ML17306A318
| ML17306A318 | |
| Person / Time | |
|---|---|
| Site: | Palo Verde  |
| Issue date: | 12/31/1990 |
| From: | Bryson J, Peevey M SOUTHERN CALIFORNIA EDISON CO. |
| To: | |
| Shared Package | |
| ML17306A314 | List: |
| References | |
| NUDOCS 9112170341 | |
| Download: ML17306A318 (60) | |
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Corporate Profile Contents SCEcorp is the parent holding company of Southern California Edison Company, the nation's second-largest electric utility, and three principal nonutility subsidiaries of The Mission Group. With headquar-ters in Rosemead, California, SCEcorp is primarily an energy-services company whose subsidiaries have combined assets of more than 8<6 billion.
SCEcorp's largest subsidiary is Edison, a coy-year-old regulated utilitythat provides electric service to 4 million customers in Central and Southern California. Edison's service territory covers 5o,ooo square miles and has a population of more than 2o million. This area has one of the nation's fastest growing and most prosperous and diversified economies.
The Year at a Glance Letter to Shareholders Special Focus: Smart Electric Solutions Review of Pending Merger A Commitment to Excellence Review of Southern California Edison Company Review of The Mission Group Financial Information Board of Directors Executive Officers Shareholder Reference Guide
'Lg x6 20 26 29 54 55 56 The Mission Group's subsidiaries include Mission Energy Company, Mission First Financial and Mission Land Company. They operate throughout the United States and abroad in businesses generally related to the corporation's expertise in the energy industry. These nonutility subsidiaries focus on such areas as electric power generation, financial investments and real estate development.
Cover Electricity powers a light-rail train of the Blue Line leaving Willowstation along a 22-mile route between Long Beach and Los Angeles. The Blue Line is a clean and efficient system that began service in July and willbe expanded throughout the Los Angeles Basin. This rapid-transit system is aimed at relieving traffic congestion and air pollution in the urban area. Edison worked with transportation agencies during construction of the line and supplies most of its electricity.
Advanced technologies using electricity play a key role in Edison's efforts to help its customers improve productivity, enhance energy efficiency and protect the environment.
(See section called, Special Focus:
Smart Electric Solutions on page 8.)
F'inancial Highlights Dollars in thousanrls, except per-share rlata 1990 Increase
'l989 (decrease)
Five-year compound annual growth rate SCEcorp Revenue Net income Earnings per share Dividends (current rate)
Rate of return on common equity Dividend payout ratio
$7,198,531
$786,360
$3.60
$2.64 14 5/o 72.8 /o
$6,9o4,386
$778,24I
$3.56
$2.56
'l5.0%
7I.3%
4.3%
6.7%
l.o 2.0 3I Southern California Edison Revenue Earnings available for SCEcorp common stock Earnings per share" Rate of return on common equity
$6,986,460
$692,627
$3.17 15.0%
$6r524r474
$678,642
$3.Io I4.7%
7.I%
6.2%
2.'l 0.0 (0 3)
The Mission Group Net income Earnings per share" Equity capital Assets Rate of return on common equity
$94,019
$.43
$904,282
$1,762,199 11.8%
$99,893
$.46
$735r 263
$Ir408rl99 I7.2%
(5.9)%
62.5%
(6.5) 6o.8 23.0 46.4 25 I 593 "Based on tveighted-average shares of SCEcorp common stock outstanding.
Earnings Per Share (SCE<<orp) h dotrrs 239'39 3.49 3.56 3.60 Annual Dividend Rate Per Share (SCEcorp) h doilers The Mission Group Consumer price rtder 86 87 88 89 90
'ftestrtrd to renrct rroreorronce of nucteerp4nt constructisn cosu 76 77 77 78 79 80 8I 82 83 84 85 86 87 88 89 90
The Year at a Glance Financial D SCEcorp's earnings per share of common stock increased 4 cents to a record $3.6o in f990 (Page 3I).
a SCEcorp's earnings were a record $786 million and revenue was a record $7.z billion (Pages 3 anrl 3z).
a SCEcorp declared its x3th increase in common stock dividends in x4 years; the annual dividend is now $z.64 per share.
D SCEcorp's common stock provided a total return of 3.x /0 in x99o from price changes and dividends, compared with a decrease of 4.3'/0 for the Dow Jones UtilityAverage (DJUA) and a o.3'/0 drop for the Dow Jones Industrial Average (DIrA). Over the past xo years, SCEcorp's common stock provided shareholders an average compounded return of more than 2T /0 annually, compared with x5.8'/0 for the QUA and x3.3 /o for the DjtA.
a Edison remains the only California electric utilitywith bonds rated AAby both major bond-rating agencies.
a Edison's earnings increased 2.T /o to $693 million (Pages zo anrl 3x).
a The Mission Group's three ongoing nonutility subsidiaries had earnings of $xxx million, up x9'/0. However, these earnings were partially offset by $g million in operating losses and reserves established for the discontinued Mission Power Engineering subsid-iary (Pages z6 anrl 3x).
Operational a Edison's total electric sales rose 3.6'/0, compared with z.8'/0 in x989 (Page 20).
tm Edison gained 90 729 new customers (Page 20).
a Edison opened the nation's largest, most comprehensive facility to promote energy-efficient and non-polluting electric technologies for its customers. This innovative facil-ity received widespread national attention from the media as well as environmental, regulatory, consumer and utilitygroups (Page 9).
o Edison made a major new commitment to energy conservation by introducing, with a coalition of statewide groups, new and intensive programs that double its conservation expenditures to a total of $x4x million over x99o and x99x. New state regulations now provide Edison the opportunity to earn a return on most of its conservation invest-ments (Page zz).
Regulatory a The Federal Energy Regulatory Commission and the California Public Utilities Commission completed hearings on Edison's proposed merger with San Diego Gas gz Electric. Edison awaits decisions by both commissions (Pages z4 and 34).
Letter to Shareholders The marketplace in which we do business is changing.
'l990 was a good year for SCEcorp. We had record revenues and earnings, and raised our dividend for the xgth time in the last x4 years. We also enhanced service to our utilitycustomers and further developed our nonutility businesses, preparing us for a more competitive future.
Financial Overview SCEcorp's earnings in z99o were a record $786 million, up x% from x989. Our util-ity subsidiary, Southern California Edison, earned $693 million, up z% from x989.
Our three active nonutility subsidiaries earned $nx million, up z9%. These non-utilityearnings were partially offset by $g million in operating losses and reserves established for Mission Power Engineering, our discontinued engineering and con-struction subsidiary. SCEcorp stock continued to outperform the utilityindustry and the major stock indexes in total return to shareholders on a one-year, five-year and xo-year basis.
New Competition The marketplace in which we do business is changing, and we are transforming ourselves to respond effectively.
Utilitycompanies such as Edison no longer have a near-monopoly on electricity generation. While our customers have been served well by our utilitypower plants, future construction of generation facilities in most cases willbe subject to competi-tion. Over the past five years, an ever-growing proportion of the generation capacity added in the United States g7% last year was built by companies that are not utilities.
At Edison, we willnot back away from this competition. As the California Energy Commission has recognized, the most economical source of new generation for Edison's customers in the next decade willbe the repowering of certain of our existing power plants for increased efficiency and reduced air emissions. None-theless, it is likely that a significant proportion of the new generating capacity required for our customers in the next decade willbe provided by nonutility businesses, from which Edison willpurchase power under long-term contracts.
As a result of these changes, a larger percentage of our total utilityinvestment willbe in transmission and distribution facilities, and energy-efficiency programs.
Because we serve a rapidly growing service territory, Edison's investments in trans-mission and distribution in the last five years have helped to offset the effect of our reduced investments in new power plants, and we project that this willcontinue to be true in the current decade.
Our mostintensive work focuses on two pressing problems in Southern California-poor air quality and transportation gridlock.
Customer Service: New Electric Technologies One of the most important priorities for us in x99o was the development of new approaches to help our customers meet their energy needs. Our most intensive work focuses on two pressing problems in Southern Californiapoor air quality and transportation gridlock.
Southern California businesses increasingly face competitive threats because of costs and production restrictions imposed by air quality regulations established to help our region meet federal clean-air standards. Amajor new mission for Edison is help-ing these customers identify and use new electric technologies to reduce pollution, increase productivity and preserve manufacturing jobs.
Another high-potential use of electricity is electrified transportation.
Edison has been working hard in recent years to encourage development of electric vehicles.
Recently, state and local governments have taken actions that give impetus to elec-tric vehicle development. Most important among them is a new state requirement that 2'/0 of all new vehicles sold in California by'1998 and xo'/0 by zoo3 be virtually free of emissions. Only electric vehicles can meet this requirement.
We have also participated in Southern California's growing use of electrified mass transit, such as the Blue Line light-rail train shown on the cover of this annual report. Electrified trains and buses can make a dual contribution to Southern California by reducing smog and cutting traffic congestion.
Customer Service: Energy Conservation We have substantially intensified efforts to help our customers make the most efficient and economic use of electric energy. The importance of this commitment is underscored by the war in the Persian Gulf, as well as the intensified international competition and recession which our customers face. We need to assist our customers in getting as much productive value from our product as possible. Building on our extensive experience over the past decade, we provide an array of more than go cost-effectiv'e energy-management and conservation programs.
In x99o, with the assistance of environmental and consumer organizations, the California Public Utilities Commission (cpuc) created a regulatory framework that gives Edison the opportunity to earn a profit on funds invested in cost-effective conservation programs. Thus, our customers and shareholders alike can gain from these conservation activities.
We need to assist our customersin getting as much productive value from our product as possible.
Edison's Oil Use: Nearing Zero Edison's customer energy efficiency programs, along with our long-time leadership in developing alternate and renewable energy resources and the strong performance of our nuclear units, allowed us in 'l990 to hold consumption of oil for electric generation to g million barrels, compared with a high of g8 million barrels in x977.
The reduction in oil use was achieved as a result of actions taken for environmental protection and energy independence since the x97os oil embargoes.
In addition to intensified conservation efforts, we have proposed to the cpvc additional invest-ment in San Onofre Nuclear Generating Station's Unit x, our oldest nuclear plant, to assure that it willcontinue to provide safe, pollution-free power into the zest century. And further, to minimize or eliminate oil consumption, we have made arrangements to store substantial quantities of gas underground and are investing in new pipeline projects that willbring more natural gas to Southern California.
UtilityCost Control An important element of Edison's financial performance in x99o was holding the increase in operation and maintenance expenses to slightly better than two percent-age points below the rate of inflation. We did that despite the cost of adding more than 9o,ooo new customers, a double-digit increase in health-care costs, and higher than projected expenses at the Palo Verde Nuclear Generating Station in Arizona, which we partially own but do not operate.
The Mission Companies: Nonutility Business Growth SCEcorp has been responding to the changing business environment through both its nonutility and utilitybusinesses.
Anticipating the growth in nonutility power generation, we created our Mission Energy subsidiary five years ago. With its strengths in power contracting, construction management and operation of clean and efficient power plants, Mission Energy has made itself one of the largest companies in a fast-growing new industry. It is a partner in 3,ooo megawatts of generation, comprising z8 projects in seven states either in operation or under construction, and js developing an additional z,ooo megawatts.
In x99o Mission Energy expanded its focus to international projects. The United Kingdom and other countries are beginning to expand the role of privately owned generation, creating business opportunities for Mission Energy.
We remain confident that the merger as proposed would benefit our share-holders and customers and serve the public interest.
Mission First Financial completed n transactions in z99o, including investments in two electric generation projects and eight affordable housing projects. Mission Land entered into five new joint-venture projects during the year and completed construc-tion on x7 new buildings at four existing industrial parks.
Our Mission Group subsidiaries, with assets of nearly $x.8 billion, have contributed significantly to SCEcorp's profits in recent years. Together they have manag'ed their businesses to position themselves for future growth.
Merger with SDGB E Regulatory review of our proposed merger with San Diego Gas 8z Electric Company continued in x99o. The review process has now taken more than two years. We were pleased that the United States Department of Justice decided the merger would not lessen competition, and that the staff of the Federal Energy Regulatory Commission (FERc) concluded that the merger should be approved. However, administrative law judges at both the FERc and the cpvc have recommended that the merger not be approved. We remain confident that the merger as proposed would benefit our shareholders and customers and serve the public interest. As is discussed more fully on page x4 of this report, the regulatory hearings have concluded and the case has been fullysubmitted to both the federal and state regulatory bodies. We await their decisions.
Regulatory Proceedings Regarding AffiliateTransactions The cr Uc is conducting regulatory proceedings to examine purchased-power trans-actions between Edison and xg nonutility power-production projects in which our Mission Energy subsidiary has up to go'/0 ownership interests. As discussed on pages z4 and 46 of this report, the cpvc in September x99o ruled that $48 million should be disallowed from Edison's rates regarding one such affiliate project. In December x99o, the cr Uc granted Edison a rehearing on its decision in this case.
The rehearing could result in a reduced disallowance. In addition, the Division of Ratepayer Advocates, the consumer-advocacy arm of the cr Uc, has recommended substantial disallowances with respect to two other affiliate projects.
The affiliate projects sell power to Edison under contracts that are at least as favor-able to Edison's customers as the cpvc-approved "standard offer" contracts, which were available to anyone at the time Edison entered into these contracts. It is important to the company that the cpUc adopt fair and reasonable treatment of these projects.
New Management Team kfoward P. Allen Effective October x, we were elected as chairman and chief executive officer and as president of SCEcorp and Edison. This followed the retirement of Howard P. Allen as chairman, president and chief executive officer of both companies. Mr. Allen willcontinue to assist the company as a consultant and as chairman of the board's executive committee. We are greatly indebted to him for his outstanding leadership during more than 36 years of dedicated service to the company.
As of December x, David J. Fogarty retired as executive vice president after 29 years of distinguished and valuable service. On June x, Edison promoted Charles B.
McCarthy Jr. and Harold B. Ray to senior vice presidents, and Harry E. Morgan Jr.
to vice president and site manager of San Onofre Nuclear Generating Station. Also, Michael L. Noel, vice president and treasurer, was elected chief financial officer on October x.
We want to recognize the dedication and skill of our x7,ooo employees. Our fullest success as a national leader in the energy-services business willdepend on encour-aging their best ideas, initiative, judgment and enthusiasm.
Finally, we thank our board of directors and you, our shareholders, for the support and confidence you have shown in us. On behalf of the entire SCEcorp team, we commit our best efforts to serve you well.
John E. Bryson Chairman anrl Chief Execntive Officer
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Michael R. Peevey President February xg, x99x John E. Bryson Michael R. Peevey
SpeciaI Focus: Smart Electric Solutions Southern California Edison has supplied reliable electric service for xo4 years. In a changing business environment, the concept of good service must be expanded to meet a wider variety of customers'nergy-related needs. In f990, Edison made a major commitment to develop emerging electric technologies and promote energy conservation.
These efforts are helping customers cut energy costs, increase efficiency and improve air quality.
OIL-PUMPING OPERATIONS The Benefits of Electric Technologies A large customer uses pollution-free electric motors at its oil.pumping operations in Ventura County. These motors are more reliable, easier to operate and require less maintenance than traditional internal. combustion engines. Edison works closely with many large customers to cut air emis-sions and comply with strict environ-mental requirements in oil, gas and water. pumping operations.
In x989, the South Coast AirQuality Management District adopted an ambitious clean-air plan for Southern California. This unprecedented plan imposes numerous new air-emission requirements on businesses and consumers.
Electric technologies offer a cost-effective means to meet these requirements for many of Edison's 4oo,ooo commercial and industrial customers. In addition, these clean and energy-efficient technologies can both reduce costs and improve product quality.
Edison has been demonstrating a host of new energy-efficient electric technolo-gies for customers at its z3,ooo-square-foot Customer Technology Application Cen-ter (crAC) in Irwindale, California. Since it opened in January s99o, the center has attracted widespread national attention, and top industry, governmental and envi-ronmental groups from all over the country have visited it.
At cTAc, visitors can participate in a variety of "hands-on" demonstrations.
Industrial customers, for example, can test clean-air technologies, including ultra-violet curing and microwave and radio-frequency heating and drying. Commercial customers can learn about energy-efficient electric motors, heat pumps, lighting and new commercial cooking technologies.
Residential customers and builders can see the electric "House of the Future," with its highly efficient electric appliances and home automation systems. Already, many customers have implemented in their own businesses new production methods they found at crAc.
The Future of Electric Transportation Electric vehicles produce 97% less air pollution than gasoline-powered ones even counting emissions from power plants generating electricity to charge the vehicles'atteries.
In the greater Los Angeles area, about two-thirds of all pollution comes from vehicles.
CLEAN-AIRCOATING TECHNOLOGY A technician from Safetran Systems Corp., an electronic equipment man-ufacturer, uses ultraviolet light to process the protective coating on cir-cuit boards at its Rancho Cucamonga plant. Faced with strict new environ-mental regulations, the industrial customer installed this pollution.free equipment after seeing a demonstra-tion at Edison's new Customer Tech-nology Application Center. Businesses throughout Southern California that use coatings in manufacturing processes-such as printers, furniture manufacturers and the metal-coating industry-benefit from cost-effective electric technologies that can cut emissions and boost productivity.
Faced with that reality, air quality agencies have mandated new rules to stimulate the manufacture of low-emission vehicles. In z99o, the California Air Resources Board mandated that z% of all new cars sold annually in the state by z998, or 4o,ooo vehicles, must produce no emissions. That figure willrise to so% of all new cars by the year zoo3, or zoo,ooo vehicles. These goals willhelp establish a large market for clean electric vehicles in the coming decade. In response, all three Amer-ican auto makers are developing electric vehicles.
In z99o, Edison worked closely with public and private organizations on programs to help commercialize electric vehicles. For example, Edison loans its fleet ofg large electric vans to cities, counties and private companies to demonstrate their practical value. The company is testing two advanced vans produced by Chrysler Corp., which go 6g miles per hour and zzo miles between recharges.
In addition, Edison joined the Los Angeles Department of Water and Power in a $7 million pro-ject to help bring xo,ooo electric vehicles to Southern California by z99g.
Edison willhave enough generating capacity over the next decade to recharge x million vehicles each night. This would make more efficient use of power plants, thereby reducing the average cost of electricity for all customers.
Electric transportation goes beyond electric vehicles it also means electrically powered light-rail, heavy-rail and magnetic-levitation trains. A major success story in z99o was the 22-mile-long Blue Line, the first link of a 3oo-mile mass-transit network to be built in Southern California. Edison worked closely with transit offi-cials in planning the system and now supplies about two-thirds of its power. The Blue Line already carries more than three times the passengers originally projected.
Other links in the rail networkthe planned Green Line to the Los Angeles Inter-national Airport and the downtown Los Angeles Red Line-should be operating within three years.
ELECTRIC VEHICLE Edison employees test the company's new prototype TEVan, a non-polluting electric minivan for fleet and personal transportation. Ajoint project of Edison and various government and industry groups, the Chrysler-built TEVan uses advanced nickel ~iron bat-teries that provide a driving range up to 120 miles and a top speed of 65 miles per hour. In addition to this TEVan, Edison has 17 full-size electric cargo and passenger vans that it loans for demonstration to its larger fleet customers. Vehicles cause most of the smog in the Los Angeles area, and air quality officials have mandated more clean-fuel vehicles on California roads.
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~ww/g The Kirk Produce Company in Placen-
'ia uses a specialized energy-efficient cooling system to prolong the shelf life of its fruits and vegetables. With assistance from Edison, the customer cut its electricity bills by installing a thermal. energy storage system that makes ice at night when electricity costs are low. It uses fans in the day to cool and humidify the produce.
This technology also enables Edison to use its generating plants more effi-ciently by shifting customers'emand for electricity from peak periods to off.peak times.
A Blueprint for Energy Efficiency DESIGN WINNER Another key element in supplying better service to customers is energy conserva-tion. A kilowatt-hour of electricity saved through improved efficiency is as valuable to the economy as a kilowatt-hour consumed.
Using energy wisely cuts air pollution as well as electricity bills.
In response to recommendations from a broad coalition of public and private groups, the California Public Utilities Commission in x99o approved a far-reaching array of programs giving consumers and utilities incentives to conserve energy. For its part, Edison willnearly double spending on these energy-efficiency programs to a total of $zyz million for z99o and x99z. With other programs, the company plans to spend more than Sago million for all its energy-management activities cluring this two-year period.
Under new and expanded programs, Edison offers incentives to commercial and residential builders to construct offices, factories and homes that go beyond Califor-nia's already stringent efficiency standards.
These energy-saving measures include home insulation and greater use of advanced technologies, such as energy-efficient lighting, electric motors, and heating and cooling systems.
The company also offers rebates to customers who install efficient appliances. In addition, Edison has increased funding for its light-bulb replacement program. Since z98y, Edison has distributed x million compact-fluorescent light bulbs to low-income customers. They last nine times as long as conventional light bulbs, while using only one-quarter the energy. In all, they save customers nearly $9 million annually through lower electricity bills.
These new programs recognize the value of energy efficiency. Under them, regu-lators allow Edison the opportunity to earn a profit on most of its energy-efficiency investments-similar to the traditional return on building a power plant or any other capital investment. As a result, shareholders as well as customers can benefit from energy conservation.
The new Social Services Center in Santa Barbara uses much less energy than conventional buildings. The energy-efficient features include highly efficient lighting, heating and air conditioning -and other special-ized features like motion sensors that shut off lights when employees leave a room. The center won a top award in the Design for Excellence program, jointlysponsored by Edison and the California Energy Commission. The program encourages energy-efficient design and construction of new build-ings above minimum state standards.
RESIDENTIALCONSTRUCTION An Edison service crew pulls cable to provide electric service at a construc-tion site for energy-efficient homes in Thousand Oaks. The company's Welcome Home program encourages energy-efficient buildings. In 1990, agreements were signed with builders to construct more than 33,000 residential units that surpass state energy-efficiency standards by 10% to 30%. Edison helps builders promote these dwellings and also pro-vides Welcome Home buyers with assistance in cutting electric bills.
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Review of Pending Merger The proposed merger of Edison and San Diego Gas h Electric Company (sDca E) is a top priority for the company. The combined utilitywould have nearly $8.7 billion of annual revenue, g.x millioncustomers, assets of Sxg.z billion and a service terri-tory of g4poo square miles from Central California to the Mexican border.
The merged company would be stronger financially and operationally than either utilitystanding alone and better able to compete in a changing business environ-ment. It would produce more stable revenue and earnings, a more diverse customer base, better growth opportunities and overall customer savings of $x.7 billion in the 199 os.
The boards of directors of SCEcorp, Edison and sDGt E agreed in November x988 to merge the two utilities. The companies'hareholders later approved the merger at their annual meetings in Aprilx989. The merger must be approved by the Califor-nia Public Utilities Commission (cPUC) and the Federal Energy Regulatory Com-mission (PERc).
Regulatory Actions In x99o, the FERc and CPuc completed xa3 days of hearings with testimony from 6o witnesses. The regulatory review of the merger proceeded through several impor-tant steps:
MERGER PLANNING Rich Garza (left) of San Diego Gas &
Electric and Richard Fox from Edison plan the integration of the two com-panies'omputer systems at Edison's Irvine Operations Center. TWenty-two transition teams from the two utili-ties have been working together for months to ensure a smooth and effi-cient integration of facilities and oper-ations after the merger is approved.
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a An environmental impact report prepared by the ct'vc determined that the merger willresult in substantial reduction of air pollution in Southern California because Edison's power plants are newer and more efficient than sDGhE's. In spe-cific areas where additional emissions are forecasted, Edison has reached agree-ments with local air quality agencies to provide further emission controls.
a In June, Edison reached agreement with the United States Department of Justice on merger conditions that would resolve its antitrust concerns.
Edison agreed to accept conditions that willprovide additional transmission service to intercon-nected utilities when it does not harm Edison's customers or interfere with pre-existing contractual commitments.
t3 In November, a FERc administrative law judge recommended against the merger.
In x988, the same administrative law judge also recommended against the PacifiCorp-Utah Power h Light merger, which the vaRc ultimately approved by a g-o vote. In Edison's merger proceeding, the United States Department of Justice and the FERc staff each urged the commission to reject key portions of the admin-istrative law judge's recommendation.
Both said that the merger complies with federal merger guidelines. The veRc staff supported the position of Edison and svc8zr; that the merger would produce economic benefits shared by utilitycus-tomers. These benefits would include lower electric rates for customers of both Edison and sDGhE, and improved service for San Diego residents.
a On February x, x99x, the administrative law judges assigned to review the merger at the ct uc recommended against the proposed merger. Although they recognized more than Sx billion of consumer benefits from the merger during the decade, they also found that the merger would harm competition. This decision is not binding on the cave's commissioners, who are expected to make their decision m '1991.
Throughout the year, Edison's representatives met with San Diego community leaders to improve mutual understanding and provide them with information about the merger. Despite these efforts, the City of San Diego and some local groups have opposed the merger, largely because they do not want to lose a hometown headquarters.
Other parties opposing the merger include the California Attorney General's Office.
Assuming the merger is approved, each socage common share would be exchanged for x.3 newly issued SCEcorp common shares. Existing socaa preferred and prefer-ence shares would be exchanged for newly issued SCEcorp preferred and preference shares on a share-for-share basis.
A Commitment to Excellence In x99o, Edison employees demonstrated their professionalism throughout the ser-vice territory. Service crews and others responded rapidly and worked ago,ooo hours to restore service when fires or winds caused electric outages. The length of non-storm outages dropped g% due to continuing emphasis on system maintenance.
Telephone representatives handled 7.x million calls from customers in x99o, a 7%
increase over t989.
Focus on Customers In response to rapidly changing demographics in Southern California, Edison has expanded services to non-English-speaking customers. The company has translated basic information for customers on billing procedures, conservation and safety and made it available at company offices. Edison also has a toll-free telephone service with representatives fluent in Spanish, Chinese (Mandarin and Cantonese), Viet-namese, Cambodian and Korean. Bilingual volunteers from the company's new multi-ethnic Speakers'ureau make presentations on a variety of energy-related topics. The Edison Electric Institute the electric utilityindustry's national trade association, recognized these communication programs by presenting the company with the x99o Common Goals award for quality service.
MULTI-ETHNICPROGRAMS Energy Services Representative Hanh Nguyen advises residential and com-mercial customers in the Little Saigon area of Westminster on ways to con-serve energy and reduce costs. The company translates information on billing, energy conservation and safety for its growing population of non-English-speaking customers.
Edison has established toll-free tele-phone service using representatives fluent in various languages.
Ratio of Customers to Employees (Edison) 204 218 230 237 243 Average for 15.large11 efeerrie uQt'e.
(frr'Nvared for 1990.)
During the year, Edison representatives made presentations to numerous senior-citizen groups on energy use, emergency preparedness and safety. Under the com-pany's Good Neighbor program, initiated in x988, employees refer elderly people needing assistance to various community organizations for medical care, meals and transportation. Other noteworthy customer service achievements included:
t3 Providing energy conservation services to 8o,ooo low-income and other customers with special needs, including bilingual assistance and free installation of energy-efficient appliances; ts Encouraging more efficient energy use by conducting nearly nz,ooo free energy audits for residential customers, and responding to zoo,ooo telephone calls about conservation on Edison's toll-free line; ts Paying part of the winter electric bills of sz,ooo low-income, elderly and disabled customers. In its eighth year, Edison's Winter Energy Assistance Fund contributed more than Shoo,ooo, matching contributions from customers; and n Offering a z4-hour, toll-free telephone number for speech-and hearing-impaired customers.
86 87 88 89 90 Needs of Large Customers By intensifying and specializing its service, Edison has stemmed the potential loss of large commercial and industrial customers that considered leaving Edison s ser-vice territory or installing their own electric generating systems.
Such companies include aerospace, plastics manufacturing and food concerns.
Edison's experts rec-ommended strategies, rate options, process modifications and electric technologies to increase productivity, improve product quality, decrease costs and improve air quality.
Edison also helped many of these customers take advantage of financial, educational and employment assistance programs available through state and local government agencies.
Promoting Equal Opportunity Equal opportunity is a top priority at Edison. In x99o, the company began imple-menting a comprehensive equal opportunity pledge made in x989. By the end of x99o, Edison had exceeded many of its goals. Women and minorities hold x8'/0 of the top 5oo positions, just two percentage points short of the company's 1995 go'll.
Women and minorities hold ~'/o of the top xoo positions, surpassing the corporate goal of xo /o by '1995 and well on the way to achieving the zo /0 goal by oooo. The advancement of minorities and women willnot come through quotas. Instead, employees willbe promoted on merit. Edison is committed to ensuring there will be no barriers to advancement by employees who perform well.
Edison's x99o purchases from minority-and women-owned businesses grew to more than x7'/0 of its approximately $x billion in procurement contracts. The com-pany expects these purchases to rise to zo'/0 by x993 thereby meeting a goal first established with the cPUc in x988. Edison expects to reach the 3o'/0 target estab-lished in last year's pledge by '1998.
Investment firms owned by minorities and women manage $x75 million, or xx'/0 of Edison's pension fund. This is the highest percentage of any large pension fund.
Furthermore, the company has $33 million in credit lines and deposits with 35 minority-and women-owned firms, making it the largest such utilityprogram in the nation.
Percentages of male, female and minority employees at year-end 1985 and 1990 hIALE
'/o YEAR.END 1985 199o FERIALE
'/o YEAR.END
'1985
'1990 ASIAN BLACK ANIERICAN 0/
0/
YEAR END YEAR.END 1985
<<990 1985
'1990 AhIERICAN INDIAN O/
YEAR.END 1985
<<990 IIISPANIC 0/
YEAR-END
<<985 199o TOTAL htINORmES
/0 YEAR-END
'x985
'x990 Management" Administrative ge operativetn Total Edisonm 81.7 76.7
'I8.3 23.3 3.8 5.'l 6.g 7.8 o.5 o.5 8.3 11,5
<<9,0 2g.9 7g.3 74.9 25.7 25.'1 9,Q 9.1 3.7 4.5 1.1
<<.Q 19.8 23.3 34.0 38.3 77.0 75.6 23.0 2g.g 7.4 7.5 g.6 5.8 0.9
'l.o 15.6 18.6 28.5 33.0 (1) Inchrdes the officials nnd "professionals'ffinnative action cntegon'es.
(2) Includes the 'technicians,'office nnd clerical," "craftsmen,'operntors and sertrice workers categories.
(3) Regulnr employees only.
x8
Good Corporate Citizenship Each year, Edison and its employees support a broad range of civic, charitable and cultural organizations. Overall, the corporation supported more than z,goo non-profit organizations during the year. Edison's good willand strong ties to more than Soo communities in its service territory are integral to its business.
Support for education is a high priority and takes many forms. During the year, zoo employees and retirees participated in the new Edison Student Mentoring Pro-gram. These volunteers help disadvantaged youngsters who have received educa-tional grants from Edison adapt to the demands of community college.
In 199o, the company expanded the number and amount of scholarships, awards and grants to students in its service territory. This included two four-year $zo,ooo scholarships to minority students. In all, annual awards to high school seniors and community college graduates seeking to advance themselves totaled $gzo,ooo.
In Edison's zgth United Way Campaign, employees showed their generosity by pledging a record $z.6 millionand the company another $t.z millionto help people in need. United Way supports more than 9oo charitable organizations in Edison's service territory. Employees also donated thousands of hours of their time as volunteers to various community organizations including ones for battered women and children, the elderly and the homeless.
EMPLOYEE HEALTH CARE Dr. Carol Peebles, staff physician, administers a treadmill test at Edison's health-care center in Rosemead.
The company's flexible benefits program allows employees to choose the coverage best suited to their needs.
Edison also encourages employees to maintain healthy lifestyles to help minimize overall health. care costs.
Edison was the first non-medical cor-poration to receive accreditation by the Joint Commission on Accredi-tation of Healthcare Organizations. Its innovative health. care programs have reduced cost increases from 23%
annually during the 1980s to 10% in 1990.
19
Review of Southern California Edison Company The utility's earnings increased 2.T% to $693 million from $679 million in s989, because of reduced taxes and improvements in several areas of operations.
Revenue grew 7.t% to a record $7.o billion from $6.g billion in t989.
Growth in Peak Demand, Customers and Sales On June 27, x99o, during an extended heat wave, the Edison system met a record peak demand for electricity of 27,647 megawatts (Mw), which was To% higher than the previous record. Edison started up 2t generating units in the two days preceding the peak, and an additional s3 peaking and combined-cycle units on the peak day, achieving coo% startup reliability.
In s99o, Edison added 90,729 customers to exceed the 4 million mark. By this measurement, it is the second-largest electric utilityin the United States.
Edison has added nearly 4go,ooo new customers in the last five years.
Retail electric sales climbed 3.6% to 7o. T billion kilowatt-hours (kwh) from 67.6 billion kwh in s989. Total electric sales in s99o, including sales to other utilities and municipalities, rose 3.6% to 7T.6 billion kwh from 69.s billion in s989.
SERVICE TERRITORY Edison supplies more than 4 million customers with electricity from nine energy resources, more than any other electric utilityin the world. Its 50,000-square-mile service territory in Central and Southein California has one of the nation's most diversified and prosperous regional economies.
To the south is the area served by San Diego Gas & Electric Company.
EI Southern California Edison Company service area 0
San Diego Gas & Electric Company service area Extra-high-voltage transmission lines
~ Hydroelectric a
Fossil I Nuclear
= Geothermal 5 Wind Ilt Solar d'or Biomass San Francisco To Pacific Northwest CALIFORNIA Big creek Los Anacics NEVADA A
O'San Onofre San Diego MEXICO Hoover oam UTAII To Four Corners (coal)
Mohave (coai)
ARIZONA 4S PaIo Verde 20
Research Focus on New Technologies Edison's research programs seek to provide customers with better value and more choices for their energy dollars. In the last two years, the company's research has shifted from emphasizing generation of electricity to a sharp focus on energy efficiency and environmental protection. Many of these programs are directed at conservation and helping consumers and businesses use electric technologies more effectively.
In 199o, the company continued to test an advanced two-way communications and electronic metering network that links the utilitywith customers.
These "smart" meters can offer customers a variety of energy-management choices and informational services. Eventually, this network could allow Edison to remotely read meters, connect and disconnect service, enhance operation of its distribution system, and offer time-of-use pricing and other services to customers.
Other research projects focus on electric transportation, as well as generation and transmission improvements.
Diverse Generating Resources Today, Edison supplies customers with electricity from nine types of generating resources: oil, natural gas, hydroelectric, coal, nuclear, biomass, solar, wind and geothermal. About one-third of this power comes from renewable and alternative SANTA BARBARAFIRE Steve O'Donnell (left), Rick Torres and Diane Miller, members of a service crew from Edison's Santa Barbara dis-trict, dig holes to replace electricity poles lost in fires that destroyed nearly 700 homes and buildings and charred 4,900 acres in June and July.
Working around-the-clock, 41 Edison crews installed 170 new poles and 110 transformers and restored service within 96 hours0.00111 days <br />0.0267 hours <br />1.587302e-4 weeks <br />3.6528e-5 months <br /> to nearly all 5,000 customers affected.
I
'f tt
(
t
resources developed in the x98os. This diversity provides considerable protection against supply disruptions and volatilityin world energy markets.
In the x99os, Edison plans to add new transmission capacity for more access to power from neighboring regions and to avoid construction of costly new power plants. In this decade, purchases from outside sources willremain a major source of power. The company also seeks to reduce costs by: greater short-term ("spot-market") purchases of electricity; expansion of conservation and load management programs; improvements in existing power-plant efficiency; and repowering of older oil-and gas-fired units with new combustion turbines that reduce air emissions and increase efficiency.
Performance of Nuclear Plants During the year, zo% of customers'lectricity needs was generated by nuclear power plants in California and Arizona. This nuclear energy saved z6 million bar-rels of oil or its equivalent in natural gas, resulting in fuel savings of about Spy million.
The three units at the San Onofre Nuclear Generating Station generated nearly xg% of the electricity used by Edison's customers.
Edison owns 8o% of the ygo-Mw Unit x and 7g% of Unit z and Unit 3, which have a combined capacity of zygo Mw. The company manages and operates the three units.
PACIFIC INTERTIE Lineman/splicer Bob Fox helps to maintain a tower of the Pacific Intertie transmission system near Palmdale.
The line is a major transmission link between California and the Pacific Northwest for sales and purchases of power. Edison is expanding its trans-mission facilities to enhance reliability and provide greater access to low-cost energy in neighboring states and the Pacific Northwest. Edison plans to have 5,300 MW of transmission access to the Pacific Northwest and Southwest by 1997.
22
Generation Mix(EdisOn) tn percent 1980 Together, the San Onofre units operated on average at 7y% of their capacity for the year, exceeding the s990 national average for nuclear plants. San Onofre ranked among the top four sites nationwide in electricity production. Unit s was shut down for the last six months of s99o for its moth refueling outage, which extended into x99t to replace reactor components. Unit 3 completed a three-month outage for refueling in mid-july.
Edison owns a sg.8% interest in the Palo Verde Nuclear Generating Station near Phoenix, Arizona. The three 'I 22I-Mw units are managed by Arizona Public Serv-ice Company. In x99o, these units together produced on average at 64% of their capacl ty.
58 Oil and gas I Huctear 12 Coat 9 Hydro 20 Purchases: other utilt'es 1990 2003andgas 20Hudear 13 Coal 3 Hydro 15 Purchases: other utisties 29 Purchases: other power producers 2000 Higher Fuel and Purchased-Power Costs Fuel and purchased-power costs are Edison's largest expenses in supplying electricity to customers.
These costs rose from $2.6g billion in x989 to $2.9o billion in 1990.
Most of this increase was due to large increases in purchases from nonutility power producers.
These purchases were made under contracts required by federal law and state regulation.
Natural gas was the primary fuel used in Edison's g gas-and oil-powered gener-ating units. During the past three years, Edison's gas supplies have been curtailed about 3o% of the time. In response to these curtailments, the cpuc permitted Edison to lease gas storage space from Southern California Gas Company for the second consecutive year. By using stored gas, Edison can avoid burning oil, which produces higher air emissions.
To avoid these gas curtailments, more gas pipeline capacity into California is needed. In x990, Edison continued to negotiate details of a s989 agreement with a subsidiary of Pacific Gas 8c Electric Company to construct a major gas-pipeline expansion project. Edison has an option to become a 2o% equity owner in this project, which eventually willsupply 3o% to go% of its gas needs from Canada.
This expansion project is scheduled for completion in late x993.
In late s990, Edison also signed xg-year contracts for firm supplies with four Canadian companies that willsupply a total of 2oo million cubic feet of natural gas daily beginning in x99y. Edison also is seeking new firm gas supplies from sources in Wyoming and the Southwest.
24 Oiland gas 10 Coal 5 Hydro 20 Purchases: other unities 26 Purchases; other power producers
Regulatory Review Rate Approvals Edison received approval for a number of revenue changes in
'r990, resulting in a net annual rate increase of 2.o%, or Sz33 million. Additional changes effective January x, 1991 further increase revenue by $464 million, or 6.8%. The major elements contributing to these rate changes included a $93 million decrease on February x, 2990, related primarily to changes in fuel and purchased-power costs, offset by a $459 million increase on January 1, 299t; and rate increases of Sr86 million in 299o for a phase-in plan approved by the California Public Util-ities Commission (cPUc) to recover the company's investment-related costs in the Palo Verde Nuclear Generating Station in Arizona.
1992 General Rate Case In December 2990, the company filed its'1992 General Rate Case application with the cPUc. The filingrequests a $154 million increase, or 2.2%, beginning January 1, 2992 to cover increases in the company's costs of doing business. The ci Uc willissue a decision by year-end l99i.
Purchased-Power Reasonableness Review On September 25 l990 the cPUc dis-allowed $48 million($37 millionplus interest) of Edison's purchased-power expenses from mid-2985 through late 2987. The disallowance is for power purchased from Kern River Cogeneration Company (RRcc), a nonutility power producer that is REGULATORY ACTIVITIES John Hughes, manager of Edison's Regulatory Affairs, frequently meets with the regulatory staff of the Cali-fornia Public Utilities Commission in San Francisco. During 1990, Edison representatives attended hundreds of meetings, workshops and formal hear-ings to address regulatory matters concerning the company. They dealt with a variety of issues, including nat-ural gas pricing, environmental pro-grams, fuel costs, new transmission projects and the 1992 general rate case.
" &Y
'4
Average Nitrogen-Oxide Emissions (Edison) trr toot per dey 94.9 62.I 59.2 31.0 14.2 9.9 4.5 5o'/o owned by Mission Energy Company, an SCEcorp subsidiary. The KRcc coIl-tract was found to be for the purchase of "as-available" rather than "firm"capacity.
The cPUC disallowed the amount of capacity payments to KRcc exceeding those that would have been based on the as-available capacity price. In response, Edison urged a rehearing, pointing out that the decision ignores substantial ratepayer bene-fits, which include $52 millionof savings compared with a cPUC-approved standard offer contract. In December 2990 the cPvc agreed to reconsider the amount of the disallowance; a final decision is expected in 299'.
Edison also purchases power from the Sycamore and Watson projects, both of which are nonutility power producers partially owned by Mission Energy Company.
For the period of late 2987 through early 2989, the cPUc's Division of Ratepayer Advocates (DRA) has recommended disallowances of $g7 million (excluding interest) for power purchased from the Sycamore project and $24 million (excluding interest) for power purchased from the Watson project. Edison strongly disagrees with these proposed disallowances. In fact, Edison's customers receive substantial benefits from these projects. Hearings on these issues are expected to be held in late 299'.
The DRA is currently reviewing Edison's power purchases from the remaining xo nonutility power producers partly owned by Mission Energy Company, and its reports on these projects are expected in late 2992. Hearings on these projects are not expected until early 2992.
For more information, see Note 3 of "Notes to Consolidated Financial State-ments," Page 46.
The 1990 Electricity Report The California Energy Commission (CEC) released its 299o Electricity Report that forecasts Edison willneed about x,2oo megawatts (Mw) of additional generating capacity between 2996 and 2999. According to the CEC, Edison should have 8oo Mw of this additional power available by x997. The need for the remaining 4oo Mwwillbe addressed in the 2992 Electricity Report.
Edison believes that repowering older oil-and gas-fired power plants is the most cost-effective, environmentally sound way to increase generating capacity. The cEc concurs with this judgment, but it proposes that half of the additional power needed by x997 should come from renewable and alternative resources.
70 75 80 85 90 95 00 et Recorded ts ltojKted 25
Review of The Mission Group The Mission Group:
Earnings Per Share Cents per strere t9 35 46 43 Mission Fest rnsnnrirl The Mission Group was established in x987 as the parent company for SCEcorp's nonutility businesses.
Its objective is to broaden SCEcorp's earnings base by devel-oping and investing in secure businesses with growth potential.
The Mission Group's earnings were $94.o million, compared with $99.9 million in x989. It contributed 4g cents per share to SCEcorp earnings in x99o, compared with 46 cents per share in x989.
The Mission Group's two largest contributors to income Mission Energy and Mission First Financial in x99o had substantially higher earnings, and Mission Land earned slightly less than in 1989. The net earnings increase at these three sub-sidiaries was partially offset by costs incurred and reserves established for litigation and the discontinued operations at Mission Power Engineering. At year end, The Mission Group had assets totaling nearly &t.8billion,with SCEcorp's equity amount-ing to $9o4.g million. The Mission Group earnings were xz% of SCEcorp's total x99o earnings, compared with x3% in z989.
87 88 89 90 Mission Paver tn9ineering Mission Energy Company Mission Energy Company, the largest subsidiary, is a national leader in the owner-ship, development and operation of independent power generation projects, espe-cially cogeneration and geothermal plants. The company provides a full range of services that include: management of engineering and construction work; operation POWER PROJECT Mario Brunasso, project manager at Mission Energy Company, oversees construction at the Salinas River cogeneration plant being built in Monterey County by Mission Energy and Texaco. Construction started in 1990 on this 33-megawatt (MW) project, the first of three that will provide electricity in the oil fields of Central California. Mission Energy, the largest subsidiary of The Mission Group, owns interest in 21 operating projects totaling 2,349 MW, enough capacity to serve 1.2 million people.
JTT i
NONUTILITYPROJECTS
~ Mission Energy Company A Mission First Financial
~ Mission Land Company
~ sk and maintenance; financing of power facilities; and ownership and management of fuel supplies for its cogeneration projects.
Mission Energy owns interests in u operating joint-venture projects totaling 2,349 megawatts (Mw), including three projects totaling4'w added in J99o.
Seven other projects totaling 559 Mw are under construction, while the company is seeking permits for six more totaling 950 Mw. A number of these operating projects are in Edison's service territory. However, to avoid future regulatory issues, Edison willno longer purchase power from new Mission Energy projects without prior approval of the California Public Utilities Commission.
To provide a hedge against rising gas prices and guarantee fuel supplies for its projects, Mission Energy has begun to purchase interests in proven producing natu-ral gas and oil reserves.
In x99o, the company purchased a zo% interest in Four Star Oil and Gas Com-pany, based in Houston, Texas, from Texaco, Inc. Four Star has ownership interests in oil-and gas-producing operations in eight U.S. locations.
In December, Mission Energy and Texaco Canada Petroleum (TExCAN) agreed to jointly purchase and operate oil-and natural gas-producing properties in British Columbia from Esso Resources Canada. The properties include: approximately 230 billion cubic feet of proven natural gas reserves and coo billion cubic feet of probable reserves; and 4 million barrels of proven reserves of crude oil and natural gas liquids and z million barrels of probable reserves.
In s99o, Mission Energy's earnings increased to $69.5 million, or 3z cents a share up more than z3%. Revenue rose to Sr53.8 million from &z7.8 million in x989. At year end, equity investment in the company totaled $494.7 million.
27
The Mission Group:
Assets Mission First Financial hmilions of doftsrs 642 971 lrt08 1,762 Mission Paver tn9ireriin9 Mission tend Mission Fist Frnsn&l Mission First Financial invests primarily in energy-related projects, which represent about 7o% of its portfolio. This approach allows the company to bring its spe-cialized skills to complicated financial transactions.
Since its inception in x987, Mission First Financial has invested in zg projects. In x99o, it completed sale/leaseback transactions for: the i,37O-Mw Midland Cogen-eration Plant in Michigan; the 29z-Mw Vidalia Hydroelectric Plant in Louisiana; and for a Boeing 747 aircraft. In addition, the company invested in eight real estate limited partnerships to provide affordable housing for low-and medium-income people. Five of the projects are in California.
In x99o, Mission First Financial's earnings increased to Sn.3 million, or xo cents per share up 43%. Revenue rose to Sz9.9 million from Szg.7 million in x989. At year end, equity investment in this subsidiary totaled $23z.x million.
87 88 89 90 The Mission Group:
Equity hmifrons of dottsrs 292 505 735 904 Mission Fist Nrrnorrf Mission Land Company Mission Land invests in real estate. It owns, develops and operates industrial parks, as well as office, retail and residential properties. The company concentrates on investments in Southern California, which is expected to remain one of the fastest growing regions in the nation into the next century.
Mission Land continues to grow through joint developments and expansion of its solely owned industrial parks. During x99o, Mission Land continued construction projects in four of its industrial parks and reached agreements for five new joint ventures in California. Mission Land sold $33.x million in industrial property dur-ing '1990.
In x99o, Mission Land Company's earnings decreased to $719.9 million, or 9 cents per share-down to%. Revenue rose to $48.9 million, compared with $4'.7 million in x989. Earnings were slightly lower because of a slowdown in the real estate market, but the company believes it is well positioned for future growth. At year end, equity investment in this company totaled Sz38.x million.
Mission Power Engineering Company 87 88 89 90 In x99o, Mission Power Engineering lost $26.7 million, or 8 cents per share. By comparison, it earned $6.6 million, or 3 cents per sharc, in x989. Revenue was $7.5 million, compared with $209.4 million in x989. At year end, equity investment in this subsidiary totaled $3.8 million.
The loss for x99o resulted primarily from a continuing dispute with California Energy Company over a completed geothermal construction project, and from reserves established in connection with this litigation. Mission Power Engineering has sued California Energy Company to collect disputed project costs, and Califor-nia Energy Company has countersued. In the third quarter of x99o, Mission Power Engineering discontinued operations.
z8
Financial Information Selected Financial Data: x986-f990 Management's Discussion and Analysis of Results of Operations and Financial Condition Responsibility for Financial Reporting Report of Independent Public Accountants Consolidated Statements of Income Consolidated Balance Sheets Consolidated Statements of Cash Flows Consolidated Statements of Capitalization Notes to Consolidated Statements of Capitalization Consolidated Statements of Retained Earnings Notes to Consolidated Financial Statements Quarterly Financial Data Electric Revenue and Kilowatt-Hour Sales Electric Revenue by Rate Components 30 3'L 35 36 37 38 40 41 42 43 44 53 53 53 29
Selected Financial Data: x9861990 SCEcorp and Subsidiaries Dollars in thousands, except per-share data SCEcorp and Subsidiaries 1990 T989 x988 x987 T986t Operating revenue Operating expenses Net income Weighted-average shares of common stock outstanding (ooo)
Per-share data:
Earnings Dividends declared Book value" Market value at year end Dividend payout ratio Rate of return on common equity'>
Price/earnings ratio Ratio of earnings to fixed charges Assets" Retained earnings Common shareholders'quity Preferred and preference stock of subsidiary:
Not subject to mandatory redemption Subject to mandatory redemption Long-term debt of subsidiaries
$ 7,198,531 5,947,427 786,360 218,474
$3.60 2.62 25.19 37'/s 72.8 /o 14.51 /0 10.5 2.72
$16,312,246 3,038,378 5,502,650 358,755 210,492 5,291,366 S 6,904 386 5'r736,612 778,24x 218,463
$3.56
- 2. 54
- 24. 21 39/s 7x.3'/o
'14.99 /o
'I'I.'I 2 79
$15r443,05T 2,824,42l 5,288,687 358r 755 223,800 5,282,764 S 61252,719 5r156I351 761,831 2x8,332
$3 49 2.45 /s 23.x8 32>/s 7o.3'/o 93 2.86 Sx4,866,276 2,6ox,o86 5,o64,848 358,755 239i037 51421 r747
$ 5r601 r926 4,637,x35 738,53x 2x8,ox4 2.35/.
22.x6 3o/.
69.5 /o T5.51 /o 9.0 2.9l
$14,35o,664 2r375 915 4I833I734 36x,238 277,538 5,x5o,883
$ 5,368,o87 4I420,93'I 520,727 2x7,78o
$2 39
- 2. 25 21.'I3 33r/s 94.1 /o
'I'I.09 /o
'14. 2 271
$x3,683,o53 2px50r75T 4p605p069 36'l,654 299i049 5r'I22r 243 Southern California Edison Company Financial data:
Earnings available for SCEcorp common stock Earnings per share+'nternal generation of funds
$6921627
$678I642
$684I689
$697r 188
$503~198 3.17
- 3. Io 3.'14
- 3. 20 2 3'I 76o/o 88 /o 100 /o 77 /o 74'/o Operating and sales data:
Area peak demand (Mw)
Area generation capacity at peak (Mw)
Kilowatt-hour sales (ooo)
Customers Employees 17,647 20,323 71,613,760 4,031,678 16,604 x5,632 2o,x36 69rT35r748 3i9401949 16,627 15,987 18,893 67,885,761 3,831,656 x6,66o 14I775 x8,2o6 65,539,481.
3,7x7,262 x7,o86 T4r599 18,32o 64,x97,4o5 3,589,414 17ISS3 The Mission Group Common shareholder's equity Net income Earnings per share+'ercent of SCEcorp's earnings per share
$904,282 94,019
.43 11 9o/o
$735,263 99,893
.46 12.9'/o
$505.371 77,763
~35 Io.o /o
$292r'108 4xr343
.19 5.6'/o
$166,381 T7r529
.o8 3.3'/o t't Restated for nuclear-plant construction-cost disallowances.
at Based on weighted-average shares of SCEcorp common stock outstanding.
30
SCEcorp and Subsidiaries Management's Discussion and Analysis of Results of Operations and Financial Condition Results of Operations Sources of Revenue
'SCEcorp)
In percent 35 Cmernerical I6industna!
8 Public authorities 5 Other etectiic 3 Oiversifred operations 33 ident'ui Distribution of Revenue (SC Ecorp)
Earnings SCEcorp's earnings per share for x99o were $3.6o, compared with $3.g6 in x989 and $g.49 in x988. Net income rose to $786.4 million in x99o, compared with $778.z millionin x989 and $76x.8 million in x988. Revenue grew to $p.z billion from $6.9 billion in x989 and $6.3 billion in x988.
In x99o, Southern California Edison Company (Edison) contributed 88% of SCEcorp's earnings, or $3.x7 per share, a 7-cent increase over x989. This increase primarily resulted from reduced income taxes and minor improvements in several areas of operations. Utilityearnings in x989 declined 4 cents per share from x988, resulting largely from costs associated with the Palo Verde Nuclear Generating Sta-tion (Palo Verde) outage (see Note g of "Notes to Consolidated Financial Statements" )
and the pending merger with San Diego Gas 8c Electric Company (sDGIhE).
In x99o, The Mission Group ofnonutility businesses provided earnings of 43 cents per share, or xz% of SCEcorp's earnings, compared with 46 cents per share in x989 and 3g cents per share in x988. Net income for x99o was $94.o million, compared with $99.9 million in x989 and $77.8 million in x988. The Mission Group's two largest contributors to income in x99o had substantially higher earnings, with Mission Energy Company's (Mission Energy) earnings up z3% to gz cents per share, as a result of placing three new projects into service, and Mission First Finan-cial's earnings rising 43% to xo cents per share, resulting from several new financing investmehts during the year. Mission Land Company's (Mission Land) earnings of 9 cents per share were offxo% as a result of slower real estate activity. The net increase in earnings at these three subsidiaries was more than offset by costs incurred and a reserve established in connection with litigation and discontinued operations at Mission Power Engineering Company (Mission Power). The reserve was established as a result of a dispute with a client over recovery of costs for a completed construction project.
The Mission Group's earnings increase of xx cents to 46 cents per share in x989 over x988 was largely from additional Mission Energy projects placed into opera-tion, project-financing investments at Mission First Financial, and the management and sale of Mission Land properties.
2l Operat'xN 8 maittenance lt OiVidends & nterest 100epredadon 8 Taxes &other 3 Reirrested earnin9s 41 fuei 8 purchased porrer Operating Revenue Operating revenue totaled $7.z billion in x99o, a $z94.x million increase over x989. Electric revenue increased $46x.9 million over x989, par-tially offset by a $x67.8 million decrease in revenue from diversified operations.
Over 98% of electric revenue is derived from Edison's retail sales, which are subject to rate regulation by the California Public Utilities Commission (cpvc). The remaining electric revenue is from Edison's sales to wholesale customers, which are regulated by the Federal Energy Regulatory Commission (FERc).
Electric revenue increased in x99o, primarily due to rate increases and a 3.6% rise in retail sales, reflecting the addition of nearly 9x,ooo customers.
Rates increased in x99o as a result of a cvvc-authorized increase of $zox million, or 3.3%, effective July x, x989, mainly to offset Edison's higher energy costs. Additionally, the cPUc authorized an attrition rate increase of $4x million for x99o to offset higher nonfuel operating expenses.
Electric revenue for x99x willreflect a cpvc-authorized rate increase of $464 mil-lion, or 6.8%, primarily to offset Edison's higher energy costs. The ci'vc also
Electric Revenue Increases (SCEcorp)
InmiRns of do845 431 593 462 authorized a xz.8g% return on common equity for x99x, unchanged from x99o and down from x3.oo% in x989.
The decrease in revenue from diversified (nonutility) operations primarily resulted from discontinued operations at Mission Power and the reserve it established as a result of a dispute with a client, as previously discussed.
However, the other three Mission companies posted a combined revenue increase of Sz6.8 million in x99o.
Ibfe dsnges Kwh Sales (Edison)
In bIIIons 64.2 65.5 679 69.I 7I.6 Operating Expenses Operating expenses in x99o increased Szxo.8 million over x989, compared with increases of Sago.3 million in x989 and Spy.z million in x988.
Purchased-power expense increased $43'.4 million in '1990 over x989, compared with increases of $4'.4 million in ~989 and $4g4.g million in x988, reflecting increased power purchases from nonutility generators as required by federal regula-tions. These power purchases were made at cPvc-approved rates, which are gener-ally higher than those for other sources.
Purchased-power expense willcontinue to increase from additional purchases from nonutility power producers, escalating prices under certain cpvc-approved contracts and higher forecasted gas prices.
The cpvc periodically reviews the reasonableness of Edison's purchased-power expenses.
As reported in Note 3 of "Notes to Consolidated Financial Statements,"
several purchased-power contracts with nonutility power producers have been reviewed by the cpvc's Division of Ratepayer Advocates and disallowances have been imposed or recommended.
The cpvc willconduct future reviews of these and other purchased-power contracts.
Edison's fuel expense declined $268.6 million in x99o, after increasing by Sz3.x million in x989 and decreasing by Stx9.o million in x988. The increase in purchased power has led to lower fuel expense as Edison reduced generation at its own facilities.
Although electric generation was down in x989 from z988, higher fuel costs caused the Sz3.x million increase in fuel expense for 'l989.
The cpvc has established various rate-making mechanisms to accumulate revenue or energy costs until they are recovered from, or refunded to, utilitycustomers through authorized rate adjustments.
These provisions for regulatory adjustment clauses reflect net overcollections of Szog.6 million in x99o, compared with $284.z million in x989 and $z4o.7 millionin x988. These overcollections are principally due to rate increases in the energy cost adjustment clause to recover prior undercollections.
Other operating expenses decreased
$88.5 million in x99o, which reflects the dis-continuance of operations at Mission Power. Operating expenses incurred in provid-ing service to new utilitycustomers partially offset the reduction at Mission Power.
Operating income before income taxes increased 4.g% in x99o. However, income taxes decreased x.6%, primarily due to a favorable settlement of tax issues related to prior years.
86 87 88 89 90 Other Income and Deductions To minimize the rate impact of Palo Verde con-struction costs, the crvc authorized a xo-year rate phase-in plan for Palo Verde Units x, z and g, which defers $zoo million of revenue during the first four years of operation for each unit. Deferrals for each unit, for years one through four, are
$8o million, $6o million, $4o million and $zo million, respectively. Edison will collect the deferred revenue, with interest, evenly over the final six years of each unit's rate phase-in plan. The four-year deferral periods for Units x and z ended in February 1990 and September x99o, respectively. The Stx7.z million decline in the provision for rate phase-in plan in x99o reflects the conclusion of the deferrals for Units x and z and the collection of the deferred revenue in rates.
Regulatory Balancing Accounts and Rate Phase-in Plan (Edison)
In rnilrions of doltars 830 862 831 923 881 Rate phase-I plan deferrafs 8arandng.aecorwt NrdefcoltKtons New Accounting Standards As discussed further in Note S of "Notes to Consolidated Financial Statements," the income tax accounting standard issued in
'2987 requires major balance sheet adjustments.
The Financial Accounting Standards Board is considering requests to amend certain provisions of the standard and has tentatively postponed its required implementation date one additional year to 1993.
These adjustments are not expected to significantly affect future earnings.
As reported in Note 6 of "Notes to Consolidated Financial Statements,"
a new accounting standard willrequire the expected cost of postretirement benefits other than pensions to be charged to expense during the years employees render service.
SCEcorp's current policy is to recognize the cost of these benefits as they are paid.
Annual employee benefits expense is expected to increase significantly upon adop-tion of the new standard in x993. cpvc hearings on the rate-making impact of this new standard are expected to begin in x992. Edison anticipates recovering the addi-tional postretirement benefit expense in rates. With rate recovery and the applica-tion of regulatory accounting principles, no significant financial effect should result from this accounting standard.
86 87 88 89 90 Financial Condition Total Generation Capacity (Edison) in hhorrsands of rnegavvatts 18.3 18.2 18.9 20.1 20.3 86 87 88 89 90 Reserve rnarg'n Peak demand Liquidityand Capital Resources SCEcorp's liquidityis primarily affected by dividend payments and its subsidiaries'onstruction expenditures and debt maturi-ties. Capital resources include cash provided by subsidiary company operations and external financings.
The cpvc regulates Edison's capital structure, thereby limitingthe dividends that Edison may pay to SCEcorpv At December 3x, x99o, Edison could pay approximately
$T.x billionin additional dividends to SCEcorp and still maintain its capital structure within the cpvc-authorized range. The California Public Utilities Code also prohibits Edison from making loans or advances to SCEcorp or The Mission Group These restrictions are not expected to affect SCEcorp's ability to meet its cash obligations.
External financings are influenced by market conditions and other factors, includ-ing limitations imposed by Edison's Articles of Incorporation and Trust Indenture.
As of December 3x, x99o, Edison could issue approximately $4. x billionof additional first and refunding mortgage bonds and $z.x billion of preferred stock at current interest and dividend rates.
SCEcorp continues to meet most of its capital requirements by cash generated through operations.
For x99o, net cash from operations increased $zo.7 million over x989, primarily due to the collection of revenue previously deferred under the Palo Verde rate phase-in plan.
SCEcorp's subsidiaries raise additional cash through short-and long-term debt issuances.
Short-term debt is used by Edison to finance fuel inventories and balanc-ing account undercollections, as authorized by the cPUc. In x99o, Edison issued $6oo million of first mortgage bonds, primarily to refinance existing debt at lower inter-est rates. The Mission subsidiaries issued $S7 million in long-term debt, primarily to finance their continued growth. Other uses of cash for financing activities, as detailed in the consolidated statements of cash flows, are for dividends, which totaled $368.o million in x99o, and Edison's repayment of long-term debt. Cash out-flows exceeded cash inflows from financing activities by $7z.o millionin %990.
33
h Mlionsof doltrrt 4.5 4.9 2796 3236 Generation 13% [
1296 trnnnrusdcn 49%
469i Distribution Construction Expenditures (Edison)
SCEcorp's subsidiaries have lines of credit totaling $z.x billion. About $x.g billion of this amount supports Edison's commercial paper and other borrowings to finance general cash requirements, fuel inventories and undercollections in regulatory bal-ancing accounts. Another $gtg million is available to Edison for the long-term refinancing ofcertain variable-rate indebtedness for pollution control facilities. The remaining $3oo million supports commercial paper and other borrowings to finance general cash requirements at Mission Energy and Mission First Financial, and leveraged leases at Mission First Financial.
The primary uses of cash for investing activities are for capital expenditures, investments in nonutility activities and contributions to nuclear decommissioning trusts. Currently, Edison contributes $97 million per year to nuclear decommis-sioning trusts. These contributions willcontinue until the trust funds are used to decommission Edison's nuclear plants. Net cash used for investing activities increased by $77.o million over x989.
Capital Structure SCEcorp's capital structure as of December g2, 'l990 was: com-mon equity, 48.4%; preferred stock, g.o%; and long-term debt, 46.6%.
1986-1990 (Rmxde4 1991-1995 fPrciected)
Pending Merger Projected Capital Requirements (SCEcorp) h bgrrorrr of dcftrrr 1.45 1.23 1.20 1.15 1.32 Preferred rtodc rederrlp6Ã$
long.term debt fIQtVntier Under the terms of a November x988 agreement to merge sDGfeE into Edison, SCEcorp willexchange x.3 shares of newly issued common stock for each sDGfeE common share. svcfeE preferred and preference stock willbe exchanged for SCEcorp preferred and preference stock with similar provisions, except that dividends on each series willbe increased between co% and zo%. During Aprilx989, the shareholders of SCEcorp, Edison and sDGhE approved the merger agreement. The merger is sub-ject to approval by regulatory agencies, including the cvvc and the FERc. The FERc and CFvc administrative law judges have recommended that the merger not be approved because of its impact on competition. Edison expects decisions from both commissions in x99t.
Pro forma financial statements of the combined companies are presented in SCEcorp's'1990 Securities and Exchange Commission Annual Report on Form xo-K.
Independent Power Producers Federal law requires utilities to purchase power from nonutility electric-generation companies at state-mandated prices. Edison is required to buy this power even ifthe prices exceed other power sources, including Edison's own facilities. Additionally, cer-tain nonutilityproducers sell power they generate to large industrial and commercial customers of Edison from projects located on-site. Further loss of sales to such cus-tomers may occur in the future ifthe electric utilityindustry undergoes deregulation.
91 92 93 94 95 Environmental Matters As reported in Note xo of "Notes to Consolidated Financial Statements,"
Edison is subject to numerous legislative and regulatory environmental requirements in the areas of air and water pollution, waste management, hazardous chemical use, noise abatement, land use, aesthetics and nuclear control. Edison's potential cost for these environmental requirements cannot be determined at this time.
Responsibility for Financial Reporting The management of SCEcorp is responsible for preparing the accompanying finan-cial statements.
The statements were prepared in accordance with generally accepted accounting principles and necessarily include amounts based on management's esti-mates and judgment. Management believes other information in the annual report is consistent with the financial statements.
Management maintains systems of internal control that provide reasonable assur-ance assets are safeguarded, transactions are properly executed in accordance with management's authorization, and accounting records may be relied upon for the preparation of financial statements and other financial information. The design of internal control systems involves management's judgment concerning the relative cost and expected benefits of specific control measures.
These systems are aug-mented by internal audit programs through which the adequacy and effectiveness of internal controls, policies and procedures are evaluated and reported to management.
In addition, Arthur Andersen 8z Co., as part of its independent audit of SCEcorp's financial statements, is responsible under generally accepted auditing standards to evaluate the internal control structures in order to determine the scope of its audit-ing procedures for the purpose of expressing its opinion on the financial statements.
Management believes SCEcorp's systems of internal control are adequate to accomplish the objectives discussed herein. Management has implemented all of the internal and external auditors'ignificant recommendations regarding the systems of internal control.
The audit committee of the board of directors, which is composed entirely of non-employee directors, meets periodically with both the external and internal auditors, who have unrestricted access to the committee. This committee recommends to the board of directors the annual appointment of a firm of independent public accoun-tants, considers the audit scope and independence of the external auditor, discusses the adequacy of internal controls, reviews financial reporting issues and is advised of management's actions regarding these matters.
Management is responsible for fostering a climate in which SCEcorp's affairs are conducted in accordance with the highest standards of personal and corporate conduct, which are reflected in SCEcorp's Standards of Conduct. Management maintains programs to encourage and assess compliance with these standards.
Richard K. Bushey Vice President anrl Controller John E. Bryson Chairman of the Board and Chief Executive Officer February x, x99i
Report of Independent Public Accountants To the Shareholders and the Board of Directors, SCEcorp:
We have audited the accompanying consolidated balance sheets and statements of capitalization of SCEcorp (a California corporation) and its subsidiaries as of December 3l, x99o, and x989, and the related consolidated statements of income, retained earnings and cash flows for each of the three years in the period ended December 3l, l99o. These financial statements are the responsibility of SCEcorp's management.
Our responsibility is to express an opinion on these financial state-ments based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-dards. Those standards require that we plan and perform the audit to obtain reason-able assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assess-ing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SCEcorp and its subsidiaries as of Decem-ber pl,'1990 and l989, and the results of their operations and their cash flows for each of the three years in the period ended December gl, l99o, in conformity with generally accepted accounting principles.
Los Angeles, California February x, 'l991 ARTHUR ANDERSEN h CO.
Consolidated Statements of Income SCEcorp and Subsidiaries ln thousands, except per-share amounts Year ended December 31, 1990 1989 1988 Electric revenue Diversified operations
$6,986,284 212,247
$6,524,386 38o,ooo
$5I93 1,682 321~037 Total operating revenue 7,198,531 6~904~386 612521719 Fuel Purchased power Provisions for regulatory adjustment clauses-net Other operating expenses Maintenance Depreciation and decommissioning Income taxes Property and other taxes 827,393 2,071,910 205,638 1,084,149 375,338 715,680 489,798 177,521 996I026 II638~495 18+206 1,172,651 377 888 689,614 497 793 179i939 972 973 11235~110 24o,681 i,o68,886 375i444 646i569 446,395 170,293 Total operating expenses 5,947,427 5 736,612 5 156 351 Operating income 1,251,104
'i~'1671774 1~0961368 Provision for rate phase-in plan Allowance for equity funds used during construction Interest income Taxes on nonoperating income Other net 2,283 13,226 147,896 (16,453) 2,644 119,478 12q598 168,331 (78.sss) 7,148 170 856 18,125 121,7o8 (79i547)
(162)
Total other income-net Income before interest and other expenses 149f596 229I000 230p980 1,400,700 1I3961 774 I13 271348 Interest on long-term debt Other interest expense Allowance for borrowed funds used during construction Capitalized interest Preferred and preference stock dividend requirements of subsidiary 454,500 136,661 (9,636)
(11,311) 44,126 467,096 130i210 (9,482)
(13 797) 44,506 439,842 io8,498 (11,883)
(17,636) 46,696 Total interest and other expenses-net Net income 614,340 618,533 565 517 786,360 778,241 761,831 Weighted-average shares of common stock outstanding Earnings per share 218,474
$3.60 218,463
$3S6 218,332
$3 49 The accompanying Notes to Consolirlated Financial State)nents are an integral part of these statements.
37
Consolidated Balance Sheets In thousanrls ASSETS December 3x, 1990 x989 Utilityplant, at original cost Less accumulated provision for depreciation and decommissioning
$17,044,604
$x6 439 476 5,696,083 5,095 086 Construction work in progress Nuclear fuel, at amortized cost Less property-related accumulated deferred income taxes Total utilityplant Nonutility property less accumulated provision for depreciation of
$36,ozx,ooo and $36,ox7,ooo at respective dates Nuclear decommissioning trusts Investments in partnerships and unconsolidated subsidiaries Investments in leveraged leases Other investments 11,348,521 741,040 294,908 12,384,469 1,164,602 11,219,867 108,627 384,667 1,021,502 316,120 62,240 xx.344I390 593,76o 394I124 x2~332,274 x,05x~527 xxi2801747 97i060 270,069 773,682 169,997 52ix40 Total other property and investments 1,893,156 xp362p948 Cash and equivalents Receivables, including unbilled revenue, less allowances of $x8,238,ooo and $x4,o85,ooo for uncollectible accounts at respective dates Fuel stock Materials and supplies, at average cost Regulatory balancing accounts-net Prepayments and other current assets 479,106 860,613 181,048 104,166 225,485 145,666 x5o,676 866,o48 89,895 96~888 320i765 x50,486 Total current assets 1,996,084 x,674,758 Unamortized debt issuance and reacquisition expense Rate phase-in plan Other deferred charges 290,172 655,950 257,017 288,664 602p073 233,86x Total deferred charges Total assets 1,203,139
'Iix24i598
$16,312,246
$15,443,o5x The accotnpanying Notes to Consolidated Financial Statements are an integral part of these statements.
SCEcorp and Subsidiaries In thorrsands CAPITALIZATIONAND LIABILITIES Common shareholders'quity Preferred stock of subsidiary:
Not subject to mandatory redemption Subject to mandatory redemption Long-term debt of subsidiaries December 3I, 1990 5 5,502,650 358,755 210,492 5,291,366 989
$ 5;288,687 358i755 223,800 5,282,764 Total capitalization (see accompanying statements)
Other long-term liabilities 11,363,263 II,I54,oo6 160,506 I54,8I9 Current portion of subsidiaries'ong-term debt and redeemable preferred stock Short-term debt Accounts payable Accrued taxes Accrued interest Dividends payable Accumulated deferred income taxes net Deferred unbilled revenue and other Total current liabilities 233,356 1,313,189 537,282 425,030 122,079 147,511 37,750 503,035 3,319,232 2I5,075 793,967 5I8,363 458I90I I32,284 I43~300 Ioo,669 398,765 2I76If324 Accumulated deferred investment tax credits Accumulated deferred income taxes-net Customer advances and other deferred credits Total deferred credits Commitments and contingencies (Notes I, 3, S, 9 anrl Io) 515,692 652,637 300,916 1,469,245 537,699 542,736 292I467 Ii372i902 Total capitalization and liabilities
$16,312,246
$I5,443,05I The accompanyirrg Notes to Consolirlaterl Financial Statenrents are an integral part of these statements.
39
Consolidated Statements of Cash Flows SCEcorp and Subsidiaries In thonsanrls Year ended December 31, 1990 1989 1988 Cash flows from operating activities:
Net income Adjustments for noncash items:
Depreciation and decommissioning Amortization Allowance for funds used during construction Rate phase-in plan Deferred income taxes and investment tax credits Equity in income from partnerships and unconsolidated subsidiaries Income from leveraged leases Other net Changes in working capital components:
Receivables Regulatory balancing accounts Fuel stock, materials and supplies Prepayments and other current assets Accrued interest and taxes Accounts payable and other current liabilities Net cash provided by operating activities Cash flows from financing activities:
Issuances of long-term debt Repayment of long-term debt Redemption of subsidiary preferred and preference stock Nuclear-fuel financing Short-term debt financings-net Dividends paid Net cash used by financing activities Cash flows from investing activities:
Capital expenditures Nuclear decommissioning trusts Investments in leveraged leases net Investments in partnerships and unconsolidated subsidiaries Distributions from partnerships and unconsolidated subsidiaries Proceeds from sale of assets Other net Net cash used by investing activities Net increase (decrease) in cash and equivalents Cash and equivalents, beginning of year Cash and equivalents, end of year 786,360 715,680 168,608 (22,862)
(53,877) 142,091 (127,065)
(21,238) 9,481 5,435 95,280 (98,431)
(11,153)
(74,005) 107,873 1,622,177 650,649 (554,291)
(13,303)
(106,252) 519,222 (568,033)
(72,008)
(905,289)
(114,598)
(129,024)
(246,184) 123,973 28,742 20,641 (1,221,739) 328,430 150,676 5
479,106 778,z41 689,614 157i454 (zz,o8o)
(166,132) 203I337 (1z7,o36)
(12,231)
(z3,zo6)
(165,7o5) 74,z61 35 287 6,904 38,638
'I34,I70 1,6o1,516
'l93,306 (168,368)
(15.363)
(129.<<7) 135I549 (550.524)
(534.507)
(837,99o)
(112,983)
(6,1o1)
(272.557) xooi432 35 370 (50 871)
('I1144~700)
(77.691) zz8,367 15o,676 761,831 646,569 156,73 (3o,oo8)
(196,181) 176,614 (87.070)
(17 056)
(20,420)
(74.554) z26,6o9 2,047 (1z,689)
(63,314)
(43 292) 1,4z5,818 631.343 (35o.383)
(48.775)
(18,569) 51i917 (530i409)
(264,876)
(834,63o)
(157,o86)
(zoo)
(168,332) 55,998 27 637
('19 388)
(I,096,001) 6+941 163,426 228,367 Cash payments for interest and taxes:
Interest Taxes Noncash investing and financing activities:
Obligation to fund investment in partnerships and unconsolidated subsidiaries 5
535,531 392,881 20,844 512i555 356I147 I3,401 485,5oo 421i90I The accotnpanying Notes to Consolidated Financial Statements are an integral part of these statements.
40
Consolidated Statements of Capitalization Notes to Consolidated Statentents of Capitalization are on page 42.
SCEcorp and Subsidiaries In thousands Common shareholders'quity (a):
Common stock no par value; 4oo,ooo,ooo shares authorized; 2x8,474,432 outstanding at each respective date (b)
Retained earnings (see accont panying statements)
Total Cumulative preferred stock of subsidiary (c):
December 3x, December 31, '1990 1990
$ 2,464,272 3,038,378 5,502,650 T989
$ 2,464,266 2,824,421 5,288,687 Not subject to mandatory redemption:
$25 par value:
Series 4.o8%
- 4. 24 4.32 5.8o lI000,000 lI200,000 1~653,429 TI296i769 2I200~000
$ 25. 50
- 25. 80 28.75
- 25. 80
- 25. 25 Shares Redemption Outstanding Price 25,000 30,000 41,336 32,419 55,000 25,000 30,000 4x,336 32~419 55,000 Total
$1oo par value:
758 8.7o 8.96 750,000 500~000 500,000 TOT.00
'101.00 101.00 75,000 50,000 50,000 358,755 75,000 50,000 50~000 358,755 Subject to mandatory redemption (d):
$1oo par value:
Preferred stock to be redeemed within one year Total Long-term debt of subsidiaries (d):
7.325%
7.8o 8.54 8.70A
'12 31 487,381 447i495 570,000 406,874 310p550 l03.03
'104. 04
'102. 75
'104.'14 xo5.83 48,738 44,750 57,000 40,687 31,055 (11,738) 210,492 51,738 46g550 59i250 42,000 36,000 (11,738) 223,8oo Maturity Interest Rates First and refunding mortgage bonds (e):
Pollution control bonds (f):
Funds held by trustees (f)
Debentures and notes (g):
Nuclear fuel indebtedness (h)
Long-term debt due within one year Unamortized debt discount net Total
'1991 through '1994
'1995 through 1999 zooo through 2oo9 zoxo through zo22 1999 through zox5 to 9/s%
71/s% to 9%
8'/g% to 9.95%
81/s% to Io%
6>/i% to TV/<% and variable
'1991 through 1999 9.6% to x1.5% and variable 718,000 1,100,000 668,250 1,625,000 962,255 (9,924) 301,638 183,433 (221,618)
(35,668) 5,291,366 690IOOO IITOOIOOO 673,500 113501777 947i730 (11 945) 464~734 292I517 (203 337)
(2x,zx2) 5,282,764 Total capitalization
$11,363,263
$11, T54,006 The accontpanying Notes to Consolirlated Financial Statements are an integral part of these statements.
Notes to Consolidated Statements of Capitalization SCEcorp and Subsidiaries (a) The California Public Utilities Commission (cvvc) regulates Southern California Edison Company's (Edison) capital structure, thereby limitingthe dividends that Edison may pay its parent company, SCEcorp At December 3x, x99o, Edison could pay approximately $x.x billion in additional dividends to SCEcorp and still maintain its capital structure within the crvc-authorized range. The California Public Utilities Code also prohibits Edison from making loans or advances to any of its nonutility affiliates.
(b) SCEcorp issued X2,5oo and 327,45x shares of common stock in x989 and x988, respectively. No stock was issued during 2990.
(c) Edison's authorized shares of original preferred, $25 cumulative preferred, Sioo cumulative preferred, $25 preference and Sxoo preference stock are 48o,ooo, 24,ooo,'ooo, xz,ooo,ooo, xo,ooo,ooo and 2,ooo,ooo shares, respectively. Allseries of cumulative pre-ferred stock are redeemable. The 3xo,55o shares of Sxoo cumulative preferred stock, X2.3x% series, are not subject to redemption until May x, x992, other than pursuant to mandatory redemption provisions.
Changes in Edison's preferred and preference stock during the last three years were:
(e) Substantially all Edison properties are subject to the liens of trust indentures, except for fuel inventories, which are financed with short-term debt in conformity with cpuc rate-making procedures.
(f) Edison has issued first and refunding mortgage bonds and other indebtedness to governmental agencies in exchange for proceeds from pollution control bonds. These proceeds have been deposited with trustees and are used to finance construction of pollution control facilities. Certain pollution control bonds may be redeemed at the discretion of bondholders under certain circum-stances.
Edison has made arrangements with security dealers for the remarketing or purchase of the pollution control bonds in such cases.
Edison has arranged lines of credit of $5x5 million as of December 3x, x99o, to refinance these bonds, should remarketing be unsuccessful.
(g) SCEcorp's nonutility subsidiaries had debt outstanding in the amount of$29x.x millionand S256.4 millionat December 3x, X99o, and x989, respectively, supported by letters and lines of credit aggregating $355.7 millionand $378.8 million at December 3x, X99o, and X989, respectively.
Shares Not subject to mandatory redemption:
- 5. 20% preference Subject to mandatory redemption:
7.325% preferred 7.8o% preferred 8.54% preferred
- 8. 7o%A preferred x2.3x% preferred 7.375% preference 99I337 30,000 18,000 22,500 13,125 49,450 30,000 ig,ooo 22r500 X3r'I25 70,000 52,629 26,500 22,500 26I250 70,000
'x,x54,546 Year ended December 3x, 1990 X989
'x988 Iu thousands December 3X, 1990 x989 Rreign-currency-denominated notest*i Commercial paper and notes
- Spent nuclear fuel obligation"'urrent maturities Total 5 38,625 S
127,743 272,620 17,065 x9,897 183,433 292,5I7 (3,134)
(2,823) 5180,299
$289,694 (h) Nuclear-fuel financing was composed of:
Total shares redeemed 133,075 X53~625
'Ir45'Xr752 (d) Preferred stock redemption requirements, long-term debt maturities and sinking fund requirements for the five years subsequent to December 3x, x99o, are:
Year ended December 3x, In thousands x99x x992 X993 x994 2995 Preferred stock redemption requirements Long-term debt maturities and sinking fund requiremcrus Total 5 xxp738 S xxp738 S xxp338 5 x2p338 S x3~9x3 22ig618 277p27X 259p283 232p680 280I786 5233g356 S289,oo9 5272,62X S245,oig 5294,699 Premiums paid upon redemption of preferred and preference shares are charged to common equity through a reduction to addi-tional paid-in capital.
(I) A subsidiary of Edison lssrrcd foreign-cnrrcncy-dcuominatcd notes totaling $396 millionin Febnrary 299o. Thc rwtcs mat rrrc 24 months from thc date ofissuance and thc prvcccds were used to finnncc mrclcar fuel.
Thrvugh a rclntcd interest rntc and crrrrcncy exchange ngrccmcnt, the cffcctivcinterest cost of the notes is rcduccd trr below prevailing comrrrcr-cinl paper rates. The wcightcd-avcrngc interest rate on the notes was g.o%
for 299o (cvmpnrcd with tlrc nominal rale of x4>/~%) Edison is grrnrnutor of both the notes arul thc rclntcrl agrccrncrrt. Frrrcign-crrrrcncy translation gains arrd losses hnvc been dcfcrrcd mul nrc included ln thc lrnnslatcd vnluc of the linbility.Any such trnnslation gain or loss is assumed by thc countcrparty to thc ngrccmcnt. Edison is exposed to credit loss lu the event of nonpc%nnnucc by thc corrntcrpnrty to thc ngrccmcnt. Edison, lrnwcvcr, docs not anlicipntc such nonperformance.
(2) A portion of ccrmmcrcial paper and notes issued to finance nuclear fuel has been classified as long-tenn debt in connection with rcfinanclng terms under lines of credit with commercial banks. Tlrc long-term portion finnnccs rmclcnr fuel schcdulcd for consumptiou after x2 months froru the balance shcct date.
(3) Prrrsrrnnt to thc Nrrclcar Waste Policy Act of 2982, Edison lras signed a contract with tlrc U.S. Dcpartmcnt of Energy fordisposal ofspent nuclear fuel from the Snn Ouofrc Nuclear Generating Station. Thc interest rate is fixed at xo.57%.
Consolidated Statements of Retained Earnings SCEcorp and Subsidiaries In thousanrls, except per-share amounts Year ended December 3x, Balance at beginning of year Net income Dividends declared on common stock Balance at end of year 1990
$2,824,421 786,360 (572,403)
$3,038,378 i989
$z,6ox,o86 778,z4x (554,9o6)
$2,824,42%
x988
>>i375i9L5 76m,8gx (536,66o)
$2,6ox,o86 Dividends declared per common share
$2.62
$2. 54
$z.45/i The accompattying Notes to Consolidated Financial Statements are an integral part of these statements.
Notes to Consolidated Financial Statements SCEcorp and Subsidiaries Note 1. Pending Merger On November go, i988, SCEcorp, Southern California Edison Company (Edison) and San Diego Gas 8z Electric Company (stx;8zE) executed an agreement to merge sDG8zE into Edison. Under the terms of the merger agreement, SCEcorp willexchange x.3 shares of newly issued common stock for each sDG8zE common share.
sDG8zE preferred and preference stock willbe exchanged for SCEcorp preferred and preference stock with similar provisions, except that dividends on each series willbe increased between so% and zo%. During Aprilz989, the shareholders of SCEcorp, Edison and sDG8zE approved the merger agreement.
The merger is subject to approval by regulatory agencies, includ-ing the California Public Utilities Commission (cpvc) and the Federal Energy Regulatory Commission (FERc). The FERc and cPvc administrative law judges have recom-mended that the merger not be approved because of its impact on competition. Edison expects decisions from both commissions in x99x.
Note 2. Summary of Significant Accounting Poiicies Consolidation Policy The consolidated financial state-ments include the accounts of SCEcorp and its subsidiaries.
The principal subsidiaries are Edison, a rate-regulated elec-tric utility,and The Mission Group, the parent company of SCEcorp's nonutility subsidiaries.
SCEcorp uses the equity method of accounting to report investments in part-nerships and go% or less owned subsidiaries. Allsignifi-cant intercompany transactions have been eliminated, except intercompany profits from energy sales to Edison by nonutility energy-producing affiliates, which are allowed in utilitycustomer rates.
Accounting Principles Edison is regulated by the a'vc and the rERc. The accompanying consolidated financial statements reflect the rate-making policies of these commissions, as applied to Edison, in conformity with generally accepted accounting principles applicable to rate-regulated enterprises.
less salvage, is charged to the accumulated provision for depreciation. Accumulated deferred income taxes related to utilityplant are presented as a deduction from utilityplant to conform with rate-making procedures used to determine rate base.
Construction Financing Costs Arvoc represents the cost of debt and equity funds used to finance construction of utilityplant. It is reported in the consolidated statements of income as a reduction of interest charges for the debt com-ponent and as other income for the equity component.
Plant construction costs, including Amoc, are recovered in authorized rates through related depreciation when com-pleted projects are placed into commercial operation.
The Arvoc rate, which reflects semiannual compound-ing, was xx.o3%, n.o6% and xo.76% for 'i990 1989 and
'1988, respectively.
Interest on loans used to finance construction projects of partnerships and unconsolidated subsidiaries is capitalized until the projects are operational. Such capitalized interest is included in the consolidated statements of income as a reduction of interest charges and in the consolidated balance sheets as investments in partnerships and unconsolidated subsidiaries.
Depreciation and Decommissioning Depreciation of utilityplant, except nuclear fuel, is computed on a straight-line, remaining-life basis. Depreciation of nonutility properties is computed on a straight-line basis over their estimated useful lives.
The estimated cost of decommissioning Edison's nuclear generating facilities is $8g6.x million, in current-year dol-lars, and is recovered in rates through annual allowances charged to depreciation expense.
Retail rates include annual decommissioning revenue requirements that are deposited in trusts until decommissioning begins. Trust fund contri-butions are invested in high-grade securities and are reported at the lower of cost or market value. At December 3x, x99o, the market value of the trusts was $398.y million.
Approximately 8y% of the trust fund contributions quali-fied as tax deductions.
UtilityPlant The costs of plant additions, including replacements and betterments, are capitalized and included in utilityplant. Capitalized costs include direct material and labor, construction overhead and an allowance for funds used during construction (ArvDc). The cost of prop-erty that is replaced or retired, and related removal costs, Nuclear Fuel The cost of nuclear fuel, including its disposal, is amortized on the basis of generation and is charged to fuel expense. In accordance with rate-making procedures adopted by the cvvc, nuclear-fuel financing costs are capitalized until the fuel is placed into production.
ln thousands RD8m costs charged to expense, RD&D costs deferred/capitalized Total RD&D costs 1990 x989 1988
$40~985
$42~555
$43~4'14 11,991 xzp6oz z7,455
$52,976
$55'6
$6o,869 In z988, a balancing account was established for RD8tD costs charged to expense, which requires Edison to refund to ratepayers any cpuc-authorized but unspent RD8zD funds at the end of the rate-case cycle.
Unamortized Debt Issuance and Reacquisition Expense Debt premium, discount and issuance expenses are amor-tized over the lives of the related issuances.
The expense of reacquiring bonds that are redeemed without refunding is amortized over the period the debt would have remained outstanding. The reacquisition expenses are amortized over the lives of the new debt issues when debt is reacquired with refunding.
Revenue Revenue is recorded for electricity that has been delivered to utilitycustomers through the end of each period but has not yet been billed.
Regulatory Balancing Accounts Operating Reventte An electric revenue adjustment mech-anism (ERAM) balancing account minimizes the effect on earnings of retail sales fluctuations. Differences between authorized and recorded base-rate revenue are accumulated in the account until they are refunded to, or recovered from, utilitycustomers through cpvc-authorized rate adjustments.
Energy Costs The energy cost adjustment clause (EcAc) adjusts results of operations for variations between the recorded energy costs, and revenue designated for recovery of such costs. Undercollected or overcollected energy costs are accumulated in the ECAC balancing account until they are recovered from, or refunded to, utilitycustomers through cvuc-authorized rate adjustments.
Research, Development and Demonstration (RD&D)
RDEZD costs not related to a specific project are expensed in the year incurred. RD8zD costs related to specific construc-tion projects are capitalized until it is determined whether they willresult in construction of plant. Ifconstruction does not result, the costs are charged to expense.
Edison's RDEzD costs were:
Year ended December 31, Currently, all fuel and purchased-power costs, including energy purchased by Edison from unregulated energy-producing affiliates, are recovered through the ECAC balanc-ing account. When the annual energy rate (AER) component of ECAC is in effect, xo'/0 of fuel and purchased-power costs are recovered through the AER and 9o'/0 of such costs through the ECAC balancing account. The 10'/o AER compo-nent was in effect during the first five months of1988 and from February z '1990 through August 8, 1990.
The cpvc has established performance incentives based on target generation levels for Edison's nuclear generating units. Fuel savings or costs attributable to levels above or below the targeted ranges are divided equally between Edison and customers through adjustments to the EcAc balancing account.
Major Plant Atirlitions Prior to 1988, Edison used major additions adjustment clause (MAAc)balancing accounts to accumulate the differences between revenue required and revenue authorized to provide recovery of ownership costs of San Onofre Nuclear Generating Station (San Onofre)
Units z and 3 and Palo Verde Nuclear Generating Station (Palo Verde) Units z and z.
Commencing in x988, ownership costs of San Onofre Units z and 3 are being recovered in base rates. The owner-ship costs of Palo Verde Units 1, z and 3 are also recovered in base rates to the extent they are not deferred in accor-dance with the Palo Verde rate phase-in plan discussed below. Recovery of the remaining undercollections in the MAACbalancing accounts has been authorized over a three-year period beginning in x989. Edison records interest income on these undercollections, excluding accumulated deferred income taxes, using the annual AEUDC rate. At December 31, '1990 $35.3 million remains to be collected in rates charged to utilitycustomers.
Interest antI Tares Interest on regulatory balancing accounts, except MAAC, is accrued at the three-month prime commercial paper rate. The weighted-average interest rates were 8.13'/o, 8.85'/o and 7.6o'/0 for l990 1989 and x988, respectively. Income tax effects on the changes in the regu-latory balancing accounts are deferred.
45
Palo Verde Rate Phase-In Plan Palo Verde Units 1, 2 and 3 have been in commercial operation, for rate-making
- purposes, since February 1, 1986, September 19, 1986, and January 2o, 1988, respectively. The cove has authorized a 10-year rate phase-in plan, which defers $2oo millionof revenue during the first four years of operation for each unit. Deferrals for each unit, for years one through four, are $8o million, $6o million, $4o million and $2o million, respectively. The deferrals and related interest income on the deferred balance willbe recovered evenly over the final six years of each unit's rate phase-in plan. The deferred balance at December 31, 1990, was $6g6.0 million.
Statements of Cash Flows For purposes of the consoli-dated statements of cash flows, short-term temporary cash investments are considered to be cash equivalents.
Reclassifications Certain items in prior periods have been reclassified to conform them to the financial statement presentations for December 31 '1990.
Note 3. Regulatory Matters Energy Cost Proceedings Contracts toith Erlison Affiliates The cpvc s Division of Ratepayer Advocates (DRA), which periodically reviews the reasonableness of utilityexpenses, recommended in December 1988 that the cr vc disallow recovery of part of the expenses incurred by Edison for power purchased from the Kern River Cogeneration Company (KRcc), a non-utilitypower producer. Mission Energy Company, which is one of SCEcorp's nonutility subsidiaries, owns a go /0 interest in KRcc. After conducting hearings on the DRA recommendation, the cpvc issued a decision in September 1990 disallowing recovery of $y8 millionof Edison power expenses (including interest) paid to KRcc between mid-1985 and late 1987. The disallowance was based on the conclusion that the contract is essentially for the purchase of "as-available" rather than "firm"capacity. Ifthe same principles were applied to expenses incurred by Edison from late 1987 through year-end 1990, the disallowance would increase to $86 million (including interest). Future KRcc disallowances, ifany, would be less significant than those through 1990 due to forecasted increases in the price of as-available capacity in subsequent years.
In an application for rehearing, Edison contested the amount of the disallowance, arguing that ifthe cvuc treats the capacity delivered under the contract on an as-available basis, it should treat the energy that KRcc delivered the same way. Pricing the energy on an as-available basis would reduce the disallowance to approximately $17 million for the period between mid-198'nd late 1987. In December 1990 the cPvc granted Edison's request for a rehearing for the purpose of determining the appropriate level of dis-allowance for the mid-198'hrough late 1987 period.
The expenses incurred by Edison for the KRcc project for the period between late 1987 and early 1990 are currently under review by the DRA. Hearings on these expenses have not been scheduled.
In November 1990, the DRA recommended that the cpuc disallow recovery ofpart of the expenses incurred by Edison for power purchased from the Sycamore Cogeneration Company (Sycamore) and the Watson Cogeneration Company (Watson) during late 1987 through early 1989.
Mission Energy owns go'/0 of the Sycamore and yg'!0 of the Watson projects. The recommended disallowances for Sycamore and Watson, which total $37 million and $14 million (both excluding interest), respectively, are based on different reasons than the KRcc decision.
The recommended disallowance for Sycamore includes
$33 million, primarily based on the DRA's allegations that Edison should have terminated or renegotiated the contract in 198', and $y million based on the assertion that the energy price could exceed avoided cost.
The DRA's recommended
$1'illiondisallowance for Watson is primarily based on allegations that Edison over-paid Watson for both capacity and energy during late 1987 through early 1989.
Edison believes its purchases from Sycamore and Watson saved its customers more than $1o million during the review period and willvigorously contest the proposed dis-allowances. Hearings on the Sycamore and Watson matters have been scheduled for late 1991.
The DRA is currently reviewing payments made to the remaining 10 nonutility power producers owned in part by Mission Energy. The DRn reports on these projects have not been issued.
Contracts with Non-affiliates In December 1988, the DRA also recommended that the cvvc disallow the recovery of
$83 million in payments made between late 1984 and late 1987 under 17 contracts negotiated with non-affiliates. This recommended disallowance was withdrawn by the DRA on February 20 '1991.
Other Matters In addition, the DRAs December 1988 report recommended a disallowance of $g million in power payments made in x987 to Pacific Power gz Light Company (vvgzL). Hearings have been held on this matter, and a CFUC decision is expected soon. In 1989, the DRA recommended a
further disallowance of $2o million paid to PPEtL and $6 million related to fuel oil carrying charges and contract administration matters, for the period from late 1987 through early x989. Hearings have not been held on this additional recommended disallowance.
Edison, which owns a 15.8'/0 interest in Palo Verde, believes the plant modifications and operating costs are reasonable and proper items for rate recovery. Although Edison cannot predict whether the cPvc willultimately allow recovery of costs subject to the on, Edison believes that the amount of refund likely to result from the investi-gation or the amount denied recovery, ifany, willnot have a material effect on results of operations. Hearings on this matter willoccur in x991 as part of the 1992 general rate case proceedmg.
The probable effect on net income of the outcome of the above matters cannot be determined at this time. However, SCEcorp believes that the outcome of the above proceedings willnot have a material effect on its financial position.
Palo Verde Outage Review During March x989, Arizona Public Service Company, operating agent for Palo Verde, removed Units 1 and 3 from service for refueling and mod-ifications of plant and management systems as required by regulatory agencies. The California Public Utilities Code requires Edison to notify the CFUC when a plant is out of service for nine or more consecutive months. Although Edison believes that the code requirement is not intended to apply when a facility is shut down for a planned outage of predetermined duration, Edison advised the cvvc of the Palo Verde outage on December 6, 1989. On December 18, 1989, the cove initiated an order instituting investigation (on) to determine, for rate recovery purposes, the reason-ableness of certain costs incurred during the period the Palo Verde units were not in service. In the oii, the cPvc ordered the subsequent collection of customer revenue in connection with the ownership and operation of the Palo Verde units to be subject to refund pending the outcome of its outage review. Unit g and Unit x resumed operation in January and July x99o, respectively. In July 199o, the code section requiring an investigation was clarified with an amendment that excludes planned outages of predetermined duration in determining whether an investigation is required.
Resale Rates In accordance with FERC procedures, resale revenue is subject to refund with interest ifsubsequently disallowed. Edison believes that any refunds resulting from pending rate proceedings willnot have a material effect on net income.
Note 4. Short-Term Debt In inillions General purpose Leveraged leases Balancing accounts Fuel Total borrowings supported by lines of credit Amount reclassified as long-term Unamortized discount 1990 1989 5
506.6 S
89.2 140.9 99.0 506.7 5ox.6 436.1 48'.6 1,590.3 x,x7z.4 (268.6)
(37m.6)
(8.5)
(5.8)
SCEcorp's subsidiaries maintain lines of credit that may be utilized at negotiated or bank index rates. At December 31,
'l990 such lines totaled $2.z billion.
Approximately $1.6 billionof these lines of credit sup-port commercial paper and other borrowings to finance general cash requirements, fuel inventories and undercollec-tions in regulatory balancing accounts. The remaining $5z5 million of these lines of credit are available for the long-term refinancing of certain variable-rate pollution control indebtedness.
The subsidiaries'hort-term debt components were:
December 3i, Net short-term debt 51,313.2 S
794.0 Commercial paper outstanding was Q.5 billion at December 31, 1990, and $892.9 million at December g1, l989.
47
Note 5. Income Taxes SCEcorp's subsidiaries are included in its consolidated fed-eral income tax and combined state franchise tax returns.
Under income tax allocation agreements, each affiliate calculates its tax liabilityseparately.
In thousanrls 1990 1989 x988 The differences between recorded state and federal income taxes and amounts determined on income before taxes by applying the federal statutory tax rate are recon-ciled and presented below:
Year ended December 3x, In thousands Current:
Federal State 1990 x989 I988
$244~245
$253~469
$24xg917 119,915 xx9p542 xojp4xl 364,160 373goil 349/328 Current and Deferred Taxes Income tax expense includes the current tax liabilityfrom operations, and deferred income taxes provided on certain items of income and expense which are reported in different periods for tax and financial reporting purposes.
The current and deferred components of income tax expense were:
Year ended December 3x, Expected federal income tax expcnsc at statutory rate Increase (decrease) in income tax expense resulting from:
Federal deduction for state taxes on income Depreciation and related timing difference not deferred State tax provision Investment and energy tax credits Ailother differences (40,975)
(4'1,976)
(4o,oo5) 55,821 120,514 52,296 I23,458 39'<<5 xx7,662 (33,003)
(35,594)
(I8,799) xoi809 (34,869) 6,I96 439,488 S
46o,560 S
437843 Deferred-Federal and State:
Investment and energy tax credits-net Depreciation Regulatory balancing accounts Leveraged leases Fuel inventory Unbilled revenue Rate phase-in plan Accrued liabilities Contributions in aid of construction Other (20,234) 188,476 (29,157) 63,114 (10,783)
(20,968) 21,625 (24,075)
(15,170)
(10,737)
(I.33I)
>07i703 (24i995) 35,o63 (x,890)
(3x,8o3) 66,68'>I 9>9)
(x5,516)
(7,637)
(xx,no) x73,380 (79i774) 38,950 I6,573 (24,420) 78,743 7 994 (I8,836)
(4,786) 1 42~091 203/337
'I76/61 4 Total income tax expense
$506,251
$576,348
$525,942 Classification of income taxes:
Included in operating expenses
$489,798 S497,793
$446 395 Included in other income 16,453 78 555 79 547 Total income tax expense
$506,251 S576,348
$5z5,94m Accumulated deferred investment tax credits are amortized over the lives of the related properties.
The federal and composite federal and state statutory income tax rates are 34'/0 and 4o.x38 /0, respectively, for
'1990, 1989 and 1988.
Total income tax expense 506,251 S
576,348 S
525,942 Pretax income Effective tax rate (total income tax expense
- pretax income)
$1,292,611 SI/354g589
$Ig287g773 39.2%%d 4I.5%
4o.g'/0 Deferred income taxes for tax depreciation prior to x98x and certain construction overheads have not been provided because the tax effects of such timing differences are not allowed for retail rate-making purposes until the taxes become payable. The cumulative net amount of these timing differences was Sz.o billion at December 3x, 1990, x989 and x988.
New Accounting Standard Under current accounting rules, deferred income tax balances are not adjusted to reflect changes in tax rates or laws. However, in 1987, the Financial Accounting Standards Board (FAsn) released an income tax accounting standard requiring such adjust-ments. The FA50 is considering requests to amend certain provisions of the standard and has tentatively postponed its required implementation date one additional year to '1993.
When the new income tax accounting standard is imple-mented, other significant balance sheet adjustments will be required. SCEcorp willrecord additional deferred income taxes related to the equity component of AFUDc, which is 48
currently recorded on an after-tax basis; the debt component of APUDc, which was recorded on a net-of-tax basis prior to i987; and other temporary differences for which deferred income taxes have not been provided.
Additional balance sheet adjustments willbe recorded for the net reduction in deferred income tax liabilities resulting from income tax rate changes; the recognition of deferred income tax assets attributable to the reduction of the book basis of property by unamortized investment tax credits; and to classify property-related accumulated deferred taxes as a liabilityinstead of a reduction of utilityplant. The majority of additional deferred tax assets and liabilities will be offset by recording regulatory assets and liabilities rep-resenting the anticipated effects of these adjustments on customer rates. Such regulatory assets and liabilities will be adjusted as they are recovered or refunded through the rate-making process and for changes in tax rates or jaws.
Accordingly, these adjustments are not expected to signifi-cantly affect future earnings.
1>> thousands 1990 i989 Actuarial present value of benefit obligations:
Vested benefits Nonvcstcd benefits Accumulated benefit obligation Value of projected future compensation levels Projected benefit obligation
$1,124,985 Si,o6ig799 28,590 32,78i 1,1 53,575 i,o94,58o 448,750 486,779
$1,602,325 Si,58i,359 In conformity with the accounting principles for rate-regulated enterprises, regulatory adjustments have been recorded to reflect, in net income, the pension costs calcu-lated under the actuarial method used for rate-making purposes.
The difference between pension costs calculated for accounting and rate-making purposes has been recorded as a deferred charge in the consolidated balance sheets.
The plan's funded status was:
December 3i, Note 6. Employee Benefit Plans Plan assets at fair value
$1,542,568 Si,630,225 In thousands Net pension expense:
Service cost for benefits earned Interest cost on projected benefit obligation Actual return on plan assets Nct amortization and deferral Pension cost pursuant to accounting standards Regulatory adjustment Year ended December 3i, 1990 i989
'i988 57/430 S
49g307 S
43p340 116,141
'i08I34'I i02p249 35,278 (306I493)
('133 p687)
(167,214) i99,260 40,6io 41,635 5o,4'i5 52,5'l2 5,173 (4,21o)
(6,4i6)
Netpenslon cost recognized 46,808 S
46205 S
46,o96 Pension Plan SCEcorp has a noncontributory defined-benefit pension plan, administered by a trustee, covering substantially all full-time employees who fulfillminimum service requirements.
Benefits are based on years of accred-ited service and average compensation.
SCEcorp's policy is to fund the plan on a level-premium actuarial method, provided that annual contributions meet the minimum funding requirements of the Employee Retirement Income Security Act and do not exceed the maximum deductible amount under income tax regulations. Prior service costs from pension plan amendments are funded over 30-year periods.
The components of pension expense were:
Projected benefit obligation in excess of (less than) plan assets Unrecognized nct gain Unrecognized prior service cost Unrecognized nct obligation being amortized over i7 years 59,757 S
(48,766) 65,394 i72,849 (6,567)
(7,ooo)
(78,594)
(84,ii7)
Accrued pension liability 39,990 S
32,966 Assumptions for defined benefit pension plan:
Discount rate 8.0%
Rate of increase in future compensation 6.0%
Expected long-term rate of return on assets 8.5%
7'5%
6.o%
8.5%
Assets of the plan consist primarily of common stocks, corporate and government bonds, short-term investments and guaranteed investment contracts.
Employee Stock Plans SCEcorp maintains an Employee Stock Ownership Plan (EsoP) and a Stock Savings Plus Plan (sspp), designed to supplement employees'etirement income. Contributions to the Esop were funded primarily by federal income tax benefits and contributions by employees.
SCEcorp contributions to the ssPr were $27.2 million in 2990, and &6.9 million each in i989 and i988.
Under Edison's Long-Term Incentive Compensation
- Plan, i,477,5oo shares of SCEcorp common stock were reserved at December 3i, i99o, for issue to key employees in various forms, including the exercise of stock options.
SCEcorp common shares subject to option at December 31, 199o, were:
Options:
Outstanding, January 1, 1989 Granted Canceled Shares Share Price" 1'151200
$32 00 $32 37 (8,522) 32.37 Exercisable, December 3'1, '1990
'106,470 32.00- 32.37
'Share options nccrue dividend equivalents at a rate equal to dividettds declared on outstanding common shares. Such dividend equivalents may be utilized against the grant price at the time the share options are exercised.
At December 31, 199o, and 1989, 1,214,17z and
'1 370 822 shares, respectively, were reserved for future grants.
Other Postretirement Benefits Employees retiring from SCEcorp's subsidiaries on or after attaining age 55 and with at least io years of service are entitled to post-retirement health care, dental, life insurance and other benefits for themselves and their dependents.
Health-care benefits are provided by a combination of programs, and are subject to deductibles, copayment provisions and other limitations. The plans may be amended or changed periodically. The costs of these benefits are recognized as expense as claims and premiums are paid, and totaled
$24.3 million in 199o, $zi.z million in 1989 and $22.8 million in 1988.
New Accounting Standard In December 199o, the FAso issued a new standard on accounting for postretirement benefits other than pensions. The new standard requires the expected cost of these benefits to be charged to expense during the years employees render service. This is a signifi-cant change from SCEcorp's current policy of recognizing the cost of these benefits as they are paid. SCEcorp is required to implement the new accounting and disclosure rules no later than 1993, and may do so through a cumula-tive adjustment or ratably over future periods.
SCEcorp expects to implement the new standard effective January 1, 1993, and amortize the transition obligation at that date over a zo-year period. Based on a preliminary review by actuaries, the accumulated obligation at Decem-ber 31, 199o, measured in accordance with the new stan-dard, is approximately $7oo million. Had the new standard been implemented in 199o, the actuaries estimate additional postretirement benefits expensed in 199o would have been Outstanding, December 31, 1989 106,678 32.00- 32.37 Granted
'x56i650 39.69 Outstanding, December 31, 1990 263,328 32.00- 39.69 in the range of $7o million to $8o million. Management believes that there willbe a similar relationship between the accumulated obligation and additional expense in 1993, although it could differ significantly due to changes in health-care cost trends or interest rates.
The cave has initiated an investigation to determine the rate-making impact of the new standard. Hearings on this matter are expected to begin in 1991. Edison anticipates recovering the additional postretirement benefit expense in rates. With rate recovery and the application of regulatory accounting principles, no significant financial effect should result from this accounting standard.
Note 7. Jointly Owned UtilityProjects In thousnnds Plant in Service Accumu-lated Deprec-iationn Under Owner-Con-ship struction Interest El Dorado Transmission System S
23,586 Four Corners Coal Generating Station-Units 4 and 5 422,739 Mohave Coal Generating Station Pacific Intertie Dc Turns mission System Palo Verde Nuclear Generating Station 1~485~729 San Onofrc Nuclear Generating Station 4 428 495 Yuma Axis Generating Station (c) 12r579 S
9,860 S
1,440 60%(a) 157,553 17,56o 48 247 '184
'107 621 7 436 56 201~663 45~298 2r577 50 159,617 6r168 15.8 1,071,381 73,438 (b) 1 333 1 1/71 2 Total
$6/821 g975
$1 g563p042
$108g620 t'i Represents a composite rnte.
'Ownership interest is go'/o in Unit 1 and 73/o in Units 2 and 3.
t" ln january zyyo, Edison entered into an agreement to sell its interest in this facility, subject to a'uc and rsRc approvnl.
Edison owns undivided interests in several generating sta-tions and transmission systems for which each participant provides its own financing. Edison's proportionate share of expenses pertaining to such projects is included in the respective operating expense category in the consolidated statements of income.
The investment in each project, as included in the consol-idated balance sheet as of December 31 1990 was:
50
Note 8. Leases Note 9. Commitments hr tlro0sanrls 1990 x989 Rentals receivable (net of principal and interest on nonrecourse debt)
S 561,742 S 257,782 Unearned income (260,842)
(87,785)
Investmcnt in leveraged leases Estimated residual value Deferred income taxes 300,900 x69,997 15,220 (171,737)
(xo7,6xx)
Net investment in leveraged leases 5 144,383 S
6a,386 Operating Lease Commitments SCEcorp's subsidiaries lease automotive, computer, office and miscellaneous equip-ment through operating rental agreements with varying terms, provisions and expiration dates.
At December 3x, xggo, estimated remaining rental com-mitments for noncancelable opemting leases were:
Year ended December 3x, Itt t110050tttls Investments in Leveraged Leases A nonutility subsidiary is the lessor in several leveraged-lease agreements, under which property is leased for terms extending from z4 to 3o years. Alloperating, maintenance, insurance and decom-missioning costs are the responsibility of the lessees.
Thc total cost of these facilities was $x.x billion at December 3x, x990, and $635.9 million at December 3x, x989.
The equity investment in these facilities represents z3'/0 of the purchase price. The remaining 77'/0 is nonrecourse debt, which is secured by first liens on the leased property.
The lenders accept their security interests as their only remedy in the event of default by the lessee.
The components of the nct investment in leveraged leases were:
December 3x, Construction Program and Fuel Supply As of December 3'i, 'i990, construction expenditures of SCEcorp's subsidiaries are estimated to be $x.z billion for xggi, $g38.g million for xggz and $gz5.z million for xgg3. In addition, minimum long-term commitments of approximately Sx.3 billion existed as of December 3'i x990, under fuel supply contracts.
Year contract expires Sharc of effective operating capacity megawatts Share of energy output xox7 a77.5 5.54 /o aox6 Long-Term Purchased-Power and Transmission Contracts Edison has contracted to purchase a portion of the gen-erating output of a hydroelectric facility and firm trans-mission service from another utility, as needed. Although there is no investment in the facility or transmission line, these contracts provide for minimum payments based, in part, on the debt service requirements of the provider, whether or not the facility or transmission line is operable.
The power contract is not expected to provide more than 5'/0 of current or estimated future operating capacity.
The cost of power and firm transmission service obtained under these contracts, including payments made when the facility or transmission line is not operating, is included in purchased power and other operating expenses in the consolidated statements of income. Purchased-power costs are generally recoverable through the ECAC balancing account.
Selected information pertaining to these contracts at December 3x, xggo, is summarized below:
Purchased Transmission Power Service l99i x992 i993 x994 x995 For periods thereafter Total future rental commitments S 30,9i8 26,228 ax,696 x7i5o3 xa,8xx x3i544 Si 22,700 Required minimum annual payments
'i99'i x99>
x993 x994 x995 For periods thereafter Total In thottsnt0Is S 3,000 S 4,7oi 3,400 4,53x 3,400 4 377 3,400 4i>37 3,400 4,'iio 73,95o 6i,7o9 Sgo,55o S83,665 Costs under the purchased-power contract were $3.4 million in xggo, $4.5 million in xggg and $3.8 million in
'l988. Costs under the transmission contract were $4.9 mil-lion in xggo, $4.4 million in xg89 and $5.3 millionin xg88.
Note 10. Contingencies Nuclear Insurance The federal statutory limiton public liabilityclaims that could arise from a nuclear incident is
$7.8 billion. Participants in San Onofre and Palo Verde have purchased the maximum private primary insurance available ($zoo million). The balance is to be covered by the industry's retrospective rating plan, using deferred pre-mium charges. This secondary level of financial protection is required by the Nuclear Regulatory Commission (NRc).
The maximum amount of the deferred premium that may be charged for each nuclear incident is $63 million per reactor, but not more than $xo million per reactor may be charged in any one year for each incident. Edison could be required to pay a maximum of $x83.6 million per nuclear incident, based on its ownership interests in San Onofre and Palo Verde, but it would have to pay no more than
$z9.x millionper incident in any one year. Such amounts include a 5'/o surcharge that would be applicable in the event that additional funds are needed to satisfy public lia-bilityclaims, and are subject to adjustment for inflation.
Property damage insurance, including decontamination costs, covers losses up to $5oo million at San Onofre and Palo Verde. Decontamination liabilityand property damage coverage in excess of the primary $5oo million layer also has been purchased in amounts exceeding NRc require-ments. Insurance covering part of the additional expense of replacement power, which could result from an accident-related nuclear unit outage, is also provided. These policies are issued primarily by mutual insurance companies owned by utilities with nuclear facilities. Iflosses at any nuclear facility covered by the arrangement were to exceed the accumulated funds available for these insurance programs, Edison could be assessed retrospective premium adjust-ments of up to $3'.5 million per year. Insurance premiums are charged to operating expenses.
Antitrust Litigation In x978, five resale customers filed a suit in federal district court, alleging violation of antitrust laws. The complaint sought monetary damages, a trebling of such damages, and certain injunctive relief. The com-plaint alleged that Edison engaged in anticompetitive behavior by charging more for electricity it sold to resale customers than it charged certain classes of retail cus-tomers. The complaint also alleged that Edison acted 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'urchases from Edison. The plaintiffs estimated that their actual damages, before trebling, were approximately $99.5 million from February x, x978, through December 3'i, x985. The trial began on July 8, x986, and concluded on September z6, x986. On October z4, x99o, the court issued a final judgment favorable to Edison. On November x5, x99o, the plaintiffs filed an appeal of the decision to the Ninth Circuit Court of Appeals.
In x983, another resale customer, the City of Vernon, also filed a complaint against Edison in federal district court, alleging violation of certain antitrust laws. The complaint alleged that Edison engaged in anticompetitive behavior by restricting access to Edison transmission facilities and foreclosing Vernon from purchasing bulk power supplies from other sources. The complaint also alleged that Edison unlawfully designed its resale rates in certain respects.
Vernon claimed damages of approximately $6o million before trebling. Final judgment for Edison on all claims was entered on August 3x, x99o. Vernon filed a notice of appeal of the court's decisions on October 23 l990.
On January 31 199T California Energy Company filed an action in federal district court against SCEcorp and three of its subsidiaries (Mission Energy, Mission Power Engineering Company and Edison), alleging violation of antitrust laws and unlawful interference with its lender contracts and negotiations for future financing. The suit seeks $z6o millionin damages, before trebling, and requests a permanent injunction prohibiting the merger of Edison and socage.
SCEcorp and its subsidiaries are reviewing the allegations and willvigorously contest the lawsuit.
Environmental Matters Edison is subject to numerous legislative and regulatory environmental requirements per-taining to air and water pollution, waste management, haz-ardous chemical use, noise abatement, land use, aesthetics and nuclear control. These requirements have caused, and willcontinue to cause, Edison to incur substantial addi-tional costs to operate its existing facilities, to construct and operate new facilities, and to clean up waste disposal sites for which it may be responsible. The potential cost of these environmental requirements for Edison cannot be determined at this time. Edison believes that the costs incurred in complying with these environmental require-ments either willbe covered by insurance or recognized by the cove or the FERc as reasonable and necessary costs of service for rate purposes.
There can be no assurance that these costs willbe recoverable, but Edison believes that any costs that are unrecovered willnot have a significant impact on its financial position or results of operations.
52
Quarterly Financial Data Unaudited SCEcorp and Subsidiaries In millions, except per-share data 1990
'1989 Total Fourth Third Second First Total Fourth Third Second First Operating revenue Operating income Net income Per share:
Earnings Dividends declared
$7ii99 X,25X 786 3.6o 2.62 Sii755
$2,258
$1,595
$1,591 297 406 266 282 182 286 146 x72
.83 x 3x
.67
.79
.66
.66
.66
.64
$6i904 1,168 3.56
- 2. 54 Sx,62o 213
'119
~54
.64
$2,182 497 401 1.83
.64 Si,572 243 141
.65
.64
$1,530 215 117
~54
.62 Common stock prices High Low Close
$40'/s
$39r/s
$38~/s
$40
$40'/j 33'/i 35'/s 33'/i 35/s 35/s 37r/s 37r/s 36 37'/i 37'/s
$4x
$41
$37r/s
$36'/<
$33 s/s 31 34/s 34/i 31 /s 31 39~/s 39/s 35s/s 34s/s 31'/i Electric Revenue and Kilowatt-Hour Sales Electric Revenue Kilowatt-Hour Sales Class of Service
% of 1990 Total In thousands 1990 1989 In thousands
% of 1988 1990 Total 1990 x989 1988 Residential Agricultural Commercial Industrial Public authorities Railroads and railways Interdepartmental Resale 34.3 1.7 36.3 16.3 8.3 1.5
$2,392,985 115,962 2,536,672 1,137,099 583,216 1.331 108 106,599
$2,155,328
'I05,982 2i356,274 Ii170i246 558,8xx 118 84,979
$1,881,290 96,o73 2,095,514 Iix55,651 513,089 109
'114,510 31.2 1.7 35.5 21.0 8.4 2.2 22,335,309 1,214,310 25,466,649 15,038,496 5,995,649 11,533 1,098 1,550,716 355,283
'l,082i9x9 24,214,070
'15,22l,756 5,761,603 Xi232 x,498,885 20i900,569 i,o49,376 23i039i977
'15,415i694 5i544i3<<
x,258
'l,934,586 Sales of electric energy Other electric revenue 98.4 6,873,972 6,43x,738 5,856,236 100.0 71,613,760 69,x35,748 67,885,76x 1.6 112,312 92,648 75,446 Total 100.0
$6,986,284
$6,524,386
$5,93x,682 100.0 71,613,760 69 'x35 748 67,885,761 Electric Revenue by Rate Components Rate Components Electric Revenue In thousands 1990 x989 1988
% of Total 1990 x989 x988 Base rates-cr vc jurisdiction Energy cost adjustment billing factor Major additions adjustment billing factor Other billing factors Resale rates (excluding fringe)
Unbilled revenue
$3,724,356 2,926,613 78,292 16,358 102,370 25,983
$3,625i331 2i743i451 94i737 (x33,64x) 88,565 13i295
$3,397,923 2i126,224 l53,840 45,o84 I'I2,920 20'45 53.3 55.6 57.3 41.9 42.o 35.8 1.1 1.4 2.6 0.2 (2.o) o.8 1.5 x.4 x.9 0.4 o.2 o.3 Sales of electric energy Other electric revenue Total 6,873,972 6i43'Ii738 5i856i236 112,312 92,648 75,446
$6,986,284
$6,524,386
$5i931,682 98.4 98.6 98.7 1.6 1.4 x.3 100.0 ioo.o xoo.o 53
Board of Directors c <<<<<<
le Jf rt/
v cENrzra John E. Bryson. FRowr ctnct.e (moat t.erT): Joan C. Hanley, Walter B. Gerken, Warren Christopher, William R. Gould, Howard P. Allen, Michael R. Peevey. tacK ctaa.e (raoht tLrr): Edward Zapanta, Henry T. Segerstrom, Norman Barker Jr., Carl E Huntsinger, E. L Shannon Jr.,
Camilla C. Frost, James M. Rosser, Roy A. Anderson, Charles D. Miller, J.J. Pinoia, Robert H. Smith.
'John E. Bryson Chairman of the Board and Chief Executive Officer a Howard P. Allen Chairman of the Executive Committee and Consultant Roy A. Anderson Chairman Emeritus, Lockheed Corporation Burbank, California Norman Barker Jr.
Chairman of the Board Pacific American Income Shares, Inc.
Los Angeles, California Warren Christopher Chairman, O'Melvcny gz Myers Los Angclcs, California Camiiia C. Frost Trustee, Chandler Trusts and Director, Secretary-Treasurer Chandlis Securities Company Los Angclcs, California Walter B. Gerken Chairman of thc Executive Committcc Fhcific Mutual Life Insurance Company Newport Beach, California William R. Gould Chairman Emeritus Southern California Edison Company Joan C. Hanley General Partner, Miramontc Vineyards and Public Affairs Consultant Monaghan Company-Long Pbint Temccula, California Carl F. Huntsinger General Partner DAE Limited Partnership, Ltd.
Ojai, California Charles D. Miller Chairman of the Board and Chief Executive Officer Avery Dennison Corporation
- Pasadena, California
>Michael R. Peevey President J.J. Pinola Chairman of the Exccutivc Committee First Interstate Bancorp Los Angeles, California James M. Rosser Prcsidcnt California State University, Los Angeles Los Angeles, California Henry T. Segerstrom Managing Partner C.J. Scgerstrom 8e Sons Costa Mesa, California E.L. Shannon Jr.
President and Chief Executive Officer Santa Fe International Corporation Alhambra, California Robert H. Smith President and Chief Executive Officer Security Pacific Corporation and Chairman of the Board Security Pacific National Bank Los Angeles, California Edward Zapanta Physician and Neurosurgeon Monterey Park and East Los Angeles, California
- s. hln Bryson was clcacd Chairman ol the Board and Chief Executive Officer ol SCEcorrp and Southern California Edison Co. effective October s, s9po.
- a. hln Allen retired as Chairman of the Brxsrd, Prcsidcnt and Chief Executive Officer ol SCEcorrp and Southern California Edison Co., and ccetinucd as a board mcmbcc and was elected Chairman of the Exccudvu Committcc of both compsnics effective October s, trito.
- 3. Mr. Prcciuy was clcctcd Prrcsidcnt ol SCEccrrp and Southern California Edison Co. and a board member of both compsnics effective Oaobcr s, sSSo.
Executive Officers SCEcorp John E. Bryson Chairman of the Board and Chief Executive Officer David N. Barry III Vice President and General Counsel Michael L. Noel Vice President, Treasurer and Chief Financial Officer Michael R. Peevey President Richard K. Bushey Vice President and Controller Diana L Peterson-More Secretary of the Corporation Southern California Edison Company John E. Bryson Chairman of the Board and Chief Executive Officer Glenn J. Bjorklund Vice President (Power Supply)
Harry E. Morgan Jr.
Vice President and Site Manager San Onofre Nuclear Generating Station Michael R. Peevey President Charles B. McCarthy Jr.
Senior Vice President LT. Papay Senior Vice President Harold B. Ray Senior Vice President David N. Barry III Vice President and General Counsel Kenneth P. Baskin Vice President (Fuel and Material Management)
Robert H. Bridenbecker Vice President (Customer Service)
Richard K. Bushey Vice President and Controller Ronald Daniels Vice President (Revenue Requirements and Governmental Affairs)
Robert Dietch Vice President (Engineering, Planning and Research)
John R. Fielder Vice President (Information Services)
Michael L. Noel Vice President, Treasurer and Chief Financial Officer Lewis M. Phelps Vice President (Corporate Communications)
Jacque J. Sokolov Vice President and Medical Director Diana L. Peterson-More Secretary of the Corporation The Mission Group John E. Bryson Chairman of the Board and Chief Executive Officer The Mission Group Michael R. Peevey President The Mission Group Thomas R. McDaniel President Mission First Financial James S. Pignatelli President Mission Energy Company Robert E. Umbaugh President Mission Land Company 55
Shareholder Reference Guide SCEcorp and Subsidiaries Stock listing and trading information SCEcorp common stock Listed on the New York, Pacific, London and Tokyo stock exchanges under the ticker symbol SCE. Shareholders can find the previous day's closing price in daily newspapers under the symbols SCEcp, or SCEcorp.
Edison preferred stocks Listed on the American and Pacific stock exchanges under the ticker symbol SCE. Pre-vious day's closing prices, when traded, are listed in the American Stock Exchange listing table under the symbol SoCalEd. The 7.gag'/o, 7.8o'/o, 8.7o /oA and 12.31'/o series are not listed.
Where to buy and sell stock The common and listed preferred stocks may be purchased through any brokerage firm. Firms handling unlisted series can be located through your broker.
Transfer agent and registrar Southern California Edison Company maintains share-holder records and acts as transfer agent and registrar forall SCEcorp and Edison stocks. Shareholders may call Share-holder Services at (8oo) gy7-86zg between 8:oo a.m.
and y:go p.m. (Pacific time) every business day, regarding:
a stock transfer and name-change requirements; rr address changes, including dividend addresses; rr taxpayer identification number (Social Security number) submission or changes; a replacement of dividend checks; a duplicate 1099 forms and w-9 tax certification forms; a notices of lost or destroyed stock certificates; a SCEcorp's Dividend Reinvestment Plan, including enroll-ment, withdrawal, terminations, transfers and statements.
The address of Shareholder Services is:
P.o. Box iioo, Rosemead, California 91770 FAx: (818) 302-4815 Annual meetings of shareholders The annual meetings of shareholders of SCEcorp and Edison willbe held on Thursday, April18,1991, at 1o:oo a.m. at the Industry Hillsand Sheraton Resort, One Industry Hills Parkway, City of Industry, California.
Shareholder profile As of December g1, 199o, there were ~y,929 SCEcorp common stock shareholders of record and ~,696 Edison preferred stock shareholders.
Millionsof other shares are held in "street name" by securities brokers and nominees.
Stock Price Range (SCEcorp) hdblair 38'/i 37 33N 30'/i 25~/i 27'/i 34r/i 4r 40'/i tfigh 32i/i 39i/i 37i/
Cue 29i/i 31 33'/i Inw How to transfer stock Whenever there is a name change on a stock certificate, regulations require a transfer of stock. This can happen when you sell the stock, make a gift of stock, or add or delete owners of the stock certifi-cate. The transfer can be made by completing the stock assignment on the back of the stock certificate and signing it exactly as the name appears on the front. The signature of the individual transferring the stock must be guaranteed by a commercial bank (not a savings and loan association) or a brokerage firm that is a member of a national securi-ties exchange. A notary's acknowledgment is not accept-able. The certificate should then be sent to Shareholder Services by registered or certified mail.
Dividend reinvestment and deposit services Please call or write Shareholder Services for a prospectus on how SCEcorp's common stock shareholders can purchase addi-tional shares by reinvesting their quarterly dividends.
Among other features, the plan also allows optional cash payments of up to $1o,ooo per calendar month.
Ifyou wish to have your dividend check mailed directly to your bank for deposit, send instructions, including your shareholder account number, your bank account number or a blank deposit slip, and the complete address of the bank to Shareholders Services.
86 87 88 89 90
Corporate Offices SCEcorp 2244 Walnut Grove Avenue
- Rosemead, California 9t77o (818) 302-2222 Southern California Edison Company 2244 Walnut Grove Avenue Rosemead, California 91770 (8%8) 302-12T2 The Mission Group 38 Executive Park Irvine, California 927I4 (7r4) 756-39oo
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