Good afternoon, and welcome to the Edison International fourth quarter 2014 financial teleconference. [Operator instructions.] 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..

Thanks, operator, and good afternoon everyone. Our principal speakers will be Chairman and Chief Executive Officer Ted Craver and Executive Vice President and Chief Financial Officer Jim Scilacci. Also here are the members of the management team.

The presentation that accompanies Jim's comments, the earnings press release, and our Form 10-K are available on our website at www.edisoninvestor.com. After the call, we will be posting Ted's and Jim's prepared remarks. Tomorrow afternoon, we will distribute our regular business update presentation for use in upcoming investor meetings.

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

The presentation includes certain outlook assumptions, as well as reconciliation of non-GAAP measures to the nearest GAAP measure. During Q&A, please limit yourself to one question and one follow-up. I'll now turn the call over to Ted Craver..

more distributed power, expanded rooftop solar, micro grids, an energy imbalance market, batter storage, the full integration of information technology and electrical distribution, and millions of electric and low carbon vehicles.” But the state’s ambition and overall direction is clear.

In broad strokes, we at Edison have been painting a similar picture of the future of the power system. Importantly, our growth strategy is aligned accordingly. Of course, the devil’s in the details. Some of the regulatory framework to implement this vision will require legislative action, and that process has already started in Sacramento.

We will be actively engaged on the legislative front. One of our larger priorities will be achieving policy goals at the lowest cost to customers.

We see the need to expand California’s renewable portfolio standard beyond the current regime of only recognizing large scale wholesale contracted projects to recognize the benefits of distributed generation, energy efficiency, and electric vehicle charging.

The three-year general rate case cycle provides a broad framework to incorporate other initiatives such as the distribution resource plan required to be filed this summer. The CPUC recently issued its final guidance on the distribution plan elements.

We anticipate that our plan will create something of a roadmap for the distribution system investments at Southern California Edison needed to realize the governor’s vision. Some elements of the plan are already in process, including initiatives on energy storage, residential rate design, and electric vehicle charging.

California’s commitment to creating a low carbon economy does not necessarily conflict with SCE’s core mission of delivering safe, reliable, and affordable electricity. SCE’s current general rate case will establish the revenue requirement and scope of work to achieve both. The record for the rate case was completed in late January.

The GRC is now in the hands of the administrative law judges to develop a proposed decision. We expect a decision sometime in 2015. So with that, I’ll now turn the call over to Jim Scilacci..

Thanks, Ted. Good afternoon everyone. My comments will cover fourth quarter and full year 2014 earnings, our updated capital spending and rate base forecast, and cost of capital. As we have previously stated, we will not provide 2015 earnings guidance until SCE receives its 2015 general rate case decision.

In this presentation, I will, however, discuss assumptions relevant to our 2015 earnings. Please turn to page two. In the fourth quarter of 2014, SCE earned $1.09 per share or $0.30 ahead of last year.

This increase was driven by many of the same factors we have been seeing during 2014, including higher revenue of $0.28 partially offset by depreciation of $0.08, net tax benefits and other items of $0.04, and O&M savings of $0.05.

There are also two items of note that are included in the $0.28 of higher revenue, and both of them were not included in our updated earnings guidance that we provided last October. First, we recorded $0.05 of additional revenue from resolution of an open item from our 2012 GRC decision.

During 2014, SCE obtained an IRS private letter ruling regarding appropriate treatment of net operating loss carryforwards. The net effect of the ruling was to increase CPUC rate base and revenues. In November, we obtained a CPUC approval authorizing the additional revenues.

Second, you may recall that during the third quarter call, we thought that the energy efficiency awards might be delayed until 2015. As things turned out, we received our award in December, and it amounted to $0.04 per share. In the fourth quarter, the net SONGS impact on core earnings was a positive $0.02 per share compared to last year.

Our fourth quarter results include recognition of revenue for the rate of return on the SONGS regulatory asset. We also had a $0.05 benefit from lower O&M costs. The largest item was lower severance expense. Taxes and other items were a net benefit of $0.04 per share, led by $0.07 in higher income tax benefits.

Most of this relates to repair deductions that we talked about previously. At the Edison International parent company level, results were a loss of $0.01 per share, compared to income of $0.02 per share last year, which is mainly due to the income from Edison Capital and tax benefits.

The loss of $0.01 this quarter includes higher income from Edison Capital and lower tax benefits. As we have indicated, Edison Capital’s remaining low income housing portfolio continues to wind down as units are sold.

Turning to noncore items, SCE recorded a net $0.08 per share benefit during the fourth quarter from a revised estimate of the impact of the SONGS settlement.

There are a number of items that make up the $0.08, including the return on SONGS regulatory asset from April 1 through September 30 of this year and an accrual of a contribution to the University of California for greenhouse gas research.

At the parent, we also recorded $0.12 per share benefit in discontinued operations related to resolution of uncertain tax positions from settlement of our 2003 to 2006 federal income tax years and other tax impacts related to EME.

As a reminder, EIX has net operating losses and tax credit carryforwards from EME that will be monetized in future years as part of our settlement with EME creditors. These tax benefits were approximately $1.1 billion at year end.

We also recorded $0.01 per share net benefit at the holding company related to allocation of income tax attributes to tax equity investors and projects developed by SoCore Energy on what is called the Hypothetical Liquidation at Book Value, or HLBV, accounting method.

Because HLBV accounting procedures produces income not related to project portfolio performance, we classify this income as noncore. Please turn to page three. For the full year, core earnings were $4.59 per share, versus $3.80 in 2013. For SCE, this improvement is mainly due to rate base growth.

Year-end 2014 rate base was $23.3 billion, a $2.2 billion increase over the prior year. In addition, SCE recorded higher net tax benefits totaling $0.16 per share, principally from repair deductions and resolution of uncertain tax positions. A number of other smaller items complete the picture.

At the holding company, core losses were comparable to last year at $0.09 per share. This remains lower than expected, primarily due to higher income from Edison Capital. I know many of you are interested in tracking our earnings relative to our guidance, so I’ll cover that next. Please turn to page four.

This slide shows a reconciliation of core earnings to guidance over the full year period. I will focus on the final three months of the year, that took us from $4.30 midpoint guidance in October to actual core earnings of $4.59. As you can see, the increase is $0.29.

First, it’s $0.10 per share of income tax benefits from additional repair and cost of removal deductions recorded in the fourth quarter. Next are the two items I mentioned earlier, the $0.05 per share benefit from the revised determination of rate base and $0.04 of energy efficiency awards.

The balance relates to cost savings and a number of small items at $0.05 per share. Holding company core results were $0.04 per share better than expected, primarily due to Edison Capital’s affordable housing project revenues. Please turn to page five.

SCE’s capital spending forecast changed slightly from our prior forecast, due to timing of transmission capital expenditures. Actual 2014 capital spending totaled $4 billion, $100 million below our forecast. Our outlook for 2015 spending is down $100 million and up $200 million in 2016.

Please note we continue to use the 12% variability between the range and request capital expenditure forecast. Please turn to page six. Our rate base forecast remains consistent with the 7% to 9% compound annual growth rates. Based on a number of changes, we’ve revised downward our rate base forecast by a net $300 million by 2017.

As the slide shows, this reflects an average reduction of $400 million from bonus depreciation, an average reduction of $100 million for timing of transmission spending, and a positive $200 million adjustment upward to update deferred taxes related to our SmartConnect project.

Please note that the capital spending and rate base forecasts do not include electric vehicle charging, energy storage, or distribution resource planned expenditures. The lion’s share of this future spending will likely occur beyond the current forecast period. Please turn to page seven.

This page updates the interest rate trends for the CPUC cost of capital trigger mechanism. Recently, CPUC approved a one-year extension of our cost of capital mechanism. We must now file our 2017 cost of capital application in April 2016. The trigger mechanism will remain in effect for 2016.

However, based on the movement of the Moody’s BAA bond index thus far, it seems unlikely that the current return on common equity of 10.45% would change for 2016. Our FERC filed rate settlement remains in place through the end of 2017. Under the settlement, the return on common equity can be reopened after June 30 of this year.

Next, I’d like to touch on some financial considerations related to 2015 earnings, given the absence of guidance. Please turn to page eight. On this page, we have included some important factors to consider in refining your earnings estimates until we can provide formal guidance.

The capital spending and rate base forecasts are taken from pages four and five of this presentation. Both CPUC and FERC return on common equity remain unchanged at 10.45%. We have some carryover items on energy efficiency awards from prior years.

The potential earnings opportunity for 2015 is up to $0.05 rather than the more typical $0.03 per single year. Please keep in mind that some of the carryover items will likely be contested by other parties, and there is no assurance that energy efficiency earnings will be approved.

Another positive item is the completion in January of the SONGS regulatory assets financing. The approved settlement let SCE finance this asset with 100% debt. The settlement also requires that we share with our customers the cost savings of this financing if the rate is below the 2.62% return on the regulatory asset.

SCE completed this financing with a weighted average cost of debt of 2.2%. The blended average rate increases over time due to debt amortization. After the cost sharing with customers, there is a very modest earnings benefit. However, the financing has the added benefit of ultimately freeing up approximately $400 million of common equity.

As we recover the regulatory asset, this amount will decline over time. At year-end 2014, SCE’s 13-month weighted average equity ratio for regulatory purposes was 48.4%. The SONGS regulatory asset totaled $1.288 billion at year-end 2014.

Of this amount, $919 million earns the 2.62% return, $345 million earns a commercial paper rate, and the balance earns no return. For 2015 and beyond, we believe that the return on SONGS regulatory assets will roughly match the financing costs.

I will also remind you that our quarter earnings results will not reflect the revenues requested in the 2015 GRC, and accordingly won’t have the typical profile during the year. Until we receive a final GRC decision, we plan to record revenues based on the 2014 authorized revenue requirement. Please turn to page nine.

The next slide highlights the details of our dividend policy that Ted has already touched on. I’d like to reinforce our view that EIX has one of the better opportunities among large cap utilities for rate base, earnings, and dividend growth. Please turn to page ten. This last slide captures our strategic framework.

Ted has touched on many of the major points already. To summarize, we are very focused on delivering on our organic growth opportunity. We have good growth visibility from our wire spending and the prospect for continued growth from a number of new initiatives.

Moreover, as we have previously said, we will continue to work to optimize our cost structure and improve our operational efficiency. Thanks. I will now turn the call over to the operator for questions..

[Operator instructions.] The first question comes from Michael Weinstein with UBS..

I wanted to ask kind of a bigger picture question here, as we’re thinking about this roadmap that you all are getting ready to file. And I hear you in the broader elements here. You’ve got storage, you’ve got efficiency, you’ve got renewables in the background.

What’s going to be different versus the individual dockets here that we have filed? How does this bring it together? How does this, from your perspective, change the capital spending plan? And perhaps it’s the different time period, but just could you elaborate a little bit?.

I’ll start out, then I’ll turn it over to Pedro for some additional comments. So the filing is coming up in the second quarter, or the first part of the third quarter, and we have a series of questions that PUC has asked us to address.

A lot of them are really what’s happening in the system and how we plan to address it to encourage and incorporate more distributed energy resources in a distribution system. At least the initial filing is not an investment filing. It’s really a description of what needs to be done, and from our view. Others will have, I’m sure, different views.

We will subsequently follow that up with probably some type of application or alternatively, we’ll include in our 2018 general rate case request the actual expenditures associated with this new plan.

And from an overall perspective, stepping back and thinking about our capital expenditures, we’ve said that capital expenditures on average have been running about $4 billion a year. And we don’t want to suggest that these new programs either will take it up or drop it down.

We think that generally going forward capital expenditures will stay in that same zone, even with these new initiatives. So I’ll pause there and turn it over to Pedro for additional elaboration, if you’d like to add anything..

No, Jim, I think you covered it very well.

And the July 1 filing has a fairly [unintelligible] set of questions that the PUC has posed, and they really go to the nuts and bolts of how will the grid need to evolve in order to accommodate deployment of distributed energy resources and look at the grid’s capacity to integrate them, look at things like the [locational] value at various points across our grid.

And so a piece of this is mechanical, but there’s a broader piece around how does the grid continue to evolve and [unintelligible] raise questions and provide some insights on what are some of the technologies and what’s the evolution of that grid over time.

And then as Jim said, we haven’t determined this yet, but we’ll have the option of either including investment opportunities that we see in our future rate case cycles.

Potentially, there might be an opportunity to do a separate filing if we saw a very pressing near term need, but that’s work that we have underway right now in determining what those next steps are and developing the filing for July 1..

Excellent. And perhaps a follow up, and once again, congratulations on the overall results for the year, but given how successful the cost savings were, particularly relative to the October 28 guidance, what exactly is that saying year over year for the run rate through most of this year in terms of the cost savings.

In the [unintelligible] sense/other, is there any way to read that into 2015 without providing guidance here?.

We can’t. We have the general rate case. We really have to answer that first question, how the PUC establishes the authorized level of revenue requirements, then we’ll have an opportunity after that to come back out and give you our views on what it could be.

But I just want to emphasize, we will continue, as I said in my script, to look for opportunities to reduce our costs..

Your next question comes from Steven Fleishman with Wolfe Research..

Jim, maybe just on the slide eight, of the factors.

So, just simplistically, would you suggest a simple kind of rate base, times equity, times ROE, plus the energy efficiency, and no AFDC earnings, we should assume, and nothing meaningfully from the SONGS items? And that’s as simple as that?.

Yeah, I think that’s what we’re strongly suggesting you go towards, because you have visibility on rate base and rate base growth, and then return on common equity, obviously, is not changing. We’re not changing the share count.

The energy efficiency is going to be somewhere in that 3% to 5% range, and we won’t know until later on in the year if there’s an opportunity for anything beyond that, or the hurdle that we’re going to have to climb over. So I think that’s the best and safest way to do it for now..

And I guess the one other missing piece is just the parent drag, which came in a little bit better with this Edison Capital income.

Is that something that we should continue to see get a little better, or should we go back to the $0.10 to $0.15 that’s typically been a drag?.

I think we’ve indicated that the parent spending is a little over a penny a month, and we see that’s probably the appropriate level. And what’s been happening either tax benefits or sale of property through Edison Capital has come through. And we don’t forecast the Edison Capital side. It’s more serendipity if anything else.

So I think it’s better to look at the actual run rate of costs, absent these other things..

Your next question comes from Ashar Khan with Visium..

Jim, what you’re suggesting is that the SONGS will reap zero earnings per share to the bottom line?.

Yeah, I should have mentioned that. Steve asked that question. Thanks for picking it up. And what I said in my prepared remarks was we believe that the return on the regulatory asset, that portion that’s earning 2.62%, and the financing that we put in place, they tend to offset one another.

So therefore, there won’t be any earnings going to the bottom line for San Onofre going forward. The other piece we talked about, there’s a significant amount of nuclear fuel, which we were already financing with 100% debt at a commercial paper rate. So that seems to be match funded.

So net-net, I don’t see any change from that going forward that we should expect any earnings from San Onofre besides the cost.

Scott, want to add anything?.

Just the other thing, just to remind everyone, we had already taken SONGS out of the rate base at the time of our announcement. So it has been out for some period of time, so the rate base comparisons are apples and apples..

And then secondly, Jim, the equity ratio that you gave us, the 13-month average, did that take out SONGS through this new financing mechanism that you mentioned? So SONGS is out of it, and you’re at 48.4? Did I hear that correct?.

So, SONGS doesn’t come out of the regulatory capital structure until after we did the financing. So it’s included in the 48.4 that I mentioned, and now it comes out when we do the financing. And the financing wasn’t completed until January, so when we release first quarter earnings, you’ll be able to see the actual equity ratio based, say, on SONGS..

So that would, then, theoretically increase the equity ratio, right, once that thing goes out? Am I correct?.

Yes..

Your next question comes from Stephen Byrd from Morgan Stanley..

Wondered if you could just talk at a high level about the latest data play in terms of the dialog on net metering policy. I know there’s a proceeding and review underway, but I’m just curious, as you see the debate continue to unfold, any comments you might have on that debate..

We’re in the midst of a multiple phase at the commission, and it’s teed up. The next slate of decisions we’ll be getting from the commission has to do with the [fixed] charges and the tiers, and then after that, we have the net energy metering, the new tariff associated with that. And I’ll pause here and look over at Pedro.

Is there anything else? Maybe the timeframe, of when we’re expecting it?.

I think you covered it right. I think on the tiers and [unintelligible] charges, we’re expecting a determination from the commission in the second quarter, if things stay on good timing. And then the NEM would be later in the year..

Okay, so we’ll just watch that.

I guess just separately, away from the utility, as you think about your renewables strategy broadly, again outside of the utility, as you see the business continuing to evolve, any high level thoughts we should be thinking about? I know you’ve talked a lot in the past about looking at how the business is going to change, and obviously there’s a lot of changes on the utility side, but just curious, outside of that, anything lately in terms of strategic thinking on renewables beyond the utility?.

I’ll take a crack at this. Very broadly speaking, as I kind of indicated in my opening comments, we see the potential in the competitive businesses to serve customers outside of the 50,000 square mile territory of Southern California Edison.

Most of the work that we’ve done up to this point has been focused more on commercial and industrial customers outside of the territory. Second to that, I would say, are various potential electrification initiatives. So these would be projects that would further electrification.

We think that actually fits into a lot of the effort across the country, but particularly here in California, to move towards a low carbon economy, moving towards higher levels of electrification in, say, the transportation sector, goods movement, water, some of the other areas. All of that helps move the economy towards a lower carbon footprint.

So those are kind of the second bucket of areas that we’re continuing to look at. Final point I’ll make is we’ve tried to be fairly high level about the things that we’re looking at on that side. I think you know us well enough by now, we don’t like to come out with a lot of fanfare up front.

We’d rather see what we can deliver and then talk about that. So at this point, most of the effort is on the distributed generation activities around SoCore and how that fits into our kind of broader strategy on the commercial and industrial customer side..

Your next question comes from Hugh Wynne with Sanford Bernstein..

You all have mentioned on a couple of occasions the governor’s vision for the upgrading of the grid, and also the need to continue to replace aging components and improve the reliability of your existing grid.

Looking forward to your capex program in a longer timeframe, would you be surprised to see the more or less $4.5 billion rate of capex that you’re forecasting for 2015, 2016, 2017 to continue into the next GRC or would you be expecting factors to come into play that would move that $4.5 billion materially up or materially down?.

I think what we’re attempting to say, and I struggled with it in an earlier question, my response was I think the $4 billion is probably in the right zone, and we’ll just have to see how things unfold.

If you go through the piece parts, distribution has been stepping up in the total level of expenditures over the last several GRCs, and we’re still working to get our replacement rates to levels that we think we need to be at to maintain the reliability of the electric system.

So you could see distribution step up somewhat more from where we are today. Transmission is related to some of these large projects that we have flowing through, and we had very modest transmission spending in years past, and that stepped up as a result of all the renewable interconnections that we were doing.

Generation has typically been a very small part of our overall equation. It was really just replacement capital expenditures, mainly at our nuclear plants, and it’s dropped down to maybe about $100 million a year.

Going forward, we’ll have to see, as we lay out the distribution resources plan, how significant and how fast the commission would want to move to make some of these improvements. We’ve put out numbers on the electric vehicle charging. It’s approximately $350 million over a multiyear period of time. There’s some storage expenditures.

So I think it’s best and safest to assume that that $4 billion is probably the appropriate level until we can get more information in the public domain..

Let me just throw in one other piece. I think a big consideration here is how fast you want to move towards modernizing the grid, converting it from largely an electromechanical system to a more digitized system capable of two-way flows of electricity, so on and so forth, all the stuff you’ve heard us talk about before.

If you envision doing that over a three to five year period, then I think you’ll probably be looking at higher numbers. If you envision doing that over a five to seven year period, it tamps it down a little bit. If you envision doing it over a ten year period, more modest yet.

So I think a big component of trying to sort this through is the pace with which these investments get made, not just the absolute number..

Your next question comes from Ali Agha with SunTrust..

My question, Ted, perhaps for you, wanted to dial a little more into your thinking on the dividend. And when you talk about getting to your targeted payout ratio over time, there’s a range there to get, you know, to the middle of that range.

But the reason I bring it up is when we run the math on the rate base math, as Jim alluded to, for the core earnings power of the utility, it’s going to be significantly lower than what you’ve reported in 2014 with all the tax benefits and cost savings, etc., that we had to [unintelligible] in the GRC.

So arguably, one could argue you’re pretty much close to the low end of that range, if you run the math, along those lines.

So I’m just curious, when you talk about still stepping up, what is it that you’re envisioning for this dividend?.

You’ve put your finger on a really good point. I think we’ve tended to think of it more in terms of what I would call the sustainable or durable earnings. It’s always hard to predict, certainly 2014 was a good case of it, just how much you’re going to have in the way of some of these other earnings points.

And of course I guess it’s possible you could have years where you end up having some of the more unusual items that work against you, but fundamentally, we kind of look at it as the core earnings power of the utility and the dividend is tied to SCE’s earnings. It really is the rate base model. So that’s the way we tend to look at it.

All of that said, you’ll see continued significant growth in rate base and therefore we see good growth in earnings. And in order to move the payout ratio up, we expect the growth rate in dividend increases to be higher than the growth rate in earnings. Otherwise, we won’t make any progress on moving the payout ratio up..

Understood. But just to clarify, the goal is not to necessarily just get to the lower end and say hey, we’re there.

The goal is to be somewhere in the middle of that range that you’ve given us?.

Well, of course I won’t take the bait to pinpoint where it will be inside the 45% to 55% payout ratio, but that’s the target that we’ve had, and I think we look at all of the factors, including what do we see the forward run rate in rate base growth, because that’s really what will drive earnings.

And as I’ve said, we see good solid growth in rate base, therefore earnings, therefore dividends..

And second question, if I could, unrelated to that, Jim, when you talked about that penny a month sort of run rate drag for the parent, just remind me, does that include any contribution from your non-utility activity, sort of in there? And assuming your vision plays out as you expect for the non-utility business, when do you think you’d be in a position to break that out as a separate segment?.

It’s a good question, on breaking out the separate segment. It’s too small now to justify doing that. We tried to provide, when you look at the K, some additional information in terms of the investment levels.

But a little bit more than $0.01 a month was just in totality on a normal run rate basis, and it excluded activities at Edison Capital, which are very hard to forecast or predict. So without Edison Capital, and any other tax benefits, we think in the normal course, we’d be hitting about a little over a penny a month.

So you can do the math there, and it’s consistent with what we’ve said in the past..

The next question comes from Michael Lapides with Goldman Sachs..

Jim, just kind of a quick update. You’ve got a significant under-recovered fuel balance, kind of the ERA that’s outstanding.

Can you talk about whether that ERA will grow some more, meaning the under-recovered balance will become a larger balance, or when that will convert to cash for SoCal Ed?.

Good question. There’s many parts associated with that, and I think when you have a chance to take a look at our K, there’s a full description in our disclosures that breaks down the piece parts.

But we’re hoping, if the commission renders a final decision in the 2015 ERA proceeding, which is before them now, that we should be fully collected in our under-collection by year-end. And the piece parts coming to help that are the rate increase and the SONGS settlement allows us to transfer some of the over-collections to that under-collection.

And another critical piece is our decommissioning decision, because we had dollars that were spent for decommissioning, but once we get approval to get access to the decommissioning trust, we’ll transfer those dollars over to the ERA under-collection. And hopefully by year-end, we’ll be in good shape.

And obviously, the thing that’s going to change that up or down is what happens with gas prices. And based on the forecasts we used for 2015, I know for a fact that we’re probably under-running the actual expenditures, because we used a higher forecast than gas prices are right now..

So, to simplify, that $1.2 billion or so should convert to cash over the next 12 months, cash that improves the balance sheet of SoCal Ed.

How do you think about utilizing that cash?.

Well, some of it’s just moving from one side of the pocket to the other, because we had the dollars sitting, and then we just transferred over as part of the SONGS settlement. And some of it we have commercial paper borrowings to support the under-collections. And those will go to [unintelligible] those short term borrowings.

Net-net-net, we probably won’t have much in the way of excess cash. We’ll have excess equity, as we talked about, from the SONGS regulatory asset financing. But most of the cash is going to be used to pay off other things that are maybe outstanding or help to fund capital expenditures going on in the utility..

Last thing, when you look at the holding company level debt, both short term and long term, it looks like it’s up a bit year over year, kind of in the 2013 into 2014.

Can you talk about what your goal is in terms of how much both short term and long term debt you want to carry at the holdco level?.

Yeah, that’s a good question. We have outstanding a $400 million note that comes due I think in 2017, if I’m not mistaken. And we’re considering what to do with that now. We added additional commercial paper borrowings and obviously note payables to the EME creditors. The total obligation was $600 million. We paid $200 million.

We’ve got two more payments of $200 million in September this year and September of next year for $400 million. And the whole source of repayment for the majority of the borrowings we have outstanding today really will be from the monetization of the EME tax benefits.

I said in my script, we’ve got $1.1 billion of NOLs and tax credit carryforwards, and if we don’t get an extension of bonus depreciation in 2015, likely SCE will be fully taxable as it runs off its NOLs, and it will be then paying taxes to the federal government.

Bonus doesn’t apply to state government, State of California, so we’re obviously paying taxes for the state. And then we’ll start rapidly amortizing EME benefits.

One of the wildcards here we’ll have to consider, and Ted mentioned in his comments, if we do get resolution of the SONGS litigation with MHI, we would look to take an abandonment loss in the year that’s resolved. We have to file a private letter ruling and we’ll take a writeoff.

And so that could affect the full timing of the monetization of the tax benefits, but I think it’s going to take it out to 2017, possibly in early 2018, and fully amortize off the $1.1 billion of EME tax benefits..

Your next question comes from Travis Miller with Morningstar..

I was wondering about the operating costs savings here.

How much of that is in the 2015 to 2017 GRC? To the extent that you guys got more operating cost savings than perhaps were in the GRC request, is there any potential to go back and adjust that? Could regulators come back and say, no, we need to adjust your operating cost forecasts? Or are we signed, sealed, and delivered here and just waiting for the commission?.

So, the full case is before the commission. The hearings occurred in January, and so it’s off to the ALJs to draft a proposed decision. Included in the case were some O&M savings that we identified as we were preparing the case, and we’re proposing that we would share 50% of those potential savings. And beyond that, I can’t comment.

I don’t know what the commission’s going to do, or what the ALJs may propose, and we’ll just have to see how it ultimately unfolds. But one point I just want to emphasize, we will continue to look for cost savings to try to improve our efficiencies..

So there is a chance the regulators could come back and talk about the request, but not necessarily likely..

We’ll just have to see what they come back with. We won’t know until we get a proposed decision..

The next question comes from Steven Fleishman with Wolfe Research..

Just a separate follow up question. Ted, maybe you could just give us a little bit of color of, you know, we see all the headlines on PG&E and ex parte issues, and then you made one potential ex parte filing.

Just how much is this impacting the ability to function on the normal things that you have to get done at the commission, including getting the GRC done? And also, just how should we think about the risk of you potentially having additional ex parte filings?.

In terms of affecting the business, I would say it doesn’t really have a significant effect on the business.

This is a fairly arcane area, but I would just say generally speaking, the ex parte rules, particularly on matters like the San Onofre matter, the OII, that’s really designed to provide equal access to all parties to the proceeding with equal time.

So I think one of the misconceptions in something like SONGS OII is that you’re precluded from having conversations. You’re not.

It’s just the rules are designed to make sure that if we have conversations with decision makers, that those are noticed, that we include in there how much time we spent with which decision maker, so that all the other parties have the equal access, equal amount of time. That’s the whole concept behind it.

So I don’t see any of this as hurting the ability to do business. It’s complicated and cumbersome, and sometimes kind of difficult on the interpretation of some of the specific provisions, but fundamentally, when we have proceedings before the commission, we follow the rules, we go about doing the business the way it’s really set up to do it.

There’s plenty of opportunity in all of those proceedings for all parties to be heard. That’s kind of the point of having these things before the commission. So I don’t see any big element there. And I got so warmed up on that part of the question, I forgot the second part of your question..

I guess just the impact on getting your GRC done. More just because the commission is so in the spotlight and dealing with this..

I don’t see it. I mean, I’ll choose my words a little carefully here. We are pretty soon going to be in the third month of 2015, the GRC was supposed to be completed at the end of last year. Just like three years ago, we’re already now well into the next year.

That makes it a little more complicated to run the business, but I don’t see that as being the result of ex parte stuff or any of that. That’s just the process of getting through a very complicated proceeding, like a GRC. So I would say generally, I don’t see it having any big impact..

The next question comes from Michael Lapides with Goldman Sachs..

Real quick, there’s both a lawsuit proceeding as well as a re-hearing request to unwind the SONGS OII settlement.

Can you just talk about the process for both of those, and kind of what the complainants are seeking, or what their grounds are?.

Let me introduce Adam Umanoff. He is our EIX general counsel. He joined us in January. We’re happy to have him.

So, Adam, could you pick up that question?.

Sure, Jim. Happy to do so. Good afternoon. You asked about the application for re-hearing and a federal lawsuit. I’ll take them one at a time. An application for re-hearing was filed by the Coalition to Decommission San Onofre, and that was filed in the end of last year, mid-December 2014.

They’re basically asking for the California Public Utility Commission to reconsider their decision approving the SONGS settlement. And the basis for their request is a bunch of alleged procedural irregularities in the proceeding undertaken by the CPUC.

It’s our view that there really is no legitimate basis for the CPUC to overturn the settlement based upon the theories advanced by the Coalition to Decommission San Onofre, but of course that’s for the CPUC to decide. All the parties to the SONGS settlement have filed a joint response in early January, rejecting the request for a re-hearing.

The CPUC does not operate under a firm deadline to respond, but they normally respond within three to five months, so we should expect to hear from the CPUC by the middle of March to the middle of May.

Separately, another plaintiff, Citizen’s Oversight, who happens to be represented by the same lawyer who represents the Coalition to Decommission San Onofre, filed a federal court action down in San Diego and basically raised some constitutional theories that the SONGS settlement was an impermissible taking of rate payer property.

That suit was filed in November of 2014. Both we and the CPUC filed motions to dismiss at the end of January. There will be some further paperwork back and forth as the plaintiff replies and we again reply in February and March. And if all goes well, we expect a decision from the federal court in April of 2015. So in a couple of months..

That was the last question. I will now turn the call back to Mr. Cunningham..

Thanks very much, everyone, for participating, and if you have any follow up questions, you know where to find us. Thanks very much, and have a good evening..