Edison International(EIX)2023-07-28 00:55Financial Data and Key Metrics - The company reaffirmed its full-year core EPS guidance of $4.55 to $4.85 for 2023 [22] - Core EPS for Q2 2023 was $1.01, with a $0.13 year-over-year increase driven by GRC attrition year revenue escalation ($0.19), higher FERC and other revenue ($0.04), and balancing account interest income ($0.10), partially offset by a $0.16 increase in interest expense [181][105] - The company expects 5% to 7% EPS growth from 2021 through 2025, with a pathway to $7 EPS potential by 2028 [146][43] - SCE's 2025 base revenue requirement is $10.3 billion, a $1.9 billion (12%) increase over 2024 rates, leading to a 9% system average rate increase and a 10% average residential customer bill increase [16] Business Line Data and Key Metrics - SCE's capital expenditure forecast for 2023-2028 is $38 to $43 billion, with over 85% allocated to distribution grid investments [162][182] - SCE has implemented AI and technology advancements, including computer vision algorithms for T&D inspections, reducing wildfire risks and improving operational efficiency [17][35] - SCE's wildfire mitigation efforts have reduced the probability of catastrophic wildfire losses by 85% compared to pre-2018 levels [151] - SCE's energy storage portfolio exceeded 5,000 megawatts by year-end, one of the largest in the nation [159] Market Data and Key Metrics - SCE's rate base growth is projected at 6% to 8%, starting from a 2023 base of $41.9 billion, nearly 20% higher than two years ago [164] - The California Independent System Operator (CAISO) identified $2.3 billion in transmission projects for SCE, with an additional $3 billion in competitive projects in Southern California [183] - The state of California allocated $2.7 billion over four years for forest resiliency and fire suppression, maintaining 98% of the original proposal [38] Company Strategy and Industry Competition - SCE is focused on advancing California's clean energy transition, maintaining cost leadership, and achieving net-zero commitments [15][20] - The company is leveraging AI, robotic process automation, and mobile solutions to enhance customer experience, grid planning, and operational efficiency [36] - SCE's 2025 GRC application emphasizes grid reliability, resilience, and readiness to support California's decarbonization goals [147] - The company is exploring additional capital deployment opportunities, with at least $2 billion in potential investments to be requested in standalone applications [23] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in achieving 5% to 7% EPS growth through 2028, driven by strong rate base growth and stabilized headwinds [61][188] - The company highlighted the potential for cost recovery in legacy wildfire proceedings, which could provide substantial upside to long-term earnings [27] - Management noted the importance of the CHIPS Act and federal infrastructure investments in supporting long-term supply chain resilience [31] - The company is prepared for the wildfire season, with 76% of distribution lines in high fire risk areas expected to be hardened by year-end [19] Other Important Information - SCE's operational excellence program has identified O&M savings, including $55 million from combined ground and aerial inspections [41][24] - The company has achieved $160 million in annual savings through its expanded wildfire self-insurance program [186] - SCE's vegetation management program inspects 1.6 million trees annually, mitigating approximately 850,000 trees, with over half in high fire risk areas [176] Q&A Session Summary Question: Long-term EPS growth and rate base growth alignment - Management clarified that the 5% to 7% EPS growth aligns with rate base growth, with stabilization of past headwinds and strong AFEDC growth contributing to this alignment [108][110] Question: Equity financing and capital needs - The company plans to rely on internal equity programs, generating approximately $100 million annually, to meet equity needs through 2028 [53][78] Question: CAISO transmission opportunities - CAISO's transmission planning process identifies projects on a 20-year outlook, with $2.3 billion in incumbent projects for SCE and $3 billion in competitive projects [57][58] Question: Operational variances and AFEDC - Management provided sensitivities for operational variances, including AFEDC and depreciation adjustments, with AFEDC expected to rise from $0.30-$0.35 to $0.45 by 2028 [100][111] Question: CCM trigger and ROE adjustment - The CCM is likely to trigger, with an advice letter to be filed in October for a potential ROE adjustment, though this is not factored into the 5% to 7% EPS growth target [106][125] Question: Wildfire cost recovery - SCE will file a cost recovery application in August for the 2017 and 2018 wildfire events, seeking full CPUC cost recovery [37][51]