Executive Summary / Key Takeaways

• Strategic Transformation and Capital Investment: Edison International (EIX) is executing a substantial $28 billion to $29 billion capital plan through 2028, primarily through Southern California Edison (SCE), to modernize its grid, enhance wildfire resilience, and support California's aggressive electrification goals, driving a projected 7% to 8% rate base growth.
• Constructive Regulatory Environment: Recent regulatory approvals, including the 2025 General Rate Case (GRC) authorizing $9.70 billion in 2025 base revenue and significant capital, alongside legislative enhancements like SB 254, provide a clearer framework for cost recovery and wildfire liability management, derisking the financial outlook.
• Technological Leadership in Risk Mitigation: SCE's Advanced Waveform Anomaly Recognition Engine (AWARE), coupled with extensive grid hardening (over 6,800 miles of covered conductor deployed), demonstrates a commitment to leveraging AI and machine learning for enhanced safety, reliability, and operational efficiency, differentiating its approach to wildfire risk.
• Stable Financial Outlook and Shareholder Returns: EIX has reaffirmed its 5% to 7% core EPS growth target through 2028, with no common equity issuances planned, supported by TKM and Woolsey recoveries and the Wildfire Insurance Fund, while maintaining a competitive dividend payout ratio of 45% to 55% of core earnings.
• Evolving Wildfire Liability Management: While the Eaton Fire presents a probable material loss, the established Wildfire Insurance Fund and SB 254's securitization provisions offer a robust liquidity mechanism, mitigating direct balance sheet impact and reinforcing the company's prudency defense.

California's Energy Architect: Forging a Resilient Future

Edison International (NYSE:EIX), through its principal subsidiary Southern California Edison (SCE), stands as a foundational pillar in California's energy landscape, supplying and delivering electricity across an expansive 50,000 square-mile service area. The company's strategic imperative is clear: to transform its grid into a modern, resilient, and clean energy delivery system capable of supporting California's ambitious electrification and decarbonization goals. This mission is unfolding against a backdrop of escalating climate-driven wildfire risks and a dynamic regulatory environment, demanding continuous innovation and substantial capital investment.

The broader utility industry is experiencing significant shifts, driven by the imperative for grid modernization, the integration of renewable energy sources, and burgeoning demand from electrification and emerging sectors like data centers. SCE is at the forefront of California's electric vehicle (EV) adoption, a key driver of load growth, with the state recently reporting a record 29% of new cars purchased in Q3 2025 as zero-emission vehicles. This trend, coupled with growth in new housing developments and commercial and industrial consumption, underpins SCE's projected near-term load growth CAGR of up to 3%, with electricity sales expected to nearly double over the next two decades. This robust demand profile necessitates continuous, strategic investment in infrastructure, positioning EIX as a critical enabler of California's economic and environmental future.

Technological Edge: Powering a Smarter, Safer Grid

EIX's commitment to operational excellence and risk mitigation is significantly bolstered by its technological advancements, which serve as a critical differentiator in the competitive utility landscape. At the core of its grid intelligence is the Advanced Waveform Anomaly Recognition Engine (AWARE). This proprietary technology leverages real-time grid sensor data, artificial intelligence (AI), and machine learning to proactively predict potential system issues and precisely pinpoint where failures occur within SCE's vast service territory. The tangible benefits of AWARE are substantial, translating directly into "higher safety and reliability, faster restoration times and higher affordability through optimized crew time." This predictive capability is invaluable for mitigating wildfire risks by identifying potential faults before they escalate, enhancing system resilience, and reducing operational costs.

Beyond AWARE, EIX is investing in other foundational technologies. The NextGen Enterprise Resource Planning (ERP) Program, for which SCE filed an application seeking approximately $1.10 billion in capital investment and $239 million in O&M expenditures, aims to modernize its core ERP system. This initiative is expected to deliver "substantial benefits to customers and enable business improvements," streamlining operations and enhancing efficiency across the organization. Additionally, SCE plans to file an application for its Advanced Metering Infrastructure (AMI) program (AMI 2.0) to replace its decade-old smart meter fleet. This upgrade will "address technology obsolescence and offers a chance to incorporate future capabilities that benefit customers," providing deeper insights into energy usage and enabling smarter energy management to enhance grid efficiency.

For investors, these technological differentiators are paramount. AWARE directly strengthens EIX's competitive moat by improving grid safety and reliability, which are critical for maintaining prudency in wildfire-prone areas and reducing potential liabilities. The ERP and AMI 2.0 programs, while not directly wildfire-related, are foundational to long-term operational efficiency, cost management, and enhanced customer service, all of which contribute to stable regulated earnings and a stronger market position. These investments underscore EIX's strategic intent to leverage technology not just for compliance, but as a core driver of competitive advantage and sustainable value creation.

Financial Fortitude: Performance and Strategic Capital Deployment

Edison International's recent financial performance reflects its strategic focus and the impact of key regulatory decisions. For the third quarter of 2025, EIX reported core EPS of $2.34, a notable increase from $1.51 a year ago. However, this comparison is not directly meaningful due to a $0.55 per share true-up recorded by SCE for the 2025 GRC final decision, which was retroactive to January 1. For the nine months ended September 30, 2025, SCE's core earnings rose to $2,088 million from $1,739 million in the prior year, primarily driven by higher revenue from the 2025 GRC and a $171 million benefit to interest expense from TKM Settlement Agreement cost recoveries. Consolidated non-core items for the nine months included $1,341 million in net earnings from the TKM Settlement, partially offset by wildfire mitigation expenses and asset impairments. SCE's operating revenue increased by $552 million in Q3 2025, largely due to the $661 million impact of the GRC decision.

The company's capital deployment strategy is robust, with a 4-year capital plan of $28 billion to $29 billion for 2025-2028. This plan incorporates substantial investments in infrastructure replacement, electrification, and system resiliency, as approved in SCE's GRC. This aggressive capital program is expected to drive rate base growth of 7% to 8% through 2028, even after accounting for wildfire mitigation capital expenditures that will not earn an equity return under SB 254. EIX's liquidity remains solid, with SCE having approximately $2.10 billion available on its revolving credit facility as of September 30, 2025. The company's debt to total capitalization ratios for both SCE (0.58 to 1) and Edison International Parent (0.64 to 1) remain within covenant limits.

EIX's financing strategy is designed for efficiency and stability, with no common equity issuances required through 2028. This is supported by the expected securitization proceeds from the TKM settlement ($1.6 billion) and the pending Woolsey settlement ($2 billion). The Wildfire Insurance Fund further provides a crucial liquidity backstop for claims payments exceeding SCE's $1 billion self-insurance, preventing direct balance sheet impact for covered wildfires. The company is also exploring cost-efficient early refinancing options for preferred equity issuances with upcoming rate resets, a move reflected in the narrowed 2025 core EPS guidance.

Regulatory Framework: A Foundation for Stability and Growth

California's regulatory and legislative landscape is a defining characteristic of EIX's operating environment. The 2025 General Rate Case (GRC) final decision, approved in September 2025, is a cornerstone of SCE's financial and operational stability. It authorized a base rate revenue requirement of $9.70 billion for 2025, an increase of $880 million over the adjusted 2024 authorized revenue requirement. The decision also greenlit approximately $1 billion for 212 miles of targeted undergrounding and 1,653 circuit miles of covered conductors for 2025-2028, representing 91% of SCE's requested capital expenditures. These investments are critical for wildfire mitigation and grid modernization.

The TKM Settlement Agreement, unanimously approved by the CPUC in January 2025, authorized SCE to recover approximately $1.60 billion in wildfire-related costs, with securitized financing approved in August 2025. Similarly, a settlement agreement for the Woolsey Fire, filed in September 2025 and awaiting CPUC approval, seeks recovery of approximately $2 billion. If approved, this could provide a significant 90 basis point benefit to FFO to debt and an annualized interest expense benefit of approximately $0.18 per share. These settlements demonstrate a constructive cost recovery framework in California.

A pivotal legislative development is Senate Bill 254 (SB 254), enacted in September 2025. This bill expands the Wildfire Insurance Fund by establishing an up to $18 billion Continuation Account, jointly funded by IOUs and customers, for fires ignited after September 19, 2025. Crucially, SB 254 enhances the liability cap calculation, basing it on the year of ignition, and allows for securitization of claims for 2025 fires if the Initial Account is exhausted. SCE's liability to reimburse the Initial Account for disallowed amounts for 2025 fires is capped at approximately $4.20 billion. These provisions are designed to provide greater certainty and financial stability for utilities.

The Eaton Fire in January 2025, a significant wind-driven wildfire, has led SCE to believe its equipment could have been associated with the ignition, resulting in probable material losses. However, SCE maintains that "Based on the information it has reviewed as of October 28, 2025, SCE believes that it would be able to make a good faith showing that its conduct with respect to its transmission facilities in the preliminary area of origin was consistent with the actions of a reasonable utility." [cite: 10-Q] The Eaton Fire is a covered wildfire for the Wildfire Insurance Fund, and SCE expects to be reimbursed for losses exceeding its $1 billion self-insurance. To expedite claims resolution, SCE is launching a Wildfire Recovery Compensation Program for Eaton Fire victims.

Competitive Dynamics: Leading in a Complex Market

EIX holds a prominent position within the California utility market, characterized by its extensive transmission network and regulatory licenses. While direct quantitative market share figures for all niche competitors are not publicly detailed, SCE's operational scale and lowest system average rate among major California investor-owned utilities underscore its strong competitive standing.

Compared to direct competitors like Southern Company (SO) and Duke Energy (DUK), EIX's strengths lie in its specialized expertise in high-voltage transmission and distribution within densely populated, high-tech urban environments. This focus allows EIX to develop and deploy advanced grid technologies like AWARE, which provides a tangible operational advantage in predictive maintenance and fault location, enhancing safety and reliability. While SO and DUK benefit from broader geographic diversification and diversified energy portfolios, EIX's deep regional focus enables a more tailored approach to California's unique energy challenges and regulatory mandates.

Against NextEra Energy (NEE), a leader in renewable generation, EIX's competitive advantage is rooted in its robust and reliable transmission and distribution infrastructure, essential for integrating the very renewables NEE produces. While NEE may lead in the speed of renewable technology innovation, EIX's comprehensive distribution network is critical for delivering power to diverse customer segments, including the growing demand from data centers and EVs. Financially, EIX's TTM P/E ratio of 6.69 and P/B ratio of 1.24 are lower than NEE's (P/E 25.78, P/B 3.09), suggesting a potentially more attractive valuation relative to its regulated earnings profile, though also reflecting higher perceived risk in California.

In comparison to PG&E Corporation (PCG), another California utility, EIX appears to exhibit more stable financial trends and stronger operational resilience, particularly in navigating wildfire-related liabilities post-AB 1054. SCE's proactive wildfire mitigation efforts, including hardening nearly 90% of its distribution lines in high fire risk areas by year-end 2025 and enabling fast curve settings on 93% of its high fire risk distribution circuits, demonstrate a robust approach to managing operational risks.

EIX faces indirect competition from renewable energy developers and distributed energy resources (DERs) like rooftop solar and battery storage. These alternatives can reduce demand for traditional grid services, potentially impacting EIX's revenue from bundled service customers. However, EIX's strategic investments in grid modernization and readiness for future transportation electrification demand position it to integrate DERs effectively and serve as the backbone for California's evolving energy ecosystem. The company's customer base, including high-demand sectors, and its relatively low exposure to foreign material tariffs (approximately 5% of total purchases) contribute to its operational stability.

Outlook: Charting a Course for Sustainable Value

Edison International's outlook is characterized by a commitment to delivering stable, regulated earnings growth, underpinned by significant capital investments and a supportive, albeit evolving, regulatory framework. The company has narrowed its 2025 core EPS guidance range to $5.95 to $6.20, which includes a potential $0.10 per share in costs associated with early refinancing activities for preferred equity. Importantly, EIX has reaffirmed its long-term core EPS growth target of 5% to 7% through 2028, off a 2025 baseline of $5.84.

This guidance is supported by several key assumptions: the continued execution of its $28 billion to $29 billion capital plan, driving 7% to 8% rate base growth; the realization of revenue increases from the 2025 GRC (approximately $500 million annually for 2026-2028); and the financial benefits from the TKM and pending Woolsey settlements. The company's financing plan through 2028 requires no common equity issuances, a testament to its strengthened credit metrics and access to the Wildfire Insurance Fund. Management's confidence is rooted in the clarity provided by the GRC decision and the ability to manage operations for all stakeholders.

Key Risks: Vigilance in a Volatile Environment

Despite a constructive outlook, Edison International operates in a complex and inherently risky environment. The primary risk remains wildfire-related liabilities, as evidenced by the Eaton Fire, where SCE's equipment is likely to be associated with the ignition, leading to probable material losses. While the Wildfire Insurance Fund and SB 254 provide crucial liquidity and a liability cap (approximately $4.20 billion for 2025 fires), the ultimate financial impact of the Eaton Fire remains unestimable. Regulatory and legislative uncertainty, particularly regarding the long-term reforms to socialize natural catastrophe risks under Phase 2 of SB 254 and the outcome of the 2026 cost of capital application, could impact future profitability and cost recovery.

Affordability concerns in California could pressure future rate approvals, potentially limiting capital investment or impacting authorized returns. Furthermore, the company faces market risks from fluctuating commodity prices and the potential for customer bypass to alternative electricity providers. Credit rating downgrades, such as the recent one from S&P, could increase borrowing costs and impact capital availability, despite Moody's and Fitch affirming stable outlooks post-SB 254. EIX's high debt-to-equity ratio (2.30) also highlights its leverage, a common characteristic in the capital-intensive utility sector.

Conclusion

Edison International is strategically positioned at the nexus of California's energy transition, driving significant capital investments to build a safer, more reliable, and cleaner grid. The company's robust capital plan, supported by recent constructive regulatory decisions and legislative actions like SB 254, provides a clear pathway for rate base and earnings growth. EIX's technological leadership, exemplified by its AWARE system and ongoing grid hardening initiatives, offers a distinct competitive advantage in mitigating wildfire risks and enhancing operational efficiency.

While the inherent wildfire risks in California remain a significant challenge, the evolving regulatory framework, particularly the Wildfire Insurance Fund and its enhanced provisions, offers a crucial layer of financial protection and liquidity. EIX's commitment to operational excellence, coupled with its disciplined financing strategy, underpins its reaffirmed long-term core EPS growth target. For discerning investors, Edison International represents a compelling opportunity to participate in the essential modernization of California's energy infrastructure, driven by a clear strategic vision, technological innovation, and a resilient financial framework, all while navigating a complex but ultimately supportive regulatory landscape.