Edison International
Q2 2021 Earnings Call Transcript

Published: 29 Jul 2021

[Operator:]

Good afternoon and welcome to the Edison International Second Quarter 2021 Financial Teleconference. My name is Terry and I will be your operator today. Today's call is being recorded. I would now like to turn the call over to Mr. Sam Ramraj, Vice President of Investor Relations. Mr. Ramraj, you may begin your conference.

[Sam Ramraj:]

Thank you, Terry. And welcome, everyone. Our speakers today are President and Chief Executive Officer, Pedro Pizarro; and the Executive Vice President and Chief Financial Officer, Maria Rigatti. Also on the call are other members of the management team.

[Pedro Pizarro:]

Well, thank you, Sam. And thanks everybody for joining. I hope of all you and loved ones are staying healthy safe. Edison International reported core earnings per share of $0.94 compared to $1 a year ago. However, this comparison is not meaningful because SCE did not receive a final decision in track 1 of its 2021 General Rate Case during the quarter. As many of you are aware, a proposed decision was issued on July 9th. The utility will file its opening comments later today and reply comments on August 3rd. While Maria will cover the PD in more detail, our financial performance for the quarter, and other financial topics, let me first give you a few observations, which are summarized on page two. The PD’s base rate revenue requirement of $6.9 billion is approximately 90% of SCE’s request. The primary drivers of the reduction are lower funding for wildfire insurance premiums, vegetation management, and depreciation. The main reduction to SCE’s 2021 capital forecast was for the Wildfire Covered Conductor Program. Excluding wildfire mitigation-related capital, the PD would approve 98% of SCE’s 2021 capital request, much of which was uncontested. The PD acknowledged the often-competing objectives of balancing safety and reliability risks with the costs associated with ensuring SCE can make necessary investments to provide safe, reliable, and clean energy. The PD also notes that wildfire mitigation is a high priority for the state and the Commission. The PD supports critical safety and reliability investments and provides the foundation for capital spending and rate base through 2023.

[Maria Rigatti:]

Thank you, Pedro. And good afternoon, everyone. My comments today will cover second quarter 2021 results, comments on the proposed decision in SCE’s General Rate Case, our capital expenditure and rate base forecasts, and updates on other financial topics. Edison International reported core earnings of $0.94 per share for the second quarter 2021, a decrease of $0.06 per share from the same period last year. As Pedro noted earlier, this year-over-year comparison is not meaningful because SCE has not received a final decision in its 2021 General Rate Case and continues to recognize revenue from CPUC activities based on 2020 authorized levels. We will account for the 2021 GRC track 1 final decision in the quarter SCE receives it. On page seven, you can see SCE’s key second quarter EPS drivers on the right hand side. I’ll highlight the primary contributors to the variance. To begin, revenue was higher by $0.10 per share. CPUC-related revenue contributed $0.06 to this variance, however this was offset by balancing account expenses.

[Pedro Pizarro:]

Terry, could you please open the call for questions. As a reminder, we request you to limit yourself to one question and one follow up. So everyone in line has the opportunity to ask questions.

[Operator:]

Thank you. And our first question comes from Jeremy Tonet with JPMorgan. Your line is now open.

[Jeremy Tonet:]

Hi, good afternoon.

[Maria Rigatti:]

Hey, Jeremy.

[Pedro Pizarro:]

Hi, Jeremy.

[Jeremy Tonet:]

Hi. I wanted to start off here with undergrounding. How helpful could the undergrounding be in your service territory? Is this an option you'd explore? And how does the covered conductor pushback kind of inform your thought process here?

[Pedro Pizarro:]

Yeah. Happy to pick up on that one, Jeremy. So I think as you've seen us say in the past, we are looking at all the tools in the toolbox. Given our terrain and the fact that is really predominant, that one of the predominant forms of ignition in the past has been from contacts with foreign objects. We find that covered conductor has really provided the optimal tool for reducing risk while maintaining affordability for customers. And so we see that covered conductor has something like 70% of the risk reduction that undergrounding has. The cost difference in the numbers we've seen to date, obviously, the team continues to keep track of what's going on and talking with our peers and talking with experts about potential improvements. But I think the latest numbers we've seen are that covered conductor cost us something like $456,000 a mile, whereas underground being, on average, in our territory, it will cost you about $3.4 million a mile. We have seen some spot applications, and in fact, there's about 17 miles that we targeted to underground between this year and next year. And we'll continue to look at the toolbox, the tune of toolbox, but at least with our territory, with our incidence of historical ignitions, we believe that covered conductor provides really an optimal tool in terms of both risk reduction and affordability.

[Jeremy Tonet:]

Got it. That's helpful. Maybe just kind of shifting gears here a bit. If you could speak more to the policy implications from the PD and how you see intravenous position here on these policies versus just pure cost considerations here?

[Pedro Pizarro:]

Yeah. I'll give you some thoughts. Maria may have more and Kevin Payne is here as well if we miss anything. Look, there'll be two thoughts that come right away to mind. First is GRCs are litigated proceedings, right? And so we always have at least two sites, actually multiple sites with multiple intervenors. You have some intervenors that are more focused on purely the affordability side of things. I think as the utility, we're really working hard to provide well supported testimony and analysis that is looking at finding the right balance, right? We're balancing - first of all, having a reliable system - actually above all, having a safe system that needs to be in violet. But you really see trade-offs between reliability and affordability, right? You could always spend more to get an extra percentage point in reliability, but at some point, it becomes unaffordable for the customer. So it's how do you find the right balance. I think as you heard me say in the prepared remarks already, really the largest issue leaders, not the only, but the largest issue has been the position that Terni took in terms of the risk reduction provided by covered conductor and how many miles are enough. And we just have a fundamental difference in view in terms of the policy argument that they're making we are facing a significant, significant wildfire risk gross estate. We've seen it in our area. We strongly believe that the welfare mitigation plans that we prepared really help address at risk. And you saw the data that we shared in the deck and that I mentioned in my remarks around some of these early returns that we're experiencing with significant decreases and some of the risks that we had just 3 years ago, right? So study the figures on reduction in faults, and frankly, no CPUC reportable ignitions yet on miles that we've covered, where we used to have pure wire. So the fundamental policy debate here is the churn has what we think is some flood map about stopping at 2,700 miles, and we believe that the plan we've laid out that will go to over 6,000 miles, covering was 50% of the 10,000 miles in high fire risk areas provides that kind of risk protection that our customers need, it's consistent with the emphasis that that has on fire mitigation, fire suppression. So affordability is always really important. But one final point I'll give you is one that Kevin Payne made really well during the oral argument. Affordability is not just about the bill that you get tomorrow. Affordability is about the entire economic equation. And if we allow a mitigated wildfire risk to persist and a fire takes place that could have been prevented, that's a much bigger affordability shop for that community in the long run, in addition to the health and safety impact that I can have. So we think we've cut it right in terms of the policy trade-offs, and we hope that the 5 commissioners will agree with that in the final decision. Maria, if you have anything to add there? Or did I cover it?

[Maria Rigatti:]

No, I think from a policy perspective, Pedro, that really is the biggest discussion we want to have with the commission and with the interveners, it's around covered conductor and the affordability and risk trade-off that you just described. There are some other things when we file our comments later today, there will be some other things that outlined some of them on one of the slides in the deck today. Those are things that certainly we think we should be treated equally as other utilities or in line with precedent. But I think the big discussion, as you can probably tell from the oral argument was really around and is really around covered conductor and the efficacy of that and the proof points also that we've seen as Pedro mentioned.

[Jeremy Tonet:]

Got it. That’s very helpful. Thank you.

[Operator:]

Thank you. And our next question comes from Angie Storozynski with Seaport. Your line is now open.

[Pedro Pizarro:]

Hey, Angei.

[Angie Storozynski:]

Hi, good afternoon. Okay. I have two questions. The first one, given what happened with the bond yields and the cost of capital having the bond yield driven true up, what do we expect here for - I mean, obviously, it all depends on what happens with the interest rates between now and October. But should we expect some filings from you guys trying to preempt this lowering of the ROE, which would be implied from current bond yields?

[Maria Rigatti:]

So Angie, I think you know the average bond yield has to be in that dead band. Right now, if you look at sort of the amount of time remaining until the measurement period is over, yields would have to average just over 4% to kind of make the whole year average within the dead band. So what happens, the end of the measurement period is the end of September. We all know that the PTC has taken positions on prior requests to either extend and defer changes on the cost of capital for others. And we also know from our experience back in 2017 that they really prefer to see litigated cases, and we're preparing testimony that's going to focus on the differentiated role and the risks that California IOUs have and that notwithstanding these lower interest rates, that's really driven by these extraordinary events over the past 18 months in all of the government programs that have been implemented to alleviate the impact of the pandemic. But that should not really imply that a change in the ROE is necessary. And I think that the changes in the volatility certainly underscore that. And I think regardless of what happens, we have to file next Spring for another cost of capital proceeding. So those are the sorts of things that we are thinking about. I think since that basic issue, we really need to demonstrate that notwithstanding the interest rate environment, the cost of equity is, in fact, lower. Yeah we'll continue to look at everything that's going on, options on how to best get that point across to the commission to the interveners and also to really underscore the point that financially stable IRUs and California IOUs that are attractive to investors ultimately support customer affordability in the long run, too. So I think we're just going to continue to monitor the situation we're preparing testimony already, and we'll go from there.

[Angie Storozynski:]

Okay. Thank you. And my second question is on your financing needs this year, you continue to settle more wildfire claims. You haven't yet - should enough equity to meet your guidance for this year. So are we waiting for the final decision and the jurist C is it that there is some movement in the total number that you might need given, again, ongoing settlement of claims?

[Maria Rigatti:]

Just to me, I'll kind of bifurcate that into a couple of different parts, if you don't mind. So I'll just kind of go back to sort of where I always like to start with this. Our financing plan is really built from the perspective of maintaining investment-grade ratings. And back when we moved to a best estimate for the wildfire liability last year, we said we would issue approximately $1 billion of equity to support the ratings and then that would allow SCE to continue to issue debt to fund the wildfire claims payment. And since then, we've been evaluating our needs and we focused on different financing options. And back in March, we issued the $1.25 billion of craft and that had the 50% equity content. We've also said in the past that we do think we have flexibility regarding the timing. And so we're continuing to have that belief that we can be flexible in terms of timing. And we're continuing to monitor market conditions, and that's going to inform our next steps. We're going to continue to consider and I think we've talked about this a little bit before, the tools that we would use. So tools needed to consider preferred equity, internal programs, and then if needed, the ATM. Now that's that piece associated with sort of the ongoing discussion around the wildfire claims and the liabilities in '17 and '18. Separately, we've also talked about the need on an ongoing basis what we think is a minimal equity requirement. That piece of it, that ongoing minimal equity need associated with the core business is one that we will provide more specificity around once we get the final decision. So that piece does kind of tie back to the final decision.

[Angie Storozynski:]

Very good. Thank you. Thank you very much.

[Maria Rigatti:]

Thanks, Angie.

[Operator:]

Thank you. And our next question comes from Shar Pourreza with Guggenheim. And your line is now open.

[Unidentified Analyst:]

Hi, good afternoon, team. It's actually Constantine here for Shar. Thanks for the update and all the information provided. I just wanted to kind of follow up a little bit on the PD and kind of the views that it takes on wildfire insurance covered conductors and such. And does that change your approach to procuring wildfire insurance? And are you comfortable with the level of insurance that you have? And would you anticipate that cost would come down as kind of more areas are converted to cover conductor?

[Pedro Pizarro:]

Actually, Maria, I'll pick up that last part first and then turn the first part to you. Constantine, nice to hear you. We would expect - certainly to hope that over time, as the risk envelope continues to be narrowed in the state, right, and it's not just a utility work, but what the state is doing in terms of flyer suppression, further constraining the overall risk envelope. We certainly hope that over time, that translates into insurer seeing that the risks they're insuring is not as large as it used to be, and that should reflect itself in premiums. But of course, the market to market, so we'll see how that progresses on a down. Mary, let me turn it over to you for the first part.

[Maria Rigatti:]

Sure. So Constantine, you know that our policy year is July 1 through June 30, so we just started a new policy year. In terms of the PD, the original request in the PD when file the application rates were increasing by big percentages year-over-year and our request had something like a $600 million wildfire insurance premium embedded in it. What came out in the PD is that, one, very importantly, they reiterated that while our insurance premiums are a cost of service, so customers will pay for that as part of their rate. They approved a number or an authorized revenue of about $460 million, which is actually, as it turns out sufficient or at least if we were to look at the balance of this year and then the beginning part of the year, which was the last policy year, that is comparable or at least a little bit more than what the premiums are. We expect the expense for this year to be about $425 million for about $4 billion gross of insurance, but net once you deduct out the self-insured retention and a little bit of coinsurance is about $875 million of wildfire insurance, which is consistent once you get right through to it with what's required in AB 1054. So from that perspective, good policy points on cost of service, aligned with at least for this year, what premiums would be. The third piece of it is that they also reiterated that to the extent premiums go up in the future, we can use that metal account feature that we have used in the past and successfully recovered premiums under in the future as well. So that's all good. The piece of conversation that we will continue to have with them is whether or not it is better to actually collect a little bit more from customers, not just the amount of the wildfire insurance premium but also collect a little bit for customer-funded health insurance, which may over time be more economical for customers since to the extent you don't have a loss, you keep it and roll it over to the next year, which is different on what you do with the premium.

[Unidentified Analyst:]

Excellent. That makes a lot of sense. And just shifting a little bit to the wildfire, the legacy wildfire loss estimates. I guess, can you qualify the level of comfort that the estimates will not change? And is the best estimate at this point, pretty much derisked now that you have all the settlements in place and kind of the remaining 1.4 f the kind of loss estimate as just kind of progressing towards completion. Do you kind of have any estimates on the duration of kind of settlement - the settlement processes or any qualitative statements around that?

[Maria Rigatti:]

Probably a statement that sounds a lot like what we said before. Even though the number more - even though more claims have been settled it's still very dynamic. Every claim is different and has to be addressed differently. We continue to monitor the situation, obviously. It's one of the biggest areas of management judgment. And we sit down and have that conversation every quarter to be sure that we're reflecting the things that we know in the reserve. But I would say there's still an error band around that and we'll have to address that as time passes.

[Unidentified Analyst:]

And I guess just as a point, it's fair to assume that since estimate hasn't moved in a while that it's been kind of close to your - the settlements that have been coming through or kind of close to your best estimate?

[Pedro Pizarro:]

Yeah. I mean as Maria said, we, Constantine, we look at this every quarter, recognize that we still have several thousand plaintiffs. These are typically smaller than the large settlements we did earlier on, for example, for the Subros. So such a wide diversity of cases and plaintiffs, everything from homeowners, small businesses, global to just a whole broad range. So that's why we'll continue to test that every quarter and keep you posted if there's any changes. But it's difficult for us and probably not appropriate for us to try and give some perspective on the probability of changes I think under the accounting rules, we provide you what our current best estimate is. And that, as you say, has not changed.

[Unidentified Analyst:]

That’s fair. That’s very helpful. Thanks for taking our questions.

[Pedro Pizarro:]

Thanks. Your take care.

[Operator:]

Thank you. And our next question comes from Michael Lapides with Goldman Sachs. Your line is now open.

[Michael Lapides:]

Hey, guys. Thank you for taking my question. A little bit of a high level one, which is if you think about things that are not in the GRC and track 1 through 4, but might be upside over the next 3 to 4 years to your potential capital spend level, can you highlight what those may be and which ones you've actually already filed for, but you don't have approval for yet? And which ones you haven't even filed for yet, but somewhere embedded within the FDA organization you've got a team of people who are - penciled a paper and started to put together numbers?

[Pedro Pizarro:]

Well, particularly with the pandemic, we're less penciled to paper and all electronics. It's all very high tech now, all virtual. But joking aside, and Maria, you can come in with details. I'll get the high-level answer to your high-level question, similar to what you heard from us before, right? What you see in the rate case, obviously, is very concrete and we'll see where the final decision comes out. But as we look forward and we think about the clean energy transition, right? There's a number of things as part of the transition that will either support our view that we'll continue to have robust investment needs for a long time or potentially create upside to that. Areas like - I talked a little bit in my remarks about Charge Ready, open question right now as to whether there will be a further role needed for utilities to continue to support the charging infrastructure market or whether private entries will be able to step in and do that fully. Interestingly, I think, Maria is a commissioner who had a recent commission meeting was I just think thinking out loud about now there may well be the need to have utilities sip in and do more, just given the scale of the transition. And in particular, as I look at it, it's not just about getting charging infrastructure to the average customer of making sure that the transition is equitable. So therefore, making sure there's enough penetration in disadvantaged communities, low-income communities, where private players might not be as economically enticed to do that and where there might be a case to socialize more of that to the build. So transportation is certainly one area, storage is another. We know that the GRC request included in there, I think an assumption of what's it, 60 megawatts or so of new storage over the dependency of the breakage period. But as we see the amounts of storage that will continue to be needed moving forward and the - certainly the potential for some of that to be part and parcel of utility operations might make a lot of sense for some portion of that to be in rate base, right? And so that also creates either support for an overall investment trajectory or potentially even further upside. Building electrification is another area where we've seen, frankly, relatively little progress to date compared to what we think will be needed as we head out as we the state heads out to 2030 and 2045. And so right now, the utility team is thinking about are there places where the utility will be able to help and where it will be economic for our customers to support that rate because you need both of those, right? And so there's some good thinking underway right now around are there potential programs where we might be able to be helpful to the state's transition. So does that give you a few examples. Maria, you may have more specific things.

[Maria Rigatti:]

Yes. I think maybe in terms of miracle examples because I think there are obviously a lot of opportunities in the list that Pedro provided more detail to come as the team, as you say, with the pencil to paper or virtually the pencil paper works more on the specifics. But in terms of things that have been filed already, where the numbers are more explicit, we did recently include in our rate base forecast, so already in the numbers, but we did recently include our customer service platform project. So that's that reflects about $500 million or so of rate base by the time you get out to 2023. So that's now embedded application was filed last week. Also, we, as you know, experienced wildfires in our service territory late last year up in the Big Creek area, a lot of restoration had to go on there. We haven't yet applied for recovery of that, but that would be, say, about another $350 million of free base. If approved, I'll say, in the year 2023, it's probably a reasonable time frame. So those are more specific things, Michael, in addition to what I would view as a clean energy transition opportunities that Pedro mentioned.

[Michael Lapides:]

Got it. Thank you, guys. much appreciated it.

[Pedro Pizarro:]

You bet.

[Operator:]

And our next question comes from Jonathan Arnold with Vertical Research Partners. And your line is now open.

[Pedro Pizarro:]

Hey, Jonathan.

[Jonathan Arnold:]

Hi. I think you just answered my question, which is that the customer replatform is effectively what's driving the higher range and sort of main rate base forecast versus last quarter. Is that pretty much all of it? Or was there something else in there?

[Maria Rigatti:]

That should be it, Jonathan. I think we haven't changed any - we've shown you what the PD numbers are, obviously, but we haven't really changed anything yet until we get the final decision.

[Jonathan Arnold:]

And your sort of confidence in a recovery of that, can you just sort of talk to that a little bit, please?

[Maria Rigatti:]

Sure. Well, the customer service platform project replaces a very, very old system, so it was very much needed. Some of it was written in software languages that we couldn't even get people to who knew them anymore. So I think from that perspective, very much needed. I think over the course of the implementation, the team has had ongoing dialogue with energy division and the like to keep them apprised of what's been happening at the project. There have been, over time, some cost increases, obviously, because we had to wrap more into the project given the complexity of our system. But we think that all the work that we've done really is well justified and the testimony that we filed supports that. We're now in stabilization mode. And so we keep keeping a close eye on just customer satisfaction, ability to answer customers' questions all of the things that you would expect to happen when a new system goes live. But the team is very, very attuned to that, and we've added extra folks in a stabilization mode as well. So I think we've done all the things that we should be doing in order to ensure that we can make a good case with the commission.

[Jonathan Arnold:]

Okay. And then maybe if I could - well, I think while you've been speaking there is a shelf filing came across. Is that just a refresh of maybe something expiring? Could you just speak to that?

[Maria Rigatti:]

Yeah, both SCE and EIX, the shelf registrations were expiring. So that's - this is just normal course. For EIX, the only thing we did was we used to have two separate ones, we put them together so that we don't have to have the - I'll say, the administrative burden of two filings. So very normal course.

[Jonathan Arnold:]

Okay, great. Thank you, guys.

[Pedro Pizarro:]

Thanks, Jonathan.

[Operator:]

And our next question comes from Sophie Karp with KeyBanc Capital Markets. And your line is now open.

[Pedro Pizarro:]

Hi, Sophine.

[Unidentified Analyst:]

Hi,. This is - actually, it's Sangita for Sophie. Thanks for taking my question. So we did go through the PD and understandably the covered conductor is the point of difference here. Would you consider, let's say, the final decision comes in close to the weather PD is, would you still consider building on your covered conductor program over the plan to seek the recovery at a future date?

[Pedro Pizarro:]

I think as Kevin Payne said during the oral argument, we will strongly factor in the guidance from the CPUC, right? And so ultimately, they will be ruling on a certain risk level, risk trade-off level as they think about balancing affordability and risk and safety. We certainly feel strongly about what the right answer is here, right, which is not the PD. It's more like what we proposed to the extent that the guidance it provide us would limit spending we will use some of the other tools that we have in the 2 box, including PSPS much more adequately right or as needed in order to make sure that we maintain an appropriate risk level for our customers.

[Unidentified Analyst:]

Great. Thanks so much.

[Pedro Pizarro:]

You bet. Thank you.

[Operator:]

Thank you. And our next question comes from Julien Dumoulin with Bank of America. And your line is now open.

[Julien Dumoulin:]

Hey, good afternoon, team. Thanks for the time.

[Pedro Pizarro:]

Hey, Julien. How are you?

[Julien Dumoulin:]

Good. Thank you. I suppose, if I can come back to the crux of the conversation around affordability, how do you think about the different scenarios around what the commission could do here and creating the bill affordability, right? It seems evident that one needs to try to continue to push as much as possible towards addressing and mitigating wildfire risk. How do you think about creating bill headroom, whether through OpEx or effectively shifting out other projects from a CapEx perspective? I'm just thinking out loud and putting it back to you on sort of the different levers here that might exist to create that affordability that seems necessary to move forward with the wildfire spending at your proposed pace?

[Pedro Pizarro:]

Yeah. Julien, it's a great question. A few reactions right away, and Maria may have more. First, it's what we've been doing for the last 5, 6, 7, 8 years, right? And you've seen us create a lot of rate headroom in order to do the work that we needed to do. I commented in my prepared remarks on the way that we've maintained O&M cost increases and frankly, total system rate at an average rate increases at around the level of inflation for the last three decades. And I know we've talked with you and with other investors and analysts significantly about that in the past. We've continued to track record. Obviously, this GRC is a major departure from that driven in large part by the wildfire-related needs. But we will continue to look at opportunities to do better cost management, to do more use of technology that can help make our work more effective, more efficient. That's definitely an ongoing tool. And I don't think on that one you're ever done, right? Because the reality is the bar keeps going up, the digital tools, the data analytics, all of these continue to improve and open up new opportunities that I don't think any of us imagined 5 or 10 years ago. So I'd say that's part one of the answer. Part two, kind of goes back to some of the discussion in -- for some of the earlier questions. There is a there's a balance there, right? And it's important that the commission be thinking about affordability broadly, not only in terms of the near-term rate increase, but the impacts of that over time, the risk that it either mitigates or doesn't mitigate the risk it might leave behind on the table that might then increase the risk of wildfire in the future that would have a much more devastating economic impact on the community or the risk that by not spending enough on covered conductor, we might have to continue using PSPS for a longer period of time in a particular community, which has one set of impacts, right? And I order the commission has appropriately been very sensitive to those. So there is absolutely a balancing act there. It's a tough job to the regulator has a tough job that we have. But I think we've put together a well-thought-out approach for balancing those risks. So just a few reactions. Maria, you may have others.

[Maria Rigatti:]

Yeah. I guess, Julien, the one thing I would also add to that maybe two things. If you go all the way back to when we filed our application for this we actually tee that up for the commission and said, we know we have to balance a lot of different things between what we need to invest for safety and also in water risk mitigation and then affordability for our customers. So we actually told them that some of our investments in infrastructure replacement, we would hold on to and not propose for this GRC cycle and instead take that up again when more of the wildfire mitigation CapEx had been spent. So I think that balance is one that we always try to strike. And I think it's the conversation with the commission and the commission raised it during their own affordability on bond because they recognize that over the longer term, more electrification is actually going to drive lower cost for customers. You've seen it in our pathway paper. The commission themselves recognize that electrification will reduce energy as a customer - as the share of customer wallet. So we have to focus on the near term with a view, not just on affordability, what's on the bill, as Kevin said in his oral argument, it's the overall economic proposition that we have to think about with our customers. And so let's get this done. I think one of the numbers he quoted in his oral arguments was that if we increase covered conductor to the level that we had in the request that's really about $2 a month on the customer bill. I'm not trying to minimize that. I know people are in different situations economically. But when you think about the alternative, that's really, I think, the most economical choice. And then that resiliency tees up the system and the customers for the long term when electrification really does minimize costs.

[Pedro Pizarro:]

Yeah. And Maria, let me just pick up one more thing triggered by your comments. Julien, a lot of the focus right now, certainly in this rate case is on the affordability trade-off relative to wildfire mitigation. I think as we move forward over the next decade or two, to Maria's point, align with our Pathway 2045 analysis, I think we'll see more of the discussion shifts to the affordability trade-offs relative to meeting clean energy targets and decarbonizing the economy. Because it's so important that, frankly, the analytical work we've done that demonstrates that using clean electricity to electrify a lot of the economy is the cheapest way for the economy to get to net zero, right? This will put pressure on the electric bill I don't think it will be the sort of rate increases year-on-year that we see in this rate case, right? But we might see excursions to a little bit of local inflation in order to build that the infrastructure needed to electrify much more of the economy and therefore, we carve it out, right? And so frankly, part of our job and the job of future teams at Edison over the next two decades will be to constantly be putting good educational materials out there, good analysis around the world, not just the sense per kilowatt hour world, but the world in a dollars per ton of GHG removed perspective because that's just as important a metric per kilowatt hour.

[Julien Dumoulin:]

Yeah. And quick, if I could. If I can throw one in quick here, just to follow up. How do you think about - obviously, there's some fairly transparent cost of capital dynamics out there that could put pressure on numbers. How do you think about offsetting factors? Again, I'm coming back to O&M, thinking about that as being a lever both in the near term and the long term. How do you think about offsetting some of the cost of capital with O&M or refinancing opportunities, et cetera? Just trying to reconcile rate base back to earnings growth here, if you will.

[Pedro Pizarro:]

Yeah. I'll give you 1 reaction, Maria may have different ones. First, look, at the end of the day, the customer sees one bill, right? And so we want to make sure we're pulling on all the levers to provide them an affordable experience that's also safe and reliable and clean. And also to make sure that we have an appropriate opportunity for our investors to get a return on and off their capital, right? So kind of stating the blatantly obvious, that's important. Get a reaction though is that we do have separate proceedings in California. We think spend a lot of value in having a separate rate case proceeding from a different cost of capital proceeding. And particularly as we get to a cost of capital filing, well, clearly, during the commission's mines, in our mind, we'll all be thinking about the impact on customers of various increments. Cost of capital in California is really constructed around ensuring that there's a fair opportunity for investors, for shareholders to get the return often on capital in order to make the California investment and attractive one relative to investments elsewhere in the country and in other marketplaces, right? And so particularly as we head into a period over the next decade or where the country as a whole will see a dramatic need for investment across all sectors of the economy to be carbonized. It's really important that the regulatory framework in California remain one that is viewed as fair, as stable, as compensatory to shareholders and to all stakeholders, and one where the cost of service principles are respected, right? And so you're seeing a lot of our efficacy focused on making sure that we are constantly coming back to the Sintrom line in terms of what's a fair cost of service and how do we get recovery in that versus what things in what areas to the shareholder of their risk of recovery. And so that's why I like the idea about fairly pure cost of capital proceeding that just looking at the math and the principles of the policy around what a fair return given the unique risks that utilities are asked to bear in California, given that we are at the leading edge of the clean energy transition. So anyway, I just see a few ambling thoughts there, Julien. Maria, anything you want to clean up or change there?

[Maria Rigatti:]

No. I think you've captured it, Pedro.

[Julien Dumoulin:]

Awesome, guys. Thank you for the time. Take care.

[Maria Rigatti:]

Thanks, Julien.

[Operator:]

Thank you. And that was our last question. So I will now turn the call back to Mr. Sam Ramraj.

[Sam Ramraj:]

Well, thank you for joining us, everyone. This concludes the conference call. And have a good rest of the day and stay safe. You may now disconnect.

[Pedro Pizarro:]

Thanks, everybody.+