Edison International, the parent company of Southern California Edison, on July 29 reported second-quarter 2021 profits of $318 million, or 84 cents per share, compared with net income of $318 million, or 85 cents per share, for the same period in 2020. As adjusted, second-quarter 2021 core earnings were $356 million, or 94 cents per share, compared with core earnings of $375 million, or $1 per share, for second quarter 2020.
SCE's second-quarter core earnings per share decreased compared with 2020 primarily due to higher depreciation. This was partially offset by higher Federal Energy Regulatory Commission revenue and lower expenses related to wildfire mitigation activities, due primarily to fewer identified remediations during SCE's inspection process, the company said in an earnings release.
SCE on July 9 received a proposed decision from the California Public Utilities Commission on Track 1 of its 2021 general rate case. "The PD's base rate revenue requirement of $6.9 billion is approximately 90 percent of SCE's request," Pedro Pizarro, president and CEO of Edison International, said in a call with investors to discuss the quarterly earnings. Lower funding for wildfire insurance premiums, vegetation management and depreciation are primary drivers of the reduction, he said.
The main reduction to SCE's 2021 capital forecast was for the Wildfire Covered Conductor Program, which the PD reduced by 54 percent. Excluding wildfire mitigation-related capital, the PD would approve 98 percent of SCE's 2021 capital request, "much of which was uncontested," Pizarro said on the call.
"SCE is making meaningful progress in mitigating wildfire risk for its customers," Pizarro said in the release. "However, we believe additional CPUC-authorized funding for SCE's covered conductor deployment is warranted to protect customers' and communities' vital interests and achieve the state's objective for minimizing wildfire risk."
Pizarro reviewed a summary of the utility's opening comments on the PD, also filed July 29, and said reply comments would be filed Aug. 3. He said the company believes the PD to be "generally well-reasoned," but said it contains policy implications that are inconsistent with the state's direction, including a reduction in capital forecast for the covered conductor program that the company sees as contrary to state and commission policy.
The covered conductor program is SCE's "paramount wildfire mitigation program," Pizarro said. The utility's comments will focus on ensuring the program's scope is consistent with the appropriate risk analyses, state policy, and achieving the desired level of risk mitigation.
"Circuits with covered conductor have experienced 69 percent fewer faults than those without," he said. "Where SCE has expanded vegetation clearance distances and removed trees that could fall into its lines, there have been 50 percent fewer tree- or vegetation-caused faults than the historic average." Since SCE began its high-fire-risk inspection program in 2019, there has been a 66-percent reduction year over year in conditions requiring remediation, he said.
The utility will ultimately deploy covered conductor at a level consistent with the CPUC's final decision, Pizarro said. It will also augment the mitigation through public-safety power shut-offs to achieve the level of risk reduction originally sought for its customers, he said.
SCE is on track to complete expedited grid hardening on frequently impacted circuits, and expects to reduce minutes of service interruption by 78 percent compared with 2020 without increasing risk, provided the weather pattern is similar. The state is also better equipped to fight wildfires, Pizarro said, pointing to funding allocations from the California Legislature and new investments by the California Department of Forestry and Fire Protection in additional firefighting aircraft and in supporting local fire agencies.
"We agree that affordability is always important and must be weighed against the long-term investments in public safety," Pizarro said. Requested increases tied to safety investments are higher than SCE's historical average, but "underfunding prudent mitigations like covered conductor is penny-wise and pound-foolish," he said, adding that such a decision could lead to greater economic pain and potential loss of life in communities affected by preventable wildfires.
SCE during the second quarter also made progress settling claims related to fires in 2017 and 2018 and in the 2018 Montecito Mudslide event. The utility resolved about $560 million in individual plaintiff claims during the quarter, leaving about $1.4 billion to be resolved, a figure that represents less than 23 percent of its best estimate for total losses.