10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________

FORM 10-Q

____________________________________________________

(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

Commission File Number 1-2313

____________________________________________________

SOUTHERN CALIFORNIA EDISON COMPANY

(Exact name of registrant as specified in its charter)

____________________________________________________

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)

____________________________________________________

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer x (Do not check if a smaller reporting company) Smaller reporting company o

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

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

Class	Outstanding at October 31, 2011
Common Stock, no par value	434,888,104

TABLE OF CONTENTS

GLOSSARY	iii
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS	1
Consolidated Statements of Income	1
Consolidated Statements of Comprehensive Income	1
Consolidated Balance Sheets	2
Consolidated Statements of Cash Flows	4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	5
Note 1. Summary of Significant Accounting Policies	5
Note 2. Consolidated Statements of Changes in Equity	6
Note 3. Variable Interest Entities	7
Note 4. Fair Value Measurements	7
Note 5. Debt and Credit Agreements	11
Note 6. Derivative Instruments and Hedging Activities	12
Note 7. Income Taxes	14
Note 8. Compensation and Benefit Plans	16
Note 9. Commitments and Contingencies	18
Note 10. Regulatory and Environmental Developments	21
Note 11. Supplemental Cash Flows Information	22
Note 12. Preferred and Preference Stock	22
Note 13. Regulatory Assets and Liabilities	23
Note 14. Other Investments	24
Note 15. Other Income and Expenses	25
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	26
FORWARD-LOOKING STATEMENTS	26
MANAGEMENT OVERVIEW	27
Highlights of Operating Results	27
Capital Program	28
2012 CPUC General Rate Case	28
FERC Formula Rates	29
Nuclear Industry and Regulatory Response to Events in Japan	29
Environmental Developments	29

RESULTS OF OPERATIONS	29
Three Months Ended September 30, 2011 versus September 30, 2010	30
Utility Earning Activities	30
Utility Cost-Recovery Activities	31
Nine Months Ended September 30, 2011 versus September 30, 2010	31
Utility Earning Activities	31

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Utility Cost-Recovery Activities	32
Supplemental Operating Revenue Information	32
Income Taxes	33
Repair Deductions	33
LIQUIDITY AND CAPITAL RESOURCES	33
Available Liquidity	34
Debt Covenant	34
Dividend Restrictions	34
Regulatory Proceedings	34
Energy Efficiency Shareholders Risk/Reward Incentive Mechanism	34
Cost of Capital	34
Margin and Collateral Deposits	35
Workers Compensation Self-Insurance Fund	35
Historical Consolidated Cash Flows	35
Condensed Consolidated Statement of Cash Flows	35
Net Cash Provided by Operating Activities	35
Net Cash Provided by Financing Activities	35
Net Cash Used by Investing Activities	36
Contractual Obligations and Contingencies	36
Contractual Obligations	36
Contingencies	36
Environmental Remediation	36
MARKET RISK EXPOSURES	36
Commodity Price Risk	37
Credit Risk	37
CRITICAL ACCOUNTING ESTIMATES AND POLICIES	37
NEW ACCOUNTING GUIDANCE	37
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38
ITEM 4. CONTROLS AND PROCEDURES	38
Disclosure Controls and Procedures	38
Internal Control Over Financial Reporting	38
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS	38
California Coastal Commission Potential Environmental Proceeding	38
Navajo Nation Litigation	38
ITEM 5. OTHER INFORMATION	39
ITEM 6. EXHIBITS	39
SIGNATURE	40

ii

GLOSSARY

The following terms and abbreviations appearing in the text of this report have the meanings indicated below.

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

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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

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

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

1

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

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

2

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

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

3

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. 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:

(in millions)	September 30, 2011		December 31, 2010
Fuel	$	24	$	21
Materials and supplies, spare parts	316		311
Total inventory	$	340	$	332

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

5

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.

Note 2. Consolidated Statements of Changes in Equity

The following table provides the changes in equity for the nine months ended September 30, 2011.

	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

The following table provides the changes in equity for the nine months ended September 30, 2010.

	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

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Note 3. 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.

Note 4. 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).

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The following table sets forth assets and liabilities that were accounted for at fair value by level within the fair value hierarchy:

	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

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	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.

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The following table sets forth a summary of changes in the fair value of Level 3 assets and liabilities:

	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.

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

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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:

	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

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.

Note 5. 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.

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Note 6. 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:

		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

Fair Value of Derivative Instruments

The following table summarizes the gross and net fair values of commodity derivative instruments at September 30, 2011:

	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

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The following table summarizes the gross and net fair values of commodity derivative instruments at December 31, 2010:

	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

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:

	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		)

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.

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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:

(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

Note 7. 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.

	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.

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.

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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:

(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

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.

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Note 8. 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:

	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

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:

	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

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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:

			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

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:

	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

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.

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Restricted Stock Units

The following is a summary of the status of Edison International nonvested restricted stock units granted to SCE employees:

	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

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

	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		—

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.

Note 9. Commitments and Contingencies

Third-Party Power Purchase Agreements

During the nine months ended September 30, 2011, additional renewable energy power purchase contracts became effective and were classified as operating leases. SCE's additional commitments under these contracts are estimated to be: $116 million each year in 2012 – 2015 and $1.9 billion for the period remaining thereafter.

In October 2011, SCE completed its 2011 annual request for offers and entered into new power purchase contracts with commitments estimated to be: $5 million in 2012, $81 million in 2013, $178 million in 2014 and $240 million in 2015.

Other Commitments

During the nine months ended September 30, 2011, SCE had a firm transmission agreement with additional commitments estimated to be: $1 million in 2011, $4 million each year in 2012 - 2015 and $78 million for the period remaining thereafter.

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Indemnities

Indemnity Provided as Part of the Acquisition of Mountainview

In connection with the acquisition of the Mountainview power plant, SCE agreed to indemnify the seller with respect to specific environmental claims related to SCE's previously owned San Bernardino Generating Station, divested by SCE in 1998 and reacquired as part of the Mountainview acquisition. SCE retained certain responsibilities with respect to environmental claims as part of the original divestiture of the station. The aggregate liability for either party to the purchase agreement for damages and other amounts is a maximum of $60 million. This indemnification for environmental liabilities expires on or before March 12, 2033. SCE has not recorded a liability related to this indemnity.

Mountainview Filter Cake Indemnity

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

Other Indemnities

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

Contingencies

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

Four Corners New Source Review Litigation

In October 2011, four private environmental organizations filed a CAA citizens' lawsuit against the co-owners of Four Corners. The complaint alleges that certain work performed at the Four Corners generating units 4 and 5, over the approximate periods of 1985-1986 and 2007-present, constituted plant “major modifications” for which the plant should have, but did not, obtain permits and install best available control technology ("BACT") in violation of the PSD requirements and of the New Source Performance Standards of the CAA. The complaint also alleges subsequent and continuing violation of BACT air emissions limits. The lawsuit seeks injunctive and declaratory relief, civil penalties, including a mitigation project and litigation costs. In November 2010, SCE entered into an agreement to sell its ownership interest in generating units 4 and 5 to APS. The sale is subject to regulatory approvals and is expected to close in late 2012. Under the agreement SCE would remain responsible for its pro rata share of certain environmental liabilities, including penalties arising from environmental violations prior to the sale, but SCE would not be liable for any costs of installing BACT or other costs related to continuing or extending Four Corners operations. SCE cannot predict the outcome of these matters or estimate the impact on its financial statements.

Concurrently, the US EPA has proposed a regional haze federal implementation plan based on an APS proposal that would require shut down of units 1, 2 and 3 by 2016 and the installation of selective catalytic reduction technology on units 4 and 5 by 2018. APS' proposal contemplated that these actions would both satisfy the federal regional haze requirements and resolve any New Source Review claims the US EPA might have. A final federal implementation plan is expected in early 2012.

Malibu Fire Order Instituting Investigation ("OII")

Following a 2007 wildfire in Malibu, California, the CPUC issued an OII to determine if any statutes, CPUC general orders, rules or regulations were violated by SCE or telecomm providers (“OII Respondents”) that shared the use of three failed power poles in the wildfire area. The CPUC's Consumer Protection and Safety Division (“CPSD”) has alleged, among other things, that the poles were overloaded, that the OII Respondents violated the CPUC's rules governing the design, construction and

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inspection of poles and misled the CPUC during its investigation of the fire, and that SCE failed to preserve evidence relevant to the investigation. In October 2011, the CPSD proposed that the OII Respondents be assessed penalties of approximately $99 million, with SCE being allocated approximately $50 million of the total. SCE has denied the allegations and believes the proposed penalties are excessive. CPSD's allegations will likely be set for hearing in the first quarter of 2012. SCE cannot predict the amount, if any, of penalties that the CPUC may ultimately impose on SCE.

Navajo Nation Litigation

On August 1, 2011, SCE and the other defendants entered into a comprehensive settlement with the Navajo Nation of the litigation filed in June 1999 against SCE and others concerning royalty payments to the Navajo for the coal supplied to the Mohave Generating Station. Pursuant to the settlement, the Navajo Nation lawsuit was dismissed. The settlement agreement reached with the Navajo Nation did not have a material impact on SCE's financial statements.

Environmental Remediation

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

As of September 30, 2011, SCE's recorded estimated minimum liability to remediate its 24 identified material sites (sites in which the upper end of the range of costs is at least $1 million) was $51 million, of which $15 million was related to San Onofre. In addition to its identified material sites, SCE also has 33 immaterial sites for which the total minimum recorded liability was $3 million. The ultimate costs to clean up SCE's identified sites may vary from its recorded liability due to numerous uncertainties inherent in the estimation process, such as: the extent and nature of contamination; the scarcity of reliable data for identified sites; the varying costs of alternative cleanup methods; developments resulting from investigatory studies; the possibility of identifying additional sites; and the time periods over which site remediation is expected to occur. SCE believes that, due to these uncertainties, it is reasonably possible that cleanup costs at these identified material sites and immaterial sites could exceed its recorded liability by up to $195 million and $7 million, respectively. The upper limit of this range of costs was estimated using assumptions least favorable to SCE among a range of reasonably possible outcomes.

The CPUC allows SCE to recover 90% of its environmental remediation costs at certain sites, representing $32 million of its recorded liability, through an incentive mechanism (SCE may request to include additional sites). In addition, SCE expects to recover 100% of environmental remediation costs incurred at the majority of the remaining sites through customer rates, representing $18 million of its recorded liability. SCE has recorded a regulatory asset of $50 million at September 30, 2011 for its estimated minimum environmental cleanup costs expected to be recovered through customer rates.

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

SCE expects to clean up its identified sites over a period of up to 30 years. Remediation costs in each of the next several years are expected to range from $7 million to $17 million. Costs incurred for the nine months ended September 30, 2011 and 2010, were $9 million and $7 million, respectively.

Based upon the CPUC's regulatory treatment of environmental remediation costs, SCE believes that costs ultimately recorded will not materially affect its results of operations, financial position or cash flows. There can be no assurance, however, that future developments, including additional information about existing sites or the identification of new sites, will not require material revisions to estimates.

Nuclear Insurance

Federal law limits public liability claims from a nuclear incident to the amount of available financial protection, which is currently approximately $12.6 billion. SCE and other owners of San Onofre and Palo Verde have purchased the maximum private primary insurance available ($375 million). The balance is covered by a loss sharing program among nuclear reactor licensees. If a nuclear incident at any licensed reactor in the United States results in claims and/or costs which exceed the

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primary insurance at that plant site, all nuclear reactor licensees could be required to contribute their share of the liability in the form of a deferred premium.

Based on its ownership interests, SCE could be required to pay a maximum of approximately $235 million per nuclear incident. However, it would have to pay no more than approximately $35 million per incident in any one year. If the public liability limit above is insufficient, federal law contemplates that additional funds may be appropriated by Congress. This could include an additional assessment on all licensed reactor operators as a measure for raising further federal revenue.

Property damage insurance covers losses up to $500 million, including decontamination costs, at San Onofre and Palo Verde. Decontamination liability and property damage coverage exceeding the primary $500 million also has been purchased in amounts greater than federal requirements. Additional insurance covers part of replacement power expenses during an accident-related nuclear unit outage. A mutual insurance company owned by entities with nuclear facilities issues these policies. If losses at any nuclear facility covered by the arrangement were to exceed the accumulated funds for these insurance programs, SCE could be assessed retrospective premium adjustments of up to approximately $48 million per year. Insurance premiums are charged to operating expense.

Spent Nuclear Fuel

Under federal law, the Department of Energy ("DOE") is responsible for the selection and construction of a facility for the permanent disposal of spent nuclear fuel and high-level radioactive waste. The DOE did not meet its contractual obligation to begin acceptance of spent nuclear fuel by January 31, 1998. Extended delays by the DOE have led to the construction of costly alternatives and associated siting and environmental issues. Currently, both San Onofre and Palo Verde have interim storage for spent nuclear fuel on site sufficient for the current license period.

In June 2010, the United States Court of Federal Claims issued a decision granting SCE and its co-owners damages of approximately $142 million to recover costs incurred through December 31, 2005 for the DOE's failure to meet its obligation to begin accepting spent nuclear fuel from San Onofre. The DOE's appeal of the decision was denied in August 2011. Additional legal action would be necessary to recover damages incurred after December 31, 2005. Any damages recovered are subject to CPUC review as to what amounts would be returned to SCE ratepayers or used to offset past or future fuel decommissioning or storage costs for the benefit of ratepayers.

Note 10. 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

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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.

Note 11. Supplemental Cash Flows Information

SCE's supplemental cash flows information is:

	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

Note 12. 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.

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Note 13. Regulatory Assets and Liabilities

Regulatory assets included on the consolidated balance sheets are:

(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

Regulatory liabilities included on the consolidated balance sheets are:

(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

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Note 14. 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:

		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

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:

	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

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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Note 15. Other Income and Expenses

Other income and expenses are as follows:

	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

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect SCE's current expectations and projections about future events based on SCE's knowledge of present facts and circumstances and assumptions about future events and include any statement that does not directly relate to a historical or current fact. Other information distributed by SCE that is incorporated in this report, or that refers to or incorporates this report, may also contain forward-looking statements. In this report and elsewhere, the words "expects," "believes," "anticipates," "estimates," "projects," "intends," "plans," "probable," "may," "will," "could," "would," "should," and variations of such words and similar expressions, or discussions of strategy or of plans, are intended to identify forward-looking statements. Such statements necessarily involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Some of the risks, uncertainties and other important factors that could cause results to differ from those currently expected, or that otherwise could impact SCE, include, but are not limited to:

• 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;

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• 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.

Additional information about risks and uncertainties, including more detail about the factors described above, is contained throughout this MD&A and in SCE's 2010 Form 10-K, including the "Risk Factors" section in Part I, Item 1A. Readers are urged to read this entire report, including the information incorporated by reference, as well as the 2010 Form 10-K, and carefully consider the risks, uncertainties and other factors that affect SCE's business. Forward-looking statements speak only as of the date they are made and SCE is not obligated to publicly update or revise forward-looking statements. Readers should review future reports filed by SCE with the U.S. Securities and Exchange Commission.

This MD&A for the three- and nine-month periods ended September 30, 2011 discusses material changes in the consolidated financial condition, results of operations and other developments of SCE since December 31, 2010 and as compared to the three- and nine-month periods ended September 30, 2010. This discussion presumes that the reader has read or has access to SCE's MD&A for the calendar year 2010 (the "year-ended 2010 MD&A"), which was included in the 2010 Form 10-K.

MANAGEMENT OVERVIEW

Highlights of Operating Results

	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

SCE's earnings are prepared in accordance with generally accepted accounting principles used in the United States. Management uses core earnings for financial planning and for analysis of performance. Core earnings are also used when communicating with analysts and investors regarding SCE's earnings results to facilitate comparisons of the performance from period to period. Core earnings are a non-GAAP financial measure and may not be comparable to those of other companies. Core earnings are defined as earnings attributable to SCE less income or loss from significant discrete items that management does not consider representative of ongoing earnings, such as: settlement of certain tax, regulatory or legal matters or proceedings.

SCE's 2011 core earnings increased $54 million and $36 million for the quarter and year-to-date, respectively. Core earnings in both periods increased due to rate base growth. The quarterly core earnings increase was also attributable to lower income taxes. The year-to-date increase was partially offset by higher income tax expense, including a $40 million benefit in the second quarter of 2010 from a change in tax accounting for asset removal costs primarily related to SCE's infrastructure replacement program. In October 2011, the CPUC authorized SCE to recover legal costs incurred between 2004 and 2009 in support of SCE's efforts to obtain generator refunds. As a result, SCE expects to record revenue of approximately $25 million in the fourth quarter of 2011.

Non-core items included:

• 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.

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• 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.

Capital Program

During the first nine months of 2011, SCE's capital investment program focused on upgrading and expanding SCE's transmission and distribution system; replacing generation asset equipment; and installing smart meters. Total capital expenditures (including accruals) were $2.5 billion during the first nine months of 2011 compared to $2.4 billion during the same period in 2010.

As discussed under "Liquidity and Capital Resources—Capital Investment Plan" in the year-ended 2010 MD&A, SCE continues to project that 2011 capital expenditures will be in the range of $3.9 billion to $4.4 billion and that 2011 - 2014 total capital expenditures will be in the range of $15.6 billion to $17.5 billion. Actual capital spending will be affected by: changes in regulatory, environmental and engineering design requirements; permitting and project delays; cost and availability of labor, equipment and materials; and other factors.

SCE is currently completing the final engineering design for the Tehachapi Transmission Project and anticipates an increase in its 2011-2014 expenditures for this project as a result of cost pressures associated with engineering design and scope changes, environmental mitigation work, and regulatory and permit delays. The project may be further impacted by the CPUC's response to SCE's petition to modify the 2009 decision approving the project for the purpose of obtaining authorization to install aviation marking and lighting. In October 2011, the CPUC staff notified SCE that the constructed portions of the project could be marked and lighted as required, but instructed SCE to defer completion of remaining project components that may require aviation marking or lighting pending CPUC review of the petition to modify. Community opposition to portions of the project continues and requests for reconsideration of the CPUC's 2009 decision are pending. Once final engineering is complete, SCE will file a revised cost estimate with the CPUC. As with all transmission investments, cost recovery will be subject to future rate proceedings.

In July 2011, the FERC adopted new rules that remove incumbent public utility transmission owners' federally-based right of first refusal to construct certain new transmission facilities. The rules direct regional entities, such as ISOs, to create new processes that would allow other providers to develop new transmission projects. The new processes will not become effective until approved by the FERC, which is expected in late 2012. The majority of SCE's 2011 – 2014 transmission capital forecast relates to transmission projects that have been approved by the CAISO and barring a re-evaluation under the new rules, will not be subject to the new processes. SCE does not expect these projects to be re-evaluated. The impact of the new rules on future transmission projects will depend on the processes ultimately implemented by regional entities.

2012 CPUC General Rate Case

As discussed in the year-ended 2010 MD&A, SCE filed its GRC application in November 2010. In October 2011, SCE submitted updated testimony to reflect changes in escalation rates, known changes due to governmental actions and changes in the timing of recovery for nuclear refueling outages, which taken together changed its requested 2012 base rate revenue requirement to $6.3 billion. SCE's updated request, after considering the effects of sales growth, would result in incremental customer base rate increases of $824 million, $136 million and $532 million in 2012, 2013 and 2014, respectively. The updated request also reflects a previously submitted base revenue requirement reduction of $38 million, $133 million and $145 million in 2012, 2013 and 2014, respectively, primarily due to a reduction in rate base from inclusion of higher deferred income taxes resulting from bonus depreciation deductions under the 2010 Tax Relief Act.

The Division of Ratepayer Advocates ("DRA") recommended that SCE's requested 2012 base rate revenue requirement be decreased by approximately $850 million, comprised of approximately $630 million in operation and maintenance expense reductions and approximately $220 million in capital-related revenue requirement reductions. The Utility Reform Network or TURN and other intervenors recommended an additional $610 million revenue requirement reduction, beyond the DRA adjustments, primarily capital-related in nature, as well as disallowances of recorded capital costs for specific projects. Intervenors have also recommended changes to SCE's proposed post test year ratemaking methodology to be used for 2013 and 2014.The current schedule anticipates a final decision on SCE's 2012 GRC by the end of 2011, but the Administrative Law Judge handling the GRC has indicated that a final decision is not expected before year-end. To the extent that a final decision is delayed beyond the end of 2011, the CPUC has authorized the establishment of a GRC memorandum account, which will make the revenue requirement ultimately adopted by the CPUC effective as of January 1, 2012. SCE cannot predict the revenue requirement the CPUC will ultimately authorize or the timing of the final 2012 GRC decision.

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FERC Formula Rates

In August 2011, the FERC accepted, subject to refund and settlement procedures, SCE's request to implement a formula rate effective January 1, 2012, to determine SCE's FERC transmission revenue requirement, including its construction work in progress ("CWIP") revenue requirement that was previously recovered through a separate mechanism. The FERC reduced SCE's proposed base ROE request from 11.5% to 9.93%. SCE estimates its total 2012 FERC weighted average ROE will be 11.1%, including the previously authorized 50 basis point incentive for CAISO participation and individual authorized project incentives. The actual weighted average ROE is dependent upon the amount and timing of capital expenditures among FERC incentive and non-incentive projects. SCE's request proposed the adoption of a specific formula to calculate a forecast revenue requirement that is used to establish rates and is trued-up annually to allow SCE to recover its actual revenue requirement, including its actual cost of service, actual rate base and the authorized return on investment. SCE's request also allows SCE to make single-issue rate filings requesting changes to certain elements of the formula, including the base ROE, depreciation rates and the retail rate structure. SCE and the other parties to the proceeding are currently in settlement negotiations. SCE does not expect a final decision until 2012 and cannot predict the formula rate structure that the FERC will ultimately authorize.

In September 2011, SCE reduced its forecasted 2012 transmission revenue requirement for the lower ROE by $49 million to $722 million. SCE had requested a rehearing of the adopted base ROE, however the FERC denied such request in October 2011. SCE is evaluating and must decide by December 2011 whether to appeal the FERC order at the DC Circuit Court. Separately, in October 2011, the FERC issued an order denying SCE's request for rehearing of its 2008 and 2011 CWIP proceedings which adopted a base ROE of 9.54% and 10.3%, respectively, compared to SCE's request of 11.5%. The reduced ROE in these proceedings did not have a material impact on SCE's financial statements.

Nuclear Industry and Regulatory Response to Events in Japan

As discussed in the 2010 Form 10-K under the heading "Nuclear Power Plant Regulation," SCE is subject to the jurisdiction of the NRC with respect to its ownership interest in San Onofre and Palo Verde. In light of the significant safety events at the Fukushima Daiichi nuclear plant in Japan resulting from the March 2011 earthquake and tsunami, the NRC has been performing and plans to continue to perform additional operational and safety reviews of nuclear facilities in the United States. The NRC's Near Term Task Force ("NTTF") conducted a systematic review of U.S. NRC processes and regulations to determine whether additional improvements to the existing nuclear regulatory system are warranted in light of the events in Japan. The NTTF concluded that a sequence of events like the Fukushima accident is unlikely to occur in the U.S., and that continued operation of U.S. reactors does not pose an imminent risk to public health and safety. The NTTF Report proposed changes to regulations applicable to protection against natural phenomena, including earthquakes and flooding and emergency preparedness, and the NTTF made a number of recommendations as to actions that the NRC might implement. The timing and prioritization of these recommendations must be voted on by the NRC and the nuclear industry will have an opportunity to comment on the timing and scope of these recommendations prior to their implementation. If implemented, the recommendations may impact future operations and capital requirements at United States nuclear facilities, including the operations and capital requirements of SCE's nuclear facilities.

Environmental Developments

For a discussion of environmental regulation developments regarding Greenhouse Gas Regulation, Greenhouse Gas Litigation Developments and Once-Through Cooling Issues, see "SCE Notes to Consolidated Financial Statements—Note 10. Regulatory and Environmental Developments."

RESULTS OF OPERATIONS

SCE's results of operations are derived mainly through two sources:

• 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.

Utility earning activities include base rates that are designed to recover forecasted operation and maintenance costs, certain capital-related carrying costs, interest, taxes and a return, including the return on capital projects recovered through CPUC-

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authorized mechanisms outside the GRC process. Differences between authorized amounts and actual results impact earnings. Also, included in utility earning activities are revenues or penalties related to incentive mechanisms, other operating revenue, and regulatory charges or disallowances, if any.

Utility cost-recovery activities include rates that provide for recovery (with no return), subject to review of reasonableness or compliance with upfront standards, of fuel costs, purchased power costs, public purpose related-program costs (including energy efficiency and demand-side management programs), certain operation and maintenance expenses, and depreciation expense related to certain projects.

The following tables summarize SCE's results of operations for the periods indicated. The presentation separately identifies utility earning activities and utility cost-recovery activities.

Three Months Ended September 30, 2011 versus September 30, 2010

	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.”

Utility Earning Activities

Utility earning activities were primarily affected by the following:

• 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 EdisonSmartConnect^TM.

• Higher depreciation, decommissioning and amortization expense of $23 million primarily related to increased

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transmission and distribution investments.

• 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.

Utility Cost-Recovery Activities

Utility cost-recovery activities were primarily affected by the following:

• 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 EdisonSmartConnect^TM project.

Nine Months Ended September 30, 2011 versus September 30, 2010

	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.”

Utility Earning Activities

Utility earning activities were primarily affected by the following:

• Higher operating revenue of $267 million primarily due to the following:

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• $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 EdisonSmartConnect^TM.

• 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.

Utility Cost-Recovery Activities

Utility cost-recovery activities were primarily affected by the following:

• 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 EdisonSmartConnect^TM project.

Supplemental Operating Revenue Information

SCE's retail billed and unbilled revenue (excluding wholesale sales and balancing account over/undercollections) was $3.3 billion and $7.8 billion for the three- and nine-month periods ended September 30, 2011, respectively, compared to $3.4 billion and $7.8 billion for the respective periods in 2010. The quarterly decrease reflects a rate decrease of $186 million and a sales volume increase of $103 million. The $186 million rate decrease primarily reflects lower generation rates for 2011 due to the refunding of prior period purchased power overcollections in 2011. The $103 million sales volume increase was primarily due to serving generation load that was previously served by CDWR contracts which expired in 2011. As a result of a CPUC-authorized decoupling mechanism, SCE does not bear the volumetric risk or benefit related to retail electricity sales (see "Item 1. Business—Overview of Ratemaking Mechanisms" in the 2010 Form 10-K).

SCE remits to CDWR and does not recognize as revenue the amounts that SCE bills and collects from its customers for electric power purchased and sold by the CDWR to SCE's customers, CDWR bond-related costs and a portion of direct access exit fees. The amounts collected and remitted to CDWR were $319 million and $873 million for the three- and nine-month periods ended September 30, 2011, respectively, and $315 million and $896 million for the respective periods in 2010. The CDWR-related rates in 2011 continue to reflect an approximately $585 million refund of operating reserves that CDWR can release as their contracts terminate. Total customer rates are expected to increase as CDWR operating reserves are fully refunded. The power contracts that CDWR allocated to SCE will terminate by the end of 2011; however, the refund of operating reserves is expected to continue through 2012. SCE's revenue and related purchased power expense is expected to increase as these CDWR contracts are replaced by power purchase agreements entered into by SCE.

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Income Taxes

The table below provides a reconciliation of income tax expense computed at the federal statutory income tax rate to the income tax provision.

	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.

For a discussion of the status of Edison International's income tax audits, see "SCE Notes to Consolidated Financial Statements—Note 7. Income Taxes."

Repair Deductions

As discussed in the year ended 2010 MD&A, in 2009, Edison International made a voluntary election to change its tax accounting method for certain repair costs incurred on SCE's transmission, distribution and generation assets. The change in tax accounting method resulted in a $192 million cash benefit realized in the fourth quarter of 2009. In August of 2011 the IRS issued guidance on repair deductions and changes in accounting method related to transmission and distribution assets. Based on this guidance SCE will file a second change in tax accounting method in 2011 for all prior years. SCE does not expect any cash impact in 2011 due to its current net operating loss carry forward position. Regulatory treatment for the incremental deductions taken after the voluntary election to change SCE's tax accounting method for certain repair costs will be addressed in SCE's 2012 GRC. Due to the pending regulatory treatment SCE has not recognized an earnings benefit or regulatory asset related to this method change and incremental deductions taken in 2009, 2010 and 2011.

LIQUIDITY AND CAPITAL RESOURCES

SCE's ability to operate its business, complete planned capital projects, and implement its business strategy are dependent upon its cash flow and access to the capital markets to finance its activities. SCE's overall cash flows fluctuate based on, among other things, its ability to recover its costs in a timely manner from its customers through regulated rates, changes in commodity prices and volumes, collateral requirements, dividend payments made to Edison International, and the outcome of tax and regulatory matters.

SCE expects to fund its continuing obligations, projected capital expenditures for 2011 and dividends to Edison International

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through cash and equivalents on hand, operating cash flows, tax benefits (including bonus depreciation) and capital market financings of debt and preferred equity, as needed. SCE also has availability under its credit facilities if additional funding and liquidity are necessary to meet operating and capital requirements.

Available Liquidity

SCE had two credit facilities: a $2.4 billion five-year credit facility that matures in February 2013, with four one-year options to extend by mutual consent, and a $500 million three-year credit facility that matures in March 2013.

(in millions)	Credit Facilities
Commitment	$	2,894
Outstanding borrowings supported by credit facilities	(550		)
Outstanding letters of credit	(83		)
Amount available	$	2,261

Debt Covenant

SCE has a debt covenant in its credit facilities that limits its debt to total capitalization ratio to less than or equal to 0.65 to 1. At September 30, 2011, SCE's debt to total capitalization ratio was 0.47 to 1.

Dividend Restrictions

The CPUC regulates SCE's capital structure and limits the dividends it may pay Edison International. In SCE's most recent cost of capital proceeding, the CPUC set an authorized capital structure for SCE which included a common equity component of 48%. SCE may make distributions to Edison International as long as the common equity component of SCE's capital structure remains at or above the 48% authorized level on a 13-month weighted average basis. At September 30, 2011, SCE's 13-month weighted-average common equity component of total capitalization was 50.5% resulting in the capacity to pay $436 million in additional dividends.

During the first nine months of 2011, SCE made $345 million in dividend payments to its parent, Edison International. Future dividend amounts and timing of distributions are dependent upon several factors including the actual level of capital expenditures, operating cash flows and earnings.

Regulatory Proceedings

Energy Efficiency Shareholder Risk/Reward Mechanism

As discussed in the 2010 Form 10-K under the heading "Overview of Ratemaking Mechanisms—Energy Efficiency Shareholder Risk/Reward Mechanism," the CPUC intended to review the framework of the Energy Efficiency Mechanism and to establish a mechanism applicable to performance during the 2010 - 2012 energy efficiency program cycle. In September 2011 the CPUC requested comments from SCE and other interested parties on an Energy Efficiency Mechanism applicable to the 2010-2012 program cycle. SCE recommended using the remainder of 2011 and 2012 for development of a new mechanism that would focus on reliability, affordability, and benefits to the environment that would be applicable for 2013 and beyond.

Cost of Capital

As discussed in the 2010 Form 10-K under the heading "Overview of Ratemaking Mechanisms—CPUC Base Rates," the CPUC extended through 2012 a multi-year cost of capital mechanism which set SCE's authorized rate of return on equity at 11.5%, subject to annual adjustments if certain thresholds are reached. The 2012 measurement period (October 2010 - September 2011) did not trigger an annual adjustment and therefore the 11.5% authorized rate of return on equity will remain in effect through 2012. In April 2012, SCE is scheduled to file a new cost of capital mechanism at the CPUC that, once approved, will establish SCE's authorized rate of return for 2013. If the current interest rate environment continues, SCE's 2013 authorized rate of return could decrease from 11.5%.

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Margin and Collateral Deposits

Certain derivative instruments, power procurement contracts and other contractual arrangements contain collateral requirements. The table below provides the amount of collateral posted by SCE to its counterparties as well as the potential collateral that would be required as of September 30, 2011.

(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.

Workers Compensation Self-Insurance Fund

SCE is self-insured for workers compensation claims. SCE assesses workers compensation claims that have been asserted and those that have been incurred but not reported to determine the probable amount of losses that should be recorded. The Department of Industrial Relations for the State of California requires companies that are self-insured for workers compensation to post collateral (in the form of cash and/or letters of credits) based on the estimated workers' compensation liability if a company's bond rating were to fall below "B." As of September 30, 2011, if SCE's bond rating were to fall below a "B" rating, SCE would be required to post $202 million for its workers compensation self-insurance plan.

Historical Consolidated Cash Flows

Condensed Consolidated Statement of Cash Flows

The table below sets forth condensed historical cash flow information for SCE.

	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

Net Cash Provided by Operating Activities

Net cash provided by operating activities decreased $384 million in the first nine months of 2011 compared to the first nine months of 2010. The decrease reflects net cash outflows related to regulatory balancing account activities and higher net tax receipts in 2010 primarily resulting from the impacts of the Global Settlement. As a result of the Global Settlement, SCE received net tax allocation payments from Edison International of approximately $295 million in 2010. These decreases were partially offset by higher receipts from customers due to increases in authorized revenue. The operating cash flows were also impacted by the timing of cash receipts and disbursements related to working capital.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the first nine months of 2011 was $672 million consisting of the following significant events:

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• 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.

Net cash provided by financing activities for the first nine months of 2010 was $622 million consisting of the following significant events:

• 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.

Net Cash Used by Investing Activities

Cash flows from investing activities are driven primarily by capital expenditures and funding of nuclear decommissioning trusts. Capital expenditures were $3.0 billion and $2.7 billion for the nine months ended September 30, 2011 and 2010, respectively, primarily related to transmission and distribution investments. Net purchases of nuclear decommissioning trust investments and other were $146 million and $133 million for the nine months ended September 30, 2011 and 2010, respectively.

Contractual Obligations and Contingencies

Contractual Obligations

SCE has power purchase commitments and firm transmission commitments which are discussed in "SCE Notes to Consolidated Financial Statements—Note 9. Commitments and Contingencies—Third-Party Power Purchase Agreements."

Contingencies

SCE has contingencies related to an Order Instituting Investigation ("OII") related to a 2007 wildfire in Malibu, California, nuclear insurance and spent nuclear fuel, which are discussed in "SCE Notes to Consolidated Financial Statements—Note 9. Commitments and Contingencies."

Environmental Remediation

As of September 30, 2011, SCE had 24 identified material sites for remediation and recorded an estimated minimum liability of $51 million. SCE expects to recover 90% of its remediation costs at certain sites. See "SCE Notes to Consolidated Financial Statements—Note 9. Commitments and Contingencies" for further discussion.

MARKET RISK EXPOSURES

SCE's primary market risks include fluctuations in interest rates, commodity prices and volumes, and counterparty credit. Fluctuations in interest rates can affect earnings and cash flows. Fluctuations in commodity prices and volumes and counterparty credit losses may temporarily affect cash flows, but are not expected to affect earnings due to expected recovery through regulatory mechanisms. SCE uses derivative instruments, as appropriate, to manage its market risks. For a further discussion of SCE's market risk exposures, including commodity price risk, credit risk and interest rate risk, see "SCE Notes to Consolidated Financial Statements—Note 6. Derivative and Hedging Activities" and "Note 4. Fair Value Measurements" and see "Market Risk Exposures—Commodity Price Risk" in the year-ended 2010 MD&A.

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Commodity Price Risk

The fair value of outstanding derivative instruments used to mitigate SCE's exposure to commodity price risk was a net liability of $641 million and $207 million at September 30, 2011 and December 31, 2010, respectively. For further discussion of fair value measurements and the fair value hierarchy, see "SCE Notes to Consolidated Financial Statements—Note 4. Fair Value Measurements."

Credit Risk

Credit risk exposure from counterparties for power and gas trading activities is measured as the sum of net accounts receivable (accounts receivable less accounts payable) and the current fair value of net derivative assets (derivative assets less derivative liabilities) reflected on the consolidated balance sheets. SCE enters into master agreements which typically provide for a right of setoff. Accordingly, SCE's credit risk exposure from counterparties is based on a net exposure under these agreements. SCE manages the credit risk on the portfolio for both rated and non-rated counterparties based on credit ratings using published ratings of counterparties and other publicly disclosed information, such as financial statements, regulatory filings, and press releases, to guide it in the process of setting credit levels, risk limits and contractual agreements, including master netting agreements. As of September 30, 2011, the amount of balance sheet exposure as described above, by the credit ratings of SCE's counterparties, was as follows:

	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.

The credit risk exposure set forth in the table above is composed of $2 million of net accounts receivable and $101 million representing the fair value, adjusted for counterparty credit reserves, of derivative contracts.

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

For a discussion of SCE's critical accounting estimates and policies, see "Critical Accounting Estimates and Policies" in the year ended 2010 MD&A.

NEW ACCOUNTING GUIDANCE

New accounting guidance is discussed in "SCE Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—New Accounting Guidance."

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information responding to this item is included in the MD&A under the heading "Market Risk Exposures" and is incorporated herein by reference.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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

Internal Control Over Financial Reporting

There were no changes in SCE’s internal control over financial reporting (as that term is defined in Rules 13a-15(f) or 15d-1(f) under the Exchange Act) during the period to which this report relates that have materially affected, or are reasonably likely to materially affect, SCE’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a discussion of SCE's legal proceedings, refer to "SCE Notes to Consolidated Financial Statements—Note 9. Commitments and Contingencies—Contingencies" in the 2010 Form 10-K. There have been no significant developments with respect to legal proceedings specifically affecting SCE since the filing of the 2010 Form 10-K, except as follows:

California Coastal Commission Potential Environmental Proceeding

In May 2010, the California Coastal Commission issued an NOV to SCE, its contractor, and property owners ("NOV Recipients") related to activity on a property that was used for equipment storage related to a nearby SCE electricity line undergrounding construction project. The NOV alleged that SCE, through its contractor, violated the California Coastal Act by removing without the appropriate permits approximately one acre of vegetation from the property, which was located in a protected coastal zone within and adjacent to the City of Newport Beach, California. In late 2010, SCE tendered an indemnification claim to its contractor for liability associated with the NOV, which the contractor accepted. In April 2011, the NOV Recipients entered into a Consent Order with the Coastal Commission to resolve the NOV Recipients' liability to the Coastal Commission under the Coastal Act. On June 10, 2011, the NOV Recipients entered into a Settlement Agreement to resolve any remaining claims among themselves pertaining to the NOV.

Navajo Nation Litigation

Developments related to the Navajo Nation litigation are discussed in "SCE Notes to Consolidated Financial Statements Note 9. Commitments and Contingencies—Contingencies—Navajo Nation Litigation."

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ITEM 5. OTHER INFORMATION

On October 27, 2011, the SCE Board of Directors amended the emergency provisions of the SCE Bylaws to reduce the period of notice required to call a meeting in an emergency and to eliminate other special emergency provisions. In addition to the amendments to the emergency provisions, the SCE Bylaws were amended to: (1) clarify that the place of shareholder and Board meetings may be designated in the meeting notice, and (2) shorten the normal Board meeting notice requirement from 48 to 24 hours.

ITEM 6. EXHIBITS

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.

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SIGNATURE

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

SOUTHERN CALIFORNIA EDISON COMPANY (Registrant)
By	/s/ Chris C. Dominski
	Chris C. Dominski Vice President and Controller (Duly Authorized Officer and Principal Accounting Officer)

Date: November 2, 2011

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EX-3.1

Exhibit 3.1

BYLAWS

OF

SOUTHERN CALIFORNIA EDISON COMPANY

(AS AMENDED OCTOBER 27, 2011)

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

i

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

ii

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

iii

BYLAWS

OF

SOUTHERN CALIFORNIA EDISON COMPANY

(As Amended Effective October 27, 2011)

ARTICLE I - PRINCIPAL OFFICE

Section 1.Principal Office.

The Edison General Office, situated at 2244 Walnut Grove Avenue, in the City of Rosemead, County of Los Angeles, State of California, is hereby fixed as the principal office for the transaction of the business of the corporation.

ARTICLE II - SHAREHOLDERS

Section 1.Meeting Locations.

All meetings of shareholders shall be held at the principal office of the corporation or at such other place or places within or without the State of California as may be designated by the Board of Directors (the "Board") or specified in the notice of the meeting. In the event such places shall prove inadequate in capacity for any meeting of shareholders, an adjournment may be taken to and the meeting held at such other place of adequate capacity as may be designated by the officer of the corporation presiding at such meeting.

Section 2.Annual Meetings.

Annual meetings of shareholders shall be held on the fourth Thursday of the month of April of each year at such time as the Board shall designate on said day to elect directors to hold office for the year next ensuing and until their successors shall be elected, and to consider and act upon such other matters as may lawfully be presented to such meeting; provided, however, that should said day fall upon a legal holiday, then any such annual meeting of shareholders shall be held at such designated time and place on the next day thereafter ensuing which is not a legal holiday.

Section 3.Special Meetings.

Special meetings of the shareholders may be called at any time by the Board, the Chairman of the Board, the President, or upon written request of any three members of the Board, or by the holders of shares entitled to cast not less than ten percent of the votes at such meeting.  Upon request in writing to the Chairman of the Board, the President, any Vice President or the Secretary by any person (other than the Board) entitled to call a special meeting of shareholders, the officer forthwith shall cause notice to be given to the shareholders entitled to vote that a meeting will be held at a time requested by the person or persons calling the meeting, not less than thirty-five nor more than sixty days after the receipt of the request. If the notice is not given within twenty days after receipt of the request, the persons entitled to call the meeting may give the notice.

ARTICLE II

Section 4.Notice of Annual or Special Meeting.

Written notice of each annual or special meeting of shareholders shall be given not less than ten (or if sent by third-class mail, thirty) nor more than sixty days before the date of the meeting to each shareholder entitled to vote thereat.  Such notice shall state the place, date, and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted, and no other business may be transacted, or (ii) in the case of an annual meeting, those matters which the Board, at the time of the mailing of the notice, intends to present for action by the shareholders, but, subject to the provisions of applicable law and these Bylaws, any proper matter may be presented at an annual meeting for such action. The notice of any special or annual meeting at which directors are to be elected shall include the names of nominees intended at the time of the notice to be presented by the Board for election. For any matter to be presented by a shareholder at an annual meeting, including the nomination of any person (other than a person nominated by or at the direction of the Board) for election to the Board, written notice must be received by the Secretary of the corporation from the shareholder not more than one hundred eighty days nor less than one hundred twenty days prior to the date on which the proxy materials for the prior year's annual meeting were first released to shareholders by the corporation; provided however, that in the event the annual meeting to which the shareholder's written notice relates is to be held on a date which is more than thirty days earlier or later than the date of the annual meeting specified in these Bylaws, the notice from a shareholder must be received by the Secretary not earlier than two hundred twenty days prior to the date of the annual meeting to which the shareholder's notice relates nor later than one hundred sixty days prior to the date of such annual meeting, unless less than one hundred seventy days' prior public disclosure of the date of the meeting is made by the earliest possible quarterly report on Form 10-Q, or, if impracticable, any means reasonably calculated to inform shareholders including without limitation a report on Form 8-K, a press release or publication once in a newspaper of general circulation in the county in which the principal office is located, in which event notice by the shareholder to be timely must be received not later than the close of business on the tenth day following the date of such public disclosure. The shareholder's notice to the Secretary shall set forth (a) a brief description of each matter to be presented at the annual meeting by the shareholder; (b) the name and address, as they appear on the corporation's books, of the shareholder; (c) the class and number of shares of the corporation which are beneficially owned by the shareholder; and (d) any material interest of the shareholder in the matters to be presented.  Any shareholder who intends to nominate a candidate for election as a director shall also set forth in such a notice (i) the name, age, business address and residence address of each nominee that he or she intends to nominate at the meeting, (ii) the principal occupation or employment of each nominee, (iii) the class and number of shares of capital stock of the corporation beneficially owned by each nominee, and (iv) any other information concerning the nominee that would be required under the rules of the Securities and Exchange Commission in a proxy statement soliciting proxies for the election of the nominee. The notice shall also include a consent, signed by the shareholder's nominees, to serve as a director of the corporation if elected.  Notwithstanding anything in these Bylaws to the contrary, and subject to the provisions of any applicable law, no business shall be conducted at a special or annual meeting except in accordance with the procedures set forth in this Section 4.

Notice of a shareholders' meeting shall be given either personally or by first-class mail (or, if the outstanding shares of the corporation are held of record by 500 or more persons on the record date for the meeting, by third-class mail) or by other means of written communication, addressed to the shareholder at the address of such shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice; or, if no such address appears or is given, at the place where the principal office of the corporation is located or by publication at least once in a newspaper of general circulation in the county in which the principal office is located. Notice by mail

ARTICLE II

shall be deemed to have been given at the time a written notice is deposited in the United States mails, postage prepaid. Any other written notice shall be deemed to have been given at the time it is personally delivered to the recipient or is delivered to a common carrier for transmission, or actually transmitted by the person giving the notice by electronic means, to the recipient.

Section 5.Quorum.

A majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders. The affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by law or the Articles; provided, however, that the shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to have less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.

Section 6.Adjourned Meeting and Notice Thereof.

Any shareholders' meeting, whether or not a quorum is present, may be adjourned from time to time by the vote of a majority of the shares, the holders of which are either present in person or represented by proxy thereat, but in the absence of a quorum (except as provided in Section 5 of this Article) no other business may be transacted at such meeting.

It shall not be necessary to give any notice of the time and place of the adjourned meeting or of the business to be transacted thereat, other than by announcement at the meeting at which such adjournment is taken. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. However, when any shareholders' meeting is adjourned for more than forty-five days or, if after adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given as in the case of an original meeting.

Section 7.Voting.

The shareholders entitled to notice of any meeting or to vote at any such meeting shall be only persons in whose name shares stand on the stock records of the corporation on the record date determined in accordance with Section 8 of this Article.

Voting shall in all cases be subject to the provisions of Chapter 7 of the California General Corporation Law, and to the following provisions:

(a)    Subject to clause (g), shares held by an administrator, executor, guardian, conservator or custodian may be voted by such holder either in person or by proxy, without a transfer of such shares into the holder's name; and shares standing in the name of a trustee may be voted by the trustee, either in person or by proxy, but no trustee shall be entitled to vote shares held by such trustee without a transfer of such shares into the trustee's name.

(b)    Shares standing in the name of a receiver may be voted by such receiver; and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into the receiver's name if authority to do so is contained in the order of the court by which such receiver was appointed.

ARTICLE II

(c)    Subject to the provisions of Section 705 of the California General Corporation Law and except where otherwise agreed in writing between the parties, a shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.

(d)    Shares standing in the name of a minor may be voted and the corporation may treat all rights incident thereto as exercisable by the minor, in person or by proxy, whether or not the corporation has notice, actual or constructive, of the non-age unless a guardian of the minor's property has been appointed and written notice of such appointment given to the corporation.

(e)    Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxyholder as the bylaws of such other corporation may prescribe or, in the absence of such provision, as the Board of Directors of such other corporation may determine or, in the absence of such determination, by the chairman of the board, president or any vice president of such other corporation, or by any other person authorized to do so by the chairman of the board, president or any vice president of such other corporation. Shares which are purported to be voted or any proxy purported to be executed in the name of a corporation (whether or not any title of the person signing is indicated) shall be presumed to be voted or the proxy executed in accordance with the provisions of this subdivision, unless the contrary is shown.

(f)    Shares of the corporation owned by any of its subsidiaries shall not be entitled to vote on any matter.

(g)    Shares of the corporation held by the corporation in a fiduciary capacity, and shares of the corporation held in a fiduciary capacity by any of its subsidiaries, shall not be entitled to vote on any matter, except to the extent that the settlor or beneficial owner possesses and exercises a right to vote or to give the corporation binding instructions as to how to vote such shares.

(h)    If shares stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, husband and wife as community property, tenants by the entirety, voting trustees, persons entitled to vote under a shareholder voting agreement or otherwise, or if two or more persons (including proxyholders) have the same fiduciary relationship respecting the same shares, unless the secretary of the corporation is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect:

(i)    If only one votes, such act binds all;

(ii)    If more than one vote, the act of the majority so voting binds all;

(iii)    If more than one vote, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionately.

If the instrument so filed or the registration of the shares shows that any such tenancy is held in unequal interests, a majority or even split for the purpose of this section shall be a majority or even split in interest.

No shareholder of any class of stock of this corporation shall be entitled to cumulate votes at any election of directors of this corporation.

ARTICLE II

Elections for directors need not be by ballot; provided, however, that all elections for directors must be by ballot upon demand made by a shareholder at the meeting and before the voting begins.

In any uncontested election of directors, approval of the shareholders (as defined in Section 153 of the California General Corporation Law) shall be required to elect a director.  If an incumbent director fails to be elected by approval of the shareholders in an uncontested election, then, unless the incumbent director has earlier resigned, the term of the incumbent director shall end on the date that is the earlier of 90 days after the date on which the voting results are determined pursuant to Section 707 of the California General Corporation Law or the date on which the Board selects a person to fill the office held by that director in accordance with the procedures set forth in Article III, Section 4 of these Bylaws and Section 305 of the California General Corporation Law.

In any election of directors that is not an uncontested election, the candidates receiving the highest number of affirmative votes of the shares entitled to be voted for them up to the number of directors to be elected by such shares shall be elected, and votes against a director and votes withheld shall have no legal effect.

For purposes of these Bylaws, an “uncontested election” means an election of directors of this corporation in which the number of candidates for election does not exceed the number of directors to be elected by the shareholders at that election, determined at the expiration of the time fixed under Article II, Section 4 of these Bylaws requiring advance notification of director candidates, or for special meetings of shareholders, at the date notice of the meeting is given or at a time fixed by the Board that is not more than 14 days before notice of the meeting is given.

Section 8.Record Date.

The Board may fix, in advance, a record date for the determination of the shareholders entitled to notice of any meeting or to vote or entitled to receive payment of any dividend or other distribution, or any allotment of rights, or to exercise rights in respect of any other lawful action. The record date so fixed shall be not more than sixty days nor less than ten days prior to the date of the meeting nor more than sixty days prior to any other action. When a record date is so fixed, only shareholders of record at the close of business on that date are entitled to notice of and to vote at the meeting or to receive the dividend, distribution, or allotment of rights, or to exercise the rights, as the case may be, notwithstanding any transfer of shares on the books of the corporation after the record date, except as otherwise provided by law or these Bylaws. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the Board fixes a new record date for the adjourned meeting. The Board shall fix a new record date if the meeting is adjourned for more than forty-five days.

If no record date is fixed by the Board, the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held. The record date for determining shareholders for any purpose other than as set forth in this Section 8 or Section 10 of this Article shall be at the close of business on the day on which the Board adopts the resolution relating thereto, or the sixtieth day prior to the date of such other action, whichever is later.

ARTICLE II

Section 9.Consent of Absentees.

The transactions of any meeting of shareholders, however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of shareholders need be specified in any written waiver of notice, consent to the holding of the meeting or approval of the minutes thereof, except as provided in Section 601(f) of the California General Corporation Law.

Section 10.Action Without Meeting.

Subject to Section 603 of the California General Corporation Law, any action which, under any provision of the California General Corporation Law, may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Unless a record date for voting purposes be fixed as provided in Section 8 of this Article, the record date for determining shareholders entitled to give consent pursuant to this Section 10, when no prior action by the Board has been taken, shall be the day on which the first written consent is given.

Section 11.Proxies.

Every person entitled to vote shares has the right to do so either in person or by one or more persons, not to exceed three, designated by a proxy authorized by such shareholder or the shareholder's attorney in fact and filed with the corporation, in accordance with Section 178 of the California General Corporation Law. Subject to the following sentence, any proxy duly authorized continues in full force and effect until revoked by the person authorizing it prior to the vote pursuant thereto by a writing delivered to the corporation stating that the proxy is revoked or by a subsequent proxy authorized by the person authorizing the prior proxy and presented to the meeting, or by attendance at the meeting and voting in person by the person authorizing the proxy; provided, however, that a proxy is not revoked by the death or incapacity of the maker unless, before the vote is counted, written notice of such death or incapacity is received by this corporation. No proxy shall be valid after the expiration of eleven months from the date of its authorization unless otherwise provided in the proxy.

Section 12.Inspectors of Election.

In advance of any meeting of shareholders, the Board may appoint any persons other than nominees as inspectors of election to act at such meeting and any adjournment thereof. If inspectors of election are not so appointed, or if any persons so appointed fail to appear or refuse to act, the chairman of any such meeting may, and on the request of any shareholder or shareholder's proxy shall, make such appointments at the meeting. The number of inspectors shall be either one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares present shall determine whether one or three inspectors are to be appointed.

ARTICLE II

The duties of such inspectors shall be as prescribed by Section 707(b) of the California General Corporation Law and shall include: determining the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies; receiving votes, ballots or consents; hearing and determining all challenges and questions in any way arising in connection with the right to vote; counting and tabulating all votes or consents; determining when the polls shall close; determining the result; and doing such acts as may be proper to conduct the election or vote with fairness to all shareholders. If there are three inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein.

ARTICLE III - DIRECTORS

Section 1.Powers.

Subject to limitations of the Articles, of these Bylaws and of the California General Corporation Law relating to action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board. The Board may delegate the management of the day-to-day operation of the business of the corporation provided that the business and affairs of the corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the Board. Without prejudice to such general powers, but subject to the same limitations, it is hereby expressly declared that the Board shall have the following powers in addition to the other powers enumerated in these Bylaws:

(a)    To select and remove all the other officers, agents and employees of the corporation, prescribe the powers and duties for them as may not be inconsistent with law, with the Articles or these Bylaws, fix their compensation and require from them security for faithful service.

(b)    To conduct, manage and control the affairs and business of the corporation and to make such rules and regulations therefor not inconsistent with law, or with the Articles or these Bylaws, as they may deem best.

(c)    To adopt, make and use a corporate seal, and to prescribe the forms of certificates of stock, and to alter the form of such seal and of such certificates from time to time as in their judgment they may deem best.

(d)    To authorize the issuance of shares of stock of the corporation from time to time, upon such terms and for such consideration as may be lawful.

(e)    To borrow money and incur indebtedness for the purposes of the corporation, and to cause to be executed and delivered therefor, in the corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations or other evidences of debt and securities therefor.

Section 2.Number of Directors.

The authorized number of directors shall be not less than nine nor more than seventeen until changed by amendment of the Articles or by a Bylaw duly adopted by the shareholders. The exact number of directors shall be fixed, within the limits specified, by the Board by adoption of a resolution or by the shareholders in the same manner provided in these Bylaws for the amendment thereof.

ARTICLE III

Section 3.Election and Term of Office.

The directors shall be elected at each annual meeting of the shareholders, subject to Article II, Section 7 of these Bylaws, but if any such annual meeting is not held or no vote is taken on the election of directors thereat, the directors may be elected at any special meeting of shareholders held for that purpose. Subject to Article II, Section 7 of these Bylaws, each director shall hold office until the next annual meeting and until a successor has been elected and qualified.

Section 4.Vacancies.

Any director may resign effective upon giving written notice to the Chairman of the Board, the President, the Secretary or the Board, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective.

Vacancies in the Board, except those existing as a result of a removal of a director, may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director, and each director so elected shall hold office until the next annual meeting and, subject to Article II, Section 7 of these Bylaws, until such director's successor has been elected and qualified. Vacancies existing as a result of a removal of a director may be filled by the shareholders as provided by law. Any vacancy on the Board resulting from any expiration of the term of an incumbent director as provided in Article II, Section 7 of these Bylaws shall be deemed to have been created by resignation, and not removal, of the incumbent director.

A vacancy or vacancies in the Board shall be deemed to exist in case of the death, resignation or removal of any director, or if the authorized number of directors be increased, or if the shareholders fail, at any annual or special meeting of shareholders at which any director or directors are elected, to elect the full authorized number of directors to be voted for at that meeting.

The Board may declare vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony.

The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors. Any such election by written consent other than to fill a vacancy created by removal requires the consent of a majority of the outstanding shares entitled to vote.

No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of the director's term of office.

Section 5.Place of Meeting.

Regular or special meetings of the Board shall be held at any place within or without the State of California which has been designated from time to time by the Board, specified in the notice of the meeting, or as otherwise provided in these Bylaws. In the absence of such designation, regular meetings shall be held at the principal office of the corporation.

Section 6.Organization Meeting.

Promptly following each annual meeting of shareholders the Board shall hold a regular meeting for the purpose of organization, election of officers and the transaction of other business.

ARTICLE III

Section 7.Special Meetings and Other Regular Meetings.

Special meetings and regular meetings other than organization meetings of the Board for any purpose or purposes may be called at any time by the Chairman of the Board, the President, any Vice President, the Secretary or by any two directors.

Such meetings of the Board shall be held upon four days' notice by mail or twenty-four hours' notice delivered personally or by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, telegraph, telex, facsimile, electronic mail or other similar means of communication. Any such notice shall be addressed or delivered to each director at such director's address, telephone number, telex number, facsimile number, E-mail address, or other designated location(s), as shown upon the records of the corporation or as may have been given to the corporation by the director for purposes of notice or, if such information is not shown on such records or is not readily ascertainable, at the place in which the meetings of the directors are regularly held. The notice need not specify the purpose of such meeting.

Notice by mail shall be deemed to have been given at the time a written notice is deposited in the United States mail, postage prepaid. Any other written notice shall be deemed to have been given at the time it is personally delivered to the recipient or is delivered to a common carrier for transmission, or actually transmitted by the person giving the notice by electronic means to the recipient.  Oral notice shall be deemed to have been given at the time it is communicated, in person or by telephone, wireless, or other similar means, to the recipient or to a person at the office of the recipient who the person giving the notice has reason to believe will promptly communicate it to the recipient, or actually transmitted to the recipient by the person giving the notice by a system or technology designed to record and communicate messages.

Section 8.Quorum.

One-third of the number of authorized directors constitutes a quorum of the Board for the transaction of business, except to adjourn as provided in Section ll of this Article. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board, unless a greater number is required by law or by the Articles; provided, however, that a meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for such meeting.

Section 9.Participation in Meetings by Conference Telephone.

Members of the Board may participate in a meeting through use of conference telephone or similar communications equipment, so long as all members participating in such meeting can hear one another. Such participation constitutes presence in person at such meeting.

Section 10.Waiver of Notice.

The transactions of any meeting of the Board, however called and noticed or wherever held, are as valid as though had at a meeting duly held after regular call and notice if a quorum is present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding such meeting or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

ARTICLE III

Section 11.Adjournment.

A majority of the directors present, whether or not a quorum is present, may adjourn any directors' meeting to another time and place. Notice of the time and place of holding an adjourned meeting need not be given to absent directors if the time and place is fixed at the meeting adjourned. If the meeting is adjourned for more than twenty-four hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of the adjournment.

Section 12.Fees and Compensation.

Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement for expenses, as may be fixed or determined by the Board.

Section 13.Action Without Meeting.

Any action required or permitted to be taken by the Board may be taken without a meeting if all members of the Board shall individually or collectively consent in writing to such action. Such written consent or consents shall have the same force and effect as a unanimous vote of the Board and shall be filed with the minutes of the proceedings of the Board.

Section 14.Rights of Inspection.

Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of the corporation and also of its subsidiary corporations, domestic or foreign. Such inspection by a director may be made in person or by agent or attorney and includes the right to copy and make extracts.

Section 15.Committees.

The Board may appoint one or more committees, each consisting of two or more directors, to serve at the pleasure of the Board. The Board may delegate to such committees any or all of the authority of the Board except with respect to:

(a)    The approval of any action for which the California General Corporation Law also requires shareholders' approval or approval of the outstanding shares;

(b)    The filling of vacancies on the Board or in any committee;

(c)    The fixing of compensation of the directors for serving on the Board or on any committee;

(d)    The amendment or repeal of Bylaws or the adoption of new Bylaws;

(e)    The amendment or repeal of any resolution of the Board which by its express terms is not so amendable or repealable;

(f)    A distribution to the shareholders of the corporation except at a rate or in a periodic amount or within a price range determined by the Board; or

(g)    The appointment of other committees of the Board or the members thereof.

ARTICLE III

Any such committee, or any member or alternate member thereof, must be appointed by resolution adopted by a majority of the exact number of authorized directors as specified in Section 2 of this Article. The Board shall have the power to prescribe the manner and timing of giving of notice of regular or special meetings of any committee and the manner in which proceedings of any committee shall be conducted. In the absence of any such prescription, such committee shall have the power to prescribe the manner in which its proceedings shall be conducted. Unless the Board or such committee shall otherwise provide, the regular and special meetings and other actions of any such committee shall be governed by the provisions of this Article applicable to meetings and actions of the Board.  Minutes shall be kept of each meeting of each committee.

ARTICLE IV - OFFICERS

Section 1.Officers.

The officers of the corporation shall be a President, a Chief Financial Officer, a Controller, a Secretary and a Treasurer. At the discretion of the Board, the corporation may also have a Chairman of the Board, one or more Vice Presidents, a General Counsel, one or more Associate General Counsel, one or more Assistant General Counsel, one or more Assistant Controllers, one or more Assistant Treasurers, one or more Assistant Secretaries, and such other officers as may be elected or appointed in accordance with Section 5 of this Article. The Board or the President may confer a special title upon any Vice President not specified herein. Any number of offices of the corporation may be held by the same person.

Section 2.Election.

The officers of the corporation, except such officers as may be elected or appointed in accordance with the provisions of Section 5 or Section 6 of this Article, shall be chosen annually by, and shall serve at the pleasure of the Board, and shall hold their respective offices until their resignation, removal, or other disqualification from service, or until their respective successors shall be elected.

Section 3.Eligibility of Chairman.

No person shall be eligible for the office of Chairman of the Board unless such person is a member of the Board of the corporation; any other officer may or may not be a director.

Section 4.Removal and Resignation.

Any officer may be removed, either with or without cause, by the Board at any time or by any officer upon whom such power of removal may be conferred by the Board. Any such removal shall be without prejudice to the rights, if any, of the officer under any contract of employment of the officer.

Any officer may resign at any time by giving written notice to the corporation, but without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

ARTICLE IV

Section 5.Appointment of Other Officers.

The Board may appoint such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in the Bylaws or as the Board may from time to time determine.

Section 6.Vacancies.

A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled at any time deemed appropriate by the Board in the manner prescribed in these Bylaws for regular election or appointment to such office.

Section 7.Salaries.

The salaries of the President, Chief Financial Officer, Vice Presidents, General Counsel, Controller, Treasurer and Secretary of the corporation shall be fixed by the Board. Salaries of all other officers shall be as approved from time to time by the President.

Section 8.Furnish Security for Faithfulness.

Any officer or employee shall, if required by the Board, furnish to the corporation security for faithfulness to the extent and of the character that may be required.

Section 9.Chairman's Duties.

The duties of the Chairman of the Board shall be as from time to time conferred upon or assigned to such office by the Board, these Bylaws or the law, and all such powers and duties shall be vested in the President while he or she is a member of the Board unless a separate Chairman of the Board is appointed by the Board.

Section 10.Intentionally Omitted.

Section 11.President's Duties.

Subject to the control of the Board, the President shall be the chief executive officer of the corporation and shall have charge of the business of the corporation, including the construction of its plants and properties and the operation thereof. In the absence or disability of the President, then unless otherwise determined by the Board, the next in order of election by the Board of the Vice Presidents shall have all of the powers and duties of the President.

Section 12.Chief Financial Officer.

The Chief Financial Officer of the corporation shall be the chief consulting officer in all matters of financial import and shall have control over all financial matters concerning the corporation.

Section 13.Vice Presidents' Duties.

The Vice Presidents shall perform such other duties as the President shall designate.

ARTICLE IV

Section 14.General Counsel's Duties.

The General Counsel shall be the chief consulting officer of the corporation in all legal matters and, subject to the President, shall have control over all matters of legal import concerning the corporation.

Section 15.Associate General Counsel's and Assistant General Counsel's Duties.

The Associate General Counsel shall perform such of the duties of the General Counsel as the General Counsel shall designate, and in the absence or disability of the General Counsel, the Associate General Counsel, in order of election to that office by the Board at its latest organizational meeting, shall perform the duties of the General Counsel. The Assistant General Counsel shall perform such duties as the General Counsel shall designate.

Section 16.Controller's Duties.

The Controller shall be the chief accounting officer of the Corporation and, subject to the Chief Financial Officer, shall have control over all accounting matters concerning the Corporation and shall perform such other duties as the President shall designate.

Section 17.Assistant Controllers' Duties.

The Assistant Controllers shall perform such of the duties of the Controller as the Controller shall designate, and in the absence or disability of the Controller, the Assistant Controllers, in order of election to that office by the Board at its latest organizational meeting, shall perform the duties of the Controller.

Section 18.Treasurer's Duties.

It shall be the duty of the Treasurer to keep in custody or control all money, stocks, bonds, evidences of debt, securities and other items of value that may belong to, or be in the possession or control of, the corporation, and to dispose of the same in such manner as the Board or the President may direct, and to perform all acts incident to the position of Treasurer.

Section 19.Assistant Treasurers' Duties.

The Assistant Treasurers shall perform such of the duties of the Treasurer as the Treasurer shall designate, and in the absence or disability of the Treasurer, the Assistant Treasurers, in order of election to that office by the Board at its latest organizational meeting, shall perform the duties of the Treasurer, unless action is taken by the Board as contemplated in Section 23 of this Article.

Section 20.Secretary's Duties.

The Secretary shall keep or cause to be kept full and complete records of the proceedings of shareholders, the Board and its committees at all meetings, and shall affix the corporate seal and attest by signing copies of any part thereof when required.

The Secretary shall keep, or cause to be kept, a copy of the Bylaws of the corporation at the principal office in accordance with Section 213 of the California General Corporation Law.

ARTICLE IV

The Secretary shall be the custodian of the corporate seal and shall affix it to such instruments as may be required.

The Secretary shall keep on hand a supply of blank stock certificates of such forms as the Board may adopt.

The Secretary shall serve or cause to be served by publication or otherwise, as may be required, all notices of meetings and of other corporate acts that may by law or otherwise be required to be served, and shall make or cause to be made and filed in the principal office of the corporation, the necessary certificate or proofs thereof.

An affidavit of mailing of any notice of a shareholders' meeting or of any report, in accordance with the provisions of Section 601(b) of the California General Corporation Law, executed by the Secretary shall be prima facie evidence of the fact that such notice or report had been duly given.

The Secretary may, with the Chairman of the Board, the President, or a Vice President, sign certificates of ownership of stock in the corporation, and shall cause all certificates so signed to be delivered to those entitled thereto.

The Secretary shall keep all records required by the California General Corporation Law.

The Secretary shall generally perform the duties usual to the office of secretary of corporations, and such other duties as the President shall designate.

Section 21.Assistant Secretaries' Duties.

Assistant Secretaries shall perform such of the duties of the Secretary as the Secretary shall designate, and in the absence or disability of the Secretary, the Assistant Secretaries, in the order of election to that office by the Board at its latest organizational meeting, shall perform the duties of the Secretary, unless action is taken by the Board as contemplated in Sections 22 and 23 of this Article.

Section 22.Secretary Pro Tempore.

At any meeting of the Board or of the shareholders from which the Secretary is absent, a Secretary pro tempore may be appointed and act.

Section 23.Election of Acting Treasurer or Acting Secretary.

The Board may elect an Acting Treasurer, who shall perform all the duties of the Treasurer during the absence or disability of the Treasurer, and who shall hold office only for such a term as shall be determined by the Board.

The Board may elect an Acting Secretary, who shall perform all the duties of the Secretary during the absence or disability of the Secretary, and who shall hold office only for such a term as shall be determined by the Board.

Whenever the Board shall elect either an Acting Treasurer or Acting Secretary, or both, the officers of the corporation as set forth in Section 1 of this Article shall include, as if therein specifically set out, an Acting Treasurer or an Acting Secretary, or both.

ARTICLE IV

Section 24.Performance of Duties.

Officers shall perform the duties of their respective offices as stated in these Bylaws, and such additional duties as the Board shall designate.

ARTICLE V - OTHER PROVISIONS

Section 1.Inspection of Corporate Records.

(a)    A shareholder or shareholders holding at least five percent in the aggregate of the outstanding voting shares of the corporation or who hold at least one percent of such voting shares and have filed a Schedule 14B with the United States Securities and Exchange Commission relating to the election of directors of the corporation shall have an absolute right to do either or both of the following:

(i)    Inspect and copy the record of shareholders' names and addresses and shareholdings during usual business hours upon five business days' prior written demand upon the corporation; or

(ii)    Obtain from the transfer agent, if any, for the corporation, upon five business days' prior written demand and upon the tender of its usual charges for such a list (the amount of which charges shall be stated to the shareholder by the transfer agent upon request), a list of the shareholders' names and addresses who are entitled to vote for the election of directors and their shareholdings, as of the most recent record date for which it has been compiled or as of a date specified by the shareholder subsequent to the date of demand.

(b)    The record of shareholders shall also be open to inspection and copying by any shareholder or holder of a voting trust certificate at any time during usual business hours upon written demand on the corporation, for a purpose reasonably related to such holder's interest as a shareholder or holder of a voting trust certificate.

(c)    The accounting books and records and minutes of proceedings of the shareholders and the Board and committees of the Board shall be open to inspection upon written demand on the corporation of any shareholder or holder of a voting trust certificate at any reasonable time during usual business hours, for a purpose reasonably related to such holder's interests as a shareholder or as a holder of such voting trust certificate.

(d)    Any such inspection and copying under this Article may be made in person or by agent or attorney.

Section 2.Inspection of Bylaws.

The corporation shall keep in its principle office the original or a copy of these Bylaws as amended to date, which shall be open to inspection by shareholders at all reasonable times during office hours.

ARTICLE V

Section 3.Contracts and Other Instruments, Loans, Notes and Deposits of Funds.

The President or a Vice President, either alone or with the Secretary or an Assistant Secretary, or the Secretary alone, shall execute in the name of the corporation such written instruments as may be authorized by the Board and, without special direction of the Board, such instruments as transactions of the ordinary business of the corporation may require and, such officers without the special direction of the Board may authenticate, attest or countersign any such instruments when deemed appropriate. The Board may authorize any person, persons, entity, entities, attorney, attorneys, attorney-in-fact, attorneys-in-fact, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances.

No loans shall be contracted on behalf of the corporation and no evidences of such indebtedness shall be issued in its name unless authorized by the Board as it may direct. Such authority may be general or confined to specific instances.

All checks, drafts, or other similar orders for the payment of money, notes, or other such evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation and in such manner as the Board or the President may direct.

Unless authorized by the Board or these Bylaws, no officer, agent, employee or any other person or persons shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or amount.

All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies, or other depositories as the Board may direct.

Section 4.Certificates of Stock and Uncertificated Stock.

Shares of the corporation's stock may be certificated or uncertificated, as provided under California law. All certificates of stock of the corporation shall be numbered and shall be entered in the books of the corporation as they are issued. Every certificate of stock of the corporation shall be signed in the name of the corporation by the Chairman of the Board, the President, or a Vice President and by the Chief Financial Officer, the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.

Certificates for shares and uncertificated shares may be used prior to full payment under such restrictions and for such purposes as the Board may provide; provided, however, that on any certificate issued to represent any partly paid shares, or, for uncertificated shares, on the initial transaction statement for such partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated.

ARTICLE V

Except as provided in this Section, no new certificate for shares and no uncertificated shares shall be issued in lieu of an old certificate unless the latter is surrendered and canceled at the same time. The Board may, however, if any certificate for shares is alleged to have been lost, stolen or destroyed, authorize the issuance of a new certificate or uncertificated shares in lieu thereof, and the corporation may require that the corporation be given a bond or other adequate security sufficient to indemnify it against any claim that may be made against it (including expense or liability) on account of the alleged loss, theft or destruction of such certificate or the issuance of such new certificate or uncertificated shares.

Transfers of shares of stock of the corporation shall be made on the books of the corporation only by the record holder of such stock, or by an attorney lawfully constituted in writing, and in the case of stock represented by a certificate, upon surrender of the certificate.

Section 5.Transfer Agent, Transfer Clerk and Registrar.

The Board may, from time to time, appoint transfer agents, transfer clerks, and stock registrars to transfer and register the shares of capital stock of the corporation, and may provide that no certificate of capital stock shall be valid without the signature of the stock transfer agent or transfer clerk, and stock registrar.

Section 6.Representation of Shares of Other Corporations.

The President or any other officer or officers authorized by the Board or the President are each authorized to vote, represent and exercise on behalf of the corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of the corporation. The authority herein granted may be exercised either by any such officer in person or by any other person authorized so to do by proxy or power of attorney duly executed by said officer.

Section 7.Stock Purchase Plans.

The corporation may adopt and carry out a stock purchase plan or agreement or stock option plan or agreement providing for the issue and sale for such consideration as may be fixed of its unissued shares, or of issued shares acquired, to one or more of the employees or directors of the corporation or of a subsidiary or to a trustee on their behalf and for the payment for such shares in installments or at one time, and may provide for such shares in installments or at one time, and may provide for aiding any such persons in paying for such shares by compensation for services rendered, promissory notes or otherwise.

Any such stock purchase plan or agreement or stock option plan or agreement may include, among other features, the fixing of eligibility for participation therein, the class and price of shares to be issued or sold under the plan or agreement, the number of shares which may be subscribed for, the method of payment therefor, the reservation of title until full payment therefor, the effect of the termination of employment and option or obligation on the part of the corporation to repurchase the shares upon termination of employment, restrictions upon transfer of the shares, the time limits of and termination of the plan, and any other matters, not in violation of applicable law, as may be included in the plan as approved or authorized by the Board or any committee of the Board.

ARTICLE V

Section 8.Fiscal Year and Subdivisions.

The calendar year shall be the corporate fiscal year of the corporation.  For the purpose of paying dividends, for making reports and for the convenient transaction of the business of the corporation, the Board may divide the fiscal year into appropriate subdivisions.

Section 9.Construction and Definitions.

Unless the context otherwise requires, the general provisions, rules of construction and definitions contained in the General Provisions of the California Corporations Code and in the California General Corporation Law shall govern the construction of these Bylaws.

ARTICLE VI - INDEMNIFICATION

Section 1.Indemnification of Directors and Officers.

Each person who was or is a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, formal or informal, whether brought in the name of the corporation or otherwise and whether of a civil, criminal, administrative or investigative nature (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is an alleged action or inaction in an official capacity or in any other capacity while serving as a director or officer, shall, subject to the terms of any agreement between the corporation and such person, be indemnified and held harmless by the corporation to the fullest extent permissible under California law and the corporation's Articles of Incorporation, against all costs, charges, expenses, liabilities and losses (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith, and such indemnification shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that (A) the corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of the corporation; (B) the corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) other than a proceeding by or in the name of the corporation to procure a judgment in its favor only if any settlement of such a proceeding is approved in writing by the corporation; (C) that no such person shall be indemnified (i) except to the extent that the aggregate of losses to be indemnified exceeds the amount of such losses for which the director or officer is paid pursuant to any directors' and officers' liability insurance policy maintained by the corporation; (ii) on account of any suit in which judgment is rendered against such person for an accounting of profits made from the purchase or sale by such person of securities of the corporation pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state or local statutory law; (iii) if a court of competent jurisdiction finally determines that any indemnification hereunder is unlawful; and (iv) as to circumstances in which indemnity is expressly prohibited by Section 317 of the California General Corporation Law; and (D) that no such person shall be indemnified with regard to any action brought by or in the right of the corporation for breach of duty to the corporation and its shareholders (a) for acts or omissions involving intentional misconduct or knowing and culpable violation of law; (b) for acts or

ARTICLE VI

omissions that the director or officer believes to be contrary to the best interests of the corporation or its shareholders or that involve the absence of good faith on the part of the director or officer; (c) for any transaction from which the director or officer derived an improper personal benefit; (d) for acts or omissions that show a reckless disregard for the director's or officer's duty to the corporation or its shareholders in circumstances in which the director or officer was aware, or should have been aware, in the ordinary course of performing his or her duties, of a risk of serious injury to the corporation or its shareholders; (e) for acts or omissions that constitute an unexcused pattern of inattention that amounts to an abdication of the director's or officer's duties to the corporation or its shareholders; and (f) for costs, charges, expenses, liabilities and losses arising under Section 310 or 316 of the California General Corporation Law. The right to indemnification conferred in this Article shall include the right to be paid by the corporation expenses incurred in defending any proceeding in advance of its final disposition; provided, however, that if the California General Corporation Law permits the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, such advances shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts to the corporation if it shall be ultimately determined that such person is not entitled to be indemnified.

Section 2.Indemnification of Employees and Agents.

A person who was or is a party or is threatened to be made a party to or is involved in any proceeding by reason of the fact that he or she is or was an employee or agent of the corporation or is or was serving at the request of the corporation as an employee or agent of another enterprise, including service with respect to employee benefit plans, whether the basis of such action is an alleged action or inaction in an official capacity or in any other capacity while serving as an employee or agent, may, subject to the terms of any agreement between the corporation and such person, be indemnified and held harmless by the corporation to the fullest extent permitted by California law and the corporation's Articles of Incorporation, against all costs, charges, expenses, liabilities and losses, (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith.

Section 3.Right of Directors and Officers to Bring Suit.

If a claim under Section 1 of this Article is not paid in full by the corporation within 30 days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall also be entitled to be paid the expense of prosecuting such claim. Neither the failure of the corporation (including its Board, independent legal counsel, or its shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is permissible in the circumstances because he or she has met the applicable standard of conduct, if any, nor an actual determination by the corporation (including its Board, independent legal counsel, or its shareholders) that the claimant has not met the applicable standard of conduct, shall be a defense to the action or create a presumption for the purpose of an action that the claimant has not met the applicable standard of conduct.

ARTICLE VI

Section 4.Successful Defense.

Notwithstanding any other provision of this Article, to the extent that a director or officer has been successful on the merits or otherwise (including the dismissal of an action without prejudice or the

settlement of a proceeding or action without admission of liability) in defense of any proceeding referred to in Section 1 of this Article or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred in  connection therewith.

Section 5.Non-Exclusivity of Rights.

The right to indemnification provided by this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, bylaw, agreement, vote of shareholders or disinterested directors or otherwise.

Section 6.Insurance.

The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the California General Corporation Law.

Section 7.Expenses as a Witness.

To the extent that any director, officer, employee or agent of the corporation is by reason of such position, or a position with another entity at the request of the corporation, a witness in any action, suit or proceeding, he or she shall be indemnified against all costs and expenses actually and reasonably incurred by him or her on his or her behalf in connection therewith.

Section 8.Indemnity Agreements.

The corporation may enter into agreements with any director, officer, employee or agent of the corporation providing for indemnification to the fullest extent permissible under the California General Corporation Law and the corporation's Articles of Incorporation.

Section 9.Separability.

Each and every paragraph, sentence, term and provision of this Article is separate and distinct so that if any paragraph, sentence, term or provision hereof shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of any other paragraph, sentence, term or provision hereof. To the extent required, any paragraph, sentence, term or provision of this Article may be modified by a court of competent jurisdiction to preserve its validity and to provide the claimant with, subject to the limitations set forth in this Article and any agreement between the corporation and claimant, the broadest possible indemnification permitted under applicable law.

ARTICLE VI

Section 10.Effect of Repeal or Modification.

Any repeal or modification of this Article shall not adversely affect any right of indemnification of a director or officer existing at the time of such repeal or modification with respect to any action or omission occurring prior to such repeal or modification.

ARTICLE VII - EMERGENCY PROVISIONS

Section 1.General.

The provisions of this Article shall be operative only during a national emergency declared by the President of the United States or the person performing the President's functions, or in the event of a nuclear, atomic or other attack on the United States or on a locality in which the corporation conducts its business or customarily holds meetings of its Board of Directors or shareholders, or during the existence of any catastrophe, disaster or other similar emergency condition.

Section 2.Notice of Meetings.

Special meetings and regular meetings of the Board may be held upon one hour's notice delivered in any manner permitted in Article III, Section 7 of these Bylaws.

Section 3.Quorum.

The number of directors necessary to constitute a quorum shall be one-third of the authorized number of directors, or such other minimum number required by law or lawful decree then in force, whichever number is less.

ARTICLE VIII - AMENDMENTS

Section 1.Amendments.

These Bylaws may be amended or repealed either by approval of the outstanding shares or by the approval of the Board; provided, however, that a Bylaw specifying or changing a fixed number of directors or the maximum or minimum number or changing from a fixed to a variable Board or vice versa may only be adopted by approval of the outstanding shares. The exact number of directors within the maximum and minimum number specified in these Bylaws may be amended by the Board alone.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, RONALD L. LITZINGER, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, of Southern California Edison Company;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

        (a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

        (b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

        (c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

        (d)   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.    The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

        (a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

        (b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 2, 2011

/s/ RONALD L. LITZINGER

RONALD L. LITZINGER

President

EX-31.2

Exhibit 31.2

CERTIFICATION

I, LINDA G. SULLIVAN, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, of Southern California Edison Company;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

        (a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

        (b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

        (c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

        (d)   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.    The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

        (a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

        (b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 2, 2011

/s/ LINDA G. SULLIVAN

LINDA G. SULLIVAN

Chief Financial Officer

EX-32.1

Exhibit 32

STATEMENT PURSUANT TO 18 U.S.C. SECTION 1350, AS

ENACTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 (the "Quarterly Report"), of Southern California Edison Company (the "Company"), and pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned certifies, to the best of his or her knowledge, that:

1. The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

2. The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 2, 2011

/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

This statement accompanies the Quarterly Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

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

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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

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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.

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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.

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Summary of Significant Accounting Policies

9 Months Ended

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:

(in millions)	September 30, 2011		December 31, 2010
Fuel	$	24	$	21
Materials and supplies, spare parts	316		311
Total inventory	$	340	$	332

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.

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Income Taxes

9 Months Ended

Sep. 30, 2011

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.

	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.

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:

(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

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.

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Preferred and Preference Stock

9 Months Ended

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.

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Compensation and Benefit Plans

9 Months Ended

Sep. 30, 2011

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:

	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

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:

	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

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:

			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

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:

	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

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:

	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

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

	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		—

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.

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Derivative Instruments and Hedging Activities

9 Months Ended

Sep. 30, 2011

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:

		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

Fair Value of Derivative Instruments

The following table summarizes the gross and net fair values of commodity derivative instruments at September 30, 2011:

	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

The following table summarizes the gross and net fair values of commodity derivative instruments at December 31, 2010:

	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

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:

	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		)

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:

(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

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Consolidated Balance Sheets (Parenthetical) (USD $) In Millions, except Share data	Sep. 30, 2011	Dec. 31, 2010
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

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Consolidated Statements of Changes in Equity

9 Months Ended

Sep. 30, 2011

Consolidated Statements Of Changes in Equity

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.

	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

The following table provides the changes in equity for the nine months ended September 30, 2010.

	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

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Variable Interest Entities

9 Months Ended

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.

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Supplemental Cash Flows Information

9 Months Ended

Sep. 30, 2011

Supplemental Cash Flows Information Disclosure [Abstract]

Supplemental Cash Flows Information

Supplemental Cash Flows Information

SCE's supplemental cash flows information is:

	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

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Fair Value Measurements

9 Months Ended

Sep. 30, 2011

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:

	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.

The following table sets forth a summary of changes in the fair value of Level 3 assets and liabilities:

	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.

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:

	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

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.

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Other Investments

9 Months Ended

Sep. 30, 2011

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:

		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

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:

	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

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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Consolidated Balance Sheets (USD $) In Millions	Sep. 30, 2011	Dec. 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
LIABILITIES AND EQUITY
Short-term debt	550	0
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
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

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Other Income and Expenses

9 Months Ended

Sep. 30, 2011

Other Income And Expenses

Other Income and Expenses

Other Income and Expenses

Other income and expenses are as follows:

	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

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Consolidated Statements of Cash Flows (USD $) In Millions	9 Months Ended
	Sep. 30, 2011	Sep. 30, 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)	0
Preference stock issued - net	123	0
Short-term debt financing - net	550	0
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	0	(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

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2011

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Third-Party Power Purchase Agreements

During the nine months ended September 30, 2011, additional renewable energy power purchase contracts became effective and were classified as operating leases. SCE's additional commitments under these contracts are estimated to be: $116 million each year in 2012 – 2015 and $1.9 billion for the period remaining thereafter.

In October 2011, SCE completed its 2011 annual request for offers and entered into new power purchase contracts with commitments estimated to be: $5 million in 2012, $81 million in 2013, $178 million in 2014 and $240 million in 2015.

Other Commitments

During the nine months ended September 30, 2011, SCE had a firm transmission agreement with additional commitments estimated to be: $1 million in 2011, $4 million each year in 2012 - 2015 and $78 million for the period remaining thereafter.

Indemnities

Indemnity Provided as Part of the Acquisition of Mountainview

In connection with the acquisition of the Mountainview power plant, SCE agreed to indemnify the seller with respect to specific environmental claims related to SCE's previously owned San Bernardino Generating Station, divested by SCE in 1998 and reacquired as part of the Mountainview acquisition. SCE retained certain responsibilities with respect to environmental claims as part of the original divestiture of the station. The aggregate liability for either party to the purchase agreement for damages and other amounts is a maximum of $60 million. This indemnification for environmental liabilities expires on or before March 12, 2033. SCE has not recorded a liability related to this indemnity.

Mountainview Filter Cake Indemnity

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

Other Indemnities

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

Contingencies

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

Four Corners New Source Review Litigation

In October 2011, four private environmental organizations filed a CAA citizens' lawsuit against the co-owners of Four Corners. The complaint alleges that certain work performed at the Four Corners generating units 4 and 5, over the approximate periods of 1985-1986 and 2007-present, constituted plant “major modifications” for which the plant should have, but did not, obtain permits and install best available control technology ("BACT") in violation of the PSD requirements and of the New Source Performance Standards of the CAA. The complaint also alleges subsequent and continuing violation of BACT air emissions limits. The lawsuit seeks injunctive and declaratory relief, civil penalties, including a mitigation project and litigation costs. In November 2010, SCE entered into an agreement to sell its ownership interest in generating units 4 and 5 to APS. The sale is subject to regulatory approvals and is expected to close in late 2012. Under the agreement SCE would remain responsible for its pro rata share of certain environmental liabilities, including penalties arising from environmental violations prior to the sale, but SCE would not be liable for any costs of installing BACT or other costs related to continuing or extending Four Corners operations. SCE cannot predict the outcome of these matters or estimate the impact on its financial statements.

Concurrently, the US EPA has proposed a regional haze federal implementation plan based on an APS proposal that would require shut down of units 1, 2 and 3 by 2016 and the installation of selective catalytic reduction technology on units 4 and 5 by 2018. APS' proposal contemplated that these actions would both satisfy the federal regional haze requirements and resolve any New Source Review claims the US EPA might have. A final federal implementation plan is expected in early 2012.

Malibu Fire Order Instituting Investigation ("OII")

Following a 2007 wildfire in Malibu, California, the CPUC issued an OII to determine if any statutes, CPUC general orders, rules or regulations were violated by SCE or telecomm providers (“OII Respondents”) that shared the use of three failed power poles in the wildfire area. The CPUC's Consumer Protection and Safety Division (“CPSD”) has alleged, among other things, that the poles were overloaded, that the OII Respondents violated the CPUC's rules governing the design, construction and inspection of poles and misled the CPUC during its investigation of the fire, and that SCE failed to preserve evidence relevant to the investigation. In October 2011, the CPSD proposed that the OII Respondents be assessed penalties of approximately $99 million, with SCE being allocated approximately $50 million of the total. SCE has denied the allegations and believes the proposed penalties are excessive. CPSD's allegations will likely be set for hearing in the first quarter of 2012. SCE cannot predict the amount, if any, of penalties that the CPUC may ultimately impose on SCE.

Navajo Nation Litigation

On August 1, 2011, SCE and the other defendants entered into a comprehensive settlement with the Navajo Nation of the litigation filed in June 1999 against SCE and others concerning royalty payments to the Navajo for the coal supplied to the Mohave Generating Station. Pursuant to the settlement, the Navajo Nation lawsuit was dismissed. The settlement agreement reached with the Navajo Nation did not have a material impact on SCE's financial statements.

Environmental Remediation

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

As of September 30, 2011, SCE's recorded estimated minimum liability to remediate its 24 identified material sites (sites in which the upper end of the range of costs is at least $1 million) was $51 million, of which $15 million was related to San Onofre. In addition to its identified material sites, SCE also has 33 immaterial sites for which the total minimum recorded liability was $3 million. The ultimate costs to clean up SCE's identified sites may vary from its recorded liability due to numerous uncertainties inherent in the estimation process, such as: the extent and nature of contamination; the scarcity of reliable data for identified sites; the varying costs of alternative cleanup methods; developments resulting from investigatory studies; the possibility of identifying additional sites; and the time periods over which site remediation is expected to occur. SCE believes that, due to these uncertainties, it is reasonably possible that cleanup costs at these identified material sites and immaterial sites could exceed its recorded liability by up to $195 million and $7 million, respectively. The upper limit of this range of costs was estimated using assumptions least favorable to SCE among a range of reasonably possible outcomes.

The CPUC allows SCE to recover 90% of its environmental remediation costs at certain sites, representing $32 million of its recorded liability, through an incentive mechanism (SCE may request to include additional sites). In addition, SCE expects to recover 100% of environmental remediation costs incurred at the majority of the remaining sites through customer rates, representing $18 million of its recorded liability. SCE has recorded a regulatory asset of $50 million at September 30, 2011 for its estimated minimum environmental cleanup costs expected to be recovered through customer rates.

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

SCE expects to clean up its identified sites over a period of up to 30 years. Remediation costs in each of the next several years are expected to range from $7 million to $17 million. Costs incurred for the nine months ended September 30, 2011 and 2010, were $9 million and $7 million, respectively.

Based upon the CPUC's regulatory treatment of environmental remediation costs, SCE believes that costs ultimately recorded will not materially affect its results of operations, financial position or cash flows. There can be no assurance, however, that future developments, including additional information about existing sites or the identification of new sites, will not require material revisions to estimates.

Nuclear Insurance

Federal law limits public liability claims from a nuclear incident to the amount of available financial protection, which is currently approximately $12.6 billion. SCE and other owners of San Onofre and Palo Verde have purchased the maximum private primary insurance available ($375 million). The balance is covered by a loss sharing program among nuclear reactor licensees. If a nuclear incident at any licensed reactor in the United States results in claims and/or costs which exceed the primary insurance at that plant site, all nuclear reactor licensees could be required to contribute their share of the liability in the form of a deferred premium.

Based on its ownership interests, SCE could be required to pay a maximum of approximately $235 million per nuclear incident. However, it would have to pay no more than approximately $35 million per incident in any one year. If the public liability limit above is insufficient, federal law contemplates that additional funds may be appropriated by Congress. This could include an additional assessment on all licensed reactor operators as a measure for raising further federal revenue.

Property damage insurance covers losses up to $500 million, including decontamination costs, at San Onofre and Palo Verde. Decontamination liability and property damage coverage exceeding the primary $500 million also has been purchased in amounts greater than federal requirements. Additional insurance covers part of replacement power expenses during an accident-related nuclear unit outage. A mutual insurance company owned by entities with nuclear facilities issues these policies. If losses at any nuclear facility covered by the arrangement were to exceed the accumulated funds for these insurance programs, SCE could be assessed retrospective premium adjustments of up to approximately $48 million per year. Insurance premiums are charged to operating expense.

Spent Nuclear Fuel

Under federal law, the Department of Energy ("DOE") is responsible for the selection and construction of a facility for the permanent disposal of spent nuclear fuel and high-level radioactive waste. The DOE did not meet its contractual obligation to begin acceptance of spent nuclear fuel by January 31, 1998. Extended delays by the DOE have led to the construction of costly alternatives and associated siting and environmental issues. Currently, both San Onofre and Palo Verde have interim storage for spent nuclear fuel on site sufficient for the current license period.

In June 2010, the United States Court of Federal Claims issued a decision granting SCE and its co-owners damages of approximately $142 million to recover costs incurred through December 31, 2005 for the DOE's failure to meet its obligation to begin accepting spent nuclear fuel from San Onofre. The DOE's appeal of the decision was denied in August 2011. Additional legal action would be necessary to recover damages incurred after December 31, 2005. Any damages recovered are subject to CPUC review as to what amounts would be returned to SCE ratepayers or used to offset past or future fuel decommissioning or storage costs for the benefit of ratepayers.

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Regulatory Assets and Liabilities

9 Months Ended

Sep. 30, 2011

Regulatory Assets and Liabilities Disclosure [Abstract]

Regulatory Assets and Liabilities

Regulatory Assets and Liabilities

Regulatory assets included on the consolidated balance sheets are:

(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

Regulatory liabilities included on the consolidated balance sheets are:

(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

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Consolidated Statements of Income (USD $) In Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 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	0	0	0	(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