Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2023

Summary of Significant Accounting Policies

Organization and Basis of Presentation

Organization and Basis of Presentation

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 decarbonization and energy solutions to commercial, institutional and industrial customers in North America and Europe. 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, SCE Recovery Funding LLC., of which SCE is the primary beneficiary. 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, 2022 (the "2022 Form 10-K"). This quarterly report should be read in conjunction with the financial statements and notes included in the 2022 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, 2022 financial statement data was derived from audited financial statements but does not include all disclosures required by GAAP. Certain prior period amounts have been conformed to the current period's presentation, including the separate presentation of common stock and preference stock dividends in SCE's consolidated statements of cash flows.

Cash, Cash Equivalents and Restricted Cash

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
	March 31,		December 31,		March 31,		December 31,
(in millions)	2023		2022		2023		2022
Money market funds	$	136	$	784	$	—	$	647

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:

	March 31,		December 31,
(in millions)	2023		2022
Edison International:
Cash and cash equivalents	$	836	$	914
Short-term restricted cash1		2		3
Total cash, cash equivalents and restricted cash	$	838	$	917

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

Allowance for Uncollectible Accounts

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.

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

	Three months ended							Three months ended
	March 31, 2023							March 31, 2022
(in millions)	Customers		All others		Total			Customers		All others		Total
Beginning balance	$	334	$	20	$	354	2	$	293	$	16	$	309
Current period provision for uncollectible accounts1		20		—		20			54		7		61
Write-offs, net of recoveries		(28)		(2)		(30)			(10)		(7)		(17)
Ending balance	$	326	$	18	$	344	2	$	337	$	16	$	353

1 For the three months ended March 31, 2023 and 2022, $14 million and $41 million of the costs were probable of recovery from customers and recorded as regulatory assets, respectively.

2 Approximately $21 million and $7 million of allowance for uncollectible accounts are included in "Other long-term assets" on SCE's consolidated balance sheets as of March 31, 2023 and December 31, 2022, respectively.

Earnings Per Share

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 March 31,
(in millions, except per-share amounts)	2023		2022
Basic earnings per share:
Net income attributable to common shareholders	$	310	$	84
Net income available to common shareholders	$	310	$	84
Weighted average common shares outstanding		383		381
Basic earnings per share	$	0.81	$	0.22
Diluted earnings per share:
Net income attributable to common shareholders	$	310	$	84
Net income available to common shareholders	$	310	$	84
Income impact of assumed conversions		1		—
Net income available to common shareholders and assumed conversions	$	311	$	84
Weighted average common shares outstanding		383		381
Incremental shares from assumed conversions		1		1
Adjusted weighted average shares – diluted		384		382
Diluted earnings per share	$	0.81	$	0.22

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 4,414,113 and 6,533,558 shares of common stock for the three months ended March 31, 2023 and 2022, respectively, were outstanding, but were not included in the computation of diluted earnings per share because the effect would have been antidilutive.

Revenue Recognition

Revenue Recognition

Revenue is recognized by Edison International and SCE when a performance obligation to transfer control of the promised goods is satisfied or when services are rendered to customers. This typically occurs when electricity is delivered to customers, which includes amounts for services rendered but unbilled at the end of a reporting period.

Regulatory Proceedings

FERC 2023 Formula Rate Update

In November 2022, SCE filed its 2023 annual update with the FERC with the proposed rates effective January 1, 2023, subject to settlement procedures and refund. Pending resolution of the FERC formula rate proceedings, SCE recognized revenue in the first quarter of 2023 based on the FERC 2023 annual update rate, subject to refund.