Edison International Q4 2022 Earnings Call Transcript

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Provided by Quartr
February 23, 2023

There are 12 speakers on the call.

Operator

Afternoon, and welcome to

Speaker 1

the Edison International 4th Quarter 2022 Financial Teleconference. My name is Ted, and I will be your operator today. Today's call is being recorded. I would now like to turn the call over to Mr. Sam Ramraj, Vice President, Investor Relations, Mr.

Speaker 1

Ramraj, you may begin your conference.

Speaker 2

Thank you, Ted, and welcome, everyone. Our speakers today are President and Chief Executive Pedro Pizzaro and Executive Vice President and Chief Financial Officer, Maria Regadi. Also on the call are other members of the management team. Materials supporting today's call are available at www.edisoninvest.com. These include Form 10 ks, Prepaid remarks from Pedro and Maria and the teleconference presentation.

Speaker 2

Tomorrow, we will distribute our regular business update presentation. During the call, we will make forward looking statements about the outlook for Edison International and its subsidiaries. Actual results could differ materially from Important factors that could cause different results are 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.

Speaker 2

I will now turn the call over to Pedro.

Operator

Well, thanks a lot, Sam, and good afternoon, everybody. I am pleased to report that Edison International's core EPS for 2022 was $4.63 which was in the upper end of our initial guidance range. Today, we are introducing 2023 EPS guidance $4.55 to $4.85 and we are reinforcing our strong confidence In delivering our long term EPS growth target of 5% to 7% from 2021 to 2025. Maria will discuss our financial performance and outlook. Well, let's start with our key accomplishments in 2022 and they're noted on Page 3.

Operator

First, we once again delivered on our annual EPS 2nd, SCE continued to make tremendous progress in reducing wildfire risk and PSPS. SCE successfully executed its wildfire mitigation plan and updated the key statistics shown on Page 5. That is that SCE now estimates it has reduced the probability of losses of catastrophic wildfires by 75% to 80% As hardening and other mitigations continue, as Dupit fit on Page 6. Despite the strong operational and financial performance, Market sentiment impacted our total shareholder return. Our TSR for 2022 trailed that of the Philadelphia Utility Sector Index And most of our peers.

Operator

As shareholders ourselves, our leadership team and I are deeply committed to Achieving our financial targets while strengthening SCE's ability to deliver safe, reliable, affordable and increasingly clean electricity. Diving deeper into SCE's tremendous progress in wildfire mitigation. Despite challenging weather conditions and some fires in our service area last year, 2022 marks the 4th consecutive year without a catastrophic wildfire associated with SCE's infrastructure. Key achievements in 2022 include deploying about 1400 circuit miles of covered conductor, bringing total installations to around 4,400 circuit To put this in perspective, this is nearly the round trip distance from Los Angeles to Washington DC. So I am Extremely proud of SCE's ongoing execution of grid hardening activities, which have made our community safer.

Operator

The utility is targeting up to another 1200 miles of covered conductor in 2023. By year end, Approximately 74% of total distribution lines in high fire risk areas or HFRA, including the 7,000 miles already underground I expect it to be hardened. This is a significant achievement and it is summarized on Page 7. SCE completed its 1 millionth high fire risk inspection since 2019, which is like visiting every structure The utility continues to build out its network of weather stations and now with more than 1600 in total, SCE has the largest privately owned weather station network in the country, providing a granular view of weather related risk to inform operations. A key result is that total acres burned from ignitions on hardened sections of our grid are 99% smaller than those in areas not yet hardened.

Operator

SCE's approach to reducing wildfire risk is differentiated by the speed of its infrastructure hardening And by reducing reliance on measures that affect customer reliability like PSPS, for example, by prioritizing hardening circuits at risk of power shutoffs. By the end of the 2023 through 2025 Wildfire Mitigation Plan, SCE will harden about 7,700 miles of its overhead distribution system and scaled innovative pilots such as early fault detection. We look forward to SCE's continued success in releasing the greatest amount of wildfire risk in the shortest amount of time. Turning to the 2017 2018 wildfire and mudslide events outlined on Page 8. In the 4th quarter, SCE paid about $280,000,000 in claim settlements.

Operator

SCE now targets filing the TKM cost recovery application In the Q3 of 2023, let me emphasize that SCE will seek full CPUC cost recovery, Excluding amounts foregone under the agreement with the CPE Enforcement Division or already recovered. SCE will show its strong compelling case that it operated the system prudently and It is in the public interest to authorize full cost recovery. The utility currently expects to request about $2,000,000,000 in this first application. Our financial assumptions for 2025 and beyond Do not factor in any potential upside from the cost recovery applications, which would represent substantial value. Looking ahead, I want to highlight key management focus areas for 2023.

Operator

These are laid out on Page 9. 1st and foremost, safety is foundational to our values and success and we are targeting reducing the rates of employee injuries By 15%. Tragically, a utility troubleman, Johnny Kinkade, died from a work related injury last month And 1200 of us joined his loved ones at his memorial service last week. This was Our first employee work related fatality in 5.5 years and it redoubled my resolve and it redoubled our teams resolve to make it our very last. SCE's unwavering commitment to keeping our communities safe through wildfire mitigation also continues.

Operator

The utility plans to keep its space of about 100 miles per month of covered conductor, reaching a total of 5,600 miles by year end. Again, filing the 1st cost recovery application for the historical wildfires is a front and center focus area for us. On the regulatory front, SCE looks forward to its upcoming 2025 GRC application Ted will monitor the cost of capital mechanism, which could result in significant upside to 2024 earnings should it trigger. On the financial side, we will be focused on achieving our capital expenditure and earnings goals as well as pursuing upgrades to our credit ratings. We believe this is well warranted considering the significant wildfire risk reduction by SCE, the state's strong firefighting capabilities And supportive California regulation.

Operator

Looking to the future, the support for economy wide electrification continues to grow And here in California, we've shared before with you that we forecast electricity usage growing 60% by 2,045. Yes, that's a big six-zero. And previously, we projected almost flat annual growth to 2,030 followed by a trajectory to 2,045, But we are now seeing earlier increases with the breadth of legislation, regulations and codes and standards approved last year. SCE has updated its electricity sales forecast to reflect these significant policy changes and now projects about 2% annual growth from 2023 through 2,035. Both transportation and marine electrification forecasts have increased significantly, Narrowing the gap to our Pathway 2,045 analysis.

Operator

This strong electrification load growth outlook is Also consistent with the California Energy Commission's forecast based on the state's decarbonization policies, providing a source of external validation. Rapid expansion of electrification sharpens the continued need to make significant investments in SCE's infrastructure. Over the coming years, SCE will continue to invest in wildfire mitigation and increase its grid work grid investment will be spread over a higher volume of sales supporting affordability overall. SCE system average rate is already the lowest I'm on major California industrial and utilities and we expect it will be the lowest for the foreseeable future. All of this, Wildfire risk reduction, cost recovery for historical wildfires, the clean electrification investment opportunity And importantly, our confidence in the 2025 EPS target makes me very excited about our near term steps and our long term growth.

Operator

So I am confident that investors will fully recognize our significant value creation. Well, with that, let me turn it over to Maria for the financial report.

Speaker 3

Thanks, Pedro. Good afternoon, everyone. Let me start by highlighting that Edison International's core EPS of 4.6 $3 for 2022 was in the upper end of our initial guidance range. In my comments today, I will discuss 4th quarter results, Our 2023 EPS guidance and our 2023 financing plan. Starting with the Q4 of 2022, EIX reported core EPS of $1.15 As you can see from the year over year quarterly variance analysis Shown on Page 10, SCE's 4th quarter earnings increased primarily due to GRC attrition year escalation.

Speaker 3

This was partially offset by higher depreciation expense and higher net interest expense. The latter was driven by higher interest associated with funding 2017 2018 wildfire claims payments. At EIX Parent and Other, There was a negative variance of $0.03 primarily due to higher holding company interest expense. I would now like to discuss SCE's capital and rate Shown on Pages 11 12. These are largely consistent with last quarter's disclosures.

Speaker 3

I want to emphasize that SCE has Significant capital expenditure opportunities driven by investments in the safety and reliability of the grid. We continue to project strong rate base growth 7% to 9% from 2021 to 2025. The forecast also incorporates SCE's current view of the And we will update our forecasts and extend them through 2028 before our Q2 earnings call. Turning to our earnings outlook, we are initiating 2023 core EPS guidance of $4.55 to $4.85 I will cover the components of 2023 guidance in a moment, but first I want to frame our year over year EPS growth. The primary driver is rate based growth, which we expect to be approximately 8.5% in 2023.

Speaker 3

However, you can see that our guidance range implies relatively flat to modest growth for the year. To help you bridge the difference, Page 13 lays out core EPS growth year over year. The primary reason for the difference is higher interest expense at both the parent and SCE. Refinancing of debt at the parent and debt for historical wildfire claims payments drive the increase. To put this in perspective, Of the gap between 2023 rate base and EPS growth, about 75% can be attributed to SCE's wildfire settlement related debt.

Speaker 3

While SCE is carrying this financing cost until they reach cost recovery resolution, I want to be very clear that the utility expects to seek full CPUC Cost recovery of all eligible claims payments, including financing costs. Please turn to Page 14 for 2023 guidance and Key earnings drivers. The components of our EPS guidance start with rate base math, which we forecast is $5.68 Let's next discuss SCE's operational variances, which have a net contribution to guidance of $0.48 to $0.75 per share. The major contributors are shown on the right side of the page. SCE costs excluded from authorized are $0.71 With the biggest contributor being interest expense on debt for wildfire claims payments.

Speaker 3

For EIX Parent and Other, we expect a total expense of $0.87 to 0 point 9 I would now like to provide the parent company's 2023 financing plan. I'll preface this by saying that regardless of the Specific instruments we use, our financing plan is fully reflected in our EPS guidance. Turning to Page 15. We project Total EIX parent financing needs of $1,400,000,000 We expect that this will be financed with a combination of securities with $300,000,000 to $400,000,000 of equity content and parent debt for the remainder. As a reminder, we issue securities with equity content to Support our investment grade credit ratings, which we are firmly committed to maintaining.

Speaker 3

To achieve our desired level of equity We may use a combination of hybrid securities, internal programs or our existing at the market program. Page 16 provides an update on the CPUC cost of capital mechanism. If the 12 month average of the Moody's BAA Utility Bond Index Exceeds 5.37 percent at the end of September, the mechanism calls for increasing the ROE by half the difference between the average and 4.3 Importantly, the mechanism also resets the authorized costs of debt and preferred equity. Through February 16, the measurement period average is around 5.8%. We will be monitoring this over the next 7 months.

Speaker 3

And as an aid for understanding the specifics of the mechanism, we have provided a spreadsheet on our Investor Relations website that you can download. Looking ahead, we are reiterating our 5% to 7% EPS growth rate guidance from 2021 through 2025, Which translates to 20.25 EPS of $5.50 to $5.90 laid out on Page 17. My management team and I are fully committed to delivering on this target. I will note that this EPS The cost of capital mechanism, which adjusts ROE and updates the cost of debt and preferred. To provide you with the sensitivity, if the mechanism does trigger, That would increase the ROE by a minimum of 50 basis points, and each 50 basis points of ROE changes 20.25 EPS by about $0.28 Further, our financial assumptions for 2025 do not factor in the potential recovery of historical wildfire costs, which could be substantial.

Speaker 3

Lastly, I want to build on Pedro's earlier point about affordability and highlight yet another action SCE has taken to maximize customer rates. Earlier this month, SCE reached a settlement agreement with Tern and Cal Advocates to move to a customer funded wildfire self insurance model. This builds on the customer funded self insurance that was previously authorized in the 2021 GRC. Under the revised SCE will be able to reduce its revenue requirement by an annualized $160,000,000 further driving down SCE's system average rate, Which is already the lowest among major California IOUs and we expect it will be the lowest for the foreseeable future. To conclude, EIX offers double digit total return potential consisting of our 5% to 7% EPS growth rate guidance And 4% dividend yield.

Speaker 3

SCE's rate based growth is the fundamental driver as the utility invests in the safety and reliability of the grid, Which increases in importance each year as economy wide electrification accelerates. That concludes my remarks. I'll hand it back to Sam.

Speaker 2

Ted, please open the call for questions. As a reminder, we request you to limit yourself to one question and one follow-up, So everyone in line has the opportunity to ask questions.

Speaker 1

The first question is from Shar Pourreza with Guggenheim Partners. Your line is now open.

Operator

Good afternoon, Char. Hey, Char.

Speaker 4

Hey, good afternoon, Pedro. Hey, Maria.

Operator

Pedro, just given The, I

Speaker 4

guess, emerging visibility on the wildfire cost recovery, I mean, I guess that's a light at the end of the tunnel, if you will. Do you still need to issue equity or equity content? I mean assuming if you start getting cost recovery, You become over equitized right at that time, so you could find some efficiency in deferring issuance and potentially Join the agency as a glide path for credit metrics?

Speaker 3

Hey, Shar, it's Maria. So I think you know that when we've shared our equity needs Before, we really focused that on the underlying rate base needs and the capital needs of the company. So we've addressed all of the liabilities already and Our focus has been on getting to that point. So really we're talking about equity on a go forward basis that $1,000,000,000 or $250,000,000 on average over the next 4 years. That's about rate based growth.

Speaker 3

Yes, if we when we get recovery, as we go through those processes, I think that we'll consider continue to address how we're going Incorporate that into the capital structure. We obviously will have some debt to retire at SCE as we get those dollars in the door. But I think we'll deal with all of that as we go

Speaker 4

Okay. Got it. So more to come there. Okay. And then just obviously since you're now seeing a 2% load growth starting in 23, I think from flattish levels.

Speaker 4

I guess do you anticipate any incremental investment needs that aren't currently in the GRC Approved CapEx within sort of this planning horizon. I mean, could that sort of have an impact on rate base? And how do we sort of think about the recovery mechanisms would that be recovered under or do you need to follow another GRC? Thanks.

Operator

Yes. Thanks, Shar. I apologize I jumped in there. There was a little blip on the phone line, so I thought you were done. A Couple of pieces to this and Steve Powell may want to add to this as well.

Operator

We're certainly managing within the current 2021 rate case. You saw that we have application, we're waiting for approval of that. Key thing here though is as we look through 2,000 and 30, 2,035, we see that growth earlier than we had expected. We will certainly be building that into the 25 to 28 GRC application that Steve's team is completing now and expecting to file in May. I think within that, we believe this is manageable.

Operator

Steve, anything you would add from a dealer perspective?

Speaker 5

I'd just point out, Pedro, in terms of clarification around load growth. Over the next 13 years, we do expect to see that load growth increase over It will start lower, so I wouldn't expect to see 2% starting next year. It will ramp up as the level of vehicle electrification as well as building begins to accelerate. And at some point, it begins to swamp the solar rooftop growth as well. So that won't really impact the next Couple of years within our current rate case cycle, but Pedro, like you said, we're really looking at hard for a 2025 rate case to figure out what additional investments will be needed to support that growth.

Operator

Yes, that's great, Steve. And Sharron, maybe more than you asked for, but I'll give you one other point here, which I think is really important and frankly exciting. This is not going to be almost certainly smooth, right? We're going to see some frankly good surprises out there Over time, that's going to bring some I'll use the term volatility. I don't mean it in a negative way, but just volatility in customer adoption.

Operator

And particularly example that we focus a lot on is think about fleet electrification. If we get a big box retailer A large truck depot that is installing or buying a fleet of heavy duty electric vehicles. They may not have let us know about that yet. That's going to be a surprise at some point. We'll be able to manage that.

Operator

But I think one of the themes you will see in the 25 GRC application is the team looking at getting proposing investments that will provide the team a little more In terms of being able to manage those goods or prices in terms of earlier electrification or more concentrated electrification And on one distribution circuit than we have experienced in the past. It's a very different day that's coming up ahead. It's a good thing, right, because it's how California will decarbonize, but it's going to come with some step changes as we go along, particularly when you think about some of the heavier duty Applications for electrification like larger trucks.

Speaker 3

So maybe Shar, just the main takeaway there is that the next couple of years we can fully manage Within our existing GRC, but you will see this load growth fully reflected in our 2025 application.

Speaker 4

Okay. This is perfect. Fantastic guys. I

Operator

Appreciate it. Thanks, Hart.

Speaker 1

The next question in the queue is from Angie Storozynski, your line is now open with Seaport.

Operator

Hi, Andy. Thank you.

Speaker 6

How are you?

Operator

How are you?

Speaker 6

Okay. Good. So first question, maybe a different angle. I actually looked at the equity needs for And they seem relatively low given that you didn't issue all of the equity you needed for 2022. So Is it a reflection of just some efficiencies on the cash flow side and thus you don't Need to do the catch up for 2022?

Speaker 6

Or is it that you've managed to, I don't know, monetize some assets, Buildings, you name it.

Speaker 3

Hi, Angie, it's Maria. So I think I'm going to I'll start by just saying we are managing to that 15% to 17% FFO to debt range. We have a real commitment to our investment grade rating. Having said that, we told you before that we have about $1,000,000,000 up to about $1,000,000,000 of equity content need 21 through 2025, but that would flex depending on where we were in our capital program, etcetera. So as we came into 2023, yes, we had deferred Some of the equity content out of 2022 given the market conditions, but we took another good look at where we want to be in terms of our metrics And this will satisfy that and allow us to continue to make that commitment to our investment grade rating.

Speaker 3

So as we move through the rest of the Through 25 cycle, we'll continue to take looks at where we are in the capital plan, but we're very comfortable with where we are today for our 2023 financing plan.

Speaker 6

Okay. And you didn't mention anything about your battery project. Could you give us a sense of the status of that project?

Operator

Yes, that's on track to be online by the summer. Steve, you want to give any more details on that?

Speaker 5

I'd just say, so as a reminder for On the SCE signed agreement back in October of 2021 for with Ameresco for 5 37 Megawatts, We've been working that project ever since. Last year it did run into supply chain and some other execution challenges. And we like Pedro said, we expect that that will be online for the summer. We fully expect still to spend about $1,000,000,000 in total on the projects. With the project coming online this year though, we also are getting it will be eligible for about $270,000,000 of tax credits under the Inflation Reduction Act.

Speaker 5

And so That will go to the benefit of our customers.

Speaker 6

Okay. And then lastly and probably most importantly, so you are Planning to accelerate the filing for the wildfire cost recovery, at least the first portion. I'm just wondering why is it Coming earlier than expected, so that's 1. And number 2 is, so you're not deferring any interest associated with the Financing of those wildfire claims because you haven't had any decision from the CPUC. So I'm just wondering if you do get a decision or a settlement or at least a Settlement in that first batch, is that enough for you to start deferring the interest expense associated with Woolsey?

Operator

Thanks, I'll take the first part, Maria can take the second part. I think what we said over the last several quarters' Earnings calls is that we were targeting the first filing by the end of this year. And also I think we commented on how we were Looking to the debt as soon as possible, right, because we recognize that there's value in getting that certainty and getting that first piece of custody recovery behind us. So I'm not sure I would say that we accelerated the filing. Again, it's consistently by the end of the year, but now that we have more clarity every quarter, We see that we have the ability to file in the Q3 and so that's where we're going to get the filing out.

Operator

Maria, you can tell me the other part?

Speaker 3

Yes. So Angie, as you Correctly point out we are not deferring the interest expense associated with the wildfire claims debt. And so that's running to the income statement. We are asking for We'll ask for recovery when we file the application. And

Operator

when we

Speaker 3

get recovery, then we would reverse that and you would recognize that in earnings. When we get the decision, we will look at what the precise language is etcetera and see if we want to apply that to Woolsey or how that would Set itself up as a precedent. So we'll see what happens around that when we actually get the language of the decision on TKM. Awesome. Thank you.

Operator

Thanks Angie.

Speaker 1

Next question is from Steve Fleishman with Wolfe Research. Your line is open.

Speaker 7

Yes. Hi, good afternoon.

Operator

Hi, Steve.

Speaker 7

You guys probably knew this already, but as we were on this Looks like Moody's may have upgraded you already, so congrats on that.

Speaker 3

So first Check mark on our scorecards, do you?

Speaker 7

Yes. But so on the I guess just on the filing for recovery, could you talk about the expected timeline To get an answer from the CPC. And I think there's isn't there like 2 decisions. There's First prudency and then determining the actual dollars

Operator

part of

Speaker 7

A prudence process, could you talk about both of those?

Speaker 3

Sure. So our intent when we file the application is to request an 18 month schedule That's consistent with how they handle rate setting sorts of applications. We are also going to ask That they consider both of those items that you just mentioned both the prudency of our operations and the prudency of our settlement process or our claims process simultaneously. What will happen after we file the application is that typically there would be a 30 day window in which people could file comments after which The commission would schedule a pre hearing conference and following a pre hearing conference they would issue their Scoping memo. The scoping memo would then have their schedule sort of their response to our requests and other intervener comments.

Speaker 3

So that's the sort of thing we're looking at and we'll know a lot more after that scoping memo is issued.

Speaker 7

Okay. Great. And then just on the I guess with respect to The operational variances, so I think you've been able to offset in terms of your long term growth rate a lot of the interest rate increases through Improvement in the operational variances particularly out to 25. Could you just give a sense better sense of What those are and driving that? And like since that's the GRC year, how does that play into the 25 GRC also?

Speaker 7

Yes. Thanks.

Speaker 3

Sure. And there's a lot of things in there and you can even see it in our 2023 guidance. We have Actually a fairly similar range in $0.23 that we have in the 2025 EPS CAGR. So what's in there? Big things that are in there are AFUDC earnings.

Speaker 3

That's a healthy chunk of operational variances. We also have Regulatory applications that we have been submitting from time to time actually pretty much every year at this point. And when those get when we get those decisions, Some of those true ups then go through the optional variances. Speaking specifically to 2025 and how do we manage through that since it's 1st year of a GRC cycle, there are things that become less aligned over the course of a GRC cycle. An example I often use is depreciation.

Speaker 3

So you can get out of you can't get misaligned with what you're actually recognizing as depreciation versus what was authorized. You get to the 1st year of a GRC cycle, you can actually true those things up and get more into a normal cadence. So those are the sorts of things that we have embedded, Whether it was 2023 or last year 2022 or the future 2025.

Speaker 7

Okay. Thank you.

Operator

Thanks, Dave.

Speaker 1

Next question is from Ryan Levine with Citi. Your line is now open.

Speaker 8

Hi, everybody. Hoping to follow-up on cost recovery application. In the Prepared remarks in the presentation, you highlight about $2,000,000,000 that would be the ask. How did you determine that amount and what factors Could cause some deviation from that request.

Operator

Good question, Ryan. And I think the simple answer is this is about the TKM case and it's separate from the Woolsey case. We have not before given you a sense of how that total amount was divided up between the two cases. Now this gives you insight into the amount that's allocated or relevant to TKM. So simply that's it.

Operator

It's just that's the accounting of what claims are which.

Speaker 3

But it probably doesn't give you perfect insight quite yet because we will continue to settle And we will continue to accrue interest and we will include a true up mechanism in the application that we filed so that we can address anything that we any costs we incur Following the application.

Speaker 8

That's right. Between now and any filing in the Q3, I presume there's a lot of work that needs To be done, any factors that you care to share that could influence the more specific timing And any milestones to watch in the process?

Operator

I think Maria covered nicely earlier, Ryan, Our expectation that we'll be proposing an 18 month schedule. I think we shared in past calls that The team has been working on these applications already for quite some time. So it's not work that starts now, it's work that's been ongoing. And so we'll have final details Once we put the application out there.

Speaker 2

Okay. Thank you.

Operator

Thanks, Ryan.

Speaker 1

The next question is from Greg Orrill with UBS. Your line is open.

Speaker 4

Hey, Greg.

Speaker 9

Yes. Hi. Thank you. Can you talk about the Track 4 proceeding and sort of how that impacts your How that's going and how that impacts your ability to hit your financial goals? How we should think about it?

Speaker 3

Sure. So Track 4 is that stub year in our 2021 GRC case. So it addresses 2024 revenue requirement. We've gotten intervenors have filed comments. I think we're going through the normal process.

Speaker 3

The schedule for that is to get a decision by the end of this year. So that's a very relevant data point for 2024. So that is sort of the normal process that we go through anytime there's a GRC or some component of the GRC outstanding. It is not something that is affecting 2025. So if you recall, we'll be through this GRC cycle as we mentioned in response to Steve's question in 2025 is the 1st year of the next GRC cycle and our 5% to 7% EPS CAGR from 2021 through 2025 is really focused on that 2025

Speaker 9

And the final outcome would be expected to be somewhere between the interveners and some improvement On that and the final decision?

Speaker 3

You're talking about Track 4?

Speaker 2

Yes.

Speaker 3

I think there's still some things we need to work through on track for. There's still procedural schedules and comments that are due. So we'll work through that the balance of the year.

Speaker 9

All right. Good luck.

Operator

Thanks, Ted.

Speaker 1

Next question is from Nicholas Campanella with Credit Suisse. Your line is now open.

Speaker 10

Hey, everyone. Thanks for taking my questions. And I wanted to ask just a follow-up on the claims. And I'm sorry if I missed it,

Operator

but just And for Woolsey,

Speaker 10

when would that actually be filed? I guess would it be sometime after 25 after the 18 month process on the TKM or can you just explain that?

Operator

Yes. We haven't given you timing on that yet. We have commented in the past on how We'll see happen around a year after TKM, so you'd expect that scheduled to be sometime later than TKM. I don't think that we would necessarily need to wait for the TKM proceeding to be completed to file for Woolsey. So Just as we did with TKM, when we have the really we have a are substantially complete In terms of settlements, I think that would be the timing for filing.

Speaker 10

Okay. That's helpful. I appreciate it. And On the earnings guidance, your confidence on $0.25 is very notable and thanks for the walk to get there. I guess just As we think about there's that $0.24 of drag with the debt balances affecting $0.23 presumably that's going to get carried forward, I would imagine, to $0.24 as You potentially await for recovery and actions from the CPUC.

Speaker 10

Just how do you frame where you are within this 5% to 7% range in 2024? Are you do you have a line of sight to be within it? Or is it more just about getting there in 2025? Thank you.

Speaker 3

Well, fundamentally, 25 is the most important aspect of this conversation, right, because that's the Target we put out there and that we're driving towards and that we'll commit to. In terms of 2024 though, how do we think about that? I think it's Obviously, we'll give guidance for 2024 on the Q4 call of next year, of this year Q4, 2023. But I still think about 2024 as Rate base is a fundamental driver of growth. And there are things that we're going to find out in 2023 that are going to inform our 2024 Guidance when we give it.

Speaker 3

So some of the things we've already discussed today, the GRC Track 4 decision, we have a number of memo account filings that We've made, and we'll see where the timing on those, for example. We're going to continue to execute on our financing plan. I want to be really clear. We've embedded sort of higher interest rate environment in all our numbers at this point. So I think I won't say to you definitively where interest rates will end up in 2025, but there is that already baked into it.

Speaker 3

We're also frankly going to continue to monitor the cost of capital mechanism. It's not necessary for us to get to our 5% to 7% EPS CAGR in 2025, But it is something that could impact 2024. So we are doing all of those things as we prepare and move into 2024. And of course, Team here continues to lean in and work on all of the operational efficiencies that are so important to this question, but also to customer affordability.

Speaker 10

Thanks for that color, Maria. I really appreciate it. Thank you.

Operator

Thanks, Nick. Take care.

Speaker 1

Next question is from David Arcara with Morgan Stanley. Your line is open.

Speaker 11

Hi. Thanks so much for taking my questions. I was wondering maybe first following up on the financing outlook and the interest rate Environment, we've seen a couple of your peers do some different types of debt securities recently convertible like debt securities that have offered lower Interest rates, wondering if there are any ideas like that that you're exploring in terms of opportunities to lower the debt financing And costs as you look at some of the upcoming refinancings and debt issuances?

Speaker 3

Yes. I think the answer to that question is we're always looking at opportunities to be It is possible. We'll have to monitor the market and see how all of those other transactions go, whether it fits our situation, but Absolutely looking for every opportunity like that that we can.

Speaker 11

Okay, got it. Thanks. And then Also following up on the operational variances looking at the 2025 outlook, I'm wondering if you could give an indication as to what kind of Portion of that increased versus the prior expectation. And are you able to give just how much of that is operational efficiencies within the overall bucket?

Speaker 3

Yes. So, we haven't broken it out into a ton of detail in terms of operational efficiencies because remember operational There's a lot of work that goes on at SCE and at EIX. And so like you have many, many line items that you're working through. But some of the broad thematic areas that we've looked that we're looking at, relate to technology improvements And leveraging technology, it relates to work management, it relates to procurement. So there are a number of areas that I would say fall into the category of operational efficiencies.

Speaker 3

But as I mentioned earlier, the operational variances bucket also includes a lot of other things. It includes AFUDC. It includes sort of the realization of regulatory applications as we get into that time period. It includes the fact that we're going to Realign some of the things that may have gotten a little bit misaligned over the course of a 4 year GRC cycle like depreciation. So there's all of those things that fall into the operational variances.

Speaker 11

Okay, great. That's helpful color. I appreciate it. Thanks so much.

Operator

Thank you. Thanks so much.

Speaker 1

The next question is from Julien Dumoulin Smith with Bank of America. Your line is open.

Speaker 8

Hey, good afternoon team. Thanks so much for the time. Appreciate it. Hope you guys are well.

Operator

And just coming back to

Speaker 8

the guidance here, right, 23%, 25%, we received a good amount of attention here. But just let me ask it this way. When you look at your parent and other, right, it's relatively flattish From $0.23 to $0.25 I'd call it like that $0.88 midpoint. Given the commentary thus far about the balance sheet and the focus on equity issuance And the fact that some of that's included, right, the parent includes that dilutive effect, it kind of suggests that there's no incremental Parent debt issuance or equity issued or if there is, there's some kind of positive offset, right, I. E, Maybe some debt pay down from TCAM or something like that.

Speaker 8

Just trying to understand the puts and takes in that parent and other line.

Speaker 3

Yes. I think, Julien, as the parent, we do the same things that the utility does and look for cost efficiencies. And we think that there are a number of areas around operational efficiencies, Around how we manage our work etcetera that will allow us to fall into the range that we've given in 2025. So I think It's not that glamorous, but it's a lot of hard work getting costs down.

Speaker 8

Got it. Do we have any sense of how much is Baked in there in terms of cost reductions through the course of the period, if you will? And also in the 'twenty three guidance, I think it was like a $0.14 EMEA. So what is that true up as well, just while we're on the subject of detail?

Speaker 3

Sure. So we're working across a whole range of items To hit our operational efficiencies and frankly just our business effectiveness at the holding company. So more to come on that as we work through those issues. In terms of the 2023 SEMA item that you're referring to that relates to so SEMA is a catastrophic event memo account. So we incurred Costs a few years ago related to capital etcetera that We had to ask because there was a catastrophic event, so a storm or wildfire that are not related to any of the 2017 or 2018 events.

Speaker 3

And when that happens, we make an application for any incremental costs. And now that application we believe will come to fruition in this year And that would be recognized in our operational variances. It's very similar in we think it's analogous to the CSRP item that we flagged when we gave

Operator

2022 guidance.

Speaker 8

Got it. All right. Thank you guys very much. Have a great day.

Speaker 3

Thanks, Julian. Thanks, Julian.

Speaker 1

And that was our last question. I will now turn the call back over to Mr. Sam Ramraj.

Speaker 2

Well, thank you for joining us. This concludes the conference call, and have a good Rest of the day and stay safe. You may now disconnect

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Earnings Conference Call
Edison International Q4 2022
00:00 / 00:00