Edison International 10Q 2020 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	September 30, 2020
☐	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)

(P.O. Box 800)

Rosemead,

California

91770

Rosemead,

California

91770

(Address of principal executive offices)

(626)

302-2222

(626)

302-1212

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Edison International:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

EIX

NYSE

LLC

Southern California Edison Company: None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 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, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-12 of the Exchange Act.

Edison International

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller Reporting Company

Emerging growth company

☐

Southern California Edison Company

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller Reporting Company

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Edison International ☐ Southern California Edison 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 October 20, 2020:

Edison International

378,513,912 Shares

Southern California Edison Company

434,888,104 Shares

TABLE OF CONTENTS


				SEC Form 10-Q Reference Number
GLOSSARY							iv
FORWARD-LOOKING STATEMENTS							1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS							3	Part I, Item 2
	MANAGEMENT OVERVIEW					3
		Highlights of Operating Results			3
		Southern California Wildfires and Mudslides			4
		COVID-19			8
		Regulatory Proceedings			9
		Wildfire Mitigation and Wildfire Insurance Expenses			10
		Capital Program			11

	RESULTS OF OPERATIONS					12
	Southern California Edison Company					12
		Three months ended September 30 , 2020 versus September 30 , 2019			13
			Earning Activities	13
			Cost-Recovery Activities	14
		Nine months ended September 30, 2020 versus September 30, 2 019			15
			Earnings Activities	15
			Cost-Recovery Activities	16
		Supplemental Operating Revenue Information			17
		Income Taxes			17
	Edison International Parent and Other					17
		Loss from Operations			17
	LIQUIDITY AND CAPITAL RESOURCES					18
	Southern California Edison Company					18
		Available Liquidity			19
		Capital Investment Plan			20

		SCE Dividends			20
		Margin and Collateral Deposits			21
		Decommissioning of San Onofre			22
	Edison International Parent and Other					22
	Historical Cash Flows					23
		Southern California Edison Company			23


		Edison International Parent and Other	27
	Contingencies			27
	MARKET RISK EXPOSURES			28
	Commodity Price Risk			28
	Credit Risk			28
	CRITICAL ACCOUNTING ESTIMATES AND POLICIES			28
	NEW ACCOUNTING GUIDANCE			28
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK					28	Part I, Item 3
FINANCIAL STATEMENTS					30	Part I, Item 1
	Edison International Consolidated Statements of Income			30
	Edison International Consolidated Statements of Comprehensive Income			31
	Edison International Consolidated Balance Sheets			32
	Edison International Consolidated Statements of Cash Flows			34
	SCE Consolidated Statements of Income			35
	SCE Consolidated Statements of Comprehensive Income			35
	SCE Consolidated Balance Sheets			36
	SCE Consolidated Statements of Cash Flows			38
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			39
		Note 1. Summary of Significant Accounting Policies	39
		Note 2. Consolidated Statements of Changes in Equity	43
		Note 3. Variable Interest Entities	47
		Note 4. Fair Value Measurements	48
		Note 5. Debt and Credit Agreements	51
		Note 6. Derivative Instruments	52
		Note 7. Revenue	55
		Note 8. Income Taxes	56
		Note 9. Compensation and Benefit Plans	58
		Note 10. Investments	59
		Note 11. Regulatory Assets and Liabilities	60
		Note 12. Commitments and Contingencies	61
		Note 13. Leases	73
		Note 1 4 . Equity	75
		Note 1 5 . Accumulated Other Comprehensive Loss	76
		Note 1 6 . Other Income	77
		Note 1 7 . Supplemental Cash Flows Information	77
		Note 1 8 . Related-Party Transactions	78

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.

iii

GLOSSARY

The following terms and abbreviations appearing in the text of this report have the meanings indicated below.


2017/2018 Wildfire/Mudslide Events			the Thomas Fire, the Koenigstein Fire, the Montecito Mudslides and the Woolsey Fire, collectively
2019 Form 10-K			Edison International's and SCE's combined Annual Report on Form 10-K for the year ended December 31, 2019
AB 1054			California Assembly Bill 1054, executed by the governor of California on July 12, 2019
AB 1054 Excluded Capital Expenditures			approximately $1.6 billion in wildfire risk mitigation capital expenditures that SCE will exclude from the equity portion of SCE's rate base as required under AB 1054
AB 1054 Liability Cap			a cap on the aggregate requirement to reimburse the Wildfire Insurance Fund over a trailing three calendar year period which applies if certain conditions are met and is equal to 20% of the equity portion of the utility's transmission and distribution rate base in the year of the applicable prudency determination
ARO(s)			asset retirement obligation(s)
Bcf			billion cubic feet
BRRBA			Base Revenue Requirement Balancing Account
CAISO			California Independent System Operator
CAL FIRE			California Department of Forestry and Fire Protection
CCAs			Community Choice Aggregators which are cities, counties, and certain other public agencies with the authority to generate and/or purchase electricity for their local residents and businesses
Cost of Capital Compliance Period			January 1, 2020 to December 31, 2022, the current compliance period for SCE's CPUC authorized capital structure
COVID-19			Coronavirus disease 2019
CPUC			California Public Utilities Commission
CSRP			Customer Service Re-platform, a SCE project to implement a new customer service system
DERs			distributed energy resources
Edison Energy			Edison Energy, LLC, a wholly-owned subsidiary of Edison Energy Group that is engaged in the competitive business of providing energy services to commercial and industrial customers
Edison Energy Group			Edison Energy Group, Inc., a wholly-owned subsidiary of Edison International, is a holding company for subsidiaries engaged in competitive businesses

EME			Edison Mission Energy
Electric Service Provider			an entity that offers electric power and ancillary services to retail customers, other than electrical corporations (like SCE) and CCAs
ERRA			Energy Resource Recovery Account
FERC			Federal Energy Regulatory Commission
FERC 2018 Settlement Period			January 1, 2018 through November 11, 2019
FERC 2019 Settlement Period			November 12, 2019 through at least December 31, 2021
FHPMA			Fire Hazard Prevention Memorandum Account
Fitch			Fitch Ratings, Inc.
GAAP			generally accepted accounting principles
GHG			greenhouse gas
GRC			general rate case


GS&RP			Grid Safety and Resiliency Program
GWh			gigawatt-hours
Joint Proxy Statement			Edison International's and SCE's definitive Proxy Statement filed with the SEC in connection with Edison International's and SCE's Annual Shareholders' Meeting held on April 23, 2020
Koenigstein Fire			a wind-driven fire that originated near Koenigstein Road in the City of Santa Paula in Ventura County, California, on December 4, 2017
kV			unit of electrical potential equal to 1000 volts
MD&A			Management's Discussion and Analysis of Financial Condition and Results of Operations
Montecito Mudslides			the mudslides and flooding in Montecito, Santa Barbara County, California, that occurred in January 2018
Moody's			Moody's Investors Service, Inc.
NEM			net energy metering
NERC			North American Electric Reliability Corporation
NRC			Nuclear Regulatory Commission
PABA			Portfolio Allocation Balancing Account
Palo Verde			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)
PCIA			Power Charge Indifference Adjustment
PG&E			Pacific Gas & Electric Company
ROE			return on common equity
RPS			Renewables portfolio standard
S&P			Standard & Poor's Financial Services LLC
San Onofre			retired nuclear generating facility located in south San Clemente, California in which SCE holds a 78.21% ownership interest
SCE			Southern California Edison Company, a wholly-owned subsidiary of Edison International
SDG&E			San Diego Gas & Electric
SEC			U.S. Securities and Exchange Commission
SED			Safety and Enforcement Division of the CPUC
September 2020 Subrogation Settlement			a settlement entered into in September 2020 among Edison International, SCE and the Settling Subrogation Plaintiffs
Settling Subrogation Plaintiffs			the plaintiffs party to the September 2020 Subrogation Settlement, representing all the insurance subrogation plaintiffs in the Thomas Fire, Koenigstein Fire and Montecito Mudslides litigation
SoCalGas			Southern California Gas Company
SoCore Energy			SoCore Energy LLC, a former subsidiary of Edison Energy Group that was sold in April 2018
TAMA			Tax Accounting Memorandum Account
Tax Reform			Tax Cuts and Jobs Act signed into law on December 22, 2017
Thomas Fire			a wind-driven fire that originated in the Anlauf Canyon area of Ventura County, California, on December 4, 2017
TOU			Time-Of-Use
US EPA			U.S. Environmental Protection Agency
VCFD			The Ventura County Fire Department
WEMA			Wildfire Expense Memorandum Account
WMP			a wildfire mitigation plan required to be filed at least once every three years under AB 1054 to describe a utility's plans to construct, operate, and maintain electrical lines and equipment that will help minimize the risk of catastrophic wildfires caused by such electrical lines and equipment


Wildfire Insurance Fund			The insurance fund established under AB 1054
Woolsey Fire			a wind-driven fire that originated in Ventura County in November 2018
WSD			Wildfire Safety Division of the CPUC

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 statements that do 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 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 through regulated rates, including costs related to uninsured wildfire-related and mudslide-related liabilities, costs incurred to mitigate the risk of utility equipment causing future wildfires, costs incurred to implement SCE's new customer service system and costs incurred as a result of the COVID-19 pandemic;

•ability of SCE to implement its WMP, including effectively implementing Public Safety Power Shutoffs when appropriate;

•ability to obtain sufficient insurance at a reasonable cost, including insurance relating to SCE's nuclear facilities and wildfire-related claims, and to recover the costs of such insurance or, in the event liabilities exceed insured amounts, the ability to recover uninsured losses from customers or other parties;

•risks associated with AB 1054 effectively mitigating the significant risk faced by California investor-owned utilities related to liability for damages arising from catastrophic wildfires where utility facilities are alleged to be a substantial cause, including SCE's ability to maintain a valid safety certification, SCE's ability to recover uninsured wildfire-related costs from the Wildfire Insurance Fund, the longevity of the Wildfire Insurance Fund, and the CPUC's interpretation of and actions under AB 1054, including their interpretation of the new prudency standard established under AB 1054;

•decisions and other actions by the CPUC, the FERC, the NRC and other governmental authorities, including decisions and actions related to nationwide or statewide crisis, determinations of authorized rates of return or return on equity, the recoverability of wildfire-related and mudslide-related costs, issuance of SCE's wildfire safety certification, wildfire mitigation efforts, and delays in executive, regulatory and legislative actions;

•ability of Edison International or SCE to borrow funds and access bank and capital markets on reasonable terms;

•risks associated with the decommissioning of San Onofre, including those related to worker and public safety, public opposition, permitting, governmental approvals, on-site storage of spent nuclear fuel, delays, contractual disputes, and cost overruns;

•pandemics, such as COVID-19, and other events that cause regional, statewide, national or global disruption, which could impact, among other things, Edison International's and SCE's business, operations, cash flows, liquidity and/or financial results and cause Edison International and SCE to incur unanticipated costs;

•extreme weather-related incidents and other natural disasters (including earthquakes and events caused, or exacerbated, by climate change, such as wildfires and extreme heat waves), which could cause, among other things, public safety issues, property damage, operational issues (such as rotating outages) and unanticipated costs;

•physical security of Edison International's and SCE's critical assets and personnel and the cybersecurity of Edison International's and SCE's critical information technology systems for grid control, and business, employee and customer data;

•risks associated with cost allocation resulting in higher rates for utility bundled service customers because of possible customer bypass or departure for other electricity providers such as CCAs and Electric Service Providers;

•risks inherent in SCE's transmission and distribution infrastructure investment program, 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 acceptance of power delivery), changes in the CAISO's transmission plans, and governmental approvals;

•risks associated with the operation of transmission and distribution assets and power generating facilities, including worker and public safety issues, the risk of utility assets causing or contributing to wildfires, failure, availability, efficiency, and output of equipment and facilities, and availability and cost of spare parts;

•actions by credit rating agencies to downgrade Edison International or SCE's credit ratings or to place those ratings on negative watch or outlook;

•changes in tax laws and regulations, at both the state and federal levels, or changes in the application of those laws, that could affect recorded deferred tax assets and liabilities and effective tax rate;

•changes in future taxable income, or changes in tax law, that would limit Edison International's and SCE's realization of expected net operating loss and tax credit carryover benefits prior to expiration;

•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 adopted by the NERC, CAISO, Western Electricity Council, and similar regulatory bodies in adjoining regions, and changes in the United States' and California's environmental priorities that lessen the importance the state places on GHG reduction;

•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;

•potential for penalties or disallowance for non-compliance with applicable laws and regulations; and

•cost of fuel for generating facilities and related transportation, which could be impacted by, among other things, disruption of natural gas storage facilities, to the extent not recovered through regulated rate cost escalation provisions or balancing accounts.

Additional information about risks and uncertainties, including more detail about the factors described in this report, is contained throughout this report and in the 2019 Form 10-K, including the "Risk Factors" section. Readers are urged to read this entire report, including information incorporated by reference, as well as the 2019 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.

Edison International and SCE post or provide direct links to (i) certain SCE and other parties' regulatory filings and documents with the CPUC and the FERC and certain agency rulings and notices in open proceedings in a section titled "SCE Regulatory Highlights," (ii) certain documents and information related to Southern California wildfires which may be of interest to investors in a section titled "Southern California Wildfires," and (iii) presentations, documents and other information that may be of interest to investors in a section titled "Events and Presentations" at www.edisoninvestor.com in order to publicly disseminate such information. The information contained on, or connected to, the Edison investor website is not incorporated by reference into this report.

The MD&A for the nine months ended September 30, 2020 discusses material changes in the consolidated financial condition, results of operations and other developments of Edison International and SCE since December 31, 2019 and as compared to the nine months ended September 30, 2019. This discussion presumes that the reader has read or has access to Edison International's and SCE's MD&A for the calendar year 2019 (the "2019 MD&A"), which was included in the 2019 Form 10-K.

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 and Edison Energy Group. SCE is an investor-owned public utility primarily engaged in the business of supplying and delivering electricity to customers in an approximately 50,000 square mile area of southern California. Edison Energy Group is a holding company for Edison Energy which is engaged in the competitive business of providing energy services to commercial and industrial customers. Edison Energy's business activities are currently not material to report as a separate business segment. Except when otherwise stated, references to each of Edison International, SCE, or Edison Energy Group mean each such company with its subsidiaries on a consolidated basis. 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 competitive subsidiaries. Unless otherwise described, all the information contained in this report relates to both filers.


	Three months ended September 30,								Nine months ended September 30,
(in millions)	2020		2019		Change		2020		2019		Change
Net (loss) income attributable to Edison International

SCE	$	(264)	$	503	$	(767)	$	336	$	1,215	$	(879)
Edison International Parent and Other	(24)		(32)		8		(123)		(74)		(49)

Edison International	(288)		471		(759)		213		1,141		(928)
Less: Non-core items
SCE
2017/2018 Wildfire/Mudslide Events claims and expenses, net of recoveries	(880)		—		(880)		(889)		—		(889)
Wildfire Insurance Fund expense	(61)		(48)		(13)		(181)		(48)		(133)
Disallowed historical capital expenditures in SCE's 2018 GRC decision	—		—		—		—		(123)		123
Sale of San Onofre nuclear fuel	21		—		21		58		3		55

Re-measurement of tax assets and liabilities	—		—		—		18		69		(51)

Edison International Parent and Other
Goodwill impairment	—		—		—		(25)		—		(25)
Re-measurement of tax liabilities	—		—		—		(3)		—		(3)

Total non-core items	(920)		(48)		(872)		(1,022)		(99)		(923)
Core earnings (losses)
SCE	656		551		105		1,330		1,314		16
Edison International Parent and Other	(24)		(32)		8		(95)		(74)		(21)
Edison International	$	632	$	519	$	113	$	1,235	$	1,240	$	(5)

Edison International's earnings are prepared in accordance with GAAP. Management uses core earnings (losses) 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 non-core items. Non-core items include income or loss from discontinued operations and income or loss from significant discrete items that management does not consider representative of ongoing earnings, such as write downs, asset impairments and other income and expense related to changes in law, outcomes in tax, regulatory or legal proceedings, and exit activities, including sale of certain assets and other activities that are no longer continuing.

Edison International's third quarter 2020 earnings decreased $759 million from the third quarter of 2019, resulting from a decrease in SCE's earnings of $767 million and a decrease in Edison International Parent and Other's losses of $8 million. SCE's lower earnings consisted of $872 million of higher non-core losses and $105 million of higher core earnings. Edison International's earnings for the nine months ended September 30, 2020 decreased $928 million from the nine months ended September 30, 2019, resulting from a decrease in SCE's earnings of $879 million and an increase in Edison International Parent and Other's losses of $49 million. SCE's lower earnings consisted of $895 million of higher non-core losses and $16 million of higher core earnings.

The increase in SCE's core earnings in both periods was primarily due to higher CPUC-related revenue due to the escalation mechanism as set forth in the 2018 GRC decision and lower expenses from regulatory deferrals related to wildfire mitigation activities, partially offset by higher operation and maintenance expenses, including customer uncollectibles resulting from the COVID-19 pandemic and SCE's response to it. In the nine month period, SCE's higher core earnings were also partially offset by the adoption of the 2018 GRC decision in the second quarter of 2019.

Edison International Parent and Other's decrease in losses for the three months ended September 30, 2020 was primarily due to increased tax benefits. Edison International Parent and Other's increased net loss for the nine months ended September 30, 2020 was due to higher core losses of $21 million and higher non-core losses of $28 million. Edison International's increase in core losses for the nine months ended September 30, 2020 was primarily due to higher interest expense, partially offset by increased tax benefits.

Consolidated non-core items for the nine months ended September 30, 2020 and 2019 primarily included:

•A charge of $1.2 billion ($889 million after-tax) in 2020 for 2017/2018 Wildfire/Mudslide Events claims and expenses, net of expected recoveries from FERC customers.

•Charges of $252 million ($181 million after-tax) recorded in 2020 and $67 million ($48 million after-tax) recorded in 2019 from the amortization of SCE's contributions to the Wildfire Insurance Fund. See "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies" for further information.

•Gains of $80 million ($58 million after-tax) recorded in 2020 and $4 million ($3 million after-tax) recorded in 2019 for SCE's sale of San Onofre nuclear fuel.

•A goodwill impairment charge of $34 million ($25 million after-tax) recorded in 2020 for Edison International Parent and Other related to Edison Energy stemming from the economic impact of COVID-19.

•An income tax benefit of $18 million and income tax expense of $3 million recorded in 2020 for SCE and Edison International Parent and Other, respectively, due to re-measurement of uncertain tax positions related to the 2010 – 2012 California state tax filings currently under audit.

•An impairment charge of $170 million ($123 million after-tax) recorded in 2019 for SCE related to disallowed historical capital expenditures in SCE's 2018 GRC decision.

•Income tax benefits of $69 million recorded in 2019 for SCE related to changes in the allocation of deferred tax

re-measurement between customers and shareholders as a result of a CPUC resolution issued in February 2019 to provide guidance on the implementation of Tax Reform. The resolution determined that customers are only entitled to excess deferred taxes which were included when setting rates and other deferred tax re-measurement belongs to shareholders.

See "Results of Operations" for discussion of SCE and Edison International Parent and Other results of operations.

Southern California Wildfires and Mudslides

Multiple factors have contributed to increased wildfire activity, and faster progression of and increased damage from wildfires across SCE's service territory and throughout California in 2020 and the past several years. These include the buildup of dry vegetation in areas severely impacted by years of historic drought, lack of adequate clearing of hazardous fuels by responsible parties, higher temperatures, lower humidity, increased incidence of dry lightning, and strong Santa Ana winds. At the same time that wildfire risk has been increasing in Southern California, residential and commercial development has occurred and is occurring in some of the highest-risk areas. Such factors can increase the likelihood and extent of wildfires. SCE has determined that approximately 27% of its service territory is in areas identified as high fire risk.

California increase the likelihood of significant damage from wildfires, including those where SCE's equipment may be alleged to be associated with the fire's ignition. In response to worsening conditions and increased wildfire activity over the past several years, SCE has developed and is implementing its 2020 – 2022 WMP to reduce the risk of SCE equipment contributing to the ignition of wildfires.

2017/2018 Wildfire/Mudslide Events

The investigating government agencies, the VCFD and CAL FIRE, have determined that the largest of the 2017 fires originated on December 4, 2017, in the Anlauf Canyon area of Ventura County (the investigating agencies refer to this fire as the "Thomas Fire"), followed shortly thereafter by the Koenigstein Fire. While SCE continues to review the progression of these two fires, the December 4, 2017 fires eventually burned substantial acreage in both Ventura and Santa Barbara Counties. The largest of the November 2018 fires, known as the Woolsey Fire, originated in Ventura County and burned acreage in both Ventura and Los Angeles Counties.

In March 2019, the VCFD and CAL FIRE jointly issued separate reports finding that the Thomas Fire and the Koenigstein Fire were each caused by SCE equipment. At this time, based on available information, SCE has not determined whether its equipment caused the Thomas Fire. Based on publicly available radar data showing a smoke plume in the Anlauf Canyon area emerging in advance of the start time of the Thomas Fire indicated in the Thomas Fire report, SCE believes that the Thomas Fire started at least 12 minutes prior to any issue involving SCE's system and at least 15 minutes prior to the start time indicated in the report. SCE has previously disclosed that SCE believed its equipment was associated with the ignition of the Koenigstein Fire. SCE is continuing to assess the progression of the Thomas and Koenigstein Fires and the extent of damages that may be attributable to each fire.

SCE has received a non-final redacted draft of a report from the VCFD subject to a protective order in the litigation related to the Woolsey fire and, other than the information disclosed in this Form 10-Q, is not authorized to release the report or its contents to the public at this time. The draft report states that the VCFD investigation team determined that electrical equipment owned and operated by SCE was the cause of the Woolsey Fire. Based on information received at hearings in the Woolsey Fire litigation, SCE anticipates that the VCFD will release its final report regarding the Woolsey Fire in the fourth quarter of 2020. Absent additional evidence, SCE believes that it is likely that its equipment was associated with the ignition of the Woolsey Fire.

Multiple lawsuits related to the Thomas and Koenigstein Fires and the Woolsey Fire have been initiated against SCE and Edison International. Some of the Thomas and Koenigstein Fires lawsuits claim that SCE and Edison International have responsibility for the damages caused by the Montecito Mudslides based on a theory alleging that SCE has responsibility for the Thomas and/or Koenigstein Fires and that the Thomas and/or Koenigstein Fires proximately caused the Montecito Mudslides.

In the third quarter of 2020, SCE entered into the September 2020 Subrogation Settlement with the Settling Subrogation Plaintiffs to resolve those parties' collective claims arising from the Thomas Fire, Koenigstein Fire or Montecito Mudslides. Under the terms of the September 2020 Subrogation Settlement, SCE paid the Settling Subrogation Plaintiffs an aggregate of $1.2 billion in October 2020 and also agreed to pay $0.555 for each dollar in claims to be paid by the Settling Subrogation Plaintiffs to their policy holders before July 15, 2023, up to an agreed upon cap. In the second and third quarters of 2020, SCE entered into settlements with several hundred of the several thousand individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation under which it agreed to pay an aggregate of approximately $73 million to those individual plaintiffs. Other claims and potential claims related to the 2017/2018 Wildfire/Mudslide Events remain. SCE continues to explore reasonable settlement opportunities with other plaintiffs in the outstanding 2017/2018 Wildfire/Mudslide Events litigation.

Final determinations of liability for the 2017/2018 Wildfire/Mudslide Events, including determinations of whether SCE was negligent, would only be made during lengthy and complex litigation processes. Even when investigations are still pending or liability is disputed, an assessment of likely outcomes, including through future settlement of disputed claims, may require estimated losses to be accrued under accounting standards. Based on information available to SCE and consideration of the risks associated with litigation, Edison International and SCE expect to incur a material loss in connection with the remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events.

At June 30, 2020, Edison International and SCE were unable to determine a best estimate of expected losses within a reasonably estimated range and therefore Edison International's and SCE's balance sheets included estimated losses, established at the lower end of the reasonably estimated range of expected losses, of $4.5 billion for the 2017/2018 Wildfire/Mudslide Events. In light of recent developments, including the 2020 Subrogation Settlement and increased settlement activity with individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation, management established a best estimate of expected potential losses for alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events litigation in the third quarter of 2020. As a result, Edison International and SCE recorded a charge of $1.3 billion as of September 30, 2020 related to the 2017/2018 Wildfire/Mudslide Events, against which SCE recorded expected recoveries through FERC electric rates of $84 million. The resulting net charge to earnings was $1.2 billion ($874 million after-tax).

As of September 30, 2020, Edison International and SCE had estimated liabilities of $5.8 billion reflected on their consolidated balance sheets related to the 2017/2018 Wildfire/Mudslide Events, consisting of $1.2 billion of fixed payments to be made under executed settlements and $4.6 billion in estimated losses for remaining alleged and potential claims. As of the same date, Edison International and SCE also had assets for remaining expected recoveries from insurance of $1.6 billion, consisting of $0.8 billion reflected as a short-term asset and $0.8 billion reflected in other long-term assets, and through FERC electric rates of $125 million on their consolidated balance sheets related to the 2017/2018 Wildfire/Mudslide Events. The estimated losses for the 2017/2018 Wildfire/Mudslide Events do not include an estimate of any potential fines or penalties that could be levied against SCE in connection with the 2017/2018 Wildfire/Mudslide Events. Edison International and SCE are currently unable to reasonably estimate the magnitude of any such fines or penalties, or the associated timing if they were to be imposed. Estimated losses for the 2017/2018 Wildfire/Mudslide Events litigation are based on a number of assumptions and are subject to change as additional information becomes available. Actual losses incurred may be higher or lower than estimated based on several factors, including: the uncertainty as to the legal and factual determinations to be made during litigation, including uncertainty as to the contributing causes of the 2017/2018 Wildfire/Mudslide Events, the complexities associated with fires that merge, whether inverse condemnation will be held applicable to SCE with respect to damages caused by the Montecito Mudslides, the preliminary nature of the litigation processes, the uncertainty in estimating damages that may be alleged, and the uncertainty as to how these factors impact future settlements.

Edison International and SCE will seek to offset any actual losses realized in connection with the 2017/2018 Wildfire/Mudslide Events in excess of available insurance through electric rates. SCE believes that, in light of the CPUC's decision in a cost recovery proceeding involving SDG&E arising from several 2007 wildfires in SDG&E's service area, there is substantial uncertainty regarding how the CPUC will interpret and apply its prudency standard to an investor-owned utility in future wildfire cost-recovery proceedings for fires ignited prior to July 12, 2019. Accordingly, while the CPUC has not made a determination regarding SCE's prudency relative to any of the 2017/2018 Wildfire/Mudslide Events, SCE is unable to conclude, at this time, that uninsured CPUC-jurisdictional wildfire-related costs are probable of recovery through electric rates.

Edison International and SCE continue to pursue regulatory and legal strategies, and anticipate pursuing legislative strategies in the longer term, to address the application of a strict liability standard to wildfire-related property damages without the guaranteed ability to recover resulting costs in electric rates.

Current Wildfire Insurance Coverage

SCE has $1.0 billion of wildfire-specific insurance coverage for events that may occur during the period July 1, 2020 through June 30, 2021, subject to up to $80 million of co-insurance and $50 million of self-insured retention, which results in net coverage of approximately $870 million. Various coverage limitations within the policies that make up SCE's wildfire insurance coverage could result in additional material self-insured costs, for instance in the event of multiple wildfire occurrences during a policy period or with a single wildfire with damages in excess of the policy limits. SCE believes that its insurance coverage for the July 1, 2020 through June 30, 2021 period meets its obligation to maintain reasonable insurance coverage under AB 1054.

2019 Wildfire Legislation

In July 2019, AB 1054 was signed by the governor of California and became effective immediately. The summary of the wildfire legislation in this report is based on SCE's interpretation of the legislation and is qualified in its entirety by, and should be read together with, AB 1054 and companion Assembly Bill 111.

Wildfire Insurance Fund

for claims related to wildfires ignited after July 12, 2019 that are determined by the responsible government investigatory agency to have been caused by a utility.

SCE and SDG&E collectively made their initial contributions totaling approximately $2.7 billion to the Wildfire Insurance Fund in September 2019. Upon its emergence from bankruptcy, on July 1, 2020, PG&E made its initial contribution of approximately $4.8 billion to the Wildfire Insurance Fund. PG&E, SCE and SDG&E are also collectively expected to make aggregate contributions of approximately $3.0 billion to the Wildfire Insurance Fund through annual contributions to the fund over a 10-year period, of which they have made their initial annual contributions totaling approximately $300 million. In addition to PG&E's, SCE's and SDG&E's contributions to the Wildfire Insurance Fund, PG&E, SCE and SDG&E are expected to collect $6.1 billion, $6.1 billion and $1.3 billion, respectively, from their customers over a 15-year period through a dedicated rate component. The amount collected from customers may be directly contributed to the Wildfire Insurance Fund or used to support the issuance of up to $10.5 billion in bonds by the California Department of Water Resources, the proceeds of which would be contributed to the fund. In addition to funding contributions to the Wildfire Insurance Fund, the amount collected from utility customers will pay for, among other things, any interest and financing costs related to any bonds that are issued by the California Department of Water Resources to support the contributions to the Wildfire Insurance Fund.

SCE made an initial contribution of approximately $2.4 billion to the Wildfire Insurance Fund in September 2019 and has committed to make ten annual contributions of approximately $95 million per year to the fund, by no later than January 1 of each year. SCE made its first annual contribution to the Wildfire Insurance Fund in December 2019. Edison International supported SCE's initial contribution to the Wildfire Insurance Fund by raising $1.2 billion from the issuance of Edison International equity. SCE raised the remaining $1.2 billion from the issuance of long-term debt. SCE's contributions to the Wildfire Insurance Fund will not be recoverable through electric rates and will be excluded from the measurement of SCE's CPUC-jurisdictional authorized capital structure. SCE will also not be entitled to cost recovery for any borrowing costs incurred in connection with its contributions to the Wildfire Insurance Fund.

Participating investor-owned utilities will be reimbursed from the Wildfire Insurance Fund for eligible claims, subject to the fund administrator's review. SCE will reimburse the fund for any withdrawn amounts if SCE receives payment of such amounts under an indemnification agreement or from an insurance provider or other third-party. SCE will also be required to reimburse the fund for withdrawn amounts that the CPUC disallows subject, in some instances, to the AB 1054 Liability Cap. A utility will not be eligible for the AB 1054 Liability Cap if it does not maintain a valid safety certification or its actions or inactions that resulted in the wildfire are found to constitute conscious or willful disregard of the rights and safety of others. Based on SCE's 2020 rate base and using the equity portion of SCE's CPUC authorized capital structure of 52%, SCE's requirement to reimburse the Wildfire Insurance Fund for eligible claims disallowed in 2020 would be capped at approximately $3.0 billion. SCE will not be allowed to recover borrowing costs incurred to reimburse the fund for amounts that the CPUC disallows. The Wildfire Insurance Fund and, consequently, the AB 1054 Liability Cap will terminate when the administrator determines that the fund has been exhausted.

AB 1054 Prudency Standard

As a result of the establishment of the Wildfire Insurance Fund, AB 1054 created a new standard that the CPUC must apply when assessing the prudency of a utility in connection with a request for recovery of wildfire costs for wildfires ignited after July 12, 2019. Under AB 1054, the CPUC is required to find a utility to be prudent if the utility's conduct related to the ignition was consistent with actions that a reasonable utility would have undertaken under similar circumstances, at the relevant point in time, and based on the information available at that time. Utilities with a valid safety certification will be presumed to have acted prudently related to a wildfire ignition unless a party in the cost recovery proceeding creates serious doubt as to the reasonableness of the utility's conduct, at which time, the burden shifts back to the utility to prove its conduct was reasonable. If a utility does not have a valid safety certification, it will have the burden to prove, based on a preponderance of evidence, that its conduct was prudent. The new prudency standard will survive the termination of the Wildfire Insurance Fund.

Utilities participating in the Wildfire Insurance Fund are not required to reimburse the fund for amounts withdrawn from the fund that the CPUC finds were prudently incurred and can recover such prudently incurred wildfire costs through electric rates if the fund has been exhausted.

Safety Certification and Wildfire Mitigation Plan

Under AB 1054, SCE can obtain an annual safety certification upon the submission of certain required safety information, including an approved wildfire mitigation plan. On September 17, 2020, SCE obtained a safety certification that will be valid for 12 months. Notwithstanding its 12-month term, if SCE requests a new safety certification prior to the expiration of its

current safety certification, then its current safety certification will remain valid until the CPUC's WSD acts on SCE's request for a new safety certification.

In June 2020 the CPUC ratified the WSD's conditional approval of SCE's 2020 – 2022 WMP. The approval is conditioned on SCE providing requested information to the WSD, including additional descriptions of how SCE is implementing, and will implement, certain requirements imposed by the WSD. The WSD issued a draft resolution in October 2020 that, if adopted, will require SCE to update its 2020 – 2022 WMP by February 5, 2021.

Capital Expenditure Requirement

Under AB 1054, approximately $1.6 billion of spending by SCE on wildfire risk mitigation capital expenditures made after August 1, 2019 cannot be included in the equity portion of SCE's rate base. SCE can apply for irrevocable orders from the CPUC to finance these AB 1054 Excluded Capital Expenditures, including through the issuance of securitized bonds, and can recover any prudently incurred financing costs. In July 2020, SCE applied for an irrevocable order from the CPUC to finance $337 million, comprised of AB 1054 Excluded Capital Expenditures incurred in connection with GS&RP and prudently incurred financing costs, through the issuance of securitized bonds. The CPUC issued a proposed decision approving SCE's application in October 2020 and is expected to issue the irrevocable financing order in November 2020. As of September 30, 2020, SCE has spent $1.1 billion on AB 1054 Excluded Capital Expenditures. SCE expects to seek additional irrevocable orders from the CPUC to finance the remaining AB 1054 Excluded Capital Expenditures.

For further information, see in the 2019 Form 10-K "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—Initial and annual contributions to the wildfire insurance fund established pursuant to California Assembly Bill 1054" and in this report "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides" and "Legal Proceedings."

COVID-19

Southern California began experiencing the impacts of the COVID-19 pandemic in the first quarter of 2020. The total impacts of the pandemic are still emerging and will vary depending on the severity of impacts on society and the economy of the US and California. As a result of the pandemic, SCE has experienced increased costs, but the pandemic has not had a pervasive impact on SCE's ability to operate its business. However, as the impacts of the pandemic continue to unfold, areas that may be impacted in the future include: SCE's ability to execute its planned work, including wildfire mitigation and capital projects and the liquidity, cash flows and results of operations of Edison International and SCE. Factors that may increase in severity or that may emerge to cause these impacts include lack of availability of company and contractor employees to perform their job functions, supply chain disruptions, stop-work orders and limitations on the ability to obtain permits for work from local governments, reduced electricity usage by commercial and industrial customers partially offset by increased electricity usage by residential customers, non-payment due to the economic impacts on the customers served by SCE and narrower access to, or increased costs of accessing, bank and capital markets.

Decoupling revenue mechanisms allow for differences in revenue resulting from actual and forecast volumetric electricity sales to be collected from or refunded to ratepayers and therefore insulate SCE's earnings from reductions in electricity usage.

In March 2020, the governor of California announced a statewide emergency as part of the state's response to address the COVID-19 pandemic. As a result SCE established memorandum accounts with CPUC approval, effective March 2020, to track incremental costs associated with the emergency for recovery, subject to CPUC reasonableness reviews.

As a direct result of the pandemic, as of September 30, 2020, SCE has recognized net costs of $166 million primarily related to increased estimates of customer uncollectibles, sequestering certain SCE employees at essential work locations and coordination of SCE's response to the emergency. As of September 30, 2020, SCE had recorded $107 million of those costs above amounts authorized for related activities in the 2018 GRC as CPUC regulatory assets and a further $6 million has been deferred for collection from FERC customers. For further information see "Notes to the Consolidated Financial Statements—Note 11. Regulatory Assets and Liabilities" and "Risk Factors." Legislation was passed in California in September 2020 allowing for securitization of revenue shortfalls associated with the economic effects of the COVID-19 pandemic, subject to approval of a financing order by the CPUC.

The pandemic has also affected the operations of Edison International and SCE with all employees who, in the companies' assessment, can work remotely and perform their job functions effectively, directed to do so. Some employees and contract workers continue to work at SCE facilities or in the field to maintain operations and perform critical work to protect public safety and reduce the risk of wildfires.

Regulatory Proceedings

2021 General Rate Case

The 2021 GRC will consist of four separate tracks. Track 1 is similar to previous GRCs and addresses revenue requirements for the three-year period 2021-2023. Tracks 2 and 3 address the reasonableness of 2018-2019 and 2020 wildfire mitigation costs that were incremental to amounts authorized in the 2018 GRC, respectively. In January 2020, a CPUC decision introduced a third attrition year in current and future GRCs. As a result, track 4 will address the revenue requirement for 2024. SCE is scheduled to submit its testimony for track 4 in May 2022.

For more information on tracks 2 and 3 of the 2021 GRC, see "—Wildfire Mitigation and Wildfire Insurance Expenses—2021 General Rate Case Wildfire Mitigation Memorandum Account Balances."

Track 1 of 2021 GRC

In August 2019, SCE filed its 2021 GRC application for the three-year period 2021 – 2023 and submitted rebuttal to intervenors' testimony in June 2020. Following amendments and other revisions to the rebuttal testimony in August and September 2020, SCE has requested a revenue requirement of $7.6 billion, an approximately $1.3 billion increase over the 2020 revenue requirement authorized in the 2018 GRC as updated for post test-year ratemaking changes. The amended and revised rebuttal testimony proposed post test-year increases in 2022 and 2023 of $452 million and $524 million, respectively. SCE's request excludes the revenue requirement associated with the approximately $1.6 billion of AB 1054 Excluded Capital Expenditures.

In April and May 2020, intervenors to the 2021 GRC proceeding, including the CPUC Public Advocates Office ("Cal Advocates") and The Utility Reform Network ("TURN"), submitted testimony in response to SCE's August 2019 application as revised and amended. Cal Advocates proposed reductions to 2021 operation and maintenance spending of $423 million or 15% of the total, and reductions to 2021 capital spending of $445 million or 9% of the total. TURN proposed reductions to 2021 operation and maintenance spending of $556 million or 17% of the total, and reductions to 2021 capital spending of $714 million or 14% of the total. The reductions to capital expenditures proposed by both parties included significant proposed reductions to SCE's Wildfire Covered Conductor Program. If adopted, the proposals of Cal Advocates and TURN would result in a 2021 revenue requirement of approximately $6.9 billion and $6.7 billion, respectively.

SCE expects a final decision on the application for the 2021 test year in the first quarter of 2021. If the final decision is received after January 1, 2021, SCE will request the CPUC to approve establishment of a memorandum account making the authorized revenue requirement changes effective January 1, 2021. SCE cannot predict the revenue requirement the CPUC will ultimately authorize or forecast the timing of a final decision.

FERC Formula Rate

2019 FERC Formula Rate Settlement

In September 2020, the FERC approved a settlement of SCE's formula rates for the 2019 Formula Rate case ("2019 Formula Rate Settlement"). The settlement establishes SCE's FERC transmission revenue requirement for the 2019 FERC Settlement Period. SCE is permitted to request a new formula rate after December 31, 2021, the end of the 2019 FERC Settlement Period. The settlement provides for a total ROE of 10.30% inclusive of CAISO and transmission incentive adders. The settlement also provides that SCE's capital structure for purposes of its formula rate will reflect the higher of SCE's actual equity ratio or 47.50%. The transmission revenue requirement and rates that have been billed to customers prior to the implementation of the 2019 Formula Rate Settlement utilized a base ROE of 11.97%. SCE expects to refund the excess amounts billed to customers through the operation of the Formula Rate in 2021 and 2022. SCE had been recognizing revenue based on the expected outcome of this settlement and the impact of recording the settlement was not material.

In December 2019, the CPUC filed a protest with the FERC alleging that $419 million of costs associated with SCE's Tehachapi Transmission Project are imprudent and should be disallowed from SCE's FERC rate base because these costs exceeded the maximum reasonable costs identified by the CPUC when it granted the project's certificate of public convenience and necessity. As part of the 2019 Formula Rate Settlement, the CPUC withdrew its protest effective as of July 27, 2020.

2021 FERC Formula Rate Annual Update

In July 2020, SCE provided its preliminary 2021 annual transmission revenue requirement update to interested parties. The update reflects an increase in SCE's transmission revenue requirement of $123 million or 12.8% higher than amounts included in the 2020 annual rates. The increase is primarily due to growth in rate base and the effect of refunds from the annual FERC Formula Rate true-up mechanism on 2020 rates. SCE expects to file its 2021 annual update with the FERC by December 1, 2020 with the proposed rates effective January 1, 2021.

Phase I Decision in Residential Rates OIR

In June 2020, the CPUC issued a final decision on the first phase of the ongoing proceeding Order Instituting Rulemaking to Consider New Approaches to Disconnections and Reconnections to Improve Energy Access and Contain Costs ("Residential Rates OIR"). This decision applies only to SCE's residential customers and requires the creation of an arrearage management program to forgive a portion of certain low income customers' past arrears as long as they remain current on monthly billing, prohibits use of establishment of credit or reestablishment of service deposits, and caps SCE's disconnection rate. SCE's disconnection rate will be capped at 8% in 2020 and will reduce by 1% each year until 2024.

The decision requires SCE to establish a two-way balancing account to reflect the actual costs of disconnections in customer rates and to establish a memorandum account to track the costs of implementing the decision.

Wildfire Mitigation and Wildfire Insurance Expenses

In response to the increase in wildfire activity, and faster progression of and increased damage from wildfires across SCE's service territory and throughout California, SCE is currently incurring wildfire mitigation and wildfire insurance related spending at levels significantly exceeding amounts authorized in its 2018 GRC. Several regulatory mechanisms, including but not limited to the GS&RP balancing account, the FHPMA, the WMP memorandum account and the WEMA, exist to allow SCE to track and seek recovery of these incremental costs. In accordance with the accounting standards applicable to rate-regulated enterprises, SCE defers costs as regulatory assets that are probable of future recovery from customers. For certain wildfire mitigation and wildfire insurance expenses SCE performs its assessment of future recovery after its year to date spending exceeds the amounts authorized for the full calendar year under its current revenue requirement. As of September 30, 2020, SCE has recognized $797 million of regulatory assets related to incremental wildfire mitigation expenses, including depreciation expense from $1.4 billion of total incremental capital expenditures. As of September 30, 2020, SCE has $110 million of regulatory assets related to incremental wildfire insurance expenses in the WEMA. While SCE believes such costs are probable of future recovery, there is no assurance that SCE will collect all amounts currently deferred as regulatory assets. SCE has recorded a further $175 million of incremental wildfire mitigation expenses, including $10 million for the quarter ended September 30, 2020, that are subject to reasonableness reviews through the 2021 GRC proceeding. As discussed below, the CPUC has approved recovery of certain incremental wildfire mitigation and wildfire insurance expenses through SCE's GS&RP and WEMA proceedings. As of September 30, 2020, SCE has wildfire-related regulatory assets totaling $1,061 million including wildfire mitigation, wildfire insurance, and wildfire and drought restoration costs. Of this amount, $119 million has been approved. The remaining $942 million of wildfire-related regulatory assets will be reviewed through ongoing or future proceedings.

Grid Safety and Resiliency Program

In April 2020, the CPUC approved a settlement agreement between SCE and certain parties to SCE's GS&RP proceeding. Under the settlement, SCE is authorized to spend approximately $599 million ($476 million capital) between 2018 and 2020. Upon approval by the CPUC in July 2020, SCE established a balancing account to track the difference between actual GS&RP costs and amounts authorized. SCE included the authorized revenue requirement (other than for AB 1054 Excluded Capital Expenditures) in rates on October 1, 2020. If spending is less than authorized, SCE will refund those amounts to customers. If spending is in excess of authorized amounts, SCE will present those costs for reasonableness review in track 3 of the 2021 GRC. Additionally, SCE's recovery of tree removal costs is capped at a specific average authorized unit cost and a total volume of trees.

Through September 30, 2020, SCE has incurred $819 million of capital expenditures, of which $343 million will be subject to a reasonableness review, and $90 million of incremental operations and maintenance expenses, all of which is within the amount authorized in the settlement agreement.

In July 2020, SCE applied for an irrevocable order from the CPUC to finance $337 million, comprised of AB 1054 Excluded Capital Expenditures incurred in connection with GS&RP and prudently incurred financing costs, through the issuance of securitized bonds. The CPUC issued a proposed decision approving SCE's application in October 2020 and is expected to issue the irrevocable financing order in November 2020.

2021 General Rate Case Wildfire Mitigation Memorandum Account Balances

In March 2020, SCE made its 2021 GRC track 2 filing with the CPUC. After updates included in SCE's September 2020 rebuttal testimony, SCE's track 2 request was $302 million of capital expenditures and $491 million of operation and maintenance expenses from 2018 and 2019 that were incremental to amounts authorized in SCE's 2018 GRC and not associated with SCE's GS&RP application. The GRC track 2 expenditures predominantly related to enhanced overhead inspections, an expanded vegetation management program and expert consultant contract labor costs supporting SCE's wildfire mitigation activities. The majority of these expenditures are recorded in the WMP memorandum account and the FHPMA. The capital revenue requirement recorded in memorandum accounts mainly represents depreciation expense, taxes, and return. After flow through tax effects and excluding the revenue requirement associated with AB 1054 Excluded Capital Expenditures, SCE's GRC track 2 filing rebuttal testimony resulted in a requested revenue requirement of $482 million.

In October 2020, SCE and all the parties to track 2 of the 2021 GRC proceeding (collectively, the "Track 2 Parties") reached a confidential settlement-in-principle regarding all issues in track 2. Once a definitive settlement is executed by the Track 2 Parties, the parties will file a motion with the CPUC seeking approval of the settlement. While SCE cannot predict the revenue requirement the CPUC will ultimately authorize or forecast the timing of a final decision, SCE does not expect the settlement-in-principle, if approved by the CPUC, to have a negative impact on SCE's results of operations.

Incremental wildfire mitigation costs from 2020, and all GS&RP costs above settled amounts, are to be reviewed in track 3 of the 2021 GRC proceeding, which will be filed in March 2021. The schedule for SCE's 2021 GRC includes a proposed decision on track 3 in the first quarter of 2022.

Wildfire Expense Memorandum Account

In September 2020, the CPUC approved SCE's WEMA application to recover $478 million in wildfire insurance premium costs to June 30, 2020 incurred in excess of premiums approved in the 2018 GRC and corresponding financing costs. The decision authorized SCE to collect a total revenue requirement of $505 million over a two-year period. SCE included the authorized revenue requirement in rates in October 2020 and the related costs previously deferred in WEMA were transferred to the BRBBA. As of September 30, 2020, the $110 million of regulatory assets in the WEMA is for wildfire insurance premium costs from July 1, 2020 to September 30, 2020.

Capital Program

Total capital expenditures (including accruals) were $3.7 billion and $3.3 billion for the first nine months of 2020 and 2019, respectively.

SCE forecasts capital expenditures within a range of $4.9 billion to $5.1 billion in 2020. The forecast has increased in the third quarter of 2020 as a result of telecommunications network and wildfire restoration expenditures not previously forecasted and may increase further as a result of the ongoing wildfire restoration work.

Reflected below is SCE's weighted average annual rate base forecast for 2020 – 2023 which has been updated since the 2019 Form 10-K to reflect SCE's 2021 GRC rebuttal testimony, the approval of SCE's Charge Ready 2 Program and the FERC approval to include Construction Work In Progress associated with the Riverside Transmission Reliability Project in transmission rate base.

The table below excludes AB 1054 Excluded Capital Expenditures and does not reflect rate base associated with non-GRC projects or programs that have not yet been approved by the CPUC, including CSRP. In addition, a third-party holds an option to invest up to $400 million in the West of Devers Transmission project at the estimated in-service date of 2021. The rate base in the table below is reduced to reflect this option.

Based on management judgment using historical precedent of previously authorized amounts and potential permitting delays and other operational considerations, a range case has been provided in the table below reflecting a 10% reduction on the total capital forecast for 2021 – 2023 and a 10% reduction on FERC capital spending and non-GRC programs for 2020.


(in billions)	2020		2021		2022		2023
Rate base for expected capital expenditures	$	33.6	$	36.0	$	38.4	$	41.2
Rate base for expected capital expenditures (using range case described above)	$	33.3	$	35.1	$	37.0	$	39.2

For further information regarding the capital program see "Liquidity and Capital Resources—SCE—Capital Investment Plan."

RESULTS OF OPERATIONS

SCE

SCE's results of operations are derived mainly through two sources:

•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 earnings activities are revenue or penalties related to incentive mechanisms, other operating revenue, and regulatory charges or disallowances.

•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. 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. SCE earns no return on these activities.

Impact of 2018 GRC

In May 2019, the CPUC approved a decision in SCE's 2018 GRC. The revenue requirements in the 2018 GRC decision were retroactive to January 1, 2018. SCE recorded the prior period impact of the 2018 GRC decision in the second quarter of 2019 including an increase to earnings of $131 million from the application of the decision to revenue, depreciation expense and income tax expense, of which $65 million was attributable to 2018 and $66 million was attributable to first quarter of 2019 and an impairment of utility property, plant and equipment of $170 million ($123 million after-tax) related to disallowed historical capital expenditures.

The following table is a summary of SCE's results of operations for the periods indicated.

Three months ended September 30, 2020 versus September 30, 2019


	Three months ended September 30, 2020										Three months ended September 30, 2019
(in millions)	Earning Activities		Cost- Recovery Activities		Total Consolidated		Earning Activities		Cost- Recovery Activities		Total Consolidated
Operating revenue	$	2,126	$	2,509	$	4,635	$	1,832	$	1,900	$	3,732
Purchased power and fuel	—		1,817		1,817		—		1,708		1,708
Operation and maintenance	515		711		1,226		542		210		752
Wildfire-related claims, net of insurance recoveries	1,297		—		1,297		—		—		—
Wildfire Insurance Fund expense	85		—		85		67		—		67
Depreciation and amortization	489		—		489		459		—		459
Property and other taxes	113		—		113		98		—		98
Impairment and other	(28)		—		(28)		—		—		—
Other operating income	—		—		—		(1)		—		(1)
Total operating expenses	2,471		2,528		4,999		1,165		1,918		3,083
Operating (loss) income	(345)		(19)		(364)		667		(18)		649
Interest expense	(178)		(10)		(188)		(182)		(1)		(183)
Other income	54		29		83		39		19		58
(Loss) income before income taxes	(469)		—		(469)		524		—		524
Income tax benefit	(251)		—		(251)		(10)		—		(10)
Net (loss) income	(218)		—		(218)		534		—		534
Preferred and preference stock dividend requirements	46		—		46		31		—		31
Net (loss) income available for common stock	$	(264)	$	—	$	(264)	$	503	$	—	$	503
Net (loss) income available for common stock					$	(264)					$	503
Less: Non-core expense					(920)						(48)






Core earnings¹					$	656					$	551

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

Earning Activities

Earning activities were primarily affected by the following:

•Higher operating revenue of $294 million primarily due to the following:

•An increase in CPUC-related revenue of $230 million primarily due to the 2018 GRC decision's escalation mechanism and higher operating costs subject to balancing account treatment as a result of the approval of the GS&RP balancing account.

•An increase in FERC-related revenue of $69 million primarily due to $84 million of expected recoveries from customers for the FERC portion of wildfire related claims (see "Management Overview—Southern California Wildfires and Mudslides—2017/2018 Wildfire/Mudslide Events"), partially offset by an increase in revenue in the third quarter 2019 due to the settlement of SCE's 2018 FERC Formula Rate proceeding in 2019.

•Lower operation and maintenance costs of $27 million primarily due to the following:

•Decreased expenses of $148 million due to increased regulatory deferrals related to wildfire mitigation activities, including inspections, preventive maintenance, and vegetation management costs. Although higher wildfire-mitigation

costs were incurred in 2020, a higher proportion of these costs were deferred to wildfire mitigation memorandum accounts.

•Increased expenses of $93 million subject to balancing account treatment primarily due to the approval of the GS&RP balancing account.

•Increased expenses of $28 million primarily due to employee benefit expenses of $7 million, customer uncollectibles expense of $7 million as a result of the COVID-19 pandemic, and higher support function expenses.

•Charge of $1.3 billion recorded in 2020 for wildfire-related claims related to the 2017/2018 Wildfire/Mudslide Events (see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides).

•Higher Wildfire Insurance Fund expense of $18 million for amortization of contributions to the Wildfire Insurance Fund for insurance protection. See "Management Overview—Southern California Wildfires and Mudslides" for further information.

•Higher depreciation and amortization expense of $30 million primarily due to increased plant balances in 2020.

•Higher property and other taxes of $15 million primarily due to higher property assessed values in 2020.

•Lower impairment and other of $28 million due to a gain related to the sale of San Onofre nuclear fuel in 2020. Under the terms of the January 2018 settlement of the San Onofre Order Instituting Investigation proceeding, the gain on sale of the nuclear fuel will not be returned to customers.

•Higher other income of $15 million primarily due to higher AFUDC equity income and higher insurance benefits.

•Higher income tax benefit of $241 million primarily due to the impact of lower pre-tax income from the charge for wildfire-related claims related to the 2017/2018 Wildfire/Mudslide Events.

•Higher preferred and preference stock dividends of $15 million primarily due to a loss on redemption of preferred securities in 2020.

Cost-Recovery Activities

Cost-recovery activities were primarily affected by the following:

•Higher purchased power and fuel costs of $109 million primarily due to higher energy purchase volume and higher power price, partially offset by higher congestion revenue rights credits.

•Higher operation and maintenance costs of $501 million driven by the authorization to recover 2018 through June 2020 wildfire insurance costs above GRC authorized that had been deferred as regulatory assets increasing expenses. See "Management Overview—Wildfire Mitigation and Wildfire Insurance Expenses—Wildfire Expense Memorandum Account" for further information.

•Higher interest expense of $9 million primarily driven by the authorization to recover financing costs associated with incremental 2018 through June 2020 wildfire insurance expenses.

•Higher other income of $10 million primarily driven by higher net periodic benefit income related to the non-service cost components for SCE's other post-retirement benefit plans. See "Notes to Consolidated Financial Statements—Note 9. Compensation and Benefit Plans" for further information.

Nine months ended September 30, 2020 versus September 30, 2019


	Nine months ended September 30, 2020										Nine months ended September 30, 2019
(in millions)	Earning Activities		Cost- Recovery Activities		Total Consolidated		Earning Activities		Cost- Recovery Activities		Total Consolidated
Operating revenue	$	5,642	$	4,753	$	10,395	$	4,919	$	4,429	$	9,348
Purchased power and fuel	2		3,811		3,813		—		3,848		3,848
Operation and maintenance	1,801		1,019		2,820		1,555		637		2,192
Wildfire-related claims, net of insurance recoveries	1,303		—		1,303		—		—		—
Wildfire Insurance Fund expense	252		—		252		67		—		67
Depreciation and amortization	1,461		—		1,461		1,259		—		1,259
Property and other taxes	326		—		326		300		—		300
Impairment and other	(80)		—		(80)		166		—		166
Other operating income	—		—		—		(4)		—		(4)
Total operating expenses	5,065		4,830		9,895		3,343		4,485		7,828
Operating income	577		(77)		500		1,576		(56)		1,520
Interest expense	(565)		(10)		(575)		(548)		(1)		(549)
Other income	130		87		217		95		57		152
Income before income taxes	142		—		142		1,123		—		1,123
Income tax benefit	(300)		—		(300)		(183)		—		(183)
Net income	442		—		442		1,306		—		1,306
Preferred and preference stock dividend requirements	106		—		106		91		—		91
Net income available for common stock	$	336	$	—	$	336	$	1,215	$	—	$	1,215
Net income available for common stock					$	336					$	1,215
Less: Non-core expense					(994)						(99)






Core earnings¹					$	1,330					$	1,314

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

Earning Activities

Earning activities were primarily affected by the following:

•Higher operating revenue of $723 million primarily due to the following:

•An increase in CPUC-related revenue of $590 million primarily due to the 2018 GRC's decision escalation mechanism and the reduction to revenue in the second quarter of 2019 due to recording the 2018 impacts of the 2018 GRC decision and higher operating costs subject to balancing account treatment primarily as a result of the approval of the GS&RP balancing account.

•An increase in FERC-related revenue of $127 million primarily due to the $84 million of expected recoveries from customers for the FERC portion of wildfire-related claims (see "Management Overview—Southern California Wildfires and Mudslides—2017/2018 Wildfire/Mudslide Events") and higher operating costs subject to balancing account treatment, partially offset by an increase in revenue in the third quarter 2019 due to the settlement of SCE's 2018 FERC Formula Rate proceeding in 2019.

•Higher operation and maintenance costs of $246 million primarily due to:

•Increased expenses of $128 million subject to balancing account treatment primarily as a result of the approval of GS&RP balancing account.

•Increased expenses related to COVID-19 of $49 million, consisting of $16 million in labor and other expenses resulting from SCE’s response to the COVID-19 pandemic and $33 million of customer uncollectibles expense.

•Higher employee benefit expenses of $36 million resulting primarily from the payout of 2019 short-term incentive compensation and other employee benefit programs.

•The $25 million reduction to expenses primarily from the 2018 impact of adopting the 2018 GRC decision's change in capitalization rates, recorded in the second quarter of 2019.

•Higher wildfire insurance expenses of $23 million primarily due to the authorization to recover certain 2018 wildfire insurance expenses reducing expenses in 2019.

•Increased other expenses of $64 million including environmental remediation, legal costs and worker's compensation costs.

•Decreased expenses of $79 million due to increased regulatory deferrals related to wildfire-mitigation costs including inspections, preventive maintenance and vegetation management costs. Although higher wildfire-mitigation costs were incurred in 2020, a higher proportion of these costs were deferred to wildfire mitigation memorandum accounts.

•Higher Wildfire Insurance Fund expense of $185 million for amortization of contributions to the Wildfire Insurance Fund for insurance protection. See "Management Overview—Southern California Wildfires and Mudslides" for further information.

•Higher depreciation and amortization expense of $202 million primarily due to the 2018 impact of a change in depreciation rates and disallowed historical capital expenditures from adoption of the 2018 GRC decision, recorded in the second quarter of 2019, and increased plant balances in 2020.

•Higher property and other taxes of $26 million primarily due to higher property assessed values in 2020.

•Lower impairment and other of $246 million primarily due to an impairment of $170 million related to the disallowed historical capital expenditures as a result of 2018 GRC decision in 2019, discussed above, and a gain of $76 million related to the sale of San Onofre nuclear fuel in 2020. As noted above, the gain on the sale of nuclear fuel will not be returned to customers.

•Higher interest expense of $17 million primarily due to increased borrowings, partially offset by lower interest rates.

•Higher other income of $35 million primarily due to higher insurance benefits and higher AFUDC equity income.

•Higher income tax benefit of $117 million primarily due to the impact of lower pre-tax income from the charge for wildfire-related claims related to the 2017/2018 Wildfire/Mudslide Events, partially offset by the 2018 tax benefit of $80 million recorded in 2019 as a result of the 2018 GRC decision and a $69 million tax benefit recorded in 2019 related to changes in the allocation of deferred tax re-measurement between customers and shareholders.

•Higher preferred and preference stock dividends of $15 million primarily due to a loss on redemption of preferred securities in 2020.

Cost-Recovery Activities

Cost-recovery activities were primarily affected by the following:

•Lower purchased power and fuel costs of $37 million driven by higher congestion revenue right credits and contract amendments, partially offset by higher energy purchase volume. In addition, CAISO issued invoices that revised FERC tariffs for interest costs associated with scheduling coordinator activities, resulting in a generation surcharge of $59 million reflected as an additional purchased power expense and a transmission refund of $66 million as a reduction in operation and maintenance expense.

•Higher operation and maintenance costs of $382 million driven by the authorization to recover 2018 through June 2020 wildfire insurance costs above GRC authorized that had been deferred as regulatory assets increasing expenses (see "Management Overview—Wildfire Mitigation and Wildfire Insurance Expenses—Wildfire Expense Memorandum Account") and higher transmission access charges, partially offset by the CAISO refund of $66 million mentioned above.

•Higher interest expense of $9 million primarily driven by the authorization to recover financing costs associated with incremental 2018 through June 2020 wildfire insurance expenses.

•Higher other income of $30 million primarily driven by higher net periodic benefit income related to the non-service cost components for SCE's other post-retirement benefit plans. See "Notes to Consolidated Financial Statements—Note 9. Compensation and Benefit Plans" for further information.

Supplemental Operating Revenue Information

SCE's retail billed and unbilled revenue (excluding wholesale sales) was $4.3 billion and $3.5 billion for the three months ended September 30, 2020 and 2019, respectively, and $9.6 billion and $8.6 billion for the nine months ended September 30, 2020 and 2019, respectively.

The increase for the three months and nine months ended September 30, 2020 compared to the same periods in 2019 is primarily due to higher CPUC revenue due to the 2018 GRC decision's escalation mechanism and the approval of the GS&RP balancing account, higher FERC revenue due to expected recoveries from customers for the FERC portion of wildfire-related claims and higher cost-recovery activities related to authorization to recover 2018-2020 wildfire insurance costs that had been deferred as regulatory assets increasing expenses. See "—Earnings Activities" and "—Cost-Recovery Activities" for further details.

As a result of the CPUC-authorized decoupling mechanism, SCE earnings are not affected by changes in retail electricity sales.

Income Taxes

SCE's income tax benefit increased by $241 million and $117 million for the three and nine months ended September 30, 2020 compared to the same period in 2019.

The effective tax rates were (53.5)% and (1.9)% for the three months ended September 30, 2020 and 2019, respectively. The effective tax rates were (211.3)% and (16.3)% for the nine months ended September 30, 2020 and 2019, respectively. SCE's effective tax rate is below the federal statutory rate of 21% primarily due to CPUC's 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. The effective tax rate decrease for the three months ended September 30, 2020 compared to the same period in 2019 is primarily due to the impact of lower pre-tax income resulting from the charge of $1.2 billion for wildfire-related claims. The effective tax rate decrease for the nine months ended September 30, 2020 compared to the same period in 2019 is primarily due to the impact of lower pre-tax income, partially offset by the absence of tax benefit from the adoption of the 2018 GRC final decision and the absence of the 2019 changes in the allocation of deferred tax re-measurement between customers and shareholders that resulted from a CPUC resolution.

See "Notes to Consolidated Financial Statements—Note 8. Income Taxes" for a reconciliation of the federal statutory rate to the effective income tax rates.

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.

Loss from Operations

The following table summarizes the results of Edison International Parent and Other:


	Three months ended September 30,						Nine months ended September 30,
(in millions)	2020		2019		2020		2019
Edison Energy Group and subsidiaries	$	(3)	$	—	$	(32)	$	(4)

Corporate expenses and other subsidiaries	(21)		(32)		(91)		(70)
Total Edison International Parent and Other	$	(24)	$	(32)	$	(123)	$	(74)
Less: Non-core expense	—		—		(28)		—




Core losses¹	$	(24)	$	(32)	$	(95)	$	(74)

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

The loss from operations of Edison International Parent and Other decreased $8 million for the three months ended September 30, 2020 and increased $49 million for the nine months ended September 30, 2020 compared to the same period in 2019.

The decrease of losses for the three months ended September 30, 2020 is primarily due to increased tax benefits. The increase of losses for the nine months ended September 30, 2020 is primarily due to a goodwill impairment charge, stemming from the economic impact of COVID-19, of $34 million ($25 million after-tax) recorded in 2020 for Edison International Parent and Other related to Edison Energy and higher interest expense as a result of increased borrowings, partially offset by increased tax benefits.

LIQUIDITY AND CAPITAL RESOURCES

SCE

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 bank and capital markets. SCE's 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, dividend payments to and equity contributions from Edison International, obligations to preference shareholders, and the outcome of tax, regulatory and legal matters.

The COVID-19 pandemic may cause narrower access to, or increased costs of accessing, bank and capital markets. As a precaution, SCE brought forward debt issuances that had been planned for later in the year to provide additional financing flexibility given possible future market uncertainty. For further details, see "Management Overview—COVID-19" and "—Available Liquidity."

In the next 12 months, SCE expects to fund its cash requirements through operating cash flows, capital market financings, and equity contributions from Edison International Parent, as needed. SCE also has availability under its credit facilities to fund cash requirements.

SCE expects to finance the approximately $1.6 billion of AB 1054 Excluded Capital Expenditures by issuing securitized bonds. For further information, see "Management Overview—Southern California Wildfires and Mudslides." Prior to issuance of such bonds, other debt instruments are being used to temporarily finance the expenditures, including a term loan of $475 million and a 364-day $800 million revolving credit facility entered into during the first quarter of 2020.

In October 2020, SCE issued $350 million of refunding mortgage bonds. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements." The proceeds were used to fund the payment of wildfire claims exceeding insurance proceeds, including $1.2 billion paid under the September 2020 Subrogation Settlement. For further information, see "Management Overview—Southern California Wildfires and Mudslides."

SCE expects to issue additional debt to finance payments for future resolutions of claims related to the 2017/2018 Wildfire/Mudslide Events that exceed insurance. Edison International anticipates issuing approximately $1.0 billion of equity to invest in SCE, dependent on the timing of such payments, to enable SCE to issue the necessary debt and maintain investment grade credit ratings.

In the third quarter of 2020, SCE redeemed $120 million of cumulative preferred stock, which were all of the outstanding shares of SCE's preferred stock, and $180 million of SCE's Series G Preference Stock. For further details, see "Notes to Consolidated Financial Statements—Note 14. Equity." The redemption reduces the preferred equity component of SCE's capital structure from 9% to 5%, bringing it in line with the capital structure authorized in the 2020 Cost of Capital decision. For further information, see "Management Overview—2020 Cost of Capital Application" in the 2019 MD&A.

SCE's long-term issuer credit ratings are at investment grade levels. However, during the third quarter of 2020, the S&P rating outlooks for all three investor-owned utilities in California were revised to negative due to unprecedented wildfire activity throughout California in August and September of 2020. Despite 2020 wildfire activity, SCE's ratings outlook from Moody's and Fitch has remained stable as of September 2020, due to the reduced financial risk that wildfires pose to SCE following the enactment of AB 1054. For further information, see "Management Overview—Southern California Wildfires and Mudslides."

The following table summarizes SCE's current, long-term issuer credit ratings and outlook from the major credit rating agencies:

Moody's

Fitch

S&P

Long-term Issuer Credit Rating

Baa2

BBB-

BBB

Outlook

Stable

Negative

SCE's credit ratings may be further affected if, among other things, regulators fail to successfully implement AB 1054 in a consistent and credit supportive manner or the Wildfire Insurance Fund is depleted by claims from catastrophic wildfires. The broad economic impacts of the COVID-19 pandemic may also affect SCE's credit rating. For further information see "Management Overview—COVID-19" and "Risk Factors." Credit rating downgrades increase the cost and may impact the availability of short-term and long-term borrowings, including commercial paper, credit facilities, bond financings or other borrowings. In addition, some of SCE's power procurement contracts require SCE to pay related liabilities or post additional collateral if SCE's credit rating were to fall below investment grade from the major credit rating agencies. Incremental collateral requirements for power procurement contracts resulting from a potential downgrade of SCE's credit rating to below investment grade are $53 million as of September 30, 2020. In addition, if SCE's credit rating falls below investment grade, it may be required to post up to $50 million in collateral, in connection with its environmental remediation obligations, within 120 days of the end of the fiscal year in which the downgrade occurs. Furthermore, if SCE was downgraded below investment grade, counterparties may also institute new collateral requirements for future transactions. For further details, see "—Margin and Collateral Deposits."

Available Liquidity

At September 30, 2020, SCE had cash on hand of $30 million.

At September 30, 2020, SCE had approximately $2.2 billion available under its $3.0 billion revolving credit facility. The credit facility is available for borrowing needs until May 2024 and may be extended for one additional year with the lenders' approval. The aggregate maximum principal amount under the credit facility may be increased up to $4.0 billion, provided additional lender commitments are obtained.

In the first quarter of 2020, SCE entered into a 364-day revolving credit facility for $800 million. The credit facility is available for borrowing needs until March 2021 and may be extended for two 364-day periods, at the lenders' discretion. The aggregate maximum principal amount under the revolving credit facility may be increased up to $1.1 billion, provided that additional lender commitments are obtained. At September 30, 2020, SCE had $146 million available under the facility. The facility was used to fund AB 1054 Excluded Capital Expenditures until issuance of securitized bonds. In the first quarter of 2020, SCE also borrowed $475 million under a term loan agreement due in March 2021 to repay commercial paper borrowings temporarily used to fund AB 1054 Excluded Capital Expenditures.

In the second quarter of 2020, SCE entered into a 364-day revolving credit facility for $1.5 billion. The credit facility is available for borrowing needs until May 2021. At September 30, 2020, there were no borrowings under the revolving credit facility. The revolving credit facility is available for general corporate purposes, including to support liquidity needs that may arise as a result of undercollections due to the COVID-19 pandemic and related consumer protection measures that SCE has put in place.

In the first quarter of 2020, SCE issued a total of $1.7 billion of first and refunding mortgage bonds. The proceeds were used to repay SCE's commercial paper borrowings and repurchase tax-exempt pollution control bonds that were subject to mandatory redemption. SCE continues to hold the tax-exempt pollution control bonds and plans to re-market them subject to market conditions. In the second quarter of 2020, SCE issued $600 million of first and refunding mortgage bonds due in 2025. The proceeds were used to finance undercollections of revenues SCE is authorized to recover from customers through regulatory balancing accounts. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."

SCE may finance balancing account undercollections and working capital requirements to support operations and capital expenditures with commercial paper, its credit facilities or other borrowings, subject to availability in the bank and capital markets. As necessary, SCE will utilize its available liquidity, capital market financings, other borrowings or parent company contributions to SCE equity in order to meet its obligations as they become due, including any potential costs related to the 2017/2018 Wildfire/Mudslide Events. For further information, see "Management Overview—Southern California Wildfires and Mudslides."

Debt Covenant

SCE's credit facilities and term loan require a debt to total capitalization ratio as defined in the applicable agreements of less than or equal to 0.65 to 1. At September 30, 2020, SCE's debt to total capitalization ratio was 0.51 to 1.

At September 30, 2020, SCE was in compliance with all financial covenants that affect access to capital.

Capital Investment Plan

Major Transmission Projects

Riverside Transmission Reliability Project

In October 2018, the CPUC issued an environmental report that identified a new route alternative, as the environmentally preferred project and proposed an additional underground section of the proposed 220-kV power line. In March 2020, the alternative project with revised scope and an updated cost of $584 million was approved by CPUC. The scheduled in-service date of the project has been extended from 2024 to 2026.

In June 2020, SCE filed a petition with the FERC seeking authorization to recover SCE's prudently incurred costs if the project is cancelled or abandoned for reasons beyond SCE’s control, and inclusion of 100% of the project’s network transmission Construction Work In Progress in transmission rate base during the construction period. In September 2020, the FERC issued orders granting SCE’s requests. SCE is allowed to seek recovery of 100% of all prudently incurred costs after September 17, 2020 and 50% of prudently incurred costs prior to that date.

Eldorado-Lugo-Mohave Upgrade

In April 2019, as directed by the CPUC, SCE filed an amended application for a certificate of public convenience and necessity ("CPCN") with the CPUC, which included total project costs of $257 million. A subsequent change to the project work scope reduced the project total cost to $246 million. In August 2020, the CPUC approved the CPCN for the project. The project is expected to be operational by 2022.

Grid Development - Transportation Electrification

Charge Ready Program

In August 2020, the CPUC issued a final decision approving SCE’s Charge Ready 2 application with certain modifications. The final decision authorized a budget of $436 million ($314 million capital) in 2018 dollars for a four-year program to support approximately 37,800 light-duty electric vehicle charging ports through an infrastructure program, rebates for charging infrastructure in new multi-unit dwelling construction, and marketing, education, and outreach. The program is expected to add approximately $400 million to SCE's rate base by 2026.

SCE Dividends

CPUC holding company rules require that SCE's dividend policy be established by SCE's Board of Directors on the same basis as if SCE were a stand-alone utility company, and that the capital requirements of SCE, as deemed to be necessary to meet SCE's electricity service obligations, shall receive first priority from the Boards of Directors of both Edison International and SCE. In addition, the CPUC regulates SCE's capital structure which limits the dividends it may pay to its shareholders.

Effective January 1, 2020, the common equity component of SCE's CPUC authorized capital structure was increased from 48% to 52% on a weighted average basis over the January 1, 2020 to December 31, 2022 compliance period ("the Capital Structure Compliance Period"). For further information, see "Management Overview—2020 Cost of Capital Application" in the 2019 MD&A. Under AB 1054, the impact of SCE's contributions to the Wildfire Insurance Fund are excluded from the measurement of SCE's CPUC-jurisdictional authorized capital structure. For further information, see "Management Overview—Southern California Wildfires and Mudslides."

In May 2020, the CPUC issued a decision on SCE's application to the CPUC for waiver of compliance with its equity ratio requirement, that allows SCE to exclude from its equity ratio calculations (i) net charges accrued in connection with the 2017/2018 Wildfire/Mudslide Events and (ii) debt issued for the purpose of paying claims related to the 2017/2018 Wildfire/Mudslide Events up to an amount equal to the net charges accrued in connection with the 2017/2018 Wildfire/Mudslide Events. The temporary exclusion will lapse on May 7, 2022 or when a determination regarding cost recovery for the 2017/2018 Wildfire/Mudslide Events is made, whichever comes earlier. If the CPUC has not made a determination regarding cost recovery by May 7, 2022, SCE is permitted to file another application for a waiver of compliance with its equity ratio

requirement. In the interim, SCE is required to notify the CPUC if an adverse financial event reduces SCE's spot equity ratio by more than one percent from the level most recently filed with the CPUC in the proceeding. The last spot equity ratio SCE filed with the CPUC in the proceeding did not exclude the then $1.8 billion net charge and was 45.2% as of December 31, 2018 (at the time the common equity component of SCE's CPUC authorized capital structure was required to remain at or above 48% on a weighted average basis over the applicable 37-month period). SCE’s spot equity ratio on December 31, 2018 would have been 48.7% had the $1.8 billion net charge at December 31, 2018 been excluded, therefore SCE will notify the CPUC if its spot ratio drops below 47.7% in any quarter. For further information, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides."

SCE monitors its compliance with the CPUC’s equity ratio requirement based on the weighted average of the common equity component of SCE’s CPUC authorized capital structure over the Capital Structure Compliance Period using its actual capital structure from the beginning of the Capital Structure Compliance Period through the reporting date together with forecasted performance and expected financing activities for the remainder of the Capital Structure Compliance Period. SCE expects to be compliant with its CPUC authorized capital structure at December 31, 2022.

As a California corporation, SCE's ability to pay dividends is also governed by the California General Corporation Law. California law requires that for a dividend to be declared: (a) retained earnings must equal or exceed the proposed dividend, or (b) immediately after the dividend is made, the value of the corporation's assets must exceed the value of its liabilities plus amounts required to be paid, if any, in order to liquidate stock senior to the shares receiving the dividend. Additionally, a California corporation may not declare a dividend if it is, or as a result of the dividend would be, likely to be unable to meet its liabilities as they mature. Prior to declaring dividends, SCE's Board of Directors evaluates available information, including when applicable, information pertaining to the 2017/2018 Wildfire/Mudslide Events, to ensure that the California law requirements for the declarations are met.

The timing and amount of future dividends are also dependent on a number of other factors including SCE's requirements to fund other obligations and capital expenditures, its ability to access the capital markets, and generate operating cash flows and earnings. If SCE incurs significant costs related to catastrophic wildfires, including the 2017/2018 Wildfire/Mudslide Events, and is unable to recover such costs through insurance, the Wildfire Insurance Fund (for fires after July 12, 2019), or from customers or is unable to access capital markets on reasonable terms, SCE may be limited in its ability to pay future dividends to Edison International and its preference shareholders.

Margin and Collateral Deposits

Certain derivative instruments, power and energy procurement contracts and other contractual arrangements contain collateral requirements. In addition, certain environmental remediation obligations require financial assurance that may be in the form of collateral postings. Future collateral requirements may differ from the requirements at September 30, 2020 due to the addition of incremental power and energy procurement contracts with collateral requirements, if any, the impact of changes in wholesale power and natural gas prices on SCE's contractual obligations and the impact of SCE's credit ratings falling below investment grade.

The table below provides the amount of collateral posted by SCE to its counterparties as well as the potential collateral that would have been required as of September 30, 2020 if SCE's credit rating had been downgraded to below investment grade as of that date. The table below also provides the potential collateral that could be required due to adverse changes in wholesale power and natural gas prices over the remaining lives of existing power and energy procurement contracts.


(in millions)
Collateral posted as of September 30, 2020¹	$	201
Incremental collateral requirements for purchase power and fuel contracts resulting from a potential downgrade of SCE's credit rating to below investment grade²	53
Incremental collateral requirements for purchase power and fuel contracts resulting from adverse market price movement³	14
Posted and potential collateral requirements	$	268

¹Net collateral provided to counterparties and other brokers consisted of $201 million in letters of credit and surety bonds.

²Power and fuel contract counterparties may also institute new collateral requirements, applicable to future transactions, at the time of a downgrade not reflected above. Furthermore, SCE may also be required to post up to $50 million in collateral in connection with its environmental remediation obligations, within 120 days of the end of the fiscal year in which the downgrade occurs.

³Incremental collateral requirements were based on potential changes in SCE's forward positions as of September 30, 2020 due to adverse market price movements over the remaining lives of existing power contracts using a 95% confidence level.

Decommissioning of San Onofre

In August 2020, SCE completed the transfer of spent nuclear fuel to dry cask storage in the Independent Spent Fuel Storage Installation and commenced major decommissioning activities at San Onofre.

In March 2020, the CPUC approved disbursements from SCE's nuclear decommissioning trusts to cover forecasted 2020 decommissioning costs, of which SCE's share is $406 million.

Edison International Parent and Other

In the next 12 months, Edison International expects to fund its net cash requirements through cash on hand, dividends from SCE, and capital market and bank financings, including by issuing additional debt and equity. Edison International may finance its ongoing cash requirements, including common stock dividends, working capital requirements, payment of obligations, and capital investments, including capital contributions to subsidiaries, with short-term or other financings, subject to availability in the bank and capital markets.

The COVID-19 pandemic may cause narrower access to, or increased costs of accessing, bank and capital markets. As a precaution, Edison International brought forward debt and equity issuances that had been planned for later in the year to provide additional financing flexibility given possible future market uncertainty. For further details, see "Management Overview—COVID-19."

At September 30, 2020, Edison International Parent had cash on hand of $62 million and no borrowings on its $1.5 billion revolving credit facility. The credit facility is available for borrowing needs until May 2024, and may be extended for one additional year with the lenders' approval. Under certain circumstances, the aggregate maximum principal amount under the credit facility may be increased up to $2.0 billion, provided additional lender commitments are obtained.

In the first quarter 2020, Edison International Parent borrowed $800 million under a term loan agreement. The proceeds were used for general corporate purposes. In May 2020, Edison International issued approximately $800 million of common stock in a registered direct offering. The proceeds were used to pay off the outstanding balance of the $800 million term loan mentioned above and for general corporate purposes. For further details, see "Notes to Consolidated Financial Statements—Note 14. Equity."

In the second quarter of 2020, Edison International Parent issued $400 million of senior notes due 2025. The proceeds were used to repay all $400 million of Edison International Parent's outstanding Senior Notes due 2020. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."

Edison International Parent and Other's liquidity and its ability to pay operating expenses and pay dividends to common shareholders are dependent on access to the bank and capital markets, dividends from SCE, realization of tax benefits and its ability to meet California law requirements for the declaration of dividends. Prior to declaring dividends, Edison International's Board of Directors evaluates available information, including when applicable, information pertaining to the 2017/2018 Wildfire/Mudslide Events, to ensure that the California law requirements for the declarations are met. For information on the California law requirements on the declaration of dividends, see "—SCE—SCE Dividends." Edison International intends to maintain its target payout ratio of 45% – 55% of SCE's core earnings, subject to the factors identified above.

Edison International Parent expects to make further capital contributions to SCE in 2020 to increase the common equity component of SCE's capital structure, after deducting CPUC allowed exclusions, to 52% on a weighted average basis over the Capital Structure Compliance Period. For further information, see "—SCE—SCE Dividends."

In addition to the capital contributions described above, Edison International anticipates issuing approximately $1.0 billion of equity to invest in SCE. The timing of such issuance will correspond to SCE's future resolutions of claims related to the 2017/2018 Wildfire/Mudslide Events. Such transactions are expected to enable SCE to issue the necessary debt and maintain investment grade credit ratings at SCE and Edison International.

Edison International Parent's credit facility requires a consolidated debt to total capitalization ratio as defined in the applicable agreements of less than or equal to 0.70 to 1. At September 30, 2020, Edison International Parent's consolidated debt to total capitalization ratio was 0.58 to 1.

At September 30, 2020, Edison International Parent was in compliance with all financial covenants that affect access to capital.

Edison International Parent's long-term issuer credit ratings are at investment grade levels. However, during the third quarter of 2020, the S&P rating outlooks for all three investor-owned utilities in California were revised to negative due to

unprecedented wildfire activity throughout California in August and September of 2020. Edison International Parent's ratings outlook from Moody's and Fitch has remained stable despite 2020 wildfire activity due to the reduced financial risk that wildfires pose to SCE following enactment of AB 1054. For further information, see "Management Overview—Southern California Wildfires and Mudslides."

The following table summarizes Edison International Parent's current long-term issuer credit ratings and outlook from the major credit rating agencies:

Moody's

Fitch

S&P

Long-term Issuer Credit Rating

Baa3

BBB-

BBB

Outlook

Stable

Negative

Edison International Parent's credit ratings may be further affected if, among other things, regulators fail to successfully implement AB 1054 in a consistent and credit supportive manner or the Wildfire Insurance Fund is depleted by claims from catastrophic wildfires. The broad economic impacts of the COVID-19 pandemic may also affect Edison International's credit rating. For further information see "Management Overview—COVID-19" and "Risk Factors." Credit rating downgrades increase the cost and may impact the availability of short-term and long-term borrowings, including commercial paper, credit facilities, note financings or other borrowings.

Historical Cash Flows

SCE


	Nine months ended September 30,
(in millions)	2020		2019
Net cash provided by (used in) operating activities	$	1,162	$	(639)
Net cash provided by financing activities	2,530		4,039
Net cash used in investing activities	(3,686)		(3,336)
Net increase in cash, cash equivalents and restricted cash	$	6	$	64

Net Cash Provided by (Used in) 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 nine months ended September 30, 2020 and 2019.


	Nine months ended September 30,						Change in cash flows
(in millions)	2020		2019		2020/2019
Net income	$	442	$	1,306
Non-cash items¹	1,325		1,277
Subtotal	1,767		2,583		$	(816)
Contributions to Wildfire Insurance Fund	—		(2,363)		2,363
Changes in cash flow resulting from working capital²	(720)		(247)		(473)
Regulatory assets and liabilities	(1,074)		(470)		(604)
Wildfire related claims³	1,267		—		1,267
Other noncurrent assets and liabilities⁴	(78)		(142)		64
Net cash provided by (used in) operating activities	$	1,162	$	(639)	$	1,801

¹ Non-cash items include depreciation and amortization, allowance for equity during construction, impairment and other, deferred income taxes, Wildfire Insurance Fund amortization expenses and other.

² Changes in working capital items include receivables, accrued unbilled revenue, prepaid expenses, inventory, accounts payable, tax receivables and payables, and other current assets and liabilities.

³ Represents an increase in estimated wildfire-related claims of $1.3 billion in the third quarter of 2020.

⁴ Includes changes in wildfire-related insurance receivables. Also includes nuclear decommissioning trusts. See "Nuclear Decommissioning Activities" below for further information.

Net cash provided by (used in) operating activities was impacted by the following:

Net income and non-cash items decreased in 2020 by $816 million primarily due to recognizing a net $1.2 billion charge ($874 million after-tax) related to wildfire-related claims in September 2020, partially offset by higher CPUC-related revenue due to the escalation mechanism as set forth in the 2018 GRC decision. Net cash used in operating activities was also impacted by cash outflow of $2.4 billion related to SCE's contribution to the Wildfire Insurance Fund in September 2019.

Net cash outflow for working capital was $720 million and $247 million during the nine months ended September 30, 2020 and 2019, respectively. Net cash outflow for working capital increased from 2019 to 2020 primarily due to increases in receivables from customers and accrued unbilled revenue of $779 million in 2020 and $533 million in 2019, respectively, partially offset by increases in payables of $156 million in 2020 and $270 million in 2019. Net cash outflow for working capital in both periods was impacted by insurance premium payments of $470 million and $453 million for wildfire-related coverage in 2020 and 2019, respectively.

Net cash used in regulatory assets and liabilities, including changes in net undercollections of balancing accounts was $1.1 billion and $470 million during the nine months ended September 30, 2020 and 2019, respectively. SCE has a number of balancing and memorandum accounts, which impact cash flows based on differences between timing of collection of amounts through rates and accrual expenditures. Cash flows were primarily impacted by the following:

2020

•Net undercollections of BRRBA were $420 million at September 30, 2020, compared to net overcollections of $328 million at December 31, 2019. Net undercollections increased by $748 million primarily due to refunds of prior overcollections (including incremental tax benefits and overcollections of distribution revenue that are being refunded over an 18-month period, starting in July 2019, as part of SCE's 2018 GRC decision) and reclassification of approximately $500 million in undercollections from WEMA to be collected over a two-year period, starting October 2020, partially offset by current year overcollections due to higher distribution revenue primarily driven by higher residential usage.

•Undercollections of $193 million related to wildfire-related expenses that are probable of future recovery from customers, including wildfire risk mitigation costs, insurance premiums, service restoration and damage repair costs, partially offset by an approximately $500 million reclassification to BRRBA as discussed above. See "Notes to Consolidated Financial Statements—Note 11. Regulatory Assets and Liabilities" for further information.

•Net overcollections of FERC balancing accounts decreased by $94 million primarily due to a refund of prior year overcollections, $84 million expected recoveries from FERC customers related to 2017/2018 Wildfire/Mudslide Events and higher expenses related to wildfire and vegetation management, partially offset by overcollections due to current year billing at a higher ROE than approved in the 2019 Formula Rate Settlement.

•Net undercollections for ERRA, PABA and the New System Generation Balancing Account decreased by $154 million primarily due to recovery of prior ERRA and PABA undercollections, partially offset by undercollections in 2020 due to higher than forecasted power purchase price, lower than forecasted sales volume in current year, and refunds of prior overcollections from the New System Generation Balancing Account.

•Undercollections of $107 million related to incremental costs associated with COVID-19, primarily related to customer uncollectibles, sequestering certain SCE employees and coordination of SCE's response to the emergency. See "Notes to Consolidated Financial Statements—Note 11. Regulatory Assets and Liabilities" for further information.

2019

•BRRBA overcollections decreased by $33 million primarily due to refunds of prior overcollections (including incremental tax benefits), offset by distribution revenue previously collected from customers in 2019 and 2018 that began being refunded over an 18-month period, starting in July 2019, as part of SCE's 2018 GRC final decision.

•The portfolio allocation balancing account was established in May 2019 to determine and pro-ratably recover from responsible bundled service and departing load customers the “above-market” costs of all generation resources that are eligible for cost recovery. Net undercollections for ERRA, PABA and the new system generation program decreased by $93 million primarily due to recovery of prior ERRA undercollections and overcollections of generation revenue occurring in 2019 and 2018 that began being refunded over an 18-month period, starting in July 2019, as part of SCE's 2018 GRC final decision. The cash inflow was partially offset by lower sales than forecasted in rates, higher than forecasted power and gas prices experienced in 2019, charges from CPUC-authorized contract terminations and refunds of prior overcollections from the new system generation program.

•Elimination of approximately $360 million in a regulatory liability that was established in 2018 to record adjustments associated with the delay in the 2018 GRC decision. In May 2019, the CPUC approved the final decision in SCE's 2018 GRC, resulting in 2019 and 2018 overcollections being refunded to customers through BRRBA and PABA, as discussed above.

•Undercollections of $234 million related to wildfire-related expenses that are probable of future recovery from customers, including risk mitigation costs and insurance premiums. See "Notes to Consolidated Financial Statements—Note 11. Regulatory Assets and Liabilities" for further information.

•Higher cash due to $141 million of overcollections related to the timing of greenhouse gas auction revenue and low carbon fuel standard credits sales, and the related refunds and rebates to eligible customers.

Cash flows used in other noncurrent assets and liabilities were primarily related to SCE's payments of decommissioning costs ($164 million in 2020 and $126 million in 2019, respectively), partially offset by net earnings from nuclear decommissioning trust investments ($23 million in 2020 and $19 million in 2019, respectively). See "Nuclear Decommissioning Activities" below for further discussion. Also includes wildfire related insurance recovery of $73 million in 2020.

Net Cash Provided by Financing Activities

The following table summarizes cash provided by financing activities for the nine months ended September 30, 2020 and 2019. Issuances of debt are discussed in "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."


	Nine months ended September 30,
(in millions)	2020		2019
Issuances of first and refunding mortgage bonds, plus premium and net of discount and issuance costs	$	2,330	$	2,306
Long-term debt repaid or repurchased	(698)		(81)
Term loan and revolving credit facility borrowing, net of repayment	1,129		—


Redemptions of preferred and preference stock	(308)		—
Short-term debt financing, net	73		(721)
Capital contribution from Edison International Parent	1,107		3,050
Payment of common stock dividends to Edison International	(1,007)		(400)
Payment of preferred and preference stock dividends	(97)		(96)
Other	1		(19)
Net cash provided by financing activities	$	2,530	$	4,039

Net Cash Used in Investing Activities

Cash flows used in investing activities are primarily due to capital expenditures related to transmission and distribution investments ($3.9 billion and $3.5 billion for the nine-month periods ended September 30, 2020 and 2019, respectively). In addition, SCE had a net redemption of nuclear decommissioning trust investments of $123 million and $114 million during the nine months ended September 30, 2020 and 2019, respectively. See "Nuclear Decommissioning Activities" below for further discussion.

Nuclear Decommissioning Activities

SCE's statement of cash flows includes nuclear decommissioning activities, which are reflected in the following line items:


	Nine months ended September 30,
(in millions)	2020		2019
Net cash used in operating activities:
Net earnings from nuclear decommissioning trust investments	$	23	$	19
SCE's decommissioning costs	(164)		(126)
Net cash provided by investing activities:
Proceeds from sale of investments	4,754		3,354
Purchases of investments	(4,631)		(3,240)
Net cash impact	$	(18)	$	7

Net cash used in operating activities relates to interest and dividends less administrative expenses, taxes and SCE's decommissioning costs. Investing activities represent the purchase and sale of investments within the nuclear decommissioning trusts, including the reinvestment of earnings from nuclear decommissioning trust investments. The net cash impact reflects timing of decommissioning payments ($164 million in 2020 and $126 million in 2019, respectively) and reimbursements to SCE from the nuclear decommissioning trust ($146 million and $133 million in 2020 and 2019, respectively).

Edison International Parent and Other

The table below sets forth condensed historical cash flow from operations for Edison International Parent and Other, including intercompany eliminations.


	Nine months ended September 30,
(in millions)	2020		2019
Net cash used in operating activities	$	(91)	$	(178)
Net cash provided by financing activities	117		519
Net cash used in investing activities	(8)		(9)
Net increase in cash and cash equivalents	$	18	$	332

Net Cash Used in Operating Activities

Net cash used in operating activities was impacted by the following:

•$91 million and $77 million cash outflow from operating activities in 2020 and 2019, respectively, primarily due to payments relating to interest and operating costs.

•$101 million cash outflow related to intercompany tax allocation payments in 2019.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was as follows:


	Nine months ended September 30,
(in millions)	2020		2019
Dividends paid to Edison International common shareholders	$	(691)	$	(594)
Dividends received from SCE	1,007		400
Capital contributions to SCE	(1,107)		(3,050)
Issuance of long-term debt, net of discount and issuance costs	396		596
Repayment of long-term debt	(400)		—
Issuance of common stock	896		2,165
Issuance of term loan, net of repayment	—		1,000


Other	16		2
Net cash provided by financing activities	$	117	$	519

Contingencies

SCE has contingencies related to wildfire and mudslide events, wildfire insurance, environmental remediation, nuclear insurance, spent nuclear fuel and the Tehachapi Transmission Project, which are discussed in "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies."

MARKET RISK EXPOSURES

Edison International's and SCE's primary market risks are described in the 2019 Form 10-K. 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 4. Fair Value Measurements" and "—Note 6. Derivative Instruments."

Commodity Price Risk

SCE records derivative instruments on its consolidated balance sheets as either assets or liabilities measured at fair value unless otherwise exempted from derivative treatment as normal purchases or sales. The fair value of outstanding derivative instruments used to mitigate exposure to commodity price risk was reflected as a net asset of $48 million and $86 million on SCE's consolidated balance sheets at September 30, 2020 and December 31, 2019, respectively. For further discussion of fair value measurements and the fair value hierarchy, see "Notes to Consolidated Financial Statements—Note 4. Fair Value Measurements" and "— Note 6. Derivative Instruments."

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 of counterparties based on credit ratings 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. Based on SCE's policies and risk exposures related to credit, SCE does not anticipate a material adverse effect on their financial statements as a result of counterparty nonperformance. At September 30, 2020, SCE's power and gas trading counterparty credit risk exposure was $47 million, of which $44 million is associated with entities that have an investment grade rating of A or higher. SCE assigns a credit rating to counterparties based on the lower of a counterparty's S&P or Moody's rating. At September 30, 2020, the majority of SCE's power and gas trading counterparty credit risk exposure was to CAISO market participants. The broad economic impacts of the COVID-19 pandemic are still emerging and may increase credit risk across CAISO market participants, as of September 30, 2020, no impacts had been noted.

For more information related to credit risks, see "Notes to Consolidated Financial Statements—Note 6. Derivative Instruments."

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

For a discussion of Edison International's and SCE's critical accounting policies, see "Critical Accounting Estimates and Policies" in the year-ended 2019 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 this section is included in the MD&A under the heading "Market Risk Exposures" and is incorporated herein by reference.

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FINANCIAL STATEMENTS


Consolidated Statements of Income	Edison International

	Three months ended September 30,						Nine months ended September 30,
(in millions, except per-share amounts, unaudited)	2020		2019		2020		2019
Total operating revenue	$	4,644	$	3,741	$	10,421	$	9,377
Purchased power and fuel	1,817		1,708		3,813		3,848
Operation and maintenance	1,248		774		2,885		2,251
Wildfire-related claims, net of insurance recoveries	1,297		0		1,303		0
Wildfire Insurance Fund expense	85		67		252		67
Depreciation and amortization	490		459		1,463		1,260
Property and other taxes	114		99		328		302
Impairment and other	(28)		0		(46)		166
Other operating income	0		(2)		0		(5)
Total operating expenses	5,023		3,105		9,998		7,889
Operating (loss) income	(379)		636		423		1,488

Interest expense	(222)		(214)		(676)		(619)
Other income	84		58		217		151
(Loss) income before income taxes	(517)		480		(36)		1,020
Income tax benefit	(275)		(22)		(355)		(212)


Net (loss) income	(242)		502		319		1,232
Preferred and preference stock dividend requirements of SCE	46		31		106		91

Net (loss) income attributable to Edison International common shareholders	$	(288)	$	471	$	213	$	1,141




Basic (loss) earnings per share:
Weighted average shares of common stock outstanding	378		347		371		333


Basic (loss) earnings per common share attributable to Edison International common shareholders	$	(0.76)	$	1.36	$	0.57	$	3.43
Diluted (loss) earnings per share:
Weighted average shares of common stock outstanding, including effect of dilutive securities	378		349		372		334


Diluted (loss) earnings per common share attributable to Edison International common shareholders	$	(0.76)	$	1.35	$	0.57	$	3.42

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


Consolidated Statements of Comprehensive Income					Edison International

	Three months ended September 30,						Nine months ended September 30,
(in millions, unaudited)	2020		2019		2020		2019
Net (loss) income	$	(242)	$	502	$	319	$	1,232
Other comprehensive income, net of tax:
Pension and postretirement benefits other than pensions:
Amortization of net loss included in net income	2		2		6		5

Other comprehensive income, net of tax	2		2		6		5
Comprehensive (loss) income	(240)		504		325		1,237
Less: Comprehensive income attributable to noncontrolling interests	46		31		106		91
Comprehensive (loss) income attributable to Edison International	$	(286)	$	473	$	219	$	1,146

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


Consolidated Balance Sheets	Edison International

(in millions, unaudited)	September 30, 2020		December 31, 2019
ASSETS
Cash and cash equivalents	$	92	$	68
Receivables, less allowances of $142 and $50 for uncollectible accounts at respective dates	1,399		788
Accrued unbilled revenue	708		488
Insurance receivable	843		0
Income tax receivables	72		118
Inventory	387		364
Prepaid expenses	338		214

Regulatory assets	1,530		1,009
Wildfire Insurance Fund contributions	323		323
Other current assets	163		188

Total current assets	5,855		3,560
Nuclear decommissioning trusts	4,650		4,562
Other investments	85		64
Total investments	4,735		4,626
Utility property, plant and equipment, less accumulated depreciation and amortization of $10,561 and $9,958 at respective dates	46,294		44,198
Nonutility property, plant and equipment, less accumulated depreciation of $92 and $86 at respective dates	176		87
Total property, plant and equipment	46,470		44,285

Regulatory assets	6,446		6,088
Wildfire Insurance Fund contributions	2,525		2,767
Operating lease right-of-use assets	1,112		693
Other long-term assets	1,413		2,363
Total long-term assets	11,496		11,911









Total assets	$	68,556	$	64,382

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


Consolidated Balance Sheets	Edison International

(in millions, except share amounts, unaudited)	September 30, 2020		December 31, 2019
LIABILITIES AND EQUITY
Short-term debt	$	1,751	$	550
Current portion of long-term debt	1,029		479
Accounts payable	1,691		1,752


Customer deposits	259		302

Regulatory liabilities	801		972
Current portion of operating lease liabilities	210		80
Wildfire-related claims	1,192		0
Other current liabilities	1,683		1,388

Total current liabilities	8,616		5,523
Long-term debt	18,958		17,864
Deferred income taxes and credits	5,161		5,078

Pensions and benefits	641		674
Asset retirement obligations	2,988		3,029
Regulatory liabilities	8,089		8,385
Operating lease liabilities	902		613
Wildfire-related claims	4,643		4,568
Other deferred credits and other long-term liabilities	2,909		3,152
Total deferred credits and other liabilities	25,333		25,499
Total liabilities	52,907		48,886
Commitments and contingencies (Note 12)

Common stock, 0 par value (800,000,000 shares authorized; 378,512,829 and 361,985,133 shares issued and outstanding at respective dates)	5,930		4,990
Accumulated other comprehensive loss	(63)		(69)
Retained earnings	7,881		8,382
Total Edison International's common shareholders' equity	13,748		13,303
Noncontrolling interests – preferred and preference stock of SCE	1,901		2,193

Total equity	15,649		15,496








Total liabilities and equity	$	68,556	$	64,382

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


Consolidated Statements of Cash Flows	Edison International

	Nine months ended September 30,
(in millions, unaudited)	2020		2019
Cash flows from operating activities:
Net income	$	319	$	1,232


Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization	1,512		1,316
Allowance for equity during construction	(87)		(75)
Impairment and other	(46)		166
Deferred income taxes	(344)		(221)
Wildfire Insurance Fund amortization expense	252		67
Other	31		21
Nuclear decommissioning trusts	(123)		(114)
Contributions to Wildfire Insurance Fund	0		(2,363)
Changes in operating assets and liabilities:
Receivables	(556)		(383)
Inventory	(24)		(68)
Accounts payable	7		284
Tax receivables and payables	197		163
Other current assets and liabilities	(311)		(340)

Regulatory assets and liabilities, net	(1,074)		(470)
Wildfire-related insurance receivable	73		0
Wildfire-related claims	1,267		0
Other noncurrent assets and liabilities	(22)		(32)


Net cash provided by (used in) operating activities	1,071		(817)
Cash flows from financing activities:
Long-term debt issued, plus premium and net of discount and issuance costs of $26 and $2 for the respective periods	2,726		2,902
Long-term debt repaid or repurchased	(1,098)		(81)
Term loan and revolving credit facility borrowing	1,929		1,750
Term loan repaid	(800)		(750)
Common stock issued	896		2,165

Preferred and preference stock redeemed	(308)		0
Short-term debt financing, net	73		(722)
Payments for stock-based compensation	(3)		(64)
Receipts from stock option exercises	14		51
Dividends and distribution to noncontrolling interests	(97)		(96)
Dividends paid	(691)		(594)
Other	6		(3)


Net cash provided by financing activities	2,647		4,558
Cash flows from investing activities:
Capital expenditures	(3,897)		(3,497)
Proceeds from sale of nuclear decommissioning trust investments	4,754		3,354
Purchases of nuclear decommissioning trust investments	(4,631)		(3,240)


Proceeds from sale of San Onofre nuclear fuel	86		4
Other	(6)		34


Net cash used in investing activities	(3,694)		(3,345)


Net increase in cash, cash equivalents and restricted cash	24		396
Cash, cash equivalents and restricted cash at beginning of period	70		152
Cash, cash equivalents and restricted cash at end of period	$	94	$	548

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


Consolidated Statements of Income	Southern California Edison Company

		Three months ended September 30,						Nine months ended September 30,
(in millions, unaudited)		2020		2019		2020		2019
Operating revenue		$	4,635	$	3,732	$	10,395	$	9,348
Purchased power and fuel		1,817		1,708		3,813		3,848
Operation and maintenance		1,226		752		2,820		2,192
Wildfire-related claims, net of insurance recoveries		1,297		0		1,303		0
Wildfire Insurance Fund expense		85		67		252		67
Depreciation and amortization		489		459		1,461		1,259
Property and other taxes		113		98		326		300
Impairment and other		(28)		0		(80)		166
Other operating income		0		(1)		0		(4)
Total operating expenses		4,999		3,083		9,895		7,828
Operating (loss) income		(364)		649		500		1,520

Interest expense		(188)		(183)		(575)		(549)
Other income		83		58		217		152
(Loss) income before taxes		(469)		524		142		1,123
Income tax benefit		(251)		(10)		(300)		(183)
Net (loss) income		(218)		534		442		1,306
Less: Preferred and preference stock dividend requirements		46		31		106		91
Net (loss) income available for common stock		$	(264)	$	503	$	336	$	1,215


Consolidated Statements of Comprehensive Income			Southern California Edison Company

	Three months ended September 30,							Nine months ended September 30,
(in millions, unaudited)	2020			2019		2020			2019
Net (loss) income	$	(218)		$	534	$	442		$	1,306
Other comprehensive income, net of tax:
Pension and postretirement benefits other than pensions:
Amortization of net loss included in net income	1			1		4			3

Other comprehensive income, net of tax	1			1		4			3
Comprehensive (loss) income	$	(217)		$	535	$	446		$	1,309

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


Consolidated Balance Sheets			Southern California Edison Company


(in millions, unaudited)	September 30, 2020		December 31, 2019
ASSETS
Cash and cash equivalents	$	30	$	24
Receivables, less allowances of $141 and $49 for uncollectible accounts at respective dates	1,396		777
Accrued unbilled revenue	708		488
Insurance receivable	395		0
Insurance receivable from affiliate	448		0
Income tax receivables	90		148
Inventory	387		364
Prepaid expenses	338		213

Regulatory assets	1,530		1,009
Wildfire Insurance Fund contributions	323		323
Other current assets	153		184
Total current assets	5,798		3,530
Nuclear decommissioning trusts	4,650		4,562
Other investments	66		46
Total investments	4,716		4,608
Utility property, plant and equipment, less accumulated depreciation and amortization of $10,561 and $9,958 at respective dates	46,294		44,198
Nonutility property, plant and equipment, less accumulated depreciation of $85 and $80 at respective dates	170		83
Total property, plant and equipment	46,464		44,281

Regulatory assets	6,446		6,088
Wildfire Insurance Fund contributions	2,525		2,767
Operating lease right-of-use assets	1,109		689
Long-term insurance receivables due from affiliate	354		803
Other long-term assets	1,041		1,507
Total long-term assets	11,475		11,854










Total assets	$	68,453	$	64,273

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


Consolidated Balance Sheets			Southern California Edison Company


(in millions, except share amounts, unaudited)	September 30, 2020		December 31, 2019
LIABILITIES AND EQUITY
Short-term debt	$	1,751	$	550
Current portion of long-term debt	1,029		79
Accounts payable	1,690		1,779


Customer deposits	259		302

Regulatory liabilities	801		972
Current portion of operating lease liabilities	210		79
Wildfire-related claims	1,192		0

Other current liabilities	1,373		1,298
Total current liabilities	8,305		5,059
Long-term debt	15,826		15,132
Deferred income taxes and credits	6,600		6,451

Pensions and benefits	215		237
Asset retirement obligations	2,988		3,029
Regulatory liabilities	8,089		8,385
Operating lease liabilities	899		610
Wildfire-related claims	4,643		4,568
Other deferred credits and other long-term liabilities	2,709		2,975
Total deferred credits and other liabilities	26,143		26,255
Total liabilities	50,274		46,446
Commitments and contingencies (Note 12)
Preferred and preference stock	1,945		2,245
Common stock, 0 par value (560,000,000 shares authorized; 434,888,104 shares issued and outstanding at respective dates)	2,168		2,168
Additional paid-in capital	5,058		3,939
Accumulated other comprehensive loss	(35)		(39)
Retained earnings	9,043		9,514
Total equity	18,179		17,827









Total liabilities and equity	$	68,453	$	64,273

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


Consolidated Statements of Cash Flows			Southern California Edison Company


	Nine months ended September 30,
(in millions, unaudited)	2020		2019
Cash flows from operating activities:
Net income	$	442	$	1,306
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization	1,506		1,312
Allowance for equity during construction	(87)		(75)
Impairment and other	(80)		166
Deferred income taxes	(285)		(207)
Wildfire Insurance Fund amortization expense	252		67
Other	19		14
Nuclear decommissioning trusts	(123)		(114)
Contributions to Wildfire Insurance Fund	0		(2,363)
Changes in operating assets and liabilities:
Receivables	(564)		(392)
Inventory	(24)		(68)
Accounts payable	(19)		275
Tax receivables and payables	208		279
Other current assets and liabilities	(321)		(341)

Regulatory assets and liabilities, net	(1,074)		(470)
Wildfire-related insurance receivable	73		0
Wildfire-related claims	1,267		0
Other noncurrent assets and liabilities	(28)		(28)
Net cash provided by (used in) operating activities	1,162		(639)
Cash flows from financing activities:
Long-term debt issued, plus premium and net of discount and issuance costs of $30 and $6 for the respective periods	2,330		2,306
Long-term debt repaid or repurchased	(698)		(81)
Term loan and revolving credit facility borrowing	1,129		750
Term loan repaid	0		(750)
Capital contributions from Edison International Parent	1,107		3,050

Preferred and preference stock redeemed	(308)		0
Short-term debt financing, net	73		(721)
Payments for stock-based compensation	(5)		(39)
Receipts from stock option exercises	0		22
Dividends paid	(1,104)		(496)
Other	6		(2)
Net cash provided by financing activities	2,530		4,039
Cash flows from investing activities:
Capital expenditures	(3,894)		(3,495)
Proceeds from sale of nuclear decommissioning trust investments	4,754		3,354
Purchases of nuclear decommissioning trust investments	(4,631)		(3,240)
Proceeds from sale of San Onofre nuclear fuel	86		4

Other	(1)		41
Net cash used in investing activities	(3,686)		(3,336)
Net increase in cash, cash equivalents and restricted cash	6		64
Cash, cash equivalents and restricted cash at beginning of period	24		22
Cash, cash equivalents and restricted cash at end of period	$	30	$	86

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

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") and Edison Energy Group, Inc. ("Edison Energy Group"). SCE is an investor-owned public utility primarily engaged in the business of supplying and delivering electricity to customers in an approximately 50,000 square mile area of southern California. Edison Energy Group is a holding company for Edison Energy, LLC ("Edison Energy") which is engaged in the competitive business of providing energy services to commercial and industrial customers. Edison Energy's 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 competitive subsidiaries and "Edison International Parent" refer to Edison International on a stand-alone basis, not consolidated with its 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 the "Notes to Consolidated Financial Statements" included in Edison International's and SCE's combined Annual Report on Form 10-K for the year ended December 31, 2019 (the "2019 Form 10-K"). This quarterly report should be read in conjunction with the financial statements and notes included in the 2019 Form 10-K.

In the opinion of management, all adjustments, consisting only of adjustments of a normal recurring nature, 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 ("GAAP") for the periods covered by this quarterly report on Form 10-Q. The results of operations for the three-month and nine-month periods ended September 30, 2020 are not necessarily indicative of the operating results for the full year. Certain prior period amounts have been conformed to the current period's presentation.

The December 31, 2019 financial statement data was derived from audited financial statements but does not include all disclosures required by GAAP.

Cash, Cash Equivalents and Restricted Cash

Cash equivalents include investments in money market funds. Generally, the carrying value of cash equivalents equals the fair value, as these investments have original maturities of three months or less. The cash equivalents were as follows:


	Edison International
(in millions)	September 30, 2020		December 31, 2019
Money market funds	$	56	$	31

Cash is temporarily invested until required for check clearing. Checks issued, but not yet paid by the financial institution, are reclassified from cash to accounts payable at the end of each reporting period as follows:


	Edison International						SCE
(in millions)	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
Book balances reclassified to accounts payable	$	51	$	75	$	50	$	74

The following table sets forth the cash, cash equivalents and restricted cash included in the consolidated statements of cash flows:


(in millions)	September 30, 2020		December 31, 2019
Edison International:
Cash and cash equivalents	$	92	$	68
Short-term restricted cash¹	2		2

Total cash, cash equivalents, and restricted cash	$	94	$	70

¹ Reflected in "Other current assets" on Edison International's consolidated balance sheets.

Allowance for Uncollectible Accounts

The allowance for uncollectible accounts is recorded based on SCE's estimate of expected credit losses and adjusted over the life of the receivables as needed. Since the customer base of SCE is concentrated in Southern California and exposes SCE to a homogeneous set of economic conditions, the allowance is measured on a collective basis on the historical amounts written-off, assessment of customer collectibility and current economic trends, including unemployment rates and any likelihood of recession for the region. At September 30, 2020, this included the estimated impacts of the COVID-19 pandemic.

The following table sets forth the changes in allowance for uncollectible accounts for SCE:


	Three months ended September 30, 2020						Nine months ended September 30, 2020
(in millions)	Customers		All others		Customers		All others
Beginning balance	$	75	$	15	$	35	$	14
Plus: current period provision for uncollectible accounts
Included in operation and maintenance expenses	11		4		39		11
Deferred to regulatory assets	43		0		64		0
Less: write-offs, net of recoveries	5		2		14		8
Ending balance	$	124	$	17	$	124	$	17

Revenue Recognition

Regulatory Proceedings

2018 General Rate Case

In May 2019, the CPUC approved a decision in SCE's 2018 GRC.

The revenue requirements in the 2018 GRC final decision were retroactive to January 1, 2018. SCE recorded the prior period impact of the 2018 GRC decision in the second quarter of 2019, including:

•An increase to earnings of $131 million from the application of the decision to revenue, depreciation expense and income tax expense, of which $65 million was attributable to 2018 and $66 million was attributable to first quarter of 2019. Depreciation expense decreased as a result of lower authorized depreciation rates. An increase in the authorized revenue requirement for income tax expenses offsets income tax expenses recognized during 2018 and the first quarter of 2019. The reduction of revenue of $265 million reflects $289 million of lower authorized revenue related to 2018 and $24 million of higher authorized revenue in 2019.

•An impairment of utility property, plant and equipment of $170 million ($123 million after-tax) related to disallowed historical capital expenditures, primarily the write-off of specific pole replacements the CPUC determined were performed prematurely.

2019 FERC Formula Rate

In September 2020, the FERC approved a settlement on SCE's formula rates for the 2019 Formula Rate case ("2019 Formula Rate Settlement"), which established SCE's FERC transmission revenue requirement for the settlement period. The settlement period is extended through December 31, 2021, at which time SCE is permitted to request a new formula rate. The settlement provides for a total ROE of 10.30% inclusive of CAISO and transmission incentive adders. The settlement also provides that SCE’s capital structure for purposes of its formula rate will reflect the higher of SCE's actual equity ratio or 47.50%. The transmission revenue requirement and rates that have been billed to customers prior to the implementation of the 2019 Formula Rate Settlement utilized a base ROE of 11.97%. SCE expects to refund the excess amounts billed to customers through the operation of the Formula Rate in 2021 and 2022. SCE had been recognizing revenue based on the expected outcome of this settlement and the impact of recording the settlement was not material.

Earnings Per Share

Edison International computes earnings per common share ("EPS") using the two-class method, which is an earnings allocation formula that determines EPS for each class of common stock and participating security. Edison International's participating securities are stock-based compensation awards, payable in common shares, which earn dividend equivalents on an equal basis with common shares once the awards are vested. See Note 14 for further information.

EPS attributable to Edison International common shareholders was computed as follows:


	Three months ended September 30,						Nine months ended September 30,
(in millions, except per-share amounts)	2020		2019		2020		2019
Basic (loss) earnings per share:
Net (loss) income attributable to common shareholders	$	(288)	$	471	$	213	$	1,141

Net (loss) income available to common shareholders	$	(288)	$	471	$	213	$	1,141
Weighted average common shares outstanding	378		347		371		333
Basic (loss) earnings per share	$	(0.76)	$	1.36	$	0.57	$	3.43
Diluted (loss) earnings per share:
Net (loss) income attributable to common shareholders	$	(288)	$	471	$	213	$	1,141

Net (loss) income available to common shareholders	$	(288)	$	471	$	213	$	1,141

Net (loss) income available to common shareholders and assumed conversions	$	(288)	$	471	$	213	$	1,141
Weighted average common shares outstanding	378		347		371		333
Incremental shares from assumed conversions¹	0		2		1		1
Adjusted weighted average shares – diluted	378		349		372		334
Diluted (loss) earnings per share	$	(0.76)	$	1.35	$	0.57	$	3.42

¹ Due to the loss reported for the quarter ended September 30, 2020, incremental shares were not included as the effect would be antidilutive.

In addition to the participating securities discussed above, Edison International also may award stock options, which are payable in common shares and are included in the diluted earnings per share calculation. Stock option awards to purchase 9,158,974 and 1,398,884 shares of common stock for the three months ended September 30, 2020 and 2019, respectively, and 9,079,789 and 5,997,917 shares for the nine months ended September 30, 2020 and 2019, respectively, were outstanding, but were not included in the computation of diluted earnings per share because the effect would have been antidilutive.

New Accounting Guidance

Accounting Guidance Adopted

In June 2016, the Financial Accounting Standards Board ("FASB") issued an accounting standards update to require the use of the current expected credit loss model to measure impairment of financial assets measured at amortized cost, including trade and other receivables, and the use of an allowance to record estimated credit losses on available-for-sale debt securities. Edison International and SCE adopted this guidance on January 1, 2020 using the prospective adoption approach to available-for-sale debt securities and the modified retrospective approach to all other financial assets. Edison International and SCE hold available-for-sale debt securities in nuclear decommissioning trusts and due to regulatory mechanisms, investment earnings and realized gains and losses have no impact on earnings. Unrealized gains and losses on decommissioning trust funds, including impairments, increase or decrease the trust assets and the related regulatory asset or liability and have no impact on electric utility revenue or decommissioning expense. Upon adoption of this guidance, SCE reviews each fixed income security for impairment on the last day of each month. If the fair value on the last day of the month is less than the amortized cost for that security, SCE impairs the disclosed amortized cost. See Note 10 for further information. The adoption of this guidance did not have a material impact on Edison International's and SCE's other financial assets including receivables.

In August 2018, the FASB issued an accounting standards update which aligns the requirement for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing costs incurred to develop or obtain internal use software. The guidance also clarified presentation requirements for reporting implementation costs in the financial statements. Edison International and SCE adopted the standard on January 1, 2020 using the prospective adoption approach. The adoption of this guidance did not have a material impact on Edison International's and SCE's financial position or result of operations.

In March 2020, the FASB issued an accounting standards update to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference London Inter-Bank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. Edison International and SCE have adopted the standard as of April 1, 2020 prospectively. SCE generally does not use hedge accounting for derivative transactions. SCE has a term loan with a variable interest rate based on LIBOR. In addition, both Edison International and SCE have revolving credit facilities with a variable interest rate based on LIBOR. These agreements contain provisions that require an amendment if LIBOR can no longer be used. SCE also has certain preference stocks, for which the distributions will be payable at a floating rate referenced to LIBOR from 2022. As of September 30, 2020, both Edison International and SCE have not utilized any of the expedients and therefore there is no impact on adoption of the guidance, however, if contract amendments are made where LIBOR is no longer valid, both Edison International and SCE expect to utilize the expedients through the allowed period of December 31, 2022.

In August 2018, the FASB issued an accounting standards update to remove, modify and add certain disclosure requirements related to employer-sponsored defined benefit pension or other postretirement plans. The guidance removes disclosure requirements that are no longer considered cost beneficial, clarifies certain specific disclosure requirements and adds disclosure requirements identified as relevant. The modifications only affect annual period disclosures and must be applied on a retrospective basis to all periods presented. Edison International and SCE have adopted this guidance for the year ending December 31, 2020. The adoption of this guidance will not materially affect the annual disclosures related to employer-sponsored defined benefit pension or other postretirement plans.

Accounting Guidance Not Yet Adopted

In August 2020, the FASB issued an accounting standards update to simplify the accounting for certain financial instruments with characteristics of liabilities and equity. The amendments in this update affect entities that issue convertible instruments indexed to or potentially settled in an entity's own equity. This guidance also simplifies an entity's application of the derivatives scope exception for contracts in its own equity and amends certain aspects of the EPS guidance. The guidance is effective January 1, 2022 with early adoption permitted after January 1, 2021. Edison International and SCE are currently evaluating the impact of the guidance.

Note 2. Consolidated Statements of Changes in Equity

The following table provides Edison International's changes in equity for the nine months ended September 30, 2020:


	Equity Attributable to Common Shareholders												Noncontrolling Interests
(in millions, except per share amounts)	Common Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Subtotal		Preferred and Preference Stock		Total Equity
Balance at December 31, 2019	$	4,990	$	(69)	$	8,382	$	13,303	$	2,193	$	15,496
Net income	—		—		183		183		30		213
Other comprehensive income	—		2		—		2		—		2

Common stock issued, net of issuance cost	88		—		—		88		—		88
Common stock dividends declared ($0.6375 per share)	—		—		(232)		(232)		—		(232)
Dividends to noncontrolling interests ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock)	—		—		—		—		(30)		(30)

Noncash stock-based compensation	7		—		—		7		—		7



Balance at March 31, 2020	$	5,085	$	(67)	$	8,333	$	13,351	$	2,193	$	15,544
Net income	—		—		318		318		30		348
Other comprehensive income	—		2		—		2		—		2
Common stock issued, net of issuance cost	815		—		—		815		—		815
Common stock dividends declared ($0.6375 per share)	—		—		(241)		(241)		—		(241)
Dividends to noncontrolling interests ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock)	—		—		—		—		(30)		(30)

Noncash stock-based compensation	8		—		—		8		—		8


Balance at June 30, 2020	$	5,908	$	(65)	$	8,410	$	14,253	$	2,193	$	16,446
Net loss	—		—		(288)		(288)		46		(242)
Other comprehensive income	—		2		—		2		—		2

Common stock issued, net of issuance cost (Note 14)	15		—		—		15		—		15
Common stock dividends declared ($0.6375 per share)	—		—		(241)		(241)		—		(241)
Dividends to noncontrolling interests ($0.247 - $0.289 per share for preferred stock; $15.625 - $35.936 per share for preference stock)	—		—		—		—		(31)		(31)

Noncash stock-based compensation and other	7		—		—		7		1		8

Redemption of preferred and preference stock	—		—		—		—		(308)		(308)

Balance at September 30, 2020	$	5,930	$	(63)	$	7,881	$	13,748	$	1,901	$	15,649

The following table provides Edison International's changes in equity for the nine months ended September 30, 2019:


	Equity Attributable to Common Shareholders												Noncontrolling Interests
(in millions, except per share amounts)	Common Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Subtotal		Preferred and Preference Stock		Total Equity
Balance at December 31, 2018	$	2,545	$	(50)	$	7,964	$	10,459	$	2,193	$	12,652
Net income	—		—		278		278		30		308
Other comprehensive income	—		2		—		2		—		2
Cumulative effect of accounting changes¹	—		(10)		10		—		—		0
Common stock dividends declared ($0.6125 per share)	—		—		(200)		(200)		—		(200)
Dividends to noncontrolling interests ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock)	—		—		—		—		(30)		(30)
Stock-based compensation	—		—		(18)		(18)		—		(18)
Noncash stock-based compensation	5		—		—		5		—		5




Balance at March 31, 2019	$	2,550	$	(58)	$	8,034	$	10,526	$	2,193	$	12,719
Net income	—		—		392		392		30		422
Other comprehensive income	—		1		—		1		—		1

Common stock dividends declared ($0.6125 per share)	—		—		(200)		(200)		—		(200)
Dividends to noncontrolling interests ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock)	—		—		—		—		(30)		(30)
Stock-based compensation	—		—		(4)		(4)		—		(4)
Noncash stock-based compensation	5		—		—		5		—		5


Balance at June 30, 2019	$	2,555	$	(57)	$	8,222	$	10,720	$	2,193	$	12,913
Net income	—		—		471		471		31		502
Other comprehensive income	—		2		—		2		—		2
Common stock issued, net of issuance cost	2,185		—		—		2,185		—		2,185
Common stock dividends declared ($0.6125 per share)	—		—		(219)		(219)		—		(219)
Dividends to noncontrolling interests ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock)	—		—		—		—		(31)		(31)
Stock-based compensation	—		—		(5)		(5)		—		(5)
Noncash stock-based compensation	6		—		—		6		—		6
Balance at September 30, 2019	$	4,746	$	(55)	$	8,469	$	13,160	$	2,193	$	15,353

¹Edison International recognized a cumulative effect adjustment to the opening balance of retained earnings and accumulated other comprehensive loss on January 1, 2019 related to the adoption of the accounting standards update on the reclassification of stranded tax effects resulting from Tax Cuts and Jobs Act ("Tax Reform.")

The following table provides SCE's changes in equity for the nine months ended September 30, 2020:



(in millions, except per share amounts)	Preferred and Preference Stock		Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Equity
Balance at December 31, 2019	$	2,245	$	2,168	$	3,939	$	(39)	$	9,514	$	17,827
Net income	—		—		—		—		249		249
Other comprehensive income	—		—		—		2		—		2

Capital contribution from Edison International Parent	—		—		269		—		—		269
Dividends declared on common stock ($0.6185 per share)	—		—		—		—		(269)		(269)
Dividends declared on preferred stock ($0.255 - $0.299 per share) and preference stock ($15.625 - $35.936 per share)	—		—		—		—		(30)		(30)
Stock-based compensation	—		—		(5)		—		—		(5)
Noncash stock-based compensation	—		—		4		—		(1)		3


Balance at March 31, 2020	$	2,245	$	2,168	$	4,207	$	(37)	$	9,463	$	18,046
Net income	—		—		—		—		411		411
Other comprehensive income	—		—		—		1		—		1

Capital contribution from Edison International Parent	—		—		619		—		—		619
Dividends declared on common stock ($0.6185 per share)	—		—		—		—		(269)		(269)
Dividends declared on preferred stock ($0.255 - $0.299 per share) and preference stock ($15.625 - $35.936 per share)	—		—		—		—		(30)		(30)

Noncash stock-based compensation	—		—		3		—		—		3


Balance at June 30, 2020	$	2,245	$	2,168	$	4,829	$	(36)	$	9,575	$	18,781
Net loss	—		—		—		—		(218)		(218)
Other comprehensive income	—		—		—		1		—		1

Capital contribution from Edison International Parent	—		—		219		—		—		219
Dividends declared on common stock ($0.6185 per share)	—		—		—		—		(269)		(269)
Dividends declared on preferred stock ($0.247 - $0.289 per share) and preference stock ($15.625 - $35.936 per share)	—		—		—		—		(31)		(31)

Noncash stock-based compensation and other	—		—		3		—		1		4
Redemption of preferred and preference stock	$	(300)	$	—	$	7	$	—	$	(15)	(308)
Balance at September 30, 2020	$	1,945	$	2,168	$	5058	$	(35)	$	9,043	$	18,179

The following table provides SCE's changes in equity for the nine months ended September 30, 2019:



(in millions, except per share amounts)	Preferred and Preference Stock		Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Equity
Balance at December 31, 2018	$	2,245	$	2,168	$	680	$	(23)	$	8,715	$	13,785
Net income	—		—		—		—		323		323
Other comprehensive income	—		—		—		1		—		1
Cumulative effect of accounting change¹							(5)		5		0
Dividends declared on common stock ($0.4599 per share)	—		—		—		—		(200)		(200)
Dividends declared on preferred stock ($0.255 - $0.299 per share) and preference stock (15.625 - $35.936 per share)	—		—		—		—		(30)		(30)
Stock-based compensation	—		—		—		—		(12)		(12)
Noncash stock-based compensation	—		—		3		—		—		3


Balance at March 31, 2019	$	2,245	$	2,168	$	683	$	(27)	$	8,801	$	13,870
Net income	—		—		—		—		449		449
Other comprehensive income	—		—		—		1		—		1
Capital contribution from Edison International Parent	—		—		1,200		—		—		1,200

Dividends declared on preferred and preference stock ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock)	—		—		—		—		(30)		(30)
Stock-based compensation	—		—		—		—		(1)		(1)
Noncash stock-based compensation	—		—		3		—		—		3


Balance at June 30, 2019	$	2,245	$	2,168	$	1,886	$	(26)	$	9,219	$	15,492
Net income	—		—		—		—		534		534
Other comprehensive income	—		—		—		1		—		1
Capital contribution from Edison International Parent	—		—		1,850		—		—		1,850
Dividends declared on common stock ($0.4599 per share)	—		—		—		—		(200)		(200)
Dividends declared on preferred and preference stock ($0.255 - $0.299 per share for preferred stock; $15.625 - $35.936 per share for preference stock)	—		—		—		—		(31)		(31)
Stock-based compensation	—		—		(2)		—		(2)		(4)
Noncash stock-based compensation	—		—		3		—		—		3
Balance at September 30, 2019	$	2,245	$	2,168	$	3,737	$	(25)	$	9,520	$	17,645

¹SCE recognized a cumulative effect adjustment to the opening balance of retained earnings and accumulated other comprehensive loss on January 1, 2019 related to the adoption of the accounting standards update on the reclassification of stranded tax effects resulting from Tax Reform.

Note 3. Variable Interest Entities

A VIE is defined as a legal entity that meets one of two conditions: (1) the equity owners do not have sufficient equity at risk, or (2) the holders of the equity investment at risk, as a group, lack any of the following three characteristics: decision-making rights, the obligation to absorb losses or the right to receive the expected residual returns of the entity. The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most significantly impact the entity's economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. The primary beneficiary is required to consolidate the VIE. Commercial and operating activities are generally the factors that most significantly impact the economic performance of such VIEs. Commercial and operating activities include construction, operation and maintenance, fuel procurement, dispatch and compliance with regulatory and contractual requirements.

Variable Interest in VIEs that are not Consolidated

Power Purchase Agreements ("PPAs")

SCE has PPAs that are classified as variable interests in VIEs, including tolling agreements through which SCE provides the natural gas to fuel the plants, contracts with qualifying facilities ("QF") and combined heat and power facilities that contain variable pricing provisions based on the price of natural gas and fixed price contracts for renewable energy. SCE has concluded that it is not the primary beneficiary of these VIEs since it does not control the commercial and operating activities of these entities. Since payments for capacity are the primary source of income, the most significant economic activity for these VIEs is the operation and maintenance of the power plants.

As of the balance sheet date, the carrying amount of assets and liabilities in SCE's consolidated balance sheet that relate to involvement with VIEs result from amounts due under the PPAs. Under these contracts, SCE recovers the costs incurred through demonstration of compliance with its CPUC-approved long-term power procurement plans. SCE has no residual interest in the entities and has not provided or guaranteed any debt or equity support, liquidity arrangements, performance guarantees, or other commitments associated with these contracts other than the purchase commitments described in Note 12 of the 2019 Form 10-K. As a result, there is no significant potential exposure to loss to SCE from its variable interest in these VIEs. The aggregate contracted capacity dedicated to SCE from these VIE projects was 5,356 megawatts ("MW") and 4,894 MW at September 30, 2020 and 2019, respectively, and the amounts that SCE paid to these projects were $360 million and $353 million for the three months ended September 30, 2020 and 2019, respectively, and $661 million and $628 million for the nine months ended September 30, 2020 and 2019, respectively. These amounts are recoverable in customer rates, subject to reasonableness review.

Unconsolidated Trusts of SCE

SCE Trust II, Trust III, Trust IV, Trust V, and Trust VI were formed in 2013, 2014, 2015, 2016, and 2017, respectively, for the exclusive purpose of issuing the 5.10%, 5.75%, 5.375%, 5.45%, and 5.00% trust preference securities, respectively ("trust securities"). The trusts are VIEs. SCE has concluded that it is not the primary beneficiary of these VIEs as it does not have the obligation to absorb the expected losses or the right to receive the expected residual returns of the trusts. SCE Trust II, Trust III, Trust IV, Trust V and Trust VI issued trust securities to the public in the face amounts of $400 million, $275 million, $325 million, $300 million, and $475 million (cumulative, liquidation amounts of $25 per share), respectively, and $10,000 of common stock each to SCE. The trusts invested the proceeds of these trust securities in Series G, Series H, Series J, Series K, and Series L Preference Stock issued by SCE in the principal amounts of $400 million, $275 million, $325 million, $300 million, and $475 million (cumulative, $2,500 per share liquidation values), respectively, which have substantially the same payment terms as the respective trust securities.

The Series G, Series H, Series J, Series K, and Series L Preference Stock and the corresponding trust securities do not have a maturity date. Upon any redemption of any shares of the Series G, Series H, Series J, Series K, or Series L Preference Stock, a corresponding dollar amount of trust securities will be redeemed by the applicable trust. The applicable trust will make distributions at the same rate and on the same dates on the applicable series of trust securities if and when the SCE Board of Directors declares and makes dividend payments on the related Preference Stock. The applicable trust will use any dividends it receives on the related Preference Stock to make its corresponding distributions on the applicable series of trust securities. If SCE does not make a dividend payment to any of these trusts, SCE would be prohibited from paying dividends on its common stock. SCE has fully and unconditionally guaranteed the payment of the trust securities and trust distributions, if and when SCE pays dividends on the related Preference Stock.

In September 2020, SCE Trust II redeemed $180 million of its trust securities from the public. The Trust II balance sheets as of September 30, 2020 and December 31, 2019 consisted of investments of $220 million and $400 million in the Series G Preference Stock, respectively, $220 million and $400 million of trust securities, respectively, and $10,000 each of common stock. The Trust III, Trust IV, Trust V and Trust VI balance sheets as of September 30, 2020 and December 31, 2019 consisted of investments of $275 million, $325 million, $300 million, and $475 million in the Series H, Series J, Series K and Series L Preference Stock, respectively, $275 million, $325 million, $300 million, and $475 million of trust securities, respectively, and $10,000 each of common stock.

The following table provides a summary of the trusts' income statements:


	Three months ended September 30,
(in millions)	Trust II		Trust III		Trust IV		Trust V		Trust VI
2020
Dividend income	$	5	$	4	$	4	$	4	$	6
Dividend distributions	5		4		4		4		6
2019
Dividend income	$	5	$	4	$	4	$	4	$	6
Dividend distributions	5		4		4		4		6


	Nine months ended September 30,
(in millions)	Trust II		Trust III		Trust IV		Trust V		Trust VI
2020
Dividend income	$	15	$	12	$	13	$	12	$	18
Dividend distributions	15		12		13		12		18
2019
Dividend income	$	15	$	12	$	13	$	12	$	18
Dividend distributions	15		12		13		12		18

Note 4. Fair Value Measurements

Recurring Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (referred to as an "exit price"). Fair value of an asset or liability considers assumptions that market participants would use in pricing the asset or liability, including assumptions about nonperformance risk. As of September 30, 2020 and December 31, 2019, nonperformance risk was not material for Edison International and SCE.

Assets and liabilities are categorized into a three-level fair value hierarchy based on valuation inputs used to determine fair value.

Level 1 – The fair value of Edison International's and SCE's Level 1 assets and liabilities is determined using unadjusted quoted prices in active markets that are available at the measurement date for identical assets and liabilities. This level includes exchange-traded equity securities, U.S. treasury securities, mutual funds, and money market funds.

Level 2 – Edison International's and SCE's Level 2 assets and liabilities include fixed income securities, primarily consisting of U.S. government and agency bonds, municipal bonds and corporate bonds, and over-the-counter derivatives. The fair value of fixed income securities is determined using a market approach by obtaining quoted prices for similar assets and liabilities in active markets and inputs that are observable, either directly or indirectly, for substantially the full term of the instrument.

The fair value of SCE's over-the-counter derivative contracts is determined using an income approach. SCE uses standard pricing models to determine the net present value of estimated future cash flows. Inputs to the pricing models include forward published or posted clearing prices from an exchange (Intercontinental Exchange) for similar instruments and discount rates. A primary price source that best represents trade activity for each market is used to develop observable forward market prices in determining the fair value of these positions. Broker quotes, prices from exchanges, or comparison to executed trades are used to validate and corroborate the primary price source. These price quotations reflect mid-market prices (average of bid and ask) and are obtained from sources believed to provide the most liquid market for the commodity.

Level 3 – The fair value of SCE's Level 3 assets and liabilities is determined using an income approach through various models and techniques that require significant unobservable inputs. This level includes derivative contracts that trade infrequently such as congestion revenue rights ("CRRs"). Edison International Parent and Other does not have any Level 3 assets and liabilities.

Assumptions are made in order to value derivative contracts in which observable inputs are not available. In circumstances where fair value cannot be verified with observable market transactions, it is possible that a different valuation model could produce a materially different estimate of fair value. Modeling methodologies, inputs, and techniques are reviewed and assessed as markets continue to develop and more pricing information becomes available and the fair value is adjusted when it is concluded that a change in inputs or techniques would result in a new valuation that better reflects the fair value of those derivative contracts. See Note 6 for a discussion of derivative instruments.

SCE

The following table sets forth assets and liabilities of SCE that were accounted for at fair value by level within the fair value hierarchy:


	September 30, 2020
(in millions)	Level 1		Level 2		Level 3		Netting and Collateral¹		Total
Assets at fair value
Derivative contracts	$	0	$	26	$	30	$	(8)	$	48
Money market funds and other	1		23		0		—		24
Nuclear decommissioning trusts:
Stocks²	1,753		0		0		—		1,753
Fixed Income³	518		2,133		0		—		2,651
Short-term investments, primarily cash equivalents	377		45		0		—		422
Subtotal of nuclear decommissioning trusts⁴	2,648		2,178		0		—		4,826
Total assets	2,649		2,227		30		(8)		4,898
Liabilities at fair value
Derivative contracts	0		6		2		(8)		0
Total liabilities	0		6		2		(8)		0
Net assets	$	2,649	$	2,221	$	28	$	0	$	4,898


	December 31, 2019
(in millions)	Level 1		Level 2		Level 3		Netting and Collateral¹		Total
Assets at fair value
Derivative contracts	$	0	$	19	$	83	$	(15)	$	87
Money market funds and other	4		14		0		—		18
Nuclear decommissioning trusts:
Stocks²	1,765		0		0		—		1,765
Fixed Income³	738		2,024		0		—		2,762
Short-term investments, primarily cash equivalents	98		48		0		—		146
Subtotal of nuclear decommissioning trusts⁴	2,601		2,072		0		—		4,673
Total assets	2,605		2,105		83		(15)		4,778
Liabilities at fair value
Derivative contracts	0		11		5		(15)		1
Total liabilities	0		11		5		(15)		1
Net assets	$	2,605	$	2,094	$	78	$	0	$	4,777

¹ Represents the netting of assets and liabilities under master netting agreements and cash collateral.

²Approximately 72% of SCE's equity investments were in companies located in the United States at September 30, 2020 and December 31, 2019.

³ Includes corporate bonds, which were diversified by the inclusion of collateralized mortgage obligations and other asset backed securities, of $31 million and $46 million at September 30, 2020 and December 31, 2019, respectively.

⁴ Excludes net payables of $176 million and $111 million at September 30, 2020 and December 31, 2019, respectively, which consist of payables and receivables related to SCE's pending securities purchases and sales as well as interest and dividend receivables.

Edison International Parent and Other

Edison International Parent and Other assets measured at fair value and classified as Level 1 consisted of money market funds of $56 million and $31 million at September 30, 2020 and December 31, 2019, respectively. Edison International Parent and Other assets measured at fair value and classified as Level 2 consisted of short-term investments of $5 million at September 30, 2020. Edison International Parent and Other had 0 short-term investments as of December 31, 2019.

SCE Fair Value of Level 3

The following table sets forth a summary of changes in SCE's fair value of Level 3 net derivative assets and liabilities:


	Three months ended September 30,						Nine months ended September 30,
(in millions)	2020		2019		2020		2019
Fair value of net assets at beginning of period	$	34	$	63	$	78	$	141

Total realized/unrealized losses¹	(6)		0		(50)		(78)




Fair value of net assets at end of period²	28		63		28		63
Change during the period in unrealized gains and losses related to assets and liabilities held at the end of the period	$	13	$	30	$	8	$	27

¹ Due to regulatory mechanisms, SCE's realized and unrealized gains and losses are recorded as regulatory assets and liabilities.

² There were no material transfers into or out of Level 3 during 2020 and 2019.

The following table sets forth SCE's valuation techniques and significant unobservable inputs used to determine fair value for significant Level 3 assets and liabilities:

Fair Value (in millions)

Valuation

Significant

Weighted

Assets

Liabilities

Technique

Unobservable Input

Range

Average

Congestion revenue rights

September 30, 2020

Auction prices

CAISO CRR auction prices

$(7.72) - $9.91

$1.72

December 31, 2019

Auction prices

CAISO CRR auction prices

(3.59) - 25.32

1.97

Level 3 Fair Value Uncertainty

For CRRs, increases or decreases in CAISO auction prices would result in higher or lower fair value as of September 30, 2020, respectively.

Nuclear Decommissioning Trusts

SCE's nuclear decommissioning trust investments include equity securities, U.S. treasury securities, and other fixed income securities. Equity and treasury securities are classified as Level 1 as fair value is determined by observable market prices in active or highly liquid and transparent markets. The remaining fixed income securities are classified as Level 2. The fair value of these financial instruments is based on evaluated prices that reflect significant observable market information such as reported trades, actual trade information of similar securities, benchmark yields, broker/dealer quotes, issuer spreads, bids, offers, and relevant credit information. There are no securities classified as Level 3 in the nuclear decommissioning trusts.

Fair Value of Debt Recorded at Carrying Value

The carrying value and fair value of Edison International's and SCE's long-term debt (including current portion of long-term debt) are as follows:


	September 30, 2020						December 31, 2019
(in millions)	Carrying Value¹		Fair Value²		Carrying Value¹		Fair Value²
Edison International	$	19,987	$	22,313	$	18,343	$	20,137
SCE	16,855		18,995		15,211		16,892

¹ Carrying value is net of debt issuance costs.

²The fair value of Edison International's and SCE's short-term and long-term debt is classified as Level 2.

Note 5. Debt and Credit Agreements

Long-Term Debt

During the first quarter of 2020, SCE issued $100 million of 2.85% first and refunding mortgage bonds due in 2029, $500 million of 3.65% first and refunding mortgage bonds due in 2050, $400 million of 2.25% first and refunding mortgage bonds due in 2030 and $700 million of 3.65% first and refunding mortgage bonds due in 2050. The proceeds were primarily used to repay SCE's commercial paper borrowings and for general corporate purposes, including the re-purchase of SCE tax exempt pollution control bonds.

During the second quarter of 2020, SCE issued $600 million of 3.70% first and refunding mortgage bonds due in 2025. The proceeds were used to finance undercollections of revenues that SCE is authorized to recover from customers through regulatory balancing accounts. Additionally, SCE purchased $373 million of its tax-exempt pollution control bonds that were subject to mandatory redemption. SCE is the holder of these bonds and plans to re-market them subject to market conditions.

In September 2020, SCE purchased $244 million of its tax-exempt pollution control bonds that were subject to optional redemption. SCE is the holder of these bonds and plans to re-market them subject to market conditions.

During the second quarter of 2020, Edison International Parent issued $400 million of 4.95% senior notes due 2025. The proceeds were used to repay all $400 million of Edison International Parent's outstanding 2.125% Senior Notes due in 2020.

Credit Agreements and Short-Term Debt

In May 2020, SCE entered into a revolving credit facility in an amount not to exceed $1.5 billion with a variable interest rate linked to changes in SCE's credit rating, which is currently LIBOR plus 150 basis points on drawn funds. The credit facility is available for borrowing needs until May 2021. As of September 30, 2020, there were 0 amounts drawn against the revolving credit facility. SCE's revolving credit facility is available for general corporate purposes, including to support liquidity needs that may arise as a result of undercollections due to the COVID-19 pandemic and related consumer protection measures.

In March 2020, SCE borrowed $475 million under a term loan agreement due in March 2021, with a variable interest rate based on the LIBOR plus 60 basis points. The proceeds were used to repay commercial paper borrowings temporarily used to fund a portion of the approximately $1.6 billion in wildfire risk mitigation capital expenditures that SCE will exclude from the equity portion of SCE's rate base as required under AB 1054 ("AB 1054 Excluded Capital Expenditures"). Additionally, in March 2020, SCE entered into a revolving credit facility in an amount not to exceed $800 million with a variable interest rate linked to changes in SCE's credit rating, which is currently LIBOR plus 65 basis points on drawn funds. The credit facility is available for borrowing needs until March 2021, and may be extended for 2, 364-day periods, at the lenders' discretion. The aggregate maximum principal amount under the revolving credit facility may be increased up to $1.1 billion, provided that additional lender commitments are obtained. As of September 30, 2020, there was $654 million drawn against the revolving credit facility. The proceeds were used to finance AB 1054 Excluded Capital Expenditures.

SCE and Edison International Parent have separate multi-year revolving credit facilities of $3.0 billion and $1.5 billion, respectively, both maturing in May 2024, with an option to extend for an additional year, which may be exercised upon agreement between SCE or Edison International Parent and their respective lenders. The aggregate maximum principal amount under the SCE and Edison International Parent revolving credit facilities may be increased up to $4.0 billion and $2.0 billion, respectively, provided that additional lender commitments are obtained. SCE's credit facility is generally used to support commercial paper borrowings and letters of credit issued for procurement-related collateral requirements, balancing account undercollections and for general corporate purposes, including working capital requirements to support operations and capital expenditures. Edison International Parent's credit facility is used to support commercial paper borrowings and for general corporate purposes. At September 30, 2020 and December 31, 2019, SCE had $623 million and $550 million outstanding commercial paper, net of discount, at a weighted-average interest rate of 0.25% and 2.24%, respectively. At September 30, 2020 and December 31, 2019, letters of credit issued under SCE's credit facility aggregated $200 million and $152 million, respectively, substantially all of which are scheduled to expire in 12 months or less. Edison International Parent had 0 outstanding commercial paper at both September 30, 2020 and December 31, 2019.

In March 2020, Edison International Parent borrowed $800 million under a term loan agreement due in March 2021 with a variable interest rate based on LIBOR plus 1.125%. The proceeds were used for general corporate purposes. In May 2020, Edison International repaid the outstanding balance of the term loan using the proceeds from issuance of common stock in a registered direct offering. Refer to Note 14 for details of the common stock issuance.

Financing Subsequent to September 30, 2020

In October 2020, SCE issued $350 million of 1.20% first and refunding mortgage bonds due in 2026. The proceeds were used to fund the payment of wildfire claims settlements exceeding insurance proceeds, including as a result of $1.2 billion paid under a settlement agreement entered into in September 2020 among Edison International, SCE and all the insurance subrogation plaintiffs in the Thomas Fire, Koenigstein Fire and Montecito Mudslides litigation. See Note 12 for further discussion.

Note 6. Derivative Instruments

Derivative financial instruments are used to manage exposure to commodity price risk. These risks are managed in part by entering into forward commodity transactions, including options, swaps and futures. To mitigate credit risk from counterparties in the event of nonperformance, master netting agreements are used whenever possible and counterparties may be required to pledge collateral depending on the creditworthiness of each counterparty and the risk associated with the transaction.

Commodity Price Risk

Commodity price risk represents the potential impact that can be caused by a change in the market value of a particular commodity. SCE's electricity price exposure arises from energy purchased from and sold to wholesale markets as a result of differences between SCE's load requirements and the amount of energy delivered from its generating facilities and PPAs. SCE's natural gas price exposure arises from natural gas purchased for the Mountainview power plant and peaker plants, QF

contracts where pricing is based on a monthly natural gas index and PPAs in which SCE has agreed to provide the natural gas needed for generation, referred to as tolling arrangements.

Credit and Default Risk

Credit and default risk represent the potential impact that can be caused if a counterparty were to default on its contractual obligations and SCE would be exposed to spot markets for buying replacement power or selling excess power. In addition, SCE would be exposed to the risk of non-payment of accounts receivable, primarily related to the sales of excess power and realized gains on derivative instruments.

Certain power and gas contracts contain master netting agreements or similar agreements, which generally allow counterparties subject to the agreement to offset amounts when certain criteria are met, such as in the event of default. The objective of netting is to reduce credit exposure. Additionally, to reduce SCE's risk exposures counterparties may be required to pledge collateral depending on the creditworthiness of each counterparty and the risk associated with the transaction.

Certain power and gas contracts contain a provision that requires SCE to maintain an investment grade rating from each of the major credit rating agencies, referred to as a credit-risk-related contingent feature. If SCE's credit rating were to fall below investment grade, SCE may be required to post additional collateral to cover derivative liabilities and the related outstanding payables. The net fair value of all derivative liabilities with these credit-risk-related contingent features was less than $1 million and $1 million as of September 30, 2020 and December 31, 2019, respectively, for which SCE posted 0 collateral to its counterparties for its derivative liabilities and related outstanding payables at both September 30, 2020 and December 31, 2019. If the credit-risk-related contingent features underlying these agreements were triggered on September 30, 2020, SCE would be required to post $13 million of collateral, and all of the $13 million is related to outstanding payables.

Fair Value of Derivative Instruments

SCE presents its derivative assets and liabilities on a net basis on its consolidated balance sheets when subject to master netting agreements or similar agreements. Derivative positions are also offset against margin and cash collateral deposits. In addition, SCE has provided collateral in the form of letters of credit. Collateral requirements can vary depending upon the level of unsecured credit extended by counterparties, changes in market prices relative to contractual commitments and other factors. See Note 4 for a discussion of fair value of derivative instruments. The following table summarizes the gross and net fair values of SCE's commodity derivative instruments:


	September 30, 2020
	Derivative Assets										Derivative Liabilities				Net Assets
(in millions)	Short-Term¹		Long-Term²		Subtotal		Short-Term³		Long-Term		Subtotal
Commodity derivative contracts
Gross amounts recognized	$	52	$	4	$	56	$	7	$	1	$	8	$	48
Gross amounts offset in the consolidated balance sheets	(7)		(1)		(8)		(7)		(1)		(8)		0
Cash collateral posted⁴	0		0		0		0		0		0		0
Net amounts presented in the consolidated balance sheets	$	45	$	3	$	48	$	0	$	0	$	0	$	48


	December 31, 2019
	Derivative Assets										Derivative Liabilities				Net Assets
(in millions)	Short-Term¹		Long-Term²		Subtotal		Short-Term³		Long-Term		Subtotal
Commodity derivative contracts
Gross amounts recognized	$	94	$	8	$	102	$	14	$	2	$	16	$	86
Gross amounts offset in the consolidated balance sheets	(13)		(2)		(15)		(13)		(2)		(15)		0
Cash collateral posted⁴	0		0		0		0		0		0		0
Net amounts presented in the consolidated balance sheets	$	81	$	6	$	87	$	1	$	0	$	1	$	86

¹Included in "Other current assets" on Edison International's and SCE's consolidated balance sheets.

²Included in "Other long-term assets" on Edison International's and SCE's consolidated balance sheets.

³Included in "Other current liabilities" on Edison International's and SCE's consolidated balance sheets.

⁴At September 30, 2020, SCE did 0t post any cash collateral. At December 31, 2019, SCE posted $24 million of cash, which was not offset against net derivative liabilities and was reflected in "Other current assets" on the consolidated balance sheets.

Financial Statement Impact of Derivative Instruments

SCE recognizes realized gains and losses on derivative instruments as purchased power and fuel expense and expects that such gains or losses will be part of the purchased power costs recovered from customers. As a result, realized gains and losses do not affect earnings, but may temporarily affect cash flows. Due to expected future recovery from customers, unrealized gains and losses are recorded as regulatory assets and liabilities and therefore also do not affect earnings. The remaining effects of derivative activities and related regulatory offsets are reported in cash flows from operating activities in the consolidated statements of cash flows.

The following table summarizes the components of SCE's economic hedging activity:


	Three months ended September 30,						Nine months ended September 30,
(in millions)	2020		2019		2020		2019
Realized gains (losses)	$	128	$	(47)	$	68	$	(17)
Unrealized gains (losses)	75		24		(39)		(104)

Notional Volumes of Derivative Instruments

The following table summarizes the notional volumes of derivatives used for SCE's economic hedging activities:

Economic Hedges

Commodity

Unit of Measure

September 30, 2020

December 31, 2019

Electricity options, swaps and forwards

GWh

2,338

3,155

Natural gas options, swaps and forwards

Bcf

Congestion revenue rights

GWh

43,229

48,170

Note 7. Revenue

SCE's revenue is disaggregated by two revenue sources:

The following table is a summary of SCE's revenue:


	Three months ended September 30, 2020										Three months ended September 30, 2019
(in millions)	Earning Activities		Cost- Recovery Activities		Total Consolidated		Earning Activities		Cost-Recovery Activities		Total Consolidated
Revenues from contracts with customers^1,2	$	1,893	$	2,327	$	4,220	$	1,862	$	2,022	$	3,884
Alternative revenue programs and other operating revenue³	233		182		415		(30)		(122)		(152)
Total operating revenue	$	2,126	$	2,509	$	4,635	$	1,832	$	1,900	$	3,732


	Nine months ended September 30, 2020										Nine months ended September 30, 2019
(in millions)	Earning Activities		Cost- Recovery Activities		Total Consolidated		Earning Activities		Cost-Recovery Activities		Total Consolidated
Revenues from contracts with customers^1,2	$	5,175	$	4,265	$	9,440	$	4,896	$	3,746	$	8,642
Alternative revenue programs and other operating revenue³	467		488		955		23		683		706
Total operating revenue	$	5,642	$	4,753	$	10,395	$	4,919	$	4,429	$	9,348

¹In the absence of a 2018 GRC decision, SCE recognized CPUC revenue in the first quarter of 2019 based on the 2017 authorized revenue requirement adjusted mainly for the July 2017 cost of capital decision and Tax Reform. SCE recorded the impact of the 2018 GRC decision in the second quarter of 2019.

² At September 30, 2020 and December 31, 2019, SCE's receivables related to contracts from customers were $1.9 billion and $1.1 billion, respectively, which include accrued unbilled revenue of $708 million and $488 million, respectively.

³Includes differences between amounts billed and authorized levels for both the CPUC and FERC.

Note 8. Income Taxes

Effective Tax Rate

The table below provides a reconciliation of income tax expense computed at the federal statutory income tax rate to the income tax provision:



	Three months ended September 30,									Nine months ended September 30,
(in millions)	2020			2019			2020			2019
Edison International:
(Loss) income from operations before income taxes	$	(517)		$	480		$	(36)		$	1,020
Provision for income tax at federal statutory rate of 21%	(108)			101			(7)			214
Increase (decrease) in income tax from:
State tax, net of federal benefit	(67)			5			(74)			0
Property-related	(81)			(124)			(228)			(267)
Change related to uncertain tax position¹	0			0			(15)			0
Deferred tax re-measurement²	0			0			0			(69)
2018 GRC Decision	0			0			0			(80)
Other	(19)			(4)			(31)			(10)
Total income tax benefit	$	(275)		$	(22)		$	(355)		$	(212)
Effective tax rate	(53.2)		%	(4.6)		%	(986.1)		%	(20.8)		%
SCE:
(Loss) income from operations before income taxes	$	(469)		$	524		$	142		$	1,123
Provision for income tax at federal statutory rate of 21%	(98)			110			30			236
Increase (decrease) in income tax from:
State tax, net of federal benefit	(61)			8			(62)			6
Property-related	(81)			(124)			(228)			(267)
Change related to uncertain tax positions¹	0			0			(18)			0
Deferred tax re-measurement²	0			0			0			(69)
2018 GRC Decision	0			0			0			(80)
Other	(11)			(4)			(22)			(9)
Total income tax benefit	$	(251)		$	(10)		$	(300)		$	(183)
Effective tax rate	(53.5)		%	(1.9)		%	(211.3)		%	(16.3)		%

¹Primarily relates to the re-measurement of uncertain tax positions related to the 2010 – 2012 California state tax filings currently under audit.

²Relates to changes in the allocation of deferred tax re-measurement between customers and shareholders as a result of a CPUC resolution issued in February 2019. The resolution determined that customers are only entitled to excess deferred taxes which were included when setting rates, while other deferred tax re-measurement belongs to the shareholders.

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. Flow-through items reduce current authorized revenue requirements in SCE's rate cases and result in a regulatory asset for recovery of deferred income taxes in future periods. The difference between the authorized amounts as determined in SCE's rate cases, adjusted for balancing and memorandum account activities, and the recorded flow-through items also result in increases or decreases in regulatory assets with a corresponding impact on the effective tax rate to the extent that recorded deferred amounts are expected to be recovered in future rates. For further information, see Note 11.

Unrecognized Tax Benefits

The following table provides a reconciliation of unrecognized tax benefits:


	Edison International						SCE
(in millions)	2020		2019		2020		2019
Balance at January 1,	$	370	$	338	$	282	$	249
Tax positions taken during the current year:
Increases	38		32		39		32
Tax positions taken during a prior year:
Increases¹	273		0		4		0
Decreases	(18)		(11)		(21)		(11)

Balance at September 30,	$	663	$	359	$	304	$	270

¹Edison International recorded favorable tax positions for the quarter ended September 30, 2020, in connection with the Edison Mission Energy ("EME") bankruptcy that required a revaluation of the reserve for uncertain tax positions.

As of September 30, 2020, if recognized, $446 million of unrecognized tax benefits would impact Edison International's effective tax rate and $87 million of the unrecognized tax benefits would impact SCE's effective tax rate.

Tax Disputes

Tax years that remain open for examination by the IRS and the California Franchise Tax Board are 2016 – 2019 and 2013 – 2019, respectively. Tax years 2007 – 2012 are currently subject to a settlement proceeding with the California Franchise Tax Board. Edison International does not expect to resolve these tax years within the next 12 months. Any impacts cannot be reasonably estimated until further progress is made.

Note 9. Compensation and Benefit Plans

Pension Plans

Net periodic pension expense components are:


	Three months ended September 30,						Nine months ended September 30,
(in millions)	2020		2019		2020		2019
Edison International:
Service cost	$	31	$	31	$	93	$	95
Non-service cost (benefit)
Interest cost	31		38		92		116
Expected return on plan assets	(55)		(52)		(163)		(156)

Amortization of prior service cost	0		0		1		1
Amortization of net loss¹	3		2		9		6
Regulatory adjustment	2		(4)		6		(12)
Total non-service benefit²	$	(19)	$	(16)	$	(55)	$	(45)
Total expense recognized	$	12	$	15	$	38	$	50
SCE:
Service cost	$	31	$	31	$	91	$	93
Non-service cost (benefit)
Interest cost	29		35		85		106
Expected return on plan assets	(51)		(48)		(153)		(146)
Amortization of prior service cost	0		0		1		1
Amortization of net loss¹	2		1		6		4
Regulatory adjustment	2		(4)		6		(12)
Total non-service benefit²	$	(18)	$	(16)	$	(55)	$	(47)
Total expense recognized	$	13	$	15	$	36	$	46

¹Represents the amount of net loss reclassified from other comprehensive loss.

²Included in "Other income" on Edison International's and SCE's consolidated statement of income.

Postretirement Benefits Other Than Pensions ("PBOP")

Net periodic PBOP expense components for Edison International and SCE are:


	Three months ended September 30,						Nine months ended September 30,
(in millions)	2020		2019		2020		2019
Service cost	$	10	$	8	$	28	$	24
Non-service cost (benefit)
Interest cost	17		21		51		63
Expected return on plan assets	(29)		(28)		(89)		(84)

Amortization of prior service cost	(1)		(1)		(1)		(1)
Amortization of net gain	(5)		0		(13)		(2)
Regulatory adjustment	8		5		24		17
Total non-service benefit¹	$	(10)	$	(3)	$	(28)	$	(7)
Total expense	$	0	$	5	$	0	$	17

¹Included in "Other income" on Edison International's and SCE's consolidated statement of income.

Note 10. Investments

Nuclear Decommissioning Trusts

Future decommissioning costs related to SCE's nuclear assets are expected to be funded from independent decommissioning trusts.

The following table sets forth amortized cost and fair value of the trust investments (see Note 4 for a discussion of fair value of the trust investments):


	Longest Maturity Dates	Amortized Cost									Fair Value
(in millions)				September 30, 2020			December 31, 2019			September 30, 2020			December 31, 2019
Stocks	—	N/A			N/A			$	1,753		$	1,765
Municipal bonds	2057	$	1,048		$	822		1,240			970
U.S. government and agency securities	2067	707			996			846			1,115
Corporate bonds	2070	479			597			565			679
Short-term investments and receivables/payables¹	One-year	236			32			246			33
Total		$	2,470		$	2,447		$	4,650		$	4,562

¹Short-term investments include $122 million and $41 million of repurchase agreements payable by financial institutions which earn interest, are fully secured by U.S. Treasury securities and mature by October 1, 2020 and January 2, 2020 as of September 30, 2020 and December 31, 2019, respectively.

Trust fund earnings (based on specific identification) increase the trust fund balance and the asset retirement obligation ("ARO") regulatory liability. Unrealized holding gains, net of losses, were $1.9 billion and $1.8 billion at September 30, 2020 and December 31, 2019, respectively.

Trust assets are used to pay income taxes arising from trust investing activity. Deferred tax liabilities related to net unrealized gains were $495 million and $449 million at September 30, 2020 and December 31, 2019, respectively. Accordingly, the fair value of trust assets available to pay future decommissioning costs, net of deferred income taxes, totaled $4.2 billion and $4.1 billion at September 30, 2020 and December 31, 2019, respectively.

The following table summarizes the gains and losses for the trust investments:


	Three months ended September 30,						Nine months ended September 30,
(in millions)	2020		2019		2020		2019
Gross realized gains	$	51	$	19	$	165	$	64
Gross realized loss	(2)		(1)		(5)		(1)
Net unrealized gains for equity securities	110		3		5		209

Due to regulatory mechanisms, changes in assets of the trusts from income or loss items have no impact on operating revenue or earnings.

Note 11. Regulatory Assets and Liabilities

Regulatory Assets

SCE's regulatory assets included on the consolidated balance sheets are:


(in millions)	September 30, 2020		December 31, 2019
Current:
Regulatory balancing and memorandum accounts	$	1,315	$	798
Power contracts	194		189

Other	21		22
Total current	1,530		1,009
Long-term:
Deferred income taxes, net of liabilities	4,349		4,026
Pensions and other postretirement benefits	81		87
Power contracts	271		434
Unamortized investments, net of accumulated amortization	115		119

Unamortized loss on reacquired debt	136		142
Regulatory balancing and memorandum accounts	1,133		981
Environmental remediation	248		237

Other	113		62
Total long-term	6,446		6,088
Total regulatory assets	$	7,976	$	7,097

Regulatory Liabilities

SCE's regulatory liabilities included on the consolidated balance sheets are:


(in millions)	September 30, 2020		December 31, 2019
Current:
Regulatory balancing and memorandum accounts	$	744	$	883

Energy derivatives	45		80


Other	12		9
Total current	801		972
Long-term:
Cost of removal	2,585		2,674
Re-measurement of deferred taxes	2,318		2,424
Recoveries in excess of ARO liabilities¹	1,677		1,569
Regulatory balancing and memorandum accounts	1,047		1,261
Other postretirement benefits	427		416
Other	35		41
Total long-term	8,089		8,385
Total regulatory liabilities	$	8,890	$	9,357

¹Represents the cumulative differences between ARO expenses and amounts collected in rates primarily for the decommissioning of SCE's nuclear generation facilities. Decommissioning costs recovered through rates are primarily placed in nuclear decommissioning trusts. This regulatory liability also represents the deferral of realized and unrealized gains and losses on the nuclear decommissioning trust investments. See Note 10 for further discussion.

Net Regulatory Balancing and Memorandum Accounts

The following table summarizes the significant components of regulatory balancing and memorandum accounts included in the above tables of regulatory assets and liabilities:


(in millions)	September 30, 2020		December 31, 2019
Asset (liability)
Energy resource recovery account	$	(264)	$	(23)
Portfolio allocation balancing account	684		537
New system generation balancing account	25		85
Public purpose programs and energy efficiency programs	(1,221)		(1,244)

Base revenue requirement balancing account	420		(328)

Greenhouse gas auction revenue and low carbon fuel standard revenue	(104)		(196)
FERC balancing accounts	(33)		(127)


Wildfire-related memorandum and balancing accounts¹	1,061		868
COVID-19-related memorandum accounts²	107		0
Other	(18)		63
Asset (liability)	$	657	$	(365)

¹The wildfire-related memorandum accounts regulatory assets represent wildfire-related costs that are probable of future recovery from customers, subject to a reasonableness review. The Fire Hazard Prevention Memorandum Account ("FHPMA") is used to track costs related to fire safety and to implement fire prevention corrective action measures in extreme and very high fire threat areas. A Catastrophic Event Memorandum Account ("CEMA") is used to track costs related to restoring service and damage repair, upon declaration of disasters by state or federal authorities. The Wildfire Expense Memorandum Account ("WEMA") is used to track incremental wildfire insurance costs and uninsured wildfire-related financing, legal and claims costs. During 2019, the CPUC approved a Wildfire Mitigation Plan memorandum account to track costs incurred to implement SCE's Wildfire Mitigation Plan that are not currently reflected in SCE's revenue requirements, a Grid Safety and Resiliency Program Memorandum Account ("GSRPMA") to track the costs of SCE's GS&RP that are incremental to costs approved for recovery in SCE's 2018 GRC and a fire risk mitigation memorandum account to track costs related to the reduction of fire risk that are incremental to costs approved for recovery in SCE's 2018 GRC that are not tracked in any other wildfire-related memorandum account.

² In July 2020, the CPUC approved establishment of the COVID-19 Pandemic Protection Memorandum Account ("CPPMA"), to track incremental consumer protection costs for residential and small commercial customers. A CEMA is used to track other incremental COVID-19 costs, including costs of sequestering employees at essential work locations. Both memorandum accounts were effective beginning March 2020.

Note 12. Commitments and Contingencies

Indemnities

Edison International and SCE have various financial and performance guarantees and indemnity agreements which are issued in the normal course of business.

Edison International and SCE have agreed to provide indemnifications through contracts entered into in the normal course of business. These are primarily indemnifications against adverse litigation outcomes in connection with underwriting agreements, and indemnities for specified environmental liabilities and income taxes with respect to assets sold or other contractual arrangements. Edison International's and SCE's obligations under these agreements may or may not be limited in terms of time and/or amount, and in some instances Edison International and SCE may have recourse against third parties. Edison International and SCE have not recorded a liability related to these indemnities. The overall maximum amount of the obligations under these indemnifications cannot be reasonably estimated.

Contingencies

In addition to the matters disclosed in these Notes, Edison International and SCE are involved in other legal, tax, and regulatory proceedings before various courts and governmental agencies regarding matters arising in the ordinary course of business. Edison International and SCE believe the outcome of these other proceedings will not, individually or in the aggregate, materially affect its financial position, results of operations and cash flows.

Southern California Wildfires and Mudslides

California has experienced unprecedented weather conditions in 2020 and SCE's service territory remains susceptible to additional wildfire activity during the remainder of 2020 and beyond. The worsening conditions across California increase the likelihood of significant damage from wildfires, including those where SCE's equipment may be alleged to be associated with the fire's ignition. In response to worsening weather and fuel conditions and increased wildfire activity over the past several years, SCE has developed and is implementing its 2020-2022 Wildfire Mitigation Plan ("WMP") to reduce the risk of SCE equipment contributing to the ignition of wildfires.

Over the past several years, wildfires have impacted portions of SCE's service territory, with wildfires in December 2017 and November 2018 causing loss of life, substantial damage to both residential and business properties, and service outages for SCE customers. The investigating government agencies, the Ventura County Fire Department ("VCFD") and California Department of Forestry and Fire Protection ("CAL FIRE"), have determined that the largest of the 2017 fires originated on December 4, 2017, in the Anlauf Canyon area of Ventura County (the investigating agencies refer to this fire as the "Thomas Fire"), followed shortly thereafter by a second fire that originated near Koenigstein Road in the City of Santa Paula (the "Koenigstein Fire"). While SCE continues to review the progression of these two fires, the December 4, 2017 fires eventually burned substantial acreage in both Ventura and Santa Barbara Counties. According to CAL FIRE, the Thomas and Koenigstein Fires, collectively, burned over 280,000 acres, destroyed or damaged an estimated 1,343 structures and resulted in 2 confirmed fatalities. The largest of the November 2018 fires, known as the "Woolsey Fire," originated in Ventura County and burned acreage in both Ventura and Los Angeles Counties. According to CAL FIRE, the Woolsey Fire burned almost 100,000 acres, destroyed an estimated 1,643 structures, damaged an estimated 364 structures and resulted in 3 confirmed fatalities. NaN additional fatalities have been associated with the Woolsey Fire. The Thomas Fire, the Koenigstein Fire, the Montecito Mudslides and the Woolsey Fire are each referred to as a "2017/2018 Wildfire/Mudslide Event," and, collectively, referred to as the "2017/2018 Wildfire/Mudslide Events").

As described below, multiple lawsuits related to the Thomas and Koenigstein Fires and the Woolsey Fire have been initiated against SCE and Edison International. Some of the Thomas and Koenigstein Fires lawsuits claim that SCE and Edison International have responsibility for the damages caused by mudslides and flooding in Montecito and surrounding areas in January 2018 (the "Montecito Mudslides") based on a theory alleging that SCE has responsibility for the Thomas and/or Koenigstein Fires and that the Thomas and/or Koenigstein Fires proximately caused the Montecito Mudslides. According to Santa Barbara County initial reports, the Montecito Mudslides destroyed an estimated 135 structures, damaged an estimated 324 structures, and resulted in 21 confirmed fatalities, with 2 additional fatalities presumed. Based on information available to SCE and consideration of the risks associated with litigation, Edison International and SCE expect to incur a material loss in connection with the remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events. The 2017/2018 Wildfire/Mudslide Events are discussed further below.

Wildfires have continued to impact portions of SCE's service territory in 2019 and 2020 (the fires that have originated in Southern California are referred to collectively as the "2019/2020 Fires"). Edison International and SCE expect that any losses incurred in connection with the 2019/2020 Fires will be covered by insurance, subject to self-insured retentions and co-insurance, and expect that any such losses after insurance recoveries will not be material.

One of the 2019/2020 Fires, the "Saddle Ridge" Fire, originated in Los Angeles county in October 2019 and burned approximately 9,000 acres, destroyed an estimated 19 structures, damaged an estimated 88 structures, and resulted in injuries to 8 individuals and 1 fatality. Based on currently available information and without considering insurance recoveries, it is reasonably possible that SCE will incur a material liability in connection with the Saddle Ridge Fire, but the range of possible losses that could be incurred cannot be estimated at this time. SCE has not recorded a charge for potential liabilities relating to the Saddle Ridge Fire because, based on currently available information, it has not determined that a loss is probable.

The “Bobcat Fire” was reported in the vicinity of Cogswell Dam in Los Angeles County, California on September 6, 2020. Although containment and damage assessments continue, the United States Forest Service ("USFS") has reported as of October 19, 2020, that the Bobcat Fire had burned approximately 116,000 acres in Los Angeles County, destroyed an estimated 87 homes, 1 commercial property and 83 minor structures, damaged an estimated 28 homes and 19 minor

structures, and resulted in injuries to 6 firefighters. In addition, the USFS has estimated suppression costs at $80 million. A camera in the vicinity of Cogswell Dam captured the initial stages of a fire with the first observed smoke approximately six minutes before an SCE circuit in the area experienced an anomaly (a relay). An investigation into the cause of the Bobcat Fire is being led by the USFS, and the USFS has taken a specific section of an SCE overhead conductor in the vicinity of Cogswell Dam into possession as part of its investigation. SCE understands that the USFS has also taken three tree branches in the area into possession. The SED is conducting an investigation of the Bobcat Fire. Given the preliminary stage of SCE’s own review of the Bobcat Fire, SCE is unable at this time to determine if it will incur a material liability as a result of the fire. Edison International and SCE expect that any liabilities incurred in connection with the Bobcat Fire will be covered by insurance, subject to self-insured retentions and co-insurance, and expect that any such losses after insurance recoveries will not be material.

2017/2018 Wildfire/Mudslide Events

The extent of liability for wildfire-related damages in actions against utilities depends on a number of factors, including whether the utility substantially caused or contributed to the damages and whether parties seeking recovery of damages will be required to show negligence in addition to causation. California courts have previously found utilities to be strictly liable for property damage along with associated interest and attorneys' fees, regardless of fault, by applying the theory of inverse condemnation when a utility's facilities were determined to be a substantial cause of a wildfire that caused the property damage. If inverse condemnation is held to be inapplicable to SCE in connection with a wildfire, SCE still could be held liable for property damages and associated interest if the property damages were found to have been proximately caused by SCE's negligence. If SCE were to be found negligent, SCE could also be held liable for, among other things, fire suppression costs, business interruption losses, evacuation costs, clean-up costs, medical expenses, and personal injury/wrongful death claims. Additionally, SCE could potentially be subject to fines for alleged violations of CPUC rules and state laws in connection with the ignition of a wildfire.

Final determinations of liability for wildfire events, including determinations of whether SCE was negligent, would only be made during lengthy and complex litigation processes. Even when investigations are still pending or liability is disputed, an assessment of likely outcomes, including through future settlement of disputed claims, may require estimated losses to be accrued under accounting standards. Each reporting period, management reviews its loss estimates for remaining alleged and potential claims related to wildfire events. The process for estimating losses associated with alleged and potential wildfire-related claims requires management to exercise significant judgment based on a number of assumptions and subjective factors, including, but not limited to: estimates of known and expected claims by third parties based on currently available information, opinions of counsel regarding litigation risk, the status of and developments in the course of litigation, and prior experience litigating and settling wildfire litigation claims. As additional information becomes available, management's estimates and assumptions regarding the causes and financial impact of wildfire events, including the 2017/2018 Wildfire/Mudslide Events, may change.

At June 30, 2020, Edison International and SCE were unable to determine a best estimate of expected losses within a reasonably estimated range and therefore Edison International's and SCE's balance sheets included estimated losses, established at the lower end of the reasonably estimated range of expected losses, of $4.5 billion for the 2017/2018 Wildfire/Mudslide Events. In light of recent developments, including the 2020 Subrogation Settlement (defined and described below) and increased settlement activity with individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation, management established a best estimate of expected potential losses for alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events litigation in the third quarter of 2020. As a result, Edison International and SCE recorded a charge of $1.3 billion as of September 30, 2020 related to the 2017/2018 Wildfire/Mudslide Events, against which SCE recorded expected recoveries through FERC electric rates of $84 million. The resulting net charge to earnings was $1.2 billion ($874 million after-tax).

during litigation, including uncertainty as to the contributing causes of the 2017/2018 Wildfire/Mudslide Events, the complexities associated with fires that merge, whether inverse condemnation will be held applicable to SCE with respect to damages caused by the Montecito Mudslides, the preliminary nature of the litigation processes, the uncertainty in estimating damages that may be alleged, and the uncertainty as to how these factors impact future settlements.

Edison International and SCE will seek to offset any actual losses realized in connection with the 2017/2018 Wildfire/Mudslide Events in excess of available insurance through electric rates. The CPUC and FERC may not allow SCE to recover uninsured losses through electric rates if it is determined that such losses were not reasonably or prudently incurred. See "Loss Estimates for Third Party Claims and Potential Recoveries from Insurance and through Electric Rates" below for additional information.

External Investigations and Internal Review

The VCFD and CAL FIRE have jointly issued reports concerning their findings regarding the causes of the Thomas Fire and the Koenigstein Fire. The reports did not address the causes of the Montecito Mudslides. SCE has also received a non-final redacted draft of a report from the VCFD regarding Woolsey Fire (the "Redacted Woolsey Report"). SCE received the Redacted Woolsey Report subject to a protective order in the litigation related to the Woolsey fire and, other than the information disclosed in this Form 10-Q, is not authorized to release the report or its contents to the public at this time. Based on information received at hearings in the Woolsey Fire litigation, SCE anticipates that the VCFD will release its final report regarding the Woolsey Fire in the fourth quarter of 2020. The VCFD and CAL FIRE findings do not determine legal causation of or assign legal liability for the Thomas, Koenigstein or Woolsey Fires; final determinations of legal causation and liability would only be made during lengthy and complex litigation.

The CPUC's Safety and Enforcement Division ("SED") is also conducting investigations to assess SCE's compliance with applicable rules and regulations in areas impacted by the Thomas, Koenigstein and Woolsey Fires and the CPUC may initiate proceedings to investigate these matters after the SED's investigations are completed. Edison International and SCE understand that the California Attorney General's Office has completed its investigation of the Thomas Fire without pursuing criminal charges. Edison International and SCE are aware of an ongoing investigation by the California Attorney General's Office of the Woolsey Fire for the purpose of determining whether any criminal violations have occurred. SCE could be subject to material fines, penalties, or restitution if it is determined that it failed to comply with applicable laws and regulations. SCE is not aware of any basis for felony liability with regards to the Thomas Fire, the Koenigstein Fire or the Woolsey Fire.

SCE's internal review into the facts and circumstances of each of the 2017/2018 Wildfire/Mudslide Events is complex and time consuming. SCE expects to obtain and review additional information and materials in the possession of third parties during the course of its internal reviews and the litigation processes.

Thomas Fire

On March 13, 2019, the VCFD and CAL FIRE jointly issued a report concluding, after ruling out other possible causes, that the Thomas Fire was started by SCE power lines coming into contact during high winds, resulting in molten metal falling to the ground. However, the report does not state that their investigation found molten metal on the ground. At this time, based on available information, SCE has not determined whether its equipment caused the Thomas Fire. Based on publicly available radar data showing a smoke plume in the Anlauf Canyon area emerging in advance of the report's indicated start time, SCE believes that the Thomas Fire started at least 12 minutes prior to any issue involving SCE's system and at least 15 minutes prior to the start time indicated in the report. SCE is continuing to assess the progression of the Thomas Fire and the extent of damages that may be attributable to that fire.

Koenigstein Fire

On March 20, 2019, the VCFD and CAL FIRE jointly issued a report finding that the Koenigstein Fire was caused when an energized SCE electrical wire separated and fell to the ground along with molten metal particles and ignited the dry vegetation below. As previously disclosed, SCE believes that its equipment was associated with the ignition of the Koenigstein Fire. SCE is continuing to assess the progression of the Koenigstein Fire and the extent of damages that may be attributable to that fire.

Montecito Mudslides

SCE's internal review includes inquiry into whether the Thomas and/or Koenigstein Fires proximately caused or contributed to the Montecito Mudslides, whether, and to what extent, the Thomas and/or Koenigstein Fires were responsible for the damages in the Montecito area and other factors that potentially contributed to the losses that resulted from the Montecito

Mudslides. Many other factors, including, but not limited to, weather conditions and insufficiently or improperly designed and maintained debris basins, roads, bridges and other channel crossings, could have proximately caused, contributed to or exacerbated the losses that resulted from the Montecito Mudslides.

At this time, based on available information, SCE has not been able to determine whether the Thomas Fire or the Koenigstein Fire, or both, were responsible for the damages in the Montecito area. In the event that SCE is determined to have caused the fire that spread to the Montecito area, SCE cannot predict whether, if fully litigated, the courts would conclude that the Montecito Mudslides were caused or contributed to by the Thomas and/or Koenigstein Fires or that SCE would be liable for some or all of the damages caused by the Montecito Mudslides.

Woolsey Fire

SCE's internal review into the facts and circumstances of the Woolsey Fire is ongoing. SCE has reported to the CPUC that there was an outage on SCE's electric system in the vicinity of where the Woolsey Fire reportedly began on November 8, 2018. SCE is aware of witnesses who saw fire in the vicinity of SCE's equipment at the time the fire was first reported. While SCE did not find evidence of downed electrical wires on the ground in the suspected area of origin, it observed a pole support wire in proximity to an electrical wire that was energized prior to the outage.

The Redacted Woolsey Report states that the VCFD investigation team determined that electrical equipment owned and operated by SCE was the cause of the Woolsey Fire. Absent additional evidence, SCE believes that it is likely that its equipment was associated with the ignition of the Woolsey Fire. SCE expects to obtain and review additional information and materials in the possession of CAL FIRE and others during the course of its internal review and the Woolsey Fire litigation process, including SCE equipment that has been retained by CAL FIRE.

Litigation

Multiple lawsuits related to the 2017/2018 Wildfire/Mudslide Events naming SCE as a defendant have been filed by three categories of plaintiffs: individual plaintiffs, subrogation plaintiffs and public entity plaintiffs. A number of the lawsuits also name Edison International as a defendant and some of the lawsuits were filed as purported class actions. The lawsuits, which have been filed in the superior courts of Ventura, Santa Barbara and Los Angeles Counties in the case of the Thomas and Koenigstein Fires and the Montecito Mudslides, and in Ventura and Los Angeles Counties in the case of the Woolsey Fire, allege, among other things, negligence, inverse condemnation, trespass, private nuisance, personal injury, wrongful death, and violations of the California Public Utilities and Health and Safety Codes. Because potential plaintiffs can still timely file claims related to the 2017/2018 Wildfire/Mudslide Events, SCE expects to be the subject of additional lawsuits related to the 2017/2018 Wildfire/Mudslide Events. The litigation could take a number of years to be resolved because of the complexity of the matters and number of plaintiffs.

The Thomas and Koenigstein Fires and Montecito Mudslides lawsuits are being coordinated in the Los Angeles Superior Court. The Woolsey Fire lawsuits have also been coordinated in the Los Angeles Superior Court. On October 4, 2018, the Superior Court denied Edison International's and SCE's challenge to the application of inverse condemnation to SCE with respect to the Thomas and Koenigstein Fires and, on February 26, 2019, the California Supreme Court denied SCE's petition to review the Superior Court's decision. In January 2019, SCE filed a cross-complaint against certain local public entities alleging that failures by these entities, such as failure to adequately plan for flood hazards and build and maintain adequate debris basins, roads, bridges and other channel crossings, among other things, caused, contributed to or exacerbated the losses that resulted from the Montecito Mudslides. These cross-claims in the Montecito Mudslides litigation were not released as part of the Local Public Entity Settlements (as defined below).

Additionally, in September 2018, a derivative lawsuit for breach of fiduciary duties and unjust enrichment was filed in the Los Angeles Superior Court against certain current and former members of the Boards of Directors of Edison International and SCE. Edison International and SCE are identified as nominal defendants in the action. The derivative lawsuit generally alleges that the individual defendants violated their fiduciary duties by causing or allowing SCE to operate in an unsafe manner in violation of relevant regulations, resulting in substantial liability and damage from the Thomas and Koenigstein Fires and the Montecito Mudslides. The lawsuit is currently stayed.

In November 2018, a purported class action lawsuit alleging securities fraud and related claims was filed in federal court against Edison International, SCE and certain current and former officers of Edison International and SCE. The plaintiff alleges that Edison International and SCE made false and/or misleading statements in filings with the Securities and Exchange Commission by failing to disclose that SCE had allegedly failed to maintain its electric transmission and distribution networks in compliance with safety regulations, and that those alleged safety violations led to fires that occurred in 2017 and 2018, including the Thomas Fire and the Woolsey Fire.

In January 2019, 2 separate derivative lawsuits alleging breach of fiduciary duties, securities fraud, misleading proxy statements, unjust enrichment, and related claims were filed in federal court against certain current and former members of the Boards of Directors and certain current and former officers of Edison International and SCE. Edison International and SCE are named as nominal defendants in those actions. The derivative lawsuits generally allege that the individual defendants breached their fiduciary duties and made misleading statements or allowed misleading statements to be made (i) between March 21, 2014 and August 10, 2015, with respect to certain ex parte communications between SCE and CPUC decision-makers concerning the settlement of the San Onofre Order Instituting Investigation proceeding (the "San Onofre OII") and (ii) from February 23, 2016 to the present, concerning compliance with applicable laws and regulations concerning electric system maintenance and operations related to wildfire risks. The lawsuits generally allege that these breaches of duty and misstatements led to substantial liability and damage resulting from the disclosure of SCE's ex parte communications in connection with the San Onofre OII settlement, and from the 2017/2018 Wildfire/Mudslide Events. The lawsuits are currently stayed.

Settlements

In the fourth quarter of 2019, SCE paid $360 million to a number of local public entities to resolve those parties' collective claims arising from the 2017/2018 Wildfire/Mudslide Events (the "Local Public Entity Settlements"). In the third quarter of 2020, SCE entered into an agreement (the "September 2020 Subrogation Settlement") with all the insurance subrogation plaintiffs in the Thomas Fire, Koenigstein Fire and Montecito Mudslides litigation (the "Settling Subrogation Plaintiffs") to resolve those parties' collective claims arising from the Thomas Fire, Koenigstein Fire or Montecito Mudslides. Under the terms of the September 2020 Subrogation Settlement, SCE paid the Settling Subrogation Plaintiffs an aggregate of $1.2 billion in October 2020 and also agreed to pay $0.555 for each dollar in claims to be paid by the Settling Subrogation Plaintiffs to their policy holders before July 15, 2023, up to an agreed upon cap (the "Future Settlement Payments"). In the second and third quarters of 2020, SCE entered into settlements with several hundred of the several thousand individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation under which it agreed to pay an aggregate of approximately $73 million to those individual plaintiffs. Other claims and potential claims related to the 2017/2018 Wildfire/Mudslide Events remain. SCE continues to explore reasonable settlement opportunities with other plaintiffs in the outstanding 2017/2018 Wildfire/Mudslide Events litigation.

Loss Estimates for Third Party Claims and Potential Recoveries from Insurance and through Electric Rates

At September 30, 2020 and December 31, 2019, Edison International's and SCE's balance sheets include accrued estimated losses of $4.6 billion and $4.5 billion for the 2017/2018 Wildfire/Mudslide Events, respectively. The following table presents changes in the estimated losses since December 31, 2019, and estimated total liabilities for the 2017/2018 Wildfire/Mudslide Events as of September 30, 2020:


(in millions)
Loss estimate balance at December 31, 2019	$	4,541
Increase in accrued estimated losses to reflect best estimate¹	1,297
Amounts paid	(37)
Fixed payments to be made under executed settlement agreements	(1,192)
Loss estimate balance at September 30, 2020²	4,609
Fixed payments to be made under executed settlement agreements³	1,192
Estimated total liabilities at September 30, 2020	$	5,801

¹Includes an estimate of the Future Settlement Payments.

² Reflects Edison International and SCE's best estimate of expected losses for remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events at September 30, 2020. Does not include an estimate of any potential fines or penalties that could be levied against SCE in connection with the 2017/2018 Wildfire/Mudslide Events.

³ Included in current "Wildfire-related claims" on Edison International's and SCE's consolidated balance sheets.

For the three and nine months ended September 30, 2020 and 2019, Edison International's and SCE's income statements include charges for the estimated losses, net of expected recoveries from insurance and FERC customers, related to the 2017/2018 Wildfire/Mudslide Events as follows:


	Three months ended September 30,						Nine months ended September 30,
(in millions)	2020		2019		2020		2019
Charge for wildfire-related claims	$	1,297	$	0	$	1,297	$	0
Expected insurance recoveries	0		0		0		0
Expected revenue from FERC customers	(84)		0		(84)		0
Total pre-tax charge	1,213		0		1,213		0
Income tax benefit	(339)		0		(339)		0
Total after-tax charge	$	874	$	0	$	874	$	0

For events that occurred in 2017 and early 2018, principally the Thomas and Koenigstein Fires and Montecito Mudslides, SCE had $1.0 billion of wildfire-specific insurance coverage, subject to a self-insured retention of $10 million per occurrence. For the Woolsey Fire, SCE had an additional $1.0 billion of wildfire-specific insurance coverage, subject to a self-insured retention of $10 million per occurrence. Edison International and SCE record a receivable for insurance recoveries when recovery of a recorded loss is determined to be probable. The following table presents changes in expected insurance recoveries associated with the estimated losses for the 2017/2018 Wildfire/Mudslide Events since December 31, 2019:


(in millions)
Balance at December 31, 2019	$	1,710
Insurance recoveries	(73)
Balance at September 30, 2020	$	1,637

At September 30, 2020, SCE had remaining expected recoveries from insurance for the Thomas Fire, Koenigstein Fire and Montecito Mudslides of approximately $843 million, recorded as current "Insurance receivable" and "Insurance receivable from affiliate" on the consolidated balance sheets of SCE and as current "Insurance receivable" on the consolidated balance sheets of Edison International. SCE expects that this insurance will be exhausted after expected recoveries for the September 2020 Subrogation Settlement and prior settlements entered into through September 30, 2020. As of September 30, 2020, SCE had approximately $794 million remaining in expected recoveries from insurance for the Woolsey Fire litigation, included in "Long-term insurance receivables due from affiliate" and "Other long-term assets" on the consolidated balance sheets of SCE and "Other long-term assets" on the consolidated balance sheets of Edison International.

In total, SCE has accrued estimated losses of $6.2 billion, has paid or agreed to pay $1.6 billion in settlements and has recovered $363 million from its insurance carriers through September 30, 2020 in relation to the 2017/2018 Wildfire/Mudslide Events.

SCE will seek to recover uninsured costs resulting from the 2017/2018 Wildfire/Mudslide Events through electric rates. Recovery of these costs is subject to approval by regulators. Under accounting standards for rate-regulated enterprises, SCE defers costs as regulatory assets when it concludes that such costs are probable of future recovery in electric rates. SCE utilizes objectively determinable evidence to form its view on probability of future recovery. The only directly comparable precedent in which a California investor-owned utility has sought recovery for uninsured wildfire-related costs is SDG&E's requests for cost recovery related to 2007 wildfire activity, where the FERC allowed recovery of all FERC-jurisdictional wildfire-related costs while the CPUC rejected recovery of all CPUC-jurisdictional wildfire-related costs based on a determination that SDG&E did not meet the CPUC's prudency standard. As a result, while SCE does not agree with the CPUC's decision, it believes that the CPUC's interpretation and application of the prudency standard to SDG&E creates substantial uncertainty regarding how that standard will be applied to an investor-owned utility in future wildfire cost-recovery proceedings for fires ignited prior to July 12, 2019. SCE will continue to evaluate the probability of recovery based on available evidence, including judicial, legislative and regulatory decisions, including any CPUC decisions illustrating the interpretation and/or application of the prudency standard when making determinations regarding recovery of uninsured wildfire-related costs. While the CPUC has not made a determination regarding SCE's prudency relative to any of the 2017/2018 Wildfire/Mudslide Events, SCE is unable to conclude, at this time, that uninsured CPUC-jurisdictional wildfire-related costs are probable of recovery through electric rates. SCE would record a regulatory asset at the time it obtains sufficient information to support a conclusion that recovery is probable. SCE will seek recovery of the CPUC portion of any

uninsured wildfire-related costs through its WEMA or its CEMA. In July 2019, SCE filed a CEMA application with the CPUC to seek recovery of, among other things, approximately $6 million in costs incurred to restore service to customers and to repair, replace and restore buildings and SCE's facilities damaged or destroyed as a result of the Thomas and Koenigstein Fires. SCE continues to incur costs for reconstructing its system and restoring service to structures that were damaged or destroyed by these two fires and plans to file additional applications with the CPUC to recover such costs. See "Recovery of Wildfire-Related Costs" below.

Through the operation of its FERC Formula Rate, and based upon the precedent established in SDG&E's recovery of FERC-jurisdictional wildfire-related costs, SCE believes it is probable it will recover its FERC-jurisdictional wildfire and mudslide related costs and recorded total regulatory assets of $233 million within the FERC balancing account. This was the FERC portion of the estimated losses accrued. As of September 30, 2020, collections have reduced the amount remaining in the FERC balancing account to $125 million.

Current Wildfire Insurance Coverage

SCE had approximately $1.2 billion of wildfire-specific insurance coverage for events that occurred during the period June 1, 2019 through June 30, 2020, subject to up to $115 million of co-insurance and $50 million of self-insured retention, which resulted in net coverage of approximately $1.0 billion. SCE has approximately $1.0 billion of wildfire-specific insurance coverage for events that may occur during the period July 1, 2020 through June 30, 2021, subject to up to $80 million of co-insurance and $50 million of self-insured retention, which results in net coverage of approximately $870 million. Various coverage limitations within the policies that make up SCE's wildfire insurance coverage could result in additional material self-insured costs, for instance in the event of multiple wildfire occurrences during a policy period or with a single wildfire with damages in excess of the policy limits. SCE believes that its insurance coverage for the July 1, 2020 through June 30, 2021 period meets its obligation to maintain reasonable insurance coverage under AB 1054.

Based on policies currently in effect, SCE anticipates that its wildfire insurance expense in 2020, prior to any regulatory deferrals, will total approximately $450 million. Wildfire insurance expense in 2019, prior to any regulatory deferrals, was approximately $400 million. Calendar year insurance expense reflects the portion of premiums attributable to policy coverage in that calendar year.

SCE tracks incremental insurance premium, self-insured retention and co-insurance costs related to wildfire liability insurance policies as well as other wildfire-related costs, including claims and legal costs, in its WEMA. In July 2019, SCE filed a WEMA application with the CPUC to seek recovery of $478 million in wildfire insurance premium costs that have been incurred or will be incurred before July 1, 2020, in excess of premiums approved in the 2018 GRC and the corresponding financing costs. In September 2020, the CPUC approved SCE's WEMA application and authorized SCE to collect a total revenue requirement of $505 million over a two-year period. SCE included the authorized revenue requirement in rates in October 2020.

SCE's cost of obtaining wildfire insurance coverage has increased significantly in recent years as a result of, among other things, the number of recent and significant wildfire events throughout California and the application of inverse condemnation to investor-owned utilities. As such, while SCE is required to maintain reasonable insurance coverage under AB 1054, SCE may not be able to obtain a reasonable amount of wildfire insurance, at a reasonable cost, for future policy periods.

Recovery of Wildfire-Related Costs

Pre-AB 1054 Cost Recovery

California courts have previously found investor-owned utilities to be strictly liable for property damage, regardless of fault, by applying the theory of inverse condemnation when a utility's facilities were determined to be a substantial cause of a wildfire that caused the property damage. The rationale stated by these courts for applying this theory to investor-owned utilities is that property damages resulting from a public improvement, such as the distribution of electricity, can be spread across the larger community that benefited from such improvement through recovery of uninsured wildfire-related costs in electric rates. However, in November 2017, the CPUC issued a decision denying SDG&E's request to include in its rates uninsured wildfire-related costs arising from several 2007 wildfires, finding that SDG&E did not meet the prudency standard because it did not prudently manage and operate its facilities prior to or at the outset of the 2007 wildfires. In July 2018, the CPUC denied both SDG&E's application for rehearing on its cost recovery request and a joint application for rehearing filed by SCE and PG&E limited to the applicability of inverse condemnation principles in the same proceeding. The California Court of Appeal, the California Supreme Court and the United States Supreme Court have denied SDG&E's petitions for review of the CPUC's denial of SDG&E's application.

2019 Wildfire Legislation

In July 2019, AB 1054 was signed by the governor of California and became effective immediately. The summary of the wildfire legislation below is based on SCE's interpretation of AB 1054. A lawsuit challenging the validity of AB 1054 was filed in federal court on July 19, 2019. Edison International and SCE are unable to predict the outcome of this lawsuit.

Wildfire Insurance Fund

AB 1054 provided for the Wildfire Insurance Fund to reimburse a utility for payment of third-party damage claims arising from certain wildfires that exceed, in aggregate in a calendar year, the greater of $1.0 billion or the insurance coverage required to be maintained under AB 1054. The Wildfire Insurance Fund was established in September 2019 and is available for claims related to wildfires ignited after July 12, 2019 that are determined by the responsible government investigatory agency to have been caused by a utility.

SCE made an initial contribution of approximately $2.4 billion to the Wildfire Insurance Fund in September 2019 and has committed to make ten annual contributions of approximately $95 million per year to the fund, by no later than January 1 of each year. SCE amortizes its contributions to the Wildfire Insurance Fund over 10 years and continues to evaluate the fund's expected life based on actual fire experience. SCE made its first annual contribution to the Wildfire Insurance Fund in December 2019. Edison International supported SCE's initial contribution to the Wildfire Insurance Fund by raising $1.2 billion from the issuance of Edison International equity. SCE raised the remaining $1.2 billion from the issuance of long-term debt. SCE's contributions to the Wildfire Insurance Fund will not be recoverable through electric rates and will be excluded from the measurement of SCE's CPUC-jurisdictional authorized capital structure. SCE will also not be entitled to cost recovery for any borrowing costs incurred in connection with its contributions to the Wildfire Insurance Fund.

Participating investor-owned utilities will be reimbursed from the Wildfire Insurance Fund for eligible claims, subject to the fund administrator's review. SCE will reimburse the fund for any withdrawn amounts if SCE receives payment of such amounts under an indemnification agreement or from an insurance provider or other third-party. SCE will also be required to reimburse the fund for withdrawn amounts that the CPUC disallows, subject, in some instances, to the AB 1054 Liability Cap (as defined below). If the utility has maintained a valid safety certification and its actions or inactions that resulted in the wildfire are not found to constitute conscious or willful disregard of the rights and safety of others, the aggregate requirement to reimburse the fund over a trailing three calendar year period is capped at 20% of the equity portion of the utility's transmission and distribution rate base in the year of the prudency determination ("AB 1054 Liability Cap"). Based on SCE's 2020 rate base and using the equity portion of SCE's CPUC authorized capital structure of 52%, SCE's requirement to reimburse the Wildfire Insurance Fund for eligible claims disallowed in 2020 would be capped at approximately $3.0 billion.

SCE will not be allowed to recover borrowing costs incurred to reimburse the fund for amounts that the CPUC disallows. The Wildfire Insurance Fund and, consequently, the AB 1054 Liability Cap will terminate when the administrator determines that the fund has been exhausted.

AB 1054 Prudency Standard

July 12, 2019. Under AB 1054, the CPUC is required to find a utility to be prudent if the utility's conduct related to the ignition was consistent with actions that a reasonable utility would have undertaken under similar circumstances, at the relevant point in time, and based on the information available at that time. Prudent conduct under the AB 1054 standard is not limited to the optimum practice, method, or act to the exclusion of others, but rather encompasses a spectrum of possible practices, methods, or acts consistent with utility system needs, the interest of the ratepayers, and the requirements of governmental agencies. AB 1054 also provides that the CPUC may determine that wildfire costs may be recoverable, in whole or in part, by taking into account factors within and outside the utility's control, including humidity, temperature, and winds. Further, utilities with a valid safety certification will be presumed to have acted prudently related to a wildfire ignition unless a party in the cost recovery proceeding creates serious doubt as to the reasonableness of the utility's conduct, at which time, the burden shifts back to the utility to prove its conduct was reasonable. If a utility does not have a valid safety certification, it will have the burden to prove, based on a preponderance of evidence, that its conduct was prudent. The new prudency standard will survive the termination of the Wildfire Insurance Fund.

Safety Certification and Wildfire Mitigation Plan

Under AB 1054, SCE can obtain an annual safety certification upon the submission of certain required safety information, including an approved wildfire mitigation plan ("WMP"). On September 17, 2020, SCE obtained a safety certification that will be valid for 12 months. Notwithstanding its 12-month term, if SCE requests a new safety certification prior to the expiration of its current safety certification, then its current safety certification will remain valid until the CPUC's Wildfire Safety Division ("WSD") acts on SCE's request for a new safety certification.

Under AB 1054, SCE is required to submit a WMP to the CPUC at least once every three years for review and approval. Beginning in 2020, each such plan is required to cover at least a three-year period. SCE filed its 2020 – 2022 WMP in February 2020. In June 2020 the CPUC ratified the WSD's conditional approval of SCE's 2020 – 2022 WMP. The approval is conditioned on SCE providing requested information to the WSD, including additional descriptions of how SCE is implementing, and will implement, certain requirements imposed by the WSD. The WSD issued a draft resolution in October 2020 that, if adopted, will require SCE to update its 2020-2022 WMP by February 5, 2021.

Capital Expenditure Requirement

Under AB 1054, approximately $1.6 billion of spending by SCE on wildfire risk mitigation capital expenditures made after August 1, 2019 cannot be included in the equity portion of SCE's rate base ("AB 1054 Excluded Capital Expenditures"). SCE can apply for irrevocable orders from the CPUC to finance these AB 1054 Excluded Capital Expenditures, including through the issuance of securitized bonds, and can recover any prudently incurred financing costs. In July 2020, SCE applied for an irrevocable order from the CPUC to finance $337 million, comprised of AB 1054 Excluded Capital Expenditures incurred in connection with GS&RP and prudently incurred financing costs, through the issuance of securitized bonds. The CPUC issued a proposed decision approving SCE's application in October 2020 and is expected to issue the irrevocable financing order in November 2020. As of September 30, 2020, SCE has spent $1.1 billion on AB 1054 Excluded Capital Expenditures. SCE expects to seek additional irrevocable orders from the CPUC to finance the remaining AB 1054 Excluded Capital Expenditures.

Environmental Remediation

SCE records its environmental remediation and restoration liabilities when site assessments and/or remedial actions are probable and a range of reasonably likely cleanup costs can be estimated. SCE reviews its sites and measures the liability quarterly, by assessing a range of reasonably likely costs for each identified site using currently available information, including existing technology, presently enacted laws and regulations, experience gained at similar sites, and the probable level of involvement and financial condition of other potentially responsible parties. These estimates include costs for site investigations, remediation, operation and maintenance, monitoring, and site closure. Unless there is a single probable amount, SCE records the lower end of this reasonably likely range of costs (reflected in "Other long-term liabilities") at undiscounted amounts as timing of cash flows is uncertain.

At September 30, 2020, SCE's recorded estimated minimum liability to remediate its 25 identified material sites (sites with a liability balance at September 30, 2020, in which the upper end of the range of the costs is at least $1 million was $256 million, including $174 million related to San Onofre. In addition to these sites, SCE also has 14 immaterial sites with a liability balance as of September 30, 2020, for which the total minimum recorded liability was $3 million. Of the

$259 million total environmental remediation liability for SCE, $248 million has been recorded as a regulatory asset. SCE expects to recover $40 million through an incentive mechanism that allows SCE to recover 90% of its environmental remediation costs at certain sites (SCE may request to include additional sites) and $208 million through a mechanism that allows SCE to recover 100% of the costs incurred at certain sites through customer rates. SCE's identified sites include several sites for which there is a lack of currently available information, including the nature and magnitude of contamination, and the extent, if any, that SCE may be held responsible for contributing to any costs incurred for remediating these sites. Thus, no reasonable estimate of cleanup costs can be made for these sites.

The ultimate costs to clean up SCE's identified sites may vary from its recorded liability due to numerous uncertainties inherent in the estimation process, such as: the extent and nature of contamination; the scarcity of reliable data for identified sites; the varying costs of alternative cleanup methods; developments resulting from investigatory studies; the possibility of identifying additional sites; and the time periods over which site remediation is expected to occur. SCE believes that, due to these uncertainties, it is reasonably possible that cleanup costs at the identified material sites and immaterial sites could exceed its recorded liability by up to $123 million and $8 million, respectively. The upper limit of this range of costs was estimated using assumptions least favorable to SCE among a range of reasonably possible outcomes.

SCE expects to clean up and mitigate its identified sites over a period of up to 30 years. Remediation costs for each of the next five years are expected to range from $9 million to $19 million. Costs incurred for the nine months ended September 30, 2020 and 2019 were $5 million and $4 million, respectively.

Based upon the CPUC's regulatory treatment of environmental remediation costs incurred at SCE, SCE believes that costs ultimately recorded will not materially affect its results of operations, financial position, or cash flows. There can be no assurance, however, that future developments, including additional information about existing sites or the identification of new sites, will not require material revisions to estimates.

Nuclear Insurance

SCE is a member of Nuclear Electric Insurance Limited ("NEIL"), a mutual insurance company owned by entities with nuclear facilities. NEIL provides insurance for nuclear property damage, including damages caused by acts of terrorism up to specified limits, and for accidental outages for active facilities. The amount of nuclear property damage insurance purchased for San Onofre and Palo Verde exceeds the minimum federal requirement of $50 million and $1.1 billion, respectively. If NEIL losses at any nuclear facility covered by the arrangement were to exceed the accumulated funds for these insurance programs, SCE could be assessed retrospective premium adjustments of up to approximately $30 million per year.

Federal law limits public offsite liability claims for bodily injury and property damage from a nuclear incident to the amount of available financial protection, which is currently approximately $13.8 billion for Palo Verde and $560 million for San Onofre. SCE and other owners of San Onofre and Palo Verde have purchased the maximum private primary insurance available through a Facility Form issued by American Nuclear Insurers. SCE withdrew from participation in the secondary insurance pool for San Onofre for offsite liability insurance effective January 5, 2018. Based on its ownership interests in Palo Verde, SCE could be required to pay a maximum of approximately $65 million per nuclear incident for future incidents. However, it would have to pay no more than approximately $10 million per future incident in any one year. Based on its ownership interests in San Onofre and Palo Verde prior to January 5, 2018, SCE could be required to pay a maximum of approximately $255 million per nuclear incident and a maximum of $38 million per year per incident for liabilities arising from events prior to January 5, 2018, although SCE is not aware of any such events.

Spent Nuclear Fuel

Under federal law, the DOE is responsible for the selection and construction of a facility for the permanent disposal of spent nuclear fuel and high-level radioactive waste. The DOE has not met its contractual obligation to accept spent nuclear fuel. Extended delays by the DOE have led to the construction of costly alternatives and associated siting and environmental issues. Currently, both San Onofre and Palo Verde have interim storage for spent nuclear fuel on site sufficient for their current license period.

In June 2010, the United States Court of Federal Claims issued a decision granting SCE and the San Onofre co-owners damages of approximately $142 million (SCE's share $112 million) to recover costs incurred through December 31, 2005 for the DOE's failure to meet its obligation to begin accepting spent nuclear fuel from San Onofre. SCE received payment from the federal government in the amount of the damage award. In April 2016, SCE, as operating agent, settled a lawsuit on behalf of the San Onofre owners against the DOE for $162 million (SCE's share $124 million, which included reimbursement for approximately $2 million in legal and other costs), to compensate for damages caused by the DOE's failure to meet its obligation to begin accepting spent nuclear fuel for the period from January 1, 2006 to December 31, 2013. In August 2018, the CPUC approved SCE's proposal to return the SCE share of the award to customers based on the amount that customers

actually contributed for fuel storage costs; resulting in approximately $106 million of the SCE share being returned to customers and the remaining $17 million being returned to shareholders. Of the $106 million, $72 million was applied against the remaining San Onofre Regulatory Asset in accordance with the Revised San Onofre Settlement Agreement.

The April 2016 settlement also provided for a claim submission/audit process for expenses incurred from 2014 – 2016, where SCE may submit a claim for damages caused by the DOE failure to accept spent nuclear fuel each year, followed by a government audit and payment of the claim. This process made additional legal action to recover damages incurred in 2014 –2016 unnecessary. The first such claim covering damages for 2014 – 2015 was filed on September 30, 2016 for approximately $56 million. In February 2017, the DOE reviewed the 2014 – 2015 claim submission and reduced the original request to approximately $43 million (SCE's share was approximately $34 million). SCE accepted the DOE's determination, and the government paid the 2014 – 2015 claim under the terms of the settlement. In October 2017, SCE filed a claim covering damages for 2016 for approximately $58 million. In May 2018, the DOE approved reimbursement of approximately $45 million (SCE's share was approximately $35 million) of SCE's 2016 damages, disallowing recovery of approximately $13 million. SCE accepted the DOE's determination, and the government paid the 2016 claim under the terms of the settlement. The damages awards are subject to CPUC review as to how the amounts will be refunded among customers, shareholders, or to offset other costs.

In November 2019, SCE filed a new complaint against the DOE to recover damages incurred from January 1, 2017 through July 31, 2018.

Tehachapi Transmission Project

The Tehachapi Transmission Project consists of new and upgraded electric transmission lines and substations between eastern Kern County and San Bernardino County and was undertaken to bring renewable resources in Kern County to energy consumers in the Los Angeles basin and the California energy grid. The project consists of eleven segments. Segments 1-3 were placed in service beginning in 2009 through 2013. Segments 4-11 were placed in service in December 2016.

In December 2019, the CPUC filed a protest alleging that $419 million of costs associated with the Tehachapi Transmission Project are imprudent and should be disallowed from SCE's FERC rate base because these costs exceeded the maximum reasonable cost identified by the CPUC when it granted the project's certificate of public convenience and necessity. As part of the 2019 Formula Rate Settlement, the CPUC withdrew its protest effective as of July 27, 2020. Refer to Note 1 for further details related to 2019 FERC Formula Rate.

Note 13. Leases

Leases as Lessee

SCE enters into various agreements to purchase power, electric capacity and other energy products that may be accounted for as leases when SCE has dispatch rights that determine when and how a plant runs. SCE also leases property and equipment primarily related to vehicles, office space and other equipment. The terms of the contracts included in the table below are primarily 3 to 20 years for PPA leases, 5 to 72 years for office leases, and 5 to 12 years for the remaining other operating leases.

The following table summarizes SCE's lease payments for operating and finance leases as of September 30, 2020:


(in millions)	PPA Operating Leases¹		Other Operating Leases^2,3		PPA Finance Leases¹
2020	$	37	$	10	$	0
2021	205		36		1
2022	208		30		1
2023	159		24		2
2024	47		19		2
Thereafter	489		114		8
Total lease payments	1,145		233		14
Amount representing interest³	209		60		5
Lease liabilities	$	936	$	173	$	9

¹Excludes expected purchases from most renewable energy contracts, which do not meet the definition of a lease payment since renewable power generation is contingent on external factors.

²Excludes escalation clauses based on consumer price or other indices and residual value guarantees that are not considered probable at the commencement date of the lease.

³Lease payments are discounted to their present value using SCE's incremental borrowing rates.

Supplemental balance sheet information related to SCE's leases was as follows:


(in millions)	September 30, 2020		December 31, 2019
Operating leases:
Operating lease right-of-use ("ROU") assets¹	$	1,109	$	689
Current portion of operating lease liabilities	210		79
Operating lease liabilities	899		610
Total operating lease liabilities¹	$	1,109	$	689

Finance leases included in:
Utility property, plant and equipment, gross	$	10	$	14
Accumulated depreciation	(1)		(5)
Utility property, plant and equipment, net	9		9
Other current liabilities	1		1
Other long-term liabilities	8		8
Total finance lease liabilities	$	9	$	9

¹ During the third quarter of 2020, a PPA operating lease contract commenced and 1 PPA contract was amended that resulted in a total of $463 million additions in ROU assets and lease liabilities.

The timing of SCE's recognition of the lease expense conforms to ratemaking treatment for SCE's recovery of the cost of electricity and is included in purchased power for operating leases and interest and amortization expense for finance leases. The following table summarizes the components of SCE's lease expense:


	Three months ended September 30,						Nine months ended September 30,
(in millions)	2020		2019		2020		2019
PPA leases:
Operating lease cost	35		38		74		98
Finance lease cost	1		1		2		1
Variable lease cost¹	676		751		1,582		1,742



Total PPA lease cost	712		790		1,658		1,841


Other operating leases cost	11		12		35		35


Total lease cost	$	723	$	802	$	1,693	$	1,876

¹Includes lease costs from renewable energy contracts where payments are based on contingent external factors such as wind, hydro and solar power generation.

Other information related to leases was as follows:


(in millions, except lease term and discount rate)	Nine month ended September 30, 2020			Nine month ended September 30, 2019

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
PPA leases	$	74		$	98
Other leases	33			34



ROU assets obtained in exchange for lease obligations:

PPA operating leases	463			0
Other operating leases	42			23


Weighted average remaining lease term (in years):
Operating leases
PPA leases	9.83			16.03
Other leases	12.35			12.75
PPA Finance leases	10.90			11.71

Weighted average discount rate:
Operating leases
PPA leases	3.08		%	4.44		%
Other leases	3.74		%	3.89		%
PPA Finance leases	8.83		%	8.74		%

Leases as lessor

EME is a wholly-owned subsidiary of Edison International. EME emerged from bankruptcy in 2014 and retained a lease investment in a hydroelectric power plant in Vidalia, Louisiana. During 2020, the lessee exercised an option in the lease agreement to purchase the asset upon expiration of the lease term in November 2020. Edison International has no remaining investment balance as of September 30, 2020 related to the lease investment. Upon completion of the sale, Edison International expects to receive net proceeds of approximately $131 million. The revenue recognized for the lease in 2020 is immaterial to Edison International's consolidated financial statements.

Note 14. Equity

In May 2020, Edison International issued 14,181,882 shares of common stock in a registered direct offering and received approximately $800 million in proceeds, before deducting fees and offering expenses of $14 million. The proceeds were used to pay off debt outstanding under a term loan agreement and for general corporate purposes. Refer to Note 5 for details of the term loan.

In May 2019, Edison International filed a prospectus supplement and executed several distribution agreements with certain sales agents to establish an "at-the-market" ("ATM") program under which it may sell shares of its common stock having an aggregate sales price of up to $1.5 billion. During the three months ended September 30, 2020, Edison International did 0t issue any shares through the ATM program. During the nine months ended September 30, 2020, Edison International issued 391,501 shares through the ATM program and received proceeds of $27 million, net of fees and offering expenses of $0.3 million. The proceeds from the sales were used for equity contributions to SCE and for general corporate and working capital purposes. As of September 30, 2020, shares of common stock having an aggregate offering price of $1.3 billion remained available to be sold under the ATM program. Edison International has no obligation to sell the remaining available shares.

Edison International continued to settle its ongoing common stock requirements of various internal programs through issuance of new common stock. During the three and nine months ended September 30, 2020, 206,900 and 1,378,700 shares of common stock were purchased by employees through the 401(k) defined contribution savings plan for net cash receipts of $11 million and $83 million, 4,749 and 338,442 shares of common stock were issued as stock compensation awards for net

cash receipts of $1 million and $14 million and 77,250 and 206,269 shares of new common stock were issued in lieu of distributing $4 million and $13 million to shareholders opting to receive dividend payments in the form of additional common stock, respectively.

In the three and nine months ended September 30, 2020, SCE received a total of $219 million and $1.1 billion in capital contributions, respectively, from Edison International Parent to support SCE's capital program, maintain the equity portion of SCE's capital structure at authorized levels and for general corporate purposes.

During third quarter of 2020, SCE redeemed $120 million of cumulative preferred stock consisting of all of the outstanding shares of the 4.32% Series, 4.08% Series, 4.24% Series, and the 4.78% Series at a price of $28.75, $25.50, $25.80 and $25.80, respectively. SCE also redeemed $180 million of the outstanding shares of the Series G Preference Stock. SCE recorded a $15 million loss on the redemption of the preferred and preference stock.

Note 15. Accumulated Other Comprehensive Loss

Edison International's accumulated other comprehensive loss, net of tax, consist of:



	Three months ended September 30,						Nine months ended September 30,
(in millions)	2020		2019		2020		2019
Beginning balance	$	(65)	$	(57)	$	(69)	$	(50)
Pension and PBOP – net loss:

Reclassified from accumulated other comprehensive loss¹	2		2		6		5
Other²	0		0		0		(10)
Change	2		2		6		(5)
Ending Balance	$	(63)	$	(55)	$	(63)	$	(55)

¹ These items are included in the computation of net periodic pension and PBOP Plan expense. See Note 9 for additional information.

²Edison International recognized cumulative effect adjustments to the opening balance of retained earnings and accumulated other comprehensive loss on January 1, 2019 related to the adoption of the accounting standards update on the reclassification of stranded tax effects resulting from Tax Reform.

SCE's accumulated other comprehensive loss, net of tax, consist of:



	Three months ended September 30,						Nine months ended September 30,
(in millions)	2020		2019		2020		2019
Beginning balance	$	(36)	$	(26)	$	(39)	$	(23)
Pension and PBOP – net loss:

Reclassified from accumulated other comprehensive loss¹	1		1		4		3
Other²	0		0		0		(5)
Change	1		1		4		(2)
Ending Balance	$	(35)	$	(25)	$	(35)	$	(25)

¹ These items are included in the computation of net periodic pension and PBOP Plan expense. See Note 9 for additional information.

²SCE recognized cumulative effect adjustments to the opening balance of retained earnings and accumulated other comprehensive loss on January 1, 2019 related to the adoption of the accounting standards update on the reclassification of stranded tax effects resulting from Tax Reform.

Note 16. Other Income

Other income net of expenses is as follows:


	Three months ended September 30,						Nine months ended September 30,
(in millions)	2020		2019		2020		2019
SCE other income (expense):
Equity allowance for funds used during construction	$	36	$	26	$	87	$	75
Increase in cash surrender value of life insurance policies and life insurance benefits	27		9		60		27
Interest income	2		13		18		29
Net periodic benefit income – non-service components	28		19		83		54
Civic, political and related activities and donations	(7)		(5)		(22)		(26)
Other	(3)		(4)		(9)		(7)
Total SCE other income	83		58		217		152
Other income (expense) of Edison International Parent and Other:
Net periodic benefit costs – non-service components	—		0		(1)		(2)
Other	1		0		1		1
Total Edison International other income	$	84	$	58	$	217	$	151

Note 17. Supplemental Cash Flows Information

Supplemental cash flows information is:


	Edison International						SCE
	Nine months ended September 30,
(in millions)	2020		2019		2020		2019
Cash payments (receipts):
Interest, net of amounts capitalized	$	689	$	582	$	607	$	518
Income taxes, net	(30)		(65)		(29)		(166)
Non-cash financing and investing activities:



Dividends declared but not paid:
Common stock	241		220		0		0

SCE's accrued capital expenditures at September 30, 2020 and 2019 were $490 million and $486 million, respectively. Accrued capital expenditures will be included as an investing activity in the consolidated statements of cash flow in the period paid.

Note 18. Related-Party Transactions

In the second quarter of 2020, SCE purchased wildfire liability insurance with premiums of $176 million from Edison Insurance Services, Inc. ("EIS"), a wholly-owned subsidiary of Edison International. SCE purchased wildfire liability insurance with premiums of $186 million and $74 million in the first and second quarter of 2019, respectively. The related-party transactions included in SCE's consolidated balance sheets for wildfire-related insurance purchased from EIS and related expected insurance recoveries were as follows:


(in millions)	September 30, 2020		December 31, 2019
Current insurance receivable due from affiliate	$	448	$	0
Long-term insurance receivable due from affiliate	354		803
Prepaid insurance¹	85		10

¹Reflected in "Prepaid expenses" on SCE's consolidated balance sheets.

The expense for wildfire-related insurance premiums paid to EIS was $45 million and $51 million for the three months ended September 30, 2020 and 2019, respectively, and $145 million and $123 million for the nine months ended September 30, 2020 and 2019, respectively.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The management of Edison International and SCE, under the supervision and with the participation of Edison International's and SCE's respective Chief Executive Officers and Chief Financial Officers, have evaluated the effectiveness of Edison International's and SCE's disclosure controls and procedures (as that term is defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended), respectively, as of the end of the third quarter of 2020. Based on that evaluation, Edison International's and SCE's respective Chief Executive Officers and Chief Financial Officers have each concluded that, as of the end of the period, Edison International's and SCE's disclosure controls and procedures, respectively, were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in Edison International's or SCE's internal control over financial reporting, respectively, during the third quarter of 2020 that have materially affected, or are reasonably likely to materially affect, Edison International's or SCE's internal control over financial reporting.

Jointly Owned Utility Plant

Edison International's and SCE's respective scope of evaluation of internal control over financial reporting includes their Jointly Owned Utility Projects as discussed in Notes to Consolidated Financial Statements—Note 2. Property, Plant and Equipment in the 2019 Form 10-K.

LEGAL PROCEEDINGS

Thomas Fire and Koenigstein Fire Litigation

In December 2017, wind-driven wildfires impacted portions of SCE's service territory, causing loss of life, substantial damage to both residential and business properties, and service outages for SCE customers. The VCFD and CAL FIRE have determined that the largest of the 2017 fires originated on December 4, 2017, in the Anlauf Canyon area of Ventura County (the investigating agencies refer to this fire as the "Thomas Fire"), followed shortly thereafter by the Koenigstein Fire. According to CAL FIRE, the Thomas and Koenigstein Fires burned over 280,000 acres, destroyed or damages an estimated 1,343 structures and resulted in two fatalities.

As of October 20, 2020, SCE was aware of at least 319 lawsuits, representing approximately 5,000 plaintiffs, related to the Thomas and Koenigstein Fires naming SCE as a defendant. One hundred and fifty-five of the 319 lawsuits also name Edison International as a defendant based on its ownership and alleged control of SCE. At least four of the lawsuits were filed as purported class actions. The lawsuits, which have been filed in the superior courts of Ventura, Santa Barbara and Los Angeles Counties allege, among other things, negligence, inverse condemnation, trespass, private nuisance, and violations of the public utilities and health and safety codes. The lawsuits have been coordinated in the Los Angeles Superior Court. Three categories of plaintiffs have filed lawsuits against SCE and Edison International relating to the Thomas Fire, Koenigstein Fire and Montecito Mudslides: individual plaintiffs, subrogation plaintiffs and public entity plaintiffs. An initial trial for a limited number of plaintiffs, sometimes referred to as a bellwether trial, on certain fire only matters is currently scheduled for February 16, 2021.

In November 2019, SCE and Edison International reached a settlement with certain local public entity plaintiffs in the Thomas Fire, Koenigstein Fire and Montecito Mudslides litigation under which SCE paid those local public entity plaintiffs parties an aggregate of $150 million and, other than as set forth below, the plaintiffs released SCE and Edison International from all claims and potential claims in the Thomas Fire, Koenigstein Fire and Montecito Mudslides litigation and/or related to or arising from the Thomas Fire, Koenigstein Fire or Montecito Mudslides. Certain of the local public entity plaintiffs will retain the right to pursue certain indemnity claims against SCE and Edison International.

In September 2020, SCE reached the September 2020 Subrogation Settlement with the Settling Subrogation Plaintiffs to resolve those parties' collective claims arising from the Thomas Fire, Koenigstein Fire or Montecito Mudslides. Under the terms of the September 2020 Subrogation Settlement, SCE paid the Settling Subrogation Plaintiffs an aggregate of $1.2 billion in October 2020 and also agreed to pay $0.555 for each dollar in claims to be paid by the Settling Subrogation Plaintiffs to their policy holders before July 15, 2023, up to an agreed upon cap.

In the second and third quarters of 2020, SCE entered into settlements with several hundred of the several thousand individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation under which it agreed to pay an aggregate of approximately $73 million to those individual plaintiffs.

Edison International and SCE did not admit liability as part of any of the settlements described above.

For further information, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides."

Montecito Mudslides Litigation

In January 2018, torrential rains in Santa Barbara County produced mudslides and flooding in Montecito and surrounding areas. According to Santa Barbara County initial reports, the Montecito Mudslides destroyed an estimated 135 structures, damaged an estimated 324 structures, and resulted in at least 21 fatalities, with two additional fatalities presumed.

Seventy-two of the 319 lawsuits mentioned under "Thomas Fire and Koenigstein Fire Litigation" above allege that SCE has responsibility for the Thomas and/or Koenigstein Fires and that the Thomas and/or Koenigstein Fires proximately caused the Montecito Mudslides, resulting in the plaintiffs' claimed damages. Forty-two of the 72 Montecito Mudslides lawsuits also name Edison International as a defendant based on its ownership and alleged control of SCE. In addition to other causes of action, some of the Montecito Mudslides lawsuits also allege personal injury and wrongful death. The Thomas and Koenigstein Fires lawsuits and the Montecito Mudslides lawsuits have been coordinated in the Los Angeles Superior Court. Three categories of plaintiffs have filed lawsuits against SCE and Edison International relating to the Thomas Fire, Koenigstein Fire and Montecito Mudslides: individual plaintiffs, subrogation plaintiffs and public entity plaintiffs. An initial jury trial for a limited number of plaintiffs, sometimes referred to as a bellwether jury trial, previously scheduled for October 12, 2020 was vacated due to the wide-spread disruption being caused by the COVID-19 pandemic.

In November 2019, SCE and Edison International reached a settlement with certain local public entity plaintiffs in the Thomas Fire, Koenigstein Fire and Montecito Mudslides litigation under which SCE paid those local public entity plaintiffs parties an aggregate of $150 million and, other than as set forth below, the plaintiffs released SCE and Edison International from all claims and potential claims in the Thomas Fire, Koenigstein Fire and Montecito Mudslides litigation and/or related to or arising from the Thomas Fire, Koenigstein Fire or Montecito Mudslides. SCE and Edison International did not release their cross-claims against the public entity plaintiffs in the Montecito Mudslides litigation, and certain of the public entity plaintiffs will retain the right to pursue certain indemnity claims against SCE and Edison International.

Edison International and SCE did not admit liability as part of any of the settlements described above.

For further information, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides."

Woolsey Fire Litigation

In November 2018, wind-driven wildfires impacted portions of SCE's service territory and caused substantial damage to both residential and business properties and service outages for SCE customers. The largest of these fires, known as the Woolsey Fire, originated in Ventura County and burned acreage located in both Ventura and Los Angeles Counties. According to CAL FIRE, the Woolsey Fire burned almost 100,000 acres, destroyed an estimated 1,643 structures, damaged an estimated 364 structures and resulted in three fatalities. Two additional fatalities have also been associated with the Woolsey Fire.

As of October 20, 2020, SCE was aware of at least 261 lawsuits, representing approximately 4,908 plaintiffs, related to the Woolsey Fire naming SCE as a defendant. One hundred ninety-one of the 261 lawsuits also name Edison International as a defendant based on its ownership and alleged control of SCE. At least two of the lawsuits were filed as purported class actions. The lawsuits, which have been filed in the superior courts of Ventura and Los Angeles Counties allege, among other things, negligence, inverse condemnation, personal injury, wrongful death, trespass, private nuisance, and violations of the

public utilities and health and safety codes. The Woolsey Fire lawsuits have been coordinated in the Los Angeles Superior Court. Three categories of plaintiffs have filed lawsuits against SCE and Edison International relating to the Woolsey Fire: individual plaintiffs, subrogation plaintiffs and public entity plaintiffs. An initial jury trial for a limited number of plaintiffs, sometimes referred to as a bellwether jury trial, is currently scheduled for June 1, 2021.

In November 2019, SCE and Edison International reached a settlement with certain local public entity plaintiffs in the Woolsey Fire litigation under which SCE paid the local public entity plaintiffs an aggregate of $210 million and those local public entity plaintiffs released SCE and Edison International from all claims and potential claims in the Woolsey Fire litigation and/or related to or arising from the Woolsey Fire.

Edison International and SCE did not admit liability as part of any of the settlements described above.

For further information, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides."

Environmental Proceedings

SCE performed 1.6 miles of access road grading and vegetation clearing in the Mission Canyon area of Santa Barbara County in December 2019, resulting in debris moving downslope into a creek bed and other impacts in the area. Several state and federal environmental agencies and the County and City of Santa Barbara are investigating the unpermitted grading and discharges to the creek, and SCE has received Notices of Violation from the Army Corps of Engineers, the County of Santa Barbara, the California Department of Fish & Wildlife and the Regional Water Quality Control Board. The Santa Barbara County District Attorney is also conducting an investigation for the purpose of determining whether any criminal violations have occurred. It is presently unknown whether any of these agencies will impose fines or penalties on SCE and, if so, in what amounts. SCE does not expect any fines or penalties that are imposed to be material.

RISK FACTORS

Edison International's and SCE's financial condition and results of operations could be materially impacted by events, like the COVID-19 pandemic, that cause significant disruption to economies, societies or workforces on a regional, statewide, national or global basis.

Edison International and SCE could be materially and adversely impacted by events, such as the widespread outbreak of a communicable disease, that result in, among other things, significant disruption to economies, societies or workforces on a regional, statewide, national or global basis. The global spread of COVID-19, which was declared a pandemic by the World Health Organization in March 2020, has created significant uncertainty, volatility and disruption globally and has impacted the operations of Edison International and SCE. The total impacts of the COVID-19 pandemic on Edison International and SCE are still emerging, and the extent to which the pandemic affects Edison International's and SCE's business, operations, cash flows, liquidity and financial results will depend on numerous evolving factors that Edison International and SCE are unable to accurately predict at this time, including, without limitation: the duration and scope of the pandemic; governmental, business and individual actions that have been and continue to be taken in response to the pandemic; the impact of the pandemic on economic activity; and the impact of the pandemic on Edison International's and SCE's employees, customers, contractors, insurers and service providers.

Many of the risks and uncertainties identified in the 2019 Form 10-K are, and will be, exacerbated by the impacts of the COVID-19 pandemic and the actions being taken by governmental entities, businesses, individuals and others in response to the pandemic. Some examples follow. Similar to other companies in California, a large portion of Edison International's and SCE's workforce, including employees of their contractors, may be unable to perform their job functions effectively due to illness, family illness, quarantine requirements, social-distancing, telework requirements and other impacts of the COVID-19 pandemic. In addition, as a result of actions being taken in response to the pandemic, SCE's supply chains have faced constraints and SCE has faced challenges from local permitting authorities. If a significant portion of SCE's workforce cannot effectively perform their job functions, SCE is unable to procure required materials, SCE does not timely obtain any required permits and/or local authorities prohibit SCE from conducting previously permitted work, SCE will likely be unable to effectively and timely complete planned work and projects, including its WMP and capital projects. Further, SCE may be unable to effectively execute its Public Safety Power Shutoff program due to, among other things, requests from local and State authorities not to shut off the power during the pandemic, and thereby may increase the risk of SCE equipment being associated with the ignition of wildfires.

In addition, impacts of the COVID-19 pandemic on SCE's customers and third parties could also result in SCE facing, among other things, significant reductions in demand for electricity and payment delays and/or defaults from customers which could result in significant under-collections. Edison International and SCE could also face payment delays and/or defaults from insurers and other counterparties. Furthermore, capital markets have been impacted by the pandemic and this has increased Edison International's and SCE's costs of accessing those markets. Edison International's and SCE's access to the bank and capital markets could also be constrained and/or the costs of accessing those markets could increase further as a result of the pandemic, including if Edison International's and/or SCE's credit ratings are downgraded, or placed on negative watch due to concerns about Edison International and/or SCE's financial health as a result of the impacts of the pandemic. SCE may also incur significant incremental costs as a result of actions it is taking in response to the pandemic, including costs being incurred to maintain its operations and assist its employees who are required to telework or are otherwise impacted by the pandemic. SCE could also face delays in important legal and regulatory proceedings. These impacts, among others, could materially and adversely impact Edison International's and SCE's business, operations, cash flows, liquidity and financial results.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by Southern California Edison Company and Affiliated Purchasers

The following table contains information about all purchases of SCE's series of preferred stock made by or on behalf of SCE in the third quarter of 2020.


Period	Series	(a) Total Number of Shares (or Units Purchased)	(b) Average Price Paid per Share (or Unit)	(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs¹	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
July 1, 2020 to July 31, 2020	—	—	—	—	—
August 1, 2020 to August 31, 2020	—	—	—	—	—
September 1, 2020 to September 30, 2020	4.08% Preferred Stock	650,000	$25.5765	650,000	—
		4.24% Preferred Stock	1,200,000	$25.8795	1,200,000	—
		4.32% Preferred Stock	1,653,429	$29.011	1,653,429	—
		4.78% Preferred Stock	1,296,769	$25.889625	1,296,769	—
Total		4,800,198		4,800,198	—

¹On September 28, 2020, SCE repurchased all of its outstanding series of preferred stock. The prices include the liquidation value and accrued dividends per share, respectively. The redemption of the preferred stock was announced by an SCE press release on August 28, 2020.

EXHIBITS

Exhibit
Number

Description

10.1**

Edison International and Southern California Edison Company Director Compensation Schedule, as adopted on August 27, 2020

10.2**

Edison International 2008 Director Deferred Compensation Plan, as amended and restated effective January 1, 2021

10.3**

Edison International 2008 Executive Deferred Compensation Plan, as amended and restated effective January 1, 2021

10.4**

Edison International 2008 Executive Retirement Plan, as amended and restated effective January 1, 2021

31.1

Certifications of the Chief Executive Officer and Chief Financial Officer of Edison International pursuant to Section 302 of the Sarbanes-Oxley Act

31.2

Certifications of the Chief Executive Officer and Chief Financial Officer of Southern California Edison Company pursuant to Section 302 of the Sarbanes-Oxley Act

32.1

Certifications of the Chief Executive Officer and the Chief Financial Officer of Edison International required by Section 906 of the Sarbanes-Oxley Act

32.2

Certifications of the Chief Executive Officer and the Chief Financial Officer of Southern California Edison Company required by Section 906 of the Sarbanes-Oxley Act

101.1

Financial statements from the quarterly report on Form 10-Q of Edison International for the quarter ended September 30, 2020, filed on October 27, 2020, formatted in XBRL: (i) the Consolidated Statements of Income; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to Consolidated Financial Statements

101.2

Financial statements from the quarterly report on Form 10-Q of Southern California Edison Company for the quarter ended September 30, 2020, filed on October 27, 2020, formatted in XBRL: (i) the Consolidated Statements of Income; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to Consolidated Financial Statements

104

The cover page of this report formatted in Inline XBRL (included as Exhibit 101)

________________________________________

** Indicates a management contract or compensatory plan or arrangement, as required by Item 15(a)(3) of Form 10-K

Edison International and SCE will furnish a copy of any exhibit listed in the accompanying Exhibit Index upon written request and upon payment to Edison International or SCE of their reasonable expenses of furnishing such exhibit, which shall be limited to photocopying charges and, if mailed to the requesting party, the cost of first-class postage.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.

EDISON INTERNATIONAL

SOUTHERN CALIFORNIA EDISON COMPANY

By:

/s/ Aaron D. Moss

By:

/s/ Aaron D. Moss

Aaron D. Moss
Vice President and Controller
(Duly Authorized Officer and
Principal Accounting Officer)

Date:

October 27, 2020

Date:

October 27, 2020

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Edison International (EIX) 10-Q2020 Q3 Quarterly report

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