Good afternoon, and welcome to the Edison International third quarter 2015 financial teleconference. My name is Brandon. I will be your operator today. [Operator Instructions] I would now like to turn the call over to Mr. Scott Cunningham, Vice President of Investor Relations. Mr. Cunningham, you may begin your conference.

Thanks, Brandon, and welcome, everyone. Our principal speakers will be Chairman and Chief Executive Officer, Ted Craver; and Executive Vice President and Chief Financial Officer, Jim Scilacci. Also here are other members of the management team. Materials supporting today's call are available at www.edisoninvestor.com. The key items are Form 10-Q, Ted and Jim's prepared remarks and the presentation that accompanies Ted's comments, Jim's comments. Tomorrow afternoon we will distribute our regular business update presentation. During this call we will make forward-looking statements about the future 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 measures. During Q&A please limit yourself to one question and one follow-up. I'll now turn the call over to Ted.

Thank you, Scott, and good afternoon, everyone. Today we reported core earnings of $1.16 per share. While this is well below last year's third quarter core earnings of $1.52 per share, year-over-year third quarter earnings comparisons, as was the case with the first two quarters of the year, are not very useful. This is because of the way we have had to recognize revenue with the delay in SCE's 2015 General Rate Case and how we are accounting for the recently released proposed decision. We have said in the past that we would provide 2015 earnings guidance when we received a final GRC decision. However, with the noise in our quarterly earnings numbers, we thought it a disservice to investors to have them guessing about 2015 earnings. Therefore, we decided it was best to provide 2015 guidance at this time today. So today we introduced core earnings guidance for 2015 of $3.77 to $3.87 per share. This guidance has some key assumptions that Jim will review in his comments. Of course, should the final GRC decision differ substantially from the proposed decision, we may have to revisit our guidance. We plan to return to our normal practice of providing annual earnings guidance for 2016, when we report full year 2015 results in late February. One more comment on the General Rate Case. While we feel the GRC proposed decision is overall generally constructive, SCE identified several important issues in its October 8 comments to the CPUC. Jim will cover most of these, but I want to touch on one in particular. The proposed decision attempts to recover certain tax repair benefits that were reflected in earnings in 2012 to 2014 through a permanent reduction to rate base of $344 million. We consider this retroactive ratemaking and a potential violation of…

Thanks, Ted. Good afternoon, everyone. I plan on covering third quarter and year-to-date results, SCE's 2015 General Rate Case proposed decision, capital spending and rate base forecast, a few other financial topics and guidance. Please turn to Page 2 of the presentation. Let me first address revenue recognition for the first six months and then for the third quarter. For the first two quarters of this year, we recorded revenues largely based on 2014 authorized revenues, which included a revenue deferral of $85 million or $0.16 per share related to incremental flow-through tax repair deductions. Our accounting was based on management judgment that these revenues would likely be refunded to customers. Having received the proposed decision, we updated our estimate of probable refunds to customers, as part of our third quarter reporting. This in turn lowered third quarter revenues. The GRC-related revenue reduction was $0.42 per share. This is comprised of the two elements shown under key earnings drivers at the right of the slide. As Ted noted, earnings comparisons will not be useful, until we receive a final GRC decision and report full year 2015 earnings. Of course, if the final GRC decision is different than the proposed decision, then there could be other related adjustments. With that background, I'd like to walk through the key earnings drivers, starting with SCE. There are two key earnings drivers of the $0.35 per share decline in SCE's earnings. First, as I mentioned before, we recorded revenue largely based on the GRC proposed decision, including a catch-up adjustment. Second, there were favorable cost and tax benefits realized in 2014, which did not recur in 2015. Looking at revenue, I've highlighted the $0.42 per share related to the GRC proposed decision. $0.20 of this revenue reduction is from the flow-through tax repair benefits…

[Operator Instructions] Our first question is from Stephen Byrd with Morgan Stanley.

Just want to follow-up on a couple of things in terms of spending outlook. The memorandum account for the GRP spend that you'd like to effect, could you talk a little bit procedurally just about how we should think about the steps to get approval for the memorandum account?

Well, we have actually already filed for it. It was part of the DRP application that's gone in and procedurally the commission then will have to act, and will look at over the SCE folks, any time frame for that Pedro or Maria?

This is Pedro Pizarro, not just about the memo account, but procedurally in the DRP filing there is public workshops that are scheduled for the November 9 to November 10, and there the PUC is looking at a broad DRP roadmap for how the DRP proceeding will be faced out in the next three to four years. With respect to the memo account itself I don't think we have a specific timing. We'd expect it would be handled as the proceeding moves along next year.

And then just follow-up on just thinking about the tax positions you highlighted in 2015. There are a number of moving parts in terms of uncertain tax positions and lower tax benefits. On a going forward basis in '16 and beyond without being specific numerically, how should we think about those kinds of moving parts? When do they start to settle down and when will they become less material, if you think future years?

That's a good question. And it really depends on ultimately how things turn out. I can tell you, for repair deduction, that's been a challenging one for us to forecast accurately. And I wouldn't expect that going forward that you will see potential shareholder benefits from repairs. But there're other tax benefits we realized, so it really comes to how accurate we are forecasting our cost versus what actually occur, so there could be differences both, for or against us. And the other related piece is O&M benefit, that's the other companion we've been talking about this whole time, where I think in the proposed decision it was clear that, it left open the door that there could be incremental O&M savings that we could realize and we've said repeatedly that we will continue to look for benefits to reduce our cost for our customers.

And as you think about those moving parts, in terms of the magnitude or volatility, I know it's hard to have a crystal ball to think about that. But do you see the same degree of potential volatility in terms of movements in these accounts or are there reasons why that volatility might be reduced in future years?

I think my answer around that was, around repair deductions, where I was talking about specifically, the proposed decision, I think effectively we'll probably capture those benefits. And there is also a balancing account that has been set up for our pole loading program, which a lot of the repair deductions are rising from. That's why these repair benefits have increased so dramatically over the last three years. So with that balancing account, there's not an opportunity for earnings or losses associated with differences from forecast. A lot of complexity there, sorry for all the -- there is still more to be written here until we get a final decision.

Our next question is from Michael Weinstein with UBS.

It's Julien here. So just following up here on the transmission reduction in the rate base, can you elaborate a little bit on nature of the issues in pushing up this CapEx, part one. And perhaps part two there, you talk about a $4 billion number, but is that fair to say that there might be some higher oscillations in that, call it, rounded $4 billion number in the '18 period now that you've pushed out this transmission CapEx. Just trying to get a sense of exactly what's going on in terms of those pieces.

So I'll just point you to Page 8 in the investor deck, which has the capital expenditures, and it provides the detail of the amounts that are changing. In terms of the reasons, what my script falls up on was these are permitting and scheduling delays and the principal the largest one is the West of Devers project. There is some other smaller ones, but West of Devers is a rather large project and we're just seeing it slip out in time. And I'll pause and look over to Pedro and Maria to see if there is anything else to add?

All right.

So that's what you've got. Now as far as the above $4 billion --

Just to clarify, if you will, you guys have historically talked about hitting a $4 billion CapEx pace consistently, does this now mean that you have call it a 2018 number that you're not closing here that would be call it materially above that $4 billion figure to reflect, call it a one-time true up on the CapEx for transmission?

Yes. And this is going to be a difficult one, because we don't have information in the public domain beyond '17. So I'm just going to touch a couple of items that we see that are changing both up and down to be fair. So clearly the DRP is a big element of potential new expenditures. We've provided information at public domain and you can see there is substantial ramp up of expenditures since '17 and as you go into '18, but those expenditures will be subject to review as part of our general rate case process. There are other things that are going up that would include our -- and we have an opportunity through the storage program. We have an opportunity through electric vehicle charging program. And those are still working their way through. And all three of those just to emphasize are not included in the numbers we're seeing here today, so there is some potential upside depending upon how those proceedings progress. On the down side, there is the transmission issue is they're still going to be -- we'll have to see where that goes, as you fit each some of this larger projects and we've ramped up in transmission area, then we ramp back down as they're finished and we'll get to a steady state of capital expenditures. We will just have to see how load growth goes that could be up or down depending upon the health of the service territory and the penetration of distributed generation resources. So I'll leave it there. There is ups and downs. There is probably more of a bias that we see to the upside, because of some of these large projects.

And just to clarify, in the transmission CapEx, just a tad bit more, is there any risk around, obviously you had the competitive project allocated. Is there any other moving piece that we should be aware of in the transmission bucket that could develop one way or another here? Obviously, the permitting was kind of unexpected.

Nothing that would stand out right now, Julien, beside what I told you.

Our next question is from Hugh Wynne with Bernstein.

Jim, I just had some, what I hope are, simple questions on Page7 around the rate case proposed decision. On the left-hand column there, the bottom bullet, the $73 million pole loading capital spending reduction? And then in the parenthetical below that it says $100 million capital expenditure reduction. What is the difference?

To one's capital to one's closings, and they don't always line up exactly. And so really, when you think about rate base, it's what's close to plant. So forecast don't line up exactly.

So they are basically telling you that they want you to spend $73 million more in your spending plan, and that is reflected in closings fulfilling by $100 million.

That was reverse. So they've taken out of the -- in the PD, they've take out $100 million of capital expenditures, which translates into $73 million of rate base. So it's lower, not higher.

And then the second point. What is the bone of contention around the customer deposits?

When you look at our forecast, they take the $180 million of customer deposits and reduce our rate base by that amount. And the bone of contentions is if there is not similarity of treatment among the three utilities, we seem to be treated differently, as a result of whatever reason. And then we've had this -- we keep raising this issue in the last several GRCs, and there is inconsistent treatment. We think that's unfair.

And then, finally, on the first point, I agree with everything you say there in the second bullet that seems like retroactive ratemaking and violation of normalization regulations, et cetera. But presumably the ALJ, who has a law degree, and I don't, has a different view. Could you characterize the different perspectives around this point?

Yes, it would be hard to characterize it completely; there was a number of arguments. But I think the simple argument that was made is that they set rates prospectively, so therefore how could it be retroactive ratemaking. We just fundamentally disagree on that point. And so that's something we'll have to figure out hopefully in the final decision that will address this issue. But we'll have to see.

Our next question is from Daniel Eggers with Credit Suisse.

Just on the $80 million of compensation expense that wanted you to get recovery on. Would you find ways to offset that or do you see opportunities to change your compensation structure like the other utilities to mitigate that drag?

Well, we'll certainly have to look at it. It was obviously a sensitive issue in oral argument in our comments. And we'll have to see what the final decision is. And we'll have to see how it unfolds. Hopefully, they turn it around.

And then, I guess, on the $344 million for this year's guidance, if you didn't get that or if the ALJ found against you, what is your course legally to address that, given the IRS issues and how would that affect the '15 guidance as you laid it out today?

In the course of action here, and I know Pedro talked about in the oral arguments and in our comments in the proposed decision that retroactive ratemaking, then you have a legal recourse. And there is a potential, as Ted said in his script, of a IRS issue, it's a normalization violation. So there is two different paths here that you might pursue. Hopefully, the Commission addresses that as part of the final decision, but we will have to see. So if it were adopted, and I think it was clearly in my prepared remarks, you'd have to take the $344 million off the rate base numbers for '15 through '17 to get back to an adjusted rate base approach.

Our next question is from Shar Pourreza with Guggenheim.

Most my questions were answered. There is a likely delay in the SONGS OII into early 2016, is there any impact to you providing 2016 guidance?

I guess, off the top of my head, and I'll hesitate and look at my collogues here. If we have a GRC decision, I think that's the critical piece we need to move ahead in providing guidance for '16. But I'll look at everybody else, I don't see the SONGS being a factor that would slow us down. And unless if they reject the whole decision, and maybe I have to go back and rethink it, but I think if we had a 2015 GRC final decision, we'd find a way to give guidance for '16.

And then just on MHI, we're obviously reaching some sort of a conclusion by hopefully the end of 2016. Is there any opportunities to give some incremental data points on that or is it just one of those where you get an order, you get a settlement, you'll disclose it at the same time?

So I'll pause here and look over to my friend, Adam Umanoff, our General Counsel. Adam any pros of wisdom?

No. Really we can't provide any additional guidance. We're operating under strict confidentiality rules of the International Chamber of Commerce proceedings. So you'll have to wait for a final decision that's announced publicly.

Our next question is from Jonathan Arnold with Deutsche Bank.

Couple of quick questions on. As we look forward, Jim, with Edison Capital out of the picture now, is it reasonable to assume that that $0.15 drag from the parent company that you are sharing for 2015, is the kind of number we'd be looking at going forward with no offset or are there other things to think about that?

We're a little premature on getting to that point. We'll give you hopefully guidance, when we report full year earnings at the end of February. But clearly what I was trying to indicate in my prepared remarks, that you lose that revenue source and so there might be a little upward pressure at the holding company.

And then, secondly, I think you said you booked the impact of the GRC PD through the first three quarters. Is the fourth quarter impact just negative, because it's lower revenue requirement or is there something else I need to think about?

I'm looking over my accountants that booked the first three quarters. Anything else in the fourth quarter that would be relevant to what Jonathan's brought up?

We'll continue to follow the proposed decision, until we get a final decision. And then we'll look at what the terms are and adjust to the final decision.

So the guidance, obviously, Jonathan is adjusted to reflect what we think, based on the proposed decision the fourth quarter will be.

And I guess, just finally, then should we read into the fact that your booking earnings according to the PD, apart from the tax adjustment item is that your best estimate of whether it shakes out, on your own accounting basis currently that you likely don't improve too much on the PD, but you do when this one issue. Is that how we should think about you giving guidance that way?

I think our view was, we felt it was important to get something out there as a stakeholder, because there is going to be -- if you wait until you get a final decision, it's really not clear that what it's going to be and we wouldn't get yearend earnings out until February. We felt that it was better for investors, as Ted said in his prepared remarks, to give some clarity. And I think we gave through our guidance, you'll have enough pieces of information to make adjustments accordingly. And so we felt that was the clearest and fairest way for everybody to do this.

And then just one other topic. Ted, I think you made the comment that you expect to; no, you hope to have the SONGS issues result this year or at worst early next. I just want to be clear that you are talking about the overall issue, including the settlement, not just the penalty piece when you make that comment?

Yes.

Our next question is from Michael Lapides with Goldman Sachs.

I was just curious, when I look at the data on Page 15 in the 10-Q and kind of the new band for CapEx, and that you've disclosed on the slides. How should we think about how this impacts the timeline to get to a higher payout ratio? And CapEx coming down frees up some cash for the balance sheet in the cash flow statement, by the time you get out to about 2018, 2019 timeframe, you'll have a higher earnings power, you'll have higher cash from operations and at lower CapEx level. Just curious about how you and the Board are thinking about kind of the timeline and the pace prior to get up for the dividend, prior to getting the proposed decision versus going forward?

Yes. It's a good question. I guess I would try to respond to it this way. If you kind of pull up from looking at one year versus the next year, any individual year, with just kind of the larger theme, the larger trends, as you know I tried to strike this theme consistently, we expect somewhere in this $4 billion-plus kind of annual CapEx. We expect pretty significant rate base growth. And we expect that as the base gets larger, as the rate base gets larger, we're going to have more cash flow. So we feel that we're going keep a good balance between solid annual CapEx and related earnings from a growing rate base, but cash to move us back in that 45% to 55%. Any given year, any couple of years, you might run a little harder on CapEx, you might run a little slower on CapEx that may give you on the margin a little more room to move on dividends or slow it down a little bit. But fundamentally, I think rather than try to pick it apart year-by-year that's the teeter totter. It's keeping CapEx in that kind of $4-plus billion range and getting back solidly. I think I use the term well within the range of 45% to 55%. So I wouldn't get too wrapped up on any one year movement. Both of those things are going to be really what we're focused on. And we believe as a result, we'll be able to provide investors with a higher than industry average growth rate in earnings and a higher than industry average growth rate in dividends.

Our next question is from Ali Agha with SunTrust.

Jim, just to be clear on Slide 9, where you've laid out your rate base numbers, new ones '15 through '17. Just to understand the moving parts there once the GRC is finalized, if I am hearing you right, you've already assumed the big tax benefit and $180 million, I believe goes in your favor, if I heard you right. And so if there is going to be any change to these numbers, it's probably to the downside if they stick with the PD or is that further upside that maybe I'm missing here?

So what I said was the $180 million, the customer deposits, is already baked into these numbers. This is net of that. And what also, I said, and I think we have it here on the first pull it on the right, the $344 million rate base reduction for the repair deduction is not included in these numbers, is not. And so to the extent, if the commission were to decide to adopt it, then you need to reduce these numbers by the $344 million.

But also, if they stick with the PD on the customer deposit, that would be another $180 million reduction?

No. I'm sorry. We incorporated the $180 million already.

Are you stuck with the PD on the $180 million?

Yes. So the only things that we haven't adopted from the PD are the tax issue, the $344 million rate base reduction. And the second thing is the SunPower termination payment for the solar panels. Those are the only two items we have not incorporated.

And then secondly on the SONGS process, just to be clear on resolutions, so the PD came out on the ex parte issue and may come up on the December meeting. Should we now expect another PD has to be issued on the petition for modification, and then at some later date that gets picked up by the CPUC or what is exactly the process for dealing with those modification petitions?

Adam, you want to take that?

Sure. And you're right. There are separate petitions for modifications and a request for rehearing, all of which are pending, and for which there has been no decision by the commission. I really can't tell you when to expect a decision. As Ted pointed out, we're hopeful that we'll see a decision later this year or early next year. Once that decision comes out, there will be an opportunity for parties to comment before it is final.

But to be clear, Adam, you need to first have a PD, which will set a 30-day clock on those issues?

Yes, on the petitions for modification, that's right, there will be a PD, a comment period and then a final decision.

Our next question is from Greg Oro with Barclays.

Back to Page 12, just regarding the AFUDC at $0.07 that it is added back, is that a good number going forward, just as an average, is there a timing issue in there, or maybe I need more of a discussion what that is?

Well, we're happy to have a further discussion, but there is a lot of moving parts associated with AFUDC. Historically, the way we've done this over the last several years, we assume that AFUDC earnings offset all the cost that aren't not recovered through the rate making process. There is executive compensation Board related cost, our corporate dues and philanthropy activities. There is a whole bucket of that costs that aren't recovered and we have assumed historically that AFUDC earnings offset those. And what can cause it to go up or down is the balance of what's in the account or the rate. So the rate can go up and down depending upon what's happening at any point in time. So I think for planning purposes, it's probably appropriate to assume that AFUDC will not come out again in the future in terms of providing the benefit and go back to that rate base approach as the core utility source of earnings and a little bit of energy efficiency that we've talked about repeatedly adjusted for the holding company cost to get you to a decent starting point.

Our last question is from Praful Mehta with Citigroup.

So I'll be quick, given it's a long call and the last question. So just quickly on the rate base that you've guided to now, if we had to bridge from the last quarter to this quarter in terms of rate base, is it just the CapEx and these GRC adjustments that you've talked about or is there other stuff that we should be thinking about in terms of reaching from last quarter to this quarter rate base?

So the two principal items are the GRC adjustments and the FERC delays. And you can see the dollar amounts of the FERC delays that's shown on Page 9 -- I'm sorry, Page 8, it has both rate base and capital expenditures and the balance is what the commission did not pick up as part of the rate making process. Scott anything else fits in there?

And probably just remember, as Jim said in his remarks, so the FERC spending is being pushed out, so you would model it later. After the current forecast period, you see it picking up in 2018 and beyond.

And just quickly the final question was on that point itself, which is, you talk about the long-term $4 billion annually. When you say long-term, how long is long-term when you think of it is? Is it a three-year window, five year window, just so we have a sense of what is it?

I don't want to be flip and say it is Wall Street long-term. But, I think it is appropriate to think through the 18 generate case cycle.

That was the last question. I will now turn the call back to the Mr. Cunningham. End of Q&A

Thanks, very much, everyone, for participating and don't hesitate to call us if you have any follow-up questions. Thanks and good afternoon.