ML13329A164

Southern California Edison Corp 1991 Annual Rept

ML13329A164
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Site:	San Onofre
Issue date:	12/31/1991
From:	Bryson J, Peevey M Southern California Edison Co
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Contents Corporate Profile SCEcorp is the parent corporation of Southern California Edison Company, the nation's second largest electric utility, and The Mission Group, 4: Letter to Shareholders whose three principal nonutility subsidiaries provide energy-related services. With headquarters in Rosemead, California, SCEcorp has assets of 8: Review of Southern California Edison nearly $17 billion.

SCEcorp's largest subsidiary is Edison, a 105-year 24: Review of The Mission Group old regulated utility that provides electric service to 4.1 million customers in Central and Southern California. Edison's rapidly growing and economi 30: Board of Directors cally diverse service territory covers 50,000 square miles and has a population of nearly 11 million.

32: Executive Officers The Mission Group's subsidiaries include Mission Energy Company, Mission First Financial and Mission Land Company They operate throughott Financial Information the United States and in foreign markets.

33: Management's Discussion and Analysis of Results of Operations and Financial Condition 35: Consolidated Statements of Income 35: Consolidated Statements of Retained Earnings 36: Consolidated Balance Sheets 39: Consolidated Statements of Cash Flows 42: Notes to Consolidated Financial Statements 56: Selected Financial Data: 1987-1991 57: Responsibility for Financial Reporting 57: Report of Independent Public Accountants 58: Shareholder Information On the cover: Edison researcher Nick Patapoff holds new photovoltaic solar cells while resting a foot on older ones at Edison's Ord Mountain telecommunication facil ity near Barstow, California. The new technology con verts sunlight directly to electricity and was initiated during a six-year $10 million partnership with Texas Instruments. It could supply clean energy at competitive prices by the late 1990s and eventually cut electricity costs of customers using the cells. This solar project is one of Edison's many future-focused research activities to develop technologies that will provide customers new forms of clean, efficient electric power.

Page 1 Financial Highlights 5-year 10-year compound compound annual annual Increase growth growth Dollars in thousands, except per-share amounts 1991 1990 (decrease) rate rate SCEcorp Revenue

$7,502,498

$7,198,531 4.2%

7.0%

6.2%

Net income

$702,605

$786,360 (10.7) 4.8 4.9 Earnings per share

$3.21

$3.60 (10.8) 4.7 3.0 Dividends (current rate)

$2.72

$2.64 3.0 3.6 5.3 Dividend payout ratio 83.5%

72.2%

Assets

$16,828,206

$16,312,246 3.2 4.1 5.5 Rate of return on common equity 12.5%

14.5%

Southern California Edison Revenue

$7,297,759

$6,986,460 4.5%

6.6%

5.7%

Earnings available for common stock

$587,315

$692,627 (15.2) 2.1 3.1 Earnings per SCEcorp common share

$2.68

$3.17 (15.5) 2.0 1.1 Rate of return on common equity 12.6%

15.0%

The Mission Group Net income

$116,082

$94,019 23.5%

29.4%

Earnings per SCEcorp conimon share

$.53

$.43 23.3 29.4 Equity capital

$1,020,364

$904,282 12.8 30.7 Assets

$2,119,500

$1,762,199 20.3 32.8 Rate of return on common equity 12.2%

11.8%

SCEcorp:

SCEcorp:

Earnings Per Share Annual Dividend Rate Per Share In dollars In dollars 3.60 2.72 3.00 3.21 f

3.00 2.40Li Consumer 2.40 dprice index 1.80 Edison 1.20

.84

.60 0 The M ission 0

8 Group 91 7

788 87 88 89 90 91 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91

Page 2 The Year at a Glance 0 The CPUC denied the proposed merger between Edison and San Diego Gas & Electric Company Edison did not appeal the decision a SCEcorp's earnings per share of common stock (Pages 4 and 22).

in 1991 were down 39 cents to $3.21. The decrease resulted from nonrecurring charges recorded by

• Edison and Texas Instruments jointly achieved Edison, which were partially offset by increased a solar energy breakthrough by developing an earnings at The Mission Group. Earnings would advanced solar cell, which ultimately could cut have risen 4 cents per share to a record $3.64 solar energy costs up to 80% (Page 11).

without these charges (Pages 4 and 33).

n Edison reached agreement with regulators on a m SCEcorp declared its 16th increase in the policy to cut nitrogen-oxides emissions. Separately, common stock dividend in 15 years; the annual it became one of the nation's first utilities to adopt dividend is $2.72 per share.

an energy resource plan that will cut carbon dioxide (GO,) emissions. Edison's goal is to reduce m SCEcorp's common stock in 1991 had a total its output of CO, a "greenhouse gas," 10% by the return of more than 31% from price appreciation year 2000, and another 10% by 2010 (Page 8).

and dividends. It outpaced the Standard & Poor's (S&P) 500 stock index, the Dow Jones industrial average and the Dow Jones utility average, as it has also done over the past 10- and 15-year periods.

m The Mission Group's three nonutility subsidiaries Southernhad earnings of $116 million, up 23%. Mission 5 5 Energy and Mission First Financial again achieved record results (Pages 6, 24 and 29).

a Southern California Edison took major steps to resolve outstanding issues and strengthen its posi-

• Mission Energy, the nation's largest nonutility tion for the future by:

power producer, placed six power projects into commercial operation in 1991, totaling 494 mega

1. Settling a dispute with the consumer advocacy watts (MW) of capacity Mission Energy now has arm of the California Public Utilities Commission substantial ownership in 27 generating projects in (CPUC) regarding contracts between Edison and the United States with 2,843 MW of capacity.

nonutility power producers. Edison customers will Mission-operated power plants achieved an on receive rate reductions valued at $250 million peak capacity factor of 95% during 1991 (Pages 4 and 43).

(Pages 6 and 24).

2. Reaching an agreement that, if approved, will m Mission First Financial invested $61.5 million in lead to the closure of San Onofre Nuclear Generat-several projects, including a waste-to-energy plant ing Station Unit 1 after nearly a quarter century (Pages 7 and 29).

of operation and will allow Edison to recover essentially all its investment in the plant (Pages 4 and 45).

3. Developing a new strategic management plan to respond to Increasing competition, expanded cus tomer choices and a changing regulatory climate (Page 4).

Energy-efficient refrtgeration: Major Account Executive Everol LEADERSH IP Miller helped Ralphs Grocery Company's Compton Central i n saving Facility cut its electricity consumption by 4 million kilowatt energy hours annually and reduce its electricity bills by $250,000 a year through an Edison energy management program. Ralphs received a rebate of $300,000 after investing $1.4 million in improvements that included replacement of old ammonia compressors with new, energy-efficient ones. The improvements will pay for themselves in four years.

Page 4

Dear Fellow Shareholders:

In 1991, SCEcorp's earnings declined 11% to The year also marked the unsuccessful conclusion

$3.21 a share. The decline resulted from one-time of a prolonged effort to win regulatory approval of charges against earnings of our Southern Califor-our proposed merger with San Diego Gas & Elec nia Edison subsidiary to resolve several significant tric Company In the end, we could not overcome business and regulatory issues. Without those very substantial opposition in San Diego to the charges, SCEcorp's 1991 earnings would have been merger, and it was not approved by the CPUC. We 4 cents per share higher than in 1990. Our Mission were disappointed with the outcome. However, Group of nonutility subsidiaries had another given the extensive San Diego area opposition, it strong year, earning 53 cents per share, a 23%

would have been difficult to implement the merger increase over 1990.

successfullywithout being distracted from other valuable initiatives.

Edison Resolves Key Matters Edison's New Strategic Focus While we are disappointed to report reduced earn ings in our utility subsidiary, we took essential In 1991, Southern California Edison conducted a steps at Edison in the past year, in some cases at comprehensive strategic assessment of its competi substantial cost, to prepare for a successful future.

tive position, the greater number of options avail The most important of these steps were:

able to customers and the changing regulatory climate that will affect us in the 1990s. In order to m A settlement of disputes with the Division of create as much growth in shareholder value as Ratepayer Advocates (DRA), the consumer advo-possible, we are setting measurable performance cacy branch of the California Public Utilities Com-targets for ourselves in five critical business dimen mission (CPUC), over contracts negotiated in the sions and have reorganized our management early-and mid-1980s between Edison and non-structure to focus on them:

utility power producers in which Mission Energy, our nonutility power production subsidiary, had an m Competition: We face significant competition in ownership interest. In October, we agreed to settle the generation sector of our business, and Califor the disputes for a disallowance valued at about nia's regulatory system now requires bidding by

$250 million. The settlement, which must be others for the right to build new generation capacity approved by the CPUC, avoids years of highly on our system. Legislative and regulatory bodies contentious regulatory proceedings. We chose to also are focusing on more access for others to utility put this matter behind us to focus our attention transmission systems. We must be prepared to meet on the future.

this potential competition, and are taking the steps to keep our power plants price-competitive.

m A decision to terminate operation of San Onofre Nuclear Generating Station Unit 1, a 436-mega-m Customers: Our business customers have more watt (MW) unit, after nearly a quarter century of choice about how they obtain their electricity operation. Under a settlement agreement with the self-generation is one option -and likely will have DRA (which the CPUC must approve), Edison will greater choice in the future. We will remain our be allowed to recover substantially all its remaining customers' supplier of choice only if we provide investment in the plant over four years.

competitively priced electricity, expanded energy efficiency programs and innovative solutions to m Development of a new strategic management plan their energy needs. Customers have differing energy and related corporate reorganization. As part of this needs, so we are offering more service and price effort, we took a $25 million charge against 1991 options to meet specific customer requirements.

earnings for a corporate restructuring program.

Ile.

John E. Bryson (left), chairman and chief cxccutive officer, and Michael R. PccVty president, at thc House of the Future in Edison's Customer Tcchnology Application Center a Regulators: Edison cannot succeed without determined to better manage the environmental sound, equitable regulation. We believe a relation-consequences of our business, and to lead in help ship with our regulators based on open conmuni-ing Southern California prosper as a desirable cation and mutual understanding of our respective place to live and work.

objectives is the best means to achieve regulatory decisions that benefit shareholders, customers and

• Our Team: To compete effectively in the 1990s, the general public.

Edison is building on its strengths to create a high performance organization focused on winning in a Community and Environment: As a regulated a competitive environment. We have studied the utility, we have special public service obligations to "best practices" of firms nationally recognized meet the economic and environmental challenges for outstanding management and are committed facing our customers and communities. We are to meet or exceed such "benchmarks" in all key operating areas.

Page 6 Letter to Shareholders Vision and Values Nonutility Businesses Growing Rapidly In the past year, we have committed ourselves at Our Mission Group companies continue to grow Edison to a new statement of our corporate vision rapidly Their $116 million net income in 1991, up and values, which appears below Our role as a 23% from 1990, was greater than the earnings of business and regional leader in Southern California more than half of the nation's 500 largest publicly builds on our utility role as a vital infrastructure held companies. Mission Land's earnings were provider to every business and citizen in one of the down because of difficult real estate market condi world's largest and strongest economic markets.

tions, but Mission Energy and Mission First Financial had a very good year.

Our Vision Mission Energy:

Number One Nationally and Growing We will be a great company that provides business Mission Energy enhanced its position in 1991 as and regional leadership.

the pre-eminent company in the large and rapidly Business Leadership growing nonutility power generation industry We will set the national standard of performance among Leading industry observers forecast that nonutility utilities. We will provide our customers cost-competitive, power producers will build 100,000 MW of new reliable electricity; energy-saving services; and creative power plants nationwide in the next decade, and solutions to their energy needs.

750,000 MW worldwide.

Regional Leadership Mission Energy's net income rose 19% in 1991 We wvil2 anticipate and address the challenges of to $83 million. Based on the market valuation of economic competitiveness and environmental quality the stock of several publicly traded competitors, facing our customers and communities. As a public Mission Energy today is worth about $1.2 billion.

utility, we are committed to helping Southern California This represents a significant increase in value for prosper as an excellent place to live and do business.

SCEcorp shareholders above the $581 million book value of Mission Energy.

Mission Energy brought six new natural gas-fired Challenge power plants into service in 1991, with a total We will challenge ourselves to continuously improve our generating capacity of 494 MW In total, Mission performance and constantly renewv our understanding of Energy has substantial interests - in most cases our changing business.

50% ownershipl-in 27 operating projects in the United States with a total generating capacity of Candor 2,843 MW It also has substantial interests in six We wvill conduct ourselves with honesty openness and additional domestic projects totaling 1,106 MW of integrity in all our relationships.

capacity that are either in construction or advanced permitting stages.

Commitment We l achieve:

In addition to Mission Energy's domestic growth W Value for our customers; potential, the company foresees significant oppor

" Leadership for our community and environment; f Excellence as a team; tunities overseas. Several hold particular promise:

SShared purpose xith regulators; and Value for our shareholders.

Page 7 m In Mexico: Mission and its Mexican partners are Mission Land negotiating the acquisition of interests in a 1,400-Mission Land's net income in 1991 was down 54%

MW coal-fired power plant currently under con-to $9 million. In 1991 it sold 11 buildings and sev struction by the national electric utility. Power eral land parcels and executed 16 new leases. Dur from the plant will be sold to industrial users and ing the year, we conducted an in-depth review of the national utility.

Mission Land and concluded that investment opportunities in the real estate business are not as

• In the United Kingdom: Mission and its partners potentially rewarding for our shareholders as our are completing arrangements for the development other nonutility efforts, so we do not plan addi of a 210-MW gas-fired combined-cycle generation tional equity investments in Mission Land.

facility that will sell its power into the deregulated power network.

Management Changes m In Australia: Mission is one of two remaining We welcome Vikram S. Budhraja, Lawrence D.

contenders for the purchase of an interest in a Han-in and J. Michael Mendez as newly promoted 1,000-MW coal-fired plant under construction in vice presidents of Edison, and Alan J. Fohrer as Victoria by the state-owned utility.

vice president, treasurer and chief financial officer of SCEcorp and Edison. They each contribute to m In Indonesia: Mission and its partners have been an able, dedicated and relatively young manage awarded the exclusive right to negotiate for the ment team. Also, two former Edison officers, ownership and operation of a 1,200-MW coal-fired Michael L. Noel and Robert Dietch, have joined power plant.

Mission Energy as senior vice presidents. Two officers of Edison, Larry T Papay, senior vice In the nonutility power business, long-term success president, and Kenneth P. Baskin, vice president, demands management strategies that protect resigned during 1991 to pursue other interests.

against fuel price increases. All Mission Energy Glenn J. Bjorklund, vice president, who served the projects are hedged against fuel price rises, either company ably for 35 years, has retired, and we will through contractual terms or by direct acquisition miss him.

of fuel resources. Success also demands reliable plant operation. Mission's operating unit, which This past year's performance strengthened the runs eight projects, ended 1991 with an average foundation for our future success and reflects the on-peak capacity factor of 95%.

efforts of all our employees. We also want to thank our board of directors for their sound guidance Mission First Financial and counsel, and you, our shareholders. We will Mission First Financial continues to build its pres-continue to work hard to reward your confidence ence in two attractive market areas - energy-related in us by providing you a healthy, growing com projects and affordable housing. Mission First's pany and a solid return on your investment.

net income in 1991 rose 15% to $25 million. Its investments in 1991 included a waste-to-energy project in New York and six affordable housing projects. In all, Mission First Financial's diversified John E. Bryson Michael R. Peevey portfolio of investments now totals nearly $700 Chairman of the Board and President, million, and its earnings have grown at an average ChiefExecutive Officer Office of the Chairman of 21% a year since its formation four years ago.

February 25, 1992

Page 8 Review of Southern California Edison Highlights 1991 1990

% Change Revenue

$7.3 billion

$7.0 billion 4.5 Earnings

$587 million

$693 million (15.2)

% of SCEcorp's earnings 83 88 Kwh sales (millions) 71,146 71,614 (0.7)

Peak demand (MW) 16,709 17,647 (5.3)

New customers 46,881 90,729 (48.3)

Customers (millions) 4.1 4.0 1.2 Employees 17,110 16,604 3.0 m Adding renewable generating Edison:

Taking the resources to its system in the next CO2 Emissions Plan Environmental Initiative decade.

In millions oftons 40 39

-Projected During the year, Edison worked Edison also reached agreements 35 level closely with many public and pri-with two regional air qualityitt vate organizations in formulating management districts in 1991 to 30 balanced solutions to tough envi-greatly reduce power plant 28 ronmental problems.

nitrogen-oxides (NOx) emissions:

10%

26 Reduc-20%

tin Reduction In May, Edison received national w In June, Ventura County 20 fom 1988 recognition for adopting an adopted regulations requiring energy resource strategy designed an 88% cut in NO, at Edison's to meet customers' energy needs two local plants. To meet these while reducing carbon-dioxide standards-the most stringent in (C0 2 ) emissions from its power the country-Edison will invest plants. Edison will cut its share up to $260 million by 1996 of this "greenhouse" gas 10%

on the latest pollution-control 1988 2000 2010 by the year 2000, and another equipment.

Actual Goal Goal 10% by 2010. According to the U CO, Emissions National Academy of Sciences, m And in July, Edison agreed with it is sound scientific, utility and the South Coast Air Quality business policy to respond to the Management District (AQMD)

Edison:

potential threat of global warming.

on new, tighter limits on NO, Hazardous Waste emissions from its Los Angeles II tbousands of eons Specifically, Edison will cut CO2 Basin power plants. Under the 16 emissions by:

new rule, Edison plans to cut emissions 86% by installing new a Stepping up conservation and pollution-control equipment by energy efficiency programs.

1997 Edison engineers have been 12 developing and testing new m Modernizing older oil and gas pollution-control technologies generating units with more fuel-that could substantially reduce 8

efficient systems.

Edison's costs below the previ ously projected $700 million for m Phasing out oil as a generation this equipment. Emissions from fuel and relying on natural gas as Edison's gas-fired boilers already its primary fuel, are among the lowest in the United States.

rqin 87 88 89 90 91 92 ut Projected

Advanced technology: Research scientist Dave Rundstrom tests equipment installed in 1991 to cut emissions at Edison's 570 in pr n megawatt Mandalay steam generating plant in Ventura County.

This preheater selective catalytic reduction equipment was the first installed in the United States and will help Edison cut its nitrogen-oxides (NOx) emissions 88% in the Ventura Basin by 1996. Edison will also reduce its overall NOx emissions a similar amount in the Los Angeles Basin by 1997.

Low-polluting coatings: Nano Fleming, energy services represen tative at Edison's Customer Technology Application Center (CTAC), displays a Fender electric guitar whose finish has been cured with ultraviolet light. It is one of several clean-air solutions CTAC engineers are exploring to help Fender Musical Instru ments Corp. meet tough new regional air quality standards at its plant in Corona, California. The plant employs 250 people and produces 65,000 guitars annually

Page 11 Review of Southern California Edison In another program, Edison and the Bonneville Power Administra-Na ifi T

tion (BPA) worked together to N

enhance Southern California air NEVADA UTAH quality and improve salmon migration in the Columbia River.

BPA released more water during BigC summer months to help salmon reach the ocean, and generated TO up to 200 megawatts (MW) of XHoowr Fon excess hydroelectric power that was transmitted to Edison, allow-M ing it to reduce power-plant emissions in Southern California.

Edison "returned" the power in winter, when air pollution levels were lower. Overall, this exchange

(_YO Vrde reduced Los Angeles area NOx emissions during 1991 by about 70 tons, the equivalent of remov ing 10,000 cars from the highways.

E Service territory This was the first such agreement in which the primary focus was E Extra-high-voltage A Fossil 0 Solar on environmental protection of transmission lines Nuclear G Biomass both regions, rather than the Geothermal exchange of power for economic reasons.

During a six-year $10-million Focusing on research project, a joint team Between 1987 and the end of Tomorrow's Technologies from the two companies found a 1992, Edison will have cut its dis-way to use inexpensive, low-purity posal of hazardous wastes 88% -

Today, utilities are taking advan-silicon in photovoltaic cells that from 16,000 tons to about 2,000 tage of advanced technologies to convert sunlight directly into tons-by recycling and other develop better ways to generate electricity This "spheral solar" means. This will save the company electricity and use it wisely In technology uses material that is more than $2 million annually 1991, through its extensive flexible enough to conform to the Other measures have permanently research program, Edison pur-contours of roofs.

reduced the company's water con-sued opportunities that will give sumption by 400 million gallons customers more value for their Strips of this new solar material a year. Furthermore, Edison energy dollars in the years ahead.

could be used on rooftops in became the nation's first electric sunny Southern California. For utility to join the U.S. Environ-New Solar Power Programs example, a 10-foot-square panel mental Protection Agency's Green Three solar research programs have on a south-facing roof could Lights Program that encourages significant future potential.

produce about one-third of the energy efficiency by American 6,000 kilowatt-hours (kwh) per businesses. Wherever possible, m In April, Edison and Texas year used by the average Southern Edison will install more energy-Instruments Inc. announced a California home.

efficient lighting systems at its breakthrough in solar cell tech facilities and construction nology that produces a clean projects.

source of renewable energy and could eventually cut the current cost of solar energy up to 80%.

Page 12 Review of Southern California Edison After conducting field tests, the

• To prepare for the day when E Commercial customers can project team will decide in 1992 electric vehicles are common on learn about energy-efficient elec whether production costs are low Southern California roadways, tric motors, heat pumps, lighting enough to justify manufacturing Edison and the AQMD announced and new commercial cooking the cells on a large-scale, commer-plans in November to build a technologies.

cial basis.

prototype solar-powered vehicle recharging station. The solar

• Residential customers and m In August, Edison and two carport will be operational in 1992 builders can see highly efficient other utilities announced plans to at the new AQMD headquarters electric appliances and home build an advanced solar power in Diamond Bar, California.

automation systems at the electric plant in the Mojave Desert near "House of the Future."

Barstow, using new and promis-The Potential of New and ing technology.

Emerging Technologies More than 25,500 people visited About one-third of Southern Cal-the center in 1991 and early 1992.

The $39-million research project, iforna's air pollution comes from Among them were U.S. Depart called Solar Two, will store the fixed sources ranging from oil ment of Energy Secretary James sun's heat in molten salt to pro-refineries and furniture manufac-Watkins and U.S. Environmental duce steam to drive a turbine turers to dry cleaners and gasoline Protection Agency Administrator generator. The 10-MW generating stations. (Edison power plants William Reilly, as well as indus facility would produce enough contribute less than 1% of the trial, governmental and environ power for about 5,000 customers.

total.) In 1991, Edison used mental groups from all over the technology and expertise to offer world. The facility received an Molten salt is a promising tech-creative solutions to customers' Environment and Conservation nology because it efficiently stores environmental problems through-Award from President Bush, as the sun's energy. Solar Two could our its service territory New and well as a Clean Air Award from be the model for larger plants emerging electric technologies the AQMD.

capable of generating enough now offer many of Edison's electricity for 100,000 to 200,000 400,000 commercial and indus-Electric Transportation:

homes by the end of the decade.

trial customers cost-effective ways The Road Ahead to meet stricter local air-quality Edison supports development and The project's costs will be shared requirements. These clean, energy-use of electric transportation-on equally by the U.S. Department efficient technologies also can highway and rail-to help reduce of Energy and an Edison-led help customers reduce costs and air pollution and traffic conges consortium of utilities, state agen-improve product quality to remain non. Motor vehicles contribute cies and research organizations.

competitive, roughly two-thirds of the air pol The plant will be built on the site lution in the Los Angeles Basin.

of Solar One, an earlier experi-Since January 1990, Edison has For that reason, the California Air mental solar power plant, which demonstrated advanced technolo-Resources Board has mandated closed in 1988 after successfully gies at its Customer Technology that 2% of all new vehicles sold in completing a six-year test pro-Application Center in Irwindale, the state be pollution-free by gram. Construction of Solar Two California. Visitors to this 1998-and 10% by 2003. Only will be completed in 1994.

23,000-square-foot facility can electric vehicles currently meet participate in many "hands-on" this standard. They are 97%

demonstrations. Some examples:

cleaner than internal-combustion vehicles, counting emissions from E Industrial customers can test Edison's power plants to recharge the latest clean-air coating tech-their batteries.

nologies, including ultraviolet curing as well as microwave and radio-frequency heating and drying.

Electric shuttle bus: Edison area manager John Britton shows off L S an electric shuttle bus that runs along Cabrillo Boulevard in Santa Barbara, California. Powered by conventional lead-acid batteries, the bus can go 40 miles per hour and travel more than 60 miles transportation on a charge. Two-thirds of Southern California's smog comes from mobile sources, such as cars, trucks and buses. Electric vehicles recharged by Edison power plants are 97% cleaner than gasoline-powered vehicles.

7I Efficient I@hts: Dina Lane, supervisor of customer assistance LEADERSH IP programs, examines energy-efficient fluorescent bulbs at the in conserving Janmar Lighting Factory. They last nine times longer than energy conventional incandescent bulbs and use only one-quarter the energy. Edison has distributed more than 1 million free bulbs to low-income customers since 1985.

Page 15 Review of Southern California Edison In July, the U.S. Advanced Bat-The 1991 South Coast Air Qual-m Fuel cells Edison is conducting tery Consortium was formed by ity Management Plan for the Los research on fuel cells that use a the U.S. Department of Energy, Angeles Basin anticipates 90%

pollution-free process to make the big three auto makers, the rail electrification and 30% bus electricity directy from chemical Electric Power Research Institute, electrification by 2010. The reactions of oxygen and hydrogen Edison and others. This consor-Los Angeles County fransporta-inside a closed container. Edison tium will invest up to $100 mil-tion Commission's 30-year plan is participating in fuel cell dem lion annually for the next 12 years devotes 80% of its $150 billion in onstration projects, including a to develop advanced battery tech-secured funding to electric mass 2-MW research plant to be built nology needed to improve the transit, such as rail and bus.

at Santa Clara in Northern range and performance of electric Edison is participating in a num-California.

vehicles.

ber of public/private partnerships to encourage development of an n Smart meters: Edison is testing Edison demonstrated the viability advanced electric transportation an advanced two-way communi of electric vehicles on January 1, industry in Southern California.

cations and electronic metering 1992, before a worldwide tele-network, known as NetComm, to vision audience of more than 325 Other Promising Technologies link the utility with its customers.

million when it sponsored the Edison is exploring creative ways These "smart" meters can offer first float in the history of the to use other technologies in the customers more cost-saving Pasadena Tournament of Roses future, such as:

choices and information about Parade to be completely powered energy use. Eventually, this by electricity. The 35,000-pound

• Desalination: In October, Edison network may allow Edison to float was propelled by the same and a real estate developer dedi-remotely read meters and connect kinds of batteries and drive motors cated a $3 million desalination and disconnect service, as well that power Edison's electric vans.

plant on Catalina Island, off as improve efficiency of its distri The float won the Tournament the coast of Los Angeles. Using bution system and offer customers Special Trophy for "exceptional reverse-osmosis technology, the time-of-use pricing.

merit in multiple classifications."

plant can produce 130,000 gallons of potable water a day -

• Composite transmission towers:~

The company will have enough enough to meet one-third of the Edison and San Diego Gas &

electric generating capacity during island's needs. Because of severe Electric are jointly testing con off-peak evening periods in the drought conditions, Edison also struction of transmission towers next 10 years to meet customers' has been exploring the feasibility made with lightweight, fiber needs and recharge 1 million of other desalination plants in reinforced resin materials. Unlike electric vehicles. Nighttime recharg-California and Mexico.

their steel counterparts, these ing would use power plants more composite, high-strength and efficiently and help reduce the

• Waste-to-energy: Scheduled to modular towers should eliminate average cost of electricity for all begin operation in 1995, the insulators, minimize electric and customers.

Advanced Integrated Recycling magnetic field levels and increase project will convert some 200 transmission corridor capacity.

tons of refuse daily to a clean-The towers could be ready for burning gas used to generate elec-commercial use by 1995.

tricit This demonstration project in Southern Californiawill be the first to produce electricity from refuse through a gasification pro cess virtually free of polluting air emissions.

Page 16 Review of Southern California Edison Edison:

Making Energy Efficiency Relying on Diverse Generation Mix a Top Priority Energy Resources Inpocent 0.9 Nuclear In 1991, the company's customers Edison supplies electricity to its 5.7 Hydro saved about 4 billion kwh from 4.1 million customers by using 116 Coal its energy efficiency programs.

nine energy resources: natural These programs cut customers' gas, oil, hydro, coal, nuclear, bio-20.7 Oil electric bills as well as air pollu-mass, solar, wind and geothermal.

tion. And, for the first time, No other utility has a more diverse Edison earned a profit for share-resource mix, which provides 26.6 Purchases:

holders through such programs.

considerable protection against other utilities However, Edison was dis-supply disruptions and volatile appointed by the energy-efficiency world energymarkets.

profit mechanism adopted by the CPUC in the company's most Edison obtains more solar 34.5 Gas recent general rate case. The com-resources (383 MW) and more pany anticipates a more positive wind energy resources (918 MW) outcome in a CPUC reassessment than any other utility in the world.

1981 of incentives for these efficiency Altogether, Edison purchased programs in 1992.

about one-third of its total energy 3 Hdro 11.2 Purchases:

requirements in 1991 from renew-other utilities By the year 2000, new and able and alternate resources owned expanded programs will cut by nonutility producers.

13.7 Coal annual electric consumption an additional 10 billion kwh, or Reliable Nuclear Power Plants 17.9 Gas enough to supply the energy Nuclear power plants in Southern needs of more than 1.5 million California and Arizona supplied homes. Over the next eight years, 21% of Edison's electricity, up 1%

these programs also will reduce from the previous year. These CO2 emissions by 38 million tons plants help protect the environ and NO, emissions by 34,000 ment because they produce no air 32.3 Purchases:

Edisonontiit supleselctictytoit tons.

emissions.

tomers bypusing In 1991, Edison spent more than The three units at the San Onofre 1991

$100 million on its 55 energy Nuclear Generating Station near efficiency programs that reached San Clemente, California, gener 5.0 Hydro more than 300,000 customers.

ated nearly 17% of Edison's elec-10.0 Coal Edison offers Incentives to com-tricity. They operated on average 14.0 Purchases:

mercial and residential builders to at 74% of capacity, exceeding other utilities construct offices, factories and the 1991 national average of 69%

homes that exceed California's for nuclear plants.

already stringent efficiency stan dards. These energy-saving meas-24.0 Gas ures include home insulation and greater use of advanced technolo gies, such as energy-efficient light ing, electric motors and heating 31.0 Purchases.

than an otherutilitoin th world and cooling systems. The com pany also offers rebates to customers who install efficient 2001 appliances.

Desngn for Excellence Award: Energy Services representative Larrie Engel tours the South Coast Air Quality Management in helping cut District's new Diamond Bar headquarters. The building, which energy use won a 1991 Design for Excellence award, features light shelves, daylighting controls, high-efficiency space conditioning and a state-of-the-art energy management system. Edison and the California Energy Commission jointly sponsor the awards to encourage design that surpasses state standards for energy efficient construction.

Massive mural: Edison painter Roy Chavez helps complete the 54,000-square-foot outdoor mural "Whaling Wall XXXI' in being a at the 87-year-old site of Edison's Redondo Beach power plant.

good neighbor The mural, by environmental artist Wyland, symbolizes the company's strong commitment to environmental protection and good corporate citizenship. Public tours of the plant and its advanced marine laboratory have helped build closer ties with the community.

Page 19 Review of Southern California Edison In January 1992, Edison reached many responsibilities formerly customer services and electric agreement with the CPUC's con-handled by Southern California distribution. When fully imple sumer advocacy division to shut Gas Company These include buy-mented in 1992, the plan also will down San Onofre Unit 1 after ing natural gas directly from pro-eliminate a layer of management the current fuel cycle (Page 45).

ducers and marketers, contracting by consolidating four geographic Edison has more than enough for pipeline transportation and divisions and 31 district service generation capacity to meet cus-arranging for storage. Edison's areas into seven regional opera tomer needs without the output new gas supply unit is the nation's tions. Edison will continue to of Unit 1.

12th-largest gas buyer.

provide its high level of customer service by answering calls 24 Edison owns 80% of Unit 1, Edison has sought reliable, com-hours a day and operating more whose capacity is 436 MW, and petitively priced supplies of gas than 180 local business offices 75% of Units 2 and 3, with a from diverse regions, including and authorized payment locations combined capacity of 2,150 MW Texas, New Mexico, Wyoming in communities throughout its The company manages and oper-and western Canada. In 1991, service territory.

ates the plant.

Edison concluded major agree ments with two pipeline com-Edison gained 46,881 customers The three units of the Palo Verde panies to transport natural gas to in 1991, compared with 90,729 Nuclear Generating Station near Southern California. One was the previous year. Even with slow Phoenix, Arizona, operated on with a subsidiary of Pacific Gas &

economic growth during the year, average at 75% of capacity.

Electric for 200 million cubic feet the company's service territory Edison owns a 15.8% interest in a day from Alberta, Canada, includes eight of the 25 fastest the units, which have a combined beginning in late 1993. The other growing cities in the United capacity of 3,663 MW. Arizona was with El Paso Natural Gas States. To serve its diverse cus Public Service manages and oper-Company for another 200 million tomer base, Edison offered a ates the plant.

cubic feet a day from the South-number of customer programs west beginning in early 1992. In and services, such as:

Record Production all, these agreements Nvill meet at Mohave about 80% of Edison's planned m Providing toll-free telephone The two units at the 1,580-MW gas needs.

service in Spanish, Chinese, Cam Mohave Generating Station in bodian, Korean and Vietamese Nevada produced a record 10.5 on billing procedures, conserva billion kwh in 1991. The plant Launching Customer tion, safety and other basic operated at 76% of its maximum Service Initiatives information.

capacity, the highest in its 20-year history. Edison owns 56% of the Helping customers realize the m Providing energy conservation plant and is plant operator.

highest value for their energy services to 76,200 low-income investment requires an effective customers and others with special New Gas Supply Unit organization adaptable to chal-needs, including bilingual assis Natural gas is the primary fuel lenging times. In 1991, Edison tance and free installation of used in Edison's 55 gas-and oil-streamlined its operations energy-efficient appliances.

powered generating units. Major through a major reorganization changes in California regulation of its customer service depart now require Edison to assume ment, the first step in a plan to strengthen customer relation ships. The department's 5,600 employees will focus on cus tomers through three distinct business lines: energy efficiency,

Page 20 Review of Southern California Edison m Making presentations to likely to leave the area include employees and parents to help numerous senior citizen groups electronics, publishing, food at-risk students in kindergarten on energy use, emergency pre-processing, transportation equip-through high school. This team paredness and safety. Employees ment, rubber and plastics, indus-approach emphasizes the impor also refer needy elderly people to trial machinery and fabricated tance of staying in school and various community organizations metals.

away from drugs, gangs and other for medical care, meals and trans-destructive influences, so these portation under Edison's Good Edison has launched an ambitious students can complete their edu Neighbor Program.

effort to retain manufacturers.

cation and be productive mem The company's energy specialists bers of society s Answering 7.7 million customer explain rate options and recom calls on its 24-hour telephone mend process modifications and m Providing eight four-year col service that includes special lines emerging technologies to increase lege scholarships of $20,000 for speech-and hearing-impaired energy efficiency, boost produc-(including two for under customers.

tivity, improve product quality represented students), 26 awards cut costs and improve air quality of $4,000 for university study,

• Encouraging more efficient Edison also helps customers take and 112 grants of $500 for com energy use through 98,500 advantage of financial, educa-munity colleges and trade schools.

energy audits for residential tional and employment assistance In all, these annual awards to customers. Edison received its programs at state and local high school seniors and conmu 1 millionth toll-free telephone call agencies.

nity college graduates throughout about conservation since 1983.

Edison's service territory totaled

$320,000.

e Paying part of the wenter elec-Providing tric bills of nearly 11,000 low-Community Service Sponsoring the company's income, elderly and disabled cus-Student Mentoring Program, tomers. In its ninth year, Edison's For as long as Edison has pro-using 200 employees and retirees.

Winter Energy Assistance Fund vided communities with electric-These volunteers help disadvan disbursed $971,000 from cus-ity, it also has sought to support taged youngsters, who are recip tomer donations matched by them as a good corporate citizen.

ients of Edison educational grants, shareholders.

adapt to the demands of commu Close Community Ties nity college.

m Providing commercial and indus-Each year, Edison and its trial customers with telephone employees support more than In Edison's 26th United Way service representatives specially 2,500 civic, charitable and cul-Campaign, employees showed trained to deal with more com-tural organizations. The company their generosity by pledging a plex rates and service needs.

values the good will and strong record $2.8 million-and the ties to more than 800 commu-company another $1.2 million Aiding Businesses nities in its service territory to help people in need. United California businesses face grow-Way supports more than 900 ing competition -and aggressive Support for education remained a charitable organizations in Edi efforts by neighboring states to high priority in 1991 and took son's service territory Employees lure them away Edison's compre-many forms, such as:

also volunteered thousands of hensive 1991 study of Southern hours of their time to various California's business climate E Introducing a multifaceted pro-community organizations, includ found that the industries most gram called STEP UP (Student, ing ones for children, the elderly Teacher, Employee, Parent and the homeless.

Upgrade Project) that combines the efforts of teachers, Edison

The STEP UP Program: Educational Services consultant James Beasley coordinates a puppet show at Inglewood's Highland in supporting School in metropolitan Los Angeles. Cultural activities are part education of Edison's STEP UP program designed to help disadvantaged youngsters stay in school and pursue their career goals. Edison provided financial assistance to STEP UP in 1991 and will continue working with teachers and parents in promoting equal opportunities for disadvantaged students.

Page 22 Review of Southern California Edison Edison:

Focus on Equal Opportunity occur every three years and set Minorities and Women Corporate leadership in promot-the company's revenue levels for in the Work Force ing equal opportunity is a top the costs of doing business, except In percent priority at Edison. Advancement for fuel and purchased power. In Minorities Women of women and minorities will its decision, the CPUC approved 33 come through promotions based an increase in revenues of $72 on individual merit. Edison seeks million, or 1.0%, beginning Janu 30 to eliminate all artificial barriers to ary 20, 1992 (Page 40).

25employment, individual advance 223 24 ment and business relationships.

Cost of Capital Also in December 1991, the 20 Edison has met or exceeded the CPUC reduced the authorized interim goals set in its 1989 return on commton equity to Comprehensive Equal Oppor-12.65% for all major California tunity Pledge. Women and minor-energy utilities under its jurisdic ities now hold 20% of the top tion. This was a reduction from 500 management positions in the Edison's last authorized return of company and 14% of the top 100.

12.85%. It was the smallest reduction of the major utilities.

LiEdison's 1991 purchases from The reduction results in an annual 81 86 91 81 86 91 minority-and women-owned revenue decrease of $23 million.

businesses grew to 19% of its approximately $1 billion in pro-Purchased-Power curement contracts. Investment Reasonableness Issues Edison:

firms owned by minorities and On November 1, 1991, Edison Minorities and Women women manage $190 million, or and the CPUC's Division of in Top Management Positions 11%, of Edison's pension fund-Ratepayer Advocates (DRA)

In percent the highest percentage of any announced agreement in principle In Top 100 In Top 500 large corporate fund, to a settlement of issues related to 30 Edison's power purchases from 13 nonutility projects partly owned Regulatory Review by Mission Energy Company, an SCEcorp subsidiary The settle Rate Approvals ment would save customers about 20 20 20 20 0

The California Public Utilities

$250 million in present value Commission (CPUC) authorized terms (Page 43).

14 a number of rate changes in 1991, which collectively increased Merger with San Diego 10o 10 annual revenue by $464 million, Gas & Electric Company or 6.8%. The biggest component In 1989, shareholders of South of this change was a $459 million e

California Edison and San increase, effiective January 1, 1991, Diego Gas & Electric Company Gealym e inivase dane which was related to higher fil approved a merger of the two 90 1 9

200 9

9198 000 and purchased-power costs.

utilities that would have saved Goal Goal Goal Goal In December 1991, the CPUC issued its decision on Edison's 1992 General Rate Case applica tion. General rate cases usually

Page 23 customers an estimated $1.7 The DRA recommended that Transmission Access billion in the decade of the 1990s.

Edison be required to solicit bids In keeping with the growing In May 1991, the CPUC unani-for 1,000 MW of capacity, includ-deregulation of other industries mously denied the two com-ing 100 MW of wind power and over the last 20 years, efforts are panies' request for approval of the 626 MW of geothermal power, now under way to enhance cor merger. Edison did not appeal the before 1999. This would cost petition in the electric utility CPUC decision and withdrew its ratepayers nearly $3 billion. The industry Access to utility trans merger application to the Federal CPUC is expected to issue a deci-mission lines is a major issue Energy Regulatory Commission.

sion in the first quarter of 1992.

with important implications for Edison. Some parties seek unlim Biennial Resource Mohave Generating Station ited access for other companies Plan Update (BRPU)

In 1985, a steam pipe ruptured at regardless of the effects. Edison The current BRPU proceeding Mohave Generating Station near believes mandatory access would before the CPUC will determine Laughlin, Nevada. Following a harm customers and shareholders how California utilities meet cus-regulatory investigation, the DRA and opposes such changes in tomer demand for electricity the issued a report claiming Edison transmission regulation.

rest of the decade. Edison origi-operated the plant imprudently nally devised a resource plan that Edison disputes these findings Edison provides transmission relied totally on conservation to (Page 45).

service to other utilities, including meet customers' needs, required those purchasing nonutility no power plant construction and Palo Verde Nuclear generated power, whenever such required $60 million of capital Generating Station service is feasible and does not investment. To respond to state In 1991, the DRA recommended adversely affect costs and service policy goals for improving effi-disallowances related to a refuel-to customers. Edison supports ciency and the environment and ing and modification outage at the establishment of a national using renewable resources, Edi-Palo Verde. Edison believes no transmission policy that:

son proposed a second resource disallowance is warranted (Page 44).

plan. This plan would develop m Requires needed facilities to annual cost-effective conservation be planned, permitted and con of 10 billion kilowatt-hours by the Legislative Review structed efficiently and in an envi year 2000; increase generating ronmentally responsible manner; efficiency at the company's San PUHCA Reform Bernardino and Huntington At the end of 1991, legislation

• Maintains the reliability of the Beach plants; reduce air emis-was before both houses of the nation's electric system; sions; and add 50 MW of wind U.S. Congress to reform the power to Edison's system. This Public Utility Holding Company m Protects native load customers plan would result in a net increase Act (PUHCA) as part of the Presi-those for whom existing trans of 709 MW of capacity over the dent's National Energy Strategy mission facilities have been next eight years at a capital cost of The amendments would encour-constructed, and to whom utility just over $1 billion, age development of new genera-service obligations are owed; and tion resources by liberalizing unduly restrictive project owner-m Prices transmission services to ship provisions. The company promote the economic expansion believes these unnecessary barriers of the transmission network.

to a more competitive wholesale generation market should be removed.

Page 24 Review of The Mission Group Highlights 1991 1990

% Change Revenue

$205 million

$212 million (3.5)

Mission Energy Company Net income

$116 million

$ 94 million 23.5 Earnings per SCEcorp share 53 cents 43 cents 23.3 Mission Energy is the nation's top

% of SCEcorp earnings 17 12 independent power company in Equity

$1.02 billion

$904 million 12.8 ownership of nonutility genera Return on common equity 12.2%

11.8%

tion projects, according to an Assets

$2.1 billion

$1.8 billion 20.3 industry survey This assessment recognizes Mission Energy's strong growth since it was formed The Mission Group of three non-In 1991 Mission Energy Cor-in 1986-growth the compan utility subsidiaries earned $116 pany and Mission First Financial g

t million in 1991, up 23.5% from reported higher earnings. Mission market in nonutility power the previous year. Its contribution Land Company's earnings were to SCEcorp's earnings rose to down because of a depressed etiated by le nutr 17%, compared with 12% in 1990.

real estate market. However, the elimnaton f lsse asocited sources to be 100,000 megawatts elimnatin ofloses asocited MW). Emergence of international The Mission Group was estab-with another subsidiary lished in 1987 as the parent com-Mission Power Engineering-private power opportunities pany of SCEcorp's nonutility1991 with some 60 business. Its goal has been to at The Mission Group.

vatitio oft ieric powe broaden SCEcorp's earnings base ndTh nation l

mar by developing and investing in At the end of 1991, The Mission for rivatized construction is fore businesses with substantial Group had assets of $2.1 billion, growth potential-and where the with equity amounting to $1.0 newpower plants over the next corporation has special expertise.

billion, decade. Mission Energy is well The issin Grup:positioned to participate in those Nonutility Projects developing markets.

Mission Energy once again posted a strong financial perfor mance in 1991, with net income of $83 million, up 18.7% from 1990. Assets grew to $1.2 billion.

Domestic Business C K, Ss During 1991, Mission Energy brought the following six projects totaling 494 MW into commer cial operation.

A Marct Point Unitso and 2: a Group$73 million, 80-MW cogenera tion plant built in Anacortes, Washington, with paruer Texaco

• Mission Energy Company Cogeneration Company The A Mission First Financial plant began operating in late

• Mission Land Company 1991. It sells electricity to Puget Sound Power and Light and steam to Texaco Producing Inc.

for oil refining.

Page 25 Highlights 1991 1990

% Change a Germany: Mission Energy is Revenue

$154 million

$139 million 11.3 considering several municipal Net income

$ 83 million

$ 70 million 18.7 heating cogeneration projects in Earnings per share 38 cents 32 cents 18.8 the range of 50 MW to 100 MW Equity investment

$581 million

$495 million 17.4 These projects would sell electric Assets

$1.17 billion

$931 million 25.8 ity and steam to individual cities.

m Nevada Sun Peak: an $83 mil-

• Coalinga: a $34 million, 38-

• Australia: Mission Energy was lion, 210-MW plant built near MW cogeneration plant built in selected as one of two remaining Las Vegas, Nevada, with partner Coalinga, California, with partner bidders to purchase a 40% inter Oxbow Sun Peak Power Inc.

Texaco Cogeneration Company est in a 1,000-MW power station This independent power project, The plant began operating inl under construction. The power which began operating in June 1991. It sells electricity to PG&E plant consists of two 500-MW 1991, sells electricity during peak and steam to Santa Fe Energy coal-fired units, with the first demand periods to Nevada Power Resources Inc. and M. H. Whit-scheduled to begin operation in Company.

tier Corporation for oil recovery.

lt193 m SaguCaro: a $110 million, 90-Mission Energy has interests in Indonesia: Mission Energy is MW cogeneration plant in Hen-27 operating projects in seven part of a consortium that was derson, Nevada, builtwith part-states generating 2,843 MW An awarded the exclusive right to niers Magna Energy Systems additional six projects in five negotiate for a 1,200-MW coal Inc. and a subsidiary of Pioneer states, totaling 1,106 MW, are in fired plant. Negotiations are con Chlor-Alkali Company Inc.

construction or advanced permit-ting w

p The plant began operating in late ting stages.

by 1996.

1991. It sells electricity to Nevada Power Company and steam to International Business nerndgyi in Pioneer Chlor-Alkali for chemical Mission Energy developed a strat-uri Mission Energy production.

egy for its expansion in the global Deced a1oneer Mision r g

marketplace and has begun imple-nt ein a100M oe tto SSalinas River: a $40 million, menting it by pursuing the follow-idepedeent power production 38-MW cogeneration plant built ing projects:

(IPP) with two facilities. (IPPs in San Ardo, California, with part-are generation facilities whose net Texaco Cogeneration Coin-

• Mexico. Mission Energy and its contracts with utilities must be panys The plant began operating Mexican partners are negotiating reviewed and approved by federal rlat

r.

993.-MWSu in late 1991. It sells electricity to the acquisition of interests in a reguacoverytvhe n

Pacific Gas & Electric (PG&E) 1,400-MW coal-fired power plant and steam to Texaco Producing under construction by the national power to rapidly growing Las Inc. and Mobil Oil for oil electric utility. Mission Energy Vegas, Nevada. This project was recovery is investing approximately $300 com in lesta8onThs million in this project. Power will Powe Companyarl andwoth steamuto m Sargent Canyon: a $39 million, be sold to industrial users and is p ati eworthe 38-MW cogeneration plant built the national utility in San Ardo, California, with ownership structure and approval partner Texaco Cogeneration United Kingdom: Mission om-tha appr te sta o Company The plant began oper-Energy is developing a 210-MW thetisn.

gTe nduExchange ating in late 1991. It sells electric-cogeneration project located near ity to PG&E and steam to Texaco Derby, England, with power to recognized Mission Energy's suc Producing Inc. and Mobil Oil for be sold to a local utility and steam cess in licensing this project as an oil recovery.

to an acetate production facility.

Operation is anticipated in 1995.

Page 26 Review of The Mission Group important milestone in the devel-In 1991, Mission Energy made which operates eight projects, oping market for IPPs. Another several fuel acquisitions for its completed another excellent year Mission Energy IPP project, the cogeneration and independent with an average on-peak capacity 310-MW Commonwealth Atlan-power projects. These include factor of 95%. Operation and tic facility in Virginia, is expected interests in coal-bed methane gas maintenance services are a part to be in operation during 1992.

properties in Alabama for a Mis-of Mission Energy's strategy of sion Energy cogeneration project being a fill-service company.

Fuel Diversity and being developed near Orlando, Price Stability Florida. In addition, gas proper-Environmental Integrity Mission Energy seeks to maintain ties in British Columbia, Canada, Respect for the environment has economic stability for its projects were obtained to provide eco-been a vital concern to the com under diverse business conditions.

nomic and reliable fuel for a Mis-pany since its inception. Its power This includes taking steps to sion Energy project in Anacortes, production facilities use advanced ensure adequate fuel supply for its Washington. These fuel acquisi-pollution-control technologies. In projects and to hedge fuel price tions are made only where needed addition to protecting air quality, risk.

for direct support of Mission project facilities are designed and Energy's projects, and are not an sited to protect sensitive plant In Mission Energy's projects, the entry by the company into the and animal species. Mission cost of electricity production is oil, coal or gas business.

Energy has contributed $500,000 hedged against fuel price rises.

to establish 500 acres of dedi This is accomplished by direct Operating Reliability cated habitat for use by the kit fox contractual linkage of revenues to Mission Energy's projects have an and other endangered animals, fuel costs, contracts with fuel outstanding operating record.

including the giant kangaroo rat, suppliers that match fuel prices to The company pays meticulous the blunt-nosedleopard lizard revenues provided by the power attention to project design, provi-and the antelope squirrel.

purchase contracts, and direct sion for backup systems and acquisition of fuel resources, maintenance planning. Mission Operating and Maintenance Inc.,

Mission Energy:

Mission Energy:

Mission Energy:

Net Income Equity Investment Assets In millions ofdollars F In millions ofdollars In millions ofdollars 83 580 581 1,200 1,171 60 435 900 40 290 600 20 14530 8780 99 91 30 878 99 187 88 8990 91 87 88 8990 91

Nevada generating plant: Mission Energy project manager L S Florence Devermann surveys the company's $83 million 210-megawatt gas-fired Sun Peak generating project that began operating in June near Las Vegas, Nevada. Sun Peak, one of the power nation's first independent power projects, sells its output to Nevada Power Company during peak-load periods. SCEcorp's Mission Energy owns interests in 27 operating projects with a total generating capacity of 2,843 megawatts, enough to serve 1.4 million people.

Waste to energy: Mission First Financial senior vice president LEADERSH IP Lawrence Yu inspects the Huntington Resource Recovery in developing Project, a 750-ton-per-day waste-to-energy plant on Long alternative Island, New York. Mission First Financial invested $26.5 million energy in a partnership with Ogden Projects for ownership and operation of the plant, which began operating in October. It sells energy to Long Island Lighting Company under a long-term contract.

Page 29 Review of The Mission Group Highlights 1991 1990

% Change Mission First Financial Revenue (including interest income)

$ 30 million

$ 29 million 1.8 Since its inception in 1987, Net income

$ 25 million

$ 21 million 15.1 Mission First Financial has estab-Earnings per share 11 cents 10 cents 10.0 lished itself as a leader in project Equity investment

$157 million

$132 million 18.6 and lease financing. It has consis-Assets

$690 million

$517 million 33.5 tently produced outstanding financial returns. The company's primary investment focus has New York that is co-owned and Mission First Financial's diversi been in the energy area, where its operated by Ogden Projects. It fied portfolio of assets now totals passive, financially oriented invest-also took advantage of attractive nearly $700 million. Its invest ments complement Mission yields for aircraft financing by ments include interests in nuclear Energy's active development and investing in two new Boeing 767 power, cogeneration, waste-to ownership investment activities.

aircraft that are leased on a long-energy and hydroelectric facilities, term basis to American Airlines.

as well as projects that address the In 1991, Mission First Financial great need for affordable housing.

achieved record earnings of $24.5 In addition, the company also At year end, nearly 65% of its million-up 15.1%. Earnings over expanded its investment in afford-long-term investments were in its four full years of operation able housing. In 1991, six afford-energy-related areas. Mission have grown at a rate of 21%

able housing projects were First's high quality portfolio of annually The company's return completed and placed in service.

investments should provide a on common equity in 1991 was The company has invested a total strong base of support for future 17.2% and has averaged 16.8%

of $64 million in 19 completed earnings growth. The company is for the past four years.

projects and has committed $71 financially strong and has suffi million to 21 additional projects cient capital resources to support In 1991, Mission First Financial to be completed in 1992 and an expanding investment base.

invested $61.5 million in new 1993. These projects, primarily in projects, including $26.5 million California, will provide more than in the Huntington Resource 3,500 units of affordable housing Recovery Project, a 750-ton-per-for lower-income individuals and day waste-to-energy facility in families.

Highlights 1991 1990

% Change Mission Land Company Revenue

$ 27 million

$ 45 million (38.9)

Net income 9 million

$ 20 million (53.9)

Mission Land Company owns, Earnings per share 4 cents 9 cents (55.6) develops and operates industrial Equity investment

$247 million

$238 million 3.9 parks, primarily in Southern Cali-Assets

$264 million

$261 million 1.3 fornia. In 1991, as a result of the recession in the real estate market, the company has focused on man-During 1991, the company com-Mission Land has investments in aging its existing portfolio rather pleted the sale of 11 buildings, five industrial parks covering more than making new investments.

totaling 404,730 square feet, than 400 acres and 2.5 million and executed 16 leases, totaling square feet of leasable space in 476,268 square feet, at its Garden operation. It also has 23 joint Grove, Brea and Chino industrial venture investments in develop parks. It also sold three parcels at ment of residential, office, retail its Oceangate joint venture in and industrial properties.

Hawthorne.

Page 30 SCEcorp Board of Directors John E. Bryson' Howard P. Allen 3, 4

Roy A. Anderson" Norman Barker Jr.2' 3,'5 Warren Christopher','

Chairman of the Chairman of the Chairman Emeritus, Chairman of the

Chairman, Board and Chief Executive Committee Lockheed Corporation, Board, Pacific American O'Melvenv & Myers, Executive Officer, and Consultant, Burbank, California Income Shares Inc.

Los Angeles, California SCEcorp and Edison SCEcorp and Edison Los Angeles, California Charles D. Miller" Michael R. Peevey 2 J.J. Pinola3,5 James M. Rosser2,5 Henry T. Segerstroml 2 Chairman of the President, Chairman of the President, California Managing Partner, Board and Chief Office of the Executive Committee, State University, C. J. Segerstrom & Sons, Executive Officer,

Chairman, First Interstate Bancorp, Los Angeles, Costa Mesa, California Avery Dennison SCEcorp and Edison Los Angeles, California Los Angeles, California Corporation, Pasadena, California Board Committees The audit committees met twice. They reviewed with management and outside auditors the status of various The boards of directors at SCEcorp and Edison have the accounting matters, pending litigation and internal audit same members. During 1991, the directors participated issues. The committees recommended appointment of on the following committees to aid the boards in their Arthur Andersen & Co. as the 1992 auditor for both duties. Composition of each commuittee is the same for companies. The recommendations were adopted.

SCEcorp and Edison.

The budget committees held four joint meetings and reviewed 87 individual projects of $2.5 million or greater. In all, they approved $979 million in capital expenditures. Directors also approved the company's 1992 dues and donations budget of $5.6 million.

Page 31 Camilla C. Frost Walter B. Gerken'"

William R. Gould',"

Joan C. Hanky",

Carl F Huntsinger"2 Trustee, Chandler Trusts Chairman of the Chairman Emeritus, General Partner, General Partei and Director and Executive Committee, Edison Miramonte Vineyards DAE Limited Secretary-Treasurer, Pacific Mutual Life Temecula, California Partnership Ltd.,

Chandis Securities Insurance Company, Ojai, California

Company, Newport Beach, Los Angeles, California California E. L. Shannon Jr.','

Robert H. Smith 4 5 Edward Zapanta, M.D.','

I Member of the audit committee Chairman of the Board, Chairman of the Physician and 2 Member of the budget committee Santa Fe International Board and Neurosurgeon, 3 Member of the compensation committee Corporation, Chief Executive Officer, Monterey Park and 4 Member of the executive committee Alhambra, California Security Pacific East Los Angeles, 5 Member of the nominating committee Corporation and California 6 Retires in arch 1992 Chairman of the Board, Security Pacific National Bank, Los Angeles, California The compensation committees held four joint meetings.

The nominating committees periodically consult with They reviewed compensation for elected officers of SCEcorp and Edison management. They review share SCEcorp and its subsidiaries to ensure that this com-holder suggestions and recommend board composition pensation is competitive and in the best interest of and prospective candidates for election to SCEcorp and shareholders.

Edison boards of directors. These comittees did not meet during 1991.

The Edison executive committee met four times and acted upon the issuance of a variety of new bonds. The SCEcorp executive committee did not meet during the year.

Page 32 Executive Officers SCEcorp John E. Bryson Chairman of the Board and Chief Executive Officer Michael R. Peevey President, Office of the Chairman David N. Barry III Vice President and General Counsel Richard K. Bushey Vice President and Controller Alan J. Fohrer Vice President, Treasurer and Chief Financial Officer Diana L. Peterson-More Secretary of the Corporation Southern California Edison Company John E. Bryson Chairman of the Board and Chief Executive Officer Michael R. Peevey President, Office of the Chairman Charles B. McCarthy Jr.

Senior Vice President Harold B. Ray Senior Vice President David N. Barry III Vice President and General Counsel Robert H. Bridenbecker Vice President, Customer Service Vikram S. Budhraja Vice President, System Planning and Operations Richard K. Bushey Vice President and Controller Ronald Daniels Vice President, Revenue Requirements John R. Fielder Vice President, Regulatory Policy and Affairs Alan J. Fohrer Vice President, Treasurer and Chief Financial Officer Lawrence D. Hamlin Vice President, Power Production J. Michael Mendez Vice President, Human Resources Harry E. Morgan Jr.

Vice President and Site Manager, San Onofre Nuclear Generating Station Lewis M. Phelps Vice President, Corporate Communications Jacque J. Sokolov Vice President and Medical Director Diana L. Peterson-More Secretary of the Corporation The Mission Group Thomas R. McDaniel President, Mission First Financial James S. Pignatelli President, Mission Energy Company Robert E. Umbaugh President, Mission Land Company

Page 33 Management's Discussion and Analysis:

SCEcorp and Subsidiaries Results of Operations Earnings The Mission Group's 1990 earnings decreased 3 cents per share from 1989, due to a reserve established for SCEcorp's earnings per share were $3.21 in 1991, litigation and discontinued operations at Mission Power, compared with $3.60 in 1990 and $3.56 in 1989. The partially offset by substantially higher earnings at Mission decline in 1991 was primarily the result of 43 cents Energy and Mission First Financial.

per share of one-time charges recorded by Southern California Edison Company, partially offset by increased earnings at The Mission Group. Without Edison's Operating Revenue nonrecurring charges, SCEcorp's earnings would have increased 4 cents per share over 1990.

Operating revenue totaled $75 billion in 1991, a $304 million increase over 1990. This compares with a $294 Edison contributed 83% of SCEcorp's earnings, or $2.68 million increase in 1990 over 1989.

per share, 49 cents less than in 1990. The decline was mainly due to the following charges:

Electric revenue increased $311 million over 1990, pri marily due to higher retail rates and increased wholesale m A 20-cent per share addition to reserves to reflect the sales. Retail rates increased in 1991, reflecting a CPUC cost of an agreement in principle between Edison and authorized increase of 6.8%, primarily due to Edison's the California Public Utilities Commission's (CPUC) higher energy costs. Retail rates, which account for over Division of Ratepayer Advocates (DRA). The agreement 98% of electric revenue, are regulated by the CPUC.

would settle disputes about Edison's power purchases Wholesale rates are regulated by the Federal Energy from 13 nonutility projects partially owned by Mission Regulatory Commission. Electric revenue in 1990 Energy Company, an Edison affiliate.

increased $462 million over 1989, primarily due to higher rates and increased retail sales.

m A 23-cent per share addition to reserves for pending legal and regulatory matters, a canceled hydroelectric Revenue from diversified operations (The Mission expansion project and a corporate restructuring program Group) decreased $7 million in 1991 and $168 million to reduce future operating costs.

in 1990. The 1990 decrease was primarily from discon tinued operations at Mission Power, partially offset by In addition to the 43 cents per share in one-time revenue increases at the other Mission companies.

charges, utility earnings were reduced by higher costs for workers' compensation claims and health care.

SCEcorp:

Utility earnings in 1990 increased 7 cents per share over Electric Revenue Increases 1989, primarily from reduced income taxes and minor In millions ofdollars operational improvements.

600 The Mission Group, SCEcorp's nonutility unit, pro vided earnings of 53 cents per share in 1991, or 17% of SCEcorp's earnings. Excluding the 8-cent per share loss 450 in 1990 from discontinued operations at Mission Power 311 Engineering Company, earnings increased 2 cents per share in 1991. This increase was primarily due to con tinued strong performances by Mission Energy and Mission First Financial. Mission Energy's earnings increased 6 cents per share, as it placed six cogeneration 353 Rate plants into service. Mission First Financial's earnings 150 1 changes increased 1 cent per share, due to several new energy related and affordable housing investments, and new sale/leaseback transactions. Mission Land Company's earnings decreased 5 cents per share, due to the con tinued recession in the real estate market and a decision

- 73 Sales volume to market fewer properties.

89h90r9v million icesin190 ovr1

Page 34 Management's Discussion and Analysis:

SCEcorp and Subsidiaries Results of Operations Other operating expenses increased $99 million in 1991, Operating Expenses reflecting a $15 million termination fee paid to San Diego Gas & Electric Company (SDG&E), as discussed Edison's fuel expense declined $119 million in 1991 in the section "Termination of Merger Agreement," and and $169 million in 1990, due to lower fuel costs and a $25 million reserve established for a corporate restruc reduced Edison power generation. An increase in turing program to reduce operating costs. Other factors required purchases from nonutility generators caused increasing operating expenses in 1991 include the vrite the reduction in Edison's generation of power. Edison off of a canceled hydroelectric project, and higher costs expects fuel expense to continue to decline as the volume for workers' compensation claims and health care. Other of purchased-power increases.

operating expenses decreased $89 million in 1990, which reflects discontinued operations at Mission Power, par Purchased-power expense increased $131 million in 1991 tially offset by additional expenses incurred by Edison in and $433 million in 1990, reflecting higher prices and providing service to new customers.

an increased volume of federally required purchases from nonutility generators. These power purchases were made at CPUC-approved rates, which generally exceed those Other Income and Deductions for other sources.

The CPUC authorized a 10-year rate phase-in plan for The CPUC periodically reviews the reasonableness of Palo Verde Nuclear Generating Station Units 1, 2 and 3.

Edison's purchased-power expenses. As reported in Note Rate phase-in plans minimize the impact of construction 2 of "Notes to Consolidated Financial Statements," the costs by implementing rate increases gradually Palo DRA recommended disallowances for several purchased-Verde's phase-in plan deferred $200 million of revenue power contracts with nonutility power producers par-for each unit over a four-year period. Collection of the tially owned by Mission Energy. Edison and the DRA deferred revenue, including interest, will occur evenly have agreed in principle to settle these disputes for over the final six years of the plan. The four-year deferral approximately $250 million (in present value terms).

periods for Units 1 and 2 ended in 1990; the deferral Edison provided an additional $74 million to reserves in period for Unit 3 ended January 20, 1992. The decline the third quarter of 1991 to fully reflect the cost of the in the provision for rate phase-in plan in 1991 and 1990 settlement in the financial statements. The settlement reflects the reversal of deferrals for Units 1 and 2 and the calls for rate recovery of approximately 94% of the collection of the deferred revenue in rates. Taxes on non capacity payments over the remaining lives of the con-operating income decreased in both years, mainly due to tracts, which will lower annual earnings by about 2 cents the reversal of the phase-in plan deferrals.

per share for the next several years. A CPUC decision on this settlement is expected in late 1992.

SCEcorp:

SCEcorp:

CPUC-authorized balancing accounts accumulate differ-Sources of Revenue Distribution of Revenue ences between estimated and actual kilowatt-hour sales In percent In percent or energy costs for subsequent rate adjustment. Balanc-3 Diversified operations I Reinvested earnings ing account rates are based on estimated kilowatt-hour 5 Other electric 4 Other sales or energy costs. The provisions for regulatory 8 P a

9 Taxes adjustment clauses (balancing accounts) reflect the net 10 Depreciation over or undercollections for the period. Overcollections 15 Industrial of $383 million in 1991, $206 million in 1990 and $184 16 Dividends & interest million in 1989 were principally due to rate increases in the energy-cost balancing account to recover prior undercollections. In addition, the provisions for regula-33 Residential 21 Operation& maintenance tory adjustment clauses reflect the $74 million in reserve additions discussed above and a $54 million reserve for pending legal and regulatory matters.

r 3 6 C o m m e $ ia l

3 9 F u e l & p u r c h a s e d p o w e r

Page 35 Consolidated Statements of Income SCEcorp and Subsidiaries In thousands, except per-share amounts Year ended December 31, 1991 1990 1989 Electric revenue

$7,297,648

$6,986,284

$6,524,386 Diversified operations 204,850 212,247 380,000 Total operating revenue 7,502,498 7,198,531 6,904,386 Fuel 708,813 827,393 996,026 Purchased power 2,202,648 2,071,910 1,638,495 Provisions for regulatory adjustment clauses-net 383,478 205,638 184,206 Other operating expenses 1,183,243 1,084,149 1,172,651 Maintenance 381,951 375,338 377,888 Depreciation and decommissioning 763,637 715,680 689,614 Income taxes 447,506 489,798 497,793 Property and other taxes 200,079 177,521 179,939 Total operating expenses 6,271,355 5,947,427 5,736,612 Operating income 1,231,143 1,251,104 1,167,774 Provision for rate phase-in plan (81,825) 2,283 119,478 Allowance for equity funds used during construction 15,570 13,226 12,598 Interest income 111,556 147,896 168,331 Taxes on nonoperating income 11,653 (16,453)

(78,555)

Other-net 12,200 2,644 7,148 Total other income-net 69,154 149,596 229,000 Income before interest and other expenses 1,300,297 1,400,700 1,396,774 Interest on long-term debt 476,949 454,500 467,096 Other interest expense 102,750 136,661 130,210 Allowance for borrowed funds used during construction (12,373)

(9,636)

(9,482)

Capitalized interest (11,872)

(11,311)

(13,797)

Preferred stock dividend requirements of subsidiary 42,238 44,126 44,506 Total interest and other expenses-net 597,692 614,340 618,533 Net income

$ 702,605

$ 786,360

$ 778,241 Weighted-average shares of common stock outstanding 218,660 218,474 218,463 Earnings per share

$3.21

$3.60

$3.56 Consolidated Statements of Retained Earnings In thousands, except per-share amounts Year ended December 31, 1991 1990 1989 Balance at beginning of year

$3,038,378

$2,824,421

$2,601,086 Net income 702,605 786,360 778,241 Dividends declared on common stock (590,887)

(572,403)

(554,906)

Balance at end of year

$3,150,096

$3,038,378

$2,824,421 Dividends declared per common share

$2.70

$2.62

$2.54 The accompanying notes are an integral part ofthese financial statements.

Page 36 Consolidated Balance Sheets In thousands December 31, 1991 1990 ASSETS Utility plant, at original cost

$17,772,073

$17,044,604 Less-accumulated provision for depreciation and decommissioning 6,339,148 5,696,083 11,432,925 11,348,521 Construction work in progress 794,303 741,040 Nuclear fuel, at amortized cost 247,227 294,908 12,474,455 12,384,469 Less -property-related accumulated deferred income taxes 1,290,485 1,164,602 Total utility plant 11,183,970 11,219,867 Nonutility property-less accumulated provision for depreciation of

$37,160 and $36,021 at respective dates 128,955 108,627 Nuclear decommissioning trusts 515,867 384,667 Investments in partnerships and unconsolidated subsidiaries 1,296,078 1,021,502 Investments in leveraged leases 382,256 316,120 Other investments 46,273 62,240 Total other property and investments 2,369,429 1,893,156 Cash and equivalents 477,087 479,106 Receivables, including unbilled revenue, less allowances of $14,962 and

$18,238 for uncollectible accounts at respective dates 858,436 860,613 Fuel stock 164,593 181,048 Materials and supplies, at average cost 110,734 104,166 Regulatory balancing accounts - net 157,833 225,485 Accumulated deferred income taxes - net 89,532 Prepayments and other current assets 170,278 145,666 Total current assets 2,028,493 1,996,084 Unamortized debt issuance and reacquisition expense 300,088 290,172 Rate phase-in plan 613,191 655,950 Other deferred charges 333,035 257,017 Total deferred charges 1,246,314 1,203,139 Total assets

$16,828,206

$16,312,246 The accompanying notes are an integral part of these financial statements.

Page 37 SCEcorp and Subsidiaries In thousands December 31, 1991 1990 CAPITALIZATION AND LIABILITIES Common shareholders' equity

$ 5,680,883

$ 5,502,650 Preferred stock of subsidiary:

Not subject to mandatory redemption 358,755 358,755 Subject to mandatory redemption 198,755 210,492 Long-term debt of subsidiaries 5,745,298 5,291,366 Total capitalization 11,983,691 11,363,263 Other long-term liabilities 346,520 160,506 Current portion of subsidiaries' long-term debt and redeemable preferred stock 262,639 233,356 Short-term debt 772,728 1,313,189 Accounts payable 617,779 537,282 Accrued taxes 390,971 425,030 Accrued interest 130,066 122,079 Dividends payable 152,711 147,511 Accumulated deferred income taxes-net 37,750 Deferred unbilled revenue and other 600,147 503,035 Total current liabilities 2,927,041 3,319,232 Accumulated deferred investment tax credits 485,080 515,692 Accumulated deferred income taxes -net 790,990 652,637 Customer advances and other deferred credits 294,884 300,916 Total deferred credits 1,570,954 1,469,245 Commitments and contingencies (Notes 2, 8, 9 and 10)

Total capitalization and liabilities

$16,828,206

$16,312,246 The accompanying notes are an integral part of these financial statements.

Page 38 Management's Discussion and Analysis:

SCEcorp and Subsidiaries Financial Condition SCEcorp's liquidity is primarily affected by dividend SCEcorp's subsidiaries have lines of credit totaling $2.2 payments, subsidiary construction expenditures and debt billion. About $1.2 billion of this amount Supports maturities. Capital resources include cash provided by Edison's short-term debt. Another $500 million is avail subsidiary company operations and external financings.

able to Edison for the long-term refinancing of certain variable-rate debt for pollution control facilities. The remaining $500 million supports commercial paper and Cash Flows from Operating Activities other borrowings to finance general cash requirements at The Mission Group's subsidiaries.

Net cash provided by operating activities totaled $1.8 billion in 1991, and $1.6 billion in both 1990 and 1989.

The CPUC regulates Edison's capital structure, which SCEcorp continues to meet most of its capital require-affects the dividends Edison may pay to SCEcorp. At ments by cash provided by operations. Cash flows from December 31, 1991, Edison could pay approximately operations, less dividends paid, exceeded capital expendi-

$20 million in additional dividends to SCEcorp and tures in all three years.

still maintain its capital structure within the authorized range. The California Public Utilities Code also prohibits Edison from making loans or advances to SCEcorp or Cash Flows from Financing Activities The Mission Group. These restrictions are not expected to affect SCEcorp's ab ility to meet its cash obligations.

External financings are influenced by market conditions SCEcorp's dividends totaled $586 million in 1991. For and other factors, including limitations imposed by financing activities, cash outflows exceeded cash inflows Edison's Articles of Incorporation and Trust Indenture.

in all three years.

As of December 31, 1991, Edison could issue approxi matelv $4.1 billion of additional first and refunding mort gage bonds and $3.6 billion of preferred stock at current Cash Flows from Investing Activities interest and dividend rates.

The primary uses of cash for investing activities are SCEcorp's subsidiaries raise additional cash through capital expenditures, investments in Mission company short-and long-term debt issuances. Short-term debt is activities and contributions to nuclear decommissioning primarily used to finance fuel inventories and balancing trists. Currently, Edison contributes approximately account undercollections, as authorized by the CPUC.

$97 million per year to nuclear decommissioning trusts.

Long-term debt is primarily used to finance capital These contributions will continue until the funds are expenditures.

used to decommission Edison's nuclear plants. Net cash used for investing activities decreased $34 million in 1991 and increased $95 million in 1990.

Edison:

SCEcorp:

Regulatory Balancing Accounts Projected Capital and Rate Phase-in Plan Requirements In millions ofdollars In bulons ofdolaris 940 1.80 Preferred stock redemptions 771 Long-trm debt 705 1.35 maturities 47si Rate pha c-in

.90 Plan deferrals Construction expenditures 235

.45 aBalavciagt-aed asnt linnalllthree years a

undercoc andons nl dc 87 88 89 90 9i 92 93 94 95 96

Page 39 Consolidated Statements of Cash Flows SCEcorp and Subsidiaries In thousands Year ended December 31, 1991 1990 1989 Cash flows from operating activities:

Net income 702,605 786,360 778,241 Adjustments for noncash items:

Depreciation and decommissioning 763,637 715,680 689,614 Amortization 166,415 168,608 157,454 Allowance for funds used during construction (27,943)

(22,862)

(22,080)

Rate phase-in plan 42,759 (53,877)

(166,132)

Deferred income taxes and investment tax credits 103,021 142,091 203,337 Equity in income from partnerships and unconsolidated subsidiaries (131,819)

(127,065)

(127,036)

Income from leveraged leases (25,235)

(21,238)

(12,231)

Other long-term liabilities 146,014 5,687 18,009 Nonrecurring reserves 78,500 Other-net 77,968 3,794 (41,215)

Changes in working capital components:

Receivables (70,280) 5,435 (165,705)

Regulatory balancing accounts 67,652 95,280 74,261 Fuel stock, materials and supplies 9,887 (98,431) 35,287 Prepayments and other current assets (72,866)

(11,153) 6,904 Accrued interest and taxes (26,072)

(74,005) 38,638 Accounts payable and other current liabilities 19,270 126,102 134,170 Net cash provided by operating activities 1,823,513 1,640,406 1,601,516 Cash flows from financing activities:

Issuance of long-term debt 797,843 650,649 193,306 Repayment of long-term debt (364,023)

(554,291)

(168,368)

Redemption of subsidiary preferred stock (11,738)

(13,303)

(15,363)

Nuclear fiel financing 22,653 (106,252)

(129,107)

Proceeds from sales of common stock 66,505 Short-term debt financings-net (545,746) 519,222 135,549 Dividends paid (585,513)

(568,033)

(550,524)

Net cash used for financing activities (620,019)

(72,008)

(534,507)

Cash flows from investing activities:

Capital expenditures (985,953)

(905,289)

(837,990)

Nuclear decommissioning trusts (131,200)

(114,598)

(112,983)

Investments in leveraged leases-net (26,371)

(129,024)

(6,101)

Investments in partnerships and unconsolidated subsidiaries (245,522)

(264,413)

(272,557)

Distributions from partnerships and unconsolidated subsidiaries 148,147 123,973 100,432 Other-net 35,386 49,383 (15,501)

Net cash used for investing activities (1,205,513)

(1,239,968)

(1,144,700)

Net increase (decrease) in cash and equivalents (2,019) 328,430 (77,691)

Cash and equivalents, beginning of year 479,106 150,676 228,367 Cash and equivalents, end of year 477,087 479,106 150,676 Cash payments for interest and taxes:

Interest 519,720 535,531 512,555 Taxes 380,543 392,881 356,147 Noncash investing and financing activities:

Obligation to fund investment in partnerships and unconsolidated subsidiaries 101,513 20,844 13,401 The accompanying notes arc an integral part of these financial statements.

Page 40 Management's Discussion and Analysis SCEcorp and Subsidiaries Regulatory Matters Environmental Protection In Edison's 1992 General Rate Case, the CPUC autho-Costs to protect the environment continue to grow due rized a $72 million, or 1.0%, increase in revenue. Edison to increasingly stringent laws and regulations.

had requested a $203 million revenue increase to recover projected increases in operation and maintenance Edison has identified 41 sites for which it is actively or expenses and capital-related costs. As a result, Edison potentially responsible for remediarion under environ will implement a restructuring program to reduce costs.

mental laws. Environmental authorities set the timing The CPUC also deferred a decision on the capitalization of investigation and remediation at these sites. Edison of software development, and research, development and has estimated the minimum liability on 12 of these sites demonstration costs incurred prior to 1992, and has at $40 million and has accrued this amount. The 29 allowed Edison to file additional information support-remaining sites are currently not a high priority for envi ing its position. These items could total as much as $100 ronmental authorities, and investigations will proceed as million. The general rate case decision was consolidated dictated by these authorities. Upon completion of inves with several other rate decisions for a total revenue tigations, some or all of these sites may require remedial increase of $138 million, or 1.9%, effective January 20, action. Due to the absence of any extensive investiga 1992. The CPUC authorized a 12.65% return on equity tions, Edison cannot reliably estimate the total cost of for 1992, compared with 12.85% for 1990 and 1989.

investigation and remediaion for the 29 remaining sites.

In 1986, the CPUC initiated an investigation into a In 1988, the CPUC established an advice letter pro steam pipe rupture at the Mohave Generating Station.

cedure for rate recovery of environmental cleanup costs, Edison incurred costs of approximately $90 million, which is expected to permit subsequent recovery of all net of insurance recoveries, to repair damage from the material investigation and remediation costs, subject to a accident and provide replacement power during the six-reasonableness review. As a result, Edison has recorded month outage. In 1991, the DRA alleged Edison con-a $40 million regulato y asset representing the future tributed to the piping failure by imprudent operation of recove y in rates of its estimated minimum costs to com the plant and recommended all costs attributable to plete investigation and remediation. In July 1991, Edison the accident be disallowed in rates. Edison believes a filed for a reasonableness review of costs incurred at manufacturing defect in a seam weld was the cause of three of these sites. An additional filing is expected in the accident and is contesting the allegations. Hearings early 1992. Hearings on both applications are expected are expected in late 1992.

to be completed by the end of 1992.

Edison and the DRA have agreed in principle for Edison to discontinue operation of San Onofre Nuclear Gener-Edison:

ating Station Unit 1 at the end of its current fuel cycle Average Nitrogen-Oxides (mid-1993). The agreement, which is subject to CPUC Emissions in L.A. Basin approval, allows Edison to recover its $350 million In tons per da investment in the unit over a four-year period. Edison 75 will earn its authorized rate of return while the plant remains in operation. Thereafter, the rate of return is fixed at 8.98%. A CPUC decision is expected in 1992.

60 The CPUC initiated an investigation in 1989 of certain costs incurred while Palo Verde Nuclear Generating 45 Station Units 1 and 3 were out of service for refueling and plant modifications. The DRA issued a report in November 1991 recommending disallowances of $59 30 million of revenue collected during the outages, $5 mil lion for capital projects deemed to be unnecessary and an unspecified amount for replacement power costs. The is cost of replacement power is estimated at $70 million 10.1 to $80 million. Edison believes these costs were reason ably incurred and should be recovered in rates. Hearings t

on this matter will be held in 1992.

fi is e d in 0 Projected

Page 41 Management's Discussion and Analysis SCEcorp and Subsidiaries Under the acid rain provisions of the federal Clean Air Act Amendments of 1990, power producers need emis-Termination of Merger Agreement sions allowances to emit sulfur dioxide. Power companies receive these allowances from the federal government The CPUC denied Edison's and SDG&E's 1988 merger and may bank or sell excess allowances. Edison expects application in May 1991. Both parties terminated the to have excess allowances under Phase II of the Clean merger agreement, and Edison paid SDG&E a $15 Air Act (2000 and later). The Act also calls for a five-year million termination fee as provided by the agreement.

study of regional haze in the southwestern U.S. The impact of this study on sulfur dioxide emissions regu lations for the Mohave Generating Station is unknown.

Energy Markets Edison's projected capital expenditures to protect the Federal law allows entry of nonutility power producers environment are $1.2 billion for the years 1992 through into the electric generation business. Edison and other 1996. Expenditures during this period are primarily to utilities are required to purchase power from these non place overhead distribution lines underground and utility companies at state-mandated prices, even if the reduce nitrogen oxides (NOx) emissions. To comply prices exceed other power sources, including Edison's with South Coast Air Quality Management District own facilities. In addition, some nonutility companies NOx emissions regulations, Edison could expend up to sell power produced on-site to large industrial and

$700 million by 1997. Pollution control equipment to commercial customers of Edison. The potential for open comply with Ventura County NOx emissions regulations transmission access could allow these nonurility com could cost up to $260 million by 1996.

panies to transmit power to Edison customers over public utility transmission lines. Further loss of sales may occur SCEcorp and Edison believe environmental costs will be if the electric utility industry undergoes deregulation.

recovered in rates, but the ultimate impact of environ mental laws cannot be predicted. SCEcorp and Edison SCEcorp's Mission Energy subsidiary is well positioned believe any unrecovered costs will not have a significant to take advantage of opportunities in the electric energy impact on financial position, market. Mission Energy currently has interests in 27 operating projects and plans to continue investing in this growing market.

New Accounting Standards Compliance with an income tax accounting standard Edison:

issued in 1992 will require major balance sheet adjust Total Generation ments. These adjustments will be required beginning in Capacity 1993 and are not expected to significantly affect results In thousands of me~awatts of operations or financial position.

22.0 20.9 A new accounting standard requires the expected cost fResen margin of postretirment benefits other than pensions to be 16.5 Icharged to expense during the years employees render service. SCEcorp currently recognizes the costs of these benefits as they are paid or funded. Annual employee benefits expense is expected to increase significantly over 1991 levels upon adoption of the new standard in 1993.

In a July 1991 decision, the CPUC authorized Edison to Tolrecover tax-deductible fuing prior to 1993 through a Peak emandbalancing account. Edison fundled $62 million in 1991 s.I and expects to fund an additional $50 million in 1992.

SCEcorp expects Edison to recover in rates the addi tional postretirement benefits expense incurred after 1992 or to record a regulatoty asset for the amount to 0

be collected through fuiture rates. Accordingly, this 87 88 89 90 91 accounting standard should have no significant financial effect. A CPUC decision is expected in mid-1992.

Page 42 1

Notes to Consolidated Financial Statements SCEcorp and Subsidiaries Note 1. Summary of Significant Accounting Policies Depreciation and Decommissioning Depreciation of utility plant, except nuclear fuel, is com The consolidated financial statements include the puted on a straight-line, remaining-life basis. Deprecia accounts of SCEcorp and its subsidiaries. The principal tion of nonutility properties is computed on a straight subsidiaries are Southern California Edison Company, a line basis over their estimated useful lives.

rate-regulated electric utility, and The Mission Group, the parent company of SCEcorp's nonutility subsidiaries.

The estimated cost of decommissioning Edison's nuclear SCEcorp uses the equity method of accounting to report generating facilities is $890 million, in current-year dol investments in partnerships and subsidiaries in which it lars, and is recovered in rates through annual charges to owns 50% or less. All significant intercompany trans-depreciation expense. Amounts collected for decommis actions have been eliminated, except intercompany profits sioning are deposited annually in trusts until decommis from energy sales to Edison by nonutility affiliates, which sioning begins. These funds are invested in high-grade are allowed in utility customer rates.

securities and are reported at the lower of cost or market value. At December 31, 1991, the market value of the Certain items in prior periods have been reclassified to trusts was $545.8 million. Approximately 85% of the conform to the financial statement presentation for trust fund contributions qualified as tax deductions.

December 31, 1991.

Nuclear Fuel Accounting Principles The cost of nuclear fuel, including disposal, is amortized Edison is regulated by the California Public Utilities on the basis of generation and charged to fuel expense.

Commission (CPUC) and the Federal Energy Regula-Under ratemaking procedures adopted by the CPUC, tory Commission (FERC). The accompanying consoli-nuclear fuel financing costs are capitalized until the fuel dated financial statements reflect the ratemaking policies is placed into production.

of these commissions, as applied to Edison, in confor mity with generally accepted accounting principles for Palo Verde Rate Phase-In Plan rate-regulated enterprises.

For ratemaking purposes, Palo Verde Nuclear Generating Station Units 1, 2 and 3 have been in commercial opera Cash Equivalents tion since February 1986, September 1986 and January Cash equivalents include temporary investments with 1988, respectively. Under a CPUC-authorized 10-year maturities of three months or less.

rate phase-in plan, $200 million of revenue was deferred during the first four years of operation for each unit. The Construction Financing Costs deferrals and interest on the deferred balance are being Allowance for funds used during construction (AFUDC) recovered evenly in the final six years of each unit's rate represents the cost of debt and equity funds used to phase-in plan.

finance construction of utility plant. It is reported in the consolidated statements of income as a reduction of Regulatory Balancing Accounts interest charges for the debt component and as other Differences between authorized and recorded kilowatt income for the equity component. Utility-plant con-hour sales or energy costs are accumulated in balancing struction costs, including AFUDC, are recovered in accounts until they are refunded to, or recovered from, authorized rates through depreciation when completed utility customers through CPUC-authorized rate adjust projects are placed into commercial operation.

ments. A kilowatt-hour sales balancing account mini mizes the effect on earnings of retail sales fluctuations.

The AFUDC rate, which reflects semiannual compound-An energy-cost balancing account adjusts earnings for ing, was 10.77%, 11.03% and 11.06%, for 1991, 1990 variations between recorded fuel and purchased-power and 1989, respectively costs, and revenue designated to recover such costs.

Page 43 The CPUC has established performance incentives based Utility Plant on target generation levels for Edison's nuclear generat-The costs of plant additions, including replacements and ing stations. Fuel savings or costs attributable to levels betterments, are capitalized and included in utility plant.

above or below these targets are divided equally between Capitalized costs include direct material and labor, con Edison and customers through adjustments to the struction overhead and AFUDC. The costs of replaced or energy-cost balancing account.

retired property and related removal costs, less salvage, are charged to the accumulated provision for deprecia Interest on regulatory balancing accounts is accrued at tion. Accumulated deferred income taxes related to utility the three-month prime commercial paper rate. Income plant are shown as a deduction from utility plant to tax effects on the changes in the regulatory balancing conform with ratemaking procedures used to determine accounts are deferred.

rate base.

Research, Development and Demonstration (RD&D)

RD&D costs for construction projects are capitalized Note 2. Regulatory Matters until it is determined whether they will result in con struction of plant. If construction does not result, the Energy Cost Proceedings costs are charged to expense. RD&D costs not related The CPUC's Division of Ratepayer Advocates (DRA),

to a specific project are expensed in the year incurred, which periodically reviews the reasonableness of utility RD&D costs charged to expense are recorded in a expenses, recommended in 1988 that the CPUC disallow balancing account; Edison must refund to ratepayers any recovery of part of Edison's expenses for power put authorized but unspent RD&D funds at the end of the chased from the Kern River Cogeneration Company, a rate-case cycle.

nonutiliry power producer. Mission Energy Company, a nonutility subsidiary of SCEcorp, owns a 50% interest Edison's RD&D costs were:

in Kern River. In September 1990, after conducting Year ended December 31, hearings on the DRA recommendation, the CPUC dis In thousands 1991 1990 1989 allowed recovery of $48 million of Edison's power RD&D charged to expenses (including interest) paid to Kern River between to$

2 9

5 mid-1985 and late 1987 The CPUC based the disal RD&D costs deferred!

lowance on the conclusion that the contract is essentially capitalized 23,625 11,991 12,601 for the purchase of "as-available rather than "firm" alcapacity.

If the same principles were applied to Edison's a

eexpenses from late 1987 through year-end 1991, the disallowance would increase to $105 million (including Revenue interest). Future Kern River disallowances, if any, would Electric revenue includes service rendered but unbilled at be less significant than those through 1991 due to fore the end of each period, casted increases in the price of as-available capacity in subsequent years.

Unamortized Debt Issuance and Reacquisition Expense Debt premium, discount and issuance expenses are amor tized over the lives of the related issuances. The expense for reacquiring bonds redeemed without refunding is amortized over the period the debt would have remained outstanding. Reacquisition expenses are amortized over the lives of new debt issues when debt is reacquired with refunding.

Page 44 Notes to Consolidated Financial Statements In an application for rehearing, Edison contested the vill result in disallowances of approximately $250 amount of the disallowance, arguing if the CPUC treats million (in present value terms), which is fully reflected the capacity delivered under the contract on an as-in the financial statements. In early 1992, Edison and the available basis, it should treat the energy Kern River DRA will file a definitive agreement for CPUC approval delivered on the same basis. In December 1990, the and a decision is expected in late 1992.

CPUC granted Edison's request for a rehearing to determine the appropriate level of disallowance for the In 1988, the DRA also recommended the CPUC mid-1985 through late 1987 period. An administrative disallow the recovery of $3 million in power-purchase law judge denied a February 1991 request by the DRA payments made in 1987 to Pacific Power and Light for reconsideration of the rehearing decision. In testi-Company In 1989, the DRA recommended a further mony filed in May 1991, Edison argued that pricing the disallowance of $26 million related to the Pacific Power energy on an as-available basis would reduce the Kern contract from late 1987 through early 1989. On Novem River disallowance to approximately $13 million (includ-ber 20, 1991, the DRA withdrew these recommended ing interest) for the period between mid-1985 and late disallovances.

1987.

Palo Verde Outage Review In November 1990, the DRA recommended the CPUC During March 1989, Arizona Public Service Company, disallow recovery of part of Edison's expenses for power operating agent for Palo Verde, removed Units 1 and 3 purchased from the Sycamore Cogeneration Company from service for refueling and modifications of plant and and the Watson Cogeneration Company during late management systems as required by regulatory agencies.

1987 through early 1989. Mission Energy owns 50% of The California Public Utilities Code requires Edison the Sycamore project and 49% of the Watson project.

(which owns a 15.8% interest in Palo Verde) to notify The recommended disallowances for Sycamore and the CPUC when a plant is out of service for nine or Watson, which total $37 million and $14 million (both more consecutive months. Although Edison believes the excluding interest), respectively, were based on different requirement was nor intended to apply when a facility is reasons than the Kern River decision. The recommended shut down for a planned outage of predetermined dura disallowance for Sycamore included $33 million, primar-tion, it advised the CPUC of the outage in December ily based on the DRA's allegations that Edison should 1989. The CPUC initiated an investigation of certain have terminated or renegotiated the contract in 1985, costs incurred vhen the units vere not in service. It also and $4 million based on the assertion the energy price ordered the subsequent collection of revenue connected could exceed avoided cost. The recommended disal-with the ownership and operation of the Palo Verde lowance for Watson was primarily based on allegations units to be subject to refund pending the outcome of its that Edison overpaid Watson for both capacity and outage review. Units 3 and 1 resumed operation in Janu energy from late 1987 through early 1989.

ary and July 1990, respectively In July 1990, the code section requiring an investigation wvas amended to The DRA also has been reviewing payments made to exclude planned outages of predetermined duration in Kern River between late 1987 and early 1991 and to 10 determining whether an investigation is required. In July other nonutility power producers partially owned by 1991, the CPUC modified the order to include only the Mission Energy. The DRA has not issued reports on revenue collected during each unit's outage as revenue these matters.

subject to refund, beginning on the date the investiga tion was initiated and ending after 100 hours0.00116 days <br />0.0278 hours <br />1.653439e-4 weeks <br />3.805e-5 months <br /> of contin On November 1, 1991, Edison and the DRA announced uous operation at full power. On November 1, 1991, the an agreement in principle to settle disputes about DRA issued a report recommending disallowances of Edison's power purchases from these 13 nonutility

$59 million of revenue collected during the outages, power producers partially owned by Mission Energy. The

$5 million for capital projects deemed to be unnecessary settlement resolves all affiliate issues from the inception and an unspecified amount of the cost of replacement of the contracts through December 31, 1991. Edison power during the outages. Although Edison has not also has agreed not to execute new power-purchase completed its determination, it estimates the cost of contracts with Mission Energy The agreement provides replacement power at $70 million to $80 million.

for a one-time disallowance of $120 million and a reduc tion in the amount Edison can recover in the future for power purchased from these affiliates. The sIttlemenn

Page 45 SCEcorp and Edison believe these costs were reasonably General Rate Case incurred and should be recovered in rates. The probable In Edison's 1992 General Rate Case, the CPUC deferred effect on net income of the outcome of this matter a decision on the capitalization of software development cannot be determined at this time. However, SCEcorp and RD&D costs incurred prior to 1992, and has and Edison believe it will not have a material effect on allowed Edison to file additional information supporting financial position. Hearings on this matter will be held its position. These items could total as much as $100 in 1992.

million. The probable effect on net income of the out come of this matter cannot be determined at this time.

Mohave Outage Review In 1986, the CPUC initiated an investigation of the Resale Rates cause of a 1985 rupture in a high-pressure steam pipe at Under FERC procedures, resale revenue billed pursuant Mohave Generating Station. Edison, which owns a 56%

to pending rate proceedings is subject to refund with interest in the plant and is its operating agent, subse-interest if subsequently disalloved. SCEcorp and Edison quently incurred costs of approximately $90 million, believe any refunds resulting from pending rate proceed net of insurance recoveries, to repair damage from the ings vill not have a material effect on results of opera accident and provide replacement power during the six-tions or financial position.

month outage.

In mid-1991, the DRA and its consultant alleged Edison Note 3. Debt contributed to the piping failure by imprudent operation of the plant and recommended that all expenditures Short-Term Debt resulting from the accident be disallowed.

SCEcorp's subsidiaries have lines of credit upon which they can borrow at negotiated or bank index rates. At Edison believes the accident wvas caused by a manufac-December 31, 1991, such lines totaled $2.2 billion.

turing defect in a seam wveld and is contesting the allega tions of the DRA and its consultant. Edison plans to file Approximately $1.7 billion of these lines of credit sup testimony on this matter in early 1992, and hearings are port commercial paper. The remaining $500 milion is expected in late 1992. The probable effect on net income available for the long-term refinancing of certain variable of the outcome of this matter cannot be determined at rate pollution control indebtedness.

this time, but SCEcorp and Edison believe it iwill not have a material effect on financial position.

The subsidiaries' short-term debt consisted of:

tions or inDncialposition San Onofre Unit 1Ieebe 1

In July 1991, Edison submitted an application requesting In millios 1991 1990 the CPUC to find future operation of San Onofre Balancing accounts

$ 419.6

$ 506.7 Nuclear Generating Station Unit 1 cost-effective and to Fuel 372.2 436.1 authorize recovery of capital expenditures of approx-General purpose 302.9 506.6 imately $100 million through 1994. These expenditures Leveraged leases 140.9 are required by the Nuclear Regulatory Commission Total commercial paper 1,094.7 1,590.3 (NRC) to operate Unit 1 beyond its current fuel cycle, Other short-term debt 16.0 which could last until mid-1993. In September 1991, the Amount reclassified as long-term (332.6)

(268.6)

DRA concluded that continued operation of Unit 1 is Unamortized discount (5.4)

(8.5) not cost-effective and recommended the unit be shut Tot

$ 772.7

$1,313.2 down and its book value amortized over four years with no return alloed. On January 16, 1992, Edison and the DRA announced an agreement in principle to discon tinue operation of Unit 1 at the end of its current fuel cycle. The agreement, which is subject to CPUC approval, allovs Edison to recover its approximately

$350 milion investment in the plant over a four-year period. While the plant remains in operation, Edison will receive its authorized rate of return. Thereafter, the rare of return is fixed at 8.98%. A CPUC decision on the agreement is expected in 1992.

Page 46 Notes to Consolidated Financial Statements Long-Term Debt Some commercial paper has been classified as long-term SCEcorp's nonutility subsidiaries had $311.0 million debt in connection with refinancing terms under lines of and $295.9 million in debt outstanding at December 31, credit with commercial banks. The long-term portion 1991, and 1990, respectively, supported by letters and finances nuclear fuel scheduled for consumption after 12 lines of credit totaling $285.0 million and $355.7 months from the balance sheet date.

million at December 31, 1991, and 1990, respectively.

Pursuant to the Nuclear Waste Policy Act of 1982, Almost all Edison properties other than fuel inventories Edison has signed a contract with the U.S. Department are subject to the liens of a trust indenture. Fuel inven-of Energy for disposal of spent nuclear fuel from San tories are financed with short-term debt under CPUC Onofre. The interest rate is fixed at 10.57%.

ratemaking procedures.

Long-term debt maturities and sinking fund require Edison has issued first and refunding mortgage bonds ments for the five years following December 31, 1991, and other forms of debt to governmental agencies in are: 1992-$250.9 million; 1993-$266.6 million; exchange for proceeds from pollution control bonds.

1994-$240.4 million; 1995-$288.1 million; 1996 These proceeds have been deposited with trustees and

$550.8 million.

are used to finance construction of pollution control facilities. Bondholders have limited discretion to redeem Long-term debt consisted of:

certain pollution control bonds. Edison has arrange-December 31, ments with security dealers to remarket or purchase the In millions 1991 1990 bonds in such cases.

bondsin sch cses.First and refunding mortgage bonds:

1992-1995 (63/8% to 9%)

$ 780.0

$ 943.0 In January and February 1992, Edison issued $200 1996-2000 (73/% to 9%)

1,025.0 1,025.0 million of 5.55% first and refunding mortgage bonds 2001-2009 (8/% to 9.95%)

513.0 518.3 due February 1995 and redeemed $458 million of first 2010-2024 (8%% to 10%)

2,025.0 1,625.0 and refunding mortgage bonds, Series JJ, KK, Y and Z.

Pollution control bonds:

1999-202 1 An Edison subsidiary has issued $39.6 million in (6 % to 1034% and variable) 989.9 962.2 foreign-currency-denominated notes due February 1992.

Funds held by trustees (3.8)

(9.9)

An interest rate and currency exchange agreement low-Debentures and note:

ered the effective interest cost of these notes and hedged 1992-20 any foreign currency translation gains or losses. Several Nuclear ftsel indebtedness:

SCEcorp subsidiaries have interest-rate swap agreements Foreign-currency-denominated notes 38.0 38.6 to reduce the impact of changes in interest rates on their Commercial paper 151.0 127.7 variable-rate debt. Edison has an agreement to effec-Spent nuclear fuel obligation 13.9 17.1 tively change the interest-rate exposure on $196 million Long-term debt due within one year (250.9)

(221.6) in pollution control bonds due 2008 to a fixed 5.585%.

Unamortized debt discout-net (50.9)

(35.7)

Mission Energy and Mission First Financial have Total

$5,745.3

$5,291.4 interest-rate swap agreements that effectively change the interest-rate exposure on $75 million in variable-rate notes due August 1996 to a fixed 798% and $100 mil lion in variable-rate notes to a fixed 8.095%. The nomi nal amount of debt covered by the latter agreement amortizes to $75 million in February 1994, $50 million in February 1995 and $25 million in February 1998; the agreement expires in February 1999. Mission Land has

$31.7 million in letters of credit guaranteeing develop ment and financing of some of its partnership real estate property. These letters of credit expire by 1993. SCEcorp is exposed to credit loss in the event of nonperformance by the counterparties to these agreements, but does not anticipate such nonperformance.

Page 47 24 million, 12 Million, 10 million and 2 million shares, Note 4. Equity respectively Mandatorily redeemable preferred stocks are subject to sinking fund provisions. The $100 cumu The CPUC regulates Edison's capital structure, which lative preferred stock, 12.31% Series, is not subject to affects the dividends Edison may pay to SCEcorp. At redemption until May 1, 1992, except for sinking fund December 31, 1991, Edison could pay approximately provisions. AU other cumulative preferred stocks are

$20 million in additional dividends to SCEcorp and still redeemable. In February 1992, Edison issued $100 mu maintain its capital structure within the authorized lion of $25 cumulative preferred stock, 736% Series, range. The California Public Utilities Code also restricts and redeemed all outstanding shares of 8.70% and Edison from making loans or advances to any of its non-8.96% preferred stock.

utility affiliates.

Premiums paid upon redemption of preferred shares are SCEcorp issued 1,478,588, zero and 12,500 shares of charged to common equity through a reduction to addi common stock in 1991, 1990 and 1989, respectively tional paid-in capital.

Edison's authorized shares of original preferred, $25 cumulative preferred, $100 cumulative preferred, $25 preference and $100 preference stock are 480 thousand, Equity consisted of:

December 31, In rhousands 1991 1990 Common shareholders' equity:

Common stock

$2,530,787

$2,464,272 Retained earnings 3,150,096 3,038,378 Total

$5,680,883

$5,502,650 Cumulative preferred stock of subsidiary:

December 31, 1991 Shares Redemption Not subject to mandatory redemption:

Series Outstanding Price

$25 par value 4.08%

1,000,000 25.50 25,000 25,000 4.24 1,200,000 25.80 30,000 30,000 4.32 1,653,429 28.75 41,336 41,336 4.78 1,296,769 25.80 32,419 32,419 5.80 2,200,000 25.25 55,000 55,000

$100 par value:

758 750,000 101.00 75,000 75,000 8.70 500,000 101.00 50,000 50,000 8.96 500,000 101.00 50,000 50,000 Total

$ 358,755

$ 358,755 Subject to mandatory redemption:

$100 par value:

7.325%

457,381 S102.78 45,738 48,738 780 429,495 103.76 42,950 44,750 8.54 547,500 102.75 54,750 57,000 8.70A 393,749 103.73 39,375 40,687 12.31 276,800 105.83 27,680 31,055 Preferred stock to be redeemed within one year (11,738)

(11,738)

Total

$ 198,755

$ 210,492

Page 48 Notes to Consolidated Financial Statements Authorized common stock is 400 million shares with no Deferred income taxes for tax depreciation before 1981 par value. Common stock outstanding was 219,953,020 and certain construction overheads have not been pro and 218,474,432 shares at December 31, 1991, and vided because the tax effects of such timing differences 1990, respectively are not allowed for retail raemaking purposes until the taxes become payable. The cumulative net amount of Preferred stock redemption requirements for the five these timing differences was approximately $1.8 billion years following December 31, 1991, are: 1992- $11.7 at December 31, 1991, 1990 and 1989.

million; 1993 -$12.3 million; 1994- $12.3 million; 1995-$13.9 million; 1996-$13.9 million.

The current and deferred components of income tax expense were:

Changes in Edison's preferred stocks during the last Year ended December31, three years were:

In thousands 1991 1990 1989 Year ended December 31, Current:

Series 1991 1990 1989 Federal

$218,918

$244,245

$253,469 7325%

30,000 30,000 30,000 State 113,914 119,915 119,542 7.80%

18,000 18,000 18,000 332,832 364,160 373,011 8.54%

22,500 22,500 22,500 8.70%A 13,125 13,125 13,125 Deferred-Federal and State:

12.31%

33,750 49,450 70,000 Accrued charges (81,650)

(24,075)

(21,929)

Depreciation 163,337 188,476 207,703 Total shares redeemed 117,375 133,075 153,625 FERC resalc 22,300 (3,263)

(8,940)

Investment and energy tax credits -nct (33,449)

(20,234)

(2,331)

Leveraged leases 76,645 63,114 35,063 Note 5. Income Taxes Rare phase-in plan (17,163) 21,625 66,682 Regularory balancing SCEcorp's subsidiaries are included in its consolidated accounts (26,909)

(29,157)

(24,995) federal income tax and combined state franchise tax Unbilled revenue (4,813)

(20,968)

(31,803) returns. Under income tax allocation agreements, each Other 4,723 (33,427)

(16,113) affiliate calculates its tax liability separately.

Current and Deferred Taxes Total income tax Income tax expense includes the current tax liability expense

$435,853

$506,251

$576,348 from operations, as well as deferred income taxes on Classification of income taxes:

certain items of income and expense reported in different Included in operating periods for tax and financial reporting purposes. Accu-income

$447,506

$489,798

$497,793 mulated deferred investment tax credits are amortized Included in other over the lives of the related properties.

income (11,653) 16,453 78,555 Total income tax The federal and composite federal and state statutory expense

$435,853

$506,251

$576,348 income tax rates were 34% and 40.138%, respectively, for 1991, 1990 and 1989.

Page 49 A reconciliation of the statutory income tax rate to the effective rate is presented below:

Note 6. Employee Benefit Plans Year ended December 31, Pension Plan 1991 1990 1989 SCEcorp has a noncontributory defined-benefit pension Federal statutory rate 34.0%

34.0%

34.0%

plan, administered by a trustee, covering substantially all Depreciation and related timing fall-time employees who fulfill minimum service require differences not deferred 4.3 4.3 3.8 ments. Benefits are based on years of accredited service Federal deduction for state taxes and average compensation. SCEcorp's policy is to fund on income (2.9)

(3.1)

(3.1) the plan on a level-premium actuarial method, pro Investment and energy tax credits (3.6)

(2.5)

(2.1) vided annual contributions meet the minimum funding Merger expenses (2.1) 0.9 0.9 State tax provision 8.6 9.3 9.1 riremnt o t Emlee RetiremeIcme Other (3.7)

(0.1) amount under income tax regulations. Prior service costs Effective tax rate 38.3%

39.2% 42.5%

from pension plan amendments are funded over 30-year periods.

New Accounting Standard Under current accounting rules,d In conformity with the accounting principles for rare balances are not adjusted for changes in tax rates ora regulated enterprises, regulatory adjustments have been Thaes a

o adjustswle frequire bein n inx 1993orlas recorded to reflect, in net income, the pension costs cal These adjustments will be required beginning in 1993 culated under the actuarial method used for ratemaking.

underThe difference between pension costs calculated for The new income tax accounting standard also will accounting and ratemaking purposes has been recorded require other significant balance sheet adjustments.

as a deferred charge in the consolidated balance sheets.

SCEcorp will record additional deferred income taxes related to the equity component of AFUDC, which is recorded on an after-tax basis; the debt component corporate and government bonds, short-term invest of AFUDC, which was recorded on a net-of-tax basis ments and guaranteed investment contracts.

before 1987; and other temporary differences for which deferred income taxes have not been provided.

Additional adjustments will be recorded: for the net Year ended December 31, reduction in deferred income tax liabilities resulting In thousands 1991 1990 1989 from income tax rate changes; for the recognition of Net pension expense:

deferred income tax assets attributable to the reduction Service cost for of the book basis of property by unamortized investment benefits eamed

$ 52,701 S 57,430

$ 49,307 tax credits; and to classify property-related deferred taxes Interest cost on as a liability instead of a reduction of utility plant. The projected benefit majority of additional deferred-tax assets and liabilities obligation 126,377 116,141 108,341 will be offset by recording regulatory assets and lia-Actual return on bilities representing the anticipated effects of these plan assets (375,300) 35,278 (306,493) adjustments on customer rates. Such regulatory assets adrral979 and liabilities will be adjusted as they are recovered or refunded through the ratemaking process and as tax Pension cost pursuant rates and laws change. Accordingly, these changes are not to accounting expected to significantly affect results of operations or standards 54,726 41,635 50,415 financial position.

Regulatory adjustment (6,963) 5,173 (4,210)

Net pension cost recognized

$ 47,763 46,808

$ 46,205

Page 50 Notes to Consolidated Financial Statements The plan's funded status was:

A summary of activity in the stock option plan for 1991 December 31, and 1990 is as follows:

In thousands 1991 1990 Actuarial present value of Options:

Shares Share Price*

benefit obligations:

Outstanding, Vested benefits

$1,249,702

$1,124,985 December 31, 1989 106,678

$32.00-$32.37 Nonvested benefits 33,649 28,590 Granted 156,650 39.69 Accumulated benefit obligation 1,283,351 1,153,575 Outstanding, Value of projected future December 31, 1990 263,328 32.00-39.69 compensation levels 556,462 448,750 Granted 160,300 37.50-40.19 Projected benefit obligation 1,839,813 1,602,325 Canceled (10,065) 32.37-39.69 PrjctdExercised (1,778) 32.37 Plan assets at fair value

$1,888,731

$1,542,568 Outstanding, Projected benefit obligation in December 31, 1991 411,785 32.00-40.19 excess of (less than) plan assets $ (48,918) 59,757 Exercisable, December 31, 1991 172,752 32.00-40.19 Unrecognized net gain 175,574 65,394 Unrecognized prior service cost (6,134)

(6,567)

• Share options accrue dividend equivalents at a rate equal to divi Unrecognized net obligation dends declared an outstanding common shares. Such dividend equiv being amortized over 17 years (73,071)

(78,594) alents may he used against thegrant price at the time the share Accrued pension liability 47,451 39,990 options are exercised.

Assumptions for defined At December 31, 1991, and 1990, 1,063,937 and benefit pension plan:

1,214,172 shares, respectively, were reserved for future Discount rate 7.5%

8.0%

grants.

Rate of increase in future compensation 6.0%

6.0%

Other Postretirement Benefits Expected long-term rate of return on assets 8.5%

8.5%

E years of service are entitled to postretirement health care, dental, life insurance and other benefits. Health care ben Employee Stock Plans efits are provided by a combination of programs and are SCEcorp maintains an Employee Stock Ownership Plan subject to deductibles, copayment provisions and other (ESOP) and a Stock Savings Plus Plan (SSPP), which limitations. The costs of these benefits are recognized as are designed to supplement employees' retirement expense as they are paid. In addition, Edison started income. Contributions to the ESOP were funded pri-funding its future liability for these benefits in 1991.

marily by federal income tax benefits and contributions Contributions are amortized as they are recovered in by employees. SCEcorp contributions to the SSPP were rates. Total expense was $33.2 million in 1991, $24.3

$18.2 million in 1991, $172 million in 1990 and $16.9 million in 1990 and $21.2 million in 1989.

million in 1989.

Under Edison's long-term incentive compensation plan, 1,475,722 shares of SCEcorp common stock were reserved at December 31, 1991, for issue to key employees in various forms, including the exercise of stock options.

Page 51 New Accounting Standard The CPUC has initiated an investigation to determine A new accounting standard for postretirement benefits the ratemaking impact of the new standard. In a July other than pensions requires the expected cost of these 1991 decision, the CPUC authorized Edison to recover benefits to be charged to expense during the years tax-deductible funding befote 1993 through a balancing employees render service. SCEcorp expects to implement account. In late 1991, Edison began this funding with the new standard in 1993 and amortize the transition

$62 million in contributions to independent trusts. This obligation over a 20-year period. The accumulated amount was recorded as a current asset and will be obligation at January 1, 1993, measured under the new amortized over a 12-month period as it is recovered in standard, is estimated at $700 million according t0 a rates. Edison expects to recover the additional postretire preliminary review by actuaries. The actuaries estimate ment benefits expense for 1993 and beyond in rates or to the postretirement benefits expense for 1993 will be record a regulatory asset for the amount to be collected

$100 million. The accumulated obligation and expense through future rates. Accordingly, this standard should in 1993 could differ significantly due to changes in have no significant financial effect. Hearings on the rate health care costs or interest rates.

making treatment for 1993 and beyond were completed in February 1992. A decision on this matter is expected in 1992.

Note 7 Jointly Owned Utility Projects Edison owns undivided interests in several generating stations and transmission systems for rrhich each partici pant provides its own financing. The proportionate share of expenses for each project is included in the consoli dated statements of income.

The investment in each project, as included in the con solidated balance sheet as of December 31, 1991, was:

Plant in Accumulared Undcr Ovnership In thousands Service Depreciation Construction Interest Eldorado ransmission System 24,342 10,524 1,560 60%()

Four Corners Coal Generating Station-Units 4 and 5 449,587 177,538 532 48 Mohave Coal Generating Station 254,552 116,083 8,963 56 Pacific intertie DC Transmission System 205,541 51,336 3,614 50 Palo Verde Nuclear Generating Station 1,499,668 199,838 35,104 15.8 San Onofre Nuclear Generating Station 4,546,353 1,225,898 66,792 (b)

Yuma Axis Generating Station(c) 12,579 12,417 10 33.3 Total

$6,992,622

$1,793,634

$116,575

(') Represents a composite rate.

(b)Ownership interest is 80% in Unit 1 and 75% in Units 2 and 3.

(c) In January 1990, Edison entered into an agreement to sell its interest in thisfacility, subject to CPUC and FERC approval.

Page 52 Notes to Consolidated Financial Statements Note 8. Leases Note 9. Commitments Investments in Leveraged Leases Construction Program and Fuel Supply Mission First Financial is the lessor in several leveraged-As of December 31, 1991, construction expenditures for lease agreements for terms of 24 to 30 years. All operat-SCEcorp's subsidiaries are estimated to be $1.1 billion ing, maintenance, insurance and decommissioning costs each for 1992, 1993 and 1994. In addition, minimum are the responsibility of the lessees. The total cost of long-term fuel supply commitments were approximately these facilities was $1.3 billion at December 31, 1991,

$2.0 billion at December 31, 1991.

and $1.1 billion at December 31, 1990.

Long-Term Purchased-Power and The equity investment in these facilities represents 23%

Transmission Contracts of the purchase price. The remainder is nonrecourse Edison has contracted to purchase 2775 megawatts, or debt, which is secured by first liens on the leased prop-5.54%, of the generating output of Hoover Dam and to erty. The lenders accept their security interests as their purchase firm transmission service on the Four Corners only remedy in the event of default by the lessee.

transmission line. Although there is no investment in the generation facility or transmission line, these contracts Net investment in leveraged lease components were:

require minimum payments based, in part, on the debt December 31, service requirements of the provider, whether or not the In tousnds 991 199 facility or transmission line is operable. The power con Intract is ot expected to provide more than 5% of current Rentals receivable (net of principal or estimated future operating capacity Purchased-power and interest on nonrecourse debt)

$ 620,009

$ 561,742 costs under the contract vere $4.7 million in 1991, Unearned income (267,373)

(260,842)

$3.4 million in 1990 and $4.5 million in 1989. Trans Investment in leveraged leases 352,636 300,900 mission costs under the contract were $4.5 million in Estimated residual value 29,620 15,220 1991, $4.9 million in 1990 and $4.4 million in 1989.

Deferred income taxes (247,136)

(171,737)

Net investment in leveraged leases

$ 135,120

$ 144,383 The cost of power and firm transmission service under these contracts, including payments made when the facil ity or transmission line is not operating, is included in Operating Lease Commitments operating expenses in the consolidated statements of SCEcorp's subsidiaries lease automotive, computer, office income. Purchased-power costs are generally recoverable and miscellaneous equipment through operating rental through the energy-cost balancing account. Edison's agreements with varying terms, provisions and expira-minimum commitments under the purchased-power tion dates.

contract are approximately $4 million per year from 1992 through 1996. From 1992 through the end of the At December 31, 1991, estimated remaining rental contract (2017), minimum commitments total $102.7 commitments for noncancelable operating leases were:

million. Edison's minimum commitments under the transmission contract are approximately $4 million per Year ended December 31, In thousands year from 1992 through 1996. From 1992 through the 1992$

30873 end of the contract (2016), minimum commitments total 1992

$ 30,873 1993 25,939

$79.0 million.

1994 21,940 1995 17,440 1996 12,617 Thereafter 23,316 Total future rental commitments

$132,125

Page 53 with other utilities to prevent or limit such resale cus Note 10. Contingencies tomers from obtaining bulk power supplies from other sources to reduce or replace the resale customers' pur Nuclear Insurance chases from Edison. The plaintiffs claimed damages of The federal statutory limit on public liability claims from approximately $99.5 million, before trebling, from 1978 a nuclear incident is $7.8 billion. Participants in San through 1985. In October 1990, the court issued a final Onofre and Palo Verde have purchased the maximum judgment in Edison's favor. In November 1990, the private primary insurance available ($200 million). The plaintiffs appealed the decision.

balance is covered by the industry's retrospective rating plan, using deferred premium charges. This secondary In 1983, another resale customer, the City of Vernon, level of financial protection is required by the NRC. The also filed a complaint against Edison in federal district maximum amount of the deferred premium for each court alleging violation of antitrust laws. The complaint nuclear incident is $63 million per reactor, but not more alleged Edison engaged in anticompetitive behavior by than $10 million per reactor may be charged in any one restricting access to Edison transmission facilities and year for each incident. Edison could be required to pay a preventing Vernon from purchasing bulk power supplies maximum of $184 million per nuclear incident on the from other sources. The complaint also alleged Edison basis of its ownership interests in San Onofre and Palo unlawfully designed its resale rates in certain respects.

Verde, but it would have to pay no more than $29 mil-Vernon claimed damages of approximately $60 million lion per incident in any one year. Such amounts include a before trebling. Final judgment for Edison was granted 5% surcharge if additional funds are needed to satisfy in August 1990. In October 1990, Vernon appealed the public liability claims, and are subject to adjustment for court's decisions.

inflation.

On February 7,1992, the appeals court affirmed the Property damage insurance, including decontamination judgment for Edison on all claims, except for Vernon's costs, covers losses up to $500 million at San Onofre claim for certain injunctive relief The plaintiffs can and Palo Verde. Decontamination liability and property appeal to the U.S. Supreme Court. SCEcorp and Edison damage coverage above the primary $500 million also believe these matters will not have a material effect on has been purchased in amounts exceeding NRC require-results of operations or financial position.

ments. Insurance covering part of the additional expense for replacement power during an accident-related nuclear In September 1990, Tucson Electric Power Company unit outage also is provided. These policies are issued (TEP) filed a suit in California Superior Court against primarily by mutual insurance companies owned by util-SCEcorp and Edison, alleging interference with TEPs ities with nuclear facilities. If losses at any nuclear facility merger agreement with San Diego Gas & Electric covered by the arrangement were to exceed the accu-Company The complaint sought unspecified compen mulated funds available for these insurance programs, satory damages plus $6.7 billion of punitive damages. In Edison could be assessed retrospective premium adjust-November 1990, SCEcorp and Edison filed a motion to ments of up to $38 million per year. Insurance premiums dismiss the suit for absence of merit. In April 1991, the are charged to operating expense.

Superior Court overruled the challenge. The matter was argued before the Court of Appeals in December 1991, Litigation but no decision has been issued. In December 1991, the In 1978, five resale customers filed suit against Edison in Superior Court denied SCEcorp and Edison's sunimary federal district court alleging violation of antitrust laws.

judgment motion, ruling that the arguments presented The complaint sought monetary damages, a trebling factual rather than legal issues. In December 1991, of such damages and certain injunctive relief The SCEcorp and Edison appealed the decision. SCEcorp complaint alleged Edison engaged in anticompetitive and Edison deny all allegations of wrongdoing and are behavior by charging more for electricity sold to resale defending the charges. A trial is scheduled for July 1992.

customers than to certain classes of retail customers. The SCEcorp and Edison believe the suit is without merit complaint also alleged Edison acted alone and in concert and will not have a material effect on results of opera tions or financial position.

Page 54 Notes to Consolidated Financial Statements Environmental Protection SCEcorp is subject to numerous legislative and regula-Note 11. Investments in Partnerships tory environmental protection requirements involving air and water pollution, waste management, hazardous The Mission Group has equity interests in several part chemical use, noise abatement, land use, aesthetics and nerships involved m energy generation and real estate nuclear control. To meet these requirements, SCEcorp investments. Summarized financial information of the has incurred, and will continue to incur, substantial costs partnerships was:

to operate existing facilities, construct and operate new facilities, and clean up waste-disposal sites for which it Income statements:

Year ended December 31, may be responsible.

In millions 1991 1990 1989 Revenue

$588.3

$985.1

$828.1 Edison has identified 41 sites for which it is actively or Expenses 510.7 739.1 605.3 potentially responsible for remediation under environ mental laws. Environmental authorities set the timing of investigation and remediation at these sites. Edison has estimated the minimum liability on 12 of these sites at Balance sheets:

December 31,

$40 million and has accrued this amount. The 29 remain-In millions 1991 1990 ing sites are currently not a high priority for environ-Current assets

$ 408.0

$ 344.3 mental authorities, and investigations will proceed as Other assets 2,112.0 2,056.0 dictated by these authorities. Upon completion of these investigations, some or all of these sites may require remedial action. Due to the absence of any extensive Current liabilities

$ 391.2

$ 198.7 investigations, Edison cannot reliably estimate the total Other liabilities 1,414.0 1,354.8 cost of investigation and remediation for the 29 remain-Equity 714.8 846.8 ing sites.

Total liabilities and equity

$2,520.0

$2,400.3 In 1988, the CPUC established an advice letter pro cedure for rate recovery of environmental cleanup costs, Tthich is expected to permit subsequent recovery of all material investigation and remediation costs, subject to a reasonableness review. As a result, Edison has recorded a $40 million regulatory asset representing the future recovery in rates of its estimated minimum costs to com plete investigation and reIediation. In July 1991, Edison filed for a reasonableness review of costs incurred at three of these sites. An additional filing is expected in early 1992. Hearings on both applications are expected to be completed by the end of 1992.

SCEcorp and Edison believe environmental costs will be recovered in rates, but the ultimate impact of environ mental laws cannot be predicted. SCEcorp and Edison believe any unrecovered costs will not have a significant impact on financial position.

Page 55 Note 12. Business Segments SCEcorp's business segments include electric utility operations (Edison) and three nonutility segments:

electric power generation (Mission Energy), financial investments (Mission First Financial) and real estate development (Mission Land). The diversified operations data shown below includes the nonutility segment opera tions, which are not individually significant for reporting purposes.

SCEcorp's business segment information for the three years ended December 31, 1991, was:

Year ended December 31, In thousands 1991 1990 1989 Revenue:

Electric

$ 7,297,759

$ 6,986,460

$ 6,524,474 Diversified operations 204,850 212,247 380,000 Corporate items and eliminations (111)

(176)

(88)

Total revenue

$ 7,502,498

$ 7,198,531

$ 6,904,386 Operating income before taxes:

Electric

$ 1,546,950

$ 1,630,225

$ 1,526,501 Diversified operations 133,602 111,284 139,680 Total operating income before taxes 1,680,552 1,741,509 1,666,181 Income taxes (448,126)

(489,991)

(497,994)

Corporate items and eliminations (1,283)

(414)

(413)

Total operating income

$ 1,231,143

$ 1,251,104

$ 1,167,774 Depreciation and decommissioning:

Electric 758,932 711,163 686,334 Diversified operations 4,705 4,517 3,280 Total depreciation and decommissioning 763,637 715,680 689,614 Identifiable assets:

Electric

$14,670,835

$14,572,053

$14,049,592 Diversified operations 2,119,500 1,762,313 1,408,225 Corporate items and eliminations 37,871 (22,120)

(14,766)

Total identifiable assets

$16,828,206

$16,312,246

$15,443,051 Capital expenditures:

Electric 964,343 884,833 811,849 Diversified operations 21,610 20,456 26,141 Total capital expenditures 985,953 905,289 837,990

Page 56 Selected Financial Data: 1987-1991 SCEcorp and Subsidiaries Dollars in thousands, except per-share amounts 1991 1990 1989 1988 1987 SCEcorp and Subsidiaries Operating revenue

$ 7,502,498

$ 7,198,531

$ 6,904,386

$ 6,252,719

$ 5,601,926 Operating expenses 6,271,355 5,947,427 5,736,612 5,156,351 4,637,135 Net income 702,605 786,360 778,241 761,831 738,531 Weighted-average shares of common stock outstanding (in thousands) 218,660 218,474 218,463 218,332 218,014 Per-share data:

Earnings

$3.21

$3.60

$3.56

$3.49

$3.39 Dividends declared 2.70 2.62 2.54 2.452 2.352 Book value 25.83 25.19 24.21 23.18 22.16 Market value at year end 46%

377/

393/

32%

30V2 Dividend payout ratio 83.5%

72.2%

70.8%

69.6%

68.7%

Rate of return on common equity 12.51%

14.51%

14.99%

15.33%

15.51%

Price/earnings ratio 14.6 10.5 11.1 9.3 9.0 Ratio of earnings to fixed charges 2.56 2.72 2.79 2.86 2.91 Assets

$16,828,206

$16,312,246

$15,443,051

$14,866,276

$14,350,664 Retained earnings 3,150,096 3,038,378 2,824,421 2,601,086 2,375,915 Common shareholders' equity 5,680,883 5,502,650 5,288,687 5,064,848 4,833,734 Preferred and preference stock of subsidiary:

Not subject to mandatory redemption 358,755 358,755 358,755 358,755 361,238 Subject to mandatory redemption 198,755 210,492 223,800 239,037 277,538 Long-term debt of subsidiaries 5,745,298 5,291,366 5,282,764 5,421,747 5,150,883 Southern California Edison Company Financial data:

Earnings available for common stock

$587,315

$692,627

$678,642

$684,689

$697,188 Earnings per SCEcorp common share 2.68 3.17 3.10 3.14 3.20 Internal generation of funds 70%

76%

88%

100%

77%

Operating and sales data:

Peak demand in megawatts (MW) 16,709 17,647 15,632 15,987 14,775 Generation capacity at peak (MW) 20,875 20,323 20,136 18,893 18,206 Kilowatt-hour sales (in thousands) 71,146,255 71,613,760 69,135,748 67,885,761 65,539,481 Customers 4,078,559 4,031,678 3,940,949 3,831,656 3,717,262 Employees 17,110 16,604 16,627 16,660 17,086 The Mission Group Common shareholder's equity

$1,020,364

$904,282

$735,263

$505,371

$292,108 Net income 116,082 94,019 99,893 77,763 41,343 Earnings per SCEcorp common share

.53

.43

.46

.35

.19 Percent of SCEcorp's earnings per share 16.5%

11.9%

12.9%

10.0%

5.6%

Page 57 Responsibility for Financial Reporting SCEcorp and Subsidiaries The management of SCEcorp is responsible for prepar-Management believes SCEcorp's systems of internal con ing the accompanying financial statements. The state-trol are adequate to accomplish the objectives discussed ments were prepared in accordance with generally herein. Management has implemented all of the internal accepted accounting principles and necessarily include and external auditors' significant recommendations amounts based on management's estimates and judg-regarding the systems of internal control.

ment. Management believes other information in the annual report is consistent with the financial statements.

The d t

iee of the bodo directors, whcts Management maintains systems of internal control to periodically with both the external and internal auditors, provide reasonable assurance assets are safeguarded, who have unrestricted access to the committee. This transactions are properly executed in accordance with committee recommends to the board of directors the management's authorization, and accounting records annual appointment of a firm of independent public may be relied upon for the preparation of financial state-accountants, considers the audit scope and independence ments and other financial information. The design of of the external auditor, discusses the adequacy of internal internal control systems involves management's judg-controls, reviews financial reporting issues and is advised ment concerning the relative cost and expected benefits of management's actions regarding these matters.

of specific control measures. These systems are augmented by internal audit programs through which the adequacy Mngm t is responsible fordfotein acimae and effectiveness of internal controls, policies and pro-with the highest standards of personal and corporate cedures are evaluated and reported to management.

conduct, which are reflected in SCEcorp's Standards of In addition, Arthur Andersen & Co., as part of its inde-Conduct. Management maintains programs to encour pendent audit of SCEcorp's financial statements, is age and assess compliance with these standards.

responsible under generally accepted auditing standards to evaluate the internal control structures in order to determine the scope of its auditing procedures for the purpose of expressing its opinion on the financial Richard K. Bushey John E. Bryson statements.

Vice President Chairman of ite Board and Controller and Chief Eecutive Officer February 7, 1992 Report of Independent Public Accountants To the Shareholders and the Board of Directors, SCEcorp:

We have audited the accompanying consolidated balance includes assessing the accounting principles used and sheets of SCEcorp (a California corporation) and its significant estimates made by management, as well as subsidiaries as of December 31, 1991, and 1990, and the evaluating the overall financial statement presentation.

related consolidated statements of income, retained earn-We believe that our audits provide a reasonable basis for ings and cash flows for each of the three years in the our opinion.

period ended December 31, 1991. These financial state-dvie ments are the responsibility of SCEcorp's management.

anaoe piento thee inanl atemen reerr toers.

Our responsibility is to express an opinion on thesein financial statements based on our audits, position of SCEcorp and its subsidiaries as of December 31, 1991, and 1990, and the results of their operations We conducted our audits in accordance with generally and their cash flows for each of the three years in the accepted auditing standards. Those standards require period ended December 31, 1991, in conformity with that we plan and perform the audit to obtain reasonable generally accepted accounting principles.

assurance about whether the financial statements are free a

of material misstatement. An audit includes examining, the on a test basis, evidence supporting the amounts and ARTHUR ANDERSEN & CO.

disclosures in the financial statements. An audit also Los Angeles, California February 7, 1992

Page 58 Shareholder Information SCEcorp:

SCEcorp:

Five-Year Stock Price History

$1,000 Investment in SCEcorp Stock In dollan In dollan 47/ High

$7,130 46% Close Price appreciation 41 40/

37%

37 36 Low 341/

3V V2 Dividends 30V2 3/8 31

$1,000 29 s Initial 29V/s investment 87 88 89 90 91 81 82 83 84 85 86 87 88 89 90 91 Quarterly Financial Data Unaudited 1991 1990 In millions, except per-share amounts Total Fourth Third Second First Total Fourth Third Second First Operating revenue

$7,502

$1,886

$2,251

$1,695

$1,670

$7,199

$1,755

$2,258

$1,595

$1,591 Operating income 1,231 246 386 295 304 1,251 297 406 266 282 Net income 703 115 248 168 172 786 182 286 146 172 Per share:

Earnings 3.21

.52 1.14

.77

.79 3.60

.83 1.31

.67

.79 Dividends declared 2.70

.68

.68

.68

.66 2.62

.66

.66

.66

.64 Common stock prices High

$47/8

$47%/

$45%/

$39%

$40

$40/

$39/8

$38%

$40

$40/

Low 36 43 38%

38 36 33/2 35/s 33/2 35%

35/8 Close 46%

46%

44%3/

38/8 39/4 377/8 377/

36 371/2 37%

The financial section of this report is printed on recycled paper.

SCEcorp and Subsidiaries Annual Meetings of Shareholders Dividend Reinvestment and Deposit Services Please call or write Shareholder Services for a prospectus Date:

Thursday, April 16, 1992 on how SCEcorp's common stock shareholders can Time:

10:00 a.m.

purchase additional shares by reinvesting their quarterly Location: Industry Hills and Sheraton Resort dividends. Among other features, the costs of purchasing One Industry Hills Parkway SCEcorp common stock through the plan will be paid City of Industry, California by SCEcorp. The plan also allows optional cash invest ments of up to $10,000 per calendar month.

Stock Listing and Trading Information If \\ou wish to have vour dividend check mailed directly to your savings institution for deposit, send SCEcorp Common Stock instructions, including your shareholder account Listed on the New York, Pacific, London and Tokyo number, your savings institution account number or a stock exchanges under the ticker symbol SCE. Share-blank deposit slip, and the complete address of the holders can find the previous day's closing price in daily savings institution to Shareholder Services.

newspapers under the symbols SCEcp, or SCEcorp.

How to Transfer Stock Edison Preferred Stocks Whenever there is a change of ownership of shares, regu Listed on the American and Pacific stock exchanges under lations require a transfer of stock. This can happen when the ticker symbol SCE. Previous day's closing prices, you sell the stock, make a gift of stock, or add or delete wvhen traded, are listed in the American Stock Exchange owners of the stock certificate. The transfer can be made listing table under the symbol SoCalEd. The 7325%,

by completing the stock assignment on the back of the 780%, 8.70%A and 12.31% series are not listed.

stock certificate and signing it exactly as the name appears onl the front. The signature of the individual Where to Buy and Sell Stock transferring the stock must be guaranteed by an eligible The common and listed preferred stocks may be pur-guarantor institution. A notary's acknowledgment is nor chased through any brokerage firm. Firms handling acceptable. The certificate should then be sent to Share unlisted series can be located through yoIr broker.

holder Services by registered or certified mail with com plete transfer inst ructions.

Transfer Agent and Registrar Shareholder Profile As of December 31, 1991, there were 143,059 SCEcorp Southern California Edison Company maintains share-common stock shareholders of record and 14,070 Edison holder records and acts as transfer agent and registrar preferred stock shareholders. Millions of other shares are for all SCEcorp and Edison stocks. Shareholders may held in "street namne" by securities brokers and others.

call Shareholder Services at (800) 347-8625 beieeen 8:00 am. and 4:30 p.m. (Pacific time) every, business day, regarding:

• stock transfer and namH-change requirements; W

address changes, including dividend addresses; l

taxpayer identification number (Social Security number)

Submission or changes; o

eduplicate 1099 forms and W-9 tax certification forms; bnotices of and replacement of lost or destroyed stock certificates and dividend checks; a

SCEcorp's Dividend Reinvestment Plan, including enrollment, withdrawal, terminations, transfers and statements.

The address of Shareholder Services is:

SO. Box 400, Rosemead, California 91770 FAX: (818) 302-4815

-NOTICE THE ATTACHED FILES ARE OFFICIAL RECORDS OF THE INFORMATION &

REPORTS MANAGEMENT BRANCH.

THEY HAVE BEEN CHARGED TO YOU FOR A LIMITED TIME PERIOD AND MUST BE RETURNED TO THE RE CORDS & ARCHIVES SERVICES SEC TION P1-22 WHITE FLINT PLEASE DO NOT SEND DOCUMENTS CHARGED OUT THROUGH THE MAIL. REMOVAL OF ANY PAGE(S) FROM DOCUMENT FOR REPRODUCTION MUST BE RE FERRED TO FILE PERSONNEL.

SCEcorp Southern California Edison The Mission Group 2244 Walnut Grove Avenue 2244 Walnut Grovc Avenue 18101 Von Karman Avenue Rosemead, California 91770 Rosemead, California 91770 Suite 1700 (818) 302-2222 (818) 302-1212 Irvine, California 92715 (714) 752-5588