Revenue

9 Months Ended

Sep. 30, 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 September 30, 2022						Three months ended September 30, 2021
			Cost-						Cost-
	Earning		Recovery		Total		Earning		Recovery		Total
(in millions)	Activities		Activities		Consolidated		Activities		Activities		Consolidated
Revenue from contracts with customers1,2	$	2,350	$	3,603	$	5,953	$	2,260	$	2,804	$	5,064
Alternative revenue programs and other operating revenue3		100		(836)		(736)		135		94		229
Total operating revenue	$	2,450	$	2,767	$	5,217	$	2,395	$	2,898	$	5,293

	Nine months ended September 30, 2022						Nine months ended September 30, 2021
			Cost-						Cost-
	Earning		Recovery		Total		Earning		Recovery		Total
(in millions)	Activities		Activities		Consolidated		Activities		Activities		Consolidated
Revenues from contracts with customers1,2	$	6,313	$	7,000	$	13,313	$	5,667	$	5,422	$	11,089
Alternative revenue programs and other operating revenue3		568		(707)		(139)		325		138		463
Total operating revenue	$	6,881	$	6,293	$	13,174	$	5,992	$	5,560	$	11,552

1 The revenue requirements in the 2021 GRC final decision are retroactive to January 1, 2021. SCE recorded the impact of the 2021 GRC decision in the third quarter of 2021, including $404 million related to the six-month period ended June 30, 2021.

2 At September 30, 2022 and December 31, 2021, SCE's receivables related to contracts from customers were $3.5 billion and $2.3 billion, respectively, which include accrued unbilled revenue of $1.3 billion 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 is amortizing 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 September 30, 2022, the deferred revenue is $384 million, of which $13 million and $371 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 September 30, 2022 and September 30, 2021, SCE has recognized revenue of $3 million and $2 million, respectively. For the nine months ended September 30, 2022 and September 30, 2021, SCE has recognized revenue of $10 million and $2 million, respectively.