Q1 2021 Edison International Earnings Call
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Good afternoon, and welcome to the Edison International first quarter 2021 financial teleconference. My name is Michelle and I will be your operator today, when we get to the question and answer session. If you have a question press star one on your phone.
Today's call is being recorded I would now like to turn the call over to Mr. Sam Robb Raj Vice President of Investor Relations. Mr. <unk> you may begin your conference.
Thank you Michelle and welcome everyone. Our speakers today are president and Chief Executive Officer, Pedro Pizarro, and Executive Vice President and Chief Financial Officer Murray You Havent got day also on the call are other members of the management team I would like to mention that we are doing this call with other executives and different locations. So please bear with us.
Experience any technical difficulties.
Materials supporting today's call are available at Www Dot Edison and best of Dot Com.
These include our form 10-Q prepared remarks from Pedro and Maria and the teleconference presentation Tomorrow, we will distribute our regular business update presentation. During this call. We will make forward looking statements about the outlook for Edison International and its subsidiaries actual results could differ materially from our current.
Important factors that could cause different yourselves set forth in our SEC filings. Please read these carefully.
Our presentation includes certain outlook assumptions as per last reconciliation of non-GAAP measures to the nearest GAAP measure.
During the question and answer session. Please limit yourself to one question and one follow up.
I'll now turn the call over to Pedro.
Well, thank you Sam and good afternoon everybody.
Today Edison International reported core earnings per share price of 79.
Compared to 63 cents a year ago. However.
However, this year over year comparison is not particularly meaningful because SCE has not received a decision and it's 2020 one general rate case.
And do you recognize revenue from CPUC activities for both the first quarter, 2000, and 2020 and 'twenty, one largely based on 2020 authorized base revenue requirements Maria will discuss our financial performance and her remarks.
Investors have been asking us about how we view Edison and risk profile given all the news reports that California is headed into another peak wildfire season with above average risk.
And I have shared before 2019 and 2020 were also above average risk years with 2020 setting records for acres burned.
However, and this is a really important however, the state has successfully avoided the scale of catastrophic damage seen in 2017 and 2018.
We'd like to highlight three key factors that have significantly improved our risk profile.
Made investments to improve firefighting CPUC progress on <unk> hundred 54 implementation and Sce's on wildfire mitigation work.
Well first the state has increased it investments and firefighting capabilities over the last several years.
Incorporating the Governor's 2020 one to 2022 proposed budget, which continues this trend. This would represent a 45 per cent increase and Cal Fire's budget since 2016, or 30 per cent increase and firefighter, but firefighters and the peak of the season since 2019 and.
And significant increases and equipment and modeling to enhance the state's wildfire suppression and capabilities.
And for example, the state is expected to have seven large air tankers operating this fire season, and another five and 2022.
These enhanced suppression resources will help to state moved more quickly to combat wildfires before they become catastrophic.
And the proposed budget also adds a focus on wildfire prevention and the governor and the legislature have already taken early action.
Earlier this month, the approved $536 million to accelerate land and forest management projects laid out and the wildfire and forged resilient action plan and an additional $80 million for roughly 1400, new Cal fire firefighters for 2020 one fire season.
We have also seen significant staff and resource additions and our local fire departments to eight response times and firefighting capacity.
The second risk improvement factor is that the CPUC has made steady and timely progress over the past nearly two years enacting Amy and 50 force provisions as designed.
For instance, shortly after the legislature passed a beta and 54, the CPUC opened the proceeding on an emergency basis to establish the non by passable charge debt funds about half of the wildfire insurance fund and.
On the other indicators that the commission has approved each of Sce's annual safety certifications in a timely manner.
This certification is a key step in implementing the prudency standard and $82 54, codified, whereas utilities' conduct is deemed reasonable if it has a balance safety certification well, let's serious that is created.
Importantly, this standard will go on beyond the life of the wildfire insurance fund.
The commission established its wildfire safety division, providing additional wildfire safety oversight and direction.
And lastly, the CPUC has completed numerous wildfire related decisions on a timely basis. Despite the COVID-19 pandemic.
The Commission has also been proactive and engaging with the Io use on public safety power shutoff or P. S. P S execution.
At the same time acknowledging that it is within the utility has discretion to use this crucial tool to protect the public safety.
Taken together these are all signs that AB 250 force intent is being implemented steadily as designed.
The third risk improvement factor is sce's on work to reduce wildfire risk.
Fire mitigation has been and integral part of Sce's operational practices for years and the utility has had several programs in place to manage and reduce wildfire risk.
With climate change and intensified wildfire risks so utility stepped up its comprehensive wildfire mitigation strategy and has made substantial progress, particularly through its Wm peak.
And 2021, SCE continues to invest and its infrastructure and new technologies to mitigate the risk of fires from the electric infrastructure increased accuracy and fire weather forecasting and enhance its operational practices and.
And improve its P. S. P S program.
SCE has assembled a dedicated P. S. P. S readiness team to address the feedback from customers and public safety partners elected officials and regulatory agencies.
And what he is accelerating the pace of covered conductor deployment and expects to install at least 1000 additional circuit miles by year end.
At this space and you will have hard and over 2500 miles or over 25% of all its overhead distribution infrastructure and high fire risk areas and substantially reducing the risk of wildfires and associated with the utility equipment.
Well this combination of investments and actions by the state of California, The CPUC and SCE gives us increasing confidence and Edison International improved risk profile with respect to wildfires flights.
Slides, two and three and our deck provides additional information on sce's year to date wildfire mitigation activities and on the state's actions over the last few years.
And this work is also a building block for longer term reliability and resiliency, which.
Which will be essential as electrification increases dramatically across the entire economy for the carbonization.
And I was speaking of the carbonization.
And we agree with the goals of precedent bite and <unk>, two and a quarter trillion dollar infrastructure proposal.
The address climate change create well paying jobs improve air quality, particularly and our most vulnerable communities and and.
Greece, our global competitiveness.
Future requires substantial deployment of Tvs electrification of buildings, and new investments and electric infrastructure to ensure clean reliable and resilient electric service for this greater demand.
We look forward to working with the administration and leaders from Congress to develop and implement the complementary policies that will effectively meet per nationally the drove and contribution or in D. C target of 50% to 52% greenhouse gas reductions across the economy relative to 2005.
This is in close alignment with what SCE outline and its about the way 2045 White paper.
And Edison has already stated its support for this economy whites target prior to the Nbc's release.
As highlighted and possibly 2045, the least expensive way to achieve economy wide and carbonization is through and equitable clean energy future with increasing amounts of carbon free generation power and the further electrification of the economy.
The average customer will also benefit from a decline and total energy costs of one third thanks to the greater efficiency and the electric technologies slight.
Slides four five and six and our earnings deck provide you with additional information on our views on these areas.
SCE has a long track record and maintaining affordability.
But in the near term customers will see increases and their bills of S E invest and grid hardening and makes the investments needed to support clean energy goals and the long term affordability that they will yield.
For over a decade SCE has proactively pursued cost reduction efforts as well as improvements in areas like reliability two is operational excellence efforts.
We expect to do more.
And embedding more digital tools and deepen our operations areas like inspections and vegetation management.
And will enable efficiencies and how we work and better harvest data to improve asset management and performance and reduce risk.
Building, a more robust capability and lean process management will help us drive these efficiencies and create a stronger basis to use automation and other technology to screen liner operations.
Fundamentally.
Delivering value to our customers starts with being an excellent and safe operator through the safe delivery of reliable and affordable electricity.
Well, let me close my comments by acknowledging Yesterdays news that our colleague and good friend, Carla Peterman Sce's SVP of strategy and regulatory affairs.
He will be leaving us on may 7th for our new ROE SPG and he's executive VP of corporate affairs.
So we are very sad to lose Carla after a great really great year, and a half together, but.
Well, we wish her well as she takes on the important and very challenging task that was helping Patty poppy and her new leadership team turnaround P. J and these operations and their relationships with their stakeholders and communities.
California needs all of its utility should be healthy and strong so I am really glad our state will continue to benefit from Carlos Challenge.
With that Maria will provide her financial report.
Thanks, Pedro and good and good afternoon, everyone. My comments today will cover first quarter, 2020, one without our capital expenditure and rate base forecast key regulatory filings and update on other financial topics.
Edison International reported core earnings and 79 per share for the first quarter 2021, and increase of 16 <unk> per share from the same period last year and.
As Pedro noted earlier this year over year comparison is not particularly meaningful because SCE has not received a decision and if 2021 and general rate case.
On page seven you can see Sce's key first quarter EPS drivers on the right hand side I.
I would like to highlight a handful of items that accounted for much of the variance.
To begin revenue was higher by <unk> <unk> per share.
First related revenue contributed <unk> <unk> to this variance primarily due to higher rate base.
CPUC related revenue contributed two cents from experience. However, this was offset by balancing account expenses with no effect on earnings.
O&M had a positive variance of 20 <unk>.
Largely due to lower wildfire mitigation related O&M and lower employee benefits expenses.
Wildfire mitigation expenses were lower and the first quarter, primarily because fewer remediation were identified through the inspection process.
And there's also a negative variance and <unk> from an increase in depreciation due to a higher asset base.
Lower net financing costs had a positive variance of <unk> due to several items, including lower interest rates on balancing accounts and lower preferred dividend due to the redemption of preferred stock and SCE last year.
Finally, ftes EPS and the quarter was four cents lower because of dilution from the increase and shares outstanding primarily associated with the equity offering in May 2020.
I would now like to comment on Sce's capital expenditure and rate base growth forecast, which are shown on page eight.
Our capital and rate base forecast are unchanged from the last quarter pending a final decision and Sce's 2021, Trc track one.
SCE and executing against a capital plan that targets key programs, while maintaining flexibility in later years to adapt to what is ultimately authorized and the GIC decision.
The rate base forecast does not include certain projects and programs that are not yet approved.
This includes the customer service free platform project, our CSR P, which went operational earlier this month.
SCE expects to file an application for cost recovery for CSR Pea later this year and if approved this could add approximately $500 million to rate base by 2023.
It also does not reflect capital spending on fire restoration related to wildfires affecting SCE facilities and equipment and late 2020.
Ftes are evaluating the cost and determine how much may be incremental to the current rate base forecast.
Please turn to page nine.
On the regulatory front, we remain hopeful that SCE will receive a proposed decision on track one of its 2021 <unk> this quarter.
As a reminder, the CPUC can vote out a final decision no sooner than 30 days after issued a proposed decision.
Consistent with our prior practice, we will issue earnings guidance. After we receive a final decision on the JRC.
Additionally, SCE filed its testimony and track three of the 'twenty, one 2021 and Trc and the first quarter.
And track three SCE is requesting recovery of $497 million and revenue requirement.
And that the CPUC and find reasonable $679 million of incremental wildfire mitigation capital expenditures.
This filing is another step towards recovery of wildfire mitigation costs, we have already incurred.
Page 10 provides a summary of the approved and pending cost recovery applications from incremental wildfire related costs, including tractor and which I just mentioned.
As you can see on page 11 in the coming months SCE will request a financing order that would allow it to securitize the cost authorized and GIC track too.
Residential on collectibles for 2020, and additional 80% and 54 capital authorized and GIC track one.
We expect Sce's total request to be approximately 1 billion composed of $500 million of 80% and before related capital.
$400 million of wildfire mitigation related O&M and $100 million and incremental residential uncollectible expenses associated with the economic effects of the COVID-19 pandemic.
Related to the 2017, and 2018 wildfire and mudslide events SCE continues to make solid progress settling the remaining individual plaintiff claims.
As shown on page 12 during the first quarter SCE resolved approximately $200 million of individual plaintiff claims.
And total that brings resolved claims to approximately $4 $2 billion, representing more than two thirds and the best estimate of total losses, which remains unchanged.
I would now like to try to provide and update on the ex financing plan and the issuance of securities with up to $1 billion and equity content and we discussed on our last earnings call.
To reiterate our previous statements. This equity content supports maintaining investment grade ratings and E I accident and utility.
During the first quarter Edison International issued $1 $25 billion of preferred stock with equity content of approximately $625 million.
We will continue to monitor market conditions and consider additional preferred equity internal programs and if needed the existing at the market program to satisfy the balance of the equity content need this year.
Beyond 2021, we continue to expect to have minimal equity needs associated with Sce's ongoing capital program and we will quantify these after receiving a final decision and the 2021 <unk>.
And my remarks.
Michelle Please open the call for questions. As a reminder, we request you to limit yourself to one question and one follow up so everyone and line has the opportunity to ask questions.
Thank you if you would like to ask a question. Please press star one on your phone one moment for the first question. Please.
Jeremy Tonet from Jpmorgan you May go ahead.
Hi, good afternoon.
Hi, there gentlemen.
But just wanted to start off on the Biden point, if I could and granted it's very kind of early innings here and it could still on changes for them, but just wondering if as you see it right now.
What impacts do you think the the plan would have on <unk>.
Particularly as it relates to transmission and Evs, if you could share any thoughts for us there.
Yeah to give you a few high level thoughts Jeremy and as you said, it's early here and well see.
We've seen the administration and provides last week the start to their plan to the MDC, but lots of details to be filled and not only by the administration, but then also ultimately by Congress right.
And so with a divided Congress and I expect that.
And he then happens in Washington, and at least on the congressional side will have to be bipartisan and and therefore something that both parties can work with.
I think at the highest level, we as I've mentioned and might be building in March we absolutely support the overall economy wide direction, and you know the 50% to 52% reduction and greenhouse gas emissions by 2000 by 2030.
And as you've seen the the initial elements of a bite and plan.
Clean energy electrification and transmission are all big parts of the of the plan and they line up really nicely with what we've been saying is the most feasible and cheapest way for California to get there through our pathway 2045 work. So that's when you go to one and if there's a strategy and I think it just provides long term support for what we've been talking.
For the last several years of Oh from and SCE perspective.
And making the investments needed to prepare the grid.
And to be able to manage that transition.
To support customers see electrifying building springs from water heating electrify and transportation.
And then.
In terms of the core utility investment with him and he says I think most importantly support for the core program that we've outlined and although we don't provide guidance beyond the wait and see cycle to date.
But we have said that we expect to see this very robust spending needs.
Investment needs for the next several years, certainly wallposter rate case, and really as you look out and on the California wide basis, we have estimated and pathway 2045 debt you know the investment and he will be something like a week or.
$250 billion or so.
Ross the need for clean energy Resources' renewables storage and transmission investment the transmission part of that alone transmission and distribution part is around $75 billion and I think one other charge in the.
And the Deca and provided a little detail on debt.
And.
I think that's what page six showed a $75 billion breakout for the state.
No.
A long way of saying, we think that that's all supportive of the core investments.
Opportunity as well as from upside opportunities to the extent of the utility Enzo meeting to play a role in California and be on Colgate investments or for example for added storage with four programs like our charge ready two and charge ready transport that we have underway right now one final thing and I'll say as debt and there was more press this morning.
On the campaign trail per cent and bite and they talked about.
Getting the power sector itself on a standalone basis, two zero ghd and by 2035 and there is now discussion about potentially setting a target of 80% reductions from 2005 levels for the power sector by 2030.
And speaking of both from an Edison perspective, and from a broader industry perspective, we're all lined up to do as much as we can and as fast as we can at a national level.
80% may really be stretching I think the feasibility for the nationwide transition just given the fact that his nine years until then.
R&D and technology, that's needed to help fill the gaps and significant technology deployment that would be needed, particularly on the transmission side is now just a couple of investment, but the permitting process.
And the quarter quite a while so our Catholic owned and 45 analysis actually concluded a California would see something like a 72% decrease and greenhouse gas emissions from 2000 price levels by 2030.
I've seen some national analysis from equity and others that suggests that the national number you know on and aggressive pathway might still be below 70%, maybe mid sixties ourselves. So.
That'll be the novel discussions among the industry and administration and Congress will be on what what defines what as much as we can do especially if we can do.
What defines the art of debt and how do we make sure the other transitions reliable affordable and equitable for all customers across the country.
Got it that's that's very helpful. Thank you I'm, sorry, and maybe more than you wanted but no no no.
Thank you and maybe just kind of pivoting a bit here and thinking kind of higher level when it comes to inverse condemnation.
I think there had been legal challenges and the path.
And just wondering what your thoughts are on this front do you see any changes on this outlook or.
Do you see any challenges going forward here or any thoughts you could share would be helpful. Thanks.
Yeah. This one maybe a more brief.
Very near term, we are pleased that we have 80% and 54 and eight depends on people did not resolve inverse condemnation, but it created a fair framework and so I.
I think that went a long ways and and our view and significantly reduced the risk exposure for utilities across the state.
In terms of.
Changing the state's current approach on the inverse itself.
I think its unlikely you would see legislative action anytime soon because quite frankly, there's been a lot of work and the legislature on wildfire issues already Brady and said before they have a full agenda and helping the economy recover from the pandemic. So I wouldn't expect that there'd be a whole lot of bandwidth for taking that up in the near term there is always a pause.
Stability is that there could be court cases, where inverse could be tested again and.
Challenged again.
Probably premature to go into details and specific court cases, but I'm aware that not only might there be some debt Papa for us as we go through our case load, but other utilities also may have opportunities to.
To challenge inverse show that that's always a possibility out there through the court system.
Got it that's helpful. That's it from me thanks.
Thanks Darren.
Thank you. Our next question comes from Julien Dumoulin Smith from Bank of America, You May go ahead.
And there Julien.
Afternoon.
Perhaps.
I'm sorry.
And I appreciate your comments on this.
And so all the mitigation actions you guys have taken about wildfires can you comment a little bit on on just the wildfire probabilities and just as you see weather events materializing, thus far et cetera, what the risk profile is going into the fall, especially relative.
Versus the mitigation efforts that you guys have already pursued here how would you frame that risk profile seems to be getting some attention yourself and put it back to you.
Thanks, Julian and that's why I've dedicated the first part of my comments to framing that.
I guess, what I would recap one part and maybe add a little bit the retail park is so.
And we do see and other golby external forecast that we see are calling for a likely above average fire risks.
Peak period here.
I think in terms of the mitigation of our <unk>.
And a fair amount of detail, maybe what I would add is that to remind you that the approach we have taken over the last several years has been a risk informed approach.
So when we went out to replace the first mile per Wildwood covered conductor and it was the milder was and one of the highest risk areas possible right. So we've been.
And going down the stack, if you will buy.
By trying to address the highest risk areas first for the mitigation would have the highest impact on risk reduction. So every piece of work, we do is reducing the risk and we've gone after the big bites on early on.
And that I think is really helpful and constructive in terms of framing that bad debt risk profile that risk profile continues to narrow and other stuff, we've been doing and as I mentioned and might be third remarks, we've also seen the state dedicate.
Outstanding effort to employing firefighting modeling and and just fire fighting period capabilities fire suppression capabilities and so that.
And that ability now that the state has debt frankly, it did and half in 2017 or 2018 to fight multiple large fires simultaneously I might recall I've mentioned and then some.
Really interesting early times articles.
Around 2018, and the challenge of the state had and fighting the camp fire and the Woolsey fire and the Hilfiger all simultaneously.
And the other states added a lot of qualified bodies with a lot more planes and trucks and equipment.
To be able to deploy across multiple fronts simultaneously and that is a significant piece of risk reduction for all of us. So.
I'm not sure I can give you a.
And disclosure on quality quantified answer this as you know so therefore, it's X dollars and 20% lower but I think it's a significant percentage.
A difference in terms of the overall risk profile that the state basis and that therefore, we face right now.
Got it excellent. Thank you I know, it's a tough question if I can clarify this.
Yeah.
You commented about the 200 million and individual claims here, but just.
As you look prospectively through 'twenty, one here any specific milestones.
That could drive perhaps chunkier resolution here and remaining claims of the third anything you can say at all on that front.
No I think Julian we're going to continue to disclose every quarter. The progress that we've made it says we've mentioned before the individual plaintiffs are not sort of like the homogeneous group that we saw in December on claims because those are all property damage claims and so we're just going to continue to move through we have some processes to try and make the discussions with the individual plaintiffs.
As streamlined and efficient as possible. So we will do that and we will come back to every quarter and let you know what the progress has been.
Okay. Thank you guys best of luck.
Thanks Julien.
Thank you. Our next question comes from Jonathan Arnold with vertical Research partners. You May go ahead, Sir Hi.
Hi, good afternoon guys.
Hi, Jonathan.
And just wondering if you could talk a little bit about your approach to PSP.
And.
What you're specifically doing to avoid some of the issues you've kind of come on and taken some flak for and the past and then also P. J and instead of putting these new criteria and front of the CPUC and.
Just curious if you're.
What I can go and I don't think similar up and up.
Date on that.
And Oh situations.
Okay.
I'll start and Maria you might have more to add.
I would separate the PSP space into two broad categories. One is the actual.
The physical execution and that rating on the planning for it and engineering behind it and then B and prosecution of the second would be the broad communications element.
I think that SCE has done frankly pretty well in terms of the core execution and.
For the last several years right.
Utility and had significant prior investment and sexual life from the grid.
And I remember reporting to you all on earnings calls probably going a year, you're going to have back about how at that point.
Something like.
And if you looked at on circuits and high fire risk areas and on average they could be scored on off into four separate section and strike, which allowed us to better target.
PSD S events, well you know we've continued to add segmentation and sexual molestation devices two circuits in high fire risk areas. So that that continues to hold down the scope of <unk> you Dan.
Through that and through better planning from 19 to 20 and out to 'twenty. One we've seen significant improvements in terms of being <unk>.
Number of customers, who have been impacted and.
Given your guidance now I have to add though that this is all very much weather driven.
And so a lot of what happened in 2020 was that we had some tough weather events and necessitate it using this tool of last resort as a last resort growth.
And so that drove some of the numbers, but even as you look now at the.
Various filings that utilities have made through.
And so the WP process.
If you take a look at the numbers.
Edison has actually had on a percentage of total customers basis has the lowest percentage of customers who were impacted by PST us and the 2020 season and.
Fortunately the continued work from 'twenty to 'twenty one has.
We believe will allow edison to significantly reduce the impact further from customers who were impacted last year. If we have the same weather as we did last year of course, we won't have the very same weather before and assumption basis. You know, we would see would be pretty significant debt reduction and the impact I think the number is over 20 or close to 30 per cent reduction.
And impact.
To customers, who were impacted last year, so lots of good things in terms of the modern capabilities.
And what to triage is down and and.
So the script being the impact of any one event on the communication side I think that's where we had a more opportunity and frankly go from 40 pointed feedback deservedly from customers and communities and local governments.
And so if you look at the action plan that SCE filed in February and there's a lot there on continuing to do better on the things that we were doing okay. Good and also doing much better than the things that we didn't do so okay, and so that's where you'll see a lot of focus on how do we have more timely.
Our communications with customers with communities with local governments with the emergency operation centers.
Improving the quality of those communications and other vehicles for them.
And so that's an area, where I hope our customer and expect our customers you'll see a good improvement going into this next peak season, Maria what am I missing there.
Yeah, I guess I would just add two things one is that you know so.
And so along the lines and how we communicate with that are on our.
Customers as well really a focus on additional programs that could benefit them when they R&D energized because I think that's obviously a big component of this I think it's clear that this tool and if necessary and important and what can we do to help customers and when we do the energizing and then I think the other aspect that I would just add it now that we.
The other action plan when do you have the opportunity now to communicate with the commission.
Our cadence is about every two weeks now so it really does provide an opportunity for us to have an ongoing dialogue around what it what it is that SCE is doing and I think those are all important aspects of P. S. P. S for this year.
Thanks, Larry I'm glad you added debt because for example, the battery programs and deployment of batteries and something we've really.
Increase the emphasis on appropriately.
Jos Pedro you trying to do it left off and if you can and make it more variable for people and we when you have to.
Absolutely, but we will do and when we have to do it right because it's an important projected tool to protect the health and safety of our communities.
And then if I.
I may just on the GIC and give any any if any sense of what sort of seems to be extending the timing a bit here and commission has been moving pretty fast on hold how does this and other things.
On that maybe this case doesn't have a statutory deadline.
Just any thoughts you have.
Why why we're still waiting here.
Yeah, Jonathan and I would not read anything into it it's and it's a complicated case. It's a it's a request that has a lot of different components like <unk> and so I think that they're just working through the different aspects of it and putting pen to paper to get that proposed decision out.
Alright, thank you.
And I think so.
And our next question comes from Sharp Lorenzo you May go ahead from Guggenheim partners.
Sure.
Hey, good afternoon, it's actually constantly and here filling in.
And just had a couple of quick one and just a follow up and a lot of questions that I have them and answered.
As Jonathan mentioned and it's been kind of quiet with the ex parte is on the filing on the CPUC has called out a few other more controversial preceding them.
Just curious to get your sense on kind of the CPUC process cycle.
Cycle, if kind of you see some prospective improvements and and the timeliness of other decisions on and kind of is this indicator of the staff getting close to a PD kind of since everything else as of now.
Moving forward.
Yeah.
If I'm hearing your question right, you're asking about broadly the PUC and not just with the <unk> right.
Yes.
So I think we mentioned this and are prepared comments a bit but.
The PUC has been moving expeditiously through a whole lot of stuff and you're throwing up endemic and to the mix and you know frankly, I think they performed pretty admirably given the amount of the number of balls. They juggle under Blue Skies, and then you make the SKU.
A lot tougher with COVID-19 and the.
The impact on their own operations of that as well as the extra.
Volume of work that COVID-19 created right.
So.
And frankly think they day, but they've been doing all right.
And we all have the GIC as a complex case and.
And obviously.
Obviously, we had hopes that we would've had a PD bye bye now.
But we're still hopeful that we'll have a P. D by the end of this quarter as Maria mentioned in her comments.
And I'm not I don't think we're seeing anything systemic there that says there is a problem.
Just the process is broken on the contrary.
And we provided a number of examples and in the prepared remarks around things like safety certifications for Edison and the.
Disposition of a number of day.
Cost recovery accounts.
So.
I just think they have a lot going on under difficult times and.
And obviously would like to see L. P. D for the GIC soon and we will do our part for that but we're not sensing that there is a.
There's something going on and the gears down more systemically.
Maria on anything you say differently, though.
No I agree.
Uh huh.
Thanks for that color. That's it that's really helpful and just one last follow up on you you mentioned that kind of some of the drivers were kind of lower expenses related so pure mitigation activities on kind of wildfire risk.
And just a.
A little bit more broadly I guess, there's been some studies on kind of the extremely low moisture content and California Forest was here and this fire season, and so I kind of I guess puts us in another and kind of high wildfire riskier.
Can you kind of qualify a little bit if you have enough kind of recoverable capacity for kind of another year of wildfire risk conditions, and I guess more broadly and how are you thinking about rate inflation, even in the near term and I know you kind of mentioned the longer term that some of these issues downtown but.
And the near term kind of sort of what other up some mitigating factors and understanding that there will be rate and.
Equation.
Yes.
And I'll take the ore body.
The first part of that yes.
On the first part of that.
And certainly seeing the risk around the moisture content and you know basically.
And basically all the signs are pointing to and above average riskier.
And when you talk about capacity to yoga and I'm thinking the multiple ways and so.
Well first and foremost focus on the fact that and we believe we're doing the things we need to do we are on wildfire mitigation plan to help mitigate our side of the risk and we believe the state is doing the things they need to do to have the fire suppression and waste, which is ready to help control and fire. If it if it ignites, but I think that your question and then also went more jail.
On the rate pressure side Maria I know you've commented on some of that already but maybe you can follow ups and more.
Sure I think.
As you mentioned, we did see some lower expenses related to wildfire mitigation and that's infections that we do we found fewer areas that we had to remediate, but I think more broadly there are still cost associated with mitigating this risk and we've talked before and in fact commission convenient on bonds not too long ago, and you talk about affordability and so as we do that.
We continue to focus people on the necessity for the wildfire mitigation expenditures that we and other Io user doing that goes squarely to maintain and safety of our communities and then over the longer term looking at what it really means to our electric rates as we further electrify the.
And.
And what that means for rates, but then also on what it means for it and the energy Bill itself and so I think as we think about affordability, we and the commission and other stakeholders are looking at it from different perspectives.
Total share of wallet that energy represents and not just the electric Bill affordability has been defined a few different ways by the commission and you know things like how many hours do you have to work at minimum wage and oriented and your electric Bill and it's gonna be on ongoing discussion, but we do know that wildfire mitigation is very important for the safety of our communities and we know that our broader election.
Vacation is important for the the greenhouse gas and environmental objectives and set that at the state has and and that's important because as we do that and we think about affordability. It's also about being equitable and having all of our communities also participate and that improvement in the environment. So I think it's going to be on ongoing discussion the commission right.
Really focused on it and we.
And I have been focused on and as well as Pedro mentioned over many on over many year cycle and try and manage our costs and then as we further electrify the economy, allowing that to help increase affordability as well.
Yeah.
Thanks, Mary that's that's very helpful commentary and and thank you for taking the questions.
Okay and particular.
Thank you and once again, if you do have a question you May press star one on your phone.
Our next question comes from Michael Lapides with Goldman Sachs. You May go ahead Sir.
Hi, Thank you for taking my question my might be of Maria question I'm, just trying to think about the puts and takes for cash flow. So if I look at slide what is it slide 10 and slide 11.
And even the liabilities you still have to pay out I mean, if I think about it the liabilities and you still need to pay out around the $2 billion based on your estimate.
I don't I want to make sure I'm not double counting here, because if I think about it you've you've still got a good chunk of cash coming in the door as outlined on our items and slide 10 and.
And then the almost 2 billion a little over 2 billion of securitization on slide 11 should I think about those two sources as more than ample enough cash to fund the cash outflow that you got them require when you finalize settlements or when the litigation and gets finalized from the 2017 and 18 ballpark.
So a couple of things and there I think as you look at page 10, and look at page 11, some of those things are.
On notch.
Meek so some other things that we talk about on page 10, and up being securitized on page 11, and it's probably easier if we kind of maybe separately and go through and I'll I'll take and tie the numbers for you.
Debt more general response to your question is we do have cash that we have already spent on wildfire mitigation and this will these securitizations Angela and recoveries through rates as we continue to file.
And the application will allow us to sort of get that cash back and endorsed and some of the pressure that you've seen often expressed through the issuance of short term debt and the past or funded through short term debt and the path will be alleviated I think from a from a claim.
Claims perspective, what we've said before is that <unk> has issued equity or preferred equity and the past and oriented and sustain the.
The the.
Credit metrics and investment grade ratings, both at the utility at the holding company and that <unk>.
Equity issuance allows SCE to continue to debt finance the on the.
And the claims payments as they come due and now that we're shortly will be past the insurance recovery and so they'll be able to do that and subject to the waiver that they have they can and keep that debt outside of the capital structure over time, you know cash is all fungible as we're putting dollars down there that me.
Impacts the exact timing of when they do their debt financings, but overtime there will be.
Funding and their business in accordance with our authorized capital structure. So I think that's the general framework I think that the numbers on slides 10, and 11 and Theres a little bit as I said of overlap between applications and then we translate that into securitization on page 11, and we can go over that and more detail. If you like later on.
That'd be great and and finally, Pedro can you circle back and you highlighted some areas where there could be upside day Capex can you revisit those a little bit for US you kind of went to debt a little bit quickly and are these items that impact you and kind of 'twenty two 'twenty three or are they beyond that meaning 24 and beyond.
Sure.
And I think there's probably some midterm and simple long term and.
And you've already seen over the last few years things that were near term debt materialized strike. So we didn't have our charge ready programs and and.
Forecast for quite a while until we got approval on those applications, but now we have over $800 million of program and of that.
And it's probably what three plus Tucson, and certainly over half a billion dollars worth of Capex.
Coming from those make ready programs for light duty and heavy duty medium heavy duty vehicles.
And that's an example of one where we were talking about it for a few years went through the process developed index volume.
On a program and got PUC support for this I think if you look at the near term.
<unk> children and mix.
Next decade or half a decade.
Storage is on the opportunity that could present some potential upside.
And because for storage because a lot of that will be done by third parties and whether it's large scale or the ppas and whether it's you know customers download and customer premise, but there may be opportunities for utility level and on grid side storage, you've seen us do already some of that.
<unk> included some lives on assumptions about a modest level.
But particularly as we see the acceleration of things like that.
Vehicle electrification.
That might lend itself to places, where it might make sense to reinforce our substation with more storage as we deal with neuro Loma, where we put in 20 megawatts of batteries a few years ago. So that's the that's kind of on near term or call. It mid from one I think longer term the upside is and transmission.
And of course, we have per quarter 1000 with competition for transmission.
And then one on make sure that the utilities and able to compete however, I'll remind you that for projects that are upgrades of existing utility on projects because utility has a right of first refusal and just given the scale of wires investment that we think is needed.
I would hypothesize candidly that there will be probably some projects that are upgrades of existing lines, where maybe we havent can see that doesn't yet and I know, we really going to be dependent on the California independent system, operator to run through its transmission planning process and determine the transmission that's needed for renewables by 2000 and.
And later on by 2045, so I think transmission per cent and other upset opportunity.
And finally Berry.
Coming way back down to the more mundane and very near term I don't know if you had mentioned this but just to remind you that we have our customer service free platform project and.
That could be.
$500 million of rate base additions if approved by the commission and we just went live with debt.
Early April and then there could also be some additional rate.
Rate base additions from the wildfire risk duration of work that we did.
In 2020 out of the Creek fire, and we Havent quantified that yet externally, but while we're finalizing the analysis now so those are more much more.
Kind of blocking and tackling near term opportunities.
Got it thank you and much appreciated.
Thanks, Michael.
Thank you. Our next question comes from Ryan Levine from Citi. You May go ahead.
Hi, good afternoon.
How's.
How does the cadence of settlement discussions continued in recent weeks for the remaining 32% on <unk> and potential claims and recognizing that they're smaller in nature as the pace and changing.
Yeah, we probably won't be able to help you very much there. Unfortunately, because those are confidential negotiations.
I think we did share that.
There's good news and that we don't have a process both for the.
Thomas Goldenstein mudslide.
And the plaintiffs as we as well as for the Wuxi plaintiffs individual plaintiffs. So there's a and established process and approved by the courts that allows us to have a.
You know smoother.
Broach too.
And working our way through.
1000 cases that remain.
I would also say you mentioned on the smaller ones remaining.
When do you think that there are smaller relative to say the subrogation settlements and we did earlier, but I want to make sure youre not generalize from too much by looking at JV our.
The dollar amount of settlements, we've done with individual planes and so far relative to the number of individual plaintiffs cases that we settle.
And making any assumptions or extrapolating from that about the remaining cases all of these are so case by case very individualized. So it's really hard to extrapolate and say you know because we did a X dollars for these white plains as you can use that ratio for the remaining ones. It's really case by case.
I think the one thing we can anchor you on is that we view the.
On the research and our best estimate every quarter, we did that once again and you saw that we did not make any changes to that estimate Maria what may have on what I had missed them.
No I think he's somebody else and there's not really anything that we can say in terms of cadence or patterns or anything like that I think that the most.
The signposts that you should look for is that we'll be updating them every quarter for the amount and settlements that we reached with some of these individual plaintiff. So that's really going to be a milestone.
Great and if I could just squeeze in one more in terms of a follow up around the transmission growth opportunity that you had outlined and your pathway to 245.
And so.
$75 billion and in light of the presidential and congressional sales before.
Congress is there any key permits that on their pain.
Debt longer term growth outlook and any politics, there may be and Fox bet that could get accelerated and why it is some of the federal and.
And and Staples.
Yes.
Oh, maybe left and we'll take a shot at that.
Probably the most honest answer I can give you said it's really early.
Alright, and you don't even see significant discussions between the administration and Congress over the next weeks and maybe even months.
I think that there is Joseph dreaming, the timing a bit I would expect that the administration will want to have.
Our plans firmly in place and time for the Glasgow.
Conference of the parties, the United Nations and talking to the parties in November.
And so.
If not hopefully sooner.
But.
The pace the scale and you even see it and the discussions right now on the the infrastructure package. It's been proposed by the precedent and you're hearing two plus billion dollars numbers coming from his proposal and Youre hearing a Republican members and talking about packages that are more on the $600 million Mark.
So gatto influences.
On.
The relative degree of emphasis on different leathers.
And the packages and so and the case of transmission I think it is generally accepted by both sides debt transmission will be a key element of the equation, but how that translates into other federal incentives and frankly from our perspective. The thing that we would really like to see the federal government do more than just money is.
On the permitting process and.
Helping on the federal side to streamline access to federal lands, where we might need to have access.
And as for rights of way for from New transmission lines that alone is probably one of the biggest levers that you have to accelerate this because it's that piece of the permitting process that adds years and years for transmission projects can take you a decade to build the transmission project.
So but in any case.
And I'll go back to my first point that it's early and the game lots of discussions ahead and those discussions will then guide the level of emphasis.
Greg mentioned and transmission, but.
How deeply to go in the power sector by what timeframe, how does that compare with other.
How are you going deeper and other sectors to what extent are using market mechanisms to do that versus more sector by sector allocations.
All of that is to be determined.
I appreciate it thank you.
You bet.
And that was our last question I will now turn the call back over to Mr. Sam from Raj.
Yes. Thank you for joining US today. This concludes our conference call.
Have a good rest of the day, everyone and stay safe and you may now disconnect.
And thank you. This concludes today's conference call. You May go ahead and disconnect at this time.