Executives of Edison International, parent company of Southern California Edison (SCE), credit SCE’s investment in transmission and distribution infrastructure as being largely responsible for strong 2Q13 financial results.
“As in the first quarter, strong operating results from Southern California Edison reflect higher authorized investment in our electric grid infrastructure, good cost management and favorable tax benefits,” Ted Craver, chairman and CEO of Edison International (NYSE:EIX), said during the 2Q13 earnings conference call Aug. 1. “These results are consistent with the Edison International core earnings guidance of $3.25 to $3.45 per share that we provided in June and that we reaffirmed today.”
SCE’s 2Q13 basic losses were 28 cents per share compared to earnings of 59 cents per share in 2Q12. The losses include an impairment charge of $1.12 per share related to the early retirement of the San Onofre Nuclear Generating Station (SONGS) Units 2 and 3.
Craver spent a significant portion of the call focusing on the company’s June 6 decision to permanently close SONGS, and said the company will focus on the key areas of safely transitioning from operating the plant to decommissioning the facility, working with state regulators and the California ISO (Cal-ISO) to plan for a reliable electric system without SONGS, and resolving cost recovery issues.
“We are highly focused on securing recovery from Mitsubishi Heavy Industries for its failure to provide functioning steam generators that met their 20-year warranty and technical specifications,” he said.
He did not cite a specific dollar figure the company is seeking from Mitsubishi.
The company is also pursuing insurance claims from the Nuclear Electric Insurance Limited (NEIL). The estimated total claims through the June 6 early retirement decision is approximately $388m. SCE’s share of that amount totals $304m, he said.
SCE will take an active role in discussions about the roles generation, transmission, demand response and demand reduction can play in planning for a reliable system without SONGS, Craver said, though “[o]ur plans remain focused on the wires-related investments, while encouraging the use of competitive markets for new generation.”
In other areas, Craver said the company filed a notice of intent with the California Public Utility Commission’s (CPUC) Division of Ratepayer Advocates on July 15 for a general rate case, with the general rate case application expected to be filed during 4Q13. The company proposed what Craver called a modest increase of $120m for 2015, $308m in 2016, and $331m in 2017.
That rate case includes a request for an incremental $360m, which SCE estimates will be the additional cost of undergrounding a 3.5-mile stretch of Segment 8A of the Tehachapi Renewable Transmission Project (TRTP) as it passes through the city of Chino Hills, Calif. The CPUC voted 3-2 on July 11 to order SCE to place the line underground, and SCE’s rate case anticipates a single-circuit configuration for the segment.
“We remain concerned about the potential precedent for future transmission lines’ costs but we respect the commission’s decision and will move forward to implement it expeditiously,” Craver said. Next steps include finalizing technical and scope questions with the CPUC, finalizing the construction plans, and filing for rate recovery with FERC based on the company’s estimated capital cost for the project’s completion. He noted that the company’s $360m estimate is higher than the estimate referenced in the CPUC decision.
SCE’s 2Q13 core earnings, excluding the SONGS impairment charge, were 84 cents per share compared to 59 cents per share in 2Q12. The core earnings increase was primarily due to the timing of the 2012 general rate case approved by the CPUC in November 2012, coupled with lower operating expenses and tax benefits, offset by severance costs.
Edison International reported 2Q13 basic and core losses from continuing operations of 5 cents per share compared to losses of 3 cents per share in 2Q12. The decrease in core earnings was mainly due to consolidated taxes, the company said.
Edison International basic earnings rose to 54 cents per share for the year-to-date period ending June 30, compared to 51 cents per share for the same period last year. Core earnings for the first six months of 2013 were $1.57 per share compared to $1.10 per share for the first half of 2012.
The company reaffirmed its 2013 core earnings guidance of $3.25 to $3.45 per share and updated its basic earnings guidance to $2.22 to $2.42 per share.