Edison International (EIX) Q2 FY26 earnings call: guidance and Q&A

Given the uncertainty around wildfire reform legislation, how will Edison evaluate future investments, especially regarding potential securitization or upfront contributions, and could a new capital plan emerge in Q3?

Pedro Pizarro stated that SCE has clear line of sight on its capital spending through 2028, with no equity needs through 2030. He acknowledged the uncertainty of legislative outcomes by August 31st, noting that a lack of a comprehensive solution or an unfavorable market reaction could impact the cost of equity and influence future investment prioritization, balancing investor returns with safety and reliability obligations.

“Clearly, if we saw that whatever the answer in '26 is, it was not viewed favorably by the market and that dramatically changed the inherent cost of our equity, then we would want to be thoughtful about making sure we're not making negative NPV decisions on behalf of investors.”

asked by Nicholas Campanella · answered by Pedro Pizarro

What is the significance of the slight change in 10-Q language regarding the Eaton fire's cause, and how does this relate to estimating the low end of liability for the Wildfire Recovery Compensation Program (WRCP)?

Pedro Pizarro explained the language change was to streamline disclosure, reflecting the passage of time and absence of viable alternative causes, confirming SCE's equipment was likely associated. He noted that despite over 2,200 WRCP offers and 2 insurer settlements, the volume is still insufficient to estimate the low end of the estimable liability range under GAAP, given over 30,000 litigation claims.

“The reality is since last quarter, 3 more months passed, there are no other -- no viable alternatives have appeared. And so we thought that the slight streamlining that we did there was appropriate in terms of just saying that SCE's equipment likely was associated with the events.”

asked by Nicholas Campanella · answered by Pedro Pizarro

What is the view on the timing for crossing the $1 billion threshold for wildfire claims and making first filings to tap into the Wildfire Fund for reimbursement?

Aaron Moss confirmed that Edison is crossing the $1 billion threshold between subrogation and WRCP settlements. He stated that they have worked out a prefunding mechanism with the CEA (administrator of the Wildfire Fund) to avoid out-of-pocket expenses and are working through the process to fund claims now.

“Yes, Carly, between the subrogation settlements that we've made and the WRCP settlements that we're making, we are crossing that $1 billion threshold. So we've worked out with the CEA, who's the administrator of the Wildfire Fund, prefunding mechanism so that we don't come out of pocket for any of those dollars there, and we're working through with them that process to fund the claims now.”

asked by Carly Davenport · answered by Aaron Moss

What are the potential options if legislative reform does not move forward this session, and what changes might be expected in the next GRC filing?

Pedro Pizarro reiterated that it's difficult to predict reactions without knowing the legislative outcome. He emphasized that if the underlying cost of equity is significantly impacted, it would influence future investments, while safety and reliability obligations remain sacrosanct. He noted that areas with more flexibility might be candidates for rethinking in future capital programs.

“Again, there's things that are sacrosanct, right, around safety, reliability. We have obligations under the PUC code. But where there are places where there might be some more flexibility, latitude that these could be candidates for rethinking or factoring that into future capital programs.”

asked by Carly Davenport · answered by Pedro Pizarro

How does the affordability conversation stand in California, particularly in the context of wildfire legislation, and how has the tone changed recently?

Pedro Pizarro stated that affordability is a pervasive topic, not just in California. He highlighted that for the average SCE customer, energy costs are in the lowest quartile nationally, but housing costs dominate affordability concerns. He explained that insufficient legislative action could lead to credit rating downgrades for California IOUs, significantly increasing the cost of debt passed to customers, framing affordability around the impact of legislative absence on customer costs.

“Affordability is really framed around the impact of the absence of legislation on customer costs. And hence, I think the great point that the CEA report made around the sense of urgency here.”

asked by Richard Sunderland · answered by Pedro Pizarro

Is the company's reference to potential rating agency downgrades based on direct communication or general reports about scenarios without legislation?

Aaron Moss clarified that the reference to IOU ratings and potential downgrades was based on prior reports from Moody's and S&P, not new direct communication. He noted these reports discuss the broader ramifications of wildfire across the California economy, not just utilities.

“But Pedro's prepared remarks did reference separate reports that both Moody's and S&P have issued over, I think, the past month about California, which IOUs are an important part of California, but it talks more broadly about the ramifications of wildfire across the California economy.”

asked by Paul Zimbardo · answered by Aaron Moss

How does the ongoing undergrounding cost-benefit analysis influence decisions on covered conductor versus undergrounding, and is there potential upside to the 190-mile undergrounding plan in the RAMP application?

Steven Powell explained that the RAMP process evaluates projects based on benefit-cost ratios, refining risk models with the latest intel. Undergrounding costs vary by segment and are combined with risk levels to calculate benefit-costs. Projects above 1.0 BCR are compared with covered conductor options, considering factors like egress and terrain. The 190 miles of undergrounding is a base scenario, and they will continue to evaluate other locations to reduce public safety power shutoffs before the final GRC filing.

“So based on what was in the RAMP, we put in about 190 miles of undergrounding in sort of a base scenario. But we'll continue to evaluate if there's other places that we need to do it, frankly, to reduce things like public safety power shutoffs and other factors.”

asked by Ryan Levine · answered by Steven Powell