Earnings Call: Q3 2020

Oct 27, 2020

Good afternoon, and welcome to the Edison International Third Quarter 2020 Financial Teleconference. My name is Michelle, and I will be your operator today. Today's call is being recorded. I would now like to turn the call over to Mr. Sam Ramraj, Vice President of Investor Relations. Mr. Ramraj, you may begin your conference. Thank you, Michelle, and welcome, everyone. Our speakers today are President and Chief Executive Officer, Pedro Pizarro and Executive Vice President and Chief Financial Officer, Maria Rigatti. Also on the call are other members of the management team. I would like to mention that we are doing this call with our executives in different locations, but please bear with us if you experience any technical difficulties. Materials supporting today's call are available at www.edisoninvestor.com. These include a Form 10 Q, prepared remarks from Pedro and Maria, and the teleconference presentation. Tomorrow, we will distribute a 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. Well, thank you, Sam, and good afternoon, everyone. Today, Edison International reported core earnings per share of $1.67 for the Q3 of 2020 that was up $0.17 compared to the same period last year. This increase was primarily due to higher CPUC related revenue from the 2018 GRC escalation mechanism and lower expenses from regulatory deferrals related to wildfire mitigation activities, partially offset by equity share dilution. Reflecting our strong year to date performance and our confidence in the outlook for the year, we are narrowing our 2020 guidance range to $4.47 to $4.62 by raising the low end $0.10 Maria will discuss our financial performance in detail in her report. We continue to address the numerous impacts of COVID-nineteen on our operations, customers and communities. At the same time, we recognize that climate change is driving unprecedented weather conditions and catastrophic wildfires in California, and the state is in the midst of another active wildfire season. Our thoughts are with the communities and families impacted and we are thankful for the 1st responders who have worked tirelessly to contain the fires and protect the lives and property of Californians. At Edison, safety remains our 1st and highest priority. SCE continues implementing measures to reduce wildfire risk, working closely with local first responders and emergency managers and communicating regularly with customers to improve awareness and promote preparedness. On the California legislative front, this year's session was shortened due to COVID-nineteen. The legislature prioritized the state's COVID-nineteen response and wildfire risk reduction. The governor signed several pieces of legislation that build on the state's investments in firefighting personnel and technology and fuels management projects. I am also pleased that 2 issues advocated by SCE, clarifying the AB1054 insurance policy year and obtaining the opportunity to securitize revenue under collections and bad debt expense due to COVID-nineteen in 2020 were both addressed by the legislature through the unanimous passage of Assembly Bill 913. During this wildfire season, we have seen near record deployments of firefighters to contain major wildfires throughout the state with over 19,000 first responders at the peak, which was the highest since 2,008. Firefighters from CAL FIRE, the U. S. Forest Service and numerous cities and counties have done a tremendous job this year despite being stretched due to significant lightning driven wildfire complexes and having to work with COVID precautions. This reflects the work done over the past couple of years to significantly increase firefighting resources and enhance the ability to model and forecast fire progression to better position ground and aerial assets. SCE's wildfire mitigation efforts augment those of state and local agencies. For example, FCE has improved its situational awareness and that of local fire authorities by installing 161 cameras. In late September, SCE contributed $2,200,000 to the Orange County Fire Authority to secure the largest heavy lift helitanker in the world for this fire season, capable of nighttime flying and making water drops of 3,000 gallons. This helicopter was working all through last night and today on the Silverado fire in Orange County. As of this morning, the Orange County Fire Authority reported that this fire has burned over 11,000 acres and is 5% contained with no structure losses. Tragically, 2 firefighters have been seriously injured battling the blaze. SCE filed an electric safety incident report or ESIR yesterday on the Silverado fire. As noted in the ESIR, there was no activity on a nearby SCE power line nor evidence of any downed power lines prior to the reported start of the fire. While SCE's investigation is at an early stage, I would like to note that preliminary investigation suggests that a lashing wire attached to a 3rd party owned telecommunication line that sits beneath SCE's power line may have contacted SCE's power line above it, possibly igniting the fire. However, it is early to draw any definitive conclusions at this point. I've mentioned before that covered conductor is the most effective and expeditious way for FCA to buy down public safety risk by preventing ignitions that can lead to catastrophic wildfires. SCE is on track to meet or exceed the target of 700 miles of installed covered conductor set in the 2020 wildfire mitigation plan. Our utility substantial enhancements over the past year to its public safety power shutoff or PSPS program. SCE has enhanced communication and coordination with government and communities and improved its capabilities to sectionalize circuits to reduce the number of customers impacted when a preventive de energization is initiated. In addition to our efforts to help reduce the risk of wildfires, the company continues to work to resolve wildfire related litigation. As we noted on September 23, SCE resolved all insurance subrogation claims for the Thomas and Konigstein fires and Montecito mudslides. With this and other information in hand, we were able to move our accounting research from the low end of the estimable range to a best estimate, providing investors greater clarity on this and our related equity need. Moving to regulatory actions at the CPUC, we are very pleased to see continued timely decisions and progress on our key filings as originally scheduled. This is a significant improvement in action and progress under the leadership of President Batcher. We commend the commission and its staff for their continuing efforts in ensuring the proceedings are staying on schedule despite challenges from the new remote working environment during the pandemic. During this quarter, the CPUC issued decisions in several of SCE's key filings. These include the 2020 safety certification, the Charge Ready 2 program and the WEMA application, authorizing $505,000,000 of wildfire insurance cost recovery and supporting continued treatment of insurance as a reasonable cost of service. We also received a proposed decision on our initial AB1054 CapEx securitization application and see timely progress on track 1 of the 2021 GRC proceeding. Furthermore, SCE has reached a settlement in principle to resolve all issues pending in track 2 of the GRC. SCE and numerous other parties filed their 2020 integrated resource plans. One of the principal objectives of this IRP is to help California meet its 2,030 and 2,045 GHG reduction targets. In SCE's plan, we urge the commission to adopt a 38,000,000 metric ton target for 2,030 to put California on a viable trajectory towards meeting its de carbonization goals. SCE also reiterated and highlighted a substantial CAISO system capacity need of 5,400 Megawatts in the 2024 through 2026 timeframe due to planned power plants retirements. To address this, SCE has recommended that the commission update its reliability planning methodology, including increasing the planning reserve margin to better reflect the state's evolving electricity market and ensure system reliability. These recommendations are consistent with the conclusions found by the CAISO, the CPUC and the California Energy Commission in their recent preliminary root cause analysis of the August rotating outages. Last month, the governor issued an executive order that moves up the timeframe to have all new vehicles sold in California be emission free to 2,035. The order aligns with our Pathway 2,045 work in which electric vehicles are an important element to achieve carbon neutrality. I am really proud that Edison has been recognized as a thought leader on this front. I want to underscore the importance of making necessary investments today to ensure that we have a strong, safe, reliable and resilient grid to accommodate the increasing electrification of the economy. This drives substantial investment opportunities to meet increased electricity usage and increased system complexity, including more distributed energy resources, higher levels of renewable resources and energy storage. Importantly, our analysis shows that this transition will also be affordable since the greater efficiency of the electric motors and appliances will reduce customers' total costs across all energy commodities by 1 third by 2,045. With that, I'll turn it over to Maria to provide her financial report. Thank you, Pedro. Edison International reported core earnings of $1.67 per share for the Q3 2020, an increase of $0.17 per share from the same period last year. This increase was primarily due to higher CPC related revenue due to the 2018 GRC escalation mechanism and lower expenses from regulatory deferrals related to wildfire mitigation activities. These were partially offset by equity share dilution. Reflecting our solid results for the 1st 9 months of the year, we are once again narrowing our guidance range by raising the low end of our 2020 EPS estimate. I will discuss this in more detail later in my remarks. On Page 2, you can see SCE's key EPS drivers on the right hand side. I would like to highlight 4 items that accounted for much of the variance. First, EPS increased by $0.43 related to higher revenue. CPUC related revenue contributed $0.25 of this increase due to the escalation mechanism from the 2018 GRC decision. FERC and other operating revenue had a negative variance of $0.05 largely because of the true up for the 2018 formula rate case we recorded last year. There was also a positive variance of $0.23 primarily related to the balancing accounts for the GSRP settlement that was approved in April. However, there were offsets in expenses related to this variance. 2nd, O and M had a positive variance of $0.08 primarily due to recognizing lower wildfire mitigation expenses as a result of deferrals to regulatory assets. 3rd, income taxes had a negative impact of $0.13 primarily reflecting lower tax benefits captured through our tax balancing account. Lastly, SCE's EPS in the quarter was lower by 0 point $0.16 because of dilution from the increase in shares outstanding. On Page 3, you will see SCE's capital expenditure and rate base forecast. CapEx is consistent with last quarter's forecast for 2021 through 2023 with a slight increase to 2020. Additionally, we updated the rate base forecast primarily for Charge Ready 2 and GRC rebuttal testimony. We continue to see significant opportunities to grow rate base over time, driven by investments in electric infrastructure. This is reflected in our robust capital program of $20,000,000,000 to $21,000,000,000 over this period. This request level represents a compound annual growth rate of 7.6% in rate base over 2 rate case periods. After applying a 10% reduction to the total capital forecast to reflect our experience of previously authorized amounts and other operational considerations, the low end of the range still reflects a strong rate base growth of 6.6%. Please turn to Page 4. Track 1 of the 2021 GRC proceeding has been on schedule, and during the quarter, all related briefs were completed. We are now waiting for a decision and continue to expect that in Q1 2021. To emphasize our previous statements, SCE's core business will require minimal equity to fund our ongoing capital expenditures program beyond 2020. We will be able to quantify these levels after we receive the final approval of the GRC. Page 5 summarizes our progress on SDE's cost recovery filing for incremental 2018 2019 wildfire mitigation costs. In April, SCE received CPUC approval for the GSRP settlement, which authorized recovery of $476,000,000 of O and M. The decision approved the revenue requirement of $159,000,000 which went into rates on October 1. The balance of the capital costs that were approved will be recovered as we securitize amounts related to wildfire mitigation as authorized in AB 1054. In September, the WENA application to recover $505,000,000 of cost for wildfire insurance is approved. This is now included in rates and will be recovered over the next 24 months. Importantly, the CPUC noted in its decision that SCE had acted reasonably and prudently in its procurement of insurance policies. The commission also recognized that wildfire liability insurance serves as an important protection for customers against third party legal claims invoking the inverse condemnation doctrine and allegations of negligence. These decisions enable SCE to recover approximately 6 $65,000,000 of cash over the next 2 years and further strengthen its balance sheet and credit metrics. In addition, the CPUC recently issued a proposed decision on SCE's application to securitize the GSRP capital noted above. When the financing is completed, it will approximately $335,000,000 to the cash position. SCE and all intervenors reached a confidential settlement in principle regarding all issues in Track 2 of the 2021 GRC. Once a definitive settlement is executed, a motion will be filed with the CPUC seeking approval. SCE expects a proposed decision on the Track II settlement in Q1 2021. We will record the impact of the settlement once the commission acts and do not expect a negative earnings impact. I will highlight a number of other pending filings and future applications related to wildfire mitigation costs. 1st, we are due to receive a decision on our FEMA filing for certain drought and restoration costs in Q1 2021. In the next few months, we also anticipate filing a LENA application for excess insurance premium costs for July through December 2020. Finally, we will make our GRC Track III filing in Q1 2021 with the proposed decision expected a year later. As for other regulatory actions during the quarter, the CPUC approved SCE's Charge Ready 2 program, which supports approximately 38,000 light duty EV charging ports. This is the largest light duty EV charging program by an investor owned utility in the U. S. And will add approximately $400,000,000 to FCE's rate base by 2026. Turning to guidance, Pages 67 show our updated 2020 guidance and the key assumptions for modeling purposes. Let me highlight that we are once again narrowing our full year 2020 EPS guidance range to $4.47 to $4.62 per share by raising the low end of the range. This also increases the midpoint of the EPS range by $0.05 to $4.55 While most of the earnings assumptions are essentially unchanged from last quarter, there are a couple of factors driving the majority of this upward revision. First, we now expect SCE earnings to be $0.04 higher than our previous assumption. This is driven by improvements of $0.01 in rate based earnings and $0.03 from SCE's variances related to the timing of financing activities as well as operational items. 2nd, the EIX parent and other forecast has improved by $0.01 versus our previous estimate. These factors and our strong performance so far this year make us increasingly confident in our narrowed 2020 EPS guidance range. Last month, we issued a news release about the September 2020 subrogation settlement and noted that we anticipate issuing approximately $1,000,000,000 of equity to invest in SCE, enabling the utility to debt finance wildfire claims payments. Since then, many of you have asked questions about the timing of the equity issuance. As we shared with you, we will provide an update on the Q4 2020 earnings call. The timing of the equity issuance will be dependent upon the timing of future claims resolutions and payments that exceed insurance. And that concludes our 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. Thank you. Our first question comes from Jonathan Arnold with Vertical Research Partners. You may go ahead, sir. Good afternoon, guys. Thank you. Hi, Jonathan. Hi, Jonathan. Could I just ask a question on the September announcement and the which, obviously, you just mentioned now? And particularly, of the €6,200,000,000 that is now your accrual, can you give us any sense, Pedro, of sort of how what proportion of that is effectively settled or agreed? And how much is still subject to estimate or extrapolation? Just sort of some directional sense of how you arrive at that being the estimate as opposed to the low end these days? Sure. Thanks, Jonathan. Maria can fill in the numbers here. But in terms of the categories, you've seen the major announcements so far, the various settlements that we have announced, the one last fall with the public entities and now the subrogation parties in this latest settlement. In addition, there's been, I think, we've shared that there's been settlements with a number of private parties, private plaintiffs. But those are small relative to the thousands of plaintiffs in the individual cases. So that's based on that and maybe I can probably give you the precise number that we disclosed that's included in the settlements. But in the writing of the best estimate, what we did was have the benefit of now having those major settlements under our wins, right, and behind us. And then in addition to that, going through the discovery process on the rest of the claims, we're deeper into the discovery process. We think we have a better understanding of the facts at hand and what our arguments would be. We have an understanding of some of the counter arguments that various classes of plaintiffs might have. And that just gives us a better ability to now move from the low end to the best estimate. Just do assumptions in there and we disclosed that the final result could be higher or lower and we're not able to disclose an uncertainty band around it, Jonathan. But our hope and expectation is that by now moving from the low end to a best estimate that we're no longer talking about being on one end of the roadway. We're now right down the middle of the roadway. And I know that investors will be probably making assumptions or having their own expectations about what that uncertainty band might be. Again, we're not in a place to be able to communicate that. But what we've given you is best estimate or best sense of what the final outcome would look like on the benefit of not only things that we've locked down, but facts that we now better understand through the litigation process. Louis, I don't know if you want to give John, if you have a handy kind of percent. Yes. I think just the only thing, Jonathan, maybe the last piece of your question is you were, I think, asking about which portion of that amount is the subject, I think the way I interpret it is the subject of the subrogation claims settlement that we reached and that's about $1,200,000,000 I know that, Maria. I was looking for just overall how much of it is known versus estimated. Yes. Maria, so I guess the answer to Johnson's question would be that you take the $6,000,000,000 plus gross amount and then point him to the settlement that we just entered for $1,200,000,000 the settlement that we had last fall, which was on the order of $1,000,000,000 the claims or $1,000,000,000 of the settlement was, call it, a third or so of that. So round numbers would be, Marie, you probably have a more precise number of 1.5 or so, 1.6. Yes. I guess I would probably just go back to what we have recorded on the books right now is the total recorded liability, Jonathan. The portion of that, the $1,200,000 approximately is associated with the separation claims payment. What I would say about your question, what's known and what's unknown, we took all of that into consideration in order to reach the best estimate. I don't think Pedro's comments earlier about the process we went through, etcetera. We're not trying to break down between all of the different types of claims payments at this point. You can understand why. Okay. Understood. And may I just sort of on a related topic for my follow-up, the equity that you say you're going to talk to us on the Q4, any can you would you comment at all on your sort of interest in using the current ATM that you have between now and then? And then sort of also why what's the thought process behind sort of waiting till you need to actually pay claims? Why not just sort of put this dilution behind you? So that for a better one for the better reason, 'twenty one will be a sort of a base that won't be further diluted. So in regards to both of those questions, I think your first question about thoughts about what I'll say approaches or tactics or tools, I think we have a lot of flexibility around the tools and all options I think are available to us running the gamut ways we've done it before, the ATM, etcetera. So I think we have a lot of options when it comes to the tools and we'll work that out as we progress closer to the point in time at which we will be issuing an equity. And I think your second question around kind of why wait, I think we've described before that the way these processes work, we have changed our best estimate, but that doesn't mean that cash is going out the door right now. In fact, the segregation settlement that we announced last month, really most of that was covered by insurance. So we're really going to follow that pattern of where when cash is actually required and that will play into our decision about the timing of the equity issuance. Okay, fair enough. Thank you. Let me just put a fine point on it, Jonathan, because perhaps reading so much between the lines of your question, there could be an implication there that perhaps events might be happening within a certain timeframe. And the reality is we just don't know what the timeframe will be for resolution of the remaining claims. I think as we've said all along, often these claims get resolved to settlement, but they need not resolve to settlement. If it goes through settlement, some have happened more quickly, like you saw the public entities settlement and the subrogation claims. But there's no guarantee that remaining claims outstanding will be settled on a similar short time frame, and it could take much longer for those to be resolved. And if we ultimately ended up going all the way through litigation that we would expect to be a multiyear process. So I think I was hearing into your question the idea, well, if you need it by X time, why not go ahead and do it a little issue the equity a little bit earlier. But we don't know whether that will be a little bit or a lot earlier because we don't really know the time frame, Jonathan. Okay, fair enough. That makes sense. Thanks very much for all the help. Thank you. Thank you. Our next question comes from Julien Dumoulin Smith from Bank of America. You may go ahead. Julien. Hey, good afternoon team. Thank you very much for the time. So if I can pivot to the Silverado fire, if you don't mind. I appreciate the remarks at the outset here. But can you help frame as best you understand the liability statutes pertaining to 3rd parties, such as those potentially involved with the telecom lines, in the case and also further, I appreciate all this is preliminary, but how should we want to think about your direct exposure? Should the fact pattern that you guys just alluded to about a third party causing the fire be affirmed in most critically that inverse condonation would not apply to the utility, seeing that at least as best I physically understand what you're describing, that this wire basically flew up from below and actually touched your presumably sparked your own wires there. Sorry for long winded question, I just want to be very clear to make sure we understand the statute here. Sure. And I'm going to give you a sadly unsatisfying answer because this fire is still raging. We know very little at this point. And so even what I won't say statute, what legal treatment would apply ultimately is still And even with that, whether it applies will depend upon the facts of a particular case, ultimately will be determined by a court. So we'd be speculating if we would try to opine on whether something like inverse would apply here. Likewise, in terms of liability potentially by other parties, I think you're understanding the picture as well as we do right now, right? As we shared, we're aware of this possibility of the lashing potentially having gone up and flown up into the power lines that were above that on that particular segment. And so that could imply then some potential liability by that 3rd party telecommunications carrier. The utility could show that there were causes like that, then the utility would be able to pursue a contribution from other responsible parties. And so that certainly is a possibility here, but it's just way too early to draw any conclusions at all, Julian. And so, I probably have to leave it at that. All right, fair enough. I'll ask you a little bit of an easier one here, if you don't mind. Where do you stand on the ability to procure insurance as you look forward here? And I'm asking this in light of continued elevated wildfire activity in the state, even if it's admittedly not been directly tied to utility matters, but rather broader environmental factors here? Yes. I'll start this and Maria will probably have even better detail that I think I'd start by saying, you saw that we procured insurance successfully for this calendar year. It is a tighter market than it's been in the past. The disclosures you're seeing of premiums and amounts of leave sought recovery of indicated that the pricing for that product is a lot higher than it was 3 or 4 years ago. I wouldn't want to speculate on what the market will look like when we're back out in the market. I think we would expect that there would be product available, but that's discovery you go through every time that you go through the insurance cycle. Maria, what would you add there? Sure. So, Julien, I think it was a tough market. It's been a tough market for a couple of years. We have had the ability to get the amount of capacity that we wanted, albeit at a higher and higher price. So that is, of course, an issue for our customers. You may be aware that in our 2021 GRC, we've actually started to try and explore other alternatives that would help to lower the cost. So funded self insurance and things like that, balancing accounts, so that if the market changes to the good or to the bad in terms of pricing that we're not caught short nor would our customers bear an undue burden if it actually turns out to be better than we were forecasting. So I think it's just something that we continue to monitor and we continue to work hard to get it into our program at the most affordable price for our customers. Maybe one more thing I would add, Julie, and that might be helpful is, and again, this is a little bit of speculation here, but at the same time, I think it's important to reflect on the fire season that we've seen so far, which has been once again historic. We thought 2017 and 2018 were historic, but in terms of acres burn, we've seen over 4,000,000 acres burned across the state with over half of that having been due to lightning strikes. The point I'd make here is one that I think I made already in my prepared remarks, the fire suppression effort has been really strong. And I'm going to speculate a little bit here, but I can't prove the negative here. But I would hazard a pretty good guess that if we had had this fire season 3 years ago before the state has significantly increased its firefighting resources and capabilities, We might be seeing a much different level of damage across the state regardless of the cost of the fire. We might have seen much more damage for the lightning induced fires. And if there were utility cost fires, we might see more damage stemming from those as well. So I would hope that as insurance carriers look at their risk profile for California, they I'm sure will be taking into account some of the climate change related weather conditions, the winds, etcetera, that have contributed to the large fires this year. But I would also hope that they would be looking at the flip side, the fire suppression effort that helps bring the risk envelope down for everyone. And at the same time, I would hope they would be looking at the efforts of all the utilities, certainly our utility in executing on the wildfire mitigation plan. The risk isn't 0. The risk will never be 0. But I think the risk is very different today than it was 3 years ago as we and we'll continue to change as we continue to harden the system, as we continue to use PSPS responsibly and the like. Got it. Thank you, guys. I'll follow-up on offline here. You bet. Thanks, Julien. Thank you. Our next question comes from Michael Lapides with Goldman Sachs. You may go ahead, sir. Hey, guys. Thank you for taking my question. I wanted I have two things. One is just a payment level question for the 2017 2018 wildfires. If I just do back of the envelope and I'm sure the queue has more and I'll hop in offline. But the $6,200,000,000 accrual, you paid out about a bill $6,000,000,000 You have somewhere between a bill $5,000,000,000 $2,000,000,000 of insurance left and you're getting around 225 dollars on FERC recovery. So that's kind of rough the cash out of pocket is somewhere in the $2,500,000,000 to $3,000,000,000 range from the 2017 and 2018 wildfires. Am I kind of in the ballpark, Maria? Yes. And that's for forward tax items? Yes, that's about right. And I was going to the math a little bit. You went through it pretty quickly, but we had about 6 and 2 and 4. It's probably I would say 2.5 seems a little low to me, if I go through the numbers. If you're going all the way from the beginning, you're not if you take all of the charges, including the ones that have already been paid for the private entity settlements back here? I'm just trying to think about cash going out from today onwards. So the $6,200,000,000 but you've already paid a Bill 6, roughly a bill 6. And you have some insurance still to collect. So and I don't remember what that number is. The max is $2,000,000,000 but I think you've already collected some. And you're going to feel So if you're only thinking about the go forward, that's probably about right about 3,000,000,000 dollars Okay. Thank you. In the best estimate, embedded in the best estimate. Understood. Pedro, I have a question just about the tone in California towards utilities, which is one of the major publications in Northern California today put out what seemed or maybe it was last night, put out what seemed like a very harsh piece on one of your peers. And it seems to have been relatively quiet coming out of Sacramento and other public officials about kind of the role utilities play in wildfires and wildfire mitigation. And maybe that's because we're going through a harsh season, But could you just talk about how the how you manage the court of public opinion from here and the sentiment? And how that impacts and kind of flows through policymakers and the coordination with policymakers? That's a good question and I'll try not to take up the whole rest of the earnings call on it because we probably could spend a whole afternoon on it. By the way, in your prior question, I'm glad you asked it. I think that your question was probably in the same zone as Jonathan's and looking for the sizing of the numbers. So hopefully, that helped everybody. I think in terms of tone, and look, I won't comment on the publication you just mentioned or other utilities out there. But I think I'll make 2 comments. I'll make a general comment and then a more specific comment about Edison. The general comment is that particularly with the 2020 wildfire season so far, the fact that over half of the acres burnt have stemmed from lightning induced fires. The issues that everybody in the population has seen around firefighting and frankly, the great efforts by firefighters, etcetera. I think at some level, there's a deeper understanding that this is not just about the source of the fire, but it's about this convergence of factors, including climate change, including weather conditions, including fuel on the ground, including all of this, right, including where homes have built that adds up to this risk that the state bears and trying to do something about. So that I think brings in maybe a little different tone overall. I'll make a second comment about our utility. One of the things we've tried to do through Autodesk is I mean, a few things we've done. 1 is we try to be really transparent, Michael. And so as we have seen issues in the system, as we've gone through the 2017 2018 wildfire experience, you saw us be very transparent when we saw that there might have been issues related to our equipment that might have contributed to fires because of all, I want to make sure that the public can have confidence and trust in the Edison Company being forthright and not only working hard to improve things and reduce wildfire risk for our communities, but also in being transparent about when things might happen. And the reality is we operate under a prudency standard, not perfection standard because we operate a system with 1,500,000 poles across 50,000 square miles with 27% of those 50,000 square miles being high fire risk territory. The other thing we've tried to do is make 2 more things we don't. The second thing has been to work really hard, really hard at continuing to learn, develop our wildfire mitigation plans, improve on them. Actually, even before there was the concept of the WMP, frankly, even before we'd seen the Thomas Fire in 2017, we started to work on the grid safety and resiliency program because we saw with the combination of the one country fires in the fall of 2017 and the instability then in the regulatory framework of the CPUC Sandia's SMA electric decision, we saw that the risk profile was very different, both physically and in regulatory space. And that began our first iteration of a radical rethinking of how we thought about wildfire risk on our system that led to the GSRP filing, and we haven't stopped since then. And we try to communicate with the communities everything that we're doing around that. The third and final thing I'll mention is even as we focus most of our attention on this near term issue and these risks, We've also kept the eye on the long term ball here. And that's why you've seen us continue to think hard about things like Pathway 2,045 and what California needs to do to address climate change, both because we're seeing the climate change impacts manifest themselves in wildfire. So it's important to take care of the wildfire risk, but we also have to help the states take care of the true long term risk, which is doing something like climate change. But also because taking care of addressing greenhouse gas reduction, it turns out that you really need a strong utility to be a major partner with the state to have a strong grid to help access clean energy and electrify the economy. And that I think that need for a strong utility for the long run to help the state achieve its climate goals is part of the fabric here, is right, is part of the reason to ensure that the utility can have a compact to keep it healthy. It's part of the reason that you saw state government support AB1054. It's part of the reason that you saw unanimous approval for AB913 this year. So a little long winded here, but we really think a lot about this in terms of what do we do in the near term, but how do we think about the long term and how we help demonstrate to the state and to our public that we want to be a partner and we need to be a strong partner for the long haul here in order to make California the great state that we all enjoy living in. Got it. Thank you, Pedro. Much appreciated. Thanks, Michael. Hey, Michael. Just one thing because I was using my scratch pad while Pedro was going through it. I think the number I can give Maria time to work some numbers. I think the number you're looking for is more like $3,500,000,000 to $3,700,000,000 And we can go over how I did my math off if you want. That sounds great. Happy. Look forward to following up, Maria. Thank you. Thanks, Markus. And the next question comes from Steve Fleishman with Wolfe Research. You may go ahead, sir. Hi, Steve. Hey, good afternoon. So just one technical question on the lashing wire and I guess the telecom wires and electric. Are you does the is the telecom company responsible for managing and servicing their own wires near your poles? Or do you have to do that at all? In general, they are responsible for managing their equipment. It gets even more complicated here because you can have multiple telco companies using the assets under joint pole agreements. In some cases, they might have a space on the pole designated for them, but they can then deem that or dedicate it to other telco providers through transactions. So it really their responsibility it is their responsibility to maintain their physical assets. That said, when we go on and inspect our facilities, we look for any hazards that could interfere with the electrical system. And so while we don't do detailed inspection of their telco assets, if we see something and we certainly keep an eye out for any hazards that the telco assets might post to the electric system and report those to the telco companies. Okay. And then just one other question on the GRC. It sounds like you feel pretty good on the timing of the Track 1 by early next year. Do you think there's any chance of settling the GRC Track 1 like you have Track 2? Or should we assume that's going to go through the litigated process? Yes, we're pretty far along in the process now. I mean, we all we have left is really the ALJ to issue a proposed decision and you could have oral arguments after that. So I won't say you can never do something like that, but we are pretty far along in the process in terms of track 1. Track 2 on the other hand, obviously, we were much earlier in the process and hadn't yet gone through a lot of the different piece parts of the proceeding when we reached the settlement in principle. And you'll wait for that to give 2021 guidance, the outcome of the GRC like you've done in the past? Yes, the TRACK-one. Yes, we will. Yes. Okay. Thank you. Steve, we always remain open. Parties want to discuss things, but I think Maria got it right. This one's pretty far down the deck. Thanks a lot. Thank you. Thank you. Our next question comes from Jeremy Tonet with JPMorgan. You may go ahead. Hi, good afternoon. Hi there. Switching gears here to the Blue Ridge fire, just wondering if you're able to share with us if any EIX assets reside within the vicinity of the Blue Ridge ignition point or if that is not the case? I think that Jeremy, thanks for the question. I think the short answer I'll give you is that we have not filed an ASIR for Blue Ridge. At this point, we don't see any basis for needing to file an ASIR. Got it. That's very helpful. Thank you. Yes. You bet. When thinking about potential changes to California system planning, how should we think about incremental capital opportunities for EIX over the next few years? Just kind of a broader question there. Yes. No, that's a great question. I'll try and keep it brief. When we think about that, I think certainly the near term thesis I talked about, right? So the procurement needs that we foresee across the state for the 2024 to 2026 timeframe. I would suspect that much of that will continue to be served by competitive generators in the state as the state has generally had a preference for that. There's always an opportunity for utility involvement. We have shared with investors before that we don't see SCE investing capital into traditional generation. It's just not the core business at this point. We like the generation that we do have in rate base, but we don't see dedicating new capital to new generation since we have a very vibrant third party market here and we have plenty of opportunities to invest capital in the wire system. A little different with storage, because storage could well be part of that, not only that mid term procurement, but we certainly see storage being a big part of the story in California as we go out to 2030 and 2,045. And so just to remind you, our Pathway 2,045 analysis suggests that California wide, you'll see an need for 80 gigawatts of new renewables and 30 gigawatts of new storage at the bulk power level statewide. And while I would expect that a lot of storage will also be done by 3rd parties, we have seen certainly an interest in statutes in preserving the option for some utility owned storage. You've seen in our current rate case, we had filed in there provisions for not a large amount of capital, but some capital that got set aside, Maria, I want to say it was around $60,000,000 if I remember correctly, but check me on that, dollars 60,000,000 right, for potential utility owned storage. And what we see storage being a more likely target for utility ownership would be where it can play a more integral role in grid operations. As an example, the 20 megawatts of batteries that we deployed at our Mira Loma substation a few years ago. I'd say bigger picture though, as we think about those near and midterm needs and in the longer term energy transition, the big capital investment opportunity and need here is making sure we have a robust grid to be able to interconnect clean energy resources with the increase in uses across the economy as the economy electrifies and as we see load, which has been generally stagnant for the last decade, increased by 60% by the time we get out to 2,045. So we see a significant need for investment in the wire system. And that along with potential upside opportunities in areas like the Charge-eighty two program, there might be other opportunities like that as the environment evolves. So hope that covers it, Jeremy. Got it. Really appreciate that. And if I could slip one more in, just what's your current outlook for customer rates over the planning period with kind of incremental recoveries authorized as expected? If you look at our current rate case, so the GRC, especially the TRK 1, if everything were approved, which obviously that never happens, but the average monthly residential bill would go to about $13 on average. Our care customers would go up to about I think it's about $8 a month. Got it. Thank you very much for that. Thanks. Thank you. And our next question comes from Ryan Levine with Citi. You may go ahead, sir. Good afternoon. Hi, Brian. In light of the blackouts in California over the last few months, can you comment around specifically blackout related potential investment opportunities in transmission and storage that may address some of the problems of the last few months and reduce risk for future seasons? Yes. Thanks for the question, Brian. And I think a lot of the answer in broad strokes is what I just shared with Jeremy. I don't think that we have a more precise beat right now on here's a specific piece of equipment that might help with that. Remember that the rotating outages were not driven by the transmission or distribution system per se. They were driven by insufficiency in supply. And so a lot of the focus, therefore, is on the kind of near term procurement that SCE advocated for and the CPUC approved last year. So recall that they approved something like 3,000 megawatts of procurement for the 2021 to 2023 timeframe. Of that, I think SCE has done that's a statewide number and I think SCE has done something like 2,700 megawatts of procurement for that timeframe, largely with keeping some existing generators going for a few more years. That's been in tandem with the State Water Resources Board having extended the timelines for retirements due to once the cooling restrictions. So I think that's a lot of the very near term action. In the midterm, that's what I was talking about earlier, we see that statewide need for around 5,400 megawatts of resources beyond current contracts statewide. And so some of that may be met by once again existing plants being able to extend their lifetime. Some of that may be driven by new resources. Some of that could be combinations of storage additions that might provide greater effective capacity. So that I think could be something that some portion of which might end up being done through utility rate base. And I think certainly it would be a large portion of that that is done through competitive processes. On the transmission side, I don't know that I can point to any specific transmission deficiencies that would have contributed to the rotating outages. But as we think about the system adding new resources, that, of course, will then need to lead to needs for transmission interconnection if those resources are landing in places that don't already have wire connections. And so I don't think I have anything specific to share in terms of the near term. I will tell you in terms of the longer term view heading out to 2,045 and our pathway 2,045 white paper when we tried to put a dollar figure around the resource needs, that 80 gigawatts of renewables and 30 gigawatts of storage, those new clean energy resources added up in our estimates, a rough estimate to around $175,000,000,000 need for new investments statewide. Again, much of that may be done by 3rd parties. And the related transmission bulk power system investments through 2,045 statewide will be something like $70,000,000,000 So there is significant investment need ahead and I think some portion of that will need to be served by utilities. Thank you. Thanks, Brian. Paul Fremont from Mizuho, you may go ahead, sir. Hi, Paul. Hi. I guess my first question is, can you tell us a little bit more about the Bobcat fire? And I guess there were some news reports with respect to the Bobcat Fire that there may have been vegetation or tree branches that came into contact with the transmission lines. Are you able to sort of give us any update there? Sure. And I don't think there are any major new updates beyond what we have reported already. But just to recap that, we have reported that this fire started in September 6. The reported start time of the fire was twelvetwenty one. We did have a relay on our system on a 12 kV circuit around 5 minutes before that at 12:16. But one of the high definition cameras that we have out there saw or captured the initial stages of the fire and saw smoke as early as 12:10 p. M. So 6 minutes before we saw any sort of activity in our circuit and 11 minutes before the reported start of the fire. The U. S. Forest Service is doing an investigation and they removed the 23 foot section of overhead conductor from the area of interest and we understand that they also removed and retained some tree branches. So they suggested they may be investigating if vegetation was involved in ignition of the fire. We don't know if the U. S. Forest Service is also looking at any other possible causes of the for the fire or if this equipment is their sole focus. SCE is doing its own review. It's still really early here. We will certainly be looking at any number of potential costs. The bottom line, Paul, is it's way too early and we have reached no conclusions in either direction in terms of causation at this point. With respect to the Track 2 settlement, with respect to the Track 2 settlement, you're making a statement that you don't expect a negative earnings impact. Can you elaborate on that? Is that relative to what? So I guess I will caveat everything by saying that since the settlement went to a lot of detail. It's only meant to didn't want people to think that there was anything in the settlement that would be untoward. We don't see any impact on earnings or anything like that. We've deferred some of the costs as being profitable of recovery. Just wanted to clarify that this is consistent with what we previously thought. Okay. So that's not in any way any type of a signal on future EPS? No. It was more to clarify that, well, mean, I guess it is a signal since I'm saying it's not going to have negative impact on earnings, but it was more to point to the fact that we had previously talked about how we were deferring costs, and this settlement covers a number of those costs that we've been deferring. Okay. Thank you very much. Thanks, Paul. That was the last question. I will now turn the call back over to Mr. Sam Ramraj. Thank you for joining us today, and please call if you have any follow-up questions. That concludes the conference call. You may now disconnect. Thank you. This concludes today's conference. You may go ahead and disconnect at this time.