Edison International · NYSE:EIX
Edison International — Corporate Update (May 2017)
48 slides from Edison International's corporate update, May 9, 2017
Slide 1: Business Update May 2017
May 9, 2017 Business Update May 2017 Exhibit 99.1
Slide 2: Forward-looking statements
May 9, 2017 1 Statements contained in this presentation about future performance, including, without limitation, operating results, capital expenditures, rate base growth, dividend policy, financial outlook, and other statements that are not purely historical, are forward-looking statements. These f
Slide 3: Table of Contents
May 9, 2017 2 Page New (N) or Updated (U) from February 2017 Business Update EIX Shareholder Value 3 SCE Highlights, SCE Long-Term Growth Drivers, Regulatory Model 4-6 U Capital Expenditures and Rate Base History and Forecast 7-9 2018 GRC Overview 10-12 N CPUC Cost of Capital 13 U Key Regulatory Pro
Slide 4: EIX Strategy Should Produce Superior Value
May 9, 2017 3 EIX Strategy Should Produce Superior Value Sustained Earnings and Dividend Growth Led by SCE Positioned for Transformative Change SCE Rate Base Growth Drives Earnings • 8.6% average annual rate base growth through 2020 at request level • SCE earnings should track rate base growth Const
Slide 5: SCE Highlights
May 9, 2017 4 One of the nation’s largest electric utilities • 15 million residents in service territory • 5 million customer accounts • 50,000 square-mile service area Significant infrastructure investment • 1.4 million power poles • 729,000 transformers • 119,000 miles of distribution and transmis
Slide 6: SCE Long-Term Growth Drivers
May 9, 2017 5 SCE Long-Term Growth Drivers Description Timeframe/Regulatory Process Sustained level of infrastructure investment required until equilibrium replacement rates achieved and then maintained • Ongoing - current and future GRCs Accelerate circuit upgrades, automation, communication, and a
Slide 7: SCE Decoupled Regulatory Model
May 9, 2017 6 SCE Decoupled Regulatory Model Decoupling of Regulated Revenues from Sales Major Balancing Accounts • Fuel • Purchased power • Energy efficiency • Pension expense Advanced Long-Term Procurement Planning Forward-looking Ratemaking • SCE earnings not affected by variability of retail ele
Slide 8: SCE Historical Rate Base and Core Earnings
May 9, 2017 7 SCE Historical Rate Base and Core Earnings Rate Base Core Earnings 7% 5% 2011 – 2016 CAGR ($ billions) Note: Recorded rate base, year-end basis. See SCE Core EPS Non-GAAP Reconciliations and Use of Non-GAAP Financial Measures. Since 2013, rate base excludes SONGS $18.8 $21.0 $21.1 $23.
Slide 9: SCE Capital Expenditure Forecast – Request Level
May 9, 2017 8 SCE Capital Expenditure Forecast – Request Level Note: Forecasted capital spending includes CPUC, FERC and other spending. See Capital Expenditure/Rate Base Detailed Forecast for further information, including potential investment excluded in forecasts. SCE currently sees 2017 capital
Slide 10: SCE Rate Base Forecast – Request Level
May 9, 2017 9 SCE Rate Base Forecast – Request Level CPUC • Rate base based on request levels from 2018 GRC and 2018 positive true-up from authorized to forecast 2017 rate base FERC • FERC rate base is approximately 19% of SCE’s rate base by 2020; includes Construction Work in Progress (CWIP) Other
Slide 11: 2018 GRC Overview
May 9, 2017 10 • 2018 GRC Application (A. 16-09-001) filed September 1, 2016 • Addresses CPUC jurisdictional revenue requirement for 2018-2020 Includes operating costs and capital investment Excludes CPUC jurisdictional costs such as fuel and purchased power, cost of capital and other potential
Slide 12: 2018 GRC Capital and Depreciation Requests
May 9, 2017 11 • Capital expenditures of $2.1 billion for grid modernization capital to support improved safety and reliability and increased levels of distributed energy resources (DER) Requested approval to establish memorandum account to facilitate $210 million of grid modernization capital exp
Slide 13: SCE Rate Base Forecast Comparison to ORA
May 9, 2017 12 SCE Rate Base Forecast Comparison to ORA – 2017-2020 ($ billions) 2016 2017 2018 2019 2020 4-year CAGR SCE’s Request Level Forecast $24.9 $26.2 $29.3 $32.0 $34.6 8.6% SCE’s Request Level Forecast at ORA Recommended Capital Spending Levels $24.9 $26.2 $28.6 $30.4 $32.2 6.6% Difference
Slide 14: CPUC Cost of Capital
May 9, 2017 13 3 4 5 6 7 10/1/12 10/1/13 10/1/14 10/1/15 10/1/16 10/1/17 10/1/18 10/1/19 R at e (% ) CPUC Cost of Capital CPUC Adjustment Mechanism Moody’s Baa Utility Index Spot Rate Moving Average (10/1/16 – 02/01/2017) = 4.60% 100 basis point +/- Deadband Starting Value – 5.00% Return on Equity (
Slide 15: SCE Key Regulatory Proceedings
May 9, 2017 14 SCE Key Regulatory Proceedings Proceeding Description Next Steps Key CPUC Proceedings 2018 General Rate Case (A. 16-09-001) Set CPUC base revenue requirement, capital expenditures and rate base for 2018-2020 Ongoing workshops and data requests; awaiting ALJ schedule; received ORA test
Slide 16: SCE Distribution System Investments
May 9, 2017 15 SCE Distribution System Investments 1. Other includes GRC energy storage, Charge Ready Phase I and mobile home pilot programs Distribution Trends • Continued focus on safety and reliability with infrastructure replacement representing 44% of total distribution capital spend, but not y
Slide 17: Energy Storage
May 9, 2017 16 Energy Storage Given counting rules, SCE has already met the aggregate 2016 targets CPUC Energy Storage Program Requirements: • Storage Rulemaking (R.10-12-007) established 1,325 MW target for IOUs by 2024 (580 MW SCE share; spread as biennial targets during 2014-20); ownership allowe
Slide 18: SCE Transportation Electrification Proposals
May 9, 2017 17 SCE Transportation Electrification Proposals On January 20, 2017, SCE filed with the CPUC a wide-ranging plan to increase electrification of cars, buses, medium- and heavy-duty trucks and industrial vehicles and equipment • SCE proposed 6 near-term, priority-review projects and 2 long
Slide 19: Transportation Electrification Overview
May 9, 2017 18 Transportation Electrification Overview California’s goals to reduce total GHG emissions by 40 percent from 1990 levels by 2030 is 42% from current levels • Recent Governor Order set a 2050 target of 80% below 1990 levels Many of California's policies to date focused on electric power
Slide 20: SCE Large Transmission Projects
May 9, 2017 19 SCE Large Transmission Projects 1. CPUC approved 2. FEIR issued and revised costs are being developed, expected Q2 3. Morongo Transmission holds an option to invest up to $400 million, or half of the estimated cost of the transmission facilities only, at the in-service date. If the op
Slide 21: 2017 Core Earnings Per Share Guidance
May 9, 2017 20 $4.05 $4.14(0.25)0.34 SCE 2017 EPS from Rate Base Forecast SCE Variances EIX Parent & Other EIX 2017 Core EPS Midpoint Guidance • O&M and financing benefits - $0.31 • Energy efficiency - $0.03 2017 Core Earnings Per Share Guidance – Building from SCE Rate Base • SCE authorized rate ba
Slide 22: SCE Operational Excellence
May 9, 2017 21 SCE Operational Excellence Top Quartile • Safety • Reliability • Customer service • Cost efficiency Optimize • Capital productivity • Purchased power cost High performing, continuous improvement culture Defining Excellence Measuring Excellence • Employee and public safety metrics • Sy
Slide 23: Responding to Industry Change
May 9, 2017 22 Responding to Industry Change • Public policy and large commercial customers prioritizing sustainability objectives • Innovation facilitating conservation and self-generation • Regulation supporting new forms of competition • Flattening domestic demand for electricity • Power grid of
Slide 24: Edison Energy
May 9, 2017 23 • Edison Energy is an advisory and services company with the capabilities to develop and integrate an array of energy solutions to help commercial and industrial customers improve management of their energy costs and risks in dealing with increasingly complex tariff and technology cho
Slide 25: EIX Annual Dividends Per Share
May 9, 2017 24 EIX Annual Dividends Per Share $0.80 $1.00 $1.08 $1.16 $1.22 $1.24 $1.26 $1.28 $1.30 $1.35 $1.42 $1.67 $1.92 $2.17 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Note: See Use of Non-GAAP Financial Measures Thirteen Years of Dividend Growth Target dividend growt
Slide 26: Appendix
May 9, 2017 25 Appendix
Slide 27: EIX and SCE Tax Reform
May 9, 2017 26 Key Reform Considerations Impact on Customer / Shareholder Comments No interest deductibility Negative Negative • Permanent increase in customer rates (top concern) • Costs passed through but lowers tax shield Lower tax rate (15%-20%) Positive Negative at EIX holding company • Lower c
Slide 28: SCE Historical Capital Expenditures
May 9, 2017 27 SCE Historical Capital Expenditures ($ billions) $3.9 $3.5 $4.0 $3.9 $3.5 2012 2013 2014 2015 2016
Slide 29: Capital Expenditure/Rate Base Detailed Forecast
May 9, 2017 28 Detailed Capital Expenditures at Request Level – 2016-2020 2016 (Actual) 2017 2018 2019 2020 Total Core Distribution1,2 $2.9 $3.0 $3.2 $3.2 $3.1 $15.4 Mobile Home Pilot Program - 0.1 - - - 0.1 Grid Modernization - 0.2 0.6 0.8 0.7 2.3 Subtotal Distribution $2.9 $3.3 $3.8 $4.0 $3.8 $17.
Slide 30: Distribution Power Grid of the Future
May 9, 2017 29 Distribution Power Grid of the Future One-Way Electricity Flow • System designed to distribute electricity from large central generating plants • Very few distributed energy resources • Voltage centrally maintained • Limited situational awareness and visualization tools for power grid
Slide 31: Grid Modernization Highlights
May 9, 2017 30 Computing intelligence inside electrical substations Future circuit designs integrate Distributed Energy Resources and increase flexibility The distribution system will require transformative technologies in planning, design, construction and operation Net benefits to customers includ
Slide 32: Grid Modernization Capital Spending and Objectives
May 9, 2017 31 $0.03 $0.18 $0.64 $0.75 $0.71 2016 (Actual) 2017 2018 2019 2020 Building next generation electric grid requires accelerating traditional Transmission and Distribution / Information Technology programs and investing in new capabilities • Increased capacity: Upgrade portions of the grid
Slide 33: Distributed Energy Resources (DER) Proceedings
May 9, 2017 32 Distributed Energy Resources (DER) Proceedings 2017 Activities • Utility incentive pilot, including a competitive solicitation framework and consultation with a stakeholder Distribution Planning Advisory Group • Regulatory approval of proposed pilot projects • Societal Cost Test • A s
Slide 34: SCE Customer Demand Trends
May 9, 2017 33 2016 29,141 41,565 7,056 4,645 1,776 84,183 1,794 85,977 4,417,340 565,222 10,445 46,133 21,233 133 22 5,060,528 38,076 23,091 SCE Customer Demand Trends Kilowatt-Hour Sales (millions of kWh) Residential Commercial Industrial Public authorities Agricultural and other Subtotal Resale T
Slide 35: California’s Energy Policy
May 9, 2017 34 California’s Energy Policy • On October 7, 2015, Governor Brown signed SB 350, which requires that 50 percent of energy sales to customers come from renewable power and a doubling of energy efficiency in existing buildings for California by 2030 Also requires Transportation Electrif
Slide 36: SCE 2017 Bundled Revenue Requirement
May 9, 2017 35 SCE 2017 Bundled Revenue Requirement Note: Rates in effect as of October 1, 2016. Represents bundled service which excludes Direct Access customers that do not receive generation services SCE Systemwide Average Rate History (¢/kWh) 2010 2011 2012 2013 2014 2015 2016 2017 14.3 14.1 14.
Slide 37: System Average Rate Historical Growth
May 9, 2017 36 9.7¢ 15.8¢ 8.0¢ 10.0¢ 12.0¢ 14.0¢ 16.0¢ 18.0¢ 20.0¢ 22.0¢ 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 Energy Crisis and return to normal cost of service rates Higher gas prices post-Katrina leads to higher rates with subsequent refund of over collection Delay in 2012 GRC leads t
Slide 38: Residential Rate Design OIR Decision
May 9, 2017 37 Residential Rate Design OIR Decision • CPUC Order Instituting Ratemaking R.12-06-013 comprehensively reviewed residential rate structure, including a future transition to time of use (TOU) rates • July 2015 CPUC Decision D.15-07-001 includes: Transition to 2 tiered rates by 2019 “
Slide 39: SCE Net Metering Rate Structure
May 9, 2017 38 SCE Net Metering Rate Structure NEM Rate Developments: • NEM allows residential customers to receive full-retail rate credit for exported generation and use these credits to offset energy purchased from the electric power company, leading to a cost-shift to non-NEM customers Through
Slide 40: Residential Solar Installations in SCE Territory
May 9, 2017 39 Note: NEM solar installations in SCE service territory include projects with solar PV only less than 1 MW Residential Solar Installations in SCE Territory July 1, 2017 • NEM customers will be required to take service under mandatory Time-of-Use rate • SCE is not expected to hit 5% NEM
Slide 41: SCE Rates and Bills Comparison
May 9, 2017 40 SCE Rates and Bills Comparison SCE’s average residential rates are above national average, but residential bills are below national average due to lower usage • SCE’s residential rates are above national average due, in part, to a cleaner fuel mix. Costs for low carbon energy are high
Slide 42: First Quarter Earnings Summary
May 9, 2017 41 Q1 2017 Q1 2016 Variance Basic Earnings Per Share (EPS)1 SCE $1.07 $0.90 $0.17 EIX Parent & Other 0.04 (0.04) 0.08 Basic EPS $1.11 $0.86 $0.25 Less: Non-Core Items SCE $ − $ − $ − EIX Parent & Other2 − 0.01 (0.01) Total Non-Core Items $ − $0.01 $(0.01) Core Earnings Per Share (EPS)1 S
Slide 43: MHI Award Accounting
May 9, 2017 42 MHI Award Accounting • On March 13, 2017, a decision was received from the International Chamber of Commerce International Court (ICC) regarding the MHI Arbitration • $47.1 million net proceeds received by SCE • CPUC will review the documentation of the final resolution of the MHI dis
Slide 44: SCE Annual Results of Operations
May 9, 2017 43 $6,305 — 1,977 1,915 334 — 4,226 2,079 (525) 64 1,618 507 1,111 113 $998 $5,180 4,266 913 — — — 5,179 1 (1) — — — — — $— $11,485 4,266 2,890 1,915 334 — 9,405 2,080 (526) 64 1,618 507 1,111 113 $998 (370) $1,368 SCE Annual Results of Operations • Earning activities – revenue authorize
Slide 45: 2016 Retrospectively Adjusted EPS by Quarter
May 9, 2017 44 2016 Retrospectively Adjusted EPS by Quarter 20161 Q4 Q3 Q2 Q1 Earnings (loss) per share attributable to Edison International Continuing Operations SCE $4.22 $1.01 $1.34 $0.98 $0.90 Edison International Parent & Other (0.23) (0.04) (0.05) (0.11) (0.04) Discontinued Operations 0.03 0.0
Slide 46: Earnings Non-GAAP Reconciliations
May 9, 2017 45 Earnings Non-GAAP Reconciliations Note: See Use of Non-GAAP Financial Measures. First quarter 2016 earnings was updated to reflect the implementation of the accounting standard for share-based payments effective January 1, 2016 ($ millions) Reconciliation of EIX GAAP Earnings to EIX C
Slide 47: SCE Core EPS Non-GAAP Reconciliations
May 9, 2017 46 SCE Core EPS Non-GAAP Reconciliations Basic EPS Non-Core Items Regulatory and tax items Write down, impairment and other charges Insurance recoveries Less: Total Non-Core Items Core EPS Reconciliation of SCE Basic Earnings Per Share to SCE Core Earnings Per Share 5% 5% $3.33 — — — — $
Slide 48: Use of Non-GAAP Financial Measures
May 9, 2017 47 Use of Non-GAAP Financial Measures Edison International's earnings are prepared in accordance with generally accepted accounting principles used in the United States. Management uses core earnings internally for financial planning and for analysis of performance. Core earnings are als