Edison International (EIX) — Q1 2021 Earnings Call Transcript

Thank you, Michelle and welcome, everyone. Our speakers today are President and Chief Executive Officer, Pedro Pizarro; and the Executive Vice President and Chief Financial Officer, Maria Rigatti. Also on the call are other members of the management team. I would like to mention that we are doing this call with our executives in different locations so please bear with us if you experience any technical difficulties. Materials supporting today's call are available at www.edisoninvestor.com. These include our Form 10-Quarter, prepared remarks from Pedro and Maria and the teleconference presentation. Tomorrow, we will distribute our regular business update presentation. During this call, we'll 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. I will now turn the call over to Pedro.

Well, thank you, Sam, and good afternoon, everybody. Today, Edison International reported core earnings per share of $0.79 compared to $0.63 a year ago. However, this year-over-year comparison is not particularly meaningful because SCE has not received a decision in its 2021 General Rate Case. SCE recognized revenue from CPUC activities for both the first quarter 2020 and 2021 largely based on 2020 authorized base revenue requirements. Maria will discuss our financial performance in her remarks. Investors have been asking us about how we view Edison's risk profile given all the news reports that California is headed into another peak wildfire season with above-average risk. As I have shared before, 2019 and 2020 were also above-average-risk years, with 2020 setting records for acres burned. However, and this is a really important, however, the state has successfully avoided the scale of catastrophic damage seen in 2017 and 2018. I would like to highlight three key factors that have significantly improved our risk profile: state investments to improve firefighting, CPUC progress on AB 1054 implementation, and SCE's own wildfire mitigation work. The first factor is that the state has increased investments in firefighting capabilities over the last several years. Incorporating the Governor's 2021 to 2022 proposed budget, which continues this trend; this would represent a 45% increase in CAL FIRE's budget since 2016, a 30% increase in firefighters at the peak of the season since 2019, and significant increases in equipment and modeling to enhance the state's wildfire suppression capabilities. For example, the state is expected to have seven large air tankers operating this fire season and another five in 2022. These enhanced suppression resources will help the state move more quickly to combat wildfires before they become catastrophic. The proposed budget also adds a focus on wildfire prevention and the Governor and the Legislature have already taken early action. Earlier this month, they approved $536 million to accelerate land and forest management projects laid out in the Wildfire and Forest Resilience Action Plan, and an additional $80 million for roughly 1,400 new CAL FIRE firefighters for the 2021 fire season. We have also seen significant staff and resource additions in our local fire departments to aid response times and firefighting capacity. The second risk improvement factor is that the CPUC has made steady and timely progress over the past nearly two years enacting AB 1054's provisions as designed. For instance, shortly after the Legislature passed AB 1054, the CPUC opened a proceeding on an emergency basis to establish the non-bypassable charge that funds about half of the Wildfire Insurance Fund. Another indicator is that the Commission has approved each of SCE's annual safety certifications in a timely manner. This certification is a key step in implementing the prudency standard that AB 1054 codified, where a utility's conduct is deemed reasonable if it has a valid safety certification, unless serious doubt is created. Importantly, this standard will go beyond the life of the Wildfire Insurance Fund. The Commission established its Wildfire Safety Division, providing additional wildfire safety oversight and direction. Lastly, the CPUC has completed numerous wildfire-related decisions on a timely pace despite the COVID-19 pandemic. The Commission has also been proactive in engaging with the IOUs on Public Safety Power Shutoff, or PSPS execution, at the same time acknowledging that it is within the utilities' discretion to use this crucial tool to protect the public's safety. Taken together, these are all signs that AB 1054's intent is being implemented steadily as designed. The third risk improvement factor is SCE's own work to reduce wildfire risk. Fire mitigation has been an integral part of SCE's operational practices for years and the utility has had several programs in place to manage and reduce wildfire risk. As climate change intensified wildfire risk, the utility stepped up its comprehensive wildfire mitigation strategy and has made substantial progress, particularly through its Wildfire Mitigation Plan. In 2021, SCE continues to invest in its infrastructure and new technologies to mitigate the risk of fires from electric infrastructure, increase accuracy in fire weather forecasting, enhance its operational practices, and improve its PSPS program. SCE has assembled a dedicated PSPS Readiness team to address the feedback from customers, public safety partners, elected officials, and regulatory agencies. The utility is accelerating the pace of covered conductor deployment and expects to install at least 1,000 additional circuit miles by year-end. At this pace, SCE will have hardened over 2,500 miles, or over 25% of all its overhead distribution infrastructure in high fire risk areas, substantially reducing the risk of wildfires associated with utility equipment. So this combination of investment and actions by the State of California, the CPUC, and SCE gives us increasing confidence in Edison International's improved risk profile with respect to wildfires. Slides 2 and 3 in our deck provide additional information on SCE's year-to-date wildfire mitigation activities and the State's actions over the last few years. This work is also a building block for longer-term reliability and resiliency, which will be essential as electrification increases dramatically across the economy for decarbonization. Now speaking of decarbonization, we agree with the goals of President Biden's $2.25 trillion infrastructure proposal to address climate change, create well-paying jobs, improve air quality, particularly in our most vulnerable communities; and increase our global competitiveness. That future requires substantial deployment of EVs, electrification of buildings, and new investments in electric infrastructure to ensure clean, reliable, and resilient electric service for this greater demand. We look forward to working with the Administration and leaders in Congress to develop and implement the complementary policies that will effectively meet the Nationally Determined Contribution, or NDC, target of 50% to 52% greenhouse gas reductions across the economy relative to 2005. This is in close alignment with what SCE outlined in its Pathway 2045 white paper, and Edison had already stated its support for this economy-wide target prior to the NDC's release. As highlighted in Pathway 2045, the least expensive way to achieve economy-wide decarbonization is through an equitable clean energy future with increasing amounts of carbon-free generation powering the further electrification of the economy. The average customer will also benefit from a decline in total energy costs of one-third thanks to the greater efficiency of electric technologies. Slides 4, 5, and 6 in our earnings deck provide you with additional information on our views in these areas. SCE has a long track record in maintaining affordability, but in the near-term customers will see increases in their bills as SCE invests in grid hardening and makes the investments needed to support clean energy goals and the long-term affordability they will yield. For over a decade, SCE has proactively pursued cost reduction efforts, as well as improvements in areas like reliability, through its operational excellence efforts. We expect to do more. Embedding more digital tools deep in our operations areas like inspections and vegetation management will enable efficiencies in how we work and better harness data to improve asset management and performance and reduce risk. Building a more robust capability in lean process management will help us drive these efficiencies and create a stronger basis to use automation and other technology to streamline our operations. Fundamentally, delivering value to our customers starts with being an excellent and safe operator, through the safe delivery of reliable and affordable electricity. Let me close my comments by acknowledging yesterday's news that our colleague and friend Carla Peterman, SCE's SVP of Strategy & Regulatory Affairs, will be leaving us on May 7 for a new role as PG&E's Executive VP of Corporate Affairs. We are very sad to lose Carla after a truly great year-and-a-half together, but we wish her well as she takes on the important and very challenging task of helping Patti Poppe and her new leadership team turn around PG&E's operations and relationships with their stakeholders and communities. California needs all of its utilities to be healthy and strong, so I am really glad our state will continue to benefit from Carla's talent. With that, Maria will provide her financial report.

Thanks, Pedro, and good afternoon, everyone. My comments today will cover first quarter 2021 results, our capital expenditure and rate base forecasts, key regulatory filings, and updates on other financial topics. Edison International reported core earnings of $0.79 per share for the first quarter 2021, an increase of $0.16 per share from the same period last year. As Pedro noted earlier, this year-over-year comparison is not particularly meaningful because SCE has not received a decision in its 2021 General Rate Case. On page 7, you can see SCE's key first quarter EPS drivers on the right-hand side. I would like to highlight a handful of items that accounted for much of the variance. To begin, revenue was higher by $0.05 per share. FERC-related revenue contributed $0.03 to this variance, primarily due to higher rate base. CPUC-related revenue contributed $0.02 to this variance. However, this was offset by balancing account expenses with no effect on earnings. O&M had a positive variance of $0.20, largely due to lower wildfire mitigation-related O&M and lower employee benefits expenses. Wildfire mitigation expenses were lower in the first quarter, primarily because fewer remediations were identified through the inspection process. There was also a negative variance of $0.08 from an increase in depreciation due to a higher asset base. Lower net financing costs had a positive variance of $0.08 due to several items, including lower interest rates on balancing accounts and lower preferred dividends due to the redemption of preferred stock at SCE last year. Finally, SCE's EPS in the quarter was $0.04 lower because of dilution from the increase in shares outstanding, primarily associated with the equity offering in May 2020. I would now like to comment on SCE's capital expenditure and rate base growth forecasts, which are shown on page 8. Our capital and rate base forecasts are unchanged from the last quarter pending a final decision in SCE's 2021 GRC track 1. SCE is executing against a capital plan that targets key programs, while maintaining flexibility in later years to adapt to what is ultimately authorized in the GRC decision. The rate base forecast does not include certain projects and programs that are not yet approved. This includes the Customer Service Re-Platform project, or CSRP, which went operational earlier this month. SCE expects to file an application for cost recovery for CSRP later this year and, if approved, this could add approximately $500 million to rate base by 2023. It also does not reflect capital spending on fire restoration related to wildfires affecting SCE's facilities and equipment in late 2020. SCE is evaluating the costs to determine how much may be incremental to the current rate base forecast. Please turn to page 9. On the regulatory front, we remain hopeful that SCE will receive a proposed decision on track 1 of its 2021 GRC this quarter. As a reminder, the CPUC can vote out a final decision no sooner than 30 days after it issues a proposed decision. Consistent with our prior practice, we will issue earnings guidance after we receive a final decision on the GRC. Additionally, SCE filed its testimony in track 3 of the 2021 GRC in the first quarter. In track 3, SCE is requesting recovery of $497 million in revenue requirement, and that the CPUC find reasonable $679 million of incremental wildfire mitigation capital expenditures. This filing is another step towards recovery of wildfire mitigation costs we have already incurred. Page 10 provides a summary of the approved and pending cost recovery applications for incremental wildfire-related costs, including track 3, which I just mentioned. As you can see on page 11, in the coming months, SCE will request a financing order that would allow it to securitize the costs authorized in GRC track 2, residential uncollectibles for 2020, and additional AB 1054 capital authorized in GRC track 1. We expect SCE's total request to be approximately $1 billion, composed of $500 million of AB 1054-related capital, $400 million of wildfire mitigation-related O&M, and $100 million of incremental residential uncollectible expenses associated with the economic effects of the COVID-19 pandemic. Related to the 2017 and 2018 Wildfire and Mudslide events, SCE continues to make solid progress settling the remaining individual plaintiff claims. As shown on page 12, during the first quarter, SCE resolved approximately $200 million of individual plaintiff claims. In total, that brings resolved claims to approximately $4.2 billion, representing more than two-thirds of the best estimate of total losses, which remains unchanged. I would now like to provide an update on the EIX financing plan and the issuance of securities with up to $1 billion of equity content that we discussed on our last earnings call. To reiterate our previous statements, this equity content supports maintaining investment grade ratings at EIX and the utility. During the first quarter, Edison International issued $1.25 billion of preferred stock, with equity content of approximately $625 million. We will continue to monitor market conditions and consider additional preferred equity, internal programs, and, if needed, the existing at-the-market program to satisfy the balance of the equity content need this year. Beyond 2021, we continue to expect to have minimal equity needs associated with SCE's ongoing capital program and we will quantify these after receiving a final decision in the 2021 GRC. That concludes my remarks.

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

Hi. Good afternoon.

Hi, there.

Good afternoon, Jeremy.

Just want to start off on the Biden point, if I could. And granted, it's very kind of early innings here, and it could still change its form. But just wondering, as you see it right now, what impact do you think the plan would have on EIX, particularly as it relates to transmission and EVs? If you could share any thoughts for us there.

Yes. To give you some high-level thoughts, Jeremy, it's still early. The administration provided the beginning of their plan last week through the NDC, but there are many details that still need to be worked out, both by the administration and ultimately by Congress. With a divided Congress, I believe any progress in Washington, particularly on the conventional side, will need to be bipartisan, meaning that it must be something both parties can agree on. At a high level, we fully support the overall direction towards a 50% to 52% reduction in greenhouse gas emissions by 2030. The key elements of the Biden plan, such as clean energy, electrification, and transmission, align well with our Pathway 2045 work, which we believe is the most feasible and cost-effective approach for California. This alignment supports our long-term strategy on making the necessary investments to prepare the grid for the transition and assist customers in electrifying buildings, heating, and transportation. In terms of core utility investment, it means significant support for the program we've outlined. Although we don’t provide guidance beyond the current rate case cycle, we anticipate a strong investment need for the coming years, far beyond the rate case. On a statewide basis, our Pathway 2045 estimates that the investment needed will be around $250 billion for clean energy resources, renewables, storage, and transmission. Specifically, the transmission and distribution investment alone is approximately $75 billion, as shown on page 6 of the presentation. In summary, we believe this supports the core investment opportunities as well as additional opportunities for the utility to contribute to core grid investments, such as added storage or programs like Charge Ready 2 and Charge Ready transports that we currently have in progress. One final thing I'll say is that there was more press this morning on the campaign trail, President Biden has talked about getting the power sector itself on a standalone basis to zero GHG by 2035, and there's now discussion about potentially setting a target of 80% reductions from 2005 levels for the power sector by 2030. Speaking here both from an Edison perspective and from a broader industry perspective, we're all lined up to do as much as we can as fast as we can at a national level. 80% may really be stretching, I think, the feasibility for the nationwide transition, just given the fact that it's nine years until ban. There's still R&D and technology that's needed to help fill the gaps and significant technology deployment that would be needed, particularly on the transmission side. It's not just the capital investment but the permitting process that can take quite a while. So, our Pathway 2045 analysis actually concluded that California would see something like a 72% decrease in greenhouse gas emissions from 2005 levels by 2030. I've seen some national analysis from EPRI and others that suggest that the national number on an aggressive pathway might still be below 70%, maybe mid-60s or so. So, I think there will be a number of discussions among the industry, the administration, and Congress on what defines the art of that? And how do we make sure that the transition is reliable, affordable, and equitable for all customers across the country.

Got it. That's very helpful. Thank you. Maybe just kind of pivoting a bit here and thinking kind of high level, when it comes to inverse condemnation. I think there had been legal challenges in the past. And just wondering what your thoughts are on this front. Do you see any changes in this outlook? Or do you see any challenges going forward here? Or any thoughts you could share would be helpful. Thanks.

Yes. This one maybe more brief. Very near term, we are pleased that we have AB 1054. And AB 1054 did not resolve inverse condemnation, but it created a fair framework. And so, I think that they went a long way, and in our view significantly reduced the risk exposure for utilities across the state. In terms of changing the state's current approach on inverse itself, I think it's unlikely you'd see legislative action anytime soon because, quite frankly, there's been a lot of workabilities and literature on wildfire issues already for AB 1054. They have a full agenda in helping the economy recover from the pandemic. So, I wouldn't expect that there'd be a whole lot of bandwidth for taking that up in the near term. There is always a possibility that there could be court cases where inverse could be tested again and challenged again. Probably premature to go into details of specific court cases, but I'm aware that not only might there be some that pop up for us as we go through our caseload, but other utilities also may have opportunities to challenge inverse. So, that's always a possibility out there through the court system.

Got it, that’s helpful. That’s it for me. Thanks.

Thanks, Jeremy.

Hey there, Julien.

Good afternoon, team. Thank you for your time. Pedro, I appreciate your comments regarding the mitigation actions taken concerning wildfires. Can you provide some insights on the probabilities of wildfires? Given the weather events we've witnessed so far, what does the risk profile look like as we approach fall, especially in relation to the mitigation efforts you have implemented? How would you characterize that risk profile? It seems to be a point of interest, so I’ll hand it back to you.

Yes. Thanks, Julien, and that's why I dedicated the first part of my comments to framing that. I guess I would recap one part and maybe add a little bit. The recap part is that we do see and I think all the external forecasts that we see are calling for a likely above-average fire risk peak period here. I think in terms of the mitigation I went through them in a fair amount of detail. Maybe what I would add is that to remind you that the approach we have taken over the last several years has been a risk-informed approach. So, when we went out to replace the first mile of bare wire with covered conductor, it was the mile that was in one of the highest-risk areas possible, right? So, we've been going down the stack if you will by trying to address the highest-risk areas first where the mitigations would have the highest impact on risk reduction. So, every piece of work we do is reducing the risk and we've gone after the big bites early on. That I think is really helpful and constructive in terms of framing that risk profile. That risk profile continues to narrow. And that's the stuff we've been doing. As I mentioned in my prepared remarks we've also seen the states dedicate just outstanding effort to improving firefighting modeling and just firefighting capabilities, fire-suppression capabilities. And so that ability now that the state has, that frankly it didn't have in 2017 or 2018 to fight multiple large fires simultaneously. You might recall I mentioned there are some really interesting L.A. Times articles around 2018 and the challenge that the state had in fighting the Camp Fire and the Woolsey Fire and the Hill Fire all simultaneously. Well, the other states added a lot of qualified bodies with a lot more planes and trucks and equipment to be able to deploy across multiple fronts simultaneously. And that is a significant piece of risk reduction for all of us. So, I'm not sure I can give you a disclosure-quality quantified answer. So, therefore it's x.y% lower. But I think it's a significant percent difference in terms of the overall risk profile that the state faces and that therefore we face right now.

Got it. Excellent. I know it's a tough question. If I can clarify this stuff Maria, you commented about the $200 million in individual claims here. But just as you look prospectively through 2021 here, any specific milestones that could drive perhaps chunkier resolution here and remaining claims of the third? Anything you can say at all on that front?

No. I think Julien, we're going to continue to disclose every quarter the progress that we've made. As we've mentioned before, the individual plaintiffs are not the same kind of group that we saw in the subro claims because those were all property damage claims. So, we're just going to continue to move through. We have some processes to try and make the discussions with the individual plaintiffs as streamlined and efficient as possible. So we'll do that and we'll come back to you every quarter and let you know what the progress has been.

Okay. Thank you guys. Best of luck.

Thanks, Julien.

Hi, Jonathan.

Hey, Jonathan.

Hi. Could you discuss your strategy regarding PSPS and how you plan to address some of the past criticisms? Additionally, I’m curious if you’re working on anything similar to the new criteria PG&E has presented to the CPUC or if you have any updates on that situation?

I would like to start by mentioning that I can categorize the PSPS space into two main areas. The first pertains to the physical execution, including the planning, engineering, and implementation. The second relates to the broader communication aspect. Overall, I believe SCE has performed quite well in core execution over the past few years. The utility has made substantial prior investments in improving the grid's segmentation. Previously, I mentioned in an earnings call about a year to a year and a half ago that many circuits in high-fire-risk areas could typically be divided into four separate sections, allowing for more targeted PSPS events. We continue to enhance the segmentation of circuits in these high-risk areas, which helps to minimize the scope of PSPS events. From 2019 to 2020, and now into 2021, we have seen significant improvements in the number of customers affected by these events. It's important to note that this is heavily influenced by weather conditions. In 2020, we faced some challenging weather events that led to increased PSPS usage. However, if you review the utility filings through the WMP process, you'll find that Edison had the lowest percentage of customers affected by PSPS during the 2020 season when compared to the total customer base. The ongoing work from 2020 into 2021 is expected to allow Edison to further reduce the impact on customers affected last year, assuming similar weather conditions to last year. While we won't experience the exact same weather, we anticipate a significant reduction in impact—around 28% to close to 30% for those customers. In regards to communication, we recognize there is more work to do and have received constructive feedback from customers, communities, and local governments. The action plan SCE filed in February includes measures to improve our communications with customers, communities, local governments, and emergency operation centers. We are focusing on enhancing the timeliness and quality of these communications. I expect our customers will notice improvements as we approach the next peak season. Maria, is there anything I missed?

Yeah. I guess I would just add two things. One is that along the lines of how we communicate with our customers as well, really a focus on additional programs that could benefit them when they are deenergized, because I think that's obviously a big component of this. I think it's clear that this tool is necessary and important, and what can we do to help customers when we do deenergize them. And then I think the other aspect that I would just add is now that we filed our action plan, we do have the opportunity now to communicate with the commission. So I think our cadence is about every two weeks now. So it really does provide an opportunity for us to have an ongoing dialogue around what it is that SCE is doing. So I think those are all important aspects of PSPS for this year.

Great. I'm glad you added that because, for example, the battery programs and deployment of batteries is something we've really increased the emphasis on appropriately.

Okay. And then if I may just on the GRC, do you have any sense of what seems to be extending the timing a bit here? And the commission has been moving pretty fast on a whole host of other things. Maybe this case doesn't have a statutory deadline or just any thoughts you have why we're still waiting here.

Yeah. Jonathan, I would not read anything into it. It's a complicated case. It's a request that has a lot of different components like most GRCs. So I think that they're just working through the different aspects of it and putting pen to paper to get that proposed decision out.

All right. Thank you.

Okay. Thanks, Jonathan.

Hi there, Shar.

Hey, good afternoon. It's actually Constantine here filling in. I just had a couple of quick ones just to follow up and a lot of the questions that I had have been answered. Kind of, as Jonathan mentioned it's been quiet with the ex partes in the filing and the CPUC has closed out a few of the more controversial proceedings. And just curious to get your sense on the CPUC process this GRC cycle if you see some prospective improvements in the timeliness of the decisions? And is this indicative of the staff getting close to the PD since everything else is now moving forward?

If I understand your question correctly, you're inquiring about the PUC as a whole, not just the GRC. We touched on this in our prepared statements. The CPUC has been working quickly on several issues, even with the added complexity of the pandemic. Considering the challenges they face, I believe they have managed quite well amidst significant pressures. The GRC is a complicated case, and while we had hoped to receive a proposed decision by now, we're still optimistic about having one by the end of this quarter, as Maria mentioned. I don't think there are any systemic issues indicating that the process is broken. We highlighted several examples in our prepared remarks regarding safety certifications for Edison and the handling of multiple cost recovery accounts. They have a lot on their plate during these challenging times, and we would like to see a proposed decision for the GRC soon. We will do our part to facilitate this, but we don't perceive anything fundamentally hindering the process. Maria, do you have anything to add?

No. I agree.

Thank you for that information; it's very helpful. I have one last follow-up question. You mentioned that lower expenses were driven by fewer mitigation activities related to wildfire risk. More broadly, there have been studies highlighting the extremely low moisture content in California forests this year, indicating another high wildfire risk season. Can you clarify whether you have sufficient recoverable capacity for another year under these wildfire risk conditions? Additionally, how are you approaching rate inflation in the near term? I understand you've mentioned that some of these issues balance out in the long term, but what are some of the mitigating factors you foresee in the near term while acknowledging that there will be rate inflation?

Yeah. Maybe, I'll take this or Maria, I was...

No. Go ahead. Go ahead.

Yeah. Now just on the first part of that, we're certainly seeing the risk around the moisture content. And basically all the signs that point to an above-average risk year. When you talk about capacity, again, I'm taking that multiple ways. And first and foremost, focused on the fact that, we believe, we're doing the things we need to do in our wildfire-mitigation plan to help mitigate our side of the risk. And we believe the state's doing the things they need to do to have the fire-suppression resources ready to help control a fire if it ignites. But I think that your question then also went more to on the rate pressure side. Maria, I know you commented some of that already, but maybe you can follow up some more.

Sure. I think, as you mentioned we did see some lower expenses related to wildfire mitigation. That's inspections that we do. We found fewer areas that we had to remediate. But I think more broadly, there are still costs associated with mitigating this risk. We've talked before, and in fact, the commission convened on bond not too long ago to talk about affordability. And so as we do that, we continue to focus people on the necessity for the wildfire-mitigation expenditures that we and other IOUs are doing that that goes squarely to maintaining the safety of our communities. And then over the longer term, looking at what it really means to our electric grades, as we further electrify the economy, what that means for rates but then also what it means for the energy bill itself. And so I think as we think about affordability, we and the commission and other stakeholders are looking at it from different perspectives, total share of wallet that energy represents so not just the electric bill. Affordability has been defined a few different ways by the commission, things like how many hours do you have to work at minimum wage in order to pay your electric bill. I think it's going to be an ongoing discussion. But we do know that wildfire mitigation is very important to the safety of our communities and we know that a broader electrification is important for the greenhouse gas and environmental objectives that the state has. And that's important because as we do that and we think about affordability, it's also about being equitable and having all of our communities also participate in that improvement in the environment. So I think it's going to be an ongoing discussion. The commission is rightfully focused on it and we have been focused on it as well, as Pedro mentioned, over a many-year cycle trying to manage our costs. And then as we further electrify the economy allowing that to help increase affordability as well.

Thanks, Maria. Thanks very helpful commentary and thank you for taking the questions.

Hi, thank you for taking my question. I have a query regarding cash flow. If I examine Slide 10 and Slide 11, along with the liabilities you still need to pay, it seems you're estimating around $2 billion in liabilities. I want to ensure I'm not double counting because you have a significant amount of cash coming in, as outlined on Slide 10, and over $2 billion from securitization on Slide 11. Should I consider these two sources as sufficient to cover the cash outflow required for finalizing settlements related to the 2017 and 2018 wildfires?

There are a few key points to discuss. Regarding Pages 10 and 11, some information overlaps. What we mention on Page 10 often relates to the securitizations found on Page 11. It might be more efficient to go through these details separately, and I can connect the numbers for you. In general, we have already allocated cash for wildfire mitigation, and the securitizations or recoveries through rate applications will help us regain that cash. This should relieve some of the financial pressure that has previously resulted in short-term debt issuance. Additionally, EIX has raised equity or preferred equity in the past to maintain credit metrics and investment-grade ratings for both the utility and holding company. This equity raising enables SCE to finance claims payments as they become due, especially as we approach the point of moving beyond insurance recovery. They have the ability to keep this debt out of the capital structure, depending on a waiver they have. While all cash is interchangeable, it might affect the timing of their debt financings, but ultimately, they will finance their operations within their authorized capital structure. So, that's the overall framework. The numbers on slides 10 and 11 show some overlap, and we can delve into that further if you're interested.

That would be great. Pedro, could you revisit the areas you mentioned where there might be potential for increased capital expenditures? You went through that quickly, and I wanted to see if you could elaborate on it. Are these factors going to affect you in 2022 or 2023, or do they extend to 2024 and beyond?

Sure. There are likely midterm and long-term opportunities. We've seen some near-term developments materialize in recent years. Our Charge Ready programs will be supported for an extended period until we receive approval for those applications. We currently have over $800 million allocated for programs, including more than $0.5 billion in capital expenditures expected from the Make Ready initiatives for light-duty and heavy-duty vehicles. This is a case where we discussed the initiative for a few years, developed it, and received support from the Public Utilities Commission. Looking ahead, storage represents a possible opportunity for growth, especially over the next five to ten years. Much of the storage will likely be managed by third parties, through large-scale projects or customer premises. There might also be prospects for utility-level grid-side storage, which we have already started to implement. Our recent rate case included projections for a modest investment in this area. As we see rapid advancements in vehicle electrification, there could be benefits from reinforcing substations with additional storage, similar to our 20-megawatt battery installation at Mira Loma a few years back. In the longer term, there's potential upside in transmission. We have quarterly competitions for transmission projects and want to ensure our utility can compete effectively. However, it's important to remember that the utility has the right of first refusal for upgrades to existing projects. Given the scale of investments required in our infrastructure, I anticipate some upcoming projects will involve upgrades to current lines that we haven't fully conceptualized yet. We will rely on the California Independent System Operator to guide the transmission planning process to identify the needs for renewable energy sources by 2030 and beyond. Finally, I want to reiterate that our Customer Service Replatform Project, which could add $500 million to the rate base if approved, went live in early April. Additionally, there may be further rate base increases related to wildfire restoration efforts from the Creek Fire in 2020, although we are still finalizing that analysis. These are more immediate opportunities that we are actively pursuing.

Got it. Thank you. Much appreciated.

Thanks, Mike.

Hi, good afternoon. How has the cadence of settlement discussions continued in recent weeks for the remaining 32% of the OE and potential claims, recognizing that they're smaller in nature as the pace has been changing?

We may not be able to provide much assistance on that, as those are confidential negotiations. However, there is good news: we now have an established process for both the Thomas, Koenigstein mudslide plaintiffs and the individual Wolfspeed plaintiffs. This court-approved process allows us to more effectively manage the several thousand cases that are still pending. Regarding the smaller cases you mentioned, they are indeed smaller compared to the earlier subrogation settlements. It’s important not to generalize or make assumptions based solely on the dollar amounts of settlements we've completed with individual plaintiffs when considering the remaining cases. Each case is addressed individually, making it difficult to draw conclusions or apply ratios from previous settlements to the ongoing ones. What I can confirm is that we review our reserves and best estimates every quarter, and we did not make any changes to that estimate this time. Maria, did I overlook anything?

No, I think you covered it. There's not really anything that we can share regarding cadence or patterns. The key signposts to watch for are the quarterly updates on the settlements we have reached with individual plaintiffs. That's really going to be the milestone.

Great. And if I could just squeeze in one more in terms of follow-up around the transmission growth opportunity that you had outlined in your Pathway 2045. Was it $75 billion? In light of the presidential and congressional bills before Congress is there any key permits that underpin that longer-term growth outlook? And any politics that may be in flux that could get accelerated in light of some of the federal and state holds?

Yes, I can address that. The most straightforward response is that it’s still quite early in the process. We will see substantial discussions between the administration and Congress over the coming weeks and possibly months. I expect that the administration will aim to have a plan ready in time for the United Nations conference in Glasgow in November, or hopefully even sooner. The discussions we are currently having about the proposed infrastructure package by the President illustrate this; his proposal includes figures over $2 billion, while Republicans are discussing packages closer to the $600 million range. This will impact us. Both sides agree that transmission will be a crucial part of the equation, but it’s uncertain how that will translate into federal incentives. From our perspective, we would prefer the federal government to focus more on streamlining the permitting process and facilitating access to federal lands for new transmission lines. This aspect of the permitting process can significantly slow down projects, sometimes extending the timeframe to a decade. Ultimately, I want to emphasize that we are still in the early stages with many discussions to come. Those discussions will determine not only the emphasis on transmission but also how deep we go into the power sector and how that compares with advancements in other sectors. There are still many details to be worked out regarding the use of market mechanisms versus sector-specific allocations.

Appreciate it. Thank you.

You bet.

Yes. Thank you for joining us today. This concludes the conference call. Have a good rest of the day everyone and stay safe. You may now disconnect.