Edison International

Good afternoon and welcome to the Edison International Second Quarter 2023 Financial Teleconference. My name is Fran and I will be your operator today. When we get to the question and answer session, if you have a question, please press star one on your phone. Today's call is being recorded. 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.

Thank you, Fran, and welcome, everyone. Our speakers today are President and Chief Executive Officer Pedro Pizarro and Executive Vice President and Chief Financial Officer Maria Rigotti. Also on the call are other members of the management team. Materials supporting today's call are available at www.edisoninvestor.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 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. During the question and answer session, Please limit yourself to one question and one follow-up. I will now turn the call over to Pedro.

Well, thanks a lot, Sam, and good afternoon, everyone. I would like to begin with three financial comments. First, driven by EIX's impressive performance through June, we are confident in our 2023 core EPS guidance of $4.55 to $4.85. Second, we remain fully confident in and deeply committed to delivering our long-term EPS growth target of 5% to 7% from 2021 to 2025. This target incorporates all known business headwinds, but does not factor in potential tailwinds, which could present significant upside. Third, based on the strength of SCE's 2025 GRC application and other investment opportunities, we are providing EPS growth guidance of 5% to 7% for 2025 to 2028 which provides the path towards $7 in earnings per share potential for 2028. Underpinning this is the rate-based growth driven by the essential investments to advance California's clean energy transition. Importantly, these actions will maintain SCE's cost leadership and the lowest system average rates for customers among California's investor-owned utilities for the foreseeable future. We are very proud of this commitment, and I'll share more about it later. On the operational front, my two key messages today are, first, SCE is strategically positioned to make substantial investments in the reliability, resiliency, and readiness of the grid as outlined in its 2025 GRC application. And second, SCE is well prepared for the wildfire season due to its successful grid hardening actions. I will also emphasize that core to everything that we do is sustainability. as Edison International remains at the forefront of the clean energy transition. Please turn to page three. On May 12th, SCE filed its 2025 GRC application. The overarching objectives are to ensure the grid is reliable, resilient, and ready. Reliable, so that it can meet customers' needs today and in the future. Resilient, to protect public safety and the integrity of the grid. And ready, ready to support the widespread electrification and decarbonization needed to meet California's ambitious greenhouse gas reduction goals. These GHG reduction goals are not just stretch targets. They are deeply embedded in the fabric of California's most important legislative and policy frameworks. Mindful of the longer-term costs of inaction when confronting the global climate crisis, SCE's GRC reflects that urgent need for the state to rapidly electrify vast swaths of the economy, which is facing the fastest electricity demand growth in decades. To meet these objectives, SCE requested a 2025 base revenue requirement of $10.3 billion. That's an increase of $1.9 billion, or about 12% over total 2024 rates. This also represents a system average rate increase of 9%, and an average residential customer bill increase of 10%. The 2025 through 2028 period will be critical to achieving California's 2030 and 2045 climate goals. SCE will continue to make substantial investments in wildfire mitigation to address the remaining wildfire risk on the system. There is also a need to ramp up infrastructure replacement work, returning to historical levels of proactive replacement to safeguard reliability. Two key things are always top of mind in any of SCE's applications and, frankly, in how the company runs. Those are operational excellence and affordability for customers. We recognize that the investments in the grid are borne by customers, so we continuously look for ways to gain efficiencies and save customers money. SCE has been building its capabilities in artificial intelligence and advancing the integration of technology into its operations. In 2018, SCE began to apply technology to some of its highest priority challenges, including wildfire risk mitigation and data quality. SCE has implemented several computer vision algorithms as part of the T&D aerial inspection process to scan images and detect defects like broken cross arms and other failure risks that could lead to outages or additions. The utility is now leveraging its images, other data, and these algorithms to develop other predictive models that can identify and refine asset data to more efficiently operate the grid, enhance fire spread modeling, and better prioritize grid hardening efforts. Building on this and further leveraging tools such as artificial intelligence, robotic process automation, and mobile solutions, SCE is ramping up its efforts around the customer experience, integrated grid planning and execution, and driving efficiencies in its support functions. Examples include predicting customer issues before they call and proactively addressing them or diverting them to the lowest cost, most effective channel. Leveraging speech and image recognition and inspections to automatically fill out surveys and focus the inspections. And using generative AI to create first drafts of everything from communications to data request responses. I am really proud that SCE is an early mover in implementing new technology that furthers its operational excellence and affordability goals. Turning to page four, let me give you a brief update on the 2017 and 2018 wildfire and mudslide events. SCE is putting finishing touches on the TKM cost recovery application and expects to file in August. I reiterate that SCE will seek full CPUC cost recovery excluding amounts already recovered or foregone under the agreement with the Safety and Enforcement Division. SCE will show its strong, compelling case that it operated its system prudently and that it is in the public interest to authorize full cost recovery. Looking at this year's wildfire season, SCE's confidence in mitigating wildfires associated with its equipment continues to grow. Over the past couple of years, SCE has deployed covered conductor at a rate of approximately 100 miles per month and has now replaced nearly 5,000 circuit miles of bare wire with covered conductor since the inception of this program around four and a half years ago. In addition to the CPUC endorsed grid hardening measure, SCE completes 360-degree inspections of its transmission and distribution structures that represent up to 99% of risk each year prior to peak fire season, and then performs repairs and replacements. SCE continues its robust vegetation management programs, inspecting 1.6 million trees across the service area annually, and typically mitigating approximately 850,000. More than half of those trees are in high-fire risk areas. In 2023, SCE plans to inspect over 130,000 trees that pose a threat of falling into SCE's electrical equipment in the highest risk locations. Now, let me give you some proof points of how well this is all working to reduce ignitions and their impacts. On fully covered segments, there have not been any ignitions due to failure of covered conductor. In 2021 and 2022, there were 98% fewer structures destroyed and 92% fewer acres burned than in 2017 and 2018. These and a lot of other statistics are shown on page five. As it has since 2021, SCE uses a rigorous insurance industry modeling approach to estimate the probability of losses from catastrophic wildfires relative to the thresholds defined by AB 1054. Incorporating SCE's latest mitigation data into the industry-leading North America wildfire HD model. Moody's RMS now estimates SCE has reduced the probability of losses from catastrophic wildfires by 85% compared to pre-2018 levels, as highlighted on page 6. Importantly, the contribution from public safety power shutoffs continues to decline, and it's now only 10%. SCE has been expeditiously hardening its grid since 2018, with 76% of distribution lines in HFRA expected to be hardened by year end, which you can see on page seven. SCE anticipates ramping down its flagship mitigation measure of covered conductor beginning in 2025, and also largely completing its targeted undergrounding work by the end of 2028. Meanwhile, the State of California continues to allocate substantial funding to forest resiliency and to fire suppression. And this includes CAL FIRE crews and aerial resources. We were pleased that the approved state budget maintained $2.7 billion. That was 98% of the original proposal over four years for critical investments restoring forest and wildland health to continue reducing the risk of catastrophic wildfires in the face of extreme climate conditions. To put the state's commitment in context, The total 2023 to 2024 CAL FIRE budget of $4.1 billion is double what was originally enacted in the 2017 to 2018 budget, and CAL FIRE staffing has increased by 74% since then. Edison International remains at the forefront of the clean energy transition, and we continue to execute on our strategy and net zero commitment. As climate change continues to challenge our world in unprecedented ways, I am confident in the strength of our team to lead the transition affordably and effectively. We're painting the way for a future powered by 100% carbon-free electricity, adapting our system to climate change, and supporting customers in reaching net zero emissions. While the road ahead is long, our 2022 progress demonstrates our sense of urgency and our ongoing commitment to sustainability. I want to encourage you to read our 2022 sustainability report. It has details about our accomplishments, our goals, and our long-term ESG commitments. Let me highlight just a few commitments, and these are covered on pages 8 and 9. In 2022, SCE delivered 45% carbon-free power to customers, installed the electric vehicle charging infrastructure to enable customers to add more than 500 medium and heavy-duty electric vehicles, and installed or contracted for more than 1,800 megawatts of energy storage. By year end, SCE's energy storage portfolio totaled more than 5,000 megawatts. That's one of the largest in the nation. Our team continues to forge coalitions nationally and internationally to address climate change, and we are proud to lead the way on these initiatives and partnerships and to support our stakeholders. A future powered by clean electricity is upon us, so we stand fully ready to make this future a reality, and we're going to do that reliably, affordably, and sustainably. With that, let me turn it over to Maria.