EIX-SCE 2014 Q1


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2014
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                        to

Commission
File Number
 
Exact Name of Registrant
as specified in its charter
 
State or Other Jurisdiction of
Incorporation or Organization
 
IRS Employer
Identification Number
1-9936
 
EDISON INTERNATIONAL
 
California
 
95-4137452
1-2313
 
SOUTHERN CALIFORNIA EDISON COMPANY
 
California
 
95-1240335

EDISON INTERNATIONAL
 
SOUTHERN CALIFORNIA EDISON COMPANY
2244 Walnut Grove Avenue
(P.O. Box 976)
Rosemead, California 91770
(Address of principal executive offices)
 
2244 Walnut Grove Avenue
(P.O. Box 800)
Rosemead, California 91770
(Address of principal executive offices)
(626) 302-2222
(Registrant's telephone number, including area code)
 
(626) 302-1212
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Edison International        Yes þ No o    Southern California Edison Company    Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Edison International        Yes þ No o    Southern California Edison Company    Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "accelerated filer," "large accelerated filer," and "smaller reporting company" in Rule 12b-12 of the Exchange Act. (Check One):
Edison International
Large Accelerated Filer þ
Accelerated Filer ¨
Non-accelerated Filer ¨
Smaller Reporting Company ¨
Southern California Edison Company
Large Accelerated Filer ¨
Accelerated Filer ¨
Non-accelerated Filer þ
Smaller Reporting Company ¨
 
 
 
 
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Edison International        Yes ¨ No þ    Southern California Edison Company    Yes ¨ No þ
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
Common Stock outstanding as of April 25, 2014:
 
 
Edison International
 
325,811,206 shares
Southern California Edison Company
 
434,888,104 shares
 
 
 
 
 
 









TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


i



 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
This is a combined Form 10-Q separately filed by Edison International and Southern California Edison Company. Information contained herein relating to an individual company is filed by such company on its own behalf. Each company makes representations only as to itself and makes no other representation whatsoever as to any other company.


ii



GLOSSARY
The following terms and abbreviations appearing in the text of this report have the meanings indicated below.
2013 Form 10-K
 
Edison International's and SCE's combined Annual Report on Form 10-K for the year-ended December 31, 2013
APS
 
Arizona Public Service Company
ARO(s)
 
asset retirement obligation(s)
Bankruptcy Code
 
Chapter 11 of the United States Bankruptcy Code
Bankruptcy Court
 
United States Bankruptcy Court for the Northern District of Illinois, Eastern Division
Bcf
 
billion cubic feet
CAA
 
Clean Air Act
CAISO
 
California Independent System Operator
CARB
 
California Air Resources Board
CDWR
 
California Department of Water Resources
CEC
 
California Energy Commission
Competitive Businesses
 
competitive businesses related to the generation, delivery and use of electricity
CPUC
 
California Public Utilities Commission
CRRs
 
congestion revenue rights
DOE
 
U.S. Department of Energy
EME
 
Edison Mission Energy
EMG
 
Edison Mission Group Inc.
EPS
 
earnings per share
ERRA
 
energy resource recovery account
FASB
 
Financial Accounting Standards Board
FERC
 
Federal Energy Regulatory Commission
Four Corners
 
coal fueled electric generating facility located in Farmington, New Mexico in
which SCE held a 48% ownership interest
GAAP
 
generally accepted accounting principles
GHG
 
greenhouse gas
GRC
 
general rate case
GWh
 
gigawatt-hours
IRS
 
Internal Revenue Service
ISO
 
Independent System Operator
kWh(s)
 
kilowatt-hour(s)
MD&A
 
Management's Discussion and Analysis of Financial Condition and Results
of Operations in this report
MHI
 
Mitsubishi Heavy Industries, Ltd. and related companies
Moody's
 
Moody's Investors Service
MW
 
megawatts
MWh
 
megawatt-hours
NAAQS
 
national ambient air quality standards
NERC
 
North American Electric Reliability Corporation
NRC
 
Nuclear Regulatory Commission
OII
 
Order Instituting Investigation
Palo Verde
 
large pressurized water nuclear electric generating facility located near
Phoenix, Arizona in which SCE holds a 15.8% ownership interest
PBOP(s)
 
postretirement benefits other than pension(s)
Petition Date
 
December 17, 2012 (date on which EME and certain of its wholly-owned subsidiaries filed for protection under Chapter 11 of the Bankruptcy Code)
PG&E
 
Pacific Gas & Electric Company


iii



QF(s)
 
qualifying facility(ies)
ROE
 
return on common equity
S&P
 
Standard & Poor's Ratings Services
San Onofre
 
retired nuclear generating facility located in south
San Clemente, California in which SCE holds a 78.21% ownership interest
SCE
 
Southern California Edison Company
SDG&E
 
San Diego Gas & Electric
SEC
 
U.S. Securities and Exchange Commission
SED
 
Safety and Enforcement Division of the CPUC, formerly known as the Consumer Protection and Safety Division or CPSD
US EPA
 
U.S. Environmental Protection Agency
VIE(s)
 
variable interest entity(ies)



iv


















(This page has been left blank intentionally)



1



PART I.    FINANCIAL INFORMATION
ITEM 1.     FINANCIAL STATEMENTS
Consolidated Statements of Income
 
Edison International
 

 

 
 
Three months ended March 31,
(in millions, except per-share amounts, unaudited)
 
2014

2013
Operating revenue
 
$
2,926


$
2,632

Fuel
 
72


73

Purchased power
 
1,071


780

Operation and maintenance
 
811


873

Depreciation, decommissioning and amortization
 
410


414

Impairment and other charges
 
231

 

Total operating expenses
 
2,595


2,140

Operating income
 
331


492

Interest and other income
 
23


34

Interest expense
 
(141
)

(131
)
Other expenses
 
(8
)

(11
)
Income from continuing operations before income taxes
 
205


384

Income tax expense (benefit)
 
(19
)

98

Income from continuing operations
 
224


286

Income (loss) from discontinued operations, net of tax
 
(22
)

12

Net income
 
202


298

Preferred and preference stock dividend requirements of utility
 
26


27

Net income attributable to Edison International common shareholders
 
$
176


$
271

Amounts attributable to Edison International common shareholders:
 



Income from continuing operations, net of tax
 
$
198


$
259

Income (loss) from discontinued operations, net of tax
 
(22
)

12

Net income attributable to Edison International common shareholders
 
$
176


$
271

Basic earnings (loss) per common share attributable to Edison International common shareholders:
 



Weighted-average shares of common stock outstanding
 
326


326

Continuing operations
 
$
0.61


$
0.79

Discontinued operations
 
(0.07
)

0.04

Total
 
$
0.54


$
0.83

Diluted earnings (loss) per common share attributable to Edison International common shareholders:
 



Weighted-average shares of common stock outstanding, including effect of dilutive securities
 
329


329

Continuing operations
 
$
0.61


$
0.78

Discontinued operations
 
(0.07
)

0.04

Total
 
$
0.54


$
0.82

Dividends declared per common share
 
$
0.355


$
0.3375


The accompanying notes are an integral part of these consolidated financial statements.

2



 
 
 
 
 
 
 
 
 
 
Consolidated Statements of Comprehensive Income
 
Edison International
 
 
 
 
 
 
Three months ended March 31,
(in millions, unaudited)
 
2014
 
2013
Net income
 
$
202

 
$
298

Other comprehensive income, net of tax:
 
 
 
 
Pension and postretirement benefits other than pensions:
 
 
 
 
Amortization of net loss included in net income
 
2

 

Other comprehensive income, net of tax
 
2

 

Comprehensive income
 
204

 
298

Less: Comprehensive income attributable to noncontrolling interests
 
26

 
27

Comprehensive income attributable to Edison International
 
$
178

 
$
271



The accompanying notes are an integral part of these consolidated financial statements.

3



Consolidated Balance Sheets
Edison International
 






(in millions, unaudited)
March 31,
2014

December 31,
2013
ASSETS
 

 
Cash and cash equivalents
$
149


$
146

Receivables, less allowances of $67 and $66 for uncollectible accounts at respective dates
725


838

Accrued unbilled revenue
576


596

Inventory
268


256

Derivative assets
112


122

Regulatory assets
931


538

Deferred income taxes
369


421

Other current assets
390


395

Total current assets
3,520


3,312

Nuclear decommissioning trusts
4,587


4,494

Other investments
220


207

Total investments
4,807


4,701

Utility property, plant and equipment, less accumulated depreciation of $7,691 and $7,493 at respective dates
30,741


30,379

Nonutility property, plant and equipment, less accumulated depreciation of $76 and $74 at respective dates
76


76

Total property, plant and equipment
30,817


30,455

Derivative assets
240


251

Regulatory assets
7,351


7,241

Other long-term assets
653


686

Total long-term assets
8,244


8,178



















 
 
 
 


















 
 
 
 






Total assets
$
47,388


$
46,646



The accompanying notes are an integral part of these consolidated financial statements.

4



Consolidated Balance Sheets

Edison International
 


 

 
(in millions, except share amounts, unaudited)

March 31,
2014
 
December 31,
2013
LIABILITIES AND EQUITY

 

 
Short-term debt

$
611


$
209

Current portion of long-term debt

601


601

Accounts payable

1,116


1,407

Accrued taxes

423


358

Customer deposits

204


201

Derivative liabilities

143


152

Regulatory liabilities

455


767

Other current liabilities

1,004


1,186

Total current liabilities

4,557


4,881

Long-term debt

9,825


9,825

Deferred income taxes and credits

7,437


7,346

Derivative liabilities

985


1,042

Pensions and benefits

1,360


1,378

Asset retirement obligations

3,471


3,418

Regulatory liabilities

5,655


4,995

Other deferred credits and other long-term liabilities

2,096


2,070

Total deferred credits and other liabilities

21,004


20,249

Total liabilities

35,386


34,955

Commitments and contingencies (Note 12)






Common stock, no par value (800,000,000 shares authorized; 325,811,206 shares issued and outstanding at respective dates)

2,417


2,403

Accumulated other comprehensive loss

(11
)

(13
)
Retained earnings

7,573


7,548

Total Edison International's common shareholders' equity

9,979


9,938

Preferred and preference stock of utility

2,023


1,753

Total noncontrolling interests

2,023


1,753

Total equity

12,002


11,691

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total liabilities and equity

$
47,388


$
46,646



The accompanying notes are an integral part of these consolidated financial statements.

5



Consolidated Statements of Cash Flows

Edison International
 



 

Three months ended March 31,
(in millions, unaudited)

2014

2013
Cash flows from operating activities:

 

 
Net income

$
202


$
298

Less: Income (loss) from discontinued operations

(22
)

12

Income from continuing operations

224


286

Adjustments to reconcile to net cash provided by operating activities:



 
Depreciation, decommissioning and amortization

410


414

Regulatory impacts of net nuclear decommissioning trust earnings

29


25

Impairment and other charges

231



Deferred income taxes and investment tax credits

(6
)

174

Other

23


23

Changes in operating assets and liabilities:



 
Receivables

112


(38
)
Inventory

(12
)

(11
)
Accounts payable

(63
)

(65
)
Other current assets and liabilities

(80
)

(120
)
Derivative assets and liabilities, net

(46
)

79

Regulatory assets and liabilities, net

(331
)

(199
)
Other noncurrent assets and liabilities

7


(62
)
Net cash provided by operating activities

498


506

Cash flows from financing activities:

 

 
Long-term debt issued, net of premium, discount, and issuance costs of $1 and $4 at respective dates

(1
)

394

Long-term debt matured or repurchased

(2
)

(1
)
Preference stock issued, net

270

 
387

Preference stock redeemed



(400
)
Short-term debt financing, net

401


245

Settlements of stock-based compensation, net

(42
)

(32
)
Dividends to noncontrolling interests

(30
)

(30
)
Dividends paid

(116
)

(110
)
Net cash provided by financing activities

480


453

Cash flows from investing activities:
 
 
 
 
Capital expenditures
 
(940
)
 
(979
)
Proceeds from sale of nuclear decommissioning trust investments
 
1,502

 
435

Purchases of nuclear decommissioning trust investments and other
 
(1,536
)
 
(466
)
Other
 
(1
)
 
(4
)
Net cash used by investing activities
 
(975
)
 
(1,014
)
Net increase (decrease) in cash and cash equivalents
 
3

 
(55
)
Cash and cash equivalents at beginning of period
 
146

 
170

Cash and cash equivalents at end of period
 
$
149

 
$
115


The accompanying notes are an integral part of these consolidated financial statements.

6



Consolidated Statements of Income
Southern California Edison Company
 
 
Three months ended March 31,
(in millions, unaudited)
 
2014
 
2013
Operating revenue
 
$
2,924

 
$
2,629

Fuel
 
72

 
73

Purchased power
 
1,071

 
780

Operation and maintenance
 
713

 
785

Depreciation, decommissioning and amortization
 
410

 
414

Property and other taxes
 
85

 
79

Impairment and other charges
 
231

 

Total operating expenses
 
2,582

 
2,131

Operating income
 
342

 
498

Interest and other income
 
23

 
32

Interest expense
 
(136
)
 
(125
)
Other expenses
 
(7
)
 
(10
)
Income before income taxes
 
222

 
395

Income tax expense (benefit)
 
(12
)
 
112

Net income
 
234

 
283

Less: Preferred and preference stock dividend requirements
 
26

 
27

Net income available for common stock
 
$
208

 
$
256


Consolidated Statements of Comprehensive Income
 
 
 
 
 
 
 
Three months ended March 31,
(in millions, unaudited)
 
2014
 
2013
Net income
 
$
234

 
$
283

Other comprehensive income (loss), net of tax:
 
 
 
 
Pension and postretirement benefits other than pensions:
 
 
 
 
Net loss arising during the period plus amortization included in net income
 
1

 
(3
)
Other comprehensive income (loss), net of tax
 
1

 
(3
)
Comprehensive income
 
$
235

 
$
280



The accompanying notes are an integral part of these consolidated financial statements.

7



Consolidated Balance Sheets
Southern California Edison Company
(in millions, unaudited)
 
March 31,
2014
 
December 31, 2013
ASSETS
 
 
 
 
Cash and cash equivalents
 
$
46

 
$
54

Receivables, less allowances of $67 and $66 for uncollectible accounts at respective dates
 
702

 
813

Accrued unbilled revenue
 
576

 
596

Inventory
 
262

 
256

Derivative assets
 
112

 
122

Regulatory assets
 
931

 
538

Deferred income taxes
 
245

 
303

Other current assets
 
388

 
393

Total current assets
 
3,262

 
3,075

Nuclear decommissioning trusts
 
4,587

 
4,494

Other investments
 
150

 
140

Total investments
 
4,737

 
4,634

Utility property, plant and equipment, less accumulated depreciation of $7,691 and $7,493 at respective dates
 
30,741

 
30,379

Nonutility property, plant and equipment, less accumulated depreciation of $72 and $70 at respective dates
 
71

 
72

Total property, plant and equipment
 
30,812

 
30,451

Derivative assets
 
240

 
251

Regulatory assets
 
7,351

 
7,241

Other long-term assets
 
396

 
398

Total long-term assets
 
7,987

 
7,890

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
46,798

 
$
46,050


The accompanying notes are an integral part of these consolidated financial statements.

8



Consolidated Balance Sheets
Southern California Edison Company
(in millions, except share amounts, unaudited)
 
March 31,
2014
 
December 31, 2013
LIABILITIES AND EQUITY
 
 
 
 
Short-term debt
 
$
405

 
$
175

Current portion of long-term debt
 
600

 
600

Accounts payable
 
1,089

 
1,373

Customer deposits
 
204

 
201

Derivative liabilities
 
143

 
152

Regulatory liabilities
 
455

 
767

Deferred income taxes
 
42

 
39

Other current liabilities
 
1,100

 
1,091

Total current liabilities
 
4,038

 
4,398

Long-term debt
 
9,423

 
9,422

Deferred income taxes and credits
 
7,928

 
7,841

Derivative liabilities
 
985

 
1,042

Pensions and benefits
 
932

 
951

Asset retirement obligations
 
3,471

 
3,418

Regulatory liabilities
 
5,655

 
4,995

Other deferred credits and other long-term liabilities
 
1,885

 
1,845

Total deferred credits and other liabilities
 
20,856

 
20,092

Total liabilities
 
34,317

 
33,912

Commitments and contingencies (Note 12)
 


 


Common stock, no par value (560,000,000 shares authorized; 434,888,104 shares issued and outstanding at respective dates)
 
2,168

 
2,168

Additional paid-in capital
 
598

 
592

Accumulated other comprehensive loss
 
(10
)
 
(11
)
Retained earnings
 
7,655

 
7,594

Total common shareholder's equity
 
10,411

 
10,343

Preferred and preference stock
 
2,070

 
1,795

Total equity
 
12,481

 
12,138

Total liabilities and equity
 
$
46,798

 
$
46,050



The accompanying notes are an integral part of these consolidated financial statements.

9



Consolidated Statements of Cash Flows
Southern California Edison Company
 
 
Three months ended March 31,
(in millions, unaudited)
 
2014
 
2013
Cash flows from operating activities:
 
 
 
 
Net income
 
$
234

 
$
283

Adjustments to reconcile to net cash provided by operating activities:
 
 
 
 
 Depreciation, decommissioning and amortization
 
410

 
414

 Regulatory impacts of net nuclear decommissioning trust earnings
 
29

 
25

Impairment and other charges
 
231

 

 Deferred income taxes and investment tax credits
 
(12
)
 
150

Other
 
22

 
22

Changes in operating assets and liabilities:
 
 
 
 
 Receivables
 
111

 
1

 Inventory
 
(7
)
 
(11
)
 Accounts payable
 
(55
)
 
(63
)
 Other current assets and liabilities
 
(80
)
 
(93
)
 Derivative assets and liabilities, net
 
(46
)
 
79

 Regulatory assets and liabilities, net
 
(331
)
 
(199
)
 Other noncurrent assets and liabilities
 
15

 
(47
)
Net cash provided by operating activities
 
521

 
561

Cash flows from financing activities:
 
 
 
 
Long-term debt issued, net of premium, discount, and issuance costs of $4 for the three months ended March 31, 2013
 

 
394

Long-term debt matured or repurchased
 
(2
)
 
(1
)
Preference stock issued, net
 
270

 
387

Preference stock redeemed
 

 
(400
)
Short-term debt financing, net
 
229

 
229

Settlements of stock-based compensation, net
 
(22
)
 
(29
)
Dividends paid
 
(30
)
 
(150
)
Net cash provided by financing activities
 
445

 
430

Cash flows from investing activities:
 
 
 
 
Capital expenditures
 
(939
)
 
(979
)
Proceeds from sale of nuclear decommissioning trust investments
 
1,502

 
435

Purchases of nuclear decommissioning trust investments and other
 
(1,536
)
 
(466
)
Other
 
(1
)
 
1

Net cash used by investing activities
 
(974
)
 
(1,009
)
Net decrease in cash and cash equivalents
 
(8
)
 
(18
)
Cash and cash equivalents, beginning of period
 
54

 
45

Cash and cash equivalents, end of period
 
$
46

 
$
27


The accompanying notes are an integral part of these consolidated financial statements.

10



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1.    Summary of Significant Accounting Policies
Organization and Basis of Presentation
Edison International is the parent holding company of Southern California Edison Company ("SCE"). SCE is an investor-owned public utility primarily engaged in the business of supplying and delivering electricity to an approximately 50,000 square mile area of southern California. Edison International is also the parent company of subsidiaries that are engaged in competitive businesses related to the delivery or use of electricity. Such competitive business activities are currently not material to report as a separate business segment. These combined notes to the consolidated financial statements apply to both Edison International and SCE unless otherwise described. Edison International's consolidated financial statements include the accounts of Edison International, SCE and other wholly owned and controlled subsidiaries. References to Edison International refer to the consolidated group of Edison International and its subsidiaries. References to Edison International Parent and Other refer to Edison International Parent and its nonutility subsidiaries. SCE's consolidated financial statements include the accounts of SCE and its wholly owned and controlled subsidiaries. All intercompany transactions have been eliminated from the consolidated financial statements.
Edison International's and SCE's significant accounting policies were described in Note 1 of "Notes to Consolidated Financial Statements" included in the 2013 Form 10-K. The same accounting policies are followed for interim reporting purposes, with the exception of accounting principles adopted as of January 1, 2014, discussed below in "—New Accounting Guidance." This quarterly report should be read in conjunction with the financial statements and notes included in the 2013 Form 10-K.
In the opinion of management, all adjustments, consisting of recurring accruals, have been made that are necessary to fairly state the consolidated financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States of America for the periods covered by this quarterly report on Form 10-Q. The results of operations for the three-month period ended March 31, 2014 are not necessarily indicative of the operating results for the full year.
The December 31, 2013 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.
Cash Equivalents
Cash equivalents included investments in money market funds. Generally, the carrying value of cash equivalents equals the fair value, as these investments have original maturities of three months or less. The cash equivalents were as follows:
 
 
Edison International
 
SCE
(in millions)
 
March 31,
2014
 
December 31, 2013
 
March 31,
2014
 
December 31, 2013
Money market funds
 
$
67

 
$
68

 
$
6

 
$
8

Cash is temporarily invested until required for check clearing from the primary disbursement accounts. Checks issued, but not yet paid by the financial institution, are reclassified from cash to accounts payable at the end of each reporting period as follows:
 
 
Edison International
 
SCE
(in millions)
 
March 31,
2014
 
December 31, 2013
 
March 31,
2014
 
December 31, 2013
Cash reclassified to accounts payable
 
$
149

 
$
168

 
$
148

 
$
163

Inventory
Inventory is primarily composed of materials, supplies and spare parts, and stated at the lower of cost or market, cost being determined by the average cost method.



11



Earnings Per Share
Edison International computes earnings per common share ("EPS") using the two-class method, which is an earnings allocation formula that determines EPS for each class of common stock and participating security. Edison International's participating securities are stock-based compensation awards payable in common shares, including performance shares and restricted stock units, which earn dividend equivalents on an equal basis with common shares once the awards are vested. EPS attributable to Edison International common shareholders was computed as follows:
 
 
Three months ended March 31,
(in millions)
 
2014
 
2013
Basic earnings per share – continuing operations:
 
 
 
 
Income from continuing operations available to common shareholders
 
$
198

 
$
259

Weighted average common shares outstanding
 
326

 
326

Basic earnings per share – continuing operations
 
$
0.61

 
$
0.79

Diluted earnings per share – continuing operations:
 
 
 
 
Income from continuing operations available to common shareholders
 
$
198

 
$
259

Income impact of assumed conversions
 

 

Income from continuing operations available to common shareholders and assumed conversions
 
$
198

 
$
259

Weighted average common shares outstanding
 
326

 
326

Incremental shares from assumed conversions
 
3

 
3

Adjusted weighted average shares – diluted
 
329

 
329

Diluted earnings per share – continuing operations
 
$
0.61

 
$
0.78

In addition to the participating securities discussed above, Edison International also may award stock options which are payable in common shares and are included in the diluted earnings per share calculation. Stock option awards to purchase 2,050,449 and 4,455,669 shares of common stock for the three months ended March 31, 2014 and 2013, respectively, were outstanding, but were not included in the computation of diluted earnings per share because the exercise price of the awards was greater than the average market price of the common shares during the respective periods and, therefore, the effect would have been antidilutive.
New Accounting Guidance
Accounting Guidance Adopted in 2014
In July 2013, the FASB issued an accounting standards update that requires that an unrecognized tax benefit be presented on the balance sheet as a reduction of a deferred tax asset for a net operating loss ("NOL") or tax credit carryforward under certain circumstances. Edison International and SCE adopted this guidance effective January 1, 2014 and it did not have a material impact on the consolidated financial statements.
Accounting Guidance Not Yet Adopted
In April 2014, the FASB issued an accounting standards update which will reduce the number of disposals that qualify for reporting as a discontinued operation and will also increase the associated disclosure. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. In addition, this update also requires disclosure of the pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting. Edison International and SCE will adopt this guidance prospectively effective January 1, 2015.

12



Note 2.    Consolidated Statements of Changes in Equity
The following table provides Edison International's changes in equity for the three months ended March 31, 2014:
 
Equity Attributable to Edison International
 
Noncontrolling Interests
 
 
(in millions)
Common
Stock
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Subtotal
 
Preferred
and
Preference
Stock
 
Total
Equity
Balance at December 31, 2013
$
2,403

 
$
(13
)
 
$
7,548

 
$
9,938

 
$
1,753

 
$
11,691

Net income

 

 
176

 
176

 
26

 
202

Other comprehensive income

 
2

 

 
2

 

 
2

Common stock dividends declared ($0.355 per share)

 

 
(116
)
 
(116
)
 

 
(116
)
Dividends, distributions to noncontrolling interests

 

 

 

 
(26
)
 
(26
)
Stock-based compensation and other
9

 

 
(50
)
 
(41
)
 

 
(41
)
Non-cash stock-based compensation and other
5

 

 
15

 
20

 

 
20

Issuance of preference stock

 

 

 

 
270

 
270

Balance at March 31, 2014
$
2,417

 
$
(11
)
 
$
7,573

 
$
9,979

 
$
2,023

 
$
12,002

The following table provides Edison International's changes in equity for the three months ended March 31, 2013:
 
Equity Attributable to Edison International
 
Noncontrolling Interests
 
 
(in millions)
Common
Stock
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Subtotal
 
Preferred
and
Preference
Stock
 
Total
Equity
Balance at December 31, 2012
$
2,373

 
$
(87
)
 
$
7,146

 
$
9,432

 
$
1,759

 
$
11,191

Net income

 

 
271

 
271

 
27

 
298

Common stock dividends declared ($0.3375 per share)

 

 
(110
)
 
(110
)
 

 
(110
)
Dividends, distributions to noncontrolling interests

 

 

 

 
(27
)
 
(27
)
Stock-based compensation and other
1

 

 
(33
)
 
(32
)
 

 
(32
)
Non-cash stock-based compensation and other
6

 

 
(4
)
 
2

 

 
2

Issuance of preference stock

 

 

 

 
387

 
387

Redemption of preference stock

 

 
(8
)
 
(8
)
 
(392
)
 
(400
)
Balance at March 31, 2013
$
2,380

 
$
(87
)
 
$
7,262

 
$
9,555

 
$
1,754

 
$
11,309


13



The following table provides SCE's changes in equity for the three months ended March 31, 2014:
 
Equity Attributable to SCE
 
 
 
 
(in millions)
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Preferred
and
Preference
Stock
 
Total
Equity
Balance at December 31, 2013
$
2,168

 
$
592

 
$
(11
)
 
$
7,594

 
$
1,795

 
$
12,138

Net income

 

 

 
234

 

 
234

Other comprehensive income

 

 
1

 

 

 
1

Dividends declared on common stock

 

 

 
(126
)
 

 
(126
)
Dividends on preferred and preference stock

 

 

 
(26
)
 

 
(26
)
Stock-based compensation and other

 
9

 

 
(31
)
 

 
(22
)
Non-cash stock-based compensation and other

 
2

 

 
10

 

 
12

Issuance of preference stock

 
(5
)
 

 

 
275

 
270

Balance at March 31, 2014
$
2,168

 
$
598

 
$
(10
)
 
$
7,655

 
$
2,070

 
$
12,481

The following table provides SCE's changes in equity for the three months ended March 31, 2013:
 
Equity Attributable to SCE
 
 
 
 
(in millions)
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Preferred
and
Preference
Stock
 
Total
Equity
Balance at December 31, 2012
$
2,168

 
$
581

 
$
(29
)
 
$
7,228

 
$
1,795

 
$
11,743

Net income

 

 

 
283

 

 
283

Other comprehensive income

 

 
(3
)
 

 

 
(3
)
Dividends declared on common stock

 

 

 
(120
)
 

 
(120
)
Dividends on preferred and preference stock

 

 

 
(27
)
 

 
(27
)
Stock-based compensation and other

 

 

 
(29
)
 

 
(29
)
Non-cash stock-based compensation and other

 
3

 

 
5

 

 
8

Issuance of preference stock

 
(13
)
 

 

 
400

 
387

Redemption of preference stock

 
8

 

 
(8
)
 
(400
)
 
(400
)
Balance at March 31, 2013
$
2,168

 
$
579

 
$
(32
)
 
$
7,332

 
$
1,795

 
$
11,842

Note 3.    Variable Interest Entities
A VIE is defined as a legal entity whose equity owners do not have sufficient equity at risk, or, as a group, the holders of the equity investment at risk lack any of the following three characteristics: decision-making rights, the obligation to absorb losses, or the right to receive the expected residual returns of the entity. The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most significantly impact the entity's economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. The primary beneficiary is required to consolidate the VIE. Commercial and operating activities are generally the factors that most significantly impact the economic performance of such VIEs. Commercial and operating activities include construction, operation and maintenance, fuel procurement, dispatch and compliance with regulatory and contractual requirements.

14



Variable Interest in VIEs that are not Consolidated
Power Purchase Contracts
SCE has power purchase agreements ("PPAs") that are classified as variable interests in VIEs, including tolling agreements through which SCE provides the natural gas to fuel the plants and contracts with qualifying facilities ("QFs") that contain variable pricing provisions based on the price of natural gas. SCE has concluded that it is not the primary beneficiary of these VIEs since it does not control the commercial and operating activities of these entities. Since payments for capacity are the primary source of income, the most significant economic activity for these VIEs is the operation and maintenance of the power plants.
As of the balance sheet date, the carrying amount of assets and liabilities in SCE's consolidated balance sheet that relate to its involvement with VIEs result from amounts due under the PPAs or the fair value of those derivative contracts. Under these contracts, SCE recovers the costs incurred through demonstration of compliance with its CPUC-approved long-term power procurement plans. SCE has no residual interest in the entities and has not provided or guaranteed any debt or equity support, liquidity arrangements, performance guarantees or other commitments associated with these contracts other than the purchase commitments described in Note 12 of the 2013 Form 10-K. As a result, there is no significant potential exposure to loss to SCE from its variable interest in these VIEs. The aggregate contracted capacity dedicated to SCE for these VIE projects was 5,641 MW and 3,578 MW at March 31, 2014 and 2013, respectively, and the amounts that SCE paid to these projects were $125 million and $98 million for the three months ended March 31, 2014 and 2013, respectively. These amounts are recoverable in customer rates, subject to reasonableness review.
Unconsolidated Trusts of SCE
SCE Trust I, Trust II and Trust III were formed in 2012, 2013 and 2014, respectively, for the exclusive purpose of issuing the 5.625%, 5.10% and 5.75% trust preference securities, respectively (“trust securities”). The trusts are VIEs. SCE has concluded that it is not the primary beneficiary of these VIEs as it does not have the obligation to absorb the expected losses or the right to receive the expected residual returns of the trusts. SCE Trust I, Trust II and Trust III issued $475 million, $400 million and $275 million, respectively, (cumulative, liquidation amount of $25 per share) to the public and $10,000 of common stock each to SCE. The trusts invested the proceeds of these trust securities in Series F, Series G and Series H Preference Stock issued by SCE in the principal amounts of $475 million, $400 million and $275 million (cumulative, $2,500 per share liquidation value), respectively, which have substantially the same payment terms as the trust securities.
The Series F, Series G and Series H Preference Stock and the corresponding trust securities do not have a maturity date. Upon any redemption of any shares of the Series F, Series G or Series H Preference Stock, a corresponding dollar amount of trust securities will be redeemed by the applicable trust (for further information see Note 13). The applicable trust will make distributions at the same rate and on the same dates on the applicable series of trust securities when and if the SCE board of directors declares and makes dividend payments on the Series F, Series G or Series H Preference Stock. The applicable trusts will use any dividends it receives on the Series F, Series G or Series H Preference Stock to make its corresponding distributions on the applicable series of trust securities. If SCE does not make a dividend payment to any of these trusts, SCE would be prohibited from paying dividends on its common stock. SCE has fully and unconditionally guaranteed the payment of the trust securities and trust distributions, if and when SCE pays dividends on the Series F, Series G and Series H Preference Stock.
The Trust I and Trust II balance sheets as of March 31, 2014 and December 31, 2013, consisted of investments of $475 million and $400 million in the Series F and Series G Preference Stock, respectively, $475 million and $400 million of trust securities, respectively, and $10,000 each of common stock. The Trust III balance sheet as of March 31, 2014 consisted of investments of $275 million in the Series H Preference Stock, $275 million of trust securities, and $10,000 of common stock.
The trusts' income statements consisted of both dividend income and dividend distributions in the amounts of $7 million and $7 million for the three months ended March 31, 2014 and 2013, respectively for Trust I, $5 million and $4 million for the three months ended March 31, 2014 and 2013, respectively for Trust II, and $1 million for the three months ended March 31, 2014 for Trust III.

15



Note 4.    Fair Value Measurements
Recurring Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (referred to as an “exit price”). Fair value of an asset or liability considers assumptions that market participants would use in pricing the asset or liability, including assumptions about nonperformance risk. As of March 31, 2014 and December 31, 2013, nonperformance risk was not material for Edison International and SCE.
Assets and liabilities are categorized into a three-level fair value hierarchy based on valuation inputs used to determine fair value.
Level 1 – The fair value of Edison International and SCE's Level 1 assets and liabilities is determined using unadjusted quoted prices in active markets that are available at the measurement date for identical assets and liabilities. This level includes exchange-traded equity securities and derivatives, U.S. treasury securities, mutual funds and money market funds.
Level 2 – Edison International and SCE's Level 2 assets and liabilities include fixed income securities primarily consisting of U.S. government and agency bonds, municipal bonds and corporate bonds and over-the-counter derivatives. The fair value of fixed income securities is determined using a market approach by obtaining quoted prices for similar assets and liabilities in active markets and inputs that are observable, either directly or indirectly, for substantially the full term of the instrument.
The fair value of SCE's over-the-counter derivative contracts is determined using an income approach. SCE uses standard pricing models to determine the net present value of estimated future cash flows. Inputs to the pricing models include forward published or posted clearing prices from exchanges (New York Mercantile Exchange and Intercontinental Exchange) for similar instruments and discount rates. A primary price source that best represents trade activity for each market is used to develop observable forward market prices in determining the fair value of these positions. Broker quotes, prices from exchanges or comparison to executed trades are used to validate and corroborate the primary price source. These price quotations reflect mid-market prices (average of bid and ask) and are obtained from sources believed to provide the most liquid market for the commodity.
Level 3 – The fair value of SCE's Level 3 assets and liabilities is determined using the income approach through various models and techniques that require significant unobservable inputs. This level includes over-the-counter options, tolling arrangements and derivative contracts that trade infrequently such as congestion revenue rights ("CRRs") and long-term power agreements. Edison International Parent and Other does not have any Level 3 assets and liabilities.
Assumptions are made in order to value derivative contracts in which observable inputs are not available. Changes in fair value are based on changes to forward market prices, including extrapolation of short-term observable inputs into forecasted prices for illiquid forward periods. In circumstances where fair value cannot be verified with observable market transactions, it is possible that a different valuation model could produce a materially different estimate of fair value. Modeling methodologies, inputs and techniques are reviewed and assessed as markets continue to develop and more pricing information becomes available and the fair value is adjusted when it is concluded that a change in inputs or techniques would result in a new valuation that better reflects the fair value of those derivative contracts.

16



SCE
The following table sets forth assets and liabilities of SCE that were accounted for at fair value by level within the fair value hierarchy:
 
March 31, 2014
(in millions)
Level 1
 
Level 2
 
Level 3
 
Netting
and
Collateral1
 
Total
Assets at fair value
 
 
 
 
 
 
 
 
 
Derivative contracts
$

 
$
20

 
$
345

 
$
(13
)
 
$
352

Other
38

 

 

 

 
38

Nuclear decommissioning trusts:
 
 
 
 
 
 
 
 
 
Stocks2
2,234

 

 

 

 
2,234

Fixed Income3
777

 
1,221

 

 

 
1,998

Short-term investments, primarily cash equivalents
335

 
75

 

 

 
410

Subtotal of nuclear decommissioning trusts4
3,346

 
1,296

 

 

 
4,642

Total assets
3,384

 
1,316

 
345

 
(13
)
 
5,032

Liabilities at fair value
 
 
 
 
 
 
 
 
 
Derivative contracts

 
29

 
1,118

 
(19
)
 
1,128

Total liabilities

 
29

 
1,118

 
(19
)
 
1,128

Net assets (liabilities)
$
3,384

 
$
1,287

 
$
(773
)
 
$
6

 
$
3,904

 
December 31, 2013
(in millions)
Level 1
 
Level 2
 
Level 3
 
Netting
and
Collateral1
 
Total
Assets at fair value
 
 
 
 
 
 
 
 
 
Derivative contracts
$

 
$
11

 
$
372

 
$
(10
)
 
$
373

Other
39

 

 

 

 
39

Nuclear decommissioning trusts:
 
 
 
 
 
 
 
 
 
Stocks2
2,208

 

 

 

 
2,208

Fixed Income3
841

 
1,102

 

 

 
1,943

Short-term investments, primarily cash equivalents
331

 

 

 

 
331

Subtotal of nuclear decommissioning trusts4
3,380

 
1,102

 

 

 
4,482

Total assets
3,419

 
1,113

 
372

 
(10
)
 
4,894

Liabilities at fair value
 
 
 
 
 
 
 
 
 
Derivative contracts

 
37

 
1,177

 
(20
)
 
1,194

Total liabilities

 
37

 
1,177

 
(20
)
 
1,194

Net assets (liabilities)
$
3,419

 
$
1,076

 
$
(805
)
 
$
10

 
$
3,700

1 
Represents the netting of assets and liabilities under master netting agreements and cash collateral across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level.
2 
Approximately 70% of SCE's equity investments were located in the United States at March 31, 2014 and December 31, 2013, respectively.
3 
At March 31, 2014 and December 31, 2013, SCE's corporate bonds were diversified and included collateralized mortgage obligations and other asset backed securities of $46 million and $47 million, respectively.
4 
Excludes net payables of $55 million and net receivables of $12 million at March 31, 2014 and December 31, 2013, respectively, of interest and dividend receivables as well as receivables and payables related to SCE's pending securities sales and purchases.

17




Edison International
Assets measured at fair value consisted of money market funds of $67 million and $68 million at March 31, 2014 and December 31, 2013, respectively, classified as Level 1.
SCE Fair Value of Level 3
The following table sets forth a summary of changes in SCE's fair value of Level 3 net derivative assets and liabilities:
 
 
Three months ended March 31,
(in millions)
 
2014
 
2013
Fair value of net liabilities at beginning of period
 
$
(805
)
 
$
(791
)
Total realized/unrealized gains (losses):
 
 
 
 
Included in regulatory assets and liabilities1
 
31

 
(82
)
Purchases
 
7

 
18

Settlements
 
(6
)
 
(27
)
Fair value of net liabilities at end of period
 
$
(773
)
 
$
(882
)
Change during the period in unrealized gains and losses related to assets and liabilities held at the end of the period
 
$
22

 
$
(66
)
1 
Due to regulatory mechanisms, SCE's realized and unrealized gains and losses are recorded as regulatory assets and liabilities.
Edison International and SCE recognize the fair value for transfers in and transfers out of each level at the end of each reporting period. There were no transfers between any levels during 2014 and 2013.
Valuation Techniques Used to Determine Fair Value
The process of determining fair value is the responsibility of SCE's risk management department, which reports to SCE's chief financial officer. This department obtains observable and unobservable inputs through broker quotes, exchanges and internal valuation techniques that use both standard and proprietary models to determine fair value. Each reporting period, the risk and finance departments collaborate to determine the appropriate fair value methodologies and classifications for each derivative. Inputs are validated for reasonableness by comparison against prior prices, other broker quotes and volatility fluctuation thresholds. Inputs used and valuations are reviewed period-over-period and compared with market conditions to determine reasonableness.
The following table sets forth SCE's valuation techniques and significant unobservable inputs used to determine fair value for significant Level 3 assets and liabilities:
 
Fair Value (in millions)
 
Significant
Range
 
Assets
 
Liabilities
Valuation Technique(s)
Unobservable Input
(Weighted Average)
Congestion revenue rights
 
 
 
 
 
 
March 31, 2014
$
345

 
$

Market simulation model
Load forecast
7,603 MW - 24,896 MW
 
 
 
 
 
Power prices
$(9.86) - $108.56
 
 
 
 
 
Gas prices
$3.50 - $7.10
December 31, 2013
366

 

Market simulation model
Load forecast
7,603 MW - 24,896 MW
 
 
 
 
 
Power prices
$(9.86) - $108.56
 
 
 
 
 
Gas prices
$3.50 - $7.10
Tolling
 
 
 
 
 
 
March 31, 2014
4

 
1,111

Option model
Volatility of gas prices
13% - 31% (18%)
 
 
 
 
 
Volatility of power prices
26% - 61% (32%)
 
 
 
 
 
Power prices
$37.50 - $70.80 ($50.10)
December 31, 2013
5

 
1,175

Option model
Volatility of gas prices
16% - 35% (21%)
 
 
 
 
 
Volatility of power prices
25% - 45% (30%)
 
 
 
 
 
Power prices
$38.00 - $63.90 ($47.40)

18



Level 3 Fair Value Sensitivity
Congestion Revenue Rights
For CRRs, where SCE is the buyer, generally increases (decreases) in forecasted load in isolation would result in increases (decreases) to the fair value. In general, an increase (decrease) in electricity and gas prices at illiquid locations tends to result in increases (decreases) to fair value; however, changes in electricity and gas prices in opposite directions may have varying results on fair value.
Tolling Arrangements
The fair values of SCE's tolling arrangements contain intrinsic value and time value. Intrinsic value is the difference between the market price and strike price of the underlying commodity. Time value is made up of several components, including volatility, time to expiration, and interest rates. The option model for tolling arrangements reflects plant specific information such as operating and start-up costs.
For tolling arrangements where SCE is the buyer, increases in volatility of the underlying commodity prices would result in increases to fair value as it represents greater price movement risk. As power and gas prices increase, the fair value of tolling arrangements tends to increase. The valuation of tolling arrangements is also impacted by the correlation between gas and power prices. As the correlation increases, the fair value of tolling arrangements tends to decline.
Nuclear Decommissioning Trusts
SCE's nuclear decommissioning trust investments include equity securities, U.S. treasury securities and other fixed income securities. Equity and treasury securities are classified as Level 1 as fair value is determined by observable market prices in active or highly liquid and transparent markets. The remaining fixed income securities are classified as Level 2. The fair value of these financial instruments is based on evaluated prices that reflect significant observable market information such as reported trades, actual trade information of similar securities, benchmark yields, broker/dealer quotes, issuer spreads, bids, offers and relevant credit information.
Fair Value of Long-Term Debt Recorded at Carrying Value
The carrying value and fair value of Edison International and SCE's long-term debt (including current portion of long-term debt) are as follows:
 
 
March 31, 2014
 
December 31, 2013
(in millions)
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
SCE
 
$
10,023

 
$
11,012

 
$
10,022

 
$
10,656

Edison International
 
10,426

 
11,442

 
10,426

 
11,084

The fair value of Edison International and SCE's short-term and long-term debt is classified as Level 2 and is based on evaluated prices that reflect significant observable market information such as reported trades, actual trade information of similar securities, benchmark yields, broker/dealer quotes of new issue prices and relevant credit information.
The carrying value of Edison International and SCE's trade receivables and payables, other investments, and short-term debt approximates fair value.

19



Note 5.    Debt and Credit Agreements
Credit Agreements and Short-Term Debt
In January 2014, SCE issued $300 million of floating rate first and refunding mortgage bonds due in January 2015. The proceeds from these bonds were used for working capital to fund the ERRA balancing account undercollections.
At March 31, 2014, SCE's outstanding commercial paper was $105 million at a weighted-average interest rate of 0.20%. This commercial paper was supported by a $2.75 billion multi-year revolving credit facility. At March 31, 2014, letters of credit issued under SCE's credit facility aggregated $141 million and are scheduled to expire in twelve months or less. At December 31, 2013, the outstanding commercial paper was $175 million at a weighted-average interest rate of 0.24%.
At March 31, 2014, Edison International Parent's outstanding commercial paper was $206 million at a weighted-average interest rate of 0.51%. This commercial paper was supported by a $1.25 billion multi-year revolving credit facility. At December 31, 2013, the outstanding commercial paper was $34 million at a weighted-average interest rate of 0.55%.
Note 6.    Derivative Instruments
Derivative financial instruments are used to manage exposure to commodity price risk. These risks are managed in part by entering into forward commodity transactions, including options, swaps and futures. To mitigate credit risk from counterparties in the event of nonperformance, master netting agreements are used whenever possible and counterparties may be required to pledge collateral depending on the creditworthiness of each counterparty and the risk associated with the transaction.
Commodity Price Risk
Commodity price risk represents the potential impact that can be caused by a change in the market value of a particular commodity. SCE's electricity price exposure arises from energy purchased from and sold to wholesale markets as a result of differences between SCE's load requirements and the amount of energy delivered from its generating facilities and power purchase agreements. SCE's natural gas price exposure arises from natural gas purchased for the Mountainview power plant and peaker plants, QF contracts where pricing is based on a monthly natural gas index and power purchase agreements in which SCE has agreed to provide the natural gas needed for generation, referred to as tolling arrangements.
Credit and Default Risk
Credit and default risk represents the potential impact that can be caused if a counterparty were to default on its contractual obligations and SCE would be exposed to spot markets for buying replacement power or selling excess power. In addition, SCE would be exposed to the risk of non-payment of accounts receivable, primarily related to the sales of excess power and realized gains on derivative instruments.
Certain power contracts contain master netting agreements or similar agreements, which generally allows counterparties subject to the agreement to setoff amounts when certain criteria are met, such as in the event of default. The objective of netting is to reduce credit exposure. Additionally, to reduce SCE's risk exposures counterparties may be required to pledge collateral depending on the credit worthiness of each counterparty and the risk associated with the transaction.
Certain power contracts contain a provision that requires SCE to maintain an investment grade rating from each of the major credit rating agencies, referred to as a credit-risk-related contingent feature. If SCE's credit rating were to fall below investment grade, SCE may be required to pay the derivative liability or post additional collateral. The net fair value of all derivative liabilities with these credit-risk-related contingent features was $53 million and $49 million as of March 31, 2014 and December 31, 2013, respectively, for which SCE has posted no collateral to its counterparties for the respective periods. If the credit-risk-related contingent features underlying these agreements were triggered on March 31, 2014, SCE would be required to post collateral in the amount of $10 million, excluding the impact of unpaid closed positions as their settlement is not impacted by the credit-risk-related contingent features.

20



Fair Value of Derivative Instruments
SCE presents its derivative assets and liabilities on a net basis on its consolidated balance sheets when subject to master netting agreements or similar agreements. Derivative positions are offset against margin and cash collateral deposits. In addition, SCE has provided collateral in the form of letters of credit. Collateral requirements can vary depending upon the level of unsecured credit extended by counterparties, changes in market prices relative to contractual commitments and other factors. The following table summarizes the gross and net fair values of SCE's commodity derivative instruments:
 
 
March 31, 2014
 
 
 
 
Derivative Assets
 
Derivative Liabilities
 
 
(in mil