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Summary of Significant Accounting Policies | 9 Months Ended
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Sep. 30, 2020
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies 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 customers in 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, 2019 (the "2019 Form 10-K"). This quarterly report should be read in conjunction with the financial statements and notes included in the 2019 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-month and nine-month periods ended September 30, 2020 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. The December 31, 2019 financial statement data was derived from audited financial statements but does not include all disclosures required by GAAP. 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. The cash equivalents were as follows:
|  | Edison International |  |  |  |  |  |
(in millions) |  | September 30, 2020 |  | December 31, 2019 |  |  |  |
Money market funds |  | $ | 56 |  |  | $ | 31 |  |  |  |  |
Cash is temporarily invested until required for check clearing. Checks issued, but not yet paid by the financial institution, are reclassified from cash to accounts payable at the end of each reporting period as follows:
|  | Edison International |  |  |  | SCE |  |
(in millions) |  | September 30, 2020 |  | December 31, 2019 |  | September 30, 2020 |  | December 31, 2019
Book balances reclassified to accounts payable |  | $ | 51 |  |  | $ | 75 |  |  | $ | 50 |  |  | $ | 74 |
The following table sets forth the cash, cash equivalents and restricted cash included in the consolidated statements of cash flows:
(in millions) |  | September 30, 2020 |  | December 31, 2019
Edison International: |  |  |  |
Cash and cash equivalents |  | $ | 92 |  |  | $ | 68 |
Short-term restricted cash1 |  | 2 |  |  | 2 |
Total cash, cash equivalents, and restricted cash |  | $ | 94 |  |  | $ | 70 |
1 Reflected in "Other current assets" on Edison International's consolidated balance sheets. Allowance for Uncollectible Accounts The allowance for uncollectible accounts is recorded based on SCE's estimate of expected credit losses and adjusted over the life of the receivables as needed. Since the customer base of SCE is concentrated in Southern California and exposes SCE to a homogeneous set of economic conditions, the allowance is measured on a collective basis on the historical amounts written-off, assessment of customer collectibility and current economic trends, including unemployment rates and any likelihood of recession for the region. At September 30, 2020, this included the estimated impacts of the COVID-19 pandemic. The following table sets forth the changes in allowance for uncollectible accounts for SCE:
| Three months ended September 30, 2020 |  |  | Nine months ended September 30, 2020 |
(in millions) | Customers | All others |  | Customers | All others
Beginning balance | $ | 75 | $ | 15 |  | $ | 35 | $ | 14
Plus: current period provision for uncollectible accounts |  |  |  |  |
Included in operation and maintenance expenses | 11 | 4 |  | 39 | 11
Deferred to regulatory assets | 43 | — |  | 64 | —
Less: write-offs, net of recoveries | 5 | 2 |  | 14 | 8
Ending balance | $ | 124 | $ | 17 |  | $ | 124 | $ | 17
Revenue Recognition Regulatory Proceedings 2018 General Rate Case In May 2019, the CPUC approved a decision in SCE's 2018 GRC. The revenue requirements in the 2018 GRC final decision were retroactive to January 1, 2018. SCE recorded the prior period impact of the 2018 GRC 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, of which $65 million was attributable to 2018 and $66 million was attributable to first quarter of 2019. 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. •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. 2019 FERC Formula Rate In September 2020, the FERC approved a settlement on SCE's formula rates for the 2019 Formula Rate case ("2019 Formula Rate Settlement"), which established SCE's FERC transmission revenue requirement for the settlement period. The settlement period is extended through December 31, 2021, at which time SCE is permitted to request a new formula rate. The settlement provides for a total ROE of 10.30% inclusive of CAISO and transmission incentive adders. The settlement also provides that SCE’s capital structure for purposes of its formula rate will reflect the higher of SCE's actual equity ratio or 47.50%. The transmission revenue requirement and rates that have been billed to customers prior to the implementation of the 2019 Formula Rate Settlement utilized a base ROE of 11.97%. SCE expects to refund the excess amounts billed to customers through the operation of the Formula Rate in 2021 and 2022. SCE had been recognizing revenue based on the expected outcome of this settlement and the impact of recording the settlement was not material. 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, which earn dividend equivalents on an equal basis with common shares once the awards are vested. See Note 14 for further information. EPS attributable to Edison International common shareholders was computed as follows:
|  | Three months ended September 30, |  |  |  | Nine months ended September 30, |  |
(in millions, except per-share amounts) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Basic (loss) earnings per share: |  |  |  |  |  |  |  |
Net (loss) income attributable to common shareholders |  | $ | (288) |  |  | $ | 471 |  |  | $ | 213 |  |  | $ | 1,141 |
Net (loss) income available to common shareholders |  | $ | (288) |  |  | $ | 471 |  |  | $ | 213 |  |  | $ | 1,141 |
Weighted average common shares outstanding |  | 378 |  |  | 347 |  |  | 371 |  |  | 333 |
Basic (loss) earnings per share |  | $ | (0.76) |  |  | $ | 1.36 |  |  | $ | 0.57 |  |  | $ | 3.43 |
Diluted (loss) earnings per share: |  |  |  |  |  |  |  |
Net (loss) income attributable to common shareholders |  | $ | (288) |  |  | $ | 471 |  |  | $ | 213 |  |  | $ | 1,141 |
Net (loss) income available to common shareholders |  | $ | (288) |  |  | $ | 471 |  |  | $ | 213 |  |  | $ | 1,141 |
Net (loss) income available to common shareholders and assumed conversions |  | $ | (288) |  |  | $ | 471 |  |  | $ | 213 |  |  | $ | 1,141 |
Weighted average common shares outstanding |  | 378 |  |  | 347 |  |  | 371 |  |  | 333 |
Incremental shares from assumed conversions1 |  | — |  |  | 2 |  |  | 1 |  |  | 1 |
Adjusted weighted average shares – diluted |  | 378 |  |  | 349 |  |  | 372 |  |  | 334 |
Diluted (loss) earnings per share |  | $ | (0.76) |  |  | $ | 1.35 |  |  | $ | 0.57 |  |  | $ | 3.42 |
1 Due to the loss reported for the quarter ended September 30, 2020, incremental shares were not included as the effect would be antidilutive. In addition to the participating securities discussed above, Edison International also may award stock options, which are payable in common shares and are included in the diluted earnings per share calculation. Stock option awards to purchase 9,158,974 and 1,398,884 shares of common stock for the three months ended September 30, 2020 and 2019, respectively, and 9,079,789 and 5,997,917 shares for the nine months ended September 30, 2020 and 2019, respectively, were outstanding, but were not included in the computation of diluted earnings per share because the effect would have been antidilutive. New Accounting Guidance Accounting Guidance Adopted In June 2016, the Financial Accounting Standards Board ("FASB") issued an accounting standards update to require the use of the current expected credit loss model to measure impairment of financial assets measured at amortized cost, including trade and other receivables, and the use of an allowance to record estimated credit losses on available-for-sale debt securities. Edison International and SCE adopted this guidance on January 1, 2020 using the prospective adoption approach to available-for-sale debt securities and the modified retrospective approach to all other financial assets. Edison International and SCE hold available-for-sale debt securities in nuclear decommissioning trusts and due to regulatory mechanisms, investment earnings and realized gains and losses have no impact on earnings. Unrealized gains and losses on decommissioning trust funds, including impairments, increase or decrease the trust assets and the related regulatory asset or liability and have no impact on electric utility revenue or decommissioning expense. Upon adoption of this guidance, SCE reviews each fixed income security for impairment on the last day of each month. If the fair value on the last day of the month is less than the amortized cost for that security, SCE impairs the disclosed amortized cost. See Note 10 for further information. The adoption of this guidance did not have a material impact on Edison International's and SCE's other financial assets including receivables. 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 adopted the standard on January 1, 2020 using the prospective adoption approach. The adoption of this guidance did not have a material impact on Edison International's and SCE's financial position or result of operations. In March 2020, the FASB issued an accounting standards update to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference London Inter-Bank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. Edison International and SCE have adopted the standard as of April 1, 2020 prospectively. SCE generally does not use hedge accounting for derivative transactions. SCE has a term loan with a variable interest rate based on LIBOR. In addition, both Edison International and SCE have revolving credit facilities with a variable interest rate based on LIBOR. These agreements contain provisions that require an amendment if LIBOR can no longer be used. SCE also has certain preference stocks, for which the distributions will be payable at a floating rate referenced to LIBOR from 2022. As of September 30, 2020, both Edison International and SCE have not utilized any of the expedients and therefore there is no impact on adoption of the guidance, however, if contract amendments are made where LIBOR is no longer valid, both Edison International and SCE expect to utilize the expedients through the allowed period of December 31, 2022. 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 removes disclosure requirements that are no longer considered cost beneficial, clarifies certain specific disclosure requirements and adds disclosure requirements identified as relevant. The modifications only affect annual period disclosures and must be applied on a retrospective basis to all periods presented. Edison International and SCE have adopted this guidance for the year ending December 31, 2020. The adoption of this guidance will not materially affect the annual disclosures related to employer-sponsored defined benefit pension or other postretirement plans. Accounting Guidance Not Yet Adopted In August 2020, the FASB issued an accounting standards update to simplify the accounting for certain financial instruments with characteristics of liabilities and equity. The amendments in this update affect entities that issue convertible instruments indexed to or potentially settled in an entity's own equity. This guidance also simplifies an entity's application of the derivatives scope exception for contracts in its own equity and amends certain aspects of the EPS guidance. The guidance is effective January 1, 2022 with early adoption permitted after January 1, 2021. Edison International and SCE are currently evaluating the impact of the guidance.

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