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Summary of Significant Accounting Policies (Policies) | 9 Months Ended
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Sep. 30, 2019
Accounting Policies [Abstract] |
Organization and Basis of Presentation | Organization and Basis of Presentation Edison International is the parent holding company of Southern California Edison Company ("SCE") and Edison Energy Group, Inc. ("Edison Energy Group"). SCE is an investor-owned public utility primarily engaged in the business of supplying and delivering electricity to an approximately 50,000 square mile area of southern California. Edison Energy Group is a holding company for Edison Energy, LLC ("Edison Energy") which is engaged in the competitive business of providing energy services to commercial and industrial customers. Edison Energy's business activities are currently not material to report as a separate business segment. These combined notes to the consolidated financial statements apply to both Edison International and SCE unless otherwise described. Edison International's consolidated financial statements include the accounts of Edison International, SCE, and other wholly owned and controlled subsidiaries. References to Edison International refer to the consolidated group of Edison International and its subsidiaries. References to "Edison International Parent and Other" refer to Edison International Parent and its competitive subsidiaries and "Edison International Parent" refer to Edison International on a stand-alone basis, not consolidated with its subsidiaries. SCE's consolidated financial statements include the accounts of SCE and its wholly owned and controlled subsidiaries. All intercompany transactions have been eliminated from the consolidated financial statements. Edison International's and SCE's significant accounting policies were described in the "Notes to Consolidated Financial Statements" included in Edison International's and SCE's combined Annual Report on Form 10-K for the year ended December 31, 2018 (the "2018 Form 10-K"). This quarterly report should be read in conjunction with the financial statements and notes included in the 2018 Form 10-K. In the opinion of management, all adjustments, consisting only of adjustments of a normal recurring nature, 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 ("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, 2019 are not necessarily indicative of the operating results for the full year. Certain prior period amounts have been conformed to the current period's presentation.
Cash, Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted Cash Cash equivalents include investments in money market funds. Generally, the carrying value of cash equivalents equals the fair value, as these investments have original maturities of three months or less.
Revenue Recognition | Revenue Recognition Regulatory Proceedings 2018 General Rate Case In May 2019, the California Public Utilities Commission ("CPUC") approved a final decision in SCE's 2018 GRC. The final decision authorized a revenue requirement of $5.116 billion for 2018 and identified changes to certain balancing accounts, including the expansion of the TAMA to include the impacts of all differences between forecast and recorded tax expense. The final decision also disallowed certain historical spending, largely related to specific pole replacements the CPUC determined were performed prematurely. The final decision allows a post-test year rate making mechanism that escalates capital additions by 2.49% for both 2019 and 2020. It also allows operation and maintenance expenses to be escalated for 2019 and 2020 through the use of various escalation factors for labor, non-labor and medical expenses. The methodology set forth in the final decision results in a revenue requirement of $5.451 billion in 2019 and $5.863 billion in 2020. The revenue requirements in the 2018 GRC final decision are retroactive to January 1, 2018. SCE recorded the prior period impact of the 2018 GRC final decision in the second quarter of 2019, including:
• | An increase to earnings of $131 million from the application of the decision to revenue, depreciation expense and income tax expense. Depreciation expense decreased as a result of lower authorized depreciation rates. An increase in the authorized revenue requirement for income tax expenses offsets income tax expenses recognized during 2018 and the first quarter of 2019. The reduction of revenue of $265 million reflects $289 million of lower authorized revenue related to 2018 and $24 million of higher authorized revenue in 2019. The reduction in revenue contributes to a refund to customers of $554 million which SCE recorded as a regulatory liability as of June 30, 2019. SCE expects to refund these amounts to customers through December 2020.
• | An impairment of utility property, plant and equipment of $170 million ($123 million after-tax) related to disallowed historical capital expenditures, primarily the write-off of specific pole replacements the CPUC determined were performed prematurely.
See Note 11 for further information. 2018 and 2019 FERC Formula Rate In October 2017, SCE filed its 2018 formula rate ("Formula Rate") with the FERC. In December 2017, the FERC issued an order setting the effective date of SCE's 2018 FERC Formula Rate as of January 1, 2018, subject to settlement procedures and refund. In November 2018, SCE filed its 2019 annual update with the FERC with the proposed rates effective January 1, 2019, subject to settlement procedures and refund, and requested a decrease in transmission revenue requirement of $131 million, or 11% from amounts currently authorized in rates. In April 2019, SCE filed an application with the FERC to revise the 2018 Formula Rate with the 2019 Formula Rate, which was subsequently accepted by the FERC, effective November 11, 2019, subject to refund and settlement procedures. In September 2019, SCE filed a settlement on its formula rates for the 2018 Formula Rate case that, will establish SCE's FERC transmission revenue requirement for January 1, 2018 through November 11, 2019 (the “FERC 2018 Settlement Period”). The settlement provides for a weighted-average ROE of 11.2%, which includes a previously authorized 50 basis point incentive for CAISO participation and individual and previously authorized project incentives. Under the settlement, if the FERC issues a final, unappealable ruling that finds SCE is not eligible for the 50 basis point incentive for CAISO participation, then the ROE for the FERC 2018 Settlement Period will be reduced to 10.7%. The FERC has approved implementing this settlement on an interim basis pending the FERC's consideration of the settlement. The transmission revenue requirement and rates that have been billed to customers for the FERC 2018 Settlement Period were based on a total FERC weighted average ROE of 11.58%. SCE will true-up customer rates for the difference between its original request and the settlement from existing regulatory liabilities pending FERC's consideration of the settlement and will reverse the true-up if the settlement is not approved by the FERC. SCE had been recognizing revenue during the FERC 2018 Settlement Period based on its expectations of the probable outcome of the 2018 Formula Rate case. Regulatory assets and liabilities were adjusted based on the probable approval of the 2018 Formula Rate case settlement, which resulted in recording a $48.4 million increase in net income. In the 2019 Formula Rate case, SCE requested a base return on equity of 17.12% ("FERC Base ROE"). The requested FERC Base ROE reflected a conventional ROE of 11.12% and an additional ROE of 6% to compensate investors for current wildfire risk. SCE's total ROE request, inclusive of project incentives and a 0.5% incentive for CAISO participation, was approximately 18.4%, compared to its proposed settlement for its 2018 Formula Rate of 11.2%. In September 2019, SCE filed a partial settlement on the 2019 Formula Rate that modifies its requested FERC Base ROE from 17.12% to 11.97%. This reduced ROE request reflects a conventional ROE of 11.12% and an additional ROE of 0.85% to compensate investors for current wildfire risk. As with the equivalent reduction in SCE's requested ROE in its 2020 CPUC Cost of Capital proceeding, for SCE, this partial settlement reflects the anticipated impact of AB 1054 on its requested ROE. As modified, SCE's total ROE request, inclusive of project incentives and a 0.5% incentive for CAISO participation, would be approximately 13.25%. The FERC has approved implementing the 2019 Formula Rate as revised by partial settlement effective as of November 12, 2019 pending the FERC's consideration of the partial settlement but subject to hearing and settlement procedures. If the partial settlement is not approved by the FERC, SCE will increase customer rates to reflect the impact of the 2019 Formula Rate based on SCE's initial request being implemented effective as of November 12, 2019. Whether or not the partial settlement is approved by the FERC, amounts billed to customers under the 2019 Formula Rate will be subject to refund until the 2019 Formula Rate proceeding is ultimately resolved.
Earnings Per Share | Earnings Per Share Edison International computes earnings per common share ("EPS") using the two-class method, which is an earnings allocation formula that determines EPS for each class of common stock and participating security. Edison International's participating securities are stock-based compensation awards payable in common shares, including restricted stock units, which earn dividend equivalents on an equal basis with common shares once the awards are vested.
New Accounting Guidance | New Accounting Guidance Accounting Guidance Adopted On January 1, 2019, Edison International and SCE adopted accounting standards updates that require lessees to recognize a lease on the balance sheet as a right-of-use ("ROU") asset and related lease liability and classify the lease as either operating or finance. Edison International and SCE adopted this guidance using the modified retrospective approach for leases that existed as of the adoption date and elected the optional transition method not to restate periods prior to the adoption date. Edison International and SCE also elected the package of practical expedients not to reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs, and the practical expedient not to reassess existing land easements. Adoption of this standard increased ROU assets and lease liabilities on the consolidated balance sheets by $956 million and $951 million as of January 1, 2019 for Edison International and SCE, respectively. The standard did not materially impact the consolidated statements of income for Edison International or SCE. Based on accounting standards adopted at January 1, 2019, a lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified assets for a period of time in exchange for consideration. This occurs when an entity has the right to obtain substantially all of the economic benefits from and has the right to direct the use of the identified asset. SCE determines if an arrangement is a lease at contract inception, and for all classes of assets, SCE includes both lease and non-lease components as a single component and accounts for it as a lease. Lease liabilities are recognized based on the present value of the lease payments over the lease term at the commencement date. Lease ROU assets are based on the liability, subject to adjustments, such as lease incentives. In measuring lease assets and liabilities, SCE excludes variable lease payments, other than those that depend on an index, a rate or are in substance fixed payments. SCE's lease terms include options to extend or terminate the lease when it is reasonably certain that such options will be exercised. Operating leases are included in operating lease ROU assets and operating lease liabilities on the consolidated balance sheets. Finance leases are included in property, plant and equipment and other liabilities on the consolidated balance sheets. See Note 13 for further information. In February 2018, the FASB issued an accounting standards update to provide entities an election to reclassify stranded tax effects resulting from Tax Reform from accumulated other comprehensive income to retained earnings. Stranded tax effects originated in December 2017 when deferred taxes were re-measured at the lower federal corporate tax rate with the impact included in operating income, while the tax effects of items within accumulated other comprehensive income were not similarly adjusted. Edison International and SCE adopted this guidance on January 1, 2019 and reclassified stranded tax effects of $10 million and $5 million, respectively, from accumulated other comprehensive income to retained earnings. See Notes 2 and 14 for further information. In August 2018, the FASB issued an accounting standards update to remove, modify, and add certain disclosure requirements related to fair value measurement. Edison International and SCE adopted this guidance effective January 1, 2019. The adoption of this guidance did not have a material impact on Edison International's and SCE's disclosures. See Note 4 for further information. Accounting Guidance Not Yet Adopted In June 2016, the FASB issued an accounting standards update to require the use of the current expected credit loss model to measure impairment of financial instruments and the use of an allowance to record estimated credit losses on available-for-sale debt securities. The guidance, as amended in November 2018 and May 2019, allows entities to irrevocably elect the fair value option for any financial instrument previously measured on an amortized costs basis. Edison International and SCE have identified accounts receivable and available for sale debt securities held in nuclear decommissioning trusts as financial assets in scope for this guidance. Edison International and SCE are in the process of implementing process changes necessary to comply with the standard's disclosure requirements. Edison International and SCE do not believe the adoption of the standard will have a material impact on the financial position or results of operations and will apply a prospective adoption approach to available-for-sale debt securities and a modified retrospective approach to all other financial assets. Edison International and SCE will not elect the fair value option. Edison International and SCE will adopt this guidance effective January 1, 2020. In January 2017, the FASB issued an accounting standards update to simplify the accounting for goodwill impairment by changing the procedural steps to apply the goodwill impairment test. After the adoption of this accounting standards update, goodwill impairment will be measured as the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Edison International will apply this guidance to goodwill impairment tests beginning in 2020. In August 2018, the FASB issued an accounting standards update which aligns the requirement for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing costs incurred to develop or obtain internal-use software. The guidance also clarified presentation requirements for reporting implementation costs in the financial statements. Edison International and SCE completed an evaluation of hosting arrangements that are service contracts with incurred implementation costs and currently the implementation costs are immaterial, as such the guidance will be applied prospectively. Edison International and SCE will adopt this guidance effective January 1, 2020. In August 2018, the FASB issued an accounting standards update to remove, modify, and add certain disclosure requirements related to employer-sponsored defined benefit pension or other postretirement plans. The guidance is effective January 1, 2021, with early adoption permitted. Edison International and SCE are currently evaluating the impact of the guidance and do not expect the adoption of this standard will materially affect disclosures.

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