EDISON INTERNATIONAL

Nature of Estimates Required. At December 31, 2024, Edison International and SCE have a $1.9 billion long-term asset and a $138 million current asset reflected as "Wildfire Insurance Fund contributions" in the consolidated balance sheets for the initial $2.4 billion contribution made during 2019 and the present value of annual contributions SCE committed to make to the Wildfire Insurance Fund, reduced by amortization. At December 31, 2024, a long-term liability of $363 million has been reflected in "Other deferred credits and other long-term liabilities" for the present value of unpaid contributions. Contributions were discounted to the present value using US treasury interest rates at the date SCE committed to participate in the Wildfire Insurance Fund.

Management concluded it would be most appropriate to account for the contributions to the Wildfire Insurance Fund similar to prepaid insurance, ratably allocating the expense to periods based on an estimated period of coverage.

Key Assumptions and Approach Used. The Wildfire Insurance Fund does not have a defined life. Instead, the Wildfire Insurance Fund will terminate when the administrator determines that the fund has been exhausted. Management reassesses the period of coverage of the fund at least annually in the first quarter each year and adjustments are applied on a prospective basis. The determination of the correct period in which to record an expense in relation to contributions to the Wildfire Insurance Fund depends, among other factors, on management's assessment of: the future occurrence and magnitude of wildfires; the involvement of SCE, or other electrical corporations which could access the Wildfire Insurance Fund, in the ignition of those fires; the probable future outcomes of CPUC cost recovery proceedings for wildfire claims, which may require reimbursement of the fund by electrical corporations; and the use of the contributions by the administrator of the Wildfire Insurance Fund. Further information regarding these factors may become available due to the actions of the fund administrator, or other entities, which could require management to reassess the period of coverage.

Edison International and SCE assess the Wildfire Insurance Fund contribution asset for impairment each reporting period. An impairment will be recorded if the Wildfire Insurance Fund contribution asset exceeds SCE's ability to benefit from the remaining coverage provided by the Wildfire Insurance Fund.

In January 2024, Edison International and SCE used Monte Carlo simulations for the annual assessment to estimate the period of coverage of the fund. This assessment was based on ten years (2014 – 2023) of historical data from wildfires caused by electrical utility equipment to estimate expected loss, resulting in an estimated fund life of 20 years from the date SCE committed to participate in the Wildfire Insurance Fund. The details of the operation of the Wildfire Insurance Fund and estimates related to claims by SCE, PG&E, and SDG&E against the fund have been applied to the expected loss simulations to estimate the period of coverage of the fund. The most sensitive inputs to the estimated period of coverage are the expected frequency of wildfire events caused by investor-owned utility electrical equipment and the estimated costs associated with those forecasted events. These inputs are most affected by the historical data used in estimating expected losses. Using a 17-year period (2007 – 2023) of historical data would further increase the period of coverage. There were fires in the service area of SCE, PG&E and SDG&E since the inception of the Wildfire Insurance Fund, including fires for which the cause is unknown, which may in the future be determined to be covered by the Wildfire Insurance Fund and have not been reflected or estimated at this time. As of the date of this filing, SCE is continuing to perform its annual assessment for 2025 to reassess its estimate of the life of the Wildfire Insurance Fund.

Effect if Different Assumptions Used. Changes in the estimated life of the insurance fund, including impairment of the fund, could have a material impact on the expense recognition.