Revenue

3 Months Ended

Mar. 31, 2022

Revenue

Revenue

Note 7.Revenue

SCE's revenue is disaggregated by two revenue sources:

● Earning activities – representing revenue authorized by the CPUC and FERC, which is intended to provide SCE a reasonable opportunity to recover its costs and earn a return on its net investment in generation, transmission and distribution assets. The annual revenue requirements are comprised of authorized operation and maintenance costs, depreciation, taxes and a return consistent with the capital structure. Also, included in earnings activities are revenue or penalties related to incentive mechanisms, other operating revenue, and regulatory charges or disallowances.

● Cost-recovery activities – representing CPUC- and FERC- authorized balancing accounts, which allow for recovery of specific project or program costs, subject to reasonableness review or compliance with upfront standards, as well as non-bypassable rates collected for SCE Recovery Funding LLC. Cost-recovery activities include rates which provide recovery, subject to reasonableness review of, among other things, fuel costs, purchased power costs, public purpose related-program costs (including energy efficiency and demand-side management programs), certain operation and maintenance expenses, and repayment of bonds and financing costs of SCE Recovery Funding LLC. SCE earns no return on these activities.

The following table is a summary of SCE's revenue:

	Three months ended March 31, 2022						Three months ended March 31, 2021
			Cost-						Cost-
	Earning		Recovery		Total		Earning		Recovery		Total
(in millions)	Activities		Activities		Consolidated		Activities		Activities		Consolidated
Revenue from contracts with customers1,2	$	1,985	$	1,375	$	3,360	$	1,704	$	1,195	$	2,899
Alternative revenue programs and other operating revenue3		282		319		601		63		(9)		54
Total operating revenue	$	2,267	$	1,694	$	3,961	$	1,767	$	1,186	$	2,953

1 In the absence of a decision on SCE’s August 2021 cost of capital application, SCE is continuing to recognize revenue based on its pre-2022 cost of capital, subject to refund. In the absence of a 2021 GRC decision, SCE recognized CPUC revenue in the first quarter of 2021 based on the 2020 authorized revenue requirement until SCE received the final 2021 GRC decision in the third quarter of 2021.

2 At March 31, 2022 and December 31, 2021, SCE's receivables related to contracts from customers were $2.2 billion and $2.3 billion, respectively, which include accrued unbilled revenue of $743 million and $794 million, respectively.

3 Includes differences between amounts billed and authorized levels for both the CPUC and FERC.

Deferred Revenue

In July 2021, Morongo Transmission LLC ("Morongo") paid SCE $400 million for the use of a portion of the West of Devers transmission line transfer capability for a period of 30 years. SCE recognized the entire proceeds as deferred revenue and will amortize deferred revenue from the use of the transfer capability over the 30-year term on a straight-line basis resulting in revenue of $13 million per year. As of March 31, 2022, the deferred revenue is $391 million, of which $13 million and $378 million are included in "Other current liabilities" and "Other deferred credits and other long-term liabilities," respectively, on SCE's consolidated balance sheets. For the three months ended March 31, 2022, SCE has recognized revenue of $3 million.