Q2 2025 Earnings Call Transcript

Good afternoon, and welcome to the Edison International Second Quarter 2025 Financial Teleconference. My name is Denise, and I will be your operator today. [Operator Instructions] Today's call is being recorded. I would now like to turn the call over to Mr. Sam Ramraj, Vice President of Investor Relations. Mr. Ramraj, you may begin your conference.

Thank you, Denise, and welcome, everyone. Our speakers today are President and Chief Executive Officer, Pedro Pizarro; and Executive Vice President and Chief Financial Officer, Maria Rigatti. Also on the call are other members of the management team. Materials supporting today's call are available at www.edisoninvestor.com.

These include our Form 10-Q, prepared remarks from Pedro and Maria and the teleconference presentation. Tomorrow, we will distribute our regular business update presentation. During this call, we will make forward-looking statements about the outlook for Edison International and its subsidiaries. Actual results could differ materially from current expectations.

Important factors that could cause different results are set forth in our SEC filings. Please read these carefully. The presentation includes certain outlook assumptions as well as reconciliation of non-GAAP measures to the nearest GAAP measure. During the question-and-answer session, please limit yourself to 1 question and 1 follow-up.

I will now turn the call over to Pedro.

Thanks a lot, Sam, and good afternoon, everyone. Today, I will address 3 key topics for our investors, an update on the Eaton Fire. Our confidence that California's legislature will support healthy investor-owned utilities and an update on regulatory decisions and future actions that position SCE well to deliver on its commitments for customers and other stakeholders. Let me start with a brief comment on earnings.

Today, Edison International reported second quarter core earnings per share of $0.97 compared to $1.23 a year ago. However, as I have mentioned before, this year-over-year comparison is not particularly meaningful because SCE has not received a final decision in its 2025 general rate case. Nonetheless, we remain confident in our ability to meet our 2025 EPS guidance and deliver a 5% to 7% core EPS CAGR through 2028. I will touch on the GRC proposed decision in a few minutes and Maria will discuss our financial performance in her remarks. On the Eaton Fire, the investigations by SCE and the LA County Fire Department remain ongoing.

There are no additional disclosures on the ignition or estimated cost at this point. To recap, SCE is not aware of evidence pointing to another possible source of ignition. Absent additional evidence, we believe that SCE equipment could have been associated with the ignition. In addition, numerous lawsuits have already been brought against SCE.

If it is determined that SCE's transmission equipment was associated with the addition of the Eaton fire, based on the information we have reviewed thus far, we remain confident that SCE would make a good faith showing at its contract with respect to its transmission facilities in the Eaton Canyon area was consistent with actions of a reasonable utility. As we know from prior wildfire events engaging with and helping the community is critical. That's why we announced last week the wildfire recovery compensation program, which SCE will launch this fall. The program will provide direct payments to eligible individuals and businesses.

Resolving claims quickly allows the community to focus on recovery and minimizes the overall cost by mitigating the impacts of interest expense and inflation. This will also help use the wildfire fund efficiently and have more of the cash support impacted community members instead of being spent on higher legal costs. On the legislative front, we are encouraged by the continuing discussions with the Governor's office and legislators to enhance California's industry-leading AB 1054 regulatory framework. Given the economy-wide consequences of in action, we believe policymakers will strengthen California's wildfire framework during the current legislative session.

The issue of wildfires is not just a utility regulation issue. The full solution must include broader actions across multiple sectors and could be addressed during next year's legislative session. Separately, a number of affordability bills are being discussed. Our track record on cost management, which I will discuss in a few minutes, shows our commitment to affordability.

There are good steps the legislature can consider to improve affordability, like rightsizing public purpose programs and NEM, and streamlining siting and permitting. However, provisions like securitizing capital may be well intentioned, but in fact, would actually raise customer costs by deteriorating credit quality. We will continue to engage with legislators to help them make decisions that are grounded in the facts. Moving to the regulatory front.

SCE continues to build on its progress across multiple proceedings, further derisking our financial outlook. Maria will expand on several of those proceedings in her remarks, but let me touch on the proposed decision in SCE's 2025 DRC issued by the administrative law judge on Monday. Page 3 provides the summit. The PD overall generally aligns with our range case rate base forecast.

We share the ALJ's view that critical investments are needed to maintain a safe, reliable and increasingly clean electric grid. On the other hand, key areas of the PD require improvement, so SCE will seek revisions. The PD would authorize base revenue of $9.8 billion or 93% of SCE's requested revenue requirement. It also supports significant capital investments in wildfire mitigation, grid modernization and infrastructure replacement, while incorporating affordability considerations for customers.

The reductions from SCE's request primarily relate to scope, pacing or cost, not to the underlying need or effectiveness of the programs. Most notably, the PD finds that covered conductor has been a highly effective wildfire mitigation strategy and that no party recommended a reduction to SCE's request. It also notes that no party disputed that targeted undergrounding is an effective tool for SCE, although it would authorize fewer miles than SCE proposed. The PD affirms the reasonableness of the utilities base load growth forecast and recognizes the importance of SCE's planning methodology, which integrates statewide forecasts with local system knowledge.

This supports our long-term strategy to ensure the grid is ready for California's electrified future. However, there are some areas where the PD is not fully aligned with customer needs and will be part of the utility's opening comments. Maria will say more in her remarks. The January wildfires underscore the importance of mitigation plans and the need for continuous and evolving tools to maintain infrastructure resiliency.

SCE submitted its 2026 through 2028 wildfire mitigation plan in May, outlining a comprehensive strategy to address both immediate and long-term wildfire risks with new and innovative solutions. The plan reflects the utility's commitment to public safety, risk reduction and affordability and builds on foundational mitigations such as covered conductor targeted undergrounding and enhanced vegetation management. Over the 2026 to 2028 period, SCE anticipates investing $6.2 billion. The plan also supports continued use of aerial firefighting assets, including the world's largest heli-tankers with nighttime capabilities and aims to inspect approximately 1 million trees annually.

Public Safety Power Shutoffs remain a critical tool in wildfire prevention. This year's PSPS updates include revised criteria and wind speed thresholds, expanded circuit coverage and broader boundaries around high fire risk areas. As always, SCE remains focused on customer support and outreach to enhance safety and reduce the impact of PSPS events. Additional details can be found on Page 4. As you will recall, a year ago, we shared our projection that even with 100% of SCE's GRC request, the utility expects its system average rate to grow on average at an inflation-like level through 2028. Based on where things stand today, that is still the expectation, which is further enabled by SCE's enduring focus on operational excellence and efficiently managing costs for customers.

SCE has a more than 15-year track record with the lowest system average rate among California's major industrial-owned utilities, banks to successfully executing on its operational excellence initiatives and taking proactive measures to address customer affordability. Technology is a major driver of better affordability, safety, reliability and resiliency. For example, last month, EEI once again selected EIX and SCE as the winner of their prestigious Edison Award, recognizing distinguished leadership, innovation and contribution to the advancement of the electric industry for the benefit of all.

Our winning project, SCE's Advanced Waveform Anomaly Recognition Engine, or AWARE for short, uses real-time grid sensor data, AI and machine learning to proactively predict potential system issues and pinpoint where failures take place with an SCE service territory. Customers benefit from higher safety and reliability, faster restoration times and higher affordability through optimized crew time. I am proud of our team for their steadfast commitment to operational excellence and for creating this AI-driven solution to help make the grid safer and more resilient for our communities. I will conclude my remarks by reiterating the key messages.

First, SCE is continuing with its investigation on the origin and cost of the Eaton Fire, and there are no new disclosures about the ignition or cost estimate at this time. When we have additional relevant information, we will share it with you and importantly, we'll continue our transparency with our community. Second, we are confident that legislative action will ultimately enhance California's AB 1054 regulatory framework. Third, SCE is well positioned from a regulatory standpoint to deliver for customers and investors.

With that, I'll turn it over to Maria for her financial report.

Thanks, Pedro, and good afternoon. In my comments today, I will cover second quarter 2025 results, provide additional insight into key regulatory proceedings and update you on other financial topics. Starting with the second quarter, EIX reported core EPS of $0.97 compared to $1.23 last year. Page 5 provides the year-over-year quarterly variance analysis.

As Pedro mentioned, the year-over-year comparison is not particularly meaningful because SCE has not received a final decision in its 2025 GRC. SCE continues to book revenues at 2024 authorized levels adjusted for the change in ROE and we'll record a true-up when it receives a final decision. SCE's core EPS variance was primarily driven by higher O&M expense and the net impact of regulatory decisions received in each period. EIX Parent and Other's variance was primarily driven by higher interest expense.

I'd like to expand on Pedro's comments on the wildfire recovery compensation program for the Eaton Fire. As SCE resolved claims, we would not expect to see actual or estimated costs run through the income statement, aside from the small shareholder contribution associated with self-insurance. The cost would be offset by SCE's customer-funded self-insurance for the first $1 billion and then by receivables or regulatory assets associated with the wildfire fund and regulation put in place by AB 1054. An efficient reimbursement process from the Wildfire Fund also means SCE would not have to issue long-term debt to fund payments.

On SCE's 2025 general rate case, if adopted, the PD would result in base rate revenue requirements of $9.8 billion in 2025, $10.2 billion in 2026, $10.6 billion in 2027 and $11 billion in 2028. Translating the rate base numbers shown in the proposed decision into total company rate base and holding all else constant, the results would be generally in line with our current range case. Following a final decision, we will incorporate all aspects of the GRC into our long-term plans and refresh our projections. In SCE's opening comments, it will outline areas where it believes revisions are warranted to deliver better outcomes for customers and ensure the decision aligns with the evidentiary record, applicable law and established regulatory principles.

Let me expand on a couple of areas. On wildfire mitigation, the decision would authorize more than 1,800 miles of grid hardening, consistent with SCE's total hardening request. However, it shifts about 400 miles from targeted undergrounding to the covered conductor program. While the PD reflects a significant increase to the historical level of targeted undergrounding, it falls short of SCE's well-supported request.

This reduction limits SCE's ability to appropriately mitigate the wildfire risk in the most vulnerable areas. On infrastructure replacement, the PD would approve the majority of the proposed programs, but scales back the scope. The decision recognizes the importance of resuming infrastructure replacement after several years of wildfire-focused spending, but we believe the gradual ramp-up does not fully reflect the urgency of today's reliability and electrification needs. As for the next steps, oral argument is scheduled for August 11, and SCE will file its opening comments on August 18 and reply comments are due August 25. The earliest the commission can vote on the proposed decision is at its August 28 voting meeting.

During oral argument and in comments, SCE will advocate for adjustments that better align with the state's climate objectives and the safety and resiliency needs of the communities we serve. As we've said before, we understand the commission's desire to balance safety, reliability and affordability, and we will continue to work collaboratively to ensure the utilities programs, deliver value to customers. Continuing on to the regulatory front, SCE has advanced other regulatory proceedings and outcomes, ultimately, derisking our financial outlook. I will highlight a few updates.

First, the CPUC issued final decisions in SCE's WMCE and WM/VM proceedings, providing certainty on the timing of cost recovery and contribution to our 2025 earnings guidance. On the WMCE settlement agreement, the CPUC authorized recovery of more than $300 million of O&M and $700 million of capital for historical wildfire mitigation and restoration. In SCE's 2022 WM/VM proceeding, the CPUC authorized the recovery of about $290 million of O&M and $99 million of capital while disallowing about $65 million of O&M. I'll note that SCE has filed an application for rehearing to address certain legal and factual errors that resulted in incorrect disallowances of costs incurred to make SCE system and communities safer and more resilient to wildfire threats.

Second, as another step toward recovering historical costs, in April, SCE filed its application for authority to issue securitized bonds to finance the recovery of about $1.6 billion related to the TKM proceeding. This securitization allows for the issuance of recovery bonds with the highest possible credit rating, which reduces financing costs for SCE's customers. The ALJ recently issued a proposed decision, which would approve the financing order, and the schedule calls for the final decision in August. Third, on the Woolsey cost recovery application, SCE recently filed its rebuttal testimony.

The schedule includes a motion for consideration of a settlement agreement or joint statement of stipulations of issues due on August 12. As always, SCE is open to settlement discussions if a fair and reasonable outcome can be achieved, benefiting customers and shareholders. Lastly, the 2026 cost of capital proceeding continues to progress with interveners submitting their testimony yesterday evening. During the quarter, the ALJ also issued a scoping memo with a schedule that calls for a proposed decision in November. Turning to Pages 6 and 7. SCE's capital expenditure and rate base forecasts remain unchanged while we await a final GRC decision.

The utility continues to make investments in safety, reliability and resiliency. The rate case request supports investments that are essential to meet customer needs both today and through the end of 2028. This includes critical work in infrastructure replacement and wildfire mitigation, as well as investments to meet the growing demand in our service area. As we have highlighted before, we continue to see substantial additional capital needs beyond the GRC that are incremental to the plan. Moving on to our EPS guidance outlined on Pages 8 and 9, we are confident in reaffirming the 2025 range of $5.94 to $6.34 and our long-term EPS growth expectations of 5% to 7% from 2025 to 2028. As a reminder, we will refresh our financial guidance 6 weeks after SCE receives a final decision in its 2025 GRC.

This will include our capital and rate base projections, 2025 core EPS range, long-term core EPS growth and financing plans. That concludes my remarks, and back to you, Sam.

Denise, can you please open the call for questions? As a reminder, we request you to limit yourself to 1 question and 1 follow-up, so everyone in line has the opportunity to ask questions.

[Operator Instructions] And our first question comes from Nicholas Campanella with Barclays.

I know that AB 1054, a lot in flux right now, legislatures on recess, but just we had news last night about the proposed $18 billion fix. And I just wanted to get your view on, if half of this is coming from utilities, how would you kind of define what is or what is not an acceptable structure and whether you're open to shareholder debt or equity contributions upfront or through a certain period in order to kind of participate in that solution?

A very fair question. Look, I'll start by saying that we saw the article 2. There's a lot of work going on between the Governor's office and legislative leaders. As I mentioned, we've been in discussions, but still a long ways, right, through the summer leases and into hopefully seeing legislation in this session. So at the end of the day, we will be looking at the balance of everything that is in a package and the devil is always in the details.

So really impossible to comment right now on this one element or that one element. I will say, and I think you've heard me say before that from a policy or principles perspective, we do believe that the investor-owned utility framework makes a lot of sense and that calls for shareholders making capital investments, having the opportunity to earn an authorized rate of return and having full recovery of all prudently incurred costs. So in that context, AB 1054 itself was a departure from that in having shareholders do an upfront contribution to help seed the fund. And so we've been vocal that moving forward, an expansion of 1054, that was purely being done along investor-owned utility rate-making principles would not have a shareholder contribution.

That said, it's a complex environment. It's a lot going on. And again, we'll need to see the balance of an ultimate package. We don't foresee and frankly, don't see a need for having upfront contributions like they were in AB 1054 previously.

There is cash in the fund and you probably saw the comments by the fund administrator, the California Earthquake Authority, that the current capacity of the fund, they estimate something like $22 billion, even taking into account the amounts that have been called for the Dixie and Kincaid fires. And as we know, unfortunately, the process of going through claims can take quite a long time and sell we don't anticipate that there would be a very rapid depletion of the fund. And we don't know how much Eaton would deplete it if Eaton ends up being SCE's fire, but whatever that amount is, it will take multiple years.

And so that would suggest that there isn't a need for an upfront piece. Beyond that, though, we'll have to take a look at what's the package and then make a determination as to whether that package is in the interest of both our customers and importantly, our shareholders.

Okay. Okay. No, that's very -- that's helpful. I appreciate it's.

There's a lot of volatility in the background, too. So I guess just you kind of mentioned that once you have greater visibility into the cause of Eaton or even the damages and liabilities that you would disclose those promptly. Should we be expecting that to be more kind of one-off, as you know, you're going to communicate to the market? Or do we have to kind of wait for earnings calls and 10-Qs to get your best assessment of when that -- of that liability?

Yes. Nicholas, great question. And I guess the way I would answer that would be our normal process, right, is to try and provide information or provide information during the quarterly earnings calls -- that is certainly the time period when we take a look at potential reserves, et cetera, right? You've seen that experience with the 17 and 18 buyers.

However, if we had a piece of information that we thought was sufficiently material not only for investors, but also for the community. I could certainly foresee a case where we might do something off-cycle. So long-winded way of answering it, it depends, right? And we'll make sure that we're doing ultimately the right thing in terms of disclosure and transparency.

The next question is from Richard Sunderland with JPMorgan.

Turning to the GRC PD, could you provide finer detail on this versus the range case in your forecast? I guess should we assume that if the PD stands that range case would essentially become your outlook? Or are there opportunities to bring capital back in beyond what you already flag as upside potential on the right-hand side of that slide?

Rich, thanks for the question. So we are going to file comments on the PD. Just as a reminder from the comments that Pedro and I have already made because we do think there are some areas there that warrant some revision. We have given you a range case before.

The PD is aligned with our range case outcome. But as you know, from other information that we share, there are other opportunities above and beyond what we've already included in our forecast. So as we work through and get the results of the final decision, we'll be working through all of those other elements as well, I'll be sharing those with you after the final decision is issued.

Okay. Understood. Just to be clear on that, the 6-week post final decision update could also offer a view on those other opportunities?

Yes.

Got it. Got it. Super helpful. And then turning to Woolsey, just following rebuttal here, how are you feeling about the ability to reach a settlement in that over the next few weeks?

I think you know that we are always open to settlement discussions as long as they're fair and reasonable discussions. We have filed our rebuttal testimony. We think we put a good showing in for that as well. I think the commentary from -- in the testimony from interveners was really focused on our various programs and how we executed on those.

And we think we have demonstrated both in our original testimony as well as in our rebuttal that we have acted as a prudent operator.

The next question comes from Carly Davenport with Goldman Sachs.

Wanted to just ask on some of the affordability legislation that's been proposed in California, specifically on the provisions around securitization. Just can I get your thoughts on perhaps other alternatives that you think could still support affordability in a more constructive way? And then if you've done any work to kind of quantify the potential impacts if the securitization provisions were passed as written, I would be curious if there's anything to share there as well.

Yes. Let me start on this one, and Maria may have additional comments. I alluded to a high level in my remarks to some of the other alternatives out there to try and work on affordability for our customers. First and foremost, Carly, it really starts with the utility being an excellent operator.

And so that's why I spent time on my comments to make sure that investors understand the hard work that this company has taken on over multiple years to continue to look at opportunities to increase O&M efficiency as well as capital efficiency. We talk about making sure that we are capturing customer value across all colors of money. And so that's work that continues and we're excited about the opportunities to use technology and continued process improvement to attack that. And that's frankly something that I know our Sacramento team and I personally have spent time making sure we share with policymakers so that they understand that starting point.

Secondly, there's a number of areas like public purpose programs, right? You've heard not just us, but you've heard other thought leaders across the industry, including academics, talk about how there are programs like the subsidies that support low-income customers that today are carried in on the electric bill. But from a policy perspective, would make more sense being born on the taxpayer build. And so that's another kind of broad category.

Yet another one is net energy metering, right? And so we are looking at provisions around that, and you've seen some build activity in Sacramento trying to address that. So finally, and maybe this leads to the back part of your question it's important that policymakers, legislators understand how the numbers end up working, right, particularly when you look at something like securitization. As I mentioned in my remarks a few minutes ago, I'll say it a little differently.

There is no free money here. There's no free lunch. And from a customer perspective, I appreciate, and in fact, I've had very candid discussions with legislators around this. I appreciate they're looking to address affordability by reducing the amount of the bill that's going towards shareholder earnings.

And what we are making sure that we're conveying is that in doing that, you're altering the overall balance of the regulatory framework, asset, for example, the rating agencies look at this. They are going to see that, that is a utility that has less credit quality. And that translates into cost of debt, which got higher cost of debt gets passed through to the customer. We try to come with some estimates.

They're not quite ready for prime time, but we are pretty confident that if you see a dollar of foregone earnings and that you might think that that's a $1 of customer savings, that will actually lead to more than $1 of added customer cost over the long run. And so we've been very clear about that. Final point I make is that you often hear in Sacramento are concerned about utility profits in general. And so when we post the business update tomorrow or the next couple of days, you will see a chart there from new analysis that our team has done that is looking at a comparison of SCE's average bill for an average residential customer and comparing it to an average municipal power bill in our territory.

And we have a lot of respect for our peers in public power. So it's not about better or worse, but it's looking at what are the differences here. And just speaking qualitatively, you'll see numbers when the chart posts in the business update, you'll see that, yes, SCE's average bill or bill for the average residential customer is higher than that for public power. But the reason it's higher is primarily around elements that are not in municipal power spill.

For example, taxes that they don't pay. But ultimately, somebody in society has to pay, right? Public purpose programs, subsidies that we're required to carry our bill that they are not. Wildfire mitigation expenses that I would think any utility in our area, whether public or industrial owned will have to ultimately be varying in the long term.

When you then take a look at the pieces that are truly comparable, which is most of the bill, right? The operational cost for T&D and generation and purchase power with financing costs fully baked in there. So those utility profits are part of that analysis. You'll see that when we compare to our good friends at the Los Angeles Department of Water and Power, the SCE bill, that portion of the bill, just the majority of the bill is actually a few dollars cheaper every month than it is for our colleagues at L.A.

And that in spite of the fact that we have a system that should be more costly to run because we serve something like 3,100 customers per square mile, whereas I think LADDVP has about around 105 customers per square mile. And again, that is with profits embedded in that analysis. So I think it just goes to show that the investor on utility model is one that has stimulated innovation, stimulated efficiency by providing, frankly, a capital market signal to our team. So I know there was a lot to fulfill out of you, but that's a way -- another way in which we're trying to quantify -- what's really -- what matters in the end is the impact on total bills.

Maria, I know you said a lot there, but anything else you would add or correct?

Yes. I think Carly, you had one other question. And I think in terms of how do you think about the math, obviously, the utility is all about rate-based math. So you can look at it from that perspective.

We continue to see a tremendous amount of customer need and opportunity to support that need that is supportive also of our long-term growth trajectory. So I think those were the 2 parts of your question.

The next question comes from Angie Storozynski with Seaport.

So just -- I mean, we're waiting for a number of regulatory decisions for you and your California peers. And I'm just looking at -- especially about the cost of capital filing, given the backdrop, a very challenging backdrop for an electric utility in your state, it doesn't seem like there's that much support in and giving you a higher ROE in order to recognize the risk. All of the fixes that we're hearing about from the legislature seem temporary to me, at least patches, right, with equity contributions from utilities. So again, like if you take a step back, one could argue what's the incentive really to as an investor to support California utilities given the headaches that I just mentioned and the fact that you're not really being remunerated for the higher risk that you are accepting.

Again, that's just being blunt here.

I appreciate it, Angie. Listen, I'll give you a short answer to this one. California has ultimately generally gotten it right. And so right now, we're seeing proposals in segment, but we haven't seen a final bill.

We've seen, I think, supportive action of the PUC at the end of the day after you go through a lot of process. Not a guarantee that they'll get it right again in this decision or that decision, but overall, we have a state that is committed to serving customers committed to the load growth that's coming across the state from electrification and data centers, et cetera and it's committed to the clean energy transition for which they need our infrastructure. So I would -- maybe what I'd qualify your thesis, Angie, by saying, yes, it feels bumpy right now, but it's felt monthly before. And ultimately, we've seen policymakers do the right thing.

One thing, Angie, you said fixed has been temporary. And I think maybe just to follow up on something that Pedro said in his prepared remarks. I think when you think about the things that are challenging California right now, affordability, yes, but also enhancing wildfire protections, et cetera. I think there are things that are, as Pedro mentioned, will happen this year, this session that really go to the foundation of stabilizing the IOU framework.

And from that stable, more stable foundation, can move on and really address what is a societal issue, right? So there will be more work to come in the future around homeowners insurance, around building codes and standards, around hopefully, liability reform. So all of those things, you're right. They're not all going to happen overnight, but we're starting from the foundation of build on the framework of AB 1054, stabilize and enhance that shore up people's confidence in that approach.

And then we can move on and take a longer-term view of other things that need to happen.

Understood. Okay. And again, I appreciate that we have a few details about the story that broke last night. But the contribution, the IOUs contribution to the fund I mean, is it fair to assume that SCE would have a disproportionately large contribution versus other utilities just like we saw what happened with PG&E at the first time around with this wildfire fund?

Yes, Angie, it'd be really tough to comment on that right now. Obviously, we're advocating to make sure there's a fair allocation across all the customers involved and the shareholders involved across the utilities. But as I said earlier, we're going to look at not just this term or that term, we're going to look at all the terms together when they come together into a package and then make a decision as to whether it's supportive piece of legislation for our customers and for our shareholders. And again, I'll reinforce what Maria just said here, we said it many times before.

This is a big, big societal issue. So right now, I'm grateful that there's a lot of focus on getting the first step around the utility piece done in this legislative session, but equally important will be that work that Maria was mentioning for next year's session because the state really needs to work on protecting homes more and reducing fire spread and continuing the great work you've done on fire suppression and redoubling that and fixing the insurance market, all these other things that add up to the wildfire issue writ large for California.

The next question comes from Gregg Orrill with UPS. I'm sorry, UBS.

Gregg, you're almost going to deliver packages there.

Yes, yes. I had 2 questions, possibly. Regarding the Eaton investigation. Can you remind us of kind of where that stands and who's involved in running that and when you expect an outcome? And then -- where do you stand on the idea of issuing equity to fund contributions to the $18 billion wildfire replenishment?

Okay. I'll take the first 1 and Maria can take the second one. On the Eaton investigation, I think I shared this in my comments already, but let me just recap here. Really think about it as 2 separate investigations.

There's the official investigation that has the involvement of LA County Fire being led by them and the work with CAL FIRE and others. So that's -- it's track. We don't -- we provide support to that when they ask us for details, et cetera, but that is an independent investigation. Separately, you have Edison's own investigation which we are doing frankly in close engagement with a number of stakeholders, including attorneys for plaintiffs as well as communities, local governments, et cetera.

And the reason for that engagement is that, that way that there is clarity about how we're proceeding, there are -- all the questions get addressed upfront in terms of how should you touch this piece of equipment or how should you remove that bracket from that tower or what have you. That does mean that it adds time because every time that you're going to do a piece of work, there's collaboration involved in developing protocols that everybody will be in agreement with. So that's why that is taking a while. We have shared in terms of timing, Gregg, that while we can't predict or forecast what the ultimate timing will be for either of the investigations.

Typically, in these complex fire cases, we have seen the official investigation take 12 to 18 months from the -- for the start of the fire. And then, again, we don't have an estimate on how long ours will take, particularly since then this is a collaborative process that just adds time to every step.

So, Gregg, I'll address your second question. So I think, first, again, we want to, as Pedro said before, understand the entire package that is potentially in any piece of legislation that comes along. And frankly, from that perspective, something that had a large firm payment would actually drive our cost of capital higher and would ultimately not benefit customers. And we are very, very aware and sensitive to where our share price is changing and what that valuation discount is.

So that's one piece of it that's top of mind for us. The second piece of it is just from an efficiency perspective, the fund doesn't need to be shored up with cash today. Pedro already discussed that previously. If you think about the process that you won't have to go through in order to get to a place where you're actually accessing the fund, if an event happens, then you have people making claims, you have to go through your claims process.

As we know from our own experience on prior events, that takes a long time. So at this point in time, we don't actually see a need and it would be inefficient for the fund itself to have cash upfront. So those 2 pieces, how it affects overall our capital structure and our cost of capital and what the ramifications would ultimately be then for customers, as well as the actual needs of the fund, I think brings together the point that it doesn't feel necessary to us right now. But again, we will look at an entire package when it becomes available to us.

The next question comes from Paul Zimbardo with Jefferies.

To follow up a little bit on the prepared remarks comments, you stated that PD -- and about the rate case specifically, the PD general line with the range-based, rate-base forecast. Is it also fair to say it aligns with the EPS growth rate considering the proposed attrition increases in the later years?

Yes. So it does align with the range case forecast and rate base is the driver for earnings. We will have to, as we get through this final decision, run through all of that and give you more granularity around places that where we might see additional capital opportunities, et cetera, to really inform sort of the more detailed analysis that we'll be providing. But it is aligned with the range case forecast, yes.

Okay. Understood. And then just as we think about that roll forward that you referenced 6 weeks afterwards, should we think about the base for that as the, I think it's $5.84 2025 ex the TKM. Should we think about a different year? Just any color you can provide on the leap off point would be helpful.

Yes. We'll be, I'll say, replicating what we have there today, which is our '25 through '28 analysis.

The next question comes from Anthony Crowdell with Mizuho.

I guess that's better than the package delivery for, but they do have nice brown uniforms. Just, I guess, if I could ask a question, maybe it's in the same vein as Angie and Nick's question earlier. And I understand it's just -- we're just all going by a Bloomberg story last night, there's not -- there's no framework out on the legislation. But it seems like in all the discussion that everyone having, maybe the core of all the discussions or what the legislature is working on is AB 1054. And AB 1054 had some really good aspects to it, but also it's a shared risk model between ratepayers and investors.

I'm curious if -- and maybe it's in line with Andrew's question, I'm curious if we're still going to use AB 1054 going forward as an anchor for the solution that's going to be required. And what concern that it continues to be a shared risk model between customers and investors. And then I have one follow-up.

Yes, sure. And maybe a quick perspective. First, there are elements of AB 1054 that continue to endure and frankly, are really important. You've always heard me say that perhaps the most important part of AB 1054 is the strengthening of the prudency provisions, right?

And so glad that, that survives the existence of the fund. So that's really critical. I think your question was if they look at what the framework is for an extension, is that following the template of 1054, that appears to be the overall direction, it is risk sharing. You heard my comments earlier in response to, I think, to Angie's question, about how in an ideal world and frankly, in the investment utility model, shareholder contribution to that risk really should be coming in when there's been a prudency issue, right?

And there's a penalty, right? Because otherwise, if we're managing wildfire risk and we've been prudent and the worst happens, but it has exacerbated by all sorts of other conditions, and it's not because of a lack of prudency, that's a prudently incurred cost that should be borne by customers and so there was a departure from that to get to the risk sharing in 1054. What we read along with you in the article last night, and we certainly have heard behind the scenes is that the legislators were looking at continuing some sort of risk sharing. And again, our decision ultimately on whether that's something that we should accept or indoors will really depend on all the levels in the details and the full package that gets presented to us.

That gets to your question. And Maria?

Yes, maybe just one more thing, Anthony. I think it goes back to what we were talking about earlier. AB 1054, shoring up the -- enhancing the wildfire fund, restoring people's confidence in it, that's a step, and I think that's a step that's very important is the foundation and certainly is 1 we're focused on for this legislative cycle. But the state of California has a wildfire issue, writ large beyond anything associated with industrial and utility equipment.

I think as we move forward in time, we will be advocating for and supporting other approaches, other things that the state can look at. We'd be very supportive of any sort of analysis that would be ongoing because it is a lot of factors, right? We have to address building codes and standards and enforcement of those. We have to address the homeowners insurance market.

We have to address liability reform potentially. There are a lot of different pieces of this. And by the way, right now, AB 1054 is IOU solution, right? What about all the munis in the state?

So there are a lot of players, and this is a much bigger analysis that will need to be done. What we're focused on now and why we're referring so often to AB 1054 is because we need that as a foundation so we can continue the good work with the rest of the stakeholders.

Maria, I'm glad you raised it and I would just add one accent to that. We know the state knows that the underlying wildfire risk, again, broadly for the state, not just utility ignitions, but wildfire risk is only going to increase with climate change. I remind you that the adapting for tomorrow, white paper that we put out, along with the SCE's climate adaptation and vulnerability assessment, about 4 years ago or so, I think it was. That said, that by 2050, California is going to be seeing -- it could be as much as 3 feet of average sea level rise and 7x more the kind of hot days that today are in the top 1% and more floods and more droughts.

And importantly, the risk of 20% more wildfire ignitions across all causes. So it's imperative to this state be able to prepare for that risk that we know is coming and it's going to be made worse by climate change. I think the good news here is that, I'll tell you, my discussions with the governor, he understands that, right? My discussions with legislative leaders, they understand that.

And we have 1 article, we have 1 framework and there's a lot more work to be done before there's a bill that gets voted on and gets signed. But I think it's really important that folks have that underpinning of where is the risk headed, what can be done this year, right, just a kind of narrower extension or strengthening of the 1054 piece, but importantly, work hopefully next year on this much broader economy-wide issue.

Great. And then one follow-up. And again, as you just said, there's so many different, I don't want to say propose, but different aspects of what they're going to come out with. But how does Eaton, the Eaton event, play into it?

Meaning is that only going to be able to access this current fund, and I understand the current fund is well funded right now. I think the earthquake authorities said it's fine. Or again, no one knows the cost estimates, but should those cost estimates be greater or is it the actual liability greater than what the current fund is, would they -- would the Eaton Fire be able to access whatever comes out of this legislative session at the end of September?

And Anthony, this whole matter depend on the final devils in the details. I will tell you the sense that I think is fairly broad right now in Sacramento is that the current fund is there for current fires. And once you have an expansion of the fund, it's really for fires that come after that. So that, I think, is kind of the general sense, but getting ahead of ski tips here because we don't have an actual piece of legislation in front of us.

And just to reiterate, I think Pedro mentioned this earlier, Anthony, sort of what the status of the fund is -- the fund administrator just had a Board meeting last week or week before and indicated that based on their analysis, they have $22 billion of claims paying capacity available in the fund. And that's after accounting for other fires that are already accessing the fund, if you will. So I think that's a pretty robust number. And that would come after $1 billion of our own customer-funded self-insurance to utilize to pay claims.

So it's a very robust point at which we are at this moment in time. And we don't, at this point, know exactly the cause of Eaton investigation is still ongoing. What we have said that there is a probable loss, but I think that's a very robust number based on the analysis that the fund administrator has done themselves.

The next question is from Ryan Levine with Citi.

What are the advantages of creating the new wildfire recovery compensation program to address the priorities of the community and key stakeholders? And what's the logic of creating this new program as the legislative session enters into a critical phase?

Yes. I'll answer the second part first. I think totally decoupled from the legislative session, right? We have now told our investors in the community that there's a probable loss, right?

Maria just reminded folks if there's a probable loss there, then that means that there would likely be draws on the wildfire fund. And meanwhile, you have a community that's been deeply impacted. It's just hard breaking to think about everything that's happened there. And so to the extent that we have a probable loss and so Edison is dealing with lots of litigation already, et cetera, then I think it's a good idea to support the community by moving quickly and establishing a program that can help cut through a lot of our tape and cut through the extensive time that's required for traditional litigation and have a place where eligible folks have been impacted, can go to get claims satisfied quickly.

We said in announcing the program that if they choose to have an attorney, they certainly welcome to do that. It's also okay to participate in the program without an attorney and taking on those legal costs. We've also said we're still deciding the program. We wanted to let the community now that is in the works.

And we did that process in the week and then solicit input, which we will be doing, soliciting input both our elected officials as well as from plaintiff attorneys and other stakeholders. So lots of good reasons to just do this and do the right thing for the community, given that we're facing a probable loss.

And maybe, Ryan, just to add on to that a little bit. We are going through the process still, as Pedro said, in terms of the investigation. The fund does -- the recovery fund does support the community that SCE serves as the community that SCE also does business in. And we also know from prior experience that if we can move through this process and handle the claims expeditiously, which is, of course, helpful to the victim, it also mitigates construction cost increases and escalation can mitigate legal expenses.

So it's also a good stewardship of the wildfire fund itself, which would then go to benefit the community even further as well as the risks that the company might otherwise face. So I think it's got a lot of benefit to it. And we got a lot of commentary even at the CEA's Board meeting about it in support of the action.

Lots of parties went for this.

I appreciate that. And just maybe one follow-up in terms of the CEA hearing from I guess, 2 weeks ago now, there's a lot of talk about subrogation claims and trying to minimize that investor group receiving capital. Does this action in your view, have an impact on who will ultimately get the proceeds from the funds?

No, I think the CEA is, of course, monitoring that. They are a lot of insurance professionals who work there, they are concerned about inflows into the fund and sort of the work that's going on around AB 1054 enhancements. They're concerned about outflows and fund as well as the longer-term solutions. I think all of those things are of interest to them.

In terms of subrogation claims, they had a long discussion, but I think they recognize that they need to go through this in a measured way and figure out what actually will be the most impactful thing. I don't think that their intention is to put the utilities at risk in terms of accessing the fund.

And that was our last question. I will now turn the call back over to Mr. Sam Ramraj.

Well, thank you for joining us. This concludes the conference call. Have a good rest of the day. You may now disconnect.