XML 36 R25.htm IDEA: XBRL DOCUMENT

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2022

Summary of Significant Accounting Policies

Edison International is the ultimate parent holding company of Southern California Edison Company ("SCE") and Edison Energy, LLC ("Edison Energy Group"). SCE is an investor-owned public utility primarily engaged in the business of supplying and delivering electricity to an approximately 50,000 square mile area of Southern California. Edison Energy Group is an indirect wholly-owned subsidiary of Edison International and a holding company for Edison Energy, LLC ("Edison Energy") which is engaged in the competitive business of providing integrated decarbonization and energy solutions to commercial, institutional and industrial customers. Edison Energy's business activities are currently not material to report as a separate business segment. These combined notes to the consolidated financial statements apply to both Edison International and SCE unless otherwise described. Edison International's consolidated financial statements include the accounts of Edison International, SCE, and other wholly owned and controlled subsidiaries. References to Edison International refer to the consolidated group of Edison International and its subsidiaries. References to "Edison International Parent and Other" refer to Edison International Parent and its competitive subsidiaries and "Edison International Parent" refer to Edison International on a stand-alone basis, not consolidated with its subsidiaries. SCE's consolidated financial statements include the accounts of SCE, its wholly owned and controlled subsidiaries and a variable interest entity of which SCE is the primary beneficiary, SCE Recovery Funding LLC. All intercompany transactions have been eliminated from the consolidated financial statements.

Edison International's and SCE's significant accounting policies were described in the "Notes to Consolidated Financial Statements" included in Edison International's and SCE's combined Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 Form 10-K"). This quarterly report should be read in conjunction with the financial statements and notes included in the 2021 Form 10-K.

In the opinion of management, all adjustments, consisting only of adjustments of a normal recurring nature, have been made that are necessary to fairly state the consolidated financial position, results of operations, and cash flows in accordance with accounting principles generally accepted in the United States ("GAAP") for the periods covered by this quarterly report on Form 10-Q. The results of operations for the interim periods presented are not necessarily indicative of the operating results for the full year.

The December 31, 2021 financial statement data was derived from audited financial statements but does not include all disclosures required by GAAP.

Cash, Cash Equivalents and Restricted Cash

Cash equivalents consist of investments in money market funds. Generally, the carrying value of cash equivalents equals the fair value, as these investments have original maturities of three months or less. The cash equivalents were as follows:


	Edison International				SCE
	September 30,		December 31,		September 30,		December 31,
(in millions)	2022		2021		2022		2021
Money market funds	$	139	$	329	$	4	$	230

Cash is temporarily invested until required for check clearing. Checks issued, but not yet paid by the financial institution, are reclassified from cash to accounts payable at the end of each reporting period.

The following table sets forth the cash, cash equivalents and restricted cash included in the consolidated statements of cash flows:


	September 30,		December 31,
(in millions)	2022		2021
Edison International:
Cash and cash equivalents	$	232	$	390
Short-term restricted cash¹		1		4
Total cash, cash equivalents and restricted cash	$	233	$	394
SCE:
Cash and cash equivalents	$	90	$	279
Short-term restricted cash¹		1		1
Total cash, cash equivalents and restricted cash	$	91	$	280

1	Reflected in "Other current assets" on Edison International's and SCE's consolidated balance sheets.

Allowance for Uncollectible Accounts

The allowance for uncollectible accounts is recorded based on SCE's estimate of expected credit losses and adjusted over the life of the receivables as needed. Since the customer base of SCE is concentrated in Southern California and exposes SCE to a homogeneous set of economic conditions, the allowance is measured on a collective basis on the historical amounts written-off, assessment of customer collectibility and current economic trends, including unemployment rates and any likelihood of recession for the region. At September 30, 2022, this included the estimated impacts of the COVID-19 pandemic.

The following table sets forth the changes in allowance for uncollectible accounts for SCE:


	Three months ended							Three months ended
	September 30, 2022							September 30, 2021
(in millions)	Customers			All others		Total		Customers			All others		Total
Beginning balance	$	364	$	17	$	381		$	254	$	16	$	270
Plus: current period provision for uncollectible accounts
Included in operation and maintenance expenses in earning activities¹		12		2		14			9		4		13
Included in operation and maintenance expenses in cost-recovery activities²		57		—		57			52		—		52
Deferred to regulatory memorandum accounts		—		—		—			7		—		7
Less: write-offs, net of recoveries		24		2		26			1		3		4
Ending balance	$	409	$	17	$	426	³	$	321	$	17	$	338


	Nine months ended							Nine months ended
		September 30, 2022						September 30, 2021
(in millions)	Customers			All others		Total		Customers			All others		Total
Beginning balance	$	293	$	16	$	309	³	$	175	$	13	$	188
Plus: current period provision for uncollectible accounts
Included in operation and maintenance expenses in earning activities¹		45		11		56			27		11		38
Included in operation and maintenance expenses in cost-recovery activities²		112		—		112			112		—		112
Deferred to regulatory memorandum accounts		3		—		3			13		—		13
Less: write-offs, net of recoveries		44		10		54			6		7		13
Ending balance	$	409	$	17	$	426	³	$	321	$	17	$	338

1	Earning activities is one of SCE's disaggregated revenue sources. See Note 7 for further details.

2	Cost-recovery activities is one of SCE's disaggregated revenue sources. See Note 7 for further details. This portion of costs from the allowance for uncollectible expenses is recovered through the residential uncollectibles balancing account.

3	Approximately $35 million and $116 million of allowance for uncollectible accounts are included in long-term "Receivables" on Edison International's and SCE's consolidated balance sheets as of September 30, 2022 and December 31, 2021, respectively.

Earnings Per Share

Edison International computes earnings per common share ("EPS") using the two-class method, which is an earnings allocation formula that determines EPS for each class of common stock and participating security. Edison International's participating securities are stock-based compensation awards, payable in common shares, which earn dividend equivalents on an equal basis with common shares once the awards are vested. See Note 13 for further information.

EPS attributable to Edison International common shareholders was computed as follows:


	Three months ended September 30,				Nine months ended September 30,
(in millions, except per-share amounts)	2022		2021		2022		2021
Basic earnings per share:
Net (loss) income attributable to common shareholders	$	(128)	$	(341)	$	197	$	236
Net (loss) income available to common shareholders	$	(128)	$	(341)	$	197	$	236
Weighted average common shares outstanding		382		380		381		380
Basic (loss) earnings per share	$	(0.33)	$	(0.90)	$	0.52	$	0.62
Diluted (loss) earnings per share:
Net (loss) income attributable to common shareholders	$	(128)	$	(341)	$	197	$	236
Net (loss) income available to common shareholders	$	(128)	$	(341)	$	197	$	236
Net (loss) income available to common shareholders and assumed conversions	$	(128)	$	(341)	$	197	$	236
Weighted average common shares outstanding		382		380		381		380
Incremental shares from assumed conversions		1		—		1		—
Adjusted weighted average shares – diluted		383		380		382		380
Diluted (loss) earnings per share	$	(0.33)	$	(0.90)	$	0.52	$	0.62

In addition to the participating securities discussed above, Edison International also may award stock options, which are payable in common shares and are included in the diluted earnings per share calculation. Stock option awards to purchase 5,089,280 and 11,315,504 shares of common stock for the three months ended September 30, 2022 and 2021, respectively, and 5,204,369 and 11,351,651 shares of common stock for the nine months ended September 30, 2022 and 2021, respectively were outstanding, but were not included in the computation of diluted earnings per share because the effect would have been antidilutive.

Impairment of Long-Lived Assets

In June 2022, the CPUC issued a decision in track 3 of SCE's 2021 GRC proceeding. As a result of the decision, SCE recorded a $17 million impairment of utility property, plant and equipment which was disallowed by the CPUC, primarily related to the costs associated with vegetation management software purchased by SCE.

In June 2022, SCE and The Utility Reform Network filed a joint motion for CPUC approval of a settlement agreement for SCE's Customer Service Re-platform ("CSRP") proceeding filed in July 2021 for expenditures incurred through April 2021. As a result of the settlement agreement, SCE recorded a $47 million impairment of property, plant and equipment.

New Accounting Guidance

Accounting Guidance Adopted

In November 2021, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update to require business entities that account for transactions with a government by analogizing to a grant or contribution accounting model to make certain annual disclosures. Edison International and SCE have adopted this standard on January 1, 2022 using the prospective adoption approach. The adoption of this standard did not have a material impact on Edison International's and SCE's annual disclosure.

Subsequent Event

In October 2022, Edison Energy acquired an international energy and sustainability consultancy based in the United Kingdom for an initial cash payment of $18 million. Under the terms of the acquisition agreement, the sellers will be entitled to up to 14 million British pounds ($15 million U.S. dollars at September 30, 2022) in additional consideration if certain financial thresholds are achieved after 3 years.