EDISON INTERNATIONAL - Quarter Report: 2021 June (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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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.

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 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.

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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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).

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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:

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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.

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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 quarterly report on Form 10-Q 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 and in the 2020 Form 10-K, including the "Risk Factors" section. Readers are urged to read this entire report, including information incorporated by reference, as well as the 2020 Form 10-K, 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 information that may be of interest to investors in a section titled "Presentations" at www.edisoninvestor.com in order to publicly disseminate such information. The reports, presentations, documents and information contained on, or connected to, the Edison investor website are not deemed part of, and are not incorporated by reference into, this report.

The MD&A for the six months ended June 30, 2021 discusses material changes in the consolidated financial condition, results of operations and other developments of Edison International and SCE since December 31, 2020 and as compared to the six months ended June 30, 2020. This discussion presumes that the reader has read or has access to Edison International's and SCE's MD&A for the calendar year 2020 (the "2020 MD&A"), which was included in the 2020 Form 10-K.

Except when otherwise stated, references to each of Edison International, SCE, or Edison Energy Group 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. Unless otherwise described, all the information contained in this report relates to both filers.

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

MANAGEMENT OVERVIEW

Highlights of Operating Results

Edison International is the parent holding company of SCE and Edison Energy Group. 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 Group is a holding company for Edison Energy which is engaged in the competitive business of providing data-driven energy solutions to commercial, institutional and industrial customers. Edison Energy's business activities are currently not material to report as a separate business segment.

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, 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 second quarter 2021 earnings remained unchanged from the second quarter of 2020, resulting from a decrease in SCE's earnings of $22 million and a decrease in Edison International Parent and Other's losses of $22 million. SCE's lower earnings consisted of $16 million of lower core earnings and $6 million of higher non-core losses. Edison International's earnings for the six months ended June 30, 2021 increased $76 million from the six months ended June 30, 2020, resulting from an increase in SCE's earnings of $55 million and a decrease in Edison International Parent and Other's

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losses of $21 million. SCE's higher earnings consisted of $61 million of higher core earnings and $6 million of higher non-core losses.

The decrease in SCE's core earnings for the second quarter 2021 from the same period in 2020 was primarily due to higher depreciation, partially offset by higher FERC revenue and lower expenses related to wildfire mitigation activities.

The increase in SCE's core earnings for the six months ended June 30, 2021 from the same period in 2020 was primarily due to lower expenses related to wildfire mitigation activities, employee benefits and lower customer uncollectibles as well as higher FERC revenue, partially offset by higher depreciation.

The decrease in Edison International Parent and Other's net loss for the three months and six months ended June 30, 2021 was due to higher core losses of $3 million and $7 million, respectively, and lower non-core losses of $25 million and $28 million, respectively. Edison International's increase in core losses was primarily due to higher preferred dividends as a result of the preferred equity issuance in 2021, partially offset by the recognition of unrealized gains from the increase in fair value of an investment in Proterra Inc, an electric vehicle technology manufacturer, and lower corporate expenses.

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Consolidated non-core items for the six months ended June 30, 2021 and 2020 primarily included:

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

2021 General Rate Case

The 2021 GRC consists of four separate tracks. Track 1 is similar to previous GRCs and addresses revenue requirements for the three-year period of 2021 – 2023. Tracks 2 and 3 address the reasonableness of 2018 – 2019 and 2020 wildfire mitigation costs that were incremental to amounts authorized in the 2018 GRC, respectively. In January 2020, a CPUC decision introduced a third attrition year in current and future GRCs. As a result, track 4 will address the revenue requirement for 2024. SCE is scheduled to submit its testimony for track 4 in May 2022.

In July 2021, the CPUC issued a proposed decision on track 1 of the 2021 GRC, which if adopted, would result in a base rate revenue requirement of $6.9 billion in 2021, an increase of $342 million over revenue requirements authorized for 2020. This is a decrease of $744 million from SCE's requested revenue requirement primarily related to lower authorized expenses for wildfire insurance, vegetation management, employee benefits and depreciation. The proposed decision, if adopted, would provide a balancing account for cost recovery of up to 115% of authorized vegetation management expenses. The proposed decision would also provide regulatory mechanisms to seek recovery of vegetation management expenses above 115% of authorized levels and incremental wildfire insurance expenses through reasonableness review applications. SCE expects

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vegetation management costs to exceed authorized levels due to increased labor rates required by state legislation in October 2019. If adopted, the proposed decision would lead to a non-core impairment of utility property, plant and equipment of up to $78 million ($56 million after-tax) related to disallowed historical capital expenditures of pole replacements the CPUC determined were performed prematurely.

The proposed decision would allow escalation of wildfire capital additions based on forecast spending for both 2022 and 2023. It would also allow operation and maintenance expenses to be escalated for 2022 and 2023 through the use of various escalation factors for labor, non-labor and medical expenses. The methodology set forth in the proposed decision would, if adopted by the CPUC, result in a revenue requirement of $7.2 billion in 2022 and $7.6 billion in 2023.

The CPUC has approved the establishment of a memorandum account making the authorized revenue requirement changes effective January 1, 2021. Under the proposed decision the increase in January 2021 to September 2021 authorized revenues would be collected over a 27-month period beginning October 1, 2021.

SCE cannot predict the revenue requirement the CPUC will ultimately authorize. SCE is recognizing revenue based on the 2020 authorized revenue requirement until a final GRC decision is issued. SCE expects a final decision on the track 1 GRC application for the 2021 test year in the third quarter of 2021. A final decision could result in material changes to the proposed decision.

This table sets out the authorized revenue and costs of service under the 2018 GRC and the 2021 GRC proposed decision:

The proposed decision, if adopted, would authorize total capital expenditures of $4.6 billion for 2021, $577 million lower than SCE's request. The most significant reduction to SCE's request is related to SCE's Wildfire Covered Conductor Program ("WCCP"), SCE's largest wildfire risk mitigation program. SCE had requested $3.4 billion of capital expenditures to install 6,272 miles from 2019 to 2023. If approved, the proposed decision would authorize $1.5 billion of capital expenditures for SCE to install 2,750 miles of covered conductor from 2019 to 2023 and a balancing account to track the difference between actual WCCP costs and amounts authorized. If spending is less than authorized, SCE would refund those amounts to customers. If spending exceeds authorized, SCE would recover spending up to 110% of the authorized amount from customers. SCE would be eligible to submit a subsequent reasonableness review application if spending is in excess of 110% of authorized amounts.

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This table sets out SCE's authorized capital expenditures, net of amounts collectible for customer requested modifications, under the 2021 GRC proposed decision, as well as SCE's forecast of CPUC jurisdictional non-GRC capital expenditures and FERC jurisdictional capital expenditures:

Reflected below is SCE's estimated weighted average annual rate base for 2021 – 2023 incorporating the 2021 GRC proposed decision, expected rate base from CSRP if approved, other CPUC non-GRC projects or programs that have been approved and forecast FERC capital expenditures. The table below does not reflect the $1.6 billion of AB 1054 Excluded Capital Expenditures, or approximately $350 million of rate base associated with 2020 wildfire restoration capital expenditures which SCE anticipates will be included in future CEMA applications. 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.

In July 2021, the CPUC issued a proposed decision which, if adopted, would deny without prejudice SCE's application to recover all restoration costs related to six 2017 wildfires. The proposed decision, if adopted, could lead to a $165 million reduction in forecast rate base in 2021. For additional information see "Liquidity and Capital Resources—SCE—Regulatory Proceedings—Wildfire Related Regulatory Proceedings—2019 CEMA Application" and "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingences."

For more information on tracks 2 and 3 of the 2021 GRC, see "Liquidity and Capital Resources—SCE—Regulatory Proceedings—Wildfire Related Regulatory Proceedings—2021 General Rate Case Wildfire Mitigation Memorandum Account Balances."

Capital Program

Total capital expenditures (including accruals) were $2.3 billion for the first six months of both 2021 and 2020.

In the absence of a 2021 GRC final decision, SCE continues to execute a capital spending plan for 2021 that would result in spending in the range of $5.4 billion to $5.5 billion.

SCE will adjust spending for what is ultimately authorized in the 2021 GRC final decision while minimizing the risk of disallowed spending. If the 2021 GRC proposed decision is adopted, recovery of any wildfire mitigation spending above authorized amounts would be subject to subsequent reasonableness review.

In addition to a final GRC decision, actual capital spending may be affected by changes in regulatory, environmental and engineering design requirements, permitting and project delays, cost and availability of labor, equipment and materials and other factors. For further information regarding the capital program see "Liquidity and Capital Resources—SCE—Capital Investment Plan" in this filing and "Management Overview—Capital Program" in the 2020 MD&A.

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Southern California Wildfires and Mudslides

California has experienced unprecedented weather conditions in recent years and SCE's service territory remains susceptible to additional wildfire activity in 2021 and beyond. The worsening 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. In response to worsening weather and fuel 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 to mitigate the risk of catastrophic wildfires during extreme weather events. SCE may be subject to mandated changes to, or restrictions on, its operational PSPS practices, regulatory fines and penalties, claims for damages and reputational harm if SCE does not execute PSPS in compliance with applicable rules and regulations or if it is determined that SCE has placed excessive or unreasonable reliance on PSPS. In June 2021, the CPUC issued a final decision which, among other things, will reduce future authorized revenue for the volumetric reductions in electricity sales resulting from PSPS events initiated after June 2021 until the CPUC determines that improvements in the PSPS program have been made.

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, and expect that any such losses after insurance recoveries will not be material.

2017/2018 Wildfire/Mudslide Events

As discussed in the 2020 Form 10-K, multiple lawsuits related to the 2017/2018 Wildfire/Mudslide Events have been initiated against SCE and Edison International.

Through June 30, 2021, Edison International and SCE have recorded total pre-tax charges of $6.2 billion, expected recoveries from insurance of $2.0 billion and expected recoveries through FERC electric rates of $233 million related to the 2017/2018 Wildfire/Mudslide Events. The after-tax net charges to earnings recorded through June 30, 2021 have been $2.9 billion.

As of June 30, 2021, SCE had paid $4.7 billion under executed settlements and had $141 million to be paid under executed settlements related to the 2017/2018 Wildfire/Mudslide Events. As of the same date, SCE had recovered $2.0 billion through insurance and $139 million through FERC-jurisdictional electric rates.

After giving effect to all settlements entered into through June 30, 2021, Edison International and SCE's best estimate of expected losses for remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events was $1.4 billion. The remaining estimated losses for the 2017/2018 Wildfire/Mudslide Events do not include an estimate of any potential fines or penalties that could be levied against SCE in connection with the 2017/2018 Wildfire/Mudslide Events. Edison International and SCE are currently unable to reasonably estimate the magnitude of any such fines or penalties, or the associated timing if they were to be imposed. 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 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, whether inverse condemnation will be held applicable to SCE with respect to damages caused by the Montecito Mudslides, uncertainties related to the litigation

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processes, the uncertainty in estimating damages that may be alleged, and the uncertainty as to how these factors impact future settlements.

SCE will seek CPUC-jurisdictional rate recovery of prudently-incurred, actual losses realized in connection with the 2017/2018 Wildfire/Mudslide Events in excess of available insurance. 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 future 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.

Current Wildfire Insurance Coverage

SCE has approximately $1.0 billion of wildfire-specific insurance coverage for events that may occur during the period July 1, 2021 through June 30, 2022, subject to $50 million of self-insured retention and up to approximately $75 million of co-insurance, which results in net coverage of approximately $875 million. Various coverage limitations within the policies that make up SCE's wildfire insurance coverage could result in additional material self-insured costs, for instance in the event of multiple wildfire occurrences during a policy period or with a single wildfire with damages in excess of the policy limits. SCE believes that its insurance coverage for the July 1, 2021 through June 30, 2022 period meets its obligation to maintain reasonable insurance coverage under AB 1054.

2019 Wildfire Legislation

In July 2019, AB 1054 was signed by the governor of California and became effective immediately. The summary of the wildfire legislation in this report is based on SCE's interpretation of the legislation and is qualified in its entirety by, and should be read together with, AB 1054 and companion Assembly Bill 111.

AB 1054 Prudency Standard

Under AB 1054, the CPUC must apply a new standard when assessing the prudency of a utility in connection with a request for recovery of wildfire costs for wildfires ignited after July 12, 2019. Utilities with a valid safety certification will be presumed to have acted prudently related to a wildfire ignition unless a party in the cost recovery proceeding creates serious doubt as to the reasonableness of the utility's conduct, at which time, the burden shifts back to the utility to prove its conduct was prudent. If a utility does not have a valid safety certification, it will have the burden to prove, based on a preponderance of evidence, that its conduct was prudent.

Wildfire Insurance Fund

AB 1054 also provided for the Wildfire Insurance Fund to reimburse a utility for payment of certain third-party damage claims arising from certain wildfires that exceed, in aggregate in a calendar year, the greater of $1.0 billion or the insurance coverage required to be maintained under AB 1054. Through June 30, 2021, the participating investor-owned utilities, PG&E, SCE and SDG&E, have collectively contributed approximately $8.1 billion to the Wildfire Insurance Fund and have not sought reimbursement of wildfire claims from the fund.

Participating investor-owned utilities will be reimbursed from the Wildfire Insurance Fund for eligible claims, subject to the fund administrator's review. Utilities participating in the Wildfire Insurance Fund are not required to reimburse the fund for amounts withdrawn from the fund that the CPUC finds were prudently incurred and can recover such prudently incurred wildfire costs through electric rates if the fund has been exhausted. SCE will reimburse the fund for any withdrawn amounts if SCE receives payment of such amounts under an indemnification agreement or from an insurance provider or other third-party. SCE will also be required to reimburse the fund for withdrawn amounts that the CPUC disallows subject to the AB

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1054 Liability Cap. A utility will not be eligible for the AB 1054 Liability Cap if it does not maintain a valid safety certification or its actions or inactions that resulted in the wildfire are found to constitute conscious or willful disregard of the rights and safety of others. Based on SCE's forecasted weighted-average 2021 transmission and distribution rate base, excluding general plant and intangibles, and using the equity portion of SCE's CPUC authorized capital structure of 52%, SCE's requirement to reimburse the Wildfire Insurance Fund for eligible claims disallowed in 2021 would be capped at approximately $3.2 billion. SCE will not be allowed to recover borrowing costs incurred to reimburse the fund for amounts that the CPUC disallows. The Wildfire Insurance Fund and, consequently, the AB 1054 Liability Cap, will terminate when the administrator determines that the fund has been exhausted.

Safety Certification and Wildfire Mitigation Plan

Under AB 1054, SCE can obtain an annual safety certification upon the submission of certain required safety information, including an approved WMP. On September 17, 2020, SCE obtained a safety certification that will be valid for 12 months. Notwithstanding its 12-month term, if SCE requests a new safety certification by September 13, 2021, then its current safety certification will remain valid until the OEIS acts on SCE's request for a new safety certification. SCE expects to request a new safety certification by September 13, 2021 and expects the OEIS to act on its request by December 13, 2021.

SCE submitted its 2020 – 2022 WMP in February 2020. In June 2020, the CPUC ratified the OEIS's conditional approval of SCE's 2020 – 2022 WMP. The approval was conditioned on SCE providing requested information to the OEIS, including additional descriptions of how SCE is implementing, and will implement, certain requirements imposed by the OEIS. SCE submitted updates to its 2020 – 2022 WMP in February 2021 to, among other things, report on implementation of its plan in 2020 and describe new and ongoing wildfire mitigation activities. In June 2021, SCE submitted revised updates to its 2020 – 2022 WMP in response to a revision notice received from the OEIS. In July 2021, the OEIS issued a draft resolution approving SCE's updates, and a draft action statement requiring SCE to remedy certain specified issues, including by reevaluating the scope and pace of its covered conductor program and providing additional clarity and consistency on risk mitigation analysis. If the draft action statement is approved, SCE will be required to submit a report regarding its progress on remedying these issues on November 1, 2021 and in its 2022 WMP update. Final approval of the draft resolution and the draft action statement is expected in August 2021.

Capital Expenditure Requirement

Under AB 1054, approximately $1.6 billion of spending by SCE on wildfire risk mitigation capital expenditures made after August 1, 2019, cannot be included in the equity portion of SCE's rate base. SCE can apply for irrevocable orders from the CPUC to finance these AB 1054 Excluded Capital Expenditures, including through the issuance of securitized bonds, and can recover any prudently incurred financing costs. In November 2020, the CPUC issued an irrevocable order permitting SCE to finance approximately $340 million, comprised of AB 1054 Excluded Capital Expenditures incurred in connection with GS&RP and prudently incurred financing costs, through the issuance of securitized bonds. As of June 30, 2021, SCE has spent all of the approximately $1.6 billion in AB 1054 Excluded Capital Expenditures.

SCE issued securitized bonds in the amount of $338 million in February 2021. In June 2021, SCE filed an application with the CPUC requesting to finance up to $1.0 billion of wildfire mitigation and customer uncollectible costs and associated financing costs through the issuance of securitized bonds. The $1.0 billion request included approximately $518 million of AB 1054 Excluded Capital Expenditures. SCE expects to seek additional irrevocable orders from the CPUC to finance the remaining AB 1054 Excluded Capital Expenditures. See "Liquidity and Capital Resources—SCE—Regulatory Proceedings—Financing Order" for further details.

For further information, see "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" in the 2020 Form 10-K and "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides" in this report.

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CSRP

In April 2021, SCE implemented a new customer service system, which replaced a majority of SCE's customer systems. The project is referred to as the Customer Service Re-Platform (CSRP). SCE has tracked the cost of the CSRP system implementation in a previously approved memorandum account. Forecasted expenditures for the CSRP project are approximately $540 million in capital and $90 million in operations and maintenance expenses from inception through 2021.

In July 2021, SCE filed an application with the CPUC requesting approval of $483 million of capital expenditures and $40 million of operations and maintenance expenses recorded in the CSRP memorandum account through April 2021 resulting in revenue requirements of $411 million from 2021 to 2024. SCE expects to seek recovery of costs incurred from May 2021 through December 2021 in a future application anticipated to be filed in 2022.

COVID-19

As discussed in the 2020 Form 10-K, 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, but the pandemic has not had a pervasive impact on SCE's or Edison International's ability to operate their business.

As a result of the pandemic and increased estimates of uncollectible expenses, largely related to the economic impacts of the pandemic on SCE's customers, SCE has recognized $250 million of incremental costs as of June 30, 2021, of which $78 million has been deferred to memorandum accounts for future CPUC reasonableness review and $172 million has been transferred to balancing accounts pending recovery. In addition to the increases in expected uncollectible accounts, SCE has incurred incremental costs associated with sequestering certain SCE employees at essential work locations and coordination of SCE's response to the emergency.

In April 2021, the CPUC issued a decision to adopt a COVID-19 disconnection moratorium for medium-large commercial and industrial electric customers and established a memorandum account to track, and seek recovery of, the resulting costs.

SCE has requested an irrevocable financing order to securitize up to $78 million of incremental uncollectible expenses. SCE plans to recover a further $34 million of incremental residential uncollectible expenses associated with the economic effects of the COVID-19 pandemic and eligible for securitization through the ERRA balancing account.

California's state assembly is considering legislation to authorize, fund and implement the CAPP, which could reduce SCE's 2020 and 2021 customer arrearages for certain residential customers. To the extent SCE's total uncollectible expenses are offset by the CAPP, no recovery will be sought through other mechanisms. See "Liquidity and Capital Resources—SCE—Regulatory Proceedings—Financing Order" for further details.

For further information see "Notes to the Consolidated Financial Statements—Note 11. Regulatory Assets and Liabilities" in this filing and "Management Overview—COVID-19" and "Risk Factors" in the 2020 MD&A.

Wildfire Mitigation, Wildfire Insurance and Restoration Expenses

As discussed in the 2020 Form 10-K, in response to the increase in wildfire activity, and faster progression of and increased damage from wildfires across SCE's service territory and throughout California, SCE is currently incurring wildfire mitigation, wildfire insurance and wildfire and drought restoration related spending at levels significantly exceeding amounts authorized in its 2018 GRC.

As of June 30, 2021, SCE has recognized approximately $1.1 billion of regulatory assets related to incremental wildfire mitigation expenses, including depreciation expense from $2.0 billion of total incremental wildfire mitigation capital expenditures. The regulatory assets include $401 million of operations and maintenance expense authorized for recovery in the GRC track 2 proceeding in January 2021. SCE expects to securitize this amount, subject to approval of a financing order by the CPUC. See "Liquidity and Capital Resources—SCE—Regulatory Proceedings—Financing Order" for further details.

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In the event these costs are not authorized for securitization, SCE will include the costs in customer rates as soon as practicable. In February 2021, the AB 1054 Excluded Capital Expenditures incurred in connection with GS&RP and prudently incurred financing costs previously deferred to memorandum accounts were recovered through a previous securitization.

Additionally, SCE has recognized $396 million of regulatory assets associated with drought and wildfire restoration and $342 million of regulatory assets related to incremental wildfire insurance expenses. While SCE believes such costs are probable of future recovery, there is no assurance that SCE will collect all amounts currently deferred as regulatory assets.

In July 2021, the CPUC issued a proposed decision which, if approved, would authorize full recovery of requested drought restoration costs and approve a revenue requirement of $81 million. However, the proposed decision, if adopted, would reject recovery of the $8 million revenue requirement associated with all $60 million of requested wildfire restoration costs related to 2017 wildfires, but would allow SCE to submit a subsequent cost recovery application for those costs. For additional information, see "Liquidity and Capital Resources—SCE—Regulatory Proceedings— Wildfire Related Regulatory Proceedings—2019 CEMA Application."

For additional information, see "Liquidity and Capital Resources—SCE" and "Liquidity and Capital Resources—SCE—Regulatory Proceedings—Wildfire Related Regulatory Proceedings."

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RESULTS OF OPERATIONS

SCE

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

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

Three months ended June 30, 2021 versus June 30, 2020

Earning Activities

Earning activities were primarily affected by the following:

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Cost-Recovery Activities

Operating revenue and the corresponding operating expenses in cost-recovery activities were primarily affected by the following:

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Six months ended June 30, 2021 versus June 30, 2020

Earning Activities

Earning activities were primarily affected by the following:

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Cost-Recovery Activities

Operating revenue and the corresponding operating expenses in cost-recovery activities were primarily affected by the following:

Supplemental Operating Revenue Information

SCE's retail billed and unbilled revenue (excluding wholesale sales) was $3.0 billion and $2.7 billion for the three months ended June 30, 2021 and 2020 respectively, and $5.7 billion and $5.3 billion for the six months ended June 30, 2021 and 2020, respectively.

The increase for the three months and six months ended June 30, 2021 compared to the same periods in 2020 is primarily due to higher cost-recovery activities related to higher purchased power and fuel costs driven by higher power and gas prices. See "—Cost-Recovery Activities" for further details.

As a result of the CPUC-authorized decoupling mechanism, SCE earnings are not affected by changes in retail electricity sales.

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Income Taxes

SCE's income tax expense increased by $50 million and $101 million for the three and six months ended June 30, 2021 compared to the same period in 2020. The increase for the three months ended June 30, 2021 is primarily due to higher pre-tax income and lower flow-through tax benefits. The increase for the six months ended June 30, 2021 is primarily due to higher pre-tax income, lower flow-through tax benefits and a tax benefit recorded in 2020 from the re-measurement of uncertain tax positions.

The effective tax rates were 16.5% and 5.9% for the three months ended June 30, 2021 and 2020, respectively. The effective tax rates were 6.8% and (8.0)% for the six months ended June 30, 2021 and 2020, respectively. SCE's effective tax rate is below the federal statutory rate of 21% primarily due to 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 results in recording regulatory assets and liabilities for amounts that would otherwise be recorded to deferred income tax expense.

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 include 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 loss from operations of Edison International Parent and Other decreased $22 million for the three months ended June 30, 2021 and decreased $21 million for the six months ended June 30, 2021 compared to the same period in 2020.

The decrease of losses for the three and six months ended June 30, 2021 is primarily due recognition of unrealized gains on investment in Proterra (see "Notes to Consolidated Financial Statements—Note 10. Investments"), and a goodwill impairment charge of $34 million ($25 million after-tax) recorded in 2020 related to Edison Energy stemming from the economic impact of COVID-19, partially offset by higher preferred dividend expense as a result of Edison International's preferred equity issuance in 2021.

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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 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.

In addition, in June 2021, SCE filed an application with the CPUC requesting to finance up to $1.0 billion of wildfire mitigation and customer uncollectible costs and associated financing costs through the issuance of securitized bonds. For further details, see "—Regulatory Proceedings—Financing Order."

In June 2021, SCE issued $475 million floating rate first and refunding mortgage bonds due in 2022, $450 million first and refunding mortgage bonds due in 2031 and $450 million first and refunding mortgage bonds due in 2051. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements." The proceeds were used to finance or refinance eligible sustainable projects, repay commercial paper borrowings and for general corporate purposes. Eligible sustainable projects include categories such as renewable energy, clean transportation, energy efficiency and carbon reduction, climate change adoption, 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.

In May 2021, SCE entered into a term loan in the amount of $1.2 billion with a termination date of May 2022. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements." SCE used the proceeds to finance certain capital projects that meet the green loan principles set forth by international loan market organizations including the Loan Syndications and Trading Association, including ongoing funding of projects that meet the green loan principles such as SCE's WCCP related to wildfire mitigation and repaying all outstanding indebtedness under its 364-day revolving credit agreement and term loan credit agreement, both entered into during March 2020 and previously used to fund such projects.

In April 2021, SCE issued $400 million of floating rate first and refunding mortgage bonds due in 2023, $400 million of floating rate first and refunding mortgage bonds due in 2024, $350 million of first and refunding mortgage bonds due in 2023 and $700 million of first and refunding mortgage bonds due in 2024. The floating rate bonds will pay interest at a floating rate equal to the Secured Overnight Financing Rate ("SOFR") plus a spread. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements." The proceeds of these issuances were used to fund the payment of wildfire claims exceeding insurance proceeds, including amounts paid under the Woolsey Subrogation Settlement.

In the first quarter of 2021, SCE Recovery Funding LLC, a bankruptcy remote, wholly owned special purpose subsidiary of SCE, issued $338 million of Senior Secured Recovery Bonds Series 2021-A ("Recovery Bonds") in three tranches, of $138 million, $100 million and $100 million with final maturities in 2033, 2040 and 2045, respectively, and used the proceeds of the Recovery Bonds to acquire SCE's right to collect charges associated with the AB 1054 Excluded Capital Expenditures from certain existing and future SCE customers ("Recovery Property"). SCE used the proceeds it received from the sale of the Recovery Property to reimburse itself for previously incurred AB 1054 Excluded Capital Expenditures, including the retirement of related debt and financing costs. For further details, see "Notes to Consolidated Financial

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Statements—Note 3. Variable Interest Entities," "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements" and "Notes to Consolidated Financial Statements—Note 11. Regulatory Assets and Liabilities."

In the first quarter of 2021, SCE issued $150 million and $750 million first and refunding mortgage bonds due in 2030 and 2051, respectively. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements." The proceeds were primarily used to repay SCE's commercial paper borrowings and for general corporate purposes.

During the first and second quarters of 2021, Edison International made equity contributions to SCE of $900 million and $325 million, respectively.

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