Q3 2023 Edison International Earnings Call

Good afternoon, and welcome to the Edison International third quarter 2023 financial teleconference. My name is Sue 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 <unk>, Vice President of Investor Relations. Mr. <unk> you may begin your conference.

Thank you Sue and welcome everyone our speakers today.

I've been Chief Executive Officer, Pedro Pizarro, and Executive Vice President and Chief Financial Officer Maria <unk> also on the call are other members of the management team.

Cereal supporting today's call are available at Www Dot Edison Investor Dot Com. These include a 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 current expectations.

Important factors that could cause different yourselves set forth in our SEC filings. Please read these carefully.

The presentation includes certain outlook assumptions as well as 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 will now turn the call turn the call over to Pedro.

Alright, Thanks, Sam and good afternoon everybody.

That's an international reported core earnings per share of $1 38 for the third quarter and $3 48 for the first nine months of the year.

We're pleased with our performance year to date and combined with the outlook for the fourth quarter. We are confident in reaffirming our 2023 core EPS guidance range of $4 55 to $4 85.

I would also like to reaffirm our ongoing commitment to delivering 5% to 7% core EPS growth through 2025, which does not factor in several potential upsides. We also reaffirm our EPS growth guidance of 5% to 7% for 2025 to <unk> 28.

My comments today cover four key topics first an update on the legacy wildfires relating to a change in the best estimate.

Second how sce's industry, leading wildfire mitigation practices differentiate the company as climate change driven wildfire risk effects of utilities across the nation.

Third several SCE regulatory updates and then finally Edison updated projections on the dramatic grid expansion required to enable the economy wide electrification in the clean energy transition.

Starting with Sce's legacy wildfires as shown on page three the process to resolve claims and estimate the final outcome is complex and challenging.

And each quarter SCE evaluates the estimated cost for resolving the remaining claims.

The utility has made substantial progress settling claims and moving toward recovering these costs.

However, this quarter's evaluation required SCE to increase the best estimate by $475 million driven.

Driven primarily by settlements being resolved at higher levels than originally estimated and assuming that trend will continue.

SCE also now has more refined information about the types of claims being presented as it works through the mediation process.

The majority about two thirds of the increase is attributable to wall Street.

The impact of this increase on you our shareholders is not lost on us.

Shareholders ourselves, we understand the importance of putting this issue behind us.

Resolving all outstanding claims is crucial.

SCE is firmly committed to completing this any reasonable and prudent manner that will ultimately support cost recovery.

A positive step in this process is that recently deadline was set for Woolsey claimants in the settlement protocol to notify SCE up their complete claims by February 2024.

After then SCE will have increased clarity on the remaining value of claims and the utility's ability to swiftly we solve them.

As always we will continue to update you each quarter, including Sce's expectation for when it will filed a cost recovery application for the Woolsey fire.

So we will see application will cover more than $4 billion of eligible claims payments plus financing of legal costs.

We recognize that utilities across the country are facing new challenges from wildfires, which were initially viewed as specific to California, but.

<unk> expanded to become an international issue.

Against this backdrop SCE has made tremendous progress since 2018, reducing its risk of losses from catastrophic wildfires by 85%.

SCE has differentiated itself. So it's multilayered wildfire mitigation strategy.

This was anchored by grid hardening and includes enhanced vegetation management asset inspections and other programs.

SCE has replaced more than 5200 miles of distribution lines with covered conductor and in fact by year end SCE will have physically hardened over 75% or is it just distribution miles in high fire risk areas.

Risk mitigation beyond covered conductor includes one of the largest private weather station networks in the country and enhanced protective settings known as fast curve settings.

With their deep experience and achievements my esteemed colleagues are sharing mitigation strategies with utilities across the country.

Moving to the regulatory front I'd like to provide three updates first in August SCE delivered on its commitment to file its teekay and cost recovery applications requesting recovery of $2 4 billion.

SCE provided a compelling case that it prudently be signed managed and operated its equipment and the associated costs were recently incurred.

The evidence provided shows of the damages resulted from extraordinary environmental conditions and other factors beyond Sce's control.

Expert testimony estimates that are reasonable decisions could save customers as much as $4 9 billion.

By avoiding excess financing cost for SCE debt issued over the next 10 years makes.

Making it more affordable to achieve economy wide electrification.

As for next steps the commission will issue a scoping memo that will set a procedural schedule.

Second in September SCE filed an unopposed motion for the CPUC to approve the settlement on track four of its 2021, <unk>, which sets the revenue requirement for 2024.

Reaching this agreement with Intervenors is a successful outcome for the utility and its customers and SCE has sought CPUC approval by the end of the year.

Maria will provide additional details in her remarks.

Third at the end of September the cost of capital capital mechanism triggered resulting in a 70 basis point increase to Sce's return on equity effective January one 2024.

SCE filed a tier two advice letter on October 13, two implements the update towards row, along with the cost of debt and preferred equity.

The response period for Intervenors ends tomorrow, after which the Cpuc's energy division can approve it or referred to the full CPUC.

Consistent with our usual practice, we will provide 2024 earnings guidance on our fourth quarter earnings call.

I would like to reiterate that our EPS growth through 2025 is achievable at Sce's currently authorized Roe.

This increase is one of the upsides I mentioned earlier in my remarks.

I now want to share a recent achievement and recognition of our company's strong corporate governance.

The center for political Accountability, and <unk> Center for business Ethics Research recently published our annual index, which is the Marty measurement of corporate political transparency and accountability.

For the second consecutive year Edison International received a perfect score and we were recognized as a corporate leader for the 10th consecutive year.

I am very proud of our team for this accomplishment and our continued commitment to integrity and transparency.

Now putting my current Edison Electric Institute Chair hat on I am also proud to say that 17. Other utilities were also identified as Trendsetters, which our S&P 500 companies with CPA Zetland index scores, indicating robust disclosure and oversight.

Edison has been a thought leader on the clean energy transition for many years and has published numerous white papers about how California can achieve it.

In September we published countdown to 2045, our latest analysis.

This updates to earlier pathway, 2045 worth, reflecting new laws and policies technology advances and customer adoption, while leveraging the latest modeling and climate science.

We conclude that for California to achieve its net zero greenhouse gas emission goals in just over two decades.

Electric grid must expand faster than ever before to levels higher than we previously estimated.

Page four shows some topline findings on how the state gets to carbon neutrality.

We forecast an 80% increase in electrical demand by 2045.

Due in part to 90% of vehicles at 95% of buildings going electric.

To serve all this load the grid will need to expand to handle three times to clean energy flowing today.

This means no transmission and distribution grid projects will need to be added at four times and 10 times their historical rates respectively.

Importantly, though the average household is going to save about 40% on their overall annual energy expenses by 2045 due to reduced fossil fuel spending and the greater efficiency of electric vehicles and appliances.

This unprecedented pace of grid build out needed to electrify the economy.

Requires bold actions to improve how the states entire energy infrastructure is planned and operate it.

At Edison, we are deeply committed to helping California reach its ambitious goal to mitigate the impacts of climate change and seized a set of approaches outlining count up to 2045 as a model for other states and nations.

With that let me turn it over to Maria for her financial report.

Thanks, Pedro and good afternoon, everyone. My comments today I will cover third quarter results discuss our 2023 EPS guidance and provide additional insight into our long term core EPS growth expectations.

Starting with third quarter of 2023, <unk> reported core EPS of $1 38.

As you can see from the year over year quarterly variance analysis shown on page five Sce's third quarter earnings saw a 3% decrease.

Recall that during this period last year SCE received the Cpuc's final decision on its customer servicing platform project and recorded a nine central App.

This resulted in an unfavorable year over year comparison for this quarter.

I will highlight two additional key variances.

<unk> earnings were driven by an increase in revenue due to the GIC escalation mechanism, partially offset by higher interest expense.

At <unk> parent and other there was a negative variance of <unk>, primarily due to higher holding company interest expense.

Overall, we are pleased with our performance in the first nine months of the year and combined with our outlook for the fourth quarter. We are confident in reaffirming our full year core EPS guidance of $4 55 to $4 85.

I'll cover this in more detail in a few minutes.

On page six we have updated the capital forecast that you incorporate the <unk> track for settlement agreements and assumptions about the timing for certain projects.

The key message here is that we continue to see $38 billion to $43 billion of capital investment opportunities from 2023 through 2028.

Turning to page seven our capital plan supports approximately 6% to 8% rate base growth from 2023% in 2028.

Let me emphasize that SCE has an electric only transmission and distribution focused utility, which benefits from several strong regulatory mechanisms and competitive <unk>.

We see this rate base growth is high quality and lower risk since it is driven by the crucial grid infrastructure needed to facilitate California's leading role in transitioning to a carbon free economy.

Sue: Good afternoon and welcome to the Edison International, 3rd quarter, 2023 Financial Telecomference. My name is Sue 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.

As outlined in our countdown to 2045 analysis unprecedented grid expansion is needed to keep pace with long term systemwide meters capacity growth.

For a sense of scale, because it'd be upgrades and additions needed for distribution circuits, Substations transformers and conductors SCE expects to have a 25% larger distribution system by 2045.

Sam Ramraj: I would now like to turn the call over to Mr. Sam Ramraj, vice president of Investor Relations. Mr. Ramraj, you may begin your conference.

This significant expansion in the grid makes us confident in the long term investment opportunity here in California.

Sam Ramraj: Thank you, Sue and welcome everyone, a speaker today, of President Chief Executive Officer, Pedro Pizarro, and Executive Vice President and Chief Financial Officer, Maria Rigatti. Also on the call, our other members of the management team. The theory of supporting today's call are available at www. EdisonInvestor.com. These include a form 10Q, 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 outlet for Edison International and its subsidiaries.

Before I discuss our outlook for 2023 and beyond I'd like to point out two key opportunities. We have identified that would add certainty around our future financing needs and financial outlook.

First SCE will be filing an application with the CPUC tomorrow. It would allow the utility to monetize its current portfolio of contracts with wireless providers and future contracting opportunities on its transmission infrastructure.

The utility currently has more than 850 leases of space on transmission towers, and other structures that wireless providers used to attach their equipment.

Sam Ramraj: Actual results could differ materially from current expectation. Important factors that could cause different results are set forward in our SEC filings, please read these carefully. The presentation includes certain outlet functions as well as reconciliation of non-gap measures to the nearest gap measure.

SCE is making this filing prior to the marketing of these assets to shorten the timeline leading to final regulatory approval.

The contract with the utility expects to monetize generate nearly $20 million in annual revenue.

This transaction will financially benefit customers and for shareholders. This is an efficient form of financing that can reduce the need for equity in the future we will.

Keep you updated as the transaction progresses.

Second <unk> recently announced a $750 million tender offer for its outstanding preferred stock.

This offer will be funded with debt issuances, such as junior subordinated notes R. J S N.

Sam Ramraj: Dealing the question and answer session, please limit yourself to one question and one follow-up.

By funding the repurchase with J S. N you will replace the equity content of the preferred stock.

Overall, the transaction will simultaneously delever, the balance sheet and reduce our interest rate exposure.

Pedro Pizarro: I will now turn the call over to Pedro. All right, thanks Sam, and it's good afternoon, everybody.

Let me underscore that this transaction creates near and long term financial benefits. In 2023, you would recognize core EPS of about <unk> <unk> for every $100 million of preferred stock tendered.

Pedro Pizarro: Edison International will be ported court earnings for share of $1.38 for the third quarter, and $3.48 for the first nine months of the year. We are pleased with our performance here today, and combined with the outlook for the fourth quarter, we are confident in reaffirming or 2023 core EPS guidance range of $4.55 to $4.85. I would also like to reaffirm our ongoing commitment to delivering five to seven percent core EPS growth between 25, which does not factor in several potential upsides. We also reaffirm our EPS growth guidance of five to seven percent for 2025 to 28.

In 2026, and beyond will have locked in lower after tax financing costs compared to the expected reset rates for the preferred stock.

These two opportunities to build on our track record of successfully identifying ways to manage the business, even more efficiently and executing to create additional value.

Pedro Pizarro: My comments today cover four key topics. First, an update on the legacy wildfires relating to a change in the best estimate. Second, how SEC is just relating wildfire mitigation practices differentiate the company as climate change driven wildfire risk affects utilities across the nation. Third, several SEC regulatory updates, and then finally, Edison's updated projections on the dramatic grid expansion required to enable economy-wide electrification and the clean energy transition. Starting with SEC's legacy wildfires as shown on page three, the process to resolve claims and estimate the final outcome is complex and challenging.

As shown on page eight we are reaffirming our 2023 core EPS guidance range of $4 55 to $4 85.

Based on our year to date performance and outlook for the rest of the year, we are confident in delivering on this target.

Recall that this guidance included 14th related to Sce's 2022 Seamer application.

The CPUC recently extended the preceding statutory deadline to April 2024, but there still is a possibility of a final decision by year end.

Together with the tender offer these two items could put us at the top end of our guidance range. However, if the FEMA final decision occurs in 2024, we will realize those earnings in that year.

Pedro Pizarro: And each quarter SEC evaluates the estimated costs for resolving the remaining claims. The utility has made substantial progress settlement claims and moving toward recovering these costs. However, this quarter's evaluation required SEC to increase the best estimate by $475 million. Driven primarily by settlements being resolved at higher levels than originally estimated, and assuming that trend will continue. SCE also now has more refined information about the types of claims being presented as it works through the mediation process.

Page nine gives you an update on our accomplishments to date in regard to our 2023 financing plan.

The financing transaction. So far this year have been in line with our expectations and supported by strong Investor response.

As I mentioned, a moment ago, we've opportunistically added a new component to our plan with the tender offer and look forward to executing another successful transaction.

On the regulatory front I'd like to expand on a couple of pages earlier points.

<unk> provides some detail on the <unk> track for the agreement with Intervenors would authorize 98% of Sce's requested revenue requirement and 99% of its requested rate base.

Pedro Pizarro: The majority, about two-thirds of the increase is attributable to Woolsey. The impact of this increase on you are shareholders is not lost on us. As shareholders ourselves, we understand the importance of putting this issue behind us. Resolving all outstanding claims is crucial, and SCE is firmly committed to completing this in a reasonable and prudent manner that will ultimately support cost recovery. A positive step in this process is that recently a deadline was set for Woolsey claimants in the settlement protocol to notify SCE of their complete claims by February 2024.

The key takeaway here is that once approved by the CPUC. The agreement will provide clarity on 2020 for revenue and translate to 12 and incremental rate base EPS over 2023.

Consistent with our typical practice, we will provide 2024 earnings guidance on our fourth quarter earnings call.

Pedro Pizarro: After then, SCE will have increased clarity on the remaining value of claims and the utility's ability to swiftly resolve them. As always, we will continue to update you each quarter, including SCE's expectation for when it will file the cost recovery application for the Woolsey fire. The Woolsey application will cover more than $4 billion of eligible claims payments plus financing and legal costs. We recognize that utilities across the country are facing new challenges from wildfires, which were initially viewed as specific to California but have expanded to become an international issue.

Pedro Pizarro: Against this backdrop, SCE has made tremendous progress since 2018, reducing its risk of losses from catastrophic wildfires by 85%. SCE has differentiated itself through its multi-layered wildfire mitigation strategy. This is anchored by grid hardening and includes enhanced vegetation management, asset inspections, and other programs. SCE has replaced more than 5,200 miles of distribution lines with covered conductor, and in fact, by year end, SCE will have physically hardened over 75% of its distribution miles in high fire risk areas.

Because that's the foundation for an attractive total return proposition.

That concludes my remarks, and with that I'll hand, it back to Sam.

<unk> can you please open to call for questions.

As a reminder, we recommend to you to limit yourself to one question and one follow up so everyone in line have 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.

Pedro Pizarro: First mitigation beyond covered conductor includes one of the largest private weather station networks in the country and enhanced protective settings known as fast curve settings. With their deep experience and achievements, my SCE colleagues are sharing mitigation strategies with utilities across the country.

Our first question is from Anthony Crow dealt with Mizzou Hope you May go ahead.

Good afternoon, Pedro good afternoon Maria.

Pedro Pizarro: Moving to the regulatory front, I'd like to provide three updates. First, in August, SCE delivered on its commitment to file its TKM cost recovery application, requesting recovery of $2.4 billion. SCE provided a compelling case that had prudently designed, managed, and operated its equipment and that the associated costs were reasonably incurred.

[noise].

Good follow up on the last slide Maria Slide 10, or Pedro and take it on the cost of capital just first I mean, you gave some some insight into the use of proceeds on the reset just curious if the Senate Bill 410.

Made into where you would deploy the proceeds and then also if you go through the procedurally what happens after November 2nd and then I have one follow up.

Pedro Pizarro: The evidence provided shows that the damages resulted from extraordinary environmental conditions and other factors beyond SCE's control. Expert testimony estimates that a reasonable decision could save customers as much as $4.9 billion by avoiding excess financing costs for SCE that issued over the next 10 years, making it more affordable to achieve economy-wide electrification.

Sure So, let's take a little bit about the 39 cents and the <unk> and the Rv's chips and I think I think about it and <unk> and basically if you think about the cost of capital mechanism. It's.

It's really driven by interest rates and it's a mechanism that has been embedded in the cost of capital proceeding for.

More than a decade now.

And it.

Pedro Pizarro: As for the next steps, the commission will issue a sproping memo that will set the procedural schedule. Second, in September, SE filed an unopposed motion for the CPUC to approve a settlement on track 4 of its 2021 GRC, which sets the revenue requirements for 2024. Reaching this agreement with interveners is a successful outcome for the utility and its customers, and SE has sought CPUC approval by the end of the year.

Part of the reason part and that's the reason for that is because we have the three your cost of capital cycle and when I think about that driver and I think about the cost of capital mechanism I have to think about interest rates and I think about interest rates in two different components is the 21 through 25 period and then the 25 to 28 period and I just want to highlight that the assumption that we've given you around the <unk>.

Once or twenty-five period, we said that we're going to finance SCE will finance at a 5.3% interest rates and that's D. I X will finance at a 6.1% interest rate and if you look at the the plan that we've had for this year and the information. That's in his life was actually executed our plan in 2023 right at those levels in fact, yeah slightly below those levels.

Maria Rigatti: Maria will provide additional details in her remarks.

Maria Rigatti: Third, at the end of September, the cost of capital mechanism triggered, resulting in a 70 basis point increase to SE's return on equity, effective January 1, 2024. SE filed a tier 2 advice letter on October 13 to implement the update to its ROE along with the costs of debt and preferred equity. The response period for interveners ends tomorrow after which the CPUC's energy division can approve it or refer it to the full CPUC.

Then I look forward to the best of the period between now and 2025 and basically I think about the cost of capital mechanism is providing a hedge against future increases in interest rates. So it's one of those really good regulatory contracts that we have here in California that really protects against the kind of very recent volatility that we've seen in rates.

And then if I think about the longer term if anything about 25 to 28, we have also giving you some assumptions around interest rates. He said that at the he would finance at 4.6% and P. I X with finance at 5%.

Maria Rigatti: Consistent with our usual practice, we will provide 2024 earnings guidance on our fourth quarter earnings call. I would like to reiterate that our EPS growth through 2025 is achievable at SE's currently authorized ROE and this increases one of the upsides I mentioned earlier in my remarks.

When I look at that I look at our normal process you know how do we develop those assumptions, we basically look to that we look for longer term fundamental forecasts and yes, those longer term fundamental forecast the more recent vintages, they're higher in the front then but again that's captured by the hedged is provided by the cost of capital mechanism longer term the current vintage prior men's.

Pedro Pizarro: I now want to share a recent achievement and recognition of our company's strong corporate governance. The Center for Political Accountability and Ziquin Center for Business Ethics Research recently published your annual index, which is the marquee measurement of corporate political transparency and accountability. For the second consecutive year, Edison International received a perfect score, and we were recognized as a corporate leader for the 10th consecutive year. I am very proud of our team for this accomplishment and our continued commitment to integrity and transparency.

G. As they are actually converging and so we think that we're still in a good place on a longer term basis of course spreads play a role too and since we first gave you our assumptions around interest rates about a year ago, we've actually seen our spreads narrow.

Hoping for more of that but certainly we've seen some some some benefit in that direction as well. So that's a component of the C. C. M O N and how we think about the use of proceeds I think the other piece that I references we have a lot of confidence in the operational drivers that we share with you already but as we see the CCN trigger.

Pedro Pizarro: And now putting my current Edison Electric Institute chair hat on, I am also proud to say that 17 other utilities were also identified as trend centers, which are S&P 500 companies with CPA Ziquin index scores indicating robust disclosure and oversight. Edison has been a thought later on the clean energy transition for many years and has published numerous white papers about how California can achieve it. In September, we published Countdown to 2045, our latest analysis.

<unk>, we do want to look at the opportunities that we might have to deploy some of that and accelerate benefits and our operational excellence program. Because you know that we have been working on operational excellence and driving efficiencies for many many years and it's not a single year effort, it's a multi year effort and so as we see opportunities to deploy more.

Initiatives and do that more quickly we will definitely take a look at it because it basically provides an even stronger foundation going forward I think those are the different components of the CCM and how we're thinking about it.

Pedro Pizarro: This updates the earlier path with 2045 worth, reflecting new laws and policies, technology advances, and customer adoption, while leveraging the latest modeling and climate science. We conclude that for California to achieve its net zero greenhouse gas emission goals in just over two decades, the electric grid must expand faster than ever before to levels higher than we previously estimated. Page four shows some top line findings on how the state gets to carbon neutrality.

Great and then post November 2nd Inconvenienced for I guess Tomorrow, and then post November 2nd I guess do we wait for comments from the energy Division work with just if you just took us through the urine.

Sure so.

Do tomorrow, Martha deadline from Intervenors once that deadline has passed the energy division would still consider whether or not they would disposition of the decision or if they would pass it on to the commission. So we will know you know relatively shortly we're getting remember, though that the cost of capital a mechanism it's very formulaic.

Pedro Pizarro: We forecast an 80 percent increase in electrical demand by 2045 due in parts to 90 percent of vehicles and 95 percent of buildings going electric. To serve all this load, the grid will need to expand to handle three times the clean energy flowing today. Project. This means new transmission and distribution grid projects will need to be added at four times and ten times their historical rates respectively. Importantly though, the average household is going to save about 40% on their overall annual energy expenses by 2045 due to reduced fossil fuel spending and the greater efficiency of electric vehicles and appliances.

Not a lot of it's only math in terms of you know how it would get implemented so I do think that's an important element of the of the other mechanisms.

Great and then just lastly, if I went to slide three I appreciate the clarity.

It's mindless incorrect, if I think about the.

The additional increase I think two thirds related woosley and by February I think where the deadline is due for claims.

Again, it maybe you may change that six four but by February we should be.

Much more certainty on the total you know the amount of claims here.

That's right in front of it because it gives a deadline bear profiling planes. So that provides a certainty around the.

Pedro Pizarro: This company requires bold actions to improve how the state's entire energy infrastructure is planned and operated. At Edison, we are deeply committed to helping California reach its ambitious goal to mitigate the impacts of climate change and cease a set of approaches outlining countdown to 2045 as a model for other states and nations.

The scope here so looking forward to reach you back they're timeless.

Great. Thanks for all the clarity so you.

Thanks.

Thank you. The next question is from sharp.

Guggenheim Partners you May go ahead and.

Sure.

Just.

Maria Rigatti: With that, let me turn it over to Maria for her financial report. Thanks, Pedro.

Monetization of the telecom infrastructure, Wheezes 20 million revenue, obviously potentially coupling that with the wall far coins recovery. What time frame are you in bedding and plan to start seeing D. P. As some credit electric benefits.

Maria Rigatti: I'm good afternoon, everyone. In my comments today, I will cover third-quarter results, discuss our 2023 EPS guidance and provide additional insight into our long-term core EPS growth expectations. Starting with third quarter of 2023, the IX reported core EPS of $1.38. As you can see from the year-over-year quarterly variance analysis shown on page 5, SCE's third quarter earnings saw a three-cent decrease. We'll call that during this period last year, SCE received a CPUC final decision on its customer service through platform projects and recorded a nine-cent row up.

The increase Queens figures present, a drug person some of the benefits from the equity carpet up though.

Hey shirts, Maria so I'm gonna I'm gonna take that in two pieces, so maybe a little bit on our credit metrics. So you know our our framework is 15% to 17% ever voted that we've laid out our capital plan and our financing plan, including the hundred million dollars or approximately through the drip enter the internal programs.

Maria Rigatti: This results in an unfavorable year-over-year comparison for this quarter. I will highlight two additional key variances. SCE's earnings were driven by an increase in revenue due to the GRC escalation mechanism partially offset by higher interest expense. At EIX parent and other, there was a negative variance of $0.7 primarily due to higher-holding company interest expense. Overall, we are pleased with our performance of the first nine months of the year, and combined with our outlook for the fourth quarter, we are confident in reaffirming our full-year core EPS guidance of $4.55 to $4.85.

And you know we are comfortable that we can hit our targets of the 15% to 17% F. I voted that obviously with additional amounts related to the increase in the reserves and there's a little bit of fluctuation in the matrix, but we are comfortable that we will be able to still meet our objectives. When it comes to our credit metrics.

That of course is related to.

Recovery the cost recovery applications that we file so we've already filed that he can application you know we will file the will of the application and we provided some some metrics in the slides this time around where for every billion dollars of cost recovery. That's about a 40 to 50 basis point improvement in our credit metrics. So it's a very material none.

Maria Rigatti: I'll cover this in more detail in a few capital forecasts to incorporate the GRC track for settlement agreements and assumptions about the timing for certain projects. The key message here is that we continue to see $38 to $43 billion of capital investment opportunities from 2023 through 2028. Turning to page 7, our capital plan supports approximately 6-8% rate-based growth from 2023 through 2028. Let me emphasize that SCE is an electric only, transmission and distribution focused utility, which benefits from several strong regulatory mechanisms and competitive ROEs.

<unk> and so you know we're.

We're focused on demonstrating our prudency, we're focused on a long term customer benefits that having a good decision will will create and we're also focused on the financial benefits and the balance sheet strength that willing to so I think that that's all you know an important element when it comes to the the tower attachment fail in terms of sort of timing of what to look at so we're.

Filing our application tomorrow, they're they're the reason we're filing it tomorrow is so that we can get a little bit more clarity on precisely what the regulatory process will be we think we qualify for a somewhat streamlined regulatory approval process, but you know in the alternative we just want to get ahead of the of the timeframe. So we are going to.

Maria Rigatti: So we see this rate-based growth as high quality and lower risk since it is driven by the crucial grid infrastructure needed to facilitate California's leading role in transitioning to a carbon-free economy. As outlined in our countdown to 2045 analysis, unprecedented grid expansion is needed to keep pace with long-term, system-wide resource capacity growth. For a sense of scale, because of the upgrades and additions needed for distribution circuits, substations, transformers, and conductors, SCE expects to have a 25% larger distribution system by 2045. This significant expansion in the grid makes us confident in the long-term investment opportunity here in California.

Ah line, our marketing schedule with the regulatory approval, so what we'd like to have the regulatory approvals just before we sign we find any purchase and sell agreements because that'll of course reduce uncertainty for everyone and depending on which Pappy a commission goes down we would expect you know potentially middle of next year.

Until some time into 2025 to see transaction close so that's the sort of time frame are looking out for that.

And the increase in value of Bitcoin does that present any challenges to the timing of bitcoins recoveries with a C. P C.

Maria Rigatti: Before I discuss our outlook for 2023 and beyond, I'd like to point out two key opportunities we have identified that would have certainty around our future financing needs and financial outlook. First, SEE will be filing application with the CPC tomorrow that would allow the utility to monetize its current portfolio of contracts with wireless providers and future contracting opportunities on its transmission infrastructure. The utility currently has more than 850 leases of space on transmission towers and other structures that wireless providers use to attach their equipment.

No sorry.

No remember <unk> <unk> R. T K I'm filing recalls speaker verification following we proposed to procedure for <unk>.

Introducing amounts would've been fellow settled after the filing days and so you've been contemplated there'll be some number settlements coming and then we'd be doing it'll be on the the the number. So weird initially filed so the increase in claims are just fib through to the final two a procedure that we proposed.

Maria Rigatti: SEE is making this filing prior to the marketing of these assets to shorten the timeline leading to final regulatory approval. The contracts, the utility expects to monetize, generate nearly $20 million an annual revenue. This transaction will financially benefit customers and for shareholders, this is an efficient form of financing that can reduce the need for equity in the future. We will keep you updated as the transaction progresses.

Okay perfect sounds good and then just lastly, you obviously noted 39 cents a upside from the cost of capital mechanisms and the opportunity to deploy it into customer focus Capex I guess.

How long would it take you to deploy the incremental capex, but the 39 cents of earnings would support.

What mechanisms would you utilize to minimize that like Thanksgiving.

Yeah. So we would be looking at a whole range of things.

Maria Rigatti: Second, EIX recently announced a $750 million tender offer for its outstanding preferred stock. This offer would be funded with debt issuances, such as Jr, subordinated notes or JFNs. By funding the repurchase with JFNs, we will replace the equity content of the preferred stock. Overall, the transaction will simultaneously deliver the balance sheet and reduce our interest rate exposure.

In terms of deploying that 39 cents and that could range from everywhere from you know further pushing forward them on our initiatives in the field to improve the the processes there and so that would allow us to get capital efficiencies as well as O&M efficiencies, we're gonna keep looking at other opportunities in customer service and.

Enhancing our improving the customer experience. We also have things that we want to do with support services and you know places in finance and regulatory affairs as examples. So we're looking at that and as I said earlier for us operational excellence cost efficiencies.

Maria Rigatti: Let me underscore that this transaction creates near and long-term financial benefits. In 2023, we would recognize core EPS of about $2 cents for every $100 million of preferred stock tender. In 2026 and beyond, we will have locked in lower after tax financing costs compared to the expected reset rates for the preferred stock. These two opportunities build on our track record are successfully identifying ways to manage the business even more efficiently and executing to create additional value.

Really driving effectiveness in the business, it's not a single year effort like we are doing this on a multi year basis and so we're going to be building on successes that we up next year into 2025. So I think the plan is still developing so we would expect to see that 25 26 27.

Maria Rigatti: As shown on page 8, we are reaffirming our 2023 core EPS guidance range of $4.55 to $4.85. They have done our year-to-date performance and outlook for the rest of the year, we are confident in delivering on this target. Recall that this guidance includes 14 cents related to SCE's 2022 CMA application. The CPC recently extended the preceding statutory deadline to April 2024, but there still is a possibility of a final decision by year-end. Together with the tender offer, these two items could put us at the top end of our guidance range. However, if the CMA final decision occurs in 2024, we will realize those earnings in that year.

Okay perfect. Thank you guys. So I appreciate it.

Thank you and our next question is from Angie <unk> with Sea Port you May go ahead.

<unk>.

Hello, Thanks for letting me ask some questions. So the first.

I mean, those wildfire mass increases are very substantial it just almost feels like it's it's a moving target right where almost of the ninth inning and you know every other quarter. We have these very big increases.

It's someone's surprising.

At least from from our vantage points to see at this late into the process.

Maria Rigatti: Page 9 gives you an update on our accomplishments to date in regard to our 2023 financing plan. The financing transactions so far this year have been in line with our expectations and supported by strong investor response. As I mentioned the moment ago, we have opportunistically added a new component to our plan with the tender offer and look forward to executing another successful transaction.

And again I am clearly hopeful that by February we will have a full picture, but it just feels like you know there was that.

There is more of those increases to come.

Would you disagree.

So.

Andrea you you heard it in my comments, we know this is.

Something bad for shareholders are truly big a notice off and you know, we we are to management and the shareholders.

Maria Rigatti: On the regulatory front, I'd like to expand on a couple of pages earlier points. First, to provide some detail on GRC track 4, the agreement with entrepreneurs would authorize 98% of SCE's requested revenue requirement and 99% of its requested rate.

The reality is that every quarter we.

We test again, we reevaluate and this border a number of factors changes as I mentioned in my comments it all adds down or boils down to we're seeing settlements coming in higher.

Maria Rigatti: Bay. The key takeaway here is that, once approved by the CPC, the agreement will provide clarity on 2024 revenue and translate to 12 cents in incremental rate-based EPS over 2023. Consistent with our typical practice, we will provide 2024 earnings guidance on our fourth quarter earnings call. Second, as shown on page 10, the cost of capital mechanism triggered a 70 basis point of RRB increase, resulting in 2024 and 2025, CPC RRBs of 10.75%.

The unexpected and so that and that'll be it comes to new best estimate I think you're right. You know, we're certainly looking forward to February and at least knowing what the claims final they were going to be for we'll see.

I do want to caution, but that's the deadline for claims filing might still take some time beyond the deadline to get all the details behind specific claims and really big into those that is it's a process as you'll see in over the last several years. So you know what could you do work at it and you know that our team is very focused.

Maria Rigatti: This benefits 2025, EPS by approximately 39 cents. The mechanism provides a hedge against future increases and interest rates above the levels embedded in our 2025 guidance of $5.50 to $5.90. In terms of operational drivers, we are confident that we will deliver results within the range shown in the modeling considerations. SCE is also evaluating opportunities to reinvest a portion of the 39 cents to accelerate initiatives that would benefit safety, quality, and affordability for customers. This investment would enable a utility to capture saving sooner, thereby providing a strong base for long-term customer benefits.

On you know, having a fair outcome as we go through all of this litigation is gonna be you know fair.

Fair to people, who were impacted by the fires, but it was supposed to be fair to our customers.

So we want to make sure that we do it as quickly as we began taking the time needed to have a good thoughtful process.

And be able to demonstrate the prudency of reactions to abuse it.

And maybe if I could just offer up one more thing and I think Pedro kind of touched on this last comment.

Maria Rigatti: I will share more on this sprung over time. I want to reiterate the high confidence we have in our ability to achieve our 2025 and 2020 EPS growth targets. In addition to our strong rate base growth, we also see upside opportunities. We are looking forward to delivering our targeted EPS growth, which sets the foundation for an attractive total return proposition.

It is a you know a process that we have to go through and we have to do an evaluation.

The most important part of this process is getting through it and creating a certainty that comes with completion because that's when we will be able to fully you know we have a trip mechanism and the T. K M application, but when we're done with all these processes will be able to go and get a final resolution also with the commission. So from our perspective, it's it's getting through the claims and getting.

Sam Ramraj: That concludes my remarks and with that, I'll hand it back to Sam. So can you please open the call for questions? As a reminder, we reckons you to limit yourself to one question and one follow-up, so everyone in 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.

Anthony Krodel: Our first question is from Anthony Krodel with Muzujo. You may go ahead.

The claimed as quickly as we possibly can because that completion will create the certainty.

Okay, but in the meantime, the the total number of claims.

You know or financing of claims grows and the cost of capital you know mechanism doesn't maybe help me here right because those or not.

Currently eligible for recovery so the the rising interest expands on those.

True that does that.

Yeah, that's how do we will what in Arcata, a couple of application we are going to file for recovery of the interest expense associated with claims the financing the planes payments and the other aspect as well is that we are and just to highlight another couple of numbers for Ya. We are about 85% complete with all of our individual plaintiffs claims resolute.

Maria Rigatti: Good afternoon, Pedro. Good afternoon, Maria. Good. Follow up on the last slide, Maria, slide 10, or if they don't take it. On the cost of capital, just first, I mean, you gave some insight into the use of proceeds on the reset. Just curious if the Senate Bill 410 played into where you would deploy the proceeds and then also go through the procedurally, what happened after November 2nd and then I have one follow-up?

<unk>. So we are moving through the <unk>.

[noise] pile, if you will you know expeditiously.

Mmk and then changing topics. So so you lowered your rate base projections.

Well 23 24 25.

Maria Rigatti: Sure, so let's think a little bit about the 39 cents in the ROE's shift. And I think about it in two different ways. And basically, you can think about the cost of capital mechanism. It's really driven by interest rates and it's a mechanism that has been embedded in the cost of capital proceeding for more than a decade now. And it's part of the reason for that is because we have this three-year cost of capital cycle.

<unk>, so <unk>, you're pointing out obviously upsides to cutbacks and best Rebase, mostly beyond 25.

So maybe some more details behind that and then secondly in your guide and <unk> I've noticed some changes in the components one of which is the 10th of increase in the few D C.

Just since the last quarter of them. If you could just put my call caller sure. It actually it turns out that your two questions are very much related so the capital that you're seeing moving around is particularly in the very near term. It's just a shift in the utility on storage project and the timing of those payments so what you're seeing.

Maria Rigatti: And when I think about that driver and I think about the cost of capital mechanism, I have to think about interest rates. And I think about interest rates in two different components. There's a 21 through 25 period and then a 25 through 28 period. And I just want to highlight that the assumptions that we've given you around the 21 through 25 period, we said that we're going to SEE will finance it at 5.3% interest rate and that EI actually have been asked at a 6.1% interest rate.

To your second question, you know shifts between right base earnings and a a P. D C on the on the on the fly that is Marlin considerations, it's really a shift between those two buckets. So <unk> utility on storage wasn't rate base before now it's it's in Ah construction work in progress longer and so you just see that the two number.

Maria Rigatti: And if you look at the plan that we've had for this year and the information that's in the slides, we've actually executed our plan in 2023 right at those levels. And so EIX slightly below those levels. Then I look forward to the rest of the period between now and 2025. And basically, I think about the cost of capital mechanism as providing a hedge against future increases in interest rates. So it's one of those really good regulatory constructs that we have here in California that really protects against the kind of very recent volatility that we've seen in race.

Or as if you add them back together there'll be the same as they were last quarter. So that's one piece of it the other piece that's going on in our capital program is we have shifted one of the transmission projects that we are still going through the permitting process on but that's just shipped out each year interested out just one ear and so you're seeing a little bit of that impact but that.

Maria Rigatti: Six, and then if I think about the longer term, if I think about 25 to 28, we've also given you some assumptions around interest rates. We said that SEE would finance at 4.6% and EI actually financed 5% percent. When I look at that, I look at our normal process, you know, how do we develop those assumptions? We basically looked for that, we looked for longer term fundamental forecasts. And yes, those longer term fundamental forecasts and more recent advantages, they're higher in the front end.

Why overall for the period 23 through 28th the capital program is still the same as it was last quarter.

Okay. Thank you.

<unk> branch manager.

Thank you. The next question is from Greg <unk> with you B S. You May go ahead.

Good.

Alright.

Sorry for detail oriented question.

Is there a temporary financing for the.

Maria Rigatti: But again, that's captured by the hedge that's provided by the cost of capital mechanisms. Longer term, the current vintage prior vintage is they're actually converging. And so, we think that we're still in a good place on a longer term basis. Of course, spreads play a role too, and since we first gave you our assumptions around interest rates, about, you know, a year ago, we've actually seen our spreads narrow, hoping for more of that, but certainly we've seen some benefit in that direction as well.

Preferred tender before you you get to the potential.

So a note financing.

So Greg this is Maria we can address it in different ways I think in the offering circuit and the offering documents. We note how we move we will finance.

The tender and we can do that either by Ah J S N or some other you know equity content security you know right. After the the offering we could have some sort of bridge you know using some other securities.

Maria Rigatti: So that's the component of the CCM, and how we think about the use of proceeds. I think the other piece that I referenced is we have a lot of confidence in the operational drivers that we've shared with you already. But as we see the CCM trigger, we do want to look at the opportunities that we might have to deploy some of that and accelerate benefits in our operational efforts program, because you know that we have been working on operational excellence and driving efficiencies for many, many years.

Temporarily, but I think our objective.

Is and then we've made it clear in the offering documents is that we will replace the equity content of the preferred stock.

Okay. Thank you.

That's great.

The next question is from Brian Levine with City you May go ahead.

Maria Rigatti: And it's not a single year effort, it's a multi year effort. And so, as we see opportunities to deploy more initiatives and do that more quickly, we will definitely take a look at it, because it basically provides an even stronger foundation going forward. Then, those are the different components of the CCM and how we're thinking about it. Great.

Hi, everybody.

Alright to clarify with one question more for Maria in terms of clarification or why now for the good telecom acid sale and can you walk through the mechanics without thinking your remarks, you suggested in offsetting to equity content, how does that work and given the.

Maria Rigatti: And then, post November 2nd, interview this file. I guess tomorrow, and then post November 2nd, I guess, do we wait for comments from the energy division? Or just if you just took us through the year end? Sure. So, comments are due to our towards the deadline from interveners. Once that deadline is passed, the energy division would still consider whether or not they would just position it the decision or if they would pass it on to the commission.

So I'll go to customers.

Sure. So a couple of things so the why now I think you know we have been getting questions before that are we looking at different things in our portfolio that my we might consider selling and so we have been doing that and so the why now is that we've completed our analysis and we think that these are attractive assets that you know folks who are in this busy.

This day in and day out will also find attractive and so that's why I that's the way now.

Maria Rigatti: So, we will know, you know, relatively shortly. We're going to remember that the cost of capital mechanism is very formulaic. There's not a lot of, it's only math in terms of, you know, how it would get implemented. So, as you think, that's an important element of the mechanism. Great.

I think that when you look at the overall portfolio that we have the other thing that helps to drive. This is that you know these.

These are good assets customers do share in the benefits of this weather, we sell them or not it you'll see in our filing tomorrow that you know round numbers you can think about this as you know 15% of the value is for customers and about 85% of the value is for the company or shareholders by taking this action now.

Anthony Krodel: And then, just lastly, if I went to slide free, I appreciate the clarity. It's my understanding and correct if I think about the additional increase, I think, two thirds of the way to loosely and by February, I think where the deadline is due for claims. Again, maybe you may change that 6.4. But by February, we should be have, much more certainty on the total, you know, amount of claims here. Yeah, that's right, Anthony, because there is a deadline there for filing claims. So, that provides a certainty around the scope here. So, looking forward to reaching the timeline. Great. Thanks for all the clarity. Thank you.

He actually during a time of affordability concerns and constraints for customers will be able to accelerate those benefits into the near term. So another element of the why now and I think that that come in I just made probably answered. The question about you know what part is for customers about price for shareholders was there something else in there Ryan.

In terms of the the junior prepared remarks, you suggested kind of all of a sudden equity yep.

<unk>.

Yeah. So when you think about our equity program and he said that you know about $100 million a year or so because they're gonna be using our internal programs. Obviously as I mentioned earlier. This you know depending on the regulatory path at the Commission goes down and you can see something and you know middle of 24, maybe into 2025 at which point. We can we can look at the pro season.

Shahriar Pourreza: The next question is from Sharpe Perez-Out with Guggenheim Partners. You may go ahead. Hey, guys. Hey, Pedro. Just, Pedro, just in the monetization of the telecom infrastructure lease is 20 million revenue, and obviously potentially coupling that with the wildfire claims recovery. What time frame are you embedding in plan to start seeing EPS and credit metric benefit? And do the increased claims of figures present a drag versus some of the benefits from the equity content of the sale. Thanks. Hey, Shahriar, Maria.

Determine what that you know, there's an opportunity there to offset some of the equity than we would otherwise tissue under our internal program.

Okay, great. Thanks.

Thank you. The next question is from Michael Monaghan with Evercore you May go ahead.

Maria Rigatti: So I'm going to take that in two pieces. So maybe a little bit on our credit metrics. So you know our framework is 15-17% FFO to debt. We've laid out our capital plan and our financing plan, including the $100 million or approximately through the drip and through the internal programs. And, you know, we are comfortable that we can hit our targets from the 15 to 70% FFO to debt. Obviously with additional amounts related to the increase in the reserve, and it's a little bit of fluctuation in the metrics.

Alright, Thanks for taking my question.

So you know there's been some concerns about electric vehicles, a man swollen no. We recently saw a Panasonic code is battery production, obviously, there's a <unk> you know be the adoption rate and your service territory have an investment program.

No supports the load grown up associated with easy I was wondering if you could share your thoughts on.

Risks within your planning period, where there there could be a slowdown or any any color you could provide on that.

Maria Rigatti: But we are comfortable that we will be able to still meet our objectives when it comes to our credit metrics. That of course is related to the recovery, the cost recovery applications that we file. So we've already filed a TKN application, you know, we will file the will of the application. And we provided some metrics in the slides this time around where for every billion dollars of cost recovery, that's about a 40 to 50 basis point improvement in our credit metrics.

Yeah, maybe I'll start and Steve <unk>, you might help some additional thoughts on this too you know for sure I'd do we seem to be pretty significant pick up <unk> in our territory and really across California.

God. That's continues through the latest reporting period that I sure I know I've seen some broader articles in the process, you're probably referring to as well in terms of could there be a slow down at a national level.

Maria Rigatti: So it's a very material number. And so, you know, we're focused on demonstrating our prudency. We're focused on the long term customer benefits that having a good decision will create. And we're also focused on the financial benefits and the balance sheet strength that we'll ensue. So I think that that's all, you know, an important element.

There are a number of things that come together here and it's like one of the important elements of these strong support that there as soon as the I R. A right before continuing not only about 7500 dollar tax credit for new electric vehicles, but also the introduction about the 4000 dollar used electric vehicle tax credits was there.

Shahriar Pourreza: When it comes to the the tower attachment fail, in terms of sort of timing of what to look at. So we're filing our application tomorrow. The reason we're filing it tomorrow is so that we can get a little bit more clarity on precisely what the regulatory process will be. We think we qualify for somewhat streamlined regulatory approval process. But, you know, in the alternative, we just want to get ahead of the time frame.

Something that by the way you Edison really helped advance in Washington since this pattern after something we had here already in California, So look up a big brick with any market and you're gonna see ups and downs and you know I have to get the things like in a higher interest rate environment, you know, making a vehicle loan is a little more expensive probably but.

Shahriar Pourreza: So we are going to align our marketing schedule with the regulatory approval. So we would like to have the regulatory approval just before. We sign, we sign any purchase and salaryments because that'll afford to reduce uncertainty for everyone. And depending on which path the commission goes down, we would expect, you know, potentially middle of next year. So it's until some time into 2020 by to see a transaction close. So that's the sort of time frame we're looking after that.

A bit of a temporary damper on that but the longterm trend I think it's pretty clear here in terms of the the the value of electric vehicle to consumers and the road that D. V Department will play in reducing greenhouse gossip truly are going into 2045 White paper makes clear how.

Valuable <unk> reduction bullshit, just you don't shave.

<unk>, what do you take a look at the total cost of ownership for electric vehicles today Uhm, it's already suddenly for the lower cost E. D models. The total cost of ownership is lower than it is for similar a combustion.

Shahriar Pourreza: Got it. And the increasing value of the claims is that present any challenges to the timing of the claims recoveries with the CPC. Yeah. Okay. And, you know, remember the chart that in our TKM filing, the cost recovery application filing. We proposed a procedure for introducing amounts that have been settled after the filing dates. And so, you know, it's been contemplated there will be so number settlements coming in. That would be doing in a beyond the numbers that we had initially filed. So the increase in claims are just fit into that final tool procedure that we proposed. Okay. Perfect. That was good.

Combustion engine vehicles.

You are so sure about the impact it could have on our infrastructure buildout in our planning and thinking right now we're seeing significant growth still and that's been baked into a rate case, so but you know weekend. We're following because from all this is people let me turn it over to you because your thoughts around in person on the distribution system or something.

Sure. So obviously, we've seen significant growth in an easy adoption in California over the last number of years in 2019 about six per cent of new vehicle sales were electric you know right now where it in about 25 per cent of new vehicle sales and the state electric and so that's we've seen the ramp up and we see that continuing we've been planning for.

Maria Rigatti: And then just last week, you obviously noted 39 cents of upside from the cost of capital mechanisms. And the opportunity to sort of deploy it into customer-focused cat backs. I guess how long would it take you to deploy the incremental cat backs that the 39 cents of earnings would support? And I guess what mechanisms would you utilize to minimize that lag? Thanks.

For this for quite some time, so in our distribution long-term planning forecast. This has been baked into our to our load forecasts, which then feeds our plans around the distribution grid and that's what informed the the plans that are 2025 to 2028 general rate case, where a big portion of our load growth program and there is driven from electrification load growth since that's what our teams are <unk>.

Maria Rigatti: [inaudible] Good Good Good Good Good Good Good Good Good Good Good Good Good[inaudible] Good Good Good Good Good Good Good Good[inaudible] Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good It is a process that we have to go through and we have to do an evaluation. The most important part of this process is getting through it and creating the certainty that comes with completion, because that's when we will be able to fully, you know, we have a true mechanism in the TKM application, but when we're done with all these processes, we will be able to go and get a final resolution also with the commission.

Focused on both not just planning it out, but then starting to build the circuits in the infrastructure to support it.

<unk> from the light duty side, we see a lot of growth in our territory from medium and heavy duty vehicle charging fix particularly in pockets that range from you know the the transportation segments down by the ports all the way out to the warehouses further inland and that's where our teams are really looking at different solutions. So that we can meet the demands because those those demands come in large chunks when they come quickly.

So we're looking at everything from how do we accelerate the infrastructure development head of that demand to temporary bridge solutions in places like little batteries in mobile Substations that can help us get through while we have to build out more circuits and substations to enable it. So the we're certainly able to meet the growth that we're seeing right now and we've planned and are planning for the growth is coming to add.

Yeah, I think the last point that Steve My name is really critical that's innovation and the general rate case to include the request for mobile equipment a temporary equipment.

It's a it's a great step because particularly when we think of a medium and heavy duty fleet deployment. That's a technical term here Chunkier right then when you're looking at a passenger vehicles being spread out over a neighborhoods and so that's where you know Stephen that theme I've been working on how to make sure we can make a note.

So Michael maybe more than you want it but it was a topic, that's near and Dear to us.

Yeah, Yeah of course no. Thank you. Thank you very much I'll I'll see you in the yard.

That's terrific.

Thank you. The next question is from David.

Karl with Morgan Stanley You May go ahead.

David.

Hey, How're you doing thanks, so much for taking my questions.

You know I was just curious to get your perspective.

On P. G needs re peace, we've had some challenge who's getting capex in rate base approved and it's three case you know it's not done yet, but just wondering if there's anything that you would take away a read across to your G. R. C. As you go forward any changes in your thinking your strategy, there or any perspective.

Might come into play as you go through the process.

Yeah, David Thanks for the question and.

Can be made very quick quick cancer here cause I think it starts with acknowledging that each of these rate cases as various situations specific company specific.

So I know that our colleagues are <unk> for example, I've got a big emphasis in the rate case on the the amount of Undergrounding based on their territory and the fact that they have so much more forest land at her high fire risk areas as compared to <unk>. We're just more more grasslands and we're doing the ambition to have been in the past more.

From elements that can be addressed through covered conduct yourselves casinos and the 20th 28 <unk> application.

Continue the completing the build out a covered conductor with another 250 miles proposed complemented by around 600 miles of underground in very different needs at our territory than empty Janie serratore. So hard to abstract out you know strong barrels were from the P. G. D case for hours just given that the.

<unk> at the same time there are some elements are common in fact, you saw that southern California, Edison file comments and be PGD rate case.

Particularly focused on the topic of the escalation.

Mechanism and there <unk>.

To be able to alternative proposed decision Ah relied on essentially twenty-five percent provided only 25 per cent of the escalation requested.

That you know, it's something that we thought needed to be called out cause we provide a common saying that in order to be fully compensatory rates up to include the full full allowable costs. An escalation is an important part of the cost structure. So that's certainly one that we watch more closely and like I said <unk>.

Maria Rigatti: So from our perspective, it's getting through the claims and getting through the claims as quickly as we possibly can, because that completion will create the certainty. Okay, but in the meantime, the total number of claims, you know, or financing of claims, grows and the cost of capital, you know, mechanism doesn't really help me here, right? Because those are not currently eligible for recovery. So the rising interest expense on those doesn't, it isn't true.

<unk> intervened in the rate case, because it's a topic there'll be.

Common interest across all utilities, but you know beyond that bill with just watching the case and.

I recognize that there's some significant differences in situations, where the two companies <unk>, yeah, and just to kind of underscore pages common about everything as various situations specific in every case is different even that last example on the escalator, we actually have a different escalation of mechanism. So I think it's like as I said.

Maria Rigatti: That's, I mean, so we will, what in our cost recovery application, we are going to file for recovery of the interest expense associated with the claims, the financing of claims payments, and the other aspect as well is that we are interested to highlight another couple of numbers for you. We are about 85% complete with all of our individual claims and claims resolutions. So we are moving through the pile, if you will, you know, expeditiously.

Cedras I'd, rather there's really not read through across to the different but generally cases in our view.

Got it got it. Thanks I appreciate the perspective and then.

Also wanted to let's see check on the the Capex outlook.

Maria Rigatti: Okay, and then changing topics. So, so you lowered your rate based projections, well, 23, 24, 25. So, and you're pointing out obviously, upside to what the graphics and that's rate based mostly beyond 25. So, maybe some more details behind that. And then secondly, in your guidance, I've noticed some changes in the components, one of which is the tensile increase in the AFU DC just since last quarter, if you could just provide more color. Sure.

It was decreased for this year and and next year was and also related to the storage project.

Yeah, So David it's entirely well not entirely but one piece of it is it related to particularly 23 and 24 that's related to you know the schedule around the utility on storage. So no more dollars will be spent in 24 versus twenty-three and then the other piece that I mentioned earlier was.

That we have some slightly different schedules around one of our transmission a larger transmission projects that we're supposed to start in the very near future. That's moved out essentially an ear as well. So it's still all captured within the the period between 28, and we're still at that $38 billion to $43 billion in Capex.

Maria Rigatti: And actually it turns out that your two questions are very much related. So the capital that you're seeing moving around is particularly in the very near term. It's just a shift in the utility on storage project and the timing of those payments. So what you're seeing related to your second question, you know, shifts between rate based earnings and AFU DC on the on the slide that has modeling considerations. It's really a shift between those two buckets.

Okay perfect. Thanks for that uhm, Okay. So I appreciate it.

Thank you. Our next question is from Paul Zimbardo with Bank of America. You May go ahead.

Maria Rigatti: So utility on storage was in rate based before. Now it's in construction work in progress longer. And so you just see the two numbers, if you add them back together, they'll be the same as they were last quarter. So that's one piece of it. The other piece that's going on in our capital program is we have shifted one of the transmission projects that we are still going through the permitting process on.

Hey, Paul.

Hi, good afternoon team.

The first time I, just wanted to clarify something and they are prepared remarks around the track for Trc benefit you mentioned 12 cents your root beer and 220 24, correct. That's just a component of kind of what you would expect in terms of like the rate base earnings per share growth.

Maria Rigatti: But that's just shifted out. Each year is shifted out just one year. And so you're seeing a little bit of that impact. But that's why overall, for the period 23 through 28, the capital program is still the same as it was last quarter. Okay.

Unknown Executive: Thank you.

Sorry, <unk> to reflect the rate base now yep.

Okay.

And then the other just assuming that the cost of capital trigger is in fourth at 39 cents.

We think about it just kinda above the earnings of.

Gregg Orrill: The next question is from Greg Oral with UBS. You may go ahead.

2025 cause I think that the midpoint that'd be like 609 versus the 590 or should we think about within the range with some of those reinvestments that you discussed.

Maria Rigatti: Hi. Sorry for a detailed oriented question. Is there a temporary financing for the preferred tender before you get to the potential subnote financing? Thank you. So Gregg, this is Maria. We can address it in different ways. I think in the offering documents, we note how we will finance the tender, and we can do that either by a JSN or some other equity content security. Right after the offering, we could have some sort of bridge using some other securities temporarily, but I think our objective is, and we've made it clear in the offering documents is that we will replace the equity content of the preferred stock. Okay, thank you. Thank you.

Yeah, So I don't want to.

Recap everything I said earlier, but I'll just go take a few points.

What I was saying in response I think it was Anthony who asked the question first off was that we have.

Capital mechanism.

It's related to interest rates, we have done a really good job completing our financing plan for 2000 2003.

Hitting the marks that we have shared with you around our interest rate assumptions.

The CCM again, driven my interest rates and I'll say the more recent volatility underscore the benefit of the D. C. M. We see that as a hedge against.

Interest rate movements beyond with embedded in our forecast going forward, that's a piece of it.

Second part of it is that we do urine and year out look for opportunities to reduce costs and benefits of customer and of course to the benefit of our overall operations. We are managing the business every day, if we see an opportunity to accelerate benefits. You know we have four years four or five years ahead of us.

Ryan Levine: The next question is from Ryan Levine with City. You may go ahead. Hi, everybody.

Maria Rigatti: There's one question more from Maria in terms of clarification of why now for the telecom assets sale, and can you walk through the mechanics of how thinking your remarks you just did in all setting to equity content. You know, how does that work and given that the benefits are to go to customers? Sure. So a couple of things. So why now? I think, you know, we have been, and we've gotten questions before about, are we looking at different things in our portfolio that might, we might consider selling, and so we have been doing that.

If we see an opportunity to accelerate blocking benefits. So that we can provide a even sure foundation for customer benefit going forward, we are gonna do that.

Plan is in works and I as I said, a during those remarks, certainly share them all with you Wanna go for basis.

I would add just more broadly on the cost of capital mechanism. So it's stinker.

Stinker saw a report of your Sir.

Where you have some questions about you know the the <unk>.

<unk> I think he might have been speculating on spiritual outcomes I'm gonna be really clear here.

Maria Rigatti: And so the why now is that we've completed our analysis, and we think that these are attractive assets that, you know, folks who are in this business day in and day out will also find attractive. And so that's why that's the why now. I think that when you look at the overall portfolio that we have, the other thing that helps to drive this is that, you know, these are good assets. That customers do share and the benefit of this, whether we sell them or not, you'll see in our filing tomorrow that, you know, round numbers, you can think about this as, you know, 15% of the value is for customers, and about 85% of the value is for the company or shareholders.

This kind of situation is precisely would this mechanism was built to deal with but whenever.

Whenever you Pat.

The kinds of an interest rate movements that have happened here, it's not an extraordinary case in the sense of what the issue. We had last year. We think it's very much part and parcel of what the magenta seamlessly signed.

To cover and to provide appropriate cost recovery. So that's why you heard Maria say earlier when she was responding to Anthony similar question that we.

We would expect us to be a fairly mechanical approach.

Maria Rigatti: By taking this action now, we actually during a time of, you know, affordability, concerns, and constraints for customers will be able to accelerate those benefits into the near term. So another element of the why now. And I think that the comment I just made probably answered the question about, you know, what part is for customers and what part is for shareholders? Is there something else in there, Ryan?

<unk> by the energy Division given that the mechanism is very strong very clearly articulated and the conditions that exist now are precisely the condition. So they're making this one was meant to to account for.

Okay, great. Thank you very much him. Thanks.

Saint Paul.

Thank you and that was our last question I will now turn the call back over to Mister Sam ROM Raj.

Maria Rigatti: In terms of thinking your proprietor, Mark, she suggested kind of all setting equity. Yeah, so when you think about our equity program, we've said that, you know, about 100 million dollars a year or so because we're going to be using our internal program. Obviously, as I mentioned earlier, this, you know, depending on the regulatory path, if the submission goes down, we could see something in, you know, middle of 24, maybe into 2025, at which point we can look at the proceeds and determine what that, you know, there's an opportunity there to offset some of the equity that we would otherwise issue under our internal program. Yeah, great. Thanks. Thank you.

Oh, Thank you everyone for joining us. This concludes our conference calls have a good rest of the day you may not disconnect [noise].

[noise].

Michael Lonegan: The next question is from Michael Lonegan with Evercore. You may go ahead. Hi, thanks for taking my question. So, you know, there's been some concerns about electric vehicle demand swelling. You know, we recently saw a panasonic products battery production. Obviously, there's a high, you know, EV adoption rate in your service territory and you have an investment program that, you know, supports the load growth associated with EVs.

Pedro Pizarro: I told you you could share your thoughts on, you know, the risks within your planning period, whether there could be a slowdown or any any color you could provide on that. Yeah, if they all start in Steve Powell, you might have some additional thoughts on this, first you're writing, we've seen a pretty significant pickup of EVs in our territory and really across California that continues through the latest reporting period that I saw.

Pedro Pizarro: I know I've seen some broader articles in the press, that you're probably referring to as well in terms of could there be a slowdown at a national level. There are a number of things that come together here and I think one of the important elements is these strong support that there is in the IRA for continuing not only the $7,500 tax credit for new electric vehicles but also the introduction of the $4,000 used electric vehicle tax credit, which is something that by the way Edison really helped advance in Washington since his pattern after something we had here already in California.

Pedro Pizarro: So look I think like with any market, you're going to see ups and downs and you know I have to guess that things like in a higher interest rate environment, making a vehicle loans a little more expensive probably puts a bit of a temporary damper on that but the long term trend I think is pretty clear here in terms of the value of electric vehicles to consumers and the role that EV deployment will play in reducing greenhouse gases. And it's really our calendar to 2045 white paper makes clear how valuable that is for GHG reduction.

Pedro Pizarro: Also, I just say that when you take a look at the total cost of ownership for electric vehicles today, it's already certainly for the lower cost EV models. The total cost of ownership is lower than it is for similar combustion engine vehicles. You asked also about the impact that could have on our infrastructure buildout and our planning and thinking right now we're seeing significant growth still and that's been baked into our rate case sale.

Steven Powell: So we're following the customer on this as Steve let me turn it over to you because you have thoughts around impacts on the distribution system or that growth. Sure. So obviously we've seen significant growth in EV adoption in California over the last number of years in 2019, about 6% of new vehicle sales were electric. You know right now we're hitting about 25% of new vehicle sales in the state being electric and so that's we've seen the ramp up and we see that continuing.

Steven Powell: We've been planning for this for quite some time so in our distribution long term planning forecasts, this has been baked into our load forecast which then feeds our plans around the distribution grid. And that's what informed the plans in our 2025 to 2028 general rate case where a big portion of our load growth program in there is driven from electrification load growth. And so that's what our teams are focused on both not just planning it out but then starting to build the circuits and the infrastructure to support it.

Steven Powell: Aside from the light duty side, we see a lot of growth in our territory from medium and heavy duty vehicle charging, particularly in pockets that range from the transportation segments down by the ports all the way out to the warehouses further inland. And that's where our teams are really looking at different solutions so that we can meet the demands because those demands come in large chunks and they come quickly. So we're looking at everything from how do we accelerate the infrastructure development ahead of that demand to temporary bridge solutions in places like mobile batteries and mobile substations that can help us get through what we have to build out more circuits and substations to enable it.

Steven Powell: So we're certainly able to meet the growth that we're seeing right now and we've planned and are planning for the growth that's coming ahead. And I think that last point that Steve Mayer is really critical that innovation in the general rate case to include the request for mobile equipment, the temporary equipment is a great step because particularly when we think about medium and heavy duty fleet deployment. That's a technical term here chunkier right then when you're looking at passenger vehicles being spread out over neighborhoods. And so that's where you know Steve and the team have been working and how to make sure we can meet that last.

Pedro Pizarro: So Michael, maybe more than you want it, but it's a topic that's near and dear to us. Yeah, of course. Oh, thank you. Thank you very much. I'll see you at E.I. Terrific. Thanks. Thank you.

David Arcaro: The next question is from David Arcaro with Morgan Stanley. You may go ahead. Hi, David. Hey, how are you doing? Thanks so much for taking my questions. You know, I was just curious to get your perspective on PG&E's rate case. They've had just some challenges getting catbacks and rate base approved in its rate case.

Pedro Pizarro: You know, it's not done yet, but just wondering if there's anything you would take away or read across, you know, if you're GRC as you go forward, any changes in your thinking or strategy there, or any perspectives that might come into play as you go through the process. Yeah, David, thanks for the question. And give me a quick answer here. I think it starts with acknowledging that each of these rate cases is very situation specific and company specific.

Pedro Pizarro: So I know that our colleagues at PG&E, for example, I've had a big emphasis in their rate case on the amount of undergrounding based on their territory and the fact that they have so much more force land in our high fire risk areas. That's compared to SEA, which has more more grasslands and where the visions have been in the past more from elements that can be addressed to a covered conductor. So you've seen us in the 25 to 28 rate case application.

Pedro Pizarro: Continue the completing the build out of covered conductor with another 250 miles per post complimented by around 600 miles of undergrounding. And, you know, very different needs in our territory than in PG&E's territory. So hard to abstract out, you know, strong perils from the PG&E case for hours is given that difference. At the same time, there are some elements that are common. And in fact, you saw that so in California, it is in filed comments in the PG&E rate case, particularly focused on the topic of the escalation mechanism in there.

Pedro Pizarro: The fact of the alternative proposed decision relied on essentially 25% provided only 25% of the escalation request that that, you know, it's something that we thought needed to be called out. And so we provide a comment saying that it ordered to be fully compensatory rates have to include the full allowable costs and escalation is an important part of the cost structure. So that's certainly one that we've watched more closely and, like I said, our team intervened in the rate case because it's a topic that will be of common interest across all utilities.

Maria Rigatti: But, you know, beyond that, though, we're just watching the case and recognize that there's some significant differences in situations for the two companies. Maria, do you want to? Yeah. And just to kind of underscore pages, common about everything is very situation specific and every rate case is different. Even that last example on the escalator, we actually have a different escalation mechanism.

David Arcaro: So I think it's like, as I said, as dangerous and rather, there's really not read through across to the different general rate cases in our view. Got it. Thanks. I appreciate the perspective.

David Arcaro: I also wanted to, let's see, check on the CAPEX Outlook. It was decreased for this year and next year was that also related to the storage project? Yeah, so David, it's entirely, well not entirely, but one piece of it is related to particularly 23 and 24. That's related to the schedule around the utility on storage, so more dollars will be spent in 25. 24 versus 23. And then the other piece that I mentioned earlier was that we have, you know, some slightly different schedules around one of our transmission, a larger transmission project that we're supposed to start in the very near future to move out essentially a year as well. So still all captured within the period through 2028 and we're still at that $38 to $43 billion of CAPEX. Okay, perfect. Thanks for that. I'll pass it on. Appreciate it.

Unknown Executive: Thank you.

Paul Zimbardo: Our next question is from Paul Zimbardo with Bank of America. You may go ahead. Paul. I get afternoon team. The first one, I just want to clarify something in the prepared remarks around the track for GRC benefit. You mentioned 12 cents year over year into 2024. That's just a component of what you would expect in terms of like the rate base earnings per share growth. That's right. That's for reflect the rate base map.

Paul Zimbardo: Yep. Okay. And then the other just assuming the cost to capital trigger is in force that 39 cents. Should we think about it as kind of above the earnings between 2025 because I think at the midpoint, I'd be like 609 versus the 590 or should we think about within the range with some of those reinvestments that you discussed?

Maria Rigatti: Yeah, so I don't want to sort of recap everything I said earlier, but I'll just take a few points. What I was saying in response, I think it was Anthony who asked the question first off was that we have the cost of capital mechanism. It's related to interest rates. We have done a really good job completing our financing plan for 2023. Kidding the marks that we have shared with you around our interest rate assumptions.

Maria Rigatti: The CCM again, driven my interest rates and I'll say the more recent volatility, you know, underscores the benefit of the CCM. We see that as a hedge against interest rate movements beyond what's embedded in our forecast going forward. That's a piece of it. Second part of it is that we do year in and year out look for opportunities to reduce costs, the benefits of the customer, and of course with the benefit of our overall operation.

Maria Rigatti: We are managing the business every day. If we see an opportunity to accelerate benefits, you know, with four years, four or five years ahead of us. If we see an opportunity to accelerate locking benefits so that we can provide an even sure foundation for customer benefit going forward, we are going to do that. The plan is in works and as I said during the hearing remarks, we'll certainly share more with you on go forward basis.

Pedro Pizarro: Well, I would add just more broadly on the cost of capital mechanisms. I think I saw a report of yours where you had some questions about, you know, the mechanism where I think you may have been speculating on potential outcomes. I want to be really clear here. This kind of situation is precisely what this mechanism was built to deal with, right? Whenever you've had the kinds of interest rate movements that have happened here, it's not an extraordinary case in the sense of what the issue we had last year, we think it's very much part and parcel of what the mechanism was assigned to cover and to provide, you know, appropriate cost recovery.

Pedro Pizarro: So that's why you heard Maria say earlier when she was responding to Anthony's similar question that we would expect this to be a fairly mechanical approach at the CPUC or by the Energy Division, given that the mechanism is very strong, very clearly articulated and the conditions that exist now are precisely the conditions of the mechanism was meant to account for. Okay, great, thank you very much, Jim.

Sam Ramraj: Thank you, and that was our last question.

Sam Ramraj: I will now turn the call back over to Mr. Sam Ramraj. Well, thank you everyone for joining us.

Sam Ramraj: This concludes the conference call. Have a good rest of the day.

Unknown Executive: You may now disconnect.