By Robert Mullin
Edison International will continue upgrading its transmission and distribution networks to take advantage of recently enacted legislation requiring California to reduce greenhouse gas emissions to 40% below 1990 levels by 2030, company officials said during their third-quarter earnings call with analysts last week.
Through its primary utility subsidiary Southern California Edison, the company is seeking to become a “key enabler” of California’s goals by facilitating the adoption of rooftop solar, energy storage and electric vehicle charging, CEO Pedro Pizarro said.
“Grid modernization, which, by the [California Public Utilities Commission’s] estimate, will be an ongoing effort into the middle part of the next decade, is a very significant part of the needed solution” for reducing emissions, Pizarro said. Edison’s quarterly profit increased by 11.1% to $419 million partly on higher revenues stemming from a revenue escalation mechanism included in a rate case approved late last year.
Pizarro noted that state officials are turning their GHG reduction efforts from the power industry — accounting for about 20% of current emissions — to the transportation sector, which is responsible for more than a third.
“We believe the significant new efforts across all sectors of the economy will be needed and many of these efforts will require significant electrification of sectors that today rely on fossil fuels,” Pizarro said.
Edison anticipates about $4 billion in yearly capital spending and $2 billion in annual rate base growth next year and into “the foreseeable future,” with nearly all of the investment on the “wire side” of the business, according to CFO Maria Rigatti.
“We believe it has lower investment opportunity risk as compared to utilities with a high percentage of growth tied to generation investment,” Rigatti said.
Edison is seeking regulatory approval to roll $200 million of “early-stage” grid modernization into its 2016-2017 rates, but the company might have to delay that investment until 2018 if it does not receive a timely decision from the CPUC. The spending would focus on replacing aging infrastructure, adding new customer connections, upgrading information technology, maintaining SoCalEd’s generators and modernizing the utility’s distribution system to accommodate the growth of distributed energy resources.
The company’s $1.1 billion West of Devers transmission project — which will upgrade existing 220-kV lines to double-circuit lines — was approved by the CPUC in August but has been challenged on environmental grounds.
Edison has also proposed alternative designs — which require “significant re-engineering” — in the CPUC’s review of the company’s $600 million Mesa substation project, which would upgrade the existing facility in the western Los Angeles Basin from 220 kV to 500 kV.
“These permitting and approval challenges are increasingly typical of transmission planning and part of the process, although the need for these projects is not affected by the regulatory delays that impact initial timing,” Rigatti said.
Edison continues to engage with Mitsubishi Heavy Industries in arbitration over steam generator design flaws that forced the permanent closure of San Onofre nuclear generating station in 2013. Edison shares ownership of the plant with San Diego Gas and Electric.
In the event of a favorable outcome for the plant’s owners, SoCalEd will refund to its ratepayers 50% of any proceeds that exceed legal expenses, Pizarro said. The rest of the money would be used to pay down or reduce the short-term debt associated with the utility’s capital spending program.
Edison anticipates receiving a decision on the matter later this year or early next year.
