Edison International (EIX) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Edison International Second Quarter 2026 Financial Teleconference. My name is Michelle, and I will be your operator today. [Operator Instructions] This call is being recorded. I would now like to turn the call over to Sam Ramraj, Vice President of Investor Relations. Mr. Ramraj, you may begin your conference.

Thank you, Michelle, and welcome, everyone. Our speakers today are President and Chief Executive Officer, Pedro Pizarro; and Executive Vice President and Chief Financial Officer, Aaron Moss. 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 Aaron 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 one question and one follow-up. I will now turn the call over to Pedro.

Thank you, Sam, and good afternoon, everyone. My comments today focus on 3 areas: a legislation update, our continued work to make communities safer and more resilient, including wildfire mitigation and recovery efforts; and our broader progress in supporting a reliable, affordable and clean energy future. Starting with a brief comment on earnings. Edison International's second quarter 2026 core EPS was $1.54, bringing year-to-date core EPS to $2.97. With this strong start to the first half of the year, we are confident in reaffirming our 2026 core EPS guidance and other financial targets, including our 5% to 7% core EPS growth over the long term. Aaron will discuss our financial performance in his remarks. On the legislative front, we're actively engaged with the Governor's office, legislators and key stakeholders on both wildfire reform and affordability. There is continued recognition that the current framework is placing increasing pressure on customers, communities and the cost of financing the investments utilities are making to support California's climate goals. Consistent with the themes we have highlighted, discussions center on aligning risk, supporting affordability and maintaining access to capital at a reasonable cost. But this is about more than utility finance. Moody's recently highlighted that the implications extend beyond utilities. They note that wildfire-related costs can affect electricity rates, affordability and California's broader economic competitiveness. S&P has also observed that wildfire-related financial risks increasingly extend beyond investor-owned utilities to public utilities, local governments, insurers and the communities they serve. That is why establishing a durable long-term solution matters not only for utilities but for customers, businesses and the state's economy as a whole. While we are encouraged by Sacramento leadership's focus on this important topic, we also recognize that the outcome remains uncertain. So we will be thoughtful about the implications of what the legislature ultimately enacts. SCE's current GRC authorization supports the utility's plan through 2028, and future investments will continue to be evaluated through a disciplined benefit-cost lens. SCE will continue to safely serve customers and maintain its unwavering focus on safety. At the same time, the clarity and quality of the legislative outcome will influence the cost of capital available to support future investment. A durable and financeable framework will help maintain access to lower cost capital, supporting affordability for customers and continued infrastructure investment. Conversely, a framework without sufficient predictability will increase Edison's financing costs, making SCE's investments for customers' benefit more expensive. It will also influence how we prioritize and deploy future capital. Turning to operations. SCE took the first step in the next GRC process and filed its Risk Assessment Mitigation Phase, or RAMP, application in May. This outlines the risk mitigations that guide proposed investments across wildfire risk, transmission and distribution reliability, cybersecurity, climate adaptation and other safety-related measures. For context, the investments identified in past RAMP filings accounted for about 1/3 of the total capital requested in the GRC. As in prior cycles, this process provides a clear safety and risk-driven framework for evaluating capital needs and supports consistent engagement with regulators and stakeholders on safety and risk priorities. A key topic in RAMP is wildfire mitigation. SCE's strategy continues to be comprehensive, as noted on Page 3. What is increasingly important is execution and prioritization. SCE is using more advanced wildfire modeling, improved data and climate-informed analysis to better identify where wildfire consequences could be greatest. SCE has developed an enhanced wildfire risk model that combines multiple data sources to improve how it identifies, prioritizes and plan safety measures while accounting for high-impact wildfire events that may not be reflected in historical data. The utility is also broadening the range of risks and failure scenarios it evaluates, reflecting both lessons learned and a more comprehensive understanding of how wildfire risk can develop. That includes looking beyond individual equipment incidents and assessing how multiple conditions and events can combine to influence safety consequences. All this will inform SCE's mitigation investments in the next GRC, which will include continued grid hardening with additional covered conductor and targeted undergrounding during the 2029 to 2032 period. SCE's preliminary estimates in the RAMP application for continued hardening are about 450 miles of covered conductor and approximately 190 miles of targeted undergrounding. To summarize, SCE's approach is increasingly location-specific, consequence-informed and adaptive. This builds on the substantial progress SCE has already made hardening its system, including the deployment of about 800 miles of covered conductor and about 90 miles of undergrounding, including all rebuild areas since January 2025. Importantly, SCE has not experienced a covered conductor failure associated with the risks that technology is designed to mitigate. Combined with millions of inspections and vegetation management activities as well as expanded situational awareness capabilities, these efforts have materially strengthened the grid and reduced wildfire risk. As a result, SCE is continuing to sharpen how it prioritizes mitigation, not only by looking at where the likelihood of ignition is highest, but also by identifying where the potential consequences to communities could be greatest. The utility is directing mitigation to areas where it can provide the greatest safety benefit, using better data and ongoing learning to adjust as conditions change, all while focusing on affordability for customers. I'd now like to highlight an initiative I'm personally really excited about as we think about Edison's future. We are increasingly combining operating experience with richer data, advanced analytics and AI-enabled capabilities to improve how risks are identified, prioritized and managed. Advances in AI will be among the most important tools available to utilities over the next decade. For SCE, the opportunity extends well beyond individual use cases. AI is an important enabler of the utility's long-term transformation, helping accelerate operational excellence, improve how the grid is planned and operated and strengthen wildfire mitigation efforts. The focus is on delivering tangible outcomes, better decisions, faster execution, lower costs and improved customer value. As these capabilities continue to mature, SCE expects them to become an increasingly important driver of safety, reliability, affordability and overall business performance. Aaron will provide some examples of in-flight activities shortly. Moving on to the Wildfire Recovery Compensation Program, or WRCP. There is continued community interest in the voluntary program. SCE has now extended more than 2,200 offers totaling over $775 million to over 12,300 community members impacted by the Eaton fire. SCE remains committed to providing information to community members to make informed decisions about what is best for their situation. Taking a broader view on sustainability, we remain committed to supporting the clean energy transition while maintaining the safety, reliability and affordability that our customers expect. Our 2025 sustainability report has details about our accomplishments, goals and long-term commitments. Here's a couple of examples. SCE delivered at least 60% carbon-free power to customers, over 70% cleaner than the national average. SCE contracted approximately 900 megawatts of energy storage, bringing the total at year-end to about 9,200 megawatts owned or under contract, one of the largest storage portfolios in the nation. I'm proud of our team, and I'm proud of the progress that we continue to make toward a clean energy future that benefits everyone. We have and we will always put customers first by strengthening the grid, mitigating wildfire risk and advancing clean energy to support affordability and community resilience for generations to come. With that, I'm very excited to turn it over to Aaron for his first financial report as our new CFO. All right, Aaron.

Thanks, Pedro. Good afternoon, everyone. It's great to be with you today. During my prior roles at Edison, I've had the chance to get to know many of you over the years. As I step into this role, I'm looking forward to continuing those conversations and discussing how we are executing on our strategy, investing in the business and creating long-term value for all of our stakeholders. In my comments today, I will cover our second quarter 2026 results, capital plans and reaffirmed earnings guidance. EIX reported second quarter earnings per share of $1.54 compared to $0.97 last year. Page 6 provides the year-over-year quarterly variance analysis. The quarter reflects continued stability in our core operations. Results benefited from regulatory decisions last year, including the GRC decision as well as the ongoing reduction in interest expense associated with the Woolsey cost recovery. Let me reinforce what Pedro said. With this strong start to the first half of the year, we are confident in reaffirming our 2026 core EPS guidance. We are also reaffirming our long-term core EPS growth rate of 5% to 7%. This outlook is supported by our capital investment plan, constructive regulatory framework and continued focus on operational excellence. At SCE, results for the quarter were primarily driven by the timing of the GRC decision last year, along with continued focus on strong performance across our core operations. We continue to optimize how we approach O&M spending over the course of the year. This allows us to prioritize our work to address operational needs as they arise while maintaining overall cost control. This approach supports both near-term performance and long-term value creation for customers and capital providers. The parent and other core loss was favorable by $0.06, primarily driven by the net financing benefits of the preferred stock redemptions we initiated at the end of 2025 and completed in the first quarter of this year. Turning to SCE's capital plan. We continue to see strong investment opportunities across the business, driven by infrastructure replacement, wildfire mitigation and growing demand for electrification. Our plan is centered around these priorities and supports long-term rate base growth of about 7%. We remain focused on optimizing these investments in a way that balances system needs with customer affordability. As part of that execution, we are pleased with SCE's progress on its wildfire mitigation investments. Of SCE's roughly 16,800 distribution lines -- distribution line miles in high fire risk areas, SCE has successfully hardened about 90%, including nearly 7,200 miles of covered conductor. These investments remain a central part of our capital plan and are key to reducing wildfire risk and improving system resilience over time. Moving to financing activities. SCE successfully completed the Woolsey Fire cost recovery securitization earlier this week, generating approximately $2 billion in proceeds. We were pleased with the outcome and the strong demand we saw from capital providers. The proceeds will be used to recover claims and other costs, including retiring related debt, further strengthening our balance sheet. Now let me transition to operational excellence, which benefits customer affordability and long-term performance. This is an area where I spent significant time in my prior roles within the utility and will remain an ongoing focus as we look to enhance both efficiency and execution across the business. As part of that effort, we are continuing to simplify processes and expand the use of emerging technologies, including targeted AI applications in areas where they can improve productivity and quality. Our efforts are focused on high-volume, repeatable work where we see meaningful opportunities to drive productivity and quality. For example, our planning organizations produce on the order of 100,000 project designs each year, and we are deploying tools to help automate initial design generation and the validation of final designs against our standards. We expect these improvements to accelerate design cycles by 20% to 30%. Similarly, we process approximately 40,000 permits annually across multiple agencies and systems. We see opportunities to streamline this process, reduce cycle times by approximately 20% and improve throughput. Efforts like these are intended to create additional capacity in the system, support timely execution of our capital program and improve cost performance over time. Our focus on operational excellence is one of the important ways we deliver consistent financial results. Looking at our year-to-date performance reinforces our confidence in the outlook for the business. We see continued momentum in our capital program, strong regulatory visibility and stable operational performance, all of which position us well for the rest of the year. Consequently, we are reaffirming our 2026 core EPS guidance range of $5.90 to $6.20. Our priorities remain consistent, delivering on our operational commitments, advancing our capital plan and maintaining a strong cost framework, all while supporting a safe and reliable system for customers. Let me conclude by saying that we are pleased with our results. The business is performing as expected. Our capital plan remains on track, and we are well positioned to deliver on our financial commitments for 2026 and beyond. That concludes my remarks. Back to Sam.

Michelle, please open the call for questions. [Operator Instructions]

[Operator Instructions] Nick Campanella with Barclays.

So I know that everyone is working to get to a financeable solution for the fund, and you acknowledge in your comments that it's a broader state issue, obviously, with a range of stakeholders being impacted. And at the same time, you're kind of saying that future investments will be evaluated and there's some uncertainty. So can you just maybe kind of talk about what's on the table from the utility side? And how are you thinking about weighing things like future securitization of capital or upfront contributions like in last year's legislation? And I know that you're in the early stage of the GRC with visibility, but is there scenarios where we could expect a new plan come third quarter?

Yes. So Nick, thanks for the question and reiterating a little bit of what I was sharing earlier. We are in a unique position in that we have a GRC in hand at SCE. It's been approved. We have full visibility -- line of sight visibility to 2028 on our capital spending. You know from what we've shared with you all over the past while that we can execute on that capital plan without any equity needs. We've gone further, right, and extended guidance beyond that rate case to provide some insights on where we think '29 and '30 are headed and committed to guidance that continues the need for growth capital investment for our customers and still don't see a need for equity through that 2030 time period. So particularly as we talk about the period to '28, we have just firm line of sight, and that's already approved by the PUC. Now we don't know what's going to happen in Sacramento. I appreciate all the efforts of everybody who's engaged there. By the way, I appreciate the efforts of investors who are weighing in and providing your perspectives. It's really important that our policymakers understand what's at stake here and the fact that they have a lot of opportunities to invest capital. And so California -- those of us in California are competing with other states and really with other global locations. So that's a quick segue tangent to say thank you for those efforts. But we don't know what's going to happen ultimately. Ideally, we would see a comprehensive solution. We may not, right? There's 4 weeks left. We haven't seen language yet. We know people are working hard, but this is not just a utility issue. It's a big cross-economy issue. And so there's certainly a possibility that we might not see a complete answer. We might see a partial answer. We might see some work done in 2026 and then some work left for 2027 in the legislature with a new governor and a number of new legislators. So it's really hard to sit here and say, well, without understanding what the answer might be, here's what some of our reaction to that might be. Clearly, if we saw that whatever the answer in '26 is, it was not viewed favorably by the market and that dramatically changed the inherent cost of our equity, then we would want to be thoughtful about making sure we're not making negative NPV decisions on behalf of investors. At the same time, upholding our obligations to safety and reliability that are set in PUC regulations. So that's going to be the balancing act. That's a lot of words. I don't think I gave you the sort of specific answer you wanted, Nick, but that's where we are today. And when we see what happens as of August 31, then September 1, actually probably later that night or August 31, we'll start working on what the implications are and whether there's any near-term actions that are needed or more impacts in the longer term, and we'll keep you posted.

I appreciate you running through that. And then just my second question is just the slight change in the 10-Q language around Eaton and that you believe the equipment was associated versus could have been. And I understand that you've previously been saying you're not aware of any other evidence, but can you frame how that disclosure fits into the context of the wildfire compensation program and getting like greater visibility eventually on what the low end of Eaton could be from a liability standpoint?

Thanks, Nick, for the question. And just briefly, look, we always look at our language and want to make sure that it's as streamlined and straightforward as possible, both for investors and for the community. And so this is a little bit of just streamlining the language, but also recognizing that there's been the passage of time. And as the fuller disclosure acknowledges, our view on this is based on the information we have in hand today and absent additional information. The reality is since last quarter, 3 more months passed, there are no other -- no viable alternatives have appeared. And so we thought that the slight streamlining that we did there was appropriate in terms of just saying that SCE's equipment likely was associated with the events. But we also recognize that there are a number of other factors that have impacted ultimately the extent of the Eaton fire and not only the weather, but some of the factors that you saw show up in the cross claims that SCE filed against a number of entities. So that's all that the language is about. Going to your question about how does this all dovetail with WRCP and ability to estimate potential liability. Again, we said for a long time now that the liability is probable given everything here. We have taken accountability and want to help the community by launching the WRCP. But the numbers I shared with you earlier of over 2,200 offers provided, even the claims numbers themselves. So you think about over 12,300 individuals represented in those claims, that is still a small number relative to, for example, in litigation, we now have -- and I'm looking at [indiscernible]. I believe we have over 30,000 claims that have been filed. And so we just don't have the volume to the WRCP yet to use that to provide an estimate of the low end of the estimable range under GAAP principles. Similarly, if you look at subrogation claims, you saw in our disclosures, I think we repeated this from prior quarters, we -- SCE has now entered settlements with 2 insurers at around $0.55 on the dollar. But that's 2 subrogation claims that were settled out of what may likely be many. And so there, again, we just don't have sufficient volume to yield an estimate. Hopefully, I covered all the parts of your question there, Nick.

And the next question comes from Carly Davenport with Goldman Sachs.

Maybe just a follow-up on the wildfire side. You continue to work through the claims on the wildfire recovery compensation program. Just curious if you have any view on timing to sort of crossing that $1 billion threshold and when you might envision sort of making first filings to tap into the wildfire fund for reimbursement?

Yes, Carly, between the subrogation settlements that we've made and the WRCP settlements that we're making, we are crossing that $1 billion threshold. So we've worked out with the CEA, who's the administrator of the Wildfire Fund, prefunding mechanism so that we don't come out of pocket for any of those dollars there, and we're working through with them that process to fund the claims now.

Got it. Okay. Really helpful. And then maybe just as we think about the potential outcomes in the legislative session and potential action plan on the back of that. Could you maybe just talk a little bit about potential options on the table in the event that reform does not move forward this session? And maybe specifically, you referenced, obviously, the RAMP filing for the next GRC. Any potential changes that you might expect to see on the next GRC filing in the event that we don't see reform move forward this session?

I mean just to maybe reemphasize a point I made in my prepared remarks, right? And I was responding to Nick's question here, we don't know what we're going to see. So it's really difficult to say what the reactions might be. I did acknowledge though that if whatever comes out ends up significantly impacting the underlying cost of equity, then that will have some influence on future investments. Again, there's things that are sacrosanct, right, around safety, reliability. We have obligations under the PUC code. But where there are places where there might be some more flexibility, latitude that these could be candidates for rethinking or factoring that into future capital programs. Aaron, anything you'd add or Steve? Yes. Sorry, Carly, I know you all want more specifics, but we're just not there yet. We want to be very thoughtful when we see what we see and work from there.

And the next question comes from Richard Sunderland with Truist Securities.

Pedro, I just wanted to go back to some of your comments in the script, and you talked about a number of different issues and focus around the legislature, but affordability was certainly part of that. And given there's been attention broadly on affordability, call it, the political backdrop in light of that and then more specific to this legislation, how do you think the affordability conversation stands right now, whether in the context of that legislation or more broadly? And how has that tone changed over the past few months?

Yes. That's a great question, Rich. And I would start by saying this. It's a topic that just colors everything, not just in California, but really across the country, right? We're in a period that has followed, frankly, some of the pressures you saw in COVID and moving on. You see now, particularly maybe even more so in other parts of the country, significant pressures as you see dramatic growth in energy consumption and that's driving infrastructure needs. I think the industry as a whole is ready to meet those needs, but we recognize region by region, there are pressures that maybe specific to those. Here in California, when you take a look at affordability, the reality is that energy, in many ways, is not the main driver. One of the points that we continue to make is that for the average SCE customer, their total cost of energy is in the lowest cost quartile relative to the rest of the country. The challenge here, though, is that housing costs are -- really dominate affordability impacts for the average consumer, along with other costs, right? And so in that environment, I think there's a tendency to go look for any levers that can be pulled. When you then have a discussion going on in Sacramento around an important and very visible topic like wildfire, where there's utility cost recovery involved, where there's the connection to insurance rates and availability, right? There's just a lot around affordability that gets wrapped into all this. One of the important points that we then make to legislators is that this is really about customer affordability because the reality is if there is insufficient action in 2026, there's a strong likelihood that the day after or a few days after, we could see credit rating downgrades for the investor-owned utilities in California and potentially for other sectors. I referenced the various Moody's and S&P reports recently that talk about multiple sectors. And so that could be a significant cost impact to the cost of debt that gets passed through to SCE customers if we don't have a framework in the next 4 weeks that is credit supportive for our utility. And if you look at just the S&P ratings, it's BBB- for the utility. So there's nowhere to go in investment grade, right? It's -- the next step is noninvestment grade, which adds a lot of cost. So affordability is really framed around the impact of the absence of legislation on customer costs. And hence, I think the great point that the CEA report made around the sense of urgency here. Aaron, anything you would add there?

I just would say, I think there's a little bit. Rich asked about affordability measures. And I'd just say as part of the legislative package, we're going to evaluate the totality of the package that comes to us and figure out a response that goes along with it.

And the next question comes from Gregg Orrill with UBS.

Congratulations on the result. I was just wondering if there was a way to get a sense of how much of the impact was timing and how much of the upside is in your view, sort of normalized?