10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to

Commission File Number 1-9936

EDISON INTERNATIONAL

(Exact name of registrant as specified in its charter)

California	95-4137452
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2244 Walnut Grove Avenue (P. O. Box 976) Rosemead, California	91770
(Address of principal executive offices)	(Zip Code)

(626) 302-2222

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  x Accelerated filer  ¨ Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class	Outstanding at May 6, 2008
Common Stock, no par value	325,811,206

EDISON INTERNATIONAL

INDEX

		Page No.
Part I. Financial Information
Item 1.	Financial Statements:	1
	Consolidated Statements of Income – Three Months Ended March 31, 2008 and 2007	1
	Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2008 and 2007	2
	Consolidated Balance Sheets – March 31, 2008 and December 31, 2007	3
	Consolidated Statements of Cash Flows – Three Months Ended March 31, 2008 and 2007	5
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	83
Item 4.	Controls and Procedures	83
Part II. Other Information
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	84
Item 6.	Exhibits	85
Signature		86

GLOSSARY

When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below.

AB	Assembly Bill
AFUDC	allowance for funds used during construction
APS	Arizona Public Service Company
ARO(s)	asset retirement obligation(s)
Btu	British thermal units
CAA	Clean Air Act
CARB	California Air Resources Board
Commonwealth Edison	Commonwealth Edison Company
CDWR	California Department of Water Resources
CEC	California Energy Commission
CONE	cost of new entry
CPSD	Consumer Protection and Safety Division
CPUC	California Public Utilities Commission
CRRs	congestion revenue rights
D.C. District Court	U.S. District Court for the District of Columbia
DOE	United States Department of Energy
DOJ	Department of Justice
DPV2	Devers-Palo Verde II
DWP	Los Angeles Department of Water & Power
EITF	Emerging Issues Task Force
EME	Edison Mission Energy
EME Homer City	EME Homer City Generation L.P.
EMG	Edison Mission Group Inc.
EMMT	Edison Mission Marketing & Trading, Inc.
EPS	earnings per share
ERRA	energy resource recovery account
Exelon Generation	Exelon Generation Company LLC
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
FGIC	Financial Guarantee Insurance Company
FIN 39-1	Financial Accounting Standards Board Interpretation No. 39-1, Amendment of FASB Interpretation No. 39
FIN 48	Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FAS 109
FTRs	firm transmission rights
GAAP	general accepted accounting principles
GHG	greenhouse gas
GRC	General Rate Case
IRS	Internal Revenue Service
ISO	California Independent System Operator
kWh(s)	kilowatt-hour(s)
MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations
MEHC	Mission Energy Holding Company
Midway-Sunset	Midway-Sunset Cogeneration Company

GLOSSARY (Continued)

Midwest Generation	Midwest Generation, LLC
MMBtu	million British thermal units
Mohave	Mohave Generating Station
Moody’s	Moody’s Investors Service
MRTU	Market Redesign Technology Upgrade
MW	megawatts
MWh	megawatt-hours
NOV	notice of violation
NOx	nitrogen oxide
NRC	Nuclear Regulatory Commission
NYISO	New York Independent System Operator
Palo Verde	Palo Verde Nuclear Generating Station
PBOP(s)	postretirement benefits other than pension(s)
PBR	performance-based ratemaking
PG&E	Pacific Gas & Electric Company
PJM	PJM Interconnection, LLC
POD	Presiding Officer’s Decision
PRB	Powder River Basin
PX	California Power Exchange
QF(s)	qualifying facility(ies)
RICO	Racketeer Influenced and Corrupt Organization
ROE	return on equity
RPM	reliability pricing model
S&P	Standard & Poor’s
San Onofre	San Onofre Nuclear Generating Station
SCE	Southern California Edison Company
SDG&E	San Diego Gas & Electric
SFAS	Statement of Financial Accounting Standards issued by the FASB
SFAS No. 133	Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities
SFAS No. 141(R)	Statement of Financial Accounting Standards No. 141(R), Business Combinations
SFAS No. 157	Statement of Financial Accounting Standards No. 157, Fair Value Measurements
SFAS No. 158	Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans
SFAS No. 159	Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities
SFAS No. 160	Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements
SFAS No. 161	Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133”
SIP(s)	State Implementation Plan(s)
SO2	sulfur dioxide
TURN	The Utility Reform Network
US EPA	United States Environmental Protection Agency
VIE(s)	variable interest entity(ies)

EDISON INTERNATIONAL

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended March 31,
In millions, except per-share amounts	2008			2007
	(Unaudited)
Electric utility	$	2,349		$	2,222
Nonutility power generation		719			672
Financial services and other		15			18
Total operating revenue		3,083			2,912
Fuel		537			486
Purchased power		491			317
Provisions for regulatory adjustment clauses – net		172			289
Other operation and maintenance		974			880
Depreciation, decommissioning and amortization		298			313
Gain on buyout of contract and sale of assets		(17	)		—
Total operating expenses		2,455			2,285
Operating income		628			627
Interest and dividend income		14			39
Equity in income from partnerships and unconsolidated subsidiaries – net		2			17
Other nonoperating income		25			17
Interest expense – net of amounts capitalized		(171	)		(198	)
Other nonoperating deductions		(12	)		(11	)
Income from continuing operations before tax and minority interest		486			491
Income tax expense		161			129
Dividends on preferred and preference stock of utility not subject to mandatory redemption		13			13
Minority interest		8			19
Income from continuing operations		304			330
Income (loss) from discontinued operations – net of tax		(5	)		3
Net income	$	299		$	333
Weighted-average shares of common stock outstanding		326			326
Basic earnings (loss) per common share:
Continuing operations	$	0.92		$	1.00
Discontinued operations		(0.01	)		0.01
Total	$	0.91		$	1.01
Weighted-average shares, including effect of dilutive securities		329			330
Diluted earnings (loss) per common share:
Continuing operations	$	0.92		$	0.99
Discontinued operations		(0.01	)		0.01
Total	$	0.91		$	1.00
Dividends declared per common share	$	0.305		$	0.29

The accompanying notes are an integral part of these consolidated financial statements.

1

EDISON INTERNATIONAL

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended March 31,
In millions	2008			2007
	(Unaudited)
Net income	$	299		$	333
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments – net		(3	)		(2	)
Pension and postretirement benefits other than pensions:
Amortization of net gain (loss) included in expense – net		—			1
Unrealized gains (losses) on cash flow hedges:
Other unrealized losses arising during the period – net of income tax benefit of $(92) and $(115) for 2008 and 2007, respectively		(138	)		(169	)
Reclassification adjustment for gain (loss) included in net income – net of income tax expense (benefit) of $(6) and $12 for 2008 and 2007, respectively		(9	)		16
Other comprehensive loss		(150	)		(154	)
Comprehensive income	$	149		$	179

The accompanying notes are an integral part of these consolidated financial statements.

2

EDISON INTERNATIONAL

CONSOLIDATED BALANCE SHEETS

In millions	March 31, 2008			December 31, 2007
		(Unaudited	)
ASSETS
Cash and equivalents	$	1,545		$	1,441
Short-term investments		35			81
Receivables, less allowance of $34 for uncollectible accounts at each date		1,038			1,033
Accrued unbilled revenue		342			370
Fuel inventory		120			116
Materials and supplies		311			316
Derivative assets		192			109
Restricted cash		3			3
Margin and collateral deposits		147			121
Regulatory assets		128			197
Accumulated deferred income taxes – net		218			167
Other current assets		339			290
Total current assets		4,418			4,244
Nonutility property – less accumulated provision for depreciation of $1,822 and $1,765 at respective dates		4,951			4,906
Nuclear decommissioning trusts		3,195			3,378
Investments in partnerships and unconsolidated subsidiaries		260			272
Investments in leveraged leases		2,486			2,473
Other investments		108			96
Total investments and other assets		11,000			11,125
Utility plant, at original cost:
Transmission and distribution		19,158			18,940
Generation		1,795			1,767
Accumulated provision for depreciation		(5,306	)		(5,174	)
Construction work in progress		1,820			1,693
Nuclear fuel, at amortized cost		231			177
Total utility plant		17,698			17,403
Derivative assets		135			122
Restricted cash		45			48
Rent payments in excess of levelized rent expense under plant operating leases		765			716
Regulatory assets		2,726			2,721
Other long-term assets		1,164			1,144
Total long-term assets		4,835			4,751
Total assets	$	37,951		$	37,523

The accompanying notes are an integral part of these consolidated financial statements.

3

EDISON INTERNATIONAL

CONSOLIDATED BALANCE SHEETS

In millions, except share amounts	March 31, 2008			December 31, 2007
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Short-term debt	$	400		$	500
Long-term debt due within one year		164			18
Accounts payable		807			979
Accrued taxes		119			49
Accrued interest		223			160
Counterparty collateral		48			42
Customer deposits		221			219
Book overdrafts		192			212
Derivative liabilities		203			125
Regulatory liabilities		1,201			1,019
Other current liabilities		814			933
Total current liabilities		4,392			4,256
Long-term debt		9,325			9,016
Accumulated deferred income taxes – net		5,201			5,196
Accumulated deferred investment tax credits		112			114
Customer advances		149			155
Derivative liabilities		111			101
Power-purchase contracts		22			22
Accumulated provision for pensions and benefits		1,133			1,089
Asset retirement obligations		2,925			2,892
Regulatory liabilities		3,256			3,433
Other deferred credits and other long-term liabilities		1,654			1,595
Total deferred credits and other liabilities		14,563			14,597
Total liabilities		28,280			27,869
Commitments and contingencies (Note 5)
Minority interest		282			295
Preferred and preference stock of utility not subject to mandatory redemption		907			915
Common stock, no par value (325,811,206 shares outstanding at each date)		2,238			2,225
Accumulated other comprehensive loss		(242	)		(92	)
Retained earnings		6,486			6,311
Total common shareholders’ equity		8,482			8,444
Total liabilities and shareholders’ equity	$	37,951		$	37,523

The accompanying notes are an integral part of these consolidated financial statements.

4

EDISON INTERNATIONAL

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended March 31,
In millions	2008			2007
	(Unaudited)
Cash flows from operating activities:
Net income	$	299		$	333
Less: Income (loss) from discontinued operations		(5	)		3
Income from continuing operations		304			330
Adjustments to reconcile to net cash provided by operating activities:
Depreciation, decommissioning and amortization		298			313
Realized loss on impairment of nuclear decommissioning trusts		45			8
Other amortization		27			31
Gain on buyout of contract and sale of assets		(17	)		—
Stock based compensation		6			6
Minority interest		8			19
Deferred income taxes and investment tax credits		31			(158	)
Equity in income from partnerships and unconsolidated subsidiaries		(2	)		(16	)
Income from leveraged leases		(13	)		(16	)
Regulatory assets		77			173
Regulatory liabilities		186			152
Levelized rent expense		(48	)		(49	)
Derivative assets		(96	)		(105	)
Derivative liabilities		(162	)		(201	)
Other assets		(20	)		(14	)
Other liabilities		92			226
Margin and collateral deposits – net of collateral received		(21	)		(7	)
Receivables and accrued unbilled revenue		22			77
Inventory and other current assets		(35	)		(90	)
Book overdraft		(20	)		24
Accrued interest and taxes		133			266
Accounts payable and other current liabilities		(215	)		(238	)
Distributions and dividends from unconsolidated entities		(2	)		(1	)
Operating cash flows from discontinued operations		(5	)		3
Net cash provided by operating activities		573			733
Cash flows from financing activities:
Long-term debt issued		677			30
Long-term debt issuance costs		(9	)		(1	)
Long-term debt repaid		(7	)		(95	)
Bonds repurchased		(212	)		—
Preference stock redeemed		(7	)		—
Rate reduction notes repaid		—			(62	)
Short-term debt financing – net		(100	)		120
Shares purchased for stock-based compensation		(24	)		(106	)
Proceeds from stock option exercises		7			39
Excess tax benefits related to stock option exercises		6			17
Dividends to minority shareholders		(17	)		(24	)
Dividends paid		(99	)		(94	)
Net cash provided (used) by financing activities	$	215		$	(176	)

The accompanying notes are an integral part of these consolidated financial statements.

5

EDISON INTERNATIONAL

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended March 31,
In millions	2008			2007
	(Unaudited)
Cash flows from investing activities:
Capital expenditures	$	(705	)	$	(691	)
Purchase of interest of acquired companies		—			(4	)
Proceeds from sale of property and interests in projects		2			—
Proceeds from nuclear decommissioning trust sales		829			1,029
Purchases of nuclear decommissioning trust investments and other		(859	)		(1,062	)
Proceeds from partnerships and unconsolidated subsidiaries, net of investment		9			15
Maturities and sales of short-term investments		47			1,422
Purchase of short-term investments		(1	)		(1,339	)
Restricted cash		2			38
Customer advances for construction and other investments		(8	)		(59	)
Net cash used by investing activities		(684	)		(651	)
Net increase (decrease) in cash and equivalents		104			(94	)
Cash and equivalents, beginning of period		1,441			1,795
Cash and equivalents, end of period	$	1,545		$	1,701

The accompanying notes are an integral part of these consolidated financial statements.

6

EDISON INTERNATIONAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Management’s Statement

In the opinion of management, all adjustments, including recurring accruals, 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 of America for the periods covered by this quarterly report on Form 10-Q. The results of operations for the three months ended March 31, 2008 are not necessarily indicative of the operating results for the full year.

This quarterly report should be read in conjunction with Edison International’s Annual Report to Shareholders incorporated by reference into Edison International’s Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission.

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

Edison International’s significant accounting policies were described in Note 1 of “Notes to Consolidated Financial Statements” included in its 2007 Annual Report on Form 10-K. Edison International follows the same accounting policies for interim reporting purposes, with the exception of accounting principles adopted as of January 1, 2008 as discussed below in “Margin and Collateral Deposits” and “New Accounting Pronouncements.”

Certain prior-year reclassifications have been made to conform to the current year financial statement presentation mostly pertaining to the adoption of FIN No. 39-1. Except as indicated, amounts presented in the Notes to the Consolidated Financial Statements relate to continuing operations.

7

Earnings Per Common Share

Edison International computes 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, including stock options, performance shares and restricted stock units, which earn dividend equivalents on an equal basis with common shares. Stock options awarded during the period 2003 through 2006 received dividend equivalents. Stock options awarded prior to 2002 and after 2006 were granted without a dividend equivalent feature. As a result of meeting a performance trigger, the options granted in 1998 and 1999 began earning dividend equivalents in 2006. EPS was computed as follows:

	Three Months Ended March 31,
In millions	2008			2007
	(Unaudited)
Basic earnings per share - continuing operations:
Income from continuing operations	$	304		$	330
Gain on redemption of preferred stock		2			—
Participating securities dividends		(5	)		(5	)
Income from continuing operations available to common shareholders	$	301		$	325
Weighted average common shares outstanding		326			326
Basic earnings per share - continuing operations	$	0.92		$	1.00
Diluted earnings per share - continuing operations:
Income from continuing operations available to common shareholders	$	301		$	325
Income impact of assumed conversions		2			3
Income from continuing operations available to common shareholders and assumed conversions	$	303		$	328
Weighted average common shares outstanding		326			326
Incremental shares from assumed conversions		3			4
Adjusted weighted average shares - diluted		329			330
Diluted earnings per share - continuing operations	$	0.92		$	0.99

Stock-based compensation awards to purchase 83,901 and 1,731,108 shares of common stock for the three months ended March 31, 2008 and 2007, respectively, were outstanding, but were not included in the computation of diluted earnings per share because the exercise price of the awards was greater than the average market price of the common shares; and therefore, the effect would have been antidilutive.

Margin and Collateral Deposits

Margin and collateral deposits include margin requirements and cash deposited with and received from counterparties and brokers as credit support under energy contracts. The amount of margin and collateral deposits varies based on changes in the value of the agreements. See “New Accounting Pronouncements” below for a discussion of the adoption of FIN No. 39-1. In accordance with FIN No. 39-1, Edison International presents a portion of its margin and cash collateral deposits net with its derivative positions on its consolidated balance sheets. Amounts recognized for cash collateral provided to others that have been offset against net derivative liabilities totaled $134 million and $ 38 million at March 31, 2008 and December 31, 2007, respectively. Amounts recognized for cash collateral received from others that have been offset against net derivative assets totaled $10 million at March 31, 2008.

8

New Accounting Pronouncements

Accounting Pronouncements Adopted

In April 2007, the FASB issued FIN No. 39-1. This pronouncement permits companies to offset fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) against fair value amounts recognized for derivative instruments executed with the same counterparty under a master netting arrangement. In addition, upon the adoption, companies were permitted to change their accounting policy to offset or not offset fair value amounts recognized for derivative instruments under master netting agreements. Edison International adopted FIN No. 39-1 effective January 1, 2008. The adoption resulted in netting a portion of margin and cash collateral deposits with derivative positions on Edison International’s consolidated balance sheets, but had no impact on its consolidated statements of income. The consolidated balance sheet at December 31, 2007 has been retroactively restated for the change, which resulted in a decrease in net assets (margin and collateral deposits) of $38 million. The consolidated statements of cash flows for the three months ended March 31, 2007 has been retroactively restated to reflect the balance sheet changes, which had no impact on total operating cash flows from continuing operations.

In February 2007, the FASB issued SFAS No. 159, which provides an option to report eligible financial assets and liabilities at fair value, with changes in fair value recognized in earnings. Edison International adopted this pronouncement effective January 1, 2008. The adoption had no impact because Edison International did not make an optional election to report additional financial assets and liabilities at fair value.

In September 2006, the FASB issued SFAS No. 157, which clarifies the definition of fair value, establishes a framework for measuring fair value and expands the disclosures on fair value measurements. Edison International adopted SFAS No. 157 effective January 1, 2008. The adoption did not result in any retrospective adjustments to its consolidated financial statements. The accounting requirements for employers’ pension and other postretirement benefit plans are effective at the end of 2008, which is the next measurement date for these benefit plans. The effective date will be January 1, 2009 for asset retirement obligations and other nonfinancial assets and liabilities which are measured or disclosed on a non-recurring basis. For further discussion, see Note 8.

Accounting Pronouncements Not Yet Adopted

In December 2007, the FASB issued SFAS No. 141(R), which establishes principles and requirements for how the acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at the acquisition date fair value. SFAS No. 141(R) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after fiscal years beginning on or after January 1, 2009. Early adoption is not permitted.

In December 2007, the FASB issued SFAS No. 160, which requires an entity to present minority interest that reflects the ownership interests in subsidiaries held by parties other than the entity, within the equity section but separate from the entity’s equity in the consolidated financial statements. It also requires the amount of consolidated net income attributable to the parent and to the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of income; changes in ownership interest be accounted for similarly as equity transactions; and, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary and the gain or loss on the deconsolidation of the subsidiary be measured at fair value. Edison International will adopt SFAS No. 160 on January 1, 2009. In accordance with this standard, Edison International will reclassify minority interest to a component of shareholder’s equity (at March 31, 2008 this amount was $282 million).

In March 2008, the FASB issued SFAS No. 161, which requires additional disclosures related to derivative instruments, including how and why an entity uses derivative instruments, how derivative instruments and related

9

hedged items are accounted for and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for fiscal years beginning after November 15, 2008, with early adoption permitted. Edison International will adopt SFAS No. 161 in the first quarter of 2009. SFAS No. 161 will impact disclosures only and will not have an impact on Edison International’s consolidated results of operations, financial condition or cash flows.

Property and Plant

Utility Plant

Utility plant additions, including replacements and betterments, are capitalized. Such costs include direct material and labor, construction overhead, a portion of administrative and general costs capitalized at a rate authorized by the CPUC, and AFUDC. AFUDC represents the estimated cost of debt and equity funds that finance utility-plant construction. Currently, AFUDC debt and equity is capitalized during plant construction and reported in interest expense and other nonoperating income, respectively. AFUDC is recovered in rates through depreciation expense over the useful life of the related asset.

On November 26, 2007, the FERC issued an order granting incentives on three of SCE’s largest proposed transmission projects, DPV2, Tehachapi Transmission Project (“Tehachapi”), and Rancho Vista Substation Project (“Rancho Vista”). The order permits SCE to include in rate base 100% of prudently-incurred capital expenditures during construction of all three projects. On February 29, 2008, the FERC approved SCE’s revision to its Transmission Owner Tariff to collect 100% of construction work in progress (CWIP) for these projects in rate base and earn a return on equity, rather than capitalizing AFUDC. SCE implemented the CWIP rate, subject to refund, on March 1, 2008. For further discussion, see “FERC Transmission Incentives” in Note 5.

Related Party Transactions

During the first quarter of 2008, a subsidiary of EME was awarded, through a competitive bidding process, a ten-year power sales contract with SCE for the output of a 479 MW gas-peaking facility located in the City of Industry, California, which is referred to as the Walnut Creek project. The power sales agreement is subject to approval of the CPUC which SCE requested on April 4, 2008. CPUC approval is expected to be granted by late 2008. As an affiliate transaction, the contract is also subject to FERC approval, which was requested on May 2, 2008. Deliveries under the power sales agreement are expected to commence in 2013.

Short-term Investments

At March 31, 2008 and December 31, 2007, Edison International classified all marketable debt securities as held-to-maturity. The securities were carried at amortized cost plus accrued interest which approximated their fair value. Gross unrealized holding gains and losses were not material.

Edison International’s held-to-maturity securities, which all mature within one year, consisted of the following:

In millions	March 31, 2008		December 31, 2007
	(Unaudited	)
Commercial paper	$   3		$ 32
Certificates of deposit	30		41
Treasury bills	2		7
Corporate bonds	—		1
Total	$ 35		$ 81

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Note 2. Liabilities and Lines of Credit

Long-Term Debt

In January 2008, SCE issued $600 million of 5.95% first and refunding mortgage bonds due in 2038. The proceeds were used to repay SCE’s outstanding commercial paper of approximately $426 million and for general corporate purposes.

The interest rates on one issue of SCE’s pollution control bonds insured by FGIC, totaling $249 million, were reset every 35 days through an auction process. Due to a loss of confidence in the creditworthiness of the bond insurers, there has been a significant reduction in market liquidity for auction rate bonds and interest rates on these bonds have risen. Consequently, SCE purchased in the secondary market $37 million of its auction rate bonds in December 2007. In the first three months of 2008, SCE purchased the remaining $212 million of its auction rate bonds, converted the issue to a variable rate mode, and terminated the FGIC insurance policy. The bonds remain outstanding and have not been retired or cancelled.

Short-Term Debt

SCE’s short-term debt is generally used to finance fuel inventories, balancing account undercollections and general, temporary cash requirements including power-purchase payments. At March 31, 2008, the outstanding short-term debt was $400 million at a weighted-average interest rate of 3.36%. SCE’s short-term debt is supported by a $2.5 billion credit line. See below in “Credit Agreement Amendments.”

Credit Agreement Amendments

On March 12, 2008, both Edison International and SCE amended their existing credit facilities, extending the maturities to February 2013 while retaining existing borrowing costs as specified in the facilities. The amendments also provide four extension options which, if all exercised, will result in final terminations of February 2017. At March 31, 2008, SCE’s $2.5 billion credit facility supported $217 million in letters of credit and $400 million of short-term debt outstanding, leaving $1.88 billion available for liquidity purposes. At March 31, 2008, all of Edison International’s (parent) $1.5 billion credit facility was available for liquidity purposes.

Note 3. Income Taxes

Edison International’s composite federal and state statutory income tax rate was approximately 40% (net of the federal benefit for state income taxes) for all periods presented. Edison International’s effective tax rate from continuing operations was 35% for the three months ended March 31, 2008, as compared to 28% for the respective period in 2007. The increased effective tax rate was caused primarily by reductions made to the income tax reserve during the first quarter of 2007 to reflect progress in an administrative appeals process with the IRS related to SCE’s income tax treatment of costs associated with environmental remediation.

Accounting for Uncertainty in Income Taxes

Pursuant to the requirements of FIN 48, Edison International records tax reserves for uncertain tax return positions taken or expected to be taken on tax returns. Edison International also has filed affirmative tax claims related to uncertain tax positions, which, if accepted, could result in refunds of taxes paid or additional tax benefits for positions not reflected on filed original tax returns. FIN 48 requires the disclosure of all unrecognized tax benefits, which includes the reserves recorded for uncertain tax positions on filed tax returns and the unrecognized portion of affirmative claims.

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Unrecognized Tax Benefits Tabular Disclosure

The following table provides a reconciliation of unrecognized tax benefits from January 1, 2008 to March 31, 2008:

In millions	(Unaudited)
Balance at January 1, 2008	$	2,114
Tax positions taken during the current year
Increases		78
Decreases		—
Tax positions taken during a prior year
Increases		20
Decreases		(63	)
Decreases for settlements during the period		—
Reductions for lapses of applicable statute of limitations		—
Balance at March 31, 2008	$	2,149

The unrecognized tax benefits in the table above reflects affirmative claims related to timing differences of $1.5 billion and $1.6 billion at March 31, 2008 and January 1, 2008, respectively, but have not met the recognition threshold pursuant to FIN 48 and have been denied by the IRS as part of their examinations. These affirmative claims remain unpaid by the IRS and no receivable has been recorded. Edison International is vigorously defending these affirmative claims in IRS administrative appeals proceedings.

It is reasonably possible that Edison International could reach a settlement with the IRS to all or a portion of the unrecognized tax benefits through tax year 2002 within the next 12 months, which could reduce unrecognized tax benefits by up to $1.2 billion.

The total amount of unrecognized tax benefits as of March 31, 2008 and January 1, 2008 that, if recognized, would have an effective tax rate impact is $203 million and $206 million, respectively.

The total amount of accrued interest and penalties were $176 million and $162 million as of March 31, 2008 and January 1, 2008, respectively. For the three months ended March 31, 2008, $8 million of after-tax interest expense was recognized and included in income tax expense.

Tax Positions being addressed as part of active examinations and administrative appeals processes

Edison International remains subject to examination and administrative appeals by the IRS for tax years 1994 and forward. Edison International is challenging certain IRS deficiency adjustments for tax years 1994 – 1999 with the Administrative Appeals branch of the IRS and Edison International is currently under active IRS examination for tax years 2000 – 2002. In addition, the statute of limitations remains open for tax years 1986 – 1993, which has allowed Edison International to file certain affirmative claims related to these tax years.

During the examination phase for tax years 1994 – 1999, which is complete, the IRS asserted income tax deficiencies related to certain tax positions taken by Edison International on filed tax returns. Edison International is challenging the asserted tax deficiencies in IRS administrative appeals proceedings; however, most of these tax positions relate to timing differences and, therefore, any amounts that would be paid if Edison International’s position is not sustained (exclusive of any penalties) would be deductible on future tax returns filed by Edison International. In addition, Edison International has filed affirmative claims with respect to certain tax years 1986 through 2005 with the IRS and state tax authorities. Any benefits associated with these affirmative claims would be recorded in accordance with FIN 48 which provides that recognition would occur at the earlier of when Edison International would make an assessment that the affirmative claim position has a more likely than not probability of being sustained or when a settlement of the affirmative claim is consummated with the tax authority. Certain of these affirmative claims have been recognized as part of the implementation of FIN 48.

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Currently, Edison International is under administrative appeals with the California Franchise Tax Board for tax years 1997 – 2002 and under examination for tax years 2003 – 2004. Edison International remains subject to examination by the California Franchise Tax Board for tax years 2005 and forward. Edison International is also subject to examination by other state tax authorities, subject to varying statute of limitations.

Lease Transactions

As part of a nationwide challenge of certain types of lease transactions, the IRS has asserted deficiencies related to Edison International’s deferral of income taxes associated with certain of its cross-border, leveraged leases. For tax years 1994 – 1999, Edison International is challenging the asserted deficiencies in ongoing IRS Appeals proceedings.

These asserted deficiencies relate to Edison Capital’s income tax treatment of both its foreign power plant and electric locomotive sale/leaseback transactions entered into in 1993 and 1994 (Replacement Leases, which the IRS refers to as a sale-in/lease-out or SILO) and its foreign power plant and electric transmission system lease/leaseback transactions entered into in 1997 and 1998 (Lease/Leaseback, which the IRS refers to as a lease-in/lease-out or LILO).

In 1999, Edison Capital entered into a lease/service contract transaction involving a foreign telecommunication system (Service Contract, which the IRS also refers to as a SILO). As part of an ongoing examination of 2000 – 2002, the IRS is reviewing Edison International’s income tax treatment of this Service Contract and has issued several data requests, to which Edison International has responded. The IRS has not formally asserted any adjustments, but Edison International believes that the IRS examination team will assert deficiencies related to this Service Contract. The following table summarizes estimated federal and state income taxes deferred from these leases as of December 31, 2007. Repayment of these deferred taxes would be accelerated if the IRS position were to be sustained:

In millions	Tax Years Under Appeal 1994 – 1999		Tax Years Under Audit 2000 – 2002		Unaudited Tax Years 2003 – 2007			Total
Replacement Leases (SILO)	$	44	$	19	$	27		$	90
Lease/Leaseback (LILO)		563		566		(8	)		1,121
Service Contract (SILO)		—		127		253			380
Total	$	607	$	712	$	272		$	1,591

As of March 31, 2008, the interest (after tax) on the proposed tax adjustments is estimated to be approximately $557 million. The IRS has also asserted a 20% penalty on any sustained tax adjustment.

Edison International believes it properly reported these transactions based on applicable statutes, regulations and case law in effect at the time the transactions were entered into, and it is vigorously defending its tax treatment of these leases with the Administrative Appeals branch of the IRS through pending appeals of the deficiencies and penalties asserted by IRS examination for the tax years 1994 – 1999. Edison International believes the IRS’s position misstates material facts, misapplies the law and is incorrect. Currently, Edison International is engaged in settlement discussions with IRS Appeals.

The payment of taxes, interest and penalties could have a significant impact on earnings and cash flow. Edison International is prepared to take legal action if an acceptable settlement cannot be reached with the IRS. If Edison International were to commence litigation in certain forums, Edison International would need to make payments of disputed taxes, along with interest and any penalties asserted by the IRS, and thereafter pursue refunds. On May 26, 2006, Edison International paid $111 million of the taxes, interest and penalties for tax year 1999 followed by a refund claim for the same amount. The cash payment was funded by Edison Capital and accounted

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for as a deposit recorded in “Other long-term assets” on the consolidated balance sheet and will be refunded with interest to the extent Edison International prevails. Since the IRS did not act on this refund claim within six months from the date the claim was filed, it is deemed denied which provides Edison International with the option of being able to take legal action to assert its refund claim.

A number of cases involving LILO and SILO transactions are pending before various federal courts. One case involving a LILO transaction was decided in favor of the IRS in a federal district court and was affirmed in a Circuit Court of Appeals decision issued in April 2008. In April 2008, a jury in a federal district court case rendered a verdict where some of the findings were unfavorable to the taxpayer. The taxpayer has asserted in a post-verdict motion that these findings are inconsistent. This case is awaiting a final judgment. In accordance with FIN 48 and FASB Staff Position FAS 13-2 “Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction,” Edison International will continue to monitor and evaluate its lease transactions with respect to on-going events. Edison International cannot predict the timing or ultimate outcome of these cases or any of the other pending LILO or SILO cases or other developments.

To the extent an acceptable settlement is not reached with the IRS, Edison International would expect to file a refund claim for any taxes and penalties that are paid for the 1994 –1996 tax years related to assessed tax deficiencies and penalties on the Replacement Leases. Edison International may make additional payments related to later tax years to preserve its litigation rights. Although, at this time, the amount and timing of these additional payments is uncertain, the amount of additional payments, if necessary, could be substantial. At this time, Edison International is unable to predict the impact of the ultimate resolution of the lease issues.

Edison International filed amended California Franchise Tax returns for tax years 1997 – 2002 to mitigate the possible imposition of new California penalty provisions on transactions that may be considered as listed or substantially similar to listed transactions described in an IRS notice that was published in 2001. These transactions include certain Edison Capital leveraged lease transactions described above and the SCE subsidiary contingent liability company transaction described below. Edison International filed these amended returns under protest retaining its appeal rights.

Balancing Account Over-Collections

In response to an affirmative claim related to balancing account over-collections, Edison International received an IRS Notice of Proposed Adjustment in July 2007. This affirmative claim is part of the ongoing IRS examinations and administrative appeals process and all of the tax years included in this Notice of Proposed Adjustment remain subject to ongoing examination and administrative appeals. The cash and earnings impacts of this position are dependent on the ultimate settlement of all open tax issues in these tax years. Edison International expects that resolution of this particular issue could potentially increase earnings and cash flows within the range of $70 million to $80 million and $300 million to $325 million, respectively.

Contingent Liability Company

The IRS has asserted deficiencies with respect to a transaction entered into by a former SCE subsidiary which may be considered substantially similar to a listed transaction described by the IRS as a contingent liability company for tax years 1997 – 1998. This is being considered by the Administrative Appeals branch of the IRS where Edison International is defending its tax return position with respect to this transaction.

Resolution of Federal and State Income Tax Issues Being Addressed in Ongoing Examinations and Administrative Appeals

Edison International continues its efforts to resolve open tax issues through tax year 2002. Although the timing for resolving these open tax positions is uncertain, it is reasonably possible that all or a significant portion of these open tax issues through tax year 2002 could be resolved within the next 12 months.

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Note 4. Compensation and Benefits Plans

Pension Plans

As of March 31, 2008, Edison International had made $7 million in contributions related to 2007 and $14 million related to 2008 and estimates to make $46 million of additional contributions in the last nine months of 2008. Expected contribution funding in 2008 could vary from anticipated amounts, depending on the funded status at year-end and tax-deductible funding limitations.

Net pension cost recognized is calculated under the actuarial method used for ratemaking. The difference between pension costs calculated for accounting and ratemaking is deferred.

Expense components are:

	Three Months Ended March 31,
In millions	2008			2007
	(Unaudited)
Service cost	$	32		$	31
Interest cost		50			47
Expected return on plan assets		(65	)		(63	)
Amortization of prior service cost		4			4
Amortization of net loss		—			1
Expense under accounting standards		21			20
Regulatory adjustment – deferred		—			1
Total expense recognized	$	21		$	21

Postretirement Benefits Other Than Pensions

As of March 31, 2008, Edison International had made no contributions related to 2007 and $5 million related to 2008 and estimates to make $49 million of additional contributions in the last nine months of 2008. Expected contribution funding in 2008 could vary from anticipated amounts, depending on the funded status at year-end and tax-deductible funding limitations.

Expense components are:

	Three Months Ended March 31,
In millions	2008			2007
	(Unaudited)
Service cost	$	12		$	11
Interest cost		35			32
Expected return on plan assets		(31	)		(30	)
Amortization of prior service cost (credit)		(8	)		(8	)
Amortization of net loss		4			7
Total expense recognized	$	12		$	12

Stock-Based Compensation

During the first quarter of 2008, Edison International granted its 2008 stock-based compensation awards, which included stock options, performance shares, deferred stock units and restricted stock units. Total stock-based compensation expense (reflected in the caption “Other operation and maintenance” on the consolidated

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statements of income) was $7 million for both of the three months ended March 31, 2008 and 2007. The income tax benefit recognized in the consolidated statements of income was $3 million for both of the three months ended March 31, 2008 and 2007. Total stock-based compensation cost capitalized was $1 million for both three months ended March 31, 2008 and 2007.

Stock Options

A summary of the status of Edison International stock options is as follows:

			Weighted-Average
	Stock Options		Exercise Price		Remaining Contractual Term (Years)	Aggregate Intrinsic Value
	(Unaudited)
Outstanding at December 31, 2007	12,105,642		$	30.55
Granted	2,269,209		$	49.95
Expired	(500	)	$	28.94
Forfeited	(19,292	)	$	47.36
Exercised	(250,740	)	$	26.30
Outstanding at March 31, 2008	14,104,319		$	33.73	6.75
Vested and expected to vest at March 31, 2008	13,615,947		$	33.28	6.68	$	240,559,743
Exercisable at March 31, 2008	8,792,954		$	26.44	5.58	$	215,493,320

Stock options granted in 2008 do not accrue dividend equivalents.

The amount of cash used to settle stock options exercised was $13 million and $86 million for the three months ended March 31, 2008 and 2007, respectively. Cash received from options exercised was $7 million and $39 million for the three months ended March 31, 2008 and 2007, respectively. The estimated tax benefit from options exercised was $3 million and $18 million for the three months ended March 31, 2008 and 2007, respectively.

Note 5. Commitments and Contingencies

The following is an update to Edison International’s commitments. See Note 6 of “Notes to Consolidated Financial Statements” included in Edison International’s 2007 Annual Report on Form 10-K for a detailed discussion.

Other Commitments

SCE entered into service contracts associated with uranium enrichment and fuel fabrication during the first three months of 2008. As a result, SCE’s additional fuel supply commitments are estimated to be $23 million for the remainder of 2008, $31 million for 2009, $31 million for 2010, $51 million for 2011, $91 million for 2012 and $204 million thereafter.

At March 31, 2008, EME’s subsidiaries had firm commitments to spend approximately $240 million during the remainder of 2008 and $4 million in 2009 on capital and construction expenditures. The majority of these expenditures relate to the construction of wind projects. These expenditures are planned to be financed by cash on hand, cash generated from operations or existing subsidiary credit agreements.

At March 31, 2008, EME had entered into agreements with vendors securing 483 wind turbines (1,076 MW) for an aggregate purchase price of $1.3 billion, with remaining commitments of $474 million in 2008, $540 million in 2009 and $49 million in 2010. At March 31, 2008, EME had recorded wind turbine deposits of $197 million

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included in other long-term assets in its consolidated balance sheet. In addition, EME had 30 wind turbines (90 MW) in temporary storage to be used for future wind projects with remaining commitments of $3 million in 2008. At March 31, 2008, EME had recorded $84 million related to these wind turbines included in other long-term assets in its consolidated balance sheet.

In connection with the acquisition of the Illinois Plants, Midwest Generation had assumed a long-term coal supply contract and recorded a liability to reflect the fair value of this contract. In March 2008, Midwest Generation entered into an agreement to buy out its coal obligations for the years 2009 through 2012 under this contract with a one-time payment to be made in January 2009. Midwest Generation recorded a pre-tax gain of $15 million ($9 million, after tax) during the first quarter of 2008. The remaining payments due under this contract are $20 million.

Guarantees and Indemnities

Edison International’s subsidiaries have various financial and performance guarantees and indemnifications which are issued in the normal course of business. As discussed below, these contracts included performance guarantees, guarantees of debt and indemnifications.

Tax Indemnity Agreements

In connection with the sale-leaseback transactions related to the Homer City facilities in Pennsylvania, the Powerton and Joliet Stations in Illinois, and, previously, the Collins Station in Illinois, EME and several of its subsidiaries entered into tax indemnity agreements. Under these tax indemnity agreements, these entities agreed to indemnify the lessors in the sale-leaseback transactions for specified adverse tax consequences that could result in certain situations set forth in each tax indemnity agreement, including specified defaults under the respective leases. The potential indemnity obligations under these tax indemnity agreements could be significant. Due to the nature of these potential obligations, EME cannot determine a maximum potential liability which would be triggered by a valid claim from the lessors. EME has not recorded a liability related to these indemnities. In connection with the termination of the Collins Station lease in April 2004, Midwest Generation continues to have obligations under the tax indemnity agreement with the former lease equity investor.

Indemnities Provided as Part of the Acquisition of the Illinois Plants

In connection with the acquisition of the Illinois Plants, EME agreed to indemnify Commonwealth Edison with respect to specified environmental liabilities before and after December 15, 1999, the date of sale. The indemnification claims are reduced by any insurance proceeds and tax benefits related to such claims and are subject to a requirement that Commonwealth Edison takes all reasonable steps to mitigate losses related to any such indemnification claim. Due to the nature of the obligation under this indemnity, a maximum potential liability cannot be determined. This indemnification for environmental liabilities is not limited in term and would be triggered by a valid claim from Commonwealth Edison. Except as discussed below, EME has not recorded a liability related to this indemnity.

Midwest Generation entered into a supplemental agreement with Commonwealth Edison and Exelon Generation on February 20, 2003 to resolve a dispute regarding interpretation of its reimbursement obligation for asbestos claims under the environmental indemnities set forth in the Asset Sale Agreement. Under this supplemental agreement, Midwest Generation agreed to reimburse Commonwealth Edison and Exelon Generation for 50% of specific asbestos claims pending as of February 2003 and related expenses less recovery of insurance costs, and agreed to a sharing arrangement for liabilities and expenses associated with future asbestos-related claims as specified in the agreement. As a general matter, Commonwealth Edison and Midwest Generation apportion responsibility for future asbestos-related claims based upon the number of exposure sites that are Commonwealth Edison locations or Midwest Generation locations. The obligations under this agreement are not subject to a maximum liability. The supplemental agreement had an initial five-year term with an automatic renewal provision for subsequent one-year terms (subject to the right of either party to terminate); pursuant to the

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automatic renewal provision, it has been extended until February 2009. Payments are made under this indemnity upon tender by Commonwealth Edison of appropriate proof of liability for an asbestos-related settlement, judgment, verdict, or expense. There were approximately 211 cases for which Midwest Generation was potentially liable and that had not been settled and dismissed at March 31, 2008. Midwest Generation had recorded a $54 million liability at March 31, 2008 related to this matter.

The amounts recorded by Midwest Generation for the asbestos-related liability are based upon a number of assumptions. Future events, such as the number of new claims to be filed each year, the average cost of disposing of claims, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the actual costs to be higher or lower than projected.

Indemnity Provided as Part of the Acquisition of the Homer City Facilities

In connection with the acquisition of the Homer City facilities, EME Homer City agreed to indemnify the sellers with respect to specific environmental liabilities before and after the date of sale. Payments would be triggered under this indemnity by a claim from the sellers. EME guaranteed the obligations of EME Homer City. Due to the nature of the obligation under this indemnity provision, it is not subject to a maximum potential liability and does not have an expiration date. EME has not recorded a liability related to this indemnity.

Indemnities Provided under Asset Sale Agreements

The asset sale agreements for the sale of EME’s international assets contain indemnities from EME to the purchasers, including indemnification for taxes imposed with respect to operations of the assets prior to the sale and for pre-closing environmental liabilities. Not all indemnities under the asset sale agreements have specific expiration dates. Payments would be triggered under these indemnities by valid claims from the sellers or purchasers, as the case may be. At March 31, 2008, EME had recorded a liability of $108 million related to these matters.

In connection with the sale of various domestic assets, EME has from time to time provided indemnities to the purchasers for taxes imposed with respect to operations of the asset prior to the sale. EME has also provided indemnities to purchasers for items specified in each agreement (for example, specific pre-existing litigation matters and/or environmental conditions). Due to the nature of the obligations under these indemnity agreements, a maximum potential liability cannot be determined. Not all indemnities under the asset sale agreements have specific expiration dates. Payments would be triggered under these indemnities by valid claims from the sellers or purchasers, as the case may be. At March 31, 2008, EME had recorded a liability of $13 million related to these matters.

Capacity Indemnification Agreements

EME has guaranteed, jointly and severally with Texaco Inc., the obligations of March Point Cogeneration Company under its project power sales agreements to repay capacity payments to the project’s power purchaser in the event that the power sales agreements terminate, March Point Cogeneration Company abandons the project, or the project fails to return to normal operations within a reasonable time after a complete or partial shutdown, during the term of the power sales agreements. The obligations under this indemnification agreement as of March 31, 2008, if payment were required, would be $67 million. EME has not recorded a liability related to this indemnity.

Indemnity Provided as Part of the Acquisition of Mountainview

In connection with the acquisition of Mountainview, SCE agreed to indemnify the seller with respect to specific environmental claims related to SCE’s previously owned San Bernardino Generating Station, divested by SCE in 1998 and reacquired as part of the Mountainview acquisition. SCE retained certain responsibilities with respect to environmental claims as part of the original divestiture of the station. The aggregate liability for either party to

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the purchase agreement for damages and other amounts is a maximum of $60 million. This indemnification for environmental liabilities expires on or before March 12, 2033. SCE has not recorded a liability related to this indemnity.

Mountainview Filter Cake Indemnity

Mountainview owns and operates a power plant in Redlands, California. The plant utilizes water from on-site groundwater wells and City of Redlands (City) recycled water for cooling purposes. Unrelated to the operation of the plant, this water contains perchlorate. The pumping of the water removes perchlorate from the aquifer beneath the plant and concentrates it in the plant’s wastewater treatment “filter cake.” Use of this impacted groundwater for cooling purposes was mandated by Mountainview’s CEC permit. Mountainview has indemnified the City for cleanup or associated actions related to groundwater contaminated by perchlorate due to the disposal of filter cake at the City’s solid waste landfill. The obligations under this agreement are not limited to a specific time period or subject to a maximum liability. SCE has not recorded a liability related to this guarantee.

Other Edison International Indemnities

Edison International provides other indemnifications through contracts entered into in the normal course of business. These are primarily indemnifications against adverse litigation outcomes in connection with underwriting agreements, and specified environmental indemnities and income taxes with respect to assets sold. Edison International’s obligations under these agreements may be limited in terms of time and/or amount, and in some instances Edison International may have recourse against third parties for certain indemnities. The obligated amounts of these indemnifications often are not explicitly stated, and the overall maximum amount of the obligation under these indemnifications cannot be reasonably estimated. Edison International has not recorded a liability related to these indemnities.

Contingencies

In addition to the matters disclosed in these Notes, Edison International is involved in other legal, tax and regulatory proceedings before various courts and governmental agencies regarding matters arising in the ordinary course of business. Edison International believes the outcome of these other proceedings will not materially affect its consolidated results of operations or liquidity.

Environmental Remediation

Edison International is subject to numerous environmental laws and regulations, which require it to incur substantial costs to operate existing facilities, construct and operate new facilities, and mitigate or remove the effect of past operations on the environment.

Edison International believes that it is in substantial compliance with environmental regulatory requirements; however, possible future developments, such as the enactment of more stringent environmental laws and regulations, could affect the costs and the manner in which business is conducted and could cause substantial additional capital expenditures. There is no assurance that additional costs would be recovered from customers or that Edison International’s consolidated financial position and results of operations would not be materially affected.

Edison International records its environmental remediation liabilities when site assessments and/or remedial actions are probable and a range of reasonably likely cleanup costs can be estimated. Edison International reviews its sites and measures the liability quarterly, by assessing a range of reasonably likely costs for each identified site using currently available information, including existing technology, presently enacted laws and regulations, experience gained at similar sites, and the probable level of involvement and financial condition of other potentially responsible parties. These estimates include costs for site investigations, remediation, operations

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and maintenance, monitoring and site closure. Unless there is a probable amount, Edison International records the lower end of this reasonably likely range of costs (classified as other long-term liabilities) at undiscounted amounts.

As of March 31, 2008, Edison International’s recorded estimated minimum liability to remediate its 44 identified sites at SCE (24 sites) and EME (20 sites primarily related to Midwest Generation) was $68 million, $64 million of which was related to SCE including $29 million related to San Onofre. This remediation liability is undiscounted. Edison International’s other subsidiaries have no identified remediation sites. The ultimate costs to clean up Edison International’s identified sites may vary from its recorded liability due to numerous uncertainties inherent in the estimation process, such as: the extent and nature of contamination; the scarcity of reliable data for identified sites; the varying costs of alternative cleanup methods; developments resulting from investigatory studies; the possibility of identifying additional sites; and the time periods over which site remediation is expected to occur. Edison International believes that, due to these uncertainties, it is reasonably possible that cleanup costs could exceed its recorded liability by up to $150 million, all of which is related to SCE. The upper limit of this range of costs was estimated using assumptions least favorable to Edison International among a range of reasonably possible outcomes. In addition to its identified sites (sites in which the upper end of the range of costs is at least $1 million), SCE also has 30 immaterial sites whose total liability ranges from $3 million (the recorded minimum liability) to $9 million.

The CPUC allows SCE to recover environmental remediation costs at certain sites, representing $33 million of its recorded liability, through an incentive mechanism (SCE may request to include additional sites). Under this mechanism, SCE will recover 90% of cleanup costs through customer rates; shareholders fund the remaining 10%, with the opportunity to recover these costs from insurance carriers and other third parties. SCE has successfully settled insurance claims with all responsible carriers. SCE expects to recover costs incurred at its remaining sites through customer rates. SCE has recorded a regulatory asset of $62 million for its estimated minimum environmental-cleanup costs expected to be recovered through customer rates.

Edison International’s identified sites include several sites for which there is a lack of currently available information, including the nature and magnitude of contamination, and the extent, if any, that Edison International may be held responsible for contributing to any costs incurred for remediating these sites. Thus, no reasonable estimate of cleanup costs can be made for these sites.

Edison International expects to clean up its identified sites over a period of up to 30 years. Remediation costs in each of the next several years are expected to range from $11 million to $31 million. Recorded costs for the 12 months ended March 31, 2008 were $23 million.

Based on currently available information, Edison International believes it is unlikely that it will incur amounts in excess of the upper limit of the estimated range for its identified sites and, based upon the CPUC’s regulatory treatment of environmental remediation costs incurred at SCE, Edison International believes that costs ultimately recorded will not materially affect its consolidated results of operations or financial position. There can be no assurance, however, that future developments, including additional information about existing sites or the identification of new sites, will not require material revisions to such estimates.

Federal and State Income Taxes

As part of a nationwide challenge of certain types of lease transactions, the IRS has raised issues about the deferral of income taxes associated with certain lease and kind of lease transactions. See Note 3, for further details.

FERC Notice Regarding Investigatory Proceeding against EMMT

In October 2006, EMMT was advised by the enforcement staff at the FERC that it is prepared to recommend that the FERC initiate a formal investigatory proceeding and seek monetary sanctions against EMMT for alleged

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violation of the Energy Policy Act of 2005 and the FERC’s rules regarding market behavior, all with respect to certain bidding practices previously employed by EMMT. EMMT is engaged in discussions with the staff to explore the possibility of resolution of this matter. Discussions to date have been constructive and may lead to a settlement agreement acceptable to both parties. Should these discussions not result in a settlement and a formal proceeding commenced, EMMT will be entitled to contest any alleged violations before the FERC and an appropriate court. EME believes that EMMT has complied with all applicable laws and regulations in the bidding practices that it employed, and intends to contest vigorously any allegation of violation.

FERC Transmission Incentives

On November 16, 2007, the FERC issued an order granting incentives on three of SCE’s largest proposed transmission projects:

• A 125 basis point ROE adder on SCE’s future proposed base ROE (“ROE Adder”) for DPV2, which is a high voltage (500 kV) transmission line from the Valley substation to the Devers substation near Palm Springs, California to a new substation near Palo Verde, west of Phoenix, Arizona;

• A 125 basis point ROE Adder for the Tehachapi Transmission Project, which is an eleven segment project consisting of newly-constructed and upgraded transmission lines and associated substations to interconnect renewable generation projects near the Tehachapi and Big Creek area; and

• A 75 basis point ROE Adder for the Rancho Vista Substation Project, which is a new 500 kV substation in the City of Rancho Cucamonga.

The order also grants a higher return on equity on SCE’s entire transmission rate base in SCE’s next FERC transmission rate case for SCE’s participation in the CAISO. SCE has not yet determined when it expects to file its next FERC rate case. In addition, the order permits SCE to include in rate base 100% of prudently-incurred capital expenditures during construction, also known as CWIP, of all three projects and 100% recovery of prudently-incurred abandoned plant costs for DPV2 and Tehachapi, if either or both of these projects are cancelled due to factors beyond SCE’s control.

FERC Construction Work in Progress Mechanism

On December 21, 2007, SCE filed a revision to its Transmission Owner Tariff to collect 100% of CWIP in rate base for Tehachapi, DPV2, and Rancho Vista, as authorized by FERC in its transmission incentives order discussed above. In the CWIP filing, SCE proposed a single-issue rate adjustment ($45 million or a 14.4% increase) to SCE’s currently authorized base transmission revenue requirement to be made effective on March 1, 2008 and later adjusted for amounts actually spent in 2008 through a new balancing account mechanism. The rate adjustment represents actual expenditures from September 1, 2005 through November 30, 2007, projected expenditures from December 1, 2007 through December 31, 2008, and a ROE (which includes the ROE adders approved for Tehachapi, DPV2 and Rancho Vista). SCE projects that it will spend a total of approximately $244 million, $27 million, and $181 million for Tehachapi, DPV2, and Rancho Vista, respectively, from September 1, 2005 through the end of 2008. The 2008 DPV2 expenditure forecast is limited to projected consulting and legal costs associated with SCE’s continued efforts to obtain regulatory approvals necessary to construct the DPV2 Project. On February 29, 2008, the CWIP filing was approved and SCE implemented the CWIP rate on March 1, 2008, subject to refund on the limited issue of whether SCE’s proposed ROEs are reasonable. In the order, SCE was also directed by FERC to make a compliance filing to provide greater detail on the costs reflected in CWIP rates for 2008. SCE made the compliance filing on March 31, 2008. On April 21, 2008, the CPUC filed a protest of the compliance filing at FERC and requested an evidentiary hearing to be set to further review the costs. SCE intends to file a response to the CPUC’s protest, which rejects the CPUC’s request for a further hearing. In addition, on March 1, 2008, the CPUC filed a Petition for Rehearing with the FERC on the FERC’s acceptance of SCE’s proposed ROE for CWIP. SCE cannot predict the outcome of this proceeding.

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Investigations Regarding Performance Incentives Rewards

SCE was eligible under its CPUC-approved PBR mechanism to earn rewards or penalties based on its performance in comparison to CPUC-approved standards of customer satisfaction, employee injury and illness reporting, and system reliability. SCE conducted investigations into its performance under these PBR mechanisms and has reported to the CPUC certain findings of misconduct and misreporting as further discussed below.

Customer Satisfaction

SCE received two letters in 2003 from one or more anonymous employees alleging that personnel in the service planning group of SCE’s transmission and distribution business unit altered or omitted data in attempts to influence the outcome of customer satisfaction surveys conducted by an independent survey organization. The results of these surveys are used, along with other factors, to determine the amounts of any incentive rewards or penalties for customer satisfaction. SCE recorded aggregate customer satisfaction rewards of $28 million over the period 1997 – 2000. Potential customer satisfaction rewards aggregating $10 million for the years 2001 and 2002 are pending before the CPUC and have not been recognized in income by SCE. SCE also anticipated that it could be eligible for customer satisfaction rewards of approximately $10 million for 2003.

Following its internal investigation, SCE proposed to refund to ratepayers $7 million of the PBR rewards previously received and forgo an additional $5 million of the PBR rewards pending that are both attributable to the design organization’s portion of the customer satisfaction rewards for the entire PBR period (1997 – 2003). In addition, SCE also proposed to refund all of the approximately $2 million of customer satisfaction rewards associated with meter reading.

SCE has taken remedial action as to the customer satisfaction survey misconduct by disciplining employees and/or terminating certain employees, including several supervisory personnel, updating system process and related documentation for survey reporting, and implementing additional supervisory controls over data collection and processing. Performance incentive rewards for customer satisfaction expired in 2003 pursuant to the 2003 GRC.

Employee Injury and Illness Reporting

In light of the problems uncovered with the customer satisfaction surveys, SCE conducted an investigation into the accuracy of SCE’s employee injury and illness reporting. The yearly results of employee injury and illness reporting to the CPUC are used to determine the amount of the incentive reward or penalty to SCE under the PBR mechanism. Since the inception of PBR in 1997, SCE has recognized $20 million in employee safety incentives for 1997 through 2000 and, based on SCE’s records, may be entitled to an additional $15 million for 2001 through 2003.

On October 21, 2004, SCE reported to the CPUC and other appropriate regulatory agencies certain findings concerning SCE’s performance under the PBR incentive mechanism for injury and illness reporting. SCE disclosed in the investigative findings to the CPUC that SCE failed to implement an effective recordkeeping system sufficient to capture all required data for first aid incidents.

As a result of these findings, SCE proposed to the CPUC that it not collect any reward under the mechanism and return to ratepayers the $20 million it has already received. SCE has also proposed to withdraw the pending rewards for the 2001 – 2003 time frames.

SCE has taken remedial action to address the issues identified, including revising its organizational structure and overall program for environmental, health and safety compliance, disciplining employees who committed wrongdoing and terminating one employee. SCE submitted a report on the results of its investigation to the CPUC on December 3, 2004.

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System Reliability

In light of the problems uncovered with the PBR mechanisms discussed above, SCE conducted an investigation into the third PBR metric, system reliability for the years 1997 – 2003. SCE received $8 million in reliability incentive awards for the period 1997 – 2000 and applied for a reward of $5 million for 2001. For 2002, SCE’s data indicated that it earned no reward and incurred no penalty. For 2003, based on the application of the PBR mechanism, it would incur a penalty of $3 million and accrued a charge for that amount in 2004. On February 28, 2005, SCE provided its final investigation report to the CPUC concluding that the reliability reporting system was working as intended.

CPUC Investigation

On June 15, 2006, the CPUC instituted a formal investigation to determine whether and in what amounts to order refunds or disallowances of past and potential PBR rewards for customer satisfaction, employee safety and system reliability portions of PBR. In June 2006, the CPSD of the CPUC issued its report regarding SCE’s PBR program, recommending that the CPUC impose various refunds and penalties on SCE. Subsequently, in September 2006, the CPSD and other intervenors, such as the CPUC’s DRA and The Utility Reform Network, filed testimony on these matters recommending various refunds and penalties be imposed on SCE. In their testimony, the various parties made refund and penalty recommendations that range up to the following amounts: refund or forgo $48 million in rewards for customer satisfaction, impose $70 million penalties for customer satisfaction, refund or forgo $35 million in rewards for employee safety, impose $35 million penalties for employee safety, impose $102 million in statutory penalties, refund $84 million related to amounts collected in rates for employee bonuses (“results sharing”), refund $4 million of miscellaneous survey expenses, and require $10 million of new employee safety programs. These recommendations total up to $388 million. On October 16, 2006, SCE filed testimony opposing the various refund and penalty recommendations of the CPSD and other intervenors.

On October 1, 2007, a POD was released ordering SCE to refund $136 million, before interest, and pay a statutory penalty of $40 million. Included in the amount to be refunded are $28 million related to customer satisfaction rewards, $20 million related to employee safety rewards, and $77 million related to results sharing. The decision requires that the proposed results sharing refund of $77 million (based on year 2000 data) be adjusted for attrition and escalation which increases the results sharing refund to $88 million. Interest as of December 31, 2007, based on amounts collected for customer satisfaction, employee safety incentives and results sharing, including escalation and attrition adjustments, would add an additional $28 million to this amount. The POD also requires SCE to forgo $35 million in rewards for which it would have otherwise been eligible. Included in the amount to be forgone is $20 million related to customer satisfaction rewards and $15 million related to employee safety rewards.

On October 31, 2007, SCE appealed the POD to the CPUC. The CPSD and an intervenor also filed appeals. The CPSD appeal requested that: (1) the statutory penalty be increased from $40 million to $83 million, (2) a penalty be imposed under the PBR customer satisfaction and employee safety mechanisms in the amount of $48 million and $35 million, respectively, and (3) SCE refund/forgo rewards earned under the customer satisfaction and employee safety mechanisms of $48 million and $35 million, respectively. The appealing intervenor asked that the statutory penalty be increased to as much as $102 million. Oral argument on the appeals took place on January 30, 2008, and it is uncertain when the CPUC will issue a decision.

SCE cannot predict the outcome of the appeal. Based on SCE’s proposed refunds, the combined recommendations of the CPSD and other intervenors, as well as the POD, the potential refunds and penalties could range from $52 million up to $388 million. SCE has recorded an accrual at the lower end of this range of potential loss and is accruing interest (approximately $16 million as of March 31, 2008) on collected amounts.

The system reliability component of PBR was not addressed in the POD. Pursuant to an earlier order in the case, system reliability incentives will be addressed in a second phase of the proceeding, which commenced with the

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filing of SCE’s opening testimony in September 2007. In that testimony, SCE confirmed that its PBR system reliability results, which reflected rewards of $13 million for 1997 through 2002 and a penalty of $3 million in 2003 were valid. An indefinite suspension of the schedule for the second phase of the proceeding pending resolution of the appeals of the POD has been granted. SCE cannot predict the outcome of the second phase.

ISO Disputed Charges

On April 20, 2004, the FERC issued an order concerning a dispute between the ISO and the Cities of Anaheim, Azusa, Banning, Colton and Riverside, California over the proper allocation and characterization of certain transmission service related charges. The order reversed an arbitrator’s award that had affirmed the ISO’s characterization in May 2000 of the charges as Intra-Zonal Congestion costs and allocation of those charges to scheduling coordinators in the affected zone within the ISO transmission grid. The April 20, 2004 order directed the ISO to shift the costs from scheduling coordinators in the affected zone to the responsible participating transmission owner, SCE. The potential cost to SCE, net of amounts SCE expects to receive through the PX, SCE’s scheduling coordinator at the time, is estimated to be approximately $20 million to $25 million, including interest. On April 20, 2005, the FERC stayed its April 20, 2004 order during the pendency of SCE’s appeal filed with the Court of Appeals for the D.C. Circuit. On March 7, 2006, the Court of Appeals remanded the case back to the FERC at the FERC’s request and with SCE’s consent. On March 29, 2007, the FERC issued an order agreeing with SCE’s position that the charges incurred by the ISO were related to voltage support and should be allocated to the scheduling coordinators, rather than to SCE as a transmission owner. The Cities filed a request for rehearing of the FERC’s order on April 27, 2007. On May 25, 2007, the FERC issued a procedural order granting the rehearing application for the limited purpose of allowing the FERC to give it further consideration. In a future order, FERC may deny the rehearing request or grant the requested relief in whole or in part. SCE believes that the most recent substantive FERC order correctly allocates responsibility for these ISO charges. However, SCE cannot predict the final outcome of the rehearing. If a subsequent regulatory decision changes the allocation of responsibility for these charges, and SCE is required to pay these charges as a transmission owner, SCE may seek recovery in its reliability service rates. SCE cannot predict whether recovery of these charges in its reliability service rates would be permitted.

Leveraged Lease Investments

At March 31, 2008, Edison Capital had a net leveraged lease investment, before deferred taxes, of $53 million in three aircraft leased to American Airlines. American Airlines has reported net loss for its first quarter 2008 and previously reported losses for a number of years prior to 2006. A default in the leveraged lease by American Airlines could result in a loss of some or all of Edison Capital’s lease investment. At March 31, 2008, American Airlines was current in its lease payments to Edison Capital.

Midway-Sunset Cogeneration Company

San Joaquin Energy Company, a wholly owned subsidiary of EME, owns a 50% general partnership interest in Midway-Sunset, which owns a 225 MW cogeneration facility near Fellows, California. Midway-Sunset is a party to several proceedings pending at the FERC because Midway-Sunset was a seller in the PX market during 2000 and 2001, both for its own account and on behalf of SCE and PG&E, the utilities to which the majority of Midway-Sunset’s power was contracted for sale. As a seller into the PX market, Midway-Sunset is potentially liable for refunds to purchasers in these markets.

The claims asserted against Midway-Sunset for refunds related to power sold into the PX market, including power sold on behalf of SCE and PG&E, are estimated to be less than $70 million for all periods under consideration. Midway-Sunset did not retain any proceeds from power sold into the PX market on behalf of SCE and PG&E in excess of the amounts to which it was entitled under the pre-existing power sales contracts, but instead passed through those proceeds to the utilities. Since the proceeds were passed through to the utilities, EME believes that PG&E and SCE are obligated to reimburse Midway-Sunset for any refund liability that it incurs as a result of sales made into the PX market on their behalves.

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On December 20, 2007, Midway-Sunset entered into a settlement agreement with SCE, PG&E, SDG&E and certain California state parties to resolve Midway-Sunset’s liability in the FERC refund proceedings. Midway-Sunset concurrently entered into a separate agreement with SCE and PG&E that provides for pro-rata reimbursement to Midway-Sunset by the two utilities of the portions of the agreed to refunds that are attributable to sales made by Midway-Sunset for the benefit of the utilities. The settlement, which had been approved previously by the CPUC was approved by FERC on April 2, 2008.

During the period in which Midway-Sunset’s generation was sold into the PX market, amounts SCE received from Midway-Sunset for its pro-rata share of such sales were credited to SCE’s customers against power purchase expenses through the ratemaking mechanism in place at that time. SCE believes that the net amounts to be reimbursed to Midway-Sunset are recoverable from its customers through current regulatory mechanisms. Edison International does not expect any refund payment to be made by Midway-Sunset, or any SCE reimbursement to Midway-Sunset, to have a material impact on earnings.

Midwest Generation Potential Environmental Proceeding

On August 3, 2007, Midwest Generation received an NOV from the US EPA alleging that, beginning in the early 1990’s and into 2003, Midwest Generation or Commonwealth Edison performed repair or replacement projects at six Illinois coal-fired electric generating stations in violation of the Prevention of Significant Deterioration requirements and of the New Source Performance Standards of the Clean Air Act, including alleged requirements to obtain a construction permit and to install best available control technology at the time of the projects. The US EPA also alleges that Midwest Generation and Commonwealth Edison violated certain operating permit requirements under Title V of the Clean Air Act. Finally, the US EPA alleges violations of certain opacity and particulate matter standards at the Illinois Plants. The NOV does not specify the penalties or other relief that the US EPA seeks for the alleged violations. Midwest Generation, Commonwealth Edison, the US EPA, and the United States Department of Justice (DOJ) are in talks designed to explore the possibility of a settlement. If the settlement talks fail and the DOJ files suit, litigation could take many years to resolve the issues alleged in the NOV. As a result, Midwest Generation is investigating the claims made by the US EPA in the NOV and has identified several defenses which it will raise if the government files suit. At this early stage in the process, Midwest Generation cannot predict the outcome of this matter or estimate the impact on its facilities, its results of operations, financial position or cash flows.

On August 13, 2007, Midwest Generation and Commonwealth Edison received a letter signed by several Chicago-based environmental action groups stating that, in light of the NOV, the groups are examining the possibility of filing a citizen suit against Midwest Generation and Commonwealth Edison based presumably on the same or similar theories advanced by the US EPA in the NOV.

By letter dated August 8, 2007, Commonwealth Edison advised EME that Commonwealth Edison believes it is entitled to indemnification for all liabilities, costs, and expenses that it may be required to bear as a result of the NOV. By letter dated August 16, 2007, Commonwealth Edison tendered a request for indemnification to EME for all liabilities, costs, and expenses that Commonwealth Edison may be required to bear if the environmental groups were to file suit. Midwest Generation and Commonwealth Edison are cooperating with one another in responding to the NOV.

Navajo Nation Litigation

The Navajo Nation filed a complaint in June 1999 in the D.C. District Court against SCE, among other defendants, arising out of the coal supply agreement for Mohave. The complaint asserts claims for, among other things, violations of the federal RICO statute, interference with fiduciary duties and contractual relations, fraudulent misrepresentations by nondisclosure, and various contract-related claims. The complaint claims that the defendants’ actions prevented the Navajo Nation from obtaining the full value in royalty rates for the coal supplied to Mohave. The complaint seeks damages of not less than $600 million, trebling of that amount, and

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punitive damages of not less than $1 billion. In March 2001, the Hopi Tribe was permitted to intervene as an additional plaintiff but has not yet identified a specific amount of damages claimed.

In April 2004, the D.C. District Court denied SCE’s motion for summary judgment and concluded that a 2003 U.S. Supreme Court decision in an on-going related lawsuit by the Navajo Nation against the U.S. Government did not preclude the Navajo Nation from pursuing its RICO and intentional tort claims. In September 2007, the Federal Circuit reversed a lower court decision on remand in the related lawsuit, finding that the U.S. Government had breached its trust obligation in connection with the setting of the royalty rate for the coal supplied to Mohave. Subsequently, the Federal Circuit denied the U.S. Government’s petition for rehearing. The U.S. Government may, however, still seek review by the Supreme Court of the Federal Circuit’s September decision. The Government’s deadline for seeking such review has been extended to May 13, 2008.

Pursuant to a joint request of the parties, the D.C. District Court granted a stay of the action in October 2004 to allow the parties to attempt to negotiate a resolution of the issues associated with Mohave with the assistance of a facilitator. In a joint status report filed on November 9, 2007, the parties informed the court that their mediation efforts had terminated and subsequently filed a joint motion to lift the stay. The parties have also filed recommendations for a scheduling order to govern the anticipated resumption of litigation. The Court granted the motion to lift the stay on March 6, 2008, reinstating the case to the active calendar, but has deferred setting an overall schedule for the action pending a determination of disputes concerning the discoverability of certain Navajo documents. SCE cannot predict the outcome of the Navajo Nation’s and Hopi Tribe’s complaints against SCE or the ultimate impact on these complaints of the Supreme Court’s 2003 decision and the on-going litigation by the Navajo Nation against the U.S. Government in the related case.

Nuclear Insurance

Federal law limits public liability claims from a nuclear incident to the amount of available financial protection, which is currently approximately $10.8 billion. SCE and other owners of San Onofre and Palo Verde have purchased the maximum private primary insurance available ($300 million). The balance is covered by the industry’s retrospective rating plan that uses deferred premium charges to every reactor licensee if a nuclear incident at any licensed reactor in the United States results in claims and/or costs which exceed the primary insurance at that plant site.

Federal regulations require this secondary level of financial protection. The NRC exempted San Onofre Unit 1 from this secondary level, effective June 1994. The current maximum deferred premium for each nuclear incident is approximately $101 million per reactor, but not more than $15 million per reactor may be charged in any one year for each incident. The maximum deferred premium per reactor and the yearly assessment per reactor for each nuclear incident will be adjusted for inflation at least once every five years beginning August 20, 2003. The next inflation adjustment should occur no later than August 20, 2008. Based on its ownership interests, SCE could be required to pay a maximum of approximately $201 million per nuclear incident. However, it would have to pay no more than approximately $30 million per incident in any one year. Such amounts include a 5% surcharge if additional funds are needed to satisfy public liability claims and are subject to adjustment for inflation. If the public liability limit above is insufficient, federal law contemplates that additional funds may be appropriated by Congress. This could include an additional assessment on all licensed reactor operators as a measure for raising further revenue.

Property damage insurance covers losses up to $500 million, including decontamination costs, at San Onofre and Palo Verde. Decontamination liability and property damage coverage exceeding the primary $500 million also has been purchased in amounts greater than federal requirements. Additional insurance covers part of replacement power expenses during an accident-related nuclear unit outage. A mutual insurance company owned by utilities with nuclear facilities issues these policies. If losses at any nuclear facility covered by the arrangement were to exceed the accumulated funds for these insurance programs, SCE could be assessed retrospective premium adjustments of up to approximately $45 million per year. Insurance premiums are charged to operating expense.

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Palo Verde Nuclear Generating Station Outage and Inspection

The NRC held three special inspections of Palo Verde, between March 2005 and February 2007. The combination of the results of the first and third special inspections caused the NRC to undertake an additional oversight inspection of Palo Verde. This additional inspection, known as a supplemental inspection, was completed in December 2007. In addition, Palo Verde was required to take additional corrective actions based on the outcome of completed surveys of its plant personnel and self-assessments of its programs and procedures. The NRC and APS defined and agreed to inspection and survey corrective actions that the NRC embodied in a Confirmatory Action Letter, which was issued in February 2008. Palo Verde operation and maintenance costs (including overhead) increased in 2007 by approximately $7 million from 2006. SCE estimates that operation and maintenance costs will increase by approximately $23 million (in 2007 dollars) over the two year period 2008 – 2009, from 2007 recorded costs including overhead costs. SCE is unable to estimate how long SCE will continue to incur these costs.

Procurement of Renewable Resources

California law requires SCE to increase its procurement of renewable resources by at least 1% of its annual retail electricity sales per year so that 20% of its annual electricity sales are procured from renewable resources by no later than December 31, 2010.

SCE filed its compliance report in March 2008. Through the use of flexible compliance rules, SCE demonstrated full compliance for the procurement year 2007 and forecasted full compliance for the procurement years 2008 to 2010. It is unlikely that SCE will have 20% of its annual electricity sales procured from renewable resources by 2010. However, SCE may still meet the 20% target by utilizing the flexible compliance rules. SCE continues to engage in several renewable procurement activities including formal solicitations approved by the CPUC, bilateral negotiations with individual projects and other initiatives.

Under current CPUC decisions, potential penalties for SCE’s failure to achieve its renewable procurement objectives for any year will be considered by the CPUC in the context of the CPUC’s review of SCE’s annual compliance filing. Under the CPUC’s current rules, the maximum penalty for failing to achieve renewable procurement targets is $25 million per year. SCE cannot predict whether it will be assessed penalties.

Scheduling Coordinator Tariff Dispute

Pursuant to the Amended and Restated Exchange Agreement, SCE serves as a scheduling coordinator for the DWP over the ISO-controlled grid. In late 2003, SCE began charging the DWP under a tariff subject to refund for FERC-authorized scheduling coordinator and line loss charges incurred by SCE on the DWP’s behalf. The scheduling coordinator charges had been billed to the DWP under a FERC tariff that was subject to dispute. The DWP has paid the amounts billed under protest but requested that the FERC declare that SCE was obligated to serve as the DWP’s scheduling coordinator without charge. The FERC accepted SCE’s tariff for filing, but held that the rates charged to the DWP have not been shown to be just and reasonable and thus made them subject to refund and further review by the FERC.

In January 2008, an agreement between SCE and the DWP was executed settling the dispute discussed above. The settlement had been previously approved by the FERC in July 2007. The settlement agreement provides that the DWP will be responsible for line losses and SCE would be responsible for the scheduling coordinator charges. During the fourth quarter of 2007, SCE reversed and recognized in earnings (under the caption “Purchased power” in the consolidated statements of income) $30 million of an accrued liability representing line losses previously collected from the DWP that were subject to refund. As of December 31, 2007, SCE had an accrued liability of approximately $22 million (including $3 million of interest) representing the estimated amount SCE will refund for scheduling coordinator charges previously collected from the DWP. SCE made its first refund payment on February 20, 2008 and the second refund payment was made on February 27, 2008. SCE previously received FERC approval to recover the scheduling coordinator charges from all transmission grid

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customers through SCE’s transmission rates and on December 11, 2007, the FERC accepted SCE’s proposed transmission rates reflecting the forecast levels of costs associated with the settlement. Upon signing of the agreement in January 2008, SCE recorded a regulatory asset and recognized in earnings the amount of scheduling coordinator charges to be collected through rates. SCE filed a refund report with the FERC on March 4, 2008. Subsequently, DWP filed with FERC two separate requests to extend the comment period for the refund report in order to verify that the amounts refunded by SCE to DWP are appropriate. The deadline for comments is now May 27, 2008. SCE expects that there will be no material change to the refunds provided to DWP as a result of DWP’s review of the refund report.

Spent Nuclear Fuel

Under federal law, the DOE is responsible for the selection and construction of a facility for the permanent disposal of spent nuclear fuel and high-level radioactive waste. The DOE did not meet its obligation to begin acceptance of spent nuclear fuel not later than January 31, 1998. It is not certain when the DOE will begin accepting spent nuclear fuel from San Onofre or other nuclear power plants. Extended delays by the DOE have led to the construction of costly alternatives and associated siting and environmental issues. SCE has paid the DOE the required one-time fee applicable to nuclear generation at San Onofre through April 6, 1983 (approximately $24 million, plus interest). SCE is also paying the required quarterly fee equal to 0.1¢ per-kWh of nuclear-generated electricity sold after April 6, 1983. On January 29, 2004, SCE, as operating agent, filed a complaint against the DOE in the United States Court of Federal Claims seeking damages for the DOE’s failure to meet its obligation to begin accepting spent nuclear fuel from San Onofre. The case was stayed through April 7, 2006, when SCE and the DOE filed a Joint Status Report in which SCE sought to lift the stay and the government opposed lifting the stay. On June 5, 2006, the Court of Federal Claims lifted the stay on SCE’s case and established a discovery schedule. In a Joint Status Report filed on February 22, 2008, the parties agreed that a trial date should be set. SCE requested that a trial date be set as soon as practicable and the government requested that the trial not occur before November 2008, due to government resource commitments regarding other pending cases. The Court has not yet acted on the requests for a trial date.

SCE has primary responsibility for the interim storage of spent nuclear fuel generated at San Onofre. Spent nuclear fuel is stored in the San Onofre Units 2 and 3 spent fuel pools and the San Onofre independent spent fuel storage installation where all of Unit 1’s spent fuel located at San Onofre and some of Unit 2’s spent fuel is stored. SCE, as operating agent, plans to transfer fuel from the Unit 2 and 3 spent fuel pools to the independent storage installation on an as-needed basis to maintain full core off-load capability for Units 2 and 3. There are now sufficient dry casks and modules available at the independent spent fuel storage installation to meet plant requirements through 2008. SCE plans to add storage capacity incrementally to meet the plant requirements until 2022 (the end of the current NRC operating license).

In order to increase on-site storage capacity and maintain core off-load capability, Palo Verde has constructed an independent spent fuel storage facility. Arizona Public Service, as operating agent, plans to add storage capacity incrementally to maintain full core off-load capability for all three units.

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Note 6. Accumulated Other Comprehensive Income (Loss) Information

Edison International’s accumulated other comprehensive income (loss) consists of:

In millions	Unrealized Gain (Loss) on Cash Flow Hedges			Foreign Currency Translation Adjustment			Pension and PBOP– Net Loss			Pension and PBOP– Prior Service Cost		Accumulated Other Comprehensive Income (Loss)
		(Unaudited)
Balance at December 31, 2007	$	(60	)	$	(1	)	$	(34	)	$	3	$	(92	)
Current period change		(147	)		(3	)		—			—		(150	)
Balance at March 31, 2008	$	(207	)	$	(4	)	$	(34	)	$	3	$	(242	)

Unrealized losses on cash flow hedges, net of tax, at March 31, 2008, included unrealized losses on commodity hedges related to Midwest Generation and EME Homer City futures and forward electricity contracts that qualify for hedge accounting. These losses arise because current forecasts of future electricity prices in these markets are greater than the contract prices. As EME’s hedged positions for continuing operations are realized, $149 million, after tax, of the net unrealized losses on cash flow hedges at March 31, 2008 are expected to be reclassified into earnings during the next 12 months. Management expects that reclassification of net unrealized losses will decrease energy revenue recognized at market prices. Actual amounts ultimately reclassified into earnings over the next 12 months could vary materially from this estimated amount as a result of changes in market conditions. The maximum period over which a cash flow hedge is designated is through December 31, 2010.

Under SFAS No. 133, the portion of a cash flow hedge that does not offset the change in value of the transaction being hedged, which is commonly referred to as the ineffective portion, is immediately recognized in earnings. EME recorded net losses of $13 million and $1 million during the first quarters of 2008 and 2007, respectively, representing the amount of cash flow hedges’ ineffectiveness for continuing operations, reflected in nonutility power generation revenue in Edison International’s consolidated income statements.

Note 7. Supplemental Cash Flows Information

Edison International’s supplemental cash flows information is:

	Three Months Ended March 31,
In millions	2008		2007
		(Unaudited)
Cash payments (receipts) for interest and taxes:
Interest – net of amounts capitalized	$	139	$	154
Tax payments (receipts)		6		5
Noncash investing and financing activities:
Dividends declared but not paid:
Common Stock	$	99	$	94
Preferred and preference stock of utility not subject to mandatory redemption		8		9
Details of assets acquired:
Fair value of assets acquired	$	—	$	23

In connection with certain wind projects acquired during March 2007, the purchase price included payments that were due upon the start and/or completion of construction. Accordingly, EME accrued for estimated payments during the first quarter of 2007 which were due upon commencement of construction in 2007 and/or completion of construction scheduled during 2008.

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Note 8. Fair Value Measurements

SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (referred to as an “exit price” in SFAS No. 157). SFAS No. 157 clarifies that a fair value measurement for a liability should reflect the entity’s nonperformance risk.

The standard establishes a hierarchy for fair value measurements. Financial assets and liabilities carried at fair value on a recurring basis are classified and disclosed in the three categories outlined below:

• Level 1 – Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets;

• Level 2 – Inputs other than quoted market prices included in Level 1 that are observable for the asset or liability either directly or indirectly; and

• Level 3 – Unobservable inputs using data that is not corroborated by market data and primarily based on internal company analysis.

Edison International’s assets and liabilities carried at fair value primarily consist of derivative positions for both SCE and EME. These positions may include forward sales and purchases of physical power, options and forward price swaps which settle only on a financial basis (including futures contracts). In addition, SCE nuclear decommissioning trust investments include equity securities, U.S. treasury securities and other fixed income securities.

Level 1 includes derivatives that are exchange traded, as well as SCE’s nuclear decommissioning trust investments in equity and U.S. treasury securities. The fair values for these derivatives and equity securities are determined using quoted exchange transaction market prices. U.S. treasury securities are categorized as Level 1 because they trade in a highly liquid and transparent market.

Level 2 includes non-exchange traded derivatives using over-the-counter markets. The fair value of these derivatives is determined using forward market prices adjusted for credit risk. The majority of EME’s Level 2 derivatives are entered into for hedging purposes. Level 2 also includes SCE’s nuclear decommissioning trust investments in other fixed income securities. The fair value of these financial instruments is based on evaluated prices that reflect observable market information, such as actual trade information of similar securities, adjusted for observable differences.

Level 3 includes the majority of SCE’s derivatives, including over-the-counter options, bilateral contracts, FTRs and CRRs in the California market, capacity and QF contracts. The fair value of these SCE derivatives is determined using uncorroborated broker quotes and models that mainly extrapolate short-term observable inputs. Level 3 also includes derivatives that trade infrequently such as FTRs and over-the-counter derivatives at illiquid locations and long-term power agreements. Where Edison International does not have observable market prices, Edison International believes that the transaction price is the best estimate of fair value at inception. For illiquid FTRs, Edison International reviews objective criteria related to system congestion on a quarterly basis and other underlying drivers and adjusts fair value when Edison International concludes a change in objective criteria would result in a new valuation that better reflects the fair value. Changes in fair values are based on hypothetical sale of illiquid positions. For illiquid long-term power agreements, fair value is based upon a discounting of future electricity prices derived from a proprietary model using the risk free discount rate for a similar duration contract, adjusted for credit and liquidity. Changes in fair value are based on changes to forward market prices, including forecasted prices for illiquid forward periods.

In circumstances where Edison International cannot verify fair value with observable market transactions, it is possible that a different valuation model could produce a materially different estimate of fair value. As markets

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continue to develop and more pricing information becomes available, Edison International continues to assess valuation methodologies used to determine fair value.

When appropriate, valuations are adjusted for various factors including liquidity, bid/offer spreads and credit considerations. Such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate is used.

The following table sets forth financial assets and liabilities that were accounted for at fair value as of March 31, 2008 by level within the fair value hierarchy.

In millions	Level 1			Level 2			Level 3			Netting and Collateral(1)			Total at March 31, 2008
	(Unaudited)
Assets at Fair Value
Derivative contracts	$	—		$	101		$	249		$	(10	)	$	340
Nuclear decommissioning trusts(2)		2,182			961			—			—			3,143
Long-term disability plan		—			6			—			—			6
Total assets(3)		2,182			1,068			249			(10	)		3,489
Liabilities at Fair Value
Derivative contracts		(91	)		(309	)		(58	)		134			(324	)
Net assets	$	2,091		$	759		$	191		$	124		$	3,165

(1) Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level.

(2) Excludes net assets of $52 million of cash and equivalents, interest and dividend receivables and receivables related to pending securities sales and payables related to pending securities purchases.

(3) Excludes $32 million of cash surrender value of life insurance investments for deferred compensation.

The following table sets forth a summary of changes in the fair value of Level 3 derivative contracts, net for the three months ended March 31, 2008.

In millions	(Unaudited)
Fair value of derivative contracts, net at January 1, 2008	$	98
Total realized/unrealized gains (losses):
Included in earnings (1)		86
Included in accumulated other comprehensive loss		(2	)
Purchases and settlements, net		12
Transfers in and/or out of Level 3		(3	)
Fair value of derivative contracts, net at March 31, 2008	$	191
Change during the period in unrealized gains (losses) related to net derivative contracts, held at March 31, 2008(2)	$	65

(1) $33 reported in “Nonutility power generation” revenue and $53 million reported in “Purchased power” expense on Edison International’s consolidated statements of income.

(2) $(4) reported in “Nonutility power generation” revenue and $69 million reported in “Purchased power” expense on Edison International’s consolidated statements of income.

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Nuclear Decommissioning Trusts

SCE has collected in rates amounts for the future costs of removal of its nuclear assets, and has placed those amounts in independent trusts. Funds collected, together with accumulated earnings, will be utilized solely for decommissioning. The CPUC has set certain restrictions related to the investments of these trusts.

Trust investments (at fair value) include:

In millions	Maturity Dates	March 31, 2008		December 31, 2007
		(Unaudited)
Municipal bonds	2008 – 2044	$	578	$	561
Stocks	–		1,910		1,968
United States government issues	2008 – 2049		651		552
Corporate bonds	2008 – 2047		41		241
Short-term	2008		15		56
Total		$	3,195	$	3,378

Note: Maturity dates as of March 31, 2008.

Trust fund earnings (based on specific identification) increase the trust fund balance and the ARO regulatory liability. Net earnings were $31 million and $37 million for the three months ended March 31, 2008 and 2007, respectively. Proceeds from sales of securities (which are reinvested) were $829 million and $1.0 billion for the three months ended March 31, 2008 and 2007, respectively. Cumulative unrealized holding gains, net of losses, were $994 million and $1.1 billion at March 31, 2008 and December 31, 2007, respectively. Realized losses for other-than-temporary impairments were $45 million and $8 million for the three months ended March 31, 2008 and 2007, respectively. Approximately 92% of the cumulative trust fund contributions were tax-deductible.

Note 9. Regulatory Assets and Liabilities

Regulatory assets included in the consolidated balance sheets are:

In millions	March 31, 2008		December 31, 2007
		(Unaudited)
Current:
Regulatory balancing accounts	$	66	$	99
Energy derivatives		20		71
Purchased-power settlements		6		8
Deferred FTR proceeds		23		15
Other		13		4
		128		197
Long-term:
Regulatory balancing accounts		9		15
Flow-through taxes – net		1,130		1,110
Unamortized nuclear investment – net		398		405
Nuclear-related asset retirement obligation investment – net		292		297
Unamortized coal plant investment – net		92		94
Unamortized loss on reacquired debt		325		331
SFAS No. 158 pensions and postretirement benefits		231		231
Energy derivatives		66		70
Environmental remediation		62		64
Other		121		104
		2,726		2,721
Total Regulatory Assets	$	2,854	$	2,918

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Regulatory liabilities included in the consolidated balance sheets are

In millions	March 31 2008		December 31, 2007
	(Unaudited)
Current:
Regulatory balancing accounts	$	1,017	$	967
Rate reduction notes – transition cost overcollection		20		20
Energy derivatives		97		10
Deferred FTR costs		62		19
Other		5		3
		1,201		1,019
Long-term:
Regulatory balancing accounts		2		—
Asset retirement obligations		582		793
Costs of removal		2,248		2,230
SFAS No. 158 pensions and other postretirement benefits		311		308
Energy derivatives		38		27
Employee benefit plans		75		75
		3,256		3,433
Total Regulatory Liabilities	$	4,457	$	4,452

Note 10. Preferred and Preference Stock Not Subject to Mandatory Redemption

In January 2008, SCE repurchased 350,000 shares of 4.08% cumulative preferred stock at a price of $19.50 per share. SCE retired this preferred stock in January 2008 and recorded a $2 million gain on the cancellation of reacquired capital stock (reflected in the caption “Common stock” on the consolidated balance sheets). There is no sinking fund requirement for redemptions or repurchases of preferred stock.

Note 11. Business Segments

Edison International’s reportable business segments include its electric utility operation segment (SCE), a nonutility power generation segment (EME), and a financial services provider segment (Edison Capital). Included in the nonutility power generation segment are the activities of MEHC, the holding company of EME. MEHC’s only substantive activities were its obligations under the senior secured notes which were paid in full on June 25, 2007. MEHC does not have any substantive operations. Edison International evaluates performance based on net income.

SCE is a rate-regulated electric utility that supplies electric energy to a 50,000 square-mile area of central, coastal and Southern California. SCE also produces electricity. EME is engaged in the business of developing, acquiring, owning or leasing, operating and selling energy and capacity from electric power generation facilities. EME also conducts hedging and energy trading activities in power markets open to competition. Edison Capital is a provider of financial services with investments worldwide.

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Segment information was:

	Three Months Ended March 31,
In millions	2008			2007
	(Unaudited)
Operating Revenue:
Electric utility	$	2,349		$	2,222
Nonutility power generation		719			672
Financial services		15			17
All others(1)		—			1
Consolidated Edison International	$	3,083		$	2,912
Net Income (Loss):
Electric utility(2)	$	150		$	180
Nonutility power generation(3)		145			139
Financial services		9			19
All others(1)		(5	)		(5	)
Consolidated Edison International	$	299		$	333

(1) Includes amounts from nonutility subsidiaries, as well as Edison International (parent) that are not significant as a reportable segment.

(2) Net income available for common stock.

(3) Includes earnings (loss) from discontinued operations of $(5) million and $3 million for the three months ended March 31, 2008 and 2007, respectively.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

This MD&A for the three months ended March 31, 2008 discusses material changes in the consolidated financial condition, results of operations and other developments of Edison International since December 31, 2007, and as compared to the three months ended March 31, 2007. This discussion presumes that the reader has read or has access to Edison International’s MD&A for the calendar year 2007 (the year-ended 2007 MD&A), which was included in Edison International’s 2007 annual report to shareholders and incorporated by reference into Edison International’s Annual Report on Form 10-K for the year ended December 31, 2007, filed with the Securities and Exchange Commission.

This MD&A contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect Edison International’s current expectations and projections about future events based on Edison International’s knowledge of present facts and circumstances and assumptions about future events and include any statement that does not directly relate to a historical or current fact. Other information distributed by Edison International that is incorporated in this report, or that refers to or incorporates this report, may also contain forward-looking statements. In this report and elsewhere, the words “expects,” “believes,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “probable,” “may,” “will,” “could,” “would,” “should,” and variations of such words and similar expressions, or discussions of strategy or of plans, are intended to identify forward-looking statements. Such statements necessarily involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Some of the risks, uncertainties and other important factors that could cause results to differ, or that otherwise could impact Edison International or its subsidiaries, include, but are not limited to:

• the ability of Edison International to meet its financial obligations and to pay dividends on its common stock if its subsidiaries are unable to pay dividends;

• the ability of SCE to recover its costs in a timely manner from its customers through regulated rates;

• decisions and other actions by the CPUC, the FERC and other regulatory authorities and delays in regulatory actions;

• market risks affecting SCE’s energy procurement activities;

• access to capital markets and the cost of capital;

• changes in interest rates, rates of inflation beyond those rates which may be adjusted from year to year by public utility regulators and foreign exchange rates;

• governmental, statutory, regulatory or administrative changes or initiatives affecting the electricity industry, including the market structure rules applicable to each market;

• environmental laws and regulations, both at the state and federal levels, that could require additional expenditures or otherwise affect the cost and manner of doing business;

• risks associated with operating nuclear and other power generating facilities, including operating risks, nuclear fuel storage, equipment failure, availability, heat rate, output, and availability and cost of spare parts and repairs;

• the cost and availability of labor, equipment and materials;

• the ability to obtain sufficient insurance, including insurance relating to SCE’s nuclear facilities;

• effects of legal proceedings, changes in or interpretations of tax laws, rates or policies, and changes in accounting standards;

• the outcome of disputes with the IRS and other tax authorities regarding tax positions taken by Edison International;

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• supply and demand for electric capacity and energy, and the resulting prices and dispatch volumes, in the wholesale markets to which EMG’s generating units have access;

• the cost and availability of coal, natural gas, fuel oil, nuclear fuel, and associated transportation to the extent not recovered through regulated rate cost escalation provisions or balancing accounts;

• the cost and availability of emission credits or allowances for emission credits;

• transmission congestion in and to each market area and the resulting differences in prices between delivery points;

• the ability to provide sufficient collateral in support of hedging activities and purchased power and fuel;

• the risk of counterparty default in hedging transactions or power-purchase and fuel contracts;

• the extent of additional supplies of capacity, energy and ancillary services from current competitors or new market entrants, including the development of new generation facilities and technologies;

• the difficulty of predicting wholesale prices, transmission congestion, energy demand and other aspects of the complex and volatile markets in which EMG and its subsidiaries participate;

• general political, economic and business conditions;

• weather conditions, natural disasters and other unforeseen events;

• changes in the fair value of investments and other assets; and

• the risks inherent in the development of generation projects as well as transmission and distribution infrastructure replacement and expansion including those related to siting, financing, construction, permitting, and governmental approvals.

Additional information about risks and uncertainties, including more detail about the factors described above, are discussed throughout this MD&A and in the “Risk Factors” section included in Part I, Item 1A of Edison International’s Annual Report on Form 10-K. Readers are urged to read this entire report, including the information incorporated by reference, and carefully consider the risks, uncertainties and other factors that affect Edison International’s business. Forward-looking statements speak only as of the date they are made and Edison International is not obligated to publicly update or revise forward-looking statements. Readers should review future reports filed by Edison International with the Securities & Exchange Commission.

Edison International is engaged in the business of holding, for investment, the common stock of its subsidiaries. Edison International’s principal operating subsidiaries are SCE, a rate-regulated electric utility, and EMG. EMG is the holding company for its principal wholly owned subsidiaries, EME, which is engaged in the business of developing, acquiring, owning or leasing, operating and selling energy and capacity from independent power production facilities, and Edison Capital, a provider of capital and financial services.

In this MD&A, except when stated to the contrary, references to each of Edison International, SCE, EMG, EME or Edison Capital mean each such company with its subsidiaries on a consolidated basis. References to Edison International (parent) or parent company mean Edison International on a stand-alone basis, not consolidated with its subsidiaries.

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This MD&A is presented in 8 major sections. The company-by-company discussion of SCE, EMG, and Edison International (parent) includes discussions of liquidity, market risk exposures, and other matters (as relevant to each principal business segment). The remaining sections discuss Edison International on a consolidated basis. The consolidated sections should be read in conjunction with the discussion of each company’s section.

	PAGE
Current Developments	38
Southern California Edison Company	40
Edison Mission Group	48
Edison International (Parent)	64
Results of Operations and Historical Cash Flow Analysis	66
New Accounting Pronouncements	75
Commitments, Guarantees and Indemnities	76
Other Developments	77

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CURRENT DEVELOPMENTS

The following section provides a summary of current developments related to Edison International’s principal business segments. This section is intended to be a summary of those current developments that management believes are of most importance since year-end December 31, 2007. This section is not intended to be an all-inclusive list of all current developments related to each principal business segment and should be read together with all sections of this MD&A.

SCE: CURRENT DEVELOPMENTS

2009 General Rate Case Proceeding

On November 19, 2007, SCE filed its GRC application requesting a 2009 base rate revenue requirement of $5.199 billion, an increase of approximately $858 million over the projected authorized base rate revenue requirements. After considering the effects of sales growth and other offsets, SCE’s request would be a $726 million increase over current authorized base rate revenue. On April 15, 2008, the DRA submitted testimony recommending that SCE’s 2009 base rate revenue requirement be increased by approximately $7 million, a difference of $719 million from SCE’s request. The $719 million difference is mainly due to reductions proposed by DRA including: recommended changes in methods for calculating depreciation expense; reductions in operations and maintenance expense; reductions in pensions and benefits; the elimination of amounts collected in rates for employee bonuses (“results sharing”) as well as the reduction in long-term incentives and other executive compensation; and other miscellaneous proposed reductions. Testimony submitted by TURN, another intervenor, seeks to reduce SCE’s 2009 request by an additional $195 million over the DRA proposed adjustments, mainly due to reduced depreciation expense. In addition, TURN intends to propose additional adjustments related to the treatment of Mohave, replaced meters, software costs and other operating revenue sharing mechanisms. See “SCE: Regulatory Matters —Current Regulatory Developments—2009 General Rate Case Proceeding” for further discussion.

2008 Cost of Capital Proceeding

On December 21, 2007, the CPUC granted SCE’s requested rate-making capital structure of 43% long-term debt, 9% preferred equity and 48% common equity for 2008. The CPUC also authorized SCE’s 2008 cost of long-term debt of 6.22%, cost of preferred equity of 6.01% and a return on common equity of 11.5%. The impact of this Phase I decision resulted in a $7 million decrease in SCE’s annual revenue requirement. On April 29, 2008, the CPUC issued a proposed decision on Phase II of the proceeding, replacing the current annual cost of capital application with a multi-year mechanism which would not require a new cost of capital application to be filed until April 2010. The proposed decision would also adopt a trigger mechanism which provides for an automatic ROE adjustment during the intervening years between the cost of capital filings if certain thresholds are reached. A final decision is expected to be issued in May 2008.

Solar Photovoltaic Program

On March 27, 2008, SCE filed an application with the CPUC to implement its Solar Photovoltaic (PV) Program to develop up to 250 MW of utility-owned Solar PV generating facilities ranging in size from 1 to 2 MW each. Targeted at commercial and industrial rooftop space in SCE’s service territory, SCE’s program will use rooftop space from entities that would not otherwise be typical candidates for the net energy metering tariff, which allows customers to offset their usage with electricity generated at their own facilities. SCE proposes to develop these projects at a rate of approximately 50 MW per year at an average cost of $3.50/watt. The estimated base case capital cost for the Solar PV Program is $875 million over the 5 year period of the program. SCE proposes a reasonableness threshold of $963 million. Subject to CPUC approval, the capital expenditures will be eligible to be included in SCE’s earning asset base if the actual costs of the program are equal to or lower than the reasonableness threshold amount. SCE also proposes to apply the CPUC-approved 100 basis point incentive adder for qualifying utility-owned renewable energy investments.

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EMG: CURRENT DEVELOPMENTS

EME Growth Activities

Renewable Energy

At March 31, 2008, EME had 566 MW of wind projects in service and another 447 MW of wind projects under construction, with scheduled completion dates during 2008. As of the same date, EME had a development pipeline of potential wind projects with an estimated installed capacity of approximately 5,000 MW. The development pipeline represents potential projects with respect to which EME either owns the project rights or has exclusive acquisition rights. This development pipeline is supported by turbine purchase commitments and turbines in storage totaling 1,166 MW for new wind projects. The majority of the turbines are scheduled to be delivered before the end of 2009.

During the first quarter of 2008, EME commenced pre-construction activities (approximately $55 million committed to date) for a 240 MW planned wind project in Illinois, referred to as the Big Sky project. The project plans to sell electricity into the PJM market as a merchant generator. Pre-construction activities will be limited to equipment purchases, site development and interconnection activities, pending resolution of wind turbine performance issues noted below. Commercial operations of the Forward wind project (29 MW) and Phase I of the Goat Mountain wind project (80 MW) commenced during April 2008.

Thermal Energy

During the first quarter of 2008, a subsidiary of EME was awarded through a competitive bidding process a ten-year power sales contract with SCE for the output of a 479 MW gas-peaking facility located in the City of Industry, California, which is referred to as the Walnut Creek project. The power sales agreement is subject to approval of the CPUC which SCE requested on April 4, 2008. CPUC approval is expected to be granted by late 2008. As an affiliate transaction, the contract is also subject to FERC approval, which was requested on May 2, 2008. Deliveries under the power sales agreement are expected to commence in 2013. Subsequent to March 31, 2008, EME and its subsidiary entered into an agreement to purchase major equipment for the project and, subsequently made equipment deposits of $21 million. The total project costs, excluding interest during construction, are estimated in the range of $500 million to $600 million.

Wind Turbines Performance Issues

Included as part of the wind projects or turbine purchase commitments described above, EME has purchased 475 turbines from Suzlon Wind Energy Corporation (Suzlon) and 71 turbines from Clipper Turbine Works, Inc. (Clipper). Rotor blade cracks were identified on certain Suzlon wind turbines, and rotor blade and gearbox problems were identified on certain Clipper wind turbines. Clipper has commenced its remediation plans that are designed to correct the current deficiencies, at its cost. EME is continuing to work with Suzlon to analyze the root causes of the performance issues and address commercial matters that result from the impact of these issues on EME and its projects. For further discussion, refer to “EMG: Liquidity—Capital Expenditures—Wind Turbine Performance Issues” in the year-ended 2007 MD&A.

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SOUTHERN CALIFORNIA EDISON COMPANY

SCE: LIQUIDITY

Overview

As of March 31, 2008, SCE had cash and equivalents of $282 million ($113 million of which was held by SCE’s consolidated VIEs). As of March 31, 2008, long-term debt, including current maturities of long-term debt, was $5.47 billion. On March 12, 2008, SCE amended its existing $2.5 billion credit facility, extending the maturity to February 2013 while retaining existing borrowing costs as specified in the facility. The amendment also provides four extension options which, if all exercised, will result in a final termination of February 2017. At March 31, 2008, the credit facility supported $217 million in letters of credit and $400 million of short-term debt outstanding, leaving $1.88 billion available for liquidity purposes.

SCE’s estimated cash outflows during the 12-month period following March 31, 2008 are expected to consist of:

• Projected capital expenditures of $2.3 billion remaining for 2008 primarily to replace and expand distribution and transmission infrastructure and construct and replace major components of generation assets (see “—Capital Expenditures” below);

• Dividend payments to SCE’s parent company. The Board of Directors of SCE declared a $25 million dividend to Edison International which was paid in January 2008 and a $100 million dividend which was paid in April 2008;

• Fuel and procurement-related costs (see “SCE: Regulatory Matters—Current Regulatory Developments—Energy Resource Recovery Account Proceedings”); and

• General operating expenses.

SCE expects to meet its continuing obligations, including cash outflows for operating expenses and power-procurement, through cash and equivalents on hand, operating cash flows and short-term borrowings. Projected capital expenditures are expected to be financed through operating cash flows and the issuance of short-term and long-term debt and preferred equity.

On February 13, 2008, President Bush signed the Economic Stimulus Act of 2008 (2008 Stimulus Act). The 2008 Stimulus Act includes a provision that provides accelerated bonus depreciation for certain capital expenditures incurred during 2008. Edison International expects that certain capital expenditures incurred by SCE during 2008 will qualify for this accelerated bonus depreciation, which would provide additional cash flow benefits estimated to be approximately $175 million for 2008. Any cash flow benefits resulting from this accelerated depreciation should be timing in nature and therefore should result in a higher level of accumulated deferred income taxes reflected on SCE’s consolidated balance sheets. Timing benefits related to deferred taxes will be incorporated into future ratemaking proceedings, impacting future period cash flow and rate base.

SCE’s liquidity may be affected by, among other things, matters described in “SCE: Regulatory Matters” and “Commitments, Guarantees and Indemnities.”

Capital Expenditures

As discussed under the heading “SCE: Liquidity—Capital Expenditures” in the year-ended 2007 MD&A, SCE is experiencing significant growth in actual and planned capital expenditures to replace and expand its distribution and transmission infrastructure, and to construct and replace generation assets. SCE’s 2008 through 2012 capital forecast includes total spending of up to $19.9 billion, including capital spending of $875 million for SCE’s Solar PV Program. As discussed in “SCE: Current Developments—Solar Photovoltaic Program,” SCE filed an application with the CPUC to implement its Solar PV Program to develop up to 250 MW of utility-owned Solar PV generating facilities. During the first quarter of 2008, SCE spent $569 million in capital expenditures related to its capital plan.

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Credit Ratings

At March 31, 2008, SCE’s credit ratings were as follows:

	Moody’s Rating	S&P Rating	Fitch Rating
Long-term senior secured debt	A2	A	A+
Short-term (commercial paper)	P-2	A-2	F-1

SCE cannot provide assurance that its current credit ratings will remain in effect for any given period of time or that one or more of these ratings will not be changed. These credit ratings are not recommendations to buy, sell or hold its securities and may be revised at any time by a rating agency.

Dividend Restrictions and Debt Covenants

The CPUC regulates SCE’s capital structure and limits the dividends it may pay Edison International (see “Edison International (Parent): Liquidity” for further discussion). In SCE’s most recent cost of capital proceeding, the CPUC set an authorized capital structure for SCE which included a common equity component of 48%. SCE determines compliance with this capital structure based on a 13-month weighted-average calculation. At March 31, 2008, SCE’s 13-month weighted-average common equity component of total capitalization was 50.4% resulting in the capacity to pay $295 million in additional dividends.

SCE has a debt covenant in its credit facility that requires a debt to total capitalization ratio of less than or equal to 0.65 to 1 to be met. At March 31, 2008, SCE’s debt to total capitalization ratio was 0.45 to 1.

Margin and Collateral Deposits

SCE has entered into certain margining agreements for power and gas trading activities in support of its procurement plan as approved by the CPUC. SCE’s margin deposit requirements under these agreements can vary depending upon the level of unsecured credit extended by counterparties and brokers, changes in market prices relative to contractual commitments, and other factors. During the first quarter of 2008, SCE implemented FIN 39-1 and elected the option to net collateral with the fair value of derivative assets/liabilities under master netting arrangements. Amount recognized for cash collateral received from others that have been offset against net derivative assets totaled $4 million at March 31, 2008. In addition, at March 31, 2008, SCE had deposits of $253 million (consisting of $36 million in cash that was not offset against net derivative positions and was reflected in “Margin and collateral deposits” on the consolidated balance sheets and $217 million in letters of credit) with counterparties and other brokers. Cash deposits with brokers and counterparties earn interest at various rates.

Future cash collateral requirements may be higher than the margin and collateral requirements at March 31, 2008, if wholesale energy prices decrease. SCE estimates that margin and collateral requirements for energy contracts outstanding as of March 31, 2008, could increase by approximately $555 million over the remaining life of the contracts using a 95% confidence level.

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The credit risk exposure from counterparties for power and gas trading activities are measured as the difference between the contract price and current fair value of open positions. SCE enters into master agreements which typically provide for a right of setoff. Accordingly, SCE’s credit risk exposure from counterparties is based on a net exposure under these arrangements. At March 31, 2008, the amount of exposure as described above, broken down by the credit ratings of SCE’s counterparties, was as follows:

In millions	March 31, 2008
S&P Credit Rating
A or higher	$    59
A-	6
BBB+	15
BBB	—
BBB-	—
Below investment grade and not rated	270
Total	$  350

SCE has structured transactions (tolling contracts) in which SCE purchases all of the output of a plant from the counterparty. SCE’s structured transactions may be for multiple years which increases the volatility of the fair value position of the transaction. A number of the counterparties with which SCE has structured transactions do not currently have an investment grade rating or are below investment grade. SCE seeks to mitigate this risk through diversification of its structured transactions, when available. Despite this, there can be no assurance that these efforts will be successful in mitigating credit risk from contracts.

SCE requires that counterparties with below investment grade ratings or those that do not currently have an investment grade rating post collateral. In the event of default by the counterparty, SCE would be able to use that collateral to pay for the commodity purchased or to pay the associated obligation in the event of default by the counterparty. Furthermore, all of the contracts that SCE has entered into with counterparties are entered into under SCE’s short-term and long-term procurement plan which has been approved by the CPUC. As a result, SCE would qualify for regulatory recovery for any defaults by counterparties on these transactions. In addition, SCE subscribes to rating agencies and various news services in order to closely monitor any changes that may affect the counterparties’ ability to perform.

SCE: REGULATORY MATTERS

Current Regulatory Developments

This section of the MD&A describes significant regulatory issues that may impact SCE’s consolidated financial condition or results of operation.

Impact of Regulatory Matters on Customer Rates

The following table summarizes SCE’s system average rates, including the portion related to CDWR which is not recognized as revenue by SCE, at various dates in 2007 and 2008:

Date	SCE System Average Rate	Portion Related to CDWR
January 1, 2007	14.5¢ per-kWh	3.1¢ per-kWh
February 14, 2007	13.9¢ per-kWh	3.0¢ per-kWh
January 1, 2008	13.8¢ per-kWh	2.9¢ per-kWh
March 1, 2008	13.9¢ per-kWh	2.9¢ per-kWh
April 7, 2008	13.8¢ per-kWh	2.9¢ per-kWh

The March 2008 rate change resulted from increasing the FERC jurisdictional base transmission rates to include adopted CWIP incentives. See “—FERC Construction Work in Progress Mechanism” for further discussion. The

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April 2008 rate change consolidated all of the 2008 authorized CPUC jurisdictional revenue requirements into rate levels. This decrease was primarily related to an increase in estimated 2008 kWh sales which more than offset a small increase in 2008 CPUC authorized revenue requirements.

2009 General Rate Case Proceeding

As discussed under the heading “SCE: Regulatory Matters—Current Regulatory Developments—2009 General Rate Case Proceeding” in the year-ended 2007 MD&A, SCE filed its GRC application on November 19, 2007. The application requests a 2009 base rate revenue requirement of $5.199 billion, an increase of approximately $858 million over the projected authorized base rate revenue requirements. After considering the effects of sales growth and other offsets, SCE’s request would be a $726 million increase over current authorized base rate revenue. If the CPUC approves these requested increases and allocates them to ratepayer groups on a system average percentage change basis, the percentage increases over current base rates and total rates are estimated to be 16.2% and 6.2%, respectively. SCE’s application also proposes a post-test year ratemaking mechanism which would result in 2010 and 2011 base rate revenue requirement increases, net of sales growth, of $216 million and $287 million, respectively. On April 15, 2008, the DRA submitted testimony recommending that SCE’s 2009 base rate revenue requirement be increased by approximately $7 million, a difference of $719 million from SCE’s request. The $719 million difference is mainly due to reductions proposed by DRA including: recommended changes in methods for calculating depreciation expense estimates resulting in a reduction of approximately $133 million; a reduction in transmission and distribution and generation operations and maintenance expense of approximately $167 million; a reduction in pensions and benefits of approximately $108 million; the elimination of results sharing as well as a reduction in long-term incentives and other executive compensation totaling approximately $141 million; and other miscellaneous proposed reductions. Testimony submitted by TURN, another intervenor, seeks to reduce SCE’s 2009 request by an additional $195 million over the DRA adjustments, due to a further reduction in depreciation expenses of approximately $125 million. In addition, TURN intends to propose additional adjustments related to the treatment of Mohave, replaced meters, software costs and other operating revenue sharing mechanisms. These issues will be the subject of evidentiary hearings scheduled in June 2008. SCE cannot predict the revenue requirement the CPUC will ultimately authorize or precisely when a final decision will be adopted although a final decision is expected prior to year-end.

FERC Construction Work in Progress Mechanism

As discussed under the headings “SCE: Regulatory Matters—FERC Transmission Incentives” and “—FERC Construction Work in Progress Mechanism” in the year-ended 2007 MD&A, on December 21, 2007, SCE filed a revision to its Transmission Owner Tariff to collect 100% of CWIP in rate base for its Tehachapi, DPV2, and Rancho Vista projects. In the CWIP filing, SCE proposed a single-issue rate adjustment ($45 million or a 14.4% increase) to SCE’s currently authorized base transmission revenue requirement to be made effective on March 1, 2008 and later adjusted for amounts actually spent in 2008 through a new balancing account mechanism. The rate adjustment represents actual expenditures from September 1, 2005 through November 30, 2007, projected expenditures from December 1, 2007 through December 31, 2008, and a ROE (which includes the ROE adders approved for Tehachapi, DPV2 and Rancho Vista). SCE projects that it will spend a total of approximately $244 million, $27 million, and $181 million for Tehachapi, DPV2, and Rancho Vista, respectively, from September 1, 2005 through the end of 2008. The 2008 DPV2 expenditure forecast is limited to projected consulting and legal costs associated with SCE’s continued efforts to obtain regulatory approvals necessary to construct the DPV2 Project. On February 29, 2008, the CWIP filing was approved and SCE implemented the CWIP rate on March 1, 2008, subject to refund on the limited issue of whether SCE’s proposed ROEs are reasonable. In the order, SCE was also directed by FERC to make a compliance filing to provide greater detail on the costs reflected in CWIP rates for 2008. SCE made the compliance filing on March 31, 2008. On April 21, 2008, the CPUC filed a protest of the compliance filing at FERC and requested an evidentiary hearing to be set to further review the costs. SCE intends to file a response to the CPUC’s protest, which rejects the CPUC’s request for a further hearing. In addition, on March 1, 2008, the CPUC filed a Petition for Rehearing with the FERC on the FERC’s acceptance of SCE’s proposed ROE for CWIP. SCE cannot predict the outcome of this proceeding.

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Energy Resource Recovery Account Proceedings

As discussed under the heading “SCE: Regulatory Matters—Current Regulatory Developments—Energy Resource Recovery Account Proceedings” in the year-ended 2007 MD&A, the ERRA is the balancing account mechanism to track and recover SCE’s fuel and procurement-related costs. At March 31, 2008, the ERRA was overcollected by $293 million, which was 5.49% of SCE’s prior year’s generation revenue. The CPUC issued a decision on March 14, 2008 authorizing SCE to refund the over-collection to customers. SCE began refunding the over-collection in its consolidating rate change implemented on April 7, 2008. See “—Impact of Regulatory Matters on Customer Rates” for further discussion of SCE’s rate changes.

Peaker Plant Generation Projects

As discussed under the heading “SCE: Regulatory Matters—Current Regulatory Developments—Peaker Plant Generation Projects” in the year-ended 2007 MD&A, in response to a CPUC order, SCE pursued construction of five combustion turbine peaker plants, four of which were placed online in August 2007 to help meet peak customer demands and other system requirements.

SCE anticipates submitting updated testimony in connection with its December 2007 cost recovery application to revise the total recorded costs as of mid-2008 in the amount of approximately $248 million with projected costs of approximately $12 million. In its cost recovery application, SCE proposed to continue tracking the capital costs of the fifth peaker according to the interim cost tracking mechanism that was previously approved by the CPUC for all five peaker projects while they were in construction. Additionally, SCE proposed to file a separate cost recovery application for the fifth peaker after it is installed or its final disposition is otherwise determined. As of March 31, 2008, SCE has incurred capital costs of approximately $37 million for the fifth peaker. Several parties have filed protests or other filings in response to SCE’s application. SCE expects to fully recover its costs from these projects, but cannot predict the outcome of regulatory proceedings. SCE expects a CPUC decision on its cost recovery application in late 2008.

Procurement of Renewable Resources

As discussed under the heading “SCE: Regulatory Matters—Current Regulatory Developments—Procurement of Renewable Resources” in the year-ended 2007 MD&A, California law requires SCE to increase its procurement of renewable resources by at least 1% of its annual retail electricity sales per year so that 20% of its annual electricity sales are procured from renewable resources by no later than December 31, 2010.

SCE filed its compliance report in March 2008. Through the use of flexible compliance rules, SCE demonstrated full compliance for the procurement year 2007 and forecasted full compliance for the procurement years 2008 to 2010. It is unlikely that SCE will have 20% of its annual electricity sales procured from renewable resources by 2010. However, SCE may still meet the 20% target by utilizing the flexible compliance rules. SCE continues to engage in several renewable procurement activities including formal solicitations approved by the CPUC, bilateral negotiations with individual projects and other initiatives.

Under current CPUC decisions, potential penalties for SCE’s failure to achieve its renewable procurement objectives for any year will be considered by the CPUC in the context of the CPUC’s review of SCE’s annual compliance filing. Under the CPUC’s current rules, the maximum penalty for failing to achieve renewable procurement targets is $25 million per year. SCE cannot predict whether it will be assessed penalties.

FERC Refund Proceedings

As discussed under the heading “SCE: Regulatory Matters—FERC Refund Proceedings” in the year-ended 2007 MD&A, SCE is participating in several related proceedings seeking recovery of refunds from sellers of electricity and natural gas who manipulated the electric and natural gas markets during the energy crisis in

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California in 2000 – 2001 or who benefited from the manipulation by receiving inflated market prices. SCE is required to refund to customers 90% of certain refunds realized by SCE, net of litigation costs, and 10% will be retained by SCE as a shareholder incentive.

In May 2008, SCE and a number of other parties entered into a settlement of the FERC refund proceeding issues with NEGT Energy Trading-Power, L.P. (NEGT) and a related party, both of which are debtors in a Chapter 11 proceeding pending in the Maryland bankruptcy court. Under the terms of the settlement, NEGT will provide refunds valued at $66 million, a portion of which will be paid in the form of an allowed, unsecured claim in the Chapter 11 bankruptcy proceeding. SCE’s share of this amount is expected to be approximately $19 million. NEGT will also assign to SCE and the other parties to the settlement a corporate guarantee and surety bond that, subject to collection, will provide an additional $14 million. SCE’s share of the $14 million is yet to be determined. The settlement remains subject to the approvals of the Maryland bankruptcy court and FERC.

SCE: OTHER DEVELOPMENTS

Palo Verde Nuclear Generating Station Inspection

As discussed under the heading “SCE: Other Developments—Palo Verde Nuclear Generating Station Inspection” in the year-ended 2007 MD&A, the NRC held three special inspections of Palo Verde, between March 2005 and February 2007. The combination of the results of the first and third special inspections caused the NRC to undertake an additional oversight inspection of Palo Verde. This additional inspection, known as a supplemental inspection, was completed in December 2007. In addition, Palo Verde was required to take additional corrective actions based on the outcome of completed surveys of its plant personnel and self-assessments of its programs and procedures. The NRC and APS defined and agreed to inspection and survey corrective actions that the NRC in a Confirmatory Action Letter, which was issued in February 2008. Palo Verde operation and maintenance costs (including overhead) increased in 2007 by approximately $7 million from 2006. SCE estimates that operation and maintenance costs will increase by approximately $23 million (in 2007 dollars) over the two year period 2008 – 2009, from 2007 recorded costs including overhead costs. SCE is unable to estimate how long SCE will continue to incur these costs.

SCE: MARKET RISK EXPOSURES

SCE’s primary market risks include fluctuations in interest rates, commodity prices and volumes, and counterparty credit. Fluctuations in interest rates can affect earnings and cash flows. Fluctuations in commodity prices and volumes and counterparty credit losses may temporarily affect cash flows, but are not expected to affect earnings due to expected recovery through regulatory mechanisms. SCE uses derivative financial instruments, as appropriate, to manage its market risks.

Interest Rate Risk

SCE is exposed to changes in interest rates primarily as a result of its borrowing and investing activities used for liquidity purposes, to fund business operations and to finance capital expenditures.

In July 2007, SCE entered into interest rate-locks to mitigate interest rate risk associated with future financings. Due to declining interest rates in late 2007, at December 31, 2007, these interest rate locks had unrealized losses of $33 million. In January and February 2008, SCE settled these interest rate-locks resulting in realized losses of $33 million. A related regulatory asset was recorded in this amount and SCE expects to amortize and recover this amount as interest expense associated with its 2008 financings.

Commodity Price Risk

As discussed in the year-ended 2007 MD&A, SCE is exposed to commodity price risk associated with its purchases for additional capacity and ancillary services to meet its peak energy requirements as well as exposure

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to natural gas prices associated with power purchased from QFs, fuel tolling arrangements, and its own gas-fired generation, including the Mountainview plant.

SCE has an active hedging program in place to minimize ratepayer exposure to spot-market price spikes; however, to the extent that SCE does not mitigate the exposure to commodity price risk, the unhedged portion is subject to the risks and benefits of spot-market price movements, which are ultimately passed-through to ratepayers.

To mitigate SCE’s exposure to spot-market prices, SCE enters into energy options, tolling arrangements, forward physical contracts, and congestion rights (FTRs and CRRs). SCE also enters into contracts for power and gas options, as well as swaps and futures, in order to mitigate its exposure to increases in natural gas and electricity pricing. These transactions are pre-approved by the CPUC or executed in compliance with CPUC-approved procurement plans.

In September 2007, the ISO allocated CRRs for the period March 2008 through December 2017 to SCE which will entitle SCE to receive (or pay) the value of transmission congestion at specific locations. These rights will act as an economic hedge against transmission congestion costs in the MRTU environment which was expected to be operational March 31, 2008, but was delayed to the fall of 2008. The CRRs meet the definition of a derivative under SFAS No. 133. In accordance with SFAS No. 157, SCE recognized the CRRs for the period beginning October 2008 at a zero fair value due to liquidity reserves. Liquidity reserves against CRRs fair values were provided since there were no quoted long-term market prices for the CRRs allocated to SCE. Although an auction was held in December 2007, the auction results did not provide sufficient evidence of long-term market prices.

During the first quarter of 2008, the ISO held an auction for FTRs. SCE participated in the ISO auction and paid $62 million to secure FTRs for the period April 2008 through March 2009. The FTRs will be replaced with CRRs in the MRTU environment. SCE recognized the FTRs for the period April 2008 through September 2008 at fair value. SCE anticipates amounts paid for FTRs for the period October 2008 through March 2009 will be refunded to SCE and has recognized this amount as a receivable from the ISO.

Any future fair value changes, given a MRTU market, will be recorded in purchased-power expense and offset through the provision for regulatory adjustments clauses as the CPUC allows these costs to be recovered from or refunded to customers through a regulatory balancing account mechanism. As a result, fair value changes are not expected to affect earnings.

SCE records its derivative instruments on its consolidated balance sheets at fair value unless they meet the definition of a normal purchase or sale. Certain derivative instruments do not meet the normal purchases and sales exception because demand variations and CPUC mandated resource adequacy requirements may result in physical delivery of excess energy that may not be in quantities that are expected to be used over a reasonable period in the normal course of business and may then be resold into the market. In addition, certain contracts do not meet the definition of clearly and closely related under SFAS No. 133 since pricing for certain renewable contracts is based on an unrelated commodity. The derivative instrument fair values are marked to market at each reporting period. Any fair value changes for recorded derivatives are recorded in purchased-power expense and offset through the provision for regulatory adjustment clauses – net; therefore, fair value changes do not affect earnings. Hedge accounting is not used for these transactions due to this regulatory accounting treatment.

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The following table summarizes the fair values of outstanding derivative financial instruments used at SCE to mitigate its exposure to spot market prices:

	March 31, 2008			December 31, 2007
In millions	Assets		Liabilities	Assets	Liabilities
Energy options	$      6		$  45	$    6	$    49
FTRs	25		—	22	—
Forward physicals (power) and tolling arrangements	34		5	7	8
Gas options, swaps and forward arrangements	147		—	46	22
Netting and collateral	(4	)	—	—	(2	)
Total	$  208		$  50	$  81	$  77

Quoted market prices, if available, are used for determining the fair value of contracts, as discussed above. If quoted market prices are not available, internally maintained standardized or industry accepted models are used to determine the fair value. The models are updated with spot prices, forward prices, volatilities and interest rates from regularly published and widely distributed independent sources. SCE implemented SFAS No. 157 during the first quarter of 2008. Under SFAS No. 157, when actual market prices, or relevant observable inputs are not available it is appropriate to use unobservable inputs which reflect management assumptions, including extrapolating limited short-term observable data and developing correlations between liquid and non-liquid trading hubs. The derivative assets and liabilities whose fair value is based on unobservable inputs are classified as level 3 measurements under SFAS No. 157. The amount of SCE’s level 3 derivative assets and liabilities measured using significant unobservable inputs as a percentage of the total derivative assets and total derivative liabilities measured at fair value was 61% and 100%, respectively. During the first quarter of 2008, the level 3 fair values increased as a result of changes in realized and unrealized gains. SCE recorded net realized and unrealized gains of $149 million and $105 million for the three months ended March 31, 2008 and 2007, respectively. The changes in net realized and unrealized gains on economic hedging activities were primarily due to higher forward natural gas prices in the first quarter of 2008, compared to the same period in 2007. Due to expected recovery through regulatory mechanisms unrealized gains and losses may temporarily affect cash flows, but are not expected to affect earnings.

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EDISON MISSION GROUP

EMG: LIQUIDITY

Liquidity

At March 31, 2008, EMG and its subsidiaries had cash and cash equivalents and short-term investments of $1.2 billion, EMG had a total of $937 million of available borrowing capacity under its credit facilities. EMG’s consolidated debt at March 31, 2008 was $4.0 billion. In addition, EME’s subsidiaries had $3.8 billion of long-term lease obligations related to the sale-leaseback transactions that are due over periods ranging up to 27 years.

Capital Expenditures

At March 31, 2008, the estimated capital expenditures through 2010 by EME’s subsidiaries related to existing projects, corporate activities and turbine commitments were as follows:

In millions	April through December 2008		2009		2010
Illinois Plants
Plant capital expenditures	$	56	$	73	$	44
Environmental expenditures		53		58		246
Homer City Facilities
Plant capital expenditures		25		34		26
Environmental expenditures		12		9		8
New Projects
Projects under construction		142		4		—
Turbine commitments		484		651		117
Other capital expenditures		45		14		8
Total	$	817	$	843	$	449

Expenditures for Existing Projects

Plant capital expenditures relate to non-environmental projects such as upgrades to boiler and turbine controls, railroad interconnection, replacement of major boiler components, mill inerting projects and ash site disposal development. Environmental expenditures relate to environmental projects such as mercury emission monitoring and control and a selenium removal system at the Homer City facilities and various projects at the Illinois plants to achieve specified emissions reductions such as installation of mercury controls. EME plans to fund these expenditures with debt financings, cash on hand or cash generated from operations. For further discussion regarding these and possible additional capital expenditures, including environmental control equipment at the Homer City facilities, refer to “Edison International: Management’s Overview,” and “Other Developments—Environmental Matters—Air Quality Regulation—Clean Air Interstate Rule—Illinois,” and “Other Developments—Environmental Matters—Air Quality Regulation—Mercury Regulation” in the year-ended 2007 MD&A.

Expenditures for New Projects

EME expects to make substantial investments in new projects during the next several years. At March 31, 2008, EME had committed to purchase turbines (as reflected in the above table of capital expenditures) for wind projects that aggregate 1,076 MW. The turbine commitments generally represent approximately two-thirds of the total capital costs of EME’s wind projects. As of March 31, 2008, EME had a development pipeline of potential

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wind projects with projected installed capacity of approximately 5,000 MW. The development pipeline represents potential projects with respect to which EME either owns the project rights or has exclusive acquisition rights. Completion of development of a wind project may take a number of years due to factors that include local permit requirements, willingness of local utilities to purchase renewable power at sufficient prices to earn an appropriate rate of return, and availability and prices of equipment. Furthermore, successful completion of a wind project is dependent upon obtaining permits, an interconnection agreement(s) or other agreements necessary to support an investment. There is no assurance that each project included in the development pipeline currently or added in the future will be successfully completed.

Credit Ratings

Overview

Credit ratings for EMG’s direct and indirect subsidiaries at March 31, 2008, were as follows:

	Moody’s Rating	S&P Rating	Fitch Rating
EME	B1	BB-	BB-
Midwest Generation	Baa3	BB+	BBB-
EMMT	Not Rated	BB-	Not Rated
Edison Capital	Ba1	BB+	Not Rated

EMG cannot provide assurance that its current credit ratings or the credit ratings of its subsidiaries will remain in effect for any given period of time or that one or more of these ratings will not be lowered. EMG notes that these credit ratings are not recommendations to buy, sell or hold its securities and may be revised at any time by a rating agency.

EMG does not have any “rating triggers” contained in subsidiary financings that would result in it being required to make equity contributions or provide additional financial support to its subsidiaries.

Credit Rating of EMMT

The Homer City sale-leaseback documents restrict EME Homer City’s ability to enter into trading activities, as defined in the documents, with EMMT to sell forward the output of the Homer City facilities if EMMT does not have an investment grade credit rating from S&P or Moody’s or, in the absence of those ratings, if it is not rated as investment grade pursuant to EME’s internal credit scoring procedures. These documents include a requirement that the counterparty to such transactions, and EME Homer City, if acting as seller to an unaffiliated third party, be investment grade. EME currently sells all the output from the Homer City facilities through EMMT, which has a below investment grade credit rating, and EME Homer City is not rated. Therefore, in order for EME to continue to sell forward the output of the Homer City facilities, either: (1) EME must obtain consent from the sale-leaseback owner participant to permit EME Homer City to sell directly into the market or through EMMT; or (2) EMMT must provide assurances of performance consistent with the requirements of the sale-leaseback documents. EME has obtained a consent from the sale-leaseback owner participant that will allow EME Homer City to enter into such sales, under specified conditions, through December 31, 2008. EME Homer City continues to be in compliance with the terms of the consent. EME is permitted to sell the output of the Homer City facilities into the spot market at any time. See “EMG: Market Risk Exposures—Commodity Price Risk—Energy Price Risk Affecting Sales from the Homer City Facilities.”

Margin, Collateral Deposits and Other Credit Support for Energy Contracts

In connection with entering into contracts in support of EME’s hedging and energy trading activities (including forward contracts, transmission contracts and futures contracts), EME’s subsidiary, EMMT, has entered into agreements to mitigate the risk of nonperformance. EME has entered into guarantees in support of EMMT’s hedging and trading activities; however, because the credit ratings of EMMT and EME are below investment

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grade, EME has historically also provided collateral in the form of cash and letters of credit for the benefit of counterparties related to accounts payable and unrealized losses in connection with these hedging and trading activities. At March 31, 2008, EMMT had deposited $32 million in cash with brokers in margin accounts in support of futures contracts and had deposited $79 million with counterparties in support of forward energy and transmission contracts. In addition, EME had issued letters of credit of $17 million in support of commodity contracts at March 31, 2008.

Future cash collateral requirements may be higher than the margin and collateral requirements at March 31, 2008, if wholesale energy prices increase or the amount hedged increases. EME estimates that margin and collateral requirements for energy contracts outstanding as of March 31, 2008 could increase by approximately $470 million over the remaining life of the contracts using a 95% confidence level.

Midwest Generation has cash on hand and a $500 million working capital facility to support margin requirements specifically related to contracts entered into by EMMT related to the Illinois plants. At March 31, 2008, Midwest Generation had available $422 million of borrowing capacity under this credit facility. As of March 31, 2008, Midwest Generation had $105 million in loans receivable from EMMT for margin advances. In addition, EME has cash on hand and $515 million of borrowing capacity available under a $600 million working capital facility to provide credit support to subsidiaries.

Dividend Restrictions in Major Financings

General

Each of EME’s direct or indirect subsidiaries is organized as a legal entity separate and apart from EME and its other subsidiaries. Assets of EME’s subsidiaries are not available to satisfy EME’s obligations or the obligations of any of its other subsidiaries. However, unrestricted cash or other assets that are available for distribution may, subject to applicable law and the terms of financing arrangements of the parties, be advanced, loaned, paid as dividends or otherwise distributed or contributed to EME or to its subsidiary holding companies.

Key Ratios of EMG’s Principal Subsidiaries Affecting Dividends

Set forth below are key ratios of EME’s principal subsidiaries required by financing arrangements at March 31, 2008 or for the 12 months ended March 31, 2008:

Subsidiary	Financial Ratio	Covenant	Actual
Midwest Generation (Illinois plants)	Debt to Capitalization     Ratio	Less than or equal to     0.60 to 1	0.23 to 1
EME Homer City (Homer City facilities)	Senior Rent Service     Coverage Ratio	Greater than 1.7 to 1	3.79 to 1

Edison Capital’s ability to make dividend payments is currently restricted by covenants in its financial instruments, which require Edison Capital, through a wholly owned subsidiary, to maintain a specified minimum net worth of $200 million. Edison Capital satisfied this minimum net worth requirement as of March 31, 2008.

For a more detailed description of the covenants binding EME’s principal subsidiaries that may restrict the ability of those entities to make distributions to EME directly or indirectly through the other holding companies owned by EME, refer to “EMG: Liquidity—Dividend Restrictions in Major Financings” in the year-ended 2007 MD&A.

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EMG: OTHER DEVELOPMENTS

PJM Matters

On April 4, 2008, the FERC issued an order rejecting PJM’s request to revise its RPM to reflect PJM’s claimed rise in its CONE values. CONE is one of the two components used by PJM to determine its Variable Resource Requirement curve for the RPM auction. PJM also proposed to add a new section to its tariff permitting PJM to unilaterally request a CONE increase for use in its May 2008 RPM auction for the 2011/2012 delivery year. In rejecting the proposal, the FERC found that PJM had not met timing provisions in its existing tariff to provide sufficient time for stakeholder review of the analysis and advance planning and that it had also failed to establish that its proposal to revise that provision was necessary on a one-time emergency basis to ensure reliable service.

The effect of FERC’s actions on future RPM auctions cannot be determined at this time. The CONE as established for the May 2008 RPM auction for the 2011/2012 delivery year is lower than the PJM request.

EMG: MARKET RISK EXPOSURES

Introduction

EMG’s primary market risk exposures are associated with the sale of electricity and capacity from and the procurement of fuel for EME’s merchant power plants. These market risks arise from fluctuations in electricity, capacity and fuel prices, emission allowances, and transmission rights. Additionally, EME’s financial results can be affected by fluctuations in interest rates. EME manages these risks in part by using derivative financial instruments in accordance with established policies and procedures.

Commodity Price Risk

Introduction

EME’s merchant operations expose it to commodity price risk, which represents the potential loss that can be caused by a change in the market value of a particular commodity. Commodity price risks are actively monitored by a risk management committee to ensure compliance with EME’s risk management policies. Policies are in place which define risk management processes, and procedures exist which allow for monitoring of all commitments and positions with regular reviews by EME’s risk management committee. Despite this, there can be no assurance that all risks have been accurately identified, measured and/or mitigated.

In addition to prevailing market prices, EME’s ability to derive profits from the sale of electricity will be affected by the cost of production, including costs incurred to comply with environmental regulations. The costs of production of the units vary and, accordingly, depending on market conditions, the amount of generation that will be sold from the units is expected to vary.

EME uses “earnings at risk” to identify, measure, monitor and control its overall market risk exposure with respect to hedge positions of the Illinois plants, the Homer City facilities, and the merchant wind projects, and “value at risk” to identify, measure, monitor and control its overall risk exposure in respect of its trading positions. The use of these measures allows management to aggregate overall commodity risk, compare risk on a consistent basis and identify the risk factors. Value at risk measures the possible loss, and earnings at risk measures the potential change in value of an asset or position, in each case over a given time interval, under normal market conditions, at a given confidence level. Given the inherent limitations of these measures and reliance on a single type of risk measurement tool, EME supplements these approaches with the use of stress testing and worst-case scenario analysis for key risk factors, as well as stop-loss limits and counterparty credit exposure limits.

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Hedging Strategy

To reduce its exposure to market risk, EME hedges a portion of its merchant portfolio risk through EMMT, an EME subsidiary engaged in the power marketing and trading business. To the extent that EME does not hedge its merchant portfolio, the unhedged portion will be subject to the risks and benefits of spot market price movements. Hedge transactions are primarily implemented through:

• the use of contracts cleared on the Intercontinental Trading Exchange and the New York Mercantile Exchange,

• forward sales transactions entered into on a bilateral basis with third parties, including electric utilities and power marketing companies,

• full requirements services contracts or load requirements services contracts for the procurement of power for electric utilities’ customers, with such services including the delivery of a bundled product including, but not limited to, energy, transmission, capacity, and ancillary services, generally for a fixed unit price, and

• participation in capacity auctions.

The extent to which EME hedges its market price risk depends on several factors. First, EME evaluates over-the-counter market prices to determine whether the types of hedge transactions set forth above at forward market prices are sufficiently attractive compared to assuming the risk associated with fluctuating spot market sales. Second, EME’s ability to enter into hedging transactions depends upon its and Midwest Generation’s credit capacity and upon the forward sales markets having sufficient liquidity to enable EME to identify appropriate counterparties for hedging transactions.

In the case of hedging transactions related to the generation and capacity of the Illinois plants, Midwest Generation is permitted to use its working capital facility and cash on hand to provide credit support for these hedging transactions entered into by EMMT under an energy services agreement between Midwest Generation and EMMT. Utilization of this credit facility in support of hedging transactions provides additional liquidity support for implementation of EME’s contracting strategy for the Illinois plants. In addition, Midwest Generation may grant liens on its property in support of hedging transactions associated with the Illinois plants. In the case of hedging transactions related to the generation and capacity of the Homer City facilities, credit support is provided by EME pursuant to intercompany arrangements between it and EMMT. See “—Credit Risk” below.

Energy Price Risk Affecting Sales from the Illinois Plants

All the energy and capacity from the Illinois plants is sold under terms, including price and quantity, arranged by EMMT with customers through a combination of bilateral agreements (resulting from negotiations or from auctions), forward energy sales and spot market sales. As discussed further below, power generated at the Illinois plants is generally sold into the PJM market.

Midwest Generation sells its power into PJM at spot prices based upon locational marginal pricing. Hedging transactions related to the generation of the Illinois plants are generally entered into at the Northern Illinois Hub in PJM, and may also be entered into at other trading hubs, including the AEP/Dayton Hub in PJM and the Cinergy Hub in the Midwest Independent Transmission System Operator. These trading hubs have been the most liquid locations for hedging purposes. See “—Basis Risk” below for further discussion.

PJM has a short-term market, which establishes an hourly clearing price. The Illinois plants are situated in the PJM control area and are physically connected to high-voltage transmission lines serving this market.

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The following table depicts the average historical market prices for energy per megawatt-hour during the first three months of 2008 and 2007.

	24-Hour Northern Illinois Hub Historical Energy Prices(1)
	2008		2007
January	$	47.09	$	35.75
February		54.46		56.64
March		58.58		42.04
Quarterly Average	$	53.38	$	44.81

(1) Energy prices were calculated at the Northern Illinois Hub delivery point using hourly real-time prices as published by PJM.

Forward market prices at the Northern Illinois Hub fluctuate as a result of a number of factors, including natural gas prices, transmission congestion, changes in market rules, electricity demand (which in turn is affected by weather, economic growth, and other factors), plant outages in the region, and the amount of existing and planned power plant capacity. The actual spot prices for electricity delivered by the Illinois plants into these markets may vary materially from the forward market prices set forth in the table below.

The following table sets forth the forward market prices for energy per megawatt-hour as quoted for sales into the Northern Illinois Hub at March 31, 2008:

	24-Hour Northern Illinois Hub Forward Energy Prices(1)
2008
April	$	55.70
May		49.49
June		55.06
July		65.11
August		63.23
September		50.13
October		47.39
November		45.89
December		51.86
2009 Calendar “strip”(2)	$	55.48

(1) Energy prices were determined by obtaining broker quotes and information from other public sources relating to the Northern Illinois Hub delivery point.

(2) Market price for energy purchases for the entire calendar year, as quoted for sales into the Northern Illinois Hub.

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The following table summarizes Midwest Generation’s hedge position (primarily based on prices at the Northern Illinois Hub) at March 31, 2008:

	2008	2009	2010
Energy Only Contracts(1)
MWh	7,746,450	7,692,290	3,471,950
Average price/MWh(2)	$  60.85	$  62.38	$  62.58
Load Requirements Services Contracts
Estimated MWh(3)	3,689,269	1,571,182	—
Average price/MWh(4)	$  64.21	$  63.65	$       —
Total estimated MWh	11,435,719	9,263,472	3,471,950

(1) Primarily at Northern Illinois Hub.

(2) The energy only contracts include forward contracts for the sale of power and futures contracts during different periods of the year and the day. Market prices tend to be higher during on-peak periods and during summer months, although there is significant variability of power prices during different periods of time. Accordingly, the above hedge position at March 31, 2008 is not directly comparable to the 24-hour Northern Illinois Hub prices set forth above.

(3) Under a load requirements services contract, the amount of power sold is a portion of the retail load of the purchasing utility and thus can vary significantly with variations in that retail load. Retail load depends upon a number of factors, including the time of day, the time of the year and the utility’s number of new and continuing customers. Estimated MWh have been forecast based on historical patterns and on assumptions regarding the factors that may affect retail loads in the future. The actual load will vary from that used for the above estimate, and the amount of variation may be material.

(4) The average price per MWh under a load requirements services contract (which is subject to a seasonal price adjustment) represents the sale of a bundled product that includes, but is not limited to, energy, capacity and ancillary services. Furthermore, as a supplier of a portion of a utility’s load, Midwest Generation will incur charges from PJM as a load-serving entity. For these reasons, the average price per MWh under a load requirements services contract is not comparable to the sale of power under an energy only contract. The average price per MWh under a load requirements services contract represents the sale of the bundled product based on an estimated customer load profile.

Energy Price Risk Affecting Sales from the Homer City Facilities

All the energy and capacity from the Homer City facilities is sold under terms, including price and quantity, arranged by EMMT with customers through a combination of bilateral agreements (resulting from negotiations or from auctions), forward energy sales and spot market sales. Electric power generated at the Homer City facilities is generally sold into the PJM market. PJM has a short-term market, which establishes an hourly clearing price. The Homer City facilities are situated in the PJM control area and are physically connected to high-voltage transmission lines serving both the PJM and NYISO markets.

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The following table depicts the average historical market prices for energy per megawatt-hour at the Homer City busbar and in PJM West Hub (EME Homer City’s primary trading hub) during the first three months of 2008 and 2007:

	Historical Energy Prices(1) 24-Hour PJM
	Homer City Busbar				PJM West Hub
	2008		2007		2008		2007
January	$	54.32	$	40.30	$	66.80	$	44.63
February		61.74		64.27		68.29		73.93
March		65.37		55.00		70.48		61.02
Quarterly Average	$	60.48	$	53.19	$	68.52	$	59.86

(1) Energy prices were calculated at the Homer City busbar (delivery point) and PJM West Hub using historical hourly real-time prices provided on the PJM web-site.

Forward market prices at the PJM West Hub fluctuate as a result of a number of factors, including natural gas prices, transmission congestion, changes in market rules, electricity demand (which in turn is affected by weather, economic growth and other factors), plant outages in the region, and the amount of existing and planned power plant capacity. The actual spot prices for electricity delivered by the Homer City facilities into these markets may vary materially from the forward market prices set forth in the table below.

The following table sets forth the forward market prices for energy per megawatt-hour as quoted for sales into the PJM West Hub at March 31, 2008:

	24-Hour Northern PJM West Hub Forward Energy Prices(1)
2008
April	$	72.25
May		70.35
June		77.56
July		94.04
August		96.78
September		74.43
October		72.40
November		67.70
December		75.35
2009 Calendar “strip”(2)	$	75.55

(1) Energy prices were determined by obtaining broker quotes and information from other public sources relating to the PJM West Hub delivery point. Forward prices at PJM West Hub are generally higher than the prices at the Homer City busbar.

(2) Market price for energy purchases for the entire calendar year, as quoted for sales into the PJM West Hub.

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The following table summarizes EME Homer City’s hedge position at March 31, 2008:

	2008	2009	2010
MWh	5,434,350	2,867,200	1,022,400
Average price/MWh(1)	$  60.84	$  73.84	$  77.80

(1) The above hedge positions include forward contracts for the sale of power during different periods of the year and the day. Market prices tend to be higher during on-peak periods and during summer months, although there is significant variability of power prices during different periods of time. Accordingly, the above hedge position at March 31, 2008 is not directly comparable to the 24-hour PJM West Hub prices set forth above.

The average price/MWh for EME Homer City’s hedge position is based on PJM West Hub. Energy prices at the Homer City busbar have been lower than energy prices at the PJM West Hub. See “—Basis Risk” below for a discussion of the difference.

Capacity Price Risk

On June 1, 2007, PJM implemented the RPM for capacity. The purpose of the RPM is to provide a long-term pricing signal for capacity resources. The RPM provides a mechanism for PJM to satisfy the region’s need for generation capacity, the cost of which is allocated to load-serving entities through a locational reliability charge.

The following table summarizes the status of capacity sales for Midwest Generation and EME Homer City at March 31, 2008:

	Fixed Price Capacity Sales
	Through RPM Auction, Net			Non-unit Specific Capacity Sales		Variable Capacity Sales
	MW	Price per MW-day		MW	Price per MW-day	MW	Price per MW-day
April 1, 2008 to May 31, 2008
Midwest Generation	2,629	$  37.27		500	$  21.31	—	—
EME Homer City	786	40.80		—	—	925	$  70.37	(1)
June 1, 2008 to May 31, 2009
Midwest Generation	2,978	123.77	(3)	880	64.35	—	—
EME Homer City	820	113.22	(3)	—	—	905	63.96	(2)
June 1, 2009 to May 31, 2010
Midwest Generation	4,614	102.04		715	71.46	—	—
EME Homer City	1,670	191.32		—	—	—	—
June 1, 2010 to May 31, 2011
Midwest Generation	4,929	174.29		—	—	—	—
EME Homer City	1,813	174.29		—	—	—	—

(1) Actual contract price is a function of NYISO capacity auction clearing prices for April 2008, and forward over-the-counter NYISO capacity prices on March 31, 2008 for May 2008.

(2) Expected price per MW-day is based on forward over-the-counter NYISO prices on March 31, 2008.

(3) During the first quarter of 2008, PJM updated capacity prices for the period June 1, 2008 to May 31, 2009 to reflect the final incremental auction for this planning year. The adjusted price for capacity per MW-day is $113.22 compared to the original price of $111.92. In addition, the price was affected by Midwest Generation’s participation in a supplemental RPM auction which resulted in purchasing certain capacity amounts at a price of $10 per MW-day, thereby reducing the aggregate forward capacity sales for this period and increasing the effective capacity price to $123.77.

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Revenues from the sale of capacity from Midwest Generation and EME Homer City beyond the periods set forth above will depend upon the amount of capacity available and future market prices either in PJM or nearby markets if EME has an opportunity to capture a higher value associated with those markets. Under PJM’s RPM system, the market price for capacity is generally determined by aggregate market-based supply conditions and an administratively set aggregate demand curve. Among the factors influencing the supply of capacity in any particular market are plant forced outage rates, plant closings, plant delistings (due to plants being removed as capacity resources and/or to export capacity to other markets), capacity imports from other markets, and the CONE.

Midwest Generation entered into hedge transactions in advance of the RPM auctions with counterparties that are settled through PJM. In addition, the load service requirements contracts entered into by Midwest Generation with Commonwealth Edison include energy, capacity and ancillary services (sometimes referred to as a “bundled product”). Under PJM’s business rules, Midwest Generation sells all of its available capacity (defined as unit capacity less forced outages) into the RPM and is subject to a locational reliability charge for the load under these contracts. This means that the locational reliability charge generally offsets the related amounts sold in the RPM, which Midwest Generation presents on a net basis in the table above.

Prior to the RPM auctions for the relevant delivery periods, EME Homer City sold a portion of its capacity to an unrelated third party for the delivery periods from June 1, 2007 through May 31, 2008 and June 1, 2008 through May 31, 2009. EME Homer City is not receiving the RPM auction clearing price for this previously sold capacity. The price EME Homer City is receiving for these capacity sales is a function of NYISO capacity clearing prices resulting from separate NYISO capacity auctions.

Basis Risk

Sales made from the Illinois plants and the Homer City facilities in the real-time or day-ahead market receive the actual spot prices or day-ahead prices, as the case may be, at the busbars (delivery points) of the individual plants. In order to mitigate price risk from changes in spot prices at the individual plant busbars, EME may enter into cash settled futures contracts as well as forward contracts with counterparties for energy to be delivered in future periods. Currently, a liquid market for entering into these contracts at the individual plant busbars does not exist. A liquid market does exist for a settlement point at the PJM West Hub in the case of the Homer City facilities and for a settlement point at the Northern Illinois Hub in the case of the Illinois plants. EME’s hedging activities use these settlement points (and, to a lesser extent, other similar trading hubs) to enter into hedging contracts. EME’s revenues with respect to such forward contracts include:

• sales of actual generation in the amounts covered by the forward contracts with reference to PJM spot prices at the busbar of the plant involved, plus,

• sales to third parties at the price under such hedging contracts at designated settlement points (generally the PJM West Hub for the Homer City facilities and the Northern Illinois Hub for the Illinois plants) less the cost of power at spot prices at the same designated settlement points.

Under PJM’s market design, locational marginal pricing, which establishes market prices at specific locations throughout PJM by considering factors including generator bids, load requirements, transmission congestion and losses, can cause the price of a specific delivery point to be higher or lower relative to other locations depending on how the point is affected by transmission constraints. Effective June 1, 2007, PJM implemented marginal losses which adjust the algorithm that calculates locational marginal prices to include a component for marginal transmission losses in addition to the component included for congestion. To the extent that, on the settlement date of a hedge contract, spot prices at the relevant busbar are lower than spot prices at the settlement point, the proceeds actually realized from the related hedge contract are effectively reduced by the difference. This is referred to as “basis risk.” During the three months ended March 31, 2008 and 2007, transmission congestion in PJM has resulted in prices at the Homer City busbar being lower than those at the PJM West Hub by an average of 12% and 11%, respectively. The monthly average difference during the 12 months ended March 31, 2008 ranged from 7% to 24%. In contrast to the Homer City facilities, during the past 12 months, the prices at the

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Northern Illinois Hub were substantially the same as those at the individual busbars of the Illinois plants, although the implementation of marginal losses on June 1, 2007 has lowered energy prices at the Illinois plants busbars.

By entering into cash settled futures contracts and forward contracts using the PJM West Hub and the Northern Illinois Hub (or other similar trading hubs) as settlement points, EME is exposed to basis risk as described above. In order to mitigate basis risk, EME may purchase financial transmission rights and basis swaps in PJM for EME Homer City. A financial transmission right is a financial instrument that entitles the holder to receive the difference of actual spot prices for two delivery points in exchange for a fixed amount. Accordingly, EME’s hedging activities include using financial transmission rights alone or in combination with forward contracts and basis swap contracts to manage basis risk.

Coal and Transportation Price Risk

The Illinois plants and the Homer City facilities purchase coal primarily obtained from the Southern PRB of Wyoming and from mines located near the facilities in Pennsylvania, respectively. Coal purchases are made under a variety of supply agreements extending through 2011. The following table summarizes the amount of coal under contract at March 31, 2008 for the remainder of 2008 and the following three years.

	Amount of Coal Under Contract in Millions of Tons(1)
	April through December 2008	2009	2010	2011
Illinois plants	12.3	11.7	11.7	—
Homer City facilities	4.3	4.4	0.4	0.1

(1) The amount of coal under contract in tons is calculated based on contracted tons and applying an 8,800 Btu equivalent for the Illinois plants and 13,000 Btu equivalent for the Homer City facilities.

EME is subject to price risk for purchases of coal that are not under contract. Prices of Northern Appalachian coal, which are related to the price of coal purchased for the Homer City facilities, increased substantially during the first quarter of 2008 from 2007 year-end prices. The price of Northern Appalachian coal (with 13,000 Btu per pound heat content and <3.0 pounds of SO₂ per MMBtu sulfur content) increased to $110.00 per ton at March 28, 2008 from $55.25 per ton at December 21, 2007, as reported by the Energy Information Administration. Prices of PRB coal (with 8,800 Btu per pound heat content and 0.8 pounds of SO₂ per MMBtu sulfur content) purchased for the Illinois plants increased during the first quarter of 2008 from 2007 year-end prices. The price of PRB coal increased to $14.55 per ton at March 28, 2008 from $11.50 per ton at December 21, 2007, as reported by the Energy Information Administration. The 2008 increases in coal prices were primarily attributable to: 1) increased Asian coal demand primarily driven by China and India, 2) port and rail infrastructure problems and monsoon flooding in Australia, 3) a record cold winter in China, and 4) an energy crisis in South Africa.

EME has contractual agreements for the transport of coal to its facilities. The primary contract is with Union Pacific Railroad (and various delivering carriers), which extends through 2011. EME is exposed to price risk related to higher transportation rates after the expiration of its existing transportation contracts. Current transportation rates for PRB coal are higher than the existing rates under contract (transportation costs are more than 50% of the delivered cost of PRB coal to the Illinois plants).

Emission Allowances Price Risk

The federal Acid Rain Program requires electric generating stations to hold SO₂ allowances, and Illinois and Pennsylvania regulations implemented the federal NO_X SIP Call requirement. As part of the acquisition of the Illinois plants and the Homer City facilities, EME obtained the rights to the emission allowances that have been

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or are allocated to these plants. EME purchases (or sells) emission allowances based on the amounts required for actual generation in excess of (or less than) the amounts allocated under these programs.

The average price of purchased SO₂ allowances decreased to $343 per ton during the first quarter of 2008 from $512 per ton during 2007. The price of SO₂ allowances, determined by obtaining broker quotes and information from other public sources, was $340 per ton as of March 31, 2008.

For a discussion of environmental regulations related to emissions, refer to “Other Developments—Environmental Matters” in the year-ended 2007 MD&A.

Accounting for Energy Contracts

EME uses a number of energy contracts to manage exposure from changes in the price of electricity, including forward sales and purchases of physical power and forward price swaps which settle only on a financial basis (including futures contracts). EME follows SFAS No. 133, and under this Standard these energy contracts are generally defined as derivative financial instruments. Importantly, SFAS No. 133 requires changes in the fair value of each derivative financial instrument to be recognized in earnings at the end of each accounting period unless the instrument qualifies for hedge accounting under the terms of SFAS No. 133. For derivatives that do qualify for cash flow hedge accounting, changes in their fair value are recognized in other comprehensive income until the hedged item settles and is recognized in earnings. However, the ineffective portion of a derivative that qualifies for cash flow hedge accounting is recognized currently in earnings. For further discussion of derivative financial instruments, refer to “Critical Accounting Estimates and Policies—Derivative Financial Instruments and Hedging Activities” in the year-ended 2007 MD&A.

SFAS No. 133 affects the timing of income recognition, but has no effect on cash flow. To the extent that income varies under SFAS No. 133 from accrual accounting (i.e., revenue recognition based on settlement of transactions), EME records unrealized gains or losses. EME classifies unrealized gains and losses from energy contracts as part of operating revenues. The results of derivative activities are recorded as part of cash flows from operating activities in the consolidated statements of cash flows. The following table summarizes unrealized gains (losses) from non-trading activities for the first quarters of 2008 and 2007:

	Three Months Ended March 31,
In millions	2008			2007
Non-qualifying hedges
Illinois plants	$	—		$	(22	)
Homer City		1			(1	)
Ineffective portion of cash flow hedges
Illinois plants		(5	)		—
Homer City		(2	)		2
Total unrealized gains (losses)	$	(6	)	$	(21	)

At March 31, 2008, unrealized losses of $45 million were recognized from non-qualifying hedge contracts or the ineffective portion of cash flow hedges related to subsequent periods ($26 million for the remainder of 2008, $14 million for 2009, and $5 million for 2010).

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Fair Value of Financial Instruments

Non-Trading Derivative Financial Instruments

The following table summarizes the fair values for outstanding derivative financial instruments used in EME’s continuing operations for purposes other than trading, by risk category:

In millions	March 31, 2008		December 31, 2007
Commodity price:
Electricity contracts	$	(388)	$	(137)

In assessing the fair value of EME’s non-trading derivative financial instruments, EME uses quoted market prices and forward market prices adjusted for credit risk. The fair value of commodity price contracts takes into account quoted market prices, time value of money, volatility of the underlying commodities and other factors. The decrease in fair value of electricity contracts at March 31, 2008 as compared to December 31, 2007 is attributable to an increase in the average market prices for power as compared to contracted prices at March 31, 2008, which is the valuation date. The following table summarizes the maturities and the related fair value, based on actively traded prices, of EME’s commodity derivative assets and liabilities as of March 31, 2008:

In millions	Total Fair Value			Maturity <1 year			Maturity 1 to 3 years			Maturity 4 to 5 years		Maturity >5 years
Prices actively quoted	$	(388	)	$	(271	)	$	(117	)	$	—	$	—

Prices actively quoted in the preceding table includes derivatives whose fair value is based on quoted market prices and forward market prices adjusted for credit risk.

Energy Trading Derivative Financial Instruments

The fair value of the commodity financial instruments related to energy trading activities as of March 31, 2008 and December 31, 2007, are set forth below:

	March 31, 2008				December 31, 2007
In millions	Assets		Liabilities		Assets		Liabilities
Electricity contracts	$	134	$	17	$	141	$	9
Other		—		1		—		—
Total	$	134	$	18	$	141	$	9

The change in the fair value of trading contracts for the quarter ended March 31, 2008, was as follows:

In millions
Fair value of trading contracts at January 1, 2008	$	132
Net gains from energy trading activities		42
Amount realized from energy trading activities		(51	)
Other changes in fair value		(7	)
Fair value of trading contracts at March 31, 2008	$	116

EME adopted SFAS No. 157 effective January 1, 2008. The standard established a hierarchy for fair value measurements.

In the table below, prices actively quoted includes both exchange traded derivatives and non-exchange traded derivatives which are priced based on forward market prices adjusted for credit risk. Also in the table, fair value

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based on models and other valuation methods includes illiquid FTRs and over-the-counter derivatives at illiquid locations and long-term power agreements which would be considered Level 3 derivative positions. For illiquid FTRs, EME determines fair value based on the hypothetical sale of illiquid positions. For long-term power agreements, EME’s subsidiary recorded these agreements at fair value based upon a discounting of future electricity prices derived from a proprietary model using the risk free discount rate for a similar duration contract, adjusted for credit and liquidity.

The following table summarizes the maturities, the valuation method and the related fair value of energy trading assets and liabilities (as of March 31, 2008):

In millions	Total Fair Value			Maturity <1 year			Maturity 1 to 3 years		Maturity 4 to 5 years		Maturity >5 years
Prices actively quoted	$	(1	)	$	(19	)	$	18	$	—	$	—
Prices based on models and other valuation methods		117			45			14		23		35
Total	$	116		$	26		$	32	$	23	$	35

Credit Risk

In conducting EME’s hedging and trading activities, EME contracts with a number of utilities, energy companies, financial institutions, and other companies, collectively referred to as counterparties. In the event a counterparty were to default on its trade obligation, EME would be exposed to the risk of possible loss associated with re-contracting the product at a price different from the original contracted price if the non-performing counterparty were unable to pay the resulting liquidated damages owed to EME. Further, EME would be exposed to the risk of non-payment of accounts receivable accrued for products delivered prior to the time a counterparty defaulted.

To manage credit risk, EME looks at the risk of a potential default by counterparties. Credit risk is measured by the loss that would be incurred if counterparties failed to perform pursuant to the terms of their contractual obligations. EME measures, monitors and mitigates credit risk to the extent possible. To mitigate credit risk from counterparties, master netting agreements are used whenever possible and counterparties may be required to pledge collateral when deemed necessary. EME also takes other appropriate steps to limit or lower credit exposure. Processes have also been established to determine and monitor the creditworthiness of counterparties. EME manages the credit risk on the portfolio based on credit ratings using published ratings of counterparties and other publicly disclosed information, such as financial statements, regulatory filings, and press releases, to guide it in the process of setting credit levels, risk limits and contractual arrangements, including master netting agreements. A risk management committee regularly reviews the credit quality of EME’s counterparties. Despite this, there can be no assurance that these efforts will be wholly successful in mitigating credit risk or that collateral pledged will be adequate.

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The credit risk exposure from counterparties of merchant energy activities (excluding load requirements services contracts) are measured as either: (i) the sum of 60 days of accounts receivable, current fair value of open positions, and a credit value at risk, or (ii) the sum of delivered and unpaid accounts receivable and the current fair value of open positions. EME’s subsidiaries enter into master agreements and other arrangements in conducting hedging and trading activities which typically provide for a right of setoff in the event of bankruptcy or default by the counterparty. Accordingly, EME’s credit risk exposure from counterparties is based on net exposure under these agreements. At March 31, 2008, the amount of exposure as described above, broken down by the credit ratings of EME’s counterparties, was as follows:

In millions	March 31, 2008
S&P Credit Rating
A or higher	$	14
A-		35
BBB+		86
BBB		15
BBB-		4
Below investment grade		—
Total	$	154

EME’s plants owned by unconsolidated affiliates in which EME owns an interest sell power under power purchase agreements. Generally, each plant sells its output to one counterparty. Accordingly, a default by a counterparty under a power purchase agreement, including a default as a result of a bankruptcy, would likely have a material adverse effect on the operations of such power plant.

In addition, coal for the Illinois plants and the Homer City facilities is purchased from suppliers under contracts which may be for multiple years. A number of the coal suppliers to the Illinois plants and the Homer City facilities do not currently have an investment grade credit rating and, accordingly, EME may have limited recourse to collect damages in the event of default by a supplier. EME seeks to mitigate this risk through diversification of its coal suppliers and through guarantees and other collateral arrangements when available. Despite this, there can be no assurance that these efforts will be successful in mitigating credit risk from coal suppliers.

EME’s merchant plants sell electric power generally into the PJM market by participating in PJM’s capacity and energy markets or transact capacity and energy on a bilateral basis. Sales into PJM accounted for approximately 48% of EME’s consolidated operating revenues for the three months ended March 31, 2008. Moody’s rates PJM’s senior unsecured debt Aa3. PJM, an independent system operator with over 300 member companies, maintains its own credit risk policies and does not extend unsecured credit to non-investment grade companies. Any losses due to a PJM member default are shared by all other members based upon a predetermined formula. At March 31, 2008, EME’s account receivable due from PJM was $100 million.

EME also derived a significant source of its revenues from the sale of energy, capacity and ancillary services generated at the Illinois plants to Commonwealth Edison under load requirements services contracts. Sales under these contracts accounted for 16% of EME’s consolidated operating revenues during the three months ended March 31, 2008. Commonwealth Edison’s senior unsecured debt ratings are BBB- by S&P and Ba1 by Moody’s. At March 31, 2008, EME’s account receivable due from Commonwealth Edison was $17 million. For the three months ended March 31, 2008, a third customer accounted for 11% of EME’s consolidated operating revenues.

Edison Capital’s investments may be affected by the financial condition of other parties, the performance of the asset, economic conditions and other business and legal factors. Edison Capital generally does not control operations or management of the projects in which it invests and must rely on the skill, experience and performance of third party project operators or managers. These third parties may experience financial difficulties or otherwise become unable or unwilling to perform their obligations. Edison Capital’s investments generally depend upon the

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operating results of a project with a single asset. These results may be affected by general market conditions, equipment or process failures, disruptions in important fuel supplies or prices, or another party’s failure to perform material contract obligations, and regulatory actions affecting utilities purchasing power from the leased assets. Edison Capital has taken steps to mitigate these risks in the structure of each project through contract requirements, warranties, insurance, collateral rights and default remedies, but such measures may not be adequate to assure full performance. In the event of default, lenders with a security interest in the asset may exercise remedies that could lead to a loss of some or all of Edison Capital’s investment in that asset.

At March 31, 2008, Edison Capital had a net leveraged lease investment, before deferred taxes, of $53 million in three aircraft leased to American Airlines. American Airlines has reported net losses for its first quarter 2008 and previously reported losses for a number of years prior to 2006. A default in the leveraged lease by American Airlines could result in a loss of some or all of Edison Capital’s lease investment. At March 31, 2008, American Airlines was current in its lease payments to Edison Capital.

Interest Rate Risk

Interest rate changes can affect earnings and the cost of capital for capital improvements or new investments in power projects. EMG mitigates the risk of interest rate fluctuations by arranging for fixed rate financing or variable rate financing with interest rate swaps, interest rate options or other hedging mechanisms for a number of its project financings. The fair market values of long-term fixed interest rate obligations are subject to interest rate risk. The fair market value of EMG’s consolidated long-term obligations (including current portion) was $3.99 billion at March 31, 2008, compared to the carrying value of $4.02 billion.

Foreign Exchange Rate Risk

Edison Capital holds a minority interest as a limited partner in three separate funds that invest in infrastructure assets in Latin America, Asia and countries in Europe with emerging economies. As of March 31, 2008, Edison Capital had investments in Latin America, Asia and Emerging Europe of $20 million, $18 million and $18 million, respectively. Edison Capital, through these investments, is exposed to foreign exchange risk in the currency of the ultimate investment.

Edison Capital’s cross-border leases are denominated in U.S. dollars and, therefore, are not exposed to foreign currency rate risk.

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EDISON INTERNATIONAL (PARENT)

EDISON INTERNATIONAL (PARENT): LIQUIDITY

The parent company’s liquidity and its ability to pay interest and principal on debt, if any, operating expenses and dividends to common shareholders are affected by dividends and other distributions from subsidiaries, tax-allocation payments under its tax-allocation agreements with its subsidiaries, and access to capital markets or external financings. As of March 31, 2008, Edison International (parent) had no debt outstanding (excluding intercompany related debt).

Edison International (parent)’s cash requirements for the 12-month period following March 31, 2008 are expected to consist of:

• Dividends to common shareholders. The Board of Directors of Edison International declared a $.305 per share quarterly dividend in December 2007, February 2008, and April 2008. The dividends were paid, or will be paid in January 2008, April 2008, and July 2008, respectively;

• Intercompany related debt; and

• General and administrative expenses.

Edison International (parent) expects to meet its continuing obligations through cash and cash equivalents on hand, borrowings and dividends and/or borrowings from its subsidiaries. At March 31, 2008, Edison International (parent) had approximately $75 million of cash and cash equivalents on hand. On March 12, 2008, Edison International (parent) amended its existing $1.5 billion credit facility, extending the maturity to February 2013 while retaining existing borrowing costs as specified in the facility. The amendment also provides four extension options which, if all exercised, will result in a final termination of February 2017. At March 31, 2008, the entire credit facility was available for liquidity purposes. The ability of subsidiaries to make dividend payments to Edison International is dependent on various factors as described below.

SCE may pay dividends to Edison International subject to CPUC restrictions. The CPUC regulates SCE’s capital structure by requiring that SCE maintain prescribed percentages of common equity, preferred equity and long-term debt in the utility’s capital structure. SCE may not make any distributions to Edison International that would reduce the common equity component of SCE’s capital structure below the authorized level on a 13-month weighted average basis (see “SCE: Liquidity—Dividend Restrictions and Debt Covenants” for further discussion). The CPUC also requires that SCE establish its dividend policy as though it were a comparable stand-alone utility company and give first priority to the capital requirements of the utility as necessary to meet its obligation to serve its customers. Other factors at SCE that affect the amount and timing of dividend payments by SCE to Edison International include, among other things, SCE’s capital requirements, SCE’s access to capital markets, payment of dividends on SCE’s preferred and preference stock, and actions by the CPUC. The Board of Directors of SCE declared a $25 million dividend which was paid in January 2008 and a $100 million dividend which was paid in April 2008.

EMG’s ability to pay dividends is dependent on its subsidiaries’ ability to pay dividends to EMG. EME’s corporate credit facility contains covenants that restrict its ability, and the ability of several of its subsidiaries, to pay dividends in the case of any event of default under the facility. As of March 31, 2008, EME was not in default under its credit facility. In addition, see “EMG: Liquidity—Dividend Restrictions in Major Financings” for further discussion. Edison Capital loaned $120 million to Edison International in January 2008 (total outstanding as of March 31, 2008 is $170 million).

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EDISON INTERNATIONAL (PARENT): OTHER DEVELOPMENTS

Federal and State Income Taxes

Edison International remains subject to examination and administrative appeals by the IRS for tax years 1994 and forward. Edison International is challenging certain IRS deficiency adjustments for tax years 1994 – 1999 with the Administrative Appeals branch of the IRS and Edison International is currently under active IRS examination for tax years 2000 – 2002. In addition, the statute of limitations remains open for tax years 1986 – 1993, which has allowed Edison International to file certain affirmative claims related to these years. See “Other Developments—Federal and State Income Taxes” for further discussion of these matters.

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EDISON INTERNATIONAL (CONSOLIDATED)

The following sections of the MD&A are on a consolidated basis and should be read in conjunction with the individual subsidiary discussion.

RESULTS OF OPERATIONS AND HISTORICAL CASH FLOW ANALYSIS

The following subsections of “Results of Operations and Historical Cash Flow Analysis” provide a discussion on the changes in various line items presented on the Consolidated Statements of Income, as well as a discussion of the changes on the Consolidated Statements of Cash Flows.

Results of Operations

The table below presents Edison International’s earnings for the three months ended March 31, 2008 and 2007, and the relative contributions by its subsidiaries.

In millions	Earnings (Loss)
Three Months Ended March 31,	2008			2007
Earnings (Loss) from Continuing Operations:
SCE	$	150		$	180
EMG		159			155
Edison International (parent) and other		(5	)		(5	)
Edison International Consolidated Earnings from Continuing Operations		304			330
Earnings (Loss) from Discontinued Operations		(5	)		3
Edison International Consolidated	$	299		$	333

Earnings (Loss) from Continuing Operations

Edison International’s first quarter 2008 earnings from continuing operations were $304 million, compared to $330 million in 2007.

SCE’s earnings from continuing operations were $150 million in 2008, compared with earnings of $180 million in 2007. The decrease was mainly due to a $31 million tax benefit recognized in 2007 related to the income tax treatment of certain costs including those associated with environmental remediation, partially offset by lower net interest expense in 2008.

EMG’s earnings from continuing operations were $159 million in 2008, compared with earnings of $155 million in 2007. The increase primarily reflects higher gross margin and the buyout of a coal contract at EMG’s Illinois plants together with higher energy trading results. These increases were partially offset by lower earnings from Edison Capital and other generation projects together with higher costs associated with EMG’s growth activities.

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Operating Revenue

Electric Utility Revenue

The following table sets forth the major changes in electric utility revenue:

In millions	Three Months Ended March 31, 2008 vs. 2007
Electric utility revenue
Rate changes and impact of tiered rate structure (including unbilled)	$	(84	)
Sales volume changes (including unbilled)		(29	)
Balancing account over/under collections		158
Sales for resale		118
SCE’s VIEs		3
Other (including inter company transactions)		(39	)
Total	$	127

SCE’s retail sales represented approximately 85% and 88% of electric utility revenue for the three months ended March 31, 2008 and 2007, respectively. Due to warmer weather during the summer months and SCE’s rate design, electric utility revenue during the third quarter of each year is generally higher than other quarters.

Total electric utility revenue increased by $127 million in the first quarter of 2008 compared to the same period in 2007 (as shown in the table above). The variances for the revenue components are as follows:

• Electric utility revenue from rate changes decreased mainly due to the rate change that was effective February 14, 2007. On February 14, 2007, SCE’s system average rate decreased from 14.5¢ per-kWh to 13.9¢ per-kWh as a result of projected lower natural gas prices in 2007, as well as the refund of overcollections in the ERRA balancing account that occurred in 2006 from lower than expected natural gas prices and higher than expected sales in the summer of 2006. See “SCE: Regulatory Matters—Current Regulatory Developments—Impact of Regulatory Matters on Customer Rates,” and “—Energy Resource Recovery Account Proceedings” for further discussion of rate changes).

• Electric utility revenue resulting from sales volume changes was mainly due to a decrease in residential and commercial customer additions in the first quarter of 2008 compared to the same period in 2007.

• SCE recognizes revenue, subject to balancing account treatment, equal to the amount of the actual costs incurred and up to its authorized revenue requirement. If revenue is collected in excess of actual power procurement-related costs incurred or above the authorized revenue requirement it is not recognized as revenue and is deferred and recorded as regulatory liabilities to be refunded in future customer rates. If amounts collected are below the authorized revenue requirement or power-procurement-related costs incurred are in excess of revenue billed the difference is recognized as revenue and recorded as a regulatory asset for future recovery. In the first quarter of 2008, SCE recognized approximately $93 million compared to a deferral of approximately $65 million in 2007. The change in deferred revenue was mainly due to the rate change discussed above.

• Electric utility revenue from sales for resale represents the sale of excess energy. Excess energy from SCE sources which may exist at certain times is resold in the energy markets. Sales for resale revenue increased due to higher excess energy in the first quarter of 2008, compared to the same period in 2007, resulting from lower demand, increased kWh purchases from new contracts, as well as increased sales from least cost dispatch energy. Revenue from sales for resale is refunded to customers through the ERRA balancing account and does not impact earnings.

• The decrease in other revenue was primarily related to lower net investment earnings and higher other-than-temporary impairment losses from SCE’s nuclear decommissioning trust due to a volatile stock market

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environment. Due to regulatory treatment, investment impairment losses and trust earnings and losses are offset in depreciation, decommissioning and amortization expense and as a result, have no impact on net income.

Amounts SCE bills and collects from its customers for electric power purchased and sold by the CDWR to SCE’s customers, CDWR bond-related costs and a portion of direct access exit fees are remitted to the CDWR and none of these collections are recognized as revenue by SCE. These amounts were $558 million and $587 million for the three months ended March 31, 2008 and 2007, respectively.

Nonutility Power Generation Revenue

The following table sets forth the major components of nonutility power generation revenue:

	Three Months Ended March 31,
In millions	2008		2007
EMG’s Illinois plants	$	468	$	431
EMG’s Homer City facilities		185		198
EMMT		41		26
Other		25		17
Nonutility power generation	$	719	$	672

Nonutility power generation revenue increased $47 million in the first quarter of 2008 compared to the same period in 2007.

Nonutility power generation revenue from EMG’s Illinois plants increased $37 million for the first quarter of 2008, compared to the first quarter of 2007. The increase was primarily attributable to higher energy and capacity prices due to higher market prices and lower unrealized losses in 2008 related to hedge contracts described below. Partially offsetting this increase was lower generation in 2008 due to unplanned outages.

EMG’s Illinois plants recorded unrealized losses of $5 million and $22 million for the first quarters of 2008 and 2007, respectively. Unrealized losses are primarily due to power contracts that did not qualify for hedge accounting under SFAS No. 133 (sometimes referred to as economic hedges). These energy contracts were entered into to hedge the price risk related to projected sales of power. During 2008, power prices increased, resulting in mark-to-market losses on economic hedges. At March 31, 2008, unrealized losses of $23 million were recognized from economic hedges and from the ineffective portion of cash flow hedges related to subsequent periods. The ineffective portion of hedge contracts at the Illinois plants was primarily attributable to changes in the difference between energy prices at NiHub (the settlement point under forward contracts) and the energy prices at the Illinois plants busbars (the delivery point where power generated by the Illinois plants is delivered into the transmission system) resulting from marginal losses. See “EMG: Market Risk Exposures—Commodity Price Risk” for more information regarding forward market prices.

Nonutility power generation revenue from EMG’s Homer City facilities decreased $13 million for the first quarter of 2008, compared to the first quarter of 2007. The 2008 decrease was primarily attributable to lower operating revenue attributable to lower average realized energy prices and lower generation (particularly off-peak) as compared to 2007. Higher forced outages in 2008 contributed to lower generation.

EME seeks to generate profit by utilizing its subsidiary, EMMT, to engage in trading activities in those markets in which it is active as a result of its management of the merchant power plants of Midwest Generation and Homer City. EMMT trades power, fuel and transmission congestion primarily in the eastern power grid using products available over the counter, through exchanges and from independent system operators. Nonutility power generation revenue from energy trading activities at EMMT increased $15 million for the first quarter of 2008,

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compared to the first quarter of 2007. The increase in nonutility power generation revenue from energy trading activities was primarily attributable to higher revenue from energy trading in the over-the-counter markets and power sales into New York.

Due to higher electric demand resulting from warmer weather during the summer months and cold weather during the winter months, nonutility power generation revenue from EMG’s Illinois plants and Homer City facilities vary substantially on a seasonal basis. In addition, maintenance outages generally are scheduled during periods of lower projected electric demand (spring and fall) further reducing generation and increasing major maintenance costs which are recorded as an expense when incurred. Accordingly, nonutility power generation revenue from EMG’s Illinois plants and Homer City facilities are seasonal and have significant variability from quarter to quarter. Seasonal fluctuations may also be affected by changes in market prices. See “EMG: Market Risk Exposures—Commodity Price Risk—Energy Price Risk Affecting Sales from the Illinois Plants” and “—Energy Price Risk Affecting Sales from the Homer City Facilities” for further discussion regarding market prices.

Operating Expenses

Fuel Expense

	Three Months Ended March 31,
In millions	2008		2007
SCE	$	350	$	310
EMG		187		176
Edison International Consolidated	$	537	$	486

SCE’s fuel expense increased $40 million in the first quarter of 2008 mainly due to an increase at SCE’s Mountainview plant resulting from higher generation and higher gas costs in 2008 due to an outage that occurred in the first quarter of 2007.

EMG’s fuel expense increased $11 million in the first quarter of 2008 mainly due to higher coal and transportation costs per megawatt hour at EMG’s Illinois plants mainly due to cost escalations included in the transportation contracts.

Purchased-Power Expense

The following is a summary of purchased-power expense:

	Three Months Ended March 31,
In millions	2008			2007
Purchased power	$	640		$	451
Unrealized (gains) losses on economic hedging activities – net		(151	)		(134	)
Realized (gains) losses on economic hedging activities – net		2			29
Energy settlements and refunds		—			(29	)
Total purchased-power expense	$	491		$	317

Total purchased-power expense increased $174 million in 2008 based on the components discussed below.

Purchased power, in the table above, increased $189 million in the first quarter of 2008 due to higher bilateral energy purchases of $45 million resulting from higher costs per kWh due to higher gas prices and increased kWh purchases from new contracts entered into in late 2007; higher QF purchased-power expense of $60 million

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resulting from increased kWh purchases and an increase in the average spot natural gas prices for certain contracts (as discussed further below); and higher ISO-related energy costs of $85 million.

Net realized and unrealized gains on economic hedging activities, in the table above, was $149 million in the first quarter of 2008 compared to $105 million in the same period in 2007 (see “SCE: Market Risk Exposures—Commodity Price Risk” for further discussion). The changes in net realized and unrealized (gains) losses on economic hedging activities were primarily due to higher forward natural gas prices in the first quarter of 2008, compared to the same period in 2007. Due to expected recovery through regulatory mechanisms realized and unrealized gains and losses may temporarily affect cash flows, but are not expected to affect earnings (see “SCE: Market Risk Exposures—Commodity Price Risk” for further discussion).

Federal law and CPUC orders required SCE to enter into contracts to purchase power from QFs at CPUC-mandated prices. Energy payments to gas-fired QFs are generally tied to spot natural gas prices. Energy payments for most renewable QFs are at a fixed price of 5.37¢ per-kWh. In late 2006, certain renewable QF contracts were amended and energy payments for these contracts are at a fixed price of 6.15¢ per-kWh, effective May 2007.

Provisions for Regulatory Adjustment Clauses – Net

Provisions for regulatory adjustment clauses – net decreased $117 million in the first quarter of 2008 compared to the same period in 2007. The first quarter 2008 variance reflects net unrealized gains on economic hedging activities of approximately $151 million in 2008, compared to $134 million for the same period in 2007 (discussed above in purchased-power expense). The 2008 variance also reflects a decrease of $60 million as a result of the rate reduction notes being fully repaid as of December 31, 2007 (See “SCE: Liquidity—Rate Reduction Notes” in the year-ended 2007 MD&A); approximately $29 million in energy refunds and generator settlements recorded in 2007; higher FTR costs of $35 million; and approximately $30 million resulting from higher net undercollections primarily related to the deferral of the residential rate increase which was recognized in revenue in 2007.

Other Operation and Maintenance Expense

	Three Months Ended March 31,
In millions	2008		2007
SCE	$	740	$	656
EMG		227		217
Edison International (parent) and other		7		7
Edison International Consolidated	$	974	$	880

SCE’s other operation and maintenance expense increased $84 million in the first quarter of 2008 compared to the first quarter of 2007. Certain of SCE’s operation and maintenance expense accounts are recovered through regulatory mechanisms approved by the CPUC. The costs associated with these regulatory balancing accounts increased $10 million in the first quarter of 2008. In addition to the increase in balancing account related operation and maintenance costs the 2008 increase was due to higher generation expenses of $20 million related to maintenance and outage expenses at San Onofre and higher overhaul and outage costs at Four Corners and Palo Verde; transmission and distribution maintenance cost of approximately $15 million; and higher administrative and general costs (including health care costs and other benefits) of $20 million primarily due to timing of expenses.

EMG’s other operation and maintenance expense increased $10 million in the first quarter of 2008, compared to the first quarter of 2007. The 2008 increase was mainly due to higher labor costs and consulting expense resulting from EME’s growth activities.

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Depreciation, Decommissioning and Amortization Expense

	Three Months Ended March 31,
In millions	2008		2007
SCE	$	253	$	276
EMG		45		37
Edison International Consolidated	$	298	$	313

SCE’s depreciation, decommissioning and amortization expense decreased $23 million in the first quarter of 2008 compared to the same period in 2007 due to a $40 million decrease in nuclear decommissioning trust earnings and higher other-than-temporary impairment losses associated with the nuclear decommissioning trust funds primarily related to a volatile stock market environment. Due to its regulatory treatment, investment impairment losses and trust earnings and losses are recorded in electric utility revenue and are offset in decommissioning expense and have no impact on net income. The decrease was partially offset by a $20 million increase resulting from transmission and distribution asset additions (see “SCE: Liquidity—Capital Expenditures” for a further discussion).

EMG’s depreciation and amortization expense increased $8 million in the first quarter of 2008 compared to the same period in 2007. The 2008 increase was primarily attributable to higher depreciation expense for wind projects.

Gain on buyout of contract and sale of assets

Gain on buyout of contract and sale of assets increased $17 million primarily related to a gain of $15 million recorded in 2008 related to the buyout of a fuel contract (see “Commitments, Guarantees and Indemnities—Fuel Supply Contracts” for further discussion).

In March 2008, First Energy exercised an early buyout right under the terms of an existing lease agreement with Edison Capital related to Unit No. 2 of the Beaver Valley Nuclear Power Plant. The exercise price is equal to the greater of a fixed amount and fair market value. The termination date of the lease under the early buy out option is June 1, 2008. Based on the fixed amount, the cash proceeds and net income from the termination of the lease (second quarter 2008) is estimated to be $68 million and $20 million, respectively.

Other Income and Deductions

Interest and dividend income

	Three Months Ended March 31,
In millions	2008		2007
SCE	$	5	$	10
EMG		8		29
Edison International (parent) and other		1		—
Edison International Consolidated	$	14	$	39

SCE’s interest income decreased $5 million in the first quarter of 2008, compared to the first quarter of 2007. The 2008 decrease was mainly due to lower undercollections balances in certain balancing accounts and lower interest rates applied to those undercollections in the first quarter of 2008, as compared to the same period in 2007.

EMG’s interest and dividend income decreased $21 million in the first quarter of 2008 compared to the first quarter of 2007. The 2008 decrease was primarily attributable to lower average short-term investment balances and lower interest rates in 2008 compared to 2007.

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Equity in Income from Partnerships and Unconsolidated Subsidiaries – Net

Equity in income from partnerships and unconsolidated subsidiaries – net decreased $15 million in the first quarter of 2008 compared to the first quarter of 2007 mainly due to gains from Edison Capital’s global infrastructure funds recorded in the first quarter of 2007.

Other Nonoperating Income

	Three Months Ended March 31,
In millions	2008		2007
SCE	$	19	$	17
EMG		6		—
Edison International Consolidated	$	25	$	17

EMG’s other nonoperating income increased $6 million in the first quarter of 2008. The 2008 increase is due to estimated insurance recoveries for EMG’s Illinois plants related to the Powerton Station outage claims on property and business interruption insurance policies of approximately $6 million recorded in 2008. On December 18, 2007, Unit 6 at the Powerton Station had a duct failure resulting in a suspension of operations at this unit through February 12. Scheduled maintenance work for the spring of 2008 was accelerated to minimize the aggregate impact of the outage.

Interest Expense – Net of Amounts Capitalized

	Three Months Ended March 31,
In millions	2008		2007
SCE	$	97	$	107
EMG		73		91
Edison International (parent) and other		1		—
Edison International Consolidated	$	171	$	198

SCE’s interest expense – net of amounts capitalized decreased $10 million in the first quarter of 2008 mainly due to lower overcollections of certain balancing accounts and lower interest rates applied to those overcollections in the first quarter of 2008 compared to the same period in 2007. The decrease was also due to lower interest expense on long-term debt resulting from lower outstanding debt during the first quarter of 2008 compared to the first quarter 2007.

EMG’s interest expense – net of amounts capitalized decreased $18 million in the first quarter of 2008 compared to the first quarter of 2007. The 2008 decrease was primarily attributable to MEHC’s redemption in full of its senior secured notes in June 2007. The variances are also attributable to $2.7 billion of new debt entered into by EME as part of its refinancing activities in May 2007 (See “EMG: Liquidity—EMG Financing Developments” in the year-ended 2007 MD&A).

Income Tax Expense (Benefit) – Continuing Operations

	Three Months Ended March 31,
In millions	2008			2007
SCE	$	81		$	53
EMG		83			77
Edison International (parent) and other		(3	)		(1	)
Edison International Consolidated	$	161		$	129

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Edison International’s composite federal and state statutory income tax rate was approximately 40% (net of the federal benefit for state income taxes) for all periods presented. Edison International’s effective tax rate from continuing operations was 35% for the three months ended March 31, 2008, as compared to 28% for the respective period in 2007. The increased effective tax rate was caused primarily by the reductions to the income tax reserve recorded in the first quarter of 2007 to reflect progress in an administrative appeals process with the IRS related to SCE’s income tax treatment of costs associated with environmental remediation.

As a matter of course, Edison International is regularly audited by federal, state and foreign taxing authorities. For further discussion of this matter, see “Other Developments—Federal and State Income Taxes.”

Minority Interest

Minority interest decreased $11 million as a result of lower earnings related to two of SCE’s VIEs mainly due to lower pricing and a planned outage in 2008 at another one of SCE’s VIEs. Earnings from two of SCE’s VIEs (the Sycamore project and the Watson project) are based on revised pricing effective January 1, 2008. Watson Cogeneration and SCE have disputed the commencement date of the prior contract which in turn affected the expiration date (Watson Cogeneration’s position is April 2008 whereby SCE’s position is December 2007). See “Market Risk Exposures—Big 4 Projects Power Purchase Agreements” in the year-ended 2007 MD&A for further discussion.

Historical Cash Flow Analysis

The “Historical Cash Flow Analysis” section of this MD&A discusses consolidated cash flows from operating, financing and investing activities.

Cash Flows from Operating Activities

Net cash provided by operating activities:

	Three Months Ended March 31,
In millions	2008			2007
Continuing operations	$	578		$	730
Discontinued operations		(5	)		3
Total	$	573		$	733

Cash provided by operating activities from continuing operations decreased $152 million in 2008, compared to 2007. The 2008 change reflects a decrease in revenue collected from SCE’s customers primarily due to the rate change that was effective February 14, 2007. On February 14, 2007, SCE’s system average rate decreased from 14.5¢ per-kWh to 13.9¢ per-kWh. See “SCE: Regulatory Matters—Current Regulatory Developments—Impact of Regulatory Matters on Customer Rates,” and “—Energy Resource Recovery Account Proceedings” for further discussion of rate changes. The 2008 change was also due to the timing of cash receipts and disbursements related to working capital items including lower income taxes paid in 2008 compared to 2007.

Cash Flows from Financing Activities

Net cash provided (used) by financing activities:

	Three Months Ended March 31,
In millions	2008		2007
Continuing operations	$	215	$	(176	)

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Cash provided (used) by financing activities from continuing operations mainly consisted of long-term debt issuances (payments) at SCE and EMG and dividends paid by Edison International to its common shareholders.

Financing activities in the first quarter of 2008 were as follows:

• In January, SCE issued $600 million of first refunding mortgage bonds due in 2038. The proceeds were used to repay SCE’s outstanding commercial paper of approximately $426 million and for general corporate purposes.

• During the first quarter, SCE purchased the remaining $212 million of its auction rate bonds, converted the issue to a variable rate mode, and terminated the FGIC insurance policy. The bonds remain outstanding and have not been retired or cancelled.

• During the first quarter, SCE’s net payment of short-term debt was $100 million.

• In January, SCE repurchased 350,000 shares of 4.08% cumulative preferred stock at a price of $19.50 per share. SCE retired this preferred stock in January 2008 and recorded a $2 million gain on the cancellation of reacquired capital stock (reflected in the caption “Common stock” on the consolidated balance sheets).

• Other financing activities include dividend payments of $99 million paid by Edison International to its common shareholders and $24 million for stock purchased for stock-based compensation.

Financing activities in the first quarter of 2007 were as follows:

• During the first quarter, SCE issued $120 million in commercial paper classified as short-term debt.

• Other financing activities include dividend payments of $94 million paid by Edison International to its common shareholders and $106 million for stock purchased for stock-based compensation.

Cash Flows from Investing Activities

Net cash used by investing activities:

	Three Months Ended March 31,
In millions	2008			2007
Continuing operations	$	(684	)	$	(651	)

Cash flows from investing activities are affected by capital expenditures, SCE’s funding of nuclear decommissioning trusts, and proceeds and maturities of investments.

Investing activities in 2008 reflect $588 million in capital expenditures at SCE, primarily for transmission and distribution assets, including approximately $19 million for nuclear fuel acquisitions, and $117 million in capital expenditures at EMG. Investing activities also include net maturities and sales of short-term investments of $46 million and net purchases of nuclear decommissioning trust investments and other of $30 million.

Investing activities in 2007 reflect $560 million in capital expenditures at SCE, primarily for transmission and distribution assets, including approximately $20 million for nuclear fuel acquisitions, and $131 million in capital expenditures at EMG. Investing activities also include net maturities and sales of marketable securities of $83 million at EMG in the first quarter of 2007 and net purchases of nuclear decommissioning trust investments and other of $33 million.

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NEW ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Adopted

In April 2007, the FASB issued FIN No. 39-1. This pronouncement permits companies to offset fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) against fair value amounts recognized for derivative instruments executed with the same counterparty under a master netting arrangement. In addition, upon the adoption, companies were permitted to change their accounting policy to offset or not offset fair value amounts recognized for derivative instruments under master netting agreements. Edison International adopted FIN No. 39-1 effective January 1, 2008. The adoption resulted in netting a portion of margin and cash collateral deposits with derivative positions on Edison International’s consolidated balance sheets, but had no impact on its consolidated statements of income. The consolidated balance sheet at December 31, 2007 has been retroactively restated for the change, which resulted in a decrease in net assets (margin and collateral deposits) of $38 million. The consolidated statements of cash flows for the three months ended March 31, 2007 has been retroactively restated to reflect the balance sheet changes, which had no impact on total operating cash flows from continuing operations.

In February 2007, the FASB issued SFAS No. 159, which provides an option to report eligible financial assets and liabilities at fair value, with changes in fair value recognized in earnings. Edison International adopted this pronouncement effective January 1, 2008. The adoption had no impact because Edison International did not make an optional election to report additional financial assets and liabilities at fair value.

In September 2006, the FASB issued SFAS No. 157, which clarifies the definition of fair value, establishes a framework for measuring fair value and expands the disclosures on fair value measurements. Edison International adopted SFAS No. 157 effective January 1, 2008. The adoption did not result in any retrospective adjustments to its consolidated financial statements. The accounting requirements for employers’ pension and other postretirement benefit plans are effective at the end of 2008, which is the next measurement date for these benefit plans. The effective date will be January 1, 2009 for asset retirement obligations and other nonfinancial assets and liabilities which are measured or disclosed on a non-recurring basis.

Accounting Pronouncements Not Yet Adopted

In December 2007, the FASB issued SFAS No. 141(R), which establishes principles and requirements for how the acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at the acquisition date fair value. SFAS No. 141(R) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after fiscal years beginning on or after January 1, 2009. Early adoption is not permitted.

In December 2007, the FASB issued SFAS No. 160, which requires an entity to present minority interest that reflects the ownership interests in subsidiaries held by parties other than the entity, within the equity section but separate from the entity’s equity in the consolidated financial statements. It also requires the amount of consolidated net income attributable to the parent and to the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of income; changes in ownership interest be accounted for similarly as equity transactions; and, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary and the gain or loss on the deconsolidation of the subsidiary be measured at fair value. Edison International will adopt SFAS No. 160 on January 1, 2009. In accordance with this standard, Edison International will reclassify minority interest to a component of shareholder’s equity (at March 31, 2008 this amount was $282 million).

In March 2008, the FASB issued SFAS No. 161, which requires additional disclosures related to derivative instruments, including how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and how derivative instruments and related hedged items affect an entity’s

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financial position, financial performance, and cash flows. SFAS No. 161 is effective for fiscal years beginning after November 15, 2008, with early adoption permitted. Edison International will adopt SFAS No. 161 in the first quarter of 2009. SFAS No. 161 will impact disclosures only and will not have an impact on Edison International’s consolidated results of operations, financial condition or cash flows.

COMMITMENTS, GUARANTEES AND INDEMNITIES

The following is an update to Edison International’s commitments, guarantees and indemnities. See the section, “Commitments, Guarantees and Indemnities” in the year-ended 2007 MD&A for a detailed discussion.

Fuel Supply Contracts

In connection with the acquisition of the Illinois plants, Midwest Generation had assumed a long-term coal supply contract and recorded a liability to reflect the fair value of this contract. In March 2008, Midwest Generation entered into an agreement to buy out its coal obligations for the years 2009 through 2012 under this contract with a one-time payment to be made in January 2009. Midwest Generation recorded a pre-tax gain of $15 million ($9 million, after tax) during the first quarter of 2008. The remaining payments due under this contract are $20 million.

SCE entered into service contracts associated with uranium enrichment and fuel fabrication during the first three months of 2008. As a result, SCE’s additional fuel supply commitments are estimated to be $23 million for the remainder of 2008, $31 million for 2009, $31 million for 2010, $51 million for 2011, $91 million for 2012 and $204 million thereafter.

Turbine Commitments

At March 31, 2008, EME had entered into agreements with vendors securing 483 wind turbines (1,076 MW) for an aggregate purchase price of $1.3 billion with remaining commitments of $474 million in 2008, $540 million in 2009 and $49 million in 2010. At March 31, 2008, EME had recorded wind turbine deposits of $197 million included in other long-term assets in its consolidated balance sheet. In addition, EME had 30 wind turbines (90 MW) in temporary storage to be used for future wind projects with remaining commitments of $3 million in 2008. At March 31, 2008, EME had recorded $84 million related to these wind turbines included in other long-term assets in its consolidated balance sheet.

Capital Improvements

At March 31, 2008, EME’s subsidiaries had firm commitments to spend approximately $240 million during the remainder of 2008 and $4 million in 2009 on capital and construction expenditures. The majority of these expenditures relate to the construction of wind projects. These expenditures are planned to be financed by cash on hand, cash generated from operations or existing subsidiary credit agreements.

Uncertain Tax Position Net Liability

At March 31, 2008, Edison International’s recorded net liability for uncertain tax positions was $460 million. Edison International currently cannot reliably predict the timing of cash flows associated with the resolution of uncertain tax positions due to the uncertainty as to the timing for resolving tax issues with the IRS related to ongoing examinations and administrative appeals. See “Other Developments—Federal and State Income Taxes” for further information.

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OTHER DEVELOPMENTS

Environmental Matters

The operating subsidiaries of Edison International are subject to numerous federal and state environmental laws and regulations, which require them to incur substantial costs to operate existing facilities, construct and operate new facilities, and mitigate or remove the effect of past operations on the environment. Edison International believes that its operating subsidiaries are in substantial compliance with existing environmental regulatory requirements. However, the US EPA has issued a NOV to Midwest Generation and Commonwealth Edison, the former owner of Midwest Generation’s coal-fired power plants, alleging violations of the CAA and certain opacity and particulate matter standards. For information on the US EPA NOV issued to Midwest Generation, see “EMG: Other Developments—Midwest Generation Potential Environmental Proceeding” in the year-ended 2007 MD&A.

The domestic power plants owned or operated by Edison International’s operating subsidiaries, in particular their coal-fired plants, may be affected by recent developments in federal and state environmental laws and regulations. These laws and regulations, including those relating to SO₂ and NO_x emissions, mercury emissions, ozone and fine particulate matter emissions, regional haze, water quality, and climate change, may require significant capital expenditures at these facilities. The developments in certain of these laws and regulations are discussed in more detail below. These developments will continue to be monitored to assess what implications, if any, they will have on the operation of domestic power plants owned or operated by SCE, EME, or their subsidiaries, or the impact on Edison International’s consolidated results of operations or financial position.

Edison International’s projected environmental capital expenditures over the next five years are: 2008 –$531 million; 2009 – $544 million; 2010 – $749 million; 2011 – $513 million; and 2012 – $526 million. The projected environmental capital expenditures are mainly for undergrounding certain transmission and distribution lines at SCE and upgrading environmental controls at EME.

For a discussion of Edison International’s environmental matters, refer to “Other Developments—Environmental Matters” in the year-ended 2007 MD&A. There have been no significant developments with respect to environmental matters affecting Edison International since the filing of Edison International’s Annual Report on Form 10-K, except as follows:

Climate Change

Litigation Developments

On February 28, 2008, the Native Village of Kivalina and the City of Kivalina, located off the coast of Alaska, filed a complaint in federal court in California against 23 corporate defendants, including Edison International and several electric generating, oil and gas, and coal mining companies. The complaint contends that the alleged global warming impacts of the GHG emissions associated with the defendants’ business activities are destroying the plaintiffs’ village through the melting of Arctic ice that had previously protected the village from winter storms. The plaintiffs further allege that the village will soon need to be abandoned or relocated at a cost of between $95 million and $400 million. Edison International cannot predict the outcome of this litigation.

State Specific Legislative Initiatives

SCE and EME are evaluating the CARB’s reporting regulations adopted December 2007 pursuant to AB 32 to assess the total cost of compliance.

In mid-March 2008, the CEC and CPUC recommended that CARB adopt a mix of direct mandatory/regulatory requirements and a cap-and-trade system for the electricity sector as part of CARB’s AB 32 scoping plan for achieving the maximum technologically feasible and cost-effective reductions in greenhouse gas emissions by 2020. The recommendations include: a mandatory minimum levels of cost-effective energy efficiency for all retail electricity providers; legislation requiring all retail electricity providers to deliver more than 20% of their

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power from renewable sources in the future, at levels and dates to be determined; a multi-sector cap-and-trade program for California that includes the electricity sector; CARB designation of deliverers of electricity to the California grid as the entities responsible for compliance with the AB 32 requirements; and the auction of at least some portion of the emission allowances available to the electricity sector for the cap-and-trade program. An integral part of this auction recommendation is that the majority of the proceeds from the auctioning of allowances for the electricity sector should be used in ways that benefit electricity consumers in California, such as to augment investments in energy efficiency and renewable energy or to provide customer bill relief.

CARB still must determine whether to adopt the CEC’s and CPUC’s recommendations as part of its AB 32 scoping plan. CARB is expected to release a draft AB 32 scoping plan in June 2008 for public review and comment. CARB is required to approve its AB 32 scoping plan by January 1, 2009.

Air Quality Regulation

Ambient Air Quality Standards

Illinois

On March 12, 2008, the US EPA signed a final rule that implements revisions to the primary and secondary national ambient air quality standards for ozone, originally proposed on July 11, 2007. With regard to the primary standard for ozone, the US EPA has reduced the 8-hour standard to 0.075 parts per million (ppm) from the current standard of 0.84 ppm. The rule is expected to become effective during the second quarter of 2008. Attainment dates for the new standards range between 2013 and 2030, depending on the severity of the non-attainment. Based on 2005-2007 data, Chicago is likely to be in non-attainment with the new standard. Available data indicates that the area in which the Homer City facilities are located is likely to be in attainment. EME intends to consider the new standards as part of its overall plan for environmental compliance.

Water Quality Regulation

Clean Water Act—Cooling Water Intake Structures

California

On March 21, 2008 the California State Water Resources Control Board released its draft scoping document and preliminary draft Statewide Water Quality Control Policy on the Use of Coastal and Estuarine Waters for Power Plant Cooling. This state policy is being developed in advance of the issuance of a final rule from the US EPA on standards for cooling water intake structures at existing large power plants. As anticipated, the Scoping Document establishes closed cycle wet cooling as the best technology available for retrofitting existing once-through cooled plants like San Onofre. Additionally, the target levels for compliance with the state policy correspond to the high end of the ranges originally proposed in the US EPA’s rule. Nuclear-fueled power plants, including San Onofre, would have until January 1, 2021 to comply with the policy. The tentative policy development schedule that was included in the Scoping Document schedules public workshops in May 2008 and a public hearing in September 2008. Policy adoption would tentatively be voted on by the State Board in December 2008. SCE is currently evaluating potential effects of the policy and working with key government policy makers. This policy may significantly impact both operations at San Onofre and SCE’s ability to procure timely supplies of generating capacity from fossil-fueled plants that use ocean water in once-through cooling systems.

Environmental Remediation

Edison International is subject to numerous environmental laws and regulations, which require it to incur substantial costs to operate existing facilities, construct and operate new facilities, and mitigate or remove the effect of past operations on the environment.

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Edison International believes that it is in substantial compliance with environmental regulatory requirements; however, possible future developments, such as the enactment of more stringent environmental laws and regulations, could affect the costs and the manner in which business is conducted and could cause substantial additional capital expenditures. There is no assurance that additional costs would be recovered from customers or that Edison International’s consolidated financial position and results of operations would not be materially affected.

Edison International records its environmental remediation liabilities when site assessments and/or remedial actions are probable and a range of reasonably likely cleanup costs can be estimated. Edison International reviews its sites and measures the liability quarterly, by assessing a range of reasonably likely costs for each identified site using currently available information, including existing technology, presently enacted laws and regulations, experience gained at similar sites, and the probable level of involvement and financial condition of other potentially responsible parties. These estimates include costs for site investigations, remediation, operations and maintenance, monitoring and site closure. Unless there is a probable amount, Edison International records the lower end of this reasonably likely range of costs (classified as other long-term liabilities) at undiscounted amounts.

As of March 31, 2008, Edison International’s recorded estimated minimum liability to remediate its 44 identified sites at SCE (24 sites) and EME (20 sites primarily related to Midwest Generation) was $68 million, $64 million of which was related to SCE including $29 million related to San Onofre. This remediation liability is undiscounted. Edison International’s other subsidiaries have no identified remediation sites. The ultimate costs to clean up Edison International’s identified sites may vary from its recorded liability due to numerous uncertainties inherent in the estimation process, such as: the extent and nature of contamination; the scarcity of reliable data for identified sites; the varying costs of alternative cleanup methods; developments resulting from investigatory studies; the possibility of identifying additional sites; and the time periods over which site remediation is expected to occur. Edison International believes that, due to these uncertainties, it is reasonably possible that cleanup costs could exceed its recorded liability by up to $150 million, all of which is related to SCE. The upper limit of this range of costs was estimated using assumptions least favorable to Edison International among a range of reasonably possible outcomes. In addition to its identified sites (sites in which the upper end of the range of costs is at least $1 million), SCE also has 30 immaterial sites whose total liability ranges from $3 million (the recorded minimum liability) to $9 million.

The CPUC allows SCE to recover environmental remediation costs at certain sites, representing $33 million of its recorded liability, through an incentive mechanism (SCE may request to include additional sites). Under this mechanism, SCE will recover 90% of cleanup costs through customer rates; shareholders fund the remaining 10%, with the opportunity to recover these costs from insurance carriers and other third parties. SCE has successfully settled insurance claims with all responsible carriers. SCE expects to recover costs incurred at its remaining sites through customer rates. SCE has recorded a regulatory asset of $62 million for its estimated minimum environmental-cleanup costs expected to be recovered through customer rates.

Edison International’s identified sites include several sites for which there is a lack of currently available information, including the nature and magnitude of contamination, and the extent, if any, that Edison International may be held responsible for contributing to any costs incurred for remediating these sites. Thus, no reasonable estimate of cleanup costs can be made for these sites.

Edison International expects to clean up its identified sites over a period of up to 30 years. Remediation costs in each of the next several years are expected to range from $11 million to $31 million. Recorded costs for the 12 months ended March 31, 2008 were $23 million.

Based on currently available information, Edison International believes it is unlikely that it will incur amounts in excess of the upper limit of the estimated range for its identified sites and, based upon the CPUC’s regulatory treatment of environmental remediation costs incurred at SCE, Edison International believes that costs ultimately recorded will not materially affect its consolidated results of operations or financial position. There can be no

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assurance, however, that future developments, including additional information about existing sites or the identification of new sites, will not require material revisions to such estimates.

Federal and State Income Taxes

Tax Positions being addressed as part of active examinations and administrative appeals processes

Edison International remains subject to examination and administrative appeals by the IRS for tax years 1994 and forward. Edison International is challenging certain IRS deficiency adjustments for tax years 1994 – 1999 with the Administrative Appeals branch of the IRS and Edison International is currently under active IRS examination for tax years 2000 – 2002. In addition, the statute of limitations remains open for tax years 1986 – 1993, which has allowed Edison International to file certain affirmative claims related to these tax years.

During the examination phase for tax years 1994 – 1999, which is complete, the IRS asserted income tax deficiencies related to certain tax positions taken by Edison International on filed tax returns. Edison International is challenging the asserted tax deficiencies in IRS administrative appeals proceedings; however, most of these tax positions relate to timing differences and, therefore, any amounts that would be paid if Edison International’s position is not sustained (exclusive of any penalties) would be deductible on future tax returns filed by Edison International. In addition, Edison International has filed affirmative claims with respect to certain tax years 1986 through 2005 with the IRS and state tax authorities. Any benefits associated with these affirmative claims would be recorded in accordance with FIN 48 which provides that recognition would occur at the earlier of when Edison International would make an assessment that the affirmative claim position has a more likely than not probability of being sustained or when a settlement of the affirmative claim is consummated with the tax authority. Certain of these affirmative claims have been recognized as part of the implementation of FIN 48.

Currently, Edison International is under administrative appeals with the California Franchise Tax Board for tax years 1997 – 2002 and under examination for tax years 2003 – 2004. Edison International remains subject to examination by the California Franchise Tax Board for tax years 2005 and forward. Edison International is also subject to examination by other state tax authorities, subject to varying statute of limitations.

Lease Transactions

As part of a nationwide challenge of certain types of lease transactions, the IRS has asserted deficiencies related to Edison International’s deferral of income taxes associated with certain of its cross-border, leveraged leases. For tax years 1994 – 1999, Edison International is challenging the asserted deficiencies in ongoing IRS Appeals proceedings.

These asserted deficiencies relate to Edison Capital’s income tax treatment of both its foreign power plant and electric locomotive sale/leaseback transactions entered into in 1993 and 1994 (Replacement Leases, which the IRS refers to as a sale-in/lease-out or SILO) and its foreign power plant and electric transmission system lease/leaseback transactions entered into in 1997 and 1998 (Lease/Leaseback, which the IRS refers to as a lease-in/lease-out or LILO).

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In 1999, Edison Capital entered into a lease/service contract transaction involving a foreign telecommunication system (Service Contract, which the IRS also refers to as a SILO). As part of an ongoing examination of 2000 – 2002, the IRS is reviewing Edison International’s income tax treatment of this Service Contract and has issued several data requests, to which Edison International has responded. The IRS has not formally asserted any adjustments, but Edison International believes that the IRS examination team will assert deficiencies related to this Service Contract. The following table summarizes estimated federal and state income taxes deferred from these leases as of December 31, 2007. Repayment of these deferred taxes would be accelerated if the IRS position were to be sustained:

In millions	Tax Years Under Appeal 1994 – 1999		Tax Years Under Audit 2000 – 2002		Unaudited Tax Years 2003 – 2007			Total
Replacement Leases (SILO)	$	44	$	19	$	27		$	90
Lease/Leaseback (LILO)		563		566		(8	)		1,121
Service Contract (SILO)		—		127		253			380
Total	$	607	$	712	$	272		$	1,591

As of March 31, 2008, the interest (after tax) on the proposed tax adjustments is estimated to be approximately $557 million. The IRS has also asserted a 20% penalty on any sustained tax adjustment.

Edison International believes it properly reported these transactions based on applicable statutes, regulations and case law in effect at the time the transactions were entered into, and it is vigorously defending its tax treatment of these leases with the Administrative Appeals branch of the IRS through pending appeals of the deficiencies and penalties asserted by IRS examination for the tax years 1994 – 1999. Edison International believes the IRS’s position misstates material facts, misapplies the law and is incorrect. Currently, Edison International is engaged in settlement discussions with IRS Appeals.

The payment of taxes, interest and penalties could have a significant impact on earnings and cash flow. Edison International is prepared to take legal action if an acceptable settlement cannot be reached with the IRS. If Edison International were to commence litigation in certain forums, Edison International would need to make payments of disputed taxes, along with interest and any penalties asserted by the IRS, and thereafter pursue refunds. On May 26, 2006, Edison International paid $111 million of the taxes, interest and penalties for tax year 1999 followed by a refund claim for the same amount. The cash payment was funded by Edison Capital and accounted for as a deposit recorded in “Other long-term assets” on the consolidated balance sheet and will be refunded with interest to the extent Edison International prevails. Since the IRS did not act on this refund claim within six months from the date the claim was filed, it is deemed denied which provides Edison International with the option of being able to take legal action to assert its refund claim.

A number of cases involving LILO and SILO transactions are pending before various federal courts. One case involving a LILO transaction was decided in favor of the IRS in a federal district court and was affirmed in a Circuit Court of Appeals decision issued in April 2008. In April 2008, a jury in a federal district court case rendered a verdict where some of the findings were unfavorable to the taxpayer. The taxpayer has asserted in a post-verdict motion that these findings are inconsistent. This case is awaiting a final judgment. In accordance with FIN 48 and FASB Staff Position FAS 13-2 “Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction,” Edison International will continue to monitor and evaluate its lease transactions with respect to on-going events. Edison International cannot predict the timing or ultimate outcome of these cases or any of the other pending LILO or SILO cases or other developments.

To the extent an acceptable settlement is not reached with the IRS, Edison International would expect to file a refund claim for any taxes and penalties that are paid for the 1994 –1996 tax years related to assessed tax deficiencies and penalties on the Replacement Leases. Edison International may make additional payments related to later tax years to preserve its litigation rights. Although, at this time, the amount and timing of these

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additional payments is uncertain, the amount of additional payments, if necessary, could be substantial. At this time, Edison International is unable to predict the impact of the ultimate resolution of the lease issues.

Edison International filed amended California Franchise Tax returns for tax years 1997 – 2002 to mitigate the possible imposition of new California penalty provisions on transactions that may be considered as listed or substantially similar to listed transactions described in an IRS notice that was published in 2001. These transactions include certain Edison Capital leveraged lease transactions described above and the SCE subsidiary contingent liability company transaction described below. Edison International filed these amended returns under protest retaining its appeal rights.

Balancing Account Over-Collections

In response to an affirmative claim related to balancing account over-collections, Edison International received an IRS Notice of Proposed Adjustment in July 2007. This affirmative claim is part of the ongoing IRS examinations and administrative appeals process and all of the tax years included in this Notice of Proposed Adjustment remain subject to ongoing examination and administrative appeals. The cash and earnings impacts of this position are dependent on the ultimate settlement of all open tax issues in these tax years. Edison International expects that resolution of this particular issue could potentially increase earnings and cash flows within the range of $70 million to $80 million and $300 million to $325 million, respectively.

Contingent Liability Company

The IRS has asserted deficiencies with respect to a transaction entered into by a former SCE subsidiary which may be considered substantially similar to a listed transaction described by the IRS as a contingent liability company for tax years 1997 – 1998. This is being considered by the Administrative Appeals branch of the IRS where Edison International is defending its tax return position with respect to this transaction.

Resolution of Federal and State Income Tax Issues Being Addressed in Ongoing Examinations and Administrative Appeals

Edison International continues its efforts to resolve open tax issues through tax year 2002. Although the timing for resolving these open tax positions is uncertain, it is reasonably possible that all or a significant portion of these open tax issues through tax year 2002 could be resolved within the next 12 months.

Midway-Sunset Cogeneration Company

As discussed under the heading “Other Developments—Midway-Sunset Cogeneration Company” in the year-ended 2007 MD&A, Midway-Sunset is a party to several proceedings pending at the FERC because Midway-Sunset was a seller in the PX market during 2000 and 2001, both for its own account and on behalf of SCE and PG&E, the utilities to which the majority of Midway-Sunset’s power was contracted for sale.

On December 20, 2007, Midway-Sunset entered into a settlement agreement with SCE, PG&E, SDG&E and certain California state parties to resolve Midway-Sunset’s liability in the FERC refund proceedings. Midway-Sunset concurrently entered into a separate agreement with SCE and PG&E that provides for pro-rata reimbursement to Midway-Sunset by the two utilities of the portions of the agreed to refunds that are attributable to sales made by Midway-Sunset for the benefit of the utilities. The settlement, which had been approved previously by the CPUC was approved by FERC on April 2, 2008.

During the period in which Midway-Sunset’s generation was sold into the PX market, amounts SCE received from Midway-Sunset for its pro-rata share of such sales were credited to SCE’s customers against power purchase expenses through the ratemaking mechanism in place at that time. SCE believes that the net amounts to be reimbursed to Midway-Sunset are recoverable from its customers through current regulatory mechanisms.

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Edison International does not expect any refund payment to be made by Midway-Sunset, or any SCE reimbursement to Midway-Sunset, to have a material impact on earnings.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Information responding to Part I, Item 3 is included in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the headings “SCE: Market Risk Exposures” and “EMG: Market Risk Exposures.”

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Edison International’s management, under the supervision and with the participation of the company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of Edison International’s disclosure controls and procedures (as that term is defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period, Edison International’s disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There were no changes in Edison International’s internal control over financial reporting (as that term is defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, Edison International’s internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table contains information about all purchases made by or on behalf of Edison International or any affiliated purchaser (as defined in Rule 10b-18(a)(3) under the Exchange Act) of shares or other units of any class of Edison International’s equity securities that is registered pursuant to Section 12 of the Exchange Act.

Period	(a) Total Number of Shares (or Units) Purchased1	(b) Average Price Paid per Share (or Unit)1		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
January 1, 2008 to January 31, 2008	919,786	$	52.50	—	—
February 1, 2008 to February 29, 2008	782,990	$	51.22	—	—
March 1, 2008 to March 31, 2008	339,575	$	49.37	—	—
Total	2,042,351	$	51.49	—	—

⁽¹⁾ The shares were purchased by agents acting on Edison International’s behalf for delivery to plan participants to fulfill requirements in connection with Edison International’s (i) 401(k) Savings Plan, (ii) Dividend Reinvestment and Direct Stock Purchase Plan, and (iii) long-term incentive compensation plans. The shares were purchased in open-market transactions pursuant to plan terms or participant elections. The shares were never registered in Edison International’s name and none of the shares purchased were retired as a result of the transactions.

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Item 6. Exhibits

Edison International

10.1	Amended and Restated Credit Agreement dated February 14, 2008, among Edison International and JPMorgan Chase Bank, N.A., as Administrative Agent, Citicorp North America, Inc., as Syndication Agent, and Credit Suisse, Lehman Commercial Paper inc., and Wells Fargo Bank, N.A., as Documentation Agents and the several lenders thereto
10.2	Terms and conditions for 2008 long-term compensation awards under the 2007 Performance Incentive Plan
10.3	Employment Agreement between Edison International and J.A. Bouknight, Jr., dated July 12, 2005
10.4*	2008 Executive bonus program (File No. 1-9936, filed as Exhibit 10.1 to Edison International’s Form 8-K dated March 5, 2008)
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
32	Statement Pursuant to 18 U.S.C. Section 1350

* Incorporated by reference pursuant to Rule 12b-32.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EDISON INTERNATIONAL
(Registrant)
By:	/s/    LINDA G. SULLIVAN
	LINDA G. SULLIVAN Vice President and Controller (Duly Authorized Officer and Principal Accounting Officer)

Dated: May 8, 2008

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EX-10.1

Incorporating the First Amendment

dated as of February 14, 2008

Exhibit 10.1

AMENDED AND RESTATED CREDIT AGREEMENT

Among

EDISON INTERNATIONAL

The Several Lenders

from Time to Time Parties Hereto

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

CITICORP NORTH AMERICA, INC.,

as Syndication Agent

CREDIT SUISSE, LEHMAN COMMERCIAL PAPER INC. and WELLS FARGO BANK,

N.A.,

as Documentation Agents

Dated as of February 23, 2007

J.P. MORGAN SECURITIES INC.

CITIGROUP GLOBAL MARKETS INC.,

as Lead Arrangers and Bookrunners

Table of Contents

		Page
SECTION 1. DEFINITIONS		1
1.1.	Defined Terms	1
1.2.	Other Definitional Provisions	13
SECTION 2. AMOUNT AND TERMS OF THE CREDIT FACILITY		13
2.1.	The Commitments; Increase in Total Commitments	13
2.2.	Procedure for Borrowing	14
2.3.	Fees	15
2.4.	Repayment of Loans and Swingline Loans; Evidence of Debt	16
2.5.	Prepayments and Termination or Reduction of Commitments	17
2.6.	Conversion and Continuation Options	17
2.7.	Minimum Amounts and Maximum Number of Tranches	18
2.8.	Interest Rates and Payment Dates	18
2.9.	Computation of Interest and Fees	19
2.10.	Inability to Determine Interest Rate	19
2.11.	Pro Rata Treatment and Payments	20
2.12.	Illegality	20
2.13.	Additional Costs	21
2.14.	Taxes	22
2.15.	Indemnity	24
2.16.	Change of Lending Office	24
2.17.	Replacement of Lenders under Certain Circumstances	25
2.18.	Extension Option	25
2.19.	Swingline Commitment	26
2.20.	Procedure for Swingline Borrowing; Refunding of Swingline Loans.	27
SECTION 3. LETTERS OF CREDIT		28
3.1.	General	28
3.2.	Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions	28
3.3.	Expiration Date	29
3.4.	Participations	29
3.5.	Reimbursement	30
3.6.	Obligations Absolute	31
3.7.	Disbursement Procedures	31
3.8.	Interim Interest	31
3.9.	Replacement of the Issuing Lender	32
SECTION 4. REPRESENTATIONS AND WARRANTIES		32
4.1.	Financial Condition	32
4.2.	No Change	33
4.3.	Corporate Existence	33
4.4.	Corporate Power; No Legal Bar	33
4.5.	Authorization; Enforceability	33

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4.6.	ERISA	33
4.7.	No Material Litigation	33
4.8.	Taxes	34
4.9.	Purpose of Loans	34
4.10.	No Default	34
4.11.	Environmental Matters	34
SECTION 5. CONDITIONS PRECEDENT		34
5.1.	Conditions of Effectiveness	34
5.2.	Conditions to Each Extension of Credit	35
SECTION 6. COVENANTS		36
6.1.	Financial Statements; Certificates	36
6.2.	Compliance; Maintenance of Existence	37
6.3.	Inspection of Property; Books and Records; Discussions	37
6.4.	Notices	37
6.5.	Limitation on Fundamental Changes	38
6.6.	Tax Allocation Agreement	38
6.7.	Disposition of Property	38
6.8.	Consolidated Capitalization Ratio	38
6.9.	Limitation on Liens	38
6.10.	Payment of Taxes	38
6.11.	Ownership of SCE	39
6.12.	No Liens on Common Stock	39
6.13.	Clauses Restricting SCE Distributions	39
SECTION 7. EVENTS OF DEFAULT		39
SECTION 8. THE ADMINISTRATIVE AGENT		42
8.1.	Appointment	42
8.2.	Delegation of Duties	42
8.3.	Exculpatory Provisions	42
8.4.	Reliance by Administrative Agent	42
8.5.	Notice of Default	43
8.6.	Non-Reliance on Administrative Agent and Other Lenders	43
8.7.	Indemnification	44
8.8.	Administrative Agent in Its Individual Capacity	44
8.9.	Successor Administrative Agent	44
8.10.	The Syndication Agent and Documentation Agents	45
SECTION 9. MISCELLANEOUS		45
9.1.	Amendments and Waivers	45
9.2.	Notices	45
9.3.	No Waiver; Cumulative Remedies	46
9.4.	Survival	46
9.5.	Payment of Expenses and Taxes	46
9.6.	Transfer Provisions	47

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9.7.	Adjustments; Set-Off	49
9.8.	Counterparts	50
9.9.	Severability	50
9.10.	Integration	50
9.11.	GOVERNING LAW	50
9.12.	WAIVERS OF JURY TRIAL	50
9.13.	Submission To Jurisdiction; Waivers	50
9.14.	Confidentiality	51
9.15.	USA Patriot Act	52

SCHEDULES
1.1	Lending Offices and Commitments
2.18	Extending Lenders

EXHIBITS
A	Form of Note
B	Form of Exemption Certificate
C	Form of Borrower Closing Certificate
D-1	Form of Legal Opinion of Associate General Counsel of the Borrower
D-2	Form of Opinion of Special Counsel to the Administrative Agent
E	Form of Assignment and Acceptance
F	Form of New Lender Supplement
G	Form of Commitment Increase Supplement

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AMENDED AND RESTATED CREDIT AGREEMENT

This AMENDED AND RESTATED CREDIT AGREEMENT, dated as of February 23, 2007 (as may be amended, supplemented or otherwise modified from time to time, this “Agreement”), is made by and among EDISON INTERNATIONAL, a California corporation (the “Borrower”), the several banks and other financial institutions from time to time parties hereto (the “Lenders”), CITICORP NORTH AMERICA, INC., as syndication agent (in such capacity the “Syndication Agent”), CREDIT SUISSE, LEHMAN COMMERCIAL PAPER INC. and WELLS FARGO BANK, N.A., as documentation agents (in their respective capacities as such, the “Documentation Agents”), and JPMORGAN CHASE BANK, N.A., as administrative agent for the Lenders (in such capacity, the “Administrative Agent” and, together with the Syndication Agent and the Documentation Agents, the “Agents”).

W I T N E S S E T H:

WHEREAS, the Borrower, the Lenders and the Agents are parties to the Amended and Restated Credit Agreement, dated as of December 15, 2005 (as amended, supplemented or otherwise modified prior to the date hereof, the “Existing Credit Agreement”);

WHEREAS, the Borrower has requested that (i) the Lenders increase the loan commitments under the Existing Credit Agreement by $500,000,000 (the “Revolving Commitment Increase”) to $1,500,000,000, (ii) the Lenders increase the letter of credit commitments under the Existing Credit Agreement by $750,000,000 (the “Letter of Credit Commitment Increase”) to $1,000,000,000 (iii) certain other amendments be made to the Existing Credit Agreement and (iv) the Existing Credit Agreement be amended and restated in its entirety; and

WHEREAS, the Lenders are willing to make the Revolving Commitment Increase and the Letter of Credit Commitment Increase available to the Borrower and make certain other amendments to the Existing Credit Agreement upon the terms and conditions set forth herein;

NOW, THEREFORE, the Borrower, the Lenders and the Agents hereby agree that the Existing Credit Agreement shall be amended and restated in its entirety as follows:

SECTION 1. DEFINITIONS

1.1. Defined Terms. As used in this Agreement, the following terms shall have the following meanings:

“ABR”: for any day, a rate per annum (rounded upwards, if necessary, to the next  ¹/16 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus  ¹/2 of 1%. Any change in the ABR due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

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“ABR Loans”: Loans and Swingline Loans, the rate of interest applicable to which is based upon the ABR.

“Act”: as defined in Section 9.15.

“Additional Costs”: as defined in Section 2.13(a).

“Administrative Agent”: as defined in the preamble hereto.

“Affiliate”: as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person.

“Agents”: as defined in the preamble hereto.

“Agreement”: as defined in the preamble hereto.

“Applicable Margin”: for any day, the applicable rate per annum set forth under the relevant column heading below, based upon the then most current senior unsecured debt ratings and/or corporate issuer ratings of the Borrower issued by S&P and Moody’s, respectively:

Level	Rating	Facility Fee Rate		Applicable Margin for ABR Loans		Applicable Margin for Eurodollar Loans		Letter of Credit Participation Fee Rate		Utilization Fee
1	A+/A1 or higher	0.040	%	0	%	0.110	%	0.110	%	0.05	%
2	A/A2	0.050	%	0	%	0.150	%	0.150	%	0.05	%
3	A-/A3	0.060	%	0	%	0.190	%	0.190	%	0.05	%
4	BBB+/Baa1	0.070	%	0	%	0.280	%	0.280	%	0.05	%
5	BBB/Baa2	0.090	%	0	%	0.360	%	0.360	%	0.05	%
6	BBB-/Baa3	0.125	%	0	%	0.475	%	0.475	%	0.05	%
7	BB+/Ba1	0.175	%	0	%	0.700	%	0.700	%	0.05	%
8	Lower than BB+/Ba1	0.200	%	0	%	0.800	%	0.800	%	0.05	%

Subject to the provisions of this paragraph regarding split ratings, changes in the Applicable Margin shall become effective on the date on which S&P and/or Moody’s changes its relevant rating. In the event of split ratings, the higher rating shall govern. In the event that, at any time, a rating is not available from one of such rating agencies, the Applicable Margin shall be determined on the basis of the rating from the other rating agency. In the event that, at any time, ratings from each such rating agency are not available for companies generally, the Applicable Margin shall be determined on the basis of the last rating(s) made available. In the event that, at any time, such ratings are not available for the Borrower but are generally available for other companies, then the Applicable Margin shall be as for Level 8.

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“Approved Fund”: with respect to any Lender that is a fund that invests in bank loans, any other fund that invests in bank loans and is advised or managed by the same investment advisor as such Lender or by an affiliate of such investment advisor.

“Assignee”: as defined in Section 9.6(c).

“Assignment and Acceptance”: as defined in Section 9.6(c).

“Board”: the Board of Governors of the Federal Reserve System (or any successor).

“Borrower”: as defined in the preamble hereto.

“Borrowing Date”: any Business Day specified in a notice (i) pursuant to Section 2.2 as a date on which the Borrower requests the Lenders to make Loans hereunder or (ii) pursuant to Section 2.20 as a date on which the Borrower requests the Swingline Lender to make Swingline Loans hereunder.

“Business Day”: a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close, except that, when used in connection with a Eurodollar Loan, the term “Business Day” shall mean any Business Day (as defined above) on which dealings in foreign currencies and exchange between banks may be carried on in London, England and in New York, New York.

“Capital Stock”: shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity ownership interest.

“Change of Control”: the acquisition of beneficial ownership, directly or indirectly, by any person or group (within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, and the rules of the Securities and Exchange Commission promulgated thereunder), of Capital Stock of the Borrower representing more than 30% of the combined voting power of all Capital Stock of the Borrower entitled to vote in the election of directors; provided, however, that a person shall not be deemed to have beneficial ownership of (a) shares of Capital Stock tendered pursuant to a tender or exchange offer made by or on behalf of such person (or its affiliate) until such shares shall have been accepted for payment and (b) if such beneficial ownership arises solely as a result of a revocable proxy delivered in response to a proxy or consent solicitation made by or on behalf of such person (or its affiliates).

“Closing Date”: February 23, 2007.

“Code”: the Internal Revenue Code of 1986, as amended from time to time.

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“Commitment”: as to any Lender, the obligation of such Lender to make Loans and to acquire participations in Letters of Credit and Swingline Loans in the aggregate principal and/or face amount set forth under the heading “Commitment” opposite such Lender’s name on Schedule 1.1 or in the Assignment and Acceptance pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof, including Section 2.1.

“Commitment Increase Amount”: as defined in Section 2.1(b).

“Commitment Increase Notice”: as defined in Section 2.1(b).

“Commitment Period”: the period from and including the Closing Date to the Termination Date.

“Commitment Utilization Percentage”: on any day, the percentage equivalent of a fraction (a) the numerator of which is the Total Exposures and (b) the denominator of which is the Total Commitments (or, on any day after termination of the Commitments, the Total Commitments in effect immediately preceding such termination).

“Commonly Controlled Entity”: an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414 of the Code.

“Consolidated Capital”: at any time, the sum of, without duplication, (i) Consolidated Total Recourse Indebtedness plus (ii) the amount set forth opposite the captions “shareholder’s equity” and “preferred stock” (or similar captions) on a consolidated balance sheet of the Borrower prepared in accordance with GAAP plus (iii) the outstanding principal amount of any junior subordinated deferrable interest debentures or similar securities issued by the Borrower or any of its Subsidiaries after December 15, 2005.

“Consolidated Capitalization Ratio”: on the last day of any fiscal quarter, the ratio of (a) Consolidated Total Recourse Indebtedness to (b) Consolidated Capital.

“Consolidated Total Recourse Indebtedness”: at any date, the sum of (i) the aggregate principal amount of all Indebtedness of the Borrower and its Subsidiaries at such date determined on a GAAP consolidated basis and (ii) without duplication, the aggregate principal amount of all Indebtedness of any other Persons at such date determined on a GAAP consolidated basis to the extent the payment of such Indebtedness is guaranteed by the Borrower or any of its Subsidiaries.

“Contractual Obligation”: as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

“Conversion Date”: as defined in Section 2.6.

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“Cost of Funds Rate”: for any day, the fluctuating rate of interest per annum for such day equal to the “ASK” rate for Federal funds appearing on Page 5 of the Telerate Service (or on any successor substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of the offer rates applicable to Federal funds for a term of one Business Day) at the time reviewed by the Administrative Agent.

“Cost of Funds Rate Loan”: a Swingline Loan that bears interest at a rate based upon the Cost of Funds Rate.

“Declining Lender”: as defined in Section 2.18.

“Default”: any of the events specified in Section 7, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied.

“Documentation Agents”: as defined in the preamble hereto.

“Dollars” and “$”: dollars in lawful currency of the United States of America.

“Environmental Laws”: any and all federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of the environment, as now or may at any time hereafter be in effect.

“ERISA”: the Employee Retirement Income Security Act of 1974, as amended from time to time.

“Eurodollar Loans”: Loans the rate of interest applicable to which is based upon the Eurodollar Rate.

“Eurodollar Rate”: with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum (rounded upwards, if necessary, to the next higher of 1/100th of 1%) equal to the rate for Dollar deposits for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on page 3750 of the Telerate screen at or about 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the Telerate screen (or otherwise on such screen), the “Eurodollar Rate” shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be selected by the Administrative Agent or, in the absence of such availability, by reference to the rate at which the Administrative Agent is offered Dollar deposits at or about 11:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where its eurodollar and foreign currency and exchange operations are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein, and in an amount comparable to the amount of its Eurodollar Loan.

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“Eurodollar Tranche”: the collective reference to Eurodollar Loans the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day).

“Event of Default”: any of the events specified in Section 7, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied.

“Excess Utilization Day”: each day on which the Commitment Utilization Percentage exceeds 50%.

“Existing Credit Agreement”: as defined in the recitals hereto.

“Existing Termination Date”: as defined in Section 2.18.

“Exposure”: with respect to any Lender at any time, an amount equal to the sum of, without duplication, (i) the amount of such Lender’s outstanding Loans, LC Exposure and Swingline Participation Amount at such time and (ii) such Lender’s Percentage of the outstanding Swingline Loans at such time.

“Extending Lender”: as defined in Section 2.18.

“Facility Fee”: the facility fee payable pursuant to Section 2.3(a) at the Facility Fee Rate.

“Facility Fee Rate”: the facility fee rate per annum set forth in the definition of “Applicable Margin”.

“Federal Funds Effective Rate”: for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it.

“First Amendment”: the First Amendment dated as of February 14, 2008 to this Agreement.

“GAAP”: generally accepted accounting principles in the United States of America in effect from time to time.

“Governmental Authority”: any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

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“Hedge Agreements”: all interest rate swaps, caps or collar agreements or similar arrangements dealing with interest rates or currency exchange rates or the exchange of nominal interest obligations, either generally or under specific contingencies.

“Indebtedness”: of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices) or representing reimbursement obligations in respect of letters of credit which have been funded, (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all indebtedness created or arising under any conditional sale or title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (d) all obligations of such Person as lessee which are capitalized in accordance with GAAP, (e) all direct and indirect guarantee obligations (whether by guarantee, reimbursement or indemnity or agreement to maintain financial condition or solvency or otherwise) of such Person in respect of any obligations of the type described in the preceding clauses (a) through (d) of any other Person, (f) all obligations of the kind referred to in clauses (a) through (d) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation and (g) for the purposes of Section 7(g) only, all obligations of such Person in respect of Hedge Agreements in an amount equal to the net amount that would be payable by such Person upon the acceleration, termination or liquidation thereof. Notwithstanding the foregoing, with respect to Borrower and its Subsidiaries, Indebtedness shall not include (i) notes outstanding pursuant to those certain Rate Reduction Certificates, Series 1997-1 issued by SCE Funding LLC, a Subsidiary of the Borrower, (ii) obligations under a Receivables Securitization of such Person, (iii) any junior subordinated deferrable interest debentures or similar securities issued by the Borrower or any of its Subsidiaries after December 15, 2005, (iv) non-recourse project finance Indebtedness of Edison Mission Group Inc. and its Subsidiaries, (v) power-purchase contract obligations and fuel contract obligations that in each case are included as indebtedness on the consolidated balance sheet of SCE and (vi) indebtedness of variable interest entities that are consolidated with the Borrower for financial reporting purposes and whose indebtedness is non-recourse to the Borrower and its Subsidiaries (other than such entities).

“Interest Payment Date”: (a) as to any ABR Loan (other than a Swingline Loan), the last day of each March, June, September and December to occur while such Loan is outstanding and the final maturity date of such Loan, (b) as to any Eurodollar Loan, having an Interest Period of three months or less, the last day of each Interest Period therefor, (c) as to any Eurodollar Loan having an Interest Period longer than three months, each day that is three months, or a whole multiple thereof (e.g., six months), after the first day of such Interest Period and the last day of such Interest Period, (d) as to any Eurodollar Loan the date of any repayment or prepayment made in respect thereof and (e) as to any Swingline Loan, the day that such Swingline Loan is required to be repaid.

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“Interest Period”: (a) with respect to any ABR Loan (other than a Swingline Loan), the period commencing on the Borrowing Date or the Conversion Date, as the case may be, with respect to such ABR Loan and ending on the last day of each March, June, September and December to occur while such Loan is outstanding and the final maturity date of such Loan, and (b) with respect to any Eurodollar Loan:

(i) initially, the period commencing on the Borrowing Date or the Conversion Date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six months or 7, 14 or 21 days thereafter as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and

(ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six months or 7, 14 or 21 days thereafter as selected by the Borrower by irrevocable notice to the Administrative Agent not less than two Business Days prior to the last day of the then current Interest Period with respect thereto;

provided that, all of the foregoing provisions relating to Interest Periods are subject to the following:

(1) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day;

(2) any Interest Period for a Loan that would otherwise extend beyond the Termination Date shall end on the Termination Date; and

(3) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month.

“Issuing Lender”: JPMorgan Chase Bank and any other Lender who agrees to act as Issuing Lender hereunder, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 3.9. The Issuing Lender may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Lender, in which case the term “Issuing Lender” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

“JPMorgan Chase Bank”: JPMorgan Chase Bank, N.A., a national banking association.

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“LC Disbursement”: a payment made by the Issuing Lender pursuant to a Letter of Credit.

“LC Exposure”: at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender at any time shall be its Percentage of the total LC Exposure at such time.

“Lenders”: as defined in the preamble hereto; provided that, wherever appropriate, each reference herein to the Lenders shall be deemed to include the Issuing Lender and/or the Swingline Lender.

“Lending Office”: each Lender’s lending office designated in Schedule 1.1 or such other office of such Lender notified to the Administrative Agent and Borrower.

“Letter of Credit”: any letter of credit issued pursuant to this Agreement.

“Letter of Credit Fronting Fee”: as defined in Section 2.3(c).

“Letter of Credit Participation Fee”: the letter of credit participation fee payable pursuant to Section 2.3(c) at the Letter of Credit Participation Fee Rate.

“Letter of Credit Participation Fee Rate”: the letter of credit participation fee rate per annum set forth in the definition of “Applicable Margin”.

“Lien”: any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any capitalized lease obligation having substantially the same economic effect as any of the foregoing).

“Loan”: any loan made by any Lender pursuant to Section 2.1 or Section 2.20(b).

“Loan Documents”: this Agreement and any Notes.

“Material Adverse Effect”: a material adverse effect on the business, property, operations or financial condition of the Borrower and its consolidated Subsidiaries taken as a whole.

“Materials of Environmental Concern”: any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including asbestos, polychlorinated biphenyls and urea-formaldehyde insulation, but excluding any such substances, materials or wastes that are used or present on any property in conformance with the Requirements of Law.

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“Moody’s”: Moody’s Investors Service, Inc.

“New Lender”: as defined in Section 2.1(c).

“Non-Excluded Taxes”: as defined in Section 2.14(a).

“Non-U.S. Lender”: as defined in Section 2.14(d).

“Note”: as defined in Section 2.4(e).

“Noticed Anniversary Date”: as defined in Section 2.18.

“Other Taxes”: any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

“Participants”: as defined in Section 9.6(b).

“PBGC”: the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA.

“Percentage”: as to any Lender at any time, the percentage which such Lender’s Commitment then constitutes of the Total Commitments or, at any time after the Commitments shall have terminated, the percentage which the aggregate principal amount of such Lender’s Exposure at such time constitutes of the Total Exposures at such time.

“Person”: an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.

“Plan”: at a particular time, any employee benefit plan which is covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Prime Rate”: the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank as its prime rate in effect at its principal office in New York City (the Prime Rate not being intended to be the lowest rate of interest charged by JPMorgan Chase Bank in connection with extensions of credit to debtors).

“Receivables Securitization”: any financing pursuant to which accounts receivable of the Borrower or any of its Subsidiaries are (or are purported to be) sold or pledged, which financing shall be non-recourse (except for customary limited recourse provisions) to the Borrower and its Subsidiaries.

“Refunded Swingline Loans”: as defined in Section 2.20(b).

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“Register”: as defined in Section 9.6(d).

“Regulation FD”: as defined in Section 9.14.

“Regulatory Change”: as to any Lender or the Issuing Lender, any change occurring or taking effect after the date of this Agreement in federal, state, local or foreign laws or regulations, or the adoption or making or taking effect after such date of any interpretations, directives, or requests applying to a class of lenders including the Lenders or to the Issuing Lender, as the case may be, of or under any federal, state, local or foreign laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof.

“Required Lenders”: at any date, the holders of more than 50% of the Total Commitments then in effect or, if the Commitments have terminated or for the purposes of determining whether to accelerate the Loans and Swingline Loans pursuant to Section 7, the Total Exposures at such time.

“Requirement of Law”: as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“Responsible Officer”: the Chief Financial Officer, the Treasurer or any Assistant Treasurer of the Borrower, or any employee of the Borrower designated by any of the foregoing.

“Revolving Commitment Increase”: as defined in the recitals hereto.

“S&P”: Standard & Poor’s Ratings Group.

“SCE”: Southern California Edison Company, a California corporation which is a majority-owned Subsidiary of the Borrower.

“SCE Credit Agreement”: SCE’s $2,500,000,000 Amended and Restated Credit Agreement dated as of the date hereof and for which JPMorgan Chase Bank acts as administrative agent.

“SCE Indenture”: the Trust Indenture, dated as of October 1, 1923 between SCE and The Bank of New York Trust Company, N.A. and D.G. Donovan as trustees, as amended and supplemented from time to time.

“Significant Subsidiary”: as defined in Regulation S-X of the United States Securities and Exchange Commission (or any successor), as the same may be amended or supplemented from time to time.

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“Subsidiary”: as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.

“Swingline Commitment”: the obligation of the Swingline Lender to make Swingline Loans pursuant to Section 2.19 in an aggregate principal amount at any one time outstanding not to exceed $200,000,000.

“Swingline Lender”: JPMorgan Chase Bank, N.A., in its capacity as the lender of Swingline Loans.

“Swingline Loans”: as defined in Section 2.19(a).

“Swingline Participation Amount”: as defined in Section 2.20(c).

“Syndication Agent”: as defined in the preamble hereto.

“Tax Allocation Agreement”: the Amended and Restated Agreement for the Allocation of Income Tax Liabilities and Benefits dated as of September 10, 1996 among the Borrower, SCE and The Mission Group (now, Edison Mission Group Inc.).

“Termination Date”: the date upon which the Commitments shall terminate, which shall be February 23, 2012, unless extended pursuant to Section 2.18.

“Total Commitments”: at any time, the aggregate amount of the Commitments then in effect. The amount of the Total Commitments as of the Closing Date is $1,500,000,000.

“Total Exposures”: at any time, the aggregate amount of the Exposures of all Lenders at such time.

“Transferee”: as defined in Section 9.6(f).

“Type”: as to any Loan, its nature as an ABR Loan or a Eurodollar Loan.

“Utilization Fee”: the utilization fee payable pursuant to Section 2.3(d) at the Utilization Fee Rate.

“Utilization Fee Rate”: the utilization fee rate per annum set forth in the definition of “Applicable Margin”.

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1.2. Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have their defined meanings when used in the Notes or any certificate or other document made or delivered pursuant hereto or thereto.

(b) As used herein and in the Notes and any certificate or other document made or delivered pursuant hereto or thereto, accounting terms relating to the Borrower and its Subsidiaries not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP.

(c) The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified.

(d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

SECTION 2. AMOUNT AND TERMS OF THE CREDIT FACILITY

2.1. The Commitments; Increase in Total Commitments. (a) Subject to the terms and conditions hereof, each Lender severally agrees to make revolving credit loans to the Borrower from time to time during the Commitment Period in an aggregate principal amount at any one time outstanding that will not result in such Lender’s Exposure exceeding such Lender’s Commitment (except as otherwise provided in Section 2.19(a) with respect to the Swingline Lender). During the Commitment Period the Borrower may use the Commitments by borrowing, prepaying the Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. Notwithstanding anything to the contrary in this Agreement, in no event may Loans be borrowed under this Section 2 if, after giving effect thereto, the aggregate principal amount of the Total Exposures at such time would exceed the Total Commitments then in effect. The Loans may from time to time be Eurodollar Loans or ABR Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.2 and 2.6.

(b) In the event that the Borrower wishes from time to time to increase the Total Commitments, it shall notify the Administrative Agent in writing of the amount (the “Commitment Increase Amount”) of such proposed increase (such notice, a “Commitment Increase Notice”), and the Administrative Agent shall notify each Lender of such proposed increase. The Borrower may, at its election (i) offer one or more of the Lenders the opportunity to participate in all or a portion of the Commitment Increase Amount pursuant to paragraph (d) below and/or (ii) with the consent of the Administrative Agent and the Issuing Lender (which consent shall not be unreasonably withheld or delayed), offer one or more additional banks, financial institutions or other entities the opportunity to participate in all or a portion of the Commitment Increase Amount pursuant to paragraph (c) below. Each Commitment Increase Notice shall specify which Lenders and/or banks, financial institutions or other entities the Borrower desires to participate in such Commitment increase. The Borrower or, if requested by the Borrower, the Administrative Agent, will notify such Lenders and/or banks, financial institutions or other entities of such offer. Each Commitment Increase Amount shall be at least $50,000,000.

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(c) Any additional bank, financial institution or other entity which the Borrower selects to offer participation in the increased Commitments and which elects to become a party to this Agreement and provide a Commitment in an amount so offered and accepted by it pursuant to Section 2.1(b)(ii) shall execute a New Lender Supplement with the Borrower and the Administrative Agent, substantially in the form of Exhibit F, whereupon such bank, financial institution or other entity (herein called a “New Lender”) shall become a Lender for all purposes and to the same extent as if originally a party hereto and shall be bound by and entitled to the benefits of this Agreement, and Schedule 1.1 shall be deemed to be amended to add the name and Commitment of such New Lender, provided that the Commitment of any such new Lender shall be in an amount not less than $5,000,000.

(d) Any Lender which accepts an offer to it by the Borrower to increase its Commitment pursuant to Section 2.1(b)(i) shall, in each case, execute a Commitment Increase Supplement with the Borrower and the Administrative Agent, substantially in the form of Exhibit G, whereupon such Lender shall be bound by and entitled to the benefits of this Agreement with respect to the full amount of its Commitment as so increased, and Schedule 1.1 shall be deemed to be amended to so increase the Commitment of such Lender.

(e) Notwithstanding anything to the contrary in this Section 2.1, (i) in no event shall any increase effected pursuant to this Section 2.1 cause the Total Commitments hereunder to exceed $1,875,000,000 and (ii) no Lender shall have any obligation to increase its Commitment unless it agrees to do so in its sole discretion.

(f) On the effective date of each increase in the Commitments pursuant to this Section 2.1 and notwithstanding other provisions of this Agreement to the contrary (i) the Lenders shall make such payments as shall be directed by the Administrative Agent in order that the outstanding Loans shall be held ratably by the Lenders based on their respective Commitments and (ii) participations in outstanding Letters of Credit and Swingline Participation Amounts shall be deemed to be reallocated according to the respective Commitments of the Lenders. Payments of interest, fees and commissions with respect to the Loans, Swingline Loans and Letters of Credit shall be made to give effect to any adjustments in the Loans and participations in the Letters of Credit made pursuant to this Section 2.1.

(g) On the effective date of each increase in the Commitments pursuant to this Section 2.1, the conditions set forth in paragraphs (b), (c), (e) (with appropriate modifications) and (f) of Section 5.1 shall have been satisfied with respect to such increased Commitments as if such paragraphs applied to such increase, mutatis mutandis.

2.2. Procedure for Borrowing. The Borrower may borrow under the Commitments during the Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice, which notice must be executed by a Responsible Officer of the Borrower and received by the Administrative Agent prior to (a) 11:00 A.M., New York City time, two Business Days prior to the requested Borrowing Date, in the case of Eurodollar Loans, or (b) 12:00 Noon, New York City time, on the requested Borrowing

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Date, in the case of ABR Loans. Each such notice shall specify (i) the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR Loans, or a combination thereof and (iv) if the borrowing is to be entirely or partly of Eurodollar Loans, the respective lengths of the initial Interest Periods therefor. Each borrowing under the Commitments shall be in an amount equal to (x) in the case of ABR Loans, $5,000,000 or a whole multiple of $1,000,000 in excess thereof and (y) in the case of Eurodollar Loans, $10,000,000 or a whole multiple of $1,000,000 in excess thereof; provided that (i) a borrowing under the Commitments that is an ABR Loan may be in any aggregate amount that is required to finance the reimbursement of all or a part of an LC Disbursement as contemplated by Section 3.5 and (ii) the Swingline Lender may request, on behalf of the Borrower, borrowings of ABR Loans in other amounts pursuant to Section 2.20(b). Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Lender thereof. Each Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in Section 9.2 prior to 1:00 P.M., New York City time, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Lenders promptly upon receipt thereof and in like funds as received by the Administrative Agent; provided that (x) Loans made to finance the reimbursement of an LC Disbursement as provided in Section 3.5 shall be remitted by the Administrative Agent to the applicable Issuing Lender and (y) Loans made to finance the reimbursement of a Swingline Loan as provided in Section 2.20(b) shall be remitted by the Administrative Agent to the Swingline Lender. Swingline Loans shall be made as provided in Section 2.19.

2.3. Fees. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a Facility Fee for the period from and including the first day of the Commitment Period to and excluding the Termination Date, computed at the Facility Fee Rate on the average daily amount of the Commitment of such Lender (or, following termination of the Commitment of such Lender, on the average daily amount of the Exposure of such Lender) during the period for which payment is made, payable in arrears on the last day of each March, June, September and December and on the Termination Date and, following termination of the Commitments, on demand.

(b) The Borrower agrees to pay to the Administrative Agent for its own account any fees separately agreed to by the Borrower and the Administrative Agent in writing.

(c) The Borrower agrees to pay (i) to the Administrative Agent for the account of each Lender (including the Issuing Lender) a Letter of Credit Participation Fee with respect to its participations in Letters of Credit, which shall accrue at the Letter of Credit Participation Fee Rate on the average daily amount of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Closing Date to but excluding the later of the date on which such Lender’s Commitment terminates and the date on which such Lender ceases to have any LC Exposure, and (ii) to the Issuing Lender a fronting fee (the “Letter of Credit Fronting Fee”), which shall accrue at the rate per annum separately agreed with the Issuing Lender on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during

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the period from and including the Closing Date to but excluding the later of the date of termination of the Commitments and the date on which there ceases to be any LC Exposure, as well as the Issuing Lender’s standard fees with respect to the issuance, amendment, renewal, extension or administration of any Letter of Credit or processing of drawings thereunder, such standard fees of JPMorgan Chase Bank as Issuing Lender as in effect as of the Closing Date having been disclosed in writing to Borrower prior to the Closing Date. Letter of Credit Participation Fees and Letter of Credit Fronting Fees accrued through and including the last day of March, June, September and December of each year shall be payable on each such last day, commencing on the first such date to occur after the Closing Date; provided that all such fees shall be payable on the date on which the Commitments terminate and any such fees accruing after the date on which the Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Lender pursuant to this paragraph shall be payable within 15 Business Days after demand.

(d) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a Utilization Fee for the period from and including the first day of the Commitment Period to and excluding the Termination Date, computed at the Utilization Fee Rate on the average daily amount of the Exposure of such Lender for each Excess Utilization Day during the period for which payment is made, payable in arrears on the last day of each March, June, September and December and on the Termination Date and, following termination of the Commitments, on demand.

2.4. Repayment of Loans and Swingline Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Loan of such Lender on the Termination Date (or such earlier date on which the Loans become due and payable pursuant to Section 7) and (ii) to the Swingline Lender the then unpaid principal amount of each Swingline Loan as set forth in Section 2.19(c). The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Loans from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in Section 2.8. The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Swingline Loans from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in Sections 2.8 and 2.19.

(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Loan and Swingline Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.

(c) The Administrative Agent shall maintain the Register pursuant to Section 9.6(d), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Loan and Swingline Loan made hereunder, the Type thereof and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender’s share thereof.

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(d) The entries made in the Register and the accounts of each Lender maintained pursuant to Section 2.4(b) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans and Swingline Loans made to the Borrower by such Lender in accordance with the terms of this Agreement.

(e) The Borrower agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will execute and deliver to such Lender a promissory note of the Borrower evidencing the Loans (and, in the case of the Swingline Lender, the Swingline Loans) of such Lender, substantially in the form of Exhibit A with appropriate insertions as to date and principal amount (a “Note”).

2.5. Prepayments and Termination or Reduction of Commitments. (a) The Borrower may, upon not less than three Business Days’ notice to the Administrative Agent, terminate or reduce the unutilized amount of the Commitments. Any reduction of the Commitments shall be in an amount equal to $10,000,000 or a whole multiple of $1,000,000 in excess thereof and shall reduce permanently the Commitments then in effect.

(b) The Borrower may at any time and from time to time prepay the Loans, in whole or in part, without premium or penalty, upon at least three Business Days’ irrevocable notice to the Administrative Agent. Each such notice shall specify the date and amount of prepayment and whether the prepayment is of Eurodollar Loans, ABR Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with any amounts payable pursuant to Section 2.15 and (except in the case of ABR Loans) accrued interest to but excluding such date on the amount prepaid. Partial prepayments shall be in an aggregate principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof.

(c) The Borrower may at any time and from time to time prepay the Swingline Loans, in whole or in part, without premium or penalty, upon irrevocable notice to the Administrative Agent and the Swingline Lender received no later than 12:00 Noon, New York City time, on the day of the proposed prepayment. Each such notice shall specify the date and amount of prepayment and whether the prepayment is of Cost of Funds Rate Loans, ABR Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with [any amounts payable pursuant to Section 2.15] and accrued interest to but excluding such date on the amount prepaid. Partial prepayments of Swingline Loans shall be in an aggregate principal amount of $100,000 or a whole multiple of $100,000 in excess thereof or the then outstanding aggregate principal amount of the Swingline Loans.

2.6. Conversion and Continuation Options. ABR Loans may, at any time, be converted into Eurodollar Loans and Eurodollar Loans may, on the last day of any Interest Period applicable thereto, be converted into ABR Loans or continued as Eurodollar Loans (the date of any such conversion, the “Conversion Date”), as follows:

(a) In order to continue outstanding Eurodollar Loans as Eurodollar Loans for another Interest Period, or to convert ABR Loans to Eurodollar Loans, the Borrower shall give the Administrative Agent irrevocable notice thereof prior to 11:00 A.M. New York City time, two Business Days before the first day of the Interest Period to be applicable to such continued or converted Eurodollar Loans, which notice shall specify the length of the Interest Period requested by the Borrower to be applicable to such Loans.

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(b) No Loan may be converted into, or continued as, a Eurodollar Loan when any Event of Default has occurred and is continuing and the Administrative Agent has or the Required Lenders have determined in its or their sole discretion not to permit such a continuation.

(c) If the Borrower fails to give a notice as described above in this Section 2.6 to continue an outstanding Eurodollar Loan or to convert such Loan to an ABR Loan, or if such continuation or conversion is not permitted pursuant to paragraph (b) above, such Loans shall be automatically converted to ABR Loans on the last day of the then expiring Interest Period applicable to such Loans.

(d) The Administrative Agent shall promptly notify each Lender of each notice received by the Administrative Agent from the Borrower pursuant to this Section 2.6.

(e) This Section shall not apply to Swingline Loans, which may not be continued or converted (it being understood that, subject to the terms and conditions set forth in this Agreement, Swingline Loans may be reborrowed on the same day other Swingline Loans are being repaid).

2.7. Minimum Amounts and Maximum Number of Tranches. All borrowings, prepayments, conversions and continuations of Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Loans comprising each Eurodollar Tranche shall be equal to $10,000,000 or a whole multiple of $1,000,000 in excess thereof. In no event shall there be more than five Eurodollar Tranches outstanding at any time.

2.8. Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin therefor.

(b) Each ABR Loan shall bear interest for each day from the applicable Borrowing Date at a rate per annum equal to the ABR plus the Applicable Margin therefor.

(c) Each Swingline Loan shall bear interest for each day from the applicable Borrowing Date at the applicable rate provided in Section 2.19.

(d) If all or a portion of (i) the principal amount of any Loan, Swingline Loan or reimbursement obligation in respect of any LC Disbursement, (ii) any interest payable thereon or

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(iii) any fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall, to the extent permitted by applicable law, bear interest at a rate per annum which is equal to the rate applicable to ABR Loans pursuant to Section 2.8(b) plus 2% from the date of such non-payment to (but excluding) the date on which such amount is paid in full (after as well as before judgment).

(e) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this Section shall be payable from time to time on demand.

2.9. Computation of Interest and Fees. (a) Interest calculated on the basis of the Prime Rate shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed; and, otherwise, interest and Facility Fees, Letter of Credit Participation Fees, Letter of Credit Fronting Fees and Utilization Fees shall be calculated on the basis of a 360-day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of each determination of a Eurodollar Rate.

(b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall deliver to the Borrower upon request a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to Section 2.8(a) or (b).

2.10. Inability to Determine Interest Rate. If prior to the first day of any Interest Period:

(a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower, absent manifest error) that the Eurodollar Rate can not be determined by any of the means set forth in the definition of “Eurodollar Rate” and, by reason of circumstances affecting the eurodollar market, quotations of interest rates for the relevant deposits are not being provided to JPMorgan Chase Bank in the relevant amount or for the relevant maturities for purposes of determining the Eurodollar Rate for such Interest Period, or

(b) the Administrative Agent shall have received notice from the Required Lenders that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders, absent manifest error) of making or maintaining their affected Loans during such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as ABR Loans, (y) any ABR Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be continued as ABR Loans and (z) any outstanding Eurodollar Loans shall be converted, on the first day of such Interest Period, to ABR Loans. Each such Lender shall promptly notify the Administrative Agent upon any change in such determination of the adequacies and fairness of the Eurodollar Rate, and the Administrative Agent shall promptly withdraw its notice to the Borrower following receipt of such notices from the Required Lenders.

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Until such withdrawal by the Administrative Agent, no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert ABR Loans to Eurodollar Loans.

2.11. Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the Lenders hereunder, each payment by the Borrower of any Facility Fee, Letter of Credit Participation Fee or Utilization Fee hereunder, each payment (including each prepayment) by the Borrower on account of principal of and interest on the Loans, and any reduction of the Commitments of the Lenders shall be made pro rata according to the Percentages of the Lenders, in each case except to the extent another provision of this Agreement specifies a different treatment. All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without set off or counterclaim and shall be made prior to 4:00 P.M., New York City time, on the due date thereof to the Administrative Agent (except payments to be made directly to the Issuing Lender or Swingline Lender as expressly provided herein), for the account of the Lenders, at the Administrative Agent’s office specified in Section 9.2, in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to the Lenders promptly upon receipt in like funds as received. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.

(b) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error. If such Lender’s pro rata share of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to repayment of such amount with interest thereon at the rate per annum otherwise applicable to such Loans hereunder, on demand, from the Borrower and, upon such payment, no further interest shall be payable with respect to such amount. The payment of interest by a Lender to the Administrative Agent pursuant to this Section 2.11(b) shall not be deemed to be a waiver of any right the Borrower may have against such Lender for such Lender’s failure to make Loans to the Borrower as required hereunder.

2.12. Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement (a) such Lender shall promptly give notice thereof to the Borrower and the Administrative Agent, (b) the commitment of such Lender hereunder to make Eurodollar Loans,

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continue Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans shall forthwith be cancelled and (c) such Lender’s outstanding Eurodollar Loans, if any, shall be converted automatically to ABR Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law.

2.13. Additional Costs. (a) If, as a result of any Regulatory Change:

(i) any Lender or the Issuing Lender shall be subject to any tax of any kind whatsoever with respect to amounts payable to it under this Agreement or any Eurodollar Loan made by it, or the basis of taxation of payments to such Lender or the Issuing Lender in respect thereof is changed (except, in each case, for Non-Excluded Taxes covered by Section 2.14, net income taxes and franchise taxes, and changes in the rate of tax on the overall net income of such Lender); or

(ii) any reserve, special deposit, or capital adequacy, or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, any Lender or the Issuing Lender are imposed, modified, or deemed applicable; or

(iii) any other condition affecting this Agreement, any Eurodollar Loans or any Letter of Credit or participation therein is imposed on any Lender or the Issuing Lender after the date hereof; and

any Lender or the Issuing Lender, as the case may be, determines that, by reason thereof, the cost to such Lender of making or maintaining its Commitment or any of its Eurodollar Loans to the Borrower, or the cost (including reduced rate of return) to such Lender or the Issuing Lender of participating in, issuing or maintaining any Letter of Credit, as the case may be, is increased or any amount receivable by such Lender or the Issuing Lender hereunder in respect of any of such Loans or Letters of Credit is reduced, in each case by an amount reasonably deemed by such Lender or the Issuing Lender to be material (such increases in cost and reductions in amounts receivable being herein called “Additional Costs”), then the Borrower shall pay to such Lender or the Issuing Lender, as the case may be, upon its request the additional amount or amounts as will compensate such Lender or the Issuing Lender, as the case may be, for such Additional Costs within 15 Business Days after written notice of such Additional Costs is received by the Borrower; provided, however, that if all or any such Additional Costs would not have been payable or incurred but for such Lender’s voluntary decision to designate a new Lending Office, the Borrower shall have no obligation under this Section 2.13 to compensate such Lender for such amount relating to such Lender’s decision; provided, further, that the Borrower shall not be required to make any payments to such Lender or the Issuing Lender for Additional Costs resulting from capital adequacy requirements incurred more than 60 days prior to the date that such Lender or the Issuing Lender, as the case may be, notifies the Borrower of such Lender’s intention to claim compensation therefor. Each Lender will notify the Borrower and the Administrative Agent of any Regulatory Change occurring after the date of this Agreement which will entitle such Lender or the Issuing Lender, as the case may be, to compensation pursuant to this Section 2.13(a) as promptly as practicable after it obtains knowledge thereof and determines to request such compensation. If such Lender or the Issuing Lender requests compensation under this Section 2.13(a) in respect of any Regulatory Change, the Borrower

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may, by notice to such Lender or the Issuing Lender, as applicable, require that such Lender or the Issuing Lender forward to the Borrower a statement setting forth the basis for requesting such compensation and the method for determining the amount thereof.

(b) Without limiting the effect of the provisions of Section 2.13(a) (but without duplication thereof), the Borrower will pay to any Lender, within 15 Business Days of receipt by the Borrower of notice from such Lender, for each day such Lender is required to maintain reserves against “Eurocurrency liabilities” under Regulation D of the Board as in effect on the date of this Agreement, an additional amount determined by such Lender equal to the product of the following:

(i) the principal amount of the Eurodollar Loan;

(ii) the remainder of (x) a fraction the numerator of which is the Eurodollar Rate for such Eurodollar Loan and the denominator of which is one minus the rate at which such reserve requirements are imposed on such Lender on such day minus (y) such numerator; and

(iii) 1/360.

Such Lender shall request payment under this Section 2.13(b) by giving notice to the Borrower as of the last day of each Interest Period for each Eurodollar Loan (and, if such Interest Period exceeds three months’ duration, also as of three months, or a whole multiple thereof, after the first day of such Interest Period). Such notice shall specify the basis for requesting such compensation and the method for determining the amount thereof. Such Lender shall provide any evidence of such requirement to maintain reserves as the Borrower may reasonably request.

(c) Determinations by any Lender or the Issuing Lender for purposes of this Section 2.13 of the effect of any Regulatory Change shall be conclusive, provided that such determinations are made absent manifest error.

2.14. Taxes. (a) All payments made by the Borrower under this Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent, the Issuing Lender or any Lender as a result of a present or former connection between the Administrative Agent, the Issuing Lender or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent, the Issuing Lender or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document), unless the Borrower is compelled by law to make such deduction or withholding. If any such non-excluded taxes, levies, imposts, duties, charges, fees deductions or withholdings (“Non-Excluded Taxes”) or any Other Taxes are required to be withheld from any amounts payable to the Administrative Agent, the Issuing Lender or any Lender hereunder or under any Note, the amounts so payable to the

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Administrative Agent, the Issuing Lender or such Lender shall be increased to the extent necessary to yield to the Administrative Agent, the Issuing Lender or such Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts they would have received had no such obligation been imposed on the Borrower; provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender with respect to any Non-Excluded Taxes that are attributable to such Lender’s designation of a different Lending Office (provided that such Non-Excluded Taxes are imposed at the time of the first payment to such Lender under this Agreement following such designation and excluding any designation required by any Requirement of Law or occurring pursuant to Section 2.16) or failure to comply with the requirements of paragraph (d) of this Section 2.14.

(b) In addition, the Borrower shall pay any Other Taxes (other than Other Taxes that are being or promptly will be contested in good faith by appropriate proceedings and for which the Borrower has set aside on its books adequate reserves in accordance with GAAP, provided that the Borrower shall be permitted not to pay such Other Taxes being so contested only so long as such nonpayment could not reasonably be expected to have any adverse effect on the rights or remedies of the Lenders hereunder or under any other Loan Document) to the relevant Governmental Authority in accordance with applicable law.

(c) Whenever any Non-Excluded Taxes or Other Taxes (other than Other Taxes that are being or promptly will be contested in good faith by appropriate proceedings and for which the Borrower has set aside on its books adequate reserves in accordance with GAAP, provided that the Borrower shall be permitted not to pay such Other Taxes being so contested only so long as such nonpayment could not reasonably be expected to have any adverse effect on the rights or remedies of the Lenders hereunder or under any other Loan Document) are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for the account of the Administrative Agent or the relevant Lender or Issuing Lender, as the case may be, certificates or other valid vouchers or receipts received by the Borrower showing payment thereof. If the Borrower fails to pay any such Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent, the Issuing Lender and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent, the Issuing Lender or any Lender as a result of any such failure.

(d) Each Lender (or Transferee) that is not a “United States person” as defined in Section 7701(a)(30) of the Code (a “Non-U.S. Lender”) shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two copies of either U.S. Internal Revenue Service Form W-8BEN (certifying as to entitlement to treaty benefits) or Form W-8ECI (claiming exemption from withholding because the income is effectively connected with a U.S. trade or business), or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of “portfolio interest”, a statement substantially in the form of Exhibit B and a Form W-8BEN (certifying as to beneficial ownership), or any subsequent versions thereof or successors thereto properly completed and duly executed by such Non-U.S. Lender claiming complete exemption

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from U.S. federal withholding tax on all payments by the Borrower under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of any Participant, on or before the date such Participant purchases the related participation). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender, or upon the reasonable request by the Borrower or the Administrative Agent. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Each Non-U.S. Lender agrees to (i) promptly notify the Administrative Agent and Borrower if any fact set forth in any such certificate ceases to be true and correct and (ii) take such steps and may be reasonably necessary to avoid any applicable Requirements of Law that Borrower make any deduction or withholding for taxes from amounts payable to the Non-U.S. Lender under this Agreement. Notwithstanding any other provision of this paragraph, a Non-U.S. Lender shall not be required to deliver any form pursuant to this paragraph after the date it becomes a party to this Agreement (or, in the case of any Participant, after the date such Participant purchases the related participation) that such Non-U.S. Lender is not legally able to deliver.

2.15. Indemnity. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of Eurodollar Loans or in the conversion into or continuation of Eurodollar Loans, after the Borrower has given a notice requesting or accepting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment of Eurodollar Loans after the Borrower has given a notice thereof in accordance with the provisions of this Agreement, or (c) the making of a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if applicable, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to but excluding the last day of the relevant Interest Period (or proposed Interest Period) at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market.

2.16. Change of Lending Office. Each Lender agrees that if it makes any demand for payment under Sections 2.13 or 2.14(a), or if any adoption or change of the type described in Section 2.12 shall occur with respect to it, it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its sole discretion) to designate a different Lending Office if the making of such a designation would reduce or obviate the need for the Borrower to make payments under Sections 2.13 or 2.14(a), or would eliminate or reduce the effect of any adoption or change described in Section 2.12.

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2.17. Replacement of Lenders under Certain Circumstances. The Borrower shall be permitted to replace any Lender (a) which requests reimbursement for amounts owing pursuant to Sections 2.13 or 2.14 (for itself or its Participant) or for which amounts are otherwise payable by the Borrower pursuant to Section 2.14, (b) which is affected in the manner described in Section 2.12 and as a result thereof any of the actions described in said Section is required to be taken, (c) which defaults in its obligation to make Loans hereunder, with a replacement bank or other financial institution or (d) which is a Declining Lender; provided that (i) such replacement does not conflict with any Requirement of Law, (ii) no Event of Default shall have occurred and be continuing at the time of such replacement, (iii) the Borrower shall repay (or the replacement bank or institution shall purchase, at par), without duplication, all Loans, participations in LC Disbursements, participating interests in Swingline Loans, Swingline Participation Amounts and other amounts owing to such replaced Lender on or prior to the date of replacement, (iv) the Borrower shall be liable to such replaced Lender under Section 2.15 if any outstanding Eurodollar Loan owing to such replaced Lender shall be prepaid (or purchased) other than on the last day of the Interest Period relating thereto, (v) the replacement bank or institution, if not already a Lender, shall be reasonably satisfactory to the Administrative Agent, (vi) the replaced Lender shall be obligated to make such replacement in accordance with the provisions of Section 9.6 (c) and (e) (provided that the Borrower or the replacement bank or institution shall be obligated to pay the registration and processing fee referred to therein), (vii) until such time as such replacement shall be consummated, the Borrower shall pay all additional amounts (if any) required pursuant to Sections 2.13 or 2.14, as the case may be, and (viii) any such replacement shall not be deemed to be a waiver of any rights which the Borrower, the Administrative Agent or any other Lender shall have against the replaced Lender.

2.18. Extension Option. The Borrower may request that the Total Commitments be renewed for additional one year periods by providing notice of such request to the Administrative Agent no earlier than a number of days specified by the Administrative Agent from time to time prior to the then next occurring anniversary of the Closing Date (each, a “Noticed Anniversary Date”). If a Lender agrees, in its individual and sole discretion, to extend its Commitment (an “Extending Lender”), it will notify the Administrative Agent, in writing, of its decision to do so no later than a number of days prior to the applicable Noticed Anniversary Date specified by the Administrative Agent from time to time (but in any event not later than 20 days prior to such Noticed Anniversary Date). The Administrative Agent will notify the Borrower, in writing, of the Lenders’ decisions no later than 5 days prior to such Noticed Anniversary Date. The Extending Lenders’ Commitments will be renewed for an additional one year from the then existing Termination Date and such extended Termination Date shall become the Termination Date (except as otherwise provided in this Section 2.18 as to Declining Lenders), provided that (i) more than 50% of the Total Commitments is extended or otherwise committed to by Extending Lenders and any new Lenders and (ii) all representations and warranties made by the Borrower in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date, except (A) any representations and warranties which are explicitly stated as having been made as of a specific date, which representations and warranties shall be true and correct in all material respects on and as of such date and (B) the representations and warranties set forth in Sections 4.2 and 4.7 shall not be required to be restated. Any Lender that declines or does not respond to the Borrower’s request for commitment renewal (a “Declining Lender”) will have its Commitment terminated on the earlier of (i) the then existing Termination Date (without regard to any

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renewals by other Lenders) (the “Existing Termination Date”) and (ii) the date such Declining Lender is replaced in accordance with Section 2.17, and at such time the Borrower shall repay all Loans, participations in LC Disbursements, participating interests in Swingline Loans and Swingline Participation Amounts and other amounts owing to such Declining Lender. The Borrower will have the right to accept commitments from third party financial institutions acceptable to the Administrative Agent in an amount up to the amount of the Commitments of any Declining Lenders, provided that the Extending Lenders will have the right to increase their Commitments up to the amount of the Declining Lenders’ Commitments before the Borrower will be permitted to substitute any other financial institutions for the Declining Lenders. The Borrower may only so extend the Termination Date five times. The Termination Date may not be extended beyond February 23, 2017. Pursuant to the First Amendment, the Termination Date for $2,402,000,000.00 of the Commitments was extended to February 25, 2013; such Extending Lenders and their Commitments are set forth on Schedule 2.18.

2.19. Swingline Commitment. (a) Subject to the terms and conditions hereof, the Swingline Lender agrees to make a portion of the credit otherwise available to the Borrower under the Commitments from time to time during the Commitment Period by making swing line loans (“Swingline Loans”) to the Borrower; provided that (i) the aggregate principal amount of Swingline Loans outstanding at any time shall not exceed the Swingline Commitment then in effect (notwithstanding that the Swingline Loans outstanding at any time, when aggregated with the Swingline Lender’s outstanding Loans (other than Swingline Loans), may exceed the Swingline Commitment then in effect) and (ii) the Borrower shall not request, and the Swingline Lender shall not make, any Swingline Loan if, after giving effect to the making of such Swingline Loan, the Total Exposures would exceed the Total Commitments. During the Commitment Period, the Borrower may use the Swingline Commitment by borrowing, repaying and reborrowing, all in accordance with the terms and conditions hereof. Swingline Loans shall be ABR Loans or Cost of Funds Rate Loans only.

(b) A Swingline Loan shall be an ABR Loan, unless the Borrower has requested a Cost of Funds Rate Loan at a Cost of Funds Rate quoted by the Swingline Lender and confirmed by the Borrower pursuant to the following procedures. If the Borrower desires a Cost of Funds Rate Loan (i) the Borrower shall request a quote for a Cost of Funds Rate Loan, and the Swingline Lender shall within a reasonable time after receipt of the request directly contact the Borrower (which may be done by telephone) with its Cost of Funds Rate (confirmed by telecopy), (ii) the Borrower shall immediately inform the Swingline Lender of its decision as to whether to request a Cost of Funds Rate Loan at the Cost of Funds Rate (which may be done by telephone and promptly confirmed in writing and which decision shall be irrevocable), and (iii) if the Borrower has so informed the Swingline Lender that it does desire a Cost of Funds Rate Loan at the Cost of Funds Rate, the Swingline Lender shall promptly make such Cost of Funds Rate Loan available to the Borrower. At all times such Loan is a Cost of Funds Rate Loan, the Borrower shall pay interest on the unpaid principal amount of such Cost of Funds Rate Loan from the date of such Cost of Funds Rate Loan until such principal amount shall be paid in full at a rate per annum equal to the Cost of Funds Rate in effect from time to time plus the Applicable Margin for Eurodollar Loans in effect from time to time.

(c) The Borrower shall repay to the Swingline Lender the then unpaid principal amount of each Swingline Loan and accrued interest thereon on the earlier of the

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Termination Date and the date that is five Business Days after such Swingline Loan is made (or such earlier date on which the Swingline Loans become due and payable pursuant to Section 7); provided that on each date that a Loan (other than a Swingline Loan) is borrowed, the Borrower shall repay all Swingline Loans then outstanding.

2.20. Procedure for Swingline Borrowing; Refunding of Swingline Loans. (a) The Borrower may borrow under the Swingline Commitment during the Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice, which notice must be executed by a Responsible Officer of the Borrower and received by the Administrative Agent prior to 1:00 P.M., New York City time, on the requested Borrowing Date. Each such notice shall specify (i) the amount to be borrowed and (ii) the requested Borrowing Date. Each borrowing under the Swingline Commitment shall be in an amount equal to $500,000 or a whole multiple of $100,000 in excess thereof; provided that a borrowing under the Swingline Commitment may be in any amount (subject to Section 2.19(a)) that is required to finance the reimbursement of all or a part of an LC Disbursement as contemplated by Section 3.5. The Swingline Lender will make the amount of each borrowing under the Swingline Facility available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in Section 9.2 prior to 3:00 P.M., New York City time, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent crediting the account of the Borrower on the books of such office with the amount made available to the Administrative Agent by the Swingline Lender promptly upon receipt thereof and in like funds as received by the Administrative Agent; provided that Swingline Loans made to finance the reimbursement of an LC Disbursement as provided in Section 3.5 shall be remitted by the Administrative Agent to the applicable Issuing Lender.

(b) The Swingline Lender, at any time and from time to time in its sole and absolute discretion may, on behalf of the Borrower (which hereby irrevocably directs the Swingline Lender to act on its behalf), on one Business Day’s notice given by the Swingline Lender no later than 12:00 Noon, New York City time, request each Lender to make, and each Lender hereby agrees to make, a Loan, in an amount equal to such Lender’s Percentage of the aggregate amount of the Swingline Loans (the “Refunded Swingline Loans”) outstanding on the date of such notice, to repay the Swingline Lender. Each Lender shall make the amount of such Loan available to the Administrative Agent for the account of the Issuing Lender at the office of the Administrative Agent specified in Section 9.2 prior to 10:00 A.M., New York City time, one Business Day after the date of such notice in funds immediately available to the Administrative Agent. The proceeds of such Loans will then be immediately made available by the Administrative Agent to the Swingline Lender for application by the Swingline Lender to the repayment of the Refunded Swingline Loans.

(c) If prior to the time a Loan could have otherwise been made pursuant to Section 2.20(b), one of the events described in Section 7(e) shall have occurred and be continuing with respect to the Borrower or if for any other reason, as determined by the Swingline Lender in its sole discretion, Loans are not or cannot be made as contemplated by Section 2.20(b), each Lender shall, on the date such Loan should have been made pursuant to the notice referred to in Section 2.20(b), purchase for cash an undivided participating interest in the

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then outstanding Swingline Loans by paying to the Swingline Lender an amount (the “Swingline Participation Amount”) equal to (i) such Lender’s Percentage times (ii) the sum of the aggregate principal amount of Swingline Loans then outstanding that were to have been repaid with such Loans.

(d) Whenever, at any time after the Swingline Lender has received from any Lender such Lender’s Swingline Participation Amount, the Swingline Lender receives any payment on account of the Swingline Loans, the Swingline Lender will distribute to such Lender its Swingline Participation Amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s participating interest was outstanding and funded and, in the case of principal and interest payments, to reflect such Lender’s pro rata portion of such payment if such payment is not sufficient to pay the principal of and interest on all Swingline Loans then due); provided, however, that in the event that such payment received by the Swingline Lender is required to be returned, such Lender will return to the Swingline Lender any portion thereof previously distributed to it by the Swingline Lender.

(e) Each Lender’s obligation to make the Loans referred to in Section 2.20(b) and to purchase participating interests pursuant to Section 2.20(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any setoff, counterclaim, recoupment, defense or other right that such Lender or the Borrower may have against the Swingline Lender, the Borrower or any other Person for any reason whatsoever, (ii) the occurrence or continuance of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Section 5, (iii) any adverse change in the condition (financial or otherwise) of the Borrower, (iv) any breach of this Agreement or any other Loan Document by the Borrower or any other Lender or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.

SECTION 3. LETTERS OF CREDIT

3.1. General. Subject to the terms and conditions set forth herein, the Borrower may request the issuance of Letters of Credit for its own account, in a form reasonably acceptable to the Administrative Agent and the Issuing Lender and in all respects consistent with the terms of this Agreement, at any time and from time to time during the period from and including the Closing Date to the date which is 15 Business Days prior to the Termination Date. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Lender relating to any Letter of Credit, the terms and conditions of this Agreement shall control.

3.2. Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Lender) to the Issuing Lender and the Administrative Agent (three Business Days in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be

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a Business Day), the date on which such Letter of Credit is to expire (which shall comply with Section 3.3), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the Issuing Lender, the Borrower also shall submit a letter of credit application on the Issuing Lender’s standard form (it being understood that this Agreement shall govern in the event of any inconsistency between any such application and this Agreement) in connection with any request for the issuance of a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed $1,000,000,000 and (ii) the sum of the Total Exposures shall not exceed the Total Commitments. Letters of Credit issued under the Existing Credit Agreement which are outstanding on the Closing Date shall be deemed to be Letters of Credit issued under this Agreement on the Closing Date.

3.3. Expiration Date. No Letter of Credit shall expire later than the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is one year following the Termination Date; provided that (A) with respect to any Letter of Credit having an expiration date beyond the Termination Date, the Borrower shall cash collateralize such Letter of Credit on the Termination Date in an amount equal to the amount of such Letter of Credit and otherwise on terms satisfactory to the Administrative Agent or the Borrower shall provide to the Issuing Lender a standby letter of credit in an amount equal to the amount of such Letter of Credit and otherwise in form and substance satisfactory to the Issuing Lender, (B) no Letter of Credit may terminate after the Existing Termination Date if, after giving effect to such Letter of Credit, the Total Commitments of the Extending Lenders (including any entity that becomes a Lender pursuant to Section 2.17) for the period following the Existing Termination Date would be less than the LC Exposure of the Letters of Credit expiring after the Existing Termination Date and (C) the Letter of Credit participations of any Declining Lender provided for in Section 3.4 shall terminate on the Existing Termination Date.

3.4. Participations. By the issuance, amendment, renewal or extension of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Lender or the Lenders, the Issuing Lender hereby grants to each Lender, and each Lender hereby acquires from the Issuing Lender, a participation in such Letter of Credit equal to such Lender’s Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Lender, such Lender’s Percentage of each LC Disbursement made by the Issuing Lender and not reimbursed by the Borrower on the date due as provided in Section 3.5, or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including (i) any setoff, counterclaim, recoupment, defense or other right that such Lender may have against the Issuing Lender, the Borrower or any other Person for any reason whatsoever, (ii) the occurrence or

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continuance of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Section 5, (iii) any adverse change in the condition (financial or otherwise) of the Borrower, the Issuing Lender, any Lender or any other Person, (iv) any breach of this Agreement or any other Loan Document by the Borrower or any other Lender or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.

3.5. Reimbursement. If the Issuing Lender shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 4:00 P.M., New York City time, on the date that such LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 12:00 P.M., New York City time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 4:00 P.M., New York City time, on the Business Day immediately following the day that the Borrower receives such notice; provided that (a) if the unreimbursed amount of such LC Disbursement is $5,000,000 or less or (b) if the unreimbursed amount of all LC Disbursements made by the Issuing Lender on any given Business Day are, in the aggregate, $5,000,000 or less, the Borrower may reimburse such unreimbursed amount or, if the Borrower does not do so (i) the Administrative Agent may, in its discretion, finance such unreimbursed amount on behalf of the Lenders with an ABR Loan in an equivalent amount (and, if not promptly reimbursed by the Borrower, shall notify the Lenders of the making of such ABR Loan) or (ii) the Swingline Lender may, in its discretion, finance such unreimbursed amount with a Swingline Loan in an equivalent amount. If the unreimbursed amount of such LC Disbursement(s) is more than $5,000,000 and the Borrower fails to reimburse such LC Disbursement(s) when due or the Swingline Lender has failed to make a Swingline Loan to reimburse such LC Disbursement(s) when due, or if the unreimbursed amount of such LC Disbursement(s) is $5,000,000 or less and the Administrative Agent has not funded an ABR Loan or the Swingline Lender has not funded a Swingline Loan in accordance with the immediately preceding sentence, the Administrative Agent shall notify each Lender of the unreimbursed amount of each applicable LC Disbursement and such Lender’s Percentage thereof. Promptly following receipt of such notice (or notice that the Administrative Agent has funded an ABR Loan or the Swingline Lender has funded a Swingline Loan in accordance with the immediately preceding sentence), each Lender shall pay to the Administrative Agent its Percentage of the unreimbursed amount of each such LC Disbursement (it being understood that each Lender hereby agrees to pay such amount notwithstanding that any condition to the making of a Loan hereunder may not be satisfied), in the same manner as provided in Section 2.2 with respect to Loans made by such Lender (and Section 2.11(b) shall apply, mutatis mutandis, to the payment obligations of the Lenders to the Administrative Agent pursuant to this Section 3.5), and the Administrative Agent shall promptly pay to the Issuing Lender the amounts so received by it from the Lenders. Any payment made by a Lender pursuant to this paragraph to reimburse the Issuing Lender for any LC Disbursement (other than the funding of ABR Loans or Swingline Loans as contemplated above) shall be treated as an ABR Loan that is immediately due and payable in the principal amount of such LC Disbursement. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the Issuing Lender or, to the extent that Lenders have made payments pursuant to this Section to reimburse the Issuing Lender, then to such Lenders and the Issuing Lender as their interests may appear.

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3.6. Obligations Absolute. The Borrower’s obligation to reimburse LC Disbursements as provided in Section 3.5 shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Lender under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. Neither the Administrative Agent, the Lenders nor the Issuing Lender, nor any of their directors, officers, employees, affiliates and agents, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Lender; provided that the foregoing shall not be construed to excuse the Issuing Lender from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Lender’s gross negligence or willful misconduct in (i) making payment under any Letter of Credit against presentation of a draft or other document that on its face does not comply with the terms of such Letter of Credit, (ii) failing to make payment under any Letter of Credit against presentation of any draft or other document that is in strict compliance with the terms of such Letter of Credit or (iii) retaining drafts or other documents presented under a Letter of Credit. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Lender may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

3.7. Disbursement Procedures. The Issuing Lender shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Lender shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Lender has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Lender and the Lenders with respect to any such LC Disbursement.

3.8. Interim Interest. If the Issuing Lender shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and

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including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement by payment or by an ABR Loan, at the rate per annum then applicable to ABR Loans; provided that, if the Borrower fails to reimburse such LC Disbursement within one Business Day of the date when due pursuant to Section 3.5, then Section 2.8(c) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Lender, except that interest accrued on and after the date of payment by any Lender pursuant to Section 3.5 to reimburse the Issuing Lender shall be for the account of such Lender to the extent of such payment.

3.9. Replacement of the Issuing Lender. The Issuing Lender may be replaced at any time (i) by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Lender and the successor Issuing Lender or (ii) at the Borrower’s election by written notice to the Administrative Agent and the Issuing Lender to be replaced but only if the credit rating of the Lender then serving as Issuing Lender is not, at the time of such election, reasonably acceptable to the Borrower. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Lender. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Lender pursuant to Section 2.3(c). From and after the effective date of any such replacement, (i) the successor Issuing Lender shall have all the rights and obligations of the Issuing Lender under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Lender” shall be deemed to refer to such successor or to any previous Issuing Lender, or to such successor and all previous Issuing Lenders, as the context shall require. After the replacement of an Issuing Lender hereunder, the replaced Issuing Lender shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Lender under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.

SECTION 4. REPRESENTATIONS AND WARRANTIES

To induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Loans and Swingline Loans and issue or participate in the Letters of Credit, as the case may be, the Borrower hereby represents and warrants to the Administrative Agent and each Lender that:

4.1. Financial Condition. (i) The consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at December 31, 2005 and the related consolidated statements of income and of cash flows for the fiscal year ended on such date, reported on by PricewaterhouseCoopers LLP, and (ii) the consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at September 30, 2006 and the related consolidated statements of income and of cash flows for the nine-month period ended on such date, copies of which have been included, respectively, in the Borrower’s Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the fiscal year and nine-month period, respectively, ended as of such dates, as filed with the Securities and Exchange Commission, present fairly in all material respects the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such dates, and the consolidated results of their operations and their consolidated cash flows for the fiscal year and nine-month period, respectively, then ended. Such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the period involved (subject, in the case of unaudited interim financial statements, to normal year-end adjustments).

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4.2. No Change. From September 30, 2006, there has been no development or event which has had a Material Adverse Effect.

4.3. Corporate Existence. The Borrower (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has the corporate power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged and (b) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

4.4. Corporate Power; No Legal Bar. The execution, delivery, and performance by the Borrower of this Agreement and any Note are within its corporate powers, have been duly authorized by all necessary corporate action, and do not violate any provision of law or any agreement, indenture, note, or other instrument binding upon or affecting it or its charter or by-laws or give cause for acceleration of any of its Indebtedness, except to the extent that such violation or acceleration would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

4.5. Authorization; Enforceability. All authorizations, approvals, and other actions by, and notices to and filings with all Governmental Authorities required for the due execution, delivery and performance of this Agreement and any Note have been obtained or made and are in full force and effect, except to the extent that the failure to obtain or make, or to have in full force and effect, such authorizations, approvals, other actions, notices and filings would not, in the aggregate, reasonably be expected to have a Material Adverse Effect. Each of this Agreement and each Note executed in connection herewith is a legally valid and binding obligation of the Borrower enforceable in accordance with its terms except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws or equitable principles relating to or limiting creditors’ rights generally.

4.6. ERISA. No “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) or “accumulated funding deficiency” (as defined in Section 302 of ERISA) or “reportable event” (herein defined as any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder) has occurred in the last five years with respect to any Plan which would reasonably be expected to have a Material Adverse Effect with respect to the consolidated financial condition of the Borrower and its consolidated Subsidiaries. The present value of all benefits vested under all Plans maintained by the Borrower or any Commonly Controlled Entity (based on those assumptions used to fund the Plans) did not, as of the last annual valuation date, exceed the value of the assets of the Plan allocable to such vested benefits.

4.7. No Material Litigation. There are no legal or arbitral proceedings or any proceedings by or before any governmental or regulatory authority or agency, now pending or, to the knowledge of the Borrower, threatened against the Borrower or any Significant Subsidiary of the Borrower which have not been disclosed in public filings with the Securities and Exchange Commission (a) that would reasonably be expected to have a Material Adverse Effect or (b) with respect to any of the Loan Documents.

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4.8. Taxes. All United States Federal income tax returns of the Borrower and its Significant Subsidiaries that file consolidated income tax returns with the Borrower have been examined and closed through the fiscal year of the Borrower ended December 31, 1993. The Borrower and such Significant Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any such Significant Subsidiary, except (a) any taxes that are being or promptly will be contested in good faith by appropriate proceedings and for which the Borrower or such Significant Subsidiary, as applicable, has set aside on its books adequate reserves in accordance with GAAP or (b) any taxes that are immaterial in amount. The charges, accruals and reserves on the books of the Borrower and such Significant Subsidiaries in respect of any taxes and other governmental charges are, in the opinion of the Borrower, adequate.

4.9. Purpose of Loans. The proceeds of the Loans and Swingline Loans shall be used by the Borrower for general corporate and working capital purposes (including to refinance and repay its commercial paper issuances). Letters of Credit shall be issued for general corporate purposes of the Borrower. No part of the proceeds of any Loans and Swingline Loans, and no other extensions of credit hereunder, will be used for “buying” or “carrying” any “margin stock” within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect.

4.10. No Default. Neither the Borrower nor any of its Significant Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect that would reasonably be expected to have a Material Adverse Effect and no Default or Event of Default has occurred and is continuing. The execution, delivery and performance of the Loan Documents do not contravene any provision of the Indenture.

4.11. Environmental Matters. The Borrower and its Significant Subsidiaries do not have liabilities under Environmental Laws or relating to Materials of Environmental Concern that have not been disclosed in public filings with the Securities and Exchange Commission as of the Closing Date that would reasonably be expected to have a Material Adverse Effect.

SECTION 5. CONDITIONS PRECEDENT

5.1. Conditions of Effectiveness. The effectiveness of this Agreement is subject to the satisfaction of the following conditions precedent on or prior to March 31, 2007:

(a) Execution of Agreement. (i) This Agreement shall have been executed and delivered by a duly authorized officer of each of the Borrower and the Administrative Agent and (ii) the Administrative Agent shall have received an executed counterpart hereof (or a copy thereof by facsimile transmission) from each Lender listed on Schedule 1.1.

(b) Closing Certificate. The Administrative Agent shall have received a certificate of the Borrower, dated as of such effective date, substantially in the form of Exhibit C, executed by any Responsible Officer and the Secretary or any Assistant Secretary of the Borrower, and attaching the documents referred to in Sections 5.1(c) and (d).

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(c) Corporate Proceedings. The Administrative Agent shall have received a copy of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors of the Borrower (or a duly authorized committee thereof) authorizing (i) the execution, delivery and performance of this Agreement and the other Loan Documents and (ii) the borrowings contemplated hereunder.

(d) Corporate Documents. The Administrative Agent shall have received a copy of the articles of incorporation and by-laws of the Borrower.

(e) Legal Opinions. The Administrative Agent shall have received the following executed legal opinions, with a copy for each Lender:

(i) the executed legal opinion of Barbara E. Mathews, Vice President, Associate General Counsel, Chief Governance Officer and Corporate Secretary to the Borrower, substantially in the form of Exhibit D-1; and

(ii) the executed legal opinion of Simpson Thacher & Bartlett LLP, special New York counsel to the Administrative Agent, substantially in the form of Exhibit D-2.

(f) Approvals. All governmental and third party approvals necessary in connection with this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby shall have been obtained and be in full force and effect.

(g) SCE Credit Agreement. The SCE Credit Agreement shall have become effective in accordance with its terms.

(h) Fees and Expenses. All fees and expenses required to be paid by the Borrower on or prior to the Closing Date in connection with this Agreement shall have been paid.

5.2. Conditions to Each Extension of Credit. The agreement of each Lender to make any Loan (including the agreement of the Swingline Lender to make any Swingline Loan) requested to be made by it on any date (including, without limitation, its initial Loan) and of the Issuing Lender to issue, amend, renew or extend any Letter of Credit to be issued by it on any date is subject to the satisfaction of the following conditions precedent:

(a) Representations and Warranties. Each of the representations and warranties made by the Borrower in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date, except (i) any representations and warranties which are explicitly stated as having been made as of a specific date, which representations and warranties shall be true and correct in all material respects on and as of such date and (ii) the representations and warranties set forth in Sections 4.2 and 4.7 shall not be required to be restated on any date (including, for the avoidance of doubt, any Borrowing Date) after the Closing Date.

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(b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Loans and Swingline Loans requested to be made, or the Letters of Credit requested to be issued, amended, renewed or extended, on such date.

Each borrowing or request for a Letter of Credit (or extension thereof) by the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date thereof that the conditions contained in this Section 5.2 have been satisfied.

SECTION 6. COVENANTS

The Borrower hereby agrees that, so long as the Commitments remain in effect, any Letter of Credit remains outstanding or any amount is owing to any Lender or the Administrative Agent hereunder or under any other Loan Document:

6.1. Financial Statements; Certificates. The Borrower shall furnish to the Administrative Agent, who shall forward to each Lender:

(a) as soon as practicable, but in any event within 120 days after the end of each fiscal year of the Borrower, a copy of the consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related consolidated statements of income, retained earnings and cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a qualification arising out of the scope of the audit, by PricewaterhouseCoopers LLP or other independent certified public accountants of nationally recognized standing;

(b) as soon as practicable, but in any event not later than 90 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and retained earnings and of cash flows of the Borrower and its consolidated Subsidiaries for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments);

(c) within fourteen days after the same are sent, copies of all financial statements and reports which the Borrower sends to its stockholders generally, and within three days after the same are filed, notice by electronic mail of the filing of any financial statements and reports which the Borrower may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority;

(d) promptly, such additional financial and other information as the Administrative Agent or any Lender through the Administrative Agent may from time to time reasonably request; and

(e) concurrently with the delivery of any quarterly or annual financial statements pursuant to this Section 6.1, a certificate of a Responsible Officer (i) stating that, to the

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best of each such Responsible Officer’s knowledge, the Borrower during such period has observed or performed all of its covenants and other agreements in this Agreement and the other Loan Documents to be observed or performed by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate and (ii) containing all information and calculations necessary for determining compliance by the Borrower with the provisions of Section 6.8 of this Agreement as of the last day of the fiscal quarter or fiscal year of the Borrower, as the case may be.

All such financial statements in (a) and (b) shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein).

6.2. Compliance; Maintenance of Existence. The Borrower will, and will cause each of its Significant Subsidiaries to (a) comply with all Requirements of Law and material Contractual Obligations except to the extent that failure to comply therewith would not materially and adversely affect the ability of the Borrower to perform its obligations hereunder; and (b)(i) preserve, renew and keep in full force and effect its organizational existence and (ii) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, except in the case of clauses (i) and (ii) above, as permitted by Section 6.5 and except, in the case of clause (ii) above, to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect.

6.3. Inspection of Property; Books and Records; Discussions. The Borrower will, and will cause each of its Significant Subsidiaries to (a) keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities and (b) permit representatives of any Lender (not more frequently than once per year if no Default or Event of Default exists) upon reasonable notice to the Borrower to visit and inspect its properties and request and obtain copies of its financial records and to discuss the business, operations, properties and financial and other condition of the Borrower and its Significant Subsidiaries with officers of the Borrower and such Significant Subsidiaries and with their independent certified public accountants.

6.4. Notices. The Borrower shall promptly give notice to the Administrative Agent, and the Administrative Agent shall in turn give notice to each Lender, of:

(a) the occurrence of any Default or Event of Default;

(b) any downgrade in the senior unsecured debt ratings of the Borrower issued by S&P or Moody’s; and

(c) any litigation or proceeding or, to the knowledge of the Borrower, investigation that relates to any Loan Document.

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Each notice pursuant to clause (a) shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto.

6.5. Limitation on Fundamental Changes. The Borrower will not enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, except that:

(a) the Borrower may be merged or consolidated with another Person so long as the Borrower is the continuing or surviving corporation and after giving effect to such merger or consolidation, no Default or Event of Default shall have occurred or be continuing; and

(b) the Borrower may be merged or consolidated with, or sell all or substantially all of its property, business and assets to, another Person so long as, if the Borrower is not the continuing or surviving corporation, (i) the senior unsecured debt rating of the survivor or purchaser shall be at least BBB- by S&P and at least Baa3 by Moody’s, (ii) the survivor or purchaser shall assume the Borrower’s obligations hereunder in accordance with documentation reasonably acceptable to the Administrative Agent and (iii) after giving effect to such merger, consolidation or sale, no Default or Event of Default shall have occurred or be continuing.

6.6. Tax Allocation Agreement. Other than pursuant to any Requirement of Law, the Borrower shall maintain in effect the Tax Allocation Agreement and shall not agree to any amendment, modification or waiver thereof that materially and adversely impairs the ability of the Borrower to repay the Loans and other obligations under the Loan Documents.

6.7. Disposition of Property. The Borrower shall not, nor shall it permit any of its Subsidiaries to, dispose of a substantial portion of its property, whether now owned or hereafter acquired (except (i) dispositions of inventory in the ordinary course of business, (ii) disposition of obsolete or worn out property in the ordinary course of business and (iii) dispositions of assets having a value, in the aggregate for all such dispositions from and after the Closing Date, not exceeding 25% of the book value of the consolidated assets of the Borrower and its Subsidiaries as reflected on the financial statements most recently furnished by the Borrower to the Administrative Agent pursuant to Section 6.1(a) or (b) prior to such disposition; provided, that if no financial statements have been provided pursuant to Section 6.1(a) or (b) since the Closing Date, as reflected on the most recent financial statements referred to in Section 4.1).

6.8. Consolidated Capitalization Ratio. The Borrower shall not permit the Consolidated Capitalization Ratio on the last day of any fiscal quarter to exceed 0.65 to 1.0.

6.9. Limitation on Liens. The Borrower shall not permit SCE or any Significant Subsidiary of SCE to create, incur, assume or suffer to exist any Lien upon any of SCE’s or such Significant Subsidiary’s property, assets or revenues, whether now owned or hereafter acquired, except for Liens not prohibited by the SCE Indenture.

6.10. Payment of Taxes. The Borrower shall, and shall cause its Significant Subsidiaries to, pay, discharge or otherwise satisfy at or before maturity or before they become

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delinquent, as the case may be, all material taxes, assessments and governmental charges or levies imposed upon any of them or their income or profits, except where (a) the amount or validity thereof is currently being contested in good faith by appropriate actions or proceedings and (b) to the extent required by GAAP, reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower.

6.11. Ownership of SCE. The Borrower shall at all times legally and beneficially own all of the common stock of SCE.

6.12. No Liens on Common Stock. The Borrower shall not create, incur, assume or suffer to exist any Lien on the common stock of SCE or Edison Mission Group Inc.

6.13. Clauses Restricting SCE Distributions. The Borrower shall not, and shall not permit any if its Subsidiaries to, enter into or suffer to exist or become effective any contractual restriction on the ability of SCE to pay dividends on, or make other distributions or payments with respect to, the Capital Stock of SCE held by the Borrower, except for such restrictions (a) existing under or by reason of any restrictions existing on the Closing Date, (b) that are a Requirement of Law or (c) that are created, exist or become effective as a result of the issuance by SCE or one of its Subsidiaries after the Effective Date of securities the terms of which provide that dividends, distributions or payments with respect to Capital Stock may not be paid or made during the time period when distributions or interest on such securities have been deferred or have not been paid in full.

SECTION 7. EVENTS OF DEFAULT

If any of the following events shall occur and be continuing:

(a) The Borrower shall fail to pay any principal of any Loan, any Swingline Loan or any reimbursement obligation in respect of any LC Disbursement when due in accordance with the terms hereof, or to pay any interest on any Loan or Swingline Loan, or any other amount payable hereunder, within 5 Business Days after any such amount becomes due in accordance with the terms hereof;

(b) Any representation or warranty made to the Administrative Agent or any Lender in connection with the execution and delivery of this Agreement or any other Loan Document or the making of Loans and the Swingline Loans hereunder proves to have been incorrect in any material respect when made;

(c) The Borrower shall default in the performance of (i) any agreement contained in Section 6.5, 6.8 or 6.11 of this Agreement or (ii) any other term, covenant, or provision contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) and (b) of this Section) and, in the case of any default under this clause (ii), such default shall continue unremedied for 30 days after the Administrative Agent shall have given notice thereof to the Borrower;

(d) The Borrower or SCE shall (a) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of all or a substantial part of its property, (b) admit in writing its inability, or be generally

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unable, to pay its debts as such debts become due, (c) make a general assignment for the benefit of its creditors, (d) commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect), (e) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts, (f) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against the Borrower or SCE in an involuntary case under such federal laws, or (g) take any corporate action for the purpose of affecting any of the foregoing;

(e) A case or other proceeding shall be commenced (including commencement of such case or proceeding by way of service of process on the Borrower or SCE), in any court of competent jurisdiction, seeking (a) the liquidation, reorganization, dissolution or winding-up, or the composition or readjustment of debts of the Borrower or SCE, (b) the appointment of a trustee, receiver, custodian, liquidator, or the like of the Borrower or SCE or of all or any substantial part of the assets of the Borrower or SCE or (c) similar relief in respect of the Borrower or SCE under any law relating to bankruptcy, insolvency, reorganization, winding up, or composition or readjustment of debts, or a warrant of attachment, execution, or similar process shall be issued against a substantial part of the property of the Borrower or SCE and such case, proceeding, warrant, or process shall continue undismissed or unstayed and in effect for a period of 45 days, or an order, judgment, or decree approving or ordering any of the foregoing shall be entered in an involuntary case under such federal bankruptcy laws;

(f) A trustee shall be appointed to administer any Plan under Section 4042 of ERISA, or the PBGC shall institute proceedings to terminate, or to have a trustee appointed to administer any Plan and such proceedings shall continue undismissed or unstayed and in effect for a period of 30 days, and any such event shall result in any liability which is material in relation to the consolidated financial condition of the Borrower and its consolidated Subsidiaries;

(g) The Borrower or SCE shall (i) default in any payment of principal or interest on any Indebtedness in an aggregate amount in excess of $75,000,000 or in the payment of any guarantee thereof beyond the period of grace, if any, provided in the instrument or agreement under which such indebtedness or guarantee thereof was created; or (ii) default beyond any applicable grace period in the observance or performance of any other agreement or condition relating to any such Indebtedness or guarantee thereof or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity; provided, however, that if such default shall be cured by the Borrower or SCE or waived by the holders of such Indebtedness and any acceleration of maturity having resulted from such default shall be rescinded or annulled, in each case in accordance with the terms of such agreement or instrument, without any modification of the terms of such Indebtedness requiring the Borrower or SCE to furnish additional or other security therefor reducing the average life to maturity thereof or increasing the principal amount thereof, or any agreement by the Borrower or SCE to furnish additional or other security

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therefor or to issue in lieu thereof Indebtedness secured by additional or other collateral or with a shorter average life to maturity or in a greater principal amount, then any default hereunder by reason thereof shall be deemed likewise to have been thereupon cured or waived unless payment of the Loans and, if applicable, Swingline Loans hereunder has been accelerated prior to such cure or waiver;

(h) There shall have been entered by a court of competent jurisdiction within the United States and shall not have been vacated, discharged or stayed within sixty (60) days from the entry thereof (or such longer period as may be provided by law) one or more final judgments or final decrees for payment of money against the Borrower or SCE involving in the aggregate a liability (to the extent not paid or covered by insurance) in excess of $75,000,000; or

(i) A Change of Control shall occur;

then, and in any such event, (A) if such event is an Event of Default specified in paragraph (d) or (e) of this Section with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans and Swingline Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including all obligations in respect of LC Exposure, whether or not such obligations are contingent or unmatured and whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans and Swingline Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including all obligations in respect of LC Exposure, whether or not such obligations are contingent or unmatured and whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) to be due and payable forthwith, whereupon the same shall immediately become due and payable. With respect to all Letters of Credit with respect to which presentment for honor for the full amount thereof shall not have occurred at the time of an acceleration pursuant to this paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Borrower hereunder and under the other Loan Documents. After all such Letters of Credit shall have expired or been fully drawn upon, all obligations in respect of the LC Exposure shall have been satisfied and all other obligations of the Borrower hereunder and under the other Loan Documents shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower (or such other Person as may be lawfully entitled thereto). Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived.

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SECTION 8. THE ADMINISTRATIVE AGENT

8.1. Appointment. Each Lender hereby designates and appoints the Administrative Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents; and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent.

8.2. Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible to the Lenders for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care.

8.3. Exculpatory Provisions. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable to any Lender for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except for its or such Person’s own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of the Borrower to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Borrower.

8.4. Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the

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payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans and Swingline Loans.

8.5. Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.

8.6. Non-Reliance on Administrative Agent and Other Lenders. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Borrower which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.

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8.7. Indemnification. The Lenders agree to indemnify each Agent in its capacity as the Administrative Agent or the Syndication Agent or a Documentation Agent, as the case may be (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Percentages in effect on the date on which indemnification is sought under this Section (or, if indemnification is sought after the date upon which the Commitments shall have terminated, the Letters of Credit shall have terminated or expired and the Loans and Swingline Loans shall have been paid in full, ratably in accordance with such Percentages immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Loans and Swingline Loans or the termination or expiration of the Letters of Credit) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from such Agent’s gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder.

8.8. Administrative Agent in Its Individual Capacity. The Administrative Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Administrative Agent were not the Administrative Agent hereunder and under the other Loan Documents. With respect to the Loans and the Swingline Loans made by it, the Administrative Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms “Lender”, “Lenders” and “Swingline Lender” shall include the Administrative Agent in its individual capacity.

8.9. Successor Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent, the Administrative Agent may resign as Administrative Agent at any time upon 15 days notice by notifying the Lenders and the Borrower. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, subject to approval by the Borrower, whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term “Administrative Agent” shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent’s rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. In the event that no such successor Administrative Agent is so appointed by the Required Lenders within 30 days of the Administrative Agent’s notice of resignation, the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent (subject to the approval of the Borrower). After any retiring Administrative Agent’s resignation

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as Administrative Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents.

8.10. The Syndication Agent and Documentation Agents. Neither the Syndication Agent nor the Documentation Agents (nor any of them individually) in their respective capacities as such shall have any rights, duties or responsibilities hereunder, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Syndication Agent or either Documentation Agent in its capacity as such.

SECTION 9. MISCELLANEOUS

9.1. Amendments and Waivers. The Required Lenders may, or, with the written consent of the Required Lenders, the Administrative Agent may, from time to time, enter into with the Borrower written amendments, supplements, modifications or waivers hereto and to the other Loan Documents; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) (A) reduce the amount or extend the scheduled date of maturity of any Loan or Swingline Loan or reimbursement obligation in respect of any LC Disbursement, (B) alter the pro rata payment sharing requirements of the first sentence of Section 2.11(a), (C) reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof or (D) increase the amount or extend the termination date of any Lender’s Commitment, in each case without the consent of each Lender affected thereby, or (ii) amend, modify or waive any provision of this Section or reduce the percentage specified in the definition of Required Lenders, in each case without the written consent of all the Lenders or (iii) (A) amend, modify or waive any provision of Section 8 without the written consent of the then Administrative Agent, (B) amend, modify or waive any provision directly affecting the rights or duties of the Issuing Lender without the written consent of the Issuing Lender or (C) amend, modify or waive any provision affecting the rights or duties of the Swingline Lender without the written consent of the Swingline Lender.

9.2. Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, addressed as follows in the case of the Borrower and the Administrative Agent, and as set forth in Schedule 1.1 in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto:

The Borrower: Edison International 2244 Walnut Grove Avenue Rosemead, California 91770 Attention: Manager of Cash Management Fax: (626) 302-6823

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The Administrative Agent:	Loan and Agency Services Group 1111 Fannin, Floor 10 Houston, Texas 77002 Attention: Marshella Williams Fax: (713) 427-6307 and Attention: Tom Casey Fax: (212) 270-3089
The Swingline Lender	[Loan and Agency Services Group 1111 Fannin, Floor 10 Houston, Texas 77002 Attention: Marshella Williams Fax: (713) 427-6307 and Attention: Tom Casey Fax: (212) 270-3089]

provided that any notice, request or demand to or upon the Administrative Agent or the Lenders pursuant to Section 2.1, 2.2, 2.5, 2.6, 2.10, 2.13, 2.19 or 2.20 or Section 3 shall not be effective until received.

9.3. No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

9.4. Survival. (a) The agreements contained in Sections 2.13, 2.14, 2.15, 8.7 and 9.5 shall survive the termination of this Agreement, the expiration or termination of the Letters of Credit and the payment of the Loans and Swingline Loans and all other amounts payable hereunder.

(b) All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith or therewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder.

9.5. Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse the Administrative Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents including, without limitation, the reasonable fees and expenses of one joint counsel to the Agents in connection with this Agreement and the other Loan Documents, (b) to pay or reimburse each Lender and the Administrative Agent for all its out-of-pocket costs and expenses incurred in connection with the

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enforcement or preservation of any rights under this Agreement or the other Loan Documents including, without limitation, the fees and disbursements of one joint counsel to the Lenders and the Administrative Agent, provided that, notwithstanding the foregoing, the Borrower agrees to pay or reimburse the fees and disbursements of separate counsel to any Lender or the Administrative Agent to the extent of any conflict of interest among the Lenders or between the Lenders and the Administrative Agent, (c) to pay, indemnify, or reimburse each Lender and the Administrative Agent for, and hold each Lender and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes (other than any net income or franchise taxes), if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents and (d) to pay, indemnify, and hold each Lender, the Issuing Lender and the Administrative Agent and their respective directors, officers, employees, affiliates and agents (each, an “indemnified person”) harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement and the other Loan Documents and the use of proceeds of the Loans or Letters of Credit (all the foregoing in this clause (d), collectively, the “indemnified liabilities”), provided, that the Borrower shall have no obligation hereunder to any indemnified person with respect to indemnified liabilities arising from the gross negligence or willful misconduct of such indemnified person, from the breach by such indemnified person of its Contractual Obligations to the Borrower or from negotiated settlements of pending or threatened legal actions entered into by such indemnified person without the Borrower’s consent (unless such consent has been unreasonably withheld).

9.6. Transfer Provisions. (a) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Administrative Agent and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender.

(b) Participations. Any Lender may, in the ordinary course of its commercial lending business and in accordance with applicable law, at any time sell to one or more banks or other entities (“Participants”) participating interests in any Loan owing to such Lender, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Loan Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender’s obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan and interests for all purposes under this Agreement and the other Loan Documents, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and the other Loan Documents. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.13, 2.14 and 2.15 with respect to its participation in the Commitments and the Loans and Swingline Loans outstanding from time to time as if such Participant were a Lender; provided that, in the

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case of Section 2.14, such Participant shall have complied with the requirements of said Section, and provided, further that such Participant shall have complied with the provisions of Section 2.16, and provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred.

(c) Assignments. Any Lender may, in the ordinary course of its commercial lending business and in accordance with applicable law, at any time and from time to time, assign to any Lender or any Affiliate or Approved Fund thereof or, with the consent of the Borrower, the Administrative Agent, the Issuing Lender and the Swingline Lender (which consent of the Borrower, the Administrative Agent, the Issuing Lender and the Swingline Lender shall not be unreasonably withheld or delayed and which consent shall not be required from the Borrower during the continuation of an Event of Default), to an additional bank or financial institution (an “Assignee”) all or any part of its rights and obligations under this Agreement and the other Loan Documents pursuant to an Assignment and Acceptance, substantially in the form of Exhibit E (an “Assignment and Acceptance”), executed by such Assignee, such assigning Lender, and (to the extent required by this paragraph) the Administrative Agent, the Issuing Lender and the Swingline Lender (and, in the case of an Assignee that is not then a Lender or an Affiliate thereof, by the Borrower) and delivered to the Administrative Agent for its acceptance and recording in the Register, provided that, in the case of any such assignment to an additional bank or financial institution, (i) the sum (without duplication) of the aggregate principal amount of the Commitments and Exposure being assigned shall not be less than $5,000,000 (or such lesser amount as may be agreed to by the Borrower and the Administrative Agent) and (ii) the sum (without duplication) of the aggregate principal amount of the Commitments and Exposure retained by the assigning Lender, if any, shall not be less than $5,000,000 (or such lesser amount as may be agreed to by the Borrower and the Administrative Agent). Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto), but shall retain its rights pursuant to Sections 2.13, 2.14, 2.15 and 9.5 in respect of the period prior to such effective date.

(d) The Register. The Administrative Agent, on behalf of the Borrower, shall maintain at the address of the Administrative Agent referred to in Section 9.2 a copy of each Assignment and Acceptance delivered to it and a register (the “Register”) for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amounts of the Loans, Swingline Loans and LC Exposure owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders may (and, in the case of any Loan, Swingline Loan or other obligation hereunder not evidenced by a Note, shall) treat each Person whose name is recorded in the Register as the owner of a Loan, Swingline Loan or other obligation hereunder for all purposes of this Agreement and the other Loan Documents, notwithstanding any notice to

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the contrary. Any assignment of any Loan, Swingline Loan or other obligation hereunder not evidenced by a Note shall be effective only upon appropriate entries with respect thereto being made in the Register. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.

(e) Recordation. Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee, the Administrative Agent and the Issuing Lender (and, in the case of an Assignee that is not then a Lender or an Affiliate thereof, by the Borrower) together with payment to the Administrative Agent of a registration and processing fee of $3,500, the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrower.

(f) Disclosure. Subject to Section 9.14, the Borrower authorizes each Lender to disclose to any Participant or Assignee (each, a “Transferee”) and any prospective Transferee, any and all financial information in such Lender’s possession concerning the Borrower and its Affiliates which has been delivered to such Lender by or on behalf of the Borrower pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Borrower in connection with such Lender’s credit evaluation of the Borrower and its Affiliates prior to becoming a party to this Agreement.

(g) Pledges. For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this Section concerning assignments of Loans, Swingline Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law.

9.7. Adjustments; Set-Off. (a) Except to the extent that this Agreement expressly provides for payments to be allocated to a particular Lender or Lenders, if any Lender (a “benefited Lender”) shall at any time receive any payment of all or part of its Loans, or interest thereon, or LC Exposure or participations in Swingline Loans, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 7(d) or (e), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender’s Loans, or interest thereon, or LC Exposure or participations in Swingline Loans, such benefited Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender’s Loans, LC Exposure and participations in Swingline Loans, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefited Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. Notwithstanding the foregoing, no Lender shall exercise any right of set-off against the Borrower in connection with this Agreement without the consent of the Required Lenders.

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(b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise), to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application.

9.8. Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent.

9.9. Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

9.10. Integration. This Agreement and the other Loan Documents represent the agreement of the Borrower, the Administrative Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.

9.11. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

9.12. WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.

9.13. Submission To Jurisdiction; Waivers. The Borrower hereby irrevocably and unconditionally:

(a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof;

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(b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in Section 9.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto;

(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and

(e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.

9.14. Confidentiality. Each of the Administrative Agent and the Lenders expressly agree, for the benefit of the Borrower and its Subsidiaries, to maintain the confidentiality of the Confidential Information (as defined below), except that Confidential Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Confidential Information and instructed to keep such Confidential Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an express agreement for the benefit of the Borrower and its Subsidiaries containing provisions substantially the same as those of this Section 9.14, to any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Agreement, (g) with the prior express written consent of the Borrower or its Subsidiaries, as applicable, or (h) to the extent such Confidential Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than the Borrower or its Subsidiaries. For the purposes of this Section 9.14, “Confidential Information” means all information, including material nonpublic information within the meaning of Regulation FD promulgated by the SEC (“Regulation FD”), received from the Borrower or its Subsidiaries relating to such entities or their respective businesses, other than any such information that is available to any

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Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by such entities; provided that, in the case of information received from the Borrower or its Subsidiaries after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Confidential Information as provided in this Section 9.14 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Confidential Information as such Person would accord to its own confidential information; provided, however, that with respect to disclosures pursuant to clauses (b) and (c) of this Section, unless prohibited by law or applicable court order, each Lender and the Administrative Agent shall attempt to notify the Borrower and its Subsidiaries of any request by any governmental agency or representative thereof or other Person for disclosure of Confidential Information after receipt of such request, and if reasonable, practicable and permissible, before disclosure of such Confidential Information. It is understood and agreed that the Borrower, its Subsidiaries and their respective Affiliates may rely upon this Section 9.14 for any purpose, including without limitation to comply with Regulation FD.

9.15. USA Patriot Act. Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with the Act.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

EDISON INTERNATIONAL
By	/s/ George T. Tabata
Name:	George T. Tabata
Title:	Assistant Treasurer
JPMORGAN CHASE BANK, N.A.,   as Administrative Agent and as Swingline Lender
By:	/s/ Juan Javellana
Name:	Juan Javellana
Title:	Vice President

[SIGNATURE PAGE TO EDISON INTERNATIONAL AMENDED AND RESTATED CREDIT AGREEMENT]

EX-10.2

Exhibit 10.2

EDISON INTERNATIONAL

2008 Long-Term Incentives

Terms and Conditions

1. LONG-TERM INCENTIVES

The long-term incentive awards granted in 2008 (“LTI”) for eligible persons (each, a “Holder”) employed by Edison International (“EIX”) or its participating affiliates (the “Companies”, or individually, the “Company”) include the following:

• Nonqualified stock options to purchase shares of EIX Common Stock (“EIX Options”) as described in Section 3;

• Contingent EIX performance units (“Performance Shares”) as described in Section 4; and

• With respect to certain eligible persons, restricted EIX stock units (“Restricted Stock Units”) as described in Section 5.

Each of the LTI awards will be granted under the 2007 Performance Incentive Plan (the “Plan”) and will be subject to adjustment as provided in Section 7.1 of the Plan.

The LTI shall be subject to these 2008 Long-Term Incentives Terms and Conditions (these “Terms”). The LTI shall be administered by the Compensation and Executive Personnel Committee of the EIX Board of Directors (the “Committee”). The Committee shall have the administrative powers with respect to the LTI set forth in Section 3.2 of the Plan.

In the event EIX grants LTI to a Holder, the number of EIX Options, Performance Shares and Restricted Stock Units (if any) granted to the Holder will be set forth in a written award certificate delivered by EIX to the Holder.

2. VESTING OF LTI

Subject to Sections 8 and 9 the following vesting rules shall apply to the LTI:

2.1 EIX Options. The EIX Options will vest over a four-year period as described in this Section 2 (the “Vesting Period”). The effective “initial vesting date” will be January 2 of the year following the date of the grant, or six months after the date of the grant, whichever date is later. The EIX Options will vest as follows:

• On the initial vesting date, one-fourth of the award will vest.

• On January 2, 2010, an additional one-fourth of the award will vest.

• On January 2, 2011, an additional one-fourth of the award will vest.

• On January 2, 2012, the balance of the award will vest.

2.2 Performance Shares. The Performance Shares will vest and become payable to the extent earned as determined at the end of the three-calendar-year period commencing on January 1, 2008, and ending December 31, 2010 (the “Performance Period”), subject to the provisions of Section 4.

2.3 Restricted Stock Units. The Restricted Stock Units will vest and become payable on January 2, 2011.

2.4 Continuance of Employment/Service Required. The vesting schedule requires continued employment or service through each applicable vesting date as a condition to the vesting of the applicable installment of the LTI and the rights and benefits thereunder. Employment or service for only a portion of the vesting period, even if a substantial portion, will not entitle the Holder to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment or services except as provided in Section 8 below.

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3. EIX OPTIONS

3.1 Exercise Price. The exercise price of an EIX Option stated in the award certificate is the closing price (in regular trading) of a share of EIX Common Stock on the New York Stock Exchange for the effective date of the award.

3.2 Cumulative Exercisability; Term of Option. The vested portions of the EIX Options will accumulate to the extent not exercised, and be exercisable by the Holder subject to the provisions of this Section 3 and Sections 8 and 9, in whole or in part, in any subsequent period but not later than January 2, 2018.

3.3 Method of Exercise. The Holder may exercise an EIX Option by providing written notice to EIX on the form prescribed by the Committee for this purpose, or completion of such other EIX Option exercise procedures as EIX may prescribe, accompanied by full payment of the applicable exercise price. Payment must be in cash or its equivalent acceptable to EIX. At the discretion of the Holder, EIX Common Stock valued on the exercise date at a per-share price equal to the closing price of EIX Common Stock on the New York Stock Exchange may be used to pay the exercise price, provided the Company can comply with any legal requirements. A broker-assisted “cashless” exercise may be accommodated for EIX Options at the discretion of EIX. Until payment is accepted, the Holder will have no rights in the optioned stock. The provisions of Section 11 must be satisfied as a condition precedent to the effectiveness of any purported exercise.

4. PERFORMANCE SHARES

4.1 Performance Shares. Performance Shares are EIX Common Stock-based units subject to a performance measure based on the percentile ranking of EIX total shareholder return (“TSR”) among the TSRs for the stocks comprising the Comparison Group (as defined below) over the entire Performance Period. TSR is calculated using (i) the average closing stock price for the relevant stock for the 20-trading-day period ending with the last day on which the New York Stock Exchange is open for trading preceding the first day of the Performance Period, and (ii) the average closing stock price for the relevant stock for the 20-trading-day period ending with the measurement date. A target number of contingent Performance Shares will be awarded on the initial grant date. The target number of contingent Performance Shares will be increased by any additional Performance Shares created by “reinvestment” of dividend equivalents as provided in Section 4.4. The actual amount of Performance Shares to be paid will depend on EIX’s TSR percentile ranking on the measurement date. If EIX’s TSR is below the 40^th percentile, no Performance Shares will be paid. Twenty-five percent (25%) of the target number of Performance Shares will be paid if EIX’s TSR percentile ranking is at the 40^th percentile. The target number of Performance Shares will be paid if EIX’s TSR rank is at the 50^th percentile. Two times the target number of Performance Shares will be paid if EIX’s TSR percentile ranking is at the 75th percentile or higher. The payment multiple is interpolated for performance between the points indicated in the preceding three sentences on a straight-line basis.

The “Comparison Group” consists of the stocks comprising the Philadelphia Utility Index as the index is constituted on the measurement date, but deleting AES Corporation and adding Sempra Energy (provided the stock is publicly traded on the measurement date), and adjusted as described below if there are less than 20 companies in such index as so adjusted on the measurement date. If the Comparison Group consists of less than 20 stocks on the measurement date, the stock with the median TSR for the entire Performance Period (or, if there are an even number of stocks in the Comparison Group before giving effect to this sentence, a stock deemed to have a TSR equal to the average TSR of the two stocks in the Comparison Group that fall in the middle of such group when ranked based on TSR for the entire Performance Period) shall be added back to the Comparison Group a sufficient number of times to bring the stocks comprising the Comparison Group to 20. (For purposes of clarity, if there are only 17 stocks in the Comparison Group before giving effect to the preceding sentence, the stock with the median TSR for the entire Performance Period will be added back to the Comparison Group a total of three times to bring the stocks comprising the Comparison Group to 20.)

4.2 Measurement Date. The performance measurement date will be the last day of the Performance Period on which the New York Stock Exchange is open for trading. As of that date, the applicable payment multiple will be determined as provided in Section 4.1 above based on the EIX TSR percentile ranking achieved

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during the Performance Period. No payment will be made with respect to the Performance Shares unless and until the Committee has certified, by resolution or other appropriate action in writing, that the applicable EIX TSR percentile ranking has been accurately determined. The Committee shall not have discretion to pay Performance Shares if the minimum EIX TSR ranking is not achieved or to pay Performance Shares in excess of the amount provided in Section 4.1 for the applicable EIX TSR ranking.

4.3 Payment of Performance Shares. Fifty percent of the Performance Shares that are earned pursuant to Section 4.1 (plus any fractional shares) will be paid in cash. The remainder of the Performance Shares earned will be paid on a one-for-one basis in EIX Common Stock under the Plan. The value of each Performance Share paid in cash will be equal to the closing price per share of EIX Common Stock on the New York Stock Exchange for the measurement date. The cash and stock payable for the earned Performance Shares will be delivered within 30 days following the end of the Performance Period. The Performance Shares are subject to termination and other conditions specified in Sections 8 and 9, and to the provisions of Section 11.

4.4 Dividend Equivalent Reinvestment. For each dividend on EIX Common Stock for which the ex-dividend date falls within the Performance Period, the Holder of Performance Shares will be credited with an additional number of target Performance Shares. The additional number of shares added on each ex-dividend date will be equal to (i) the per-share cash dividend paid by EIX on its Common Stock with respect to the related ex-dividend date, multiplied by (ii) the Holder’s number of target Performance Shares (including any additional target Performance Shares previously credited under this Section 4.4), divided by (iii) the closing price of a share of EIX Common Stock on the related ex-dividend date, with the result rounded to four decimal places. Any target Performance Shares added pursuant to the foregoing provisions of this Section 4.4 will be subject to the same vesting, payment, termination and other terms, conditions and restrictions as the original target Performance Shares to which they relate (including application of the TSR payment multiple as contemplated by Section 4.1). No target Performance Shares will be added pursuant to this Section 4.4 with respect to any target Performance Shares which, as of the related ex-dividend date, have either become payable pursuant to Section 4.3 or terminated pursuant to Section 8.

5. RESTRICTED STOCK UNITS

5.1 Restricted Stock Units. Restricted Stock Units are EIX Common Stock-based units that vest based on the passage of time. As soon as administratively practical following January 2, 2011 (and in all events within 30 days after such date), EIX will deliver to the Holder a number of shares of EIX Common Stock equal to the number of Restricted Stock Units that have vested, except that if the Restricted Stock Units vest pursuant to Section 8.3, 8.4, 8.5 or 9, the Restricted Stock Units will become payable as provided in the applicable section below. The Restricted Stock Units are subject to termination and other conditions specified in Sections 8 and 9, and to the provisions of Section 11.

5.2 Dividend Equivalent Reinvestment. For each dividend declared on EIX Common Stock with an ex-dividend date on or after the date an award of Restricted Stock Units is granted and before all of such Restricted Stock Units either have become payable pursuant to Section 5.1 or have terminated pursuant to Section 8, the Holder of such award will be credited with an additional number of Restricted Stock Units equal to (i) the per-share cash dividend paid by EIX on its Common Stock with respect to the related ex-dividend date, multiplied by (ii) the total number of outstanding and unpaid Restricted Stock Units (including any Restricted Stock Units previously credited under this Section 5.2) subject to such award as of such ex-dividend date, divided by (iii) the closing price of a share of EIX Common Stock on the related ex-dividend date, with the result rounded to four decimal places. Any additional Restricted Stock Units credited pursuant to the foregoing provisions of this Section 5.2 will be subject to the same vesting, payment, termination and other terms, conditions and restrictions as the original Restricted Stock Units to which they relate; provided, however, that the Committee shall retain discretion to pay any Restricted Stock Units in cash rather than shares of EIX Common Stock if and to the extent that payment in shares would exceed the applicable share limits of the Plan, with any fractional shares to be paid in cash. No crediting of Restricted Stock Units will be made pursuant to this Section 5.2 with respect to any Restricted Stock Units which, as of the related ex-dividend date, have either been paid pursuant to Section 5.1 or terminated pursuant to Section 8.

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6. DELAYED PAYMENT OR DELIVERY OF LTI GAINS

Notwithstanding any other provision herein, Holders who are eligible to defer salary under the EIX Executive Deferred Compensation Plan (the “EDCP”) may irrevocably elect to defer receipt of all or a part of the cash payable in respect of the portion of earned Performance Shares that are payable in cash pursuant to the terms of the EDCP. To make such an election, the Holder must submit a signed agreement in the form approved by, and in advance of the applicable deadline established by, the Committee. In the event of any timely deferral election, the LTI with respect to which the deferral election was made shall be paid in accordance with the terms of the EDCP.

7. TRANSFER AND BENEFICIARY

7.1 Limitations on Transfers. Except as provided below and in Section 11, the LTI will not be transferable by the Holder and, during the lifetime of the Holder, the LTI will be exercisable only by him or her. The Holder may designate a beneficiary who, upon the death of the Holder, will be entitled to exercise the then vested portion of the LTI during the remaining term subject to the provisions of the Plan and these Terms.

7.2 Exceptions. Notwithstanding the foregoing, the LTI of the CEOs of EIX, Edison Mission Group, and Southern California Edison Company, and the EVPs of EIX, are transferable to a spouse, children or grandchildren, or trusts or other vehicles established exclusively for their benefit. Any transfer request must specifically be authorized by EIX in writing and shall be subject to any conditions, restrictions or requirements as the Committee may determine.

8. TERMINATION OF EMPLOYMENT

8.1 General. In the event of termination of the employment of the Holder for any reason other than those specified in Sections 8.2, 8.3 or 8.4, the LTI will terminate as follows: (i) the Holder’s unvested EIX Options will terminate for no value on the date such employment terminates, (ii) the Holder’s vested EIX Options will terminate for no value 180 days from the date on which such employment terminated (or, if earlier, on the last day of the applicable EIX Option term) to the extent not theretofore exercised, (iii) the Holder’s unearned Performance Shares will terminate for no value, and (iv) the Holder’s unvested Restricted Stock Units will terminate for no value. Any fractional vested EIX Options will be rounded up to the next whole share.

8.2 Retirement. If the Holder terminates employment on or after the first day of the month in which he or she (i) attains age 65 or (ii) attains age 61 with five “years of service,” as that term is defined in the Edison 401(k) Savings Plan (a “Retirement”), then the vesting and exercise or payment provisions of this Section 8.2 will apply.

(A) EIX Options. The EIX Options will vest; provided, however, that in the event the Holder’s Retirement occurs within the calendar year in which the applicable EIX Option is granted, the portion of the option that vests upon the Holder’s Retirement will be prorated by multiplying the total number of shares subject to the option by a fraction, the numerator of which shall be the number of whole months in the calendar year of grant that the Holder was employed by one or more of the Companies, and the denominator of which shall be twelve (12). In no event shall the Holder be credited with services performed during any portion of a calendar month (even if a substantial portion) if the Holder is not employed by one of the Companies as of the last day of such calendar month. The portion of the option not eligible to vest following the Holder’s Retirement after giving effect to the proration described in the preceding two sentences shall terminate upon the Holder’s Retirement, and the Holder shall have no further rights with respect to such terminated portion. Any fractional EIX Options vested under this Section 8.2 will be rounded up to the next whole number. Although vested upon Retirement, the options will become exercisable on the schedule under which they would have been vested had the Holder not retired (one-fourth of the option grant on the effective initial vesting date (January 2, 2009 or six months after the date of grant, whichever is later) and an additional one-fourth on January 2, 2010, 2011 and 2012), except that if the Holder dies, the then-outstanding portion of the option will be immediately exercisable as of the date of the Holder’s death. In the event prorated vesting is required in connection with the Holder’s Retirement, the portion of the option that does vest will become exercisable first on the effective initial vesting date (up to the maximum number of shares that would have become exercisable on that date had no termination of employment occurred) and so

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on until the vested portion of the option becomes exercisable, except that if the Holder dies, the then-outstanding portion of the option will be immediately exercisable as of the date of the Holder’s death. Once exercisable, EIX Options will remain exercisable as provided in Section 3 for the remainder of the original EIX Option term.

(B) Performance Shares. The Performance Shares will vest and become payable at the end of the Performance Period to the extent they would have vested and become payable if the Holder’s employment had continued through the last day of the Performance Period; provided, however, that if the Holder’s Retirement occurs within the calendar year in which the applicable Performance Shares are granted, the portion of the Performance Shares that will vest and become payable will equal (i) the portion that would have vested and become payable if the Holder’s employment had continued through the last day of the Performance Period, multiplied by (ii) a fraction, the numerator of which shall be the number of whole months in the calendar year of grant that the Holder was employed by one or more of the Companies, and the denominator of which shall be twelve (12), with the result rounded to four decimal places. For this purpose, the number of “whole calendar months” shall be calculated as provided in Section 8.2(A) above. Performance Shares will be payable to the Holder on the payment date specified in Section 4.3 to the extent of the EIX TSR ranking achieved as specified in Section 4.1. Any fractional Performance Shares vested under this Section 8.2 will be paid in cash. Any unvested Performance Shares (after application of the foregoing vesting provisions) will terminate for no value.

(C) Restricted Stock Units. The Restricted Stock Units will vest upon the Holder’s Retirement and will be payable on or as soon as practicable following January 2, 2011 (and in all events within 30 days after such date); provided, however, that in the event the Holder’s termination of employment occurs within one year following the date the applicable Restricted Stock Unit award is granted, the number of Restricted Stock Units that vests upon the Holder’s Retirement will be prorated by multiplying the total number of Restricted Stock Units subject to the award by a fraction, the numerator of which shall be the number of whole months in the calendar year of grant that the Holder was employed by one or more of the Companies, and the denominator of which shall be twelve (12), with the result rounded to four decimal places. In no event shall the Holder be credited with services performed during any portion of a calendar month (even if a substantial portion) if the Holder is not employed by one of the Companies as of the last day of such calendar month. Any fractional Restricted Stock Units vested under this Section 8.2 will be paid in cash. Any unvested Restricted Stock Units (after application of the foregoing vesting provisions) will terminate for no value. Notwithstanding the foregoing provisions, if the Holder dies after Retirement and prior to the date the vested Restricted Stock Units are paid, the vested Restricted Stock Units will be paid within 30 days following the date of the Holder’s death.

8.3 Death or Disability. If, prior to the Holder’s termination of employment with a Company, the Holder dies or incurs a “disability” (as such term is defined for purposes of Section 409A of the Code), the provisions of this Section 8.3 will apply.

(A) EIX Options. Any unvested EIX Options will immediately vest. The EIX Options will be exercisable immediately as of the date of such termination and will remain exercisable as provided in Section 3 for the remainder of the original EIX Option term.

(B) Performance Shares. The Performance Shares will vest and become payable at the end of the Performance Period as provided in Section 4.3 to the extent they would have vested and become payable if the Holder’s employment had continued through the last day of the Performance Period.

(C) Restricted Stock Units. Any unvested Restricted Stock Units will immediately vest and become payable as soon as practicable (and in all events within 30 days) after the date of termination of the Holder’s death or disability, as applicable.

8.4 Involuntary Termination Not for Cause. Upon involuntary termination of the Holder’s employment by his or her employer not for cause (and other than due to the Holder’s death or disability), the provisions of this Section 8.4 shall apply.

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(A) EIX Options. Unvested EIX Options will vest to the extent necessary to cause the aggregate number of shares subject to vested EIX Options (including any shares acquired pursuant to previously exercised EIX Options) to equal the number of shares granted multiplied by a fraction (not greater than 1), the numerator of which is the number of weekdays in the period from January 1 of the year of grant of the award through the one-year anniversary of the Holder’s last day of employment prior to termination of the Holder’s employment, and the denominator of which is the number of weekdays in the four calendar years 2008-2011. The Holder will have one year following the date of termination in which to exercise the EIX Options, or until the end of the EIX Option term, whichever occurs earlier, except that if the Holder qualifies for Retirement (as defined in Section 8.2) the EIX Options will become exercisable on the schedule specified in Section 8.2 and will remain exercisable for the remainder of the original EIX Option term. The Holder’s vested options will terminate for no value at the end of such period to the extent not theretofore exercised. The portion of the option not eligible to vest following the termination of the Holder’s employment after giving effect to the proration described in this Section 8.4(A) shall terminate upon the termination of the Holder’s employment, and the Holder shall have no further rights with respect to such terminated portion. Any fractional EIX Options vested under this Section 8.4 will be rounded up to the next whole number.

(B) Performance Shares. The Performance Shares will vest with respect to (i) the number of Performance Shares that would have vested and become payable if the Holder’s employment had continued through the last day of the Performance Period, multiplied by (ii) a fraction (not greater than 1), the numerator of which is the number of weekdays the Holder was employed by EIX or a subsidiary from January 1 of the year of grant of the award through the one-year anniversary of the Holder’s last day of employment prior to termination of the Holder’s employment, and the denominator of which is the number of weekdays in the three calendar years 2008-2010, with the result rounded to four decimal places. Such vested Performance Shares will be payable to the Holder as provided in Section 4.3 to the extent of the EIX TSR ranking achieved as provided in Section 4.1. Any fractional Performance Shares vested under this Section 8.4 will be paid in cash. Any unvested Performance Shares (after application of the foregoing vesting provisions) will terminate for no value as of the date of the Holder’s termination of employment.

(C) Restricted Stock Units. The Restricted Stock Units will vest to the extent necessary to cause the aggregate number of vested Restricted Stock Units to equal the number of Restricted Stock Units granted (including any Restricted Stock Units added as provided in Section 5.2) multiplied by a fraction (not greater than 1), the numerator of which is the number of weekdays in the period from January 1 of the year of grant of the award through the one-year anniversary of the Holder’s last day of employment prior to termination of the Holder’s employment, and the denominator of which is the number of weekdays in the three calendar years 2008-2010, with the result rounded to four decimal places. Any fractional Restricted Stock Units vested under this Section 8.4 will be paid in cash. Any unvested Restricted Stock Units (after application of the foregoing vesting provisions) will terminate for no value as of the date of the Holder’s termination of employment. Vested Restricted Stock Units will be paid as soon as administratively feasible (and in all events within 30 days) following the date of the Holder’s Separation from Service. For purposes of the LTI, a “Separation from Service” means the Holder’s “separation from service” with the Company as that term is used for purposes of Section 409A of the Code. Notwithstanding the foregoing provisions of this Section 8.4(c), if at the time of the Holder’s involuntary termination the Holder is eligible for Retirement, the provisions of Section 8.2(c) rather than this Section 8.4(c) shall apply as to that Holder’s LTI.

(D) Conditions of Benefits. Notwithstanding the foregoing provisions, if at the time of the Holder’s involuntary termination the Holder is covered by a severance plan of EIX or any of its affiliates, the Holder shall be entitled to the accelerated vesting provided in this Section 8.4 only if the Holder satisfies the applicable conditions for receiving severance benefits under that plan (including, without limitation, any requirement to execute and deliver a release of claims) in connection with such involuntary termination. In the event that such conditions are not satisfied, the provisions of Section 8.1 above shall apply, and the Holder shall not be entitled to any accelerated vesting under this Section 8.4.

8.5 Effect of Change of Employer. For purposes of the LTI only, involuntary termination of employment will be deemed to occur on the date the Holder’s employing company is no longer a member of the EIX

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controlled group of corporations as defined in Section 1563(a) of the Internal Revenue Code (the “Code”), regardless of whether Holder’s employment continues with that entity or a successor entity outside of the EIX controlled group. A termination of employment will not be deemed to occur for purposes of the LTI if a Holder’s employment by one EIX Company terminates but immediately thereafter the Holder is employed by another EIX Company.

9. CHANGE IN CONTROL; EARLY TERMINATION OF LTI

Notwithstanding any other provision herein, in the event of a Change in Control of EIX (as defined in Section 9.5), the provisions of this Section 9 will apply.

9.1 EIX Options. Upon (or, as may be necessary to effect the acceleration, immediately prior to) a Change in Control of EIX, all outstanding and unvested EIX Options will become fully vested; provided, however, that such acceleration provision will not apply, unless otherwise expressly provided by the Committee, with respect to any EIX Options to the extent the Committee has made a provision for the substitution, assumption, exchange or other continuation or settlement of the EIX Options, or the EIX Options would otherwise continue in accordance with their terms, in the circumstances. Any EIX Options that become vested pursuant to this Section 9.1 or are otherwise vested shall terminate upon the related Change in Control of EIX; provided that the Holder of such EIX Option will be given reasonable advance notice of the impending termination and a reasonable opportunity to exercise such EIX Option in accordance with its terms before such termination (except that in no event will more than 10 days’ notice of the accelerated vesting and impending termination be required); and provided further, that the Committee may provide for such EIX Option, to the extent such option remains outstanding and unexercised, to be settled by a cash payment to the Holder of such option based upon the distribution or consideration payable to the holders of the EIX Common Stock upon or in respect of such event, such cash payment to be made as soon as practicable after the Change in Control of EIX.

9.2 Performance Shares. Upon a Change in Control of EIX, the Performance Period for all outstanding Performance Shares will be shortened so that the Performance Period will be deemed to have ended on the last day prior to such Change in Control of EIX, and the Performance Shares that will vest and become payable will be determined in accordance with Section 4.1 based on such shortened Performance Period; provided, however, that this provision will not apply, unless otherwise expressly provided by the Committee, with respect to any Performance Shares to the extent the Committee has made a provision for the substitution, assumption, exchange or other continuation or settlement of the Performance Shares, or the Performance Shares would otherwise continue in accordance with their terms, in the circumstances. Any Performance Shares that become subject to a shortened Performance Period pursuant to this Section 9.2 shall be paid, to the extent such Performance Shares become vested and payable after giving effect to the first sentence of this Section 9.2, to the Holder in cash as soon as practicable (and in all events within 30 days ) after the date of the Change in Control of EIX, and any such Performance Shares that do not become vested and payable shall terminate for no value as of the date of the Change in Control of EIX.

9.3 Restricted Stock Units. Upon (or, as may be necessary to effect the acceleration, immediately prior to) a Change in Control of EIX, all outstanding and unvested Restricted Stock Units will become fully vested. If such Change in Control constitutes a “change in the ownership” of EIX, a “change in the effective control” of EIX, or a “change in the ownership of a substantial portion of the assets” of EIX, within the meaning of the Treasury Regulations promulgated under Section 409A of the Code, all then-outstanding Restricted Stock Units will be paid on or as soon as administratively feasible (and in all events within 30 days) following the date of such event; otherwise, such Restricted Stock Units shall be paid at the applicable time otherwise provided in these Terms.

9.4 Other Acceleration Rules. Any acceleration of LTI pursuant to this Section 9 will comply with applicable legal requirements and, if necessary to accomplish the purposes of the acceleration or if the circumstances require, may be deemed by the Committee to occur within a limited period of time not greater than 30 days prior to the Change in Control of EIX. Without limiting the generality of the foregoing, the Committee may deem an acceleration to occur immediately prior to the applicable event and/or reinstate the original terms of a LTI if the event giving rise to acceleration does not occur.

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9.5 Definition of Change in Control of EIX. A “Change in Control of EIX” shall be deemed to have occurred as of the first day, after the date of grant of the award, that any one or more of the following conditions shall have been satisfied:

(A) Any Person (other than a trustee or other fiduciary holding securities under an employee benefit plan of EIX) becomes the Beneficial Owner, directly or indirectly, of securities of EIX representing thirty percent (30%) or more of the combined voting power of EIX’s then outstanding securities. For purposes of this clause, “Person” shall mean any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), except that such term shall not include one or more underwriters acquiring newly-issued voting securities (or securities convertible into voting securities) directly from EIX with a view towards distribution; and the term “Beneficial Owner” shall mean as defined under Rule 13d-3 promulgated under the Exchange Act.

(B) On any day after the date of grant (the “Reference Date”) Continuing Directors cease for any reason to constitute a majority of the Board. A director is a “Continuing Director” if he or she either:

(i) was a member of the Board on the applicable Initial Date (an “Initial Director”); or

(ii) was elected to the Board, or was nominated for election by EIX’s shareholders, by a vote of at least two-thirds ( ²/3) of the Initial Directors then in office.

A member of the Board who was not a director on the applicable Initial Date shall be deemed to be an Initial Director for purposes of clause (b) above if his or her election, or nomination for election by EIX’s shareholders, was approved by a vote of at least two-thirds ( ²/3) of the Initial Directors (including directors elected after the applicable Initial Date who are deemed to be Initial Directors by application of this provision) then in office. For these purposes, “Initial Date” means the later of (A) the date of grant or (B) the date that is two (2) years before the Reference Date.

(C) EIX is liquidated; all or substantially all of EIX’s assets are sold in one or a series of related transactions; or EIX is merged, consolidated, or reorganized with or involving any other corporation, other than a merger, consolidation, or reorganization that results in the voting securities of EIX outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of EIX (or such surviving entity) outstanding immediately after such merger, consolidation, or reorganization. Notwithstanding the foregoing, a bankruptcy of EIX or a sale or spin-off of an affiliate of EIX (short of a dissolution of EIX or a liquidation of substantially all of EIX’s assets, determined on an aggregate basis) will not constitute a Change in Control of EIX.

(D) The consummation of such other transaction that the Board may, in its discretion in the circumstances, declare to be a Change in Control of EIX for purposes of the Plan.

10. ENGAGING IN COMPETITION WITH EIX OR ITS AFFILIATES

In the event that a Holder who is at the level of Senior Vice President or above “competes” (as defined below) with any of the Companies prior to, or during the six-month period following, any exercise of an EIX Option, the Committee, in its sole discretion, may rescind such exercise within two years after such exercise. In the event of any such rescission, the Holder shall pay to EIX, or the Company by which the Holder is or was last employed, the amount of any gain realized as a result of the rescinded exercise in such manner and on such terms and conditions as the Committee may require, and EIX or such Company shall be entitled to set-off the amount of any such gain against any amount owed to the Holder by EIX or such Company. For purposes of this Section 10, “compete” shall mean the Holder’s rendering of services for any organization, or engaging directly or indirectly in any business, that competes with the business of EIX or any of the Companies without the prior written consent of the General Counsel of EIX.

11. TAXES AND OTHER WITHHOLDING

Upon any exercise, vesting, or payment of any LTI, the Company shall have the right at its option to:

• require the Holder (or the Holder’s personal representative or beneficiary, as the case may be) to pay or provide for payment of at least the minimum amount of any taxes which the Company may be required to withhold with respect to such LTI event or payment; or

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• deduct from any amount otherwise payable in cash to the Holder (or the Holder’s personal representative or beneficiary, as the case may be) the minimum amount of any taxes which the Company may be required to withhold with respect to such cash payment.

To the extent that the receipt, exercise and/or vesting of any LTI requires tax withholding and a sufficient amount of cash (not otherwise deferred) is not generated from the underlying transaction to satisfy such withholding obligations, EIX shall (except as provided below) substitute a cash award for a number of shares of Common Stock otherwise issuable pursuant to the LTI, rounded up to the next whole share for fractional shares, valued in a consistent manner at their fair market value as of the vesting or exercise date or the date the LTI otherwise became payable, necessary to satisfy the minimum applicable withholding obligation in connection with such transaction to the extent that such withholding amount exceeds the amount of cash generated from the underlying transaction and not otherwise deferred. In no event shall the shares withheld exceed the minimum whole number of shares required for tax withholding under applicable law. If for any reason EIX cannot or elects not to satisfy such withholding obligations in such manner, the Company shall have the right to satisfy such withholding obligations, or require the Holder to satisfy such withholding obligations, as otherwise provided above.

To the extent that the receipt, exercise and/or vesting of any LTI requires Garnishment Payments by the Company, and a sufficient amount of cash is not generated by the underlying transaction to satisfy the Garnishment Payment obligations arising from such transaction, the Company shall substitute a cash award for a number of shares of Common Stock otherwise issuable pursuant to the LTI, rounded up to the next whole share for fractional shares, having a fair market value as of the vesting or exercise date or the date the LTI otherwise became payable equal to the amount required by any Garnishment, less any cash received and not deferred in connection with such transaction. For this purpose, “Garnishment” means garnishment orders, levies, and other assessments imposed by legal authority and “Garnishment Payments” means payments required by the Company pursuant to any such Garnishment.

12. CONTINUED EMPLOYMENT

Nothing in the award certificate or these Terms will be deemed to confer on the Holder any right to continue in the employ of any Company or interfere in any way with the right of the Companies to terminate his or her employment at any time.

13. INSIDER TRADING; SECTION 16

13.1 Insider Trading. Each Holder shall comply with all EIX notice, trading and other policies regarding transactions in and involving EIX securities (including, without limitation, policies prohibiting insider trading).

13.2 Section 16. If an LTI is granted to a person who later becomes subject to the provisions of Section 16 of the Exchange Act (“Section 16”), the LTI will immediately and automatically become subject to the requirements of Rule 16b-3(d) and/or 16b-3(e) ( the “Rule”) and may not be exercised, paid or transferred until the Rule has been satisfied. In its sole discretion, the Committee may take any action to assure compliance with the requirements of the Rule, including withholding delivery to Holder (or any other person) of any security or of any other payment in any form until the requirements of the Rule have been satisfied. The Secretary of EIX may waive compliance with the requirements of the Rule if he or she determines the transaction to be exempt from the provisions of paragraph (b) of Section 16.

13.3 Notice of Disposition. The Holder agrees that if he or she should plan to dispose of any shares of stock acquired on the exercise or payment of LTI awards (including a disposition by sale, exchange, gift or transfer of legal title) and the Holder is a person who is required to preclear EIX securities transactions, the Holder will notify EIX prior to such disposition.

9

14. AMENDMENT

The LTI are subject to the terms of the Plan, as may be amended from time to time. EIX reserves the right to amend these Terms from time to time to the extent that EIX reasonably determines that the amendment is necessary or advisable to comply with applicable laws, rules or regulations or to preserve the intended tax consequences of the applicable LTI (including, without limitation, compliance with Section 409A of the Code and regulations thereunder, to the extent that Section 409A is applicable to the LTI). The LTI may not otherwise be amended or terminated (by amendment to or of a Plan or otherwise) in any manner materially adverse to the rights of the Holder of the affected LTI without such Holder’s consent.

15. MISCELLANEOUS

15.1 Force and Effect. The various provisions herein are severable in their entirety. Any determination of invalidity or unenforceability of any one provision will have no effect on the continuing force and effect of the remaining provisions.

15.2 Governing Law. These Terms will be construed under the laws of the State of California.

15.3 Notice. Unless waived by EIX, any notice required under or relating to the LTI must be in writing, with postage prepaid, addressed to: Edison International, Attn: Corporate Secretary, P.O. Box 800, Rosemead, CA 91770.

15.4 Construction. These Terms shall be construed and interpreted to comply with Section 409A of the Code. Additionally, when any provision of this document refers to a date, and that date falls on a holiday or weekend, the date shall be deemed to be the next succeeding business day, except that the last day of the Performance Period shall occur on December 31, 2010. Any determination of trading price or fair market value for purposes of these Terms shall be made consistent with the resolutions adopted by the EIX Board of Directors on July 19, 2001 entitled “Fair Market Value Measure for Equity-Based Awards.” EIX Options and Performance Shares are intended to qualify as performance-based compensation exempt from the deductibility limitations of Section 162(m) of the Code and these Terms shall be construed and interpreted consistent with that intent.

15.5 Transfer Representations. The Holder agrees that any securities acquired by him or her hereunder are being acquired for his or her own account for investment and not with a view to or for sale in connection with any distribution thereof and that he or she understands that such securities may not be sold, transferred, pledged, hypothecated, alienated, or otherwise assigned or disposed of without either registration under the Securities Act of 1933 or compliance with the exemption provided by Rule 144 or another applicable exemption under such act.

15.6 Award Not Funded. The Holder will have no right or claim to any specific funds, property or assets of the Companies as to any award of LTI.

15.7 Section 409A. Notwithstanding any provision of these Terms to the contrary, if the Holder is a “specified employee” as defined in Section 409A of the Code, the Holder shall not be entitled to any payment with respect to any LTI subject to Section 409A in connection with the Holder’s Separation from Service until the earlier of (a) the date which is six (6) months after the Holder’s Separation From Service for any reason other than the Holder’s death, or (b) the date of the Holder’s death. Any amounts otherwise payable to the Holder following the Holder’s Separation From Service that are not so paid by reason of this Section 15.7 shall be paid as soon as practicable (and in all events within thirty (30) days) after the date that is six (6) months after the Holder’s Separation From Service (or, if earlier, the date of the Holder’s death). The provisions of this Section 15.7 shall only apply if, and to the extent, required to comply with Section 409A of the Code.

10

EX-10.3

Exhibit 10.3

John E. Bryson Chairman, President & Chief Executive Officer

July 12, 2005

Mr. J. A. Bouknight, Jr.

Steptoe & Johnson

1330 Connecticut Avenue, NW

Washington, D.C. 20036-1795

Dear Lon,

I am pleased to offer you the position of Executive Vice President and General Counsel of Edison International. We are very pleased to extend this offer and are enthusiastic about the prospect of your joining our senior management team. You will report directly to me in our corporate offices in Rosemead, California. I am confident you will make significant contributions in this essential role.

Your first day of employment by Edison International (your “employment commencement date”) will be July 29, 2005.

Your initial compensation and benefits package will be as follows:

• You will earn a base salary at an initial rate of $525,000 annually, payable in accordance with our standard payroll policies.

• Your executive bonus target percentage will be 70% of your annual base salary rate, with a maximum bonus percentage of 140% of your annual base salary rate. Any bonus with respect to 2005 will be prorated for the portion of the year you work for Edison International in 2005.

• Your long-term incentive target percentage will be 200% of your annual base salary rate (without proration for 2005). Three-fourths of the value of the long-term incentive award will be in Edison International non-qualified stock options, and one-fourth in performance shares, with the 2005 grants to be made on your employment commencement date.

P.O. Box 999

2244 Walnut Grove Ave.

Rosemead, CA 91770

626-302-2265

Mr. J. A. Bouknight, Jr.
Page 2	July 12, 2005

In the future, your base salary rate, bonus target, and long-term incentives will be reviewed on a regular basis at the same time and in the same manner as peer (Band B) executives. During the first three years of your employment your annual base salary rate will not be less than $525,000 and your bonus and long-term incentive target incentives will be those applicable for Band B executives.

You will receive four weeks paid vacation annually, calculated from your date of hire rather than on a calendar year basis, until your years of service make you eligible for a higher accrual under Edison International’s vacation program for employees. Such vacation shall accrue and be taken in accordance with Edison International’s standard policies and procedures.

You have been approved for Edison International’s Relocation Plan 1 (Summary Plan enclosed).

As an employee of Edison International, you will be eligible for all benefit programs offered to employees, subject to the eligibility rules and terms and conditions of each program as in effect from time to time. In addition, you will be eligible for all benefit programs offered to Band B executives, including the Executive Retirement Plan, Executive Deferred Compensation Plan, Executive Severance Plan, Executive Disability Plan, Survivor Benefit Plan, car allowance, Estate and Financial Planning Program, and Executive Health Enhancement Program, subject to the terms and conditions of each program as in effect from time to time.

If you remain continuously employed by Edison International through the fourth anniversary of your employment commencement date (July 29, 2009, which would result in five years of service credit for purposes of vesting your benefit under our Executive Retirement Plan), you will receive an additional four years of service credit for purposes of

Mr. J. A. Bouknight, Jr.
Page 3	July 12, 2005

determining your benefit under our Executive Retirement Plan (such that at the end of your first four years of employment, you will have a total of eight years of service credited for purposes of the Executive Retirement Plan benefit calculation and be fully vested in that benefit). If you remain continuously employed through the fifth anniversary of your employment commencement date (July 29, 2010), you will receive, in addition to credit for the additional year of work and the benefit provided in the preceding sentence, an additional year of such service credit (such that at the end of your first five years of employment, you will have a total of ten years of service credited for purposes of the Executive Retirement Plan benefit calculation and be fully vested in that benefit). You will not receive any further enhanced benefit (beyond credit for the additional time that you remain continuously employed) even if you continue working after the fifth anniversary of your employment commencement date. Except as provided in the next sentence, you will not receive any additional years of service credit as an enhanced benefit if your employment by Edison International terminates before the fourth anniversary date of your employment commencement date. If your employment terminates before the fourth anniversary of your employment commencement date in circumstances that entitle you to severance benefits pursuant to the Executive Severance Plan or because of your death or disability that qualifies you for benefits under our long-term disability plan, then for purposes of determining your Executive Retirement Plan benefit you will receive an additional number of years of service credit equal to the number of years that you are actually employed by Edison International provided that the total years of service credit for purposes of the Executive Retirement Plan will not be less than six and you will be deemed to be fully vested in that benefit.

If your employment terminates before the third anniversary of your employment commencement date in circumstances that entitle you to severance benefits pursuant to the Executive Severance Plan (or any similar successor plan), your cash severance benefit pursuant to Section

Mr. J. A. Bouknight, Jr.
Page 4	July 12, 2005

5.3.1 of that plan (as modified by Section 5.5.1 of that plan, if applicable) (or the corresponding provisions of any similar successor plan, as the case may be) will not be less than the amount determined as set forth below:

(1) the sum of (A) $2,667,500 (your starting salary and targeted annual bonus amount times three), plus (B) the aggregate amount of the cash bonuses actually paid to you by Edison International over the course of your employment which exceeded the established targeted bonus amount, including any amounts that are otherwise then payable and including amounts deducted for tax withholding and other authorized deductions;

MINUS

(2) the aggregate amount of the base salary and the target portion of cash bonuses actually paid to you by Edison International over the course of your employment, including any amounts that are otherwise then payable and including amounts deducted for tax withholding and other authorized deductions (that is, you would retain the portions of bonuses paid that exceeded the target amounts in addition to the three years’ worth of starting salary and target bonus).

Your employment with Edison International is contingent upon successful completion of a substance screen, verification of your legal right to work permanently in the United States, personal and/or professional references, past employment, education, and professional license or certification, and completion of a Security Questionnaire form and background investigation. Our Human Resources staff will contact you to assist. Additionally, this offer is contingent on the approval of the Edison International Board of Directors. Your employment with Edison International will be on an “at will” basis.

Mr. J. A. Bouknight, Jr.
Page 5	July 12, 2005

We look forward to your response as soon as possible.

Lon, I am personally delighted to have the opportunity to work with you and have you join the leadership team here at Edison International. Please feel free to call if you would like to discuss this further.

Please signify your acceptance of our offer by signing the enclosed copy of this letter and faxing it back to me at 626-302-9935. Please also mail a copy of the signed original to me. This offer is valid until the close of business on July 19, 2005.

Sincerely,

/s/ John E. Bryson

John E. Bryson

Chairman, President and CEO

Encls.

I understand my employment by Edison International will be “at will,” which means that it may be terminated by either the company or me at any time without advance notice, and with or without cause. I also understand that the company may modify my compensation at any time, subject to the provisions of the foregoing letter. I agree to abide by the general employment and other policies of Edison International (including, without limitation, insider trading policies) as they are in effect from time to time.

I agree that for the course of my employment by Edison International I will devote substantially all of my business time, energy and skill to the performance of my duties for Edison International and will hold no other job that conflicts with this obligation. I represent to Edison International that the execution and delivery of this letter by me and Edison International and the performance by me of my duties for Edison International will not constitute a breach of, or otherwise contravene, the terms of any other agreement or policy to which I am a party or otherwise bound.

I understand that the provisions of this paragraph and the preceding two paragraphs cannot be altered except in a writing signed by an authorized officer of Edison International (other than myself). This letter contains the entire offer that has been made by Edison International to me and supersedes all prior and contemporaneous negotiations and agreements with respect to my employment terms. Edison International has made no representations, warranties, or other agreements except as expressly set forth herein.

/s/ J. A. Bouknight, Jr.	July 14, 2008
Accepted: J.A. Bouknight, Jr.	Date

EX-31.1

Exhibit 31.1

CERTIFICATION

I, JOHN E. BRYSON, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, of Edison International;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2008

/s/    JOHN E. BRYSON        

John E. Bryson

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, THOMAS R. McDANIEL, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, of Edison International;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2008

/s/    THOMAS R. MCDANIEL        

Thomas R. McDaniel

Chief Financial Officer

EX-32

Exhibit 32

STATEMENT PURSUANT TO 18 U.S.C. SECTION 1350, AS

ENACTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (the “Quarterly Report”), of Edison International (the “Company”), and pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned certifies, to the best of his knowledge, that:

1. The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

2. The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

May 8, 2008

/s/    JOHN E. BRYSON        

John E. Bryson

Chief Executive Officer

Edison International

/s/    THOMAS R. MCDANIEL        

Thomas R. McDaniel

Chief Financial Officer

Edison International

This statement accompanies the Quarterly Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.