EDISON INTERNATIONAL - Annual Report: 2021 (Form 10-K)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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(Mark One)

☑            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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☐             TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                        to

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Securities registered pursuant to Section 12(b) of the Act:

Edison International:

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Southern California Edison Company: None

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Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

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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.

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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-12 of the Exchange Act. (Check One):

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

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

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Aggregate market value of voting and non-voting common equity held by non-affiliates of the registrants as of June 30, 2021, the last business day of the most recently completed second fiscal quarter:

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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 February 17, 2022:

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OMISSION OF CERTAIN INFORMATION

Southern California Edison Company meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this Form with the reduced disclosure format allowed under the General Instruction.

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DOCUMENTS INCORPORATED BY REFERENCE

Designated portions of the Edison International Proxy Statement relating to Edison International's 2022 Annual Meeting of Shareholders are incorporated by reference into Part III of this report.

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This is a combined Form 10-K 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.

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GLOSSARY

The following terms and abbreviations appearing in the text of this report have the meanings indicated below.

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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect Edison International's and SCE's current expectations and projections about future events based on Edison International's and SCE's knowledge of present facts and circumstances and assumptions about future events and include any statements that do not directly relate to a historical or current fact. Other information distributed by Edison International and SCE 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 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 and SCE, include, but are not limited to the:

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Additional information about risks and uncertainties, including more detail about the factors described in this report, is contained throughout this report. Readers are urged to read this entire report, including information incorporated by reference, and carefully consider the risks, uncertainties, and other factors that affect Edison International's and SCE's businesses. Forward-looking statements speak only as of the date they are made and neither Edison International nor SCE are obligated to publicly update or revise forward-looking statements. Readers should review future reports filed by Edison International and SCE with the SEC. Edison International and SCE post or provide direct links to (i) certain SCE and other parties' regulatory filings and documents with the CPUC and the FERC and certain agency rulings and notices in open proceedings in a section titled "SCE Regulatory Highlights," (ii) certain documents and information related to Southern California wildfires which may be of interest to investors in a section titled "Southern California Wildfires," and (iii) presentations, documents and other information that may be of interest to investors in a section titled "Events and Presentations" at www.edisoninvestor.com in order to publicly disseminate such information.

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

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion related to the results of operations and changes in financial condition for 2020 compared to 2019 is incorporated by reference to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in Edison International's and SCE's combined Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC in February 2021.

MANAGEMENT OVERVIEW

Highlights of Operating Results

Edison International is the ultimate parent holding company of SCE and Edison Energy. SCE is an investor-owned public utility primarily engaged in the business of supplying and delivering electricity to an approximately 50,000 square mile area of southern California. Edison Energy is engaged in the competitive business of providing integrated decarbonization and energy solutions to commercial, institutional and industrial customers. Edison Energy's business activities are currently not material to report as a separate business segment.

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Edison International's earnings are prepared in accordance with GAAP. Management uses core earnings (losses) internally for financial planning and for analysis of performance. Core earnings (losses) are also used when communicating with investors and analysts regarding Edison International's earnings results to facilitate comparisons of the company's performance from period to period. Core earnings (losses) are a non-GAAP financial measure and may not be comparable to those of other companies. Core earnings (losses) are defined as earnings attributable to Edison International shareholders less non-core items. Non-core items include income or loss from discontinued operations and income or loss from significant discrete items that management does not consider representative of ongoing earnings,

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such as write downs, asset impairments and other income and expense related to changes in law, outcomes in tax, regulatory or legal proceedings, and exit activities, including sale of certain assets and other activities that are no longer continuing.

Edison International's 2021 earnings increased $20 million, driven by an increase in SCE's earnings of $19 million and a decrease in Edison International Parent and Other losses of $1 million. SCE's higher net income consisted of $99 million of higher non-core losses and $118 million of higher core earnings.

The increase in SCE's core earnings was due to higher revenue from the 2021 GRC final decision, higher FERC revenue and income tax benefits from the settlement of 2007 – 2012 California tax audits, partially offset by lower insurance benefits and higher property taxes.

Edison International Parent and Other lower losses consisted of $64 million of higher non-core earnings and $63 million higher core losses. The increase in core losses in 2021 was primarily due to higher preferred dividends as a result of preferred equity issuances in 2021.

Consolidated non-core items for 2021 and 2020 for Edison International included:

See "Results of Operations" for discussion of SCE and Edison International Parent and Other results of operations.

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Electricity Industry Trends

The electric power industry is undergoing transformative change driven by technological advances, such as customer-owned generation, electric vehicles and energy storage, which are altering the nature of energy generation and delivery. California is committed to reducing its GHG emissions, improving local air quality and supporting continued economic growth. The state set goals to reduce GHG emissions by 40% from 1990 levels by 2030 and 80% from the same baseline by 2050. Additionally, the state is aiming to be carbon neutral by 2045. State and local air quality plans call for substantial improvements. In the most polluted areas of the state this includes reducing smog-causing nitrogen oxides 90% below 2010 levels by 2032. If California is to meet its 2030 and 2045 climate change goals, the state must quadruple its annual rate of greenhouse gas reductions by adopting market-transforming policies and incentives that address historical inequities within the next one to two years. While these policy goals cannot be achieved by the electric sector alone, the electric grid is a critical enabler of the adoption of new energy technologies that support California's climate change and GHG reduction objectives. California has set RPS targets which require California retail sellers of electricity to provide 60% of energy sales from renewable resources by 2030. California also requires sellers of electricity to deliver 100% of retail sales from carbon free sources by 2045. In 2021, approximately 42% of SCE's customer deliveries came from carbon-free resources. SCE remains well-positioned to meet its 2030 and 2045 RPS and carbon-free power goals and interim targets. In addition, Edison International is committed to achieving net-zero GHG emissions by 2045, in alignment with economy-wide climate actions planned by California. This commitment covers the power SCE delivers to customers and Edison International's enterprise-wide operations.

The current federal administration has shown an enhanced and renewed desire to respond to climate change through numerous regulatory and Executive Order actions including for the development of more robust fuel efficiency and vehicle emission standards. Many of these actions align with internal company goals and efforts to address and mitigate climate change. Additionally, Congress passed historic infrastructure legislation that provides significant new funding to electrify the economy. Edison International believes these actions complement its industry-leading efforts to equitably transition to a decarbonized economy.

Edison International believes that California's 2045 goals can be achieved most economically through emissions reductions from using clean electricity serving 100% of retail sales, electrifying approximately 76% of light-duty vehicles, 67% of medium-duty vehicles, 38% of heavy-duty vehicles, 85% of buses and 70% of buildings and using low-carbon fuels for technologies that are not yet viable for electrification. California has demonstrated strong long-term support of transportation electrification as shown by the approval of SCE's Charge Ready 2 program and the Governor's September 2020 Executive Order banning sales of new gas vehicles by 2035. However, SCE believes that more state policy support, along with public and private investment, is needed to enable California to reach its 2030 GHG reduction targets.

To support these goals, Edison International's vision is to lead the transformation of the electric power industry and the company is focused on opportunities in delivering clean energy, advancing efficient electrification, building a modernized and more reliable grid, and enabling customers' technology choices. SCE is focused on improving the safety, reliability and resilience of the transmission and distribution network and enabling increased penetration of DERs, electric transportation, building electrification and energy efficiency programs. SCE's ongoing focus to drive operational and service excellence is intended to allow it to achieve these objectives safely while controlling costs and customer rates. SCE's focus on the transmission and distribution of electricity aligns with California's policy supporting competitive power procurement markets.

SCE is undertaking projects and programs to accelerate economy-wide electrification. To support system reliability, SCE is investing $1.0 billion in utility owned storage capacity in 2022. See "—Capital Program" for further details. SCE also continues to implement its transport electrification programs and as of December 31, 2021, SCE had completed

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construction at 151 sites to support 2,759 charge ports under its suite of light duty Charge Ready Programs, and 27 sites to support the electrification of 311 medium and heavy-duty vehicles through its Charge Ready Transport program.

To address a portion of the expected outcome gap to achieving California's 2030 goals, in December 2021, SCE filed a $677 million Building Electrification Program Application for a four-year program (2024 – 2027) to incentivize replacing 250,000 gas-fueled water and space heaters with efficient electric heat pumps and to upgrade the electrical infrastructure for 65,000 homes to support electrification. The proposed program includes $200 million for customer-side electrical infrastructure upgrades for which SCE has requested inclusion as a regulatory asset in rate base and $69 million in capital expenditures. The remaining $408 million of operations and maintenance expense includes heat pump incentives, program administration, and implementation costs.

Changes in the electric power industry are impacting customers and jurisdictions outside California as well. Edison International believes that other states will also pursue climate change and GHG reduction objectives and large commercial and industrial customers will continue to pursue cost reduction and sustainability goals. Edison Energy provides integrated decarbonization and energy solutions to commercial, institutional and industrial customers who may be impacted by these changes. Edison Energy aims to provide energy solutions that address cost, carbon and complex choices for their customers.

To better engage in this broader transformation and provide a view of developments outside of SCE, Edison International has made several minority investments in emerging companies in areas related to the technology changes that are driving industry transformation and may make additional investments in the future. These investments are not financially material to Edison International.

2021 Cost of Capital Application

In August 2021, SCE filed an application with the CPUC for authority to establish its authorized cost of capital for utility operations for 2022 and to reset the related annual cost of capital mechanism. SCE filed its application pursuant to the cost of capital mechanism's provision that the utilities have a right to file a cost of capital application at any time upon an extraordinary or catastrophic event that materially impacts their respective cost of capital and/or capital structure and affects them differently than the overall financial markets. SCE believes the COVID-19 pandemic and accompanying government stimulus efforts constitute such an extraordinary event because they have led to a decrease in interest rates but an increase in SCE and other utilities' cost of equity, disrupting the traditional relationship between debt and equity assumed in adopting the cost of capital mechanism.

In October 2021, the CPUC consolidated SCE's, PG&E's and SDG&E's cost of capital proceedings and ordered the utilities to file all materials that would have normally been required in advice letters filed as a result of triggering the cost of capital mechanism (see "Business—SCE—Overview of Ratemaking Process" for further information on the adjustment mechanism). SCE provided this information in November 2021. In December 2021, the CPUC granted SCE's motion to establish a memorandum account to record the difference in the revenue requirements from rates in effect beginning January 1, 2022 and the rates adopted in the proceeding. In December 2021, the CPUC also set an initial phase for the proceeding to determine whether extraordinary circumstances warrant a departure from the cost of capital mechanism for 2022 and, if so, whether the CPUC should leave the cost of capital components at pre-2022 levels for the year 2022 or open a second phase to consider alternative proposals. SCE served opening testimony in January 2022 in support of suspending operation of the cost of capital mechanism's formula adjustment mechanism and leaving cost of capital components at pre-2022 levels for 2022.

If the CPUC ultimately finds that the cost of capital mechanism adjustment should have been implemented effective January 1, 2022, SCE's revenue requirements for 2022 would reduce by $179 million due to adjustments to SCE's authorized weighted average cost of capital.

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SCE is required to file its regularly scheduled cost of capital application in April 2022 for rates effective in 2023.

Capital Program

Total capital expenditures (including accruals) were $5.4 billion in 2021 and $5.5 billion in 2020. SCE's year-end rate base was $37.9 billion at December 31, 2021, compared to $34.7 billion at December 31, 2020, after excluding rate base associated with AB 1054 Excluded Capital Expenditures.

SCE's capital expenditure forecast reflects planned CPUC-jurisdictional spending including WCCP and other programs outlined in SCE's WMP and above amounts authorized in the 2021 GRC, CPUC-approved utility owned storage expenditures and planned FERC capital expenditures.

Potential capital spending variability associated with future regulatory requests based on management judgment, potential for permitting delays and other operational considerations is reflected in the range case below. The completion of projects, the timing of expenditures, and the associated cost recovery may be affected by permitting requirements and delays, construction schedules, availability of labor, equipment and materials, financing, legal and regulatory approvals and developments, community requests or protests, weather and other unforeseen conditions.

SCE's 2021 recorded and 2022 – 2023 forecast for capital expenditures are set forth in the table below:

*      Not applicable

SCE expects to make additional CPUC capital expenditures, the recovery of which will be subject to future regulatory approval. This includes expenditures from track 4 of the 2021 GRC, the 2025 GRC and non-GRC programs including the Building Electrification Program. These capital expenditures and expected FERC capital expenditures, excluded from the table above, are expected to be approximately $0.2 billion in 2023 and in a range of approximately $10.4 billion to $12.8 billion between 2024 and 2025.

In October 2021, SCE contracted for the construction of utility owned storage at three sites in SCE's service territory with an aggregate capacity of 537.5 MW. These storage projects are expected to result in $1.0 billion of capital expenditures through the anticipated in-service date in the summer of 2022. In December 2021, the CPUC approved recovery of these expenditures and establishment of a balancing account for the associated revenue requirement, to be reflected in rates beginning in the first quarter of 2022.

SCE's authorized CPUC-jurisdictional rate base is determined through the GRC and other regulatory proceedings. Differences between actual and CPUC-authorized capital expenditures are addressed in subsequent GRC or other regulatory proceedings. FERC-jurisdictional rate base is generally determined based on actual capital expenditures.

Reflected below is SCE's weighted average annual rate base for 2021 – 2023 incorporating authorized CPUC-jurisdictional expenditures including utility owned storage, planned FERC capital expenditures, and planned non-GRC

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projects or programs. The table below does not reflect the $1.6 billion of AB 1054 Excluded Capital Expenditures. The table below reflects the July 2021 reduction in rate base from a $400 million payment from a third party for the 30-year use of a portion of the West of Devers transmission project.

*     Not applicable

Including programs outlined in SCE's WMP subject to future cost recovery proceedings, rate base associated with wildfire restoration capital expenditures subject to future CEMA applications, and planned expenditures from track 4 of the 2021 GRC and the 2025 GRC, SCE's weighted average annual rate base could be up to $41.8 billion in 2023, and between $43.8 billion and $46.0 billion in 2024 and between $46.6 billion and $49.4 billion in 2025.

For further information regarding the capital program see "Liquidity and Capital Resources—SCE—Capital Investment Plan."

COVID-19

The COVID-19 pandemic is having a significant impact on global society and economies. As a result of the pandemic, Edison International and SCE have experienced increased costs and SCE's supply chain has faced constraints, but the pandemic has not had a pervasive impact on SCE's or Edison International's ability to operate their businesses (see "Risk Factors" for further information). However, the total impacts of the COVID-19 pandemic on Edison International and SCE will depend on numerous factors that continue to evolve and which Edison International and SCE are unable to accurately predict at this time, including the impact of any legal requirements or company policies for mandatory COVID-19 vaccination, or testing, on SCE's ability to retain its workforce.

As a result of actions taken in response to the pandemic and increased estimates of uncollectible expenses, largely related to the economic impacts of the pandemic on SCE's customers, SCE has incurred $303 million of incremental costs, net of savings, as of December 31, 2021, of which $94 million has been deferred to memorandum accounts for CPUC reasonableness review and $197 million has been transferred to balancing accounts pending recovery.

In July 2021, California's state assembly passed legislation to authorize, fund and implement the CAPP, which reduced SCE's 2020 and 2021 customer arrearages for certain residential customers. SCE received $185 million of CAPP funds on behalf of customers in January 2022. To the extent SCE's uncollectible expenses against qualified arrearages were offset by the CAPP, no recovery will be sought through other mechanisms. The legislation also prohibited certain customer disconnections for non-payment during the period that the California Department of Community Services and Development reviews the allocation of CAPP funds, SCE expects to be able to recommence disconnections of customers for non-payment in mid-2022.

In September 2021, SCE requested recovery of $57 million of incremental operation and maintenance expenses tracked in a CEMA related to COVID-19 in 2020. Incremental expenses deferred to the COVID-19 Pandemic Protections Memorandum Account of $47 million are subject to CPUC reasonableness review in annual ERRA review proceedings, with a decision on the 2020 balance expected in mid-2022. For further information see "Liquidity and Capital Resources—SCE—Regulatory Proceedings—2021 CEMA Application."

In January 2022, the CPUC approved SCE's application to recover $78 million of incremental residential uncollectible expenses subject to balancing account recovery in customer rates over a 36-month period starting March 2022. Remaining amounts subject to balancing account recovery will be recovered over a 12-month period beginning in the first quarter of 2022.

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For further information see "Notes to the Consolidated Financial Statements—Note 11. Regulatory Assets and Liabilities" and "Risk Factors."

Southern California Wildfires and Mudslides

California has experienced unprecedented weather conditions in recent years due to climate change. The worsening weather and fuel conditions across California increase the likelihood of wildfires, including those where SCE's equipment may be alleged to be associated with the fire's ignition, and SCE's service territory remains susceptible to additional wildfire activity in 2022 and beyond. In response to worsening conditions and increased wildfire activity over the past several years, SCE has developed and is implementing its 2020 – 2022 WMP to reduce the risk of SCE equipment contributing to the ignition of wildfires. In addition, California has increased its investment in wildfire prevention and fire suppression capabilities. In addition to the investments SCE is making as part of its WMP, SCE also uses its PSPS program to proactively de-energize power lines as a last resort to mitigate the risk of catastrophic wildfires during extreme weather events.

Wildfires in SCE's territory in December 2017 and November 2018 caused loss of life, substantial damage to both residential and business properties, and service outages for SCE customers. Edison International and SCE have incurred material losses in connection with the 2017/2018 Wildfire/Mudslide Events.

SCE's equipment has been, and may further be, alleged to be associated with several wildfires that have originated in Southern California subsequent to 2018. Edison International and SCE expect that any losses incurred in connection with those fires will be covered by insurance, subject to self-insured retentions and co-insurance, or third-party receivables, and expect that any such losses after recoveries will not be material.

2017/2018 Wildfire/Mudslide Events

Multiple lawsuits and investigations related to the 2017/2018 Wildfire/Mudslide Events have been initiated against SCE and Edison International. As of December 31, 2021, in addition to the Local Public Entity Settlement, the TKM Subrogation Settlement and the Woolsey Subrogation Settlement, SCE had entered into settlements with approximately 5,000 individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation under which it has agreed to pay an aggregate of approximately $2.0 billion.

In addition, in October 2021, SCE and the SED executed the SED Agreement to resolve the SED's investigations into the 2017/2018 Wildfire/Mudslide Events and three other 2017 wildfires for, among other things, aggregate costs of $550 million. The $550 million in costs is comprised of a $110 million fine to be paid to the State of California General Fund, $65 million of shareholder-funded safety measures, and an agreement by SCE to waive its right to seek cost recovery in CPUC-jurisdictional rates for $375 million of third-party uninsured claims payments (the "SED Excluded Losses"). The SED Agreement provides that SCE may, on a permanent basis, exclude from its ratemaking capital structure any after-tax charges to equity or debt borrowed to finance costs incurred under the SED Agreement. The SED Agreement also imposes other obligations on SCE, including reporting requirements and safety-focused studies. SCE did not admit imprudence, negligence or liability with respect to the 2017/2018 Wildfire/Mudslide Events in the SED Agreement. The CPUC approved the SED Agreement in December 2021 but its approval has been legally challenged by The Utility Reform Network. SCE's obligations under the SED Agreement will only commence after CPUC approval of the SED Agreement is final and non-appealable.

Through December 31, 2021, Edison International and SCE have recorded total pre-tax charges of $7.5 billion, recoveries from insurance of $2.0 billion and expected recoveries through FERC electric rates of $300 million related to the 2017/2018 Wildfire/Mudslide Events. The after-tax net charges to earnings recorded through December 31, 2021 have been $3.8 billion.

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As of December 31, 2021, SCE had paid $5.7 billion under executed settlements and had $131 million to be paid under executed settlements related to the 2017/2018 Wildfire/Mudslide Events. In addition, SCE's obligations under the SED Agreement will commence after CPUC approval of the SED Agreement is final and non-appealable. As of December 31, 2021, SCE had recovered $2.0 billion through insurance and $135 million through FERC-jurisdictional electric rates.

After giving effect to all payment obligations under settlements entered into through December 31, 2021, Edison International's and SCE's best estimate of expected losses for remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events and for the SED Agreement was $1.6 billion. As of the same date, Edison International and SCE had assets for expected recoveries through FERC electric rates of $165 million on their consolidated balance sheets and had exhausted expected insurance recoveries related to the 2017/2018 Wildfire/Mudslide Events.

Estimated losses for the 2017/2018 Wildfire/Mudslide Events litigation are based on a number of assumptions and are subject to change as additional information becomes available. Actual losses incurred may be higher or lower than estimated based on several factors, including: the uncertainty in estimating damages that have been or may be alleged, the ability to reach settlements through the ongoing claims mediation processes, uncertainties related to the litigation processes, uncertainty as to the legal and factual determinations to be made during litigation, including uncertainty as to the contributing causes of the 2017/2018 Wildfire/Mudslide Events, the complexities associated with fires that merge and whether inverse condemnation will be held applicable to SCE with respect to damages caused by the Montecito Mudslides, and the uncertainty as to how these factors impact future settlements.

SCE will seek rate recovery of prudently-incurred, actual losses realized in connection with the 2017/2018 Wildfire/Mudslide Events in excess of available insurance, other than for CPUC-jurisdictional rate recovery of the $375 million of SED Excluded Losses if the CPUC's approval of the SED Agreement becomes final and non-appealable. SCE believes that, in light of the CPUC's decision in a cost recovery proceeding involving SDG&E arising from several 2007 wildfires in SDG&E's service area, there is substantial uncertainty regarding how the CPUC will interpret and apply its prudency standard to an investor-owned utility in wildfire cost-recovery proceedings for fires ignited prior to July 12, 2019. Accordingly, while the CPUC has not made a determination regarding SCE's prudency relative to any of the 2017/2018 Wildfire/Mudslide Events, SCE is unable to conclude, at this time, that uninsured CPUC-jurisdictional wildfire-related costs are probable of recovery through electric rates.

For further information, see "Business— Southern California Wildfires," "Risk Factor," "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—Initial and annual contributions to the wildfire insurance fund established pursuant to California Assembly Bill 1054" and "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides" in this report.

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RESULTS OF OPERATIONS

SCE

SCE's results of operations are derived mainly through two sources:

Impact of 2021 GRC

The table below reflects the 2020 GRC authorized revenue adjusted for revenue requirements from the WEMA and GS&RP approvals in 2020, which included revenue requirements for expenditures incurred from 2018 – 2020. Revenue requirements of $497 million for operation and maintenance expense and depreciation incurred in 2020 are not included in the table as they remain subject to approval in track 3 of the 2021 GRC.

The 2021 GRC final decision resulted in a non-core impairment of utility property, plant and equipment of $79 million ($47 million after-tax) related to disallowed historical capital expenditures of pole replacements the CPUC determined were performed prematurely.

The 2021 GRC final decision determines the amount of revenue that SCE is authorized to collect from customers to recover anticipated costs, including return on rate base. The 2021 GRC final decision approved an authorized revenue requirement of $6.9 billion in 2021, an increase of $1.0 billion over amounts authorized in the 2018 GRC and an increase of $331 million over revenue requirements authorized for 2020 including the 2018 GRC and subsequent WEMA and GS&RP approvals.

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This table sets out the authorized revenue and costs of service for revenue requirements authorized in 2020 as discussed above and the 2021 GRC final decision through December 31, 2021:

Authorized revenue increased $331 million in 2021 compared to 2020, which was comprised of an increase of $200 million in authorized revenue for earning activities and $131 million in authorized revenue for cost recovery activities.

The following tables summarize SCE's results of operations for the periods indicated. The presentation below separately identifies earning activities and cost-recovery activities. In the 2021 GRC final decision, the CPUC approved balancing accounts for cost recovery of vegetation management and wildfire insurance costs. As a result, SCE classified revenues and costs associated with these programs as cost recovery activities in 2021. Previously, SCE classified the recovery of actual costs incurred under these programs as earnings activities. The reclassification of revenues and costs had no impact on earnings.

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Years ended December 31, 2021, 2020 and 2019

The following table is a summary of SCE's results of operations for the periods indicated:

Earning Activities

Earning activities in 2021 compared to 2020 were primarily affected by the following:

The $200 million change in authorized revenue impacting earnings included an increase of $352 million in GRC revenues from the 2021 GRC final decision offset by lower non-GRC authorized revenue of $152 million from the approval of the GS&RP balancing account in the third quarter of 2020.

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Cost-Recovery Activities

Cost-recovery activities in 2021 compared to 2020 were primarily affected by the following:

Supplemental Operating Revenue Information

SCE's retail billed and unbilled revenue (excluding wholesale sales) was $13.5 billion, $12.5 billion, and $11.4 billion for 2021, 2020 and 2019, respectively.

The 2021 revenue increase is primarily related to the authorization for cost recovery as part of the GRC implementation through various balancing accounts and higher cost-recovery activities related to higher purchased power and fuel costs driven by higher power and gas prices. See "—Cost-Recovery Activities" and "—Earnings Activities" for further details.

As a result of the CPUC-authorized decoupling mechanism, the price of SCE's services depends on amounts authorized for recovery through SCE's GRCs and other regulatory proceedings and SCE earnings are not affected by changes in retail electricity sales (see "Business—SCE—Overview of Ratemaking Process").

Income Taxes

SCE's income tax benefit decreased by $294 million in 2021 compared to 2020. The effective tax rates were 1.8% and (41.7)% for 2021 and 2020, respectively. SCE's effective tax rate is below the federal statutory rate of 21% for 2021 and 2020 primarily due to the CPUC's ratemaking 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

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results in recording regulatory assets and liabilities for amounts that would otherwise be recorded to deferred income tax expense.

The effective tax rate increase in 2021 is primarily due to the impact of higher pre-tax income, non-tax deductible portions of the SED Agreement, an adjustment as a result of an IRS private letter ruling discussed above, lower flow-through tax benefits as a result of the adoption of the 2021 GRC final decision for certain property-related items discussed above, partially offset by higher tax benefits from the re-measurement of uncertain tax positions, including the impacts of a settlement with the FTB for tax years 2007 – 2012.

See "Notes to Consolidated Financial Statements—Note 8. Income Taxes" for a reconciliation of the federal statutory rate to the effective income tax rates.

Edison International Parent and Other

Results of operations for Edison International Parent and Other includes amounts from other subsidiaries that are not significant as a reportable segment as well as intercompany eliminations.

Loss from Operations

The following table summarizes the results of Edison International Parent and Other:

The net loss attributable to common stock from operations of Edison International Parent and Other decreased $1 million in 2021 compared to 2020 primarily due to:

LIQUIDITY AND CAPITAL RESOURCES

SCE

SCE's ability to operate its business, fund capital expenditures, and implement its business strategy is dependent upon its cash flow and access to the bank and capital markets. SCE's overall cash flows fluctuate based on, among other things, its ability to recover its costs in a timely manner from its customers through regulated rates, changes in commodity

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prices and volumes, collateral requirements, interest obligations, dividend payments to and equity contributions from Edison International, obligations to preference shareholders, and the outcome of tax, regulatory and legal matters.

In the next 12 months, SCE expects to fund its cash requirements through operating cash flows, capital market financings, and equity contributions from Edison International Parent, as needed. SCE also has availability under its credit facilities to fund cash requirements. SCE expects to issue bonds to finance or refinance eligible sustainable projects. Eligible sustainable projects include categories such as renewable energy, clean transportation, energy efficiency and carbon reduction, climate change adaptation, and socioeconomic advancement and empowerment. SCE maintains processes to ensure that proceeds from the sale of the bonds are only used for projects that are aligned with the Edison International sustainable financing framework issued in June 2021. SCE also expects to issue additional debt for general corporate purposes and to finance payments for future resolutions of claims related to the 2017/2018 Wildfire/Mudslide Events.

At December 31, 2021 SCE had invested all $1.6 billion of the required AB 1054 Excluded Capital Expenditures and SCE expects to finance these amounts by issuing securitized bonds. SCE issued securitized bonds in the amounts of $338 million in February 2021 and $533 million in February 2022. SCE expects to securitize the remaining balance of AB 1054 Excluded Capital Expenditures based on the timing of the CPUC approval of those expenditures and related financing costs. For further information, see "—Regulatory Proceedings—Wildfire Related Regulatory Proceedings." SCE expects to extend a $1.2 billion term loan due in May 2022 as necessary prior to full settlement from the proceeds of the securitized bonds.

SCE's cash flows are affected by regulatory balancing and memorandum accounts overcollections or undercollections. Overcollections and undercollections represent differences between cash collected in current rates for specified forecasted costs and the costs actually incurred. With some exceptions, SCE seeks to adjust rates on an annual basis or at other designated times to recover or refund the balances recorded in its balancing accounts. Undercollections or overcollections in these balancing and memorandum accounts impact cash flows and can change rapidly. Undercollections and overcollections generally accrue interest based on a three-month commercial paper rate published by the Federal Reserve. See "—Regulatory Proceedings" and "Notes to Consolidated Financial Statements—Note 11. Regulatory Assets and Liabilities" for further information.

The following table summarizes SCE's current, long-term issuer credit ratings and outlook from the major credit rating agencies: