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Compensation and Benefit Plans (Tables)
 12 Months Ended
Dec. 31, 2011
Compensation and Retirement Disclosure [Abstract]  
Information on pension plan assets and benefit obligations
Information on plan assets and benefit obligations is shown below:
 
Years ended December 31,
(in millions)
2011
 
2010
Change in projected benefit obligation
 
 
 
Projected benefit obligation at beginning of year
$
4,080

 
$
3,688

Service cost
165

 
149

Interest cost
210

 
210

Amendments
—

 
6

Actuarial loss
327

 
210

Benefits paid
(289
)
 
(183
)
Projected benefit obligation at end of year
$
4,493

 
$
4,080

Change in plan assets
 
 
 
Fair value of plan assets at beginning of year
$
3,235

 
$
2,857

Actual return on plan assets
61

 
434

Employer contributions
146

 
127

Benefits paid
(289
)
 
(183
)
Fair value of plan assets at end of year
$
3,153

 
$
3,235

Funded status at end of year
$
(1,340
)
 
$
(845
)
Amounts recognized in the consolidated balance sheets consist of:
 
 
 
Current liabilities
$
(11
)
 
$
(12
)
Long-term liabilities
(1,329
)
 
(833
)
 
$
(1,340
)
 
$
(845
)
Amounts recognized in accumulated other comprehensive loss consist of:
 
 
 
Prior service cost
$
1

 
$
1

Net loss
139

 
116

 
$
140

 
$
117

Amounts recognized as a regulatory asset:
 
 
 
Prior service cost
$
34

 
$
40

Net loss
955

 
500

 
$
989

 
$
540

Total not yet recognized as expense
$
1,129

 
$
657

Accumulated benefit obligation at end of year
$
4,157

 
$
3,736

Pension plans with an accumulated benefit obligation in excess of plan assets:
 
 
 
Projected benefit obligation
$
4,493

 
$
4,080

Accumulated benefit obligation
4,157

 
3,736

Fair value of plan assets
3,153

 
3,235

Weighted-average assumptions used to determine obligations at end of year:
 
 
 
Discount rate
4.5
%
 
5.25
%
Rate of compensation increase
4.5
%
 
5.0
%
Expense components for pension plan
Expense components are:
 
Years ended December 31,
(in millions)
2011
 
2010
 
2009
Service cost
$
165

 
$
149

 
124

Interest cost
210

 
210

 
207

Expected return on plan assets
(238
)
 
(210
)
 
(169
)
Amortization of prior service cost
7

 
8

 
11

Amortization of net loss
28

 
22

 
61

Expense under accounting standards
$
172

 
$
179

 
$
234

Regulatory adjustment – deferred
(28
)
 
(52
)
 
(94
)
Total expense recognized
$
144

 
$
127

 
140
Changes in pension plan assets and benefit obligations recognized in other comprehensive income
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
 
Years ended December 31,
(in millions)
2011
 
2010
 
2009
Net loss
$
35

 
$
30

 
$
17

Amortization of prior service cost
—

 
(1
)
 
(1
)
Amortization of net loss
(13
)
 
(10
)
 
(11
)
Total recognized in other comprehensive loss
$
22

 
$
19

 
$
5

Total recognized in expense and other comprehensive income
$
166

 
$
146

 
$
145
Weighted-average assumptions used to determine pension expense
The following are weighted-average assumptions used to determine expense:
 
Years ended December 31,
 
2011
 
2010
 
2009
Discount rate
5.25
%
 
6.0
%
 
6.25
%
Rate of compensation increase
5.0
%
 
5.0
%
 
5.0
%
Expected return on plan assets
7.5
%
 
7.5
%
 
7.5
%
Pension benefit payments expected to be paid
The following benefit payments, which reflect expected future service, are expected to be paid:
(in millions)
Years ended
December 31,
2012
$
302

2013
310

2014
316

2015
329

2016
338

2017 – 2021
1,738
Information on postretirement benefits other than pension plan assets and benefit obligations
Information on plan assets and benefit obligations is shown below:
 
Years ended December 31,
(in millions)
2011
 
2010
Change in benefit obligation
 
 
 
Benefit obligation at beginning of year
$
2,425

 
$
2,110

Service cost
43

 
37

Interest cost
121

 
127

Amendments
—

 
23

Actuarial loss
47

 
216

Plan participants' contributions
18

 
17

Medicare Part D subsidy received
5

 
5

Benefits paid
(106
)
 
(110
)
Benefit obligation at end of year
$
2,553

 
$
2,425

Change in plan assets
 
 
 
Fair value of plan assets at beginning of year
$
1,606

 
$
1,459

Actual return on assets
11

 
175

Employer contributions
36

 
60

Plan participants' contributions
18

 
17

Medicare Part D subsidy received
5

 
5

Benefits paid
(106
)
 
(110
)
Fair value of plan assets at end of year
$
1,570

 
$
1,606

Funded status at end of year
$
(983
)
 
$
(819
)
Amounts recognized in the consolidated balance sheets consist of:
 
 
 
Current liabilities
$
(19
)
 
$
(20
)
Long-term liabilities
(964
)
 
(799
)
 
$
(983
)
 
$
(819
)
Amounts recognized in accumulated other comprehensive loss (income) consist of:
 
 
 
Prior service cost (credit)
$
8

 
$
7

Net loss
27

 
28

 
$
35

 
$
35

Amounts recognized as a regulatory asset (liability):
 
 
 
Prior service credit
$
(125
)
 
$
(161
)
Net loss
839

 
718

 
$
714

 
$
557

Total not yet recognized as expense
$
749

 
$
592

Weighted-average assumptions used to determine obligations at end of year:
 
 
 
Discount rate
4.75
%
 
5.5
%
Assumed health care cost trend rates:
 
 
 
Rate assumed for following year
9.50
%
 
9.75
%
Ultimate rate
5.25
%
 
5.5
%
Year ultimate rate reached
2019

 
2019
Expense components for postretirement benefits other than pension
Expense components are:
 
Years ended December 31,
(in millions)
2011
 
2010
 
2009
Service cost
$
43

 
$
37

 
30

Interest cost
121

 
127

 
122

Expected return on plan assets
(111
)
 
(101
)
 
(81
)
Amortization of prior service credit
(36
)
 
(38
)
 
(34
)
Amortization of net loss
27

 
36

 
45

Total expense
$
44

 
$
61

 
$
82
Changes in postretirement other than pension plan assets and benefit obligations recognized in other comprehensive income
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
 
Years ended December 31,
(in millions)
2011
 
2010
 
2009
Net loss (gain)
$
(1
)
 
$
13

 
$
(8
)
Prior service cost (credit)
—

 
11

 
(3
)
Amortization of prior service credit
1

 
2

 
2

Amortization of net loss
(1
)
 
(1
)
 
(1
)
Total recognized in other comprehensive income
$
(1
)
 
$
25

 
$
(10
)
Total recognized in expense and other comprehensive income
$
43

 
$
86

 
$
72
Weighted-average assumptions used to determine postretirement benefits other than pension expense
The following are weighted-average assumptions used to determine expense:
 
Years ended December 31,
 
2011
 
2010
 
2009
Discount rate
5.5
%
 
6.0
%
 
6.25
%
Expected long-term return on plan assets
7.0
%
 
7.0
%
 
7.0
%
Assumed health care cost trend rates:
 
 
 
 
 
Current year
9.75
%
 
8.25
%
 
8.75
%
Ultimate rate
5.5
%
 
5.5
%
 
5.5
%
Year ultimate rate reached
2019

 
2016

 
2016
Postretirement benefits other than pension plans, payments expected to be paid
The following benefit payments are expected to be paid:
 
Year ending December 31,
(in millions)
Before Subsidy1
 
Net
2012
$
100

 
$
94

2013
108

 
102

2014
117

 
110

2015
126

 
119

2016
136

 
128

2017 – 2021
809

 
755

1 
Medicare Part D prescription drug benefits
Fair value of pension plan assets by asset Hierarchy level
The following table sets forth the Master Trust investments that were accounted for at fair value as of December 31, 2011 by asset class and level within the fair value hierarchy:
(in millions)
Level 1
 
Level 2
 
Level 3
 
Total
Corporate stocks1
$
642

 
$
—

 
$
—

 
$
642

Partnerships/joint ventures2
—

 
140

 
448

 
588

Common/collective funds3
—

 
582

 
—

 
582

Corporate bonds4
—

 
497

 
—

 
497

U.S. government and agency securities5
104

 
351

 
—

 
455

Other investment entities6
—

 
247

 
—

 
247

Registered investment companies7
79

 
29

 
—

 
108

Interest-bearing cash
5

 
—

 
—

 
5

Other
(1
)
 
69

 
—

 
68

Total
$
829

 
$
1,915

 
$
448

 
$
3,192

Receivables and payables, net
 

 
 

 
 

 
(39
)
Net plan assets available for benefits
 

 
 

 
 

 
$
3,153

The following table sets forth the Master Trust investments that were accounted for at fair value as of December 31, 2010 by asset class and level within the fair value hierarchy:
(in millions)
Level 1
 
Level 2
 
Level 3
 
Total
Corporate stocks1
$
786

 
$
—

 
$
—

 
$
786

Partnerships/joint ventures2
—

 
155

 
345

 
500

Common/collective funds3
—

 
600

 
—

 
600

Corporate bonds4
—

 
555

 
—

 
555

U.S. government and agency securities5
84

 
316

 
—

 
400

Other investment entities6
—

 
236

 
—

 
236

Registered investment companies7
84

 
92

 
—

 
176

Interest-bearing cash
5

 
—

 
—

 
5

Other
2

 
30

 
—

 
32

Total
$
961

 
$
1,984

 
$
345

 
$
3,290

Receivables and payables, net
 

 
 

 
 

 
(55
)
Net plan assets available for benefits
 

 
 

 
 

 
$
3,235

1 
Corporate stocks are diversified. For 2011 and 2010, respectively, performance is primarily benchmarked against the Russell Indexes (60% and 63%) and Morgan Stanley Capital International (MSCI) index (40% and 37%).
2 
Partnerships/joint venture Level 2 investments consist primarily of a partnership which invests in publicly traded fixed income securities, primarily from the banking and finance industry and U.S. government agencies. At December 31, 2011 and 2010, respectively, approximately 55% and 60% of the Level 3 partnerships are invested in (1) asset backed securities, including distressed mortgages and (2) commercial and residential loans and debt and equity of banks. The remaining Level 3 partnerships are invested in small private equity and venture capital funds. Investment strategies for these funds include branded consumer products, early stage technology, California geographic focus, and diversified US and non-US fund-of-funds.
3 
At December 31, 2011 and 2010, respectively, the common/collective assets were invested in equity index funds that seek to track performance of the Standard and Poor's (S&P 500) Index (29% and 29%), Russell 200 and Russell 1000 indexes (27% and 28%) and the MSCI Europe, Australasia and Far East (EAFE) Index (10% and 11%). A non-index U.S. equity fund representing 23% of this category for both 2011 and 2010 is actively managed. Another fund representing 8% of this category for both 2011 and 2010 is a global asset allocation fund.
4 
Corporate bonds are diversified. At December 31, 2011 and 2010, respectively, this category includes $53 million and $65 million for collateralized mortgage obligations and other asset backed securities of which $10 million and $17 million are below investment grade.
5 
Level 1 U.S. government and agency securities are U.S. treasury bonds and notes. Level 2 primarily relates to the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.
6 
Other investment entities were primarily invested in (1) emerging market equity securities, (2) a hedge fund that invests through liquid instruments in a global diversified portfolio of equity, fixed income, interest rate, foreign currency and commodities markets, and (3) domestic mortgage backed securities.
7 
Level 1 of registered investment companies consisted of a global equity mutual fund which seeks to outperform the MSCI World Total Return Index. Level 2 primarily consisted of short-term, emerging market, high yield bond funds and government inflation-indexed bonds.
Summary of changes in the fair value of Level 3 investments of pension plan assets
The following table sets forth a summary of changes in the fair value of Level 3 investments for 2011 and 2010:
(in millions)
2011
 
2010
Fair value, net at beginning of period
$
345

 
$
240

Actual return on plan assets:
 
 
 
Relating to assets still held at end of period
6

 
42

Relating to assets sold during the period
22

 
24

Purchases
130

 
108

Dispositions
(55
)
 
(69
)
Transfers in and /or out of Level 3
—

 
—

Fair value, net at end of period
$
448

 
$
345
Fair value of postretirement benefits other than pension plan assets by asset category
The following table sets forth the PBOP Plan's financial assets that were accounted for at fair value as of December 31, 2011 by asset class and level within the fair value hierarchy:
(in millions)
Level 1
 
Level 2
 
Level 3
 
Total
Common/collective funds1
$
—

 
$
642

 
$
—

 
$
642

Corporate stocks2
319

 
—

 
—

 
319

Corporate notes and bonds3
—

 
177

 
—

 
177

Partnerships4
—

 
16

 
130

 
146

U.S. government and agency securities5
100

 
42

 
—

 
142

Registered investment companies6
80

 
—

 
—

 
80

Interest bearing cash
12

 
—

 
—

 
12

Other7
4

 
71

 
—

 
75

Total
$
515

 
$
948

 
$
130

 
$
1,593

Receivables and payables, net
 

 
 

 
 

 
(23
)
Combined net plan assets available for benefits
 

 
 

 
 

 
$
1,570

The following table sets forth the PBOP Plan's financial assets that were accounted for at fair value as of December 31, 2010 by asset class and level within the fair value hierarchy:
(in millions)
Level 1
 
Level 2
 
Level 3
 
Total
Common/collective funds1
$
—

 
$
657

 
$
—

 
$
657

Corporate stocks2
344

 
—

 
—

 
344

Corporate notes and bonds3
—

 
184

 
—

 
184

Partnerships4
—

 
16

 
92

 
108

U.S. government and agency securities5
50

 
38

 
—

 
88

Registered investment companies6
144

 
1

 
—

 
145

Interest bearing cash
12

 
—

 
—

 
12

Other7
4

 
76

 
—

 
80

Total
$
554

 
$
972

 
$
92

 
$
1,618

Receivables and payables, net
 

 
 

 
 

 
(12
)
Combined net plan assets available for benefits
 

 
 

 
 

 
$
1,606

1 
At December 31, 2011 and 2010, respectively, 63% and 61% of the common/collective assets are invested in a large cap index fund which seeks to track performance of the Russell 1000 index. 21% and 23% of the assets in this category are in index funds which seek to track performance in the MSCI Europe, Australasia and Far East (EAFE) Index. 6% and 7% of this category are invested in a privately managed bond fund and 6% and 6% in a fund which invests in equity securities the fund manager believes are undervalued.
2 
Corporate stock performance is primarily benchmarked against the Russell Indexes (53% and 54%) and the MSCI All Country World (ACWI) index (47% and 46%) for 2011 and 2010, respectively.
3 
Corporate notes and bonds are diversified and include approximately $14 million and $15 million for commercial collateralized mortgage obligations and other asset backed securities at December 31, 2011 and 2010, respectively.
4 
At December 31, 2011 and 2010, respectively, 81% and 84% of the Level 3 partnerships category is invested in (1) asset backed securities including distressed mortgages, (2) distressed companies and (3) commercial and residential loans and debt and equity of banks.
5 
Level 1 U.S. government and agency securities are U.S. treasury bonds and notes. Level 2 primarily relates to the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association.
6 
Level 1 registered investment companies consist of an investment grade corporate bond mutual fund and a money market fund.
7 
Other includes $60 million and $64 million of municipal securities at December 31, 2011 and 2010, respectively.
Summary of changes in the fair value of Level 3 investments of postretirement benefits other than pension plan assets
The following table sets forth a summary of changes in the fair value of PBOP Level 3 investments for 2011 and 2010:
(in millions)
2011
 
2010
Fair value, net at beginning of period
$
92

 
$
49

Actual return on plan assets
 
 
 
Relating to assets still held at end of period
(3
)
 
14

Relating to assets sold during the period
6

 
—

Purchases
48

 
46

Dispositions
(13
)
 
(17
)
Transfers in and /or out of Level 3
—

 
—

Fair value, net at end of period
$
130

 
$
92
Fair value of options granted determined as of the grant date using the Black-Scholes option-pricing model
The Black-Scholes option-pricing model requires various assumptions noted in the following table:
 
Years ended December 31,
 
2011
 
2010
 
2009
Expected terms (in years)
7.0
 
7.3
 
7.4
Risk-free interest rate
1.4% – 3.1%
 
2.0% – 3.2%
 
2.8% – 3.5%
Expected dividend yield
3.1% – 3.5%
 
3.3% – 4.0%
 
3.6% – 5.0%
Weighted-average expected dividend yield
3.4%
 
3.8%
 
4.9%
Expected volatility
18.2% – 19.0%
 
18.8% – 19.8%
 
20% – 21%
Weighted-average volatility
18.9%
 
19.8%
 
20.6%
Summary of the status of stock options
The following is a summary of the status of Edison International stock options:
 
 
 
Weighted-Average
 
 
 
Stock options
 
Exercise
Price
 
Remaining
Contractual
Term (Years)
 
Aggregate
Intrinsic Value
(in millions)
Outstanding at December 31, 2010
19,142,209

 
$
33.28

 
 

 
 

Granted
3,467,254

 
38.02

 
 

 
 

Expired
(200,075
)
 
48.85

 
 

 
 

Forfeited
(387,284
)
 
33.16

 
 

 
 

Exercised
(2,307,890
)
 
25.59

 
 

 
 

Outstanding at December 31, 2011
19,714,214

 
34.86

 
5.94

 
 

Vested and expected to vest at December 31, 2011
19,242,454

 
34.88

 
5.89

 
$
156

Exercisable at December 31, 2011
11,238,882

 
35.52

 
4.36

 
93
Monte Carlo simulation valuation model assumptions
The Monte Carlo simulation valuation model requires various assumptions noted in the following table.
 
Years ended December 31,
 
2011
 
2010
 
2009
Equity awards
 
 
 
 
 
Grant date risk-free interest rate
1.2%
 
1.3%
 
1.3%
Grant date expected volatility
20.4%
 
21.6%
 
21.4%
Liability awards1
 
 
 
 
 
Expected volatility
15.9%
 
20.6%
 
21.9%
Risk-free interest rate:
 
 
 
 
 
2011 awards
0.3%
 
—%
 
—%
2010 awards
0.2%
 
0.6%
 
—%
2009 awards
—%
 
0.3%
 
1.1%
1 
The portion of performance shares classified as share-based liability awards are revalued at each reporting period.
Summary of nonvested performance shares
The following is a summary of the status of Edison International nonvested performance shares:
 
Equity Awards
 
Liability Awards
 
Shares
 
Weighted-Average
Grant Date
Fair Value
 
Shares
 
Weighted-Average
Fair Value
Nonvested at December 31, 2010
415,028

 
$
30.99

 
415,028

 
$
34.74

Granted
156,765

 
29.97

 
156,765

 
 

Forfeited1
(120,244
)
 
42.60

 
(120,244
)
 
 

Nonvested at December 31, 2011
451,549

 
27.92

 
451,549

 
29.61

1 
Includes performance shares that expired with zero value as performance targets were not met.
Summary of nonvested restricted stock units
The following is a summary of the status of Edison International nonvested restricted stock units:
 
Restricted
Stock Units
 
Weighted-Average
Grant Date
Fair Value
Nonvested at December 31, 2010
644,796

 
$
32.18

Granted
256,208

 
38.01

Forfeited
(27,813
)
 
32.19

Paid Out
(135,556
)
 
47.42

Nonvested at December 31, 2011
737,635

 
$
32.20
Schedule of supplemental data on stock based compensation
Supplemental Data on Stock Based Compensation
 
Years ended December 31,
(in millions, except per award amounts)
2011
 
2010
 
2009
Stock Based Compensation Expense1
 
 
 
 
 
Stock options
$
16

 
$
18

 
$
13

Performance shares
6

 
10

 
5

Restricted stock units
8

 
7

 
5

Other
7

 
9

 
10

Total stock based compensation expense
$
37

 
$
44

 
$
33

Income tax benefits related to stock compensation expense
$
15

 
$
17

 
$
13

Excess tax benefits2
13

 
8

 
9

Stock options
 
 
 
 
 
Weighted average grant date fair value per option granted
$
5.61

 
$
4.89

 
$
3.05

Fair value of options vested
18

 
18

 
14

Cash used to purchase shares to settle options
90

 
61

 
25

Cash from participants to exercise stock options
59

 
38

 
13

Value of options exercised
31

 
23

 
12

Tax benefits from options exercised
12

 
9

 
5

Performance Shares3 Classified as Equity Awards
 
 
 
 
 
Weighted average grant date fair value per share granted
$
29.97

 
$
32.25

 
$
21.42

Fair value of shares vested
4

 
4

 
1

Restricted Stock units
 
 
 
 
 
Values of shares settled
$
6

 
$
—

 
$
—

Tax benefits realized from settlement of awards
3

 
—

 
—

Weighted average grant date fair value per unit granted
38.01

 
32.12

 
25.21

1 
Reflected in "Operations and maintenance" on the consolidated statements of income.
2 
Reflected in "Settlements of stock based compensation – net" in the financing section of the consolidated statements of cash flows.
3 
There were no settlements of awards for performance shares in 2011, 2010 and 2009 as performance targets were not met.