Good afternoon and welcome to the Edison International Second Quarter 2017 Financial Teleconference. My name is Natalie, 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 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 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, prepared remarks from Pedro and Maria, and the teleconference presentation. Tomorrow, we will distribute our regular business update presentation. During the 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 a 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.

Thank you, Sam, and good afternoon, everyone. Before we start the review of the quarter, I would like to welcome Sam again as our new Vice President of Investor Relations. Sam joined our team in June, and some of you have already had the chance to speak with him on the phone during this past month. Sam has significant Investor Relations experience, with 15 years on the corporate side and prior experience as a sell-side analyst. And I will admit, I have also enjoyed kidding Sam a bit about how his move from the oil industry to the electric sector is very well-aligned with California's transportation electrification policy objectives. So Sam, welcome again. Now on to the quarter. Edison International reported second quarter earnings of $0.85 per share, which were slightly below last year's second quarter earnings of $0.86 per share. Typically, we make decisions about adjustments to guidance after we have third quarter results, but we are making an exception in this instance. We have previously indicated that there is a bias towards the upper half of the range. We have now adjusted guidance to a midpoint of $4.23 per share, primarily to incorporate the tax benefits related to share-based compensation which we discussed earlier this year, and Maria will cover this in more detail in her remarks. My comments today will focus on SCE's key regulatory proceedings and long-term growth opportunities. I will also provide an update on our recently announced restructuring at Edison Energy. Let me start with the SCE 2018 General Rate Case. As requested by the administrative law judges, SCE entered into initial settlement discussions on the rate case in the May to June timeframe. As is always the case, there are a number of interveners involved. While we remain open to a settlement, at…

Thank you, Pedro. And good afternoon, everyone. Before we discuss results, I'd also like to welcome Sam. We're all looking forward to working with him. Turning to other topics, my comments today will cover second quarter and year-to-date results, updated earnings guidance and our updated capital expenditure and rate base forecast. Let's begin by looking at the key SCE earnings drivers for the quarter shown on the right of the slide. So please turn to page two of the presentation. Overall, SCE revenue was not an earnings driver this quarter. Higher revenue from the normal attrition mechanism and SCE's current General Rate Case generated a positive $0.11 per share variance compared to last year's second quarter. But other CPUC and FERC revenue offset this amount. As part of our rebuttal testimony filed in the General Rate Case on June 16, we included an update to account for a prior assignment of certain compensation costs to customers instead of shareholders. SCE expects to refund $17 million or $0.03 per share to customers. This refund reduced other CPUC revenue in the second quarter. FERC revenue was lower due to $0.04 per share of items that were offset by lower operating costs and thus had no earnings impact. This was largely related to amortization in 2016 with the Coolwater-Lugo transmission project which was offset by higher depreciation. SCE continues to see lower operations and maintenance expenses quarter-over-quarter due to the ongoing implementation of various operational and service excellence initiatives. These initiatives contributed $0.03 per share to earnings in the quarter. Higher depreciation is to be expected due to SCE's major capital spending program but was partially offset by the Coolwater-Lugo project recovery in 2016 mentioned previously. Net financing costs were also higher by $0.01 per share mainly due to increased borrowings to finance…

Thank you. Our first question comes from Ali Agha of SunTrust. Your line is now open.

Thank you. Good afternoon.

Hi, Ali.

Hi.

How are you? My first question, with regards to the new 2017 guidance, if we take the midpoint of the guidance, the new midpoint, that's implying that second half 2017 earnings will be essentially flat in second half 2016. Could you explain why that directly would be the case?

Ali, this is Maria. Hi. So we provided the guidance – we wanted to update guidance to incorporate the discrete items around the share-based compensation tax benefits as well as the SoCore impairment. We've included a new guidance from the get-go earlier in the year, the $0.31 of operational benefits and financing benefits. As we continued through the year, we're going to keep an eye on all of those things. And as we get through the summer period, we will revisit that and see if we need to make any adjustments. But for now, I think that's where we are on guidance.

Okay. Well, Maria, there's nothing that would be driving flat comparisons, right, just fundamentally speaking?

We are, you know, doing the work that we've been doing every year. I think that we are looking at continuing to find ways to keep the O&M costs, et cetera, in line. And I think as we get through this period, we're going to take another look at guidance and we'll be back to you with that.

Okay. And my second question, with regards to the GRC and the rate base outlook, are you expecting – first of all, I wanted to just clarify that, I mean from Pedro's remarks, that given where we are and the hearings going on, the settlement probably is not a high probability item. But then as you're going through this process, is there a possibility of further refinement to the CapEx and the rate base numbers before we reach the finish line from your perspective?

Ali, let me take the first part of that and then turn to Maria and Ron Nichols for a second. On the possibility of settlement, we're not really handicapping the possibility. We acknowledge that there's been discussions. We don't have a comprehensive settlement at this point and we're focused on the hearings. We'll always remain open-minded but not really providing any sort of handicapping or probability of assessment.

Yeah. I think where we are right now, Ali, is in the middle of – or we're probably closer to the end of evidentiary hearings. We did file our rebuttal testimony which had some updates in it. At this point, we would be anticipating that we would make updates when we would get a proposed decision or final decision.

I see. Thank you.

Thanks, Ali.

Our next question comes from Praful Mehta of Citigroup. Your line is now open.

Thanks so much. I wanted to just touch on Edison Energy and the sale of the solar business. If you could just give some context around – you said you've already hired, I guess, bankers to run the process. Where we are in that process in terms of timing, and just size and scale of the business? And also user proceeds, is it just capital that will help fund the utility growth, or are you looking at something else?

Let me kick it off and then Maria can fill in some of the details here. And hi, Praful. Nice to hear you. So as I said in my remarks, we have engaged an advisor this early in the process here, and the point is to explore all options. And I think as I mentioned in my comments, we really want to make sure we have an open mind. We think it's an interesting business, and frankly, solar will be a big part of the electric energy economy in the decades ahead. But given where we are at this point in time and particularly where we are in tax appetite, et cetera, we just wanted to explore whether there are other options, including the potential for a sale. Maybe Maria can fill us in, in terms of the scale?

Sure. And Praful, so you know the scale of businesses currently is not material relative to the rest of the company in terms of use of proceeds. We would see what happens at the time we completed a transaction if we do. But I would say, you can think about it more like general corporate purposes as opposed to anything else.

Gotcha. Fair enough. That gives the context, which is helpful. And then broadly, we are all looking forward to the broader Edison Energy discussion as well in September. But just to understand from that context, everything is on the table in terms of like more strategic decisions around do we want to stay in this business? Or is it more what are the milestones that we want to achieve in terms of how we wanted to kind of grow or build this business going forward?

Yeah, I'd say it's more the latter. I think that we are, and as I – I think I mentioned in my comments, we think this is an interesting business and one that we want to prove out. I'm honestly a little worried that by the time we get to the September meeting, some of this might be anticlimactic because maybe (27:38) rocket science. But we're hoping to give you some just interesting way points in terms of more of the proof points that we see for the business and the time scale for getting it to earnings neutral, which is sooner rather than later, but we want to give you some more context around it and also some more views, some – what the long range potential scale can be for the business. And so we want to make sure we set expectations right here. We're excited about it. We've got a lot of work to do. And we have a business to prove out and so the discussion will focus in filling in some of the blanks that we haven't been able to fill in to-date, and provide some of the metrics and milestones we'll be using, so – because we had an interesting discussion, but I also don't want folks to think there's a big cliff hanger or something like that. So it's not quite (28:31) here yet.

Gotcha. Fair enough. And just finally quickly on this grid modernization topic, it looks like at least from the current process, given its initial phases of the full grid modernization CapEx spend, it's more challenging and more difficult to get a bunch of that approved, or at least in terms of the support that you need from the customer advocates. Is that something you see as more of an education process almost in terms of how this kind of goes over time, and over time as people understand what grid model is and why it's needed, you get more support going forward?

I think it's important to start by saying – and again, Maria or Kevin Payne around it because I don't want to say more here, but I want to start by saying that, at least my interpretation of the discussion right now, I don't think that anybody is doubting that this state is committed to having a very different energy system and going towards 2030, cleaning the energy resources and cleaning a lot of the economy and using electrification to do that and having a lot more use of distributed resources as part of the supply stack and as part of customer uses. The question some of the interveners are raising is one more of pace. And we believe that our proposal has responded to the data point the commission has put out to-date on the sense of urgency around this. And mind you, again, given that we view grid modernization as being essential towards driving the dramatic changes that will be needed across the California economy to get that 40% greenhouse gas reduction by 2030 12.5 years from now, we believe that the pace that we proposed in the GRC is merited. But again, I think that the debate mainly is more about when, not if, and I think we're all waiting to see how the commission comes out in terms of their guidance. We had hoped we would've had guidance through the DRP (30:28) proceeding by this point that I think has not happened yet, and we might expect a decision more like in the third quarter. We certainly will look for guidance in terms of how the commission handles our proposals in the rate case, but it's not about that. Ron, you'd like to add, or Kevin?

I would just add that there has been a bit of an education process, and we'll see how that plays out in the process, but it's making sure that the parties are aware that grid modernization also has very significant reliability and safety benefits in addition to what it does for distributed resources.

Absolutely.

Great. Thanks so much, guys.

Our next question comes from Michael Lapides with Goldman Sachs. Your line is now open. Michael Lapides - Goldman Sachs & Co.: Hey, guys. I have a simple one, and you guys might laugh at me when I ask this one, but if I look at slide five, your capital spending forecast, the 2017 amount is down about $300 million, $400 million. But when I then look at the next slide, the rate base slide, nothing actually changes. Can you walk me through that again, am I missing something here? Is it because this is the first couple hundred million dollars of a five- or seven-year project and therefore, it wouldn't have actually booked a rate base until after 2020, or is there some other moving part that I'm just not following here?

So there's two pieces to the answer, Michael. This is Maria. The first piece is just what you said, the FERC spend doesn't actually close until after the forecast period, so you wouldn't see it in rate base until after that. So that's one piece of it. The other piece of it around the CPUC spend is that this is – 2017 is authorized, 2018 through 2020 is part of our rate case. As we get a final decision in the rate case, we will be rolling through any changes to capital and to – et cetera. Michael Lapides - Goldman Sachs & Co.: Got it. Okay. But the FERC spending in 2017, you still would've earned AFUDC on that $300 million to $400 million, you just simply won't – you won't get that noncash earnings power over the next couple of years until you actually ramp that project up?

So correct, the whole $400 million is not FERC, by the way, but yes, we'll get AFUDC but that's the noncash aspect of it. Yes. Michael Lapides - Goldman Sachs & Co.: Got it. Okay. And then second question, when you get out to – let's say your 2018 through 2020 CapEx at almost $5 billion a year happens at that level and not at a lower level like interveners suggest. Will SCE need cash from the parent? Meaning, will the parent need to inject more cash than it has been historically into SCE to fund SCE's rate base growth?

I think from a planning perspective, it's a little early days to identify that sort of need. SCE has a fair amount of flexibility built in at the operating company level, so it has that extra layer of equity. But it also importantly has a very robust – or ability to have a very robust short-term debt program, so (33:44) program, which it can utilize to fill in the blanks as well. So we'll have to really see what the cash needs are at the utility, and since they have so much flexibility I think it'd be premature to estimate that. Michael Lapides - Goldman Sachs & Co.: Got it. Thanks.

And maybe one thing to add, I know you've heard us emphasize before, as Maria said, there's a number of tools that we could use to address that as we get out there, and as we see what actually gets approved in the rate case. But even in the bookend case, well, we got everything that we asked for, we still don't foresee any need to issue equity at EIX level to support the SCE capital program. So that – I think you've heard us say that before, but it's an important part of the message. And by the way, Michael, nobody's laughing at you inside the room. This stuff is complicated. Michael Lapides - Goldman Sachs & Co.: Got it. Thanks, guys. Much appreciated.

You bet.

Our next question comes from Shahriar Pourreza of Guggenheim Partners. Your line is now open.

Hey, guys. Sorry if this was – obviously, this has been addressed a lot, but on sort of the modernization in spend, it's such a big piece of the growth and sort of this rate case here. I know it's a factor of timing, but is it a factor of – are you dealing with interveners that want to layer it in on the next rate case, or are they thinking more sort of back-end loaded? And I'm kind of curious, the revision you've done on sort of the capital side of this, did that impact some of the settlement discussions and why you're – we don't see something before you file – I mean, before the hearings start, I guess?

I'll kick it off by saying that it's probably hard to speculate where any one intervener is coming from, and I think we're focused on what happens in this case. The other thing I'd throw in here is that as we move forward into future rate cases, I'm not even sure we would have a separate grid modernization request. Grid modernization – but the grid will be becoming more modern, and so the kind of design principles we've embedded in this particular request, I think at some point, whether it's a next rate case or maybe the one after that, will get more and more baked into our overall request. Because that'll – we will be doing all the grid modern as opposed to having a separate grid mod request. In terms of what drove the change in our update, and I'll turn it over to Kevin Payne here in a minute to give you a little bit more color, but it really was about the fact that with the benefit of an extra year and a half, couple years, and the fact that this stuff is all, frankly, fairly new in terms of design and we have some pilots, et cetera, we knew a lot more than we wanted to bake into the updates. So it was something we did on its own standalone basis as opposed to connected any sort of discussions. So, Kevin, more detail (36:35).

Yes, sure. That's right. I mean, we -- I think there are two elements to this that we talked about before. There is a lot of education going on to get the interveners and the Commission itself to understand what it is that needs to be done, and then secondarily, in what timeframe? And as we've looked at our proposal more deeply and done more analysis over the last year and a half, as Pedro said, we've identified a few areas where we thought we could actually push some of the modifications out. One that comes to mind is our sub-transmission relay replacements. So we know that that will need to be done eventually, and we know what it is that will drive it, and largely, the penetration of distributed energy resources and other things. But we have identified a different timeframe that we could do it in. So I think it's really about educating people about exactly what it is that needs to be done because some of the design features that we're proposing are new. But as Pedro said, in the next case, they will be our new design and we'll be continuing to implement that across the system.

Could the modernization spend – and that's helpful. Can the modernization spend kind of be carved out and something to be accounted for in a separate proceeding in between the rate case?

The guidance we have from the commission is that that is not the way they've designed it. Even in the distribution resources proceeding where the concepts about what would need to happen to modernize the grid were introduced. It was explicit that the money would not be authorized in that proceeding, but that proposals would be made in a General Rate Case.

Okay. Got it. That's very helpful. Thanks.

Our next question comes from Jonathan Arnold of Deutsche Bank. Your line is now open.

Hi. Good afternoon, guys.

Hey, Jonathan.

Hi. Just a couple of questions on the EEG. When I look at it in the Q, it looks like it lost $17 million in the second quarter, which is that same as second quarter last year, and compared to $5 million or $6 million in the first quarter of both years. Is that a seasonality or is it a different feel, given how you were evolving the business so far in Q2 this year?

So some of the things that are going on in Q2 this year actually relate to the SoCore impairment. So you'll see that we took a $10 million after-tax charge, about $17 million pre tax. And so that's embedded in the Q2 results for EEG, which is probably throwing you off in terms of making the quarter-over-quarter comparison. So far, year-to-date, I think you will see EEG as performing – absent the $0.03 impairment, EEG is performing consistently with the guidance that we provided.

So does that mean that absent the impairment, you might have broken even this quarter?

No, I don't think we would've done that. Because the guidance for the year is an $0.08 loss.

Right. Okay. And then just separately, the Q also says that you're not accounting for SoCore as an asset held for sale because you're not sure you'll necessarily sell it within the next 12 months. Can you – I want to just be clear, are you – what is the scenario where you don't sell it? How will that business look as far as this portfolio and what is the message?

So I think that when it comes down to that comment about whether or not the asset is held for sale, you know that it's a relatively straightforward assessment of whether or not you think it's probable within the next year that you'll sell the asset. If it is, you give it that categorization. In this instance, since we're just starting the process with SoCore, we've just retained someone to help us on that process, we don't have enough market information to know if that's going to be the decision. But clearly, we are evaluating that option in a very serious way. So I think it's really sort of how the accounting works, and our actions are really, going forward, I think, indicative of the fact that we're taking seriously the process.

Okay. And then similar note, Pedro, your remark was that you streamlined the focus on near-term needs rather than long term potential scale, does that change the – that suggests focus on getting to breakeven rather than growing, I think. Is it changing the timeframe? Without telling me what the timeframe is, but is it a sign that the timeframe is shifting?

No, it's not. It's not meant to be a signal that the timeframe is shifting. I think as we – the team took some initial steps. You always have the tradeoffs you go through in terms of what capabilities do you get in place now today, versus which ones do you get in place next week, versus next year or the year after. And in some cases we may have gotten some capabilities a little ahead of their time. And of course you're playing in a startup business, you're paying the freight for that. And so we wanted to make the adjustment and turn down the volume knob on some areas that will be valuable. We'll probably need to build those capabilities in the future, but we can still manage the business to do what we need to do and not have that cash flowing for these activities just yet. So frankly, just read financial discipline into the alignment that we made. Does that make sense, Jonathan?

Yeah, it does. Could you just remind me, have you made an actual commitment to sort of by when you intend to be earnings neutral?

We have not, but we will be sharing that with you in September.

Okay. Thank you.

Thanks, Jonathan.

Our next question comes from Gregg Orrill of Barclays. Your line is now open.

Yeah. Thank you. Are you able to provide any guidance on what you think the holding company expenses will be going forward? I know they came down from $0.17 to $0.08 in the guidance. I guess that was due to tax timing.

So it was. The change was related to the benefits that we received from the share based compensation. I would say we're still in the same place we've been historically, that $0.01, $0.015 per month for the holding company is the right zone to be in.

Okay. Thank you.

Our next question comes from Travis Miller of Morningstar. Your line is now open.

Good afternoon. Thank you.

Hi.

Hi.

Just one real quick follow up on the SoCore stuff. What would other options be besides a sale?

Continuing to operate the business. I think with our strategic review, we're looking at a sale option, but we're also looking at the areas of emphasis that we have today, and do we want to turn the knob up on some of those or turn the knob down on some of those. Today, as you might recall, the business has really largely started by developing projects for commercial and industrial customers. The business has also added on community solar projects, looking at potential for other places that it could play in solar. So it's a strategic review just looking at where it can play and whether that should change and then having that view of how we would optimize the business and how we would maximize the values with EIX as the owner versus if somebody else who might be able to optimize that and signal through their response in an exploration of a sale.

Okay. So there is some probability that you would keep the business and invest in it or is that a zero probability?

I think we've just started the process of exploring a sale so I think it's probably premature to assign probability to non-zero probabilities to outcomes.

Yeah. And this is why it's not a full asset held for sale.

Sure. Okay. And then real quick on the grid modernization, how much of those numbers in 2018 to 2020 would you have to invest in anyway, kind of put it into distribution just like what you did in 2016, 2017 with some grid mod spending? How much could you just say okay, we didn't get approval for a grid mod, we're not going to do anything versus there's still some $100 million or so that we would have to do in there? Can you give a sense for that because you guys did the grid mod, right, for 2016, 2017?

Let me kick off the answer this way. What we've done – you obviously saw what we asked for in 2016 and 2017 in terms of a memo account. We have not had action from the PUC on that. As we look more deeply at a lot of that spend, as Ron Nichols mentioned earlier, while some of that spend was design or conceived thinking about elements of grid modernization and the support for distributor resources, et cetera, there's a very gray line between the modern and the grid part to some extent, and so some of the work that supports grid modernization also supports safety and reliability in the system. And so we prioritized some of that work and proceeded with it in 2017. When we get a rate case decision, we will see what the PUC decides, what guidance they have for us, how specific that guidance is, and then we'll manage the business prudently inside that. And as we – rate cases are every three years. Clearly, the day after we get the rate case decision, the guidance is pretty fresh. Three years into the three-year cycle, things change. And I think part of the job of a prudent utility manager is to reallocate capital within reason to serve customers. So it may be that there's some reallocation that might make sense in the future. Kevin, a different view on that or anything you'd like to add?

I agree. And maybe I could just add a little to that. The technologies that we're using in grid modernization are not unfamiliar ones. We have a certain level of activity there today: substation automation, distribution automation, things like that. Some of the larger grid management computer type systems are new but will ultimately have to be built out anyway. So part of grid modernization is implementing familiar technologies and emerging technologies and doing it at a pace that we think will support the state of California's goals. If the Commission doesn't see the full extent of our proposal, it doesn't favor the full extent of our proposal in grid modernization, we will still consider and use aspects of those technologies to accomplish our safety and reliability goals such as focusing automation on our worst-performing circuits to improve reliability and those kinds of things. So we'll work within the authorization that we have, and we'll continue to advance the technologies that we implement on the grid.

Okay. Great. I appreciate it.

Our last question is from Anthony Crowdell of Jefferies. Your line is now open.

Good afternoon. You may have just addressed it. I was just curious, two quick questions. One is, is there an ability if you maybe delayed some of the other CapEx in your proposal and worked with grid mod to just show how effective and how important it would be for California meeting their goals, and once maybe the commission sees how effective it is, some of the projects that you delayed you could add into the next case and also grid mod? Is that possible or it's just too late in the process?

Well, I think some of the -- we're doing some of that already in the pilots that have been requested by the commission, and with that exact desire in mind to be able to show how this works and do that at initially relatively modest level. As to how quickly those reviewed and move forward, it depends on the end results of that. It also depends on the continuing guidance that we get during the pendency of the GRC the guidance that may come out of the separate distribution resource plan proceeding. So there could be some initial guidance that comes out of that in that timeframe that could influence ultimate decisions on that. But even absent that, we would expect that we'll have some results during this next ERC on the pilot programs that could enable some additional activities go forward. It's hard to put a number on that at this point.

Okay. And just lastly on Edison Energy, I don't know if the company has already done it but maybe in September, is there the ability to show what maybe different business segments are causing more of the loss and maybe evaluate those, doing an evaluation of whether you sell that and keep some of the others? Or the company's not going to give that kind of detail?

Anthony, it's Maria. I think you're kind of talking about like underneath Edison Energy, the various service lines that we have, if one or the other is driving some of this. I think we think of some of those service lines really as a whole. They are sort of the first step in providing the types of advice and advisory services to the commercial and industrial customers that we have. And then layered over that is another service line, portfolio advisory services. So I think we think of them that way. We've already gone through an assessment of other aspects of the Edison Energy group businesses. So we talked earlier this year about water, about transmission, we talked a lot today about SoCore. So yes, those pieces have been evaluated, Edison Energy and its service lines we will view as more holistically.

And just lastly, I'd hate to go a whole call without talking about SONGS. Is there any ability to maybe settle or is there other settlement discussions scheduled?

As I mentioned in my remarks, the whole process for the mediation is confidential so I just can't comment, unfortunately, on the prospects for the meetings or the like. Let me just reiterate what I said before that we've approached this proceeding fully and taking it very seriously. And at the end of the day, if we and the other parties involved end up agreeing on a revision to the settlement that we think is in the interest of our customers and our shareholders, then we are certainly intellectually open to that and we'd be looking at that in the context of the various other alternatives outside of a mediation process including the potential scenario of returning to litigation. So we take it pretty seriously, and unfortunately that's about all we can say at this point.

Great. Thanks for taking my questions.

No. Absolutely. Thanks a lot.

There's one question queued up, and this our last and final question and it's from Ashar Khan of Verican (52:47). Your line is now open.

My questions have been answered. Thank you very much.

Okay. Thank you. Nice hearing you.

Thank you.

All right. Well, before I turn it back over to Sam to do the closing, let me just say thank you all for joining us on the call today. We continue to be very focused on our businesses, and with the utility, strong alignment with what's going on in California, with Edison Energy, the potential to capitalize in the technology changes in the industry. And we look forward to our next engagement with you. And please feel free to reach back out with questions after the call if you have any. Sam?

This concludes the call today. And please call us if you have any follow-up questions. Thank you.

That concludes today's conference. Thank you all for your participation. You may now disconnect.