Text

Annual Financial Rept 1978
	ML13329A097
Person / Time
Site:	San Onofre
Issue date:	03/22/1979
From:	; Southern California Edison Co
To:	;
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ML13308B419	List: ML13308B418; ML13329A097;
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	NUDOCS 7904270389
	Download: ML13329A097 (52)
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CURITIES ANID EXCHANGE COMMISSION, Wilshington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF nE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended Decmber 31, 1978 Commission File Number 1-2313 SOUTHERN 8'ALFORNIA. EISON COMPANY (Exact namne of registrant as specified in charter)

'California 95-1240335 (State or other jurisdiction of incorporation or organization)

(I-RS Employer Identification No.)

2244 WALNUT GROVE. AVENUE (P. 0 BOX 800), ROSEMEAD, CALIFORNIA 91770 (Address of principal executive offices.)

(Zip Code)

Registrant'steephone number, including area code (213) 572-1212 Securities registered pursuant to SectiOn 12 (b) of the Act:

Name of each exchange Titlecof each class on which registered L'apital Stock....

Original Preferred' American and Pacific (Par Valic -8 Yper share)

Cumuliative Preferid2~,

(Par Value $25 ersthare)

American iand Pacific 4 08%-Se ries,*

4.24~% Series 7

4 78% Series 4 7580%

Series 8 80% Series 9 20% Series

$ 1,0Q umulative Preferred (ParVal$

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Amescand Paoific 8 96%aSerie Preference f(Par Value $25 per~-share)

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TABLE OF CONTENTS PART I Item Page

1. Business 3

2. Summary of Operations 10

3. Properties 10

4. Parents and Subsidiaries 12

5. Legal Proceedings 13

6. Increases and Decreases in Outstanding Securities and Indebtedness...........

15

7. Changes in Securities and Changes in Security for Registered Securities 17

8. Defaults upon Senior Securities 17

9. Approximate Number of Equity Security Holders 17

10. Submission of Matters to a Vote of Security Holders 18

11.

Indemnification of Directors and Officers 18

12. Financial Statements, Exhibits Filed and Reports on Form 8-K 18 PART II

13. Security Ownership of Certain Beneficial Owners and Management 47

14. Directors and Executive Officers of the Registrant 48

15. Management Remuneration and Transactions 49 Signatures 50 Exhibit 1 52 2

PART I Item 1. Business Southern California Edison Company ("Company") was incorporated in 1909 under Cali fornia law and is a public utility primary engaged in the business of supplying electric energy to a 50,000 square-mile area of central and southern California, excluding the City of Los Angeles and certain other cities. This area includes some 800 cities and communities with a population of nearly eight million people. As of December 31, 1978, the Company employed 13,505 people.

General problems of the industry The electric utility industry in general is currently experiencing problems relating to (i) high costs of fuel, wages and materials; (ii) vast capital outlays and longer construction periods for the larger and more complex new generating units needed to meet current and future service requirements of customers; (iii) greater reliance on capital markets with high costs of both equity and borrowed capital; (iv) an uncertain supply of natural gas; (v) effects of compliance with numerous regulatory and environmental requirements; and (vi) difficulties and delays in obtaining needed rate increases. The Company is, to varying degrees, currently experiencing all.of these problems.

Regulation The retail operations of the Company are subject to regulation by the California Public Utilities Commission ("CPUC"), which has the power, among other things, to establish retail rates and to regulate security issues, accounting and depreciation. The Company's resale operations are subject to regulation by the Federal Energy Regulatory Commission ("FERC")

as to rates on sales for resale, as well as other matters, including accounting and depreciation.

The Company's plant construction, planning and siting are subject to the jurisdiction of the California Energy Commission.

Under the National Energy Act, the federal Department of Energy has been granted regulatory authority over certain aspects of energy conservation, solar energy development, power plant fuel use, coal conversion, public utility regulatory policy and natural gas pricing.

The Company is also subject to various governmental licensing requirements and to certain other federal, state and local laws and regulations, including those related to nuclear energy and nuclear plant construction, environmental protection, fuel supplies and land use.

RATE MATTERS General rate increases On December 12, 1978, the CPUC granted the Company an annual increase in general rates which, combined with a partial rate increase received in July 1978, brought the total annual amount granted the Company to $124 million, based on a 1979 test year. The Company's authorized rate of return on common equity was increased from 12.63% to 13.49% and its authorized rate of return on rate base was increased from 8.8% to 9.6%.

The December decision also called for a major revamping of the Company's tariff schedules as a means of encouraging conservation of electric energy.

As a result of new procedures initiated by the CPUC to reduce regulatory lag, the final general rate decision was issued only 14 months after the application was filed, which is a significant improvement over the 30 months required to complete the Company's prior general rate case.

3

Energy cost adjustment clauses Under the Company's Energy Cost Adjustment Clause ("ECAC"), adopted by the CPUC in 1976, a balancing account has been established in which energy costs that vary from those used in establishing electric rates are recorded. The procedure calls for adjusting rates every six months, subject to CPUC approval, to reflect changes in energy costs and any accumulated balance in the ECAC balancing account on which interest is accrued at the rate of 7% per annum. Under present ECAC procedures, changes in energy costs subject to CPUC jurisdiction should not affect the Company's reported earnings because it is contemplated that such costs will be reported as operating expenses as they are reflected in electric rates and thereby offset by revenues.

The Company also has a fuel cost adjustment clause in effect for its resale rates which are subject to FERC jurisdiction.

Tax change adjustment clause In June 1978, California voters approved Proposition 13, the property tax initiative which, among other things, limits taxation of real property. In response thereto, the CPUC, in September 1978, authorized the Company's addition of a Tax Change Adjustment Clause ("TCAC") to its tariffs which is designed to flow-through to ratepayers the Company's property tax savings, less any increases in state or local taxes, licenses, fees or levies imposed by government to offset the effect of Proposition 13. The rates established in the Company's recent general rate decision reflect the lower post-Proposition 13 level of property taxes.

Resale rate increases Under FERC procedures, increases in resale rates are permitted to become effective pending hearings before FERC. Such increases are subject to refund with interest to the extent that FERC subsequently determines that the requested increases are inappropriate. At December 31, 1978, the Company had billed, subject to refund, approximately $272 million of revenues pursuant to FERC tariff filings which became effective on May 2, 1974, August 4, 1974 and February 1, 1976. Of these revenues, FERC has determined that approximately $47 million billed pursuant to a fuel cost adjustment clause included in the first of such filings was just and reasonable. This decision has been appealed to the U.S. Court of Appeals, District of Columbia Circuit, by certain of the Company's resale customers. FERC has not yet issued decisions on the Company's other filings.

The Company believes that the amount of revenues collected pursuant to its resale rates which may be required to be refunded, if any, would not have a significant effect on net income in any of the related periods. See Note 4 of "Notes to Financial Statements" for more information.

On January 15, 1979, the Company filed higher resale rates with FERC which are designed to increase annual revenues by approximately $5.5 million. An optional time-of-use rate for resale customers was also included in the filing. A number of resale customers have intervened in this proceeding opposing the increase, and FERC has suspended the rate increase until August 16, 1979, pending a hearing on the matter.

Fuel adjustment clause refund On October 16, 1978, the United States Supreme Court denied the Company's appeal of an April 27, 1976 CPUC decision requiring the Company to refund revenues of approximately

$133 million, plus interest on the unrefunded balance from May 1976 which were collected under rates authorized by the CPUC through the Company's prior fuel adjustment clause from May 1972 through April 1976. On December 12, 1978, the CPUC approved a plan for refunding these revenues, plus approximately $45 million in interest. The plan calls for a credit adjust 4

ment to customers' billings over a three-year period which began January 1, 1979. The impact on earnings of the refund has already been reflected in the Company's financial statements for periods ending prior to January 1, 1979, except for an estimated $18 million of the interest which is applicable to and will be recorded during the three-year refund period. See Note 2 of "Notes to Financial Statements" for more information.

FUEL SUPPLY Fuel costs Fuel and purchased power costs amounted to $1.2 billion in 1978, essentially the same as in 1977. Sources of energy and unit costs of fuel during 1974 through 1978 are as follows:

Sources of energy Average cost per million BTU's 1974 1975 1976 1977 1978 1974 1975 1976 1977 1978 Oil..................

38%

46%

47%

56%

43%

1980 2670 2520 2540 2910 Natural gas..........

17 13 11 15 18 58 87 125 185 205 Coal................

15 14 14 14 10 27 28 36 41 53 Nuclear 5

5 3

3 3

11 17 29 34 36 All fuels..............

75 78 75 88 74 119 176 180 200 224 Hydroelectric........

10 8

4 2

9 (1)

Purchased and interchanged power 15 14 21 10 17 (2) 100%

100%

(1) There are no fuel costs associated with the Company's hydroelectric generation.

(2) For the year ended December 31, 1978, the net cost of purchased and interchanged power (primarily hydroelectric) was 1.127 cents per kilowatt-hour.

Average fuel costs, expressed in cents per kilowatt-hour for the year ended December 31, 1978 were: oil 2.920; natural gas 2.138; coal.605; nuclear.391.

Natural gas supply A number of the Company's major steam electric generating units are designed to burn oil or natural gas as a primary boiler fuel. The Company's use of natural gas boiler fuel is dependent upon the amount of gas available from the Company's primary gas supplier as well as upon applicable federal and state laws and regulations. The Company cannot predict with any certainty the extent to which natural gas will continue to be a significant source of fuel for the generation of electric energy. To the extent the Company's use of natural gas is restricted, it will be forced to rely heavily on fuel oil, with resulting increases in fuel expense.

Fuel oil supply Air pollution control laws and regulations applicable to the Company's oil-and gas-fired steam electric generating units have required the Company to depend to an increasing extent on more costly 0.25% low-sulphur fuel oil. The Company now has under contract approxi mately 50% of its estimated requirements for 0.25% sulphur oil through 1986 and has completed arrangements to modify the sulphur content of oil to be delivered under other contracts to cover a total of not less than 80% of its fuel oil requirements through such year. The balance of its fuel oil requirements is expected to be met with oil to be purchased on the spot market and under short-term contracts or through flexibility in existing long-term contracts. The prices for oil now under contract are subject to various adjustments based on, among other factors, speci 5

fied foreign prices for crude oil (including prices established by OPEC nations), import license fees and duties, royalties, taxes and transportation charges. The Company's supply of fuel oil is not expected to be substantially affected by current unrest in the Middle East, although cost may be affected indirectly through price adjustments described above. (See "Energy Cost Adjustment Clauses" discussed above.)

At March 25, 1979, the Company had in inventory enough low-sulphur fuel oil to supply the Company's oil-burning facilities for at least 60 days, assuming projected utilization of the Company's coal-burning, nuclear and hydroelectric facilities and purchased and interchanged power. If the Company cannot purchase enough low-sulphur fuel oil to meet its fuel oil re quirements in the future, it may still be able to acquire higher-sulphur fuel oil. However, the Company's ability to burn such higher-sulphur fuel oil would be dependent upon obtaining variances under air pollution control regulations.

Nuclear fuel supply The Company has contractual arrangements covering 100% of the nuclear fuel cycle for San Onofre Nuclear Generating Station ("San Onofre") through the years indicated below:

Units Unit 1 2 & 3 Mining and milling to produce concentrates(1) 1984 1984 Conversion 1980 1980 Enrichment...

1990(2) 2008 Fabrication 1992 1983 Spent fuel storage(3) 1992 1992 (1) The Company has contracted for approximately 48% of the uranium concentrates required for San Onofre Units 1, 2 and 3 from 1985 through 1990. Approximately 46% of the Company's uranium concentrate requirements for the period 1979 through 1990 are expected to be pro vided by a mine and mill in which Mono Power Company ("Mono"), a wholly-owned subsid iary of the Company, is a participant. See Note 11 of "Notes to Financial Statements" for more information on Mono's activities.

(2) After 1990, approximately 45% of the Unit 1 enrichment requirements are under contract.

(3) The dates indicated assume full utilization of the capacities of existing and planned on and off-site storage for normal operations of these Units, including interpool transfers. If re processing is unavailable when storage limits are reached, additional arrangements would be required, the availability or cost of which the Company cannot predict at this time.

Participants in the Palo Verde Nuclear Generating Station Units 1, 2 and 3 ("Palo Verde")

have contractual commitments for the supply of uranium concentrates, conversion services and related fuel fabrication services required for approximately 17 years of operation for all three nuclear units. Contracts have also been entered into with the Department of Energy for uranium enrichment services covering the estimated life of the three units.

Although the Palo Verde participants have no commitments for reprocessing or off-site storage of fuel discharged from reactors, on-site storage for spent fuel is being planned to accommodate normal operation through 1991 for Unit 1 and through later dates for the Units 2 and 3. The extent to which either off-site storage or reprocessing services may be required, or will be available, cannot be accurately predicted.

6

Coal supply Coal supplies for the operation of the Mohave and Four Corners Projects (as defined in Item 3) are obtained pursuant to purchase contracts which extend over the expected useful lives of those projects and provide for the purchase of low-sulphur coal to support anticipated levels of operation during such periods.

Powerplant and Industrial Fuel Act of 1978 Implementation of the Powerplant and Industrial Fuel Act of 1978 could preclude the utilization of natural gas and petroleum fuels in new powerplants and could limit the utilization of natural gas and petroleum fuels in existing powerplants, unless reasonable exemption stand ards and procedures are implemented. The Act's impact on the Company is not presently determinable.

ENVIRONMENTAL MATTERS Legislative and regulatory activities in the areas of air pollution, water pollution, noise abatement, land use, aesthetics and nuclear control continue to result in the imposition of numerous restrictions on the operation by the Company of its existing facilities and on the timing, cost, location, design, construction and operation by the Company of new facilities required to meet its future load requirements. These activities substantially affect future planning and will continue to require modifications of the Company's existing facilities and operating procedures. They also increase the risk of forced abandonment of construction projects with a resultant loss of design, engineering and construction costs and the payment of cancellation charges which in the aggregate could be substantial.

The Company's capital expenditures for certain categories of environmental protection for the years 1969 through 1978 and its projected capital expenditures for such purposes for 1979 through 1983 (based upon the Company's December 21, 1978 plant budget/forecast, which is subject to periodic revision) are:

(Thousands of dollars)

Air Water Solid Noise Additional Pollution Pollution Waste Abate-Plant Miscel Years Total Control Control Disposal ment Aesthetics Capacity laneous 1969-1978

$579,319

$ 54,748

$ 13,713

$ 2,750

$ 3,155

$462,395

$ 3,746

$ 38,812 1979 152,710 9,726 22,720 103 85,588 34,573 1980 127,235 9,928 13,753 70 32 81,732 21,720 1981 165,887 76,416 6,104 34 141 75,364 7,828 1982 141,664 60,179 3,957 129 74,372 3,027 1983 96,619 12,101 4,307 267 79,547 397 It is anticipated that capital expenditures for such environmental protection projects will continue for the foreseeable future. The Company believes that costs incurred for these en vironmental purposes will be recognized by the CPUC and the FERC as reasonable and neces sary costs of service for rate purposes.

Air quality The Federal Clean Air Act, as amended, provides the statutory framework to implement a program for achieving national ambient air quality standards and provides for maintenance of air quality in areas exceeding such standards. As a result, the Company may incur additional 7

expenses in reducing or eliminating emissions at existing facilities and in constructing new facilities. However, because major regulations relating to such amendments have not as yet been promulgated, the Company is unable at this time to determine the extent to which such amendments will affect its operations and capital expenditures.

The Company is subject to rules and regulations promulgated by the South Coast Air Quality Management District and the California Air Resources Board with respect to the emission of pollutants into the atmosphere. In January 1979, the Board adopted a rule which calls for substantially reducing emissions of oxides of nitrogen from the Company's fossil fuel-fired generating units in southern California. To comply with the rule, the Company esti mates it would cost approximately $180 million through 1982 and an additional $1.2 billion through 1990 for additional air pollution control equipment. The Company anticipates con ducting further negotiations with the District and the Board with respect to the cost benefits, schedules and practicality of applying unproven emission control technology.

Water quality and land use The State of California has adopted a policy discouraging the use of fresh water for plant cooling purposes at inland locations. Such a policy, when taken in conjunction with existing federal and state water quality regulations and coastal zone land use restrictions, could sub stantially increase the difficulty of siting new generating plants anywhere in California.

8

SOUTHERN CALIFORNIA EDISON COMPANY OPERATING STATISTICS Year Ended December 31,

% of 1978 1974 1975 1976 1977 1978 Total Energy Generated and Purchased -

KWH (000):

Generated -

Net Station Output Hydroelectric Plants....................

5,514,446 4,732,201 2,550,415 1,509,058 5,887,687 9.2 Thermal Plants........................

41,469,835 42,925,421 44,671,019 55,417,884 47,183,394 73.9 Total Generated.................

46,984,281 47,657,622 47,221,434 56,926,942 53,071,081 83.1 Purchased Power......................

6,095,460 4,773,360 11,933,835 6,009,426 10,535,636 16.5 Power Interchanged (Net)..............

2,026,247 2,692,853 272,658 408,338 270,399 0.4 Total Generated, Purchased and Interchanged...................

55,105,988 55,123,835 59,427,927 63,344,706 63,877,116 100.0 Company Use..........................

(100,348)

(116,100)

(94,364)

(119,748)

(115,050)

Losses and Unaccounted for..............

(3,915,659)

(3,680,227)

(5,648,185)

(5,498,685)

(6,735,031)

Total Energy Consumption........

51,089,981 51,327,508 53,685,378 57,726,273 57,027,035 Energy Consumption -

KWH (000):

Residential.............................

13,059,518 13,493,387 13,946,809 14,285,971 15,369,184 27.0 Agricultural............................

1,049,878 1,074,606 1,275,643 1,377,939 851,017 1.5 Commercial............................

11,514,671 12,036,129 12,951,697 13,388,075 13,937,000 24.4 Industrial..............................

15,553,144 15,055,646 15,622,603 16,393,105 16,652,243 29.2 Public Authorities.......................

5,575,587 5,578,669 5,621,955 5,666,173 5,813,443 10.2 Interdepartmental.......................

927 962 914 731 1,015 Resale................................

4,336,256 4,088,109 4,265,757 6,614,279 4,403,133 7.7 Total Energy Consumption........

51,089,981 51,327,508 53,685,378 57,726,273 57,027,035 100.0 Operating Revenues -

(000):

Residential.............................

$ 506,154

$ 564,389

$ 589,397

$ 616,520

$ 704,658 30.2 Agricultural...........................

33,788 37,521 45,338 50,781 40,449 1.7 Commercial............................

364,994 413,458 464,254 505,469 610,735 26.2 Industrial..............................

354,334 389,829 430,427 481,587 593,580 25.5 Public Authorities........................

141,376 153,850 166,038 188,054 206,838 8.9 Interdepartmental........................

28 29 27 22 30 Resale................................

71,278 97,439 120,459 208,145 138,253 6.0 Customer Refunds (a)..................

(122,473)

(20,881) 17,072 Operating Revenues -Sales 1,349,479 1,635,634 1,833,012 2,050,578 2,294,543 98.5 Other.................................

11,480 11,500 13,528 14,336 34,255 1.5 Total Operating Revenues..........$1,360,959

$1,647,134

$1,846,540

$2,064,914

$2,328,798 100.0 Number of Customers:

Residential............................

2,385,705 2,438,903 2,497,076 2,572,826 2,648,841 88.7 Agricultural............................

24,816 24,997 25,465 25,888 25,802 0.9 Commercial............................

219,499 222,694 227,143 234,276 242,264 8.1 Industrial..............................

30,169 30,410 31,405 33,791 35,126 1.1 Public Authorities........................

31,482 32,658 33,294 34,053 34,491 1.2 Interdepartmental.......................

2 2

2 Resale................................

18 16 18 20 19 Total Customers..................2,691,691 2,749,680 2,814,403 2,900,856 2,986,545 100.0 Averages:

Annual Use Per Residential Customer (KWH) 5,541 5,596 5,650 5,630 5,883 Annual Revenue Per Residential Customer(b)

$214.76

$234.07

$238.77

$242.98

$269.73 Revenue Per KWH(b):

Residential............................

3.880 4.180 4.230 4.320 4.580 Commercial...........................

3.170 3.440 3.580 3.780 4.380 Industrial................................

2.280 2.590 2.760 2.940 3.560 (a) See Note 2 of "Notes to Financial Statements".

(b) Does not reflect Customer Refunds.

9

Item 2. Summary of Operations Information responding to this item is included with the financial statements in Item 12(a) (1) beginning on page 20 and in Exhibit 1, and should be read in conjunction with Management's Discussion and Analysis of Statements of Income beginning on page 19.

Item 3. Properties Existing generating facilities The Company owns and operates 11 fossil-fueled steam electric generating plants, two combustion turbine plants, one diesel-electric generating plant, 36 hydroelectric plants and the 80%-owned San Onofre nuclear generating station, all located in central and southern Cali fornia. In addition, the Company owns two small fossil-fuel electric generating units in Arizona and a 48% undivided interest (768 MW) in Units 4 and 5 of a coal-fired steam electric generating plant in New Mexico (the "Four Corners Project") all of which are operated by another utility.

The Company also operates and owns a 56% undivided interest (885 MW) in two coal-fired steam electric generating units in Clark County, Nevada (the "Mohave Project"). The Company also operates certain hydroelectric generating units owned by others in Arizona. Of the existing Company-owned generating capacity, approximately 78% is dependent on gas and oil fuel, 13%

on coal, 6% on hydroelectric and 3% on nuclear fuel.

San Onofre, the Four Corners Project, certain of the Company's substations and certain portions of its tranmission, distribution and communication systems are located on lands of the United States or others under (with minor exceptions) licenses, permits, easements or leases or on public streets or highways pursuant to franchises. Certain of such documents obligate the Company, under specified circumstances, at its expense to relocate transmission, distribution and communication facilities located on lands owned or controlled by federal, state or local governments. With certain exceptions, major and certain minor hydroelectric plants, with related reservoirs, having an effective operating capacity of 836 MW and located in whole or in part on lands of the United States, are owned and operated under government licenses which expire at various times between 1979 and 2009. Such licenses contain numerous restrictions and obligations on the part of the Company, including the right of the United States to acquire the project under certain conditions upon the payment of specified compensation.

If any project is not taken over by the United States at the expiration of the license, FERC is authorized to issue a new license to the original licensee or (upon payment of the same compensation as the United States would be required to pay) to a new licensee. Any new licenses issued to the Company are expected to be issued upon terms and conditions less favorable than those of the expired licenses. Applications of the Company for the relicensing of certain of the hydroelectric plants referred to above with an aggregate effective operating capacity of 21.4 MW are pending, and until such proceedings are completed, the Company has been issued annual license renewals for such projects.

As of March 15, 1979, the total interconnected system operating capacity available to the Company under favorable operating conditions was approximately 14,691 MW, which includes 1,571 MW from sources under contract. The record peak instantaneous demand experienced on the Company's interconnected system through March 15, 1979, was 11,997 MW on September 25, 1978.

Unit 1 at San Onofre is now being operated under a provisional operating license from the Nuclear Regulatory Commission, and the Company has applied for a full-term operating license for this unit. Modifications of this unit have been and may continue to be required in light of new and revised regulatory requirements, technical data, environmental data and design criteria applicable to Units 2 and 3 and other nuclear generating facilities. The Company cannot deter mine with certainty the additional costs it will incur for future modifications.

10

Generating facilities under construction The Company currently has approximately 5,326 MW of new generating capacity scheduled for completion at various dates through 1988, of which 51% will use nuclear fuel, 34% will use natural gas and fuel oil, 10% will use coal, 3% will be hydroelectric and 2% will use other energy sources. The major generating facilities under construction are the following nuclear plants being built jointly with other utilities:

Company's share of Recorded Percent Costs Completed Planned Estimated as of as of Full Firm Net Total December December Power Capacity Cost(1) 31,1978 Facility Location 31, 1978 Operation Facility (MW)

(000)

San Onofre San Clemente, 63 1981-1983 80.0%

1,760

$1,920,000

$1,135,000 2,3 CA Palo Verde Wintersburg, 20 1982-1984 15.8%

579 711,000 130,514 1,2 &3 AZ

& 1986 (1) Exclusive of fuel and related transmission facilities. Estimates are subject to revision because of numerous factors, some of which are beyond the Company's control.

An additional 192 MW of capacity currently under construction is scheduled for completion through 1981. Additions to existing facilities totaling 2,795 MW are planned for operation by 1988. The Company's expenditures to date for these projects have not been substantial.

The application for an operating license for San Onofre Units 2 and 3 is currently the subject of administrative review by an Atomic Safety Licensing Board, which has given persons opposed to operation of the units permission to intervene in the proceedings.

Construction expenditures In

1976, 1977 and 1978, the Company expended $500,326,000, $500,269,000 and

$567,831,000, respectively, for construction of new facilities. The Company estimates that the funds required for construction from 1979 through 1983 will be as follows:

(Thousands of dollars) 1979 1980 1981 1982 1983 Electric generating plants...................

$575,517

$535,444

$441,673

$322,850

$284,617 Electric transmission lines and substations....

45,251 86,032 69,147 24,490 53,429 Electric distribution lines and substations......

141,298 143,945 153,905 164,181 176,167 Other expenditures........................

20,671 17,818 6,701 9,940 9,722 Total construction additions.................

782,737 783,239 671,426 521,461 523,935 Less allowance for funds used during construction..............

123,000 160,000 118,000 53,000 49,000 Funds required for construction expenditures.

$659,737

$623,239

$553,426

$468,461

$474,935 The Company's construction program and related expenditures are subject to continuous review and periodic revisions because of changes in estimated system load growth, rates of inflation, receipt of adequate and timely rate relief, the availability and timing of environmental and other regulatory approvals, the scope of modifications required by regulatory agencies, and the availability and costs of external sources of capital.

11

To finance its construction program through 1983 and to retire $436,355,000 of long-term debt obligations maturing during that period, the Company estimates that approximately $1.9 billion will be required from external sources. See Note 8 of "Notes to Financial Statements" for more information concerning long-term debt. The balance of funds required to finance the Company's construction program through 1983 is expected to be obtained from internal sources.

The timing, type and amount of all additional external financing are dependent upon market conditions, rate relief and other factors including restrictions imposed by the Company's Articles of Incorporation, trust indenture and the California usury law. To date, such restrictions have not prevented the Company from issuing securities to finance its construction expenditures.

Effect of governmental utilities and utility districts Under various acts of Congress, federal power projects have been constructed in California and neighboring states. Municipally-owned utilities, cooperative utilities and other public bodies have certain preference over investor-owned utilities in the purchase of electric power provided by federally funded power projects and, in addition, have certain preference over investor-owned utilities in connection with the acquisition of licenses to build hydroelectric power plants on federal lands. Any energy which is or may be generated at these projects and transmitted for the account of such other utilities and public bodies over present or future government or utility-owned lines into the territory or markets served by the Company would result in a loss of sales by the Company.

Under the laws of California, utility districts may be formed and may include incorporated as well as unincorporated territory. Such districts, as well as municipalities, have the right to construct, purchase or condemn and operate electric facilities. In addition, when a city owning an electric system annexes adjacent unincorporated territory which the Company has previously served, the Company may experience a loss of customers.

The Company's construction permits for San Onofre Units 2 and 3 contain certain condi tions, the terms of which require the Company (i) to permit privately or publicly-owned utilities, including the Company's resale customers, within or adjacent to the Company's service area, on timely notice, to participate on mutually agreeable terms in future nuclear units initiated by the Company, and (ii) to interconnect and coordinate reserves with, furnish emergency service to, sell to and purchase bulk power from, and provide certain transmission services for, such utilities.

The Company has also entered into agreements with certain of its resale customers which contemplate their possible participation in jointly-owned generating projects initiated by the Company, and the integration of power sources acquired by each such customer, including the dispatching, reserve sharing, partial power supply requirements and transmission services required in conjunction with such integrated operations. Pursuant to these agreements, two resale customers have exercised an option to participate in the Company's ownership entitle ment in San Onofre Units 2 and 3. The Company has recently negotiated definitive agreements with these two resale customers which specify the services to be provided. The Company believes that an effect of these conditions and agreements is a potential loss of generation and transmission capacity and sales of power. The Company is unable to determine what effect, if any, these potential losses will have on its business and operations.

Item 4. Parents and Subsidiaries All subsidiaries of the Company are California corporations and are 100% owned by the Company. The subsidiaries, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. These subsidiaries are accounted for by the Company 12

under the equity method of accounting for investments in subsidiaries. See Note 11 of "Notes to Financial Statements" for more information.

Item 5. Legal Proceedings Antitrust litigation On March 2,1978, five of the Company's resale customers (the California cities of Anaheim, Riverside, Banning, Colton and Azusa) filed a suit against the Company in the U.S. District Court for the Central District of California alleging violation of certain antitrust laws. The complaint seeks damages in excess of $23 million, the trebling of these damages and certain injunctive relief.

One principal contention set forth in the complaint is that the Company is engaging in anti-competitive behavior by charging more for wholesale electricity sold to the resale customers than the Company charges certain classes of its retail customers. The plaintiffs have alleged that there is a resulting anti-competitive "price squeeze" in that the resale customers, to recover their higher costs of supply, are required to raise some or all of their retail rates to levels exceeding the Company's comparable retail rates, with the effect of inhibiting the resale customers' ability to persuade their existing or potential customers to remain or locate within their service areas.

Another principal contention is that the Company, in violation of the antitrust laws, has taken actions alone and in concert with other utilities to prevent or limit such resale customers from obtaining bulk power supplies from other sources to reduce or replace the resale customers' wholesale purchases from the Company. The Company is alleged to-have entered into agreements and understandings with other investor-owned utilities to preempt bulk power supplies available from other utilities in the Pacific Northwest and in California and to have unilaterally restricted the sale of transmission services to and within California in such a way that the resale customers are prevented from obtaining transmission services to transmit bulk power supplies from outside California.

On August 31, 1978, the U.S. District Court granted the Company's motion to stay the action in all respects pending resolution of proceedings described below involving the Company before the FERC. On February 26, 1979, the plaintiffs moved the Court to end the stay of the action. The motion is scheduled for argument on May 7, 1979.

Five of the Company's resale customers have intervened in the Company's three resale rate proceedings currently pending before the FERC alleging, among other things, that the Company has engaged in certain anti-competitive activities similar to those described above.

Four of the same resale customers have also made charges with the FERC in separate proceed ings alleging that the Company, through contracts for the purchase of power over the Pacific Intertie and through its participation in the California Power Pool Agreement, has engaged in anti-competitive conduct by restricting access to the Intertie transmission facilities and by pre venting the resale customers from purchasing power from suppliers in the Pacific Northwest.

The resale customers have asked the FERC to modify these contracts and to order the Company to provide transmission service to them. The matter is set for hearing on June 4, 1979.

The foregoing proceedings involve complex issues of law and fact, and although the Company is unable to predict their final outcome, it has categorically denied the allegations of these resale customers.

Fair employment practices matters In 1972 a charge was filed with the Federal Equal Employment Opportunity Commission

("EEOC") and in 1974 a class action lawsuit was filed in federal court, both of which alleged 13

that the Company had engaged in unlawful, discriminatory employment practices against women and certain minorities.

Although denying that it had engaged in any unlawful employment practices, the Company entered into a Conditional Settlement with the EEOC and the representatives of most of the class action plaintiffs which, on November 7, 1977, was submitted to the federal court for approval as a consent decree. The estimated cost of this settlement is initially $700,000 with the possibility of an additional estimated $300,000 in payment on individual awards after hearings.

If the settlement should not be approved and the case is tried, it is the opinion of Company counsel that the Company has a number of defenses which should be sustained by a court and which, among other things, have the effect of limiting monetary damages. The Company believes, based on a current analysis of the applicable law and facts, that the amount of any recovery for monetary damages, including back pay, should not have a material effect on the financial position of the Company.

Environmental litigation On March 10, 1978, the Environmental Protection Agency ("EPA") issued citations alleging excessive emissions of particulates and violations of opacity regulations applicable to Four Corners Units 4 and 5, which allegations are being disputed by the Four Corners participants.

It now appears likely that the dispute will result in litigation. In addition, on August 28, 1978, EPA advised the State of New Mexico that it will propose disapproval of the State's recently adopted regulations applicable to sulphur dioxide and particulate emissions at the Four Corners Project. The extent, if any, to which plant operations would be adversely effected by the ultimate resolution of these matters is not currently predictable.

In December 1976 the Company and the Southern California Air Pollution Control District stipulated to orders issued by the District's Hearing Board for abatement of emissions of certain particulates from the Company's Alamitos and Redondo Generating Stations which have allegedly resulted in damage to property in the vicinity of the two stations. The orders required the Company to conduct a two-year study of particulate emissions, to recommend implementa tion of particulate reduction methods and to utilize higher cost 0.25% sulphur fuel oil at both stations through April 15, 1979 (see "Fuel Supply" for a discussion of the Company's plans to burn 0.25% sulphur content fuel oil at certain of its steam electric generating units). The orders provide for a further hearing date to be set by April 1979 to consider a schedule for implement ing particulate reduction methods, based on research investigations. Preliminary estimates of the Company indicate that the cost of modifications to the plants will be approximately $20 million.

During 1978, six misdemeanor complaints were filed against the Company alleging various violations of state law or local rules relating to the discharge of emissions into the atmosphere.

Of the complaints filed, five have been dismissed and one resulted in the Company being fined $300.

Tax litigation In July 1975, the State of New Mexico imposed a tax upon electricity generated at the Four Corners Project and elsewhere within that state. The constitutionality of this tax is being challenged in the United States Supreme Court, and oral arguments were heard by the Court on February 26, 1979. From July 1975 through December 1978, the Company has charged to expense, net of income tax benefits, approximately $2.7 million for this tax.

The Navajo Tribal Council has adopted, but not yet implemented, a possessory interest tax, a business activity tax and a sulphur emissions tax which could apply to the Four Corners 14

Project. The validity of these taxes is currently being litigated by participants in the Project.

The Company cannot predict the ultimate effect of these taxes, if implemented, upon future costs associated with the Four Corners Project or their effect upon costs of power or fuel derived from New Mexico operations.

The Company expects to recover through rates any increased costs of operations attrib utable to such taxes.

Item 6. Increases and Decreases in Outstanding Securities and Indebtedness Increases in the amount of equity securities.

Common stock sold by the Company during 1978 which was registered under the Securities Act of 1933:

Number of Shares Common stock outstanding as of December 31, 1977...............

54,646,457 Add:

Common stock issued October 25, 1978.......................

6,000,000

Quarterly issuances of common stock through the Company's Dividend Reinvestment and Stock Purchase Plan..............

637,014

Quarterly issuances of common stock through the Company's Employee Stock Purchase Plan.............................

631,521

Quarterly issuances of common stock through the Company's Employee Stock Ownership Plan (not registered).............

203,879

Miscellaneous issuances of common stock resulting from con versions of Preference Stock, 5.20% Convertible Series at various times throughout the year...................................

417,710 Total common stock outstanding as of December 31, 1978..........

62,536,581

Not previously reported because the aggregate number of shares issued did not exceed 5%

of total outstanding common stock.

Pursuant to an Underwriting Agreement dated October 17, 1978, between the Company and Dean Witter Reynolds Inc.; Blyth Eastman Dillon & Co. Incorporated; The First Boston Corporation; E. F. Hutton and Company Inc.; and Merrill Lynch, Pierce, Fenner & Smith Incor porated, as Representatives for a group of 137 underwriters (none of whom are affiliates of the Company), the Company, on October 25, 1978, issued and sold 6,000,000 shares of Common Stock ($8V/ par value) (the "New Stock") to such underwriters. The aggregate net proceeds received by the Company, before the deduction of expenses payable by the Company estimated at $225,000, were $148 million.

The net proceeds were used by the Company:

(a) to reimburse the Company for monies previously expended to repay $5,500,000 principal amount of First Mortgage Bonds, 3% Series, due June 1, 1978 and to repay

$30,000,000 principal amount of First and Refunding Mortgage Bonds, Series E, due August 15, 1978; (b) to reimburse the Company for monies previously expended for its construction program, exclusive of maintenance of service and replacements. The amounts so reim bursed became a part of the general treasury funds of the Company. The Company used a portion of such treasury funds to repay a portion of its outstanding short-term debt which aggregated approximately $270 million at the time of such repayment; and 15

(c) to pay and discharge expenses incurred in connection with the issue and sale of the New Stock.

A registration statement covering the New Stock was filed under the Securities Act of 1933 on Form S-7 under File No. 2-62610 and became effective October 17, 1978.

Pursuant to the Company's Dividend Reinvestment and Stock Purchase Plan, Employee Stock Purchase Plan, and Employee Stock Ownership Plan, the Company issued the following number of shares of common stock ("Plan Stock"):

Plan Date Shares Proceeds Dividend Reinvestment and Stock Purchase Plan February 16, 1978 131,075

$3,252,863 May 16, 1978 149,170 3,630,344 August 16,1978 161,887 4,030,109 November 16, 1978 194,882 4,436,721 Employee Stock Purchase Plan April 3, 1978 150,841 3,930,841 July 3, 1978 151,052 3,819,818 October 2, 1978 161,770 4,211,957 December 29, 1978 167,858 4,171,691 Employee Stock Ownership Plan February 16, 1978 2,233 57,276 May 16, 1978 188,702 4,724,406 August 16,1978 6,229 161,020 November 16,1978 6,715 164,853 The net proceeds of the sale of Plan Stock are used to reimburse the Company for monies expended for its construction program, exclusive of maintenance of service and replacements.

The amounts so reimbursed become a part of the general treasury funds of the Company and, among other things, may be used to retire short-term obligations, if any, outstanding at the date of issuance of the Plan Stock.

The Dividend Reinvestment and Stock Purchase Plan and the Employee Stock Purchase Plan are registered under the Securities Act of 1933. A registration statement was filed (i) for the Company's Dividend Reinvestment and Stock Purchase Plan on Form S-7 under File No.

2-54670 and on Form S-16 under File No. 2-62625, and (ii) for the Company's Employee Stock Purchase Plan on Form S-8 under File No. 2-54685.

Increase in the amount of debt securities Pursuant to a Bid and Bond Purchase Agreement dated October 31, 1978, between the Company and The First Boston Corporation, Dean Witter Reynolds Inc.; Drexel Burnham Lambert Incorporated; Goldman Sachs & Co.; E. F. Hutton & Company Inc.; Loeb Rhoades Hornblower & Co. Inc.; Paine, Webber, Jackson & Curtis, Incorporated; Smith Barney, Harris Upham and Co. Incorporated; Wertheim & Co., Inc.; and Donaldson, Lufkin & Jenrette Securities Corporation, as Representatives for a group of 34 purchasers (none of whom were affiliates of the Company), the Company on November 9, 1978, issued and sold $200 million principal amount of First and Refunding Mortgage Bonds, Series JJ, Due 2003 (the "New Bonds"), to such purchasers. The net proceeds to the Company, excluding accrued interest in the approximate amount of $428,000 and before the deduction of expenses payable by the Company estimated at $286,000, were $197 million.

16

The net proceeds were used by the Company:

(a) to reimburse the Company for monies previously expended for its construction program, exclusive of maintenance of service and replacements. The amounts so reim bursed became a part of the general treasury funds of the Company. The Company used a portion of such treasury funds to repay all or a portion of its outstanding short-term bank borrowings and commercial paper which aggregated approximately $160 million at the time of such repayment; and (b) to pay and discharge expenses incurred in connection with the issue and sale of the New Bonds.

A registration statement covering the New Bonds was filed under the Securities Act of 1933 on Form S-7 under File No. 2-62609 and became effective for competitive bidding on October 17, 1978. A Post-Effective Amendment to said Registration Statement was filed on October 31,1978.

Decrease in the amount of equity securities During 1978, 580,854 shares of Preference Stock, 5.20% Convertible Series were converted into 417,710 shares of Common Stock.

Item 7. Changes in Securities and Changes in Security for Registered Securities Commencing October 26, 1978, as a result of the issuance of 6,000,000 additional shares of Common Stock, the conversion prices at which the Preference Stock, 5.20% Convertible Series and the 3V8%

Convertible Debentures, Due 1980, may be converted into the Company's Common Stock were reduced from $35.00 and $38.50 to $34.00 and $37.50, respectively.

Item 8. Defaults Upon Senior Securities None.

Item 9. Approximate Number of Equity Security Holders Approximate Number of Title of Class Record Holders*

Original Preferred.........................................

1,504 Cumulative Preferred (all series)............................

31,713

$100 Cumulative Preferred (all series)........................

9,000 Preference (all series)....................................

3,039 Com mon....................

136,613 3/e% Convertible Debentures, Due 1980 1,079 182,948

Data shown for various classes of equity securities is as of January 5, 1979. Data shown for 3Ve%

Convertible Debentures is as of December 31, 1978.

17

Item 10. Submission of Matters to a Vote of Security Holders (a) Date and type of meeting:

Annual Meeting of Shareholders held April 20, 1978.

(b) Proxies for the meeting were solicited pursuant to Regulation 14A; there was no solicitation in opposition to the management's nominees as listed in the proxy statement and all of such nominees were elected.

(c) Matters voted upon, other than election of directors and approval of auditors:

Proposal to amend the Company's Articles of Incorporation to provide for a Preferred Stock Special Voting Right.

Affirmative Votes:

67,720,026 Negative Votes:

1,797,859 Abstain:

3,752,831 Item 11.

Indemnification of Directors and Officers The information required is unchanged from the 1976 Form 10-K.

Item 12. Financial Statements, Exhibits Filed and Reports on Form 8-K 12(a)(1) Financial Statements Page Management's Discussion and Analysis of Statements of Income 19 Report of Independent Public Accountants 20 Statements of Income -

Five Years Ended December 31, 1978 21 Balance Sheets -December 31, 1977 and 1978 22 Statements of Earnings Reinvested in the Business and Statements of Additional Paid-In Capital -

Five Years Ended December 31, 1978................................

24 Statements of Changes in Financial Position -

Five Years Ended December 31, 1978....

25 Notes to Financial Statements 26 Schedules Supporting Financial Statements:

Schedule V -Property, Plant and Equipment for the Years Ended December 31, 1977 and 1978 41 Schedule VI -

Accumulated Depreciation and Amortization of Property, Plant and Equipment for the Years Ended December 31, 1977 and 1978....................

43 Schedule XII -

Reserves for the Years Ended December 31, 1977 and 1978.........

45 Information Required by Schedules IX, XIII and XVI is shown in the Financial Statements or Notes thereto.

Schedules I to XIX, inclusive, except those referred to above, are omitted as not required or not applicable.

18

MANAGEMENT'S DISCUSSION AND ANALYSIS OF STATEMENTS OF INCOME General As discussed in Note 2 of "Notes to Financial Statements", the Statements of Income have been restated to give retroactive effect to an April 27, 1976 decision of the California Public Utilities Commission ("CPUC") relating to the Company's prior fuel adjustment clause. For periods after April 30, 1976, the Statements of Income reflect the operation of the Company's Energy Cost Adjustment Clause ("ECAC") discussed in Note 1 of "Notes to Financial State ments".

1977 Compared with 1976 Operating revenues increased by $218,374,000, or 11.8%, because of: an increase in energy sales to special contract customers more affected by prevailing drought conditions in California and the Pacific Northwest; a 3.6% increase in kilowatt-hour consumption by cus tomers, other than special contract customers; a general rate increase authorized by the CPUC and effective in January 1977 designed to produce additional annual revenues of approxi mately $44,500,000; and an increase in ECAC revenues.

Fuel expense increased by $294,096,000, or 35.9%, primarily because the drought con ditions which prevailed in 1977 necessitated an increase in generation at the Company's oil and gas fueled plants. However, energy costs reflected in the Statements of Income increased only $123,960,000, or 13.5%, due primarily to the impact 'of the provision for energy cost adjustments. Such provision reflected the amount by which incurred costs of energy covered by the ECAC exceeded ECAC revenues for the year.

Maintenance expenses increased by $19,978,000, or 17.7%, largely as a result of an intensified maintenance program for steam power generation units.

Allowance for debt and equity funds used during construction ("ADC") increased by

$12,628,000, or 26.5%, due to more construction work-in-progress primarily related to the San Onofre Nuclear Generating Station.

1978 Compared With 1977 Operating revenues increased by $263,884,000, or 12.8%, due largely to higher ECAC revenues. Total kilowatt-hour consumption decreased by 1.2% as sales to special contract customers were down sharply due to the easing of drought conditions and consumption by customers, other than special contract customers, was up by only 2.7%.

Although fuel expense declined $26,977,000, or 2.4%, and purchased power expense increased $42,129,000, or 55.0%, each reflecting primarily the greater availability of energy from off-system sources due to easing of drought conditions, energy costs reflected in the Statements of Income increased by $199,938,000, or 19.2%, due to the effect of the provision for energy cost adjustments in both periods. Such provision for 1978 of $35,280,000 reflected the amount by which ECAC revenues for the year recovered energy costs previously deferred.

At December 31, 1978, deferred energy costs reflected net undercollections (including interest) of $102,369,000.

Other operation expenses increased by $41,659,000, or 17.2%, primarily due to the impact of inflation on costs of labor, materials and services and additional operating costs associated with system growth.

Maintenance expenses increased by $30,945,000, or 23.2%, primarily as a result of maintenance necessitated by severe storm damage in the first quarter of 1978.

The increase of $18,183,000, or 30.2%, in ADC reflected the operation of the same factors which accounted for the increase in 1977 as compared with 1976.

19

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Southern California Edison Company:

We have examined the balance sheets of Southern California Edison Company (a California corporation, hereinafter referred to as the "Company") as of December 31, 1977 and 1978, and the related statements of income, earnings reinvested in the business, additional paid-in capital and changes in financial position for each of the five years in the period ended December 31, 1978, and the supporting schedules listed in the accompanying index. Our examinations were made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the financial statements referred to above present fairly the financial position of the Company as of December 31, 1977 and 1978, and the results of its operations and the changes in its financial position for each of the five years in the period ended December 31, 1978, and the supporting schedules referred to above present fairly the information required to be set forth therein, all in conformity with generally accepted accounting principles consistently applied.

ARTHUR ANDERSEN & CO.

Los Angeles, California February 9, 1979 20

SOUTHERN CALIFORNIA EDISON COMPANY STATEMENTS OF INCOME As more fully discussed in Note 2, the Statements of Income and the other financial statements of Southern California Edison Company ("Company") have been revised to give retroactive effect to an April 27, 1976 decision of the California Public Utilities Commission which was affirmed by the California Supreme Court on March 23, 1978. The Statements of Income should be read in conjunction with the other financial statements, related notes and "Management's Discussion and Analysis of Statements of Income" included in this Report. The Statements of Income for the five years ended December 31, 1978, have been examined by Arthur Andersen & Co., independent public accountants, as set forth in their report included herein.

(Thousands of Dollars)

Year Ended December 31, 1974 1975 1976 1977 1978 Operating Revenues:

Sales (Notes 1, 2 and 4)......................

$1,349,479

$1,635,634

$1,833,012

$2,050,578

$2,294,543 Other..........

11,480 11,500 13,528 14,336 34,255 Total operating revenues (Note 5).......

1,360,959 1,647,134 1,846,540 2,064,914 2,328,798 Operating Expenses:

Fuel (Note 4)................................

505,209 768,843 818,932 1,113,028 1,086,051 Purchased power (Note 14).................

36,681 55,983 84,515 76,569 118,698 Provision for energy cost adjustments (Notes 1 and 5).................

12,684 (149,506) 35,280 Subtotal -energy costs..................

541,890 824,826 916,131 1,040,091 1,240,029 Other operation expenses (Notes 5, 6 and 7)....

200,728 201,385 223,647 241,963 283,622 Maintenance (Note 1)........................

91,905 93,716 113,188 133,166 164,111 Provision for depreciation (Notes 1 and 5)......

116,189 120,410 124,802 140,520 157,203 Taxes on income -

current and deferred (Notes 2 and 5)....................

70,618 46,623 59,506 68,792 72,803 Property and other taxes (Note 5).............

86,919 93,568 102,126 109,660 86,429 Total operating expenses (Note 13).....

1,108,249 1,380,528 1,539,400 1,734,192 2,004,197 Operating Income (Note 5)......................

252,710 266,606 307,140 330,722 324,601 Other Income and Income Deductions:

Allowance for equity funds used during construction (Note 3)......................

12,405 20,548 36,541 46,233 58,471 Other -

Net (Notes 5 and 11).................

4,430 9,587 16,416 22,097 31,319 Total other income and income deductions 16,835 30,135 52,957 68,330 89,790 Total Income before Interest Charges.............

269,545 296,741 360,097 399,052 414,391 Interest Charges:

Interest on long-term debt (Note 8)............

104,145 124,674 134,423 143,152 154,301 Other interest and amortization (Notes 1,2 and 8) 8,814 1,511 9,945 17,926 28,357 Total interest charges..................

112,959 126,185 144,368 161,078 182,658 Allowance for debt funds used during construction (Note 3).......................

(3,758)

(6,225)

(11,069)

(14,005)

(19,950)

Net interest charges....................

109,201 119,960 133,299 147,073 162,708 Net Income (Note 5)

.160,344 176,781 226,798 251,979 251,683 Dividends on Cumulative Preferred and Preference Stock.............................

35,688 39,604 41,751 45,649 49,457 Earnings Available for Common and Original Preferred Stock (Note 2)......................

$ 124,656

$ 137,177

$ 185,047

$ 206,330

$ 202,226 Weighted Average Shares of Common and Original Preferred Stock Outstanding and Common Stock Equivalents (000)...........................

44,580 47,965 48,678 54,347 57,477 Earnings Per Share (Notes 2, 5 and 10):

Primary....................................

$2.80

$2.86

$3.80

$3.52 Fully Diluted.............................

$2.68

$2.75

$3.61

$3.63

$3.38 Dividends Declared per Common Share (Note 9)...

$1.68

$2.06

$2.30 The accompanying notes are an integral part of these statements.

21

SOUTHERN CALIFORNIA EDISON COMPANY BALANCE SHEETS ASSETS (Thousands of Dollars)

December 31, 1977 1978 UTILITY PLANT:

Utility plant, at original cost less contributions (Notes 1, 3, 4, 13 and Schedule V)

$4,964,888

$5,303,746 Less -

Accumulated provision for depreciation (Notes 1, 13 and Schedule VI)..............................

1,383,009 1,519,174 Net utility plant..............................

3,581,879 3,784,572 Construction work in progress (Notes 6, 13 and Schedule V)..

1,209,502 1,493,573 Nuclear fuel, at amortized cost (Schedules V and VI).........

17,343 13,572 Total utility plant 4,808,724 5,291,717 OTHER PROPERTY AND INVESTMENTS:

Real estate and other, at cost -

less accumulated provision for depreciation......................................

6,024 7,658 Subsidiary companies (Notes 1 and 11)....................

82,579 85,818 Total other property and investments.....

88,603 93,476 CURRENT ASSETS:

C ash (N ote 4 )..........................................

9,245 7,458 Temporary cash investments............................

80,532 Receivables, less reserve of $5,714,000 and $5,608,000 for uncollectible accounts at respective dates (Notes 1, 8 and Schedule X II)..........................

213,002 211,625 Fuel stock, at cost (first-in, first-out) (Note 4).............

277,586 163,021 Materials and supplies, at average cost......................

28,016 28,463 Deferred energy costs (Notes 1 and 5)....................

132,559 102,369 Prepayments and other (taxes, insurance, etc.)............

63,476 42,022 Total current assets..........................

723,884 635,490 DEFERRED DEBITS:

Accumulated deferred income taxes -

customer refunds (Notes 2 and 5)...............

78,801 Other deferred charges..................

25,254 37,014 Total deferred debits..........................

104,055 37,014

$5,725,266

$6,057,697 The accompanying notes are an integral part of these balance sheets.

22

SOUTHERN CALIFORNIA EDISON COMPANY BALANCE SHEETS CAPITALIZATION AND LIABILITIES (Thousands of Dollars)

December 31, 1977 1978 SHAREHOLDERS' EQUITY:

Original preferred stock................................$

4,000 4,000 Cumulative preferred stock...............................593,755 593,755 Preference stock 117,417 102,895 Common stock, including additional stated capital, 90,000,000 shares authorized, 54,646,457 and 62,536,581 shares out standing at respective dates.470,374 547,166 Total capital stock -

stated value (Note 9) 1,185,546 1,247,816 Additional paid-in capital 443,109 569,673 Earnings reinvested in the business (Notes 2 and 12) 862,956 931,217 Total shareholders' equity.2,491,611 2,748,706 LONG-TERM DEBT (Notes 1 and 8)

.2,314,874 2,477,474 Total capitalization.4,806,485 5,226,180 CURRENT LIABILITIES:

Accounts payable...................

169,128 154,495 Commercial paper payable (Note 4) 135,365 Notes payable to banks (Note 4)....

19,986 Current maturities of long-term debt (Note 8) 35,500 33,737 Customer refunds -

current (Note 2) 52,724 Taxes accrued (Note 5) 95,753 92,550 Interest accrued.

47,802 51,069 Customer deposits 14,267 15,601 Dividends declared 35,223 43,205 Accumulated deferred income taxes -

deferred energy costs (Notes 1 and 5)...........................

69,832 53,928 Other.15,127 23,612 Total current liabilities 617,997 540,907 COMMITMENTS AND CONTINGENCIES (Note 4).

RESERVES AND DEFERRED CREDITS:

Customer advances and other deferred credits 40,804 46,115 Customer refunds (Note 2)...............................149,657 107,774 Accumulated deferred income taxes and investment tax credits (Notes 1 and 5)......................

80,870 110,096 Reserves for pensions, insurance, etc.(Note 7 and Schedule XII) 29,453 26,625 Total reserves and deferred credits 300,784 290,610

$5,725,266

$6,057,697 The accompanying notes are an integral part of these balance sheets.

23

SOUTHERN CALIFORNIA EDISON COMPANY STATEMENTS OF EARNINGS REINVESTED IN THE BUSINESS (Thousands of Dollars)

Year Ended December 31, 1974 1975 1976 1977 1978 Balance at Beginning of Period As previously reported

$573,261

$677,839

$742,706

$ 835,507

$ 862,956 Adjustments (Note 2)

(3,323)

(61,277)

(71,158)

(66,082)

As restated...........

569,938 616,562 671,548 769,425 862,956 Add:

Net income (Note 5)...

160,344 176,781 226,798 251,979 251,683 Adjustments -

net (Note 12)............

(2,136) 3,801 728,146 793,343 898,346 1,021,404 1,118,440 Deduct:

Dividends declared on capital stock (Note 9):

Original Preferred...

792 806 806 922 1,075 Cumulative Preferred.

32,157 35,705 37,851 38,423 42,532 Preference.........

3,900 3,900 3,900 6,844 6,926 Common...........

74,735 79,775 82,544 111,372 132,205 Capital stock expense (Note 12)...........

1,609 3,820 887 4,485 111,584 121,795 128,921 158,448 187,223 Balance at End of Period (a)............

$616,562

$671,548

$769,425

$ 862,956

$ 931,217 (a) Includes undistributed earnings of unconsolidated subsidiary companies of $8,621,000 and an appropriation of $3,801,000 relating to certain federally-licensed hydroelectric projects at December 31, 1978.

STATEMENTS OF ADDITIONAL PAID-IN CAPITAL (Thousands of Dollars)

Year Ended December 31, 1974 1975 1976 1977 1978 Balance at Beginning of Period................$316,636

$350,503

$ 427,422

$ 443,109 Premium received on sale of Common Stock.....

33,867 76,919 15,690 126,572 Payments made in lieu of issuing fractional shares of Common Stock.....

(3)

(8)

Balance at End of Period..

$350,503

$427,422

$ 443,109

$ 569,673 The accompanying notes are an integral part of these statements.

24

SOUTHERN CALIFORNIA EDISON COMPANY STATEMENTS OF CHANGES IN FINANCIAL POSITION (Thousands of Dollars)

Year Ended December 31, 1974 1975 1976 1977 1978 FUNDS PROVIDED BY:

Operations Net income (Note 5)

$ 160,344

$176,781

$ 226,798

$ 251,979

$ 251,683 Non-fund items:

Depreciation (Notes 1 and 5)...............

116,189 120,410 124,802 140,520 157,203 Equity in earnings of unconsolidated subsidiaries (Notes 1 and 11)

.(1,040)

(290)

(968)

(551)

(608)

Allowance for debt and equity funds used during construction (Note 3).(16,163)

(26,773)

(47,610)

(60,238)

(78,421)

Investment tax credit deferred -

net (Notes 1 and 5)

(781) 6,624 16,366 26,886 32,568 Other-net 6,603 5,746 15,417 8,152 4,788 Customer refunds -

net (Note 2).57,954 9,881 (5,076) 4,774 36,918 Earnings distributed from unconsolidated subsidiaries 3,500 1,000 1,000 1,000 Total from operations 323,106 295,879 330,729 372,522 405,131 Long-term financing Preferred stock (Note 9) 50,000 50,000 60,000 Preference stock (Note 9) 42,419*

(14,522)*

Common stock (Note 9) 67,200 123,951 43,323 203,364 Long-term debt (Note 8) 222,486 161,641 126,263 200,000 200,000 Total from long-term financing 339,686 211,641 250,214 345,742 388,842 Other sources Construction advances and other 169 9,404 5,529 9,102 9,258 Sale of non-current assets.....................

10,883 Decrease in working capital...................

140,431 13,067 Total from other sources 169 9,404 145,960 19,985 22,325 Total funds provided

$ 662,961

$516,924

$ 726,903

$ 738,249

$ 816,298 FUNDS APPLIED TO:

Construction additions - net..................

$ 336,837

$407,903

$ 547,936

$ 560,507

$ 646,252 Less -

allowance for debt and equity funds used during construction (Note 3)...................

16,163 26,773 47,610 60,238 78,421 Funds used for construction expenditures 320,674 381,130 500,326 500,269 567,831 Advances to unconsolidated subsidiaries.

13,870 8,375 5,900 (999) 3,630 Dividends....

111,584 120,186 125,101 157,561 182,738 Repayment of long-term debt (Note 8).............-

80,840 35,500 Other-net..................................

3,157 14,736 2,015 26,599 Increase in working capital.......................

213,676 7,233 79,403 Total funds applied.................

$ 662,961

$516,924

$ 726,903

$ 738,249

$ 816,298 WORKING CAPITAL CHANGES (Other than current maturities of long-term debt):

Receivables and temporary cash investments....

$ 98,352

$(66,401) 3,689

$ 86,554

$ 79,155 Fuel stock and materials and supplies..............

139,951 42,729 (124,614) 84,672 (114,118)

Prepayments and other.........................

40,931 (35,033) 6,418 9,243 (21,454)

Deferred energy costs -

net (Notes 1 and 5).......

(10,122) 72,849 (14,286)

Notes and accounts payable.....................

42,338 (10,350)

(2,418)

(145,639) 68,803 Taxes and interest accrued........................

(100,706) 70,243 (2,107)

(19,918)

(64)

Other-net....................................

(7,190) 6,045 (11,277)

(8,358)

(11,103)

Increase (Decrease) in working capital.

$ 213,676

$ 7,233

$(140,431)

$ 79,403

$ (13,067)

These amounts include conversions of Preference Stock, 5.20% Convertible Series, to Common Stock in the amount of

$19,581,000 for 1977 and $14,522,000 for 1978.

The accompanying notes are an integral part of these statements.

25

SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS Note 1 -

Summary of Significant Accounting Policies The Company is a public utility primarily engaged in the business of supplying electric energy in portions of central and southern California, excluding the City of Los Angeles and certain other cities. The accounting records of the Company are maintained in accordance with the Uniform System of Accounts prescribed by the Federal Energy Regulatory Commission

("FERC") and adopted by the California Public Utilities Commission ("CPUC").

Additions to utility plant and replacements of retirement units of property are capitalized at original cost less contributions, which cost includes labor, material, indirect charges for engi neering, supervision, transportation, etc., and an allowance for debt and equity funds used during construction. Maintenance is charged with the cost of repairs and minor renewals; plant accounts with the replacement of property units; and the depreciation reserve with the cost, less net salvage, of property units retired.

Depreciation of utility plant is computed on a straight-line remaining life basis for financial statement purposes and approximated 2.9% of average depreciable plant for 1974 through 1976, 3.1% for 1977 and 3.2% for 1978. Although the eventual cost of retiring a nuclear generating unit cannot be predicted with certainty, the Company has estimated that decommissioning costs will approximate $36,000,000 for nuclear generation facilities in service. The Company's rates are designed to recover such costs through depreciation expense over the estimated remaining useful lives of such facilities. Current income tax expense has been reduced by the current tax reductions arising from the use of liberalized methods and lives in computing depreciation for income tax purposes and a portion of investment tax credits ("ITC"). The current reduction of income tax liability due to certain additional ITC made available by the Tax Reduction Act of 1975 and the Tax Reform Act of 1976 is being normalized.

Debt premium or discount and related expenses are being amortized to income over the lives of the issues to which they pertain.

Customers are billed monthly, except for most residential customers who are billed bi monthly. Revenues are recorded when customers are billed.

Deferred energy costs result from the Company's Energy Cost Adjustment Clause

("ECAC"), which requires monthly entries to adjust the results of operations and maintenance of a balancing account for overcollections or undercollections. Variations between ECAC revenues and the related energy costs included in rates are deferred until such variations are refunded to, or recovered from, utility customers through CPUC authorized rate adjustments.

ECAC related energy costs include incurred transportation and storage costs related to spent nuclear fuel. The income tax effects of ECAC also are deferred. For income tax purposes, billed revenues and incurred energy costs are utilized in the determination of taxable income.

Investments in unconsolidated subsidiary companies, all of which are wholly-owned, are accounted for under the equity method of accounting.

26

SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)

Note 2-Prior Period Adjustments The amounts of earnings available for Common and Original Preferred Stock for the years 1974-1977, inclusive, have been revised from the amounts previously reported to give retroactive effect to an April 27, 1976 decision of the CPUC which was affirmed by the California Supreme Court on March 23, 1978. On October 16, 1978, the United States Supreme Court denied the Company's appeal of this decision. The combined effect of the CPUC decision and a CPUC order issued December 12, 1978, requires the Company to refund, as reductions of customers' billings over a three-year period which began January 1, 1979, revenues collected pursuant to the operation of the Company's fuel adjustment clause during the period May 1972 through April 1976, in the approximate amount of $133,000,000 and approximately $45,000,000 of interest for the period from May 1976 through December 1981.

Except for an estimated

$18,000,000 of the interest which is applicable to and will be recorded during the three-year refund period, the earnings impact of the refund has been reflected in the Company's financial statements for periods ending prior to January 1, 1979. These retroactive adjustments reduced the balance of earnings reinvested in the business by $3,323,000 as of January 1, 1974 and reduced earnings available for Common and Original Preferred Stock and primary earnings per share by $57,954,000 ($1.30 per share) for 1974 and $9,881,000 ($0.21 per share) for 1975, whereas the adjustments increased such items for 1976 by $5,076,000 ($0.10 per share) because of undercollections, and reduced such items by $4,774,000 ($0.08 per share) for 1977, as follows:

(Thousands of Dollars)

Year Ended December 31, 1974 1975 1976 1977 Earnings Available for Common and Original Preferred Stock -

previously reported........

$182,610

$147,058

$179,971

$211,104 Adjustments to:

Operating revenues (122,473)

(20,881) 17,072 Other interest and amortization (6,345)

(10,089)

Taxes on income 64,519 11,000 (5,651) 5,315 As adjusted

$124,656

$137,177

$185,047

$206,330 Note 3 -

Allowance for Funds Used During Construction Allowance for Funds Used During Construction ("ADC") is the generally accepted utility accounting procedure designed to capitalize the cost of both debt and equity funds used to finance plant additions during construction periods and to restore net income to the level which would have been experienced without the construction program through a transfer of such costs from the income statement to the balance sheet as utility plant construction work in progress. Such costs are recovered from rate-payers as a cost of service through provisions for depreciation in future periods. Although ADC increases net income, it does not represent current cash earnings. The ADC rate authorized by the CPUC was 8.0% for 1974 through 1976.

Effective January 1, 1977 a FERC Order requires the use of a prescribed formula for computing the ADC rate and permits semi-annual compounding. An effective annual ADC rate of 6.96%

was utilized during the years 1977 and 1978. The formula provides for the separate computation of ADC applicable to debt funds and to equity funds. Prior to 1977, separate rates were not re quired to be determined. ADC for periods ending prior to January 1, 1977 have been reclassified to conform to the new presentation. The reclassification is based upon the current ratio of the debt and equity portions of ADC to total ADC as determined by the application of the formula.

27

SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)

Note 4 -

Commitments and Contingencies Construction program and fuel supply The Company has significant purchase commitments in connection with its continuing construction program. As of December 21, 1978 (the date of the Company's latest approved budget), funds required for construction expenditures are estimated at $660,000,000 for 1979 and $623,000,000 for 1980. Minimum long-term commitments of approximately $6.6 billion existed on December 31, 1978 under the Company's fuel supply and transportation arrangements.

Government licenses Major hydroelectric plants together with certain reservoirs are located in whole or in part on lands of the United States under Government licenses and permits which expire between 1979 and 2009. Such licenses and permits contain numerous restrictions and obligations, including the right of the United States to acquire the projects, under certain conditions, upon payment of specified compensation.

Revenues Pursuant to FERC procedures, on May 2, 1974, August 4, 1974 and February 1, 1976, rate increases applicable to resale sales became effective, subject to refund with interest to the extent that any of the increases are subsequently determined by the FERC to be in appropriate. For the period May 2, 1974 through December 31, 1978, additional revenues of approximately $272,000,000 billed under these rate filings remain subject to refund. A FERC decision dated April 26, 1978, determined that substantially all of the increased rates relating to a fuel cost adjustment clause placed in effect on May 2, 1974 were just and reasonable. In August 1978 certain of the Company's resale customers filed a petition with the U. S. Court of Appeals, District of Columbia Circuit, for a review of this decision. If the Court of Appeals sustains the FERC decision, approximately $225,000,000 of such additional revenues billed during the period from August 4, 1974 through December 31, 1978, will remain subject to refund. The Company believes that based on these and other facts, the amount of revenues, if any, which may be required to be refunded would not have a significant effect on net income in any of the related periods.

Compensating balances and short-term debt In order to continue lines of credit with various banks, which amounted to approximately

$161,000,000 on December 31, 1977 and $170,000,000 on December 31, 1978, the Company presently maintains deposits aggregating approximately $14,000,000 which are not legally restricted as to withdrawal. None of such lines of credit was used during 1977 and 1978. The variation between cash reported on the Company's balance sheet and the minimum aggregate deposits recorded by the banks is "float", which is due to timing differences in recording deposits and withdrawals by the Company and the banks.

The Company has an additional $150,000,000 line of credit which may be utilized only for the purchase of fuel oil through the use of bankers' acceptances. Notes issued under this agreement are secured by a pledge of the Company's fuel oil inventory. The maximum amount of bankers' acceptances outstanding for 1977 and 1978 was $72,006,000 and $68,545,000, respectively. The average daily borrowings for these same periods were $10,396,000 and 28

SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)

Note 4 -Commitments and Contingencies (continued)

$24,259,000, respectively, with weighted average annual interest rates (total interest divided by average daily borrowings) of 6.22% and 7.87%, respectively.

The maximum amount of commercial paper outstanding for 1977 and 1978, was $160,500,000 and $165,273,000, respectively. The average daily borrowings for these same periods were

$88,967,000 and $113,414,000, respectively, with weighted average annual interest rates of 5.63%

and 7.23%, respectively.

There were no notes payable outstanding during 1977; however, the maximum amount of notes payable outstanding for 1978 was $87,970,000. The average daily borrowings for this period was $41,402,000, with a weighted average annual interest rate of 8.23%. These notes are unrelated to the lines of credit referred to above.

Legal matters In March 1978, five resale customers filed a suit against the Company in Federal Court alleging violation of certain antitrust laws. The complaint seeks damages in excess of

$23,000,000, the trebling of these damages and certain injunctive relief, and alleges that the Company (i) is engaging in anti-competitive behavior by charging more for wholesale electricity sold to the resale customers than the Company charges certain classes of its retail customers, and (ii) has taken actions alone and in concert with other utilities to prevent or limit such resale customers from obtaining bulk power supplies from other sources to reduce or replace the resale customers' wholesale purchases from the Company. In August 1978, the Federal Court granted the Company's motion to stay the action pending resolution of the Company's FERC resale rate filing which became effective in February 1976, and of other FERC proceedings involving bulk power contracts and substantially the same antitrust issues. The resale customers have asked the FERC to modify these contracts and to order the Company to provide additional transmission services to them.

The foregoing proceedings involve complex issues of law and fact, and although the Company is unable to predict their final outcome, it categorically denies the allegations of these resale customers.

In 1972, a charge was filed with the Federal Equal Employment Opportunity Commission

("EEOC") and a class action lawsuit was filed in Federal Court in 1974, both of which alleged that the Company had engaged in unlawful, discriminatory employment practices.

Although denying that it has engaged in any unlawful employment practices, the Company has entered into a Conditional Settlement with the EEOC and the representatives of most of the class action plaintiffs which, on November 7, 1977, was submitted to the Federal Court for approval as a consent decree. The estimated cost of this settlement is initially $700,000 with the possibility of an additional estimated $300,000 in payment on individual awards after hearings.

If the settlement should not be approved and the case is tried, it is the opinion of Company counsel that the Company has a number of defenses which should be sustained by a court and which, among other things, have the effect of limiting monetary damages. The Company believes, based on a current analysis of the applicable law and facts, that the amount of any recovery for monetary damages, including back pay, should not have a material effect on the financial position of the Company.

29

SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)

Note 5 -

Supplementary Income Data Taxes on income As required by the CPUC and discussed in Note 1, no provisions are made for income tax reductions (net) which result from reporting certain transactions for income tax purposes in a period different from that in which they are reported in the financial statements, except for certain ITC discussed below, the retroactive adjustments to taxes on income resulting from the restatement discussed in Note 2 and the tax effects of the ECAC balancing account provisions.

Effective January 1, 1976, pursuant to FERC procedure, the Company began providing deferred income taxes for certain timing differences allocable to resale rates. The revenues related to such deferred income taxes are being collected subject to refund, as discussed in Note 4, pending action by the FERC.

ITC not deferred.have been applied as a current reduction of income tax expense. Addi tional ITC, made available to the Company under the provisions of the Tax Reduction Act of 1975 and the Tax Reform Act of 1976, have been deferred and are being amortized to income tax expense ratably over the service lives of the properties generating such credits.

30

SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)

Note 5 -

Supplementary Income Data (continued)

Supplementary information regarding taxes on income included in operating expenses is set forth in the following table. Deferred Federal and State taxes on income have been revised from amounts previously reported as set forth below and in Note 2.

(Thousands of Dollars)

Year Ended December 31, 1974 1975 1976 1977 1978 Current:

Federal.................................

$111,359

$ 37,897

$ 25,165

$(48,360)

$(49,219)

State...................................

24,241 12,481 14,344 1,233 3,567 135,600 50,378 39,509 (47,127)

(45,652)

Deferred -

Federal and State:

Investment tax credit - net.................

(781) 6,624 16,366 26,886 32,568 Energy cost adjustment balancing account.-

(11,269) 81,101 (15,904)

Customer refunds (Note 2).................

(64,519)

(11,000) 5,651 (5,315) 78,801 Other....................................

(2,129)

(2,144) 3,432 1,345 2,208 (67,429)

(6,520) 14,180 104,017 97,673 Total taxes on income.......................$

68,171

$ 43,858

$ 53,689

$ 56,890

$ 52,021 Taxes on income included in operating expenses

$ 70,618

$ 46,623

$ 59,506

$ 68,792

$ 72,803 Taxes on income included in other income.(2,447)

(2,765)

(5,817)

(11,902) 20,782)

Total taxes on income........................$

68,171

$ 43,858

$ 53,689

$ 56,890

$ 52,021 Differences between the federal statutory tax rate and the Company's effective tax rate are reconciled as follows:

Federal statutory tax rate...................

48.0%

Excess of tax over book depreciation (12.1)

(11.6)

(9.1)

(6.0)

(3.4)

Allowance for debt and equity funds used during construction (3.4)

(5.8)

(8.1)

(9.4)

(12.4)

Repair allowance........................

2.1)

(2.9)

(4.7)

Administrative and general expenses capitalized.....

.(2.3)

(3.0)

(2.4)

(2.3)

(2.7)

Investment tax credit-net................

(3.8)

(3.1)

(4.9)

(6.6)

(8.4)

Ad valorem lien date adjustment (0.5)

(0.6)

(0.7)

(0.5) 4.2 Federal deduction for state taxes on income.0.8 (4.6)

(1.9)

(3.5)

(2.7)

All other differences......................

(2.5)

(4.0)

(4.7)

(2.9)

(5.5)

State tax provision.......................

5.6 4.6 5.0 4.5 4.7 Effective tax rate.........................

29.8%

19.9%

19.1%

18.4%

17.1%

Property and other taxes included in operating expenses:

Property.................................

$ 80,448

$ 84,965

$ 91,601

$ 98,370

$ 74,665 Payroll and other(........................T s6,471 8,603 10,525 11,290 11,764

$ 86,919

$ 93,568

$102,126

$109,660

$ 86,429 31

SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)

Note 5 -

Supplementary Income Data (continued)

Quarterly financial data A summary of audited quarterly financial information for 1978 and as restated for 1977 to provide for the refund of fuel adjustment clause "overcollections", is as follows (see Note 2 for further details regarding the restatement):

Three Months Ended March 31, June 30, September 30, December 31, 1978 1978 1978 1978 Operating Revenues (000)

$547,518

$545,444

$634,934

$600,902 Operating Income (000) 64,050 70,612 90,778 99,162 Net Income (000) 46,470 50,912 68,846 85,455 Primary Earnings Per Share

$.62

$.69

$1.00

$1.19 Fully Diluted Earnings Per Share

$.59

$.67

$.96

$1.15 Three Months Ended March 31, June 30, September 30, December 31, 1977 1977 1977 1977 Operating Revenues (000):

As previously reported.

$505,819

$471,859

$550,790

$536,446 Adjustment for restatement.

As restated

$505,819

$471,859

$550,790

$536,446 Operating Income (000):

As previously reported....................

$ 84,707

$ 75,684

$ 86,341

$ 78,675 Adjustment for restatement................

1,295 1,315 1,340 1,365 As restated..............................

$ 86,002

$ 76,999

$ 87,681

$ 80,040 Net Income (000):

As previously reported.....................

$ 68,759

$ 57,973

$ 68,808

$ 61,213 Adjustment for restatement................

(1,161)

(1,183)

(1,204)

(1,226)

As restated..............................

$ 67,598

$ 56,790

$ 67,604

$ 59,987 Primary Earnings Per Share:

As previously reported

$1.07

$.86

$1.05

$.90 As restated

$1.05

$.84

$1.03

$.88 Fully Diluted Earnings Per Share:

As previously reported..

$1.02

$.82

$1.01

$.86 As restated....

$1.00

$.80

$.99

$.84 Leases and rentals The Company has entered into various arrangements to lease nuclear fuel, automotive equipment, computer equipment, office space and other incidental equipment and property which are accounted for as operating leases. Neither the annual gross lease expense nor the present value of the minimum commitments of capital leases are material.

Other The amounts of taxes, depreciation and maintenance charged to other accounts and royalties paid are not significant. Advertising costs included in other operation expenses are less than 1% of revenues.

32

SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)

Note 6-Research and Development Research and Development ("R&D") expenditures are expensed currently if they are of a general nature. Plant related R&D expenditures are accumulated in construction work in progress ("CWIP") until a determination is made whether or not such projects will result in construction of electric plant. If no construction of electric plant ultimately results, the expendi tures are charged to operating expense. The balance of R&D expenditures included in CWIP at December 31, 1977 and 1978 was $13,331,000 and $17,178,000, respectively.

(Thousands of Dollars)

Year Ended December 31, 1974 1975 1976 1977 1978 R&D expensed..................................

$15,944

$ 9,636

$10,887

$12,710

$14,442 R&D charged to CWIP -

net.............

(542) 4,814 5,551 2,407 3,847 Total R&D expenditures..........................

$15,402

$14,450

$16,438

$15,117

$18,289 Note 7 -

Retirement Plans The Company's current pension program is based on a trusteed non-contributory pension plan. Company contributions are determined on the basis of a level premium funding method and prior service costs are funded. Pension costs are funded or reserved for on an actuarial basis and amounted to $19,789,000 for 1974; $23,702,000 for 1975; $23,417,000 for 1976;

$27,689,000 for 1977; and $32,236,000 for 1978. Accumulated pension funds and reserves exceed vested benefits under the program.

Under the Employee Stock Purchase Plan adopted to supplement employees' income after retirement, employees may elect to contribute specified percentages of their compensation to a trustee for the purchase of Company Common Stock and the Company contributes to the Plan an amount equal to one-half of the aggregate contributions of employees, less forfeitures.

The Company's contribution amounted to $2,272,000 for 1974; $2,473,000 for 1975; $2,461,000 for 1976; $2,591,000 for 1977; and $2,785,000 for 1978.

The Tax Reduction Act of 1975 introduced a provision for an additional 1% ITC if the funds generated therefrom are invested in the purchase of employer securities for the benefit of employees and transferred into an Employee Stock Ownership Plan. Eligible securities include Common Stock or securities convertible into Common Stock. The Company has estab lished a Tax Reduction Act Employee Stock Ownership Plan with respect to the years 1976 and 1977 and has issued in trust 102,262 shares of Common Stock during 1977 and 203,879 shares of Common Stock during 1978. The allocation of such shares to participants and the continuation of the Plan are contingent upon the receipt of a favorable ruling by the Internal Revenue Service that the Company is eligible for the additional 10% ITC.

33

SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued) 1ote 8-Long-Term Debt A summary of long-term debt outstanding follows:

(Thousands of Dollars)

December 31, 1977 1978 Interest Series Maturity Rate Principal Amount First and Refunding Mortgage Bonds.....

E 1978 3%%

30,000 F

1979 3

30,000 30,000 G

1981 3%

40,000 40,000 H

1982 4%

37,500 37,500 I

1982 4%

40,000 40,000 J

1982 4%

40,000 40,000 K

1983 4%

50,000 50,000 L

1985 5

30,000 30,000 M

1985 4%

60,000 60,000 N

1986 42 30,000 30,000 O

1987 4

40,000 40,000 P

1987 4

50,000 50,000 Q

1988 43/

60,000 60,000 R

1989 4%

60,000 60,000 S

1990 4V2 60,000 60,000 T

1991 5

75,000 75,000 U

1991 6/s 80,000 80,000 V

1992 5/S 80,000 80,000 W

1993 6%

100,000 100,000 X

1994 7V/

75,000 75,000 Y

1994 81/s 100,000 100,000 Z

1995 77/8 100,000 100,000 AA 1996 8

100,000 100,000 BB 1997 73/

125,000 125,000 CC 1999 8

100,000 100,000 DDP 1999 7

15,030 15,030 EE 1981 9

100,000 100,000 FF 2000 87 150,000 150,000 GG 2001 8V/

125,000 125,000 HH 2002 8%

125,000 125,000 II 1984 7

75,000 75,000 JJ 2003 9%

200,000 2,182,530 2,352,530 First Mortgage Bonds (Calectric) 1978-1991 2/4 -5/a 71,500 66,000 Convertible Debentures...................

1980 31/s 74,902 74,902 Promissory Notes......................

1979-1983 5/2 17,953 17,953 Principal Amounts Outstanding...................................

2,346,885 2,511,385 Current Maturities of Long-Term Debt..............................

(35,500)

(33,737)

Unamortized Premium or (Discount)-

net...........................

3,489 (174)

Total Long-Term Debt.....................................

$2,314,874

$2,477,474 34

SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)

Note 8 -

Long-Term Debt (continued)

The authorized principal amount of each series of First and Refunding Mortgage Bonds is equal to the amount outstanding. The Trust Indenture under which these bonds are issued per mits the issuance from time to time of additional bonds thereunder pursuant to the restrictions and conditions contained therein. Each of the bond indentures requires semiannual deposits with the Trustees of 11/2% of the principal amount of its outstanding First and Refunding Mortgage Bonds and the First Mortgage Bonds of Calectric. The Calectric Indenture requires an annual deposit with the Trustee of 1% of the principal amount of First Mortgage Bonds issued less certain bonds retired, plus an amount equivalent to the excess of 15% of gross operating revenues over costs of maintenance of the property subject to the lien of such indenture. These deposit requirements of such indentures may be and have been satisfied by property additions and replacements, and by delivery and cancellation of bonds outstanding under the applicable indenture. The Series DDP, First and Refunding Mortgage Bonds are subject to a mandatory sinking fund commencing on July 1, 1990.

Current maturities of long-term debt on December 31, 1978 included First and Refunding Mortgage Bonds, Series F, Due August 15, 1979 in the amount of $30,000,000, 512% Promissory Notes, due February 28, 1979 in the amount of $1,879,000 and 5V2%

Promissory Notes, due August 31, 1979 in the amount of $1,858,000. The amounts of long-term debt maturing in the four years subsequent to December 31, 1979, will be: $84,544,000 in 1980; $143,548,000 in 1981; $121,025,000 in 1982; and $53,501,000 in 1983.

On December 31, 1977 the 3V8% Convertible Debentures, Due 1980, were convertible at the adjusted rate of one share of Common Stock for each $39.00 of the principal amount of such debentures. Subsequent to the issuance of 6,000,000 shares of Common Stock on October 25, 1978, the conversion price decreased to $37.50 which was the conversion price at December 31, 1978. Any such debentures which are converted may not be reissued.

The Company has entered into a financing agreement, as amended, with certain English banks pursuant to which it issued promissory notes payable in pounds sterling. These notes are secured by a pledge of the Company's customer accounts receivable. On June 28, 1976, the Company entered into forward exchange contracts with a United States bank to purchase, at various times from February 1979 through August 1983, pounds sterling to repay substantially all of the promissory notes.

On November 9, 1978, the Company sold $200,000,000 principal amount of First and Refunding Mortgage Bonds, Series JJ, Due 2003 (95/8%).

Note 9 -

Capital Stock Transactions in the capital stock accounts for the five years ended December 31, 1978, were as follows:

In 1974, 2,000,000 shares of Cumulative Preferred Stock, 8.85% Series and 4,000,000 shares of Common Stock were issued; in 1975, 2,000,000 shares of Cumulative Preferred Stock, 9.20%

Series were issued; in 1976, 87,656 shares and 556,191 shares of Common Stock were issued under the Company's Dividend Reinvestment and Stock Purchase Plan and the Employee Stock Purchase Plan, respectively, and 5,000,000 shares were issued publicly. In 1977, the Company issued 2,480,000 shares of Preference Stock, 7.375% Series; 600,000 shares of $100 Cumulative Preferred Stock, 7.80% Series; and 323,932 shares, 540,081 shares, and 102,262 shares of 35

0 SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)

Note 9 -

Capital Stock (continued)

Common Stock under the Company's Dividend Reinvestment and Stock Purchase Plan, Employee Stock Purchase Plan, and the Tax Reduction Act Employee Stock Ownership Plan, respectively. Also in 1977, 783,226 shares of Preference Stock, 5.20% Convertible Series, were converted into 551,452 shares of Common Stock. In 1978, the Company issued 637,014, 631,521, and 203,879 shares of Common Stock under the Company's Dividend Reinvestment and Stock Purchase Plan, Employee Stock Purchase Plan and the Tax Reduction Act Employee Stock Ownership Plan, respectively and 580,854 shares of Preference Stock, 5.20% Converti ble Series, were converted into 417,710 shares of Common Stock. In addition, on October 25, 1978, the Company issued 6,000,000 shares of Common Stock at an initial public offering price of $25.375 per share.

The quarterly dividend rate was increased from 390 per share to 420 per share effective with the dividend paid on Common Stock on April 30, 1974, and on Original Preferred Stock on June 30, 1974; to 500 per share effective with the dividend paid on Common Stock on April 30, 1977 and on Original Preferred Stock on June 30, 1977; to 560 per share effective with the dividend paid on Common Stock on January 31, 1978, and on Original Preferred Stock with the dividend paid on March 31, 1978; and to 620 per share effective with the dividend paid on Common Stock on January 31, 1979, and on Original Preferred Stock with the dividend to be paid on March 31, 1979.

A summary of the capital stock accounts follows:

December 31, 1978 Redemption (Thousands of Dollars)

Price December 31, Shares Per Outstanding Share 1977 1978 Original Preferred -5%,

prior, cumulative, partici pating, not redeemable, authorized 480,000 shares, par value $81/3 per share......................

480,000 4,000 4,000 Cumulative Preferred -

authorized 24,000,000 shares, par value $25 per share(a) 4.08% Series.............................

1,000,000

$ 25.50 25,000 25,000 4.24% Series.............................

1,200,000 25.80 30,000 30,000 4.32% Series.............................

1,653,429 28.75 41,336 41,336 4.78% Series..............................1,296,769 25.80 32,419 32,419 5.80% Series..............................2,200,000 25.65 55,000 55,000 8.85% Series..............................2,000,000 27.20 50,000 50,000 9.20% Series..............................2,000,000 27.25 50,000 50,000

$100 Cumulative Preferred -

authorized 6,000,000 shares, par value $100 per share(a) 7.325% Series.............................

750,000 110.00 75,000 75,000 7.58 % Series.............................

750,000 105.00 75,000 75,000 7.80 % Series.600,000 110.00 60,000 60,000 8.70 % Series.500,000 111.00 50,000 50,000 8.96 % Series.500,000 111.00 50,000 50,000 593,755 593,755 Preference-authorized 10,000,000 shares, par value $25 per share(a) (b) 5.20 % Convertible Series..................1,635,820 25.00 55,417 40,895 7.375% Series............................2,480,000 26.25 62,000 62,000 117,417 102,895 Common -

authorized 90,000,000 shares, par value

$83 per share, including additional stated capital (b) (c) (e)..................................

62,536,581 470,374 47,166 Total capital stock -stated value (d).....

$1,185,546

$1,247,816 36

SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)

Note 9 -

Capital Stock (continued)

(a) All series of $100 Cumulative Preferred, Cumulative Preferred and Preference Stock are redeemable at the option of the Company. The various series of $100 Cumulative Preferred Stock, the Cumulative Preferred Stock, 8.85% Series and 9.20% Series, and the Preference Stock, 7.375% Series are subject to certain restrictions on redemption for refunding pur poses. The $100 Cumulative Preferred Stock, 7.325% Series has a cumulative sinking fund provision requiring the redemption of 30,000 shares annually at $100 per share, plus accumulated unpaid dividends, commencing July 31, 1983, and continuing until all shares are redeemed. Commencing November 30, 1983, and continuing until all shares are re deemed, the $100 Cumulative Preferred Stock, 7.80% Series, has.a cumulative sinking fund provision requiring the annual redemption of a specified percentage of shares origin ally outstanding (2.5% in 1983 and increasing to 5.5% by 2003) at $100 per share plus accumulated unpaid dividends. Commencing September 1, 1984 and continuing until all shares are repurchased, the Company has a contractual obligation to purchase a minimum of 496,000 shares annually of its Preference Stock, 7.375% Series, at $25 per share plus accumulated unpaid dividends.

(b) Under a prescribed formula, the conversion prices of convertible securities are adjusted when additional shares of Common Stock are sold by the Company. At December 31, 1977 and 1978, the shares of Common Stock reserved for the conversion of the Preference Stock, 5.20% Convertible Series amounted to 1,561,039 and 1,202,809, respectively, at the adjusted conversion prices of $35.50 per share and $34.00 per share, respectively. In addition, 1,920,565 and 1,997,388 shares of Common Stock were reserved at those respec tive dates for the conversion of 3/8% Convertible Debentures, Due 1980 at the adjusted conversion prices of $39.00 and $37.50 per share, respectively.

(c) At December 31, 1978, there were approximately 2,051,398, 572,207 and 693,859 authorized and unissued shares of Common Stock reserved for sale and issuance under provisions of the Company's Dividend Reinvestment and Stock Purchase Plan, Employee Stock Purchase Plan, and Tax Reduction Act Employee Stock Ownership Plan, respectively. On February 16, 1979, the Company issued 223,657 and 6,921 shares of Common Stock under the Dividend Reinvestment and Stock Purchase Plan and the Tax Reduction Act Employee Stock Ownership Plan, respectively.

(d) The Company's Articles of Incorporation authorize the issuance of 2,000,000 shares of $100 Preference Stock, $100 par value, none of which was outstanding as of December 31, 1977 and 1978.

(e) The book value per common share after giving effect to the participating provision of the Original Preferred Stock was $32.30 and $32.57 at December 31, 1977 and 1978, respectively.

Note 10-Earnings Per Share Primary earnings per share are based on the number of weighted average shares of Common and Original Preferred Stock outstanding and Common Stock Equivalents for funds held by the Employee Stock Purchase Plan Trustee in each period, giving effect to the participating provisions of the Original Preferred Stock, and after providing for cumulative preferred and preference dividend requirements. Fully diluted earnings per share also give effect to the dilution which would result from the conversion of the Preference Stock, 5.20%

Convertible Series, and the 3Va%

Convertible Debentures, Due 1980.

37

SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)

Note 11 -

Subsidiary Companies None of the Company's five wholly-owned subsidiaries is considered significant for financial reporting purposes. Mono Power Company ("Mono"), a non-public utility, is engaged primarily in the acquisition and development of mineral properties and interests therein. Mono has entered into agreements to conduct uranium, oil, coal, gas and geothermal exploration and development, substantially all of the costs and benefits of which are being reflected in the Company's energy costs.

Note 12 -

Adjustments to Earnings Reinvested in the Business On December 31, 1974, the unamortized balance of capital stock expense, $2,136,000, was transferred to earnings reinvested in the business since it is the Company's intention to charge earnings reinvested in the business directly for capital stock expenses incurred in future periods. In 1974 and prior years, capital stock expense was amortized to income over a five-year period from the dates incurred. Pursuant to a FERC order, an operating reserve in the amount of $3,801,000 relating to certain federally-licensed hydroelectric projects was transferred to earnings reinvested in the business in April 1978 and became an appropriation thereof.

These adjustments have not had a significant effect on net income and are in compliance with the orders and authorizations of the regulatory agencies exercising jurisdiction over the Company's accounting.

Earnings reinvested in the business have also been revised from amounts previously reported as set forth in Note 2.

Note 13 -

Jointly-Owned Electric Utility Plants The Company owns undivided interests in several jointly-owned generating and trans mission facilities for which each participant must provide its own financing. The Company's proportionate share of expenses pertaining to such facilities is included in the appropriate category of operating expenses in the Statements of Income. In the table below, the dollar amounts represent the Company's share as recorded on the Balance Sheet for each such facility.

(Thousands of Dollars)

December 31, 1978 Estimated Electric Accumulated Construction Plant in Provision for Work in Ownership Facility Service Depreciation Progress Interest Mohave Generating Station............

$167,299

$ 32,100 6,488 56.0%

San Onofre Generating Station........

147,936 30,351 1,157,919 80.0 Four Corners Generating Station.......

92,739 24,264 15,615 48.0 Axis Generating Station..............

17,384 6,066 186 100.0(1)

Palo Verde Generating Station.........

135,668 15.8 800 KV DC System...................

65,715 12,239 1,016 50.0 El Dorado System....................

19,054 3,836 27 60.0(2)

Total.......................

$510,127

$108,856

$1,316,919 (1) The Company's share of operating capacity is 33.3%.

(2) Represents a composite rate.

38

SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)

Note 14 -

Long-Term Contracts for the Purchase of Power Under certain contracts, the Company has agreed to purchase portions of the generating output of certain facilities. Although the Company has no investment in such facilities, these contracts provide that the Company pay certain minimum amounts (which are based at least in part on the debt service requirements of the supplier) whether or not the plant is operating.

None of such contracts provides, or is expected to provide, in excess of five percent of the Company's current or estimated future operating capacity. The cost of power obtained under the contracts, including payments made when a plant is not operating, is included in Purchased Power in the Statements of Income. Information as of December 31, 1978 pertaining to such contracts is summarized in the following table:

Navajo Hoover Sales Oroville-Thermalito Layoff Agreement Agreement Power Sale Agreement Date of Expiration....................

September 30, 1989 or May 31, 1987 April 1, 1983 upon five years' notice from U.S. Bureau of Reclamation. Current estimated termination date is January 1,

1985.

Share of Effective Operating Capacity...

327.5 MW 331 MW 340 MW Share of Energy Output 14.6%

7.9%

37.6%

Estimated Annual Cost.................

$23,366,000

$1,857,000

$5,985,000 Portion of Estimated Annual Cost Applicable to Supplier's Annual Minimum Debt Service Requirement..

$ 1,978,000

$ 383,000

$5,234,000 Allocable Portion of Interest of Supplier Included in Annual Minimum Debt Service Requirement................

617,000

$ 106,000

$4,601,000 Related Long-Term Debt or Lease Obligations Outstanding of Company

.None None None Estimated Replacement Cost Data At December 31, 1977 and 1978 (Unaudited)

The following replacement cost information is presented in order to comply with the reporting requirements of the Securities and Exchange Commission ("SEC").

This data is imprecise because of the many subjective analyses required in the process of estimating replacement cost. The information does not represent the current value of the Company's assets nor what could be realized if such assets were sold. Furthermore, there are significant inherent limitations in using this information to compute the overall effect of inflation on the Company because of the limited scope of the data.

The Company is subject to the jurisdiction of certain regulatory commissions which authorize rates of return on the Company's investment in utility plant. Under current rate-making policy, the Company recovers, through future depreciation charges, the historical investment in productive capacity. The rate-making process does not allow the Company to recover the excess of replacement cost over historical cost which may be incurred in the future. However, when actual replacements of productive capacity are made, the related higher depreciation expense is recoverable under established regulatory practice.

39

Estimated Replacement Cost Data (continued)

Both the Company and the SEC urge caution in the simplistic use of replacement cost data and advise readers that the effect of replacement cost on net income should not be computed with the limited information available because there are substantial theoretical problems in determining an income effect.

The Company's productive capacity is assumed to be utility plant as of December 31, 1977 and 1978 (excluding land, land rights, intangibles, plant held for future use and other items).

It is further postulated that plant would be replaced more or less in kind and in place, with allowances for technological changes and environmental requirements. Replacement cost data was developed by applying to the various categories of plant a combination of the following:

unit costs used by the Company for engineering estimates, unit costs developed from recent construction cost data, and appropriate price indices.

Related accumulated depreciation reserve ratios for the various applicable classes of utility plant were calculated using historical cost reserve ratios at December 31, 1977 and 1978. These ratios, as applied to gross replacement costs, yield the replacement cost amount reported for accumulated depreciation.

Estimated depreciation expense was calculated by applying annual straight line deprecia tion rates for various classes of plant to average replacement cost data.

Replacement cost determination is not applicable to the following items: (1) the original cost of land, land rights, intangibles and plant held for future use which are not considered part of productive capacity; (2) non-capitalized leases which are not significant; (3) nuclear fuel and fuel stock which are provided for in the Company's Energy Cost Adjustment Clause; and (4) materials and supplies inventories which are immaterial in comparison with other assets of the Company.

Data subject to the replacement cost estimation process are as follows:

(Thousands of Dollars)

December 31, 1977 December 31, 1978 Estimated Estimated Historical Replacement Historical Replacement Cost Cost Cost Cost Utility plant..................................

$4,772,087

$13,500,000

$5,112,483

$14,600,000 Accumulated depreciation.......................

1,383,009 4,100,000 1,519,174 4,600,000

$3,389,078

$ 9,400,000

$3,593,309

$10,000,000 Depreciation expense, years ended December 31, 1977 and 1978..............................

$ 140,520 380,000

$ 157,203 440,000 The historical cost amount for utility plant shown above is reconciled to the Company's December 31, 1977 and 1978 balance sheets as follows:

(Thousands of Dollars)

December 31, December 31, 1977 1978 Utility plant, subject to the replacement cost estimation process

$4,772,087

$5,112,483 Land, land rights, and intangibles.........................

158,393 157,742 Plant held for future use..................................

29,226 28,373 O ther...................................................

5,182 5,148 Utility plant at original cost less contributions................

$4,964,888

$5,303,746 40

SOUTHERN CALIFORNIA EDISON COMPANY SCHEDULE V -

PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31, 1977 (Thousands of Dollars)

Baac tAdd (Deduct)

Balance at Beginning Additions Other End Classification of Period at Cost Retirements Changes of Period Steam Production.........$1,288,890 $

13,569 (375) $

$1,302,084 Nuclear Production.78,532 56,262 (1,278) 133,516 Hydro Production.214,744 950 (171) 215,523 Other Production.146,236 54,852 201,088 Transmission.............1,079,476 50,973 (2,747) 1,127,702 Distribution.1,727,394 111,596 (18,887) 1,820,103 General................

125,630 7,394 (2,046) 130,978 Plant Held for Future Use 28,371 1,071 (216) 29,226 Experimental Electric Plant Unclassified.5,474 (4,775) 699 Other Utility Plant.3,786 185

-(2) 3,969 Subtotal -

Utility Plant.4,698,533 292,077 (25,720)

(2) 4,964,888 Construction Work in Progress..............

938,294 270,242 966 1,209,502 Nuclear Fuel 40,264 37,854 (40,905) (a) 37,213 Gross Utility Plant.

$5,677,091

$ 600,173 $ (24,754) $ (40,907) $6,211,603 Nonutility Plant.

3,604 2,853 (732) $

5,725 (a) Represents nuclear fuel sold and leased back.

41

SOUTHERN CALIFORNIA EDISON COMPANY SCHEDULE V -

PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31, 1978 (Thousands of Dollars)

Baac tAdd (Deduct)

Balance at Beginning Additions Other End Classification of Period at Cost Retirements Changes of Period Steam Production...........$1,302,084 $

23,829 (2,310) $

$1,323,603 Nuclear Production..........

133,516 12,051 (2) 145,565 Hydro Production...........

215,523 391 (267) 215,647 Other Production.201,088 148,914 350,002 Transmission...............1,127,702 39,693 (3,058) 186 1,164,523 Distribution................

1,820,103 128,404 (18,052)

(189) 1,930,266 General....................

130,978 12,370 (3,968)

(6) 139,374 Plant Held for Future Use..

29,226 (851)

(2) 28,373 Experimental Electric Plant Unclassified.699 (482) 217 Other Utility Plant.3,969 2,245 (38) 6,176 Subtotal -

Utility Plant.

4,964,888 366,564 (27,697)

(9) 5,303,746 Construction Work in Progress 1,209,502 285,122 (1,051) 1,493,573 Nuclear Fuel 37,213 608 (1,468) (a) 36,353 Gross Utility Plant.......$6,211,603 $ 652,294

$ (28,748) $

(1,477) $6,833,672 Nonutility Plant..............$

5,725 1,123 (2,783) $

3,117 7,182 (a) Represents nuclear fuel sold and leased back.

42

SOUTHERN CALIFORNIA EDISON COMPANY SCHEDULE VI-ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT(a)

FOR THE YEAR ENDED DECEMBER 31, 1977 (Thousands of Dollars)

Additions Add (Deduct)

Balance at Charged to Balance at Beginning Costs &

Other End Description of Period Expense Retirements Changes(b)

Salvage of Period Steam Production........$

461,721 39,619 $

(376) $

10 5 $ 500,979 Nuclear Production......

21,718 3,967 (1,282) 2 24,405 Hydro Production........

79,365 2,992 (171)

(25) 2 82,163 Other Production........

24,665 7,593 32,258 Transmission...........

165,842 20,308 (2,346) 4,115 1,138 189,057 Distribution.............

480,270 63,599 (19,225)

(5,089) 6,547 526,102 General................

26,329 4,834 (2,129)

(214) 385 29,205 Experimental Electric Plant Unclassified 2,504 310 (2,606) 208 Retirement Work in Progress..............

(4,800) 1,188 375 1,065 (2,172)

Other Utility Plant Reserves 713 93 (2) 804 Subtotal.....

1,258,327 143,315 (24,343)

(3,434) 9,144 1,383,009 Nuclear Fuel Amortization.

18,658 2,774 (1,562) 19,870 Total Utility Plant Reserves..........$1,276,985

$ 146,089

$ (24,343) $

(4,996) $

9,144

$1,402,879 Nonutility Plant Reserves..

1,037 96 1,133 (a)

Depletion is not applicable.

(b) Includes removal costs related to facilities retired, damage claims and relocation costs collected from others, and various other adjustments of depreciation and amortization.

43

SOUTHERN CALIFORNIA EDISON COMPANY SCHEDULE VI-ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT(a)

FOR THE YEAR ENDED DECEMBER 31, 1978 (Thousands of Dollars)

Additions Add (Deduct)

Balance at Charged to Balance at Beginning Costs &

Other End Description of Period Expense Retirements Changes(b)

Salvage of Period Steam Production........$

500,979 39,503 $

(472) $

242 2 $ 540,254 Nuclear Production......

24,405 5,800 30,205 Hydro Production........

82,163 3,119 (265)

(40) 2 84,979 Other Production........

32,258 11,469 (1,318) 42,409 Transmission............

189,057 25,026 (2,926) 599 1,188 212,944 Distribution.............

526,102 69,197 (17,541)

(4,221) 5,779 579,316 General................

29,205 5,791 (3,989)

(71) 463 31,399 Experimental Electric Plant Unclassified 208 95 (302) 1 Retirement Work in Progress.............

(2,172)

(925) 426 (536)

(3,207)

Other Utility Plant Reserves 804 103 (34) 1 874 Subtotal............

1,383,009 160,103 (26,152)

(4,685) 6,899 1,519,174 Nuclear Fuel Amortization 19,870 2,911 22,781 Total Utility Plant Reserves.........

$1,402,879 $ 163,014 $ (26,152) $

(4,685) $

6,899 $1,541,955 Nonutility Plant Reserves.,

1,133 134 1,267 (a) Depletion is not applicable.

(b) Includes removal costs related to facilities retired, damage claims and relocation costs collected from others, and various other adjustments of depreciation and amortization.

44

SOUTHERN CALIFORNIA EDISON COMPANY SCHEDULE XII -

RESERVES FOR THE YEAR ENDED DECEMBER 31, 1977 (Thousands of Dollars)

Additions Balance at Charged to Charged to Balance at Beginning Costs &

Other End Description of Period Expense Accounts Deductions of Period Group A:

Uncollectible Accounts Customers................

$ 2,287

$ 3,859

$ 4,096

$ 2,050 All Other...................

5,347 379 2,062 3,664 Total..............

$ 7,634

$ 4,238

$ 6,158(a) $ 5,714 Group B:

Pension and Benefits..........$20,067

$ 1,067

$ 7,931(b) $11,568(c) $17,497 Insurance, Casualty and Other..

11,654 14,685 201 14,584(d) 11,956 Total.............

$31,721

$15,752

$ 8,132

$26,152

$29,453 (a) Accounts written off, net.

(b) Principally, charges are to various plant and expense accounts as a payroll additive for employees' paid absences.

(c) Includes pension payments to retired employees, amounts paid to active employees during periods of illness and the funding of certain pension benefits.

(d) Principally charges from work orders closed and amounts charged to operations that were not covered by insurance.

45

SOUTHERN CALIFORNIA EDISON COMPANY SCHEDULE XII -

RESERVES FOR THE YEAR ENDED DECEMBER 31, 1978 (Thousands of Dollars)

Additions Balance at Charged to Charged to Balance at Beginning Costs &

Other End Description of Period Expense Accounts Deductions of Period Group A:

Uncollectible Accounts Customers................

$ 2,050

$ 4,110 15

$ 4,116

$ 2,059 All Other..................

3,664 1,097 1,212 3,549 Total.............

$ 5,714

$ 5,207 15

$ 5,328(a) $ 5,608 Group B:

Pensions and Benefits........

$17,497 869

$ 8,335(b) $11,165(c) $15,536 Insurance, Casualty and Other..

11,956 28,757 29,624(d) 11,089 Total.............

$29,453

$29,626

$ 8,335

$40,789

$26,625 (a) Accounts written off, net.

(b) Principally, charges are to various plant and expense accounts as a payroll additive for employees' paid absences.

(c) Includes pension payments to retired employees, amounts paid to active employees during periods of illness and the funding of certain pension benefits.

(d) Pursuant to a FERC order, operating reserves relating to certain federally-licensed hydro electric projects in the amount of $3,801,000 were transferred to Earnings Reinvested in the Business and became an appropriation thereof. Other deductions were principally charges from work orders closed and amounts charged to operations that were not covered by insurance.

46

0A 12(a) (2) Exhibits Filed Page Exhibit 1. -Computation of Fully Diluted Earnings Per Share............ 52 The following exhibits have heretofore been physically filed with the Securities and Exchange Commission ("Commission") (specified document and file number noted) and are incorporated herein by reference pursuant to Rule 12b-32:

(a) Trust Indenture, dated as of October 1, 1923 (Form A-2, File Number 2-1 369, effective April 19, 1935)

(b) Third Supplemental Indenture, dated as of June 24, 1935 (Form A-2, File Number 2-1602, effective September 16, 1935)

(c) Fourth Supplemental Indenture, dated as of September 1, 1935 (Form A-2, File Number 2-4522, effective October 8, 1940)

(d) Sixth Supplemental Indenture, dated as of September 1, 1940 (Form S-7, File Number 2-59199, effective June 30, 1977)

(e) Eighth Supplemental Indenture, dated as of August 15, 1948 (Form S-1, File Number 2-7610, effective August 10, 1948)

(f) Twenty-Fourth Supplemental Indenture, dated as of February 15, 1964 (Form S-9, File Number 2-22056, effective February 17, 1964)

(g) Forty-First Supplemental Indenture, dated as of November 1, 1978 (Form S-7, File Number 2-62609, effective October 17, 1978)

(h) Resolution creating First and Refunding Mortgage Bonds, Series JJ, Due 2003, dated October 31, 1978 (Form S-7, File Number 2-62609, effective October 17, 1978) 12(b) Reports on Form 8-K No reports on Form 8-K have been filed during the last quarter of 1978.

PART 11 Item 13. Security Ownership of Certain Beneficial Owners and Management Information responding to Item 13 was included in a proxy statement filed by the Company on or about February 27, 1979 with the Commission pursuant to Regulation 14A and is omitted herein pursuant to General Instruction H.

47

Item 14. Directors and Executive Officers of the Registrant Executive officers of the Company Age at December 31, Effective Executive Officer 1978 Company Position as of December 31, 1978 Date Jack K. Horton 62 Chairman of the Board, Chief Executive Officer April 18, 1968 and Director William R. Gould 59 President and Director February 1, 1978 Howard P. Allen 53 Executive Vice President December 20, 1973 H. Fred Christie 45 Senior Vice President and Chief Financial Officer January 1, 1977 David J. Fogarty 51 Senior Vice President September 1, 1977 A. Arenal 53 Vice President (System Development)

September 1, 1976 J. H. Drake 54 Vice President (Engineering and Construction)

January 15, 1970 Joe T. Head, Jr.

57 Vice President (Power Supply)

November 21, 1974 P. L. Martin 49 Vice President (Customer Service)

September 1, 1978 A. L. Maxwell 57 Vice President and Comptroller July 17, 1975 Jack B. Moore 64 Vice President (Advanced Engineering)

December 21, 1967 Edward A. Myers, Jr.

55 Vice President (Conservation, Communications August 19,1971 and Revenue Services)

William H. Seaman 61 Vice President (Fuel Supply)

July 17, 1969 Robert E. Umbaugh 41 Vice President (Administration)

September 1, 1976 G. E. Wilcox 61 Vice President (Personnel)

December 18, 1969 John R. Bury 51 General Counsel September 1, 1978 Michael L. Noel 37 Treasurer September 1, 1976 J. C. Bobek 61 Secretary November 1, 1975 None of the Company's executive officers are related to each other by blood or marriage.

All of the executive officers have been actively engaged in the business of the Company for more than five years.

All officers have been employees of the Company for the past five years. Those officers who have not held their present position for the past five years had the following business experience during that period:

William R. Gould Executive Vice President December 20, 1973 to January 31, 1978 H. Fred Christie Senior Vice President September 1, 1976 to December 31, 1976 Vice President and Treasurer July 17, 1975 to August 31, 1976 Treasurer March 1, 1970 to July 16, 1975 David J. Fogarty Vice President -

System Development October 22, 1971 to August 31, 1977 A. Arenal Manager of Engineering and Construction November 1, 1971 to August 31, 1976 Joe T. Head, Jr.

Manager of Power Supply September 1, 1971 to November 20, 1974 P. L. Martin Manager of Customer Service -Southeastern December 31, 1973 to Division August 31, 1978 A. L. Maxwell Comptroller November 1, 1968 to July 16, 1975 Robert E. Umbaugh Manager of Data Processing January 1, 1974 to August 31, 1976 John R. Bury Assistant General Counsel December 20, 1973 to August 31, 1978 Michael L. Noel Assistant Treasurer December 1, 1975 to August 31, 1976 Manager of Corporate Planning September 30, 1974 to November 30, 1975 Assistant Treasurer and Manager of April 20, 1972 to Financial Planning September 29, 1974 J. C. Bobek Assistant Secretary April 19, 1957 to October 31, 1975 48

Other information responding to Item 14 was included in a proxy statement filed by the Company on or about February 27, 1979 with the Commission pursuant to Regulation 14A and is omitted herein pursuant to General Instruction H.

Item 15. Management Remuneration and Transactions Information responding to Item 15 was included in a proxy statement filed by the Company on or about February 27, 1979 with the Commission pursuant to Regulation 14A and is omitted herein pursuant to General Instruction H.

49

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SOUTHERN CALIFORNIA EDISON COMPANY (Registrant)

By H. FRED CHRISTIE H. Fred Christie Senior Vice President and Chief Financial Officer DATE: March 29, 1979 50

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our report appearing in the annual report on Form 10-K for the year ended December 31, 1978 of Southern California Edison Company in the Registration Statement Form S-16 which became effective on October 19, 1978 (File #2-62625).

ARTHUR ANDERSEN & CO.

March 29, 1979 51

Exhibit 1 SOUTHERN CALIFORNIA EDISON COMPANY COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE (Thousands of Dollars)

Year Ended December 31, 1974 1975 1976 1977 1978 Net Income................

$160,344

$176,781

$226,798

$251,979

$251,683 Less: Preferred and Prefer ence dividend requirements 36,480 40,410 42,557 46,571 50,532 Add: Original Preferred dividends 792 806 806 922 1,075 Add: Convertible Preference dividend requirements.....

3,900 3,900 3,900 3,212 2,354 Add: Interest on 3%%

Con vertible Debentures.......

2,341 2,341 2,341 2,341 2,341 Less: Tax effect of interest on 3% % Convertible Deben tures (A) 1,233 1,233 1,233 1,233 1,233 Adjusted amount available

$129,664

$142,185

$190,055

$210,650

$205,688 Weighted average shares Original Preferred.......

480,000 480,000 480,000 480,000 480,000 Common(B) 44,100,268 47,484,883 48,198,116 54,136,673 57,199,490 Common shares reserved for conversion of:

3%%

Convertible Deben tures....

1,804,868 1,804,868 1,896,254 1,920,565 1,997,388 Preference Stock, 5.20%

Convertible Series......

2,026,960 2,026,960 2,112,606 1,561,039 1,202,809 Total weighted average shares 48,412,096 51,796,711 52,686,976 58,098,277 60,879,687 Fully diluted earnings per share (C).....

$2.68

$2.75

$3.61

$3.63

$3.38 Notes:

(A) Composite tax rate...

52.68%

(B) Includes Common Stock equivalents and Common Stock issued due to conversions during 1977 and 1978, adjusted as if they were outstanding at the beginning of the period.

(C) Adjusted amount available divided by total weighted average shares.

52

ML13329A097

Text

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