EIX 2013 Q1



 

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

FORM 10-Q

(Mark One)
R
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2013
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                        to

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

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

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

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

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

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

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

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

Edison International        Yes ¨ No þ    Southern California Edison Company    Yes ¨ No þ
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
Common Stock outstanding as of April 26, 2013:
 
 
Edison International
 
325,811,206 shares
Southern California Edison Company
 
434,888,104 shares
 
 
 
 
 
 





TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


i



 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Environmental Remediation
 

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


ii



GLOSSARY
The following terms and abbreviations appearing in the text of this report have the meanings indicated below.
2012 Form 10-K
 
Edison International's and SCE's combined Annual Report on Form 10-K for the year-ended December 31, 2012
APS
 
Arizona Public Service Company
ARO(s)
 
asset retirement obligation(s)
BACT
 
best available control technology
Bankruptcy Code
 
Chapter 11 of the United States Bankruptcy Code
Bankruptcy Court
 
United States Bankruptcy Court for the Northern District of Illinois, Eastern Division
Bcf
 
billion cubic feet
CAA
 
Clean Air Act
CAISO
 
California Independent System Operator
CARB
 
California Air Resources Board
CDWR
 
California Department of Water Resources
CEC
 
California Energy Commission
CPUC
 
California Public Utilities Commission
CRRs
 
congestion revenue rights
DOE
 
U.S. Department of Energy
EME
 
Edison Mission Energy
EMG
 
Edison Mission Group Inc.
EPS
 
earnings per share
ERRA
 
energy resource recovery account
FASB
 
Financial Accounting Standards Board
FERC
 
Federal Energy Regulatory Commission
FIP(s)
 
federal implementation plan(s)
Four Corners
 
coal fueled electric generating facility located in Farmington, New Mexico in
which SCE holds a 48% ownership interest
GAAP
 
generally accepted accounting principles
GHG
 
greenhouse gas
GRC
 
general rate case
GWh
 
gigawatt-hours
IRS
 
Internal Revenue Service
ISO
 
Independent System Operator
kWh(s)
 
kilowatt-hour(s)
MD&A
 
Management's Discussion and Analysis of Financial Condition and Results
of Operations in this report
MHI
 
Mitsubishi Heavy Industries, Inc.
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
MW
 
megawatts
MWh
 
megawatt-hours
NAAQS
 
national ambient air quality standards
NERC
 
North American Electric Reliability Corporation
Ninth Circuit
 
U.S. Court of Appeals for the Ninth Circuit
NRC
 
Nuclear Regulatory Commission


iii



NSR
 
New Source Review
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)
Petition Date
 
December 17, 2012 (date on which EME and certain of its wholly-owned subsidiaries filed for protection under Chapter 11 of the Bankruptcy Code)
PG&E
 
Pacific Gas & Electric Company
PSD
 
Prevention of Significant Deterioration
QF(s)
 
qualifying facility(ies)
ROE
 
return on equity
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
SCE
 
Southern California Edison Company
SCR
 
selective catalytic reduction equipment
SDG&E
 
San Diego Gas & Electric
SEC
 
U.S. Securities and Exchange Commission
SED
 
Safety and Enforcement Division of the CPUC, formerly known as the Consumer Protection and Safety Division or CPSD
Settlement Transaction
 
Certain transactions related to EME's Chapter 11 bankruptcy filing that the parties to the Support Agreement have by virtue of that agreement agreed to further document and support
Support Agreement
 
Transaction Support Agreement dated as of December 16, 2012 by and among Edison Mission Energy, Edison International and the Noteholders named therein
US EPA
 
U.S. Environmental Protection Agency
VIE(s)
 
variable interest entity(ies)



iv


















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1



PART I.    FINANCIAL INFORMATION
ITEM 1.     FINANCIAL STATEMENTS
Consolidated Statements of Income
Edison International
 


 
Three months ended March 31,
(in millions, except per-share amounts, unaudited)
2013

2012
Operating revenue
$
2,632


$
2,415

Fuel
73


77

Purchased power
780


615

Operation and maintenance
873


946

Depreciation, decommissioning and amortization
414


388

Total operating expenses
2,140


2,026

Operating income
492


389

Interest and other income
34


34

Interest expense
(131
)

(126
)
Other expenses
(11
)

(10
)
Income from continuing operations before income taxes
384


287

Income tax expense
98


91

Income from continuing operations
286


196

Income (loss) from discontinued operations, net of tax
12


(84
)
Net income
298


112

Dividends on preferred and preference stock of utility
27


19

Net income attributable to Edison International common shareholders
$
271


$
93

Amounts attributable to Edison International common shareholders:



Income from continuing operations, net of tax
$
259


$
177

Income (loss) from discontinued operations, net of tax
12


(84
)
Net income attributable to Edison International common shareholders
$
271


$
93

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



Weighted-average shares of common stock outstanding
326


326

Continuing operations
$
0.79


$
0.54

Discontinued operations
0.04


(0.26
)
Total
$
0.83


$
0.28

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



Weighted-average shares of common stock outstanding, including effect of dilutive securities
329


329

Continuing operations
$
0.78


$
0.54

Discontinued operations
0.04


(0.26
)
Total
$
0.82


$
0.28

Dividends declared per common share
$
0.3375


$
0.325


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

2



 
 
 
 
 
 
 
 
 
 
Consolidated Statements of Comprehensive Income
 
Edison International
 
 
 
 
 
 
Three months ended March 31,
(in millions, unaudited)
 
2013
 
2012
Net income
 
$
298

 
$
112

Other comprehensive income (loss), net of tax:
 
 
 
 
Pension and postretirement benefits other than pensions:
 
 
 
 
Net loss arising during the period, net of income tax benefit of $4 for the three months ended March 31, 2013
 
(2
)
 

Amortization of net loss included in net income, net of income tax expense of $1 and $4 for the three months ended March 31, 2013 and 2012, respectively
 
2

 
7

Unrealized gain (loss) on derivatives qualified as cash flow hedges:
 
 
 
 
Unrealized holding gain arising during the period, net of income tax expense of $17 for the three months ended March 31, 2012
 

 
25

Reclassification adjustments included in net income, net of income tax benefit of $8 for the three months ended March 31, 2012
 

 
(11
)
Other comprehensive income, net of tax
 

 
21

Comprehensive income
 
298

 
133

Less: Comprehensive income attributable to noncontrolling interests
 
27

 
19

Comprehensive income attributable to Edison International
 
$
271

 
$
114



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

3



Consolidated Balance Sheets

Edison International
 







(in millions, unaudited)
 
March 31,
2013
 
December 31,
2012
ASSETS

 

 
Cash and cash equivalents

$
115


$
170

Receivables, less allowances of $67 and $75 for uncollectible accounts at respective dates

797


762

Accrued unbilled revenue

403


550

Inventory

351


340

Prepaid taxes

26


22

Derivative assets

111


129

Margin and collateral deposits

10


8

Regulatory assets

672


572

Other current assets

185


119

Total current assets

2,670


2,672

Nuclear decommissioning trusts

4,246


4,048

Investments in unconsolidated affiliates

2


2

Other investments

199


184

Total investments

4,447


4,234

Utility property, plant and equipment, less accumulated depreciation of $7,662 and $7,424 at respective dates

30,673


30,200

Nonutility property, plant and equipment, less accumulated depreciation of $126 and $123 at respective dates

72


73

Total property, plant and equipment

30,745


30,273

Derivative assets

81


85

Restricted deposits

4


4

Regulatory assets

6,518


6,422

Other long-term assets

690


704

Total long-term assets

7,293


7,215


















































Total assets

$
45,155


$
44,394



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

4



Consolidated Balance Sheets

Edison International
 


 

 
(in millions, except share amounts, unaudited)

March 31,
2013

December 31,
2012
LIABILITIES AND EQUITY

 

 
Short-term debt

$
420


$
175

Current portion of long-term debt

800



Accounts payable

1,100


1,423

Accrued taxes

134


61

Accrued interest

126


176

Customer deposits

196


193

Derivative liabilities

107


126

Regulatory liabilities

443


536

Deferred income taxes

174


64

Other current liabilities

779


990

Total current liabilities

4,279


3,744

Long-term debt

8,829


9,231

Deferred income taxes

6,289


6,127

Deferred investment tax credits

103


104

Customer advances

150


149

Derivative liabilities

1,014


939

Pensions and benefits

2,610


2,614

Asset retirement obligations

2,824


2,782

Regulatory liabilities

5,470


5,214

Other deferred credits and other long-term liabilities

2,278


2,299

Total deferred credits and other liabilities

20,738


20,228

Total liabilities

33,846


33,203

Commitments and contingencies (Note 9)






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

2,380


2,373

Accumulated other comprehensive loss

(87
)

(87
)
Retained earnings

7,262


7,146

Total Edison International's common shareholders' equity

9,555


9,432

Preferred and preference stock of utility

1,754


1,759

Total noncontrolling interests

1,754


1,759

Total equity

11,309


11,191

Total liabilities and equity

$
45,155


$
44,394



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

5



Consolidated Statements of Cash Flows

Edison International
 



 

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

2013

2012
Cash flows from operating activities:

 

 
Net income

$
298


$
112

Less: Income (loss) from discontinued operations

12


(84
)
Income from continuing operations

286


196

Adjustments to reconcile to net cash provided by operating activities:



 
Depreciation, decommissioning and amortization

414


388

Regulatory impacts of net nuclear decommissioning trust earnings

25


77

Other amortization and other

17


19

Stock-based compensation

6


8

Deferred income taxes and investment tax credits

174


30

Proceeds from U.S. treasury grants



29

Changes in operating assets and liabilities:



 
Receivables

(38
)

88

Inventory

(11
)

10

Margin and collateral deposits, net of collateral received

(2
)

(1
)
Prepaid taxes

(5
)

11

Other current assets

82


17

Accounts payable

(65
)

(47
)
Accrued taxes

60


170

Other current liabilities

(255
)

(302
)
Derivative assets and liabilities, net

79


273

Regulatory assets and liabilities, net

(199
)

(254
)
Other assets

(13
)

(9
)
Other liabilities

(49
)

72

Operating cash flows from continuing operations

506


775

Operating cash flows from discontinued operations, net



(98
)
Net cash provided by operating activities

506


677

Cash flows from financing activities:

 

 
Long-term debt issued

398


395

Long-term debt issuance costs

(4
)

(4
)
Long-term debt repaid

(1
)

(2
)
Preference stock issued, net

387


345

Preference stock redeemed

(400
)


Short-term debt financing, net

245


(86
)
Settlements of stock-based compensation, net

(32
)

(22
)
Dividends to noncontrolling interests

(30
)

(14
)
Dividends paid

(110
)

(106
)
Financing cash flows from continuing operations

453


506

Financing cash flows from discontinued operations, net



279

Net cash provided by financing activities

$
453


$
785


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

6



Consolidated Statements of Cash Flows

Edison International
 



 

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

2013

2012
Cash flows from investing activities:

 

 
Capital expenditures

$
(979
)

$
(1,189
)
Proceeds from sale of nuclear decommissioning trust investments

435


602

Purchases of nuclear decommissioning trust investments and other

(466
)

(684
)
Other investments and customer advances for construction

(4
)

(3
)
Investing cash flows from continuing operations

(1,014
)

(1,274
)
Investing cash flows from discontinued operations, net



(174
)
Net cash used by investing activities

(1,014
)

(1,448
)
Net (decrease) increase in cash and cash equivalents

(55
)

14

Cash and cash equivalents at beginning of period

170


1,469

Cash and cash equivalents at end of period

115


1,483

Cash and cash equivalents from discontinued operations



1,300

Cash and cash equivalents from continuing operations

$
115


$
183



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

7


















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8



Consolidated Statements of Income
Southern California Edison Company

 
 
Three months ended March 31,
(in millions, unaudited)
 
2013
 
2012
Operating revenue
 
$
2,629

 
$
2,412

Fuel
 
73

 
77

Purchased power
 
780

 
615

Operation and maintenance
 
785

 
851

Depreciation, decommissioning and amortization
 
414

 
389

Property and other taxes
 
79

 
83

Total operating expenses
 
2,131

 
2,015

Operating income
 
498

 
397

Interest and other income
 
32

 
33

Interest expense
 
(125
)
 
(121
)
Other expenses
 
(10
)
 
(9
)
Income before income taxes
 
395

 
300

Income tax expense
 
112

 
99

Net income
 
283

 
201

Less: Dividends on preferred and preference stock
 
27

 
19

Net income available for common stock
 
$
256

 
$
182


Consolidated Statements of Comprehensive Income
 
 
 
 
 
Three months ended March 31,
(in millions, unaudited)
 
2013
 
2012
Net income
 
$
283

 
$
201

Other comprehensive income (loss), net of tax:
 
 
 
 
Pension and postretirement benefits other than pensions:
 
 
 
 
Net loss arising during the period, net of income tax benefit of $3 for the three months ended March 31, 2013
 
(4
)
 

Amortization of net loss included in net income, net of income tax expense of $1 and $3 for the three months ended March 31, 2013 and 2012, respectively
 
1

 
3

Other comprehensive income (loss), net of tax
 
(3
)
 
3

Comprehensive income
 
$
280

 
$
204




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

9



Consolidated Balance Sheets
Southern California Edison Company

(in millions, unaudited)
 
March 31,
2013
 
December 31, 2012
ASSETS
 
 
 
 
Cash and cash equivalents
 
$
27

 
$
45

Receivables, less allowances of $67 and $75 for uncollectible accounts at respective dates
 
754

 
755

Accrued unbilled revenue
 
403

 
550

Inventory
 
351

 
340

Prepaid taxes
 
30

 
48

Derivative assets
 
111

 
129

Regulatory assets
 
672

 
572

Other current assets
 
194

 
123

Total current assets
 
2,542

 
2,562

Nuclear decommissioning trusts
 
4,246

 
4,048

Other investments
 
125

 
116

Total investments
 
4,371

 
4,164

Utility property, plant and equipment, less accumulated depreciation of $7,662 and $7,424 at respective dates
 
30,673

 
30,200

Nonutility property, plant and equipment, less accumulated depreciation of $120 and $117 at respective dates
 
70

 
70

Total property, plant and equipment
 
30,743

 
30,270

Derivative assets
 
81

 
85

Regulatory assets
 
6,518

 
6,422

Other long-term assets
 
537

 
531

Total long-term assets
 
7,136

 
7,038

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
44,792

 
$
44,034


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

10



Consolidated Balance Sheets
Southern California Edison Company

(in millions, except share amounts, unaudited)
 
March 31,
2013
 
December 31, 2012
LIABILITIES AND EQUITY
 
 
 
 
Short-term debt
 
$
404

 
$
175

Current portion of long-term debt
 
800

 

Accounts payable
 
1,069

 
1,297

Accrued taxes
 
131

 
72

Accrued interest
 
125

 
172

Customer deposits
 
196

 
193

Derivative liabilities
 
107

 
126

Regulatory liabilities
 
443

 
536

Deferred income taxes
 
174

 
81

Other current liabilities
 
654

 
861

Total current liabilities
 
4,103

 
3,513

Long-term debt
 
8,427

 
8,828

Deferred income taxes
 
6,781

 
6,669

Deferred investment tax credits
 
103

 
104

Customer advances
 
150

 
149

Derivative liabilities
 
1,014

 
939

Pensions and benefits
 
2,234

 
2,245

Asset retirement obligations
 
2,824

 
2,782

Regulatory liabilities
 
5,470

 
5,214

Other deferred credits and other long-term liabilities
 
1,844

 
1,848

Total deferred credits and other liabilities
 
20,420

 
19,950

Total liabilities
 
32,950

 
32,291

Commitments and contingencies (Note 9)
 


 


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

 
2,168

Additional paid-in capital
 
579

 
581

Accumulated other comprehensive loss
 
(32
)
 
(29
)
Retained earnings
 
7,332

 
7,228

Total common shareholder's equity
 
10,047

 
9,948

Preferred and preference stock
 
1,795

 
1,795

Total equity
 
11,842

 
11,743

Total liabilities and equity
 
$
44,792

 
$
44,034



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

11



Consolidated Statements of Cash Flows
Southern California Edison Company

 
 
Three months ended March 31,
(in millions, unaudited)
 
2013
 
2012
Cash flows from operating activities:
 
 
 
 
Net income
 
$
283

 
$
201

Adjustments to reconcile to net cash provided by operating activities:
 
 
 
 
 Depreciation, decommissioning and amortization
 
414

 
389

 Regulatory impacts of net nuclear decommissioning trust earnings
 
25

 
77

 Other amortization
 
18

 
20

 Stock-based compensation
 
4

 
4

 Deferred income taxes and investment tax credits
 
150

 
156

 Proceeds from U.S. treasury grants
 

 
29

Changes in operating assets and liabilities:
 
 
 
 
 Receivables
 
1

 
90

 Inventory
 
(11
)
 
11

 Margin and collateral deposits, net of collateral received
 
(2
)
 
(1
)
 Prepaid taxes
 
18

 
(1
)
 Other current assets
 
79

 
19

 Accounts payable
 
(63
)
 
(53
)
 Accrued taxes
 
59

 
62

 Other current liabilities
 
(247
)
 
(185
)
 Derivative assets and liabilities, net
 
79

 
336

 Regulatory assets and liabilities, net
 
(199
)
 
(317
)
 Other assets
 
(15
)
 
(10
)
 Other liabilities
 
(32
)
 
(52
)
Net cash provided by operating activities
 
561

 
775

Cash flows from financing activities:
 
 
 
 
Long-term debt issued
 
398

 
395

Long-term debt issuance costs
 
(4
)
 
(4
)
Long-term debt repaid
 
(1
)
 
(1
)
Preference stock issued, net
 
387

 
345

Preference stock redeemed
 
(400
)
 

Short-term debt financing, net
 
229

 
(89
)
Settlements of stock-based compensation, net
 
(29
)
 
(15
)
Dividends paid
 
(150
)
 
(131
)
Net cash provided by financing activities
 
430

 
500

Cash flows from investing activities:
 
 
 
 
Capital expenditures
 
(979
)
 
(1,189
)
Proceeds from sale of nuclear decommissioning trust investments
 
435

 
602

Purchases of nuclear decommissioning trust investments and other
 
(466
)
 
(684
)
Customer advances for construction and other investments
 
1

 
2

Net cash used by investing activities
 
(1,009
)
 
(1,269
)
Net (decrease) increase in cash and cash equivalents
 
(18
)
 
6

Cash and cash equivalents, beginning of period
 
45

 
57

Cash and cash equivalents, end of period
 
$
27

 
$
63


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

12



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1.    Summary of Significant Accounting Policies
Organization and Basis of Presentation
Edison International is the parent holding company of Southern California Edison Company ("SCE"). SCE is an investor-owned public utility primarily engaged in the business of supplying electricity to an approximately 50,000 square mile area of southern California. Edison International is also the parent company of nonutility subsidiaries that are engaged in competitive businesses related to the delivery or use of electricity. Such competitive business activities are currently not material to report as a separate business segment. These combined notes to the consolidated financial statements apply to both Edison International and SCE unless otherwise described. Edison International's consolidated financial statements include the accounts of Edison International, SCE and other wholly owned and controlled subsidiaries. References to Edison International refer to the consolidated group of Edison International and its subsidiaries. References to Edison International Parent and Other refer to Edison International Parent and its nonutility subsidiaries, including EME. SCE's consolidated financial statements include the accounts of SCE and its wholly owned and controlled subsidiaries. All intercompany transactions have been eliminated from the consolidated financial statements.
Edison International's and SCE's significant accounting policies were described in Note 1 of "Notes to Consolidated Financial Statements" included in the 2012 Form 10-K. The same accounting policies are followed for interim reporting purposes, with the exception of accounting principles adopted as of January 1, 2013, discussed below in "—New Accounting Guidance." This quarterly report should be read in conjunction with the financial statements and notes included in the 2012 Form 10-K.
Except as indicated, amounts in the notes to the consolidated financial statements relate to continuing operations of Edison International. See Note 16 for information related to discontinued operations.
In the opinion of management, all adjustments, consisting of recurring accruals, have been made that are necessary to fairly state the consolidated financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States of America for the periods covered by this quarterly report on Form 10-Q. The results of operations for the three month period ended March 31, 2013 are not necessarily indicative of the operating results for the full year.
The December 31, 2012 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.
Cash Equivalents
Cash equivalents included investments in money market funds. Generally, the carrying value of cash equivalents equals the fair value, as these investments have original maturities of three months or less. The cash equivalents were as follows:
 
Edison International
 
SCE
(in millions)
March 31, 2013
 
December 31, 2012
 
March 31, 2013
 
December 31, 2012
Money market funds
$
58

 
$
107

 
$
5

 
$
5

Cash is temporarily invested until required for check clearing from the primary disbursement accounts. Checks issued, but not yet paid by the financial institution, are reclassified from cash to accounts payable at the end of each reporting period as follows:
 
Edison International
 
SCE
(in millions)
March 31, 2013
 
December 31, 2012
 
March 31, 2013
 
December 31, 2012
Cash reclassified to accounts payable
$
165

 
$
247

 
$
165

 
$
242


13



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 consisted of the following:
(in millions)
March 31, 2013
 
December 31, 2012
Materials, supplies and spare parts
$
333

 
$
319

Fuel
18

 
21

Total inventory
$
351

 
$
340

Greenhouse Gas Emission Allowances
SCE is allocated greenhouse gas ("GHG") allowances annually which it is then required to submit to quarterly auctions. GHG proceeds from the auction are recorded as a regulatory liability to be refunded to customers. SCE purchases GHG allowances from quarterly auctions or bilateral parties to satisfy its compliance obligations and recovers such costs of GHG from customers. GHG allowances held for use are classified as "Other current assets" on the consolidated balance sheets and are stated at the lower of weighted-average cost or market.

Earnings Per Share
Edison International computes earnings per share ("EPS") using the two-class method, which is an earnings allocation formula that determines EPS for each class of common stock and participating security. Edison International's participating securities are stock-based compensation awards payable in common shares, 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. EPS attributable to Edison International common shareholders was computed as follows:
 
Three months ended March 31,
(in millions)
2013
 
2012
Basic earnings per share – continuing operations:
 
 
 
Income from continuing operations available to common shareholders
$
259

 
$
177

Weighted average common shares outstanding
326

 
326

Basic earnings per share – continuing operations
$
0.79

 
$
0.54

Diluted earnings per share – continuing operations:
 
 
 
Income from continuing operations available to common shareholders
$
259

 
$
177

Income impact of assumed conversions

 

Income from continuing operations available to common shareholders and assumed conversions
$
259

 
$
177

Weighted average common shares outstanding
326

 
326

Incremental shares from assumed conversions
3

 
3

Adjusted weighted average shares – diluted
329

 
329

Diluted earnings per share – continuing operations
$
0.78

 
$
0.54

Stock-based compensation awards to purchase 4,455,669 and 8,602,107 shares of common stock for the three months ended March 31, 2013 and 2012, 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 during the respective periods and, therefore, the effect would have been antidilutive.

14



New Accounting Guidance
Accounting Guidance Adopted in 2013
Offsetting Assets and Liabilities
In December 2011 and January 2013, the FASB issued accounting standards updates modifying the disclosure requirements about the nature of an entity's rights of offsetting recognized assets and liabilities in the statement of financial position under master netting agreements and similar arrangements associated with derivative instruments, repurchase agreements and securities lending transactions. The guidance requires increased disclosure of the gross and net recognized assets and liabilities, collateral positions and descriptions of setoff rights. Edison International and SCE adopted this guidance effective January 1, 2013. The adoption of this standard did not impact the consolidated income statements, balance sheets or cash flows of Edison International or SCE. For further information, see Note 6.
Items Reclassified out of Accumulated Other Comprehensive Income
In February 2013, the FASB issued an accounting standards update which requires disclosure related to items reclassified out of AOCI. The guidance requires companies to present separately, for each component of other comprehensive income, current period reclassifications and the remainder of the current-period other comprehensive income. In addition, for certain current period reclassifications, an entity is required to disclose the effect of the item reclassified out of AOCI on the respective line item(s) of net income. Edison International and SCE adopted this guidance effective January 1, 2013. For further information, see Note 10.
Note 2.    Consolidated Statements of Changes in Equity
The following table provides Edison International's changes in equity for the three months ended March 31, 2013:
 
Equity Attributable to Edison International
 
Noncontrolling Interests
 
 
(in millions)
Common
Stock
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Subtotal
 
Preferred
and
Preference
Stock
 
Total
Equity
Balance at December 31, 2012
$
2,373

 
$
(87
)
 
$
7,146

 
$
9,432

 
$
1,759

 
$
11,191

Net income

 

 
271

 
271

 
27

 
298

Common stock dividends declared ($0.3375 per share)

 

 
(110
)
 
(110
)
 

 
(110
)
Dividends, distributions to noncontrolling interests

 

 

 

 
(27
)
 
(27
)
Stock-based compensation and other
1

 

 
(33
)
 
(32
)
 

 
(32
)
Noncash stock-based compensation and other
6

 

 
(4
)
 
2

 

 
2

Issuance of preference stock

 

 

 

 
387

 
387

Redemption of preference stock

 

 
(8
)
 
(8
)
 
(392
)
 
(400
)
Balance at March 31, 2013
$
2,380

 
$
(87
)
 
$
7,262

 
$
9,555

 
$
1,754

 
$
11,309

In February 2013, SCE redeemed all outstanding shares of Series B and C preference stock and charged the issuance costs to retained earnings.

15



The following table provides Edison International's changes in equity for the three months ended March 31, 2012:
 
Equity Attributable to Edison International
 
Noncontrolling Interests
 
 
(in millions)
Common
Stock
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained
Earnings
 
Subtotal
 
Other
 
Preferred
and
Preference
Stock
 
Total
Equity
Balance at December 31, 2011
$
2,360

 
$
(139
)
 
$
7,834

 
$
10,055

 
$
2

 
$
1,029

 
$
11,086

Net income

 

 
93

 
93

 

 
19

 
112

Other comprehensive income

 
21

 

 
21

 

 

 
21

Contributions from noncontrolling interests

 

 

 

 
238

 

 
238

Transfer of assets to Capistrano Wind Partners
(50
)
 

 

 
(50
)
 

 

 
(50
)
Common stock dividends declared ($0.325 per share)

 

 
(106
)
 
(106
)
 

 

 
(106
)
Dividends, distributions to noncontrolling interests and other

 

 

 

 
3

 
(19
)
 
(16
)
Stock-based compensation and other
8

 

 
(36
)
 
(28
)
 

 

 
(28
)
Noncash stock-based compensation and other
7

 

 
(2
)
 
5

 

 

 
5

Issuance of preference stock

 

 

 

 

 
345

 
345

Balance at March 31, 2012
$
2,325

 
$
(118
)
 
$
7,783

 
$
9,990

 
$
243

 
$
1,374

 
$
11,607

The following table provides SCE's changes in equity for the three months ended March 31, 2013:
 
Equity Attributable to SCE
 
 
 
 
(in millions)
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Preferred
and
Preference
Stock
 
Total
Equity
Balance at December 31, 2012
$
2,168

 
$
581

 
$
(29
)
 
$
7,228

 
$
1,795

 
$
11,743

Net income

 

 

 
283

 

 
283

Other comprehensive loss

 

 
(3
)
 

 

 
(3
)
Dividends declared on common stock

 

 

 
(120
)
 

 
(120
)
Dividends declared on preferred and preference stock

 

 

 
(27
)
 

 
(27
)
Stock-based compensation and other

 

 

 
(29
)
 

 
(29
)
Noncash stock-based compensation and other

 
3

 

 
5

 

 
8

Issuance of preference stock

 
(13
)
 

 

 
400

 
387

Redemption of preference stock

 
8

 

 
(8
)
 
(400
)
 
(400
)
Balance at March 31, 2013
$
2,168

 
$
579

 
$
(32
)
 
$
7,332

 
$
1,795

 
$
11,842

In February 2013, SCE redeemed all outstanding shares of Series B and C preference stock and charged the issuance costs to retained earnings.

16



The following table provides SCE's changes in equity for the three months ended March 31, 2012:
 
Equity Attributable to SCE
 
 
 
 
(in millions)
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained
Earnings
 
Preferred
and
Preference
Stock
 
Total
Equity
Balance at December 31, 2011
$
2,168

 
$
596

 
$
(24
)
 
$
6,173

 
$
1,045

 
$
9,958

Net income

 

 

 
201

 

 
201

Other comprehensive income

 

 
3

 

 

 
3

Dividends declared on common stock

 

 

 
(116
)
 

 
(116
)
Dividends declared on preferred and preference stock

 

 

 
(19
)
 

 
(19
)
Stock-based compensation and other

 
6

 

 
(21
)
 

 
(15
)
Noncash stock-based compensation and other

 
3

 

 
3

 

 
6

Issuance of preference stock

 
(5
)
 

 

 
350

 
345

Balance at March 31, 2012
$
2,168

 
$
600

 
$
(21
)
 
$
6,221

 
$
1,395

 
$
10,363

Note 3.    Variable Interest Entities
Variable Interest in VIEs that are not Consolidated
Power Purchase Contracts
SCE has power purchase agreements ("PPAs") that have variable interests in VIEs, including tolling agreements through which SCE provides the natural gas to fuel the plants and contracts with qualifying facilities ("QFs") 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 these VIEs is the operation and maintenance of the power plants.
As of the balance sheet date, the carrying amount of assets and liabilities in SCE's consolidated balance sheet that relate to its involvement with VIEs result from amounts due under the PPAs or the fair value of those derivative contracts. Under these contracts, SCE recovers the costs incurred through demonstration of compliance with its CPUC-approved long-term power procurement plans. SCE has no residual interest in the entities and has not provided or guaranteed any debt or equity support, liquidity arrangements, performance guarantees or other commitments associated with these contracts other than the purchase commitments described in Note 9 in the 2012 Form 10-K. As a result, there is no significant potential exposure to loss to SCE from its variable interest in these VIEs. The aggregate contracted capacity dedicated to SCE for these VIE projects was 3,578 MW and 2,014 MW at March 31, 2013 and 2012, respectively, and the amounts that SCE paid to these projects were $98 million and $78 million for the three months ended March 31, 2013 and 2012, respectively. These amounts are recoverable in customer rates, subject to reasonableness review. As of March 31, 2013, SCE has additional VIE contracts with future aggregate contracted capacity of 1,837 MW to be delivered starting in June 2013, August 2013 and January 2014.
Unconsolidated Trusts of SCE
SCE Trust I and Trust II were formed in 2012 and 2013, respectively, for the exclusive purpose of issuing the 5.625% and 5.10% trust preference securities, respectively (“trust securities”). The trusts are VIEs. SCE has concluded that it is not the primary beneficiary of these VIEs as it does not have the obligation to absorb the expected losses or the right to receive the expected residual returns of the trusts.
In May 2012, SCE Trust I issued $475 million (aggregate liquidation preference) of 5.625% trust securities (cumulative, liquidation amount of $25 per share) to the public and $10,000 of common stock (100%) to SCE. The trust invested the proceeds of these trust securities in Series F Preference Stock issued by SCE in the principal amount of $475 million (cumulative, $2,500 per share liquidation value) and which have substantially the same payment terms as the trust securities.
In January 2013, SCE Trust II issued $400 million (aggregate liquidation preference) of 5.10% trust securities (cumulative, liquidation amount of $25 per share) to the public and $10,000 of common stock (100%) to SCE. The trust invested the proceeds of these trust securities in Series G Preference Stock issued by SCE in the principal amount of $400 million (cumulative, $2,500 per share liquidation value) and which have substantially the same payment terms as the trust securities.

17



The Series F and Series G Preference Stock and the corresponding trust securities do not have a maturity date. Upon any redemption of any shares of the Series F or Series G Preference Stock, a corresponding dollar amount of trust securities will be redeemed by the applicable trust (for further information see Note 12). The applicable trust will make distributions at the same rate and on the same dates on the applicable series of trust securities when and if the SCE board of directors declares and makes dividend payments on the Series F or Series G Preference Stock. The applicable trusts will use any dividends it receives on the Series F or Series G Preference Stock to make its corresponding distributions on the applicable series of trust securities. If SCE does not make a dividend payment to either trust, SCE would be prohibited from paying dividends on its common stock. SCE has fully and unconditionally guaranteed the payment of the trust securities and trust distributions, if and when SCE pays dividends on the Series F and Series G Preference Stock.
The Trust I balance sheet as of March 31, 2013 and December 31, 2012, consisted of an investment of $475 million in the Series F Preference Stock, $475 million of trust securities and $10,000 of common stock. The trust's income statement consisted of dividend income and dividend distributions of $7 million each for the three months ended March 31, 2013.
The Trust II balance sheet as of March 31, 2013, consisted of an investment of $400 million in the Series G Preference Stock, $400 million of trust securities and $10,000 of common stock. The trust's income statement consisted of dividend income and dividend distributions of $4 million each for the three months ended March 31, 2013.
Note 4.    Fair Value Measurements
Recurring Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (referred to as an “exit price”). Fair value of an asset or liability considers assumptions that market participants would use in pricing the asset or liability, including assumptions about nonperformance risk. As of March 31, 2013 and December 31, 2012, nonperformance risk was not material for Edison International and SCE.
Assets and liabilities are categorized into a three-level fair value hierarchy based on valuation inputs used to determine fair value. 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).

18



SCE
The following table sets forth assets and liabilities of SCE that were accounted for at fair value by level within the fair value hierarchy:
 
March 31, 2013
(in millions)
Level 1
 
Level 2
 
Level 3
 
Netting
and
Collateral1
 
Total
Assets at Fair Value
 
 
 
 
 
 
 
 
 
Money market funds
$
5

 
$

 
$

 
$

 
$
5

Derivative contracts:
 
 
 
 
 
 
 
 
 
Congestion Revenue Rights

 

 
170

 

 
170

Electricity

 
3

 
29

 
(14
)
 
18

Tolling

 

 
4

 

 
4

Subtotal of derivative contracts

 
3

 
203

 
(14
)
 
192

Long-term disability plan
8

 

 

 

 
8

Nuclear decommissioning trusts:
 
 
 
 
 
 
 
 
 
Stocks2
2,468

 

 

 

 
2,468

U.S. government and agency securities
571

 
75

 

 

 
646

Municipal bonds

 
631

 

 

 
631

Corporate bonds3

 
408

 

 

 
408

Short-term investments, primarily cash equivalents4
81

 

 

 

 
81

Subtotal of nuclear decommissioning trusts
3,120

 
1,114

 

 

 
4,234

Total assets
3,133

 
1,117

 
203

 
(14
)
 
4,439

Liabilities at Fair Value
 
 
 
 
 
 
 
 
 
Derivative contracts:
 
 
 
 
 
 
 
 
 
Electricity

 

 
1

 

 
1

Natural gas

 
77

 

 
(41
)
 
36

Tolling

 

 
1,084

 

 
1,084

Subtotal of derivative contracts

 
77

 
1,085

 
(41
)
 
1,121

Total liabilities

 
77

 
1,085

 
(41
)
 
1,121

Net assets (liabilities)
$
3,133

 
$
1,040

 
$
(882
)
 
$
27

 
$
3,318


19



 
December 31, 2012
(in millions)
Level 1
 
Level 2
 
Level 3
 
Netting
and
Collateral1
 
Total
Assets at Fair Value
 
 
 
 
 
 
 
 
 
Money market funds
$
5

 
$

 
$

 
$

 
$
5

Derivative contracts: