(Mark One) | ||
S | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended September 30, 2011 | ||
£ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
California (State or other jurisdiction of incorporation or organization) | 95-1240335 (I.R.S. Employer Identification No.) | |
2244 Walnut Grove Avenue (P. O. Box 800) Rosemead, California (Address of principal executive offices) | 91770 (Zip Code) | |
(626) 302-1212 (Registrant's telephone number, including area code) |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer x (Do not check if a smaller reporting company) | Smaller reporting company o |
Class | Outstanding at October 31, 2011 | |
Common Stock, no par value | 434,888,104 |
2010 Form 10-K | SCE's Annual Report on Form 10-K for the year-ended December 31, 2010 | |
2010 Tax Relief Act | Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 | |
AFUDC | allowance for funds used during construction | |
APS | Arizona Public Service Company | |
ARO(s) | asset retirement obligation(s) | |
Bcf | Billion cubic feet | |
CAA | Clean Air Act | |
CAIR | Clean Air Interstate Rule | |
CAISO | California Independent System Operator | |
CAMR | Clean Air Mercury Rule | |
CARB | California Air Resources Board | |
CDWR | California Department of Water Resources | |
CEC | California Energy Commission | |
CPUC | California Public Utilities Commission | |
CRRs | congestion revenue rights | |
DOE | U. S. Department of Energy | |
ERRA | energy resource recovery account | |
FASB | Financial Accounting Standards Board | |
FERC | Federal Energy Regulatory Commission | |
FGIC | Financial Guarantee Insurance Company | |
FIP(s) | federal implementation plan(s) | |
Four Corners | coal fueled electric generating facility located in Farmington, New Mexico in which SCE holds a 48% ownership interest | |
GAAP | generally accepted accounting principles | |
GHG | greenhouse gas | |
Global Settlement | A settlement between Edison International and the IRS that resolves all of SCE's federal income tax disputes and affirmative claims for tax years 1986 through 2002 and related matters with state tax authorities. | |
GRC | general rate case | |
IRS | Internal Revenue Service | |
ISO | Independent System Operator | |
kWh(s) | kilowatt-hour(s) | |
MD&A | Management's Discussion and Analysis of Financial Condition and Results of Operations in this report | |
Mohave | two coal fueled electric generating facilities that no longer operate located in Clark County, Nevada in which SCE holds a 56% ownership interest | |
Moody's | Moody's Investors Service | |
MRTU | Market Redesign Technical Upgrade | |
MW | megawatts | |
MWh | megawatt-hours | |
NAAQS | national ambient air quality standards | |
NERC | North American Electric Reliability Corporation | |
Ninth Circuit | U.S. Court of Appeals for the Ninth Circuit |
NOx | nitrogen oxide | |
NRC | Nuclear Regulatory Commission | |
NSR | New Source Review | |
Palo Verde | large pressurized water nuclear electric generating facility located near Phoenix, Arizona in which SCE holds a 15.8% ownership interest | |
PBOP(s) | postretirement benefits other than pension(s) | |
PBR | Performance-based ratemaking | |
PG&E | Pacific Gas & Electric Company | |
PSD | Prevention of Significant Deterioration | |
QF(s) | qualifying facility(ies) | |
ROE | return on equity | |
S&P | Standard & Poor's Ratings Services | |
San Onofre | large pressurized water nuclear electric generating facility located in south San Clemente, California in which SCE holds a 78.21% ownership interest | |
SCE | Southern California Edison Company | |
SDG&E | San Diego Gas & Electric | |
SEC | U.S. Securities and Exchange Commission | |
SIP(s) | state implementation plan(s) | |
SO2 | sulfur dioxide | |
US EPA | U.S. Environmental Protection Agency | |
VIE(s) | variable interest entity(ies) | |
year-ended 2010 MD&A | Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in the 2010 Form 10-K |
Consolidated Statements of Income | Southern California Edison Company | ||||||||||||||
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
(in millions, unaudited) | 2011 | 2010 | 2011 | 2010 | |||||||||||
Operating revenue | $ | 3,386 | $ | 3,098 | $ | 8,063 | $ | 7,504 | |||||||
Fuel | 110 | 100 | 269 | 275 | |||||||||||
Purchased power | 1,264 | 1,118 | 2,422 | 2,337 | |||||||||||
Operation and maintenance | 819 | 803 | 2,450 | 2,272 | |||||||||||
Depreciation, decommissioning and amortization | 358 | 316 | 1,058 | 945 | |||||||||||
Property and other taxes | 71 | 65 | 217 | 195 | |||||||||||
Gain on sale of assets | — | — | — | (1 | ) | ||||||||||
Total operating expenses | 2,622 | 2,402 | 6,416 | 6,023 | |||||||||||
Operating income | 764 | 696 | 1,647 | 1,481 | |||||||||||
Interest income | 2 | 2 | 7 | 5 | |||||||||||
Other income | 26 | 33 | 103 | 103 | |||||||||||
Interest expense | (116 | ) | (109 | ) | (344 | ) | (315 | ) | |||||||
Other expenses | (10 | ) | (10 | ) | (35 | ) | (39 | ) | |||||||
Income before income taxes | 666 | 612 | 1,378 | 1,235 | |||||||||||
Income tax expense | 245 | 205 | 496 | 338 | |||||||||||
Net income | 421 | 407 | 882 | 897 | |||||||||||
Dividends on preferred and preference stock | 15 | 13 | 44 | 39 | |||||||||||
Net income available for common stock | $ | 406 | $ | 394 | $ | 838 | $ | 858 |
Consolidated Statements of Comprehensive Income | |||||||||||||||
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
(in millions, unaudited) | 2011 | 2010 | 2011 | 2010 | |||||||||||
Net income | $ | 421 | $ | 407 | $ | 882 | $ | 897 | |||||||
Other comprehensive income, net of tax: | |||||||||||||||
Pension and postretirement benefits other than pensions: | |||||||||||||||
Amortization of net loss included in net income, net of income tax expense of $1 million for the three months ended September 30, 2011, and $2 million and $1 million for the nine months ended September 30, 2011 and 2010, respectively. | 1 | — | 3 | 2 | |||||||||||
Comprehensive income | $ | 422 | $ | 407 | $ | 885 | $ | 899 |
Consolidated Balance Sheets | Southern California Edison Company | |||||||
(in millions, unaudited) | September 30, 2011 | December 31, 2010 | ||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 65 | $ | 257 | ||||
Receivables, less allowances of $97 and $85 for uncollectible accounts at respective dates | 969 | 715 | ||||||
Accrued unbilled revenue | 709 | 442 | ||||||
Inventory | 340 | 332 | ||||||
Prepaid taxes | 120 | 168 | ||||||
Derivative assets | 68 | 87 | ||||||
Regulatory assets | 454 | 378 | ||||||
Other current assets | 107 | 81 | ||||||
Total current assets | 2,832 | 2,460 | ||||||
Nuclear decommissioning trusts | 3,393 | 3,480 | ||||||
Other investments | 85 | 68 | ||||||
Total investments | 3,478 | 3,548 | ||||||
Utility property, plant and equipment, less accumulated depreciation of $6,745 and $6,319 at respective dates | 26,490 | 24,778 | ||||||
Nonutility property, plant and equipment, less accumulated depreciation of $104 and $100 at respective dates | 73 | 71 | ||||||
Total property, plant and equipment | 26,563 | 24,849 | ||||||
Derivative assets | 132 | 367 | ||||||
Regulatory assets | 4,777 | 4,347 | ||||||
Other long-term assets | 340 | 335 | ||||||
Total long-term assets | 5,249 | 5,049 | ||||||
Total assets | $ | 38,122 | $ | 35,906 |
Consolidated Balance Sheets | Southern California Edison Company | |||||||
(in millions, except share amounts, unaudited) | September 30, 2011 | December 31, 2010 | ||||||
LIABILITIES AND EQUITY | ||||||||
Short-term debt | $ | 550 | $ | — | ||||
Accounts payable | 1,128 | 1,271 | ||||||
Accrued taxes | 122 | 45 | ||||||
Accrued interest | 102 | 169 | ||||||
Customer deposits | 203 | 217 | ||||||
Derivative liabilities | 287 | 212 | ||||||
Regulatory liabilities | 734 | 738 | ||||||
Other current liabilities | 511 | 663 | ||||||
Total current liabilities | 3,637 | 3,315 | ||||||
Long-term debt | 8,032 | 7,627 | ||||||
Deferred income taxes | 5,483 | 4,829 | ||||||
Deferred investment tax credits | 86 | 118 | ||||||
Customer advances | 133 | 112 | ||||||
Derivative liabilities | 554 | 449 | ||||||
Pensions and benefits | 1,863 | 1,838 | ||||||
Asset retirement obligations | 2,583 | 2,507 | ||||||
Regulatory liabilities | 4,481 | 4,524 | ||||||
Other deferred credits and other long-term liabilities | 1,438 | 1,380 | ||||||
Total deferred credits and other liabilities | 16,621 | 15,757 | ||||||
Total liabilities | 28,290 | 26,699 | ||||||
Commitments and contingencies (Note 9) | ||||||||
Common stock, no par value (560,000,000 shares authorized; 434,888,104 shares issued and outstanding at each date) | 2,168 | 2,168 | ||||||
Additional paid-in capital | 587 | 572 | ||||||
Accumulated other comprehensive loss | (22 | ) | (25 | ) | ||||
Retained earnings | 6,054 | 5,572 | ||||||
Total common shareholder's equity | 8,787 | 8,287 | ||||||
Preferred and preference stock | 1,045 | 920 | ||||||
Total equity | 9,832 | 9,207 | ||||||
Total liabilities and equity | $ | 38,122 | $ | 35,906 |
Consolidated Statements of Cash Flows | Southern California Edison Company | |||||||
Nine months ended September 30, | ||||||||
(in millions, unaudited) | 2011 | 2010 | ||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 882 | $ | 897 | ||||
Adjustments to reconcile to net cash provided by operating activities: | ||||||||
Depreciation, decommissioning and amortization | 1,058 | 945 | ||||||
Regulatory impacts of net nuclear decommissioning trust earnings | 131 | 106 | ||||||
Other amortization | 97 | 82 | ||||||
Stock-based compensation | 12 | 12 | ||||||
Deferred income taxes and investment tax credits | 526 | 336 | ||||||
Changes in operating assets and liabilities: | ||||||||
Receivables | (253 | ) | (197 | ) | ||||
Inventory | (8 | ) | (5 | ) | ||||
Margin and collateral deposits – net of collateral received | (9 | ) | 1 | |||||
Prepaid taxes | 48 | 33 | ||||||
Other current assets | (280 | ) | (279 | ) | ||||
Accounts payable | 142 | (3 | ) | |||||
Accrued taxes | 77 | 140 | ||||||
Other current liabilities | (230 | ) | (103 | ) | ||||
Derivative assets and liabilities – net | 433 | 1,012 | ||||||
Regulatory assets and liabilities – net | (363 | ) | (530 | ) | ||||
Other assets | (21 | ) | (26 | ) | ||||
Other liabilities | 30 | 235 | ||||||
Net cash provided by operating activities | 2,272 | 2,656 | ||||||
Cash flows from financing activities: | ||||||||
Long-term debt issued | 497 | 1,135 | ||||||
Long-term debt issuance costs | (5 | ) | (16 | ) | ||||
Long-term debt repaid | (12 | ) | (256 | ) | ||||
Bonds purchased | (86 | ) | — | |||||
Preference stock issued – net | 123 | — | ||||||
Short-term debt financing – net | 550 | — | ||||||
Settlements of stock-based compensation – net | (7 | ) | (2 | ) | ||||
Dividends paid | (388 | ) | (239 | ) | ||||
Net cash provided by financing activities | 672 | 622 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (3,014 | ) | (2,659 | ) | ||||
Proceeds from sale of nuclear decommissioning trust investments | 2,108 | 903 | ||||||
Purchases of nuclear decommissioning trust investments and other | (2,254 | ) | (1,036 | ) | ||||
Customer advances for construction and other investments | 24 | 1 | ||||||
Effect of deconsolidation of variable interest entities | — | (92 | ) | |||||
Net cash used by investing activities | (3,136 | ) | (2,883 | ) | ||||
Net increase (decrease) in cash and cash equivalents | (192 | ) | 395 | |||||
Cash and cash equivalents, beginning of period | 257 | 462 | ||||||
Cash and cash equivalents, end of period | $ | 65 | $ | 857 |
(in millions) | September 30, 2011 | December 31, 2010 | |||||
Fuel | $ | 24 | $ | 21 | |||
Materials and supplies, spare parts | 316 | 311 | |||||
Total inventory | $ | 340 | $ | 332 |
Equity Attributable to SCE | |||||||||||||||||||||||
(in millions) | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Preferred and Preference Stock | Total Equity | |||||||||||||||||
Balance at December 31, 2010 | $ | 2,168 | $ | 572 | $ | (25 | ) | $ | 5,572 | $ | 920 | $ | 9,207 | ||||||||||
Net income | — | — | — | 882 | — | 882 | |||||||||||||||||
Other comprehensive income | — | — | 3 | — | — | 3 | |||||||||||||||||
Dividends declared on common stock | — | — | — | (345 | ) | — | (345 | ) | |||||||||||||||
Dividends declared on preferred and preference stock | — | — | — | (44 | ) | — | (44 | ) | |||||||||||||||
Stock-based compensation and other | — | 5 | — | (12 | ) | — | (7 | ) | |||||||||||||||
Noncash stock-based compensation and other | — | 12 | — | 1 | — | 13 | |||||||||||||||||
Issuance of preference stock | — | (2 | ) | — | — | 125 | 123 | ||||||||||||||||
Balance at September 30, 2011 | $ | 2,168 | $ | 587 | $ | (22 | ) | $ | 6,054 | $ | 1,045 | $ | 9,832 |
Equity Attributable to SCE | |||||||||||||||||||||||||||
(in millions) | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Preferred and Preference Stock | Noncontrolling Interest | Total Equity | ||||||||||||||||||||
Balance at December 31, 2009 | $ | 2,168 | $ | 551 | $ | (19 | ) | $ | 4,746 | $ | 920 | $ | 349 | $ | 8,715 | ||||||||||||
Net income | — | — | — | 897 | — | — | 897 | ||||||||||||||||||||
Other comprehensive income | — | — | 2 | — | — | — | 2 | ||||||||||||||||||||
Deconsolidation of variable interest entities | — | — | — | — | — | (349 | ) | (349 | ) | ||||||||||||||||||
Dividends declared on common stock | — | — | — | (100 | ) | — | — | (100 | ) | ||||||||||||||||||
Dividends declared on preferred and preference stock | — | — | — | (39 | ) | — | — | (39 | ) | ||||||||||||||||||
Stock-based compensation and other | — | 3 | — | (5 | ) | — | — | (2 | ) | ||||||||||||||||||
Noncash stock-based compensation and other | — | 12 | — | (3 | ) | — | — | 9 | |||||||||||||||||||
Balance at September 30, 2010 | $ | 2,168 | $ | 566 | $ | (17 | ) | $ | 5,496 | $ | 920 | $ | — | $ | 9,133 |
As of September 30, 2011 | |||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Collateral | Total | ||||||||||||||
Assets at Fair Value | |||||||||||||||||||
Money market funds1 | $ | 15 | $ | — | $ | — | $ | — | $ | 15 | |||||||||
Derivative contracts2: | |||||||||||||||||||
Electricity | — | — | 34 | — | 34 | ||||||||||||||
Natural gas | — | 61 | 10 | (4 | ) | 67 | |||||||||||||
CRRs | — | — | 95 | — | 95 | ||||||||||||||
Tolling | — | — | 4 | — | 4 | ||||||||||||||
Subtotal of derivative contracts | — | 61 | 143 | (4 | ) | 200 | |||||||||||||
Long-term disability plan | 9 | — | — | — | 9 | ||||||||||||||
Nuclear decommissioning trusts: | |||||||||||||||||||
Stocks3 | 1,721 | — | — | — | 1,721 | ||||||||||||||
Municipal bonds | — | 767 | — | — | 767 | ||||||||||||||
U.S. government and agency securities | 378 | 123 | — | — | 501 | ||||||||||||||
Corporate bonds4 | — | 318 | — | — | 318 | ||||||||||||||
Short-term investments, primarily cash equivalents5 | 2 | 151 | — | — | 153 | ||||||||||||||
Sub-total of nuclear decommissioning trusts | 2,101 | 1,359 | — | — | 3,460 | ||||||||||||||
Total assets6 | 2,125 | 1,420 | 143 | (4 | ) | 3,684 | |||||||||||||
Liabilities at Fair Value | |||||||||||||||||||
Derivative contracts2: | |||||||||||||||||||
Electricity | — | 6 | 80 | (6 | ) | 80 | |||||||||||||
Natural gas | — | 240 | 12 | (12 | ) | 240 | |||||||||||||
Tolling | — | — | 521 | — | 521 | ||||||||||||||
Subtotal of derivative contracts | — | 246 | 613 | (18 | ) | 841 | |||||||||||||
Total liabilities | — | 246 | 613 | (18 | ) | 841 | |||||||||||||
Net assets (liabilities) | $ | 2,125 | $ | 1,174 | $ | (470 | ) | $ | 14 | $ | 2,843 |
As of December 31, 2010 | |||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Collateral | Total | ||||||||||||||
Assets at Fair Value | |||||||||||||||||||
Money market funds1 | $ | 243 | $ | — | $ | — | $ | — | $ | 243 | |||||||||
Derivative contracts2: | |||||||||||||||||||
Electricity | — | — | 119 | — | 119 | ||||||||||||||
Natural gas | — | 69 | 11 | — | 80 | ||||||||||||||
CRRs | — | — | 137 | — | 137 | ||||||||||||||
Tolling | — | — | 118 | — | 118 | ||||||||||||||
Subtotal of derivative contracts | — | 69 | 385 | — | 454 | ||||||||||||||
Long-term disability plan | 9 | — | — | — | 9 | ||||||||||||||
Nuclear decommissioning trusts | |||||||||||||||||||
Stocks3 | 2,029 | — | — | — | 2,029 | ||||||||||||||
Municipal bonds | — | 790 | — | — | 790 | ||||||||||||||
Corporate bonds4 | — | 346 | — | — | 346 | ||||||||||||||
U.S. government and agency securities | 215 | 73 | — | — | 288 | ||||||||||||||
Short-term investments, primarily cash equivalents5 | 1 | 31 | — | — | 32 | ||||||||||||||
Sub-total of nuclear decommissioning trusts | 2,245 | 1,240 | — | — | 3,485 | ||||||||||||||
Total assets6 | 2,497 | 1,309 | 385 | — | 4,191 | ||||||||||||||
Liabilities at Fair Value | |||||||||||||||||||
Derivative contracts2: | |||||||||||||||||||
Electricity | — | 1 | 24 | — | 25 | ||||||||||||||
Natural gas | — | 285 | 11 | (4 | ) | 292 | |||||||||||||
Tolling | — | — | 344 | — | 344 | ||||||||||||||
Subtotal of derivative contracts | — | 286 | 379 | (4 | ) | 661 | |||||||||||||
Total liabilities | — | 286 | 379 | (4 | ) | 661 | |||||||||||||
Net assets | $ | 2,497 | $ | 1,023 | $ | 6 | $ | 4 | $ | 3,530 |
1 | Money market funds are included in cash and cash equivalents on SCE's consolidated balance sheets. |
2 | Represents the netting of assets and liabilities under master netting agreements and cash collateral across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level. |
3 | Approximately 69% and 67% of the equity investments were located in the United States at September 30, 2011 and December 31, 2010, respectively. |
4 | At September 30, 2011 and December 31, 2010, corporate bonds were diversified and included collateralized mortgage obligations and other asset backed securities of $21 million and $27 million, respectively. |
5 | Excludes net liabilities of $67 million and $5 million at September 30, 2011 and December 31, 2010, respectively, of interest and dividend receivables and receivables related to pending securities sales and payables related to pending securities purchases. |
6 | Excludes $31 million at both September 30, 2011 and December 31, 2010, of cash surrender value of life insurance investments for deferred compensation. |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
(in millions) | 2011 | 2010 | 2011 | 2010 | |||||||||||
Fair value of derivative contracts, net assets (liabilities) at beginning of period | $ | (359 | ) | $ | (869 | ) | $ | 6 | $ | (111 | ) | ||||
Total realized/unrealized losses, net: | |||||||||||||||
Included in regulatory assets and liabilities1 | (128 | ) | (142 | ) | (510 | ) | (924 | ) | |||||||
Purchases | 19 | 9 | 35 | 33 | |||||||||||
Settlements | (2 | ) | 3 | (1 | ) | 3 | |||||||||
Transfers into Level 3 | — | — | — | — | |||||||||||
Transfers out of Level 3 | — | (16 | ) | — | (16 | ) | |||||||||
Fair value of derivative contracts, net liabilities at end of period | $ | (470 | ) | $ | (1,015 | ) | $ | (470 | ) | $ | (1,015 | ) | |||
Change during the period in unrealized losses related to assets and liabilities held at the end of period | $ | (135 | ) | $ | (160 | ) | $ | (502 | ) | $ | (883 | ) |
1 | Due to regulatory mechanisms, SCE's realized and unrealized gains and losses are recorded as regulatory assets and liabilities. |
September 30, 2011 | December 31, 2010 | ||||||||||||||
(in millions) | Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||
Long-term debt, including current portion | $ | 8,032 | $ | 9,826 | $ | 7,627 | $ | 8,285 |
Economic Hedges | |||||||
Commodity | Unit of Measure | September 30, 2011 | December 31, 2010 | ||||
Electricity options, swaps and forwards | GWh | 30,143 | 32,138 | ||||
Natural gas options, swaps and forwards | Bcf | 266 | 250 | ||||
CRRs | GWh | 146,628 | 181,291 | ||||
Tolling arrangements | GWh | 104,822 | 114,599 |
Derivative Assets | Derivative Liabilities | ||||||||||||||||||||||||||
(in millions) | Short- Term | Long- Term | Subtotal | Short- Term | Long- Term | Subtotal | Net Liability | ||||||||||||||||||||
Non-trading activities | |||||||||||||||||||||||||||
Economic hedges | $ | 82 | $ | 145 | $ | 227 | $ | 305 | $ | 577 | $ | 882 | $ | 655 | |||||||||||||
Netting and collateral | (14 | ) | (13 | ) | (27 | ) | (18 | ) | (23 | ) | (41 | ) | (14 | ) | |||||||||||||
Total | $ | 68 | $ | 132 | $ | 200 | $ | 287 | $ | 554 | $ | 841 | $ | 641 |
Derivative Assets | Derivative Liabilities | ||||||||||||||||||||||||||
(in millions) | Short- Term | Long- Term | Subtotal | Short- Term | Long- Term | Subtotal | Net Liability | ||||||||||||||||||||
Non-trading activities | |||||||||||||||||||||||||||
Economic hedges | $ | 87 | $ | 367 | $ | 454 | $ | 216 | $ | 449 | $ | 665 | $ | 211 | |||||||||||||
Netting and collateral | — | — | — | (4 | ) | — | (4 | ) | (4 | ) | |||||||||||||||||
Total | $ | 87 | $ | 367 | $ | 454 | $ | 212 | $ | 449 | $ | 661 | $ | 207 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
(in millions) | 2011 | 2010 | 2011 | 2010 | |||||||||||
Realized losses | $ | (58 | ) | $ | (53 | ) | $ | (132 | ) | $ | (116 | ) | |||
Unrealized losses | (110 | ) | (165 | ) | (433 | ) | (1,022 | ) |
(in millions) | September 30, 2011 | December 31, 2010 | |||||
Collateral provided to counterparties: | |||||||
Offset against derivative liabilities | $ | 14 | $ | 4 | |||
Reflected in other current assets | 9 | 5 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
(in millions) | 2011 | 2010 | 2011 | 2010 | |||||||||||
Income before income taxes | $ | 666 | $ | 612 | $ | 1,378 | $ | 1,235 | |||||||
Provision for income tax at federal statutory rate of 35% | 233 | 214 | 482 | 433 | |||||||||||
Increase (decrease) in income tax from: | |||||||||||||||
Items presented with related state income tax, net | |||||||||||||||
Global settlement related1 | — | (42 | ) | — | (95 | ) | |||||||||
Change in tax accounting method for asset removal costs2 | — | — | — | (40 | ) | ||||||||||
State tax – net of federal benefit | 31 | 26 | 61 | 47 | |||||||||||
Health care legislation3 | — | — | — | 39 | |||||||||||
Property-related and other | (19 | ) | 7 | (47 | ) | (46 | ) | ||||||||
Total income tax expense | $ | 245 | $ | 205 | $ | 496 | $ | 338 | |||||||
Effective tax rate | 37 | % | 33 | % | 36 | % | 27 | % |
1 | During the nine months ended September 30, 2010, SCE recognized a $95 million earnings benefit relating to the California impact of the federal Global Settlement, including $53 million in the second quarter resulting from the acceptance by the California Franchise Tax Board of the tax positions finalized with the IRS in 2009 and $42 million in the third quarter resulting from receipt of the final interest determination for the Franchise Tax Board. |
2 | During the second quarter of 2010, the IRS approved SCE's request to change its tax accounting method for asset removal costs primarily related to its infrastructure replacement program. As a result, SCE recognized a $40 million earnings benefit (of which $28 million relates to asset removal costs incurred prior to 2010) from deducting asset removal costs earlier in the construction cycle. These deductions were recorded on a flow-through basis. |
3 | During the first quarter of 2010, SCE recorded a $39 million non-cash charge to reverse previously recognized federal tax benefits eliminated by the federal health care legislation enacted in March 2010. The health care law eliminated the federal tax deduction for retiree health care costs to the extent those costs are eligible for federal Medicare Part D subsidies. |
(in millions) | 2011 | 2010 | |||||
Balance at January 1, | $ | 329 | $ | 482 | |||
Tax positions taken during the current year | |||||||
Increases | 58 | 65 | |||||
Tax positions taken during a prior year | |||||||
Increases | 44 | 185 | |||||
Decreases | (34 | ) | (14 | ) | |||
Decreases for settlements during the period | — | (68 | ) | ||||
Balance at September 30, | $ | 397 | $ | 650 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
(in millions) | 2011 | 2010 | 2011 | 2010 | |||||||||||
Service cost | $ | 38 | $ | 29 | $ | 114 | $ | 87 | |||||||
Interest cost | 47 | 49 | 141 | 147 | |||||||||||
Expected return on plan assets | (56 | ) | (49 | ) | (168 | ) | (147 | ) | |||||||
Amortization of prior service cost | 2 | 2 | 6 | 6 | |||||||||||
Amortization of net loss | 4 | 6 | 12 | 18 | |||||||||||
Expense under accounting standards | 35 | 37 | 105 | 111 | |||||||||||
Regulatory adjustment – deferred | (6 | ) | (14 | ) | (18 | ) | (42 | ) | |||||||
Total expense recognized | $ | 29 | $ | 23 | $ | 87 | $ | 69 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
(in millions) | 2011 | 2010 | 2011 | 2010 | |||||||||||
Service cost | $ | 10 | $ | 7 | $ | 30 | $ | 21 | |||||||
Interest cost | 31 | 30 | 93 | 90 | |||||||||||
Expected return on plan assets | (27 | ) | (25 | ) | (81 | ) | (75 | ) | |||||||
Amortization of prior service cost (credit) | (9 | ) | (9 | ) | (27 | ) | (27 | ) | |||||||
Amortization of net loss | 9 | 8 | 27 | 24 | |||||||||||
Total expense | $ | 14 | $ | 11 | $ | 42 | $ | 33 |
Weighted-Average | |||||||||||||
Stock Options | Exercise Price | Remaining Contractual Term (Years) | Aggregate Intrinsic Value (in millions) | ||||||||||
Outstanding at December 31, 2010 | 10,064,736 | $ | 32.86 | ||||||||||
Granted | 1,850,749 | 37.98 | |||||||||||
Expired | (50,811 | ) | 48.90 | ||||||||||
Forfeited | (288,776 | ) | 33.54 | ||||||||||
Exercised | (677,595 | ) | 24.32 | ||||||||||
Affiliate transfers – net | 110,287 | 31.98 | |||||||||||
Outstanding at September 30, 2011 | 11,008,590 | 34.15 | 6.11 | ||||||||||
Vested and expected to vest at September 30, 2011 | 10,752,504 | 34.15 | 6.06 | $ | 69 | ||||||||
Exercisable at September 30, 2011 | 6,300,938 | 34.42 | 4.51 | 46 |
Equity Awards | Liability Awards | ||||||||||||
Weighted-Average Grant Date Fair Value | Weighted-Average Fair Value | ||||||||||||
Shares | Shares | ||||||||||||
Nonvested at December 31, 2010 | 219,904 | $ | 32.15 | 219,904 | $ | 37.68 | |||||||
Granted | 83,235 | 29.66 | 83,235 | ||||||||||
Forfeited1 | (54,654 | ) | 49.94 | (54,654 | ) | ||||||||
Affiliate transfers – net | 3,496 | 26.90 | 3,496 | ||||||||||
Nonvested at September 30, 2011 | 251,981 | 27.96 | 251,981 | 23.35 |
Restricted Stock Units | Weighted-Average Grant Date Fair Value | |||||
Nonvested at December 31, 2010 | 385,877 | $ | 32.90 | |||
Granted | 137,445 | 37.98 | ||||
Forfeited | (23,243 | ) | 31.83 | |||
Paid Out | (96,802 | ) | 48.20 | |||
Affiliate transfers – net | 6,747 | 30.56 | ||||
Nonvested at September 30, 2011 | 410,024 | 32.06 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
(in millions) | 2011 | 2010 | 2011 | 2010 | |||||||||||
Stock based compensation expense1 | $ | 4 | $ | 6 | $ | 13 | $ | 16 | |||||||
Income tax benefits related to stock compensation expense | 1 | 2 | 5 | 6 | |||||||||||
Excess tax benefits2 | 2 | 1 | 5 | 3 | |||||||||||
Stock options | |||||||||||||||
Cash used to purchase shares to settle options | 4 | 5 | 26 | 12 | |||||||||||
Cash from participants to exercise stock options | 3 | 3 | 17 | 8 | |||||||||||
Value of options exercised | 1 | 2 | 9 | 4 | |||||||||||
Restricted stock units | |||||||||||||||
Value of shares settled | 1 | — | 5 | — | |||||||||||
Tax benefits realized from settlement of awards | — | — | 2 | — |
Nine months ended September 30, | |||||||
(in millions) | 2011 | 2010 | |||||
Cash payments (receipts) for interest and taxes: | |||||||
Interest – net of amounts capitalized | $ | 369 | $ | 339 | |||
Tax refunds – net | (126 | ) | (309 | ) | |||
Noncash investing and financing activities: | |||||||
Accrued capital expenditures | $ | 362 | $ | 360 | |||
Details of debt exchange: | |||||||
Pollution-control bonds redeemed | $ | (86 | ) | $ | (303 | ) | |
Pollution-control bonds issued | 86 | 303 | |||||
Deconsolidation of variable interest entities: | |||||||
Assets other than cash | $ | — | $ | 306 | |||
Liabilities and noncontrolling interests | — | (398 | ) | ||||
Dividends declared but not paid: | |||||||
Preferred and preference stock | $ | 12 | $ | 9 |
(in millions) | September 30, 2011 | December 31, 2010 | |||||
Current: | |||||||
Regulatory balancing accounts | $ | 191 | $ | 213 | |||
Energy derivatives | 262 | 162 | |||||
Other | 1 | 3 | |||||
Total Current | 454 | 378 | |||||
Long-term: | |||||||
Deferred income taxes – net | 1,938 | 1,855 | |||||
Pensions and other postretirement benefits | 1,084 | 1,097 | |||||
Unamortized generation investment – net | 323 | 355 | |||||
Unamortized loss on reacquired debt | 253 | 268 | |||||
Energy derivatives | 505 | 177 | |||||
Nuclear related investment – net | 160 | 154 | |||||
Unamortized transmission and distribution investment – net | 153 | 105 | |||||
Regulatory balancing accounts | 62 | 56 | |||||
Other | 299 | 280 | |||||
Total Long-term | 4,777 | 4,347 | |||||
Total Regulatory Assets | $ | 5,231 | $ | 4,725 |
(in millions) | September 30, 2011 | December 31, 2010 | |||||
Current: | |||||||
Regulatory balancing accounts | $ | 728 | $ | 733 | |||
Other | 6 | 5 | |||||
Total Current | 734 | 738 | |||||
Long-term: | |||||||
Costs of removal | 2,663 | 2,623 | |||||
Asset Retirement Obligations | 944 | 1,099 | |||||
Regulatory balancing accounts | 873 | 802 | |||||
Other | 1 | — | |||||
Total Long-term | 4,481 | 4,524 | |||||
Total Regulatory Liabilities | $ | 5,215 | $ | 5,262 |
Amortized Cost | Fair Value | ||||||||||||||||
(in millions) | Longest Maturity Dates | September 30, 2011 | December 31, 2010 | September 30, 2011 | December 31, 2010 | ||||||||||||
Stocks | — | $ | 861 | $ | 895 | $ | 1,721 | $ | 2,029 | ||||||||
Municipal bonds | 2051 | 644 | 706 | 767 | 790 | ||||||||||||
U.S. government and agency securities | 2041 | 445 | 270 | 501 | 288 | ||||||||||||
Corporate bonds | 2054 | 266 | 288 | 318 | 346 | ||||||||||||
Short-term investments and receivables/payables | One-year | 81 | 26 | 86 | 27 | ||||||||||||
Total | $ | 2,297 | $ | 2,185 | $ | 3,393 | $ | 3,480 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
(in millions) | 2011 | 2010 | 2011 | 2010 | |||||||||||
Balance at beginning of period | $ | 3,657 | $ | 3,083 | $ | 3,480 | $ | 3,140 | |||||||
Realized gains – net | 41 | 14 | 76 | 48 | |||||||||||
Unrealized gains (losses) – net | (305 | ) | 233 | (199 | ) | 90 | |||||||||
Other-than-temporary impairments | (22 | ) | (5 | ) | (35 | ) | (16 | ) | |||||||
Interest, dividends, contributions and other | 22 | 22 | 71 | 85 | |||||||||||
Balance at end of period | $ | 3,393 | $ | 3,347 | $ | 3,393 | $ | 3,347 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
(in millions) | 2011 | 2010 | 2011 | 2010 | |||||||||||
Other income: | |||||||||||||||
Equity allowance for funds used during construction | $ | 18 | $ | 24 | $ | 74 | $ | 76 | |||||||
Increase in cash surrender value of life insurance policies | 6 | 7 | 19 | 19 | |||||||||||
Other | 2 | 2 | 10 | 8 | |||||||||||
Total other income | $ | 26 | $ | 33 | $ | 103 | $ | 103 | |||||||
Other expenses: | |||||||||||||||
Civic, political and related activities and donations | $ | 6 | $ | 7 | $ | 21 | $ | 21 | |||||||
Other | 4 | 3 | 14 | 18 | |||||||||||
Total other expenses | $ | 10 | $ | 10 | $ | 35 | $ | 39 |
• | 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; |
• | possible customer bypass or departure due to technological advancements or cumulative rate impacts that make self-generation or use of alternative energy sources economically viable; |
• | risks associated with the operation of transmission and distribution assets and nuclear and other power generating facilities including: nuclear fuel storage issues, public safety issues, failure, availability, efficiency, output, cost of repairs and retrofits of equipment and availability and cost of spare parts; |
• | environmental laws and regulations, both at the state and federal levels, or changes in the application of those laws, that could require additional expenditures or otherwise affect the cost and manner of doing business; |
• | cost of capital and the ability to borrow funds and access to capital markets on reasonable terms; |
• | cost and availability of electricity including the ability to procure sufficient resources to meet expected customer needs in the event of significant counterparty defaults under power purchase agreements; |
• | changes in the fair value of investments and other assets; |
• | changes in interest rates and rates of inflation, including those rates which may be adjusted by public utility regulators; |
• | governmental, statutory, regulatory or administrative changes or initiatives affecting the electricity industry, including the market structure rules applicable to each market and price mitigation strategies adopted by Independent System Operators and Regional Transmission Organizations; |
• | availability and creditworthiness of counterparties and the resulting effects on liquidity in the power and fuel markets and/or the ability of counterparties to pay amounts owed in excess of collateral provided in support of their obligations; |
• | cost and availability of labor, equipment and materials; |
• | ability to obtain sufficient insurance, including insurance relating to SCE's nuclear facilities and wildfire-related liability, and to recover the costs of such insurance; |
• | ability to recover uninsured losses in connection with wildfire-related liability; |
• | effects of legal proceedings, changes in or interpretations of tax laws, rates or policies, and changes in accounting standards; |
• | potential for penalties or disallowances caused by non-compliance with applicable laws and regulations; |
• | cost and availability of natural gas and nuclear fuel, and related transportation to the extent not recovered through regulated rate cost escalation provisions or balancing accounts; |
• | 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; |
• | ability to provide sufficient collateral in support of hedging activities and power and fuel purchased; |
• | weather conditions and natural disasters; |
• | risks inherent in transmission and distribution infrastructure replacement and expansion projects, including those related to project site identification, construction, permitting, and governmental approvals; and |
• | risks that competing transmission systems will be built by merchant transmission providers in SCE's territory. |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
(in millions) | 2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||
Net income available for common stock | $ | 406 | $ | 394 | $ | 12 | $ | 838 | $ | 858 | $ | (20 | ) | ||||||||||
Less: Non-Core Earnings (Loss) | |||||||||||||||||||||||
Global settlement | — | 42 | (42 | ) | — | 95 | (95 | ) | |||||||||||||||
Tax impact of health care legislation | — | — | — | — | (39 | ) | 39 | ||||||||||||||||
Core Earnings | $ | 406 | $ | 352 | $ | 54 | $ | 838 | $ | 802 | $ | 36 |
• | An earnings benefit of $95 million recorded in 2010 relating to the California impact of the federal Global Settlement, including $53 million in the second quarter resulting from acceptance by the Franchise Tax Board of the tax positions finalized with the IRS in 2009 and $42 million in the third quarter resulting from receipt of the final interest determination from the Franchise Tax Board. |
• | An after-tax earnings charge of $39 million recorded in the first quarter of 2010 to reverse previously recognized federal tax benefits eliminated by federal health care legislation enacted in 2010. The health care law eliminated the federal tax deduction for retiree health care costs to the extent those costs are eligible for federal Medicare Part D subsidies. |
• | Utility earning activities – representing CPUC and FERC-authorized base rates, including the opportunity to earn the authorized return; and |
• | Utility cost-recovery activities – representing CPUC and FERC-authorized balancing accounts which allow for recovery of costs incurred or provide for mechanisms to track and recover or refund differences in forecasted and actual amounts. |
Three months ended September 30, 2011 | Three months ended September 30, 2010 | ||||||||||||||||||||||
(in millions) | Utility Earning Activities | Utility Cost- Recovery Activities | Total Consolidated | Utility Earning Activities | Utility Cost- Recovery Activities | Total Consolidated | |||||||||||||||||
Operating revenue | $ | 1,697 | $ | 1,689 | $ | 3,386 | $ | 1,601 | $ | 1,497 | $ | 3,098 | |||||||||||
Fuel and purchased power | — | 1,374 | 1,374 | — | 1,218 | 1,218 | |||||||||||||||||
Operations and maintenance | 541 | 278 | 819 | 541 | 262 | 803 | |||||||||||||||||
Depreciation, decommissioning and amortization | 323 | 35 | 358 | 300 | 16 | 316 | |||||||||||||||||
Property taxes and other | 69 | 2 | 71 | 64 | 1 | 65 | |||||||||||||||||
Total operating expenses | 933 | 1,689 | 2,622 | 905 | 1,497 | 2,402 | |||||||||||||||||
Operating income | 764 | — | 764 | 696 | — | 696 | |||||||||||||||||
Net interest expense and other | (98 | ) | — | (98 | ) | (84 | ) | — | (84 | ) | |||||||||||||
Income before income taxes | 666 | — | 666 | 612 | — | 612 | |||||||||||||||||
Income tax expense | 245 | — | 245 | 205 | — | 205 | |||||||||||||||||
Net income | 421 | — | 421 | 407 | — | 407 | |||||||||||||||||
Dividends on preferred and preference stock | 15 | — | 15 | 13 | — | 13 | |||||||||||||||||
Net income available for common stock | $ | 406 | $ | — | $ | 406 | $ | 394 | $ | — | $ | 394 | |||||||||||
Core Earnings1 | $ | 406 | $ | 352 | |||||||||||||||||||
Non-Core Earnings: | |||||||||||||||||||||||
Global Settlement | — | 42 | |||||||||||||||||||||
Total SCE GAAP Earnings | $ | 406 | $ | 394 |
1 | See use of Non-GAAP financial measures in “Management Overview-Highlights of Operating Results.” |
• | Higher operating revenue of $96 million primarily due to the following: |
• | $50 million increase primarily due to a 4.35% increase in 2011 authorized revenue approved in the 2009 CPUC GRC decision. |
• | $25 million increase in FERC-related revenue primarily due to CWIP incentive revenue for the Tehachapi transmission project. |
• | $15 million increase related to capital-related revenue requirements primarily related to the steam generator replacement project and EdisonSmartConnectTM. |
• | Higher depreciation, decommissioning and amortization expense of $23 million primarily related to increased |
• | Higher net interest expense and other of $14 million primarily due to higher outstanding balances on long-term debt. |
• | Higher income taxes primarily due to a benefit recorded in 2010 related to the Global Settlement. See "—Income Taxes" below for further information. |
• | Higher purchased power expense of $146 million primarily driven by the cost to replace CDWR contracts that expired in 2011. |
• | Higher operation and maintenance expense of $16 million resulting primarily from increased energy efficiency program costs. |
• | Higher depreciation, decommissioning and amortization expense of $19 million primarily related to the steam generator replacement project and the EdisonSmartConnectTM project. |
Nine months ended September 30, 2011 | Nine months ended September 30, 2010 | ||||||||||||||||||||||
(in millions) | Utility Earning Activities | Utility Cost- Recovery Activities | Total Consolidated | Utility Earning Activities | Utility Cost- Recovery Activities | Total Consolidated | |||||||||||||||||
Operating revenue | $ | 4,442 | $ | 3,621 | $ | 8,063 | $ | 4,175 | $ | 3,329 | $ | 7,504 | |||||||||||
Fuel and purchased power | — | 2,691 | 2,691 | — | 2,612 | 2,612 | |||||||||||||||||
Operations and maintenance | 1,619 | 831 | 2,450 | 1,598 | 674 | 2,272 | |||||||||||||||||
Depreciation, decommissioning and amortization | 964 | 94 | 1,058 | 905 | 40 | 945 | |||||||||||||||||
Property taxes and other | 212 | 5 | 217 | 193 | 2 | 195 | |||||||||||||||||
Gain on sale of assets | — | — | — | — | (1 | ) | (1 | ) | |||||||||||||||
Total operating expenses | 2,795 | 3,621 | 6,416 | 2,696 | 3,327 | 6,023 | |||||||||||||||||
Operating income | 1,647 | — | 1,647 | 1,479 | 2 | 1,481 | |||||||||||||||||
Net interest expense and other | (269 | ) | — | (269 | ) | (244 | ) | (2 | ) | (246 | ) | ||||||||||||
Income before income taxes | 1,378 | — | 1,378 | 1,235 | — | 1,235 | |||||||||||||||||
Income tax expense | 496 | — | 496 | 338 | — | 338 | |||||||||||||||||
Net income | 882 | — | 882 | 897 | — | 897 | |||||||||||||||||
Dividends on preferred and preference stock | 44 | — | 44 | 39 | — | 39 | |||||||||||||||||
Net income available for common stock | $ | 838 | $ | — | $ | 838 | $ | 858 | $ | — | $ | 858 | |||||||||||
Core Earnings1 | $ | 838 | $ | 802 | |||||||||||||||||||
Non-Core Earnings: | |||||||||||||||||||||||
Global Settlement | — | 95 | |||||||||||||||||||||
Tax impact of health care legislation | — | (39 | ) | ||||||||||||||||||||
Total SCE GAAP Earnings | $ | 838 | $ | 858 |
1 | See use of Non-GAAP financial measures in “Management Overview-Highlights of Operating Results.” |
• | Higher operating revenue of $267 million primarily due to the following: |
• | $130 million increase primarily due to a 4.35% increase in 2011 authorized revenue approved in the 2009 CPUC GRC decision. |
• | $90 million increase in FERC-related revenue primarily due to CWIP incentive revenue for the Tehachapi transmission project and the implementation of the 2010 FERC rate case effective March 1, 2010. |
• | $50 million increase related to capital-related revenue requirements primarily related to the steam generator replacement project and EdisonSmartConnectTM. |
• | Higher depreciation, decommissioning and amortization expense of $59 million primarily related to increased transmission and distribution investments. |
• | Higher net interest expense and other of $25 million primarily due to higher outstanding balances on long-term debt. |
• | Higher income taxes primarily due to benefits recorded in 2010 related to the Global Settlement. See "—Income Taxes" below for more information. |
• | Higher purchased power expense of $85 million primarily driven by the cost to replace CDWR contracts that expired in 2011 and higher average prices from a shift to renewable contracts. The increase was partially offset by increased purchased power in 2010 during the outages at San Onofre and Four Corners. |
• | Higher operation and maintenance expense of $157 million resulting primarily from increased energy efficiency program costs. |
• | Higher depreciation, decommissioning and amortization expense of $54 million primarily related to the steam generator replacement project and the EdisonSmartConnectTM project. |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
(in millions) | 2011 | 2010 | 2011 | 2010 | |||||||||||
Income before income taxes | $ | 666 | $ | 612 | $ | 1,378 | $ | 1,235 | |||||||
Provision for income tax at federal statutory rate of 35% | $ | 233 | $ | 214 | $ | 482 | $ | 433 | |||||||
Increase (decrease) in income tax from: | |||||||||||||||
Items presented with related state income tax, net | |||||||||||||||
Global settlement related1 | — | (42 | ) | — | (95 | ) | |||||||||
Change in tax accounting method for asset removal costs2 | — | — | — | (40 | ) | ||||||||||
State tax – net of federal benefit | 31 | 26 | 61 | 47 | |||||||||||
Health care legislation3 | — | — | — | 39 | |||||||||||
Property-related and other | (19 | ) | 7 | (47 | ) | (46 | ) | ||||||||
Total income tax expense | $ | 245 | $ | 205 | $ | 496 | $ | 338 | |||||||
Effective tax rate | 37 | % | 33 | % | 36 | % | 27 | % |
1 | During the nine months ended September 30, 2010, SCE recognized a $95 million earnings benefit relating to the California impact of the federal Global Settlement, including $53 million in the second quarter resulting from the acceptance by the California Franchise Tax Board of the tax positions finalized with the IRS in 2009 and $42 million in the third quarter resulting from receipt of the final interest determination for the Franchise Tax Board. |
2 | During the second quarter of 2010, the IRS approved SCE's request to change its tax accounting method for asset removal costs primarily related to its infrastructure replacement program. As a result, SCE recognized a $40 million earnings benefit (of which $28 million relates to asset removal costs incurred prior to 2010) from deducting asset removal costs earlier in the construction cycle. These deductions are recorded on a flow-through basis. |
3 | During the first quarter of 2010, SCE recorded a $39 million non-cash charge to reverse previously recognized federal tax benefits eliminated by the federal health care legislation enacted in March 2010. The health care law eliminated the federal tax deduction for retiree health care costs to the extent those costs are eligible for federal Medicare Part D subsidies. |
(in millions) | Credit Facilities | ||
Commitment | $ | 2,894 | |
Outstanding borrowings supported by credit facilities | (550 | ) | |
Outstanding letters of credit | (83 | ) | |
Amount available | $ | 2,261 |
(in millions) | |||
Collateral posted as of September 30, 20111 | $ | 106 | |
Incremental collateral requirements for power procurement contracts resulting from a potential downgrade of SCE's credit rating to below investment grade | 135 | ||
Posted and potential collateral requirements2 | $ | 241 |
1 | Collateral provided to counterparties and other brokers consisted of $14 million which was offset against net derivative liabilities and $92 million, which consisted of $9 million in cash reflected in “Other current assets” on the consolidated balance sheets and $83 million in letters of credit. |
2 | Total posted and potential collateral requirements may increase by an additional $2 million based on SCE's forward positions as of September 30, 2011 due to adverse market price movements over the remaining lives of the existing power procurement contracts using a 95% confidence level. |
Nine months ended September 30, | |||||||
(in millions) | 2011 | 2010 | |||||
Net cash provided by operating activities | $ | 2,272 | $ | 2,656 | |||
Net cash provided by financing activities | 672 | 622 | |||||
Net cash used by investing activities | (3,136 | ) | (2,883 | ) | |||
Net increase (decrease) in cash and cash equivalents | $ | (192 | ) | $ | 395 |
• | Issued $500 million of 3.875% first and refunding mortgage bonds due in 2021. The proceeds from these bonds were used to repay commercial paper borrowings and to fund SCE's capital program. |
• | Issued $550 million of commercial paper supported by SCE's line of credit to fund interim working capital requirements. |
• | Issued $125 million of 6.5% Series D preference stock. The proceeds from the issuance were used for general corporate purposes. |
• | Paid $345 million of dividends to Edison International. |
• | Purchased $86 million of its variable rate tax-exempt bonds. |
• | Issued $1 billion of first refunding mortgage bonds due in 2040 to fund SCE's capital program. |
• | Reissued $144 million of tax-exempt pollution control bonds due in 2035 to fund SCE's capital program. |
• | Repaid $250 million of senior unsecured notes. |
• | Paid $200 million in dividends to Edison International. |
September 30, 2011 | |||||||||||
(in millions) | Exposure2 | Collateral | Net Exposure | ||||||||
S&P Credit Rating1 | |||||||||||
A or higher | $ | 98 | $ | — | $ | 98 | |||||
Not rated3 | 5 | (1 | ) | 4 | |||||||
Total | $ | 103 | $ | (1 | ) | $ | 102 |
1 | SCE assigns a credit rating based on the lower of a counterparty's S&P or Moody's rating. For ease of reference, the above table uses the S&P classifications to summarize risk, but reflects the lower of the two credit ratings. |
2 | Exposure excludes amounts related to contracts classified as normal purchases and sales and non-derivative contractual commitments that are not recorded on the consolidated balance sheets, except for any related net accounts receivable. |
3 | The exposure in this category relates to long-term power purchase agreements. SCE's exposure is mitigated by regulatory treatment. |
3.1 | Bylaws of Southern California Edison Company, as amended October 27, 2011 | ||
31.1 | Certification of the President 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 | ||
101* | Financial statements from the quarterly report on Form 10-Q of SCE for the quarter ended September 30, 2011, filed on November 2, 2011, formatted in XBRL: (i) the Consolidated Statements of Income; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to the Consolidated Financial Statements | ||
* | Furnished, not filed, pursuant to Rule 406T of SEC Regulation S-T. |
SOUTHERN CALIFORNIA EDISON COMPANY (Registrant) | |
By | /s/ Chris C. Dominski |
Chris C. Dominski Vice President and Controller (Duly Authorized Officer and Principal Accounting Officer) |
INDEX | Page | |
ARTICLE I - PRINCIPAL OFFICE | ||
Section 1. Principal Office | 1 | |
ARTICLE II - SHAREHOLDERS | ||
Section 1. Meeting Locations | 1 | |
Section 2. Annual Meetings | 1 | |
Section 3. Special Meetings | 1 | |
Section 4. Notice of Annual or Special Meeting | 2 | |
Section 5. Quorum | 3 | |
Section 6. Adjourned Meeting and Notice Thereof | 3 | |
Section 8. Record Date | 5 | |
Section 9. Consent of Absentees | 6 | |
Section 10. Action Without Meeting | 6 | |
Section 11. Proxies | 6 | |
Section 12. Inspectors of Election | 6 | |
ARTICLE III - DIRECTORS | ||
Section 1. Powers | 7 | |
Section 2. Number of Directors | 7 | |
Section 3. Election and Term of Office | 8 | |
Section 4. Vacancies | 8 | |
Section 5. Place of Meeting | 8 | |
Section 6. Organization Meeting | 8 | |
Section 7. Special Meetings and Other Regular Meetings | 9 | |
Section 8. Quorum | 9 | |
Section 9. Participation in Meetings by Conference Telephone | 9 | |
Section 10. Waiver of Notice | 9 | |
Section 11. Adjournment | 10 | |
Section 12. Fees and Compensation | 10 | |
Section 13. Action Without Meeting | 10 | |
Section 14. Rights of Inspection | 10 |
Section 15. Committees | 10 | |
ARTICLE IV - OFFICERS | ||
Section 1. Officers | 11 | |
Section 2. Election | 11 | |
Section 3. Eligibility of Chairman | 11 | |
Section 4. Removal and Resignation | 11 | |
Section 5. Appointment of Other Officers | 12 | |
Section 6. Vacancies | 12 | |
Section 7. Salaries | 12 | |
Section 8. Furnish Security for Faithfulness | 12 | |
Section 9. Chairman's Duties | 12 | |
Section 10. Intentionally Omitted | 12 | |
Section 11. President's Duties | 12 | |
Section 12. Chief Financial Officer | 12 | |
Section 13. Vice Presidents' Duties | 12 | |
Section 14. General Counsel's Duties | 13 | |
Section 15. Associate General Counsel's and Assistant General | ||
Counsel's Duties | 13 | |
Section 16. Controller's Duties | 13 | |
Section 17. Assistant Controllers' Duties | 13 | |
Section 18. Treasurer's Duties | 13 | |
Section 19. Assistant Treasurers' Duties | 13 | |
Section 20. Secretary's Duties | 13 | |
Section 21. Assistant Secretaries' Duties | 14 | |
Section 22. Secretary Pro Tempore | 14 | |
Section 23. Election of Acting Treasurer or Acting Secretary | 14 | |
Section 24. Performance of Duties | 15 | |
ARTICLE V - OTHER PROVISIONS | ||
Section 1. Inspection of Corporate Records | 15 | |
Section 2. Inspection of Bylaws | 15 | |
Section 3. Contracts and Other Instruments, Loans, Notes | ||
and Deposits of Funds | 16 | |
Section 4. Certificates of Stock and Uncertificated Stock | 16 | |
Section 5. Transfer Agent, Transfer Clerk and Registrar | 17 | |
Section 6. Representation of Shares of Other Corporations | 17 | |
Section 7. Stock Purchase Plans | 17 | |
Section 8. Fiscal Year and Subdivisions | 18 | |
Section 9. Construction and Definitions | 18 | |
ARTICLE VI - INDEMNIFICATION | ||
Section 1. Indemnification of Directors and Officers | 18 | |
Section 2. Indemnification of Employees and Agents | 19 | |
Section 3. Right of Directors and Officers to Bring Suit | 19 | |
Section 4. Successful Defense | 20 | |
Section 5. Non-Exclusivity of Rights | 20 | |
Section 6. Insurance | 20 | |
Section 7. Expenses as a Witness | 20 | |
Section 8. Indemnity Agreements | 20 | |
Section 9. Separability | 20 | |
Section 10. Effect of Repeal or Modification | 21 | |
ARTICLE VII - EMERGENCY PROVISIONS | ||
Section 1. General | 21 | |
Section 2. Notice of Meetings | 21 | |
Section 3. Quorum | 21 | |
ARTICLE VIII - AMENDMENTS | ||
Section 1. Amendments | 21 |
/s/ RONALD L. LITZINGER |
RONALD L. LITZINGER President |
/s/ LINDA G. SULLIVAN |
LINDA G. SULLIVAN Chief Financial Officer |
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. |
/s/ RONALD L. LITZINGER |
RONALD L. LITZINGER President Southern California Edison Company |
/s/ LINDA G. SULLIVAN |
LINDA G. SULLIVAN Chief Financial Officer Southern California Edison Company |
Consolidated Statements of Comprehensive Income (USD $) In Millions | 3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
Net income | $ 421 | $ 407 | $ 882 | $ 897 |
Pension and postretirement benefits other than pensions: | ||||
Amortization of net loss included in net income, net of income tax expense of $1 million for the three months ended September 30, 2011, and $2 million and $1 million for the nine months ended September 30, 2011 and 2010, respectively. | 1 | 0 | 3 | 2 |
Comprehensive income | $ 422 | $ 407 | $ 885 | $ 899 |
Consolidated Statements of Comprehensive Income (Parenthetical) (USD $) In Millions | 3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
Statement of Income and Comprehensive Income [Abstract] | ||||
Amortization of net loss included in net income, income tax expense | $ 1 | $ 0 | $ 2 | $ 1 |
Document and Entity Information | 9 Months Ended | |
---|---|---|
Sep. 30, 2011 | Oct. 31, 2011 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | SOUTHERN CALIFORNIA EDISON CO | |
Entity Central Index Key | 0000092103 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2011 | |
Document Fiscal Year Focus | 2011 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 434,888,104 |
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Debt and Credit Agreements | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Debt And Credit Agreements Disclosure [Abstract] | |
Debt and Credit Agreements | Debt and Credit Agreements Long-Term Debt In May 2011, SCE issued $500 million of 3.875% first and refunding mortgage bonds due in 2021. The proceeds from these bonds were used to repay commercial paper borrowings and to fund SCE's capital program. In October 2011, SCE issued $150 million of floating rate first and refunding mortgage bonds due in 2014. The proceeds from these bonds were used to finance fuel inventories. In May 2011 and September 2011, SCE purchased $56 million and $30 million, respectively, of its variable rate tax-exempt bonds. Credit Agreements and Short-Term Debt At September 30, 2011, SCE's outstanding short-term debt was $550 million at a weighted-average interest rate of 0.34%. This short-term debt was supported by a $2.4 billion credit facility. At December 31, 2010, there was no outstanding short-term debt. At September 30, 2011, letters of credit issued under SCE's credit facilities aggregated $83 million and are scheduled to expire in twelve months or less. |
Regulatory and Environmental Developments | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Regulatory And Environmental Developments Disclosure [Abstract] | |
Regulatory and Environmental Developments | Regulatory and Environmental Developments Environmental Developments Water Quality Once-Through Cooling Issues In March 2011, the US EPA proposed standards under the federal Clean Water Act which would affect cooling water intake structures at generating facilities. The standards are intended to protect aquatic organisms by reducing capture in screens attached to cooling water intake structures (impingement) and in the water volume brought into the facilities (entrainment). The regulations are expected to be finalized by July 2012. SCE is evaluating the proposed standards and believes, from a preliminary review, that compliance with the proposed standards regarding impingement will be achievable without incurring material additional capital expenditures or operating costs. The required measures to comply with the proposed standards regarding entrainment are subject to the discretion of the permitting authority, and SCE is unable at this time to assess potential costs of compliance, which could be significant for San Onofre. In addition to the proposed draft US EPA standards, the existing California once-through cooling policy may result in significant capital expenditures at San Onofre and may affect its operations. If other coastal power plants in California that rely on once-through cooling are forced to shut down or limit operations, the California policy may also significantly impact SCE's ability to procure generating capacity from those plants, which could have an adverse effect on system reliability and the cost of electricity. Greenhouse Gas Regulation California Air Resources Board's ("CARB") regulations implementing a California cap-and-trade program continue to be the subject of litigation. In June 2011, the CARB announced that initial cap-and-trade program compliance for the electricity sector would be delayed until January 2013. In April 2011, California enacted a law requiring California utilities to procure 33% of their electricity requirements from renewable resources, as defined in the statute. The impact of the new 33% law will depend on how the CPUC and CEC implement the law, which remains uncertain. Greenhouse Gas Litigation Developments In June 2011, the U.S. Supreme Court dismissed public nuisance claims against five power companies, ruling that the CAA and the US EPA actions it authorizes displace federal common law nuisance claims that might arise from the emission of greenhouse gases. The court also affirmed the Second Circuit's determination that at least some of the plaintiffs had standing to bring the case. The court did not address whether the CAA also preempts state law claims arising from the same circumstances. Parties to the case brought by the Alaskan Native Village of Kivalina against Edison International and other defendants, the appeal of which was deferred before the Ninth Circuit Court of Appeals pending the Supreme Court's ruling described above, have requested that the appeal recommence and have asked for permission to file additional briefs on the impact of the Supreme Court's ruling. The stay of the appeal has now been lifted and argument before the Ninth Circuit is scheduled for November 2011. Kivalina is seeking damages of up to $400 million for the cost of relocating the village. On May 27, 2011, private citizens filed a purported class action complaint in the United States District Court for the Southern District of Mississippi, naming among a large number of defendants, Edison International and its subsidiaries, including SCE. Plaintiffs allege that the defendants' activities resulted in emissions of substantial quantities of greenhouse gases that have contributed to climate change and sea level rise, which in turn are alleged to have increased the destructive force of Hurricane Katrina. The lawsuit alleges causes of action for negligence, public and private nuisance, and trespass, and seeks unspecified compensatory and punitive damages. The claims in this lawsuit are nearly identical to a subset of the claims that were raised against many of the same defendants in a previous lawsuit that was filed in, and dismissed by, the same federal district court where the current case has been filed. Edison International was dismissed as a defendant in this complaint in July 2011, but SCE remains a defendant. |
Summary of Significant Accounting Policies | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||
Summary Of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies SCE is an investor-owned public utility primarily engaged in the business of supplying electricity to an approximately 50,000 square mile area of southern California. SCE is a wholly owned subsidiary of Edison International. Basis of Presentation SCE's significant accounting policies were described in Note 1 of "SCE Notes to Consolidated Financial Statements" included in the 2010 Form 10-K. SCE follows the same accounting policies for interim reporting purposes, with the exception of accounting principles adopted as of January 1, 2011, discussed below in "—New Accounting Guidance." This quarterly report should be read in conjunction with the financial statements and notes included in the 2010 Form 10-K. 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 ("GAAP") for the periods covered by this quarterly report on Form 10-Q. The results of operations for the three- and nine-month periods ended September 30, 2011 are not necessarily indicative of the operating results for the full year. The December 31, 2010 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Cash Equivalents Cash equivalents included investments in money market funds totaling $15 million and $243 million at September 30, 2011 and December 31, 2010, respectively. Generally, the carrying value of cash equivalents equals the fair value, as all investments have maturities of three months or less. SCE temporarily invests the ending daily cash balance in its primary disbursement accounts until required for check clearing. SCE reclassified $215 million and $196 million of checks issued against these accounts, but not yet paid by the financial institution, from cash to accounts payable at September 30, 2011 and December 31, 2010, respectively. Inventory Inventory is stated at the lower of cost or market, cost being determined by the average cost method for fuel and materials and supplies. Inventory consisted of the following:
New Accounting Guidance Accounting Guidance Adopted in 2011 Fair Value Measurements and Disclosures The Financial Accounting Standards Board ("FASB") issued an accounting standards update modifying the disclosure requirements related to fair value measurements. Under these requirements, purchases and settlements for Level 3 fair value measurements are presented on a gross basis, rather than net. SCE adopted this guidance effective January 1, 2011. Accounting Guidance Not Yet Adopted Fair Value Measurement In May 2011, the FASB issued an accounting standards update modifying the fair value measurement and disclosure guidance. This guidance prohibits grouping of financial instruments for purposes of fair value measurement and requires the value be based on the individual security. This amendment also results in new disclosures primarily related to Level 3 measurements including quantitative disclosure about unobservable inputs and assumptions, a description of the valuation processes and a narrative description of the sensitivity of the fair value to changes in unobservable inputs. SCE will adopt this guidance effective January 1, 2012 and does not expect the adoption of this standard will have a material impact on SCE's consolidated statements of income, financial position or cash flows. Presentation of Comprehensive Income In June 2011, the FASB issued an accounting standards update on the presentation of comprehensive income. An entity can elect to present items of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate but consecutive statements. SCE will adopt this guidance effective January 1, 2012. SCE currently presents the statement of comprehensive income immediately following the statement of income and expects to continue to do so. The adoption of this accounting standards update does not change the items that constitute net income and other comprehensive income. |
Income Taxes | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Income Taxes Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes Effective Tax Rate The table below provides a reconciliation of income tax expense computed at the federal statutory income tax rate to the income tax provision.
The CPUC requires flow-through ratemaking treatment for the current tax benefit arising from certain property-related and other temporary differences which reverse over time. The accounting treatment for these temporary differences results in recording regulatory assets and liabilities for amounts that would otherwise be recorded to deferred income tax expense. Accounting for Uncertainty in Income Taxes Authoritative guidance related to accounting for uncertainty in income taxes requires an enterprise to recognize, in its financial statements, the best estimate of the impact of a tax position by determining if the weight of the available evidence indicates it is more likely than not, based solely on the technical merits, that the position will be sustained upon examination. The guidance requires the disclosure of all unrecognized tax benefits, which includes both the reserves recorded for tax positions on filed tax returns and the unrecognized portion of affirmative claims. Unrecognized Tax Benefits The following table provides a reconciliation of unrecognized tax benefits:
As of September 30, 2011 and December 31, 2010 $266 million and $225 million, respectively, of the unrecognized tax benefits, if recognized, would impact the effective tax rate. Edison International's federal income tax returns and its California combined franchise tax returns are currently open for years subsequent to 2002. In addition, specific California refund claims made by Edison International for years 1991 through 2002 are currently under review by the Franchise Tax Board. The IRS examination phase of tax years 2003 through 2006 was completed in the fourth quarter of 2010. This included a proposed adjustment to disallow a component of SCE's repair allowance deduction, which if sustained, would result in a federal tax payment of approximately $92 million, including interest through September 30, 2011. Edison International disagrees with the proposed adjustment and filed a protest with the IRS in the first quarter of 2011. Accrued Interest and Penalties The total amount of accrued interest and penalties related to SCE's income tax liabilities was $69 million and $61 million as of September 30, 2011 and December 31, 2010, respectively. The net after-tax interest and penalties recognized in income tax expense was $2 million and $5 million for the three- and nine-month periods ended September 30, 2011, respectively, compared to a benefit of $27 million and $48 million for the same periods in 2010. |
Preferred and Preference Stock | 9 Months Ended |
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Sep. 30, 2011 | |
Preferred And Preference Stock [Abstract] | |
Preferred and Preference Stock | Preferred and Preference Stock In March 2011, SCE issued 1,250,000 shares of 6.5% Series D preference stock (cumulative, $100 liquidation value). The Series D preference stock may not be redeemed prior to March 1, 2016. After March 1, 2016, SCE may, at its option, redeem the shares, in whole or in part for a price of $100 per share plus accrued and unpaid dividends, if any. These shares are not subject to mandatory redemption. The proceeds from the sale of these shares were used for general corporate purposes. |
Compensation and Benefit Plans | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Compensation And Benefit Plans Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation and Benefit Plans | Compensation and Benefit Plans Pension Plans and Postretirement Benefits Other Than Pensions Pension Plans During the nine months ended September 30, 2011, SCE made contributions of $90 million and during the remainder of 2011, expects to make $24 million of additional contributions. SCE's 2011 annual contributions made to most of its pension plans are recovered through CPUC-approved regulatory mechanisms and are expected to be, at a minimum, equal to the annual expense. Expense components are:
Postretirement Benefits Other Than Pensions During the nine months ended September 30, 2011, SCE made contributions of $17 million and during the remainder of 2011, expects to make $37 million of additional contributions. SCE's annual contributions are recovered through CPUC-approved regulatory mechanisms and are expected to be, at a minimum, equal to the annual expense. Expense components are:
Stock-Based Compensation During 2011, Edison International granted stock-based compensation awards to SCE employees, which included stock options, performance shares and restricted stock units. Stock Options The following is a summary of the status of Edison International stock options granted to SCE employees:
At September 30, 2011, there was $12 million of total unrecognized compensation cost related to stock options, net of expected forfeitures. That cost is expected to be recognized over a weighted-average period of approximately three years. Performance Shares The following is a summary of the status of Edison International nonvested performance shares granted to SCE employees:
1 Includes performance shares that expired with zero value as performance targets were not met. The current portion of nonvested performance shares classified as liability awards is reflected in "Other current liabilities" and the long-term portion is reflected in "Pensions and benefits" on the consolidated balance sheets. At September 30, 2011, there was $3 million of total unrecognized compensation cost related to performance shares. That cost is expected to be recognized over a weighted-average period of approximately two years. Restricted Stock Units The following is a summary of the status of Edison International nonvested restricted stock units granted to SCE employees:
At September 30, 2011, there was $5 million of total unrecognized compensation cost related to restricted stock units, net of expected forfeitures, which is expected to be recognized as follows: $1 million in 2011, $3 million in 2012 and $1 million in 2013. Supplemental Data on Stock Based Compensation
1 Reflected in "Operations and maintenance" on the consolidated statements of income. 2 Reflected in "Settlements of stock based compensation—net" in the financing section of the consolidated statements of cash flows. |
Derivative Instruments and Hedging Activities | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities Commodity Price Risk SCE is exposed to commodity price risk which represents the potential impact that can be caused by a change in the market value of a particular commodity. SCE's hedging program reduces ratepayer exposure to variability in market prices related to SCE's power and gas activities. As part of this program, SCE enters into options, swaps, forwards, tolling arrangements and CRRs. These transactions are pre-approved by the California Public Utilities Commission ("CPUC") or executed in compliance with CPUC-approved procurement plans. SCE recovers its related hedging costs through the energy resource recovery account ("ERRA") balancing account, and as a result, exposure to commodity price risk is not expected to impact earnings, but may impact cash flows. SCE's electricity price exposure arises from electricity purchased from and sold to the California and other wholesale markets as a result of differences between SCE's load requirements and the amount of energy delivered from its generating facilities, power purchase agreements and California Department of Water Resources ("CDWR") contracts allocated to SCE. SCE's natural gas price exposure arises from natural gas purchased for generation at the Mountainview power plant and peaker plants, QF contracts where pricing is based on a monthly natural gas index and power purchase agreements in which SCE has agreed to provide the natural gas needed for generation, referred to as tolling arrangements. Notional Volumes of Derivative Instruments The following table summarizes the notional volumes of derivatives used for hedging activities:
Fair Value of Derivative Instruments The following table summarizes the gross and net fair values of commodity derivative instruments at September 30, 2011:
The following table summarizes the gross and net fair values of commodity derivative instruments at December 31, 2010:
Income Statement Impact of Derivative Instruments SCE recognizes realized gains and losses on derivative instruments as purchased-power expense and expects that such gains or losses will be part of the purchased power costs recovered from ratepayers. As a result, realized gains and losses are not reflected in earnings, but may temporarily affect cash flows. Due to expected future recovery from ratepayers, unrealized gains and losses are recorded as regulatory assets and liabilities and therefore are also not reflected in earnings. The results of derivative activities and related regulatory offsets are recorded in cash flows from operating activities in the consolidated statements of cash flows. The following table summarizes the components of economic hedging activity:
Contingent Features/Credit Related Exposure Certain derivative instruments and power procurement contracts under SCE's power and natural gas hedging activities contain collateral requirements. SCE has historically provided collateral in the form of cash and/or letters of credit for the benefit of counterparties. These requirements can vary depending upon the level of unsecured credit extended by counterparties, changes in market prices relative to contractual commitments and other factors. Certain of these power contracts contain a provision that requires SCE to maintain an investment grade credit rating from each of the major credit rating agencies, referred to as a credit-risk-related contingent feature. If SCE's credit rating were to fall below investment grade, SCE may be required to pay the derivative liability or post additional collateral. The aggregate fair value of all derivative liabilities with these credit-risk-related contingent features was $162 million and $67 million as of September 30, 2011 and December 31, 2010, respectively, for which SCE has posted no collateral and $4 million of collateral to its counterparties for the respective periods. If the credit-risk-related contingent features underlying these agreements were triggered on September 30, 2011, SCE would be required to post $23 million of collateral. Counterparty Default Risk Exposure As part of SCE's procurement activities, SCE contracts with a number of utilities, energy companies, financial institutions, and other companies, collectively referred to as counterparties. If a counterparty were to default on its contractual obligations, SCE could be exposed to potentially volatile spot markets for buying replacement power or selling excess power. In addition, SCE would be exposed to the risk of non-payment of accounts receivable, primarily related to sales of excess energy and realized gains on derivative instruments. All of the contracts that SCE has entered into with counterparties are either entered into under SCE's short-term or long-term procurement plan which has been approved by the CPUC, or the contracts are approved by the CPUC before becoming effective. As a result of regulatory recovery mechanisms, losses from non-performance are not expected to affect earnings, but may temporarily affect cash flows. To manage credit risk, SCE 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. To mitigate credit risk from counterparties, master netting agreements are used whenever possible and counterparties may be required to pledge collateral when deemed necessary. Margin and Collateral Deposits Margin and collateral deposits include cash deposited with counterparties and brokers as credit support under energy contracts. The amount of margin and collateral deposits generally varies based on changes in the fair value of the related positions. SCE nets counterparty receivables and payables where balances exist under master netting agreements. SCE presents the portion of its margin and collateral deposits netted with its derivative positions on its consolidated balance sheets. The following table summarizes margin and collateral deposits provided to counterparties:
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Consolidated Balance Sheets (Parenthetical) (USD $) In Millions, except Share data | Sep. 30, 2011 | Dec. 31, 2010 |
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Statement of Financial Position [Abstract] | ||
Receivables, allowances for uncollectible accounts (in dollars) | $ 97 | $ 85 |
Utility property, plant and equipment, accumulated depreciation (in dollars) | 6,745 | 6,319 |
Nonutility property, plant and equipment, accumulated depreciation (in dollars) | $ 104 | $ 100 |
Common stock, shares authorized | 560,000,000 | 560,000,000 |
Common stock, shares issued | 434,888,104 | 434,888,104 |
Common stock, shares outstanding | 434,888,104 | 434,888,104 |
Consolidated Statements of Changes in Equity | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Consolidated Statements of Changes in Equity | Consolidated Statements of Changes in Equity The following table provides the changes in equity for the nine months ended September 30, 2011.
The following table provides the changes in equity for the nine months ended September 30, 2010.
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Variable Interest Entities | 9 Months Ended |
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Sep. 30, 2011 | |
Variable Interest Entities Disclosure [Abstract] | |
Variable Interest Entities | Variable Interest Entities A variable interest entity ("VIE") is defined as a legal entity whose equity owners do not have sufficient equity at risk, or, as a group, the holders of the equity investment at risk lack any of the following three characteristics: decision-making rights, the obligation to absorb losses, or the right to receive the expected residual returns of the entity. The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most significantly impact the entity's economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. The primary beneficiary is required to consolidate the VIE. Commercial and operating activities are generally the factors that most significantly impact the economic performance of VIEs in which SCE has a variable interest. Commercial and operating activities include construction, operation and maintenance, fuel procurement, dispatch and compliance with regulatory and contractual requirements. Variable Interest in VIEs that are not Consolidated Power Purchase Contracts SCE has 16 power purchase agreements ("PPAs") that have variable interests in VIEs, including 6 tolling agreements through which SCE provides the natural gas to fuel the plants and 10 contracts with qualifying facilities ("QFs") that contain variable pricing provisions based on the price of natural gas. SCE has concluded that it is not the primary beneficiary of these VIEs since it does not control the commercial and operating activities of these entities. In general, because payments for capacity are the primary source of income, the most significant economic activity for SCE's VIEs is the operation and maintenance of the power plants. As of the balance sheet date, the carrying amount of assets and liabilities in SCE's consolidated balance sheet that relate to its involvement with VIEs result from amounts due under the PPAs or the fair value of those derivative contracts. Under these contracts, SCE recovers the costs incurred under its approved long-term power procurement plans. SCE has no residual interest in the entities and has not provided or guaranteed any debt or equity support, liquidity arrangements, performance guarantees or other commitments associated with these contracts other than the purchase commitments described in Note 9. As a result, there is no significant potential exposure to loss as a result of SCE's involvement with these VIEs. The aggregate capacity dedicated to SCE for these VIE projects was 3,820 MW at September 30, 2011 and the amounts that SCE paid to these projects were $178 million and $205 million for the three months ended September 30, 2011 and 2010, respectively, and $347 million and $447 million for the nine months ended September 30, 2011 and 2010, respectively. These amounts are recovered in customer rates. |
Supplemental Cash Flows Information | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Supplemental Cash Flows Information | Supplemental Cash Flows Information SCE's supplemental cash flows information is:
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Fair Value Measurements | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Measurements Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements Recurring Fair Value Measurements Fair value is defined 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. Fair value of an asset or liability should consider assumptions that market participants would use in pricing the asset or liability, including assumptions about nonperformance risk. SCE categorizes financial assets and liabilities into a fair value hierarchy based on valuation inputs used to determine fair value. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The following table sets forth assets and liabilities that were accounted for at fair value by level within the fair value hierarchy:
The following table sets forth a summary of changes in the fair value of Level 3 assets and liabilities:
SCE determines the fair value for transfers in and transfers out of each level at the end of each reporting period. There were no significant transfers between levels during 2011 and 2010. Valuation Techniques Used to Determine Fair Value Level 1 Includes financial assets and liabilities where fair value is determined using unadjusted quoted prices in active markets that are available at the measurement date for identical assets and liabilities. Financial assets and liabilities classified as Level 1 include exchange-traded equity securities, exchange traded derivatives, U.S. treasury securities and money market funds. Level 2 Pricing inputs include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the derivative instrument. Financial assets and liabilities utilizing Level 2 inputs include fixed-income securities and over-the-counter derivatives. Derivative contracts that are over-the-counter traded are valued using pricing models to determine the net present value of estimated future cash flows and are generally classified as Level 2. Inputs to the pricing models include forward published or posted clearing prices from exchanges (New York Mercantile Exchange and Intercontinental Exchange) for similar instruments and discount rates. A primary source that best represents traded activity for each market is used to develop observable forward market prices in determining the fair value of these positions. Broker quotes or prices from exchanges are used to validate and corroborate the primary source. These price quotations reflect mid-market prices (average of bid and ask) and are obtained from sources believed to provide the most liquid market for the commodity. Broker quotes are incorporated when corroborated with other information which may include a combination of prices from exchanges, other brokers and comparison to executed trades. Level 3 Includes financial assets and liabilities where fair value is determined using techniques that require significant unobservable inputs. Over-the-counter options, bilateral contracts, capacity contracts, QF contracts, derivative contracts that trade infrequently (such as congestion revenue rights ("CRRs") in the California market), long-term power agreements, and derivative contracts with counterparties that have significant nonperformance risks are generally valued using pricing models that incorporate unobservable inputs and are classified as Level 3. Assumptions are made in order to value derivative contracts in which observable inputs are not available. In circumstances where SCE 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 continue to develop and more pricing information becomes available, SCE continues to assess valuation methodologies used to determine fair value. For derivative contracts that trade infrequently (CRRs), changes in fair value are based on models forecasting the value of those contracts. The models' inputs are reviewed and the fair value is adjusted when it is concluded that a change in inputs would result in a new valuation that better reflects the fair value of those derivative contracts. For illiquid long-term power agreements, fair value is based upon the discounting of future electricity and natural gas prices derived from a proprietary model using the risk free discount rate for a similar duration contract, adjusted for credit risk and market liquidity. Changes in fair value are based on changes to forward market prices, including forecasted prices for illiquid forward periods. The fair value of the majority of SCE's derivatives that are classified as Level 3 is determined using uncorroborated non-binding broker quotes and models which may require SCE to extrapolate short-term observable inputs in order to calculate fair value. Broker quotes are obtained from several brokers and compared against each other for reasonableness. Nonperformance Risk The fair value of the derivative assets and liabilities are adjusted for nonperformance risk. To assess nonperformance risks, SCE considers the probability of and the estimated loss incurred if a party to the transaction were to default. SCE also considers collateral, netting agreements, guarantees and other forms of credit support when assessing nonperformance. The nonperformance risk adjustment represented an insignificant amount at both September 30, 2011 and December 31, 2010. Nuclear Decommissioning Trusts SCE's nuclear decommissioning trust investments include equity securities, U.S. treasury securities and other fixed-income securities. Equity and treasury securities are classified as Level 1 as fair value is determined by observable market prices in active or highly liquid and transparent markets. The remaining fixed-income securities are classified as Level 2. The fair value of these financial instruments is based on evaluated prices that reflect significant observable market information such as reported trades, actual trade information of similar securities, benchmark yields, broker/dealer quotes, issuer spreads, bids, offers and relevant credit information. Fair Value of Long-Term Debt Recorded at Carrying Value The carrying value and fair value of long-term debt are:
Fair values of long-term debt are based on evaluated prices that reflect significant observable market information such as reported trades, actual trade information of similar securities, benchmark yields, broker/dealer quotes of new issue prices and relevant credit information. The carrying value of trade receivables, payables and short-term debt approximates fair value. |
Other Investments | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Other Investments Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Investments | Other Investments Nuclear Decommissioning Trusts Future decommissioning costs of removal of nuclear assets are expected to be funded from independent decommissioning trusts, which currently receive contributions of approximately $23 million per year included in SCE customer rates. Contributions to the decommissioning trusts are reviewed every three years by the CPUC. If additional funds are needed for decommissioning, it is probable that the additional funds will be recoverable through customer rates. 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. The following table sets forth amortized cost and fair value of the trust investments:
Trust fund earnings (based on specific identification) increase the trust fund balance and the asset retirement obligations ("ARO") regulatory liability. Proceeds from sales of securities (which are reinvested) were $962 million and $302 million for the three months ended September 30, 2011 and 2010, respectively, and $2.1 billion and $903 million for the nine months ended September 30, 2011 and 2010, respectively. Unrealized holding gains, net of losses, were $1.1 billion and $1.3 billion at September 30, 2011 and December 31, 2010, respectively. The following table sets forth a summary of changes in the fair value of the trust:
Due to regulatory mechanisms, earnings and realized gains and losses (including other-than-temporary impairments) have no impact on operating revenue or earnings. |
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