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EX-10.5 - EDISON INTERNATIONAL 2008 EXECUTIVE RETIREMENT PLAN - EDISON INTERNATIONALeixq12015ex10-5.htm
EX-10.1 - EDISON INTERNATIONAL 2015 EXECUTIVE ANNUAL INCENTIVE PROGRAM - EDISON INTERNATIONALeixq12015ex10-1.htm
EX-10.2 - EDISON INTERNATIONAL 2015 LONG-TERM INCENTIVES TERMS AND CONDITIONS - EDISON INTERNATIONALeixq12015ex10-2.htm
EX-31.1 - EXHIBIT 31.1 - EDISON INTERNATIONALeixq12015ex31-1.htm
EX-32.1 - EXHIBIT 32.1 - EDISON INTERNATIONALeixq12015ex32-1.htm
EX-10.3 - EDISON INTERNATIONAL 2015 EXECUTIVE INCENTIVE COMPENSATION PLAN - EDISON INTERNATIONALeixq12015ex10-3.htm
EX-32.2 - EXHIBIT 32.2 - EDISON INTERNATIONALsceq12015ex32-2.htm
EX-10.4 - SCE EXECUTIVE SUPPLEMENTAL BENEFIT PROGRAM - EDISON INTERNATIONALsceq12015ex10-4.htm
EX-31.2 - EXHIBIT 31.2 - EDISON INTERNATIONALsceq12015ex31-2.htm
EXCEL - IDEA: XBRL DOCUMENT - EDISON INTERNATIONALFinancial_Report.xls
EX-10.6 - EDISON INTERNATIONAL 2008 EXECUTIVE SEVERENCE PLAN - EDISON INTERNATIONALeixq12015ex10-6.htm


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2015
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                        to

Commission
File Number
 
Exact Name of Registrant
as specified in its charter
 
State or Other Jurisdiction of
Incorporation or Organization
 
IRS Employer
Identification Number
1-9936
 
EDISON INTERNATIONAL
 
California
 
95-4137452
1-2313
 
SOUTHERN CALIFORNIA EDISON COMPANY
 
California
 
95-1240335

EDISON INTERNATIONAL
 
SOUTHERN CALIFORNIA EDISON COMPANY
2244 Walnut Grove Avenue
(P.O. Box 976)
Rosemead, California 91770
(Address of principal executive offices)
 
2244 Walnut Grove Avenue
(P.O. Box 800)
Rosemead, California 91770
(Address of principal executive offices)
(626) 302-2222
(Registrant's telephone number, including area code)
 
(626) 302-1212
(Registrant's telephone number, including area code)

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.

Edison International        Yes þ No o    Southern California Edison Company    Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Edison International        Yes þ No o    Southern California Edison Company    Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "accelerated filer," "large accelerated filer," and "smaller reporting company" in Rule 12b-12 of the Exchange Act. (Check One):
Edison International
Large Accelerated Filer þ
Accelerated Filer ¨
Non-accelerated Filer ¨
Smaller Reporting Company ¨
Southern California Edison Company
Large Accelerated Filer ¨
Accelerated Filer ¨
Non-accelerated Filer þ
Smaller Reporting Company ¨
 
 
 
 
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Edison International        Yes ¨ No þ    Southern California Edison Company    Yes ¨ No þ
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
Common Stock outstanding as of April 24, 2015:
 
 
Edison International
 
325,811,206 shares
Southern California Edison Company
 
434,888,104 shares
 
 
 
 
 
 




TABLE OF CONTENTS
 
 
 
 
 
 
SEC Form 10-Q Reference Number
 
 
Part I, Item 2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Part I, Item 3
Part I, Item 1
 
 
 
 
 
 
 
 


i



 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Part I, Item 4
 
 
 
 
 
 
Part II, Item 1
Part II, Item 2
 
 
Part II, Item 6
 
This is a combined Form 10-Q separately filed by Edison International and Southern California Edison Company. Information contained herein relating to an individual company is filed by such company on its own behalf. Each company makes representations only as to itself and makes no other representation whatsoever as to any other company.



ii



FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect Edison International's and SCE's current expectations and projections about future events based on Edison International's and SCE's knowledge of present facts and circumstances and assumptions about future events and include any statement that does not directly relate to a historical or current fact. Other information distributed by Edison International and SCE that is incorporated in this report, or that refers to or incorporates this report, may also contain forward-looking statements. In this report and elsewhere, the words "expects," "believes," "anticipates," "estimates," "projects," "intends," "plans," "probable," "may," "will," "could," "would," "should," and variations of such words and similar expressions, or discussions of strategy or of plans, are intended to identify forward-looking statements. Such statements necessarily involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Some of the risks, uncertainties and other important factors that could cause results to differ from those currently expected, or that otherwise could impact Edison International and SCE, include, but are not limited to the:
ability of SCE to recover its costs in a timely manner from its customers through regulated rates, including regulatory assets related to San Onofre and undercollection of fuel and purchased power costs;
decisions and other actions by the CPUC, the FERC, the NRC and other regulatory authorities and delays in regulatory actions;
ability of Edison International or its subsidiaries to borrow funds and access the capital markets on reasonable terms;
possible customer bypass or departure due to technological advancements, federal and state subsidies, or cumulative rate impacts that make self-generation or use of alternative energy sources economically viable;
risks inherent in the construction of transmission and distribution infrastructure replacement and expansion projects, including those related to project site identification, public opposition, environmental mitigation, construction, permitting, power curtailment costs (payments due under power contracts in the event there is insufficient transmission to enable the acceptance of power delivery), and governmental approvals;
risks associated with the operation of transmission and distribution assets and power generating facilities including: public safety issues, failure, availability, efficiency, and output of equipment and availability and cost of spare parts;
risks associated with the retirement and decommissioning of nuclear generating facilities;
physical security of SCE's critical assets and personnel and the cyber security of SCE's critical information technology systems for grid control, and business and customer data;
cost and availability of electricity, including the ability to procure sufficient resources to meet expected customer needs in the event of power plant outages or significant counterparty defaults under power-purchase agreements;
environmental laws and regulations, at both the state and federal levels, or changes in the application of those laws, that could require additional expenditures or otherwise affect the cost and manner of doing business;
changes in the fair value of investments and other assets;
changes in interest rates and rates of inflation, including escalation rates, which may be adjusted by public utility regulators;
governmental, statutory, regulatory or administrative changes or initiatives affecting the electricity industry, including the market structure rules applicable to each market and price mitigation strategies adopted by the California Independent System Operator, Regional Transmission Organizations, and adjoining regions;
availability and creditworthiness of counterparties and the resulting effects on liquidity in the power and fuel markets and/or the ability of counterparties to pay amounts owed in excess of collateral provided in support of their obligations;
cost and availability of labor, equipment and materials;
ability to obtain sufficient insurance, including insurance relating to SCE's nuclear facilities and wildfire-related liability, and to recover the costs of such insurance or in the absence of insurance the ability to recover uninsured losses;
effects of legal proceedings, changes in or interpretations of tax laws, rates or policies;
potential for penalties or disallowances caused by non-compliance with applicable laws and regulations;


iii



cost and availability of fuel for generating facilities and related transportation to the extent not recovered through regulated rate cost escalation provisions or balancing accounts;
extent of technological change in the generation, storage, transmission, distribution and use of electricity;
cost and availability of emission credits or allowances for emission credits;
risk that competing transmission systems will be built by merchant transmission providers in SCE's service area; and
weather conditions and natural disasters.
Additional information about risks and uncertainties, including more detail about the factors described above, is contained throughout this MD&A and in Edison International's and SCE's combined 2014 Form 10-K, including the "Risk Factors" section. Readers are urged to read this entire report, including the information incorporated by reference, as well as the 2014 Form 10-K, and carefully consider the risks, uncertainties and other factors that affect Edison International's and SCE's businesses. Forward-looking statements speak only as of the date they are made and neither Edison International nor SCE are obligated to publicly update or revise forward-looking statements. Readers should review future reports filed by Edison International and SCE with the SEC.
The MD&A for the three months ended March 31, 2015 discusses material changes in the consolidated financial condition, results of operations and other developments of Edison International and SCE since December 31, 2014, and as compared to the three months ended March 31, 2014. This discussion presumes that the reader has read or has access to Edison International's and SCE's MD&A for the calendar year 2014 (the "year-ended 2014 MD&A"), which was included in the 2014 Form 10-K.
Except when otherwise stated, references to each of Edison International, SCE, EMG, Edison Energy, EME or Edison Capital mean each such company with its subsidiaries on a consolidated basis. References to "Edison International Parent and Other" mean Edison International Parent and its consolidated non-utility subsidiaries.


iv



GLOSSARY
The following terms and abbreviations appearing in the text of this report have the meanings indicated below.
Amended Plan of Reorganization
 
EME Chapter 11 Bankruptcy Plan of Reorganization as amended to incorporate the terms of the Settlement Agreement, dated February 19, 2014
AFUDC
 
allowance for funds used during construction
2014 Form 10-K
 
Edison International's and SCE's combined Annual Report on Form 10-K for the year-ended December 31, 2014
ALJ
 
administrative law judge
APS
 
Arizona Public Service Company
ARO(s)
 
asset retirement obligation(s)
Bcf
 
billion cubic feet
CAA
 
Clean Air Act
CAISO
 
California Independent System Operator
CARB
 
California Air Resources Board
CPUC
 
California Public Utilities Commission
CRRs
 
congestion revenue rights
DOE
 
U.S. Department of Energy
Edison Energy
 
Edison International's subsidiary that holds interests in competitive businesses related to the generation, delivery and use of electricity
EME
 
Edison Mission Energy
EME Settlement Agreement
 
Settlement Agreement entered into by Edison International, EME, and the Consenting Noteholders in February 2014
EMG
 
Edison Mission Group Inc.
EPS
 
earnings per share
ERRA
 
energy resource recovery account
FERC
 
Federal Energy Regulatory Commission
Four Corners
 
coal fueled electric generating facility located in Farmington, New Mexico in
which SCE held a 48% ownership interest
GAAP
 
generally accepted accounting principles
GHG
 
greenhouse gas
GRC
 
general rate case
GWh
 
gigawatt-hours
HLBV
 
hypothetical liquidation at book value
IRS
 
Internal Revenue Service
ISO
 
Independent System Operator
MD&A
 
Management's Discussion and Analysis of Financial Condition and Results
of Operations in this report
MHI
 
Mitsubishi Heavy Industries, Ltd. and a related company
Moody's
 
Moody's Investors Service
MW
 
megawatts
MWh
 
megawatt-hours
NAAQS
 
national ambient air quality standards
NDTCP
 
Nuclear Decommissioning Trust Costs Proceeding
NERC
 
North American Electric Reliability Corporation
NRC
 
Nuclear Regulatory Commission
ORA
 
CPUC's Office of Ratepayers Advocates
OII
 
Order Instituting Investigation
Palo Verde
 
large pressurized water nuclear electric generating facility located near
Phoenix, Arizona in which SCE holds a 15.8% ownership interest
PBOP(s)
 
postretirement benefits other than pension(s)


v



PG&E
 
Pacific Gas & Electric Company
QF(s)
 
qualifying facility(ies)
ROE
 
return on common equity
S&P
 
Standard & Poor's Ratings Services
San Onofre
 
retired nuclear generating facility located in south San Clemente, California in which SCE holds a 78.21% ownership interest
San Onofre OII Settlement Agreement
 
Settlement Agreement by and among SCE, The Utility Reform Network, the CPUC's Office of Ratepayer Advocates and SDG&E, which was later joined by the Coalition of California Utility Employees and Friends of the Earth, (together, the "Settling Parties), dated November 20, 2014
SCE
 
Southern California Edison Company
SDG&E
 
San Diego Gas & Electric
SEC
 
U.S. Securities and Exchange Commission
SED
 
Safety and Enforcement Division of the CPUC, formerly known as the Consumer Protection and Safety Division or CPSD
US EPA
 
U.S. Environmental Protection Agency
VIE(s)
 
variable interest entity(ies)



vi


















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1



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MANAGEMENT OVERVIEW
Highlights of Operating Results
Edison International is the parent holding company of SCE. SCE is a public utility primarily engaged in the business of supplying and delivering electricity to an approximately 50,000 square mile area of southern California. Edison International is also the parent company of Edison Energy, a subsidiary that holds interests in competitive businesses that are related to the generation or use of electricity. Such competitive business activities are currently not material to report as a separate business segment. References to Edison International refer to the consolidated group of Edison International and its subsidiaries. References to Edison International Parent and Other refer to Edison International Parent, Edison Energy, and other subsidiaries. Unless otherwise described, all of the information contained in this report relates to both filers.
 
 
Three months ended March 31,
 
 
(in millions)
 
2015
 
2014
 
Change
Net income (loss) attributable to Edison International
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
 
SCE
 
$
305

 
$
208

 
$
97

Edison International Parent and Other
 
(6
)
 
(10
)
 
4

Discontinued operations
 

 
(22
)
 
22

Edison International
 
299

 
176

 
123

Less: Non-core items
 
 
 
 
 
 
     SCE
 

 
(96
)
 
96

     Edison International Parent and Other
 
5

 

 
5

     Discontinued operations
 

 
(22
)
 
22

Total non-core items
 
5

 
(118
)
 
123

Core earnings (losses)
 
 
 
 
 
 
SCE
 
305

 
304

 
1

Edison International Parent and Other
 
(11
)
 
(10
)
 
(1
)
Edison International
 
$
294

 
$
294

 
$

Edison International's earnings are prepared in accordance with GAAP used in the United States. Management uses core earnings internally for financial planning and for analysis of performance. Core earnings (losses) are also used when communicating with investors and analysts regarding Edison International's earnings results to facilitate comparisons of the Company's performance from period to period. Core earnings (losses) are a non-GAAP financial measure and may not be comparable to those of other companies. Core earnings (losses) are defined as earnings attributable to Edison International shareholders less income or loss from discontinued operations, income resulting from allocation of losses to tax equity investor under the hypothetical liquidation at book value ("HLBV") accounting method and income or loss from significant discrete items that management does not consider representative of ongoing earnings, such as: exit activities, including sale of certain assets and other activities that are no longer continuing; asset impairments and certain tax, regulatory or legal settlements or proceedings.
SCE's first quarter 2015 core earnings were similar to the first quarter of 2014 as the delay in the 2015 CPUC GRC decision and lower income tax benefits were offset by higher FERC-related revenue from rate base growth and higher earnings on funds used during construction.
During the first quarter of 2015, SCE recognized revenue from CPUC activities largely based on 2014 authorized base revenue requirements included in customer rates. The revenue requirement ultimately adopted by the CPUC will be retroactive to January 1, 2015.

2



Consolidated non-core items included:
Impairment and other charges of $231 million ($96 million after-tax) in the first quarter of 2014 related to the San Onofre OII Settlement Agreement (as discussed below). For further information, see "—San Onofre Proceedings, Recoveries, and Decommissioning."
A loss of $22 million for the first quarter of 2014 from revised estimates of the tax impact of a tax deconsolidation of EME from Edison International as originally contemplated prior to the EME Settlement. See 2014 Form 10-K, "Management Overview—Resolution of Uncertainty Related to EME in Bankruptcy."
Income of $5 million in the first quarter of 2015 related to losses allocated to tax equity investors under the HLBV accounting method. Edison International reflected in core earnings the operating results of the solar rooftop projects, related financings and the priority return to the tax equity investor. The losses allocated to the tax equity investor under HLBV accounting method results in income allocated to subsidiaries of Edison International, neither of which is due to the operating performance of the projects but rather due to the allocation of income tax attributes under the tax equity financing. Accordingly, Edison International has included the non-operating allocation of income as a non-core item. For further information on HLBV, see the 2014 Form 10-K, "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies."
2015 General Rate Case
As discussed in the 2014 10-K, SCE filed its original base rate revenue requirement request for its 2015 GRC in November 2013. The request was updated in January 2015 to $5.713 billion, which would be an $80 million increase over currently authorized base rate revenue. The updated base rate revenue requirement request also proposed post-test year increases in 2016 and 2017 of $286 million and $315 million, respectively. The CPUC has approved the establishment of a GRC memorandum account, which will make the 2015 revenue requirement ultimately adopted by the CPUC effective as of January 1, 2015. SCE cannot predict the revenue requirement the CPUC will ultimately authorize or forecast the timing of a final decision.
Labor Contract Negotiation
Approximately 3,900 of SCE's full-time employees are covered by collective bargaining agreements with the International Brotherhood of Electrical Workers ("IBEW"). The IBEW collective bargaining agreements expired on December 31, 2014 and are currently under negotiation. The parties have agreed to allow the expired agreements to remain in force during ongoing negotiations, subject to either party's right to terminate the agreement on 120 days written notice. SCE has made proposals to IBEW that include, among other things, pay increases. To date, the parties have not reached an agreement and there is no assurance that the parties will be able to do so.
Capital Program
During the first quarter of 2015 SCE's capital expenditures were primarily on projects designed for maintaining reliability and expanding the capability of SCE's transmission and distribution system; and upgrading and constructing new transmission lines and substations for system reliability and increased access to renewable energy. Total capital expenditures (including accruals) were $825 million and $684 million for the first three months of 2015 and 2014, respectively.
SCE has reduced its capital expenditures forecast for 2015 2017 by approximately $325 million to be in the range of $11.5 billion to $13.1 billion, including $3.6 billion to $4.1 billion for 2015. The update reflects a reduction in capital expenditures related to the Coolwater-Lugo Transmission Project due to the CAISO request for suspension of the CPUC proceeding for the project and revisions to the timing of capital spending (for more information, see "—Liquidity and Capital Resources—SCE—Capital Investment Plan"). Actual capital spending will be affected by: changes in regulatory, environmental and engineering design requirements; permitting and project delays; cost and availability of labor, equipment and materials; and other factors.
San Onofre Proceedings, Recoveries, and Decommissioning
As discussed in the 2014 Form 10-K, in November 2014, the CPUC approved the San Onofre OII Settlement Agreement that SCE had entered into with TURN, the ORA, SDG&E, the Coalition of California Utility Employees, and Friends of the Earth. The San Onofre OII Settlement Agreement resolved the CPUC's OII and related proceedings regarding the Steam Generator Replacement Project at San Onofre and the related outage and subsequent shutdown of San Onofre. The San Onofre OII Settlement Agreement does not affect proceedings related to recoveries from third parties described below, but does describe how shareholders and customers will share any potential recoveries.

3



A federal lawsuit challenging the CPUC's authority to permit rate recovery of San Onofre costs and an application to the CPUC for rehearing of its decision approving the San Onofre OII Settlement Agreement were filed in November and December 2014, respectively. On April 16, 2015, a ruling was issued dismissing the federal lawsuit with prejudice.
In February 2015, SCE filed in the OII proceeding a Late-Filed Notice of Ex Parte Communication regarding a meeting in March 2013 between an SCE senior executive and the president of the CPUC, both of whom have since retired from their respective positions. In response, the Alliance for Nuclear Responsibility, one of the intervenors in the OII, filed an application requesting that the CPUC institute an investigation into whether sanctions should be imposed on SCE in connection with the ex parte communication. The application requests that the CPUC order SCE to produce all ex parte communications between SCE and the CPUC or its staff since January 31, 2012 and all internal SCE unprivileged communications that discuss such ex parte communications.
On April 14, 2015, the OII ALJs ordered SCE to produce unprivileged documents pertaining to oral and written communications regarding the possible settlement of the OII proceeding between any SCE employee and CPUC decision makers. SCE's response is due on April 29, 2015.
On April 17, 2015, ORA and TURN issued press releases asking the CPUC to impose penalties on SCE in connection with the ex parte communication. ORA recommended penalties in the amount of $648 million, representing ORA's calculation of the difference in ratepayer value between ORA's initial negotiating position in the SONGS OII and the approved settlement. TURN did not recommend a penalty amount. Neither party asked the CPUC to reopen the settlement. TURN stated that, based on SCE's response to the OII ALJs' April 14, 2015 order, it may seek a reopening of the OII proceeding. On April 27, 2015, the Alliance for Nuclear Responsibility filed a petition to modify the CPUC’s decision approving the San Onofre OII Settlement Agreement due to the ex parte communication. The petition seeks the reversal of the decision approving the San Onofre OII Settlement Agreement and reinstatement of the OII proceeding.
SCE cannot predict the outcome of these proceedings. For further discussion of NRC Proceedings and Third-Party Recoveries, including claims against MHI and under the NEIL property damage insurance, see "Notes to Consolidated Financial Statements—Note 11. Commitments and Contingencies—Contingencies—San Onofre Related Matters."
Rate Impacts
Due to the implementation of the San Onofre OII Settlement Agreement as of December 31, 2014, customers were refunded approximately $540 million through a reduction in SCE's ERRA undercollection ($1.03 billion at December 31, 2014). At March 31, 2015, SCE's ERRA undercollection decreased to $683 million primarily due to lower power and gas prices experienced in 2015 relative to forecasted amounts. The ERRA undercollection is expected to continue to decrease from recovery of prior year undercollections through implementation of the 2015 ERRA forecast proceeding. In addition, the ERRA undercollection is expected to decrease by approximately $340 million if the CPUC approves SCE's request to classify the majority of costs incurred at San Onofre since June 7, 2013 as decommissioning costs and provide reimbursement from SCE's nuclear decommissioning trust. These decreases will be impacted by over/undercollection of purchased power and fuel costs during 2015, including changes in natural gas and power prices.
For further information on 2015 ERRA forecast application, see "Liquidity—Regulatory Proceedings—ERRA Forecast Filing – 2015" in the year-ended 2014 MD&A.
Decommissioning
As discussed in the 2014 Form 10-K, SCE decided to permanently retire and decommission San Onofre Units 2 and 3 on June 6, 2013. For further information about the decommissioning cost estimates, see the 2014 Form 10-K under the headings, "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—Nuclear Decommissioning and Asset Retirement Obligation" and "Management Overview—Permanent Retirement of San Onofre and San Onofre OII Settlement" in the year-ended 2014 MD&A.
SCE has nuclear decommissioning trust funds for San Onofre Units 2 and 3 of $3.5 billion as of March 31, 2015. If the decommissioning cost estimate and assumptions regarding trust performance do not change, SCE believes that future contributions to the trust funds will not be necessary. The CPUC must issue an order granting approval for withdrawal of decommissioning trust funds.
Decommissioning costs incurred in 2013 and 2014 were recorded as operations and maintenance expenses pending the CPUC decision on access to the trusts for reimbursement. Accordingly, such costs were recovered through GRC revenues. Costs incurred for 2013 have been found reasonable under the San Onofre OII Settlement Agreement. The CPUC will conduct a reasonableness review for 2014 costs and years going forward. In March 2015, SCE requested that the CPUC

4



permit access to the nuclear decommissioning trusts for reimbursement of approximately $340 million in 2013 and 2014 Units 2 and 3 decommissioning costs. Under the San Onofre OII Settlement Agreement, any recoveries of 2013 and 2014 decommissioning costs from the nuclear decommissioning trusts must be refunded to customers through ERRA.
Beginning in 2015, SCE must fund decommissioning costs (recorded as a reduction of SCE's asset retirement obligation) until the CPUC approves SCE's request to access the trust funds. SCE expects that the CPUC would approve access to the trust in 2015. SCE's share of the decommissioning costs recorded during the first quarter were approximately $32 million and are estimated to be approximately $183 million for the remainder of 2015.
Depending on the ultimate interpretation of IRS regulations that address the taxation of a qualified nuclear decommissioning trust, SCE may also be restricted from withdrawing amounts from the qualified decommissioning trusts to pay for independent spent fuel storage installation ("ISFSI") where SCE is seeking, or plans to seek, recovery of the ISFSI costs in litigation against the DOE. SCE's share of ISFSI costs for 2015 (included in the above 2015 decommissioning costs estimate) are currently estimated to be approximately $28 million.
RESULTS OF OPERATIONS
Southern California Edison Company
SCE's results of operations are derived mainly through two sources:
Utility earning activities – representing revenue authorized by the CPUC and FERC which is intended to provide SCE a reasonable opportunity to recover its costs and earn a return on its net investment in generation, transmission and distribution assets. The annual revenue requirements are comprised of authorized operation and maintenance costs, depreciation, taxes and a return consistent with the capital structure. Also, included in utility earnings activities are revenue or penalties related to incentive mechanisms, other operating revenue, and regulatory charges or disallowances.
Utility cost-recovery activities – representing CPUC- and FERC-authorized balancing accounts which allow for recovery of specific project or program costs, subject to reasonableness review or compliance with upfront standards. Utility cost-recovery activities include rates which provide recovery, subject to reasonableness review of, among other things, fuel costs, purchased power costs, public purpose related-program costs (including energy efficiency and demand-side management programs) and certain operation and maintenance expenses.
The following table is a summary of SCE's results of operations for the periods indicated.
 
Three months ended March 31, 2015
Three months ended March 31, 2014
(in millions)
Utility
Earning
Activities
Utility
Cost-
Recovery
Activities
Total
Consolidated
Utility
Earning
Activities
Utility
Cost-
Recovery
Activities
Total
Consolidated
Operating revenue
$
1,563

$
945

$
2,508

$
1,550

$
1,374

$
2,924

Purchased power and fuel

786

786


1,143

1,143

Operation and maintenance
462

159

621

482

231

713

Depreciation, decommissioning and amortization
463


463

410


410

Property and other taxes
88


88

85


85

Impairment and other charges



231


231

Total operating expenses
1,013

945

1,958

1,208

1,374

2,582

Operating income
550


550

342


342

Interest expense
(136
)

(136
)
(136
)

(136
)
Other income and expenses
26


26

16


16

Income before income taxes
440


440

222


222

Income tax expense (benefit)
107


107

(12
)

(12
)
Net income
333


333

234


234

Preferred and preference stock dividend requirements
28


28

26


26

Net income available for common stock
$
305

$

$
305

$
208

$

$
208

Core earnings1
 
 
$
305

 
 
$
304

Non-core earnings
 
 

 
 
(96
)
Total SCE GAAP earnings
 
 
$
305

 
 
$
208

1 
See use of non-GAAP financial measures in "Management Overview—Highlights of Operating Results."

5



Utility Earning Activities
During the first quarter of 2015, SCE recognized revenue from CPUC activities largely based on 2014 authorized base
revenue requirements included in customer rates. SCE deferred $36 million of the 2014 authorized base revenue requirement allocated to the first quarter related to incremental repair deductions pending the outcome of the 2015 GRC. The revenue deferral did not affect net income as the reduction in revenue was offset by lower income taxes. The amount of the deferred revenue was equal to the revenue requirement for flow-through tax benefits for repair deductions recorded during the first quarter of 2015 in excess of the pro rata amounts reflected in SCE's January 2015 authorized revenue requirement request (incremental repair deductions). The CPUC has authorized the establishment of a GRC memorandum account, which will make the 2015 revenue requirement ultimately adopted by the CPUC effective as of January 1, 2015. Recognition of the revenue for the period January 1, 2015 through the date of a final decision, as well as any delays in certain expenditures and changes in authorized treatment of specific costs, will impact the timing of earnings in 2015. Accordingly, quarterly earnings in 2015 will not be comparable to the same periods in 2014 (see "Management Overview—2015 General Rate Case" for further discussion).

Utility earning activities were primarily affected by the following:
Higher operating revenue of $13 million primarily due to the following:
An increase in FERC-related revenue of $35 million primarily related to rate base growth and higher operating costs.
A decrease in CPUC-related revenue of $25 million primarily due to the revenue deferral of $36 million, as discussed above, partially offset by a net increase in San Onofre-related revenue of $9 million due to the implementation of the San Onofre OII Settlement Agreement. Revenue for San Onofre during the first quarter of 2015 primarily related to recovery of amortization of the regulatory asset and authorized return as provided by the San Onofre Settlement Agreement compared to revenue during the first quarter of 2014 related to recovery of San Onofre's cost of service. See "Management Overview—San Onofre Proceedings, Recoveries, and Decommissioning" above for more information.
Lower operation and maintenance expense of $20 million primarily due to San Onofre-related expense of $26 million in the first quarter of 2014. Beginning January 1, 2015, expense related to San Onofre has been classified as decommissioning costs and recorded as a reduction to SCE's asset retirement obligation.
Higher depreciation, decommissioning and amortization expense of $53 million primarily due to San Onofre-related expense of $32 million in 2015 related to the amortization of the regulatory asset and a $20 million increase in depreciation primarily related to transmission and distribution investments.
Impairment and other charges of $231 million in the first quarter of 2014 related to the San Onofre OII Settlement Agreement. For further information, see "Management Overview—San Onofre Proceedings, Recoveries, and Decommissioning."
Higher other income and expenses of $10 million primarily due to higher AFUDC equity income related to higher rates and higher construction work in progress balances in 2015.
Higher income taxes of $119 million primarily due to income tax benefits and lower pre-tax income in 2014 due to the San Onofre Settlement Agreement. See "—Income Taxes" below for more information.
Utility Cost-Recovery Activities
Utility cost-recovery activities were primarily affected by the following:
Lower purchased power and fuel of $357 million primarily driven by lower power and gas prices experienced in 2015 relative to 2014 and reduced customer sales from warmer weather in the first quarter of 2015 compared to the same period in 2014.
Lower operation and maintenance expense of $72 million primarily due to lower spending on various public purpose programs, a decrease in transmission access charges and lower pension expenses.
Supplemental Operating Revenue Information
SCE's retail billed and unbilled revenue (excluding wholesale sales and balancing account overcollections/undercollections) was $2.6 billion and $2.3 billion for the three months ended March 31, 2015 and, 2014, respectively. The increase is primarily due to the implementation of the 2014 ERRA rate increase in June 2014.

6



Income Taxes
SCE's income tax provision increased by $119 million during the first quarter of 2015 compared to same period in 2014. The effective tax rates were 24.3% and (5.4)% for the three months ended March 31, 2015 and 2014, respectively. The effective tax rate increase was primarily caused by income tax benefits recorded in 2014 due to the San Onofre Settlement Agreement.
The CPUC requires flow-through ratemaking treatment for the current tax benefit arising from certain property-related and other temporary differences, which reverse over time. The accounting treatment for these temporary differences results in recording regulatory assets and liabilities for amounts that would otherwise be recorded to deferred income tax expense.
See "Notes to Consolidated Financial Statements—Note 7. Income Taxes" for a reconciliation of the federal statutory rate of 35% to the effective income tax rates and "Management Overview—San Onofre Proceedings, Recoveries, and Decommissioning" above for more information.
Edison International Parent and Other
Results of operations for Edison International Parent and Other include amounts from other Edison International subsidiaries that are not significant as a reportable segment, as well as intercompany eliminations.
Income from Continuing Operations
The following table summarizes the results of Edison International Parent and Other:
 
Three months ended March 31,
(in millions)
2015
 
2014
Edison Energy and subsidiaries
$
2

 
$
(2
)
Edison Mission Group and subsidiaries
3

 
1

Corporate expenses and Other
(11
)
 
(9
)
Total Edison International Parent and Other
$
(6
)
 
$
(10
)
The loss from continuing operations of Edison International Parent and Other decreased $4 million for the three months ended March 31, 2015 compared to the same period in 2014 primarily due to income allocated to subsidiaries of Edison Energy under the HLBV accounting method that resulted in losses allocated to tax equity investors ($5 million after-tax). For further information, see the 2014 Form 10-K, "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies" and "Management Overview—Highlights of Operating Results." Results of Edison Mission Group for the three months ended March 31, 2015, were primarily due to the sale of interests in affordable housing projects of Edison Capital.
Loss from Discontinued Operations (Net of Tax)
Loss from discontinued operations, net of tax, was $22 million for the three months ended March 31, 2014. The 2014 loss from discontinued operations resulted from revised estimates of the tax impact of a tax deconsolidation of EME from Edison International as originally contemplated prior to the EME Settlement. See 2014 Form 10-K, "Management Overview—Resolution of Uncertainty Related to EME in Bankruptcy."
LIQUIDITY AND CAPITAL RESOURCES
Southern California Edison Company
SCE's ability to operate its business, fund capital expenditures, and implement its business strategy is dependent upon its cash flow and access to the capital markets. SCE's overall cash flows fluctuate based on, among other things, its ability to recover its costs in a timely manner from its customers through regulated rates, changes in commodity prices and volumes, collateral requirements, interest obligations and dividend payments to Edison International, and the outcome of tax and regulatory matters.
SCE expects to fund its 2015 obligations, capital expenditures and dividends through operating cash flows, and capital market financings of debt and preferred equity, as needed. SCE also has availability under its credit facilities to fund requirements.

7



Available Liquidity
At March 31, 2015, SCE had $2.33 billion available under its $2.75 billion multi-year revolving credit facility. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."
Debt Covenant
The debt covenant in SCE's credit facility limits its debt to total capitalization ratio to less than or equal to 0.65 to 1. At March 31, 2015, SCE's debt to total capitalization ratio was 0.45 to 1.
Capital Investment Plan
Transmission Projects
Coolwater-Lugo Transmission Project
The Coolwater-Lugo Project would provide additional 220 kV transmission capacity in the Kramer Junction and Lucerne Valley areas of San Bernardino County. The Coolwater-Lugo scope primarily consists of installing new transmission lines and new substation facilities. In March 2015, the CAISO filed comments with the CPUC stating that the Coolwater-Lugo project is not necessary to provide full capacity deliverability and that it would conduct additional studies, to be completed in the fourth quarter of 2015, to evaluate whether there is residual need for any elements of the Coolwater-Lugo project to interconnect any other generators. The CAISO requested that the CPUC suspend its approval proceeding for the project. On April 20, 2015, the ALJ assigned to the approval proceeding issued a proposed decision that would dismiss the approval proceeding but would allow SCE to apply for new approval if future studies determine that there is residual need for any elements of the project. SCE supports the suspension rather than the dismissal of the CPUC approval proceeding. The proposed decision is expected to be voted on at the May 21, 2015 CPUC meeting. SCE's capital expenditures forecast for the Coolwater-Lugo project were estimated to be $740 million, of which $584 million was for the 2015 2017 period and has been removed from the capital expenditure forecast. SCE has obtained FERC approval for abandoned plant cost recovery in the event the project is not completed.
Dividend Restrictions
The CPUC regulates SCE's capital structure which limits the dividends it may pay Edison International. SCE may make distributions to Edison International as long as the common equity component of SCE's capital structure remains at or above 48% on a 13-month weighted average basis. At March 31, 2015, SCE's 13-month weighted-average common equity component of total capitalization was 48.4% and the maximum additional dividend, taking into account declared but unpaid dividends, that SCE could pay to Edison International under this limitation was approximately $103 million, resulting in a restriction on net assets of approximately $13.33 billion.
In February 2015, SCE declared a dividend to Edison International of $147 million which will be paid in the second quarter of 2015. Future dividend amounts and timing of distributions are dependent upon several factors including the level of capital expenditures, operating cash flows and earnings.
Margin and Collateral Deposits
Certain derivative instruments, power procurement contracts and other contractual arrangements contain collateral requirements. Future collateral requirements may differ from the requirements at March 31, 2015, due to the addition of incremental power and energy procurement contracts with collateral requirements, if any, and the impact of changes in wholesale power and natural gas prices on SCE's contractual obligations.
Some of the power procurement contracts contain provisions that require SCE to maintain an investment grade credit rating from the major credit rating agencies. If SCE's credit rating were to fall below investment grade, SCE may be required to pay the liability or post additional collateral.

8



The table below provides the amount of collateral posted by SCE to its counterparties as well as the potential collateral that would be required as of March 31, 2015.
(in millions)
 
 
Collateral posted as of March 31, 20151
 
$
237

Incremental collateral requirements for power procurement contracts resulting from a potential downgrade of SCE's credit rating to below investment grade
 
33

Posted and potential collateral requirements2
 
$
270

1 
Net collateral provided to counterparties and other brokers consisted of $71 million of cash which was offset against net derivative liabilities on the consolidated balance sheets, $36 million of cash reflected in "Other current assets" on the consolidated balance sheets and $130 million in letters of credit and surety bonds.
2 
SCE's total posted and potential collateral requirements may increase by $47 million based on SCE's forward positions as of March 31, 2015 due to adverse market price movements over the remaining lives of the existing power procurement contracts using a 95% confidence level.
Edison International Parent and Other
Edison International Parent and Other's liquidity and its ability to pay operating expenses and dividends to common shareholders are dependent on dividends from SCE and access to bank and capital markets.
At March 31, 2015, Edison International Parent had $625 million available under its $1.25 billion multi-year revolving credit facility. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."
Edison International may finance working capital requirements to support operations and capital expenditures with commercial paper or other borrowings, subject to availability in the capital markets.
The debt covenant in Edison International Parent's credit facility requires a consolidated debt to total capitalization ratio of less than or equal to 0.65 to 1. At March 31, 2015, Edison International Parent's consolidated debt to total capitalization ratio was 0.49 to 1.
In August 2014, Edison International entered into an amendment of the EME Settlement Agreement that finalized the remaining matters related to the EME Settlement. Edison International is obligated to make payments of $204 million on September 30, 2015 and $214 million on September 30, 2016. Edison International intends to make these payments from realization of tax benefits or issuance of commercial paper or other borrowings. Edison International has net operating loss and tax credit carryforwards retained by EME which are available to offset future consolidated taxable income or tax liabilities. As a result of the extension of 50% bonus depreciation for qualifying property under the Tax Increase Prevention Act of 2014, realization of these tax benefits has been deferred (currently forecasted through 2018). The timing of realization of these tax benefits may be further delayed in the event of future extensions of bonus depreciation and the value of the net operating loss carryforwards could be permanently reduced in the event that tax reform decreases the current corporate tax rate.
Historical Cash Flows
Southern California Edison Company
 
Three months ended March 31,
(in millions)
2015
 
2014
Net cash provided by operating activities
$
966

 
$
588

Net cash provided by financing activities
320

 
445

Net cash used in investing activities
(1,288
)
 
(1,041
)
Net decrease in cash and cash equivalents
$
(2
)
 
$
(8
)

9



Net Cash Provided by Operating Activities
The following table summarizes major categories of net cash provided by operating activities as provided in more detail in SCE's consolidated statements of cash flows for the three months ended March 31, 2015 and 2014.
 
Three months ended
March 31,
 
Change in cash flows
(in millions)
2015
2014
 
2015/2014
Net income
$
333

$
234

 
 
Non cash items1
532

641

 
 
    Subtotal
$
865

$
875

 
$
(10
)
Changes in cash flow resulting from working capital2
(99
)
(31
)
 
(68
)
Derivative assets and liabilities, net
(10
)
(46
)
 
36

Regulatory assets and liabilities, net
193

(331
)
 
524

Other noncurrent assets and liabilities, net
17

121

 
(104
)
Net cash provided by operating activities
$
966

$
588

 
$
378

1 
Non cash items include depreciation, decommissioning and amortization, allowance for equity during construction, impairment and other charges, deferred income taxes and investment tax credits and other.
2 
Changes in working capital items include receivables, inventory, accounts payable, prepaid and accrued taxes, and other current assets and liabilities.
Changes in cash flows related to working capital items decreased in 2015 by $68 million. During the first quarter of 2015, SCE had higher payments for payroll and payroll related costs and income taxes. In addition, SCE had severance payments of $23 million and $10 million during the first quarters of 2015 and 2014, respectively, related to the workforce reductions.
Net cash provided by operating activities was also impacted by changes in regulatory assets and liabilities, including changes in over (under) collections of balancing accounts. SCE has a number of balancing accounts under CPUC decisions, which impact cash flows based on differences between timing of collection of amounts through rates and accrual expenditures. During the first quarters of 2015 and 2014, cash flows were impacted by the two principal balancing accounts:
ERRA under collections for fuel and purchased power decreased $345 million in the first quarter of 2015 due to lower power and gas prices experienced in 2015. ERRA under collections for fuel and purchased power increased $473 million in the first quarter of 2014 primarily due to higher purchased power than the forecast purchases included in customer rates in addition to higher power and gas prices.
The base rate revenue account ("BRRBA") tracks differences between amounts authorized by the CPUC in the GRC proceedings and amounts billed to customers. BRRBA under collections increased $72 million in the first quarter of 2015 primarily due to reduced customer sales from warmer weather during the first quarter of 2015. BRRBA over collections decreased $218 million in the first quarter of 2014 primarily due to refunds to customers of approximately $150 million, related to the sale of Four Corners in December 2013.
Cash flows provided by other noncurrent assets and liabilities were $17 million and $121 million in the first quarters of 2015 and 2014, respectively. Beginning in 2015, SCE paid $32 million of decommissioning costs (recorded as a reduction of SCE's asset retirement obligation). In addition, net cash provided by operating activities of SCE's nuclear decommissioning trusts were $67 million lower in 2015.

10



Net Cash Provided by Financing Activities
The following table summarizes cash provided by financing activities for the three months ended March 31, 2015 and 2014. Issuances of debt are discussed in "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements—Long-Term Debt."
 
Three months ended March 31,
(in millions)
2015
 
2014
Issuances of first and refunding mortgage bonds, net
$
1,287

 
$

Long-term debt matured or repurchased
(419
)
 
(2
)
Issuances of preference stock, net

 
270

Short-term debt financing, net
(370
)
 
229

Payments of common stock dividends to Edison International
(147
)
 

Payments of preferred and preference stock dividends
(34
)
 
(30
)
Other
3

 
(22
)
Net cash provided by financing activities
$
320

 
$
445

Net Cash Used in Investing Activities
Cash flows used in investing activities are primarily due to capital expenditures and funding of nuclear decommissioning trusts. Capital expenditures were $1.3 billion and $939 million for the three months ended March 31, 2015 and 2014, respectively, primarily related to transmission, distribution and generation investments. Net purchases of nuclear decommissioning trust investments and other were $22 million and $102 million for the three months ended March 31, 2015 and 2014, respectively.
Nuclear Decommissioning Trusts
SCE's statement of cash flows includes activities of the Nuclear Decommissioning Trusts which are reflected in the following line items:
 
Three months ended March 31,
(in millions)

2015
 
2014
Net cash provided by operating activities:
   Nuclear decommissioning trusts
$
29

 
$
96

Net cash flow from investing activities:
   Proceeds from sale of investments
2,853

 
1,502

   Purchases of investments
(2,889
)
 
(1,603
)
Net cash impact
$
(7
)
 
$
(5
)
Net cash provided by operating activities of the nuclear decommissioning trusts relate to interest and dividends less administrative expenses, taxes and decommissioning costs. Such activities represent the source (use) of the funds for investing activities. The net cash impact represents the contributions made by SCE to the nuclear decommissioning trusts. In future periods, SCE expects decommissioning costs of San Onofre to increase significantly. Such amounts will be reflected as a decrease in SCE net cash provided by operating activities and will be funded from sales of investments of the nuclear decommissioning trusts once approved by the CPUC. Decommissioning costs incurred prior to CPUC approval will be funded by SCE and are reflected as cash flow used by operating activities. See "Notes to Consolidated Financial Statements—Note 9. Other Investments" for further information.

11



Edison International Parent and Other
The table below sets forth condensed historical cash flow from operations for Edison International Parent and Other.
 
Three months ended March 31,
(in millions)
2015
 
2014
Net cash used in operating activities
$
(2
)
 
$
(23
)
Net cash (used in) provided by financing activities
(7
)
 
35

Net cash used in investing activities
(6
)
 
(1
)
Net (decrease) increase in cash and cash equivalents
$
(15
)
 
$
11

Net Cash Used in Operating Activities
Net cash used in operating activities increased $21 million for the first quarter of 2015 compared to 2014 due to the timing of payments and receipts relating to interest, operating costs and income taxes.
Net Cash (Used in) Provided by Financing Activities
Net cash (used in) provided by financing activities were as follows:
 
Three months ended March 31,
(in millions)
2015
 
2014
Dividends paid to Edison International common shareholders
$
(136
)
 
$
(116
)
Dividends received from SCE
147

 

Payment for stock-based compensation
(94
)
 
(86
)
Receipt from stock option exercises
54

 
47

Debt financing, net1
15

 
172

Other
7

 
18

Net cash (used in) provided by financing activities
$
(7
)
 
$
35

1  
Includes $9 million debt financing for Edison Energy, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements—Project Financing."
Contingencies
SCE has contingencies related to San Onofre Related Matters, Nuclear Insurance, Wildfire Insurance and Spent Nuclear Fuel which are discussed in "Notes to Consolidated Financial Statements—Note 11. Commitments and Contingencies."
Environmental Remediation
As of March 31, 2015, SCE had identified 19 material sites for remediation and recorded an estimated minimum liability of $116 million. SCE expects to recover 90% of its remediation costs at certain sites. See "Notes to Consolidated Financial Statements—Note 11. Commitments and Contingencies" for further discussion.
MARKET RISK EXPOSURES
Edison International's and SCE's primary market risks include fluctuations in interest rates, commodity prices and volumes, and counterparty credit. Fluctuations in interest rates can affect earnings and cash flows. Fluctuations in commodity prices and volumes and counterparty credit losses may temporarily affect cash flows, but are not expected to affect earnings due to expected recovery through regulatory mechanisms. Derivative instruments are used, as appropriate, to manage market risks including market risks of SCE's customers. For a further discussion of market risk exposures, including commodity price risk, credit risk and interest rate risk, see "Notes to Consolidated Financial Statements—Note 6. Derivative Instruments" and "—Note 4. Fair Value Measurements."


12



Commodity Price Risk
The fair value of outstanding derivative instruments used to mitigate exposure to commodity price risk was a net liability of $986 million and $927 million at March 31, 2015 and December 31, 2014 respectively. For further discussion of fair value measurements and the fair value hierarchy, see "Notes to Consolidated Financial Statements—Note 4. Fair Value Measurements."
Credit Risk
Credit risk exposure from counterparties for power and gas trading activities is measured as the sum of net accounts receivable (accounts receivable less accounts payable) and the current fair value of net derivative assets (derivative assets less derivative liabilities) reflected on the consolidated balance sheets. SCE enters into master agreements which typically provide for a right of setoff. Accordingly, SCE's credit risk exposure from counterparties is based on a net exposure under these arrangements. SCE manages the credit risk on the portfolio for both rated and non-rated counterparties based on credit ratings using published ratings of counterparties and other publicly disclosed information, such as financial statements, regulatory filings, and press releases, to guide it in the process of setting credit levels, risk limits and contractual arrangements, including master netting agreements.
As of March 31, 2015, the amount of balance sheet exposure as described above broken down by the credit ratings of SCE's counterparties, was as follows:
 
March 31, 2015
(in millions)
Exposure2
 
Collateral
 
Net Exposure
S&P Credit Rating1
 
 
 
 
 
A or higher
$
297

 
$

 
$
297

Not rated3
10

 
(5
)
 
5

Total
$
307

 
$
(5
)
 
$
302

1 
SCE assigns a credit rating based on the lower of a counterparty's S&P or Moody's rating. For ease of reference, the above table uses the S&P classifications to summarize risk, but reflects the lower of the two credit ratings.
2 
Exposure excludes amounts related to contracts classified as normal purchases and sales and non-derivative contractual commitments that are not recorded on the consolidated balance sheets, except for any related net accounts receivable.
3 
The exposure in this category relates to long-term power purchase agreements. SCE's exposure is mitigated by regulatory treatment.
CRITICAL ACCOUNTING ESTIMATES AND POLICIES
For a complete discussion on Edison International's and SCE's critical accounting policies, see "Critical Accounting Estimates and Policies" in the year-ended 2014 MD&A.
NEW ACCOUNTING GUIDANCE
New accounting guidance is discussed in "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—New Accounting Guidance."
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information responding to Item 3 is included in the MD&A under the heading "Market Risk Exposures" and is incorporated herein by reference.

13



FINANCIAL STATEMENTS
Consolidated Statements of Income

Edison International
 


 

 

 
Three months ended March 31,
(in millions, except per-share amounts, unaudited)

 
2015

2014
Total operating revenue

 
$
2,512


$
2,926

Purchased power and fuel

 
786


1,143

Operation and maintenance

 
636


726

Depreciation, decommissioning and amortization

 
463


410

Property and other taxes
 
 
89

 
85

Impairment and other charges

 


231

Total operating expenses

 
1,974


2,595

Operating income

 
538


331

Interest and other income

 
39


23

Interest expense

 
(143
)

(141
)
Other expenses

 
(10
)

(8
)
Income from continuing operations before income taxes

 
424


205

Income tax expense (benefit)

 
106


(19
)
Income from continuing operations

 
318


224

Loss from discontinued operations, net of tax

 


(22
)
Net income

 
318


202

Preferred and preference stock dividend requirements of utility

 
28


26

Other noncontrolling interests
 
 
(9
)
 

Net income attributable to Edison International common shareholders

 
$
299


$
176

Amounts attributable to Edison International common shareholders:

 



Income from continuing operations, net of tax

 
$
299


$
198

Loss from discontinued operations, net of tax

 


(22
)
Net income attributable to Edison International common shareholders

 
$
299


$
176

Basic earnings (loss) per common share attributable to Edison International common shareholders:

 



Weighted-average shares of common stock outstanding

 
326


326

Continuing operations

 
$
0.92


$
0.61

Discontinued operations

 


(0.07
)
Total

 
$
0.92


$
0.54

Diluted earnings (loss) per common share attributable to Edison International common shareholders:

 



Weighted-average shares of common stock outstanding, including effect of dilutive securities

 
329


329

Continuing operations

 
$
0.91


$
0.61

Discontinued operations

 


(0.07
)
Total

 
$
0.91


$
0.54

Dividends declared per common share

 
$
0.4175


$
0.3550


The accompanying notes are an integral part of these consolidated financial statements.

14




Consolidated Statements of Comprehensive Income
 
 
Edison International
 
 
 
 
 
 
 
 
Three months ended March 31,
(in millions, unaudited)
 
 
2015
 
2014
Net income
 
 
$
318

 
$
202

Other comprehensive (loss) income, net of tax:
 
 
 
 
 
Pension and postretirement benefits other than pensions:
 
 
 
 
 
Net loss arising during the period plus amortization included in net income
 
 
(1
)
 
2

Other comprehensive (loss) income, net of tax
 
 
(1
)
 
2

Comprehensive income
 
 
317

 
204

Less: Comprehensive income attributable to noncontrolling interests
 
 
19

 
26

Comprehensive income attributable to Edison International
 
 
$
298

 
$
178



The accompanying notes are an integral part of these consolidated financial statements.

15



Consolidated Balance Sheets
Edison International
 






(in millions, unaudited)
March 31,
2015

December 31,
2014
ASSETS
 

 
Cash and cash equivalents
$
115


$
132

Receivables, less allowances of $67 and $68 for uncollectible accounts at respective dates
752


790

Accrued unbilled revenue
636


632

Inventory
290


281

Derivative assets
94


102

Regulatory assets
1,152


1,254

Deferred income taxes
359


452

Other current assets
382


376

Total current assets
3,780


4,019

Nuclear decommissioning trusts
4,896


4,799

Other investments
217


207

Total investments
5,113


5,006

Utility property, plant and equipment, less accumulated depreciation and amortization of $8,372 and $8,132 at respective dates
33,249


32,859

Nonutility property, plant and equipment, less accumulated depreciation of $78 and $76 at respective dates
123


122

Total property, plant and equipment
33,372


32,981

Derivative assets
212


219

Regulatory assets
7,737


7,612

Other long-term assets
364


349

Total long-term assets
8,313


8,180























































Total assets
$
50,578


$
50,186



The accompanying notes are an integral part of these consolidated financial statements.

16



Consolidated Balance Sheets

Edison International
 


 

 
(in millions, except share amounts, unaudited)

March 31,
2015

December 31,
2014
LIABILITIES AND EQUITY

 

 
Short-term debt

$
936


$
1,291

Current portion of long-term debt

504


504

Accounts payable

1,203


1,580

Accrued taxes

118


81

Customer deposits

228


221

Derivative liabilities

185


196

Regulatory liabilities

435


401

Other current liabilities

962


1,205

Total current liabilities

4,571


5,479

Long-term debt

11,133


10,234

Deferred income taxes and credits

7,415


7,313

Derivative liabilities

1,107


1,052

Pensions and benefits

2,176


2,155

Asset retirement obligations

2,824


2,821

Regulatory liabilities

5,972


5,889

Other deferred credits and other long-term liabilities

2,279


2,255

Total deferred credits and other liabilities

21,773


21,485

Total liabilities

37,477


37,198

Commitments and contingencies (Note 11)






Redeemable noncontrolling interest
 
3

 
6

Common stock, no par value (800,000,000 shares authorized; 325,811,206 shares issued and outstanding at respective dates)

2,460


2,445

Accumulated other comprehensive loss

(59
)

(58
)
Retained earnings

8,675


8,573

Total Edison International's common shareholders' equity

11,076


10,960

Noncontrolling interests – preferred and preference stock of utility

2,022


2,022

Total equity

13,098


12,982






















Total liabilities and equity

$
50,578


$
50,186



The accompanying notes are an integral part of these consolidated financial statements.

17



Consolidated Statements of Cash Flows

 
Edison International
 


 



 
Three months ended March 31,
(in millions, unaudited)

 
2015

2014
Cash flows from operating activities:

 
 

 
Net income

 
$
318


$
202

Less: loss from discontinued operations

 


(22
)
Income from continuing operations

 
318


224

Adjustments to reconcile to net cash provided by operating activities:

 


 
Depreciation, decommissioning and amortization

 
485


432

Allowance for equity during construction

 
(21
)

(13
)
Impairment and other charges

 


231

Deferred income taxes and investment tax credits

 
72


(6
)
Other

 
5


4

Changes in operating assets and liabilities:

 


 
Receivables

 
31


112

Inventory

 
(10
)

(12
)
Accounts payable

 
63


(63
)
Prepaid and accrued taxes
 
 
38

 
65

Other current assets and liabilities

 
(229
)

(145
)
Derivative assets and liabilities, net

 
(10
)

(46
)
Regulatory assets and liabilities, net

 
193


(331
)
Nuclear decommissioning trusts
 
 
29

 
96

Other noncurrent assets and liabilities

 


17

Net cash provided by operating activities

 
964


565

Cash flows from financing activities:

 
 

 
Long-term debt issued, net of discount and issuance costs of $13 and $1 at respective dates

 
1,287


(1
)
Long-term debt matured or repurchased

 
(419
)

(2
)
Preference stock issued, net

 


270

Short-term debt financing, net

 
(355
)

401

Cash contribution from redeemable noncontrolling interest
 
 
6

 

Dividends to noncontrolling interests

 
(34
)

(30
)
Dividends paid

 
(136
)

(116
)
Other
 
 
(36
)
 
(42
)
Net cash provided by financing activities

 
313


480

Cash flows from investing activities:

 
 

 
Capital expenditures

 
(1,268
)

(940
)
Proceeds from sale of nuclear decommissioning trust investments

 
2,853


1,502

Purchases of nuclear decommissioning trust investments

 
(2,889
)

(1,603
)
Other

 
10


(1
)
Net cash used in investing activities

 
(1,294
)

(1,042
)
Net (decrease) increase in cash and cash equivalents

 
(17
)

3

Cash and cash equivalents at beginning of period

 
132


146

Cash and cash equivalents at end of period

 
$
115


$
149


The accompanying notes are an integral part of these consolidated financial statements.

18



Consolidated Statements of Income
 
Southern California Edison Company
 
 
 
 
 
 
 
 
 
 
Three months ended March 31,
(in millions, unaudited)
 
 
 
 
 
2015
 
2014
Operating revenue
 
 
 
 
 
$
2,508

 
$
2,924

Purchase power and fuel
 
 
 
 
 
786

 
1,143

Operation and maintenance
 
 
 
 
 
621

 
713

Depreciation, decommissioning and amortization
 
 
 
 
 
463

 
410

Property and other taxes
 
 
 
 
 
88

 
85

Impairment and other charges
 
 
 
 
 

 
231

Total operating expenses
 
 
 
 
 
1,958

 
2,582

Operating income
 
 
 
 
 
550

 
342

Interest and other income
 
 
 
 
 
33

 
23

Interest expense
 
 
 
 
 
(136
)
 
(136
)
Other expenses
 
 
 
 
 
(7
)
 
(7
)
Income before income taxes
 
 
 
 
 
440

 
222

Income tax expense (benefit)
 
 
 
 
 
107

 
(12
)
Net income
 
 
 
 
 
333

 
234

Less: Preferred and preference stock dividend requirements
 
 
 
 
 
28

 
26

Net income available for common stock
 
 
 
 
 
$
305

 
$
208


Consolidated Statements of Comprehensive Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended March 31,
(in millions, unaudited)
 
 
 
 
 
2015
 
2014
Net income
 
 
 
 
 
$
333

 
$
234

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
Pension and postretirement benefits other than pensions:
 
 
 
 
 
 
 
 
Amortization of net loss included in net income
 
 
 
 
 
1

 
1

Other comprehensive income, net of tax
 
 
 
 
 
1

 
1

Comprehensive income
 
 
 
 
 
$
334

 
$
235



The accompanying notes are an integral part of these consolidated financial statements.

19



Consolidated Balance Sheets
Southern California Edison Company
(in millions, unaudited)
 
March 31,
2015
 
December 31, 2014
ASSETS
 
 
 
 
Cash and cash equivalents
 
$
36

 
$
38

Receivables, less allowances of $67 and $68 for uncollectible accounts at respective dates
 
732

 
749

Accrued unbilled revenue
 
636

 
632

Inventory
 
282

 
275

Derivative assets
 
94

 
102

Regulatory assets
 
1,152

 
1,254

Other current assets
 
400

 
390

Total current assets
 
3,332

 
3,440

Nuclear decommissioning trusts
 
4,896

 
4,799

Other investments
 
164

 
158

Total investments
 
5,060

 
4,957

Utility property, plant and equipment, less accumulated depreciation of $8,372 and $8,132 at respective dates
 
33,249

 
32,859

Nonutility property, plant and equipment, less accumulated depreciation of $76 and $75 at respective dates
 
69

 
69

Total property, plant and equipment
 
33,318

 
32,928

Derivative assets
 
212

 
219

Regulatory assets
 
7,737

 
7,612

Other long-term assets
 
314

 
300

Total long-term assets
 
8,263

 
8,131

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
49,973

 
$
49,456


The accompanying notes are an integral part of these consolidated financial statements.

20



Consolidated Balance Sheets
Southern California Edison Company
(in millions, except share amounts, unaudited)
 
March 31,
2015
 
December 31, 2014
LIABILITIES AND EQUITY
 
 
 
 
Short-term debt
 
$
297

 
$
667

Current portion of long-term debt
 
300

 
300

Accounts payable
 
1,211

 
1,556

Accrued taxes
 
133

 
87

Customer deposits
 
228

 
221

Derivative liabilities
 
185

 
196

Regulatory liabilities
 
435

 
401

Deferred income taxes
 
278

 
209

Other current liabilities
 
965

 
1,183

Total current liabilities
 
4,032

 
4,820

Long-term debt
 
10,523

 
9,624

Deferred income taxes and credits
 
8,390

 
8,288

Derivative liabilities
 
1,107

 
1,052

Pensions and benefits
 
1,681

 
1,672

Asset retirement obligations
 
2,823

 
2,819

Regulatory liabilities
 
5,972

 
5,889

Other deferred credits and other long-term liabilities
 
2,013

 
2,010

Total deferred credits and other liabilities
 
21,986

 
21,730

Total liabilities
 
36,541

 
36,174

Commitments and contingencies (Note 11)
 


 


Common stock, no par value (560,000,000 shares authorized; 434,888,104 shares issued and outstanding at each date)
 
2,168

 
2,168

Additional paid-in capital
 
631

 
618

Accumulated other comprehensive loss
 
(27
)
 
(28
)
Retained earnings
 
8,590

 
8,454

Total common shareholder's equity
 
11,362

 
11,212

Preferred and preference stock
 
2,070

 
2,070

Total equity
 
13,432

 
13,282

Total liabilities and equity
 
$
49,973

 
$
49,456



The accompanying notes are an integral part of these consolidated financial statements.

21



Consolidated Statements of Cash Flows
Southern California Edison Company
 
 
Three months ended March 31,
(in millions, unaudited)
 
2015
 
2014
Cash flows from operating activities:
 
 
 
 
Net income
 
$
333

 
$
234

Adjustments to reconcile to net cash provided by operating activities:
 
 
 
 
Depreciation, decommissioning and amortization
 
483

 
432

Allowance for equity during construction
 
(21
)
 
(13
)
Impairment and other charges
 

 
231

Deferred income taxes and investment tax credits
 
67

 
(12
)
Other
 
3

 
3

Changes in operating assets and liabilities:
 
 
 
 
Receivables
 
18

 
111

Inventory
 
(7
)
 
(7
)
Accounts payable
 
52

 
(55
)
Prepaid and accrued taxes
 
43

 
54

Other current assets and liabilities
 
(205
)
 
(134
)
Derivative assets and liabilities, net
 
(10
)
 
(46
)
Regulatory assets and liabilities, net
 
193

 
(331
)
Nuclear decommissioning trusts
 
29


96

Other noncurrent assets and liabilities
 
(12
)
 
25

Net cash provided by operating activities
 
966

 
588

Cash flows from financing activities:
 
 
 
 
Long-term debt issued, net of discount and issuance costs of $13 for the three months ended March 31, 2015
 
1,287

 

Long-term debt matured or repurchased
 
(419
)
 
(2
)
Preference stock issued, net
 

 
270

Short-term debt financing, net
 
(370
)
 
229

Dividends paid
 
(181
)
 
(30
)
Other
 
3

 
(22
)
Net cash provided by financing activities
 
320

 
445

Cash flows from investing activities:
 
 
 
 
Capital expenditures
 
(1,266
)
 
(939
)
Proceeds from sale of nuclear decommissioning trust investments
 
2,853

 
1,502

Purchases of nuclear decommissioning trust investments
 
(2,889
)
 
(1,603
)
Other
 
14

 
(1
)
Net cash used in investing activities
 
(1,288
)

(1,041
)
Net decrease in cash and cash equivalents
 
(2
)
 
(8
)
Cash and cash equivalents, beginning of period
 
38

 
54

Cash and cash equivalents, end of period
 
$
36

 
$
46


The accompanying notes are an integral part of these consolidated financial statements.

22



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1.    Summary of Significant Accounting Policies
Organization and Basis of Presentation
Edison International is the parent holding company of Southern California Edison Company ("SCE"). SCE is an investor-owned public utility primarily engaged in the business of supplying and delivering electricity to an approximately 50,000 square mile area of southern California. Edison International is also the parent company of Edison Energy, a company that holds interests in subsidiaries that are engaged in competitive businesses related to the delivery or use of electricity. Such competitive business activities are currently not material to report as a separate business segment. These combined notes to the consolidated financial statements apply to both Edison International and SCE unless otherwise described. Edison International's consolidated financial statements include the accounts of Edison International, SCE and other wholly owned and controlled subsidiaries. References to Edison International refer to the consolidated group of Edison International and its subsidiaries. References to Edison International Parent and Other refer to Edison International Parent and its nonutility subsidiaries. SCE's consolidated financial statements include the accounts of SCE and its wholly owned and controlled subsidiaries. All intercompany transactions have been eliminated from the consolidated financial statements.
Edison International's and SCE's significant accounting policies were described in Note 1 of "Notes to Consolidated Financial Statements" included in the 2014 Form 10-K. This quarterly report should be read in conjunction with the financial statements and notes included in the 2014 Form 10-K.
In the opinion of management, all adjustments, consisting of recurring accruals, have been made that are necessary to fairly state the consolidated financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States of America for the periods covered by this quarterly report on Form 10-Q. The results of operations for the three-month period ended March 31, 2015 are not necessarily indicative of the operating results for the full year.
The December 31, 2014 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.
Revision to Consolidated Statements of Cash Flow
The consolidated statements of cash flows of Edison International and SCE for the three months ended March 31, 2014 were revised to correct an error in the amount of purchases of nuclear decommissioning trust investments and in the amount attributable to the nuclear decommissioning trusts in the operating activities section of the consolidated statements of cash flows. The revisions had no impact on the consolidated balance sheet, statements of income, comprehensive income, changes in equity or on the net change in cash and cash equivalents. Management believes the revisions do not have a material impact on the prior period financial statements. The following table presents the cash flow statement effects related to the revision for the three months ended March 31, 2014:
 
Edison International
 
SCE
(in millions)
As Reported
 
Adjustment
 
As Revised
 
As Reported
 
Adjustment
 
As Revised
Nuclear decommissioning trusts
$
29

 
$
67

 
$
96

 
$
29

 
$
67

 
$
96

Total cash provided by operating activities
498

 
67

 
565

 
521

 
67

 
588

Purchases of nuclear decommissioning trust investments
(1,536
)
 
(67
)
 
(1,603
)
 
(1,536
)
 
(67
)
 
(1,603
)
Total cash used in investing activities
(975
)
 
(67
)
 
(1,042
)
 
(974
)