Edgar Filing: EDISON INTERNATIONAL

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TABLE OF CONTENTS

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

FORM 10-Q


(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended September 30, 2010
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to
Commission File Number 1-9936

EDISON INTERNATIONAL
(Exact name of registrant as specified in its charter)


California		95-4137452
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
2244 Walnut Grove Avenue (P. O. Box 976) Rosemead, California		91770
(Address of principal executive offices)		(Zip Code)
(626) 302-2222 (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.


Large accelerated filer ý		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

Class		Outstanding at October 26, 2010

Common Stock, no par value		325,811,206

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TABLE OF CONTENTS


GLOSSARY			i
PART I. FINANCIAL INFORMATION			1
ITEM 1. FINANCIAL STATEMENTS			1
	Consolidated Statements of Income		1
	Consolidated Statements of Comprehensive Income		2
	Consolidated Balance Sheets		3
	Consolidated Statements of Cash Flows		5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			7
	Note 1. Summary of Significant Accounting Policies		7
	Note 2. Derivative Instruments and Hedging Activities		10
	Note 3. Liabilities and Lines of Credit		17
	Note 4. Income Taxes		18
	Note 5. Compensation and Benefit Plans		20
	Note 6. Commitments and Contingencies		23
	Note 7. Consolidated Statements of Changes in Equity		35
	Note 8. Accumulated Other Comprehensive Income		36
	Note 9. Supplemental Cash Flows Information		37
	Note 10. Fair Value Measurements		37
	Note 11. Regulatory Assets and Liabilities		43
	Note 12. Other Income and Expenses		44
	Note 13. Variable Interest Entities		44
	Note 14. Business Segments		48
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			50
	FORWARD-LOOKING STATEMENTS		50
EDISON INTERNATIONAL OVERVIEW
	Introduction		52
	Highlights of Operating Results		52
	SCE Capital Program		54
	SCE 2012 General Rate Case		55
	Environmental Developments		55
		Midwest Generation Environmental Compliance Plans and Costs	55
		Environmental Regulation Developments	56
	EMG Renewables Program		56
		Mitsubishi Lawsuit	56
	Parent Company Liquidity		57

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SOUTHERN CALIFORNIA EDISON COMPANY
	RESULTS OF OPERATIONS				58
	Electric Utility Results of Operations				58
		Three Months Ended September 30, 2010 versus September 30, 2009			59
			Utility Earning Activities		60
			Utility Cost-Recovery Activities		60
		Nine Months Ended September 30, 2010 versus September 30, 2009			61
			Utility Earning Activities		61
			Utility Cost-Recovery Activities		63
		Supplemental Operating Revenue Information			63
		Income Taxes			64
	LIQUIDITY AND CAPITAL RESOURCES				64
	Available Liquidity				64
		Debt Covenant			65
	Regulatory Proceedings				65
		Energy Efficiency Risk/Reward Incentive Mechanism			65
		2010 FERC Rate Case			65
	Dividend Restrictions				65
	Income Tax Matters				65
	Margin and Collateral Deposits				65
	Historical Consolidated Cash Flows				66
		Condensed Consolidated Statement of Cash Flows			66
			Cash Flows Provided by Operating Activities		66
			Cash Flows Provided (Used) by Financing Activities		66
			Cash Flows Used by Investing Activities		67
	Contractual Obligations and Contingencies				67
		Contractual Obligations			67
		Contingencies			67
			Environmental Remediation		67
	MARKET RISK EXPOSURES				68
	Interest Rate Risk				68
	Commodity Price Risk				68
		Natural Gas and Electricity Price Risk			68
	Credit Risk				69
EDISON MISSION GROUP
	RESULTS OF OPERATIONS				70
	Results of Continuing Operations				70
		Adjusted Operating Income (Loss) ("AOI") – Overview			71
		Adjusted Operating Income from Consolidated Operations			73
			Midwest Generation Plants		73
			Homer City Facilities		74
			Non-GAAP Disclosures—Fossil-Fueled Facilities		75
				Adjusted Operating Income	75
			Seasonal Disclosure—Fossil-Fueled Facilities		75
			Renewable Energy Projects		76

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		Energy Trading	77
	Adjusted Operating Income from Leveraged Lease Activities		77
	Adjusted Operating Income from Lease Terminations and Other		77
	Adjusted Operating Income from Unconsolidated Affiliates		77
		Doga	77
		March Point	77
		Seasonal Disclosure	77
	Interest Related Income (Expense)		78
	Income Taxes		78
Results of Discontinued Operations			78
Derivative Instruments			78
	Unrealized Gains and Losses		78
	Fair Value Disclosures		79
LIQUIDITY AND CAPITAL RESOURCES			79
Available Liquidity			79
	Small Business Jobs Act of 2010		80
Capital Investment Plan			81
Historical Consolidated Cash Flows			82
	Condensed Consolidated Statement of Cash Flows		82
		Consolidated Cash Flows Provided (Used) by Operating Activities	82
		Consolidated Cash Flows Provided (Used) by Financing Activities	82
		Consolidated Cash Flows Provided (Used) by Investing Activities	82
Credit Ratings			83
	Overview		83
	Credit Rating of EMMT		83
	Margin, Collateral Deposits and Other Credit Support for Energy Contracts		83
Debt Covenants and Dividend Restrictions			84
	Credit Facility and Financial Ratios		84
	Dividend Restrictions in Major Financings		84
	EME's Senior Notes and Guaranty of Powerton-Joliet Leases		85
Contractual Obligations and Contingencies			85
	Fuel Supply and Transportation Contracts		85
	Midwest Generation New Source Review Lawsuit		85
	Homer City New Source Review Notice of Violation		85
Off-Balance Sheet Transactions			85
Environmental Matters and Regulations			85
MARKET RISK EXPOSURES			86
Commodity Price Risk			86
	Energy Price Risk Affecting Sales from the Fossil-Fueled Facilities		86
	Capacity Price Risk		88
	Basis Risk		88
	Coal and Transportation Price Risk		89
	Emission Allowances Price Risk		89
Credit Risk			90
Interest Rate Risk			91

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EDISON INTERNATIONAL PARENT AND OTHER
	RESULTS OF OPERATIONS		92
	LIQUIDITY AND CAPITAL RESOURCES		92
	Historical Cash Flow		92
		Condensed Statement of Cash Flows	92
		Cash Flows Used by Operating Activities	92
		Cash Flows Provided (Used) by Financing Activities	92
EDISON INTERNATIONAL (CONSOLIDATED)
	CONTRACTUAL OBLIGATIONS		94
	CRITICAL ACCOUNTING ESTIMATES AND POLICIES		94
	NEW ACCOUNTING GUIDANCE		94
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			94
ITEM 4. CONTROLS AND PROCEDURES			94
	Disclosure Controls and Procedures		94
	Changes in Internal Control Over Financial Reporting		94
PART II. OTHER INFORMATION			95
ITEM 1. LEGAL PROCEEDINGS			95
	Homer City New Source Review Notice of Violation		95
	Midwest Generation New Source Review Lawsuit		95
	Mitsubishi Lawsuit		95
	Navajo Nation Litigation		95
	California Coastal Commission Potential Environmental Proceeding		95
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			96
	Purchases of Equity Securities by the Issuer and Affiliated Purchasers		96
ITEM 6. EXHIBITS			96
SIGNATURE			97

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GLOSSARY

When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below.


2009 Form 10-K		Edison International's Annual Report on Form 10-K for the year ended December 31, 2009
AB		Assembly Bill
AFUDC		allowance for funds used during construction
Ambit project		American Bituminous Power Partners, L.P.
AOI		Adjusted Operating Income (Loss)
APS		Arizona Public Service Company
ARO(s)		asset retirement obligation(s)
BACT		best available control technology
BART		best available retrofit technology
Bcf		billion cubic feet
Big 4		Kern River, Midway-Sunset, Sycamore and Watson natural gas power projects
Btu		British thermal units
CAA		Clean Air Act
CAIR		Clean Air Interstate Rule
CAISO		California Independent System Operator
CAMR		Clean Air Mercury Rule
CARB		California Air Resources Board
Commonwealth Edison		Commonwealth Edison Company
CDWR		California Department of Water Resources
CEC		California Energy Commission
CONE		cost of new entry
CPS		Combined Pollutant Standard
CPUC		California Public Utilities Commission
CRRs		congestion revenue rights
DCR		Devers-Colorado River
DOE		U.S. Department of Energy
DOJ		U.S. Department of Justice
DRA		Division of Ratepayer Advocates
DWP		Los Angeles Department of Water & Power
EME		Edison Mission Energy
EMG		Edison Mission Group Inc.
EMMT		Edison Mission Marketing & Trading, Inc.
EPS		earnings per share
ERRA		energy resource recovery account
EWG		Exempt Wholesale Generator
Exelon Generation		Exelon Generation Company LLC
FASB		Financial Accounting Standards Board
FERC		Federal Energy Regulatory Commission
FGD		flue gas desulfurization
FGIC		Financial Guarantee Insurance Company
FTRs		firm transmission rights
Four Corners		coal fueled electric generating facility located in Farmington, New Mexico in which Edison International holds a 48% ownership interest
GAAP		generally accepted accounting principles

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Global Settlement		A settlement between Edison International and the IRS that resolved federal tax disputes related to Edison Capital's cross-border, leveraged leases through 2009, and all other outstanding federal tax disputes and affirmative claims for tax years 1986 through 2002 and related matters with state tax authorities.
GRC		General Rate Case
GWh		Gigawatt-hours
Homer City		EME Homer City Generation L.P.
Illinois EPA		Illinois Environmental Protection Agency
Illinois PCB		Illinois Pollution Control Board
Investor-Owned Utilities		SCE, SDG&E and PG&E
IRS		Internal Revenue Service
ISO		Independent System Operator
kWh(s)		kilowatt-hour(s)
LIBOR		London Interbank Offered Rate
MD&A		Management's Discussion and Analysis of Financial Condition and Results of Operations in this report
MEHC		Mission Energy Holding Company
Midwest Generation		Midwest Generation, LLC
Midwest Generation Plants		EME's power plants (fossil fuel) located in Illinois
MMBtu		million British thermal units
Mohave		two coal fueled electric generating facilities that no longer operate located in Clark County, Nevada in which SCE holds a 56% ownership interest
Moody's		Moody's Investors Service
MRTU		Market Redesign and Technology Upgrade
MW		megawatts
MWh		megawatt-hours
NAAQS		national ambient air quality standards
NAPP		Northern Appalachian
NERC		North American Electric Reliability Corporation
Ninth Circuit		U.S. Court of Appeals for the Ninth Circuit
NOV		notice of violation
NO_x		nitrogen oxide
NRC		Nuclear Regulatory Commission
NSR		New Source Review
PADEP		Pennsylvania Department of Environmental Protection
Palo Verde		large pressurized water nuclear electric generating facility located near Phoenix, Arizona in which SCE holds a 15.8% ownership interest
PBOP(s)		Postretirement benefits other than pension(s)
PBR		performance-based ratemaking
PG&E		Pacific Gas & Electric Company
PJM		PJM Interconnection, LLC
POD		Presiding Officer's Decision
PRB		Powder River Basin
PSD		Prevention of Significant Deterioration
PUHCA 2005		Public Utility Holding Company Act of 2005
PX		California Power Exchange
QF(s)		qualifying facility(ies)
RGGI		Regional Greenhouse Gas Initiative
RICO		Racketeer Influenced and Corrupt Organization

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ROE		return on equity
RPM		reliability pricing model
RTO		Regional Transmission Organization
S&P		Standard & Poor's Ratings Services
San Onofre		large pressurized water nuclear electric generating facility located in south San Clemente, California in which SCE holds a 78.21% ownership interest
SB		Senate Bill
SCAQMD		South Coast Air Quality Management District
SCE		Southern California Edison Company
SCR		selective catalytic reduction
SNCR		selective non-catalytic reduction
SDG&E		San Diego Gas & Electric
SEC		U.S. Securities and Exchange Commission
SIP(s)		State Implementation Plan(s)
SO₂		sulfur dioxide
SRP		Salt River Project Agricultural Improvement and Power District
TURN		The Utility Reform Network
US EPA		U.S. Environmental Protection Agency
VIE(s)		variable interest entity(ies)

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS



Consolidated Statements of Income	Edison International
	Three Months Ended September 30,						Nine Months Ended September 30,

(in millions, except per-share amounts)	2010			2009			2010			2009

	(Unaudited)
Electric utility	$	3,097		$	3,068		$	7,502		$	7,529
Competitive power generation		691			596			1,838			1,781

Total operating revenue		3,788			3,664			9,340			9,310

Fuel		328			406			877			1,120
Purchased power		1,118			1,032			2,337			2,155
Operation and maintenance		1,102			1,093			3,285			3,136
Depreciation, decommissioning and amortization		378			365			1,127			1,053
Lease terminations and other		—			—			2			888

Total operating expenses		2,926			2,896			7,628			8,352

Operating income		862			768			1,712			958
Interest and dividend income		4			2			27			29
Equity in income from partnerships and unconsolidated subsidiaries – net		62			35			101			34
Other income		33			74			103			131
Interest expense – net of amounts capitalized		(175	)		(187	)		(518	)		(556	)
Other expenses		(12	)		(16	)		(39	)		(41	)

Income from continuing operations before income taxes		774			676			1,386			555
Income tax expense (benefit)		247			232			261			(169	)

Income from continuing operations		527			444			1,125			724
Income (loss) from discontinued operations – net of tax		(4	)		(1	)		4			(5	)

Net income		523			443			1,129			719
Less: Net income attributable to noncontrolling interests		13			40			39			82

Net income attributable to Edison International common shareholders	$	510		$	403		$	1,090		$	637

Amounts attributable to Edison International common shareholders:
Income from continuing operations, net of tax	$	514		$	404		$	1,086		$	642
Income (loss) from discontinued operations, net of tax		(4	)		(1	)		4			(5	)

Net income attributable to Edison International common shareholders	$	510		$	403		$	1,090		$	637

Basic earnings per common share attributable to Edison International common shareholders:
Weighted-average shares of common stock outstanding		326			326			326			326
Continuing operations	$	1.57		$	1.23		$	3.32		$	1.95
Discontinued operations		(0.01	)		—			0.01			(0.01	)

Total	$	1.56		$	1.23		$	3.33		$	1.94

Diluted earnings per common share attributable to Edison International common shareholders:
Weighted-average shares of common stock outstanding, including effect of dilutive securities		328			329			328			328
Continuing operations	$	1.57		$	1.22		$	3.30		$	1.95
Discontinued operations		(0.01	)		—			0.01			(0.01	)

Total	$	1.56		$	1.22		$	3.31		$	1.94

Dividends declared per common share	$	0.315		$	0.310		$	0.945		$	0.930

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

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Consolidated Statements of Comprehensive Income			Edison International
			Three Months Ended September 30,						Nine Months Ended September 30,

(in millions)			2010			2009			2010			2009

			(Unaudited)
Net Income			$	523		$	443		$	1,129		$	719
Other comprehensive income (loss), net of tax:
	Foreign currency translation adjustments – net			—			—			—			4
	Pension and postretirement benefits other than pensions:
		Net gain arising during the period		1			—			13			1
		Amortization of net (gain) loss included in net income		1			1			(5	)		4
		Prior service adjustment arising during the period		—			—			2			—
		Amortization of prior service adjustment		—			—			(2	)		—
	Unrealized gain (loss) on derivatives qualified as cash flow hedges:
		Unrealized holding gain (loss) arising during the period, net of income tax expense (benefit) of $29 and $(4) for the three months and $41 and $44 for the nine months ended September 30, 2010 and 2009, respectively		43			(5	)		61			56
		Reclassification adjustments included in net income, net of income tax benefit of $5 and $52 for the three months and $54 and $75 for the nine months ended September 30, 2010 and 2009, respectively		(7	)		(72	)		(80	)		(104	)

Other comprehensive income (loss)				38			(76	)		(11	)		(39	)

Comprehensive income				561			367			1,118			680
Less: Comprehensive income attributable to noncontrolling interests				13			40			39			82

Comprehensive income attributable to Edison International			$	548		$	327		$	1,079		$	598

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

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Consolidated Balance Sheets		Edison International
(in millions)		September 30, 2010			December 31, 2009

		(Unaudited)
ASSETS
Cash and equivalents		$	2,009		$	1,673
Short-term investments			4			10
Receivables, less allowances of $59 and $53 for uncollectible accounts at respective dates			1,075			1,017
Accrued unbilled revenue			612			347
Inventory			547			533
Derivative assets			174			357
Restricted cash			15			69
Margin and collateral deposits			91			125
Regulatory assets			404			120
Other current assets			110			179

Total current assets			5,041			4,430

Competitive power generation and other property – less accumulated depreciation of $1,794 and $2,231 at respective dates			5,265			5,147
Nuclear decommissioning trusts			3,347			3,140
Investments in partnerships and unconsolidated subsidiaries			581			216
Other investments			251			251

Total investments and other assets			9,444			8,754

Utility plant, at original cost:
	Transmission and distribution		23,747			22,214
	Generation		2,731			2,667
Accumulated depreciation			(6,097	)		(5,921	)
Construction work in progress			3,020			2,701
Nuclear fuel, at amortized cost			340			305

Total utility plant			23,741			21,966

Derivative assets			266			268
Restricted deposits			44			43
Rent payments in excess of levelized rent expense under plant operating leases			1,186			1,038
Regulatory assets			5,227			4,139
Other long-term assets			617			806

Total long-term assets			7,340			6,294

Total assets		$	45,566		$	41,444

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

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Consolidated Balance Sheets	Edison International
(in millions, except share amounts)	September 30, 2010		December 31, 2009

	(Unaudited)
LIABILITIES AND EQUITY
Short-term debt	$	98	$	85
Current portion of long-term debt		43		377
Accounts payable		1,228		1,347
Accrued taxes		163		186
Accrued interest		200		196
Customer deposits		224		238
Derivative liabilities		231		107
Regulatory liabilities		804		367
Other current liabilities		896		884

Total current liabilities		3,887		3,787

Long-term debt		12,117		10,437

Deferred income taxes		4,896		4,334
Deferred investment tax credits		103		102
Customer advances		114		119
Derivative liabilities		1,330		529
Pensions and benefits		2,143		2,061
Asset retirement obligations		3,372		3,241
Regulatory liabilities		3,663		3,328
Other deferred credits and other long-term liabilities		2,395		2,500

Total deferred credits and other liabilities		18,016		16,214

Total liabilities		34,020		30,438

Commitments and contingencies (Note 6)
Common stock, no par value (800,000,000 shares authorized; 325,811,206 shares issued and outstanding at each date)		2,325		2,304
Accumulated other comprehensive income		26		37
Retained earnings		8,283		7,500

Total Edison International's common shareholders' equity		10,634		9,841
Noncontrolling interests		5		258
Preferred and preference stock of utility not subject to mandatory redemption		907		907

Total equity		11,546		11,006

Total liabilities and equity	$	45,566	$	41,444

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

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Consolidated Statements of Cash Flows		Edison International
		Nine Months Ended September 30,
(in millions)		2010			2009

		(Unaudited)
Cash flows from operating activities:
Net income		$	1,129		$	719
Less: Income (loss) from discontinued operations			4			(5	)

Income from continuing operations			1,125			724
Adjustments to reconcile to net cash provided by operating activities:
	Depreciation, decommissioning and amortization		1,127			1,053
	Regulatory impacts of net nuclear decommissioning trust earnings (reflected in accumulated depreciation)		106			133
	Other amortization		90			95
	Lease terminations and other		2			888
	Stock-based compensation		20			17
	Equity in income from partnerships and unconsolidated subsidiaries – net		(101	)		(34	)
	Distributions and dividends from unconsolidated entities		76			5
	Deferred income taxes and investment tax credits		414			(1,322	)
	Income from leveraged leases		(3	)		(13	)
Changes in operating assets and liabilities:
	Receivables		(184	)		(154	)
	Inventory		(27	)		4
	Restricted cash		53			(148	)
	Margin and collateral deposits – net of collateral received		32			(99	)
	Other current assets		(244	)		(65	)
	Rent payments in excess of levelized rent expense		(148	)		(161	)
	Accounts payable		28			267
	Accrued taxes		(23	)		(318	)
	Other current liabilities		(129	)		9
	Derivative assets and liabilities – net		1,079			(414	)
	Regulatory assets and liabilities – net		(530	)		951
	Proceeds from U.S. Treasury grants		92			—
	Other assets		(42	)		(136	)
	Other liabilities		(67	)		835
Operating cash flows from discontinued operations			4			(5	)

Net cash provided by operating activities			2,750			2,112

Cash flows from financing activities:
Long-term debt issued			1,652			939
Long-term debt issuance costs			(35	)		(25	)
Long-term debt repaid			(371	)		(566	)
Bonds repurchased			—			(219	)
Short-term debt financing – net			13			(2,058	)
Settlements of stock-based compensation – net			(7	)		4
Cash contributions from noncontrolling interests			—			2
Dividends and distributions to noncontrolling interests			(39	)		(88	)
Dividends paid			(308	)		(303	)

Net cash provided (used) by financing activities		$	905		$	(2,314	)

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

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Consolidated Statements of Cash Flows	Edison International
	Nine Months Ended September 30,
(in millions)	2010			2009

	(Unaudited)
Cash flows from investing activities:
Capital expenditures	$	(3,129	)	$	(2,287	)
Purchase of interest in acquired companies		(4	)		(7	)
Proceeds from termination of leases		—			1,420
Proceeds from sale of nuclear decommissioning trust investments		903			1,814
Purchases of nuclear decommissioning trust investments and other		(1,036	)		(1,977	)
Proceeds from partnerships and unconsolidated subsidiaries, net of investment		35			10
Maturities and sale of short-term investments		7			3
Purchases of short-term investments		(1	)		(1	)
Investments in other assets		(3	)		(278	)
Effect of consolidation and deconsolidation of variable interest entities		(91	)		—

Net cash used by investing activities		(3,319	)		(1,303	)

Net increase (decrease) in cash and equivalents		336			(1,505	)
Cash and equivalents, beginning of period		1,673			3,916

Cash and equivalents, end of period	$	2,009		$	2,411

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

Edison International's principal wholly owned subsidiaries are SCE, a rate-regulated electric utility that supplies electric energy to a 50,000 square-mile area of central, coastal and southern California; and EMG, a wholly owned competitive power generation subsidiary. EMG is a holding company whose subsidiaries and affiliates are engaged in the business of developing, acquiring, owning or leasing, operating and selling energy and capacity from independent power production facilities. EMG's subsidiaries also conduct hedging and energy trading activities in competitive power markets.

Basis of Presentation

Edison International's significant accounting policies were described in Note 1 of "Edison International Notes to Consolidated Financial Statements" included in the 2009 Form 10-K. Edison International follows the same accounting policies for interim reporting purposes, with the exception of accounting principles adopted as of January 1, 2010 as discussed below in "—New Accounting Guidance." This quarterly report should be read in conjunction with such financial statements.

In the opinion of management, all adjustments, including recurring accruals, have been made that are necessary to fairly state the consolidated financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States of America for the periods covered by this quarterly report on Form 10-Q. The results of operations for the three- and nine-month periods ended September 30, 2010 are not necessarily indicative of the operating results for the full year.

The December 31, 2009 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. Except as indicated, amounts presented in the Notes to the Consolidated Financial Statements relate to continuing operations.

Cash and Equivalents

Cash equivalents included money market funds totaling $1.71 billion and $1.46 billion at September 30, 2010 and December 31, 2009, respectively. The carrying value of cash equivalents approximates the fair value, as all investments have maturities of three months or less. For further discussion of money market funds, see Note 10.

Edison International temporarily invests the ending daily cash balance in its primary disbursement accounts until required for check clearing. Edison International reclassified $320 million and $224 million of checks issued against these accounts, but not yet paid by the financial institution, from cash to accounts payable at September 30, 2010 and December 31, 2009, respectively.

Earnings Per Share

Edison International computes 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, including stock options, performance shares and restricted stock units, which earn dividend equivalents on an equal basis with common shares. Stock options awarded during the period 2003 through 2006 received dividend equivalents. Stock options awarded prior to 2003 and after 2006 were granted without a

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dividend equivalent feature. 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)	2010			2009			2010			2009

	(Unaudited)
Basic earnings per share – continuing operations:
Income from continuing operations attributable to common shareholders, net of tax	$	514		$	404		$	1,086		$	642
Participating securities dividends		(3	)		(4	)		(5	)		(5	)

Income from continuing operations available to common shareholders	$	511		$	400		$	1,081		$	637

Weighted average common shares outstanding		326			326			326			326

Basic earnings per share – continuing operations	$	1.57		$	1.23		$	3.32		$	1.95

Diluted earnings per share – continuing operations:
Income from continuing operations available to common shareholders	$	511		$	400		$	1,081		$	637
Income impact of assumed conversions		2			2			3			2

Income from continuing operations and assumed conversions available to common shareholders	$	513		$	402		$	1,084		$	639

Weighted average common shares outstanding		326			326			326			326
Incremental shares from assumed conversions		2			3			2			2

Adjusted weighted average shares – diluted		328			329			328			328

Diluted earnings per share – continuing operations	$	1.57		$	1.22		$	3.30		$	1.95

Stock-based compensation awards to purchase 9,700,218 and 6,279,410 shares of common stock for the three months ended September 30, 2010 and 2009, respectively, and 6,154,826 and 8,645,549 shares of common stock for the nine months ended September 30, 2010 and 2009, respectively, were outstanding, but were not included in the computation of diluted earnings per share because the exercise price of the awards was greater than the average market price of the common shares; and therefore, the effect would have been antidilutive.

Inventory

Inventory is stated at the lower of cost or market, cost being determined by the weighted-average cost method for fuel, and the average cost method for materials and supplies. Inventory at September 30, 2010 and December 31, 2009 consisted of the following:

(in millions)	September 30, 2010		December 31, 2009


	(Unaudited)
Coal, gas, fuel oil and raw materials	$	171	$	158
Spare parts, materials and supplies		376		375

Total	$	547	$	533

Margin and Collateral Deposits

Margin and collateral deposits include cash deposited with counterparties and brokers and cash received from counterparties and brokers as credit support under energy contracts. The amount of margin and collateral deposits generally varies based on changes in the value of the positions. Edison

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International nets margin and cash collateral deposits subject to a master netting arrangement with its derivative positions on its consolidated balance sheets. The following table summarizes margin and collateral deposits provided to and received from counterparties:

(in millions)		September 30, 2010		December 31, 2009


		(Unaudited)
Collateral provided to counterparties:
	Offset against derivative liabilities	$	9	$	49
	Reflected in margin and collateral deposits		91		125
Collateral received from counterparties:
	Offset against derivative assets		118		124
	Reflected in other current liabilities		56		59

New Accounting Guidance

Accounting Guidance Adopted in 2010

Consolidation – Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities

The FASB issued an accounting standards update that changes how a company determines when an entity, that is insufficiently capitalized or is not controlled through voting (or similar rights), should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an ability to direct the activities of the entity that most significantly impact the entity's economic performance and whether the entity has an obligation to absorb losses or the right to receive expected returns of the entity. This guidance requires a company to provide additional disclosures about its involvement with variable interest entities and any significant changes in risk exposure due to that involvement. Edison International adopted this guidance prospectively effective January 1, 2010. The impact of adopting this guidance resulted in the deconsolidation of assets totaling $683 million and the consolidation of assets totaling $99 million at January 1, 2010, and resulted in a cumulative effect adjustment which increased retained earnings by $15 million. For further discussion, see Note 13.

Fair Value Measurements and Disclosures

The FASB issued an accounting standards update that provides for new disclosure requirements related to fair value measurements. The requirements, which Edison International adopted effective January 1, 2010, include separate disclosure of significant transfers in and out of Levels 1 and 2 and the reasons for the transfers. The update also clarified existing disclosure requirements for the level of disaggregation, inputs and valuation techniques. In addition, effective January 1, 2011, the Level 3 reconciliation of fair value measurements using significant unobservable inputs should include gross rather than net information about purchases, sales, issuances and settlements. The guidance impacts disclosures only. For further discussion, see Note 10.

Accounting Guidance Not Yet Adopted

In October 2009, the FASB issued amended guidance for identifying separate deliverables in a revenue-generating transaction where multiple deliverables exist, and provides guidance for allocating and recognizing revenue based on those separate deliverables. This update also requires additional

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disclosure related to the significant assumptions used to determine the revenue recognition of the separate deliverables. This guidance is effective beginning January 1, 2011 and is required to be applied prospectively to new or significantly modified revenue arrangements. Edison International is currently assessing the effects this guidance may have on its consolidated financial statements.

Note 2. Derivative Instruments and Hedging Activities

Electric Utility

Commodity Price Risk

SCE is exposed to commodity price risk, which represents the potential impact that can be caused by a change in the market value of a particular commodity. SCE's hedging program reduces ratepayer exposure to variability in market prices related to SCE's power and gas activities. As part of this program, SCE enters into energy options, swaps, forward arrangements, tolling arrangements and congestion revenue rights ("CRRs"). These transactions are pre-approved by the CPUC or executed in compliance with CPUC-approved procurement plans. SCE recovers its related hedging costs through the ERRA balancing account and as a result, exposure to commodity price risk is not expected to impact earnings, but may impact cash flows.

SCE's electricity price exposure arises from energy produced and sold in the MRTU market as a result of differences between SCE's load requirements versus the amount of energy delivered from its generating facilities, existing bilateral contracts and CDWR contracts allocated to SCE.

A portion of SCE's purchased power supply is subject to natural gas price volatility. SCE's natural gas price exposure arises from purchasing natural gas for generation at the Mountainview power plant and peaker plants, from bilateral contracts where pricing is based on natural gas prices (this includes contract energy prices for some renewable QFs which are based on the monthly index price of natural gas delivered at the southern California border), and power contracts in which SCE has agreed to provide the natural gas needed for generation, referred to as tolling arrangements.

Notional Volumes of Derivative Instruments

The following table summarizes the notional volumes of derivatives used for hedging activities:

		Economic Hedges

Commodity	Unit of Measure	September 30, 2010		December 31, 2009

		(Unaudited)
Electricity options, swaps and forward arrangements	GWh		12,721		14,868
Natural gas options, swaps and forward arrangements	Bcf		272		266
Congestion revenue rights	GWh		146,538		195,367
Tolling arrangements¹	GWh		115,681		116,398

¹: In compliance with a CPUC mandate, SCE held an open, competitive solicitation that produced agreements with different project developers who have agreed to construct new southern California generating resources. SCE has entered into a number of contracts which are recorded as derivative instruments. The contracts provide for fixed capacity payments as well as pricing for energy delivered based on a heat rate and contractual operation and maintenance prices. However, due to uncertainty regarding the availability of required emission credits, some of the new generating resources may not be constructed and the contracts associated with these resources could therefore terminate, at which time SCE would no longer account for these contracts as derivatives.

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Fair Value of Derivative Instruments

The following table summarizes the gross and net fair values of commodity derivative instruments at September 30, 2010:

		Derivative Assets						Derivative Liabilities


(in millions)		Short- Term		Long- Term		Subtotal		Short- Term			Long- Term		Subtotal			Net Liability

		(Unaudited)
Non-trading activities:
	Economic hedges	$	69	$	192	$	261	$	230		$	1,298	$	1,528		$	1,267
	Netting and collateral		—		—		—		(5	)		—		(5	)		(5	)

Total		$	69	$	192	$	261	$	225		$	1,298	$	1,523		$	1,262

The following table summarizes the gross and net fair values of commodity derivative instruments at December 31, 2009:

		Derivative Assets						Derivative Liabilities


(in millions)		Short- Term		Long- Term		Subtotal		Short- Term		Long- Term		Subtotal		Net Liability

		(Unaudited)
Non-trading activities:
	Economic hedges	$	160	$	187	$	347	$	102	$	496	$	598	$	251

Income Statement Impact of Derivative Instruments

SCE recognizes realized gains and losses on derivative instruments as purchased-power expense and recovers these costs, subject to reasonableness review, from ratepayers. As a result, realized gains and losses are not reflected in earnings, but may temporarily affect cash flows. Due to expected future recovery from ratepayers, unrealized gains and losses are recorded as regulatory assets or liabilities and therefore are also not reflected in earnings. The results of derivative activities and related regulatory offsets are recorded in cash flows from operating activities in the consolidated statements of cash flows.

The following table summarizes the components of economic hedging activity:

	Three Months Ended September 30,						Nine Months Ended September 30,


(in millions)	2010			2009			2010			2009

	(Unaudited)
Realized loss	$	(53	)	$	(113	)	$	(116	)	$	(307	)
Unrealized gain (loss)		(165	)		(198	)		(1,022	)		428

Contingent Features/Credit-Related Exposure

Certain derivative instruments and power procurement contracts under SCE's power and natural gas hedging activities contain collateral requirements. SCE has historically provided collateral in the form of cash and/or letters of credit for the benefit of counterparties. These requirements can vary depending upon the level of unsecured credit extended by counterparties, changes in market prices relative to contractual commitments, and other factors.

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Certain of these power contracts contain a provision that requires SCE to maintain an investment grade credit 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 pay the derivative liability or post additional collateral. The aggregate fair value of all derivative liabilities with these credit-risk-related contingent features was $240 million and $91 million, as of September 30, 2010 and December 31, 2009, respectively, for which SCE has posted no collateral to its counterparties. If the credit-risk-related contingent features underlying these agreements were triggered on September 30, 2010, SCE would be required to post $16 million of additional collateral based on the contractual terms.

Competitive Power Generation

EMG uses derivative instruments to reduce its exposure to market risks that arise from fluctuations in prices of electricity, capacity, fuel, emission allowances, and transmission rights. Additionally, EMG's financial results can be affected by fluctuations in interest rates. To the extent that EMG does not use derivative instruments to hedge these market risks, the unhedged portions will be subject to the risks and benefits of spot market price movements.

Risk management positions may be designated as cash flow hedges or economic hedges, which are derivatives that are not designated as cash flow hedges. Economic hedges are accounted for at fair value on EMG's consolidated balance sheets with offsetting changes recorded in the consolidated statements of income. For transactions that qualify for accounting hedge treatment, the fair value is recognized, to the extent effective, on EMG's consolidated balance sheets with offsetting changes in fair value recognized in accumulated other comprehensive income until the related forecasted transaction occurs.

Derivative instruments that are utilized for trading purposes are measured at fair value and included in the balance sheet as derivative assets or liabilities. Changes in fair value are recognized in the consolidated statements of income.

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Notional Volumes of Derivative Instruments

The following table summarizes the notional volumes of derivatives used for hedging and trading activities:

September 30, 2010

				Hedging Activities
Commodity	Instrument	Classification	Unit of Measure	Cash Flow Hedges			Economic Hedges			Trading Activities

				(Unaudited)
Electricity	Forwards/Futures	Sales	GWh		26,322	¹		15,995	³		33,485
Electricity	Forwards/Futures	Purchases	GWh		408	¹		16,529	³		35,741
Electricity	Capacity	Sales	MW-Day (in thousands)		195	²		—			150	²
Electricity	Capacity	Purchases	MW-Day (in thousands)		12	²		—			461	²
Electricity	Congestion	Sales	GWh		—			136	⁴		10,977	⁴
Electricity	Congestion	Purchases	GWh		—			1,016	⁴		210,974	⁴
Natural gas	Forwards/Futures	Sales	bcf		—			0.6			37.3
Natural gas	Forwards/Futures	Purchases	bcf		—			—			36.4
Fuel oil	Forwards/Futures	Sales	barrels		—			150,000			319,000
Fuel oil	Forwards/Futures	Purchases	barrels		—			495,000			329,000
Coal	Forwards/Futures	Sales	tons		—			—			1,794,750
Coal	Forwards/Futures	Purchases	tons		—			—			1,748,250

(in millions)

Instrument	Purpose	Type of Hedge	Notional Amount		Expiration Date

			(Unaudited)
Amortizing interest rate swap	Convert floating rate (6-month LIBOR) debt to fixed rate (3.175%) debt	Cash flow	$	145	June 2016
Amortizing forward starting interest rate swap	Convert floating rate (3-month LIBOR) debt to fixed rate (4.29%) debt	Cash flow		122	December 2025
Amortizing forward starting interest rate swap	Convert floating rate (3-month LIBOR) debt to fixed rate (3.46%) debt	Cash flow		68	March 2026

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The following table summarizes the fair value of derivative instruments reflected on EMG's consolidated balance sheets:

The following table provides the activity of accumulated other comprehensive income, containing the information about the changes in the fair value of cash flow hedges and reclassification from accumulated other comprehensive income into results of operations:

The portion of a cash flow hedge that does not offset the change in the value of the transaction being hedged, which is commonly referred to as the ineffective portion, is immediately recognized in earnings.

EMG recorded a net gain of $4 million and $11 million during the third quarters of 2010 and 2009, respectively, and $5 million and $16 million during the nine months ended September 30, 2010 and 2009, respectively, representing the amount of cash flow hedge ineffectiveness and are reflected in "Competitive power generation" revenue on the consolidated statements of income.

The effect of realized and unrealized gains (losses) from derivative instruments used for economic hedging and trading purposes on the consolidated statements of income is presented below:

Certain derivative instruments contain margin and collateral deposit requirements. Since EME's credit ratings are below investment grade, EME has provided collateral in the form of cash and letters of credit for the benefit of counterparties related to the net of accounts payable, accounts receivable, unrealized losses and unrealized gains in connection with derivative activities. Certain derivative contracts do not require margin, but contain provisions that require EME or Midwest Generation to comply with the terms and conditions of their respective credit facilities. The credit facilities each contain financial covenants. Some hedge contracts include provisions related to a change in control or material adverse effect resulting from amendments or modifications to the related credit facility. Failure

by EME or Midwest Generation to comply with these provisions may result in a termination event under the hedge contracts, enabling the counterparties to terminate and liquidate all outstanding transactions and demand immediate payment of amounts owed to them. EMMT has hedge contracts that do not require margin, but provide that each party can request additional credit support in the form of adequate assurance of performance in the case of an adverse development affecting the other party. The aggregate fair value of all derivative instruments with credit-risk-related contingent features is in an asset position at September 30, 2010 and, accordingly, the contingent features described above do not currently have a liquidity exposure. Future increases in power prices could expose EME, Midwest Generation or EMMT to termination payments or additional collateral postings under the contingent features described above.

In March 2010, SCE issued $500 million of 5.5% first and refunding mortgage bonds due in 2040. In May 2010, SCE reissued $144 million of 5.0% tax-exempt pollution control bonds due in 2035. In August 2010, SCE issued $500 million of 4.5% first and refunding mortgage bonds due in 2040. These issuances are part of long-term financing plans to fund SCE's capital program.

In July 2010, EMG completed through its subsidiary, Laredo Ridge Wind, LLC, a non-recourse financing of its interests in the Laredo Ridge wind project. The financing included a $53 million bridge loan, secured by the expected U.S. Treasury grant, immediately due to be fully repaid upon receipt of the U.S. Treasury grant and no later than December 31, 2011. As of September 30, 2010, there was $50 million outstanding under the bridge loan at a weighted average interest rate of 2.76% classified as long-term obligations.

EMG consolidated the Ambit project on January 1, 2010. At September 30, 2010, this project had $71 million of bonds payable, which are supported by a letter of credit. Principal payments are due annually through October 1, 2017. Interest rates are reset weekly based on current bond yields for similar securities. The average interest rate for the nine months ended September 30, 2010 was 0.27%. Annual maturities of this debt at September 30, 2010 for the next five years are summarized as follows: $8 million in 2010, $8 million in 2011, $9 million in 2012, $10 million in 2013, and $10 million in 2014. In January 2010, Edison Capital repaid in full its medium-term loans. The balance of these loans was $89 million at December 31, 2009.

In September 2010, Edison International (parent) issued $400 million of 3.75% senior notes due in 2017. The proceeds from these bonds were used to repay short-term borrowings under the revolving credit facility and the remainder for corporate liquidity purposes.

In March 2010, SCE replaced its $500 million 364-day revolving credit facility with a new $500 million three-year credit facility that terminates in March 2013.

In March 2010, EMG completed through its subsidiary, Cedro Hill Wind, LLC, a non-recourse financing of its interests in the Cedro Hill wind project. The financing included a $135 million construction loan that is required to be converted to a 15-year amortizing term loan by May 31, 2011, subject to meeting specified conditions. As of September 30, 2010, there was $78 million outstanding under the construction loan at a weighted average interest rate of 3.26%.

In July 2010, EMG completed through its subsidiary, Laredo Ridge Wind, LLC, a non-recourse financing of its interests in the Laredo Ridge wind project. The financing included a $75 million construction loan required to be converted to a 15-year amortizing term loan by August 31, 2011, subject to meeting specified conditions. As of September 30, 2010, there was $20 million outstanding under the construction loan at a weighted average interest rate of 3.01% classified as a construction loan.

Letters of credit issued under SCE's credit facilities aggregated $11 million and are scheduled to expire in twelve months or less. As of September 30, 2010, letters of credit issued under EME and its subsidiaries' credit facilities aggregated $133 million and are scheduled to expire as follows: $8 million in 2010 and $125 million in 2011.

The table below contains a reconciliation of income tax expense computed at the federal statutory income tax rate to the income tax provision from continuing operations attributable to common shareholders:

The CPUC requires flow-through rate-making 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.

During 2010, Edison International recognized a $175 million earnings benefit relating to the Global Settlement, including $138 million in the second quarter resulting from acceptance by the California Franchise Tax Board of the tax positions finalized with the IRS in 2009 and revision to interest recorded on the federal Global Settlement, and $37 million in the third quarter resulting from receipt of the final interest determination from the California Franchise Tax Board.

During the nine months ended September 30, 2009, Edison International recorded a consolidated after-tax earnings charge of $274 million related to the Global Settlement finalized with the IRS and termination of Edison Capital's cross-border leases ($920 million pre-tax loss). (See discussion of Global Settlement in "Item 8. Edison International Notes to Consolidated Financial Statements—Note 4. Income Taxes" of the 2009 Form 10-K.)

During the second quarter of 2010, the IRS approved Edison International's request to change its tax accounting method for asset removal costs primarily related to SCE's infrastructure replacement program. As a result, Edison International recognized a $40 million earnings benefit ($28 million of which relates to asset removal costs incurred prior to 2010) from deducting asset removal costs earlier in the construction cycle. These deductions are recorded on a flow-through basis.

During the first quarter of 2010, Edison International recognized a $39 million non-cash charge to reverse previously recognized federal tax benefits eliminated by the federal health care legislation enacted in March 2010. The Patient Protection and Affordable Care Act, as modified by the Health Care and Education Reconciliation Act, includes a provision that eliminates the federal tax deduction of retiree health care costs to the extent those costs are eligible for federal Medicare Part D subsidies. Although this change does not take effect until January 1, 2013, Edison International is required to recognize the full accounting impact of the legislation in its financial statements in the period of enactment.

The following table provides a reconciliation of unrecognized tax benefits from January 1 to September 30 for 2010 and 2009:

As of September 30, 2010 and December 31, 2009, respectively, if recognized, $363 million and $374 million of unrecognized tax benefits would impact the effective tax rate.

The total amount of accrued interest and penalties related to Edison International's income tax liabilities was $255 million and $380 million as of September 30, 2010 and December 31, 2009, respectively.

The net after-tax interest and penalties recognized in income tax expense was a benefit of $7 million for the three months ended September 30, 2010, compared to an expense of $7 million for the same period in 2009. Net after-tax interest and penalties recognized in income tax expense was a benefit of $95 million and $92 million for the nine months ended September 30, 2010 and 2009, respectively.

The Internal Revenue Service examination phase of Edison International's federal income tax returns for tax years 2003 through 2006 is anticipated to be completed by the end of 2010. During the third quarter, Edison International received a proposed adjustment increasing the taxable gain on the 2004 sale of EME's international assets, which, if sustained, would result in federal and state tax payments of approximately $152 million, including interest. The Internal Revenue Service examination team is considering whether to assess penalties in addition to this proposed tax adjustment. Edison International does not agree with the proposed adjustment and expects to file an appeal with the Internal Revenue Service after the examination phase is completed. Finally, the Internal Revenue Service examination team, during the third quarter, has informed Edison International that it has completed its review of certain other tax positions and will not be proposing adjustments. The IRS examination team may propose additional adjustments prior to completing the 2003 – 2006 examination.

During the nine months ended September 30, 2010, Edison International made 2009 plan year contributions of $13 million, 2010 plan year contributions of $82 million and expects to make $30 million of additional 2010 plan year contributions during the remainder of 2010. Annual contributions made to most of SCE's pension plans are recovered through CPUC-approved regulatory mechanisms. Annual contributions to these plans are expected to be, at a minimum, equal to the related annual expense.

During the nine months ended September 30, 2010, Edison International made 2010 plan year contributions of $22 million and expects to make $33 million of additional 2010 plan year contributions during the remainder of 2010. Annual contributions made to SCE plans are recovered through CPUC-approved regulatory mechanisms and are expected to be, at a minimum, equal to the total annual expense for these plans.

During the first quarter of 2010, Edison International granted its 2010 stock-based compensation awards, which included stock options, performance shares and restricted stock units. Total stock-based compensation expense (reflected in the caption "Operation and maintenance" on the consolidated statements of income) was $9 million for both the three months ended September 30, 2010 and 2009, and $26 million and $25 million for the nine months ended September 30, 2010 and 2009, respectively. The income tax benefit recognized in the consolidated statements of income was $3 million and $4 million for the three months ended September 30, 2010 and 2009, respectively, and $10 million for both the nine months ended September 30, 2010 and 2009. Excess tax benefits included in "Settlements of stock-based compensation – net" in the financing section of the consolidated statements of cash

flows were $5 million and $6 million for the nine months ended September 30, 2010 and 2009, respectively.

Cash outflows to purchase Edison International shares in the open market to settle stock option exercises were $17 million and $2 million for the three months ended September 30, 2010 and 2009, respectively, and were $30 million and $8 million for the nine months ended September 30, 2010 and 2009, respectively. Cash inflows from participants to exercise stock options were $10 million and $1 million for the three months ended September 30, 2010 and 2009, respectively, and were $19 million and $5 million for the nine months ended September 30, 2010 and 2009, respectively. The tax benefit realized from options exercised was $3 million and less than $1 million for the three months ended September 30, 2010 and 2009, respectively, and $5 million and $1 million for the nine months ended September 30, 2010 and 2009, respectively.

The following is a summary of the status of Edison International nonvested performance shares:

SCE entered into two 20-year power purchase contracts which are classified as capital leases and are expected to be recorded on the consolidated balance sheets upon commencement of the contracts in 2012 and 2013. SCE's commitments upon commencement are estimated to be: $38 million in 2012, $98 million in 2013, $120 million in 2014, and $2.1 billion for the period remaining thereafter (amounts representing executory costs and interest are $490 million and $911 million, respectively).

At September 30, 2010, SCE had power purchase contracts with additional commitments estimated to be: $30 million for the remainder of 2010, $94 million in 2011, $77 million in 2012, $53 million in 2013, $49 million in 2014, and $1 billion for the period remaining thereafter.

In October 2010, SCE completed its 2010 annual request for offers and entered into new power purchase contracts with commitments estimated to be: $35 million in 2011, $122 million in 2012, $163 million in 2013, and $69 million in 2014.

At September 30, 2010, EMG's subsidiaries had firm commitments to spend approximately $199 million during the remainder of 2010 and $79 million in 2011 on capital and construction expenditures. These expenditures primarily relate to the construction of wind projects. EMG intends to fund these expenditures through project-level and turbine vendor financing, U.S. Treasury grants, cash on hand and cash generated from operations.

EME has entered into various turbine supply agreements with vendors to support its wind development efforts. As of September 30, 2010, EME had commitments, excluding turbines subject to the legal dispute described below, to purchase 46 wind turbines (69 MW) and had 2 wind turbines (6 MW) in storage to be used for future wind projects. EME has payment commitments related to wind turbines of $82 million due in 2011.

Excluded from the turbine commitments referred to above are commitments under a turbine supply agreement between Mitsubishi Power Systems Americas, Inc. and EME, which was subject to a legal dispute as of September 30, 2010. On October 8, 2010, EME and the Mitsubishi entities entered into a settlement agreement with respect to the dispute. As a result of the settlement agreement, EME's $68 million deposit previously paid under the original contract will be applied to the purchase price for 23 wind turbines (55 MW). Within the next three years, EME may elect to deploy 60 additional wind turbines (144 MW). EME may be obligated to make a payment of up to $30 million following the end of the three-year period if it has not elected to deploy the additional turbines and if certain other criteria apply. EME further agreed to payments of up to $40 million for settlement of remaining disputes on turbines purchased.

At September 30, 2010, Midwest Generation and Homer City had fuel purchase commitments with various third-party suppliers for the purchase of coal. Based on the contract provisions, which consist of fixed prices, subject to adjustment clauses, these minimum commitments are estimated to aggregate $883 million, summarized as follows: $136 million for the remainder of 2010, $461 million in 2011, $253 million in 2012, and $33 million in 2013.

At September 30, 2010, Midwest Generation and Homer City each had contractual agreements for the transport of coal to their respective facilities. The commitments under these contracts are based on either actual coal purchases or minimum quantities. Accordingly, contractual obligations for transportation based on actual coal purchases are derived from committed coal volumes set forth in fuel supply contracts. The minimum commitments under these contracts are estimated to aggregate $300 million, summarized as follows: $75 million for the remainder of 2010, and $225 million in 2011.

SCE and EME have letters of credit outstanding under their credit facilities. For further discussion, see Note 3.

Edison International's subsidiaries have various financial and performance guarantees and indemnifications which are issued in the normal course of business. As discussed below, these contracts include performance guarantees, guarantees of debt and indemnifications.

In connection with the acquisition of the Midwest Generation plants, EME agreed to indemnify Commonwealth Edison with respect to specified environmental liabilities before and after December 15, 1999, the date of sale. The indemnification claims are reduced by any insurance proceeds and tax benefits related to such claims and are subject to a requirement that Commonwealth Edison takes all reasonable steps to mitigate losses related to any such indemnification claim. This indemnification for environmental liabilities is not limited in term and would be triggered by a valid claim from Commonwealth Edison. Also, in connection with the sale-leaseback transaction related to the Powerton and Joliet Stations in Illinois, EME agreed to indemnify the lessors for specified environmental liabilities. Due to the nature of the obligations under these indemnities, a maximum potential liability cannot be determined. Commonwealth Edison has advised EME that Commonwealth Edison believes it is entitled to indemnification for all liabilities, costs, and expenses that it may be required to bear as a result of the litigation discussed below under "—Contingencies—Midwest Generation New Source Review Lawsuit." The sale-leaseback participants have requested similar indemnification. Except as discussed below, EME has not recorded a liability related to these environmental indemnities.

Midwest Generation entered into a supplemental agreement with Commonwealth Edison and Exelon Generation Company LLC on February 20, 2003 to resolve a dispute regarding interpretation of its reimbursement obligation for asbestos claims under the environmental indemnities set forth in the Asset Sale Agreement. Under this supplemental agreement, Midwest Generation agreed to reimburse Commonwealth Edison and Exelon Generation for 50% of specific asbestos claims pending as of February 2003 and related expenses less recovery of insurance costs, and agreed to a sharing arrangement for liabilities and expenses associated with future asbestos-related claims as specified in the agreement. As a general matter, Commonwealth Edison and Midwest Generation apportion responsibility for future asbestos-related claims based upon the number of exposure sites that are Commonwealth Edison locations or Midwest Generation locations. The obligations under this agreement are not subject to a maximum liability. The supplemental agreement had an initial five-year term with an automatic renewal provision for subsequent one-year terms (subject to the right of either party to terminate); pursuant to the automatic renewal provision, it has been extended until February 2011. There were approximately 220 cases for which Midwest Generation was potentially liable and that had not been settled and dismissed at September 30, 2010. Midwest Generation had recorded a $57 million liability at September 30, 2010 for previous, pending and future claims.

The amounts recorded by Midwest Generation for the asbestos-related liability are based upon a number of assumptions. Future events, such as the number of new claims to be filed each year, the average cost of disposing of claims, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the actual costs to be higher or lower than projected.

In connection with the acquisition of the Homer City facilities, Homer City agreed to indemnify the sellers with respect to specified environmental liabilities before and after the date of sale. Payments would be triggered under this indemnity by a valid claim from the sellers. EME guaranteed this obligation of Homer City. Also, in connection with the sale-leaseback transaction related to the Homer City facilities, Homer City agreed to indemnify the lessors for specified environmental liabilities. Due to the nature of the obligation under this indemnity provision, it is not subject to a maximum potential liability and does not have an expiration date. For discussion of the NOV received by Homer City and associated indemnity claims, see "—Contingencies—Homer City New Source Review Notice of Violation." EME has not recorded a liability related to this indemnity.

The asset sale agreements for the sale of EME's international assets contain indemnities from EME to the purchasers, including indemnification for taxes imposed with respect to operations of the assets prior to the sale and for pre-closing environmental liabilities. Not all indemnities under the asset sale agreements have specific expiration dates. Payments would be triggered under these indemnities by valid claims from the sellers or purchasers, as the case may be. At September 30, 2010, EME had recorded a liability of $42 million related to these matters.

In connection with the sale of various domestic assets, EME has from time to time provided indemnities to the purchasers for taxes imposed with respect to operations of the asset prior to the sale. EME has also provided indemnities to purchasers for items specified in each agreement (for example, specific pre-existing litigation matters and/or environmental conditions). Due to the nature of the obligations under these indemnity agreements, a maximum potential liability cannot be determined.

Not all indemnities under the asset sale agreements have specific expiration dates. Payments would be triggered under these indemnities by valid claims from the sellers or purchasers, as the case may be. No significant amounts are recorded as a liability for these matters.

In connection with the sale-leaseback transactions related to the Homer City facilities in Pennsylvania, the Powerton and Joliet Stations in Illinois and, previously, the Collins Station in Illinois, EME and several of its subsidiaries entered into tax indemnity agreements. Although the Collins Station lease terminated in April 2004, Midwest Generation's tax indemnity agreement with the former lease equity investor is still in effect. Under these tax indemnity agreements, these entities agreed to indemnify the lessors in the sale-leaseback transactions for specified adverse tax consequences that could result in certain situations set forth in each tax indemnity agreement, including specified defaults under the respective leases. The potential indemnity obligations under these tax indemnity agreements could be significant. Due to the nature of these potential obligations, EME cannot determine a maximum potential liability which would be triggered by a valid claim from the lessors. No significant amounts are recorded as a liability for these matters.

In connection with the acquisition of the Mountainview power plant, SCE agreed to indemnify the seller with respect to specific environmental claims related to SCE's previously owned San Bernardino Generating Station, divested by SCE in 1998 and reacquired as part of the Mountainview acquisition. SCE retained certain responsibilities with respect to environmental claims as part of the original divestiture of the station. The aggregate liability for either party to the purchase agreement for damages and other amounts is a maximum of $60 million. This indemnification for environmental liabilities expires on or before March 12, 2033. SCE has not recorded a liability related to this indemnity.

The Mountainview power plant utilizes water from on-site groundwater wells and City of Redlands ("City") recycled water for cooling purposes. Unrelated to the operation of the plant, the groundwater contains perchlorate. The pumping of the water removes perchlorate from the aquifer beneath the plant and concentrates it in the plant's wastewater treatment "filter cake." Use of this impacted groundwater for cooling purposes was mandated by Mountainview's California Energy Commission permit. SCE has indemnified the City for cleanup or associated actions related to groundwater contaminated by perchlorate due to the disposal of filter cake at the City's solid waste landfill. The obligations under this agreement are not limited to a specific time period or subject to a maximum liability. SCE has not recorded a liability related to this indemnity.

SCE provides other 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 specified environmental indemnities and income taxes with respect to assets sold. SCE's obligations under these agreements may be limited in terms of time and/or amount, and in some instances SCE may have recourse against third parties for certain indemnities. The obligated amounts of these indemnifications often are not explicitly stated, and the overall maximum amount of the obligation under these indemnifications cannot be reasonably estimated. SCE has not recorded a liability related to these indemnities.

In addition to the matters disclosed in these Notes, Edison International is 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 is subject to numerous environmental laws and regulations, which typically require a lengthy and complex process for obtaining licenses, permits and approvals and require it to incur substantial costs to operate existing facilities, construct and operate new facilities, and mitigate or remove the effect of past operations on the environment.

Possible developments, such as the enactment of more stringent environmental laws and regulations, proceedings that may be initiated by environmental and other regulatory authorities, cases in which new theories of liability are recognized, and settlements agreed to by other companies that establish precedent or expectations for the power industry, could affect the costs and the manner in which

business is conducted, and could cause substantial additional capital expenditures or operational expenditures or the ceasing of operations at certain facilities. There is no assurance that any additional costs arising from such developments would be recovered from customers or that Edison International's financial position, results of operations and cash flows would not be materially affected by these developments.

During the third quarter of 2010, Midwest Generation continued its permitting and planning activities for NO_x and SO₂ controls to meet the requirements of the CPS. Midwest Generation has received all necessary permits from the Illinois EPA allowing the installation of selective non-catalytic reduction (SNCR) technology on multiple units to meet the NO_x portion of the CPS, and is engaged with the Illinois EPA with respect to permitting the installation of equipment to meet required reductions for SO₂.

Work continued on the possible use of flue gas desulfurization (FGD) technology using dry scrubbing with sodium-based sorbents as a method to comply with the SO₂ portion of the CPS. Testing of this technology demonstrated significant reductions in SO₂ emissions when using the type of coal used by Midwest Generation. Use of this technology in combination with the type of coal employed by Midwest Generation is expected to require substantially less capital and installation time than the spray dryer absorber technology originally contemplated, but would likely result in higher ongoing operating costs and may consequently result in lower dispatch rates and competitiveness of Midwest Generation's plants, depending on competitors' costs. Also, the use of dry scrubbing with sodium-based sorbents to meet environmental regulations will likely require Midwest Generation to incur the costs of upgrading its particulate removal systems.

Based on the work to date, Midwest Generation estimates the cost of retrofitting all units, using dry scrubbing with sodium-based sorbents to comply with CPS requirements for SO₂ emissions, and associated upgrading of particulate removal systems, would be approximately $1.2 billion in 2010 dollars. If completed, these expenditures would be incurred over multiple years.

Decisions regarding whether or not to proceed with the above projects or other approaches to compliance remain subject to a number of factors, such as market conditions, regulatory and legislative developments, and forecasted commodity prices and capital and operating costs applicable at the time decisions are required or made. Midwest Generation could also elect to shut down units, instead of installing controls, to be in compliance with the CPS. Therefore, decisions about any particular combination of retrofits and shutdowns it may ultimately employ also remain subject to conditions applicable at the time decisions are required or made. Due to existing uncertainties about these factors, Midwest Generation may defer final decisions about particular units for the maximum time available. Accordingly, final decisions on whether to install controls, to install particular kinds of controls, and to actually expend capital that is budgeted may not occur until 2012 for some of the units and potentially later for others.

Homer City operates selective catalytic reduction equipment on all three units to reduce NO_x emissions, operates FGD equipment on Unit 3 to reduce SO₂ emissions, and uses coal-cleaning equipment on site to reduce the ash and sulfur content of raw coal to meet both combustion and environmental requirements. Homer City may be required to install additional environmental equipment on Unit 1 and Unit 2 to comply with environmental regulations for future operations. For further information, see "—Transport Rule" and "—Homer City New Source Review Notice of

Violation." Restrictions under the agreements entered into as part of Homer City's 2001 sale-leaseback transaction could affect, and in some cases significantly limit or prohibit, Homer City's ability to incur indebtedness or make capital expenditures. Homer City will have limited ability to obtain additional outside capital for such projects without amending its lease and related agreements. EME is under no contractual obligation to provide funding to Homer City.

In June 2010, the US EPA finalized the Prevention of Significant Deterioration ("PSD") and Title V GHG tailoring rule. The effective date of the final rule is August 2, 2010. The emissions thresholds for CO₂ equivalents in the final rule are as follows:

Numerous legal challenges to the greenhouse gas tailoring rule have been filed. As written, the rule applies to all sources meeting the thresholds that are built or modified after January 1, 2011. If controls are required to be installed at the facilities of Edison International subsidiaries in the future in order to reduce greenhouse gas emissions pursuant to regulations issued by the US EPA or others, the potential impact will depend on the nature of the controls applied, which remains uncertain.

In July 2010, the US EPA issued a Notice of Proposed Rulemaking for a proposed rule, known as the Transport Rule, which would require 31 eastern states (including Pennsylvania and Illinois) and the District of Columbia to reduce power plant emissions of NO_x and SO₂ substantially, starting in 2012, with additional reductions in 2014. The Transport Rule would replace the Clean Air Interstate Rule, which had been remanded to the US EPA in 2008 for revision.

The US EPA has proposed three possible approaches to emissions allowance trading. Under its preferred approach, a pollution limit would be set for each state, intrastate trading would be permitted among power plants, and limited interstate trading would also be permitted consistent with the requirement that each state meet its own pollution control obligations. Under the first alternative, a pollution limit would be set for each state, and only intrastate trading of allowances would be permitted. Under the second alternative, a pollution limit would be set for each state, an emissions limit would be set for each power plant, and limited emissions averaging would be permitted among affected units.

Under the Transport Rule, each covered state would initially be subject to a federal implementation plan designed to reduce pollution that significantly contributed to nonattainment of, or interferes with the maintenance of, NAAQS in other states. States would be able to choose to develop state implementation plans to replace the federal implementation plans.

The Transport Rule is scheduled to be finalized in 2011. The Clean Air Interstate Rule will remain in place until that time. EME believes that the US EPA's preferred approach to emissions allowance trading would provide allowance allocations which are adequate for the Midwest Generation plants based on projected emissions using the Illinois CPS allowable emission rates. If adopted as proposed,

the Transport Rule may require the installation of additional environmental equipment to reduce SO₂ emissions at Units 1 and 2 of the Homer City facilities.

In June 2010, the US EPA finalized the primary NAAQS for SO₂ by establishing a new one-hour standard at a level of 75 parts per billion. The final standard is in line with EME's expectations and is being taken into account in EME's environmental compliance strategy. Revisions to state implementation plans to achieve compliance with the new standard are due to be submitted to the US EPA by February 2014. The US EPA anticipates that the deadline for attainment with the SO₂ NAAQS will be August 2017 (five years after the US EPA intends to finalize initial determinations as to the areas of the country that are and are not in attainment with the primary SO₂ NAAQS).

In June 2010, the US EPA published proposed regulations relating to coal combustion wastes. Two different proposed approaches are under consideration. The first approach, under which the US EPA would list these wastes as special wastes subject to regulation under Subtitle C of the Resource Conservation and Recovery Act (the section for hazardous wastes), could require EME to incur additional capital and operating costs. The second approach, under which the US EPA would regulate these wastes under Subtitle D of the Resource Conservation and Recovery Act (the section for nonhazardous wastes), is substantially similar to the requirements of existing regulations. Comments on the proposed regulations are due November 19, 2010.

In September 2010, CARB voted to adopt a Renewable Electricity Standard regulation, which would require most retail sellers of electricity in California to procure 33% of their electricity from eligible renewable energy resources by 2020. The potential impact of the Standard will depend on provisions, which have not yet been finalized, and therefore remains uncertain. SCE believes that achieving a 33% renewables portfolio standard in this timeframe will be highly ambitious, given the magnitude of the infrastructure build-out required and the slow pace of transmission permitting and approvals.

In May 2010, the California State Water Resources Board issued a final policy, which establishes closed-cycle wet cooling as required technology for retrofitting existing once-through cooled plants like San Onofre and many of the existing fossil-fueled power plants along the California coast. The final policy requires an independent engineering study to be completed prior to the fourth quarter of 2013 regarding the feasibility of compliance by California's two coastal nuclear power plants. Depending on the results of the study, the required compliance may result in significant capital expenditures at San Onofre and may affect its operations. The policy may also significantly impact SCE's ability to procure generating capacity from fossil-fueled plants that use ocean water in once-through cooling systems, system reliability and the cost of electricity to the extent other coastal power plants in California are forced to shut down or limit operations. The policy has the potential to adversely affect California's nineteen once-through cooled power plants, which provide over 21,000 MW of combined, in-state generation capacity, including over 9,100 MW of capacity interconnected within SCE's service territory.

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

As of September 30, 2010, Edison International's recorded estimated minimum liability to remediate its 29 identified sites at SCE (23 sites) and EME (6 sites primarily related to Midwest Generation) was $42 million, of which $38 million was related to SCE. Edison International's other subsidiaries have no identified remediation sites. The ultimate costs to clean up Edison International's identified sites may vary from its recorded liability due to numerous uncertainties inherent in the estimation process, such as: the extent and nature of contamination; the scarcity of reliable data for identified sites; the varying costs of alternative cleanup methods; developments resulting from investigatory studies; the possibility of identifying additional sites; and the time periods over which site remediation is expected to occur. Edison International believes that, due to these uncertainties, it is reasonably possible that cleanup costs at these identified sites could exceed its recorded liability by up to $228 million, all of which is related to SCE. The upper limit of this range of costs was estimated using assumptions least favorable to Edison International among a range of reasonably possible outcomes. In addition to its identified sites (sites in which the upper end of the range of costs is at least $1 million), SCE also has 34 immaterial sites for which total liability ranges from $5 million (the recorded minimum liability) to $10 million.

The CPUC allows SCE to recover 90% of its environmental remediation costs at certain sites, representing $34 million of its recorded liability, through an incentive mechanism (SCE may request to include additional sites). Under this mechanism, SCE will recover 90% of cleanup costs through customer rates; shareholders fund the remaining 10%, with the opportunity to recover these costs from insurance carriers and other third parties. SCE has successfully settled insurance claims with all responsible carriers. SCE expects to recover costs incurred at its remaining sites through customer rates. SCE has recorded a regulatory asset of $39 million for its estimated minimum environmental cleanup costs expected to be recovered through customer rates.

Edison International's identified sites include several sites for which there is a lack of currently available information, including the nature and magnitude of contamination, and the extent, if any, that Edison International may be held responsible for contributing to any costs incurred for remediating these sites. Thus, no reasonable estimate of cleanup costs can be made for these sites.

SCE expects to clean up its identified sites over a period of up to 30 years. Remediation costs in each of the next several years are expected to range from $3 million to $18 million. Recorded costs were $3 million and $2 million for the three months ended September 30, 2010 and 2009, respectively, and were $7 million for both the nine months ended September 30, 2010 and 2009.

Based on currently available information, Edison International believes it is unlikely that it will incur amounts in excess of the upper limit of the estimated range for its identified sites and, based upon the CPUC's regulatory treatment of environmental remediation costs incurred at SCE, Edison International 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 such estimates.

Edison International's federal income tax returns are currently under examination by the IRS for tax years 2003 through 2006 and are subject to examination through tax year 2009. Edison International's combined California state franchise tax returns are subject to examination for tax years 1991 through 2009. For further discussion, see Note 4.

In September 2009, the FERC issued an order allowing SCE to implement its proposed 2010 rates effective March 1, 2010, subject to refund. The proposed rates would increase SCE's FERC revenue requirement by $107 million, or 24%, over the 2009 FERC revenue requirement primarily due to an increase in transmission rate base, and would result in an approximate 1% increase to SCE's overall system average rate. SCE has terminated settlement negotiations and begun the litigation process for the proposed 2010 rates. A final decision is expected in the second half of 2011.

In November 2007, the FERC issued an order granting ROE incentive adders, recovery of the ROE and incentive adders in the CWIP proceedings, and 100% recovery of abandoned plant costs (if any) for three of SCE's transmission projects. The current ROE incentive adders are: 100 basis point adder for DCR, 125 basis point adder for Tehachapi, and 75 basis point adder for Rancho Vista. The CPUC filed an appeal of the November order, which had been stayed pending final resolution by the FERC of the 2008 CWIP proceeding. In April 2010, the FERC issued an order on SCE's 2008 CWIP proceeding. The order sets SCE's 2008 base ROE (before incentives) at 9.54% and establishes a methodology for determining the base ROE for 2009 and 2010 CWIP incentives. In May 2010, SCE filed an application for rehearing with the FERC. The order did not have a material impact on SCE's earnings or cash flows. The collected 2008 through 2010 CWIP revenue requirements are subject to refund, pending a final FERC order on these matters.

In May 2010, Homer City received an NOV from the US EPA. The new NOV alleges claims similar to those in the 2008 NOV, but it adds nonattainment New Source Review requirements to the alleged PSD violations. It also adds two prior owners of the Homer City facilities as parties.

In July 2010, Homer City received a 60-day Notice of Intent to Sue signed by the State of New York and the Pennsylvania Department of Environmental Protection (PADEP), stating their intent to file a citizen suit based on the same or similar theories advanced by the US EPA in the NOV. The Notice of Intent to Sue also named the sale-leaseback owner participants of the Homer City facilities, Homer City's general partner and limited partner, and two prior owners of the Homer City facilities.

In June 2008, Homer City received an NOV from the US EPA alleging that, beginning in 1988, Homer City (or former owners of the Homer City facilities) performed repair or replacement projects at Homer City Units 1 and 2 without first obtaining construction permits as required by the PSD requirements of the CAA. The US EPA also alleges that Homer City has failed to file timely and complete Title V permits. The NOV does not specify the penalties or other relief that the US EPA seeks for the alleged violations. On June 30, 2009 and January 2, 2010, the US EPA issued requests for information to Homer City under Section 114 of the CAA. Homer City is working on a response to the requests. Homer City has met with the US EPA and has expressed its intent to explore the possibility of a settlement. If no settlement is reached and the U.S. Department of Justice files suit, litigation could take many years to resolve the issues alleged in the NOV. EME cannot predict the outcome of this matter or estimate the impact on its facilities, its results of operations, financial position or cash flows.

Homer City has sought indemnification for liability and defense costs associated with the NOV from the sellers under the asset purchase agreement pursuant to which Homer City acquired the Homer City facilities. The sellers responded by denying the indemnity obligation, but accepting a portion of defense costs related to the claims.

Homer City notified the sale-leaseback owner participants of the Homer City facilities of the NOV under the operative indemnity provisions of the sale-leaseback documents. The owner participants of the Homer City facilities, in turn, sought indemnification and defense from Homer City for costs and liabilities associated with the Homer City NOV. Homer City responded by recognizing its indemnity obligation and defense of the claims on terms consistent with its contractual obligations.

In March 2010, the Federal District Court for the Northern District of Illinois dismissed nine of the ten counts related to PSD requirements in the complaint filed by the US EPA and the State of Illinois against Midwest Generation, holding that, as a subsequent owner, Midwest Generation could not be held liable under the PSD provisions for modifications allegedly made by Commonwealth Edison, the prior owner of the Midwest Generation plants. The Court also dismissed the tenth count to the extent it sought civil penalties under the CAA, as barred by the applicable statute of limitations. The decision did not address (i) other counts in the complaint that allege violations of opacity and particulate matter limitations under the Illinois State Implementation Plan and Title V of the CAA, or (ii) the complaint in intervention filed by a group of Chicago-based environmental action groups, which also alleges opacity and particulate matter violations.

In April 2010, the US EPA formally issued to EME the same NOV that was issued to Midwest Generation in 2007. The transmittal letter stated that the action was based on a review of the asset purchase agreement for the Midwest Generation plants and that the NOV was being issued to EME as a successor in interest to Commonwealth Edison.

In June 2010, the US EPA, the State of Illinois, and several environmental groups filed amended complaints in the New Source Review litigation. The amended complaints are similar to the prior complaints, but seek to add Commonwealth Edison and EME as defendants and introduce new legal theories to impose liability on Midwest Generation and EME. Midwest Generation and EME have

filed a motion to dismiss the amended complaints, and a status hearing has been scheduled for February 2011.

In August 2007, Midwest Generation received an NOV from the US EPA alleging that, beginning in the early 1990s and into 2003, Midwest Generation or Commonwealth Edison performed repair or replacement projects at six Illinois coal-fired electric generating stations in violation of the PSD requirements and of the New Source Performance Standards of the CAA, including alleged requirements to obtain a construction permit and to install controls sufficient to meet best available control technology (BACT) emissions rates. The US EPA also alleged that Midwest Generation and Commonwealth Edison violated certain operating permit requirements under Title V of the CAA. Finally, the US EPA alleged violations of certain opacity and particulate matter standards at the Midwest Generation plants. At approximately the same time, Commonwealth Edison received an NOV substantially similar to the Midwest Generation NOV. Midwest Generation, Commonwealth Edison, the US EPA, and the U.S. Department of Justice, along with several Chicago-based environmental action groups, had discussions designed to explore the possibility of a settlement but no settlement resulted.

In August 2009, the US EPA and the State of Illinois filed a complaint in the Northern District of Illinois against Midwest Generation, but not Commonwealth Edison, alleging claims substantially similar to those in the NOV. In addition to seeking penalties ranging from $25,000 to $37,500 per violation, per day, the complaint calls for an injunction ordering Midwest Generation to install controls sufficient to meet BACT emissions rates at all units subject to the complaint; to obtain new PSD or New Source Review permits for those units; to amend its applications under Title V of the CAA; to conduct audits of its operations to determine whether any additional modifications have occurred; and to offset and mitigate the harm to public health and the environment caused by the alleged CAA violations. The remedies sought by the plaintiffs in the lawsuit could go well beyond those required under the CPS. By order dated January 19, 2010, the Court allowed a group of Chicago-based environmental action groups to intervene in the case.

The owner participants of the Powerton and Joliet Stations have sought indemnification and defense from Midwest Generation and/or EME for costs and liabilities associated with these matters. EME responded by recognizing its indemnity obligation and defense of the claims on terms consistent with its contractual obligations.

An adverse decision could involve penalties and remedial actions that could have a material adverse impact on the financial condition and results of operations of EME at such time. EME cannot predict the outcome of these matters or estimate the impact on its facilities, its results of operations, financial position or cash flows.

The Navajo Nation filed a complaint in June 1999 against SCE, among other defendants, arising out of the coal supply agreement for Mohave. Subsequently, the Hopi Tribe was added as an additional plaintiff. As amended in April 2010, the Navajo Nation's complaint asserts claims for, among other things, interference with fiduciary duties and contractual relations, fraudulent misrepresentations by nondisclosure, and various contract-related claims. The complaint claims that the defendants' actions prevented the Navajo Nation from obtaining the full value in royalty rates for the coal supplied to Mohave. The complaint seeks damages of not less than $600 million, plus interest thereon, and punitive damages of not less than $1 billion. No trial date has been set for this litigation. In April 2009, in a related case filed in December 1993 against the U.S. Government, the U.S. Supreme Court found that

the Navajo Nation did not have a claim for compensation. In September 2010, the Hopi Tribe settled all of its claims and the remaining parties agreed to engage in mediation. SCE cannot predict the outcome of the Navajo Nation's complaint against SCE.

Federal law limits public liability claims from a nuclear incident to the amount of available financial protection, which is currently approximately $12.6 billion. SCE and other owners of San Onofre and Palo Verde have purchased the maximum private primary insurance available ($375 million). The balance is covered by a loss sharing program among nuclear reactor licensees. If a nuclear incident at any licensed reactor in the United States results in claims and/or costs which exceed the primary insurance at that plant site, all nuclear reactor licensees could be required to contribute their share of the liability in the form of a deferred premium.

Based on its ownership interests, SCE could be required to pay a maximum of approximately $235 million per nuclear incident. However, it would have to pay no more than approximately $35 million per incident in any one year. If the public liability limit above is insufficient, federal law contemplates that additional funds may be appropriated by Congress. This could include an additional assessment on all licensed reactor operators as a measure for raising further federal revenue.

Property damage insurance covers losses up to $500 million, including decontamination costs, at San Onofre and Palo Verde. Decontamination liability and property damage coverage exceeding the primary $500 million also has been purchased in amounts greater than federal requirements. Additional insurance covers part of replacement power expenses during an accident-related nuclear unit outage. A mutual insurance company owned by entities with nuclear facilities issues these policies. If losses at any nuclear facility covered by the arrangement were to exceed the accumulated funds for these insurance programs, SCE could be assessed retrospective premium adjustments of up to approximately $43 million per year. Insurance premiums are charged to operating expense.

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 did not meet its contractual obligation to begin acceptance of spent nuclear fuel by January 31, 1998. 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 the current license period.

In January 2004, SCE, as operating agent of San Onofre, filed a complaint against the DOE in the United States Court of Federal Claims seeking damages for the DOE's failure to meet its obligation to begin accepting spent nuclear fuel from San Onofre. In June 2010, the United States Court of Federal Claims issued a decision granting SCE damages of approximately $142 million to recover costs incurred through December 31, 2005, which has been appealed by the DOE. Additional legal action would be necessary to recover damages incurred after that date. Any damages recovered would be returned to SCE ratepayers or used to offset past or future fuel decommissioning or storage costs for the benefit of the ratepayer.

The following table provides the changes in equity for the nine months ended September 30, 2010:

The following table provides the changes in equity for the nine months ended September 30, 2009:

Included in accumulated other comprehensive income at September 30, 2010 was $104 million, net of tax, in unrealized gains on EMG's commodity-based cash flow hedges; and an $18 million, net of tax, unrealized loss related to interest rate hedges. The maximum period over which a cash flow hedge is designated is through March 31, 2026.

EMG's unrealized gains on commodity hedges consist of futures and forward electricity contracts that qualify for hedge accounting. These gains arise because current forecasts of future electricity prices in these markets are lower than the contract prices. Approximately $89 million of unrealized gains on cash flow hedges, net of tax, are expected to be reclassified into earnings during the next 12 months. Management expects that reclassification of net unrealized gains will increase energy revenues recognized at market prices. Actual amounts ultimately reclassified into earnings over the next 12 months could vary materially from this estimated amount as a result of changes in market conditions. The maximum period over which a commodity cash flow hedge is designated is through May 31, 2014.

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 for a liability should reflect the entity's nonperformance risk. Fair value is determined using a hierarchy to prioritize the inputs to valuation models. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are:

Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities;

Level 2—Pricing inputs that include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the derivative instrument; and

Level 3—Prices or valuations that require inputs that are both significant to the fair value measurements and unobservable.

Edison International's assets and liabilities carried at fair value primarily consist of derivative contracts, SCE nuclear decommissioning trust investments and money market funds. Derivative contracts are primarily commodity contracts for the purchase and sale of power and gas and include contracts for

forward physical sales and purchases, options and forward price swaps which settle only on a financial basis (including futures contracts). Derivative contracts can be exchange or over-the-counter traded.

The fair value of derivative contracts takes into account quoted market prices, time value of money, volatility of the underlying commodities and other factors. Derivatives that are exchange traded in active markets for identical assets or liabilities are classified as Level 1. Investments in money market funds are generally classified as Level 1, as fair value is determined by observable market prices in active markets.

EMG's derivative contracts, valued based on forward market prices in active markets (PJM West Hub, Northern Illinois Hub peak and AEP/Dayton) adjusted for nonperformance risks, are classified as Level 2. EMG obtains forward market prices from traded exchanges (Intercontinental Exchange Futures U.S. or New York Mercantile Exchange) and available broker quotes. Then, EMG selects a primary source that best represents traded activity for each market to develop observable forward market prices in determining the fair value of these positions. Broker quotes or prices from exchanges are used to validate and corroborate the primary source. These price quotations reflect mid-market prices (average of bid and ask) and are obtained from sources that EMG believes to provide the most liquid market for the commodity. EMG considers broker quotes to be observable when corroborated with other information which may include a combination of prices from exchanges, other brokers and comparison to executed trades.

SCE's Level 2 derivatives primarily consist of natural gas financial swaps and natural gas physical trades for which SCE obtains the applicable Henry Hub, basis, index, or forward market prices from the New York Mercantile Exchange and Intercontinental Exchange.

Level 3 includes the majority of SCE's derivatives, including over-the-counter options, bilateral contracts, capacity contracts, and QF contracts. The fair value of these derivatives is determined using uncorroborated non-binding broker quotes and models which may require SCE to extrapolate short-term observable inputs in order to calculate fair value. Broker quotes are obtained from several brokers and compared against each other for reasonableness.

Level 3 also includes derivatives that trade infrequently (such as firm transmission rights and CRRs in the California market, financial transmission rights traded in markets outside California and over-the-counter derivatives at illiquid locations) and long-term power agreements. For illiquid financial transmission rights and CRRs, objective criteria are reviewed, including system congestion and other underlying drivers, and fair value is adjusted when it is concluded that a change in objective criteria would result in a new valuation that better reflects fair value.

Changes in fair values are based on the hypothetical sale of illiquid positions. For illiquid long-term power agreements, fair value is based upon a discounting of future electricity and natural gas prices derived from a proprietary model using the risk free discount rate for a similar duration contract, adjusted for credit risk and market liquidity. Changes in fair value are based on changes to forward market prices, including forecasted prices for illiquid forward periods. In circumstances where Edison International cannot verify fair value with observable market transactions, it is possible that a different valuation model could produce a materially different estimate of fair value. As markets continue to develop and more pricing information becomes available, Edison International continues to assess valuation methodologies used to determine fair value. Derivative contracts with counterparties that have significant nonperformance risks are classified as Level 3.

The fair value of the derivative assets and liabilities are adjusted for nonperformance risk. To assess nonperformance risk, SCE considers default risk and the loss incurred if a counterparty defaults. EME

reviews credit ratings of counterparties (and related default rates based on such credit ratings) and prices of credit default swaps. The market price (or premium) for credit default swaps represents the price that a counterparty would pay to transfer the risk of default, typically bankruptcy, to another party. A credit default swap is not directly comparable to the credit risks of derivative contracts, but provides market information of the related risk of nonperformance. The fair value of derivative assets and derivative liabilities nonperformance risk was $3 million and $9 million, respectively, at September 30, 2010 and was $4 million and $7 million, respectively, at December 31, 2009.

The SCE 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.

The following tables set forth assets and liabilities that were accounted for at fair value by level within the fair value hierarchy:

The following table sets forth a summary of changes in the fair value of Level 3 assets and liabilities:

Edison International determines the fair value for transfers in and transfers out of each level at the end of each reporting period. There were no significant transfers between levels during 2010 and 2009.

SCE is collecting in rates amounts for the future costs of removal of its nuclear assets, and has placed those amounts in independent decommissioning trusts. Contributions are approximately $31 million per year. Funds collected, together with accumulated earnings, will be utilized solely for decommissioning. The CPUC has set certain restrictions related to the investments of these trusts.

The following table sets forth amortized cost and fair value of the trust investments:

Trust fund earnings (based on specific identification) increase the trust fund balance and the ARO regulatory liability. Proceeds from sales of securities (which are reinvested) were $302 million and $503 million for the three months ended September 30, 2010 and 2009, respectively, and $902 million and $1.8 billion for the nine months ended September 30, 2010 and 2009, respectively. Unrealized holding gains, net of losses, were $1.2 billion and $1.1 billion at September 30, 2010 and December 31, 2009, respectively. Approximately 92% of the cumulative trust fund contributions were tax-deductible.

The following table sets forth a summary of changes in the fair value of the trust:

Due to regulatory mechanisms, earnings and realized gains and losses (including other-than-temporary impairments) have no impact on operating revenue or earnings.

Fair values of long-term debt are 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 of new issue prices and relevant credit information.

The carrying value of trade receivables, payables and short-term debt approximate fair value and therefore are not included in the table above.

In July 2009, the Mountainview power plant was transferred to utility rate base pursuant to CPUC and FERC approvals which resulted in recognition of $50 million in Equity AFUDC during the three- and nine-month periods ended September 30, 2009.

Effective January 1, 2010, Edison International adopted the FASB's new guidance regarding variable interest entities ("VIEs"). A VIE is defined as a legal entity whose equity owners do not have sufficient

equity at risk, or, as a group, the holders of the equity investment at risk 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 new guidance replaces the predominantly quantitative model for determining which reporting entity, if any, has a controlling financial interest in a VIE with a qualitative approach. Under this new qualitative model, 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 unless specific exceptions or exclusions are met. Commercial and operating activities are generally the factors that most significantly impact the economic performance of VIEs in which Edison International has a variable interest. Commercial and operating activities include construction, operation and maintenance, fuel procurement, dispatch and compliance with regulatory and contractual requirements.

At September 30, 2010 and December 31, 2009, EMG had majority interests in 15 wind projects with a total generating capacity of 700 MW that have minority interests held by others. The projects are located in Iowa, Minnesota, New Mexico, Nebraska and Texas. As of December 31, 2009, all of these projects were consolidated by EMG. Upon the application of the new guidance effective January 1, 2010, EMG deconsolidated two of these projects. See further discussion in "—Variable Interests in VIEs that are not Consolidated—Equity Interests." In determining that EMG was the primary beneficiary of the 13 projects consolidated at September 30, 2010, the key factors considered were EMG's ability to direct commercial and operating activities and EMG's obligation to absorb losses and right to receive benefits that could potentially be significant to the variable interest entities.

The following table presents summarized financial information of the wind projects that had minority interests held by others and were consolidated by Edison International:

Assets serving as collateral for the debt obligations had a carrying value of $75 million and $81 million at September 30, 2010 and December 31, 2009, respectively, and primarily consist of property, plant and equipment.

EMG has a 50% partnership interest in the Ambit project. EMG has the power to direct the commercial and operating activities of the project pursuant to the existing contracts and has the obligation to absorb losses and right to receive benefits from the project. Therefore, under the new guidance, EMG is the primary beneficiary which resulted in the consolidation of the Ambit project by Edison International. Total assets consolidated at September 30, 2010 and January 1, 2010 were $99 million at both dates. Substantially all of the assets of the Ambit project are pledged as collateral for the partnership's debt obligations.

SCE has power purchase agreements ("PPAs") in which it has a variable interest in 17 VIEs, including 6 tolling agreements where SCE provides the natural gas to operate the plants and 11 contracts with QFs (including the Big 4 projects) that contain variable pricing provisions based on the price of natural gas. 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. In general, because payments for capacity are the primary source of income, the most significant economic activity for SCE's VIEs is the operation and maintenance of the power plants. SCE does not have control over the operation and maintenance of the facilities considered VIEs and it does not bear operational risk of the facilities. See further discussion of the Big 4 projects below.

As of the balance sheet date, the carrying amount of assets and liabilities in SCE's consolidated balance sheet that relate to its involvement with VIEs result from amounts due under the PPAs or the fair value of those derivative contracts, which are accounted for at fair value. See Note 10 for a discussion on nonperformance risk. Further, 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 6. The aggregate capacity dedicated to SCE for these VIE projects was 4,045 MW at September 30, 2010 and the amounts that SCE paid to these projects were $205 million and $184 million for the three months ended September 30, 2010 and 2009, respectively, and $447 million and $414 million for the nine months ended September 30, 2010 and 2009, respectively. These amounts are recoverable in customer rates.

The following table summarizes as of September 30, 2010, SCE's assets and liabilities and exposure to loss associated with SCE's variable interests in the VIEs described above:

The following table summarizes as of December 31, 2009, SCE's assets and liabilities and exposure to loss associated with SCE's variable interests in the VIEs described above:

Realized and unrealized losses are recovered or expected to be recovered from ratepayers in rates, subject to reasonableness review, and therefore are not reflected in earnings.

EMG accounts for domestic energy projects in which it has a 50% or less ownership interest, and cannot exercise unilateral control, under the equity method. As of September 30, 2010 and December 31, 2009, EMG had significant variable interests in projects that are not consolidated consisting of the Big 4 projects and the Sunrise project. A subsidiary of EMG operates the Big 4 projects and EMG's partner provides the fuel management services. In addition, the executive director of these projects is provided by EMG's partner. Commercial and operating activities are jointly controlled by a management committee of each VIE. Accordingly, EMG continues to account for its variable interests under the equity method.

As noted previously in "—Projects or Entities that are Consolidated," EMG deconsolidated two renewable wind energy generating facilities, the Elkhorn Ridge wind project and San Juan Mesa wind project, on January 1, 2010. The commercial and operating activities of these entities are directed by a management committee comprised of representatives of each partner. Thus, EMG is not the primary beneficiary of these projects. Accordingly, effective January 1, 2010, EMG accounts for its interests in these projects under the equity method.

The following table presents the carrying amount of EMG's investments in unconsolidated variable interest entities and the maximum exposure to loss for each investment:

EMG's maximum exposure to loss in its variable interest entities accounted for under the equity method is generally limited to its investment in these entities. Two of EMG's domestic energy projects have long-term debt that is secured by a pledge of assets of the project entity, but does not provide for recourse to EMG. Accordingly, a default on a long-term financing of a project could result in foreclosure on the assets of the project entity resulting in a loss of some or all of EMG's investment, but would not require EMG to contribute additional capital. At September 30, 2010, entities which EMG has accounted for under the equity method had indebtedness of $141 million, of which $53 million is proportionate to EMG's ownership interest in these projects.

Edison International has variable interests in the Big 4 Projects through equity interests held by EMG and power contracts between SCE and the Big 4 Projects that contain variable contract pricing provisions based on the price of natural gas. Prior to 2010, Edison International had determined that SCE was the primary beneficiary of these four VIEs and, therefore, consolidated these projects. Edison International deconsolidated the Big 4 Projects at January 1, 2010 since it did not control the commercial and operating activities of these projects through EMG and SCE. Commercial and operating activities are jointly controlled by a management committee of each VIE. Therefore, neither EMG, SCE nor Edison International on a consolidated basis has control of the entities. In addition, EMG's partner provides the executive director and fuel management services and the steam supply is based on the needs of EMG's partner. The deconsolidation did not result in a gain or loss.

The following table presents the carrying amounts of VIEs consolidated by Edison International at December 31, 2009 (these balances were deconsolidated at January 1, 2010):

Edison International's reportable business segments include its electric utility operation segment (SCE) and a competitive power generation segment (EMG). Prior to January 1, 2010, Edison International reported three business segments: electric utility operations segment, competitive power generation segment and financial services segment. As a result of termination of the cross-border leases during 2009 and the continued decline of the remaining portfolio of the financial services segment, the remaining business activity is no longer significant enough to report separately. Accordingly, the financial services segment has been combined into the competitive power generation segment for all periods presented. The combination of these business activities is consistent with the management structure of EMG and evaluation of performance by Edison International. The significant accounting policies of the segments are the same as those described in Note 1.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This MD&A contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect Edison International's current expectations and projections about future events based on Edison International's knowledge of present facts and circumstances and assumptions about future events and include any statement that does not directly relate to a historical or current fact. Other information distributed by Edison International that is incorporated in this report, or that refers to or incorporates this report, may also contain forward-looking statements. In this report and elsewhere, the words "expects," "believes," "anticipates," "estimates," "projects," "intends," "plans," "probable," "may," "will," "could," "would," "should," and variations of such words and similar expressions, or discussions of strategy or of plans, are intended to identify forward-looking statements. Such statements necessarily involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Some of the risks, uncertainties and other important factors that could cause results to differ from those currently expected, or that otherwise could impact Edison International, include, but are not limited to:

Additional information about risks and uncertainties, including more detail about the factors described above, are discussed throughout this MD&A and in the "Risk Factors" section included in Part I, Item 1A of the 2009 Form 10-K. Readers are urged to read this entire report, including the information incorporated by reference, and carefully consider the risks, uncertainties and other factors that affect Edison International's business. Forward-looking statements speak only as of the date they are made and Edison International is not obligated to publicly update or revise forward-looking statements. Readers should review future reports filed by Edison International with the Securities and Exchange Commission.

This MD&A for the three- and nine-month periods ended September 30, 2010 discusses material changes in the consolidated financial condition, results of operations and other developments of Edison International since December 31, 2009, and as compared to the three- and nine-month periods ended September 30, 2009. This discussion presumes that the reader has read or has access to Edison International's MD&A for the calendar year 2009 (the "year-ended 2009 MD&A"), which was included in the 2009 Form 10-K.

Except when otherwise stated, references to each of Edison International, SCE and EMG mean each such company with its subsidiaries on a consolidated basis. References to "Edison International (parent)" or "parent company" mean Edison International on a stand-alone basis, not consolidated with its subsidiaries.

The overview is presented as an update to the overview presented in the 2009 Form 10-K. See pages 62 to 69 of the 2009 Form 10-K for additional information on these topics.

(in millions)		2010			2009


		(Unaudited)
Balance at January 1		$	664		$	2,237
Tax positions taken during the current year:
	Increases		60			134
Tax positions taken during a prior year:
	Increases		251			135
	Decreases		(86	)		(30	)
Decreases for settlements during the period			(82	)		(1,807	)

Balance at September 30		$	807		$	669

				Weighted-Average


	Stock options			Exercise Price		Remaining Contractual Term (Years)		Aggregate Intrinsic Value

	(Unaudited)
Outstanding at December 31, 2009		17,368,032		$	32.15
Granted		3,804,916			33.28
Expired		(29,975	)		47.06
Forfeited		(184,324	)		30.76
Exercised		(928,242	)		21.18

Outstanding at September 30, 2010		20,030,407			32.86		6.41

Vested and expected to vest at September 30, 2010		19,524,599			32.88		6.36	$	101,533,965

Exercisable at September 30, 2010		11,310,570			33.13		4.83	$	67,096,297

	Equity Awards					Liability Awards


	Shares			Weighted-Average Grant Date Fair Value		Shares			Weighted-Average Fair Value¹

	(Unaudited)
Nonvested at December 31, 2009		343,452		$	35.41		343,452
Granted		144,518			32.12		144,518
Forfeited		(70,203	)		55.18		(70,203	)

Nonvested at September 30, 2010		417,767			30.95		417,767		$	15.22



January – June 2011		75,000 tons per year for new and modified sources already subject to PSD for pollutants other than GHGs
July 2011 – June 2013		100,000 tons per year for new sources, and 75,000 tons per year for modified sources

			Amortized Cost				Fair Value


(in millions)	Maturity Dates¹		September 30, 2010		December 31, 2009		September 30, 2010		December 31, 2009

			(Unaudited)
Stocks		–	$	848	$	822	$	1,840	$	1,772
Municipal bonds		2010 – 2049		618		545		733		634
Corporate bonds		2010 – 2044		327		309		418		393
U.S. government and agency securities		2010 – 2040		284		287		320		308
Short-term investments and receivables/payables		2010		34		33		36		33

Total			$	2,111	$	1,996	$	3,347	$	3,140

		Three Months Ended September 30,					Nine Months Ended September 30,


(in millions)	Income Statement Location	2010		2009			2010		2009

		(Unaudited)
Economic hedges	Competitive power generation revenue	$	7	$	19		$	—	$	35
	Fuel costs		2		(2	)		—		12
Trading activities	Competitive power generation revenue		28		16			108		43

	Equity Attributable to Edison International											Noncontrolling Interests


(in millions)	Common Stock		Accumulated Other Comprehensive Income			Retained Earnings			Subtotal			Other			Preferred and Preference Stock			Total Equity

	(Unaudited)
Balance at December 31, 2009	$	2,304	$	37		$	7,500		$	9,841		$	258		$	907		$	11,006
Net income		—		—			1,090			1,090			—			39			1,129
Other comprehensive loss		—		(11	)		—			(11	)		—			—			(11	)
Deconsolidation of variable interest entities		—		—			—			—			(249	)		—			(249	)
Cumulative effect of a change in accounting principle, net of tax		—		—			15			15			—			—			15
Common stock dividends declared ($0.945 per share)		—		—			(308	)		(308	)		—			—			(308	)
Dividends, distributions to noncontrolling interests and other		—		—			—			—			(4	)		(39	)		(43	)
Stock-based compensation – net		5		—			(12	)		(7	)		—			—			(7	)
Noncash stock-based compensation and other		16		—			(2	)		14			—			—			14

Balance at September 30, 2010	$	2,325	$	26		$	8,283		$	10,634		$	5		$	907		$	11,546

(in millions)	Cash Flow Hedges – Net Unrealized Gain (Loss)			Pension and PBOP – Net Gain (Loss)			Pension and PBOP – Prior Service Cost		Accumulated Other Comprehensive Income (Loss)


	(Unaudited)
Balance at December 31, 2009	$	105		$	(70	)	$	2	$	37
Current period change		(19	)		8			—		(11	)

Balance at September 30, 2010	$	86		$	(62	)	$	2	$	26

			As of September 30, 2010

(in millions)			Level 1		Level 2			Level 3			Netting and collateral¹			Total

			(Unaudited)
Assets at Fair Value
	Money market funds²		$	1,724	$	—		$	—		$	—		$	1,724

	Derivative contracts
		Electricity		—		195			312			(148	)		359
		Natural gas		3		65			16			(3	)		81
		Fuel oil		10		—			—			(10	)		—

		Subtotal of commodity contracts		13		260			328			(161	)		440

	Long-term disability plan			9		—			—			—			9

	Nuclear decommissioning trusts
		Stocks³		1,840		—			—			—			1,840
		Municipal bonds		—		733			—			—			733
		Corporate bonds⁴		—		418			—			—			418
		U.S. government and agency securities		260		60			—			—			320
		Short-term investments, primarily cash equivalents⁵		3		13			—			—			16

		Subtotal of nuclear decommissioning trusts		2,103		1,224			—			—			3,327

Total assets⁶			$	3,849	$	1,484		$	328		$	(161	)	$	5,500

Liabilities at Fair Value
	Derivative contracts:
		Electricity	$	—	$	(37	)	$	(1,203	)	$	44		$	(1,196	)
		Natural gas		—		(323	)		(18	)		5			(336	)
		Coal		—		(3	)		—			3			—

		Subtotal of commodity contracts		—		(363	)		(1,221	)		52			(1,532	)

		Interest rate contracts		—		(29	)		—			—			(29	)

Net assets (liabilities)			$	3,849	$	1,092		$	(893	)	$	(109	)	$	3,939

	September 30, 2010				December 31, 2009


(in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value

	(Unaudited)
Long-term debt, including current portion	$	12,160	$	12,334	$	10,814	$	10,452

(in millions)		September 30, 2010		December 31, 2009


		(Unaudited)
Current:
	Regulatory balancing accounts	$	207	$	94
	Energy derivatives		197		25
	Other		—		1

			404		120

Long-term:
	Regulatory balancing accounts		52		43
	Deferred income taxes – net		1,838		1,561
	Unamortized nuclear investment – net		301		340
	Nuclear-related ARO investment – net		243		258
	Unamortized coal plant investment – net		70		73
	Unamortized loss on reacquired debt		273		287
	Pensions and other postretirement benefits		999		1,014
	Energy derivatives		1,201		357
	Environmental remediation		39		36
	Other		211		170

			5,227		4,139

Total regulatory assets		$	5,631	$	4,259

(in millions)		September 30, 2010		December 31, 2009


		(Unaudited)
Current assets		$	22	$	73
Net property, plant and equipment¹			669		944
Other long-term assets			2		2

	Total assets¹	$	693	$	1,019

Current liabilities		$	15	$	17
Long-term obligations net of current maturities			17		20
Deferred revenues			57		58
Other long-term liabilities			19		21

	Total liabilities	$	108	$	116

Noncontrolling interests		$	4	$	76

	As of September 30, 2010

(in millions)	Investment		Maximum Exposure

	(Unaudited)
Natural gas-fired projects	$	360	$	360
Wind projects		218		218

(in millions)		December 31, 2009


		(Unaudited)
Cash		$	92
Other current assets			81
Competitive power generation and other property, plant and equipment – net			253
Other long-term assets			4

	Total assets	$	430

Current liabilities		$	64
Asset retirement obligations			17
Noncontrolling interest			349

	Total liabilities and equity	$	430

(in millions)	September 30, 2010			December 31, 2009


	(Unaudited)
Total Assets:
Electric utility	$	36,227		$	32,474
Competitive power generation		9,407			9,543
Parent and other²		(68	)		(573	)

Consolidated Edison International	$	45,566		$	41,444

		Three Months Ended September 30,							Nine Months Ended September 30,

		2010		2009			Change		2010		2009			Change

Net Income (Loss) attributable to Edison International
	SCE	$	394	$	346		$	48	$	858	$	1,053		$	(195	)
	EMG		110		60			50		214		(450	)		664
	Edison International Parent and Other		6		(3	)		9		18		34