minimum liability to
remediate its 51 identified sites is $178 million, which includes $75 million
for the two sites discussed above. One of SCE's sites, a former
pole-treating facility, is considered a federal Superfund site and represents
42% 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 $246 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 41 of
its sites, representing $91 million of Edison International's recorded
liability, through an incentive mechanism. 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 from insurance
carriers and other third parties. SCE has successfully settled insurance
claims with all responsible carriers. Costs incurred at SCE's remaining
sites are expected to be recovered through customer rates. SCE has recorded
a regulatory asset of $153 million for its estimated minimum
environmental-cleanup costs expected to be recovered through customer
rates. This amount includes $60 million of marine mitigation costs remaining
to be recovered through the San Onofre incentive pricing plan.
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 $10 million. Recorded costs
for 1997 were $10 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 materially affect 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 $820 million for the 1998 - 2002 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 has been the subject of scientific
research. After many years of research, scientists have not found that
exposure to EMF causes disease in humans. Research on this topic is
continuing. 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.
SAN ONOFRE STEAM GENERATOR TUBES
- -------------------------------------------------------------------------------
The San Onofre Units 2 and 3 steam generators have performed relatively well
through the first 15 years of operation, with low rates of ongoing steam
generator tube degradation. However, during the Unit 2 scheduled refueling
and inspection outage, which was completed in Spring 1997, an increased rate
of tube degradation was identified, which resulted in the removal of more
tubes from service than had been expected. The steam generator design allows
for the removal of up to 10% of the tubes 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 early 1998 for Unit 2.
During Unit 3's refueling outage, which was completed in July 1997,
inspections of structural supports for steam generator tubes identified
several areas where the thickness of the supports had been reduced,
apparently by erosion during normal plant operation. As a result, a
mid-cycle inspection outage is planned for early 1998. However, during Unit
2's Spring 1997 inspection outage, similar tube supports showed no signs of
such erosion.
PROPOSED NEW ACCOUNTING STANDARD
- -------------------------------------------------------------------------------
During 1996, the Financial Accounting Standards Board issued an exposure
draft that would establish accounting standards for the
32
EDISON INTERNATIONAL AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
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.
YEAR 2000 ISSUE
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Many of SCE's existing computer systems identify a year by only two digits
instead of four. If not corrected, these programs could fail or create
erroneous results when the new century begins. This situation has been
referred to generally as the Year 2000 Issue.
SCE has developed plans and is addressing the programming changes that
it has determined are necessary in order for its computer systems to function
properly beginning in 2000. Remediation of SCE's key financial systems for
the Year 2000 Issue was completed in 1997. SCE's informational and
operational systems have been assessed, and detailed plans have been
developed to address modifications required to be completed, tested and
operational by December 31, 1999. Preliminary estimates of the costs to
complete these modifications, including the cost of new hardware and software
application modifications, range from $55 million to $80 million, about half
of which are expected to be capital costs. Current rate levels for providing
electric service should be sufficient to provide funding for these
modifications. Remediation of existing critical systems is expected to be
75% complete by the end of 1998. SCE expects its Year 2000 date conversion
project to be completed on a timely basis, with no material adverse impact to
its results of operations or financial position.
SCE's Year 2000 date conversion project includes an assessment of
critical interfaces with the computer systems of others and it does not
expect a material adverse effect on its operating and business functions from
the Year 2000 Issue.
QUARTERLY FINANCIAL DATA
- -----------------------------------------------------------------------------------------------
(UNAUDITED)
1997
- -----------------------------------------------------------------------------------------------
IN MILLIONS,
EXCEPT PER-SHARE AMOUNTS TOTAL FOURTH THIRD SECOND FIRST
- -----------------------------------------------------------------------------------------------
Operating revenue $ 9,235 $ 2,329 $ 2,738 $ 2,167 $ 2,001
Operating income 1,498 342 470 329 357
Net income 700 139 277 139 145
Per share:
Basic earnings 1.75 .37 .70 .34 .35
Diluted earnings 1.73 .36 .70 .34 .34
Dividends declared 1.00 .25 .25 .25 .25
Common stock prices:
High $ 27 13/16 $ 27 13/16 $ 27 1/8 $ 25 5/8 $ 23 1/8
Low 19 1/2 24 13/16 24 20 1/4 19 1/2
Close 27 3/16 27 3/16 25 1/4 24 7/8 22 1/2
1996
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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:
Basic earnings 1.64 .27 .63 .35 .38
Diluted earnings 1.63 .27 .63 .35 .37
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
33
EDISON INTERNATIONAL AND SUBSIDIARIES
RESPONSIBILITY FOR FINANCIAL REPORTING
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 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.
/s/ RICHARD K. BUSHEY /s/ JOHN E. BRYSON
- ---------------------------------- ----------------------------------
RICHARD K. BUSHEY JOHN E. BRYSON
VICE PRESIDENT AND CONTROLLER CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
January 30, 1998
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
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, 1997, and 1996, and the related consolidated statements of income,
retained earnings and cash flows for each of the three years in the period
ended December 31, 1997. 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, 1997, and 1996, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
- -------------------------------------
ARTHUR ANDERSEN LLP
Los Angeles, California
January 30, 1998
34
EDISON INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
IN MILLIONS, EXCEPT PER-SHARE AMOUNTS YEAR ENDED DECEMBER 31, 1997 1996 1995
- ----------------------------------------------------------------------------------------------------
Electric utility revenue $ 7,953 $ 7,583 $ 7,873
Diversified operations 1,282 962 532
-------- -------- --------
TOTAL OPERATING REVENUE 9,235 8,545 8,405
-------- -------- --------
Fuel 1,074 768 694
Purchased power 2,854 2,706 2,582
Provisions for regulatory adjustment clauses -- net (411) (226) 230
Other operating expenses 1,781 1,555 1,411
Maintenance 406 331 359
Depreciation and decommissioning 1,362 1,173 1,014
Income taxes 537 563 528
Property and other taxes 134 197 210
-------- -------- --------
TOTAL OPERATING EXPENSES 7,737 7,067 7,028
-------- -------- --------
OPERATING INCOME 1,498 1,478 1,377
-------- -------- --------
Provision for rate phase-in plan (48) (84) (122)
Allowance for equity funds used during construction 8 16 19
Interest and dividend income 85 63 65
Minority interest (39) (70) (48)
Other nonoperating income (deductions) -- net (62) (13) 41
-------- -------- --------
TOTAL OTHER INCOME (DEDUCTIONS) -- NET (56) (88) (45)
-------- -------- --------
INCOME BEFORE INTEREST AND OTHER EXPENSES 1,442 1,390 1,332
-------- -------- --------
Interest on long-term debt 584 604 539
Other interest expense 139 90 81
Allowance for borrowed funds used during construction (9) (10) (14)
Capitalized interest (15) (58) (60)
Dividends on subsidiary preferred securities 43 47 47
-------- -------- --------
TOTAL INTEREST AND OTHER EXPENSES -- NET 742 673 593
-------- -------- --------
NET INCOME $ 700 $ 717 $ 739
-------- -------- --------
-------- -------- --------
Weighted-average shares of common stock outstanding 400 437 446
BASIC EARNINGS PER SHARE $ 1.75 $ 1.64 $ 1.66
DILUTED EARNINGS PER SHARE $ 1.73 $ 1.63 $ 1.65
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
IN MILLIONS, EXCEPT PER-SHARE AMOUNTS YEAR ENDED DECEMBER 31, 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
BALANCE AT BEGINNING OF YEAR $ 3,753 $ 3,700 $ 3,452
Net income 700 717 739
Dividends declared on common stock (395) (435) (446)
Stock repurchase and retirement (882) (229) (45)
-------- -------- --------
BALANCE AT END OF YEAR $ 3,176 $ 3,753 $ 3,700
-------- -------- --------
-------- -------- --------
Dividends declared per common share $ 1.00 $ 1.00 $ 1.00
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
35
EDISON INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
IN MILLIONS DECEMBER 31, 1997 1996
- ----------------------------------------------------------------------------------------------------
ASSETS
Transmission and distribution:
Utility plant, at original cost, subject to cost-based rate regulation $ 11,213 $ 10,973
Accumulated provision for depreciation (5,574) (5,129)
Construction work in progress 493 462
--------- ---------
6,132 6,306
--------- ---------
Generation:
Utility plant, at original cost, not subject to cost-based rate regulation 9,522 9,427
Accumulated provision for depreciation and decommissioning (4,970) (4,302)
Construction work in progress 100 95
Nuclear fuel, at amortized cost 155 177
--------- ---------
4,807 5,397
--------- ---------
TOTAL UTILITY PLANT 10,939 11,703
--------- ---------
Nonutility property -- less accumulated provision for depreciation
of $238 and $203 at respective dates 3,178 3,570
Nuclear decommissioning trusts 1,831 1,486
Investments in partnerships and unconsolidated subsidiaries 1,408 1,372
Investments in leveraged leases 960 584
Other investments 194 104
--------- ---------
TOTAL OTHER PROPERTY AND INVESTMENTS 7,571 7,116
--------- ---------
Cash and equivalents 1,907 897
Receivables, including unbilled revenue, less allowances of $27
and $26 for uncollectible accounts at respective dates 1,077 1,095
Fuel inventory 58 72
Materials and supplies, at average cost 133 154
Accumulated deferred income taxes -- net 123 240
Regulatory balancing accounts -- net 193 --
Prepayments and other current assets 106 114
--------- ---------
TOTAL CURRENT ASSETS 3,597 2,572
--------- ---------
Unamortized debt issuance and reacquisition expense 359 347
Income tax-related deferred charges 1,544 1,741
Other deferred charges 1,091 1,080
--------- ---------
TOTAL DEFERRED CHARGES 2,994 3,168
--------- ---------
TOTAL ASSETS $ 25,101 $ 24,559
--------- ---------
--------- ---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
36
EDISON INTERNATIONAL AND SUBSIDIARIES
IN MILLIONS, EXCEPT SHARE AMOUNTS DECEMBER 31, 1997 1996
- ----------------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES
Common shareholders' equity:
Common stock (375,764,429 and 424,524,178 shares
outstanding at respective dates) $ 2,261 $ 2,547
Cumulative translation adjustments -- net 30 64
Unrealized gain in equity investments -- net 60 33
Retained earnings 3,176 3,753
-------- --------
5,527 6,397
Preferred securities of subsidiaries:
Not subject to mandatory redemption 184 284
Subject to mandatory redemption 425 425
Long-term debt 8,871 7,475
-------- --------
TOTAL CAPITALIZATION 15,007 14,581
-------- --------
OTHER LONG-TERM LIABILITIES 480 424
-------- --------
Current portion of long-term debt 868 592
Short-term debt 330 397
Accounts payable 441 438
Accrued taxes 577 530
Accrued interest 132 131
Dividends payable 95 109
Regulatory balancing accounts -- net -- 182
Deferred unbilled revenue and other current liabilities 1,285 1,059
-------- --------
TOTAL CURRENT LIABILITIES 3,728 3,438
-------- --------
Accumulated deferred income taxes -- net 4,085 4,283
Accumulated deferred investment tax credits 351 372
Customer advances and other deferred credits 1,441 754
-------- --------
TOTAL DEFERRED CREDITS 5,877 5,409
-------- --------
MINORITY INTEREST 9 707
-------- --------
Commitments and contingencies (Notes 2, 8, 9 and 10)
TOTAL CAPITALIZATION AND LIABILITIES $ 25,101 $ 24,559
-------- --------
-------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
37
EDISON INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
IN MILLIONS YEAR ENDED DECEMBER 31, 1997 1996 1995
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 700 $ 717 $ 739
Adjustments for non-cash items:
Depreciation and decommissioning 1,362 1,173 1,014
Amortization 88 96 73
Rate phase-in plan 47 79 111
Deferred income taxes and investment tax credits 115 91 (166)
Equity in income from partnerships and
unconsolidated subsidiaries (190) (154) (115)
Other long-term liabilities 56 80 33
Other -- net (131) (98) --
Changes in working capital:
Receivables (8) 68 (27)
Regulatory balancing accounts (375) (156) 282
Fuel inventory, materials and supplies 36 39 (19)
Prepayments and other current assets 10 13 (17)
Accrued interest and taxes 47 3 19
Accounts payable and other current liabilities 195 70 13
Distributions from partnerships and unconsolidated
subsidiaries 182 176 178
------ ------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,134 2,197 2,118
------ ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt issued 1,646 1,365 1,496
Long-term debt repaid (2,219) (1,315) (960)
Rate reduction notes issued 2,449 -- --
Preferred securities issued -- 414 63
Preferred securities redeemed (100) -- (75)
Common stock repurchased (1,173) (344) (70)
Short-term debt financing -- net (68) (312) (46)
Dividends paid (408) (440) (447)
Other -- net (14) 45 31
------ ------ ------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 113 (587) (8)
------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and plant (783) (744) (969)
Purchase of nonutility power stations -- -- (1,015)
Funding of nuclear decommissioning trusts (154) (148) (151)
Investments in partnerships and unconsolidated subsidiaries (131) (336) (45)
Unrealized gain in equity investments -- net 27 15 8
Other -- net (196) (7) 35
------ ------ ------
NET CASH USED BY INVESTING ACTIVITIES (1,237) (1,220) (2,137)
------ ------ ------
Net increase (decrease) in cash and equivalents 1,010 390 (27)
Cash and equivalents, beginning of year 897 507 534
------ ------ ------
CASH AND EQUIVALENTS, END OF YEAR $ 1,907 $ 897 $ 507
------ ------ ------
------ ------ ------
CASH PAYMENTS FOR INTEREST AND TAXES:
Interest -- net of amounts capitalized $ 579 $ 486 $ 463
Taxes 298 447 642
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Obligation to fund investments in partnerships and
unconsolidated subsidiaries 237 237 466
Additions to property and plant funded by the
minority owner of consolidated subsidiaries -- 33 77
Goodwill related to purchase of nonutility power stations -- -- 312
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
38
EDISON INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
ACCOUNTING PRINCIPLES
Southern California Edison Company's (SCE) 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). As a result of industry restructuring
legislation enacted by the State of California and a related change in the
application of accounting principles for rate-regulated enterprises adopted
recently by the Financial Accounting Standards Board's Emerging Issues Task
Force (EITF), during the third quarter of 1997 SCE began accounting for its
investment in generation facilities in accordance with GAAP applicable to
enterprises in general. Although this change did not result in any adjustment
of the carrying value of such investment, the amount is shown separately on
Edison International's Balance Sheet under the caption: Generation utility
plant, at original cost, not subject to cost-based rate regulation. The
competitive market for electric generation in California is scheduled to
begin March 31, 1998.
COMPETITION TRANSITION CHARGE (CTC)
Beginning January 1, 1998, a non-bypassable charge is being billed to all SCE
customers, which provides SCE the opportunity to recover its costs to
transition to a competitive market.
CONSOLIDATION POLICY
The consolidated financial statements include Edison International and its
wholly owned subsidiaries. Edison International's subsidiaries use the
equity method to account for significant investments in partnerships and
subsidiaries in which they own 50% or less. Intercompany transactions have
been eliminated, except Edison Mission Energy's (EME) profits from energy
sales to SCE, which are allowed in utility rates.
EARNINGS PER SHARE (EPS)
Basic and diluted EPS are computed in accordance with a recently issued
accounting standard. Basic EPS for Edison International equals previously
reported primary EPS. EPS amounts were as follows:
IN MILLIONS, EXCEPT PER-SHARE AMOUNTS
- -------------------------------------------------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
- -------------------------------------------------------------------------------
For the Year Ended December 31, 1997:
Income $ 743
Less: dividends on subsidiary
preferred securities 43
------
Basic EPS
Net income available to common
shareholders 700 400 $ 1.75
------ ---- ------
Effect of dilutive securities:
Employee stock options 4
----
Diluted EPS $ 700 404 $ 1.73
------ ---- ------
For the Year Ended December 31, 1996:
Income $ 764
Less: dividends on subsidiary
preferred securities 47
------
Basic EPS
Net income available to common
shareholders 717 437 $ 1.64
------ ---- ------
Effect of dilutive securities:
Employee stock options 2
----
Diluted EPS $ 717 439 $ 1.63
------ ---- ------
For the Year Ended December 31, 1995:
Income $ 786
Less: dividends on subsidiary
preferred securities 47
------
Basic EPS
Net income available to common
shareholders 739 446 $ 1.66
------ ---- ------
Effect of dilutive securities:
Employee stock options 2
----
Diluted EPS $ 739 448 $ 1.65
------ ---- ------
ESTIMATES
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 restructuring, decommissioning and contingencies are further
discussed in Notes 2, 9 and 10 to the Consolidated Financial Statements,
respectively.
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.
NATURE OF OPERATIONS
Edison International's wholly owned subsidiaries include: SCE, a
rate-regulated electric utility which produces and supplies electric energy
for its 4.3 million customers in Central and Southern California; EME, a
market leader in the development, ownership and operation of independent
power facilities; Edison Capital, a leading provider of capital and financial
services; and Edison Enterprises, the retail business arm of Edison
International. EME and Edison Capital have domestic and foreign projects,
primarily in Europe and Asia.
SCE currently operates in a highly regulated environment in which it has
an obligation to deliver 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 domestic projects generally
sell power to a limited number of electric utilities under long-term (15 to
30 years) contracts. EME's plants are located in different geographic areas,
which mitigates the effects of regional markets, economic down-turns or
unusual weather conditions.
39
EDISON INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, September 1996 and January 1998 for Units 1, 2 and
3, respectively.
Under federal law, 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 non-bypassable customer rates.
In 1992, SCE discontinued operation of San Onofre Nuclear Generating
Station Unit 1, after the CPUC approved a settlement agreement between SCE
and the CPUC's Office of Ratepayer Advocates (ORA) to discontinue operation
of Unit 1 because operation of the unit was no longer cost-effective. 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.
In 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 a further acceleration of the
recovery of SCE's remaining investment of $2.6 billion in San Onofre Units 2
and 3. The accelerated recovery will continue through December 2001, earning
a 7.35% fixed rate of return. Operating costs, including nuclear fuel and
nuclear fuel financing costs, and incremental capital expenditures at San
Onofre Units 2 and 3 are recovered through an incentive pricing plan which
allows SCE to receive about 4CENTS per kilowatt-hour through 2003. Any
differences between these costs and the incentive price will flow through to
the shareholders. Beginning January 1, 1998, the accelerated plant recovery
and the incentive pricing plan became part of the CTC mechanism. Beginning
in 2004, SCE will be required to share equally with ratepayers the net
benefits received from operation of the units.
In January 1997, the CPUC authorized a further acceleration of the
recovery of its remaining investment of $1.2 billion in Palo Verde Units 1, 2
and 3. The accelerated recovery will continue through December 2001, earning
a 7.35% fixed rate of return. The accelerated plant recovery, as well as
operating costs, including nuclear fuel and nuclear fuel financing costs, and
incremental capital expenditures, are subject to balancing account treatment
through 2001. Beginning January 1, 1998, the balancing account became part of
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. Beginning in 2002, SCE
will be required to share equally with ratepayers the net benefits received
from operation of Palo Verde.
PROPERTY AND PLANT
Plant additions, including replacements and betterments, are capitalized.
Such costs for utility property 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 5.2%
for 1997, 4.2% for 1996 and 3.6% for 1995.
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,
3.2% for 1997, 3.9% for 1996 and 3.8% for 1995.
During the third quarter of 1997, SCE discontinued accounting for its
investment in generation facilities using accounting principles applicable to
rate-regulated enterprises and began accounting for such investment using
GAAP applicable to enterprises in general. The carrying value of such
investment was unaffected by this change.
RECLASSIFICATIONS
Certain prior-year amounts were reclassified to conform to the December 31,
1997, financial statement presentation.
REGULATORY BALANCING ACCOUNTS
Prior to January 1, 1998, the differences between CPUC-authorized and actual
base-rate revenue from kilowatt-hour sales and CPUC-authorized and actual
energy costs were accumulated in balancing accounts until they were refunded
to, or recovered from, utility customers through authorized rate adjustments
(with interest). Beginning January 1, 1998, the difference between
generation-related revenue and generation-related costs is being accumulated
in a transition cost balancing account. These transition costs are being
recovered from utility customers (with interest) through the CTC through
2001. Income tax effects on all balancing account changes are deferred.
In January 1997, in compliance with the new restructuring legislation,
overcollections in the kilowatt-hour sales and energy cost balancing accounts
at December 31, 1996, were transferred to an interim balancing account and
were credited to the transition cost balancing account beginning in January
1998.
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 $39 million in 1997, $21 million in 1996 and $28 million in
1995.
40
EDISON INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVENUE
Electric utility revenue includes amounts for services rendered but unbilled
at the end of each year.
NOTE 2. REGULATORY MATTERS
- -------------------------------------------------------------------------------
CALIFORNIA ELECTRIC UTILITY INDUSTRY RESTRUCTURING
- -------------------------------------------------------------------------------
RESTRUCTURING LEGISLATION -- In September 1996, the State of California
enacted legislation to provide a transition to a competitive market
structure. The legislation substantially adopted the CPUC's December 1995
restructuring decision by addressing stranded-cost recovery for utilities and
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 included provisions to finance
a portion of the stranded costs that residential and small commercial
customers would have paid between 1998 and 2001, which would allow SCE to
reduce rates by 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 included 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 during the 1998 - 2001 transition period. In
addition, the legislation mandated the implementation of the CTC that
provides utilities the opportunity to recover costs made uneconomic by
electric utility restructuring. Finally, the legislation contained
provisions for the recovery (through 2006) of reasonable employee-related
transition costs, incurred and projected, for retraining, severance, early
retirement, outplacement and related expenses.
RATE REDUCTION NOTES -- In May 1997, SCE filed an application with the CPUC
requesting approval of the issuance of an aggregate amount of up to $3
billion of rate reduction notes in one or more series or classes and a 10%
rate reduction for the period from January 1, 1998, through March 31, 2002.
At the same time, SCE filed an application with the California Infrastructure
and Economic Development Bank for approval to issue the notes. Residential
and small commercial customers will repay the notes over the expected
10-year term through non-bypassable charges based on electricity consumption.
In December 1997, after receiving approval from both the CPUC and the
Infrastructure Bank, a limited liability company created by SCE issued
approximately $2.5 billion of these notes. For further details, see the
discussion under Long-Term Debt in Note 3 to the Consolidated Financial
Statements.
CPUC RESTRUCTURING DECISION -- The CPUC's December 1995 decision on
restructuring California's electric utility industry started the transition
to a new market structure, which is expected to provide competition and
customer choice and is scheduled to begin March 31, 1998. Key elements of
the CPUC's restructuring decision included: creation of an independent power
exchange (PX) and independent system operator (ISO); availability of direct
customer access and customer choice; performance-based ratemaking (PBR) for
those utility services not subject to competition; voluntary divestiture of
at least 50% of utilities' gas-fueled generation, and implementation of the
CTC.
RATE-SETTING -- In December 1996, SCE filed a more comprehensive plan
(elaborating on its July 1996 filing related to the conceptual aspects of
separating costs as requested by CPUC and FERC directives) for the functional
unbundling of its rates for electric service, beginning 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 into separate charges for energy,
transmission, distribution, the CTC, public benefit programs and nuclear
decommissioning. The transmission component of this rate unbundling process
was addressed at the FERC through a March 1997 filing. In December 1997, the
FERC approved these rates, subject to refund, to be effective on the date the
ISO begins operation. CPUC hearings on SCE's rate unbundling (also known as
rate-setting) plan were concluded in April 1997. In August 1997, the CPUC
issued a decision which adopted the methodology for determining CTC
residually (see CTC discussion below) and adopted SCE's revenue requirement
components for public benefit programs and nuclear decommissioning. The
decision also adjusted SCE's proposed distribution revenue requirement by
reallocating $76 million of the amount annually to other functions such as
generation and transmission. Under the decision, SCE will be able to recover
most of the reallocated amount through market revenue, other rate-making
mechanisms after petitioning the CPUC to modify its prior decisions, or
another review process later in its divestiture proceeding.
PX AND ISO -- 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. In November 1996, the FERC conditionally
accepted the proposal and directed the three utilities, the ISO, and the PX
to file more specific information. The filing was made in March 1997, and
included SCE's proposed transmission revenue requirement. On October 29,
1997, the FERC gave conditional, interim authorization for operation of the
PX and ISO to begin on January 1, 1998. The FERC stated it would closely
monitor the PX and ISO, require further studies and make modifications, where
necessary. A comprehensive review will be performed by the FERC after three
years of operation of the PX and ISO. On December 22, 1997, the PX and ISO
governing boards announced a delay in the planned start-up of the PX and ISO
due to insufficient testing of operational, settlement and billing systems.
The PX and ISO are now expected to begin operation by March 31, 1998.
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 are backed by utility guarantees; SCE's share was
45%, or $113 million. In August 1996, the CPUC issued an interim order
establishing the restructuring trust and the funding level of $250 million,
which has
41
EDISON INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
been used to build the hardware and software systems for the ISO and PX. The
ISO and PX will repay the trust's loans and recover funds from future ISO and
PX customers. In November 1997, the CPUC approved a petition jointly filed
by the three utilities which requested an increase in the loan guarantees
from $250 million to $300 million; SCE's share of this new total is $135
million. In December 1997, the CPUC approved a remaining item with respect
to the petition which requested that the one-time restructuring
implementation charge, to be paid to the PX by the utilities, be deemed a
non-bypassable charge to be recovered from all retail customers. The amount
of the PX charge is $85 million; SCE's share is 45%, or $38 million.
DIRECT CUSTOMER ACCESS -- In May 1997, the CPUC issued a decision describing
how all California investor-owned-utility customers will be able to choose
who will provide them with electric generation service beginning January 1,
1998. On December 30, 1997, the CPUC issued a decision delaying direct
access until March 31, 1998, due to operational delays in the start-up of the
PX and ISO. On this date, customers will be able to choose to remain utility
customers with bundled electric service from SCE (which will purchase its
power through the PX), or choose direct access, which means the customer can
contract directly with either independent power producers or retail electric
service providers such as power brokers, marketers and aggregators.
Additionally, all investor-owned-utility customers must pay the CTC whether
or not they choose to buy power through SCE. Electric utilities will
continue to provide the core distribution service of delivering energy
through its distribution system regardless of a customer's choice of
electricity supplier. The CPUC will continue to regulate the prices and
service obligations related to distribution services. If the new competitive
market cannot accommodate the volume of direct access transactions, the CPUC
could implement a contingency plan. However, the CPUC believes it is likely
that interest in and migration to direct access will be gradual.
REVENUE CYCLE SERVICES -- A decision issued by the CPUC in May 1997,
introduces customer choice to metering, billing and related services
(referred to as revenue cycle services) that are now provided by California's
investor-owned utilities. Under this revenue cycle services unbundling
decision, beginning in January 1998, direct access customers may choose to
have either SCE or their electric generation service provider render
consolidated (energy and distribution) bills, or they may choose to have
separate billings from each service provider. However, not all electric
generation service providers will necessarily offer each billing option. In
addition, beginning in January 1998, customers with maximum demand above 20
kW (primarily industrial and large commercial) can choose SCE or any other
supplier to provide their metering service. All other customers will have
this option beginning in January 1999. In determining whether any credit
should be provided by the utility to firms providing customers with revenue
cycle services, and the amount of any such credit, the CPUC has indicated
that it is appropriate to net the cost incurred by the utility and the cost
avoided by the utility as a result of such services being provided by the
other firm rather than by the utility.
PBR -- In 1993, SCE filed for a PBR mechanism to determine most of its
revenue (excluding fuel). The filing was subsequently divided between
transmission and distribution (T&D) and power generation.
In September 1996, the CPUC adopted a non-generation or T&D PBR
mechanism for SCE which began on January 1, 1997. According to the CPUC,
beginning in 1998 (coincident with the initiation of the competitive market),
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.
With the CPUC's 1995 restructuring decision and the passage of
restructuring legislation in 1996, the majority of power generation
ratemaking (primarily fossil-fueled and nuclear) was assigned to other
mechanisms. In April 1997, a CPUC interim order determined that the proposed
structure of the fossil-fueled plants' must-run contracts were under the
FERC's jurisdiction. On October 31, 1997, SCE filed must-run tariff
schedules with the FERC covering its six ISO-designated must-run plants. In
the meantime, SCE is pursuing the divestiture of these plants (see
Divestiture discussion below) and might not ever itself provide service under
these FERC tariff schedules.
In December 1997, the CPUC adopted a PBR-type rate-making mechanism for
SCE's hydroelectric plants. The mechanism sets the hydroelectric revenue
requirement in 1998 and establishes a formula for extending it through the
duration of the electric industry restructuring transition period, or until
market valuation of the hydroelectric facilities, whichever occurs first.
The mechanism provides that power sales revenue from hydroelectric facilities
in excess of the hydroelectric revenue requirement be credited against the
costs to transition to a competitive market (see CTC discussion below).
DIVESTITURE -- In November 1996, SCE filed an application with the CPUC to
voluntarily divest, by auction, all 12 of its oil- and gas-fueled generation
plants. 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 restructuring legislation
enacted in September 1996. 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. In
September 1997, the CPUC approved SCE's proposal to auction the 12 plants.
On December 1, 1997, SCE filed a compliance filing with the CPUC stating
that it had sold 10 plants. On December 16, 1997, the CPUC approved the sale
of the 10 plants. On February 6, 1998, SCE filed a compliance filing with
the CPUC regarding the sale of
42
EDISON INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
an 11th plant. CPUC approval of the sale is expected before March 31, 1998.
The total sales price of the 11 plants is $1.1 billion, or 2.16 times their
combined book value of $531 million. Net proceeds of the sales will be used
to reduce stranded costs, which otherwise were expected to be collected
through the CTC mechanism. The transfer of ownership of the 11 plants is
expected to occur shortly before the start of the new competitive market,
which the PX and ISO currently expect to occur on March 31, 1998. The sale
and CPUC approval of the single remaining plant is expected to be completed
in early 1998.
CTC -- The CTC applies to all customers who were using or began using utility
services on or after the CPUC's 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, 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, 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 facilities (QF) contracts, which are the direct result
of prior legislative and regulatory mandates; and $5.6 billion to $6.3
billion from costs pertaining to certain generating plants (successful
completion of the sale of SCE's gas-fired generating plants would reduce this
estimate of transition costs for SCE-owned generation to less than $5
billion) 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 Units 2 and 3 and the Palo Verde units (as
discussed in Note 1 to the Consolidated Financial Statements), and certain
other costs. In February 1997, SCE filed an update to the CTC filing to
reflect approval by the CPUC of settlements regarding ratemaking for SCE's
share of Palo Verde and the buyout of a power purchase agreement, as well as
other minor data updates. No substantive changes in the total CTC estimates
were included. This issue has been separated into two phases; Phase 1
addresses the rate-making issues and Phase 2 the quantification issues.
A decision on Phase 1 was issued in June 1997, which, among other
things, required the establishment of a transition cost balancing account and
annual transition cost proceedings, set a market rate forecast for 1998
transition costs, and required that generation-related regulatory assets be
amortized ratably over a 48-month period. Hearings on Phase 2 were held in
May and June 1997 and a final decision was issued on November 19, 1997. The
Phase 2 decision established the calculation methodologies and procedures for
SCE to collect its transition costs from 1998 through the end of the rate
freeze. The Phase 2 decision also reduced SCE's authorized rate of return on
certain assets eligible for transition cost recovery (primarily fossil- and
hydroelectric-generation related assets) beginning July 1997, five months
earlier than anticipated. The decision, excluding the effects of other rate
actions, had a negative impact on 1997 earnings of approximately 4 CENTS per
share. SCE has filed an application for rehearing on the 1997 rate of return
issue.
ACCOUNTING FOR GENERATION-RELATED ASSETS -- If the CPUC's electric industry
restructuring plan is implemented as outlined above, SCE would be allowed to
recover its CTC through non-bypassable charges to its distribution customers
(although its investment in certain generation assets would be subject to a
lower authorized rate of return).
As previously reported, from November 1996 to July 1997, SCE and the
other major California electric utilities were engaged in discussions with
the Securities and Exchange Commission staff regarding the proper application
of regulatory accounting standards in light of the electric industry
restructuring legislation enacted by the State of California in September
1996 and the CPUC's electric industry restructuring plan. This issue was
placed on the agenda of the EITF during April 1997 and a final consensus was
reached at the July EITF meeting. During the third quarter of 1997, SCE
implemented the EITF consensus and discontinued application of accounting
principles for rate-regulated enterprises for its investment in generation
facilities.
However, implementation of the EITF concensus did not require SCE to
write off any of its generation-related assets, including regulatory assets
of approximately $600 million at December 31, 1997. SCE has retained these
assets on its balance sheet because the legislation and restructuring plan
referred to above make probable their recovery through a CTC to distribution
customers. These regulatory assets relate primarily to the recovery of
accelerated income tax benefits previously flowed through to customers,
purchased power contract termination payments, unamortized losses on
reacquired debt, and the recovery of amounts deferred under the Palo Verde
rate phase-in plan. The consensus reached by the EITF also permits the
recording of new generation-related regulatory assets during the transition
period that are probable of recovery through the CTC mechanism.
If during the transition period events were to occur that made the recovery
of these generation-related regulatory assets no longer probable, SCE would
be required to write off the remaining balance of such assets as a one-time,
non-cash charge against earnings. If such a write-off were to be required,
SCE believes that it should not affect the recovery of stranded costs
provided for in the legislation and restructuring plan.
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
43
EDISON INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 additional
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.
FERC RESTRUCTURING DECISION
In April 1996, the FERC issued its decision on stranded-cost recovery and
open access transmission, effective July 1996. The decision, reaffirmed by
the FERC in its March and November 1997 orders, 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
opportunity to recover stranded costs associated with existing wholesale
customers, retail-turned-wholesale customers and retail wheeling when the
state regulatory body does not have authority to address retail stranded
costs. Even though the CPUC is currently addressing stranded-cost recovery
through the CTC proceedings, the FERC has also asserted primary jurisdiction
over the recovery of stranded costs associated with retail-turned-wholesale
customers, such as a new municipal electric system or a municipal annexation.
However, the FERC did clarify that it does not intend to prevent or interfere
with a state's authority and that it has discretion to defer to a state
stranded-cost-calculation method. In January 1997, the FERC accepted the
open access transmission tariff SCE filed in compliance with the April 1996
decision. The rates included in the tariff are being collected subject to
refund. In May 1997, SCE filed a revised open access tariff to reflect the
few revisions set forth in the March 1997 order. The open access
transmission tariff will be terminated on the date the ISO begins operation.
CANADIAN GAS CONTRACTS
In 1994, SCE filed its testimony in the non-QF phase of the 1994 Energy Cost
Adjustment Clause proceeding. In 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 recommended a disallowance of $13 million for excessive
costs incurred from November 1993 through March 1994 associated with SCE's
Canadian gas purchase and supply contracts. The report requested 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 1996, the ORA issued its report
for the 1995 record period recommending a $38 million disallowance for
excessive costs incurred from April 1994 through March 1995. Both
proposed disallowances were later consolidated into one proceeding. On
December 3, 1997, the CPUC approved a settlement agreement between SCE and
the ORA on this and any future issues, which will result in a $61 million
(including interest) refund to SCE's customers. This refund is fully
reflected in the financial statements and will be made in first quarter 1998.
MOJAVE COGENERATION CONTRACT
In 1991, SCE filed its testimony in the QF phase of the 1991 Energy Cost
Adjustment Clause proceeding. In 1993, the ORA filed its report on the
reasonableness of SCE's QF contracts and alleged that SCE had imprudently
renegotiated a QF contract with the Mojave Cogeneration Company. The report
recommended a disallowance of $32 million (1993 net present value) over the
contract's 20-year life. Subsequently, SCE and the ORA reached a settlement
where SCE agreed to a one-time reduction to its energy cost adjustment clause
balancing account of $14 million plus interest. In October 1996, the CPUC
approved the settlement agreement, subject to SCE and the ORA accepting
certain conditions concerning the way the $14 million payment would be
reflected in rates. After reviewing the decision, SCE declined to accept the
condition proposed by the CPUC and in November 1996 filed an application for
rehearing. In February 1997, the CPUC denied SCE's application. Because SCE
and the ORA were unable to finalize their settlement, hearings on the ORA's
disallowance recommendations were held in June 1997. During the hearings,
the ORA presented testimony to update its assessment of ratepayer harm, which
it now estimates to be $45 million (1997 net present value) over the
contract's life. In November 1997, a CPUC administrative law judge (ALJ)
issued a proposed decision which would adopt the ORA's $45 million
disallowance. In January 1998, the CPUC withdrew the ALJ's proposed decision
pending oral arguments. Oral arguments were heard on February 4, 1998, at
which time SCE requested an alternate proposed decision be issued. SCE
expects this matter to be returned to the CPUC's agenda in the near future
and a final decision to be issued during second quarter 1998. SCE cannot
predict the final outcome of this matter but does not believe it will
materially affect its results of operations.
NOTE 3. FINANCIAL INSTRUMENTS
- -------------------------------------------------------------------------------
CASH EQUIVALENTS
Cash and equivalents include tax-exempt investments ($949 million at December
31, 1997, and $376 million at December 31, 1996), and time deposits and other
investments ($958 million at December 31, 1997, and $521 million at December
31, 1996) with maturities of three months or less.
DERIVATIVE FINANCIAL INSTRUMENTS
Edison International's risk management policy allows the use of derivative
financial instruments to manage financial exposure on its investments and
fluctuations in interest rates, but prohibits the use of these instruments
for speculative or trading purposes.
Edison International uses the hedge accounting method to record its
derivative financial instruments, except for gas call options. Hedge
accounting requires an assessment that the transaction reduces risk, that the
derivative be designated as a hedge at the inception of the derivative
contract, and that the changes in the market value of a hedge move in an
inverse direction to the item being hedged. Under hedge accounting, the
derivative itself is not recorded on Edison International's balance sheet.
Mark-to-market
44
EDISON INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
accounting would be used if the hedge accounting criteria were not met.
Interest rate differentials and amortization of premiums for interest rate
caps are recorded as adjustments to interest expense. If the derivatives
were terminated before the maturity of the corresponding debt issuance, the
realized gain or loss on the transaction would be amortized over the
remaining term of the debt.
SCE uses the mark-to-market accounting method for its gas call options.
Gains and losses from monthly changes in market prices are recorded as income
or expense. However, the costs of the options and the market price changes
are recovered through the transition cost balancing account. As a result,
the mark-to-market gains or losses have no effect on earnings.
Projects in the United Kingdom sell their energy and capacity through a
centralized electricity pool, which establishes a half-hourly clearing price
for electrical energy. The pool price is extremely volatile, and can vary by
a factor of 10 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 electricity rate
swap agreements, related to either the selling or purchase price of power.
These contracts can be sold in two structures: one-way contracts, where a
specified monthly amount is received in advance and difference payments are
made when pool prices rise above the price specified in the contract, and
two-way contracts, where First Hydro is paid when pool prices fall below the
contract price instead of a specified monthly amount. These contracts
attempt to stabilize production revenue or purchasing costs by removing an
element of First Hydro's net exposure to pool price volatility.
Loy Yang B sells their electrical energy through a centralized
electricity pool, which provides for a system of generator bidding, central
dispatch and a settlement system based on a clearing market for each
half-hour of every day. To mitigate the exposure to price volatility of the
electricity traded in the pool, Loy Yang B has entered into a number of
financial hedges. Between May 1997 and December 2000, approximately 53% to
64% of the plant output sold is hedged under vesting contracts, with the
remainder of the plant capacity hedged under the state hedge described below.
Vesting contracts set base strike prices at which the electricity will be
traded, and the parties to the agreement make payments, calculated based on
the difference between the price in the contract and the half-hourly pool
clearing price for the element of power under the contract. These contracts
can be sold as one-way or two-way contracts, which are similar to the
electricity rate swap agreements described above. These contracts are
accounted for as electricity rate swap agreements. The state hedge is a
long-term contractual agreement based upon a fixed price commencing in May
1997 and terminating in October 2016.
Interest rate swaps, collars 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,
1997, SCE had pledged $19 million as collateral due to a decline in market
interest rates. SCE is exposed to credit loss in the event of nonperformance
by the counterparty to the agreement, but does not expect the counterparty to
fail to meet its obligation.
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) under 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 seeks 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 and/or steam
revenue by entering into long-term fuel supply and transportation agreements.
Accordingly, EME does not anticipate a material effect on its results of
operations or financial condition as a result of counterparty nonperformance.
Edison International had the following interest rate hedges:
DECEMBER 31,
---------------------------------------------------
1997 1996
----------------------- -------------------
NOTIONAL CONTRACT NOTIONAL CONTRACT
IN MILLIONS AMOUNT EXPIRES AMOUNT EXPIRES
- -------------------------------------------------------------------------------
SWAPS:
Fixed to variable $441 1999 - 2008 $245 1999 - 2002
Variable to fixed 858 1998 - 2007 440 1997 - 2008
COLLAR:
Variable to fixed $ 77 1999 -- --
CAP:
Variable to fixed -- -- $ 30 1997
At December 31, 1997, SCE had gas call options valued at $34 million.
These options mitigate SCE's exposure to increases in natural gas prices.
Increases in natural gas prices tend to increase the price of electricity
purchased from the PX. The options cover various periods from 1998 through
2001.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair values of financial instruments were:
DECEMBER 31,
-------------------------------------------------
1997 1996
-------------------- -------------------
COST FAIR COST FAIR
INSTRUMENT (IN MILLIONS) BASIS VALUE BASIS VALUE
- -------------------------------------------------------------------------------
FINANCIAL ASSETS:
Decommissioning trusts $1,371 $1,831 $1,217 $1,486
Electricity rate swaps -- 77 -- 27
Equity investments 9 90 11 68
Gas call options 34 34 -- --
FINANCIAL LIABILITIES:
DOE decommissioning and
decontamination fees $ 50 $ 43 $ 54 $ 45
Interest rate hedges -- 92 -- 34
Long-term debt 8,871 9,618 7,475 7,712
Preferred securities
subject to mandatory
redemption 425 451 425 445
45
EDISON INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial assets are carried at their fair value based on quoted market
prices for decommissioning trusts and equity investments and on financial
models for gas call options and electricity rate swaps. Financial
liabilities are recorded at cost. Financial liabilities' fair values are
based on: termination costs for the interest rate swaps; brokers' quotes for
long-term debt, preferred stock and the interest rate collar and cap; and
discounted future cash flows for U.S. Department of Energy (DOE)
decommissioning and decontamination fees. Due to their short maturities,
amounts reported for cash equivalents and short-term debt approximate fair
value.
Gross unrealized holding gains on financial assets were:
IN MILLIONS DECEMBER 31, 1997 1996
- -----------------------------------------------------------------
Decommissioning trusts:
Municipal bonds $131 $ 79
Stocks 190 138
U.S. government issues 91 39
Short-term and other 48 13
---- ----
460 269
Equity investments 81 57
---- ----
Total $541 $326
---- ----
---- ----
There were no unrealized holding losses on financial assets for the years
presented.
INVESTMENTS
Net unrealized gains (losses) in equity investments are recorded as a
separate component of shareholders' equity under the caption: Unrealized gain
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.
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.
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.
Commercial paper intended to be refinanced for a period exceeding one
year and used to finance nuclear fuel scheduled to be used more than one year
after the balance sheet date is classified as long-term debt.
Long-term debt maturities and sinking-fund requirements for the next
five years are: 1998--$848 million; 1999--$670 million; 2000--$719 million;
2001--$728 million; and 2002--$635 million.
In December 1997, SCE Funding LLC, a special purpose entity (SPE), of
which SCE is the sole member, issued approximately $2.5 billion of rate
reduction notes to Bankers Trust Company of California, as certificate
trustee for the California Infrastructure and Economic Development Bank
Special Purpose Trust SCE-1 (Trust), which is a special purpose entity
established by the State of California. The terms of the rate reduction
notes generally mirror the terms of the pass-through certificates issued by
the Trust, which are known as rate reduction certificates. The proceeds of
the rate reduction notes were used by the SPE to purchase from SCE an
enforceable right known as transition property. Transition property is a
current property right created pursuant to the restructuring legislation and
a financing order of the CPUC and consists generally of the right to be paid
a specified amount from a non-bypassable tariff levied on residential and
small commercial customers. Notwithstanding the legal sale of the transition
property by SCE to the SPE, the amounts reflected as assets on SCE's balance
sheet have not been reduced by the amount of the transition property sold to
the SPE, and the liabilities of the SPE for the rate reduction notes are for
accounting purposes reflected as long-term liabilities on the consolidated
balance sheet of SCE. SCE used the proceeds from the sale of the transition
property to retire debt and equity securities.
The rate reduction notes have maturities ranging from one to 10 years,
and bear interest at rates ranging from 5.98% to 6.42%. The rate reduction
notes are secured solely by the transition property and certain other assets
of the SPE, and there is no recourse to SCE or Edison International.
Although the SPE is consolidated with SCE in the financial statements,
as required by generally accepted accounting principles, the SPE is legally
separate from SCE, the assets of the SPE are not available to creditors of
SCE or Edison International, and the transition property is legally not an
asset of SCE or Edison International.
Long-term debt consisted of:
IN MILLIONS DECEMBER 31, 1997 1996
- -----------------------------------------------------------------
First and refunding mortgage bonds:
1998--2026 (5.45% to 8.375%) $1,825 $2,725
Rate reduction notes:
1998--2007 (5.98% to 6.42%) 2,463 --
Pollution-control bonds:
1999--2027 (5.4% to 7.2% and variable) 1,202 1,204
Funds held by trustees (2) (2)
Debentures and notes:
1997--2026 (5% to 20% and variable) 4,028 3,891
Subordinated debentures:
2044 (8.375%) 100 100
Commercial paper for nuclear fuel 92 112
Capital lease obligation 68 91
Current portion of capital lease obligation (20) (19)
Long-term debt due within one year (848) (573)
Unamortized debt discount - net (37) (54)
------ ------
Total $8,871 $7,475
------ ------
------ ------
On January 30, 1998, SCE redeemed $125 million of 8.375% first and
refunding mortgage bonds, due 2017. Also, on January 30, 1998, a wholly
owned financing subsidiary of SCE redeemed $200 million of 7.375% notes, due
2003.
46
EDISON INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SHORT-TERM DEBT
Short-term debt consisted of:
IN MILLIONS DECEMBER 31, 1997 1996
- -----------------------------------------------------------------
Commercial paper $415 $ 470
Other short-term debt 8 167
Amount reclassified as long-term (92) (237)
Unamortized discount (1) (3)
---- -----
Total $330 $ 397
---- -----
---- -----
Weighted-average interest rate 6.0% 5.6%
At December 31, 1997, Edison International and its subsidiaries had $3.6
billion of borrowing capacity available. SCE had available lines of credit
of $1.8 billion, with $1.3 billion for short-term debt and $500 million for
the long-term refinancing of its variable-rate pollution-control bonds. The
nonutility subsidiaries had lines of credit of $800 million available to
finance general cash requirements. The parent company had available lines of
credit totaling $1.0 billion. 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.
NOTE 4. EQUITY
- ------------------------------------------------------------------------------
The CPUC regulates SCE's capital structure, limiting the dividends it may pay
Edison International. At December 31, 1997, SCE had the capacity to pay
$1.4 billion in additional dividends and continue to maintain its authorized
capital structure. These restrictions are not expected to affect Edison
International's ability to meet its cash obligations.
Edison International's authorized common stock is 800 million shares
with no par value.
Edison International purchased on the open market and retired the
following amounts of common stock: in 1997--48,992,365 shares ($1.2 billion),
in 1996--19,216,627 shares ($344 million) and in 1995--4,212,398 shares ($70
million).
Under Edison International's long-term incentive compensation plan, it
issued 232,612 shares ($4.9 million) in 1997, 133,131 shares ($2.4 million)
in 1996 and 20,900 shares ($0.4 million) in 1995.
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.
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.
Preferred stock redemption requirements for the next five years are:
1998 through 2001--zero and 2002--$105 million.
Edison International subsidiaries' cumulative preferred securities
consisted of:
DECEMBER 31, 1997
------------------------ DECEMBER 31,
DOLLARS IN MILLIONS, SHARES REDEMPTION -------------------
EXCEPT PER-SHARE AMOUNTS OUTSTANDING PRICE 1997 1996
- ------------------------------------------------------------------------------------------------------
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 -- -- 100
---- ----
Total $184 $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 1997, 4 million shares of Series 7.36% preferred stock were redeemed.
In 1995, 750,000 shares of Series 7.58% preferred stock were redeemed and 2.5
million of Series 8.50% preferred securities were issued. There were no
preferred stock issuances or redemptions in 1996.
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 owns 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.
47
EDISON INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of the net accumulated deferred income tax liability
were:
IN MILLIONS DECEMBER 31, 1997 1996
- -------------------------------------------------------------------------------
DEFERRED TAX ASSETS:
Property-related $ 227 $ 247
Unrealized gains or losses 273 201
Investment tax credits 192 206
Regulatory balancing accounts 180 298
Decommissioning-related 114 208
Other 691 366
------- -------
Total $ 1,677 $ 1,526
------- -------
DEFERRED TAX LIABILITIES:
Property-related $ 4,010 $ 4,345
Leveraged leases 623 534
Capitalized software costs 127 122
Other 879 568
------- -------
Total $ 5,639 $ 5,569
------- -------
Accumulated deferred income taxes-net $ 3,962 $ 4,043
------- -------
------- -------
CLASSIFICATION OF ACCUMULATED DEFERRED
INCOME TAXES:
Included in deferred credits $ 4,085 $ 4,283
Included in current assets 123 240
The current and deferred components of income tax expense were:
IN MILLIONS YEAR ENDED DECEMBER 31, 1997 1996 1995
- -------------------------------------------------------------------------------
CURRENT:
Federal $ 244 $ 325 $ 507
State 55 108 150
Foreign 103 39 7
------ ----- -----
402 472 664
------ ----- -----
DEFERRED:
Accrued charges (33) (14) 1
Asset basis adjustment 18 (25) 12
Depreciation (26) 71 72
Investment and energy tax credits-net (22) (37) (26)
Leveraged leases 87 26 38
Loss carryforwards 121 (41) (37)
Nonutility special charges -- 9 (21)
Pension reserves (5) 45 (3)
Rate phase-in plan (19) (31) (46)
Regulatory balancing accounts 141 34 (118)
State tax-privilege year 2 18 (9)
Other (167) (21) (35)
------ ----- -----
97 34 (172)
------ ----- -----
Total income tax expense $ 499 $ 506 $ 492
------ ----- -----
------ ----- -----
CLASSIFICATION OF INCOME TAXES:
Included in operating income $ 537 $ 563 $ 528
Included in other income (38) (57) (36)
The composite federal and state statutory income tax rate was 40.551%
for 1997 and 41.045% for 1996 and 1995.
The federal statutory income tax rate is reconciled to the effective tax
rate below:
YEAR ENDED DECEMBER 31, 1997 1996 1995
- -------------------------------------------------------------------------------
Federal statutory rate 35.0% 35.0% 35.0%
Capitalized software (0.8) (0.8) (0.8)
Depreciation and other 5.9 7.3 5.1
Housing credits (4.3) (3.6) (2.7)
Investment and energy tax credits (1.6) (2.7) (2.3)
State tax-net of federal deduction 6.3 6.2 5.6
---- ---- ----
Effective tax rate 40.5% 41.4% 39.9%
---- ---- ----
---- ---- ----
NOTE 6. EMPLOYEE COMPENSATION AND 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,
options on 4.4 million shares of Edison International common stock are
currently outstanding to officers and senior managers of SCE. There were 3.2
million, 4.5 million, 5.4 million and 6.3 million shares reserved for future
grant at December 31, 1997, 1996, 1995 and 1994, 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. 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. 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
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.
48
EDISON INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Edison International measures compensation expense related to
stock-based compensation by the intrinsic value method. Compensation
expense recorded under the stock-compensation program was $6 million, $9
million and $4 million for 1997, 1996 and 1995, respectively.
Stock-based compensation expense under the fair-value method of
accounting would have resulted in pro forma earnings of $696 million, $714
million and $737 million for 1997, 1996 and 1995, respectively, and in pro
forma basic earnings per share of $1.74, $1.63 and $1.65 for 1997, 1996 and
1995, respectively.
The fair value for each option granted, 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 with the model:
1997 1996
- -------------------------------------------------------------------------------
Expected life 7.0 years 7.0 years
Risk-free interest rate 6.3%-6.8% 5.5%
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
accounting to calculate 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, 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
Granted 1,350,809 19.75 - 25.19 20.19 $ 7.62
Expired -- -- --
Forfeited (33,599) 14.56 - 19.75 17.76
Exercised (460,300) 14.56 - 23.28 19.06
---------
Outstanding,
Dec. 31, 1997 4,411,666 $ 14.56 - $ 25.19 $ 18.76 7.0 years
The number of options exercisable and their weighted-average exercise
prices at December 31, 1997, 1996 and 1995 were 3,218,189 at $18.48,
1,760,766 at $20.54 and 1,240,425 at $21.08, 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
7.75%, 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 the phantom stock options
was $79 million in 1997, $17 million in 1996 and $1 million in 1995.
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. SCE 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, Edison International recorded
pension gains from a special voluntary early retirement program.
The plan's funded status was:
IN MILLIONS DECEMBER 31, 1997 1996
- -------------------------------------------------------------------------------
ACTUARIAL PRESENT VALUE OF BENEFIT
OBLIGATION:
Vested benefits $ 1,588 $ 1,679
Nonvested benefits 130 73
-------- --------
Accumulated benefit obligation 1,718 1,752
Value of projected future compensation levels 398 267
-------- --------
Projected benefit obligation $ 2,116 $ 2,019
-------- --------
-------- --------
Fair value of plan assets $ 2,316 $ 2,171
-------- --------
-------- --------
Projected benefit obligation less than plan assets $ (200) $ (152)
Unrecognized net gain 305 294
Unrecognized prior service cost (184) (199)
Unrecognized net obligation
(17-year amortization) (40) (45)
-------- --------
Pension liability (asset) $ (119) $ (102)
-------- --------
-------- --------
Discount rate 7.0% 7.75%
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.
49
EDISON INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of pension expense were:
IN MILLIONS YEAR ENDED DECEMBER 31, 1997 1996 1995
- -------------------------------------------------------------------------------
Service cost for benefits earned $ 46 $ 51 $ 59
Interest cost on projected benefit
obligation 140 180 157
Actual return on plan assets (372) (345) (457)
Net amortization and deferral 224 146 270
----- ----- ----
Pension expense under accounting standards 38 32 29
Special termination benefits -- 1 3
Regulatory adjustment - deferred 17 22 23
----- ----- ----
Net pension expense recognized 55 55 55
Settlement gain -- (121) --
----- ----- ----
Total expense (gain) $ 55 $ (66) $ 55
----- ----- ----
----- ----- ----
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Employees retiring at or after age 55 (or those eligible for all benefits
under the 1996 special voluntary early retirement program) with at least 10
years of service, are eligible for postretirement health care, dental, life
insurance and other benefits. Health care benefits are subject to
deductibles, copayment provisions and other limitations.
SCE funds 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, 1997 1996
- -------------------------------------------------------------------------------
ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATION:
Retirees $ 1,004 $ 933
Employees eligible to retire 45 35
Other employees 497 394
------- -------
Accumulated benefit obligation $ 1,546 $ 1,362
------- -------
------- -------
Fair value of plan assets $ 815 $ 617
------- -------
------- -------
Plan assets less than accumulated benefit obligation $ 731 $ 745
Unrecognized transition obligation (405) (432)
Unrecognized net gain (loss) (245) (236)
------- -------
Recorded liability $ 81 $ 77
------- -------
------- -------
Discount rate 7.0% 7.75%
Expected long-term rate of return on assets 8.0% 8.5%
The components of postretirement benefits other than pensions expense
were:
IN MILLIONS YEAR ENDED DECEMBER 31, 1997 1996 1995
- --------------------------------------------------------------------------------
Service cost for benefits earned $ 31 $ 33 $ 36
Interest cost on benefit obligation 100 91 78
Actual return on plan assets (50) (43) (28)
Amortization of loss 5 6 1
Amortization of transition obligation 27 27 27
----- ----- -----
Net expense 113 114 114
Special termination expense -- 72
----- ----- -----
Total expense $ 113 $ 186 $ 114
----- ----- -----
----- ----- -----
The assumed rate of future increases in the per-capita cost of health
care benefits is 8.5% for 1998, gradually decreasing to 5.25% for 2004 and
beyond. Increasing the health care cost trend rate by one percentage point
would increase the accumulated obligation as of December 31, 1997, by $255
million and annual aggregate service and interest costs by $28 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 $16 million in 1997, $25 million in 1996 and $20 million in
1995.
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, 1997, was:
PLANT IN ACCUMULATED UNDER OWNERSHIP
IN MILLIONS SERVICE DEPRECIATION CONSTRUCTION INTEREST
- ------------------------------------------------------------------------------------
TRANSMISSION SYSTEMS:
Eldorado $ 28 $ 9 $ 3 60%
Pacific Intertie 241 75 1 50
GENERATING STATIONS:
Four Corners (coal)
Units 4 and 5 459 247 3 48
Mohave (coal) 307 146 5 56
Palo Verde (nuclear) 1,601 665 9 16
San Onofre (nuclear) 4,212 2,210 38 75
------- ------- ------
Total $ 6,848 $ 3,352 $ 59
------- ------- ------
------- ------- ------
NOTE 8. LEASES
- -------------------------------------------------------------------------------
LEVERAGED LEASES
Edison Capital is the lessor in several leveraged-lease agreements with terms
of 13 to 38 years. All operating, maintenance, insurance and decommissioning
costs are the responsibility of the lessees. The total cost of these
facilities was $3.1 billion and $1.8 billion at December 31, 1997, and 1996,
respectively.
The equity investment in these facilities is 21% 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.
The net investment in leveraged leases consisted of:
IN MILLIONS DECEMBER 31, 1997 1996
- ------------------------------------------------------------------------------
Rentals receivable (net of principal and
interest on nonrecourse debt) $ 1,634 $ 830
Unearned income (728) (303)
------- -----
Investment in leveraged leases 906 527
Estimated residual value 58 58
Deferred income taxes (623) (534)
------- -----
Net investment in leveraged leases $ 341 $ 51
------- -----
------- -----
50
EDISON INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OPERATING AND CAPITAL LEASES
Edison International has operating leases, primarily for vehicles (with
varying terms, provisions and expiration dates) and a capital lease ($68
million) for a nonutility power-production facility.
Estimated remaining commitments for noncancelable leases at December 31,
1997, were:
OPERATING CAPITAL
IN MILLIONS LEASES LEASE
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 $ 24 $ 27
1999 19 27
2000 15 27
2001 11 --
2002 8 --
Thereafter 26 1
---- ----
Total future commitments $103 82
----
----
Amount representing interest (9.65%) (14)
----
Net commitments $ 68
----
----
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
$2.1 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 accrued and recovered through
non-bypassable customer rates over the term of each nuclear facility's
operating license, are recorded as a component of depreciation expense.
Decommissioning expense was $154 million in 1997, $148 million in 1996 and
$151 million in 1995. The accumulated provision for decommissioning was $1.1
billion at December 31, 1997, and $949 million at December 31, 1996. The
estimated costs to decommission San Onofre Unit 1 ($280 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 1997 1996
- -----------------------------------------------------------------------
Municipal bonds 1998-2026 $ 459 $ 400
Stocks -- 392 549
U.S. government issues 1998-2027 357 212
Short-term and other 2002-2003 163 56
------ ------
Trust fund balance (at cost) $1,371 $1,217
------ ------
------ ------
Trust fund earnings (based on specific identification) increase the
trust fund balance and the accumulated provision for decommissioning. Net
earnings were $54 million in 1997, $49 million in 1996 and $51 million in
1995. Proceeds from sales of securities (which are reinvested) were $595
million in 1997, and $1.0 billion in 1996 and in 1995. 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 QFs (cogenerators and
small power producers) and other utilities. The QF 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
or estimated future operating capacity. SCE's minimum commitment under both
contracts is approximately $193 million through 2017.
Certain commitments for the years 1998 through 2002 are estimated below:
IN MILLIONS 1998 1999 2000 2001 2002
- ----------------------------------------------------------------------------------------------
Projected construction
expenditures $1,057 $807 $763 $721 $671
Fuel supply contracts 296 215 236 228 237
Purchased-power
capacity payments 686 711 714 716 714
Unconditional purchase
obligations 9 9 10 9 10
EME has firm commitments to make equity and other contributions to its
projects of $295 million, primarily for the Paiton project in Indonesia, the
ISAB project in Italy and the Doga project in Turkey. EME also has
contingent obligations to make additional contributions of $181 million,
primarily for equity support guarantees related to Paiton.
51
EDISON INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. On December 17, 1997, the Brooklyn Navy Yard project partnership
completed a $407 million permanent, nonrecourse financing for the project.
In February 1997, the contractor asserted general monetary claims under
the turnkey agreement against Brooklyn Navy Yard Cogeneration Partners, L.P.
(BNY) for damages in the amount of $137 million. In addition to defending
this action, BNY has filed an action against the contractor in New York State
Court asserting general monetary claims in excess of $13 million arising out
of the turnkey agreement. EME agreed to indemnify the partnership and its
partner from all claims and costs arising from or in connection with the
contractor litigation, which indemnity has been assigned to the lenders.
Edison International believes that the outcome of this litigation will not
materially affect its 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
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.
In connection with the issuance of the San Onofre Units 2 and 3
operating permits, SCE reached an agreement with the California Coastal
Commission in 1991 to restore certain marine mitigation sites. The
restorations include two sites: designated wetlands and the construction of
an artificial kelp reef off the California coast. After SCE requested
certain modifications to the agreement, the Coastal Commission issued a final
ruling in April 1997 to reduce the scope of remediations. SCE elected to pay
for the costs of marine mitigation in lieu of placing the funds into a trust.
Rate recovery of these costs is occurring through the San Onofre incentive
pricing plan discussed in Note 1 to the Consolidated Financial Statements.
Edison International's recorded estimated minimum liability to remediate
its 51 identified sites (50 at SCE and one at EME) is $178 million, which
includes $75 million for the two sites discussed above. 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 $246 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 41 of its
sites, representing $91 million of its 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 from insurance carriers and other third parties. SCE has successfully
settled insurance claims with all responsible carriers. Costs incurred at
SCE's remaining sites are expected to be recovered through customer rates.
SCE has recorded a regulatory asset of $153 million for its estimated minimum
environmental-cleanup costs expected to be recovered through customer rates.
This amount includes $60 million of marine mitigation costs remaining to be
recovered through the San Onofre incentive pricing plan.
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 $10 million. Recorded costs
for 1997 were $10 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 materially affect 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
52
EDISON INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($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
also has 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 $28 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, 1997 1996 1995
- ----------------------------------------------------------------------------------------------
Revenue $1,946 $1,731 $1,400
Expenses 1,578 1,393 1,121
------ ------ ------
Net income $ 368 $ 338 $ 279
------ ------ ------
------ ------ ------
IN MILLIONS DECEMBER 31, 1997 1996
- ----------------------------------------------------------------------------------------------
Current assets $ 637 $ 673
Other assets 5,520 4,747
------ ------
Total assets $6,157 $5,420
------ ------
------ ------
Current liabilities $ 949 $ 691
Other liabilities 3,592 3,110
Equity 1,616 1,619
------ ------
Total liabilities and equity $6,157 $5,420
------ ------
------ ------
NOTE 12. BUSINESS SEGMENTS
- ------------------------------------------------------------------------------
Edison International's business segments include electric utility operations
(SCE) and three nonutility segments: unregulated power generation (EME);
financial investments (Edison Capital); and retail services (Edison
Enterprises). 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
- -------------------------------------------------------------------------------------------
1997
Operating revenue $ 7,953 $192 $ 783 $ 307 $ 9,235
Operating income 1,642 78 316 (1)(1) 2,035(2)
Depreciation and
decommissioning 1,240 15 88 19 1,362
Assets 18,059 926 4,059 2,057 25,101
Additions to
property and plant 685 4 84 10 783
- -------------------------------------------------------------------------------------------
1996
Operating revenue $ 7,583 $170 $ 674 $ 118 $ 8,545
Operating income 1,711 75 292 (37)(1) 2,041(2)
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)(1) 1,905(2)
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(3) 3 2,011
Corporate items and eliminations are not material.
(1) Excludes reported tax benefits of $61 million in 1997, $80 million in
1996 and $44 million in 1995.
(2) Excludes income taxes of $537 million in 1997, $563 million in 1996
and $528 million in 1995.
(3) Includes $1,042 million from EME's acquisition of First Hydro.
53
BOARD OF DIRECTORS
JOHN E. BRYSON(1)
CHAIRMAN OF THE BOARD
AND CEO, EDISON INTERNATIONAL
AND SOUTHERN CALIFORNIA EDISON
A director since 1990
WINSTON H. CHEN(2), (5)
CHAIRMAN OF THE PARAMITAS
FOUNDATION AND CHAIRMAN OF
PARAMITAS INVESTMENT
CORPORATION, SANTA CLARA, CA
A director since 1995
WARREN CHRISTOPHER(1), (2)
SENIOR PARTNER,
O'MELVENY & MYERS,
LOS ANGELES, CA
A director since 1971*
STEPHEN E. FRANK
PRESIDENT AND CHIEF
OPERATING OFFICER,
SOUTHERN CALIFORNIA EDISON
A director since 1995
CAMILLA C. FROST(3), (4), (6)
TRUSTEE, CHANDLER TRUSTS,
DIRECTOR AND SECRETARY-TREASURER,
CHANDIS SECURITIES COMPANY,
LOS ANGELES, CA
A director since 1985
JOAN C. HANLEY(4), (5)
GENERAL PARTNER,
MIRAMONTE VINEYARDS,
RANCHO PALOS VERDES, CA
A director since 1980
CARL F. HUNTSINGER(1), (5)
GENERAL PARTNER,
DAE LIMITED PARTNERSHIP LTD.,
OJAI, CA
A director since 1983
CHARLES D. MILLER(3), (5)
CHAIRMAN OF THE BOARD AND CEO,
AVERY DENNISON CORPORATION,
PASADENA, CA
A director since 1987
LUIS G. NOGALES(2), (3)
PRESIDENT,
NOGALES PARTNERS,
LOS ANGELES, CA
A director since 1993
RONALD L. OLSON(2), (4)
SENIOR PARTNER,
MUNGER, TOLLES AND OLSON,
LOS ANGELES, CA
A director since 1995
J. J. PINOLA(3), (4), (6)
RETIRED CHAIRMAN OF THE BOARD AND CEO,
FIRST INTERSTATE BANCORP,
LOS ANGELES, CA
A director since 1985
JAMES M. ROSSER(2), (4)
PRESIDENT,
CALIFORNIA STATE UNIVERSITY,
LOS ANGELES,
LOS ANGELES, CA
A director since 1985
E. L. SHANNON, JR.(1), (2)
RETIRED CHAIRMAN OF THE BOARD,
SANTA FE INTERNATIONAL
CORPORATION,
ALHAMBRA, CA
A director since 1977
ROBERT H. SMITH(1), (4)
MANAGING DIRECTOR,
SMITH AND CROWLEY INCORPORATED,
PASADENA, CA
A director since 1987
THOMAS C. SUTTON(3), (5)
CHAIRMAN OF THE BOARD AND CEO,
PACIFIC LIFE INSURANCE COMPANY,
NEWPORT BEACH, CA
A director since 1995
DANIEL M. TELLEP(3), (5)
RETIRED CHAIRMAN OF THE BOARD,
LOCKHEED MARTIN COMPANY,
BETHESDA, MD
A director since 1992
JAMES D. WATKINS(2), (5)
ADMIRAL USN, RETIRED,
PRESIDENT, JOINT OCEANOGRAPHIC
INSTITUTIONS, INC., AND PRESIDENT,
CONSORTIUM FOR OCEANOGRAPHIC
RESEARCH AND EDUCATION,
WASHINGTON, D.C.
A director since 1993
EDWARD ZAPANTA, M.D.(1), (5)
PHYSICIAN AND NEUROSURGEON,
TORRANCE, CA
A director since 1984
* 8/19/71 to 1/20/77
6/18/81 to 1/19/93
5/15/97 to present
(1) Member of the Executive Committee
(2) Member of the Finance Committee
(3) Member of the Compensation and Executive Personnel Committee
(4) Member of the Nominating Committee
(5) Member of the Audit Committee
(6) Retiring on April 16, 1998
54
MANAGEMENT TEAM
EDISON INTERNATIONAL
- --------------------
JOHN E. BRYSON
CHAIRMAN OF THE BOARD AND CEO
BRYANT C. DANNER
EXECUTIVE VICE PRESIDENT AND
GENERAL COUNSEL
ALAN J. FOHRER
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
THEODORE F. CRAVER, JR.
SENIOR VICE PRESIDENT AND TREASURER
ROBERT G. FOSTER
SENIOR VICE PRESIDENT, PUBLIC AFFAIRS
WILLIAM J. HELLER
SENIOR VICE PRESIDENT,
STRATEGIC PLANNING AND
NEW BUSINESS DEVELOPMENT
RICHARD K. BUSHEY
VICE PRESIDENT AND CONTROLLER
LILLIAN R. GORMAN
VICE PRESIDENT, HUMAN RESOURCES
THOMAS J. HIGGINS
VICE PRESIDENT,
CORPORATE COMMUNICATIONS
MAHVASH YAZDI
VICE PRESIDENT AND
CHIEF INFORMATION OFFICER
BEVERLY P. RYDER
CORPORATE SECRETARY
SOUTHERN CALIFORNIA EDISON
- --------------------------
JOHN E. BRYSON
CHAIRMAN OF THE BOARD AND CEO
STEPHEN E. FRANK
PRESIDENT AND CHIEF OPERATING OFFICER
BRYANT C. DANNER
EXECUTIVE VICE PRESIDENT AND
GENERAL COUNSEL
ALAN J. FOHRER
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
HAROLD B. RAY
EXECUTIVE VICE PRESIDENT,
GENERATION BUSINESS UNIT
THEODORE F. CRAVER, JR.
SENIOR VICE PRESIDENT AND TREASURER
JOHN R. FIELDER
SENIOR VICE PRESIDENT,
REGULATORY POLICY AND AFFAIRS
ROBERT G. FOSTER
SENIOR VICE PRESIDENT, PUBLIC AFFAIRS
RICHARD M. ROSENBLUM
SENIOR VICE PRESIDENT,
T&D WIRES BUSINESS UNIT
EMIKO BANFIELD
VICE PRESIDENT, SHARED SERVICES
PAMELA A. BASS
VICE PRESIDENT,
CUSTOMER SOLUTIONS BUSINESS UNIT
RICHARD K. BUSHEY
VICE PRESIDENT AND CONTROLLER
BRUCE C. FOSTER
VICE PRESIDENT,
SAN FRANCISCO REGULATORY AFFAIRS
LILLIAN R. GORMAN
VICE PRESIDENT, HUMAN RESOURCES
LAWRENCE D. HAMLIN
VICE PRESIDENT, POWER PRODUCTION
THOMAS J. HIGGINS
VICE PRESIDENT,
CORPORATE COMMUNICATIONS
R. W. KRIEGER
VICE PRESIDENT, NUCLEAR GENERATION
J. MICHAEL MENDEZ
VICE PRESIDENT, LABOR RELATIONS
DWIGHT E. NUNN
VICE PRESIDENT, NUCLEAR ENGINEERING
AND TECHNICAL SERVICES
FRANK J. QUEVEDO
VICE PRESIDENT, EQUAL OPPORTUNITY
MAHVASH YAZDI
VICE PRESIDENT AND
CHIEF INFORMATION OFFICER
BEVERLY P. RYDER
CORPORATE SECRETARY
EDISON MISSION ENERGY
- ---------------------
EDWARD R. MULLER
PRESIDENT AND CEO
ROBERT M. EDGELL
EXECUTIVE VICE PRESIDENT
TERRY V. CHARLTON
SENIOR VICE PRESIDENT
JAMES V. IACO, JR.
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
GEORGIA R. NELSON
SENIOR VICE PRESIDENT
S. LINN WILLIAMS
SENIOR VICE PRESIDENT AND
GENERAL COUNSEL
EDISON CAPITAL --
MISSION LAND COMPANY
- ----------------------
THOMAS R. MCDANIEL
PRESIDENT AND CEO,
EDISON CAPITAL AND
MISSION LAND COMPANY
ASHRAF T. DAJANI
SENIOR VICE PRESIDENT,
EDISON CAPITAL
RICHARD E. LUCEY
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER,
EDISON CAPITAL
LARRY C. MOUNT
VICE PRESIDENT AND
GENERAL COUNSEL,
EDISON CAPITAL
CHARLES W. JOHNSON
EXECUTIVE VICE PRESIDENT,
MISSION LAND COMPANY
EDISON TECHNOLOGY SOLUTIONS
- ---------------------------
VIKRAM S. BUDHRAJA
PRESIDENT
EDISON ENTERPRISES
- ------------------
STEPHEN E. PAZIAN
PRESIDENT AND CEO,
EDISON ENTERPRISES
A. ROBERT HANDELL
PRESIDENT AND CHIEF OPERATING OFFICER,
EDISON SOURCE
MICHAEL L. MERLO
PRESIDENT AND CHIEF OPERATING OFFICER,
EDISON SELECT
DIANE O. WITTENBERG
PRESIDENT AND CEO,
EDISON EV
PRESIDENT,
EDISON UTILITY ALLIANCES
DENNIS A. EASTMAN
SENIOR VICE PRESIDENT AND
GENERAL MANAGER,
EDISON UTILITY SERVICES
CLARK W. COLLINS
SENIOR VICE PRESIDENT,
EDISON ENTERPRISES
KENNETH PICKRAHN
VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER,
EDISON ENTERPRISES
55
EDISON INTERNATIONAL AND SUBSIDIARIES
SELECTED FINANCIAL AND OPERATING DATA: 1993 - 1997
DOLLARS IN MILLIONS,
EXCEPT PER-SHARE AMOUNTS 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
EDISON INTERNATIONAL AND SUBSIDIARIES
Operating revenue $ 9,235 $ 8,545 $ 8,405 $ 8,345 $ 7,839
Operating expenses $ 7,737 $ 7,067 $ 7,028 $ 7,046 $ 6,611
Net income $ 700 $ 717 $ 739 $ 681 $ 639
Weighted-average shares of common
stock outstanding (in millions) 400 437 446 448 448
Per-share data:
Basic earnings $ 1.75 $ 1.64 $ 1.66 $ 1.52 $ 1.43
Diluted earnings $ 1.73 $ 1.63 $ 1.65 $ 1.52 $ 1.42
Dividends paid $ 1.00 $ 1.00 $ 1.00 $ 1.21 $ 1.41
Dividends declared $ 1.00 $ 1.00 $ 1.00 $ 1.105 $ 1.415
Book value at year-end $ 14.71 $ 15.07 $ 14.41 $ 13.72 $ 13.30
Market value at year-end $27 3/16 $ 19 7/8 $ 17 5/8 $ 14 5/8 $ 20
Dividend payout ratio (paid) 57.1% 61.0% 60.2% 79.6% 98.6%
Rate of return on common equity 11.7% 11.1% 11.8% 11.3% 11.7%
Price/earnings ratio 15.5 12.1 10.6 9.6 14.0
Ratio of earnings to fixed charges 2.39 2.40 2.55 2.48 2.28
Assets $ 25,101 $ 24,559 $ 23,946 $ 22,390 $ 21,831
Retained earnings $ 3,176 $ 3,753 $ 3,700 $ 3,452 $ 3,266
Common shareholders' equity $ 5,527 $ 6,397 $ 6,393 $ 6,144 $ 5,958
Preferred securities:
Not subject to mandatory redemption $ 184 $ 284 $ 284 $ 359 $ 359
Subject to mandatory redemption $ 425 $ 425 $ 425 $ 362 $ 275
Long-term debt $ 8,871 $ 7,475 $ 7,195 $ 6,347 $ 6,459
SOUTHERN CALIFORNIA EDISON COMPANY
Operating revenue $ 7,953 $ 7,583 $ 7,873 $ 7,799 $ 7,397
Earnings $ 576 $ 621 $ 643 $ 599 $ 637
Basic earnings per Edison
International common share $ 1.44 $ 1.42 $ 1.44 $ 1.34 $ 1.42
Rate of return on common equity 11.6% 12.1% 12.6% 12.0% 12.9%
Internal generation of funds 104% 153% 89% 76% 78%
Peak demand in megawatts (MW) 19,118 18,207 17,548 18,044 16,475
Generation capacity at peak (MW) 21,511 21,602 21,603 20,615 20,606
Kilowatt-hour sales (in millions) 77,234 75,572 74,296 77,986 73,308
Customers (in millions) 4.25 4.22 4.18 4.15 4.12
Full-time employees* 12,642 12,057 14,886 16,351 16,585
EDISON MISSION ENERGY
Revenue $ 975 $ 844 $ 467 $ 381 $ 291
Net income $ 115 $ 92 $ 64 $ 55 $ 2
Assets $ 4,985 $ 5,153 $ 4,374 $ 2,843 $ 2,286
Rate of return on common equity 12.2% 8.8% 9.5% 9.6% 0.3%
Ownership in operating projects (MW) 5,180 4,706 4,212 2,048 1,862
Full-time employees 1,140 940 902 690 673
EDISON CAPITAL
Revenue $ 138 $ 49 $ 49 $ 47 $ 39
Net income $ 61 $ 41 $ 39 $ 33 $ 29
Assets $ 1,783 $ 1,423 $ 1,063 $ 1,008 $ 972
Rate of return on common equity 23.2% 17.7% 18.5% 16.8% 14.5%
Full-time employees 85 70 42 33 20
*1993 AND 1994 ARE BASED ON TWELVE-MONTH AVERAGES.
56
EDISON INTERNATIONAL:
Shareholder Information
ANNUAL MEETING
- ------------------------------------------------------------------------------
The 1998 annual meeting of shareholders will be held on Thursday, April 16,
1998, at 10:00 a.m. at the Industry Hills Sheraton Resort and Conference
Center, One Industry Hills Parkway, City of Industry, California.
STOCK LISTING AND TRADING INFORMATION
- ------------------------------------------------------------------------------
EDISON INTERNATIONAL COMMON STOCK
The New York and Pacific stock exchanges use the ticker symbol EIX. Daily
papers list as EdisonInt.
PREFERRED STOCK
Southern California Edison's preferred stocks are listed on the American and
Pacific stock exchanges under the ticker symbol SCE. Previous day's closing
prices, when traded, are listed in the daily newspapers in the American Stock
Exchange table under the symbol SoCalEd. The 6.05%, 6.45% and 7.23% series
are not listed. The preferred securities of Mission Capital, an affiliate of
Edison Mission Energy, are listed on the New York Stock Exchange under the
ticker symbol MEPrA for the 9.875% series and MEPrB for the 8.50% series.
TRANSFER AGENT AND REGISTRAR
- ------------------------------------------------------------------------------
Southern California Edison maintains shareholder records and is transfer
agent and registrar for Edison International common stock and Southern
California Edison preferred stocks. Shareholders may call Shareholder
Services, 800.347.8625, between 8:00 a.m. and 4:00 p.m. (Pacific time) every
business day regarding:
- - stock transfer and name-change requirements;
- - address changes, including dividend addresses;
- - electronic deposit of dividends;
- - taxpayer identification number submission or changes;
- - duplicate 1099 and W-9 forms;
- - notices of and replacement of lost or destroyed stock certificates and
dividend checks;
- - requests to eliminate multiple annual report mailings;
- - Edison International's Dividend Reinvestment Plan, including enrollments,
withdrawals, terminations, sales, transfers and statements; and
- - requests for access to online account information via Edison
International's Internet Home Page, www.edisonx.com.
The address of Shareholder Services is:
P.O. Box 400, Rosemead, California 91770-0400. FAX: 626.302.4815
DIVIDEND REINVESTMENT AND ELECTRONIC FUNDS TRANSFER
- ------------------------------------------------------------------------------
Shareholders can purchase additional common shares by reinvesting their
quarterly dividends. A prospectus on Edison International's Dividend
Reinvestment Plan is available from Shareholder Services.
Dividend checks can be electronically deposited directly to your
financial institution. Enrollment forms are available upon request.
PAGE
EXHIBIT 21
EDISON INTERNATIONAL SUBSIDIARIES
HOLDING COMPANY
00 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 a California corporation
engaged in the remediation and mitigation of environmental
liabilities.
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 an inactive Delaware corporation that
acted as a financing vehicle for SCE.
02 SCE FUNDING LLC is a Delaware limited liability company that acts
as a financing vehicle for rate reduction bonds.
02 SOUTHERN STATES REALTY is a California corporation engaged in
providing real estate and consulting services to SCE and third
parties.
NONUTILITY SUBSIDIARIES
01 EDISON INSURANCE SERVICES, INC., is a captive insurance company,
incorporated and having its principal executive office in Hawaii,
formed for the purpose of issuing domestic and foreign property
damage and business interruption insurance to Edison International
and its subsidiaries.
PAGE 1
01 EDISON VENTURES (formerly 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 nonutility companies.
The subsidiaries of Edison Ventures are as follows:
02 EDISON TRANSENERGY is a California corporation engaged in
pipeline development activities to transport crude oil.
01 EDISON ENERGY (inactive)
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 TECHNOLOGY SOLUTIONS (formerly Edison Technologies, Inc.)
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 engage in research
and development.
02 EDISON ENVIRONMENTAL SERVICES 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
provide nuclear decommissioning services in a joint venture with
Bechtel.
02 EDISON ENTERPRISES is a California corporation having its
principal place of business at 13191 Crossroads Parkway North,
City of Industry, California 91745, which was organized to own
the stock and coordinate the activities of various retail
companies. The subsidiaries of Edison Enterprises are as
follows:
03 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.
03 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.
03 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.
04 EDISON HOME PROTECTION COMPANY (inactive)
04 SELECT HOME WARRANTY COMPANY 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 providing consumer products and
services governed by the California Department of
Insurance.
03 EDISON UTILITY SERVICES 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 providing services including billing and
transmission and distribution outsourcing.
PAGE 2
02 EDISON CAPITAL (formerly Mission First Financial) is a California
corporation having its principal place of business at 18101 Von
Karman Avenue, Suite 800, 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. (P)=partnership; (C)=commitment.
03 BURLINGTON APARTMENTS, INC.
04 Burlington Arboretum L.P. (P) 1%
03 EDISON CAPITAL EUROPE LIMITED (UK corporation)
03 EDISON FUNDING COMPANY (formerly Mission Funding Company)
04 EDISON CAPITAL HOUSING INVESTMENTS (formerly Edison Housing
Investments and Mission Housing Investments)
05 16th & Church Street Associates L.P. (P) 99%
05 1732 Champa L.P. (Buerger Brothers Lofts) (P) 99%
05 18303 Kittridge Associates - 39 L.P. (P) 99%
05 1856 Wells Court Partners, L.P. (Wells Court) (P) 99%
05 210 Washington Avenue Associates (Renaissance Plaza)
(Connecticut partnership) 99%
05 2814 Fifth Street Associates L.P. (Land Park Woods) (P) 99%
05 AE Associates L.P. (Avenida Espana) (P) 99%
05 Agape Housing L.P. (P) 99%
05 Anglo Edison Pinecrest L.L.C. (P) 99%
05 Anglo Edison Ravenwood L.L.C. (P) 99%
05 Argyle Redevelopment Partnership, Ltd. (Colorado partnership)
99%
05 Avalon Courtyard L.P. (Carson Senior Housing) (P) 3%
05 B.A.I. Anglo Edison Pinecrest, LLC (Pinecrest) (P) 99%
05 B.A.I. Anglo Edison Ravenwood, LLC (Ravenwood) (P) 99%
05 Bartlett Hill Associates L.P. (P) 70%; 100% w/ MBHCo.
05 Beacon Manor Associates L.P. (P) 99%
05 Bermuda Gardens Apartments L.P. (C) 99%
05 Borregas Court L.P. (P) 99%
05 Brantwood II Associates L.P. (P) 98.99%
05 Brooks School Associates L.P. (P) 99%
05 Bryn Mawr - Belle Shore L.P. (P) 99%
05 Burlington Arboretum L.P. (P) 94.66%
05 Bush Hotel L.P. (P) 99%
05 Carson Housing L.P. (P) 99%
05 CCS/Bellingham L.P. (Washington Grocery Building) (P) 99%
05 CCS/Renton Housing L.P. (C) 99%
05 Cedarshores L.P. (P) 98.99%
05 Centertown Associates L.P. (P) 99%
05 Centro Partners L.P. (El Centro) (P) 99%
05 Cochrane Village Apartments L.P. (P) 99%
05 Conejo Valley Community Housing Associates (Community House
Apartments) (P) 99%
05 Coolidge Station Apartments L.L.C. (P) 99%
05 Coyote Springs Apartments Associates L.P. (P) 99%
05 Cypress Cove Associates (P) 99%
05 Delta Plaza Apartments L.P. (P) 99%
05 EAH Larkspur Creekside Associates L.P. (P) 99%
05 EAST COAST CAPITAL, INC. (Massachusetts corporation)
05 East Cotati Avenue Partners L.P. (P) 99%
05 Eastwood Homes L.P. (P) 98.99%
05 EC ASSET SERVICES, INC. (Massachusetts corporation)
PAGE 3
05 EC PROPERTIES, INC. (Massachusetts corporation)
06 Corporations for Affordable Housing L.P. (P) 1%
07 Arbor Lane Associates Phase II L.P. (Timberwood) (P) 99%
07 Arroyo Vista Associates L.P. (P) 99%
07 Artloft Associates L.P. (P) 35.6%
07 Caleb Affordable Housing Associates L.P. (Ledges/Pinebrook)
(P) 99%
07 The Carlin L.P. (P) 99%
07 Diamond Phase III Venture L.P. (P) 99%
07 Fairmount Hotel Urban Renewal Associates L.P. (P) 99%
07 Mackenzie Park Associates L.P. (P) 99%
07 Parkside Associates L.P. (Parkside Garden) (P) 99%
07 Pines Housing L.P. (P) 99%
07 Pines Housing II, L.P. (P) 99%
07 Smyrna Gardens Associates L.P. (P) 99%
07 Tioga Gardens L.P. (P) 99%
07 Walden Pond, L.P. (Hamlet) (P) 99%
06 Corporations for Affordable Housing L.P. II (P) 1%
07 2601 North Board Street Associates L.P. (Station House) (P)
99%
07 Artloft Associates L.P. (P) 53.43%
07 Brookline Housing Associates LLC (Bridgewater) (P) 99%
07 EDA L.P. (Eagle's Nest) (P) 99%
07 Edgewood Manor Associates II L.P. (P) 99%
07 Gateway Housing L.P. (Gateway Townhomes) (P) 99%
07 Homestead Village Associates L.P. (P) 99%
07 Junction City Apartments L.P. (Green Park) (P) 99%
07 Liberty House Associates L.P. (P) 99%
07 Maple Ridge Development Associates L.P. (P) 99%
07 Parsonage Cottage Senior Residence L.P. (P) 99%
07 Rittenhouse School L.P. (P) 99%
07 Silver City Housing L.P. (P) 99%
07 South 55th Street, L.P. (P) 99%
07 W. M. Housing Associates L.P. (Williamsport Manor) (P) 99%
07 Winnsboro Apartments L.P. (Deer Wood) (P) 99%
05 EC PROPERTIES III, INC. (Massachusetts corporation)
06 Corporations for Affordable Housing L.P. III (P) 1%
07 Piedmont Housing Associates (P) 99%
07 Pines Housing III (P) 99%
07 Salem-Lafayette Urban Renewal Associates, L.P. (P) 99%
07 Spring Valley Commons (P) 99%
07 Stevenson Housing Associates (Park Vista) (P) 99%
05 EC-SLP, INC. (Massachusetts corporation)
05 ECHI WYVERNWOOD, INC. [dead project]
05 ECH/HFC GP Partnership No. 1 (P) 34.9%
06 Edison Capital Housing Partners VII L.P. (P) 19.4%
07 C-Court L.P. (Cawelti Court) (P) 99%
07 Cottonwood Affordable Housing L.P. (P) 99%
07 Fifth & Wilshire (P) 99%
07 Flagstaff Affordable Housing II, L.P. (Forest View Apts.)
(P) 99%
07 Huff Avenue Associates L.P. (P) 99%
07 Mountain View Townhomes Associates L.P. (P) 99%
07 Oak Forest Associates L.P. (P) 99%
07 Paradise Road Partners L.P. (Gateway Village) (P) 99%
07 Woodland Arms Apartments, Ltd. (P) 99%
05 ECH/HFC GP Partnership No. 2 (P) 56.7%
06 Edison Capital Housing Partners VIII L.P. (P) 18.54%
07 Catalonia Associates L.P. (P) 99%
07 Ohlone Housing Associates L.P. (P) 99%
05 EDISON CAPITAL AFFORDABLE HOUSING 97 V
05 EDISON CAPITAL AFFORDABLE HOUSING 97 VI
05 EDISON CAPITAL AFFORDABLE HOUSING 97 VII
05 EDISON CAPITAL AFFORDABLE HOUSING 97 VIII
PAGE 4
05 Edison Capital Contributions VI Partners (P) 91.77%
06 ECH Investors Partner VI-A L.P. (P) 15.39%
07 Edison Capital Housing Partners VI L.P. (P) 61.82%
08 Admiralty Heights Associates II 1995 L.P. (Kent Manor)
(P) 99%
08 Affordable/Citrus Glenn Phase II, Ltd. (Citrus Glenn
Apts. Phase II) (P) 99%
08 Altamont Hotel Associates L.P. (P) 99%
08 Bradley Manor Senior Apartments L.P. (P) 99%
08 Double X Associates 1995 L.P. (Terrace Manor) (P) 99%
08 Hamilton Place Apartments L.P. (Larkin Place) (P) 99%
08 Hamilton Place Senior Living L.P. (P) 99%
08 Hearthstone Group 3 L.P. (Evergreen Court) (P) 99%
08 KDF Malabar L.P. (P) 99%
08 LINC-Bristol Associates I, L.P. (City Gardens) (P) 99%
08 MAS-WT, L.P. (Washington Terrace) (P) 99%
08 Northwood Manor Associates L.P. (P) 99%
08 Silver Lake Properties L.P. (P) 99%
08 University Park Properties L.P. (P)99%
08 Upland Senior Housing L.P. (Coy D. Estes) (P) 99%
08 Vista Verde Townhomes II LLC (P) 99%
08 Vista Properties LLC (Vista View) (P) 99%
06 ECH Investors Partner VI-B L.P. (P) 15.39%
07 Edison Capital Housing Partners VI L.P. (P) 37.18%
08 Admiralty Heights Associates II 1995 L.P. (Kent Manor)
(P) 99%
08 Affordable/Citrus Glenn Phase II, Ltd. (Citrus Glenn
Apts. Phase II) (P) 99%
08 Altamont Hotel Associates L.P. (P) 99%
08 Bradley Manor Senior Apartments L.P. (P) 99%
08 Double X Associates 1995 L.P. (Terrace Manor) (P) 99%
08 Hamilton Place Apartments L.P. (Larkin Place) (P) 99%
08 Hamilton Place Senior Living L.P. (P) 99%
08 Hearthstone Group 3 L.P. (Evergreen Court) (P) 99%
08 KDF Malabar L.P. (P) 99%
08 LINC-Bristol Associates I, L.P. (City Gardens) (P) 99%
08 MAS-WT, L.P. (Washington Terrace) (P) 99%
08 Northwood Manor Associates L.P. (P) 99%
08 Silver Lake Properties L.P. (P) 99%
08 University Park Properties L.P. (P)99%
08 Upland Senior Housing L.P. (Coy D. Estes) (P) 99%
08 Vista Verde Townhomes II LLC (P) 99%
08 Vista Properties LLC (Vista View) (P) 99%
05 Edison Capital Housing Partners V L.P. (P) 16.38%
06 AMCAL Santa Barbara Fund XXXVI L.P. (Positano) (P) 99%
06 Bodega Hills Investors L.P. (P) 99%
06 Mercy Housing California IV L.P. (Vista Grande) (P) 99%
06 Park Place Terrace L.P. (P) 99%
06 River Walk Apartments Homes L.P. (P) 99%
06 San Diego Golden Villa Partners L.P. (P) 99%
06 Santa Alicia Gardens Townhomes L.P. (The Gardens) (P) 99%
06 St. Hedwigs Gardens (P) 99%
06 Sunshine Terrace L.P. (P) 99%
06 Union Meadows Apartments (P) 99%
05 EDISON CAPITAL HOUSING FLORIDA
05 EDISON CAPITAL HOUSING MANAGEMENT
06 JOHN STEWART COMPANY
Address: 2310 Mason Street, San Francisco, CA 94133
07 2814 Fifth Street Associates L.P. (P) 0.5%GP
07 381 Turk Street L.P. (P) 1%GP
07 Community Investment L.P. (Oak Village Apartments) (P) 1%GP
07 Crescent Manor Associates L.P. (P) 2.85%GP
PAGE 5
07 Del Norte Place L.P. (P) 18%GP
07 The IBEX Group (P) 10%GP
07 Jackie Robinson Apartments L.P. (P) 1.67%GP
07 Larkspur Isle L.P. (P) 0.5%GP
07 Las Casitas L.P. (P) 0.5%GP
07 Mason Street Enterprises L.P. (P) 1%GP
07 Mountain View Apartments L.P. (P) 0.26%GP
07 Piper Court G.P. (P) 50%GP
07 Shiloh Arms L.P. (P) 1%GP/9.8%LP
07 St. John's L.P. (P) 1%GP/19.6%LP
07 Village East Apartments L.P. (P) 3%GP
07 Woodhaven Senior Residences L.P. (P) 1%GP
05 EDISON CAPITAL HOUSING NEW JERSEY
06 El Barrio Academy Urban Renewal Associates, L.P. (P) 98.99%
06 Pellettieri Homes Urban Renewal Associates, L.P. (P) 98.99%
05 EDISON CAPITAL HOUSING NEW YORK
06 Pier A Historic Rehabilitation at Battery Park (P) 99%
05 EDISON CAPITAL HOUSING PENNSYLVANIA
06 Lackawana Housing Associates LLC (Goodwill Neighborhood
Residences) (P) 99%
06 McFarland Press Associates (P) 98.9%
06 Villa Maria Housing L.P. (P) 98.9%
05 EDISON HOUSING GEORGIA
06 HMB-Atlanta I L.P. (Spring Branch) (P) 99%
05 EDISON HOUSING NORTH CAROLINA
06 Edison Capital Contributions VI Partners (P) 4.03%
07 ECH Investors Partner VI-A L.P. (P) 15.39%
08 Edison Capital Housing Partners VI L.P. (P) 61.82%
09 Admiralty Heights Associates II 1995 L.P. (Kent Manor)
(P) 99%
09 Affordable/Citrus Glenn Phase II, Ltd. (Citrus Glenn
Apts. Phase II) (P) 99%
09 Altamont Hotel Associates L.P. (P) 99%
09 Bradley Manor Senior Apartments L.P. (P) 99%
09 Double X Associates 1995 L.P. (Terrace Manor) (P) 99%
09 Hamilton Place Apartments L.P. (Larkin Place) (P) 99%
09 Hamilton Place Senior Living L.P. (P) 99%
09 Hearthstone Group 3 L.P. (Evergreen Court) (P) 99%
09 KDF Malabar L.P. (P) 99%
09 LINC-Bristol Associates I, L.P. (City Gardens) (P) 99%
09 MAS-WT, L.P. (Washington Terrace) (P) 99%
09 Northwood Manor Associates L.P. (P) 99%
09 Silver Lake Properties L.P. (P) 99%
09 University Park Properties L.P. (P)99%
09 Upland Senior Housing L.P. (Coy D. Estes) (P) 99%
09 Vista Verde Townhomes II LLC (P) 99%
09 Vista Properties LLC (Vista View) (P) 99%
07 ECH Investors Partner VI-B L.P. (P) 15.39%
08 Edison Capital Housing Partners VI L.P. (P) 37.18%
09 Admiralty Heights Associates II 1995 L.P. (Kent Manor)
(P) 99%
09 Affordable/Citrus Glenn Phase II, Ltd. (Citrus Glenn
Apts. Phase II) (P) 99%
09 Altamont Hotel Associates L.P. (P) 99%
09 Bradley Manor Senior Apartments L.P. (P) 99%
09 Double X Associates 1995 L.P. (Terrace Manor) (P) 99%
09 Hamilton Place Apartments L.P. (Larkin Place) (P) 99%
09 Hamilton Place Senior Living L.P. (P) 99%
09 Hearthstone Group 3 L.P. (Evergreen Court) (P) 99%
09 KDF Malabar L.P. (P) 99%
09 LINC-Bristol Associates I, L.P. (City Gardens) (P) 99%
09 MAS-WT, L.P. (Washington Terrace) (P) 99%
PAGE 6
09 Northwood Manor Associates L.P. (P) 99%
09 Silver Lake Properties L.P. (P) 99%
09 University Park Properties L.P. (P)99%
09 Upland Senior Housing L.P. (Coy D. Estes) (P) 99%
09 Vista Verde Townhomes II LLC (P) 99%
09 Vista Properties LLC (Vista View) (P) 99%
05 EDISON HOUSING OREGON, INC.
05 EDISON HOUSING SOUTH CAROLINA
06 Edison Capital Contributions VI Partners (P) 4.20%
07 ECH Investors Partner VI-A L.P. (P) 15.39%
08 Edison Capital Housing Partners VI L.P. (P) 61.82%
09 Admiralty Heights Associates II 1995 L.P. (Kent Manor)
(P) 99%
09 Affordable/Citrus Glenn Phase II, Ltd. (Citrus Glenn
Apts. Phase II) (P) 99%
09 Altamont Hotel Associates L.P. (P) 99%
09 Bradley Manor Senior Apartments L.P. (P) 99%
09 Double X Associates 1995 L.P. (Terrace Manor) (P) 99%
09 Hamilton Place Apartments L.P. (Larkin Place) (P) 99%
09 Hamilton Place Senior Living L.P. (P) 99%
09 Hearthstone Group 3 L.P. (Evergreen Court) (P) 99%
09 KDF Malabar L.P. (P) 99%
09 LINC-Bristol Associates I, L.P. (City Gardens) (P) 99%
09 MAS-WT, L.P. (Washington Terrace) (P) 99%
09 Northwood Manor Associates L.P. (P) 99%
09 Silver Lake Properties L.P. (P) 99%
09 University Park Properties L.P. (P)99%
09 Upland Senior Housing L.P. (Coy D. Estes) (P) 99%
09 Vista Verde Townhomes II LLC (P) 99%
09 Vista Properties LLC (Vista View) (P) 99%
07 ECH Investors Partner VI-B L.P. (P) 15.39%
08 Edison Capital Housing Partners VI L.P. (P) 37.18%
09 Admiralty Heights Associates II 1995 L.P. (Kent Manor)
(P) 99%
09 Affordable/Citrus Glenn Phase II, Ltd. (Citrus Glenn
Apts. Phase II) (P) 99%
09 Altamont Hotel Associates L.P. (P) 99%
09 Bradley Manor Senior Apartments L.P. (P) 99%
09 Double X Associates 1995 L.P. (Terrace Manor) (P) 99%
09 Hamilton Place Apartments L.P. (Larkin Place) (P) 99%
09 Hamilton Place Senior Living L.P. (P) 99%
09 Hearthstone Group 3 L.P. (Evergreen Court) (P) 99%
09 KDF Malabar L.P. (P) 99%
09 LINC-Bristol Associates I, L.P. (City Gardens) (P) 99%
09 MAS-WT, L.P. (Washington Terrace) (P) 99%
09 Northwood Manor Associates L.P. (P) 99%
09 Silver Lake Properties L.P. (P) 99%
09 University Park Properties L.P. (P)99%
09 Upland Senior Housing L.P. (Coy D. Estes) (P) 99%
09 Vista Verde Townhomes II LLC (P) 99%
09 Vista Properties LLC (Vista View) (P) 99%
05 Edmundson Associates L.P. (Willows) (P) 99%
05 EHI DEVELOPMENT COMPANY (formerly MHI Development Company)
05 EHI DEVELOPMENT FUND (formerly MHI Development Fund)
05 Elizabeth West & East L.P. (P) 99%
05 Elk View Homes (C) 99%
05 Farm (The) Associates L.P. (P) 99%
05 Florence Apartments LLC (P) 99%
05 Garnet Housing Associates (P) 99%
05 Gilroy Redwood Associates L.P. (Redwoods) (P) 99%
05 Ginzton Associates L.P. (P) 99%
05 Grace Housing L.P. (P) 99%
PAGE 7
05 Grandy Lake 1996 L.P. (Grandy Lake Residences) (P) 99%
05 Grossman Apartments Investors L.P. (P) 99%
05 Harry Clark Jr. Residential Center LLC (P) 99%
05 Heartland-Wisconsin Rapids Timber Trails LLC (Timber Trails)
(P) 99%
05 Heather Glen Associates L.P. (P) 99%
05 Holy Family Associates L.P. (P) 99%
05 Kennedy Lofts Associates L.P. (Massachusetts partnership) 97%
05 Lark Ellen L.P. (P) 99%
05 Las Brisas Apartments L.P. (P) 99%
05 Maplewood School Apartments L.P. (P) 99%
05 Mar Associates L.P. (P) 99%
05 Marlton Residences Associates L.P. (P) 99%
05 Mercy Housing California IX L.P. (Sycamore) (P) 99%
05 Merrill Road Associates L.P. (P) 99%
05 MH I L.P. (P) 1%
06 California Park Apartments L.P. (P) 1% of 99%
05 MH II L.P. (P) 1%
06 5363 Dent Avenue Associates L.P. (P) 1% of 99%
05 MH III L.P. (P) 1%
06 DeRose Housing Associates L.P. (P) 1% of 99%
05 MH IV L.P. (P) 1%
06 MPT Apartments L.P. (MacArthur Park) (P) 1% of 99%
05 MH V L.P. (P) 1%
06 Centennial Place L.P. (P) 1% of 99%
05 MHIFED 94 COMPANY
05 MHIFED 94 L.P. (Delaware partnership) 1%GP; 99%LP to NYNEX
06 Berry Avenue Associates L.P. (P) 1% of 99%
06 Carlton Way Apartments L.P. (P) 1% of 99%
06 CDR Senior Housing Associates (Casa del Rio) (P) 1% of 99%
06 Corona Ely/Ranch Associates L.P. (P) 1% of 99%
06 Fairview Village Associates L.P. (P) 1% of 99%
06 Fell Street Housing Associates L.P. (P) 1% of 99%
06 Hope West Apartments L.P. (P) 1% of 99%
06 Morrone Gardens Associates L.P. (P) 1% of 99%
06 Pajaro Court Associates L.P. (P) 1% of 99%
06 Tierra Linda Associates L.P. (P) 1% of 99%
06 Tlaquepaque Housing Associates L.P. (P) 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) (P) 1% of 99%
06 Hollywood El Centro L.P. (P) 1% of 99%
06 La Brea/Franklin L.P. (P) 1% of 99%
06 Larkin Pine L.P. (P) 1% of 99%
06 Mercy Housing California III L.P. (3rd & Reed) (P) 1% of 99%
06 Pinole Grove Associates L.P. (P) 1% of 99%
06 Second Street Center L.P. (Santa Monica) (P) 1% of 99%
06 Solinas Village Partners L.P. (P) 1% of 99%
06 Three Oaks Housing L.P. (P) 1% of 99%
06 1101 Howard Street Associates L.P. (P) 1% of 99%
05 MHIFED 95C COMPANY
05 MHIFED 96 COMPANY
05 MHIFED 96 L.P. (Delaware partnership) 5%GP; 95%LP to Cargill
06 Lavell Village Associates L.P. (P) 5% of 99%
06 North Town Housing Partners L.P. (Villa del Norte Village)
(P) 5% of 99%
06 Poco Way Associates L.P. (P) 5% of 99%
06 Seasons Affordable Senior Housing L.P. (P) 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. (P) 1% of 99%
06 Reseda Village L.P. (P) 1% of 99%
PAGE 8
06 Oxnard Housing Associates L.P. (P) 1% of 99%
06 Metro Senior Associates L.P. (P) 1% of 99%
06 Round Walk Village Apartments L.P. (P) 1% of 99%
06 Santa Alicia Family Housing Associates (P) 1% of 99%
06 Vine Street Court L.P. (P) 1% of 99%
06 Vine Street Court L.P. II (P) 1% of 99%
05 MHIFED 97 COMPANY
05 MHICAL 94 COMPANY
06 MHICAL 94 L.P. (Delaware partnership) 99%LP
07 Mayacamas Village Associates L.P. (P) 99% of 99%
07 Rincon De Los Esteros Associates L.P. (P) 99% of 99%
07 West Capital Courtyard L.P. (P) 99% of 99%
07 Winfield Hill Associates L.P. (P) 99% of 99%
05 MHICAL 94 L.P. (Delaware partnership) 1%GP
06 Mayacamas Village Associates L.P. (P) 1% of 99%
06 Rincon De Los Esteros Associates L.P. (P) 1% of 99%
06 West Capital Courtyard L.P. (P) 1% of 99%
06 Winfield Hill Associates L.P. (P) 1% of 99%
05 MHICAL 95 COMPANY
06 MHICAL 95 L.P. (Delaware partnership) 99%LP
07 Abby Associates L.P. (Windmere) (P) 99% of 99%
07 Antelope Associates L.P. (P) 99% of 99%
07 Baker Park Associates L.P. (P) 99% of 99%
07 Bracher Associates L.P. (P) 99% of 99%
07 Colina Vista L.P. (P) 99% of 99%
07 ECH/HFC GP Partnership No. 2 (P) 43.3%
08 Edison Capital Housing Partners VIII L.P. (P) 18.54%
09 Catalonia Associates L.P. (P) 99%
09 Ohlone Housing Associates L.P. (P) 99%
07 Florin Woods Associates L.P. (P) 99% of 99%
07 Mercy Housing California VI L.P. (205 Jones) (P) 99% of 99%
07 Pinmore Associates L.P. (P) 99% of 99%
07 Sunset Creek Partners L.P. (P) 99% of 99%
05 MHICAL 95 L.P. (Delaware partnership) 1%GP
06 Abby Associates L.P. (Windmere) (P) 1% of 99%
06 Antelope Associates L.P. (P) 1% of 99%
06 Baker Park Associates L.P. (P) 1% of 99%
06 Bracher Associates L.P. (P) 1% of 99%
06 Colina Vista L.P. (P) 1% of 99%
06 Florin Woods Associates L.P. (P) 1% of 99%
06 Mercy Housing California VI L.P. (205 Jones) (P) 1% of 99%
06 Pinmore Associates L.P. (P) 1% of 99%
06 Sunset Creek Partners L.P. (P) 1% of 99%
05 MHICAL 96 COMPANY
06 MHICAL 96 L.P. (Delaware partnership) 99%LP
07 ECH/HFC GP Partnership No. 1 (P) 50.4%
08 Edison Capital Housing Partners VII L.P. (P) 19.4%
09 C-Court L.P. (Cawelti Court) (P) 99%
09 Cottonwood Affordable Housing L.P. (P) 99%
09 Fifth & Wilshire (P) 99%
09 Flagstaff Affordable Housing II, L.P. (Forest View
Apts.) (P) 99%
09 Huff Avenue Associates L.P. (P) 99%
09 Mountain View Townhomes Associates L.P. (P) 99%
09 Oak Forest Associates L.P. (P) 99%
09 Paradise Road Partners L.P. (Gateway Village) (P) 99%
09 Woodland Arms Apartments, Ltd. (P) 99%
07 Greenway Village Associates L.P. (P) 99% of 99%
07 Kennedy Court Partners L.P. (P) 99% of 99%
07 Klamath Associates L.P. (P) 99% of 99%
07 Monterra Village Associates L.P. (P) 99% of 99%
07 Sky Parkway Housing Associates L.P. (P) 99% of 99%
PAGE 9
07 Strobridge Housing Associates L.P. (P) 99% of 99%
07 Westgate Townhomes Associates L.P. (P) 99% of 99%
07 1010 SVN Associates L.P. (P) 99% of 99%
05 MHICAL 96 L.P. (Delaware partnership) 1%GP
06 Greenway Village Associates L.P. (P) 1% of 99%
06 Kennedy Court Partners L.P. (P) 1% of 99%
06 Klamath Associates L.P. (P) 1% of 99%
06 Monterra Village Associates L.P. (P) 1% of 99%
06 Sky Parkway Housing Associates L.P. (P) 1% of 99%
06 Strobridge Housing Associates L.P. (P) 1% of 99%
06 Westgate Townhomes Associates L.P. (P) 1% of 99%
06 1010 SVN Associates L.P. (P) 1% of 99%
05 MHICAL 97 COMPANY
06 MHICAL 97 L.P. 99%LP
07 Alma Place Associates L.P. (P) 99% of 99%
07 ECH/HFC GP Partnership No. 1 (P) 14.7%
08 Edison Capital Housing Partners VII L.P. (P) 19.4%
09 C-Court L.P. (Cawelti Court) (P) 99%
09 Cottonwood Affordable Housing L.P. (P) 99%
09 Fifth & Wilshire (P) 99%
09 Flagstaff Affordable Housing II, L.P. (Forest View
Apts.) (P) 99%
09 Huff Avenue Associates L.P. (P) 99%
09 Mountain View Townhomes Associates L.P. (P) 99%
09 Oak Forest Associates L.P. (P) 99%
09 Paradise Road Partners L.P. (Gateway Village) (P) 99%
09 Woodland Arms Apartments, Ltd. (P) 99%
05 MHICAL 97 L.P. 1%GP
06 Alma Place Associates L.P. (P) 1% of 99%
05 Mid-Peninsula Century Village Associates L.P. (Century Village)
(P) 99%
05 Mid-Peninsula Sharmon Palms Associates L.P. (Sharmon Palms) (P)
99%
05 Mission Capp L.P. (P) 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. (P) 99%
05 MISSION HOUSING DELTA
06 MH I L.P. (P) 99%
07 California Park Apartments L.P. (P) 99% of 99%
06 MH II L.P. (P) 99%
07 5363 Dent Avenue Associates L.P. (P) 99% of 99%
06 MH III L.P. (P) 99%
07 DeRose Housing Associates L.P. (P) 99% of 99%
06 MH IV L.P. (P) 99%
07 MPT Apartments L.P. (MacArthur Park) (P) 99% of 99%
06 MH V L.P. (P) 99%
07 Centennial Place L.P. (P) 99% of 99%
05 MISSION HOUSING DENVER
06 Mercantile Square L.P. (P) 99%
06 North Park Village LLC (P) 99%
05 MISSION HOUSING EPSILON
06 Riverside/Liebrandt Partners L.P. (La Playa) (P) 99%
05 MISSION HOUSING GAMMA
06 Del Carlo Court Associates L.P. (P) 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)
(P) 99% of 99%
PAGE 10
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)
(P) 1% of 99%
05 MISSION HOUSING THETA
06 MISSION FUNDING THETA
07 Brantwood II Associates L.P. (P) 0.01%
07 Cedarshores L.P. (P) 0.01%
07 Eastwood Homes L.P. (P) 0.01%
07 El Barrio Academy Urban Renewal Associates, L.P. (P) 0.01%
07 McFarland Press Associates (P) 0.01%
07 Pellettieri Homes Urban Renewal Associates, L.P. (P) 0.01%
07 Persimmon Associates L.P. (P) 0.01%
07 Roebling Village Inn Urban Renewal L.P. (P) 0.01%
07 Sherman Glen, L.L.C. (P) 0.01%
07 Timber Sound, Ltd. (P) 0.01%
07 Timber Sound II, Ltd. (P) 0.01%
07 Villa Maria Housing L.P. (P) 0.01%
07 Woodleaf Village L.P. (P) 0.01%
06 Mission Housing Investors Partnership 5%GP; 95%LP to GECC
07 Forest Winds Associates L.P. (P) 5% of 99%
07 Glen Eden Associates L.P. (P) 5% of 99%
07 Gray's Meadows Investors L.P. (P) 5% of 99%
07 Prince Bozzuto L.P. (Fairground Commons) (Maryland
partnership) 5% of 99%
07 Rancho Park Associates L.P. (P) 5% of 99%
07 Rustic Gardens Associates L.P. (P) 5% of 99%
07 Sea Ranch Apartments L.P. (P) 5% of 99%
07 Springdale Kresson Associates L.P. (Jewish Federation) (New
Jersey partnership) 5% of 99%
07 1028 Howard Street Associates L.P. (P) 5% of 99%
05 MISSION HOUSING ZETA
06 Fremont Building L.P. (Crescent Arms) (P) 99%
05 MISSION SA COMPANY
05 Montview Park Apartments (C) 99%
05 Morgan Hill Ranch Housing L.P. (P) 99%
05 Neary Lagoon Partners L.P. (P) 99%
05 New Harbor Vista Apartments (C) 99%
05 Northstar Apartments (C) 99%
05 Oceanside Gardens L.P. (P) 99%
05 Olive Court Apartments L.P. (P) 98.9%
05 Omaha Amber Ridge L.P. (Amber Ridge) (P) 99%
05 Ontario Senior Housing L.P. (Ontario Plaza) (P) 98.9%
05 Open Doors Associates L.P. (West Valley) (P) 99%
05 Pacific Terrace Associates L.P. (C) 99%
05 Pacifica Community Associates L.P. (Villa Pacifica) (P) 99%
05 Palmer House L.P. (P) 99%
05 Pecan Court Associates L.P. (C) 99%
05 Persimmon Associates L.P. (P) 98.99%
05 Pilot Grove L.P. (Massachusetts partnership) 99%
05 Post Office Plaza L.P. (Ohio partnership) 99%
05 Red Lake Homes (C) 99%
05 Riverwalk Apartments (Colorado) (C) 99%
05 Roebling Village Inn Urban Renewal L.P. (P) 98.99%
05 Rosebloom Associates L.P. (Oakshade) (P) 99%
05 San Juan Commons 1996 L.P. (P) 99%
05 San Pablo Senior Housing Associates L.P. (P) 99%
05 San Pedro Gardens Associates L.P. (P) 99%
05 Santa Paulan Senior Apartments Associates L.P.(P) 99%
05 School Court Housing Associates L.P. (C) 99%
05 Sherman Glen, L.L.C. (P) 98.99%
05 South Beach Housing Associates L.P. (Steamboat) (P) 99%
PAGE 11
05 South Winery Associates L.P. (The Winery Apartments) (P) 99%
05 Stoney Creek Associates L.P. (P) 99%
05 Studebaker Building L.P. (P) 99%
05 Sultana Acres Associates L.P. (P) 99%
05 Tabor Grand L.P. (Colorado partnership) 99%
05 Terra Cotta Housing Associates L.P. (C) 99%
05 The Cornerstone Building (C) 99%
05 The Josephinum Associates L.P. (Washington partnership) 99%
05 The World Schoolhouse Residences L.P. (C) 99%
05 Thomson Rental Housing, L.P. (Washington Place) (P) 99%
05 Timber Sound, Ltd. (P) 98.99%
05 Timber Sound II, Ltd. (P) 98.99%
05 Trinity Park Apartments L.P. (P) 99%
05 Tuscany Associates L.P. (Tuscany Villa) (P) 99%
05 Venbury Trail L.P. (P) 99%
05 Walnut Avenue Partnership L.P. (P) 99%
05 WGA INVESTORS COMPANY [dead project]
05 Washington Creek Associates L.P. (P) 99%
05 Westfield Condominium Investment L.P. (P) 99%
05 Westport Village Homes Associates L.P. (P) 99%
05 Wheeler Manor Associates L.P. (P) 99%
05 White Mountain Apache Housing (P) 99%
05 Winfield Hill Associates L.P. (P) 99%
05 Woodleaf Village L.P. (P) 98.99%
05 Yanktown Sioux Homes (P) 99%
05 YWCA Villa Nueva Partners L.P. (P) 99%
04 EDISON FUNDING OMICRON GP
05 Olive Court Housing Associates L.P. (P) 0.1%
05 Ontario Senior Housing L.P. (Ontario Plaza) (P) 0.1%
04 EDISON INTEGRATED ENERGY SERVICES (formerly Mission Integrated
Energy Services)
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
06 Edison Capital LAI (Bermuda) Ltd. (Bermuda corporation)
06 Edison Capital Latin American Investments (Bermuda) Ltd.
(Bermuda corporation) 50%
05 EDISON CAPITAL LATIN AMERICAN INVESTMENTS HOLDING COMPANY
(Delaware corporation)
06 Edison Capital Latin American Investments (Bermuda) Ltd.
(Bermuda corporation) 50%
05 GEM Energy Company (New York partnership) 50%
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
PAGE 12
04 MISSION FUNDING KAPPA
05 ABB Funding Partners, L.P. (P) 14.27%
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. (P) 30% [29%LP, 1%GP]; 100% w/ ECHI
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 18101 Von Karman Avenue, Suite 800,
Irvine, California 92612-1046. 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 (P) (inactive) 79%GP
05 Central Valley/Calabasas L.P. (P) [in dissolution] 50%LP
03 CALABASAS PALATINO, INC.
04 Central Valley/Calabasas L.P. (P) [in dissolution] 50%GP
03 Carol Stream Developers G.P. (Illinois partnership) 60%GP
03 Centrelake Partners, L.P. (limited partnership) 98%GP
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 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 (P) (formerly Mission Comstock Crosser Hickey)
75%GP
03 MISSION/ONTARIO, INC.
03 MISSION SOUTH BAY COMPANY (inactive)
04 Mission-Oceangate (P) (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
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)
PAGE 13
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.
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 (P) 50%
03 ARROWHEAD ENERGY COMPANY (inactive)
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 (P) 50%
03 DELAWARE ENERGY CONSERVERS, INC. (Delaware corporation) (inactive)
PAGE 14
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. (P) 50%
03 EAST MAINE ENERGY COMPANY (inactive) [dissolving]
03 EDISON MISSION ENERGY FUEL [formerly MISSION ENERGY FUEL COMPANY]
04 EDISON MISSION ENERGY OIL AND GAS [formerly MISSION ENERGY OIL AND
GAS COMPANY]
05 Four Star Oil & Gas Company (P) 46.85% (owns Lost Hills
Cogeneration Facility)
04 EDISON MISSION ENERGY PETROLEUM [formerly 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 EDISON MISSION ENERGY FUNDING CORP. (Delaware corporation) 1%
03 Edison Mission Energy Interface Ltd. (formerly Edison Mission Energy
Canada Ltd. and Mission Energy Canada Corporation) (British Columbia
company)
04 The Mission Interface Partnership (Province of Ontario G.P.) 50%
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 (P) 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)
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 (inactive)
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 (inactive)
03 MISSION ENERGY CONSTRUCTION SERVICES, INC. (formerly Glenwood
Springs Property, Inc.)
PAGE 15
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 Limited Partnership (UK limited partnership)
05 EME Generation Holdings Limited (UK limited partnership) 30%
[See International section for structure of EME Generation
Holdings Ltd.]
03 MISSION ENERGY WESTSIDE, INC. (formerly Sun Coast Energy Company)
03 Mission Operations de Mexico, S.A. de C.V. 5%
03 MISSION 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 (inactive)
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. (P) 50%
03 SAN JUAN ENERGY COMPANY (GP)
04 March Point Cogeneration Company (P) 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)
PAGE 16
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 (P) 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. (P) (Aidlin) 5%LP
03 SOUTH COAST ENERGY COMPANY (GP)
04 Harbor Cogeneration Company (P) 30%
03 SOUTHERN SIERRA ENERGY COMPANY (GP)
04 Kern River Cogeneration Company (general partnership) 50%
03 THOROFARE ENERGY COMPANY (inactive)
03 VIEJO ENERGY COMPANY (GP)
04 Sargent Canyon Cogeneration Company (P) 50%
03 VISTA ENERGY COMPANY (New Jersey corporation) (inactive)
03 WESTERN SIERRA ENERGY COMPANY (GP)
04 Sycamore Cogeneration Company (general partnership) 50%
EME 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 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%
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%
Address: 391-B Orchard Road, Ngee Ann City, Tower B,
14th Floor, #14-08/10, Singapore 238874
06 Edison Mission Operation & Maintenance Services Pte Ltd 100%
Address: 391-B Orchard Road, Ngee Ann City, Tower B,
14th Floor, #14-08/10, Singapore 238874
06 P.T. Edison Mission Operation and Maintenance Indonesia
[formerly P.T. Mission Operation and Maintenance Indonesia
(Indonesian company) 99%
Address: Jl. Gen. A Yani No. 54
Probolinggo, East Java, Indonesia
05 Loy Yang Holdings Pty Ltd (Australia corporation) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
06 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
07 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
08 Latrobe Power Partnership (Australian partnership) 1%
09 Loy Yang B Joint Venture (Australian J.V.) [see 4.09]
51%
PAGE 17
07 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
07 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
07 Mission Energy Holdings Superannuation Fund Pty Ltd.
(retirement fund required by Australia law) 100%
07 Mission Energy (Kwinana) Pty Ltd (Australia) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
08 Kwinana Power Partnership (Australian G.P.) 1%
Address: Level 23, St. Martins Tower
44 St George's Terrace, Perth WA 6000
06 Latrobe Power Pty. Ltd. (Australian corporation) 1%
07 Mission Victoria Partnership (Australian partnership)
52.31%
08 Latrobe Power Partnership (Australian partnership) 99%
09 Loy Yang B Joint Venture (Australian J.V.) [see 4.09]
51%
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) 99%
09 Loy Yang B Joint Venture (Australian J.V.) [see 4.09]
51%
06 Traralgon Power Pty. Ltd. (Australian corporation) 1%
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) 99%
09 Loy Yang B Joint Venture (Australian J.V.) [see 4.09]
51%
05 Edison Mission Energy International B.V. (formerly MEC Mission
B.V.) (Netherlands company) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
05 EME Victoria B.V. 100%
05 Hydro Energy B.V. (Netherlands limited liability company)
(formerly Continfin Management B.V.) 10%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
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
PAGE 18
06 Hydro Energy B.V. (Netherlands company) 90%
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.
05 Latrobe Power Pty. Ltd. (Australian corporation) 99%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
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
4.09] 51%; 49% to Gippsland
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
06 Doga Isi Satis Hizmetteri Ticaret L.S. (Turkish corporation)
80%
Address: Merkez Man, Mahallesi Caddesi 11/8,
Esenyurt, Istanbul, Turkey
06 Doga Isletme ve Bakim Ticaret L.S. (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 4.10] 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
06 Edison Mission Energy International B.V. (formerly MEC
Mission B.V.) (Netherlands company) 1%
06 MEC Esenyurt B.V. (Netherlands company) (Doga Project) 1%
07 Doga Enerji Uretim Sanayi ve Ticaret Anomin Sirketi
(Turkish corporation)
07 Doga Isi Satis Hizmetteri Ticaret L.S. (Turkish
corporation) 80%
07 Doga Isletme ve Bakim Ticaret L.S. (Turkish corporation)
80%
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%
PAGE 19
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 4.10] 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 4.13]
06 MEC Priolo B.V. (Netherlands company) (ISAB Project) 1%
07 ISAB Energy, s.r.l. (Italian J.V. company) (equity) [see
4.11] 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 Sidi Krir B.V. [formerly MEC Colombia B.V.] (Netherlands
company) 1%
06 MEC Sumatra B.V. (formerly MEC Turkey B.V.) (Netherlands
company) 1%
06 MEC Wales B.V. (formerly MEC Global Services B.V.)
(Netherlands Company) 1%
07 Mission Hydro Limited Partnership (UK limited partnership)
08 EME Generation Holdings Limited (UK company) 100%
09 Loyvic Pty Ltd. (Australia company) 100%
10 Energy Capital Partnership (Australia partnership)
1%
11 Enerloy Pty Ltd. (Australia company) 100%
09 EME Victoria Generation Limited (UK company) 100%
10 Energy Capital Partnership (Australia partnership
98%
11 Enerloy Pty Ltd. (Australia company) 100%
10 Mission Energy Development Australia Pty Ltd
11 Gippsland Power Pty Ltd 100%
12 Loy Yang B Joint Venture 49%
09 Energy Capital Partnership (Australia partnership)
1%LP
10 Enerloy Pty Ltd. (Australia company) 100%
09 First Hydro Holdings Company (Australia partnership)
99%
10 First Hydro Company [see 4.12] 99%
10 First Hydro Finance plc
11 First Hydro Company [see 4.12] 1%
06 Mission Energy Italia s.r.l. 10% (Office in Italy)
06 P.T. Edison Mission Operation and Maintenance Indonesia
[formerly 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 4.13]
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
4.11] 99% of 49% (quota, not shares)
Address: Corso Gelone No. 103, Siracusa, Sicily, Italy
PAGE 20
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 Sidi Krir B.V. [formerly MEC Colombia B.V.] (Netherlands
company) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
05 MEC Sumatra B.V. (formerly 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
06 Mission Hydro Limited Partnership 69%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
07 EME Generation Holdings Limited (UK company) 100%
08 Loyvic Pty Ltd. (Australia company) 100%
09 Energy Capital Partnership (Australia partnership) 1%
10 Enerloy Pty Ltd. (Australia company) 100%
08 EME Victoria Generation Limited (UK company) 100%
09 Energy Capital Partnership (Australia partnership 98%
10 Enerloy Pty Ltd. (Australia company) 100%
09 Mission Energy Development Australia Pty Ltd
10 Gippsland Power Pty Ltd 100%
11 Loy Yang B Joint Venture 49%
08 Energy Capital Partnership (Australia partnership) 1%LP
09 Enerloy Pty Ltd. (Australia company) 100%
08 First Hydro Holdings Company (Australia partnership) 99%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
09 First Hydro Company [see 4.12] 99%
Address: Bala House, St. David's Park
Ewloe, Dlwyd, Wales CH5 3XJ
09 First Hydro Finance plc 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
10 First Hydro Company [see 4.12] 1%
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 4.14] 33%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Edison Mission Energy Limited (formerly Mission Energy
Limited) (UK private limited company) 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Edison Mission Operation & Maintenance Limited (a United
Kingdom corporation) 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Mission Energy Services Limited (UK private limited company)
100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Mission Hydro (UK) Limited 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
PAGE 21
07 First Hydro Holdings Company 1%
08 First Hydro Company [see 4.12] 99%
08 First Hydro Finance plc 100%
09 First Hydro Company [see 4.12] 1%
07 Mission Hydro Limited Partnership 1%GP
08 EME Generation Holdings Limited (UK company) 100%
09 Loyvic Pty Ltd. (Australia company) 100%
10 Energy Capital Partnership (Australia partnership)
1%
11 Enerloy Pty Ltd. (Australia company) 100%
09 EME Victoria Generation Limited (UK company) 100%
10 Energy Capital Partnership (Australia partnership
98%
11 Enerloy Pty Ltd. (Australia company) 100%
10 Mission Energy Development Australia Pty Ltd
11 Gippsland Power Pty Ltd 100%
12 Loy Yang B Joint Venture 49%
09 Energy Capital Partnership (Australia partnership)
1%LP
10 Enerloy Pty Ltd. (Australia company) 100%
09 First Hydro Holdings Company (Australia partnership)
99%
10 First Hydro Company [see 4.12] 99%
10 First Hydro Finance plc 99%
11 First Hydro Company [see 4.12] 1%
06 Mission (No. 2) Limited (UK private limited company)
(formerly Mowlem Power Ltd.) 100%
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 4.15] 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
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 4.15] 80%
Address: Roosecote Power Station, Barrow-In-Furness,
Cumbria, England LA13 OPX
06 Lakeland Power Development Company (UK corporation) 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
05 Traralgon Power Pty. Ltd. (Australian corporation) 99%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
06 Mission Victoria Partnership (Australian partnership) 46.69%
(100% w/ Latrobe PPL 52.31% and MEVALP 1%)
07 Latrobe Power Partnership (Australian partnership)
08 Loy Yang B Joint Venture (Australian J.V.) [see 4.09]
51%; 49% to Gippsland