ML17297A652

Annual Financial Rept 1980

ML17297A652
Person / Time
Site:	Palo Verde
Issue date:	02/19/1981
From:	SOUTHERN CALIFORNIA EDISON CO.
To:
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ML17297A650	List: ML17297A649 ML17297A651 ML17297A652 ML17297A653 ML17297A654 ML20037D501
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Download: ML17297A652 (44)

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Southern California Edison Company Southern California Edison Company provides electric ser-vice in a 50,000 square-mile area of Central and Southern California. This area includes some 800 cities and commu-nities'with a population of more than eight millionpeople.

Edison's gross investment in utilityplant totals nearly

$8.4 billion. Operating capacity at peak during 1980 to-taled 15,504 megawatts (MW),which included 13,221 MW of Company-owned facilities and 2,283 MWof capacity from other sources. Of the Company-owned facilities, 78 /0 was comprised of oil-and gas-fired generating units.

SCE's interest in coal-fired generating units accounted for another 12 /o, and 7 /0 is in hydroelectric plants. The Com-pany's 80 /0 interest in a nuclear plant accounted for the remaining 3 /o.

The Company, incorporated in 1909 under the laws of California, is a public utilityand its retail operations are subject to regulation by the California Public UtilitiesCom-mission which has the authority, among other things, to establish retail rates and to regulate security issuances, accounting and depreciation. The Company's resale operations are subject to regulation by the Federal Energy Regulatory Commission as to rates on sales for resale, as well as to other matters including accounting and depreciation.

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

The Company's planning and siting of new plant con-struction are subject to the jurisdiction of the California Energy Commission. Edison also is subject to various governmental licensing requirements, to Securities and Exchange Commission filingand disclosure requirements, and to certain other federal, state and local laws and regulations, including those related to nuclear energy and nuclear plant construction, environmental protection, fuel supplies and land use.

Contents 2:

Letter to Shareholders 5:

Review of 1980 16:

Financial Review 18:

Reports of Management and Independent Public Accountants 19:

Financial Statements 34:

Capital StockDividend and Price Information 34:

Management's Discussion and Analysis of Financial Condition and Results of Operations 36:

Selected Financial Data 1970-1980

Southern California Edison Contpatty 1980 Annual Report Highlights Earnings Per Share 1980 3.50 1979 4.56 Change (23.2)%

Five-Year Compound Growth 4.1%

Common Dividends Paid PerShare'2.78 2.54 9.4 10.6 Operating Revenues (000)

$3,661,117

$2,563,974 42.8 17.3 Energy Costs (000)

Operating Expenses Net of Energy Costs (000)

$2,371,827 917,156

$1,344,023 834,955 76.5 9.8 10.5 Kilowatt-hour Consumption (000)

Customers Served 59,915,187 3,163,968

~ 59,517,861 3,082,382

'0.7 2.6 3.1 2.8 Area Peak Demand (Megawatts)

Area Generating Capacity at Peak (Megawatts) 12,841 k

15,504 12,662 15,071 1.4 2.9

'On September 18,1980, the Company's Board of Directors authorized an increase in the common stock quarterly dividend to $0.74 from $0.68 per sharc, effective with the October 31, 1980 payment, which is equivalent to $2.96 pcr share on an annual basis.

Earnings Per Share and Dividends Paid Per Share

$3.80,

$3.80

$3. 52

$4. 56

$3. 50

$1.68

$ 1.92

$2.24

, $2.54

$2.78 1980 Sources and Distribution of Income

~ Earnings Per Share E2 Dividends Paid Per Share Agricultural Other Itesale Public authorities 2%

6%

6%

god

/o 7%

Dividends Earnings rcinvested 1%

in the business 2%

Taxes Depreciation ~ 6oro Maintenance ~

Interest 70 Commercial 2$%

Other operation expenses (principally labor) 10 Industrial 26%

Energy costs 62%

Residential 27%

1976 1977 1978 1979 1980 Consistent increases in the common stock dividend underscore the Company's commitment to provide competitive returns to its common stock shareholders. The Company's $294 milliongeneral rate increase, cffcctive January 1, 1981, is expected to reverse the earnings decline experienced in 1980.

Sources Distribution The Company's sources of income in 1980 reflected a well balanced contribution from each of the major customer classes. Energy costs represented a major portion of the distribution of income, accounting for approximately 62 cents out of every dollar the Company collected in 1980.

Southern California Edison Company To Our Shareholders The year 1981 began on an encouraging note with increased recognition from both the public and private sectors that we must find solutions to the problems of inflation and lagging productivity, in-crease our domestic energy resources, reduce our re-liance on foreign oil and give greater attention to cost-effective decisions and actions.

Your Company for some time has been working toward these goals, and we pledge to continue and intensify our efforts to improve productivity through increased management effectiveness, stringent cost controls and practical conservation programs.

Further, we intend to remain in the forefront of innovation in our planning and operations to eco-nomically and efficiently meet the needs of our customers.

In the area of cost control, excluding cost increases since the 1973 oil embargo of low-sulfur, foreign oil and other fuels over which we have no control, Edi-son's price of electricity has gone up less than the rate of inflation and less than most other commodities and pioducts in Southern California.

In the. area of conservation, the Company has implemented nearly 100 conservation programs since the early 1970s.which, with positive customer re-spons'e and 'co'operation, have saved more than 17 millionbari'els of costly fuel oil: This effort earned Edison the"President's Award for energy efficiency in January 1981 from,then-President Carter, and the State of California's first business award for energy conserv'ation in'1980 from Governor Brow'n.

In the area of innovation, your Company made a major policy commitment in 1980 to the accelerated development of alternative and renewable energy resources including wind, geothermal, solar, fuel cells, small hydro and cogeneration. Our strong existing resource base of hydroelectric, coal, oil and nuclear resources gave us the foundation from which to pursue these promising new energy forms that are important to our future generation mix.

Success in their development willcontribute to re-ducing our dependence on expensive fuel oil.and eliminating the adverse financial impact of large gen-erating facilitydevelopment that requires costly con-struction and long lead times for regulatory approval.

Edison's ability to financially support development of renewable and alternate resources as well as con-ventional resources is dependent upon timely and adequate rate relief. In this connection, effective January 1, 1981, the California Public Utilities Com-mission (CPUC) authorized the Company an annual increase in general rates of $294 million. The new rates provide for an increase in the Company's 1981 authorized rate of return on rate base from 9.6% to 11.2% and an increase in return on common equity from 13.49% to 14.95%, the highest return ever authorized by the CPUC for a major California utility.

The increased rates and higher authorized return are of particular importance because earnings per share for 1980 were $3.50, down from $4.56 recorded in 1979. The lower earnings resulted primarily from increases in operating and money costs not covered by 1980 rates and by the dilutive effect of an in-creased number of common shares outstanding.

Earnings also decreased as a result of oil inventory financing costs which were above the level included in 1980 rates. However, a recent energy cost adjust-ment decision by the CPUC should help provide for the recovery of future inventory carrying costs asso-ciated with fuel oil price increases.

The adverse impact of inflation on earnings in 1982 also should be partially alleviated by a $92 million attrition allowance granted by the CPUC to be effec-tive January 1 of the 1982 non-rate-case year.

By turning more to alternative resources and en-ergy management programs, we believe we can further neutralize some of the inflationary factors which adversely affected 1980 financial results.

Largely because of conservation programs, Edison currently projects average annual peak demand to in-crease by only 2.8% per year in the present decade while kilowatt-hour (KWH)consumption is estimated to increase by only 2.4% annually. This compares with a 1970 projected growth rate of 7.5% annually for both peak demand and KWHconsumption for the decade of the 70s.

The Company projects a need for about 6,000 additional megawatts (MW) of generating capacity to meet the requirements of an estimated four million customers by the end of the decade. Renewable and alternative energy resources are now forecast to meet approximately one-third or 2,000 MWof this additional need. Another 2,340 MW are scheduled to be provided by San Onofre Nuclear Generating Sta-tion Units 2 and 3, and Palo Verde Nuclear Units 1, 2, and 3 in Arizona.

While extensive studies by the Nuclear Regulatory Commission (NRC) reaffirmed in January 1981 the

Southern California Edison Contpany seismic design basis of San Onofre Units 2 and 3, continued slow NRC administrative processing has caused scheduled operation of Unit 2 to be moved back from the fourth quarter of 1981 to the second quarter of1982, and operation of Unit 3 to be moved back from the first quarter of 1983 to the third quar-ter of 1983. Public hearings for the licensing of Units 2 and 3 are expected to begin in mid-1981.

We also willcontinue to pursue the licensing of California and out-of-state coal projects in order to maintain our coal option for future energy resources.

These power generation projects are important to our resource requirements in the event that renew-able and alternative sources are delayed in fulfilling the promise we believe they hold.

On September 18, the Board of Directors declared an 8.8% increase in the common stock quarterly dividend by raising the rate, on an annual basis, to

$2.96 per share. At year-end, the dividend was pro-viding a yield on common stock market value of11.6%

The Board's action represented the fifthdividend increase in the past four years. Over that period, the annual dividend increase has averaged 15.2%.

Edison's Board of Directors elected your Chairman and ChiefExecutive Officer,and yourPresident to their current positions effective July 1 following the re-tirement of Jack K. Horton who served with distinc-tion as the Company's Chairman since 1968 and its Chief Executive Officer since 1965. Additionally, your President was elected a Director effective July 1.

The elections of H. Fred Christie as Executive Vice President and Chief Financial Officer, and Michael L.

Noel as Vice President and Treasurer also became.

effective on July 1. Mr. Christie was formerly Senior Vice President and Chief Financial Officer while Mr. Noel was Treasurer.

We willcontinue to benefit from Mr. Horton's ex-perience in his current capacity as a Director and Chairman of the Board's Executive Committee. His contributions to the Company have been well ex-pressed in a resolution of the Los Angeles City Council which termed his career "a unique blending of respected leadership and innovative thinking."

We willmiss the able counsel of Company Directors William B. Coberly, Jr., and Terrell C. Drinkwater, who, because of having reached retirement age, are not standing for reelection to the Board on April16.

Mr. Coberly served as a Director since 1953, and Mr.

Drinkwater served as a Director since 1964.

Howard P. Allen Presirlent February 19, 1981 WilliamR. Gould Chairman of the Board Howard P. Allen WilliamR. Gould I~

Jack K. Horton Perhaps never before in the history of our industry has the need for innovation been as apparent as in this first year of the new decade. In this spirit, we reaffirm our commitment to improved productivity, effective conservation programs and the develop-ment of alternative and renewable energy resources.

Our new energy policy was cited as "a nationally significant breakthrough in utilityresource planning" by John Bryson, President of the California Public Utilities Commission. With the continued counsel of our Directors and the support of you, our sharehold-ers, our employees and our customers, and with a dedication to continued hard work and thoughtful innovation in the way we do business, we plan to live up to that appraisal.

Southern Ca!ifornia Edison Contpany Nuclear Approximately 1,760 MW willbe added to the Edison system by San Onofre Nuclear Generating Station Units 2 and 3 which are now 86%

complete. The licensing of the two units (shown below and at right),

coupled with the realization of Edi-son's alternative energy goals, will contribute to the displacement of expensive fuel oil in the last half of the 1980s. Edison also has a 15.8%

interest or 579 MW in Palo Verde Nuclear Generating Station Units1, 2, and 3 which are 56% complete.

Sonlhern California Edison Company Year in Review Monthly BillingAffects Reported Electric Consumption Electric consumption by Edison's 3.2 millioncustomers in 1980 totaled 59.9 billionKWH.However, Edison's conver-sion of customer accounts from bi-monthly to monthly billing has caused a distortion in statistical comparison of 1980 KWHconsumption with 1979 consumption.

The monthly billingchangeover was initiated in April and essentially completed in December. Electric bills, sent to about1.3 millioncustomers in December, would not have been mailed nor recorded until January of the 1981 report-ing year under the previous bi-monthly system. As a re-sult, reported electricity consumption in 1980 was 0.7%

over 1979 levels. Excluding the effect of the conversion, total KWHconsumption for 1980 would have de-clined 0.4%.

A total of 81,586 customers were added to the Edison system in 1980 compared to 95,837 in 1979 when the largest yearly customer increase since 1963 was recorded.

The increase in customers during the year subsequently increased total 1980 residential consumption by 1.7%

compared with 1979. Customer conservation efforts in

~ 1980 and the higher cost of electricity, however, served to reduce average annual residential consumption to 5,939 KWH as compared with 6,010 KWHin 1979.

Commercial usage gained 2.2% in 1980 as compared with the previous year, while industrial consumption de-clined 3.3% and consumption by other customer class-

,ifications increased by 3.2%.

The average annual growth in total KWHconsumption over the last five years has been 3.1%.

Record Peak Set During Heat Wave A record area peak demand of12,841 MW was set July 30, as a result of heavy air-conditioning loads during a heat wave. The new record represents a 1.4% increase over the 12,662 MWarea peak recorded in September 1979. The annual growth in peak demand over the last five years, including the 1980 peak, was 4.4%.

Generation Resources Under Construction Edison projects a need for 6,000 MWof new generating capacity for this decade to meet the electric needs of its customers. This generation requirement is equal to about 40 percent of Edison's current resources, In 1980, Edison spent approximately $782 millionon its construction programs and currently projects an expendi-ture of about $953 million in 1981.

Edison's ownership share of San Onofre Nuclear Gen-erating Station Units 2 and 3, which willeach provide 1,100 MW, was reduced from 80% to 76.55% during the year. This resulted from the purchase by the cities of Ana-heim and Riverside of1.66% and 1.79%, respectively, of Edison's interest in the two units, which are now about 86% completed. The Company's ownership interest in San Onofre Unit 1 remains at 80%.

Edison also has a 15.8% interest totaling 579 MWin three 1,222-MW units being constructed at the Palo Verde Nuclear Generating Station near Phoenix, Arizona.

Construction is about 56% complete and operation is scheduled for the 1983-86 period.

San Onofre Changes: As a result of evaluations of the Three Mile Island (TMI)accident, the NRC required a re-view of the design and operating procedures of all operat-ing nuclear power plants. Although San Onofre Unit 1 is different in design from TMI, the Company removed Unit 1 from service from late January to early February to per-form certain NRC-required changes. Additional NRC-required changes were implemented during the plant's re-fueling which commenced in April,and the Company ex-pects to proceed with additional design changes in 1981 and 1982.

During'the'April refueling of Unit 1 at San Onofre, normal maintenance procedures revealed deterioration of a number of the steam generator tubes. Corrective action irivolvinga new process developed by the steam gener-ator manufacturer, termed "sleeving," has been initiated to correct the tube leaks. The Company presently expects that Unit1 willreturn to service in the second quarter of 1981, subject to NRC authorization. Advantage is being

Southern California Edison Contpany Hydro Penstocks drop sharply through mountains to Edison's Big Creek Power Station P3 in photo at right below. Photo directly below shows new turbine which was added to the four-turbine power station in early 1980 to contribute another 35 MW to the Edison system. Of Edison's alternative and renewable energy options, hydroelectric power is estimated to be a prime source with a total of 720 MWof additional hydro generation targeted by the Company in the current decade.

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Southern California Edison Contpany Capacity Additions: 1981-1990 The Company has set a goal for renewable and alternative resources during the next ten years to provide about one<<

third of the approximately 6,000 megawatts of capacity additions required for load growth and retirement of older oiland gas-fired units.

Rene wablel Alternative (incl. hydro) 30%

Purchased power 21%

Nuclear 35%

Coal 14%

taken of the outage to perform additional NRC-required design changes which would have necessitated unit shutdown.

Generation Resources Planned Edison's reduced annual load growth projection of 2.8%

(down from an earlier forecast of 3.3%) has combined with increased purchased power and the Company's com-mitment to alternative and renewable energy resources to necessitate the rescheduling of two generating projects in 1980.

In November, Edison applied to the California Energy Commission for a deferral in hearings for its proposed Lucerne Valley 1,290-MW "peaker park" combustion-turbine generating facility.The facility is scheduled as a contingency project should other alternatives not develop as expected.

Edison has rescheduled the California Coal Project from 1988-1990 to 1991-1993. In response to the Company's Notice of Intent to build this three-unit, 1,500-MW coal-fired generating station, the California Energy Commission has recently determined that three sites located in the east-ern California desert are acceptable.

Edison has been pursuing the licensing of the Allen-Warner Valley Energy System, a multi-component coal project in Nevada and Utah. The Company withdrew its licensing application on this total project and plans to re-submit the application for a project limited to just the coal-fired Harry Allen Generating Plant in Nevada, which is now more consistent with the Company's current projec-tions for needed capacity.

Edison also continues to actively pursue the acquisition of non-capital generation resources in an effort to reduce the large amount of capital required for annual construction programs, and to further reduce dependence on expensive foreign oil. As opportunities arise, the Company plans to continue to purchase generating resources constructed and owned by other utilities in an effort to reduce the need for capital expenditures.

Non-capital generation resources are being examined in the Western U.S., Mexico and in Canada where a feasibility study is in progress for purchase participation in a 2,000-MW coal-fired generating station near Calgary, Alberta.

Edison Pursues Renewable Energy Resources Renewable and alternative energy resources are now fore-cast to meet one-third, or 2,000 MW, of the approximately 6,000 MWof additional electric generating capacity needed by Edison customers during the 1980s, compared to 14% or 900 MWprior to the Company's acceleration of its renewable energy plans.

Significant steps were taken in 1980 toward meeting this goal in four key areas.

~ Utilization of hydroelectric energy through hydro purchases from others and through expansion of Edison-owned hydro resources.

~ Utilization of solar energy through central station thermal generation and a program to encourage low-cost solar photovoltaic development.

~ Utilization of wind energy through wind turbine developments and a program to encourage wind turbine installations by others.

~ Utilization of geothermal energy from beneath California's Imperial Valley and through a geothermal purchase agreement with Mexico.

Hydro: On February 24, a hydroelectric unit was placed in operation at Big Creek in the High Sierra which added 35 MW to the Edison system, and an application was filed in February with the Federal Energy Regulatory Commis-sion for the construction of a 200-MW hydroelectric, unit near Big Creek in the mid-1980s.

Hydroelectric power remains the Company's prime source of alternative energy with a total of 720 MWof additional hydro generation planned by the end of the current decade.

Edison has entered into contractual agreements to pur-chase hydro power from the development of a facilityof between 200 MWand 300 MWby the Upper San Joaquin

Soufhern California Edison Contpany Geothermal Three Edison generating stations in California's Imperial Valley will provide the base for Edison's accel-erated commitment to geothermal energy by 1990. Edison also has completed a benchmark geothermal purchase agreement with Mexico for 70 MWof geothermal power.

Shown below is the Company's 10-MW Brawley geothermal plant which is the nation's first utility-owned central station generating system to operate on steam con-verted from a hot water geothermal source. Schematic at right shows how steam propellant is extracted from Imperial Valley's highly saline geothermal fluids.

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Water Flow Steam Flow Production well Hot water Sc steam Separator Steam Turbine Generator Electricity Condenser Cooling tower Cooled water Water vapor Injection pump Waste water Injection well 1

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Southern California Edison Ctnnpany In addition to completing nu-clear capacity under construc-tion, Edison is pursuing the development of renewable and alternative resources and non-oil-generated purchases to reduce its dependence on foreign oil and to help stabilize the cost of service to its customers.

1990 Projected Megawatts 20,230 Hydro 6'urchased 15%

power 2%

Nuclear 10%

Rene wablel Alternative (incl. hydro)

Purchased power 13%

16 Nuclear 13%

I +IIIICoal 13 Generation Capacity Mix

'1980 Recorded Megawatts 15,504 Oil6 Gas 67%

Oil 6c Gas 45%

River Water and Power Authority and from a 120-MW Dinkey Creek project by the Kings River Conservation District, both scheduled for operation in the mid-1980s.

An additional 100 MWof small hydro capacity from customer-owned facilities and Edison-owned hydro im-provements are also planned in the same time frame.

Solar: On July 23, Edison completed an agreement for the pilot production of silicon solar cells using a new dendritic web process for increased cell efficiencies and lower manufacturing costs, and on October 30 dedicated the nation's largest solar electric central receiver power plant near Daggett, California. The project, termed "Solar One," is scheduled for operation in late 1981 and willbe-come the first electric generating station powered directly by solar energy and connected to a utilitygrid. Solar One is a cooperative effort by Edison, which serves as project manager of the non-solar portion of the plant, the Depart-ment of Energy (DOE), the Los Angeles Department of Water and Power, and the California Energy Commission.

Located at Edison's Cool Water Generating Station, the solar system willproduce 10 MWof electric power during peak daylight hours, enough electricity to serve about 5,000 people. The facilityalso willinclude a thermal stor-age subsystem capable of providing steam to generate electricity at approximately 7 MWduring periods of cloud

" cover'and in the early'evening hours following sunset.

Edison's production goal for solar generation is 310 MW in the current decade through the development. of both solar, heat conversion systems and solar photovoltaics.

'"%nid 'On October 30, Edison became the'first electric"'tility to issue a proposal for the shared development of wind parks, and on December 16, began operation of Cali-fornia's first wind turbine generator near Palm Springs.

The horizontal axis wind turbine generator is located near Edison's Devers Substation where the Company plans to complete construction of a vertical axis wind turbine generator in early 1981. The horizontal Bendix/Schachle unit is designed to produce approximately 3 MWof elec-tricitywhile the vertical axis Alcoa Darrieus generator represents a second concept in wind energy conversion and is expected to produce about i/z MWof electricity.

In a further effort toward achieving the development goal of 120 MWof wind-generated electricity by 1990, Edi-son became the first investor-owned electric utilityto solicit proposals from private developers for the commer-cialization of wind parks. Under the plan, Edison will purchase wind power from energy suppliers who install

'ind generators of their own selection at sites or parks withiriEdison's 50,000 square-mile service territory.

Geo/hernial: On October 15, Edison dedicated the first system to use the Imperial Valley's highly saline geother-mal fluids for central station electrical generation, and on November 12 signed the first agreement between the U.S.

and Mexico'o purchase energy from Mexican geothermal deposits.

In a cooperative venture with Uriion Oil Company of California, Edison began utilizing geothermal energy from the Imperial Valley at Brawley in October to produce 10 MWof electricity, enough power for a community of 5,000 people. The Brawley unit is the first utility-owned generating plant in the United States to operate on steam converted from a geothermal hot water resource, as dis-tinguished from a pure steam resource..

Union and Edison also are developing a 10-MW geo-,

thermal plant near Niland, south of the Salton Sea. The plant's initial operation is scheduled for 1982. Also, com-pletion of a commercial size, 41-MW geothermal generat-ing unit at Heber is projected for 1983. The three Imperial Valley developments willprovide the base from which Edison plans to meet its goal of 420 MWof geothermal energy by 1990.

Edison signed an agreement in November to purchase electricity'-from Mexico's geothermal fields nea'r~3llexicali.

The transaction with Comision Federal de Electricidad (CFE) marks the first international sale of geothermal'ower in North America. It gives the Company purchase rights to up to 70 MWof electricity beginning in 1984 when Mexico's new geothermal generating units are scheduled to be on line. Another 260 MW in purchase contracts with CFE are also anticipated.

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Southern California Edison Contpany 10 Cogeneration and Fuel Cells Heat from on-site electricity genera-tion helps paper manufacturing process at Pomona's Garden State Paper Company in photo below.

Termed cogeneration, electricity as an industrial by-product, and small power production arrangements within Edison's service territory in 1980 totaled 206 MW. Additional generation capability by 1990 is planned from fuel cell de-velopments. A phosphoric acid fuel cell built by United Technologies Corporation is pictured at right along with schematic showing cell's electrochemical operation.

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1. Fuel

2. Fuel processing system

3. Hydrogen

4. Air(oxygen)

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6. Cathode

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10. AC electricity I'/+7 l L'rt777L

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Southertt California Edisott Company Research and Development Expenditures (in millions)

The Company, an industry leader in research and devel-opment, has made a major commitment to the accelerated development ofrenewable and alternative energy resources.

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$28 C3 Recorded,

~ Projected 1977 1978 1979 1980 1981 Cogenerntiott: Edison actively pursued cogeneration contracts with large commercial and industrial customers during the year in a major effort to convert waste heat and gas from industrial processes into usable electricity at the industrial site. At year's end, electrical cogeneration and small power production arrangements within the Company's service territory totaled 206 MW.

Under the Company's accelerated resource plan, cogeneration is projected to contribute an additional 300 MW to the Edison system by 1990.

Research attd Development: Edison's research and develop-ment expenditures in 1980 totaled more than $40 million.

Expenditures of nearly $56 millioncurrently are planned for research and development in 1981 including substantial alternative energy R&D.

The Company's research efforts include support of a solar photovoltaic pilot production facilitydesigned to test production feasibility of a low-cost, continuous silicon ribbon manufacturing process. Development efforts also include a 92-MW coal-gasifier/combined cycle demonstra-tion facilityat Edison's Cool Water Generating Station site, a feasibility study near the Salton Sea aimed at generating electricity from solar heated salt ponds, and investigation of a 200-ton-per-day demonstration facility which would utilize thermochemical and bioconversion systems to produce gaseous fuel from wastes.

In addition, Edison plans to produce 130 MWfrom fuel cells in the current decade through research support at Westinghouse and General Electric and through con-tinued participation in a multi-utilityprogram with United Technologies Corporation.

Conservation Efforts Increase Customer response to the Company's conservation pro-grams in 1980 resulted in a savings of more than three billionKWHof electricity, equivalent to about five million barrels of expensive fuel oil. This response was due to the combined efforts of nonresidential and residential cus-tomers as well as the Company's activities in the areas of voltage regulation, distribution circuit management and streetlight conversion.

Edison has placed increased emphasis on its streetlight conversion program and at the end of 1980, energy-efficient high-pressure sodium vapor lamps had been in-stalled in 102,390 Edison-owned streetlights. The remain-ing 238,610 Edison-owned streetlights are scheduled for conversion to sodium vapor by 1984.

The Company augmented its commercial and industrial energy audit activities in 1980 to include the testing of fi-nancial incentives to further encourage customers to make investments in conservation and load management hard-ware such as more efficient lighting fixtures and demand limitingequipment and controls. These financial incen-tives and the'ongoing energy audit activities with the Company's commercial, industrial, agricultural and public authority customers achieved a total savings of 1.1 billion KWHand a demand reduction of 276 MW.

While Edison has offered home energy audits to high-use (1,000 KWH per month) residential customers on a continuing basis with more than 15,000 audits conducted

,in 1980, the service willbe expanded in 1981. The ex-panded program conforms to the federally-mandated Res-idential Conservation Services program as filed during the year by the California Energy Commission.

The computerized home energy audit program termed "SAVES" (Sure Actions forValuable Energy Savings) was expanded in 1980 to respond to inquiries from 115,000 res-idential customers with personalized detailed conserva-tion and load management suggestions.

The Company plans to test the use of heat pump water heaters in approximately 300 residences in 1981. The heat pump water'heater test program is the result of:two years of testing concluded in 1980 with DOE and other Califor-nia electric utilities.

The Company installed more than 37,000 electric water heater insulation jackets in 1980 and distributed approxi-mately 37,700 low-flowshower devices. Since the pro-gram's inception in 1978, almost 83,000 jackets and 81,000 shower devices have been installed with energy savings

Southern California Edison Company Wind Resembling a propeller from a gi-gantic aircraft, 191-foot tall Bendix/

Schachle 3-MW wind turbine generator (WTG) towers above California's first wind energy center near Palm Springs. The wind center was dedicated by Edison in De-cember and willhouse a second,

'/x-MWAlcoa Darrieus WTG (at right) in early 1981. Edison plans to help augment its electrical genera-tion base by 1990 through such in-stallations and through a program to encourage wind turbine in-stallations by others.

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Southern California Erlison Company 13 Energy costs, the Company's largest expense, continue to rise. However, recent modiTi-cations to the Energy Cost Adjustment Clause (ECAC) procedure have enabled the Company to recover its energy costs on a timely basis.

CDTotal Revenues

~ Energy Costs Total Revenues and Energy Costs (in billions)

$1.8

$2.1

$2.3

$2.6

$3.7

$0.9

$1.0

$ 1.2

$1.3

$2.i 19'76 1977 1978 1979 1980 from the combined installations totaling approximately 206 million KWH.

Load Management Activities Increase Complementing Edison's conservation efforts are a number of nonresidential and residential load manage-ment programs designed to reduce peak demand and defer the need for constructing additional generation facilities. These programs are expected to reduce the Company's projected peak demand by 700 MWby 1985, a capacity equivalent to an amount which could serve more than 350,000 people.

To meet Edison's goal to reduce peak demand, the Company has developed a number of load management programs for commercial, industrial and agricultural customers. Edison's load deferral experiments are designed to test load shifting equipment performance, while load management programs have been implemented to include several rate categories such as time-of-use (TOU) rates and interruptible rates, both designed to limitpeak demand.

Historically, residential customers are the single largest contributors to Edison's demand peak. In 1980, Edison initiated an innovative approach to residential load man-agement called Demand Subscription Service (DSS).

The DSS concept allows a customer to select a level of kilowatt demand and is designed to automatically limit the customer's demand for electricity to that level when the device is activated during periods of critical capacity availability. DSS utilizes a load management device in-stalled in conjunction with the customer's meter which willtrip (shut off) the customer's total electrical load ifthe predetermined demand level is exceeded. The customer may manually reset the device and restore service after the electrical load has been reduced to the predetermined level or below.

The Company's Swimming Pool Pump program is de-signed to shift swimming pool pumping to off-peak hours and to reduce the customer's pool pumping time by in-stalling time-clock trippers. Approximately 54,000 new participants were added to the program in 1980, bringing total participation to more than 95,600 customers and resulting in an on-peak demand reduction of 108 MW.

Energy Costs Continue To Rise Energy costs continue to represent the Company's largest expense, amounting to $2.4 billionin 1980, compared with

$1.3 billionin 1979. These costs consumed approximately 62 cents out of each income dollar.

Fuel oil consumption in'1980 totaled 30 millionbarrels, down from 48 millionbarrels in 1979, primarily because the Company was able to utilize significant amounts of natural gas in addition to purchased energy from the Pacific Northwest and Southwest.

More than 196 billioncubic feet of natural gas, equal to about 33 millionbarrels of oil, was burned during 1980, compared to approximately 150 billion cubic feet, equal to about 25 millionbarrels ofoil,in 1979. Natural gas supplies met more than 50% of the fuel requirements of the Company's oil-and gas-fired generating plants for the first time since 1972.

Synthetic Fuels The Company, through Mono Power Company, its wholly-owned fuel resources exploration and develop-"

ment subsidiary, is participating in a feasibility study of the proposed Emery, Utah, Coal Conversion Project, which is intended to produce substitute natural gas and methanol. Mono also is one of12 participants in the Paraho Project, an $8 millionengineering effort for an oil shale commercial demonstration module.

7 Resale Rates In December 1980, the Company filed an application with the Federal Energy Regulatory Commission for higher re-sale rates and an optional TOU rate for resale customers.

These rates',"if approved, would produce annual increases in resale revenues of approximately $18.6 million.

Costly AirQuality Rule In 1980, Edison initiated a court challenge to a rule adopted by the California AirResources Board which re-quired a 90% reduction of oxides of nitrogen (NOx) from power plants by 1990. This rule could have cost the Com'-

pany's ratepayers as much as $1.5 billion by requiring massive NOx control equipment retrofitting at 16 Edison

Southern California Edison Contpany 14 Solar Technicians install first of 1,818 heliostats (mirrors) at nation's largest central station solar generat-ing facilitynear Daggett, Californi, in photo at right below. When completed in late 1981, computer-directed heliostats willreflect sun' heat to 300-foot central tower (shown in background and in schematic at right) to produce 10 MWof electricity during daylight hours. Edison plans to increase its generating capacity in the 1980s from both solar thermal systems like Solar One and high efficiency, low-cost solar photovoltaic systems similar in configuration to sys-tem shown directly below.

t~a

@~<3 t~>a l~><3 V~<3 10 5

Y 4

u te

~ Waterflow o-Steam flo

1. Sun

2. Heliostat

3. Boiler

4. Steam

5. Turbine

6. Generator

7. Electricity

8. Condenser

9. Cooling tower

10. Cooled water

11. Water vapor

12. Pump

13. Make-up water

~

I I

I I

5%

I I

II"

I I

'( 'I

>> I 5I I

7 t I>>

Southern California Edison Company 15 In1980, a July heat wave pushed the demand for elec-tricity to a record peak of 12,841 megawatts. However, Edison's load management programs and conservation ef-forts by its customers helped hold the 1980 peak to only 1.4% above the 1979 peak.

Area Capacity and Peak Demand (in megawatts) 14.071

'4,278 14.966 15.071 15,501 11,292 11,564 12,159 12,662 12,841

~ Area Capacity

~ Area Peak Demand Edison Van Pool Program In May, Edison initiated a van pool program for Company employees which, when fullyoperational, is expected to save more than 400,000 gallons of gasoline annually by removing approximately 500 vehicles per workday from roads and freeways. Fares charged to employees currently in the program are used to pay for Edison's lease on the vans and for fuel, insurance and upkeep. The Company pays for the administrative costs of the program, which is the first ever underwritten in California by a publicly-held utility.

AffirmativeAction Program Continues Efforts to increase the representation of minorities and females in the work force continued during 1980 through the Company's AffirmativeAction Program.

During 1980, minority representation increased from 22.2% at the beginning of the year to 24.8% at year-end.

During the same period, female representation increased from 18.9% to 20.2%.

During the five-year period from year-end1975 through year-end 1980, minority representation in the Company's work force increased from 16.5% to 24.8% and female employees increased from 1S.4% to 20.2%.

Management Appointments Effective January 1, 19M, Alan M. Nedry was appointed Vice President-Washington D.C. Region, and Geoffrey Cook was appointed Vice President-Sacramento Region.

R. D. Blake, formerly Central Division manager, and R. L. Whelchel, formerly Southeastern Division manager, 1976 1977 1978 1979 1980 Reserve margin:

2598 2396 2396 19'fo 219'r power plants. However, revisions to the rule adopted by were appointed Central and Southeastern Division the Hoard at year's end are expected to reduce the cost Vice Presidents, respectively, effective June 1, 1980.

burden to ratepayers to between $300 millionand $500 millionby limitingthe retrofit to seven power plants. Sub-Jack K. Horton Humanitarian Award stantial cost exposures remain, however, and the Company Edison has established an award to provide recognition plans to continue its challenges through the courts to the for those deserving employees who have distinguished most recent version of the rule.

themselves by displaying acts of exceptional courage and initiative in an emergency situation, or who perform any other noteworthy act or service of a humanitarian nature.

'he award is named in honor of Jack K. Horton who, while serving as Edison Chairman for 22 years," contrib-uted much toward the achievement of excellence for which this Company stands.

Percentage of Male, Female and Minority Employees at Year-End 1975 and 1980 Male Year-End 1975 1980 Female Year-End 1975 1980 Black Year-End 1975 1980 Asian American Year-End

'1975

'1980 American Indian Year-End 1975 1980 Hispanic Year-End 1975 1980 Total Minorities Year-End 1975 1980 Management'"

93.5 88.0 6.5 12.0 1.7 3.0 3.S 5.1'.6 0.5 4.1 6.2 9.9 14.9 Non-Management'2'0.7 76.1 19.3 23.9 6.4 9.0 1.4 2.8 0.7 0.9 10.8 16.6 19.4 29.3 Total Company"'4.6 79.8 15.4 20.2 5.0 7.1 2.1 3.6 0.7 0.8 8.8 13.4 16.5 24.8 il) htanagcmrnt employers include thc "0/fictats and Managers" and "professionals" Af/innatiec Action Categories.

Q) lvon.htanagrmrnl employers include the "Technicians," "O/Pcc and Clerical," "Craftsmen," "Operators,"

"taborer>>" and "Scruler 1Vor hers" Affirmative Action Categories.

i3l Includes all classes ofcmptoyccs.

Southern California Edison Company Financial Review 16 The following discussion highlights the events and occur-rences which the Company believes had a significant im-pact on its financial position during 1980. A more detailed review of the factors affecting Edison's operations is con-tained in Management's Discussion and Analysis of Finan-cial Condition and Results of Operations in this report.

Revenues surpassed the three and one-half billiondol-lar level during 1980, totaling $3.66 billionfor the year.

This represented an increase of $1.097 billionor 43% over 1979 revenues. However, most of the increase reflected re-imbursement for expensive foreign oil and other energy costs and did not affect earnings. Therefore, despite this record level of revenues, earnings per share. for 1980 were down considerably from the $4.56 recorded in 1979, result-ing primarily from increases. in operating expenses and financing costs irt the year between general rate case deci-sions and the dilutive effect of an increased number of common shares outstanding. Earnings also decreased as a result of oil inventory financing costs which were above the level included in 1980 rates. However, a recent Energy Cost Adjustment Clause (ECAC) decision by the Califor-nia Public Utilities Commission (CPUC) should help provide for the recovery of certain inventory carrying costs associated with fuel oil price increases.

General Rate Increase Granted As discussed in the Letter to Shareholders, the Company was granted a $294 milliongeneral rate increase effective January 1, 1981. In granting this increase, the CPUC recog-nized substantial inflationary increases in operating and capital costs along with added expenses for customer con-servation programs and the further development of re-newable and alternate energy resources.

The biennial rate review process, in effect since 1979, and inflation caused the Company to experience lower earnings in the non-rate-case year. This condition, which affected the Company in 1980, should be partially alleviated as a result of the CPUC's authorization of an additional $92 millionattrition allowance for 1982. This al-lowance is designed to offset some of the increases in operating and maintenance costs generally experienced in the year following a rate-case year.

Energy Cost Adjustments Under the ECAC procedure, electric rates are adjusted up or down three times annually to reflect the cost of fuel and purchased power used to generate electricity in a given period. Energy costs above or below those used in the established rates are accumulated in a balancing ac-count, and the accumulated amount is reflected in suc-ceeding rate adjustments. Although cash flow is affected, the ECAC procedure is designed to prevent fluctuations in earnings as a result of changes in energy costs.

The ECAC procedure was modified by the CPUC early in 1980 and, as a result, the 1979 year-end undercollection of over $300 million, together with interest, was fullyre-covered during 1980. This was accomplished through two ECAC increases granted by the Commission which, in part, were designed to eliminate the undercollection in the balancing account. The first increase, of $338 million annually, became effective in February concurrent with the changes in the ECAC procedure. The second increase, of $560 millionannually, was effective in May.

In recent months, substantial quantities of natural gas have been available to the Company, reducing the need to burn higher-priced foreign oil. Consequently, at the re-quest of the Company, the CPUC granted two ECAC rate reductions. The first, a decrease of $236 millionannually, was effective in October. The second, of $194 millionan-nually, became effective concurrent with the general rate increase on January 1, 1981.

Financing Program Continues Continued double-digit inflation, the Federal Reserve Board's restrictive monetary policy, and uncertain domes-tic and world affairs all contributed to extreme vola-tilityin interest rates and financial markets during 1980.

The prime rate, the interest rate charged by large U.S.

commercial banks to their most credit-worthy business borrowers, reached a record high of 20% in April, then plunged to below 11% in July. Late in the year, interest rates soared again and ended the year at an all-time high of 21'/r.%.

Southern California Edison Contpany 17 Funds Required for Construction (in millions)

Construction expenditures are projected to be within the Company's objective to main-tain a financially manageable growth in plant additions.

Construction expenditures for 1981 reflect the near-term completion of San Onofre Nu-clear Units 2 and 3.

$782

$953

$768

$806

$769

$839

~ Recorded

~ Projected 7<<'j

<<Cl.'

<< I 1980 1981 1982 1983 1986 198$

Despite these difficulties in the capital market, the Company raised $726 millionin new capital through four public securities issues, one private placement, and the sale of common stock under Edison's Dividend Reinvest-ment and Stock Purchase Plan, Employee Stock Purchase Plan, and Employee Stock Ownership Plan. This capital was used to finance the Company's continuing construc-tion program and to refund maturing debt obligations of

$85 million. Details of these issues are provided in the ac-companying table.

Of particular note, in September the Company privately placed $50 million in 9s/8% mortgage bonds through an agreement, negotiated in September 1979, with a syndi-cate of foreign banks.

Reflecting the $726 millionin total new capital raised in 1980, Edison's capital structure at year-end 1980 was 47.5% debt, 13.6% preferred and preference stock, and 38.9% common equity.

Looking to 1981, the Company's capital expenditures are expected to amount to approximately $953 million for the construction of new facilities and the development of renewable and alternative resources. Additionally, $144 millionwillbe required to refund maturing debt obliga-tions. To help finance these capital needs, Edison plans to issue common and preferred stock, and mortgage bonds.

Some of the non-conventional sources of capital which Edison plans to pursue include Eurodollar funds, U.S.

government loan guarantees and grants for its research and development programs in renewable and alternative resources, and tax-exempt financing for pollution control equipment.

The first financing of the new year, eight millionshares of common stock, was issued on January 29 at an initial public offering price of $243/s per share, raising approxi-mately $188 millionin net proceeds.

Over the five-year period 1981 to 1985, construction ex-penditures are projected to amount to approximately $4.1 billion. Construction expenditures as a percent of total capitalization are expected to average less than 10% annu-ally during this period, which is within the Company's objective to maintain financially manageable growth in plant additions.

1980 Financings Month Issue February Common Stock 7,000,000 shares

$23'/s March 25-Year First &Refunding Mortgage Bonds Cou on Rate 15'/8%

September 7-year First &Refunding Mortgage Bonds Coupon Rate9s/s%

October Cumulative Preferred Stock Dividend Rate 12%

November 30-year First & Refunding Mortgage Bonds Coupon Rate 133/2%

Amount (Millions)

$162 200 50'5 150 Ongoing Dividend Reinvestment and

, Stock Purchase Plan, Employee Stock Purchase Plan, and Employee Stock Ownership Plan 89

$726 "Reported as long-term debt in 1979 Balance Sheet and Statement of Changes in Financial Position.

Dividend Reinvestment Plan Continues to Grow At the end of1980, more than 20,000 shareholders, or about 13% of the holders of Edison's common stock, were participating in the Dividend Reinvestment and Stock Purchase Plan.

During the year, participants purchased 1.7 million shares with over $40 millionof dividends and optional cash payments. Since the plan was started in 1976, over $93 million has been invested in new shares. This represented approximately 4 millionshares, or 5%, of the Company's total common stock outstanding on December 31, 1980.

Southern California Edison Conipany 18 Report ofManagement The accompanying financial statements have been pre-pared by Company personnel in conformity with gen-erally accepted accounting principles appropriate in the circumstances applied on a consistent basis. The integrity and objectivity of the data in these financial statements are the responsibility of management. In order to assure this integrity and objectivity, the Company maintains a highly developed system of internal controls. This system includes communication by written policies and proce-dures, organization structures that provide for appropri-ate division of responsibility, and the selection and training of qualified personnel and is augmented by pro-grams of internal audits.

An independent examination of these financial state-ments has been conducted by Arthur Andersen &Co.,

independent public accountants, in accordance with generally accepted auditing standards. The accompanying

,Report of the Independent Public Accountants expresses ari informed opinion as to whether the financial state-ments, considered in their entirety, present fairlythe Com-pany's financial position, results of operations and changes in financial position, in conformity with generally accepted accounting principles applied on a consistent basis.

The Audit Committee of the Board of Directors is entirely composed of Directors who are free from any rela-tionships that, in the opinion of the Board of Directors, would interfere with the exercise of independent judg-H. Fred Christie Executive Vice President and Chief Financial Officer WilliamR. Gould Chairnian of the Board and Chief Executive Officer ment as Audit Committee members. The Audit Commit-tee meets periodically with the management of the Com-pany, the independent public accountants and the internal auditors to make inquiries as to the manner in which the responsibilities of each are being discharged and reports thereon to the Board of Directors. In addition, the Audit Committee recommends to the Board of Directors the an-

'nual appointment of the independent public accountants with whom the Audit Committee reviews the scope of the audit and non-audit assignments and the related fees, the accounting principles being applied by the Company in financial reporting, the scope of internal financial auditing procedures, and the adequacy of internal accounting con-trols.

To further assure independence in performing and reporting the results of audits, representatives of the inde-pendent public accountants and the Company's staff of internal auditors have fulland free access to meet with the Audit Committee, without members of Company management being present, to discuss any accounting, auditing, or financial reporting matter.

Report. ofIndependent Public Accountants

'To the Shareholders and the Board of Directors, Southern California Edison Company:

We have examined the balance sheets and statements of capital stock and long-term debt of Southern California Edison Company (a California corporation, hereinafter re-ferred to as the "Company" ), as of December 31, 1980 and 1979, and the related statements of income, earnings reinvested in the business, additional paid-in capital and changes in financial position for each of the three years in the period ended December 31, 1980. Our examinations were made in accordance with generally accepted audit-ing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances, and also included similar examinations of the financial statements for each quarter within each of the years.

Los Angeles, California February 6, 1981 ARTHURANDERSEN &CO.

In our opinion, the financial statements referred to above present fairly the financial position of the Company as of December 31, 1980 and 1979, and the results of its operations and the changes in its financial position for each of the three years in the period ended December 31, 1980, and further, in our opinion, the quarterly financial data set forth in Note 7 of "Notes to Financial Statements" summarize fairlythe results of operations for each quarter within such years, all in conformity with generally ac-cepted accounting principles applied on a consistent basis.

Southerrr California Edison Conrpany Statements of Income 1980 Year Ended Deeenrber 31, 1979 Thousands ofDollars 1978 19 Operating Revenues:

Sales (Note1)

Other

$3,631,373 29,744

$2,553,126 10,848

$2,294,543 34,255 Total operating revenues (Note 7) 3,661,117 2,563,974 2,328,798 Operating Expenses:

Fuel (Note 2)

Purchased power (Note 9).

Provision for energy cost adjustments (Notes 1 and 4)..............

Subtotalenergy costs...............

Other operation expenses (Notes 2, 5 and 6)

Maintenance (Note 1).

Provision for depreciation (Note 1).........

Taxes on incomecurrent and deferred (Notes 1 and 4)

Property and other taxes (Note 4)..........

Total operating expenses 1,729,552 280,675 361,600 2,371,827 392,593 228,269 187,959 38,683.

69,652 3,288,983 1,433,658 99,245 1,086,051 118,698 (188,880) 1,344,023 322,191 177,407 178,637 35,280 1,240,029 283,622 164,111 157,203 100,292 56,428 72,803 86,429 2,178,978 2,004,197 Operating Income (Note 7) 372,134 384,996 324,601 Other Income and Income Deductions:

Allowance for equity funds used during construction (Note 1)

Othernet (Notes 1 and 4)..............

Total other income and income deductions 121,488 65,771 187,259 92,019 47,739 139,758 58,471 31,319 89,790 Total Income before Interest Charges 559,393 524,754 414,391 Interest Charges:

Interest on long-term debt.............

Other interest and amortization (Note 1) 227,163 55,493 179,626 25,456 154,301 28,357 Total interest charges Allowance for debt funds used during construction (Note 1)...

Net interest charges Net Income (Note 7)

Dividends on Cumulative Preferred and Preference Stock 282,656 (40,799) 241,857 317,536 60,950 205,082 (26,547) 178,535 346,219 53,738 182,658 (19,950) 162,708 251,683 49,457 Earnings Available for Common and Original Preferred Stock..

256,586 292,481 202,226 Weighted Average Shares of Common and Original Preferred Stock Outstanding and Common Stock Equivalents (000) 73,241 64,202 4

57,477 Earnings Per Share:

Primary (Notes 1 and 7).

Fully diluted (Notes 1 and 7)

Dividends Declared Per Common Share

$3.50

$3.48

$2.84

$4.56

$4.39

$2.60

$3.52

$3.38

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

.Southern California Edison Company 20 Balance Sheets ASSETS UtilityPlant:

Utilityplant, at original cost (Notes 1, 2 and 8)..

LessAccumulated provision for depreciation (Notes 1 and 8).

Net utilityplant.

Construction work in progress (Notes 5 and S)

Nuclear fuel, at amortized cost Total utilityplant 1,840,233 3,944,967 2,600,460 20,649 6,566,076 1,676,148 3,826,836 2,058,958 15,728 5,901,522 Dcmnbcr 31, 1980 1979 Thousands ofDollars

$5,785,200

$5,502,984 Other Property and Investments:

Real estate and other, at costless accumulated provision for depreciation..

Subsidiary companies (Note 1)

Total other property and investments.....,

9,754 96,757 106,511 11,110 93,725 104,835 Current Assets:

Cash and temporary cash investments (Note 3)...

Receivables, less reserves of $8,005,000 and

$8,496,000 for uncollectible accounts at respective dates (Note 1).

Fuel stock, at cost (first-in,first-out) (Notes 2 and 3)

Materials and supplies, at average cost..........

Regulatory balancing accounts (Notes 1 and 4).....

Accumulated deferred income taxes (Notes 1 and 4)

Prepayments and other (taxes, insurance, etc.)...

Total current assets 7,642 288,979 593,008 48,942 29,343 54,040 1,021,954 4,705 212,728 317,908 39,388 307,090 43,717 925,536 Deferred Charges:

Unamortized debt expense (Note 1)..

Other deferred charges Total deferred charges 18,880 20,477 39,357

$7,733,898 16,589 28,755 45,344

$6,977,237 The. accompanying notes are an integral part of these balance sheets.

Southern California Edison ConIpany 21 CAPITALIZATIONANDLIABILITIES Capitalization:

Preferred Stocksubject to mandatory redemption/repurchase requirements:

Cumulative Preferred Stock Preference Stock Preferred Stockother:

Original Preferred Stock Cumulative Preferred Stock Preference Stock Common Stock, including additional stated capital Other Shareholders'quity:

Additional paid-in capital Earnings reinvested in the business....

Long-term debt (Note 1)

Total capitalization Demnber 31, 19BO 1979 71tousands ofDollars 4,000 458,755 19,897 4,000 458,755 27,067 673,921 577,259 763,519 1I092I137 2,945,824 6,357,553 601,578 1,054,296 2,746,207 5,793,662 337,500 262,500 62,000 62,000 Current Liabilities:

Accounts payable Commercial paper payable (Note 3)....

Notes payable to banks (Note 3).......

Current maturities of long-term debt..

Customer refunds Taxes accrued (Note 4)

Interest accrued Customer deposits Dividends declared.

Regulatory balancing accounts net (Notes1 and 4).

Accumulated deferred income taxes (Notes 1 and 4)

Other Total current liabilities 356,340 164,975 19,998 143,548 66,160 121,916 66,124 11,242 60,292 37,518 26,167 1,074,280 288,897 134,340 19,840 84,544 58,139 73.312 55,619 14,583 48,381 89,893 18,130 885,678 Commitments and Contingencies (Note 2)

Reserves and Deferred Credits:

Customer advances and other deferred credits Customer refunds Accumulated deferred income taxes and investment tax credits (Notes 1 and 4)........

Reserves for pensions, insurance, etc. (Note 6)..

Total reserves and deferred credits............

63,652 198,476 39,937 302,065

$7 733 898 51,598 58,454 155,297 32,548 297,897

$6,977,237 The accotnpanying 'iIotes are aiI integral part of these balance sheets.

Soufhcru California Edison Coutpany Statements of Changes in Financial Position 1980 Year Ended December 31, 1979 Thousands of Dollars 1978 22 Funds Provided By:

Operations Long-term financing Net income (Note 7)

Non-fund items Depreciation (Nofc 1)

Equity in earnings of unconsolidated subsidiaries (Note 1)

Allowance for debt and equity funds used during construction (Note 1)...

Investment tax credit deferred net (Nofes1 attd 4).......

Deferred income taxconversion to monthly billing.

Othernet Earnings distributed from unconsolidated subsidiaries.

Total from operations Preferred stock.

Preference stock'ommon stock'ong-termdebt Total from long-term financing 317,536 187,959 (2,164)

(162,287) 25,235 18,299 13,136 397,714 75,000 (7,169) 258,607 350,000 676,438 346,219

$251,683 178,637 157,203 (3,133)

(608) 45,533 32,568 9,269 4,788 1,000 1,000 458,959 368,213 127,500 (13,828) 62,002 355,000 (14,522) 203,364 200,000 530,674 388,842 (118,566)

(78,421)

Other sources Construction advances and other Sale of non-current assets Decrease in working capital".....

Total from other sources 14,131 89,557 33,180 136,868 11,628 3,918 15,546 9,258 13,067 22,325 Funds Applied To:

Total funds provided Construction expenditures Lessallowance for debt and equity funds used during construction (Nofe 1).........

Funds used for construction expenditures Advances to unconsolidated subsidiaries....

Dividends Repayment of long-term debt..............

Customer refunds net.

Othernet.

Total funds applied

$1,211,020

$1,005,179

$779,380 943,797 162,287 781,510 720 273I312 84,544 58,454 12,480 792,713 118,566 674,147 5,769 221,400 33,736 49,321 20,806

$646,252 78,421 567,831 3,630 182,738 35,500 (36,918) 26,599

$1,211,020

$1,005,179

$779,380 Working Capital Changes Receivables net Fuel stock and materials and supplies (Notes 2 and 3)

Prepayments and other Regulatory balancing accounts net (Notes 1 and 4)

Notes and accounts payable Taxes and interest accrued Othernet (Decrease) in working capital" 76,251 284,654 18,583 (235,512)

(106,257)

(59,109)

(11,790)

(33,180) 1,103 165,812 6,474 162,586 (274,011) 14,688 (80,570)

(3,918)

$ (1,377)

(114,118)

(31,990)

(9,301) 77,288 (64) 66,495

$ (13,067I

'These amounts include conversions of Preference Stock, 5.20% Convertible Series, to Common Stock.

"Other than current maturities of long-term debt.

The accorapanying nofes are an integral part of these sfatetttenfs.

Southern California Edison Conrpany Statements of Earnings Reinvested in the Business 1980 Year Ended December 31, 1979 Thousands ofDollars 1978 23 Balance at January1 Add:

Deduct:,.

Net income Transfer of amortization reserve Federal (a)..

Dividends declared on capital stock Original preferred Cumulative preferred.

Preference Common

$2.84 per share for 1980,

$2.60 per share for 1979 and

$2.30 per share for 1978.....

Capital stock expense

$1,054,296 317,536 1,371,832 1,334 55,230 5,721 211,027 6,383 279,695 1,219 1,075 47,574 42,532 6,164 6,926 166,443 1,740 132,205 4,485 223,140 187,223 931,217 862,956 346,219 251,683 3,801 1,277,436 1,118,440 Balance at December 31 (b).

$1,092,137

$1,054,296 931,217 (a) Pursuant to a regulatory order, an operating reserve relating to certain federally-licensed hydroelectric projects was transferred to Earnings Reinvested in the Business and became an appropriation thereof.

(b) Includes undistributed earnings of unconsolidated subsidiaries ofQ2,918,000 at December 31,1980.

Statements of Additional Paid-in Capital 1980 Year Ended Decenrber 31, 1979 Thousands ofDollars 1978 Balance at January 1 Balance at December 31 Premium received on sale of common stock..

Payments made in lieu of issuing fractional shares of common stock........

$601,578 161,949 (8)

$763,519

$569,673 31,908

$443,109 126,572 (3)

(8)

$601,578

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

Southern California Edison Contpany Statements of Capital Stock December 31, 1980 Rcdcmytion Shares Price Ou/s/anding Per Share Slated Value-Deceinber 31, 1980 1979 Thousands ofDollars Preferred StockSubject to Mandatory Redemption/

Repurchase Requirements (a) (b):

$100 Cumulative Preferred par value $100 per share (I):

71.325% Series 7l80% Series 8,54% Series 8.70% Series A 12.00% Series Preference par value $25 per share:

7375% Scrics Preferred StockOther:

Original Preferred 5%, prior, cumulative, participating, not redeemable, authorized 480,000 shares, par value $8'h pcr share Cumulative Preferred authorized 24,000,000 shares, par value

$25 per share (a):

4.08% Series 4.24% Series 4.32% Series 4.78% Series 5.80% Series 8.85% Series.

9.20% Series

$100 Cumulative Preferred authorized,6,000,000 shares, par value

$100 per share (a):

7,.58% Series 8.70% Series 8.96% Series 750,000 600,000 750,000 S25,000 750,000 2,480,000 480,000 1,000,000 1,200,000 1,653,429 1,296,769 2,200,000 2,000,000 2,000,000 750,000 500,000 500,000

$110.00 110.00 108.54 110.00 112.00 25.75

$ 25.50 25.80 28.75 25.80 25.65 26.50 26.50 105.00 107.00 107.00

$ 75,000 60,000 75,000 52,500 75,000

$337,500

$ 62,000 4,000

$ 25,000 30,000 41,336 32,419 55,000 50,000 50,000 75,000 50,000 50,000

$458,755

$ 75,000 60,000 75,000 52,500

$262,500

$ 62,000 4,000

$ 25,000 30,000 41,336 32,419 55,000 50,000 50,000 7S,000 50,000 50,000

$458,755 Preference authorized 10,000,000 shares, par value

$25 per share (a) (c) (f):

5.20% Convertible Series..

$100 Preference authorized 2,000,000 shares, par value

$100 pcr share Common Stockauthorized 140,000,000 shares, par value $8Vs per share, including additional stated capital (c) (d) (c) (I) 795,900 75,853,818

$ 19,897

$ 27,067

$673,921

$577,259 (a) Allseries of $100 Cumulative Preferred Stock, Cumulative Preferred Stock and Prefer-ence Stock are redeemable at the option of

'he Company. Thc various series of the $100~

Cumulative Preferred Stock, and the Preference Stock, 7.375% Series, arc subject to certain re-strictions on redemption for refunding pur-poses. Authorized shares of Preferred Stock Subject to Mandatory Redemption or Repur-chase Requirements are included under Pre-ferred StockOther.

S

$100 Cumulative Preferred 7.325%

7.80%

8.54 ohio 8.70% A 12.00oio P~ee eeeeee 7.375%

2/1/85 496,000

$ 25 (1) Plus accumulated unpaid dividends.

Redemption or repurchase to continue annually until all shares'are redeemed or repurchased.

7/31/83 30,000

$100 11/30/83 15,000(2)

$100 6/30/86 22,500

$100 6/30/85 13,125(3)

$100 12/31/86 22,500

$100 (b) Preferred Stock Subject to Mandatory Redemption or Repurchase Requirements:

Rcdemytion or Reyurchasc Nome Comeennoo o/Shorn Prio Per efles monl Don Annnouy Slea'ro/0 (2) Based upon 2.5% of shares originally out-standing and increasing to 5.5% by 2003.

(3) Based upon 2.5% of shares originally out-standing and increasing to 9.5% by 2000.

For each of the five12-month periods sub-sequent to December 31, 1980, the aggregate mandatory redemption or repurchase re-quirements willbe: none for 1981 and 1982,

$4,500,000 for1983, $4,500,000 for1984 and

$18,212,500 for1985.

(c) Under a prescribed formula, the conversion prices of convertible securities are adjusted when additional shares of Common Stock are sold by the Company. The shares of Common Stock reserved for conversion and the adjusted conversion prices per share were as follows:

Series Dceenlbcr 31, 1980 1979 Preference Stock, 612,230(1) 796,088(1)

S.20% Convertible Series

$32.50(2)

$34.00(2) 3'/s% Convertible 2,024,380(1)

Debentures, Due 1980

$37.00(2)

(1) Shares of Common Stock reserved (2) Adjusted conversion price per share (d) At December 31, 1980, there were 9,'126,673 authorized and unissued shares of Common Stock reserved for sale and issuance under provisions of the Company's stock purchase plans. On February 2, 1981, the Company issued 540,053 shares of Common Stock under these plans.

(e) On January 29, 1981, 8,000,000 shares of Common Stock were issued at an initial public offering price of $24~h per share.

(f) Transactions in the capital stock accounts during 1980, 1979 and 1978 reflect the following:

In 1980, 7,000,000 shares of Common Stock at an initial public offering price of $23;125 per share and 750,000 shares of $100 Cumulative Preferred Stock, '12% Series, were issued; in 1979, 525,000 shares of $100 Cumulative Pre-ferred Stock, 8.70% Series A and 750,000 shares of $100 Cumulative Preferred Stock, 8.54%

Series, were issued; and in 1978, 6,000,000 shares of Common Stock were issued at an ini-tial public offering price of $25.375 per share.

Additional shares of Common Stock were is-sued for the Dividend Reinvestment and Stock Purchase Plan (DRIP), Employee Stock Pur-chase Plan (ESPP), Employee Stock Ownership Plan (ESOP) and the conversion of 286,780, 553,'140, and 580,854 shares in respective years of Preference Stock, 5.20% Convertible Series (5.20% Series) as follows:

Shares /ssued 1980 1979 1978 DRIP.......... 1,751,330 1,165,073 637,014 ESPP..........

953,885 756,427 631,521 ESOP......... 1,033,794 30,282 203,879 5.20% Series...

219,873 406,573 417,710 The aceolnpanying notes are an infegral part of these sfatentenls.

Southern California Edison Conlpalty Statements of Long-term Debt Year Ended Deceinber 31, 1980 1979 Thousands ofDollars First and Refunding Mortgage Bonds (a):

Series G, Series H, Series I, Series J, Series K, Series L, Series M, Series N, Series 0, Series P, Series Q, Series R, Series S, Scrics T, Series U, Series V, Series W, Series X, Series Y, Series Z, Series AA, Series BB, Series CC, Series DDP, Series EE, Series FF, Series GG, Series HH, Series II, Series JJ, Series KK, Series LL, Series MM, Series NN, Series OO, First Mortgage Bonds (Calectric) (a)

Convertible Debentures Promissory Notes (b)

Short-term debt expected to be refinanced Commercial Principal amounts outstanding.

Current maturities of long-term debt (d)

Unamortized premium (discount) nct Total long-term debt Due 1981 (3s/so/o)

Due 1982 (4'/s o/o)

Due 1982 (4s/s /o)

Due 1982 (4r/so/o).

Due 1983 (4s/so/o)

Due 1985 (5%)

Due 1985 (4s/so/o).

Due 1986 (4'/so/o).

Due 1987 (4'/s o/o).

Due 1987 (4'/s o/o)

Due 1988 (4s/so/o).

Due 1989 (4s/s%)

Due 1990 (4'/s%).

Due 1991 (5'/4 o/o).

Due 1991 (6'/s%).

Due 1992 (Sr/s%).

Due 1993 (6s/so/o)

Due 1994 (7i/s%).

Due 'l994 (8'/s%).

Due 1995 (7r/so/o).

Due 1996 (8%).

Due 1997 (7s/so/o)

Due 1999 (8'/4%).

Due 1999 (7%) (a).

Due 1981 (9%).

Due 2000 (8~/s%).

Due 2001 (8~/s%).

Due 2002 (8'/s o/o).

Due 1984 (7 /s%).

Due 2003 (9 /s%).

Due 2004 (9.95%) (a)

Due1987(9/s%) (c).

Due 2001 (11 /4 o/o)

Due 2005 (15'/s%).

Due 2010 (13 h'Yo).

Due 1980-1991 (2/s%-5'/s%)

Due 1980 (3'/s'Yo).

Due 1980-1983 (5'h%)

~

paper (c).....

40,000 37~0 40,000 40,000 50,000 30,000 60,000 30,000 40,000 50,000 60,000 60,000 60,000

/S,000 80',000 80,000 100,000 75,000 100,000 100,000 100,000 125,000 100,000 15,030 100,000 150,000 125,000 125,000 7S,000 200,000 105,000 50,000 200,000 200,000 150,000 3,027,530 60,000 10+76 3,098,106 (143+48)

(8,734)

$2,945,824 40,000 37,500 40,000 40,000 50,000 30,000 60,000 30,000 40,000 50,000 60,000 60,000 60,000 75,000 80,000 80,000 100,000 75,000 100,000

'100,000 100,000 125,000 100,000 15,030 100,000 150,000 125,000 125,000 75,000 200,000 105,000 200,000 2,627,530 66,000 74,902 14,217 50,000 2,832,649 (84,544)

(1,898)

$2,746,207 (a) The authorized principal amount of each series of First and Refunding Mortgage Bonds is equal to the amount outstanding. The Trust In-denture under which these bonds are issued permits the issuance from time to time of addi-tional bonds, including additional bonds equal in principal amount to bonds retired, pursuant to the restrictions and conditions contained therein. Each of the bond indentures requires semiannual deposits with the Trustees of1'/so/o of the principal amount of its outstanding First and Refunding Mortgage Bonds and the First Mortgage Bonds of Calectric. The Calectric In-denture requires an annual cash deposit with the Trustee of1% of thc principal amount of Calectric First Mortgage Bonds issued less cer-tain bonds retired, or 166%% of such amount ifproperty additions are used to satisfy the annual deposit requirements. In addition, an amount equiva!ent to the excess of15% of de-fined operating revenues over costs of mainte-nance of the property subject to the lien of such indenture is required to be deposited with the trustee annually. These deposit requirements of such indentures may be or have been satisfied by property additions and replacements, and by delivery and cancellation of bonds outstanding under the applicable indenture. Thc Series DDP and KK,First and Refunding Mortgage Bonds, are subject to mandatory sinking fund require-ments commencing on July 1, 1990 and June 1S, 1985, respectively.

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

(c) The Company refinanced $50,000,000 of short-term obligations. Such amount was classified as long-term debt in the balance sheet at December 31, 1979.

(d) Current maturities of long-term debt on December 31, 1980, include 5'/s% Promissory Notes Due February 27, 1981, in the amount of

$1,786,000 and Due August 31, 1981 in the amount of $1,762,000, First and Refunding Mortgage Bonds, Series G, Due April15, 1981 (3s/so/o) in the amount of $40,000,000, and First and Refunding Mortgage Bonds, Series EE, Due November 1,1981 (9%) in the amount of

$100,000,000. The amounts of long-term debt maturing in thc four twelve-month periods subsequent to December 31,1981 willbe:

$121,025,000 in 1982; $53,501,000 in 1983;

$83,000,000 in 1984; and $101,250,000 in 1985.

The accompanying notes are an integral part of these statenlents.

Southern California Edisoii Conipany 26 Notes to Financial Statements Note 1Summary of Significant Accounting Policies General-The Company is a public utilityprimarily engaged in the business of supplying electric energy in portions of central and southern California, excluding the City of Los Angeles and certain other cities. The accounting records of the Company are maintained in accordance with the Uniform System of Accounts as prescribed by the Federal Energy Regulatory Commission (FERC) and adopted by the California Public Utilities Commission (CPUC).

UtilityPlant-The cost of additions and replacements of retirement units of property is capitalized and included in utilityplant.

Such cost includes labor, material, indirect charges for en-gineering, supervision, transportation, etc., and an allow-ance for debt and equity funds used during construction (AFUDC). The amount of AFUDC capitalized is also re-ported in the Statements of Income as a reduction of interest charges for the debt component of AFUDC and as other income for the equity component. Although AFUDC increases net income, it does not represent cur-rent cash earnings. The AFUDC rate was 7.82% for 1980, 7.76% for 1979 and 6.96% for 1978, and is based upon a formula prescribed by the FERC.

The. cost of minor additions and repairs is charged to maintenance expense and the original cost, less net sal-vage, of retired property units is charged to the accumu-lated provision for depreciation.

Depreciation-For financial reporting purposes, depreciation of utility plant is computed on a straight-line remaining life basis and it approximated 3.5%, 3.5%, and 3.2% of average depreciable plant for the years 1980, 1979 and 1978, re-spectively. The Company's rates are designed to recover the original cost of utilityplant, including the estimated decommissioning costs of $36,000,000 for nuclear genera-tion facilities in service, through depreciation expense over the estimated remaining useful lives of the facilities.

Taxes Accounting policies with respect to taxes on income and related investment tax credits are set forth in Note 4, together with supplementary income tax information.

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

Revenues aiid Regulatory Balancing Accounts Customers are billed monthly on a cycle basis and revenues are recorded when customers are billed. As authorized by the CPUC, the Company has established several regulatory balancing accounts for its adjustment clauses, which affect the accounting for most of its energy costs. The Energy Cost Adjustment Clause (ECAC) balancing account is used by the Company to record monthly entries to adjust the results of operations for the variation between ECAC-related energy costs incurred and those included in rates billed to customers. Such variations, including interest thereon, are accumulated in the balancing account until they are refunded to, or recovered from, utility customers through CPUC-authorized rate adjustments.

ECAC-related energy costs include incurred transportation and storage costs related to spent nuclear fuel. The income tax effects of ECAC variations are deferred. Billed revenues and incurred energy costs are utilized in the determination of taxable income.

Subsidiaries-The Company's investments in unconsolidated subsidiary companies, all of which are wholly-owned, are accounted for by the equity method. None of the Company's wholly-owned subsidiaries is considered significant for financial reporting purposes.

Earnings Per Share Primary earnings per share are determined by dividing the earnings available for Common and Original Preferred Stock by a weighted average number of such shares out-standing. After providing for cumulative preferred and preference dividend requirements, effect is given to the participating provisions of the Original Preferred Stock and Common Stock Equivalents for funds held for the purchase of the Company Stock by the Employee Stock Purchase Plan Trustee in each period. Fully-diluted earn-ings per share give effect to the dilution which would re-

Southern California Edison Conipany 27 suit from the conversion of convertible securities out-standing at the end of each period and treat all actual conversions during each period as ifthey took place at the beginning of the period. In the computation of fully-diluted earnings per share for 1979, consideration has been given to the dilutive effect of potential conversion of the Preference Stock, 5.20% Convertible Series, and the 3i/8% Convertible Debentures, Due 1980. In the computa-tion of fully-diluted earnings per share for 1980, however, dilution attributable only to the former has been consid-ered, since the 3'/e% Convertible Debentures were retired on August '15, 1980.

Note 2Commitments and Contingencies Construction prograni afoul fuel supply-The Company has significant purchase commitments in connection with its continuing construction program. As of Decemberl8, 1980 (the date of the Company's latest approved budget), funds required for construction expen-ditures are estimated at $953,031,000 for 1981; $767,978,000 for 1982 and $806,494,000 for 1983. Minimum long-term commitments of approximately $9.4 billion existed on December 31, 1980 under the Company's fuel supply and transportation arrangements.

Government licenses-The terms and provisions of licenses granted by the United States cover the Company's major and certain minor hydroelectric plants. These licenses also cover certain storage and regulating reservoirs and related trans-mission facilities. Allof the above licenses expire at various times between 1981 and 2009. The licenses contain numerous restrictions and obligations on the part of the Company, including the right of the United States to acquire Company properties or the FERC to issue a license to a new licensee under certain conditions and upon the payment to the Company of specified compensation.

Resale revenues Pursuant to FERC procedures, on August 4, 1974, February 1, 1976, and August 16, 1979, increases in the Company's resale rates became effective, subject to refund with interest to the extent that any of the increases are subsequently determined to be inappropriate. Effective May 2, 1974, a Fuel Clause Adjustment (FCA) was added to the Company's resale rates and was modified effective February 1, 1976 and August 16, 1979. As of December 31, 1980, approximately $473,100,000 had been billed subject to refund.

Energy cost arjlustntent clause-On October 8, 1980, the CPUC issued an interim decision approving a Company filingproviding for a reduction in revenues under the ECAC of approximately $236,300,000 on an annual basis. Such reduction provides for recovery of $35,000,000 in the ECAC balancing account, recovery of which had been deferred by an October 23, 1979 CPUC decision pending an evaluation of the reasonableness of operating capacity factors at the Company's coal-fired power plants. A final decision on this matter has not yet been rendered.

On December 5, 1980, the CPUC modified energy cost adjustment procedures forCalifornia utilities. Inaddition to various procedural changes, the revised ECAC procedures willprovide for the application of ECAC to 98% of the Company's energy costs with the remaining 2% being subject to annual base rate treatment. The revised ECAC also willenable the Company to recover certain inventory carrying costs associated with fuel oil price increases.

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

$23,000,000, consequential damages and a trebling of such damages, and certain injunctive relief, and alleges that the Company (i) is engaging in anti-competitive behavior by charging more for wholesale electricity sold to the resale customers than the Company charges certain classes of its retail customers, and (ii) has taken actions alone and in concert with other utilities to prevent or limitsuch resale customers from obtaining bulk power supplies from other sources to reduce or replace the resale customers'hole-sale purchases from the Company. In May 1979, the Federal Court continued a stay of the proceedings pending resolution of the Company's FERC resale rate filingwhich became effective on February 1, 1976, and of the FERC proceedings involving bulk power contracts and sub-stantially the same antitrust issues. The resale customers have asked the FERC to modify these contracts and to order the Company to provide additional transmission services to them. On February15, 1980, the Court lifted the stay on discovery. On February 2, 1981, the Plaintiffs filed a motion to adjudicate certain facts, and to limitthe scope of discovery and issues to be tried. The next status confer-ence and oral argument on the motions is set for April6, 1981. The foregoing proceedings involve complex issues of law and fact, and, although the Company is unable to predict their final outcome, it has categorically denied the allegations of these resale customers.

Sonthern California Edison Company

'Notes to Financial Statentents (continued) 28 Leases anrl Rentals-The Company has entered into various arrangements to lease automotive equipment, computer equipment, nu-clear fuel, office space and other incidental equipment and property. These agreements are accounted for as operat-ing leases based upon ratemaking practices. Neither the annual gross lease expense nor the present value of the minimum commitments under capital leases are considered material for financial reporting purposes.

Although a portion of the Company's ITC has been applied as a current reduction of income tax expense, ad-ditional ITC, permitted by the Tax Reduction Act of 1975 and the Tax Reform Act of 1976, have been deferred and are being amortized as reductions to income tax expense ratably over the lives of the properties which gave rise to the credits.

Supplementary information regarding taxes on income and other taxes is set forth in the following table:

Note 3Compensating Balances and Short-Term Debt In order to continue lines of credit with various banks, the Company presently maintains deposits aggregating ap-proximately $12,000,000 which are not legally restricted as to withdrawal. The lines of credit, which are. also available to support commercial paper, amounted to $555,000,000 and $198,000,000 as of December 31, 1980 and December 31, 1979, respectively. None of such lines of credit was used during 1980 and 1979.

The Company has an additional $150,000,000 line of creditwhich may be utilized only for the purchase of fuel oil through the use of bankers'cceptances.

Notes is-sued under this agreement are secured by a pledge of the Company's fuel oil inventory. There were no bankers'cceptances outstanding during 1980 or 1979.

Note 4 Taxes In accordance with CPUC requirements, no deferred in-come taxes are provided for net increases or decreases in income tax expense which result from reporting certain transactions for income tax purposes in a period different from that in which they are reported in the financial statements except for the resale revenues, and additional investment tax credits (ITC) discussed below, and the tax effects of the regulatory balancing account provisions.

Effective January 1, 1976, pursuant to FERC procedure, the Company began providing deferred income taxes for certain timing differences related to resale revenues.

The revenues associated with such deferred income taxes are being collected subject to refund, as discussed in Note 2, pending action by the FERC.

Current:

Federal State.

DeferredFederal and State:

Investment tax creditsnet....

Regulatory balancing accounts..

Customer refunds.............

Other.

Total taxes on income...

Taxes on income included in operating expenses........

Taxes on income included in other income.............

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

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

Federal statutory tax rate.....

Excess of tax over book depreciation..............

Allowance for debt and equity funds used during construction..............

Percentage repair allowance..

Administrative and general expenses capitalized.......

Investment tax creditsnet..

Federal deduction for state taxes on income...........

Ad valorem lien date deduction................

Nuclear fuel lease interest capitalized........

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

Other differences...........

Effective tax rate................

Other taxes included in operating expenses:

Property Payroll and other...

Thousands of Dollars Year Ended December 31, 1980 1979

'1978

$ 38,582 36,909

/5,491 6,717 4,019 10,736

$(49,219) 3,567 (45,652) 25,235 (107@22) 14,921 (67,166) 8+25 45,533 34,148 (13,644) 66,037 5 76,773 32,568 (15,904) 78,801 2,208 97,673

$ 52,021

$ 38,683

$100,292

$ 72,803 (30,358) 8@25 (23,519)

$ 76,773 (20,782)

$ 52,021 46 0%

46.0%

48.0%

(1.2)

(3.4)

(22.9)

(12.9)

(12.4)

(3.5)

(3.3)

(4.7)

(3 4)

(2.2)

(2.7)

(6.8)

(8.1)

(8.4)

(1.0)

(2.2)

(2.7)

(0.3)

(0.2) 4.2 (3.3)

(0.9)

(0.6) 2.1 4.7 4.7 (3.1)

(2.8)

(4.9) 2 6%

18 1%

17 1

$ 54,114

$ 48,300

$ 74,665 15,538 8,128 11,764

$ 69,652

$ 56,428

$ 86,429

Southern California Edison Coinpany 29 R&Dcharged to expense.....

'R&Dcharged to CWIPnet..

Total R&Dexpenditures......

$21,964 19,812

$41,776

$15,778 12,260

$28,038

$14,442 3,847

$18,289 Note 6Employee Benefit Plans Pension Plan-The Company's current pension program is based on a trusteed pension plan, which is non-contributory by em-ployees. Company contributions are determined on the basis of a level premium funding method and prior ser-vice costs are funded. Pension costs are funded or re-served for on an actuarial basis and amounted to

$40,321,000, $37,456,000, and $32,236,000 for 1980, 1979 and 1978, respectively.

Thousands of Dollars December 31, 1979(1) 1978 Actuarial present value of accumulated plan benefits:

Vested.

Nonvested Net assets available for benefits

$301,429 19,965

$321,394

$375,846

$270,142 25,387

$295,529

$316,349 (1) Latest available information.

An assumed rate of return of 5.5% was used in deter-mining the actuarial present value 'of accumulated plan benefits for both 1979 and 1978.

Note SResearch and Development Research and Development (R&D) costs are expensed cur-rently ifthey are of a general nature. Plant-related R&D costs are accumulated in construction work in progress (CWIP) until a determination is made as to whether such projects willresult in construction of electric plant. Ifno construction of electric plant ultimately results, the costs are charged to operating expense. The balance of R&D expenditures included in CWIP at December 31, 1980, 1979 and 1978 was $35,076,000, $29,438,000, and $17,178,000, respectively.

Thousands of Dollars Year Ended December 31, 1980 1979 1978 Employee Stock Purchase Plan Under the Employee Stock Purchase Plan (ESPP) adopted to supplement employees'ncome after retirement, employ-ees may elect to contribute specified percentages of their compensation to a trustee for the purchase of Company Common Stock and the Company contributes to the Plan an amount equal to one-half of the employees'ontribu-tions, less forfeitures. The Company's contributions to this Plan amounted to $3,679,000, $3,263,000 and $2,785,000 for 1980, 1979 and 1978, respectively. In addition, employ-ees may contribute up to 5% of their regular monthly base pay through supplemental contributions without regard to their years of service. These supplemental contributions are not matched by the Company.

Entployee Stock Otonership Plan Under the Employee Stock Ownership Plan (ESOP), shares of Company Common Stock are purchased for the benefit of eligible employees and held in trust using funds gener-.

ated by an additional 1% and '/2% investment tax credits and matching employee contributions for the '/a% ITC.

The Company has elected the additional 1% ITC for the years 1976 through 1979, and the '/a% ITC for the years 1978 through 1979. The Company expects to elect the addi-tional 1% and '/2% ITC for 1980. As of December 31, 1980, 1,370,217 shares of Common Stock were held by the Trustee under the Plan. In addition, as of December 31, 1980, the Company had a liabilityto the Plan in the amount of $7,006,000.

For 1979 and 1978, the amounts of ESOP ITC were.

higher than those utilized in the Federal income tax re-.

turns for such years. It is expected such ITC willbe utilized in the 1980 Federal income tax return. For 1980, the amount of ESOP ITC is higher than that expected to

~

be utilized in that year's Federal income tax return. Ifnot-completely utilized in 1980 or future income tax returns, the excess ITC would expire in 1987, in which event the Company would be allowed a tax deduction for the amounts contributed to the ESOP.

Southern California Edison Conipany 30 Notes to Financial Statenfefits (continued)

Note 7Quarterly Financial Data Thousands of Dollars Earnings Per Share Three Months Ended Operating Operating Net Fully Revenues Income Income Primary Diluted December 31, 1980....

September 30, 1980...

June 30,1980........

March 31, 1980.......

December 31,1979....

September 30, 1979...

June 30,1979........

March 3l,1979.......

December 31, 1978....

September 30, 1978...

June 30,1978........

March 31, 1978.......

969,227 1,058,916 828,028 804,946 709,252 684,334 566,656 603,733 600,902 634,934 545,444 547,518

$ 91,649 103,011 88,996 88,478 100,352 106,738 81,748 96,159 99,162 90,778 70,612 64,050

$70,495 88,427 76,929 81,685 92,538 98,822 71,183 83,677 85,455 68,846 50,912 46,470

$0.71

$0.71 0.99 0.98 0.84 0.82 0.96 0.93 1.19 1.15 1.32

'1.27 0.91 0.88 1.13 1.09 1.19 1.15 1.00 0.96 0.69 0.67 0.62 0.59 Projects Estimated Utility Accumulated Construction Plant in Provision for

'ivork in Ownership Service Depredation Progress interest Axis Generating Station...$ 12,167 Pacific Intertie DC System 67,837 El Dorado System.........

19,243 Four Corners Generating Station.................

99,802 Mohave Generating Station. 178,465 Palo Verde Generating Station.................

San Onofre Generating StationUnit 1.........

183,845 San Onofre Generating StationUnits 2 &3....

Solar Power Generating Project.................

Total..............". $561,359 (1) Represents a composite rate.

6 811 114 33 3 16,475 49 50.0 4,812 735 60.0(1) 29,570 41,544 26,056 48.0 8,728 56.0 366,621 15.8 48,788 35,081 80.0 1,835,444 76.55

$148,000 6,649 80.0

$2,279,477 Note 87ointly-Owned UtilityProjects The Company owns undivided interests in several jointly-owned generating stations and transmission sys-tems for which each participant must provide its own financing. The Company's proportionate share of expenses pertaining to such projects is included in the appropriate category of operating expenses in the Statements of In-come. In the table below, the amounts represent the Company's share for each such project as reported on the Balance Sheet:

(Thousands of Dollars)

December 31, 1980 Navajo LayoffAgroomeat Orovitto.Thermattto Hoover Sales Power Sale Agreameat Agreement Date of Expiration......, January 1, 1985 May 31, 1987(2)

April1, 1983(3)

Share of Effective Operating Capacity Megawatts (MW)......

327.5 MW(1) 331 MW 340 MW Share of Energy Output.

14.6'%.9yo 37.6 /o Estimated Annual Cost..

$38,556,000

$1,872,000

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

$ 1,978,000 S

456,000

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

523,000 85,000

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

None None None (I) The Company has agreed to certain reductions in its share of effective operating capacity prior to the January1, 1985 termination date.

(2) The Company has certain renewal rights under the existing agreement.

(3) The Company has obtained entitlement of 350 MWfrom April1, 1983 through December 31, 2004, subject to termination upon five years'otice from the California Department of Water Resources.

Note 9Long-Term Purchased Power Contracts Under fixed contracts, the Company has agreed to pur-chase portions of the generating output of certain facilities. Although the Company has no investment in such facilities, these contracts provide that the Company pay certain minimum amounts (which are based at least in part on the debt service requirements of the supplier) whether or not the facilityis operating. None of such con-tracts provides, or is expected to provide, in excess of five percent of the Company's current or estimated future operating capacity. The cost of power obtained under the contracts, including payments made when a facility is not operating, is included in Purchased Power in the Statements of Income. Information as of December 31, 1980 pertaining to such contracts is summarized in the following table:

Southern California Edison Cotnpany 31 Supplementary Information to Disclose the Effects of Changing Prices (Unaudited)

In accordance with the requirements and guidelines of the Financial Accounting Standards Board, the sup-plementary information presented below is intended to provide certain information about the effects of both general inflation and changes in specific prices. It.

should be viewed as an estimate of the approximate effect of inflation, rather than as a precise measure.

Statement of Earnings Available for Common and Original Preferred Stock Adjusted for Changing Prices for the Year Ended December 31,1980 As Reported in the primary Financial Statements (Thousands of Dollars)

Average 1980 Dollars Constant Dollar Current Cost Total Operating Revenues

$3,661,117

$3,661,117

$3,661,117 Operating Expenses:

Provision for depreciation Other operating expenses Other income and deductions Net interest charges Dividends on cumulative preferred and preference stock 187,959 3,101,024 (187,259) 241,857 60,950 406,000 3,101,024 (187,259) 241,857 60,950 488,000 3,101,024 (187,259) 241,857 60,950 3,404,531 3,622,572 3,704,572 Earnings available for (loss on) common and original preferred stock (excluding reduction of utilityplant to net recoverable cost)........

256,586 38,545 (43,455).

Excess of increase in general price level of$1,336,000,000 over increase in specific prices of $1,039,000,000 of utilityplant held during the year (a)

Reduction of utilityplant to net recoverable cost Gain from decline in purchasing power of net monetary liabilities....

$ (297,000)

$ (501,000)

$ (122,000) 445,000 445,000 (a) At December 31, 1980, current cost of utilityplant, net of accumulated depreciation, was $12,312,000,000 while related historical cost and net recoverable cost was $6,566,000,000. The difference of $5,746,000,000, which includes $1,039,000,000 for the current year, represents the changes in specific prices (current cost) of utilityplant from the date the plant was originally acquired.

Southern California Erlison Company 32 Supplententary htjormation (continued)

Five Year Comparison of Selected Supplementary Financial Data Adjusted for the Effects of Changing Prices (Data ad'usted for the effects of changing prices are reported in average 1980 dollars)

I Year Ended December 31, (In Thousands of Dollars, Except Per Share Amounts) 1980 1979 1978 1977 1976 Total Operating Revenues As reported........

In constant dollars..

$3,661,117

$2,563,974

$2,328,798

$2,064,914

$1,846,540

$3,661,117

$2,911,000

$2,941,000

$2,808,000

$2,673,000 Earnings Available for (Loss on) Common and Original Preferred Stock' As reported.........

In constant dollars...

At current cost......

Earnings (Loss) Per Share on Common and Original Preferred Stock' As reported........

In constant dollars..

At current cost.....

$256,586

$ 38,545

$ (43,455)

$3.50

$.53

$ (.59)

$292,481

$137,497

$ 63,707

$4.56

$2.15

$.99 Excess of Increase in General Price Level Over Increase in Specific Prices of UtilityPlant after Reduction to Net Recoverable Cost Net Assets at Year End at Net Recoverable Cost As reported..............

In constant dollars and current cost..........

Gain from Decline in Purchasing Power of Net Monetary. Liabilities

$419,000

$563,000

$2,529,577

$2,233,133

$2,420,000

$2,397,000

$445,000

$513,000 Cash Dividends Declared Per Common Share As reported............

In constant dollars......

$2.84

$2.82

$2.60

$2.92

$2.30

$2.87

$2.06

$2.78

$1.68

$2.42 Market Price Per Share at Year End In historical dollars In constant dollars..

$25.625

$24.51

$24.50

$25.75

$26.375

$22.875

$26.30

$31.32

$34.98

$32.39 Average Consumer Price IndexUrban

'Excludes reduction of utilityplant to net recoverable cost.

"'Estimated.

246.8" 217.4

'195.4 181.5 170.5 Constant dollar amounts represent historical costs of utilityplant restated in terms of dollars of equal purchas-ing power, as measured by the Consumer Price Index for all Urban Consumers. Current cost amounts reflect the changes in specific prices of utilityplant from the date the plant was acquired to the present, and differ from constant dollar amounts to the extent that prices in gen-eral have increased more or less rapidly than specific prices. The current cost of utilityplant was determined by restating its historical cost using Company projections of year-end indices to be reported in the Handy-Whitman Index of Public UtilityConstruction Costs.

The provision for depreciation on constant dollar and current cost bases was determined by applying primary financial statement depreciation rates to restated utility plant accounts.

Because only historical costs are deductible for income tax purposes, the income tax expense in the primary financial statements was not adjusted.

Fuel inventories and the cost of fuel used in the gener-ation of electricity have not been restated from their his-torical cost because rate regulation limits the recovery of fuel and purchased power costs to recorded costs. As such, fuel inventories are effectively monetary assets and have been included in the computation of purchasing power gain or loss.

Sontltern California Edison Company 33 Under ratemaking procedures prescribed by the regula-tory commissions exercising rate jurisdiction over the Company, only the historical cost of utilityplant is re-coverable through future depreciation charges. There-fore, the cost of utilityplant, stated in terms of constant dollars or current cost, exceeding the historical cost of utilityplant is not presently recoverable through depre-ciation charges, and, accordingly, the excess is reflected as a reduction of utilityplant to net recoverable cost.

While the ratemaking process gives no recognition to the current cost of replacing utilityplant, based on past ratemaking practices the Company believes itwillbe allowed to recover and earn a return on the increased cost of its investment when replacements of utility plant occur.

During a period of inflation, holders of monetary assets suffer a loss of general purchasing power while holders of monetary liabilities experience a gain. The gain from the decline in purchasing power of net.monetary liabilities is primarily attributable to the substantial amount of debt which has been used to finance utility plant. However, to properly reflect the economics of.rate regulation, the gain from the decline in purchasing power of net monetary liabilities, including Cumulative Preferred and Preference Stock, offsets the reduction to net recoverable cost of utilityplant. The Company, therefore, does not have the opportunity to realize such holding gain on net monetary liabilities.

Operating Revenues and Kilowatt-HourConsumption Class ofSeroice Residential..............

Agricultural.............

Commercial.............

Industrial...............

Public Authorities........

Interdepartmental........

Resale Subtotal.................

Resale-Special Contracts..

Public Authorities-Special................

Total Sales of Electric Energy................

Other Electric Revenues Total

%of 1980 total 28.1 1.9 26.7 27.3 8.5 5.4 97.9 1.2 0.1 99.2 0.8 100.0 Operating Revenues (ooo) 1980

$1,026,778 68,503 979,051 997,831 312,578 51 198,543 3,583,335 44,631 1979 764,595 47,146 663,678 683,013 222,223 39 149,266 2,529,960 20,038

~chan e

34.3 45.3 47.5 46.1 40.7 31.7 33.0 41.6 122.7

%of 1980 total 27.5 1.6 24.7 28.0 7.7 7.4 96.9 1.8 3,407 3,128 8.9 1.3 3,631,373 29,744 2,553,126 10,848 42.2 174.2 42.8 100.0 100.0

$3,661,117

$2,563,974 Kilowatt-HourConsumption (ooo) 1980 16,471,840 964,452 14,778,843 16,777,563 4,623,886 1,138 4,415,038 58,032,760 1,071,184 1979

~chan e

16,191,091 1.7 975,311 (1'.1) 14,454,319 2.2 17,351,728 (3.3) 4,701,251 (1.6) 1,134 0.4 4,426,206 (0.3) 58,101,040 (0.1) 558,385 91.8 811,243 858,436 (5.5) 59,915,187 59,517,861 0.7 59,915,187 59,517,861 0.7

Southern California Erlison Contpany 34 Capital StockDividend and Price Information Class and Series of Stock Quarterly Dividends Paid Per Share (a) (0 High Low Calendar Quarter 1980 2

3 High Low High Low Hi h and Low Sales Prices ($)

Calendar Quarter 1979 4

'I 2

3 4

High Low High Low High Low High Low High Low Original Preferred Cumulative Preferred:

4.08%

4.24 4.32 4.78%

5 80%

8.85%

9.20%

$100 Cumulative Preferredt 7.325% (b) 7 58%

7.80% (b) 8.54o/o 8.70%

8.70%-A (b) 8.96o/0 12.00%

Preference:

520 Convertible 7.375o/o (b)

Common (d) (e) 26 22~/4 28'/a 19'7 23r/4 25 /4 22 27rh 25 Vz 27%

24%

28 25'/s 27r/s 25 /4 251/2

.26Vz

.27

.29r/s

.36%

.553125

.57%

10>/s 6~/4 10~/s 7'h 93/4 7'/s 11>/s 8

13%

10s/s 20Vz

'15r/a 203/4 15s/s 10 7'h 103/4 8

103/4 7s/s 11r/s Bi/s 14%

10s/s 22s/s 15~/s 22s/s 16'/4 93/4 7~/6 10s/s 8

11%

8 11'/s 83/4 14a/s 11~/4 21~/8 16 /4 22'/s 17s/6 9

7 Ss/s 7'/6 8~/4 7~/s 10'/a 7r/6 12~/a 10 17~/4 14%

19'/s 15 11s/s 10'/4

'12'/4 10s/8 12 10th 13~/s 11%

16/4 19 1.83'/s 1.899'.95 2.13t/a 2.17'h 2.17th 2.24 2.30 (c) 67%

54 74%

51 70'/4 92s/s 79 79 56~/s 77~/4 66 90 82 74 60 93 84 85 58'h 823/4 88'h 67%

723/4 62%

50'h 87 70'/6 71 59r/s 74~/4 62 101 97 82>/i 77'h 84'/4 78'h 95s/s 89 98'h 94 96s/s 90

'100 91 987e 87~h 99'h 90 77%

63 93 85'/4 87 72 92 74 321h

.460938

.68 24'/e 20~/4 27>/i 21s/s 26%

24'/6 26'/s 23'/s 27~/s 25 /s 27~/4 24>/4 26r/s 25'/i 269m 23'h 17'/s 15s/s 20r/s 16s/s 193/4 18'0~/a 17>/4 19r/s 18r/a

'19s/8 17s/s 19r/4 18>h 19 17'/s (a) Quarterly dividends were paid at the rates indicated in each quarter of1980 except the fourth quarter dividend on Original Prelerred Stock and Common Stock, which was at the rate of$0.74 per share.

(b) There are no prices as these issues are private placements and shares are not traded.

(c) Initialpro rata dividend paid December 31, 1980. Subsequent quarterly dividends to be paid at $3.00 per share or $12.00 annually.

(d) Dividends declared on Common Stock totalled $2.84 and $2.60 for1980 and 1979, respectively.

(e) As of December 31, 1980, there were approximately 150,000 Common Stock shareholders.

(I) The Indenture securing the Company's First and Refunding Mortgage Bonds provides in substance that the Company shall not pay any cash dividends except out of its surplus and out of earnings.

Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The Company's primary earnings per share for the years 1980, 1979 and 1978 of $3.50, $4.56 and $3.52, respectively, reflected the biennial general rate review process which has caused earnings to decline in the non-rate-case year.

Operating expenses and capital costs have increased substantially from year to year. Also, an increased number of common shares outstanding has had a dilutive effect on earnings per share. However, the higher general rates which became effective on January 1, 1979 (the majority of the increase had become effective in July 1978) to offset these effects were based on a 1979 test year and did not include an allowance for attrition in 1980. Such an allow-ance, $92 millionto become effective January 1, 1982, was granted with the decision authorizing an increase in gen-eral rates of $294 millionannually effective January 1, 1981.

Total operating revenues increased during 1980 by nearly

$1.1 billion, or 43%; however, almost 89% of the increase was, along with a balancing account procedure, for the pur-pose of offsetting higher energy costs and did not impact earnings. Recorded kilowatt-hour consumption was up by only 4.4% in 1979 and 0.7% in 1980 despite increases in the number ofcustomers served of95,837 in 1979 and 81,586 in 1980. This reflected continuing conservation efforts

Southern California Edison Conipany 35 by our customers and the impact of price elasticity. A re-cently completed conversion to monthly billingof cus-tomers previously billed bimonthly caused a distortion in comparisons of kilowatt-hour consumption between 1980 and 1979. Excluding the effect of the conversion, kilowatt-hour consumption would have been down by 0.4%.

Increases in operation expenses other than energy costs continue to be due in large part to the impact of inflation on the costs of labor, material and services. In addition, the costs related to the Company's energy con-servation programs have risen. Also, beginning in 1980, increased costs were incurred related to the conversion to monthly billing.

Maintenance expenses also reflected the impact of infla-tion. However, the $50.9 million, or 29%, increase recorded in 1980 was caused in part by higher than usual costs for the repair of damaged propertywind and rain in the first quarter and fires and wind in the fourth quarterand

= large expenditures at the Mohave and San Onofre (Unit 1) generating stations.

The increases in interest charges and dividends on cumulative preferred and preference stock in 1980 reflected the combined effects of additional short-and long-term debt and preferred stock outstanding and higher interest and dividend rates. The overall rate of return authorized by the general rate case decision in December 1978, although allowing for rates on new issues of 9.15% for bonds and 8.42% for preferred stock, did not anticipate the extent to which money costs would accelerate nation-ally in 1979 and 1980. The costs on securities issued reached 15.36% for the Series NN Bonds issued April9, 1980, and 12% for the Preferred Stock issued October 22, 1980. At the end of 1980, the Company's annualized, effec-tive interest rate for all long-term debt securities then outstanding was 8.40%, as compared with a rate of 7.14%

included in the decision of December 1978. Similarly, the Company's annualized effective rate on preferred and preference stock at the end of 1980 was 7.94%, as compared with 7.29% reflected in the authorized rate of return.

In its decision effective January 1, 1981, the CPUC has recognized the adverse effect on the Company of financial attrition as well as operational attrition and authorized an overall rate of return which included projected year-end 1981 costs of capital. The assumptions used by the CPUC for the 1981 incremental costs of long-term debt and preferred stock were 13% and 12%, respectively.

Financing costs also increased in 1980 as a result of car-rying an oil inventory above the level included in rates.

However, a recent ECAC decision by the CPUC willnow help provide for the recovery of future carrying costs associated with fuel oil price increases.

The Company's earnings pattern for the past three years has not produced a similar pattern forfunds provided from operations. Of the total of funds used for construction expenditures, funds provided from operations furnished approximately 65% in 1978, 68% in 1979 and 51% in 1980.

However, when funds provided by operations are com-bined with changes in certain working capital items, which changes may either provide or use funds, this dissimilarity may be more pronounced. For example, fuel stock and materials and supplies were reduced substantially in 1978 which provided funds, however, increases during 1979 and 1980 used funds. In addition, funds are generated by reductions in the regulatory balancing accounts such as occurred in 1978 and to a greater extent in 1980, in which years the Company's revenues were recovering pre-viously deferred energy costs. Conversely, in 1979, funds were used by an increase in the balancing accounts as revenues were deficient in relation to energy costs.

See pages 31 through 33 for discussion relating to sup-plementary information to disclose the effects of changing prices.

Liquidity The Company's ability to generate cash adequate to meet its needs ("liquidity") results from rates collected from customers for energy service, periodic bank and commer-cial paper borrowings and the sale of debt and equity securities. These sources of liquidityare utilized for con-struction expenditures, dividend payments, maturing se-curities and operating and capital costs not yet recovered through the ratemaking process.

Revenues collected from customers have increased each year reflecting growth in the number of customers and recovery of rising energy costs. During the year ended December 31, 1980, the Company's liquiditywas improved'y the collection of deferred energy costs (ECAC) and conversion of customer billingfrom a bi-monthly to a monthly basis. Liquiditywas adversely affected by in-creased costs of carrying fuel oil inventory, principally as-sociated with fuel oil price increases.

(See Note 2 of "Notes to Financial Statements" for a discussion of re-vised ECAC procedures which willenable the Company to recover certain inventory carrying costs.)

The Company has a total of $725 millionof short-term borrowing facilities, including a $150 millionbankers'c-ceptances line, with foreign and domestic banks. At De-cember 31, 1980 approximately $20 millionof borrowings was outstanding under these arrangements.

Capital Resources The Company's capital resource commitments at Decem-ber 31, 1980 principally consisted of purchase commit-ments related to its continuing construction program and fuel supply and transportation arrangements.

(See Note 2 of "Notes to Financial Statements.") In addition, the Company is obligated to meet long-term debt 'matu-rities and preferred stock sinking fund requirements.

(See Statements of Long-Term Debt and Statements of Capital Stock, respectively.) The Company intends to finance these commitments with funds generated from its internal sources of liquidityand sale of debt and equity securities. No material changes are contemplated in the mix of debt and equity portions of capitalization.

Southern California Edison Company Selected Financial Data 1970 1980 1980 1979 36 Summary of Operations (in thousands ofdollars except percent and per share data)

Balance Sheet Data (in thousands ofdollars except percent and per share data)

Operating and Consumption Data (a) Included in Operating Expenses.

Operating Revenues.

Operating Expenses.......................

Energy Costs (a)

Taxes on IncomeCurrent and Deferred (a)

Allowance for Debt and Equity Funds Used During Construction Interest Charges Net Income Earnings Available for Common and Original Preferred Stock.............

Weighted Average Shares of Common and Original Preferred Stock Outstanding and Common Stock Equivalents..........

Per Share Data:

Primary Earnings Fully Diluted Earnings Dividends Declared per Common Share...

Dividend Payout Ratio (paid).............

Total Assets Gross UtilityPlant Accumulated Provision for Depreciation..

Percent of Gross UtilityPlant.................

Long-Term Debt (includes current maturities) (b):

Bonds.

Debentures Other.

Preferred StockSubject to Mandatory Redemption/Repurchase Requirements........

Preferred StockOther.

Common Stock, including Additional Stated Capital Additional Paid-in Capital Earnings Reinvested in the Business Capital Structure (percent):

Long-Term Debt:

Bonds.

Debentures Other Preferred 8z Preference Stock Common Equity Return on Common Equity.

Book Value Per Common Share Area Generating Capacity at Peak (MW) (c)..

Total Energy Requirement (KWH) (000).....

Percent Output:

Thermal Hydro-Company Plants.

Purchased Power 8z Other Sources........

Kilowatt-HourConsumption (000)..........

Number of Customers Average Annual KWHConsumption Per Residential Customer Number of Employees Area Peak Demand (MW)

$3,661,117 3,288,983 2+71,827 38,683 162,287 282,656 317,536 256,586 73,241

$3.50

$3.48

$2.84 79.4%

$7,733,898 8,406,309 1,840,233 21.9 3,078,796 10,576 399,500 482,652 673,921 763,519

$1,092,137 47.3%

0.2 13.6 38.9 10.76%

$33.19 15,504 65,459,278 71.4 9.0 19.6 59,915,187 3,163,968 5,939 14,157 12,841

$2,563,974 2,178,978 1,344,023 100,292 118,566 205,082 346,219 292,481 64,202

$4.56

$4.39

$2.60 55.7%

$6,977,237 7,577,670 1,676,148 22.1 2,691,577 74,957 64,217 324,500 489,822 577,259 601,578

$1,054,296 45.8%

1.3 1.1 13.8 38.0 13.64%

$34.22 15,071 66,216,910 82.1 7.6 10.3 59,517,861 3,082,382 6,010 12,917 12,662

Sonlhern California Edison Company 37 197B

$2,328,798 2,004,197 1,240,029 72,803 78,421 182,658 251,683 1977

$2,064,914 1,734,192 1,040,091 68,792 60,238 161,078 251,979 1976

$1,846,540 1,539,400 916,131 59,506 47,610 144,368 226,798 1975

$1,647,134 1,380,528 824,826 46,623 26,773 126,185 176,781 1974

$1,360,959 1,108,249 541,890 70,618 16,163 112,959 160,344 1973

$1,075,949 843,530 344,990 46,496 10,190 97,728 146,110 1972 927,674 709,724 240,135 44,542 7,152 91,752 135,648 1971 802,434 612,732 192,982 38,542 15,859 82,308 127,297 1970 720,661 535,846 143,475 38,635 17,007 77,633 127,495 202,226 206,330 185,047 137,177 124,656 117,268 110,469 105,752 110,497 57,477

$3.S2

$3.38

$2.30 63.6%

54,347

$3.80

$3.63

$2.06 50.5%

48,678

$3.80

$3.61

$1.68 44.2%

47,965

$2.86

$2.75

$1.68 5S.7%

44,580

$2.80

$2.68

$1.68 58.9%

43,965

$2.67

$2.57

$1.56 5S.4%

43,965

$2.51

$2.43

$1.56 62.2%

43,041 40,963

$2.46

$2.70

$2.37

$2.59

$1.51'1.50 61.0%

54.6%

$6,057,697 6,810,891 1,519,174 22.3

$5,725,266 6,191,733 1,383,009 22.3

$5,020,843 5,658,433 1,258,327 22.2

$4,729,444 5,147,333 1,149,311 22.3

$4,481,488 4,766,175 1,051,024 22.1

$3,893,379 4,458,631 958,210 21.5

$3,774,664 4,233,067 851,910 20.1

$3,498,985 3,998,045 779,409 19.5

$3,226,881 3,737,837 707,928 18.9 2,418,212 75,046 17,953 197,000 503,650 2,255,216 75,135 20,023 197,000 518,172 2,055,966 75,224 20,671 75,000 537,753 2,012,597 75,313 25,968 75,000 537,753 1,863,951 75,401 14,327 75,000 487,753 1,640,349 75,490 6,871 75,000 437,753 1,705,139 75,579 7,991 437,753 1,584,840 74,902 7,991 362,753 1,484,840 74,987 438 362,753 547,166 470,374 442,741 395,709 395,709 569,673 443,109 427,422 350,503 350,503 931,217 862,956

$ 769,425'671,548 616,562 362,376 362,376 362,376 316,636 316,636 316,636 569,938 512,164 470,754 337,360 243,437 430,477 46.0%

1.4 0.4 13.3 38.9 10.54%

$32.57 14,966 63,877,116 46.6%

1.6 0.4 14.7 36.7 12.05%

$32.30 14,278 63,344,706 46.7ogo 1.7 0.5 13.9 37.2 12.07%

$30.67, 14,071 59,427,973 48.6%

1.8 0.6 14.8 34.2 9.84%

$29.64 13,941 56,279,231 48.1%

1.9 0.4 14.5 35.1 9.52%

$28.50 13,750 55,105,988 47.1%

2.2 0.2 14.7 35.8 9.59%

$28.46 13,500 57,730,121 49.9%

2.2 0.3 12.8 34.8 9.42%

$27.14 12,819 55,686,776 49.9%

2.3 0.3 11.4 36.1 9.80%

$26.20 11,575 52,672,084 50.6%

2.6 12.4 34.4 11.20%

$24.72 H,128 49,674,757 73.9 9.2 16.9 57,027,035 2,986,545 87.5 75.2 76.2 2.4 '.3 8.4 10.1 20.5 15.4 57,726,273 53,685,378 51,327,508 2,900,856 2,814,403 2,749,680 75.2 10.0 14.8 51,089,981 2,691,691 84 9 9.0 6.1 54,092,934 2,626,492 86.6 80.0 6.4 8.4 7.0 11.6 52,309,906 48,856,493 2,566,341 2,497,342 82.5 9.2 8.3 45,881,076 2,438,584 5,883 12,845 12,159 5,630 12,671 11,564 5,650 12,510 11,292 5,596 12.377 10,369 5,541 12,970 10,279 5,885 13,391 10,535 5,777 12,907 10,317 5,642 12,534 9,817 5,240 12,048 8,556 (b) The years subsequent to 1971 include unamortized premium or discount related to each category of long-term debt.

(c) Includes 2,283, 1,944 and 1,886 MWavailable from others in 1980, 1979 and 1978, respectively.

Southern California Edison Company 38 Board of Directors

~ WilliamR. Gould

~Howard P. Allen-

>Roy A. Anderson

~Norman Barker, Jr.

Edward W. Carter "WilliamB. Coberly, Jr.

"'Terrell C. Drinkwater

~Walter B. Gerken Joan C. Hanley "Jack K. Horton

~ Frederick G. Larkin, Jr.

'T. M. McDaniel, Jr.

~John V. Newman

~Gerald H. Phipps Henry T. Segerstrom E. L. Shannon, Jr.

- H. Russell Smith Richard R. Von Hagen Chairman of the Board and Chief Executive Officer President Chairman of the Board and Chief Exectt tive Officer, Lockheed Corporation, Burbank, California Chairntan of the Board and Chief Executive Officer, United California Bank, and Vice Chairntan of the Board, Western Bankcorporation, Los Angeles, California-Chairman of the Board, Carter Harvley Hale Stores, Inc., Los Angeles, California President, California Cotton Oil Corporation (Investntents and Real Estate Holdings),

Los Angeles, Califontia Retired AirlineExecutive, Los Angeles, California Chainuan of the Board and Chief Executive Officer, Pacific Mutual Life Insurance Company, Netvport Beach, California General Partner and Manager, Miramonte Vineyards, Rancho California, California Chairntan of the Executive Conntut tee and Consultant (Retired Chairntan of the Board anrl Chief Executive Officer, Southern California Edisott Contpany), Los Angeles, California Chairntan of the Executive Conunit tee, Security Pacific National Bauk, Los Angeles, California Corporate Director and Consultant (Retired President, Southern California Edison Contpany),

San Marino, Califonu'a President, CBS-Sony California, Inc. (Citrus Production), Oxnard, California President, Gerald H. Phipps, Inc., General Contractors (Building Construction), Denver, Colorado Managing Partner, C.J. Segerstront &Sons (Real Estate Develop>nent), Costa Mesa, California Chairntan of the Board and Chief Executive Officer, Santa Fe International Corporation (Oil Service, Petro!cunt Exploration and Production), Orange, California Chairman of the Board, Avery International (Manufacturer of Self-Adhesive Prorlucts), San Marino, California President, Lloyd Corporation, Ltd.

(Real Estate Developntent and Production ofOil and Gas), Beverly Hills, California

'Messrs. Coberly and Drinkwater, having reached retirement age, willnot stand for reelection to the Board of Directors in 1981.

Southern California Edison Co~npany 39 Executive OEGcers WilliamR. Gould Howard P. Allen H. Fred Christie David J. Fogarty A. Arenal G.J. Bjorklund Robert Dietch C. E. Hathaway Joe T. Head, Jr.

P. L. Martin A. L. Maxwell Edward A. Myers, Jr.

Michael L. Noel L.T. Papay WilliamH. Seaman Robert E. Umbaugh John R. Bury Honor Muller Chairman of the Boarcl and Chief Executive Officer President Executive Vice President and Chief Financial Ofhcer Senior Vice President Vice President (Engineering and Construction)

Vice President (Syste>n DevelopnIent)

Vice President (Nuclear Engineering and Operations)

Vice President (Human Resources)

Vice President (Power Supply)

Vice President (Customer Service)

Vice President and Comptroller Vice President (Conservation, Communications and Revenue Services)

Vice President and Treasurer Vice President (Advanced Engineering)

Vice President (Fuel Supply)

Vice President (Adunnistration)

General Counsel Secretary

Southerzz California Edison Company 40 1981 Annual Shareholders'eeting The annual meeting of shareholders of Southern Califor-nia Edison Company willbe held at 10 a.m., Thursday, April16, 1981, at the Company's Corporate Headquarters, 2244 Walnut Grove Avenue, Rosemead, California 91770.

Telephone (213) 572-1212.

Statistical Supplement A comprehensive financial and statistical supplement to this report is available in limited quantity. A copy may be requested by writing to the Manager ofInvestor Relations, Southern California Edison Company, P.O. Box 800, Rosemead, California 91770.

Stock Transfer Agent Southern California Edison Company Post Office Box 400 Rosemead, California 91770 Registrar of Stock Security Pacific National Bank Los Angeles, California Dividend Reinvestment and Stock Purchase Plan Agent Bank of America N.T. & S.A.

San Francisco, California For Investor Relations:

Institutional Investors contact:

Treasurer's Department Manager of Investor Relations Telephone (213) 572-1090 Izzdividual Shareholders contact:

Secretary's Department Telephone (213) 572-1937 For Dividend Reinvestment and Stock Purchase Plan Information:

Southern California Edison Company Secretary's Department Room 240 Post Office Box 400 Rosemead, California 91770 Telephone (213) 572-1852 Stock Exchange Listings Common Stock:

New York Stock Exchange Pacific Stock Exchange Preferred and Preference Stocks:

American Stock Exchange Pacific Stock Exchange Ticker Symbol SCE (Common Stock)

Media Listing:

SCalEd This Annual Rcport and the statements and statistics contained herein Iiave been assembled for general informative purposes and are not intended to induce, orfor use in connection with, any sale or purchase ofsecurities. Under no circumstances is this report or any part ofits contents to be considered a prospectrzs, or as an offer to sell, or the solicitatiozz of azz offer to buy, any securities.

Southern California Edison Company System to Pacilic Northwest San Francisco CAI.I PORN I A NEVADA UTAH Big Creek Las Vcgas po Hoover Four Comers >

(coal)

L Solar Oneo Mohave ARIZONA C3 Service territory pg Extra-high-voltage (EHv) transmission lines

~ Hydroelectric generating station A Fossil fuel generating station O Nuclear generating station

~ goscrrrcarfyr s t0 L wind Center LOS AugCICS L)

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under t0 LL construction Pat)I spri Irs San Onofre I 69 Geothermal Palo Verde

Southern California Edison Company 2244 Walnut Grove Avenue, Rosemead, California 91770