SOUTHERN CALIFORNIA EDISON Co - Annual Report: 2019 (Form 10-K)

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•	ability of SCE to recover its costs through regulated rates, including costs related to uninsured wildfire-related and mudslide-related liabilities, costs incurred to mitigate the risk of utility equipment causing future wildfires and costs incurred to implement SCE's new customer service system;

•	ability of SCE to implement its WMP, including effectively implementing Public Safety Power Shut-Offs when appropriate;

•	ability to obtain sufficient insurance at a reasonable cost, including insurance relating to SCE's nuclear facilities and wildfire-related claims, and to recover the costs of such insurance or, in the event liabilities exceed insured amounts, the ability to recover uninsured losses from customers or other parties;

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risks associated with AB 1054 effectively mitigating the significant risk faced by California investor-owned utilities related to liability for damages arising from catastrophic wildfires where utility facilities are alleged to be a substantial cause, including SCE's ability to maintain a valid safety certification, SCE's ability to recover uninsured wildfire-related costs from the Wildfire Insurance Fund, the longevity of the Wildfire Insurance Fund, and the CPUC's interpretation of and actions under AB 1054, including their interpretation of the new prudency standard established under AB 1054;

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decisions and other actions by the CPUC, the FERC, the NRC and other regulatory and legislative authorities, including decisions and actions related to determinations of authorized rates of return or return on equity, the recoverability of wildfire-related and mudslide-related costs, issuance of SCE's wildfire safety certification, wildfire mitigation efforts, and delays in regulatory and legislative actions;

•	ability of Edison International or SCE to borrow funds and access bank and capital markets on reasonable terms;

•	risks associated with the decommissioning of San Onofre, including those related to public opposition, permitting, governmental approvals, on-site storage of spent nuclear fuel, delays, contractual disputes, and cost overruns;

•	extreme weather-related incidents and other natural disasters (including earthquakes and events caused, or exacerbated, by climate change, such as wildfires), which could cause, among other things, public safety issues, property damage and operational issues;

•	physical security of Edison International's and SCE's critical assets and personnel and the cybersecurity of Edison International's and SCE's critical information technology systems for grid control, and business, employee and customer data;

•	risks associated with cost allocation resulting in higher rates for utility bundled service customers because of possible customer bypass or departure for other electricity providers such as CCAs and Electric Service Providers;

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risks inherent in SCE's transmission and distribution infrastructure investment program, including those related to project site identification, public opposition, environmental mitigation, construction, permitting, power curtailment costs (payments due under power contracts in the event there is insufficient transmission to enable acceptance of power delivery), changes in the CAISO's transmission plans, and governmental approvals;

•	risks associated with the operation of transmission and distribution assets and power generating facilities, including public and employee safety issues, the risk of utility assets causing or contributing to wildfires, failure, availability, efficiency, and output of equipment and facilities, and availability and cost of spare parts;

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•	actions by credit rating agencies to downgrade Edison International or SCE's credit ratings or to place those ratings on negative watch or outlook;

•	ability of Edison International to develop competitive businesses, manage new business risks, and recover and earn a return on its investment in newly developed or acquired businesses;

•	changes in tax laws and regulations, at both the state and federal levels, or changes in the application of those laws, that could affect recorded deferred tax assets and liabilities and effective tax rate;

•	changes in future taxable income, or changes in tax law, that would limit Edison International's and SCE's realization of expected net operating loss and tax credit carryover benefits prior to expiration;

•	changes in the fair value of investments and other assets;

•	changes in interest rates and rates of inflation, including escalation rates (which may be adjusted by public utility regulators);

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governmental, statutory, regulatory, or administrative changes or initiatives affecting the electricity industry, including the market structure rules applicable to each market adopted by the NERC, CAISO, Western Electricity Council, and similar regulatory bodies in adjoining regions, and changes in California's environmental priorities that lessen the importance the state places on GHG reduction;

•	availability and creditworthiness of counterparties and the resulting effects on liquidity in the power and fuel markets and/or the ability of counterparties to pay amounts owed in excess of collateral provided in support of their obligations;

•	cost and availability of labor, equipment and materials;

•	potential for penalties or disallowance for non-compliance with applicable laws and regulations; and

•	cost of fuel for generating facilities and related transportation, which could be impacted by, among other things, disruption of natural gas storage facilities, to the extent not recovered through regulated rate cost escalation provisions or balancing accounts.

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•	Charges of $218 million ($157 million after-tax) in 2019 and $2.5 billion ($1.8 billion after-tax) in 2018 for SCE's wildfire-related claims, net of expected recoveries from insurance and FERC customers.

•	An impairment charge of $170 million ($123 million after-tax) recorded in 2019 for SCE related to disallowed historical capital expenditures in SCE's 2018 GRC final decision.

•	A charge of $152 million ($109 million after-tax) recorded in 2019 from the amortization of SCE's contributions to the Wildfire Insurance Fund. See "Notes to Consolidated Financial Statements— Note 12. Commitments and Contingencies" for further information.

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Income tax benefit of $88 million recorded in 2019 for SCE related to changes in the allocation of deferred tax re-measurement between customers and shareholders as a result of a CPUC resolution issued in February 2019. The resolution determined that customers are only entitled to excess deferred taxes which were included when setting rates and other deferred tax re-measurements belong to shareholders.

•	An impairment charge of $25 million ($18 million after-tax) in 2019 for Edison Energy following a goodwill assessment.

•	A loss of $56 million ($46 million after-tax) in 2018 for Edison International Parent and Other primarily related to sale of SoCore Energy in April 2018.

•	Income of $12 million ($9 million after-tax) in 2018 for SCE due to the elimination of the GHG Reduction Funding Program as a result of the Revised San Onofre Order Instituting Investigation Settlement Agreement among SCE, SDG&E and various intervening parties, dated January 30, 2018 and modified on August 2, 2018.

•	The 2018 settlement of the 1994 – 2006 California tax audits, which resulted in income tax expense of $12 million for Edison International Parent and Other and income tax benefits of $66 million and $34 million for SCE and discontinued operations, respectively.

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Earning activities – representing revenue authorized by the CPUC and the FERC which is intended to provide SCE a reasonable opportunity to recover its costs and earn a return on its net investment in generation, transmission and distribution assets. The annual revenue requirements are comprised of authorized operation and maintenance costs, depreciation, taxes and a return consistent with the capital structure. Also, included in earnings activities are revenue or penalties related to incentive mechanisms, other operating revenue and regulatory charges or disallowances.

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Cost-recovery activities – representing CPUC- and FERC-authorized balancing accounts which allow for recovery of specific project or program costs, subject to reasonableness review or compliance with upfront standards. Cost-recovery activities include rates which provide recovery, subject to reasonableness review of, among other things, fuel costs, purchased power costs, public purpose related-program costs (including energy efficiency and demand-side management programs) and certain operation and maintenance expenses. SCE earns no return on these activities.

1	The change in authorized revenue in the Test Year is comprised of $129 million in earnings activities and $160 million in cost recovery activities.

2	Authorized revenue for operation and maintenance costs decreased due to:

•	$178 million reduction for earnings activities primarily from SCE's initiatives to improve operational efficiency, which has resulted in lower forecasted costs than included in the 2017 authorized amounts.

•	$160 million reduction in cost-recovery activities, which do not impact earnings, primarily for medical and employee benefit costs.

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1	See use of non-GAAP financial measures in "Management Overview—Highlights of Operating Results."

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•	Higher operating revenue of $118 million is primarily due to:

•	An increase in CPUC-related revenue of $100 million primarily due to the adoption of the 2018 GRC final decision, including the application of the decision retroactively to January 1, 2018, as discussed above.

•	An increase of $38 million in FERC-related revenue primarily due to the settlement of SCE's 2018 Formula Rate proceeding, rate base growth and higher operating costs subject to balancing account treatment, partially offset by lower recoveries from FERC customers for wildfire-related claims in 2019 as compared to 2018.

•	A decrease in other operating revenue of $20 million primarily due to rate adjustments implemented in the second quarter of 2019.

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Higher operation and maintenance expenses of $101 million primarily due to expenses related to wildfire mitigation activity that were not deferred as regulatory assets. Activities driving higher expenses included higher inspection, preventive maintenance and vegetation management costs in non-high fire risk areas. SCE has not recorded regulatory assets for $119 million of 2019 wildfire mitigation costs as there is no current precedent for recovery of these costs, but SCE is seeking recovery of these costs through a separate track of the 2021 GRC. Those costs were partially offset by the impact of the adoption of the 2018 GRC final decision primarily due to a change in capitalization rates and the timing of regulatory deferral and cost recovery of incremental wildfire insurance expenses.

•	Charges of $255 million and $2.7 billion recorded in 2019 and 2018, respectively, for wildfire-related claims, net of expected insurance recoveries.

•	Expense of $152 million for insurance protection from the Wildfire Insurance Fund following SCE's election to participate in and contribute to the fund. See "Management Overview—Southern California Wildfires and Mudslides" for further information.

•	Lower depreciation and amortization expense of $140 million primarily related to the change in depreciation rates and the impact of disallowed historical capital expenditures from the adoption of the 2018 GRC final decision.

•	Higher impairment and other of $171 million primarily related to the disallowed historical capital expenditures in SCE's 2018 GRC final decision, as discussed above.

•	Higher interest expense of $67 million primarily due to increased borrowings.

•	Higher other income of $12 million primarily due to interest income from various balancing accounts.

•	Lower income tax benefits of $467 million primarily due to the following:

•	Lower tax benefit of $612 million due to higher pre-tax income.

•	Lower tax benefit of $66 million due to the 2018 settlement of the 1994 – 2006 California tax audit.

•	Higher tax benefit of $211 million primarily due to the changes in the allocation of deferred tax re-measurement between customers and shareholders as a result of a CPUC resolution issued in February 2019, the adoption of the 2018 GRC final decision and tax benefit on property-related items.

•	Lower purchased power and fuel costs of $567 million primarily driven by lower load related to customer departures to CCAs and cooler weather, partially offset by lower congestion revenue right credits, higher contract termination charges and the absence of settlement funds received in 2018 related to the California energy crisis.

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•	Higher operation and maintenance expenses of $133 million primarily driven by the authorization to recover 2018 wildfire insurance costs that had been deferred as regulatory assets and higher transmission access charges, partially offset by lower employee-related expenses subject to balancing account treatment and lower spending on public programs.

•	Lower other income of $11 million primarily driven by lower net periodic benefit income related to the non-service cost components for SCE's other post-retirement benefit plans. See "Notes to Consolidated Financial Statements—Note 9. Compensation and Benefit Plans" for further information.

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1	Direct expenditures include direct labor, land and contract costs incurred for the respective projects and exclude overhead costs that are included in the capital expenditures forecast discussed in "Management Overview—Capital Program."

2	Includes the original estimated project cost for Alberhill. In January 2020, SCE submitted a supplemental analysis to the CPUC which included alternative projects as well as an update to the original project cost. SCE is unable to predict the timing of a final CPUC decision, the corresponding in-service date, and what the final project costs will be for the Alberhill System Project.

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1	Net collateral provided to counterparties and other brokers consisted of $154 million in letters of credit and surety bonds and $24 million of cash collateral which was reflected in "Other current assets" on the consolidated balance sheets.

2

If SCE's credit rating fell below investment grade, existing purchased power and fuel contracts would require $44 million of incremental collateral. Counterparties may also institute new collateral requirements, applicable to future transactions, at the time of a downgrade. Furthermore, SCE may also be required to post up to $50 million in collateral in connection with its environmental remediation obligations, within 120 days of the end of the fiscal year in which the downgrade occurs.

3	Incremental collateral requirements were based on potential changes in SCE's forward positions as of December 31, 2019 due to adverse market price movements over the remaining lives of the existing power and fuel contracts using a 95% confidence level.

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1	Non-cash items include depreciation and amortization, allowance for equity during construction, impairment and other, Wildfire Insurance Fund amortization expense, deferred income taxes and other.

2	Changes in working capital items include receivables, inventory, amortization of prepaid expenses, accounts payable, tax receivables and payables, and other current assets and liabilities.

3	Includes changes in liabilities for wildfire-related claims and wildfire-related insurance receivables. Also includes nuclear decommissioning trusts. See "Nuclear Decommissioning Activities" below for further information.

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•	BRRBA overcollections decreased by $300 million primarily due to refunds of prior overcollections (including incremental tax benefits) and current year undercollection due to rate changes delayed beyond January 1, 2019, offset by additional overcollection of distribution revenue to be refunded to customers over an 18-month period, starting in July 2019, as part of SCE's 2018 GRC final decision.

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PABA was established in May 2019 to determine and pro-ratably recover from responsible bundled service and departing load customers the "above-market" costs of all generation resources that are eligible for cost recovery. Net undercollections for ERRA, PABA and the New System Generation Balancing Account decreased by $142 million primarily due to recovery of prior ERRA undercollections and overcollections of generation revenue occurring in 2019 and 2018 that are being refunded over an 18-month period, starting in July 2019, as part of SCE's 2018 GRC final decision. The cash inflow was partially offset by lower sales than forecasted in rates, higher than forecasted energy prices experienced in 2019, charges from CPUC-authorized contract terminations and refunds of prior overcollections from the New System Generation Balancing Account.

•	Lower cash due to elimination of approximately $360 million in a regulatory liability that was established in 2018 to record adjustments associated with the delay in the 2018 GRC decision. In May 2019, the CPUC approved the final decision in SCE's 2018 GRC, resulting in 2019 and 2018 overcollections being refunded to customers through BRRBA and PABA, as discussed above.

•	Additional undercollections of $596 million related to wildfire-related expenses that are probable of future recovery from customers, including wildfire risk mitigation costs, insurance premiums and service restoration and damage repair costs. See "Notes to Consolidated Financial Statements—Note 11. Regulatory Assets and Liabilities" for further information.

•	Higher cash due to $115 million of overcollections related to the timing of GHG auction revenue, low carbon fuel standard credit sales, and the related refunds and rebates to eligible customers.

•	Additional cash outflow due to refund of prior year overcollection of recovery of certain employee benefit related costs and reversal of TAMA overcollection as a result of adoption of the 2018 GRC final decision.

•	BRRBA overcollections increased by $428 million primarily due to a $263 million reclassification of 2017 incremental tax benefits from TAMA to BRRBA (to be refunded in 2019) and higher sales than forecasted in rates, partially offset by a refund of 2016 incremental tax benefits.

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Higher cash from increased regulatory liabilities of approximately $365 million primarily due to the delay in the 2018 GRC decision. During 2018, the amounts billed to customers were largely based on the 2017 authorized GRC revenue requirement, however, the amount of revenue recognized has been adjusted mainly for the July 2017 cost of capital decision and Tax Reform pending the outcome of the 2018 GRC and therefore, a regulatory liability has been established to record any associated adjustments.

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Net undercollections for ERRA and the new system generation program were $741 million and $267 million at December 31, 2018 and 2017, respectively. Net undercollections increased $474 million during 2018 primarily due to an increase in costs due to higher than forecasted power and gas prices experienced in 2018 and higher load requirements than forecasted in rates, partially offset by an increase in cash due to recovery of prior year undercollections.

•	TAMA overcollections decreased by $287 million primarily due to a $263 million reclassification from TAMA to BRRBA to refund customers as discussed above.

•	Undercollections of $128 million related to the establishment, in the fourth quarter of 2018, of a WEMA to track wildfire-related costs including insurance premiums in excess of the amounts that will be ultimately approved in the 2018 GRC decision.

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•	Outflows of $137 million and $92 million from operating activities in 2019 and 2018, respectively, due to payments and receipts relating to interest and operating costs.

•	An outflow of $79 million in 2019 primarily related to $164 million of intercompany tax-allocation payments offset by $85 million of federal and state income tax refunds. An inflow of $78 million in 2018 primarily related to federal income tax refunds.

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1	For additional details, see "Notes to Consolidated Financial Statements—Note 5. Debt and Credit Agreements." Amount includes interest payments totaling $11.9 billion and $623 million over applicable period of the debt for SCE and Edison International Parent and Other, respectively.

2	Certain power purchase agreements entered into with independent power producers are treated as operating or finance leases. For further discussion, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies" and "—Note 13. Leases."

3	At December 31, 2019, SCE's other operating lease payments were primarily related to vehicles, office space and other equipment. For further discussion, see "Notes to Consolidated Financial Statements—Note 13. Leases."

4	For additional details, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies." At December 31, 2019, other commitments were primarily related to maintaining reliability and expanding SCE's transmission and distribution system and nuclear fuel supply contracts.

5

At December 31, 2019, Edison International Parent and Other and SCE had estimated contributions to the pension and PBOP plans. SCE estimated contributions are $48 million, $42 million, $40 million, $41 million and $44 million in 2020, 2021, 2022, 2023 and 2024, respectively, which are excluded from the table above. Edison International Parent and Other estimated contributions are $18 million, $21 million, $19 million, $17 million and $23 million for the same respective periods and are excluded from the table above. These amounts represent estimates that are based on assumptions that are subject to change. See "Notes to Consolidated Financial Statements—Note 9. Compensation and Benefit Plans" for further information.

6	At December 31, 2019, Edison International and SCE had a total net liability recorded for uncertain tax positions of $370 million and $282 million, respectively, which is excluded from the table. Edison International and SCE cannot make reliable estimates of the cash flows by period due to uncertainty surrounding the timing of resolving these open tax issues with the tax authorities.

7	The contractual obligations table does not include derivative obligations and asset retirement obligations, which are discussed in "Notes to Consolidated Financial Statements—Note 6. Derivative Instruments" and "—Note 1. Summary of Significant Accounting Policies," respectively.

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Decommissioning Costs. The estimated costs for labor, "material, equipment and other," and low-level radioactive waste costs are included in each of the NRC decommissioning stages; license termination, site restoration and spent fuel storage. The liability to decommission SCE's nuclear power facilities is based on a 2017 decommissioning study that was filed as part of the 2018 NDCTP for San Onofre Units 1, 2, and 3, with revisions to the cost estimate in 2018 for San Onofre Units 2 and 3 and a 2016 decommissioning study for Palo Verde, with revisions to the cost estimate in 2017. SCE revised the ARO for San Onofre Units 2 and 3 due to increases in decommissioning cost estimates in 2018, related to the impact of operational uncertainties, and in 2017, related to changes to onboarding the general contractor at San Onofre.

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Escalation Rates. Annual escalation rates are used to convert the decommissioning cost estimates in base year dollars to decommissioning cost estimates in future-year dollars. Escalation rates are primarily used for labor, material, equipment and low-level radioactive waste burial costs. SCE's current estimates are based upon SCE's decommissioning cost methodology used for ratemaking purposes. Average escalation rates range from 2.2% to 7.5% (depending on the cost element) annually.

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Timing. Cost estimates for Palo Verde are based on an assumption that decommissioning will commence promptly after the current NRC operating licenses expire. The Palo Verde 1, 2, 3 operating licenses currently expire in 2045, 2046 and 2047, respectively. Initial decommissioning activities at San Onofre Unit 1 started in 1999 and at Units 2 and 3 in 2013. Cost estimates for San Onofre Units are currently based on completion of decommissioning activities by 2051.

•	Spent Fuel Dry Storage Costs. Cost estimates are based on an assumption that the U.S. Department of Energy will begin to take spent fuel from the nuclear industry in 2028 and will remove the last spent fuel from the San Onofre and Palo Verde sites by 2049 and 2078, respectively.

•	Changes in Decommissioning Technology, Regulation and Economics. The current cost studies assume the use of current technologies under current regulations and at current cost levels.

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*	Not applicable to pension plans.

1

The discount rate enables Edison International and SCE to state expected future cash flows at a present value on the measurement date. Edison International and SCE select its discount rate by performing a yield curve analysis. This analysis determines the equivalent discount rate on projected cash flows by matching the timing and amount of expected future benefit payments to the corresponding yields from the Aon- Hewitt AA Only Bond Universe yield curve on the measurement date.

2

To determine the expected long-term rate of return on pension plan assets, current and expected asset allocations are considered, as well as historical and expected returns on plan assets. A portion of PBOP trusts asset returns are subject to taxation, so the 5.3% rate of return on plan assets above is determined on an after-tax basis. Actual time-weighted, annualized returns on the pension plan assets were 19.2%, 8.0% and 9.6% for the one-year, five-year and ten-year periods ended December 31, 2019, respectively. Actual time-weighted, annualized returns on the PBOP plan assets were 19.0%, 6.8% and 8.8% over these same periods. Accounting principles provide that differences between expected and actual returns are recognized over the average future service of employees.

3	The health care cost trend rate gradually declines to 5.0% for 2029 and beyond.

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1	Reflected in "Other current assets" on Edison International's and SCE's consolidated balance sheets.

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1	An ARO represents the present value of a future obligation. Accretion is an increase in the liability to account for the time value of money resulting from discounting.

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An increase to earnings of $131 million from the application of the decision to revenue, depreciation expense and income tax expense. Depreciation expense decreased as a result of lower authorized depreciation rates. An increase in the authorized revenue requirement for income tax expense offsets income tax expense recognized during 2018 and the first quarter of 2019. The reduction of revenue of $265 million reflected $289 million of lower authorized revenue related to 2018 and $24 million of higher authorized revenue in 2019. The reduction in revenue contributed to a refund to customers of $554 million, which SCE recorded as a regulatory liability. SCE expects to refund these amounts to customers through December 2020.

•	An impairment of utility property, plant and equipment of $170 million ($123 million after-tax) related to disallowed historical capital expenditures, primarily the write-off of specific pole replacements the CPUC determined were performed prematurely.

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1	Due to the loss reported for the year ended December 31, 2018, incremental shares were not included as the effect would be antidilutive.

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1	Represents the netting of assets and liabilities under master netting agreements and cash collateral.

2	Approximately 72% and 71% of SCE's equity investments were located in the United States at December 31, 2019 and 2018, respectively.

3	Includes corporate bonds, which were diversified and included collateralized mortgage obligations and other asset backed securities of $46 million and $67 million at December 31, 2019 and 2018, respectively.

4	Excludes net payables of $111 million and $143 million at December 31, 2019 and 2018, respectively, which consist of interest and dividend receivables as well as receivables and payables related to SCE's pending securities sales and purchases.

1	Due to regulatory mechanisms, SCE's realized and unrealized gains and losses are recorded as regulatory assets and liabilities.

2	There were no material transfers into or out of Level 3 during 2019 and 2018.

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1	Carrying value is net of debt issuance costs.

2	The fair value of Edison International's and SCE's long-term debt is classified as Level 2.

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1	Included in "Other long-term assets" in the consolidated balance sheets.

2	At December 31, 2019, SCE posted $24 million of cash collateral that is not offset against derivative liabilities and is reflected in "Other current assets" on the consolidated balance sheets.

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Earning activities – representing revenue authorized by the CPUC and FERC, which is intended to provide SCE a reasonable opportunity to recover its costs and earn a return on its net investment in generation, transmission and distribution assets. The annual revenue requirements are comprised of authorized operation and maintenance costs, depreciation, taxes and a return consistent with the capital structure. Also, included in earnings activities are revenues or penalties related to incentive mechanisms, other operating revenue and regulatory charges or disallowances.

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Cost-recovery activities – representing CPUC- and FERC- authorized balancing accounts, which allow for recovery of specific project or program costs, subject to reasonableness review or compliance with upfront standards. Cost-recovery activities include rates which provide recovery, subject to reasonableness review of, among other things, fuel costs, purchased power costs, public purpose related-program costs (including energy efficiency and demand-side management programs) and certain operation and maintenance expenses. SCE earns no return on these activities.

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1

In the absence of a 2018 GRC decision, SCE recorded CPUC revenue in 2018 and the first quarter of 2019 based on the 2017 authorized revenue requirements adjusted for the July 2017 cost of capital decision and Tax Reform. SCE recorded the impact of the 2018 GRC final decision in the second quarter of 2019, including a $265 million reduction in revenue. These revenue adjustments are included in "Revenues from contracts with customers." For further information, see Note 1.

2	At December 31, 2019 and 2018, SCE's receivables related to contracts from customers were both $1.1 billion, which included accrued unbilled revenue of $488 million and $482 million, respectively.

1	In the fourth quarter of 2018, Edison International and SCE recognized tax benefits related to a settlement with the California Franchise Tax Board for tax years 1994 – 2006. See further discussion in Tax Disputes below.

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1	Relates to accrued estimated losses for wildfire-related claims, net of expected recoveries from insurance and FERC customers, and contributions to the Wildfire Insurance Fund. For further information, see Note 12 and Note 1.

2	As of December 31, 2019, deferred tax assets for net operating loss and tax credit carryforwards are reduced by unrecognized tax benefits of $212 million and $130 million for Edison International and SCE, respectively.

3	As of December 31, 2019, Edison International has recorded a valuation allowance of $30 million for non-California state net operating loss carryforwards, and $5 million for California capital losses generated from sale of SoCore Energy in 2018, which are estimated to expire before being utilized.

4	Included in "Deferred income taxes and credits" on the consolidated balance sheets.

1	Under the Tax Reform, net operating losses generated after December 31, 2017 can carryforward indefinitely.

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4	Includes state taxes of $(11) million for Edison International and $(2) million for SCE for the year ended December 31, 2017.

5	In 2017, Edison International and SCE recorded a charge to earnings related to the re-measurement of deferred taxes resulting from Tax Reform. This charge was updated in 2019 to conform to a CPUC resolution which finalized the re-measurement amounts belonging to shareholders and those amounts are charged to earnings.

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1	Decrease in 2018 was related to re-measurement as a result of a settlement with the California Franchise Tax Board for tax years 1994 – 2006.

2	In 2018, Edison International reached a settlement with the California Franchise Tax Board for tax years 1994 – 2006. In 2017, Edison International settled all open tax positions with the IRS for taxable years 2007 – 2012.

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1

For Edison International and SCE, respectively, the 2019 actuarial losses are primarily related to $401 million and $373 million in losses from a decrease in the discount rate (from 4.19% as of December 31, 2018 to 3.11% as of December 31, 2019), partially offset by $157 million and $177 million in gains from other economic assumption changes. The 2018 actuarial gains are primarily related to $277 million and $261 million in gains from an increase in discount rate (from 3.46% as of December 31, 2017 to 4.19% as of December 31, 2018), respectively.

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2

The SCE liability excludes a long-term payable due to Edison International Parent of $133 million and $117 million at December 31, 2019 and 2018, respectively, related to certain SCE postretirement benefit obligations transferred to Edison International Parent. SCE's accumulated other comprehensive loss of $17 million at December 31, 2019 and 2018, excludes net losses of $37 million and $21 million related to these benefits, respectively.

1	Includes the amount of net loss reclassified from accumulated other comprehensive loss. The amount reclassified for Edison International was $7 million, $9 million and $10 million for the years ended December 31, 2019, 2018 and 2017, respectively. The amount reclassified for SCE was $5 million, $6 million and $6 million for the years ended December 31, 2019, 2018 and 2017.

1	The amount of net loss expected to be reclassified from accumulated other comprehensive loss for Edison International and SCE is $11 million and $8 million, respectively.

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•	United States equities: common and preferred stocks of large, medium, and small companies which are predominantly United States-based.

•	Non-United States equities: equity securities issued by companies domiciled outside the United States and in depository receipts which represent ownership of securities of non-United States companies.

•	Fixed income: fixed income securities issued or guaranteed by the United States government, non-United States governments, government agencies and instrumentalities including municipal bonds, mortgage backed securities and corporate debt obligations. A portion of the fixed income positions may be held in debt securities that are below investment grade.

•	Opportunistic: investments in short to intermediate term market opportunities. Investments may have fixed income and/or equity characteristics and may be either liquid or illiquid.

•	Alternative: limited partnerships that invest in non-publicly traded entities.

•	Other: investments diversified among multiple asset classes such as global equity, fixed income currency and commodities markets. Investments are made in liquid instruments within and across markets. The investment returns are expected to approximate the plans' expected investment returns.

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1	These investments are measured at fair value using the net asset value per share practical expedient and have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the net plan assets available for benefits.

2	Level 1 U.S. government and agency securities are U.S. treasury bonds and notes. Level 2 primarily relates to the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.

3	Corporate stocks are diversified. At December 31, 2019 and 2018, respectively, performance for actively managed separate accounts is primarily benchmarked against the Russell Indexes (40%) and (43%) and Morgan Stanley Capital International (MSCI) index (60%) and (57%).

4	Corporate bonds are diversified. At December 31, 2019 and 2018, respectively, this category includes $45 million and $60 million for collateralized mortgage obligations and other asset backed securities.

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5

At December 31, 2019 and 2018, respectively, the common/collective assets were invested in equity index funds that seek to track performance of the Standard and Poor's 500 Index (35% and 43%) and Russell 1000 indexes (17% and 14%). In addition, at December 31, 2019 and 2018, respectively, 28% and 21% of the assets in this category are in index funds which seek to track performance in the MSCI All Country World Index exUS and 12% and 15% of this category are in non-index U.S. equity fund, which is actively managed.

6

At December 31, 2019 and 2018, respectively, 51% and 50% are invested in private equity funds with investment strategies that include branded consumer products, clean technology and California geographic focus companies, 17% and 1% are invested in ABS including distressed mortgages and commercial and residential loans, 19% and 16% are invested in publicly traded fixed income securities, and 8% and 30% are invested in a broad range of financial assets in all global markets.

7

At both December 31, 2019 and 2018, other investment entities were invested in (1) emerging market equity securities and (2) domestic mortgage backed securities. In addition, other investment entities were also invested in a hedge fund that invests through liquid instruments in a global diversified portfolio of equity, fixed income, interest rate, foreign currency and commodities markets at December 31, 2018.

8	Level 1 registered investment companies primarily consisted of a global equity mutual fund which seeks to outperform the MSCI World Total Return Index.

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1	These investments are measured at fair value using the net asset value per share practical expedient and have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the net plan assets available for benefits.

2	Level 1 U.S. government and agency securities are U.S. treasury bonds and notes. Level 2 primarily relates to the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association.

3	Corporate stock performance for actively managed separate accounts is primarily benchmarked against the Russell Indexes (68% and 67%) and the MSCI All Country World Index (32% and 33%) for 2019 and 2018, respectively.

4	Corporate notes and bonds are diversified and include approximately $49 million and $59 million for commercial collateralized mortgage obligations and other asset backed securities at December 31, 2019 and 2018, respectively.

5	At both December 31, 2019 and 2018, 74% of the common/collective assets are invested in index funds which seek to track performance in the MSCI All Country World Index Investable Market Index and 19% are invested in a non-index U.S. equity fund which is actively managed. The remaining assets in this category are primarily invested in emerging market fund.

6

At December 31, 2019 and 2018, respectively, 55% and 48% of the partnerships are invested in private equity and venture capital funds. Investment strategies for these funds include branded consumer products, clean and information technology and healthcare. 28% and 17% of the remaining partnerships category are invested in asset backed securities including distressed mortgages, distressed companies and commercial and residential loans and debt and equity of banks. 15% and 34% are invested in a broad range of financial assets in all global markets.

7	At both December 31, 2019 and 2018, registered investment companies were primarily invested in (1) a money market fund, (2) exchange rate trade funds which seek to track performance of MSCI Emerging Market Index, Russell 2000 Index and international small cap equities.

8	Other includes $66 million and $58 million of municipal securities at December 31, 2019 and 2018, respectively.

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1	Reflected in "Operation and maintenance" on Edison International's and SCE's consolidated statements of income.

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1	Relates to performance shares that will be paid in 2020 as performance targets were met at December 31, 2019.

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1	Short-term investments include $41 million and $71 million of repurchase agreements payable by financial institutions which earn interest, are fully secured by U.S. Treasury securities and mature by January 2, 2020 and January 2, 2019 as of December 31, 2019 and 2018, respectively.

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1	In 2018, SCE amended the termination date of two power purchase agreements. As a result of this amendment, SCE is required to make early termination payments totaling $206 million by 2021. The unpaid portion of $29 million and $206 million were reflected as a regulatory asset in the consolidated balance sheets as of December 31, 2019 and 2018, respectively.

2	Relates to a regulatory asset that earns a rate of return. See below for further information.

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1

During 2018, SCE recorded CPUC revenue based on the 2017 authorized revenue requirement adjusted for the July 2017 cost of capital decision and Tax Reform pending the outcome of the 2018 GRC. SCE recorded regulatory liabilities primarily associated with these adjustments. In May 2019, these regulatory liabilities were reversed due to the adoption of 2018 GRC final decision. For further information, see Note 1.

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1

SCE's cost-recovery mechanism for its fuel and purchased power-related costs is facilitated in three main balancing accounts, the Energy Resource Recovery Account ("ERRA"), the Portfolio Allocation Balancing Account ("PABA") and the New System Generation Balancing Account ("NSGBA"). In May 2019, the CPUC approved a PABA to determine and pro-ratably recover from responsible bundled service and departing load customers the "above-market" costs of all generation resources that are eligible for cost recovery. The ERRA and PABA balancing accounts are subject to a trigger mechanism that allows SCE to request an expeditious rate change if the sum of the ERRA balance and the bundled service customers' pro-rata share of the PABA balance either exceeds 5% of SCE's prior year generation rate revenue or exceeds 4% of SCE's prior year generation rate revenue and SCE does not expect the overcollection or undercollection to fall below 4% within 120 days. For 2020, the 4% and 5% trigger amounts are approximately $200 million and $250 million, respectively. SCE will begin recovering the combined ERRA, PABA and NSGBA undercollection from customers in rates beginning in April 2020, which will be fully recovered in April 2021.

2

The wildfire-related memorandum accounts regulatory assets represent wildfire-related costs that are probable of future recovery from customers, subject to a reasonableness review. The Fire Hazard Prevention Memorandum Account ("FHPMA") is used to track costs related to fire safety and to implement fire prevention corrective action measures in extreme and very high fire threat areas. The Catastrophic Event Memorandum Account ("CEMA") is used to track costs related to restoring service and damage repair, upon declaration of disasters by state or federal authorities. During 2018, the CPUC approved the establishment of the Wildfire Expense Memorandum Account ("WEMA") to track incremental wildfire insurance costs and uninsured wildfire-related financing, legal and claims costs. In March 2019, the CPUC approved a fire risk mitigation memorandum account to track costs related to the reduction of fire risk that are incremental to the amount in SCE's any other revenue requirement. In June 2019, the CPUC approved a wildfire mitigation plan memorandum account to track costs incurred to implement SCE's Wildfire Mitigation Plan that are not currently reflected in SCE's revenue requirements.

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1	Includes $242 million related to certain lease contracts to be recorded as short-term lease expense in 2021.

2	Certain power purchase agreements are treated as operating or finance leases. For further discussion, see Note 13. Includes a lease contract that has not yet commenced with future lease payments of $135 million. The lease is expected to commence during the third quarter of 2020.

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1	Additional insurance recoveries of $55 million were received in February 2020.

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1	Excludes expected purchases from most renewable energy contracts, which do not meet the definition of a lease payment since renewable power generation is contingent on external factors.

2	During the second quarter of 2019, SCE amended three power contracts that resulted in a $161 million reduction in ROU assets and lease liabilities as these contracts no longer qualify as leases.

3	Excludes escalation clauses based on consumer price or other indices and residual value guarantees that are not considered probable at the commencement date of the lease.

4	Lease payments are discounted to their present value using SCE's incremental borrowing rates.

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1	Includes lease costs from renewable energy contracts where payments are based on contingent external factors such as wind, hydro and solar power generation.

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1	These items are included in the computation of net periodic pension and PBOP expenses. See Note 9 for additional information.

2

Edison International and SCE recognized cumulative effect adjustments to the opening balance of retained earnings and accumulated other comprehensive loss on January 1, 2019 and 2018 related to the adoption of the accounting standards update on the reclassification of stranded tax effects resulting from Tax Reform in 2019 and the measurement of financial instruments in 2018. See Note 1 for further information on the reclassification of stranded tax effects.

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1	Effective January 1, 2018, Edison International and SCE adopted an accounting standards update on revenue recognition, using the modified retrospective method. As a result, prior period amounts were not adjusted to reflect the adoption of this standard.

2	Expenses for the years ended December 31, 2017, 2016 and 2015 were updated to reflect the implementation of the accounting standard update for net periodic benefit costs related to the defined benefit pension and other postretirement plans.

4	Effective December 31, 2015, Edison International and SCE adopted an accounting standard, retrospectively, that requires all deferred income tax assets and liabilities be presented as noncurrent in the consolidated balance sheet.

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5	This capital structure is based on the financial statements as reported under generally accepted accounting principles and does not factor in the adjustments required to calculate CPUC ratemaking capital structure.

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1

This amount includes 9,278,677 shares covered by outstanding stock options, 332,775 shares covered by outstanding restricted stock unit awards, 137,825 shares covered by outstanding deferred stock unit awards, and 124,075 shares covered by outstanding performance share awards and payable in Edison International common stock (calculated at 100% of the target number of shares subject to each performance share award; the actual payout for each award will be zero to twice the target number of shares for the award, depending on performance), with the outstanding shares covered by outstanding restricted stock unit, deferred stock unit, and performance share awards including the crediting of dividend equivalents through December 31, 2019. The weighted average exercise price of awards outstanding under equity compensation plans approved by security holders reflected in column (b) above is calculated based on the outstanding stock options under these plans as the other forms of awards outstanding have no exercise price. Awards payable solely in cash are not reflected in this table.

2

This amount is the aggregate number of shares available for new awards under the Edison International 2007 Performance Incentive Plan as of December 31, 2019. The maximum number of shares of Edison International Common Stock that may be issued or transferred pursuant to awards under the Edison International 2007 Performance Incentive Plan is 71,031,524. Shares available under the Edison International 2007 Performance Incentive Plan may generally, subject to certain limits set forth in the plan, be used for any type of award authorized under that plan, including stock options, restricted stock, performance shares, restricted or deferred units, and stock bonuses.

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*	Incorporated by reference pursuant to Rule 12b-32.

**	Indicates a management contract or compensatory plan or arrangement, as required by Item 15(a)(3).

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a	Accounts written off, net.

b	During 2018, Edison International recorded an additional valuation allowance of $4 million for non-California state net operating loss carryforwards and $4 million for California capital losses generated from the April 2018 sale of SoCore Energy, which are estimated to expire before being utilized. The additional valuation allowance in 2017 was a result of Tax Reform.

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a	Accounts written off, net.

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