CEO: Southern California Edison investments home in on transmission, distribution

Southern California Edison (SCE) will gravitate more toward distribution and transmission than generation investments, Ted Craver, chairman and CEO of parent company Edison International (NYSE:EIX), said during the company’s 4Q12 earnings call on Feb. 26.

“It’s the wires space, and particularly in the small wires space, that we see the greatest opportunities,” Craver said. “SCE will continue to focus its investment in the wires side of the business, and largely leave construction of conventional and renewable power generation to the competitive marketplace.”

Noting that transmission expenditures are needed to maintain system reliability and increase access to renewable energy, company officials highlighted three large transmission projects being developed by SCE.

Construction on the Tehachapi Renewable Transmission Project is well underway. Total project costs are estimated at $2.5bn, and the company continues to target an in-service date of 2015. Additional costs associated with the potential undergrounding of Section 8A through the city of Chino Hills, Calif., will not have a material effect on the company’s earnings, an Edison International spokesperson told TransmissionHub Feb. 26.

The Devers to Colorado River project is expected to be in service in 3Q13 at a total project cost of $860m, the company said, an increase from the previous cost estimate of $697m reflected in TransmissionHub data. The company submitted a revised cost forecast to the CPUC in 4Q12.

Finally, the company revised downward its total cost forecast for the Eldorado to Ivanpah project to $385m from $444m. That project is also expected to enter service in 3Q13.

In announcing the company’s 2013 earnings guidance of $3.45 to $3.65 per share, Craver said those numbers largely reflects the company’s efforts at operational excellence, and significant investment in its core wires business.

Craver also addressed the ongoing outage of the San Onofre nuclear generating station (SONGS) in southern California, saying Edison International faces “significant uncertainty” over the fate of the power plant. SONGS has been out of service due to a tube leak that was discovered in Unit 3 in January 2012. Unit 2 had been taken offline a few weeks earlier for scheduled maintenance.

“First and foremost, nuclear safety is our paramount goal,” he said, adding that assertions by elected officials and others that the company knew about design problems with the replacement steam generators when they were installed are “just not accurate.”

Craver said the company is convinced that, after an extensive period working with manufacturer Mitsubishi Heavy Industries, it is safe to return Unit 2 to service. He acknowledged that the final decision is in the hands of the Nuclear Regulatory Commission (NRC), and said he expects a decision in the late April to May time frame.

However, the company is taking actions to ensure that adequate power is available for the summer in the event that Unit 2 is not approved for restart by the summer peak season.

“Our plan for 2013 is to accelerate transmission upgrades to increase flows into south Orange County, with a big focus on demand response, which was successful [in trimming demand] last year,” Ronald Litzinger, president of SCE, said.

If the plant remains out of service for a longer term, Craver said replacement generation and transmission would be necessary to ensure continued reliability, noting that those additions and upgrades would also be expensive, and would take a significant amount of time to permit and construct.

“It is costly, both in dollars and in risk to reliability, to have Unit 2 remain idle,” Craver said. “San Onofre has been a crucial component of grid stability and electric service reliability for Southern California for many years.”

For the balance of the decade, Craver sees solid growth in the company’s rate base, even without any new public policy mandates such as higher renewable energy targets or the installation of smart meters, both of which contributed to the company’s growth in the past.

Edison International posts higher 4Q12 earnings

Edison International reported an increase in core earnings for 4Q12 and for the full year during its quarterly earnings call Feb. 26.

Quarterly earnings were $1.79 per share compared to 79 cents per share during 4Q11. Full-year earnings rose to $3.92 per share compared to $3.31 per share last year. SCE’s 4Q12 core earnings were $1.85 per share compared to 76 cents per share in 4Q11.

The primary driver for the increase in core earnings for both Edison International and SCE was the implementation of SCE’s 2012 general rate case, which was approved by the California Public Utilities Commission (CPUC) in November 2012.

“These strong results demonstrate Southern California Edison’s ongoing ability to deliver rate base growth and cost management, even during an extended period of rate case uncertainty,” Ted Craver, chairman and CEO of Edison International, said during the call. “Looking ahead, success in providing our customers with safe, reliable and affordable electricity provides the foundation for sustainable growth in earnings and dividends.”

On a GAAP basis, the company lost 56 cents per share for 2012 due to Edison Mission Energy’s (EME) filing for Chapter 11 bankruptcy protection on Dec. 17, 2012. As a result of that filing, EME will no longer be a part of Edison International’s business portfolio, and Edison International will no longer consolidate the earnings and losses of EME or its subsidiaries.