EDISON INTERNATIONAL EIX

The California legislative session concluded with the passage of SB 254, a significant step to support IOUs, address wildfire risk, and boost financial stability. The bill creates an up to $18 billion continuation account, jointly funded by IOUs and customers, for wildfires ignited after September 19, 2025. It enhances the liability cap framework by basing it on the year of ignition, providing greater certainty. The law also allows for securitization of wildfire claims payments for 2025 wildfires if the initial fund is exhausted.

Investigations into the Eaton Fire are ongoing, with SCE believing its equipment is likely associated with the ignition. SCE has entered a settlement with an insurance claimant for $0.52 per dollar paid to policyholders, though this is a single data point. The Wildfire Fund administrator confirmed Eaton as a covered wildfire. SCE is launching a voluntary Wildfire Recovery Compensation Program to provide direct payments to impacted individuals and businesses, aiming to resolve claims quickly and minimize overall costs.

SCE made significant progress in resolving legacy wildfire liabilities. The CPUC approved the TKM Settlement, authorizing recovery of approximately $1.6 billion. More recently, SCE reached a settlement agreement in the Woolsey Fire proceeding, authorizing recovery of approximately $2 billion of the $5.6 billion requested, subject to CPUC approval. Combined, these settlements would result in recovery of 43% or about $3.6 billion of total costs above insurance and FERC recoveries, improving FFO to debt by up to 90 bps.

SCE received a final decision on its 2025 GRC in September, authorizing $9.7 billion in 2025 base revenue. The decision supports significant investments in wildfire mitigation, safety, reliability, and load growth upgrades, while incorporating affordability. It also authorizes average revenue increases of about $500 million per year for 2026-2028, subject to inflation. The GRC authorized 91% of SCE's requested capital expenditures.

SCE has deployed over 6,800 miles of covered conductor and expects to have hardened nearly 90% (over 14,000 miles) of its distribution lines in high fire risk areas by year-end. The GRC authorizes installing another 1,650 miles of covered conductor and 212 miles of targeted undergrounding. Public Safety Power Shutoffs remain a critical tool, with updated criteria, wind speed thresholds, and expanded circuit coverage.

Edison International's financing plan through 2028 does not require any equity issuance, supported by TKM and Woolsey recoveries. The company aims for a 15% to 17% FFO to debt framework. While Moody's affirmed ratings with a stable outlook and Fitch removed its rating watch negative, S&P downgraded EIX and SCE by one notch, a view management believes does not fully recognize legislative intent. The company is exploring early refinancing options for preferred equity issuances with upcoming rate resets.

SCE anticipates a near-term load growth CAGR of up to 3%, driven by a diverse mix including EV adoption (29% of new cars purchased in Q3 2025 were zero-emission vehicles), new housing developments, and commercial/industrial consumption. Long-term, electricity sales are projected to nearly double over the next two decades, necessitating substantial infrastructure upgrades.