SOUTHERN CALIFORNIA EDISON Co - Quarter Report: 2010 March (Form 10-Q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended March 31, 2010
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission File Number 1-2313

SOUTHERN CALIFORNIA EDISON COMPANY
(Exact name of registrant as specified in its charter)


California		95-1240335
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
2244 Walnut Grove Avenue (P. O. Box 800) Rosemead, California		91770
(Address of principal executive offices)		(Zip Code)

(626) 302-1212
(Registrant's telephone number, including area code)

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. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.


Large accelerated filer o		Accelerated filer o		Non-accelerated filer ý (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

Class		Outstanding at May 3, 2010

Common Stock, no par value		434,888,104

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TABLE OF CONTENTS


GLOSSARY				i
PART I – FINANCIAL INFORMATION				1
ITEM 1. FINANCIAL STATEMENTS				1
	Consolidated Statements of Income			1
	Consolidated Statements of Comprehensive Income			1
	Consolidated Balance Sheets			2
	Consolidated Statements of Cash Flows			4
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			5
	Note 1. Summary of Significant Accounting Policies			5
	Note 2. Derivative Instruments and Hedging Activities			7
	Note 3. Liabilities and Lines of Credit			9
	Note 4. Income Taxes			9
	Note 5. Compensation and Benefit Plans			10
	Note 6. Commitments and Contingencies			12
	Note 7. Consolidated Statement of Changes in Equity			17
	Note 8. Supplemental Cash Flows Information			18
	Note 9. Fair Value Measurements			18
	Note 10. Regulatory Assets and Liabilities			24
	Note 11. Other Income and Expenses			25
	Note 12. Variable Interest Entities			25
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS				28
	FORWARD-LOOKING STATEMENTS			28
	MANAGEMENT OVERVIEW			29
	Introduction			29
	Highlights of Operating Results			30
	SCE Capital Program			30
	Environmental Developments			31
		California Renewable Energy Developments		31
		Once-Through Cooling		31
	RESULTS OF OPERATIONS			32
	Electric Utility Results of Operations			33
		Utility Earning Activities		34
			2010 vs. 2009	34
		Utility Cost-Recovery Activities		34
			2010 vs. 2009	34
		Supplemental Operating Revenue Information		35
		Effective Income Tax Rates		35

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	LIQUIDITY AND CAPITAL RESOURCES			35
	Available Liquidity			36
		Debt Covenant		36
	Regulatory Proceedings			36
		Energy Efficiency Risk/Reward Incentive Mechanism		36
		2010 FERC Rate Case		36
	Dividend Restrictions			36
	Margin and Collateral Deposits			37
	Historical Consolidated Cash Flow			37
		Condensed Consolidated Statement of Cash Flows		37
			Cash Flows Provided by Operating Activities	37
			Cash Flows Provided (Used) by Financing Activities	38
			Cash Flows Used by Investing Activities	38
	Contractual Obligations and Contingencies			38
		Contractual Obligations		38
		Contingencies		39
			Environmental Remediation	39
	MARKET RISK EXPOSURES			39
	Interest Rate Risk			39
	Commodity Price Risk			39
		Natural Gas and Electricity Price Risk		39
	Credit Risk			40
	NEW ACCOUNTING GUIDANCE			41
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK				41
ITEM 4T. CONTROLS AND PROCEDURES				41
	Disclosure Controls and Procedures			41
	Internal Control Over Financial Reporting			41
PART II. OTHER INFORMATION				41
ITEM 1. LEGAL PROCEEDINGS				41
	Navajo Nation Litigation			41
ITEM 6. EXHIBITS				41
SIGNATURE				43

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GLOSSARY

When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below.


AB		Assembly Bill
AFUDC		allowance for funds used during construction
APS		Arizona Public Service Company
ARO(s)		asset retirement obligation(s)
Bcf		Billion cubic feet
CAA		Clean Air Act
CAIR		Clean Air Interstate Rule
CAISO		California Independent System Operator
CAMR		Clean Air Mercury Rule
CARB		California Air Resources Board
CDWR		California Department of Water Resources
CEC		California Energy Commission
CPUC		California Public Utilities Commission
CRRs		congestion revenue rights
DCR		Devers-Colorado River
DOE		U. S. Department of Energy
DRA		Division of Ratepayer Advocates
DWP		Los Angeles Department of Water & Power
EME		Edison Mission Energy
ERRA		energy resource recovery account
FASB		Financial Accounting Standards Board
FERC		Federal Energy Regulatory Commission
FGIC		Financial Guarantee Insurance Company
Four Corners		coal-fired electric generating facility located in Farmington, New Mexico where SCE holds a 48% ownership interest in Units 4 and 5
FTRs		firm transmission rights
GAAP		generally accepted accounting principles
Global Settlement		A settlement between Edison International and the IRS that resolves all of SCE's federal income tax disputes and affirmative claims for tax years 1986 through 2002.
GRC		General Rate Case
Illinois EPA		Illinois Environmental Protection Agency
Investor-Owned Utilities		SCE, SDG&E and PG&E
IRS		Internal Revenue Service
ISO		Independent System Operator
kWh(s)		kilowatt-hour(s)
MD&A		Management's Discussion and Analysis of Financial Condition and Results of Operations in this report
Moody's		Moody's Investors Service
Mohave		Mohave Generating Station
MRTU		Market Redesign Technical Upgrade
MW		megawatts
MWh		megawatt-hours
NAAQS		national ambient air quality standards
NERC		North American Electric Reliability Corporation
Ninth Circuit		U.S. Court of Appeals for the Ninth Circuit

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NOx		nitrogen oxide
NRC		Nuclear Regulatory Commission
NSR		New Source Review
Palo Verde		Palo Verde Nuclear Generating Station
PBOP(s)		postretirement benefits other than pension(s)
PBR		Performance-based ratemaking
PG&E		Pacific Gas & Electric Company
POD		Presiding Officer's Decision
PX		California Power Exchange
QF(s)		qualifying facility(ies)
RICO		Racketeer Influenced and Corrupt Organization
ROE		return on equity
S&P		Standard & Poor's Ratings Services
San Onofre		San Onofre Nuclear Generating Station
SCAQMD		South Coast Air Quality Management District
SCE		Southern California Edison Company
SDG&E		San Diego Gas & Electric
SEC		U.S. Securities and Exchange Commission
SIP(s)		State Implementation Plan(s)
SO₂		sulfur dioxide
SRP		Salt River Project Agricultural Improvement and Power District
The Tribes		Navajo Nation and Hopi Tribe
TURN		The Utility Reform Network
US EPA		U.S. Environmental Protection Agency
VIE(s)		variable interest entity(ies)

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS



Consolidated Statements of Income		Southern California Edison Company
			Three Months Ended March 31,
(in millions)			2010			2009

			(Unaudited)
Operating revenue			$	2,159		$	2,189

Fuel				81			199
Purchased power				608			540
Operation and maintenance				713			658
Depreciation, decommissioning and amortization				309			285
Property and other taxes				68			66

Total operating expenses				1,779			1,748

Operating income				380			441
Interest income				1			4
Other income				34			26
Interest expense – net of amounts capitalized				(99	)		(109	)
Other expenses				(10	)		(8	)

Income before income taxes				306			354
Income tax expense				129			121

Net income				177			233
Less: Net income attributable to noncontrolling interests				—			12
	Dividends on preferred and preference stock not subject to mandatory redemption			13			13

Net income available for common stock			$	164		$	208

Consolidated Statements of Comprehensive Income

			Three Months Ended March 31,
(in millions)			2010		2009

			(Unaudited)
Net income			$	177	$	233
Other comprehensive income, net of tax:
	Pension and postretirement benefits other than pensions:
		Amortization of net loss included in net income		1		—

Comprehensive income				178		233
Less: Comprehensive income attributable to noncontrolling interests				—		12

Comprehensive income attributable to SCE			$	178	$	221

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Balance Sheets		Southern California Edison Company
(in millions)			March 31, 2010			December 31, 2009

			(Unaudited)
ASSETS
Cash and equivalents			$	66		$	462
Short-term investments				9			9
Receivables, less allowances of $53 for uncollectible accounts at both dates				626			719
Accrued unbilled revenue				360			347
Inventory				320			337
Derivative assets				130			160
Regulatory assets				303			120
Deferred income taxes				—			78
Other current assets				229			97

Total current assets				2,043			2,329

Nonutility property – less accumulated depreciation of $92 and $744 at respective dates				70			324
Nuclear decommissioning trusts				3,248			3,140
Other investments				75			67

Total investments and other assets				3,393			3,531

Utility plant, at original cost:
	Transmission and distribution			22,674			22,214
	Generation			2,680			2,667
Accumulated depreciation				(6,064	)		(5,921	)
Construction work in progress				2,790			2,701
Nuclear fuel, at amortized cost				314			305

Total utility plant				22,394			21,966

Derivative assets				141			187
Regulatory assets				4,675			4,139
Other long-term assets				329			322

Total long-term assets				5,145			4,648






Total assets			$	32,975		$	32,474

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Balance Sheets	Southern California Edison Company
(in millions, except share amounts)		March 31, 2010			December 31, 2009

		(Unaudited)
LIABILITIES AND EQUITY
Short-term debt		$	180		$	—
Current portion of long-term debt			—			250
Accounts payable			897			1,282
Accrued taxes			39			9
Accrued interest			114			162
Customer deposits			234			238
Derivative liabilities			178			102
Regulatory liabilities			288			367
Deferred income taxes			47			—
Other current liabilities			427			637

Total current liabilities			2,404			3,047

Long-term debt			6,984			6,490

Deferred income taxes			3,796			3,651
Deferred investment tax credits			95			97
Customer advances			112			119
Derivative liabilities			920			496
Pensions and benefits			1,702			1,681
Asset retirement obligations			3,229			3,198
Regulatory liabilities			3,521			3,328
Other deferred credits and other long-term liabilities			1,680			1,652

Total deferred credits and other liabilities			15,055			14,222

Total liabilities			24,443			23,759

Commitments and contingencies (Note 6)
Common stock, no par value (560,000,000 shares authorized; 434,888,104 shares issued and outstanding at each date)			2,168			2,168
Additional paid-in capital			557			551
Accumulated other comprehensive loss			(18	)		(19	)
Retained earnings			4,905			4,746

Total common shareholder's equity			7,612			7,446

Preferred and preference stock not subject to mandatory redemption			920			920
Noncontrolling interests			—			349

Total equity			8,532			8,715

Total liabilities and equity		$	32,975		$	32,474

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Statements of Cash Flows		Southern California Edison Company
			Three Months Ended March 31,
(in millions)			2010			2009

			(Unaudited)
Cash flows from operating activities:
Net income			$	177		$	233
Adjustments to reconcile to net cash provided by operating activities:
	Depreciation, decommissioning and amortization			309			285
	Regulatory impacts of net nuclear decommissioning trust earnings (reflected in accumulated depreciation)			38			32
	Other amortization			21			25
	Stock-based compensation			4			3
	Deferred income taxes and investment tax credits			189			122
Changes in operating assets and liabilities:
	Receivables			62			23
	Inventory			1			43
	Margin and collateral deposits – net of collateral received			(2	)		(20	)
	Other current assets			(151	)		18
	Accounts payable			(158	)		(170	)
	Accrued taxes			29			26
	Other current liabilities			(153	)		(78	)
	Derivative assets and liabilities – net			577			(348	)
	Regulatory assets and liabilities – net			(636	)		244
	Other assets			(14	)		(13	)
	Other liabilities			20			(19	)

Net cash provided by operating activities				313			406

Cash flows from financing activities:
Long-term debt issued				500			750
Long-term debt issuance costs				(11	)		(10	)
Long-term debt repaid				(252	)		(151	)
Bonds repurchased				—			(219	)
Short-term debt financing – net				180			(335	)
Stock-based compensation – net				1			2
Distributions to noncontrolling interest				—			(25	)
Dividends paid				(113	)		(113	)

Net cash provided (used) by financing activities				305			(101	)

Cash flows from investing activities:
Capital expenditures				(867	)		(690	)
Proceeds from sale of nuclear decommissioning trust investments				286			658
Purchases of nuclear decommissioning trust investments and other				(335	)		(700	)
Sales of short-term investments				1			—
Purchases of short-term investments				(1	)		(1	)
Customer advances for construction and other investments				(6	)		(6	)

Net cash used by investing activities				(922	)		(739	)

Effect of deconsolidation of variable interest entities				(92	)		—

Net decrease in cash and equivalents				(396	)		(434	)
Cash and equivalents, beginning of period				462			1,611

Cash and equivalents, end of period			$	66		$	1,177

The accompanying notes are an integral part of these consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

SCE is a rate-regulated electric utility that supplies electric energy to a 50,000 square-mile area of central, coastal and southern California. SCE is a wholly-owned subsidiary of Edison International.

Basis of Presentation

SCE's significant accounting policies were described in Note 1 of "SCE Notes to Consolidated Financial Statements" included in its 2009 Annual Report on Form 10-K. SCE follows the same accounting policies for interim reporting purposes, with the exception of accounting principles adopted as of January 1, 2010, as discussed below in "—New Accounting Guidance." This quarterly report should be read in conjunction with such financial statements.

In the opinion of management, all adjustments, including recurring accruals, have been made that are necessary to fairly state the consolidated financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States of America for the periods covered by this quarterly report on Form 10-Q. The results of operations for the three months ended March 31, 2010 are not necessarily indicative of the operating results for the full year.

Management has performed an evaluation of subsequent events through the date the financial statements were issued.

The December 31, 2009 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

Cash and Equivalents

Cash equivalents included money market funds totaling $40 million and $360 million at March 31, 2010 and December 31, 2009, respectively. The carrying value of cash equivalents equals the fair value, as all investments have maturities of less than three months. For further discussion of money market funds, see Note 9.

SCE has a cash management program under which the ending daily cash balance in its primary disbursement accounts are temporarily invested until required for check clearing. SCE reclassified $238 million and $224 million of checks issued against these accounts, but not yet paid by the financial institution, from cash to accounts payable at March 31, 2010 and December 31, 2009, respectively.

Margin and Collateral Deposits

Margin and collateral deposits include cash deposited with counterparties and brokers, and cash received from counterparties and brokers as credit support under energy contracts. The amount of margin and collateral deposits generally varies based on changes in the fair value of the positions. SCE presents margin and cash collateral deposits subject to a master netting arrangement netted with its

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derivative positions on its consolidated balance sheets. The following table summarizes margin and collateral deposits provided to and received from counterparties:

(in millions)		March 31, 2010		December 31, 2009


		(Unaudited)
Collateral provided to counterparties:
	Offset against derivative liabilities	$	10	$	—
	Reflected in other current assets		5		6
Collateral received from counterparties:
	Reflected in other current liabilities		56		59

New Accounting Guidance

Accounting Guidance Adopted in 2010

Consolidation—Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities

The FASB issued an accounting standards update that changes how a company determines when an entity, that is insufficiently capitalized or is not controlled through voting (or similar rights), should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an ability to direct the activities of the entity that most significantly impact the entity's economic performance and whether the entity has an obligation to absorb losses or the right to receive expected returns of the entity. This guidance requires a company to provide additional disclosures about its involvement with variable interest entities and any significant changes in risk exposure due to that involvement. SCE adopted this guidance prospectively effective January 1, 2010. The impact of adopting this guidance resulted in the deconsolidation of projects related to four QF contracts. For further discussion, see Note 12.

Fair Value Measurements and Disclosures

The FASB issued an accounting standards update that provides for new disclosure requirements related to fair value measurements. Requirements, effective January 1, 2010, include separate disclosure of significant transfers in and out of Levels 1 and 2 and the reasons for the transfers. The update also clarified existing disclosure requirements for the level of disaggregation, inputs and valuation techniques. In addition, effective January 1, 2011, the Level 3 reconciliation of fair value measurements using significant unobservable inputs should include gross rather than net information about purchases, sales, issuances and settlements. The guidance impacts disclosures only. For further discussion, see Note 9.

Accounting Guidance Not Yet Adopted

Accounting pronouncements recently issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants and the SEC that were effective after March 31, 2010 are not expected to have a material effect on SCE's consolidated results of operations, financial position or cash flows.

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Note 2. Derivative Instruments and Hedging Activities

Commodity Price Risk

SCE is exposed to commodity price risk, which represents the potential impact that can be caused by a change in the market value of a particular commodity. SCE's hedging program reduces ratepayer exposure to variability in market prices related to SCE's power and gas activities. As part of this program, SCE enters into energy options, swaps, forward arrangements, tolling arrangements and congestion revenue rights ("CRRs"). These transactions are pre-approved by the CPUC or executed in compliance with CPUC-approved procurement plans. SCE recovers its related hedging costs through the ERRA balancing account and as a result, exposure to commodity price risk is not expected to impact earnings, but may impact cash flows.

SCE's electricity price exposure arises from energy purchased and sold in the MRTU market as a result of differences between SCE's load requirements versus the amount of energy delivered from its generating facilities, existing bilateral contracts and CDWR contracts allocated to SCE.

A portion of SCE's purchased power supply is subject to natural gas price volatility. SCE's natural gas price exposure arises from purchasing natural gas for generation at Mountainview and peaker plants, bilateral contracts where pricing is based on natural gas prices (this includes contract energy prices for most renewable QFs which are based on the monthly index price of natural gas delivered at the southern California border), and power contracts in which SCE has agreed to provide the natural gas needed for generation, referred to as tolling arrangements.

Notional Volumes of Derivative Instruments

The following table summarizes the notional volumes of derivatives used for hedging activities:

		March 31, 2010		December 31, 2009


Commodity	Unit of Measure	Economic Hedges		Economic Hedges

		(Unaudited)
Electricity options, swaps and forward arrangements	GWh		14,943		14,868
Natural gas options, swaps and forward arrangements	Bcf		251		266
Congestion revenue rights	GWh		180,518		195,367
Tolling arrangements¹	GWh		116,398		116,398

¹: In compliance with a CPUC mandate, SCE held an open, competitive solicitation that produced agreements with different project developers who have agreed to construct new southern California generating resources. SCE has entered into a number of contracts which are recorded as derivative instruments. The contracts provide for fixed capacity payments as well as pricing for energy delivered based on a heat rate and contractual operation and maintenance prices. However, due to uncertainty regarding the availability of required emission credits, some of the new generating resources may not be constructed and the contracts associated with these resources could therefore terminate, at which time SCE would no longer account for these contracts as derivatives.

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Fair Value of Derivative Instruments

The following table summarizes the gross and net fair values of commodity derivative instruments at March 31, 2010:

	Derivative Assets								Derivative Liabilities


(in millions)	Short- Term			Long- Term		Subtotal			Short- Term			Long- Term		Subtotal			Net Liability

	(Unaudited)
Non-trading activities:
Economic hedges	$	132		$	141	$	273		$	190		$	920	$	1,110		$	837
Netting and collateral		(2	)		—		(2	)		(12	)		—		(12	)		(10	)

Total	$	130		$	141	$	271		$	178		$	920	$	1,098		$	827

The following table summarizes the gross and net fair values of commodity derivative instruments at December 31, 2009:

	Derivative Assets						Derivative Liabilities


(in millions)	Short- Term		Long- Term		Subtotal		Short- Term		Long- Term		Subtotal		Net Liability

	(Unaudited)
Non-trading activities:
Economic hedges	$	160	$	187	$	347	$	102	$	496	$	598	$	251
Netting and collateral		—		—		—		—		—		—		—

Total	$	160	$	187	$	347	$	102	$	496	$	598	$	251

Income Statement Impact of Derivative Instruments

SCE recognizes realized gains and losses on derivative instruments as purchased-power expense and recovers these costs from ratepayers. As a result, realized gains and losses do not affect earnings, but may temporarily affect cash flows. Due to expected future recovery from ratepayers, unrealized gains and losses are deferred and are not recognized as purchased-power expense and therefore do not affect earnings. The results of derivative activities and related regulatory offsets are recorded in cash flows from operating activities in the consolidated statements of cash flows.

The following table summarizes the components of economic hedging activity:

	Three Months Ended March 31,

(in millions)	2010			2009

	(Unaudited)
Realized gain (loss)	$	(24	)	$	(98	)
Unrealized gain (loss)		(581	)		333

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				Weighted-Average

	Stock Options			Exercise Price		Remaining Contractual Term (Years)		Aggregate Intrinsic Value

	(Unaudited)
Outstanding at December 31, 2009		8,749,015		$	31.91
Granted		2,005,056			33.30
Forfeited		(6,662	)		30.52
Exercised		(112,315	)		23.86
Affiliate transfers – net		23,408			34.81

Outstanding at March 31, 2010		10,658,502			32.26		6.99

Vested and expected to vest at March 31, 2010		10,374,048			32.26		6.93	$	56,649,657

Exercisable at March 31, 2010		5,851,805			32.31		5.34		37,437,597

	Performance Shares			Weighted-Average Grant Date Fair Value


	(Unaudited)
Nonvested at December 31, 2009		172,604		$	36.65
Granted		75,916			32.50
Forfeited		(32,149	)		57.77
Affiliate transfers – net		801			37.80

Nonvested at March 31, 2010		217,172			32.25

	Performance Shares			Weighted-Average Fair Value


	(Unaudited)
Nonvested at December 31, 2009		172,604
Granted		75,916
Forfeited		(32,149	)
Affiliate transfers – net		801

Nonvested at March 31, 2010		217,172		$	28.04

		Three Months Ended March 31,

(in millions)		2010			2009

		(Unaudited)
Fair value of derivative contracts, net liability at beginning of period		$	(111	)	$	(518	)
Total realized/unrealized gains (losses):
	Included in regulatory assets and liabilities¹		(487	)		388
Purchases and settlements, net			2			4
Transfers into Level 3			—			—
Transfers out of Level 3			—			—

Fair value, net liability at end of period		$	(596	)	$	(126	)

Change during the period in unrealized gains (losses) related to assets and liabilities held at the end of period		$	(468	)	$	391

			Amortized Cost				Fair Value


(in millions)	Maturity Dates¹		March 31, 2010		December 31, 2009		March 31, 2010		December 31, 2009

			(Unaudited)
Stocks		–	$	828	$	822	$	1,846	$	1,772
Municipal bonds		2010 – 2047		559		545		652		634
Corporate bonds		2010 – 2044		325		309		403		393
U.S. government and agency securities		2010 – 2039		284		287		302		308
Short-term investments and receivables/payables		2010		43		33		45		33

Total			$	2,039	$	1,996	$	3,248	$	3,140

	Equity Attributable to SCE

(in millions)	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Preferred and Preference Stock		Noncontrolling Interest			Total Equity

	(Unaudited)
Balance at December 31, 2009	$	2,168	$	551	$	(19	)	$	4,746		$	920	$	349		$	8,715
Net income		—		—		—			177			—		—			177
Other comprehensive income		—		—		1			—			—		—			1
Deconsolidation of variable interest entities (see Note 12)		—		—		—			—			—		(349	)		(349	)
Dividends declared on preferred and preference stock not subject to mandatory redemption		—		—		—			(13	)		—		—			(13	)
Stock-based compensation – net		—		2		—			(1	)		—		—			1
Noncash stock-based compensation and other		—		4		—			(4	)		—		—			—

Balance at March 31, 2010	$	2,168	$	557	$	(18	)	$	4,905		$	920	$	—		$	8,532

			As of March 31, 2010

(in millions)			Level 1		Level 2			Level 3			Netting and Collateral¹			Total

			(Unaudited)
Assets at Fair Value
	Money market funds²		$	40	$	—		$	—		$	—		$	40

	Derivative contracts:
		Natural Gas		—		3			71			(2	)		72
		CRRs		—		—			199						199

		Sub-total of derivative contracts		—		3			270			(2	)		271

	Long-term disability plan			9		—			—			—			9

	Nuclear decommissioning trusts:
		Stocks³		1,846		—			—			—			1,846
		Municipal bonds		—		652			—			—			652
		Corporate bonds⁴		—		403			—			—			403
		U.S. government and agency securities		253		49			—			—			302
		Short-term investments, primarily cash equivalents⁵		12		23			—			—			35

		Sub-total of nuclear decommissioning trusts		2,111		1,127			—			—			3,238

Total assets⁶			$	2,160	$	1,130		$	270		$	(2	)	$	3,558

Liabilities at Fair Value
	Derivative contracts:
		Electricity	$	—	$	—		$	(82	)	$	—		$	(82	)
		Natural Gas		—		(244	)		(52	)		12			(284	)
		Tolling		—		—			(732	)		—			(732	)

		Sub-total of derivative contracts		—		(244	)		(866	)		12			(1,098	)

Net assets (liabilities)			$	2,160	$	886		$	(596	)	$	10		$	2,460

	March 31, 2010				December 31, 2009


(in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value

	(Unaudited)
Long-term debt, including current portion	$	6,984	$	7,368	$	6,740	$	7,202

(in millions)	March 31, 2010		December 31, 2009


	(Unaudited)
Current:
Regulatory balancing accounts	$	166	$	94
Energy derivatives		136		25
Other		1		1

		303		120

Long-term:
Regulatory balancing accounts		51		43
Deferred income taxes – net		1,640		1,561
Unamortized nuclear investment – net		325		340
Nuclear-related ARO investment – net		253		258
Unamortized coal plant investment – net		73		73
Unamortized loss on reacquired debt		282		287
Pensions and other postretirement benefits		1,009		1,014
Energy derivatives		826		357
Environmental remediation		39		36
Other		177		170

		4,675		4,139

Total Regulatory Assets	$	4,978	$	4,259

	December 31, 2009

(in millions)	Electric Utility		VIEs		Eliminations			SCE

	(Unaudited)
Cash and equivalents	$	370	$	92	$	—		$	462
Accounts receivable – net		689		62		(32	)		719
Inventory		321		16		—			337
Other current assets		94		3		—			97
Nonutility property – net of accumulated depreciation		71		253		—			324
Other long-term assets		318		4		—			322

Total assets	$	32,076	$	430	$	(32	)	$	32,474

Accounts payable	$	1,031	$	59	$	(32	)	$	1,058
Other current liabilities		632		5		—			637
Asset retirement obligations		3,181		17		—			3,198
Noncontrolling interest		—		349		—			349

Total liabilities and equity	$	32,076	$	430	$	(32	)	$	32,474

		Three Months Ended March 31, 2010									Three Months Ended March 31, 2009


(in millions)		Utility Earning Activities			Utility Cost- Recovery Activities			Total Consolidated			Utility Earning Activities			Utility Cost- Recovery Activities^1,2			Total Consolidated

Operating revenue		$	1,265		$	894		$	2,159		$	1,204		$	985		$	2,189

Fuel and purchased power			—			689			689			—			739			739
Operation and maintenance			519			194			713			441			217			658
Depreciation, decommissioning and amortization			300			9			309			273			12			285
Property taxes and other			68			—			68			66			—			66

Total operating expenses			887			892			1,779			780			968			1,748

Operating income			378			2			380			424			17			441
Net interest expense and other			(72	)		(2	)		(74	)		(82	)		(5	)		(87	)

Income before income taxes			306			—			306			342			12			354
Income tax expense			129			—			129			121			—			121

Net income			177			—			177			221			12			233
Net income attributable to noncontrolling interest			—			—			—			—			12			12
Dividends on preferred and preference stock not subject to mandatory redemption			13			—			13			13			—			13

Net income available for common stock		$	164		$	—		$	164		$	208		$	—		$	208

Core Earnings³								$	203								$	208
Non-Core Earnings:
	Tax impact of health care legislation								(39	)								—

Total SCE GAAP Earnings								$	164								$	208

(in millions)		Three Months Ended March 31, 2009


Operating revenue			$ 143

Fuel			102
Operation and maintenance			21
Depreciation			8

Total operating expenses			131

Net Income			$ 12

(in millions)	Credit Facilities¹


Commitment	$	2,894
Outstanding borrowings		(180	)
Outstanding letters of credit		(82	)

Amount available	$	2,632

(in millions)	March 31, 2010


Collateral posted as of March 31, 2010¹	$	97
Incremental collateral requirements resulting from a potential downgrade of SCE's credit rating to below investment grade		154

Total posted and potential collateral requirements²	$	251

	March 31, 2010						December 31, 2009


(in millions)	Assets			Liabilities			Assets		Liabilities

Electricity options, swaps and forward arrangements	$	—		$	82		$	1	$	25
Natural gas options, swaps and forward arrangements		74			296			86		171
Congestion revenue rights		199			—			217		—
Tolling arrangements¹		—			732			43		402
Netting and collateral		(2	)		(12	)		—		—

Total	$	271		$	1,098		$	347	$	598

(in millions)

Fair value of derivative contracts, net liability at January 1, 2010		$	(251	)
Total realized/unrealized net losses:
	Included in regulatory assets and liabilities¹		(605	)
Purchases and settlements, net			19
Netting and collateral			10

Fair value of derivative contracts, net liability at March 31, 2010		$	(827	)

	March 31, 2010

(in millions)	Exposure²		Collateral		Net Exposure

S&P Credit Rating¹
A or higher	$	209	$	—	$	209
A-		1		—		1
BBB+		—		—		—
BBB		—		—		—
BBB-		—		—		—
Below investment grade and not rated		—		—		—

Total	$	210	$	—	$	210


	10.1		Credit Agreement dated as of March 5, 2010 among Southern California Edison Company and Bank of America, N.A., as Administrative Agent, Wells Fargo Bank, N.A., as Syndication Agent, and Barclays Bank PLC, Morgan Stanley Bank, N.A., SunTrust Bank, UBS Loan Finance LLC, US Bank, National Association, BNP Paribas, Royal Bank of Canada, and The Bank of Nova Scotia as Co-Documentation Agents, and the lenders thereto. (File No. 1-2313, filed as Exhibit 10 to Southern California Edison Company form 8-K dated March 5, 2010)*
	10.2		Edison International 2010 Executive Annual Incentive Program (File No. 1-9936, filed as Exhibit 10.1 to the Edison International's Form 10-Q for the quarter ended March 31, 2010)*


	10.3		Edison International 2010 Long-Term Incentives Terms and Conditions (File No. 1-9936 filed as Exhibit 10.2 to Edison International Form 10-Q for the quarter ended March 31, 2010)*
	31.1		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
	31.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
	32		Statement Pursuant to 18 U.S.C. Section 1350
	101		Financial statements from the quarterly report on Form 10-Q of Southern California Edison Company for the quarter ended March 31, 2010, filed on May 7, 2010, formatted in XBRL: (i) the Consolidated Statements of Income; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to Consolidated Financial Statements tagged as blocks of text.


		SOUTHERN CALIFORNIA EDISON COMPANY
		(Registrant)
		By		/s/ CHRIS C. DOMINSKI CHRIS C. DOMINSKI Vice President and Controller (Duly Authorized Officer and Principal Accounting Officer)