EDISON INTERNATIONAL - Annual Report: 2022 (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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If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

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Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

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, 2022, 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 16, 2023:

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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 2023 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," “targets,” 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 information that may be of interest to investors in a section titled "Presentations and Updates" 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.

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 subsidiaries other than SCE and its 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

The discussion related to the results of operations and changes in financial condition for 2021 compared to 2020 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, 2021, which was filed with the SEC in February 2022.

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 in North America and Europe. 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, 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 2022 earnings decreased $147 million, driven by an increase in Edison International Parent and Other losses of $165 million, offset by an increase in SCE's earnings of $18 million. Edison International Parent and Other higher losses consisted of $103 million of lower non-core earnings and $62 million of higher core losses. SCE's higher net income consisted of $86 million of higher core earnings, offset by $68 million of higher non-core losses.

The increase in SCE's core earnings was primarily due to higher revenue due to the escalation mechanism as set forth in the 2021 GRC final decision and higher return on rate base from capital balancing accounts, partially offset by higher operating and maintenance expenses, higher depreciation from increased plant balance and higher interest expense.

The increase in Edison International Parent and Other's core losses was primarily due to higher preferred dividends.

Consolidated non-core items for 2022 and 2021 for Edison International included:

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

Electricity Industry Trends

The electric power industry is undergoing transformative change driven by federal and state government actions to reduce GHG emissions, as well as technological advances, such as customer-owned generation, electric vehicles and energy storage. These factors are altering the way in which electricity is generated and delivered as well as the regulatory and business environment for the industry.

California is committed to reducing its GHG emissions, improving local air quality and supporting continued economic growth. The state codified into law goals to reduce GHG emissions by 40% from 1990 levels by 2030 and 85% from the same baseline by 2045, as well as to be carbon neutral by 2045. State and local air quality plans also 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.

While these policy goals cannot be achieved by the electric sector alone, the electric grid is a critical enabler of the adoption of 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 power from renewable resources by 2030. California also requires sellers of electricity to deliver 100% of retail sales from carbon-free sources by 2045, including interim targets of 90% by 2035 and 95% by 2040. In 2022, approximately 48% of SCE's customer deliveries came from carbon-free resources. SCE remains well-positioned to meet its long-term 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 also responded 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, building upon the historic infrastructure legislation of 2021, Congress passed the IRA in 2022 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 to serve 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 programs and 2022 legislation

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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 electrification, building a modernized and more reliable grid, and enabling customers' technology choices. SCE is focused on accelerating clean power and electrification, strengthening and modernizing the grid, achieving operational and service excellence and proactively mitigating climate change-related risks, including wildfires. 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 projects that, even as electricity bills increase over time, due to higher efficiency of electrified end-use technologies, decarbonization and electrification will reduce energy consumption costs for the average family by one-third by 2045. 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 as well as contracting for substantial new clean energy resources. See "—Capital Program" and "Business—SCE—Purchased Power and Fuel Supply—CAISO Wholesale Energy Market" for further details. SCE also continues to implement its transportation electrification programs. As of December 31, 2022, SCE had completed construction at 179 sites to support 3,048 charge ports under its suite of light duty Charge Ready Programs, and 42 sites to support the electrification of 895 medium and heavy-duty vehicles through its Charge Ready Transport program.

Changes in the electric power industry are impacting customers and jurisdictions outside California as well. Many other states and countries are also pursuing climate change and GHG reduction objectives and large commercial and industrial customers are continuing to pursue cost reduction and sustainability goals. Edison Energy provides decarbonization and energy solutions to commercial, institutional and industrial customers in North America and Europe who may be impacted by these changes.

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

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2025 General Rate Case

SCE expects to file its 2025 GRC application with the CPUC in May 2023, for the four-year period of 2025 – 2028. In its 2025 GRC, SCE will seek necessary funding for various grid planning and development activities to support California's clean energy transformation and economy-wide decarbonization objectives, while continuing to prioritize wildfire mitigation programs in high fire risk areas, focus on increased system reliability, technology enabled grid investments and provide safe, reliable, and affordable service to customers.

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Cost of Capital Applications

In 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 that can adjust the authorized cost of capital between SCE's cost of capital proceedings based on changes in Moody's utility bond rate index. In November 2022, the CPUC issued a decision maintaining SCE's cost of capital at pre-2022 levels for 2022 and closing the proceedings. In December 2022, intervenors filed an application for rehearing of the decision; if the CPUC takes further action it may impact revenues collected in rates during 2022.

In April 2022, SCE filed an application with the CPUC for authority to establish its authorized cost of capital for utility operations for a three-year term beginning in 2023 and to reset the related annual cost of capital adjustment mechanism (see "Business—SCE—Overview of Ratemaking Process" for further information on the adjustment mechanism). In December 2022, the CPUC issued a final decision that set SCE's ROE at 10.05%, and maintained SCE's current authorized capital structure, after CPUC-allowed exclusions, of 52% common equity, 43% long-term debt, and 5% preferred equity. Under the final decision, SCE's 2023 authorized cost of long-term debt and preferred equity are 4.39% and 6.50%, respectively. Based on the approved capital structure and costs, SCE's weighted average return on rate base for 2023 will be 7.44%. Based on the revenue requirement approved in SCE's 2021 GRC, the final decision will decrease SCE's revenue requirement for 2023 by approximately $90 million compared to the cost of capital currently in rates. In January an intervenor filed an application for rehearing, if the CPUC takes further action it may impact revenues being collected in rates during 2023.

The cost of capital adjustment mechanism's benchmark beginning January 1, 2023, is the 12-month, October 1, 2021 through September 30, 2022, average Moody's Baa utility bond yield of 4.37%. If the difference between the benchmark and the average of the same index for the 12-month period from October 1, 2022 to September 30, 2023 exceeds 100-basis points, SCE's CPUC-authorized ROE will be adjusted for 2024 by half the amount of the difference (up or down). The average Moody's Baa utility bond yield between October 1, 2022 and February 16, 2023 was 5.78%. The spot rate for Moody's Baa utility bond was 5.65% on February 16, 2023. An average Moody's Baa utility bond yield of 5.13% or higher from February 17, 2023 through September 30, 2023 would trigger the mechanism to adjust upward.

Capital Program

Total capital expenditures (including accruals) were $5.7 billion in 2022 and $5.4 billion in 2021. SCE's year-end rate base was $40.6 billion at December 31, 2022, compared to $37.9 billion at December 31, 2021, after excluding rate base associated with AB 1054 Excluded Capital Expenditures.

SCE's 2022 recorded and 2023 – 2024 forecast capital expenditures are set forth in the table below:

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* Not applicable

SCE's capital expenditure forecast reflects planned CPUC-jurisdictional spending including amounts requested in SCE's GRC track 4 filing for the 2024 attrition year of the 2021 GRC, the WCCP and other programs outlined in SCE's WMP that are above amounts authorized in the 2021 GRC, CPUC-approved utility owned storage expenditures and planned FERC capital expenditures. See "Liquidity and Capital Resources—SCE—Regulatory Proceedings" for more information on the GRC track 4 filing.

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 above, including deferral of all activity on the Riverside Transmission Reliability Project during 2023. For more information, see "Liquidity—SCE—Capital Investment Plan." 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.

In addition to the amounts presented in the table above SCE expects to make additional CPUC capital expenditures, the recovery of which will be subject to future regulatory approval. This includes expenditures to be requested in the 2025 GRC application which will reflect SCE's 2023 – 2025 WMP and non-GRC programs including the Building Electrification Program and an enterprise resource planning software implementation. These capital expenditures and expected FERC capital expenditures are expected to be in a range of approximately $5.3 billion to $6.8 billion in aggregate between 2024 and 2025.

Reflected below is SCE's weighted average annual rate base for 2023 – 2024 incorporating authorized CPUC-jurisdictional expenditures including utility owned storage, planned FERC capital expenditures, and planned non-GRC projects or programs.

* 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 the 2025 GRC and non-GRC programs, SCE's weighted average annual rate base could be up to $45.0 billion in 2024 and is expected to be between $47.2 billion and $49.5 billion in 2025.

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Utility Owned Storage Projects

In October 2021, SCE contracted with Ameresco, Inc. ("Ameresco") for the construction of utility owned energy storage projects at three sites in SCE's service territory with an aggregate capacity of 537.5 MW and an in-service date of August 1, 2022.

In April 2022, SCE received a force majeure event notice from Ameresco in which Ameresco asserted that both manufacturing delays related to COVID-19 shut-downs in China and new shipping restrictions imposed by Chinese governmental authorities were then impacting the supply of batteries from China necessary for timely completion of the projects. Ameresco subsequently supplemented its force majeure notice noting additional supply chain issues related to COVID-19. Permitting delays and engineering issues and certain changes requested by SCE also impacted the projects in 2022. SCE expects to receive in aggregate approximately $270 million of tax credits available under the IRA for all three projects, which will accrue to the benefit of its customers. In January 2023, SCE received a force majeure event notice from Ameresco in which Ameresco asserted that severe winter storms in Southern California had impacted the timely completion of the projects.

While Ameresco has advised SCE that it currently expects all three projects to be in-service prior to June 2023, SCE believes that there is risk of delay beyond Ameresco's projected in-service dates.

SCE is continuing to evaluate the force majeure event notices and is awaiting additional information from Ameresco on the underlying events. If there is a valid force majeure event under the contracts with Ameresco, subject to certain conditions, the project schedules and any related triggers of liquidated damages may be extended, and the contract prices may be increased to account for the impact of the force majeure event. Because Ameresco did not achieve an in-service date of August 1, 2022, SCE is entitled to liquidated damages under the terms of the contracts subject to any relief Ameresco may be entitled to under the contracts, including any relief for any valid force majeure events. Once triggered, liquidated damages accrue daily for up to 60 days up to a maximum of $89 million in aggregate for all three projects.

Subject to reductions for any liquidated damages SCE is paid, SCE currently expects these storage projects to result in $1.0 billion of capital expenditures. In December 2021, the CPUC approved recovery of these expenditures and establishment of a balancing account for the associated revenue requirement, which have been reflected in rates beginning in the first quarter of 2022. Authorized revenue requirements will be included in the annual ERRA review proceeding and can only be disallowed upon a finding that SCE failed to prudently administer the contracts.

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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 2023 and beyond. In response to worsening conditions and increased wildfire activity over the past several years, SCE has developed and is implementing its 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 significant 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. SCE has incurred material losses in connection with the 2017/2018 Wildfire/Mudslide Events.

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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, recoveries through electric rates 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, 2022, in addition to the Local Public Entity Settlement, the TKM Subrogation Settlement and the Woolsey Subrogation Settlement, SCE had entered into settlements with approximately 9,500 individual plaintiffs in the 2017/2018 Wildfire/Mudslide Events litigation. In addition, SCE and the SED executed the SED Agreement in October 2021, and SCE's obligations under the SED Agreement commenced on August 15, 2022, when CPUC approval of the SED Agreement became final and non-appealable.

In 2022, SCE accrued estimated losses of $1.3 billion for the 2017/2018 Wildfire/Mudslide Events. As a result, SCE also recorded expected recoveries through FERC electric rates of $76 million against the charge, and the resulting net charge to earnings was $1.2 billion ($879 million after-tax).

Through December 31, 2022, SCE has accrued estimated losses of $8.8 billion, expected recoveries from insurance of $2.0 billion and expected recoveries through FERC electric rates of $376 million related to the 2017/2018 Wildfire/Mudslide Events. The after-tax net charges to earnings recorded through December 31, 2022 have been $4.6 billion.

As of December 31, 2022, SCE had paid $7.6 billion under executed settlements and had $185 million to be paid under executed settlements, including $120 million to be paid under the SED Agreement, related to the 2017/2018 Wildfire/Mudslide Events. As of the same date, SCE had recovered $2.0 billion through insurance and approximately $234 million through FERC-jurisdictional electric rates.

After giving effect to all payment obligations under settlements entered into through December 31, 2022, including under the SED Agreement, 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 was $934 million. As of the same date, SCE had assets for expected recoveries through FERC electric rates of $142 million on their consolidated balance sheets and had exhausted expected insurance recoveries related to the 2017/2018 Wildfire/Mudslide Events. Edison International and SCE may incur a material loss in excess of amounts accrued in connection with the remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events.

SCE will seek CPUC-jurisdictional rate recovery of prudently-incurred losses and related costs realized in connection with the 2017/2018 Wildfire/Mudslide Events in excess of available insurance and FERC-jurisdictional recoveries, other than for any obligations under the SED Agreement. Based on Edison International's and SCE's current best estimate of expected losses for the 2017/2018 Wildfire/Mudslide Events, SCE currently expects to seek CPUC-jurisdictional rate recovery of approximately $6 billion by filing multiple future applications with the CPUC. SCE targets the third quarter of 2023 for the first of such cost recovery applications, and expects to request recovery of approximately $2 billion in that filing. SCE's plans with respect to these filings may be delayed or modified. For example, the filings may be delayed if proceedings related to the 2017/2018 Wildfire/Mudslide Events do not progress as anticipated. 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 the adoption of AB 1054 on 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

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CPUC-jurisdictional wildfire-related costs related to the 2017/2018 Wildfire/Mudslide Events are probable of recovery through electric rates.

Post-2018 Wildfires

Several wildfires have significantly impacted portions of SCE's service territory after 2018, including the 2019 Saddle Ridge Fire, the 2020 Bobcat Fire, the 2022 Coastal Fire and the 2022 Fairview Fire.

In 2022, SCE recorded a $572 million increase in estimated losses for the Post-2018 Wildfires and recorded $399 million in expected insurance recoveries against the charge. In light of the prudency standard the CPUC is required to apply under AB 1054 to utilities holding a safety certificate at the time a wildfire ignited after July 12, 2019, SCE has concluded, at this time, that both uninsured CPUC-jurisdictional and uninsured FERC-jurisdictional wildfire-related costs related to the Post-2018 Wildfires, other than for those already authorized for inclusion in electric rates, are probable of recovery through electric rates. As a result, SCE also recorded expected recoveries through electric rates of $162 million against the charges accrued related to the Post-2018 Wildfires. The resulting net charge to earnings was $11 million ($8 million after-tax).

As of December 31, 2022, SCE had paid $13 million under executed settlements related to the Post-2018 Wildfires. After giving effect to all payment obligations under settlements entered into through December 31, 2022, Edison International's and SCE's estimated losses (established at the lower end of the estimated range of reasonably possible losses) for remaining alleged and potential claims related to the Post-2018 Wildfires was $682 million. As of the same date, SCE had assets for expected recoveries through insurance of $473 million and through electric rates of $166 million on their consolidated balance sheets related to the Post-2018 Wildfires.

Expected recoveries from insurance recorded for the Post-2018 Wildfires are supported by SCE's insurance coverage for multiple policy years. While Edison International and SCE may incur material losses in excess of the amounts accrued for each of the Post-2018 Wildfires, Edison International and SCE expect that any losses incurred in connection with any such fire will be covered by insurance, subject to self-insured retentions and co-insurance, and expect that any such losses after expected recoveries from insurance and through electric rates will not be material.

For further information on Southern California Wildfires and Mudslides, see "Business— Southern California Wildfires," "Risk Factors," "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.

Upstream Lighting Program

From 2017 – 2019, SCE administered the Upstream Lighting Program, part of a statewide program administered by investor-owned utilities that offered discounted energy efficient light bulbs to customers through incentives to lighting manufacturers. The CPUC began investigating the programs administered by the investor-owned utilities based on reports that investor-owned utilities, including SCE, shipped a significant number of bulbs under the program that could not be tracked to customers.

In May 2022, the CPUC issued an order directing SCE to show cause as to why SCE should not be required to: (i) refund ratepayer funding for the portion of the program budget associated with light bulbs that were unaccounted for, (ii) refund energy efficiency incentive mechanism ("ESPI") awards associated with unaccounted-for light bulbs, and (iii) pay penalties for misrepresenting program progress and results to the CPUC. In September 2022, a Presiding Officer's Decision ("POD") was issued in the proceeding finding that SCE mismanaged its Upstream Lighting Program from 2017 through 2019 and failed to ensure that efficient light bulbs were tracked and sold as intended by the program design. The POD requires SCE to (i) refund to ratepayers $76.1 million, representing the portion of the program budget associated

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with light bulbs that could not be accounted for, (ii) refund to ratepayers $6.8 million, representing ESPI awards associated with light bulbs that could not be accounted for, (iii) pay $19.06 million in fines; and (iv) bear the cost of SCE's investigation, approximately $900,000. The CPUC issued its final decision in November 2022 in line with the POD.

RESULTS OF OPERATIONS

SCE

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

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Years ended December 31, 2022, 2021, and 2020

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

Earning Activities

Earning activities in 2022 compared to 2021 were primarily affected by the following:

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Cost-Recovery Activities

Cost-recovery activities in 2022 compared to 2021 were primarily affected by the following:

Supplemental Operating Revenue Information

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

Income Taxes

Lower income tax expense of $126 million in 2022 compared to 2021 (a tax benefit was recorded in 2022) was primarily driven by a decrease in pre-tax income and the absence of a one-time charge recorded in 2021. In July 2021, SCE received the IRS's response to its private letter ruling request, regarding the scope of the deferred tax normalization requirements and the computations required to comply with the average rate assumption method. As a result of the IRS ruling, SCE's estimate changed, and a charge was recorded in 2021 to reduce the 2018 through 2021 cumulative tax benefits returned to customers. The effective tax rates were (12.9)% and 1.8% for 2022 and 2021, respectively. SCE's effective tax rate is below the federal statutory rate of 21% for 2022 and 2021 primarily due to the CPUC's ratemaking treatment for the current tax benefit arising from certain property-related and other temporary differences, which reverse

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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 reportable as segments, as well as intercompany eliminations.

Loss from Operations

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

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The net loss attributable to common shareholders from operations of Edison International Parent and Other increased $165 million in 2022 compared to 2021 primarily due to an income tax benefit of $110 million recorded in 2021 related to the settlement of the 2007 – 2012 California tax audits with the FTB and higher preferred dividends in 2022.

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 and bank financings and equity contributions from Edison International Parent, as needed. SCE also has availability under its credit facility 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.

SCE has invested all $1.6 billion of the required AB 1054 Excluded Capital Expenditures. SCE issued securitized bonds in the amounts of $338 million and $533 million in February 2021 and 2022, respectively, to finance a portion of these expenditures. SCE expects to use the proceeds of future securitized bonds to repay a term loan of $730 million prior to its maturity in May 2023, which financed the remaining AB 1054 Excluded Capital Expenditures. SCE has filed a regulatory application for authorization to issue additional securitized bonds. For further information, see "—Regulatory Proceedings—Financing Order."

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The IRA was signed into law in August 2022. See "—Edison International Parent and Other— Edison International Income Taxes" for a description of the impacts of the legislation on the Edison International consolidated tax group including SCE.

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

SCE's credit ratings may be affected if, among other things, regulators fail to successfully implement AB 1054 in a consistent and credit supportive manner or the Wildfire Insurance Fund is depleted by claims from catastrophic wildfires. Credit rating downgrades increase the cost and may impact the availability of short-term and long-term borrowings, including commercial paper, credit facilities, bond financings or other borrowings. In addition, some of SCE's power procurement contracts and environmental remediation obligations would require SCE to pay related liabilities or post additional collateral if SCE's credit rating were to fall below investment grade. For further details, see "—Margin and Collateral Deposits."

Available Liquidity

At December 31, 2022, SCE had cash on hand of $766 million and approximately $2.7 billion available to borrow on its $3.4 billion revolving credit facility. The credit facility is available for borrowing needs until May 2026.

At December 31, 2022, SCE had $195 million outstanding commercial paper, net of discount, at a weighted average interest rate of 5.20%. The aggregate maximum principal amount under the SCE revolving credit facility may be increased up to $4.0 billion, provided that additional lender commitments are obtained. For further details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements."

SCE may finance balancing account undercollections and working capital requirements to support operations and capital expenditures with commercial paper, its credit facilities or other borrowings, subject to availability in the bank and capital markets. As necessary, SCE will utilize its available liquidity, capital market financings, other borrowings or parent company contributions to SCE equity in order to meet its obligations as they become due, including costs related to the 2017/2018 Wildfire/Mudslide Events. For further information, see "Management Overview—Southern California Wildfires and Mudslides."

Debt Covenant

SCE's credit facilities and term loan require a debt to total capitalization ratio as defined in the applicable agreements of less than or equal to 0.65 to 1. At December 31, 2022, SCE's debt to total capitalization ratio was 0.56 to 1.

At December 31, 2022, SCE was in compliance with all financial covenants that affect access to capital.

Regulatory Proceedings

Wildfire Related Regulatory Proceedings

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 has incurred wildfire mitigation, wildfire insurance and wildfire and drought restoration related spending at levels significantly exceeding amounts authorized in SCE's GRCs.

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2021 General Rate Case Wildfire Mitigation Memorandum Account Balances

The 2021 GRC decision authorized the establishment of balancing accounts for expenses for vegetation management, wildfire insurance, and the WCCP program, with expenditures up to certain thresholds approved for cost recovery. SCE may submit subsequent reasonableness review applications for any spending in excess of these thresholds. SCE has incurred, and in 2023 expects to incur, vegetation management expenses and capital expenditures for WCCP in excess of thresholds established in the 2021 GRC. SCE has also incurred, and in 2023 expects to incur, costs in excess of amounts authorized in the 2021 GRC related to other wildfire mitigation activities, including inspections and maintenance and to support execution of PSPS events. SCE tracks these incremental amounts in memorandum accounts which will be subject to approval in future regulatory proceedings. For more information see "Business—SCE—Overview of Ratemaking Process."

In June 2022, SCE filed an application with the CPUC requesting reasonableness review of these incremental costs incurred in 2021 related to non-covered conductor wildfire mitigation and vegetation management activities, requesting a total revenue requirement of approximately $327 million. In October 2022, the CPUC temporarily suspended the procedural schedule for the proceeding to consider whether there is a sufficient record in the proceeding to address the issue of whether recorded costs are incremental, reasonable, and properly recoverable. In December 2022, the CPUC began to conduct an audit of SCE's 2021 incurred costs, with an expectation of issuing an audit report in July 2023.

2021 General Rate Case Track 3

In June 2022, the CPUC issued a decision on SCE's 2021 GRC track 3 filing that authorized SCE to recover
$385 million of incremental wildfire mitigation operation and maintenance expense and approved $465 million of incremental wildfire mitigation capital expenditures as reasonable. SCE did not obtain a determination of reasonableness for an additional $197 million of capital expenditures, associated with construction in progress, plant assets and installation of current limiting fuses, portions of which were defective. SCE expects to provide additional information supporting its application for recovery of approximately $25 million of current limiting fuses expenditure in its 2025 GRC application. The construction in progress not approved as reasonable in the 2021 GRC track 3 was not eligible for inclusion in SCE's final financing order application, but is being recovered as part of SCE's authorized rate base included in the 2021 GRC decision on a forecast basis.

The decision did not find reasonable certain capital expenditures related to vegetation management software purchased by SCE. As a result of the decision, SCE recorded a $17 million impairment of utility property, plant and equipment.

In October 2022, SCE filed a request to seek recovery of $35 million, after accounting for a $10 million deductible, for vegetation management-related operations and maintenance expenses not approved in this proceeding. These increased costs are tracked in a "Z-Factor" memorandum account for vegetation management line clearance costs related to Senate Bill 247, which went into effect January 1, 2020, and requires SCE to pay line clearance tree trimmers the prevailing wage of qualified electrical workers.

The decision resulted in a revenue requirement of approximately $400 million including a $15 million 2020 revenue requirement for capital expenditures previously found reasonable by the CPUC. The approved revenue requirements are required to be amortized over a 36-month period. SCE is seeking recovery of the approved capital expenditures in a separate financing order application. See "— Financing Order" below.

Wildfire Expense Memorandum Account

SCE tracks insurance premium costs related to wildfire liability insurance policies as well as other wildfire-related costs in its WEMA. In December 2020, SCE filed a WEMA application with the CPUC to seek recovery of $215 million of costs recorded in WEMA at December 31, 2020. The costs primarily related to incremental wildfire insurance premium

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expenses and associated costs for wildfire liability insurance policies that provide coverage for the last six months of 2020. In October 2022, the CPUC extended the statutory deadline for completion of the proceeding to April 2023.

SCE believes that uninsured CPUC-jurisdictional wildfire-related costs related to the Post-2018 Wildfires, other than for those already authorized for inclusion in electric rates, are probable of recovery through electric rates. As of
December 31, 2022, SCE has recorded total expected recoveries related to the Post-2018 Wildfires of $152 million within the WEMA and risk management balancing accounts.

2020 Emergency Wildfire Restoration

Multiple wildfires occurred during 2020 which caused damage within SCE's service territory and to SCE's Big Creek hydroelectric facility.

In March 2022, SCE filed a CEMA application requesting recovery of $207 million of operation and maintenance expenses incremental to authorized revenue requirements and $312 million of capital expenditures incremental to amounts authorized in the 2021 GRC primarily related to these restoration efforts. SCE has not yet filed for recovery of generation restoration costs, as repairs to hydroelectric generation facilities are not complete.

2021 General Rate Case Track 4

SCE made its 2021 GRC track 4 filing with the CPUC in May 2022. SCE is requesting a revenue requirement of
$8.6 billion for 2024. This represents an increase of $938 million compared to SCE's revenue requirement of $7.7 billion for the 2023 attrition year. A significant component of the track 4 revenue requirement request relates to projects previously authorized by the CPUC, including those which were completed and put into service since the 2021 GRC final decision. The other primary drivers of the increase are inflation and SCE's 2024 vegetation management and wildfire mitigation spending forecasts, partially due to a legislatively required wage rate increase. The schedule adopted by the CPUC for the 2021 GRC track 4 filing calls for a proposed decision in the fourth quarter of 2023.

Financing Order

In September 2022, SCE filed its third application for an irrevocable order from the CPUC to finance $772 million, comprised of AB1054 Excluded Capital Expenditures, allowed overhead costs and associated financing expenses, through the issuance of securitized bonds. The expenditures consist of $204 million approved in the 2021 GRC track 1 and $465 million approved in the 2021 GRC track 3. SCE received a proposed decision on this application in January 2023, which would authorize the issuance of securitized bonds, if approved. SCE expects a final decision in the first quarter of 2023.

CSRP

In September 2022, the CPUC approved SCE's CSRP proceeding for expenditures incurred through April 2021. The approval resulted in a revenue requirement of $388 million through December 2024. See "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Polices— Impairments of Long-lived Assets" for further information.

In May 2022, SCE filed a second CSRP application with the CPUC requesting recovery of $59 million of capital expenditures and $28 million of operation and maintenance expenses incurred from May 2021 to December 2021. SCE also expects to propose review and cost recovery for additional post-implementation CSRP costs incurred from January 2022 through December 2024 in its 2025 GRC filing.

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ERRA Proceeding

SCE's cost-recovery mechanism for its fuel and purchased power-related costs is facilitated in three main balancing accounts, the ERRA, the PABA, and the NSGBA. SCE sets rates based on an annual forecast of the costs that it expects to incur during the subsequent year. The undercollection in ERRA and PABA during 2022 resulted in SCE triggering an established mechanism requiring SCE to file an application to advise the CPUC that SCE's undercollections had exceeded the trigger amount. In December 2022, the CPUC approved inclusion of the undercollection in a January 1, 2023 rate change.

At December 31, 2022, the ERRA and PABA were undercollected by approximately $1.5 billion due to higher gas and power prices and in January 2023, SCE notified the CPUC of a further trigger of the mechanism. Due to the new rate effective in January 2023, undercollections are expected to decrease, however, if undercollections remain above the trigger level, it could result in a further adjustment to customer rates during 2023. See "Business—SCE—Overview of Ratemaking Process" for further information.

In October 2022, as part of the 2020 ERRA review proceeding, the CPUC rejected the methodology SCE used to calculate the portion of uncollectibles expense incremental to amounts authorized in SCE's GRC. This led to a disallowance of $16 million of uncollectibles expense recorded to the residential uncollectible balancing account ("RUBA") in 2020. Beginning in the fourth quarter of 2022, SCE modified its methodology for calculating incremental uncollectibles expense to be included in RUBA to align with the decision.

2023 FERC Formula Rate Annual Update

In November 2022, SCE filed its 2023 annual transmission revenue requirement update with the FERC, with the proposed rate effective January 1, 2023. The update reflects a $2 million increase from SCE's 2022 transmission revenue requirement included in customer rates. The 2023 filing was in line with the 2022 transmission revenue requirement due to significant wildfire-related claims expenses recorded in both years.

2022 California Arrearage Payment Program ("CAPP 2022")

In June 2022, California's State Assembly passed legislation to authorize, fund and implement the CAPP 2022, which is expected to reduce customer arrearages for certain residential customers of California's investor-owned utilities by up to $1.0 billion. In November 2022, SCE received $202 million of CAPP funds on behalf of customers, which has been applied to accounts receivable outstanding from individual customers. To the extent SCE's uncollectibles expenses have been offset by the CAPP 2022, recovery will not be sought through other mechanisms.

Building Electrification Programs Application

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 or enhance the electrical infrastructure for 65,000 homes to support electrification. The proposed program would include $200 million for customer-side electrical infrastructure upgrades for which SCE has requested inclusion as a regulatory asset in rate base, $69 million in capital expenditures and $408 million of operations and maintenance expense including heat pump incentives, program administration, and implementation costs. The CPUC is expected to issue a final decision on the application in mid-2023.

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Capital Investment Plan

Major Transmission Projects

A summary of SCE's most significant transmission and substation construction projects during the next two years is presented below. The timing of the projects below is subject to timely receipt of permitting, licensing and regulatory approvals.

Riverside Transmission Reliability Project

The Riverside Transmission Reliability Project is a joint project between SCE and Riverside Public Utilities ("RPU"), the municipal utility department of the City of Riverside. While RPU will be responsible for constructing some of the project's facilities within Riverside, SCE's portion of the project consists of constructing upgrades to its system, including a new 230 kV substation; certain interconnection and telecommunication facilities and transmission lines in the cities of Riverside, Jurupa Valley and Norco and in portions of unincorporated Riverside County. In May 2022, the Riverside City Council voted to review and advise on alternatives to the CPUC approved project. Consequently, SCE suspended all major activities on the project. In January 2023, the City Council voted to establish a working group to pursue funding for additional undergrounding. SCE's capital forecast currently includes $128 million and $190 million of Riverside Transmission Reliability Project expenditures in 2023 and 2024, respectively, which may be affected by further delays to the project.

Alberhill System Project

The Alberhill System Project consists of constructing a new 500 kV substation, two 500 kV transmission lines to connect the proposed substation to the existing Serrano-Valley 500 kV transmission line, telecommunication equipment and subtransmission lines in western Riverside County. The project was designed to meet long-term forecasted electrical demand in the proposed Alberhill System Project area and to increase electrical system reliability and resiliency. In April 2018 and July 2018, the CPUC issued a proposed decision and an alternate proposed decision, both denying SCE's ability to construct the Alberhill System Project based on a perceived lack of need. SCE filed comments on both proposed decisions requesting that the CPUC grant the certificate of public convenience and necessity ("CPCN") for the Alberhill System Project. In August 2018, the CPUC issued a decision that did not deny or approve the Alberhill System Project but directed SCE to submit supplemental information on the Alberhill System Project including but not limited to a load forecast and cost benefit analysis of several alternatives to the proposed project. Ongoing capital spending has been deferred as a result of the CPUC request for additional information. In January 2020, SCE submitted a supplemental analysis to the CPUC for the Alberhill System Project including several alternatives to the proposed project as well as an update to the original project cost. A final decision on the Alberhill System Project remains

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pending. Given the uncertainty associated with the resolution of the permitting process, potential revisions to the project have not been reflected in total direct expenditures. SCE continues to believe a system solution is needed for the project area but is unable to predict the timing of a final CPUC decision in connection with the Alberhill System Project proceeding.

Approximately 48% of the Alberhill System Project costs spent to date would be subject to recovery through CPUC revenue and 52% through FERC revenue. In October 2017, SCE obtained approval from the FERC for abandoned plant treatment for the Alberhill System Project, which allows SCE to seek recovery of 100% of all prudently incurred costs after the approval date and 50% of prudently incurred costs prior to the approval date. Excluding land costs, which may be recovered through sale to a third party, SCE has incurred approximately $59 million and $55 million of capital expenditures, including overhead costs, of which approximately $42 million and $39 million may not be recoverable if the project is cancelled, as of December 31, 2022 and 2021, respectively.

Eldorado-Lugo-Mohave Upgrade Project

The Eldorado-Lugo-Mohave Upgrade Project will increase capacity on existing transmission lines to allow additional renewable energy to flow from Nevada to southern California. The project would modify SCE's existing Eldorado, Lugo, and Mohave electrical substations to accommodate the increased flows from Nevada to southern California; increase the power flow through the existing 500 kV transmission lines by constructing two new capacitors along the lines; raise transmission tower heights to meet ground clearance requirements; and install fiber optics on the transmission lines to provide communications between existing SCE substations. In August 2020, the CPUC approved the CPCN for the project.

Construction for the project began in November 2020 and the project is expected to be operational in the second quarter of 2023.

Other Capital Investment Projects and Programs

For a discussion of utility owned storage and forecast wildfire mitigation capital expenditures, including the WCCP, see "Management Overview—Capital Program." For discussion of Electrification and Clean Energy Transition Programs, see "— Regulatory Proceedings—Building Electrification Programs Application."

Decommissioning of San Onofre

The decommissioning of a nuclear plant requires the management of three related activities: radiological decommissioning, non-radiological decommissioning and the management of spent nuclear fuel. SCE has engaged the DGC to undertake a significant scope of decommissioning activities for Units 1, 2 and 3 at San Onofre. The decommissioning of San Onofre is expected to take many years.

Under federal law, the U.S. Department of Energy ("DOE") is responsible for the selection and construction of a facility for the permanent disposal of spent nuclear fuel and high-level radioactive waste. The DOE has not met its contractual obligation to accept spent nuclear fuel. Extended delays by the DOE have led to the construction of costly alternatives and associated siting and environmental issues.

Two Independent Spent Fuel Storage Installations ("ISFSI") store nuclear fuel onsite at San Onofre. The first primarily stores nuclear fuel from Unit 1 ("ISFSI 1") and the second stores nuclear fuel from Units 2 and 3 ("ISFSI 2"). SCE's CDPs for ISFSI 1 and ISFSI 2 extend through 2035.

Decommissioning of San Onofre Unit 1 began in 1999 and the transfer of spent nuclear fuel from Unit 1 to dry cask storage in ISFSI 1 was completed in 2005. Major decommissioning work for Unit 1 has been completed except for certain underground work.