Good afternoon, and welcome to the Edison International Second Quarter 2016 financial teleconference. My name is Tony and I’ll be operator for today. [Operator Instructions] Today’s call is being recorded. I would now turn the call over to Mr. Scott Cunningham, Vice President of Investor Relations. Mr. Cunningham, you may begin your conference.

Thanks, Tony. Welcome, everyone. Our principal speakers today 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. These include our form 10-Q, Ted’s and Jim’s prepared remarks and the presentation that accompanies 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 GAAP and non-GAAP measures. During Q&A, please limit yourself to one question and one follow-up. We will be finishing our Q&A just a few minutes early today for some final comments. With that, I will turn the call over to Ted.

Think you, Scott, and good afternoon, everyone. Second-quarter results were below last year’s results as we expected. You will recall that we told investors in our first-quarter earnings call that quarterly year-over-year comparisons would not be all that meaningful. This is primarily due to timing mismatches including impacts from the delayed decision on SCE’s 2015 to 2017 rate case, the significant SCE tax benefits recorded last year but not repeated this year, no Edison capital asset sales this year versus last year and the timing of Edison energy costs versus revenues. The larger point that I want to leave with you is that core earnings are on track for the full-year. That is why, today, we reaffirmed our full-year core earnings guidance range of $3.81 to $4.01 earnings per share. In fact, based on second-quarter results, although there are various puts and takes amongst the businesses, our current outlook indicates that consolidated results for the full-year are in the top half of our guidance range. However, consistent with what we have done in several of the past years, we will hold off until our third quarter results are in to decide if we should adjust our core earnings guidance. We are in the final half of our 2015 to 2017 CPUC rate case period. We have communicated to investors that based on CPUC approved capital spending and expected spending on FERC jurisdictional transmission projects, we expect rate-based growth – rate base to grow approximately 7% in the 2016 to 2017 period. This still seems appropriate. We have communicated several times in the past that there is relatively little variance expected in the timing of CPUC jurisdictional spending for the 2016 to 2017 period, but more variability is possible in the timing, but less likely in the ultimate amount of our…

Thanks, Ted. Hello everyone. My comments today will cover second quarter and year-to-date results, earnings guidance and our updated capital expenditures and rate base forecasts. Please turn to page 2 of the presentation. As a brief reminder, comparisons to 2015 will not be meaningful primarily because of the timing of the 2015 GRC decision and the impact of taxes. I also explained last quarter how we removed in the variance analysis the impact of repair deductions, pole loading, and San Onofre tax items because these revenue items have offsets within the income statement. EIX’s basic and core earnings per share are $0.85 for the second quarter or $0.31 per share less than the same quarter last year. SCE’s second-quarter basic and core earnings are $0.21 per share lower and EIX parent other are $0.10 per share lower. The lower earnings are primarily due to $0.31 per share of income tax benefits recorded in the second quarter of last year. Focusing on the SCE key EPS drivers column, the utilities revenue is $0.10 per share higher quarter-over-quarter. This increase includes $0.09 per share from the GRC attrition mechanism which automatically adjusts authorized revenue following the 2015 test year. This is largely offset by a $0.06 per share timing issue with the 2015 GRC decision. As I discussed last quarter, authorized revenue reductions from the 2015 GRC decision are not reflected in results for the first or second quarter of this year. You will see this reverse in the third and fourth quarters of this year. The results are a $0.03 per share positive variance from the pole loading balancing account. This balancing account was created with a final 2015 GRC decision, so the $0.08 of pole loading earnings we had last year was all recorded in the fourth quarter. FERC revenues…

Thank you. [Operator Instructions] Our first question would come from Julien Dumoulin-Smith from UBS. Your line is now open.

Good afternoon and once more, congratulations to both of you.

Okay. Thanks, Julian.

Absolutely, here is a question. Let’s see if you can respond to it. MHI filed updated notice as far as the Tokyo Stock Exchange. Can you provide a little more color on why that was and what that says with respect to the arbitration case?

We are going to toss that one out to Adam Umanoff, our General Counsel.

Hi, Julian, thanks for the question. I really can’t give you much additional detail. As MHI did last year, they felt an obligation under the Tokyo Stock Exchange rules to make a comment with respect to their view of their exposure under the arbitration. We can’t comment or confirm anything they’ve said in that filing. We are operating under a confidentiality order in the International Chamber of Commerce litigation that really precludes us from making any substantive comment. Sorry I can’t give you any more information.

No worries. I thought I’d have to ask. And separately, related, feel compelled, I suppose it is somewhat awkward given the timing. Can you opine a little bit on the desirability of the utility and the utility jurisdictions outside of California. To what extent is there, given the media headlines, a desire to expand? Or deviate from the Edison Energy strategy you guys have previously articulated as being the go-forward plan outside of SCE?

Julian, this is Ted. I will wade into that nice easy question. I think we’ve been fairly open with investors over the years about our prospects, and in a weird way, the most difficult element is we have tremendous growth prospects here at Southern California, Edison. Our organic growth and the expected CAGRs from rate base and ultimately earnings really make looking at other utilities outside of our territory as more often than not, looking dilutive either to the underlying strategic approach that we have which is, as you know, a wires based focus or a delivery of electricity focus rather than a heavy involvement in some of the other parts of the business, or dilutive from and earnings growth perspective. As a result of that, we have continued to focus primarily on where we see the best opportunities and those are really our organic growth opportunities. I ought to keep it at the 100,000 foot level. I certainly don’t want to engage in speculation on any specific thing.

Julien, did we hit your question?

Yes. I think that is fair. Thank you, very much, both.

Thank you. Our next question would come from Steve Fleishman from Wolfe Research. Your line is now open.

Okay. Thank you, a couple quick questions. Just, first, the MHI spending in terms of legal spending you’ve made, is that at SCE or is that at the parent?

It is at the utility, Steve.

At the utility? Okay. And one question on the parent, if you excluded the kind of one time payment that you made to the employees of the company you bought, would you be roughly on track for the year without that one-time payment?

It would be a little higher than that.

Higher being higher losses or lower?

Yes, the losses are a little bit higher.

Okay.

After adjusting for the buyout of the earnout.

Okay, good. And then just one other question on SONGS. Are we just basically waiting for the assigned commissioner to tell us next steps at this point?

So everything has been filed that was required to be. Adam, I will throw back out if there is anything more that’s yet to be done.

Jim, you’re exactly right. Steve, briefs were filed in July. The ball is in the court of the assigned commissioner in the ALJ to decide what to do next.

Okay, great. Jim, you sounded like you were winning an Academy award there, best of luck to you. I’m sure I will see you, but you’re making me feel old. Best of luck.

All right, thanks Steve.

It’s making us feel old too Steve.

Thank you. Our next question would come from Ali Agha, from SunTrust. You may go ahead sir.

Thank you. Good afternoon.

Hi, Ali.

Jim, all the best to all of you, as well.

Thanks.

First question, just to be clear, just clarifying the points you were making on parent. So, if we look at that, it is running at around $0.07 negative per quarter. Obviously, higher than what you had originally thought. And I’m excluding that one-time payment. Is that a good run rate to think about going forward?

So what I think I’m indicating is that we had more expenses in the first half of the year and you pulled out, we said it was $0.18 in total for the first half minus the $0.04 for the essentially the one-time item that gets you to $0.14. I am suggesting, I think I was trying to get to it in Steve’s comment and question that we’re going to have more revenues in the second half of the year. It’s going – I have indicated it’s going to be slightly above the $0.18 for the full-year, but it’s not going to be that much above.

Okay. And then to get to the higher end of the range for the year, given that the parent drag will be higher, again would imply that you are going to be earning above your authorized ROE for this final year in this GRC. How much capacity do you have to further cut back on costs so you can continue to do that in the three-year cycle of the GRC program? Which innings are we as far as the cost reduction cycle is concerned?

It’s an ongoing process. I think when we started this four years ago there was a lot to be done. If you just looked at our headcount there has been a lot of reductions over the last four years compliments to Ron Litzinger and the effort he started and continue with Pedro. And there’s more to be done. What we keep finding when we do these benchmarking studies, those in the first quartile keep getting more competitive. They continue to reduce their costs. So, the job for us is there even greater to keep up with them and then the close in the ranks, because our goal here is to get to first quartile. So there’s more to be done, and we have indicated it in our guidance for this year and we’ve indicated there will be some earnings from cost reductions next year, too. Of course, we pass that back as part of the 2018 GRC, and then we start it fresh looking for cost reductions.

One last one. Ted, I just wanted to clarify from your prepared remarks, when you talked about the SONGS situation and where all the parties were coming from. Can one infer from that that the outcomes would be either that they agree that nothing needs to happen or there is an additional fine perhaps imposed on you as TURN and ORA want? Are those the two realistic scenarios given where all these parties are with their re-filings?

So we are not going to speculate on what the outcomes might be. We think the settlement is reasonable based on all of the filings that we’ve made. Adam, anything else to add on that?

No. Thanks, Jim. You are exactly right. It really is difficult for us to speculate on what the CPUC might do.

Got it, thank you.

Thank you, Ali.

Thank you. Our next would come from Brian Chin from Bank of America.

Hi, good afternoon. On the MHI, can we just get a sense of what the calendar of next events looks like?

Brian, it’s Adam Umanoff. Again, we are operating under a confidentiality agreement. What we can tell you is that the hearing ended at the end of April of this year, and we are expecting a decision as soon as the end of the year although it could be later. Other than that I can’t give you any specifics about the process or the substance.

Okay. And then just to be clear, going back to Slide 6, you indicated that you will provide a forecast through 2020 after the next GRC application is filed on September 1. So we should expect that these rate-based numbers might be adjusted to some extent in the next, on the third quarter call or perhaps EEI? Is that the right way to think about this for 2018 and beyond or is there any other adjustments that might be made?

So what will happen on September 1, we will file our application with the Public Utilities Commission. In concurrent with that, Brian, we will put out an 8K providing additional information. We will probably pick up the capital expenditure forecast and the SCE rate base forecast, and it will cover the periods 2015, 2016, 2017, 2018, 2019 and 2020. So you have the full view in terms of, and 2015, obviously, was authorized. It’s just a base to start from. So you will have the full five-year forecast, and we will probably provide some additional detail in terms of some of the major components and the potential impact on bonus depreciation. So we are still developing that, but the current plan is to provide it concurrently with the GRC.

That is great. Thank you, very much.

Okay, Brian.

Thank you. Our next question would come from Shar Pourreza from Guggenheim Partners. Your line is now open

Hey, everyone.

Hi Shar.

Just on a shifting of the transmission spend, can you just confirm that this licensing delay is really sort of like that, it’s administrative and not a function of something like renewables having a counterattack where it pushes off in the weeds the near term?

Yes, it has nothing to do with renewables. It has everything to do with the process of getting approvals through the regulatory processes we have to jump through. And this is all in the public domain. It is hard to track every single one of these projects that are working their way through. But we are working through it, and as Ted said and I said, we firmly believe that these projects are going to get built. It is just hard pinning down the exact time frame given the regulatory hoops we jump through.

Got it, got it. Lastly, on the upcoming GRC, I know we’ll get an update, but can you confirm sot of the top end of the DRP portion is around $2 billion to $2.5 billion from the 2018, 2020 timeframe. And then maybe some leverage that we can think about that can mitigate the retail rate impact assuming you’re still kind of thinking it’s going to be inflationary at best?

So the best thing we can guide you to is, if you go to the business update, there is a document in there that’s the DRP capital expenditures estimates. There is an 2018 through 2020 period expenditures. What Ted’s comments were, we will roughly, there will be some changes, obviously, but the magnitude will generally be in the dollars that you are seeing in this chart on Page 18 of the investor update.

Like $1.4 billion or $2.7 billion roughly, $2.6 billion.

Okay, great. Jim and Ted, congrats on the stage two of your career and I am going to miss the steak dinners.

Okay.

You can buy as a steak dinner anytime.

All right no problem.

Thanks guys.

Okay, sure.

Our next question would come from Michael Lapides with Goldman Sachs. Your line is now open.

Hey, guys. I just wanted to ask a little bit of a question kind of thinking about long-term capital spending levels. I mean, Ted, in your prepared remarks, are you implying that you think the capital spending levels will remain in the low $4 billion a year range, or do you think it’s when you make your 2018 rate case filing and get into the DRP filing and docket that we are talking about something that is materially different from that level?

Yes, I will maybe use some slightly different words but capture the same themes. What I was really trying to do in the prepared remarks is keeping this thing simple. You should expect in our 2018 General Rate Case to see expenses kind of in two very broad buckets. One bucket is what I will call pretty much the traditional meat and potato type investment request that we make every General Rate Case. That covers kind of standard stuff, infrastructure replacement, expected demand increases on certain of our circuits, new connections, so on and so forth. When you take that chunk, together with the things that aren’t in the GRC, such as the Charge Ready program and FERC jurisdictional transmission spend, you should expect to see a number, generally in the neighborhood, maybe a little bit higher than what we have traditionally kind of talked about. I will just call that broadly the $4 billion plus type of base number. Then, there is a second, smaller bucket that you will see in the 2018 General Rate Case request which will really be the first attempt to try to put some specificity around what is required to really modernize the distribution system such that it can facilitate the states carbon reduction goals and customer choice on technology, so distributed energy resources. That is a lot harder for us at this early juncture to be able to handicap what of that would ultimately be approved. There is kind of the standard stuff which, when you lump it together with transmission spending and the like, it is going to look pretty similar to what you have seen in the past from us, maybe a little bit higher. Then there is a new layer of stuff that really this rate case will kind of start that conversation about, what that might look like and that would be additive to that kind of base level. So this is what I signaled last earnings call and what we have elaborated on a little bit more in this earnings call.

When you talk to customer groups and when you meet with some of the big parties, how flexible are they in terms of the balanced need to modernize the distribution system versus the impact of what that does on rates and therefore their own economics?

I did not go into that again, here, on this call, but last earnings call, I made a fairly involved discussion about what has been the pace of electric rate increases relative to the pace of underlying consumer price index increases. A lot of this depends on what year you are starting with and what year you’re ending with. But as I said in the last call, whether you looked at the 1 year, the 5 year, the 10, the 20, the rate of increase in customer rates, the system average rate has actually been at or below the rate of inflation, the Southern California area CPI. I remember the 20 year number because that is probably the most relevant one. Over the long-term, that CPI increase from 1995 to 2015 was 2.4% Compound Annual Growth Rate. The rate of Increase in electric rates over that same 1995 to 2015 period was 2.0% Compound Annual Growth Rate. As it demonstrates, over the long haul, we have been able to manage the price of electricity at or below the rate of inflation and that continues to be kind of our overall goal. You will have periods where you get more of a surge. You get other periods where you end up consolidating some of those increases, but the key, I think, over the long haul is to have the price of electricity stay at or below the rate of inflation. That is our overall goal. That remains our goal.

Got it. Thank you, Ted. Much appreciated.

Thank you.

Our next question comes from Anthony Crowdell from Jefferies.

Good afternoon. I just have a quick question on the MHI. I know you can’t talk about it or a decision has yet to be rendered, but any thought on the use of proceeds from the shareholder portion of a decision?

Not at this time. Obviously, if there were recoveries, it would be excess equity based on the sharing arrangements associated with the settlement, and then we will have to decide if we’re fortunate enough to get in that position what to do with the cash.

Does that excess equity go to the utility, the parent or does it matter?

I am sorry. I should have been clearer. It definitely goes to the utility.

Great. Thanks for taking my question, guys and good luck in retirement.

Okay. Thank you very much.

Next we will move on to Praful Mehta from Citigroup. You may go ahead with your questions.

Thanks, very much. Hi, guys.

How are you doing, Praful? Sorry.

[Indiscernible]

Prahul, hold on a second. You have to get closer. The mic is really breaking up.

Is this any better?

A little bit. Go ahead.

On Edison Energy, I just wanted to understand a quick update on how the different businesses are doing and if there is any update on size or scale of that business [indiscernible]?

This is Ted. I will do something really quick here. I think most of the focus most recently has been on SoCore, so that is our solar distributive solar generation company, and Edison Energy which is the new venture that is focused on providing energy services to commercial and industrial customers. I think at this juncture, we may have made some comment about this in the last earnings call, but I think we feel encouraged based on customer reaction to the launch of Edison Energy, the CNI energy services business. This is not one of those things where it is going to get built overnight. This is going to take some time. There really isn’t, as we see it, at least, there isn’t a category out there that addresses the market that we are trying to create, so it is going to take a little bit of time, but we are encouraged based on customer reaction, and we are encouraged based on some deals that have been coming in the door the last few months. I will just leave it there. I don’t think you should expect we will be providing something every quarter on this. It’s probably more likely to be maybe a couple times a year as this thing progresses.

Okay. [Indiscernible]

I’m really sorry, but for some reason your microphone is kind of really breaking up. I did not catch much of the question.

Pardon me. I was trying to understand, so you were saying the scale and revenues from the businesses should not change [indiscernible].

Praful, the connection is very bad. I have a call with you after the conclusion of this, and we will just follow-up with that question so we can get it clearer for you.

Thanks, guys.

Thanks.

Next question is from the line of Michael Weinstein, from Credit Suisse.

Congratulations, Ted and Jim.

Thanks, Mike.

It sounds like you intend to address the bulk of DRP planned spending through 2020 in the GRC filing. Is that intended to supersede the current outstanding DRP review docket, or does the earlier docket still have the potential to result in changes to the GRC plan after the fact?

Mike, we are going to have Ron Nichols from the utility answer that question. He is responsible for all our regulatory activities at the utility.

Michael, the DRP, the Distribution Resources Plan, provides for some of the policy level guidance that we’re going to do. Ultimately, the recovery of costs are expected after some change which there hasn’t been so far. It would be recovered through the ultimate GRC. I think that was what your question was. If I’m not answering it, you might want to restate it.

I guess I’m wondering if, let’s say, priorities are changed in that docket. I guess you would go back and you would have to change the approved spending plan in the GRC? The GRC approves a certain level of CapEx for Distribution Resource Planning and then certain priorities are changed in the other docket. Does that go back and wind up making reductions to the amount of spending that is planned through 2020?

First of all, the commission hasn’t made clear, yet, they are actually still discussing what that interrelationship between the DRP and the General Rate Case’s will be. It is a matter that is still being discussed. I certainly would not anticipate retroactive changes. Pedro?

This is Pedro Pizarro. I would also add that I would expect that the kind of spending that we would see over the next few years is all going to be fairly foundational. We will provide more detail on that in the GRC, but even in what we put out there in our DRP filing last year and the materials that Jim was referencing earlier in our business update, if you take a look at the categories of spend there. It is fairly foundational. It is upgrading circuits, some of our older circuits that are lower voltage and need to be brought up to more modern standards in order to accommodate distributed energy resources. It is also technology side things around our field area network, communications infrastructure to have enough bandwidth to handle the new devices out there. I think that will hopefully provide a little narrower range in terms of the direction, but you’re right that priorities change through DRP or the policy filings that ultimately gets reflected in the GRC’s.

Mike, related to this, and Ted mentioned this in his comments, is the memorandum account that we just recently filed. We want to spend some capital and O&M dollars, especially next year. It is really hard to step up in a material way to ramp up a program, and you need to do it in steps. That is what that memorandum account is really designed to do, to get us going and then give us a running start into the 2018 GRC period. That is an important milestone. What the commission does with that will be an important thing for our GRC.

Understood. Thank you.

We probably have time for one more quick question.

Our next question is from the line of Paul Patterson with Glenrock Associates.

Hi. Can you hear me?

Yes, Paul.

Congratulations on the retirement.

Thank you, very much.

Just really quickly, most of my questions have been answered, but what actually triggered this one-timer, or it seems like a one-timer, this incentive payment, and if you could elaborate a little bit more on that and this sentence about solar sales declining or revenues declining and calls going up? Why isn’t it a one-timer? Why is it non-core?

We are going to give Ron Litzinger, the present of Edison Energy to give you a sense of what the background was, and I will pick up the core versus non-core.

Really, it was to make sure that all of the acquired companies are incentivized around the earnings or the EBITDA for the entire Edison Energy enterprise, and when we did the acquisitions, we did not have a long-term incentive plan established. We now have that based on Edison energy earnings in total, and we felt it was best where there were individual earnout’s that were aligned around goals of the earnings for that entity only. It did not line up with our broader integrated and cross-selling model. We felt it best to transition everyone to the Edison Energy long-term incentive program and get out of the earnout.

Thanks, Ron. On the broader question of core versus non-core, given the size of this, there is a number of items that we have during any year where there are questions whether if it is recurring or non-recurring. We would just rather keep it in core and identify it. If it is large, discrete, or if you sell a business or when we shut down SONGS, those things are clearly in our view, non-core. These ones are, we just prefer to keep them in core and identify them as such.

Okay. Thanks, guys.

Okay, Paul.

Thank you. That was the last question. I will now turn the call back to Edison International.

This is Ted and I am going to pick up from here. Obviously, you know this is my last earnings call with Edison, and I just ask you to indulge me while I make a few closing comments. First, it has been a true honor to be the CEO of Edison International. This company has been an essential part of the economic fabric of this region for 130 years during which we provided the most essential of goods for modern society to function and prosper that is electricity. To have been a part of this great company is truly humbling. I am exceptionally proud of what this management team and our employees have accomplished these last years. I am sincerely grateful for the wisdom, advice, counsel of our Board of Directors that they have provided. I particularly want to single out Jim Scilacci just because it is so much fun. For a huge thank you. He, above all, will tell me like it is. He will tell me what I must hear, not what I might like to hear. He does it with such glee. He has been a great friend and a great colleague so thank you, Jim. I believe we have crafted a strong strategy for success and value creation here at Edison. We have overcome many obstacles. You might say we are still getting our trailing leg over a couple of hurdles yet. We have repositioned SCE to be a wires-focused electric utility in sync with and essential to California’s low carbon policy objectives. Edison energy has the potential to create a new business model, concentrating mostly on commercial and industrial customers and grit edge customer focused energy services. We continue to gain confidence that both Edison Energy and SCE are pioneers in their respective business. We…

Thanks, everyone for participating and as always, please call if you have any follow-up questions. Thanks, and have a great evening. Goodbye.

Thank you. That concludes today’s conference. Thank you all for participating. You may now disconnect.