愛迪生國際 (EIX) 2014 Q3 法說會逐字稿

Good afternoon, and welcome to the Edison International third-quarter 2014 financial teleconference. My name is Sheila and I will be your operator today. (Operator Instructions). Today's call is being recorded.

I would now like to turn the call over to Mr. Scott Cunningham, Vice President of Investor Relations. Mr. Cunningham, you may begin your conference.

Thank you, Sheila, and good afternoon, everyone. Our principal speakers today will be Chairman and Chief Executive Officer, Ted Craver; and Executive Vice President and Chief Financial Officer, Jim Scilacci. Also with us are other members of the management team.

The presentation that accompanies Jim's comments, the earnings press release, and our Form 10-Q are available on our website at www.edisoninvestor.com. After the call, we will be posting Ted's and Jim's prepared remarks.

We will be filing and distributing our regular business update the week of November 3, ahead of the EEI Financial Conference in Dallas. The presentation will have the usual additional information on current topics.

During this call, we will make forward-looking statements about the financial outlook for Edison international and its subsidiaries, and about other future events. Actual results could differ materially from current expectations. Important factors that could cause different results are set forth in our SEC filings. We encourage you to read these carefully.

The presentation includes certain outlook assumptions, as well as reconciliation of non-GAAP measures to the nearest GAAP measure.

When we get to Q&A, please limit yourself to one question and one follow-up. If you have further questions, please return to the queue.

With that, I will turn the call over to Ted Craver.

Thank you, Scott, and good afternoon, everyone. I intend to keep my remarks fairly short today.

I'm pleased to report that Edison International has delivered another quarter of strong financial results, with third-quarter core earnings of $1.52 per share, up 7% from last year. I'm particularly pleased to note that we have also increased our full-year earnings guidance. We now anticipate 2014 core earnings will be in the range of $4.25 to $4.35 per share. This is an increase of $0.60 per share over the midpoint of guidance we provided last February.

We continued to deliver solid growth and returns from investing in needed infrastructure to support public safety and reliability, as well as California's public policy objectives of creating a low-carbon economy and technological innovation. We should note that some of the increase in our core earnings outlook for the year is made up of items, such as taxes, that we cannot expect will reoccur each year. These items create a higher base, against which earnings growth in future years will look less impressive in year-over-year comparisons.

However, these additional earnings increase equity, which allows us to make more substantial investments in needed electric infrastructure in the future without needing to issue stock. The high level of investment we have made over the last several years in electric infrastructure, coupled with our firm belief that it was not financially prudent to issue equity to manufacture larger dividend increases, has caused our dividend to fall below the industry averages for yield and earnings payout ratio. To repeat what I have said before, we are committed to bringing our dividend back into our targeted payout ratio of 45% to 55% of SCE's earnings, in steps, over time.

We recognize that redressing this imbalance is job number one for many of our investors. The higher earnings outlook we announced today makes it easier to deliver on this objective. We've made important progress since our last investor call in resolving key uncertainties that have detracted from our longer-term potential.

On October 9, the administrative law judges recommended adoption of the amended SONGS settlement. Their proposed decision found that the settlement met all of the legal requirements for comprehensive settlement, and that it was reasonable in light of the whole record, consistent with law, and in the public interest.

There will also be oral arguments this Friday. All of the settling parties remain in support of the settlement. Although we do not know the timing of CPUC action, the proposed decision could be considered as early as the CPUC's November 20 meeting. The Commission posts agendas 10 days prior to its meeting.

The amended SONGS settlement includes several modifications requested by the administrative law judges and the assigned commissioner. The principal change agreed to by the settling parties involved the formula for sharing any future recoveries from insurance and Mitsubishi Heavy Industries.

Another change added a 50-50 sharing of any financing arbitrage between the authorized 2.62% rate of return on the SONGS regulatory assets and actual financing costs. The utilities were also asked to fund $25 million over five years for carbon-related research initiatives. Our share of this will be $20 million, and will be funded with shareholder dollars through our corporate philanthropy program.

I want to give a quick update on the NEIL insurance claims process. Under the amended settlement, customers will, net of recovery costs, receive 95% of any insurance proceeds related to the purchase power under what's called the outage policy. Edison's shareholders will receive 5%. SCE has currently filed $334 million in outage insurance claims. We don't expect to receive a first determination of coverage by the insurer until late in the year, or perhaps early next. If we disagree with NEIL's determination, the policy provides for a dispute resolution process.

Under the amended settlement, MHI claims would be shared 50-50 between customers and shareholders, net of costs of recovery. Our contract with Mitsubishi calls for international arbitration of disputes. The three arbitrators have now been selected, and the process for organizing and scheduling the arbitration has begun. We don't intend to provide ongoing progress reports unless and until we can report material development. We continue to expect this to be a lengthy process. We are committed to representing our customers and our shareholders forcefully during this proceeding.

During the quarter we also completed the final steps in our settlement related to the Edison Mission Energy bankruptcy. In late August we finalized the 2015 and 2016 payment amounts to the EME Reorganization Trust, consistent with the settlement reached earlier this year. The final payment increased by $9 million above our prior estimates, due to an increase in the estimated tax benefits retained.

I'd like to turn, finally, to the status of SCE's General Rate Case. Evidentiary hearings have now concluded, as scheduled. Intervenor testimony called for material reductions in electric system investment from when we filed. In our policy and rebuttal testimony and in the hearings, we continue to assert, as the Commission has supported in the past, that preventative maintenance and investment in the grid maximizes customer reliability and public safety. The current schedule continues to foreshadow a GRC decision sometime in 2015.

With that, I will now turn the call over to Jim Scilacci.

Thanks, Ted, and good afternoon, everyone. My comments will cover third-quarter and year-to-date earnings; our reaffirmed 7% to 9% rate base growth forecast; our increased earnings guidance; and our plans for 2015 earnings guidance.

Please turn to page 3 of the presentation. As Ted has already mentioned, EIX's third-quarter core earnings per share are $1.52 per share, or $0.10 above last year. SCE's third-quarter core earnings increased $0.08 per share to $1.54 per share, largely driven by higher revenues for rate base growth. This increase was partially offset by lower income tax benefits.

In the third quarter of last year, SCE recorded tax benefit of $0.06 per share related to IRS guidance for generation repair deductions. The earnings driver shown on the right of the slide are consistent with this year's trends of core and utility results. Higher CPUC and FERC authorized revenues provide for escalation of O&M, return, depreciation, financing, and taxes. Much of this is consistent with ongoing rate base growth. SONGS' results are $0.03 per share lower than the third quarter last year.

As we look ahead to 2015, we expect to recover our actual SONGS cost from the Nuclear Decommissioning Trust. We have submitted an advice letter to the CPUC to access the Trust, and have filed our decommissioning plans with the NRC. Assuming the amended settlement agreement is approved by the CPUC, it provides a return on long-term debt and preferred stock, which should be roughly comparable for our costs of financing the SONGS regulatory assets. We will also share with ratepayers the cost savings of any refinancing of SONGS regulatory asset at a rate lower than the settlement's authorized rate of 2.62%.

At this point in time, we are not forecasting any savings between the 2.62% and the expected refinancing cost.

One thing to note is that we continue to contain our O&M costs, which are pretty much flat with the third quarter last year, after eliminating O&M related to SONGS and Four Corners.

Our 2015 General Rate Case filing incorporates all savings from 2012 through 2014. Going forward, we have proposed sharing 50% of any 2015 savings from in-flight IT and customer service cost initiatives. Beyond these initiatives, we will continue to constantly seek to improve our costs and service performance.

Turning to Edison International parent and other -- as a reminder, this includes the core holding company costs; new business costs under Edison Energy; the remaining investments for Edison Capital, which continues to wind down; and two small investments at Edison Mission Energy. Edison Capital and EME are subsidiaries of Edison Mission Group.

During the third quarter, Edison Mission Group contributed $0.03 per share from affordable housing projects. The holding company and Edison Energy costs were higher by $0.02, while we had additional tax benefit of $0.01 per share, bringing the total impact from EIX parent and other to a positive $0.02 per share [variance]. The non-core item this quarter relates to recording the completion of the EME settlement.

Please turn to page 4. The year-to-date increase in earnings over last year is driven by higher authorized revenues for escalation of O&M, return, depreciation, financing, and taxes. Our year-to-date earnings increase also reflects reduced O&M, mainly from lower severance costs and higher tax benefit (technical difficulty). As we discussed in our second-quarter call, we recorded a $0.09 per share tax benefit from a change in estimate of uncertain tax position. This primarily relates to progress made with the IRS in settling the 2003 through 2006 audit cycle.

During the second-quarter call, we also mentioned that SCE had earned $0.03 per share for California energy crisis litigation settlements. Other minor factors bring year-to-date SCE core earnings to $3.58 per share. Net of holding company costs, EIX core earnings year-to-date increased $0.52 per share to $3.50 per share.

Turning to page 5, we updated SCE's capital expenditure forecast through 2017. The three-year forecast is about $200 million higher. As you can see in the chart, spending is forecast to be down by about $300 million in 2015, from updated CPUC spending and timing of FERC transmission projects. However, an additional $300 million of FERC's transmission spending is now included in 2016 and 2017 for the Coolwater-Lugo and the Mesa Loop-In projects.

Moreover, our forecast now includes over $200 million of new spending, roughly split between 2016 and 2017, to begin converting certain mobile home parks from a master meter to individually metered mobile homes. This comes as a result of a March CPUC decision that ordered a pilot program to convert 10% of mobile parks for safety and reliability reasons. This pilot program is being handled outside of the General Rate Case process.

At this point in time, it is not possible to predict if the CPUC will extend this program beyond the pilot phase.

On page 6, we have also reaffirmed SCE's 7% to 9% annual rate base growth forecast. As we've discussed previously, the rate of rate base growth is dependent upon the CPUC's decision and SCE's 2015 general rate case. Some intervenors in the case have suggested productions and capital expenditures that will result in lower rate base growth. However, we have aggressively responded during the rate case hearings on the need for continuing, and, in fact, increasing infrastructure spending consistent with the Commission's focus on public safety and reliability. We therefore believe the forecast range remains a reasonable one. More information on intervenor positions is included in the presentation appendix.

A final topic is guidance. Please turn to page 7. We've continued with the same approach to guidance that we showed you in February and again in April. We start with the SCE rate base-driven earnings estimate of $3.40 per share, based on the midpoint of the rate base forecast.

Looking across the bottom of the slide, we have updated our guidance to reflect our current outlook for earnings, and we have also assumed that the amended SONGS settlement is adopted this year. Our original guidance assumed a $0.07 per share negative impact related to SONGS. This was primarily from the lack of authorized revenues to cover the cost of debt and preferred stock.

The settlement allows a partial return of the SONGS regulatory asset of 2.62%, thus providing $0.03 of incremental earnings. The amended settlement includes a five-year philanthropic contribution of the University of California that totals $20 million. Our updated guidance accrues for the five-year charitable contribution for $0.04 per share.

There are other small items that net to a positive $0.01. The net effect of all these items is, again, a negative $0.07 per share for SONGS.

The major positive items for our guidance related to income taxes -- higher income taxes benefits, cost savings, and other items that we have previously reported in our year-to-date result. Cost savings and other remained the largest element, and we have increased from $0.35 per share in our original guidance to $0.69 per share.

Income tax benefits are now forecasted at $0.41 per share compared to $0.14 previously. We also have removed the 2014 energy efficiency earnings of $0.03 per share, based on the CPUC's action to delay processing of the utilities energy efficiency award request. As a result, we would expect that energy efficiency awards in 2015 will include multiple years.

The combined impact of these benefits is now $1.10 per share, up $0.58 per share from the original $0.52 share estimate. We have also updated the Edison International parent and other cost estimate from $0.15 per share previously to $0.13 per share, reflecting year-to-date results. This gets us to a new core earnings midpoint of $4.30 per share, and a new core earnings range of $4.25 to $4.35 per share, per year, as Ted has already said.

I'll finish up with a comment on 2015 guidance. Please turn to page 8. Based on the current GRC schedule, it is not likely that SCE will receive a final GRC decision by the time we report full-year results in late February of next year. We intend to follow our prior practice of not providing 2015 earnings guidance until we receive a GRC decision.

We are mindful of the importance of helping investors model their earnings outlook, even in the absence of a decision. We believe that our rate base forecast continues to be the best indicator of ongoing earnings power.

Thanks. And now I will turn the call over to the operator.

(Operator Instructions). Greg Gordon, ISI Group.

A couple questions. One is, can you tell us whether or not the ex parte communication situation that has evolved at PG&E has had any impact at all on your ability to conduct business at the CPUC? And if there's any potential for either a self-policing review or an external party looking for -- looking into your communications with PUC?

Greg, this is Ted. In terms of has it caused any kind of interruption in the business that we have before the PUC, I think probably the best thing I can point to is the ongoing General Rate Case activities. I think I mentioned in my comments that we actually just finished up the evidentiary hearings as scheduled. So at least from what we can see, this seems to be really something that's primarily focused on the San Bruno item, as opposed to the activities that we have before the PUC.

So, we're certainly trying to make sure that all of our personnel know what's expected of them, in terms of proper conduct with the PUC. We have a compliance program. We have training. We have redoubled efforts along those things, just to make sure that that's very present in everyone's mind. But beyond that, really we're pretty much in business as usual.

And you haven't been approached by the Attorneys General, and asked to dispose your communications in lieu of what they're doing over at [PCG]?

No.

Okay, thanks. Second question, you said that you thought the energy efficiency decisions would all be multiple years in 2015. I know you keep telling us to use the rate base map when we think about the earnings power of the Company, and you have explicitly not given guidance for 2015 and beyond. But can you give us any sense of whether or not there will be items beyond rate base math that could potentially impact 2015 earnings and beyond?

Greg, this is Jim. What we will plan on doing is putting out a schedule that shows the energy efficiency potential earnings. This is all in the public domain; we are just going to put it on the schedule where you can see which year it was earned from, and when we expect to receive it. That will be one helpful bit of information.

But beyond that, we won't predict shortage in our rate case decision, if there's any potential O&M, or tax benefits that could result in future years. We would assume -- as a working assumption, a lot of that is passed back as part of the rate-making process, and we will need a decision before we can really hone in on that number.

Okay, when will we see that schedule?

It will probably be as part of our February -- when we come out with our year-end earnings, we will provide that information. Most of it is already in the public domain. We're just trying to get it so people can see it in one place.

Right. A final question: when would you expect to make the next move on the dividend? Is going to be in the normal cycle here, coming in December?

Greg, this is Ted. You are triple-dipping here today.

I think that was four, something like that. (laughter)

I only have one question, but it's in 27 parts.

Yes, I like that (laughter).

I like it; it's creative. On the dividend, I think everyone knows we have typically looked at that during our December Board meeting, but there's no set schedule to it. And that's something that we really leave for the Board to make a decision on, in kind of the normal course, when they have all of the facts in front of them. There's a general practice, but no set schedule.

Okay. Thanks, guys.

Jonathan Arnold, Deutsche Bank.

Could I just ask on the -- so, the SONGS item in the guidance, which is $0.07 negative, but its composition is different from what it was before. If I heard you right, the $0.04 piece, the philanthropic contribution, you've booked the whole five-year thing up front in 2014, or you intend to. Is that correct?

Correct.

Okay. And then the settlement, is that an ongoing impact of the settlement, or a one-time aspect of the settlement?

So, the return on the debt and 50% of preferred, that's what I was referring to for the $0.03 positive, with the assumption that we get a decision.

So that a full-year impact?

Yes. Yes.

Would be. So, as we think about that line going forward, Jim, is there a -- there's a slight drag from SONGS items in 2015 and beyond. Is that the right way to think about it?

We'll reset. As we said before, a couple years ago when this got started, that the rate base is going to be readjusted, and the debt and preferred and the common will now be based on the actual rate base. And we wouldn't expect that we'd have separate SONGS item ongoing.

This won't be of feature of whatever the new guidance is?

Right.

When you give it. Okay, great. That's very helpful, thank you. And then could I just ask on the parent and other, your number ticked down slightly. Is that sort of directionally where parent costs are heading?

Yes, this one has been -- and periodically, it's hard to predict. We've had some earnings pulling up from Edison Capital. Remember, we've been liquidating a low-income housing portfolio there, and it's hard to predict. And we don't forecast earnings coming from that, and periodically we get some earnings. So that's the primary reason why the parent/other was down this quarter. But we've said -- and I keep by that statement -- that it roughly, it's a little over $0.01 per month in costs from the holding company, all-in.

And is that what we should anticipate as a steady-state modeling outcome going forward, absent some other change?

Well, I will stand by 2014, and I don't see it changing appreciably going forward.

Okay, great. Thank you, Jim.

Hugh Wynne, Sanford Bernstein.

Congratulations on a great quarter. I'd just like to know how one achieves an increase in cost savings from $0.37 to $0.69. How does that get done?

Hugh, it's Jim. It's across the board a lot of different things going on. It's higher revenues; it's lower labor expense; it's lower tax expense related to benefits. It's a lot of little things. And remember, we had higher severance expense last year, lower this year. So the year-over-year changes had a factor on it, too. So it's a number of different things.

We had been predicting all along that there would be savings coming out this year that we will pass back as part of the rate-making process. And we're just seeing a higher level of savings than what we had originally anticipated.

These are -- one, the savings are so substantial, and the rate of increase in the savings is so substantial, that one is tempted to extrapolate into the future the possibility that you might find savings in the next General Rate Case budget that would allow you, then, to exceed your expected earnings in the coming GRC, as well.

Is that a realistic expectation? Or do you think this is just a one-off cut in your operating and maintenance expense that really cannot be replicated in the future?

Well, what I did say in my script, that we will continue to look for cost and service improvements. They key thing that's not available here is in terms of what the Commission decides is going to be the O&M levels and our spending levels for 2015, 2016, and 2017; what the attrition mechanism might be for 2016 and 2017. Those are unknowns, so I think that's why we've been taking you back. And my comments for guidance, for 2015 guidance, was the one thing that we have a higher degree of confidence around is the rate case forecast, and that's the true driver of earnings. And we may have some transitory earnings or potential losses, depending upon things and how they evolve, in both O&M and tax benefit. But the rate base is the true one guide towards future earnings.

Great. Thank you very much.

Julien Dumoulin-Smith, UBS.

So, following up on the GRC, if you will, what's the latest timeline? Could you give us a little bit of an update on where we stand, just given everything going on at the CPUC?

And perhaps as a follow-up question, and I'll stick with just one follow-up here, how could that potentially impact the CapEx on the various timing outcomes of the GRC here?

Julien, this is Jim. It's a good question. We concluded, Ted said, today, hearings. That was an important milestone. And the next real key thing we've got coming up, we have update hearings, unless they change them, in January. Don't we, Maria? Pedro?

That is the last bit of information where they update for known changes that have occurred, and there are hearings around that. And then you've got to get into filing your briefs, and your closing briefs, reply briefs. And then it's on to the judges for drafting of a proposed decision.

Normally, if you go back in prior years, the update hearings were typically in November of the year [for]. So it looks like we're at least two, maybe three months behind, just from looking at that schedule. But I can't predict, once we turn it over to the ALJs, how long it's going to take them to prepare the proposed decision. That's the key unknown.

Your second question -- and thank you for keeping it to two -- the capital expenditures. Part of what we do is we look out over the three-year period, and we attempt to set our capital expenditures so we can have a steady state of work. If you go back and look over the last couple of years, we've been challenged to ramp up our capital expenditures to reflect the level that was authorized. And it had a lot to do with getting the crews in place in order to get to the constant steady state of work. And we're trying to maintain that constant steady state of work without dropping back to a lower level of capital expenditures, because we don't have certainty.

So our view is if they do come in and lower capital expenditures, you can adjust your rate of spending in the prior year, so beyond 2015 -- so, 2016 and 2017. So we have some flexibility around in how you schedule things over that three-year period. But we're trying to maintain the level of overall expenditures at this higher level, because it really reflects a lot of work to get the crews ramped up to where we are today.

But, ultimately, it seems like the timeline on the actual rate case doesn't seem to be too impacted by the latest development, if I hear you correctly.

Yes, I think that's how we're going to operate the business. We're going to watch our O&M spending, obviously, because O&M is different than capital. You have three years to deal with capital. You only have one year for O&M. So we'll very much carefully watch our O&M; but our capital, we want to maintain at the levels we've identified in our documents here.

Great. Well, thank you very much.

Dan Eggers, Credit Suisse.

Just following up on Hugh's question, just the pretty remarkable improvement in O&M cost management -- can you just remind us how those adjustments, or kind of that better starting point from this year gets reflected in the GRC process, given the relatively short open period for adjustments and docket tweaks, and that sort of stuff?

So, really, it's just part of the rate case process. No update for -- they're looking at forecasts, and they'll look at some actuals, because they will be able to go beyond -- the record doesn't close until next year. And so you would expect them to pick up a lot of the factors that we have this year. And then whatever they decide from there, it's hard to predict at this point in time where they will set the actual level of O&M, until you actually get a proposed decision, then a final decision.

And along those lines, did I hear you correctly saying that you guys would split 50-50 if you had more IT and some other savings in 2015 and beyond?

No, we said we had some specific things that we had identified as part of the rate case process. And we offered those up as part of our showing within the rate case, and said, we will share 50% of the savings. And I also said that we will continue to look for additional cost savings. And so those are the facts as they are today.

And just one last one. Ted, on the payout ratio, should we be thinking about that 45% to 55% based on the rate base map of what earnings would be, as you guys provide it right now? Or should we assume that if you start realizing better earned ROEs because of some of the operating efficiency savings, that that is where you calibrate your payout ratio?

Yes. There's always, I guess I'll say, unpredictable pluses and minuses. So what we really tend to do is just make it straightforward. It's based on the rate base. That's really the durable growth and the durable earnings power of the Company. And that, to us, seems to be the appropriate way to think about the 45% to 55% payout ratio.

Obviously, like in the case of this year, if you have additional earnings from taxes or whatever it may be, that just builds your equity and makes it a stronger balance sheet from which to finance the type of significant electric infrastructure investments that we see in the future. So it puts you in better financial strength; better balance sheet strength; provides, I think, more certainty that you can manage the growth in electric infrastructure investment without having to tap the equity markets; which, as you know, is something we've really tried to keep in balance.

Got it. Thank you, guys.

Michael Lapides, Goldman Sachs.

One thing. Just thinking -- and this is a little bit follow-on on the rate case questions. In the rate case filing, is the O&M that you requested higher or lower than -- if I were to take an annualized run rate for what O&M has been at SCE so far in 2014?

I don't know if I can answer the question, Michael. You have to go back and compare. We have been driving the O&M down. And as I said in my prepared comments, you are taking SONGS out, and we're taking Four Corners out. And so you would expect, based on that, that the trajectory is lower. But trying to line it up exactly -- I don't think I can do it right here for you.

Okay. Just trying to think about -- are you incurring costs that you had already filed for in the rate case? Or if the rate case has higher 2015 O&M versus 2014, it's for costs you are not already incurring. So if you are not authorized, the revenues that go with those costs -- it's not like you've got to go through a major cost-cutting exercise.

It all depends on what they authorize in the end, Michael.

Got it.

So, I understand the crux of your question, in terms of where we're spending relative to what's in the GRC. It ultimately then goes to what they authorize.

Okay. On energy efficiency for 2015 and beyond, since you are not recognizing any of it in 2014, does that mean 2015 could be a little bit of a catch-up year, where you recognize both 2014 and 2015 in that one year? Or are you just going to skip a year?

I think that's how we're thinking about it now. You may have a pancaking of years.

Got it, okay. Thanks, Jim, much appreciated.

Kit Konolige, [BGC].

I think a lot of this has been asked already. But Jim, maybe -- I'm not sure I caught a lot of detail about the positive tax impacts that we're seeing so far. Is it possible to explain those in a non-technical way that would give us some idea of what's driving that, and how sustainable they might be?

Yes, I didn't give a lot of detail, so you didn't miss it. We see additional repair deductions. So when you have work like pole-loadings or infrastructure replacement, you have a repair deduction, so you get faster deductions for tax purposes. And we're continuing to see those come through, and we've been running behind in terms of what our original expectation was in that area.

We see additional property tax reductions. There are a number of different taxes here; cost of removal deductions. So there's a number of different pieces here, so it doesn't add up to one item being large; but all of them together, collectively, have made a significant change from what we had previously forecast.

But they all -- moving up in the same direction, that it comes out to a pretty significant dollar amount. Is that related -- does that relate to anything that's unusual about your capital spend, or acceleration of CapEx, or anything like that? Or is this just how the tax laws happen to be written?

It's more the nature of what the capital expenditures are. It has to do with more of our expenditures, and as we're -- you know, we are ramping up now for infrastructure replacement. And pole-loading expenditures qualify for repair deductions and cost of removal. And we're seeing deltas relative to what we had in our forecast in the current GRC. So that's why you are seeing these earnings pop out for this year.

Great. Okay, thanks a lot.

Ali Agha, SunTrust.

Jim, just to put that bucket in your earnings guidance, the $1.10 of incremental earnings that you are picking up this year -- can you just remind us how much of that was picked up in the third quarter and then year to date?

So, of the $1.10 -- and I don't know if I can break it out completely; I can give you some numbers that we've seen previously. We said, back in the second quarter, there were $0.23 of earnings that were outside of our guidance feeding back into that from that number. And beyond that, it's more difficult to break it out by quarter -- what was in the third; what we anticipate being in the fourth. But that's the closest I can give you right now, Ali.

Okay. And then second, am I correct? When I looked at the rate base numbers in your latest slide deck, specifically for 2015 and 2016, compared them to the last time you had given us those numbers, there's about a $400 million per year reduction in the ranges for 2015 and 2016. Am I correct in that calculation?

Yes. There are some changes going on. As I said in my prepared comments, we're shifting dollars out of 2015, and so they are going into 2016 and 2017. And there's a net increase in overall capital expenditures, because we have a new program for converting mobile home parks from master meters to individually metered mobile homes. And so it's affecting both capital then ultimately [rate base].

Okay. But, again, if I add in 2017 to the mix, it seems that you only pick up about $100 million to $200 million there, and you are reducing about $400 million in each of the years 2015 and 2016. So, over the three-year period, it looks like a net reduction, if I'm looking at it right.

It's hard to -- you really have to go into how the actual closings are being forecasted. So as you have capital expenditures; then, ultimately, closings; and how it relates to your rate base. I don't have any further detail I can give you on that. That can change periodically.

I see. Last question, sorry for that. On slide 12, where you talk about some of your growth CapEx initiatives beyond 2017, just to put that in some context, does that sustain your rate base growth at the same level, based on all the items you've listed on that slide 12?

We haven't put out a forecast for rate base growth figures. What we've been trying to indicate, that $4 billion a year capital expenditure is kind of like the sweet spot. Ted has mentioned that previously. And so we see infrastructure replacement going up in spending; transmission has come down a little bit; and we have some of these other initiatives that are on the periphery, the horizon, that we're thinking about now that could affect our overall capital expenditures beyond the 2017 timeframe.

So I'm not trying to guide you higher than that level of capital expenditures, and I'm not providing you actual CAGRs. And you would expect, as the base gets bigger, your CAGR will probably come down slightly, just from the math on it.

Right. Thank you.

Shahriar Pourreza, Citigroup.

I think we -- just on two filings, I think we discussed in the past that there's potentially two filings next year: one distribution resource plan under AB 327; and then another proposal to potentially look to do electric vehicle charging stations. Is this above your 7% to 9% rate base growth, or is it embedded in the numbers? Can it move the needle?

Yes, I think it's a good question. I think the timeframe may be out slightly, as you get into when those might take effect. And obviously you have to file an application, and the application is going to take time to process. And I could anticipate that it would be well into 2016, potentially 2017, before you actually see spending from either of those two initiatives. And so it's hard, at this point in time, to forecast that it might push it higher than where we are forecasting today.

Got you, got you. And then just a follow-up. On the MHI proceedings, are you bound by ordinance to remain -- to not disclose the process? Or is this sort of like you just want to update investors, once you have some data point to update investors with? What's the procedural process there?

We're going to have Bob Adler, our General Counsel, comment on that.

Bob?

These proceedings are typically confidential in nature. It would take the parties to agree to make them otherwise, as well as the tribunal. And so, at this point in time, we are simply not going to be commenting beyond the material events that would require disclosure.

Terrific, thanks. Congrats for the good quarter.

Angie Storozynski, Macquarie.

I just have a quick question on GRC. Now that the hearings are over, and the commissioner assigned to the rate case is not going to be around past the end of -- I mean of the CPUC -- at the end of this year, is it possible that we would have a settlement instead of a fully litigated case?

Angie, it's Jim. I don't think we can speculate on that. Of course, if it were appropriate, we would enter in discussions, but we can't comment beyond what we know now.

Okay, thanks.

Travis Miller, Morningstar.

The income tax benefit that you've been realizing -- how much, if any, ultimately would go back to ratepayers, either through the GRC or some other type of mechanism?

Travis, this is Jim. We've been forecasting and signaling clearly that we would expect the tax benefits to be realized during this GRC to go back to customers. And that's all part of the rate case process, and we'll update for that. And so we are not indicating that we'd expect earnings from tax benefits going forward.

And that would ultimately show up in a lower revenue requirement.

I'm sure they will adjust for the benefits, yes. They will take it away; lower the revenue requirement. It's already incorporated in our GRC request.

Okay, got it. And another subject, maybe Ted, what's your latest thinking on the FERC Order 1000 projects? Is that in a planning stage for you guys, or is that too far off to think about?

Well, we're certainly not in a place where we think we would have something to disclose about it. But we've indicated previously that competitive transmission, if you will, FERC Order 1000 base transmission projects, is something that we are seriously considering and looking at. We have a subsidiary that we've formed, Edison Transmission, which is really to explore those possibilities. And should something come together, then we, of course, would have more to say about it.

But at this point, I think, like most companies out there, we're looking at it, trying to assess where the opportunities are. We have ourselves organized to go after these things in a logical way. And if we see good projects that make good sense, then presumably we would go forward and do those.

Okay, great. Thanks a lot.

Neel Mitra, Tudor, Pickering.

Just wanted to get your thoughts on the probability of the renewable portfolio standard going over 33%, and what the timing of that would be, and what possible investment generally that would require from you going forward.

This is Ted. It's going to be difficult to really speculate much on this. We're currently, of course, focused on trying to get to the 33%, and we have procurement efforts and the like to get us there. Whether this becomes something that either the governor's office or legislators want to look at, that's really hard to predict. I'm not aware of any specific bills that are being put together or floated at this point. So, it's really just hard to speculate on it.

Okay, thank you.

(Operator Instructions). And it appears that was the last question.

I will now turn the call back to Mr. Cunningham.

Thanks very much, everyone, for participating. And please call us at Investor Relations if you have any follow-up questions. Thanks, and good evening.

That concludes today's conference. Thank you for participating. You may disconnect at this time.