EDISON INTERNATIONAL

Unprecedented weather conditions in California due to climate change have contributed to wildfires, including those where SCE's equipment has been alleged to be associated with the fire's ignition, that have caused loss of life and substantial damage in SCE's service area, including as recently as January 2025.

SCE continues to implement its WMP to reduce the risk of SCE equipment contributing to the ignition of wildfires. Further to the investments SCE is making as part of its WMP, SCE also uses its PSPS program to proactively de-energize power lines as a last resort to mitigate the risk of significant wildfires during extreme weather events. In addition, California has increased its investment in wildfire prevention and fire suppression capabilities. Yet, the potential for catastrophic wildfire activity in SCE's service area still exists.

Eaton Fire

In January 2025, several wind-driven wildfires impacted portions of SCE's service area, causing loss of life, substantial damage and service outages for SCE customers. One of the largest of these wildfires, the Eaton Fire, ignited in SCE's service area in Los Angeles County and spread under conditions of an extreme Santa Ana windstorm.

According to preliminary information provided by CAL FIRE, the Eaton Fire burned approximately 14,000 acres; destroyed approximately 6,018 single residence structures, 3,146 other minor structures, 96 multiple residences and 158 mixed commercial/residential and nonresidential commercial structures; damaged approximately 750 residential structures, 260 other minor structures, 28 multiple residences and 35 mixed commercial/residential and nonresidential commercial structures and resulted in 17 confirmed civilian fatalities and 9 confirmed fire personnel injuries/illnesses. In addition, fire authorities have estimated suppression costs at approximately $100 million.

The Los Angeles County Fire Department is leading the investigation into the origin and cause of the Eaton Fire, with the assistance of CAL FIRE, and has identified a preliminary area of origin of the fire. SCE has transmission facilities in the preliminary area of origin. As part of its investigation, the Los Angeles County Fire Department has requested that SCE preserve in-place its equipment in the preliminary area of origin. The SED is also conducting an investigation with respect to the Eaton Fire.

Multiple lawsuits related to the Eaton Fire have been initiated against SCE and Edison International. SCE’s ongoing internal review into the facts and circumstances of the Eaton Fire is complex and will require significant time. SCE's review includes ongoing inspections of its facilities and records and of third-party information, including analysis of concerning images and videos that suggest a possible link to SCE's transmission facilities in the preliminary area of origin. As of February 27, 2025, based on the information it has reviewed, SCE has not determined whether its equipment was associated with the ignition of the Eaton Fire.

SCE has $1.0 billion of customer-funded self-insurance coverage available for wildfires ignited between January 1, 2025 and December 31, 2025, subject to a shareholder contribution of up to $12.5 million. If SCE incurs losses in excess of $1.0 billion for claims for third-party damages related to the Eaton Fire, SCE will be reimbursed for such losses from the Wildfire Insurance Fund, subject to approval of the fund administrator and the Wildfire Insurance Fund’s claims-paying capacity, initially approximately $21 billion for all three participating utilities. PG&E is seeking reimbursement from the Wildfire Insurance Fund for losses related to the 2021 Dixie Fire and has disclosed that, as of December 31, 2024, it had recorded aggregate recoveries from the Wildfire Insurance Fund of $925 million, of which it had received $169 million. Until the fund administrator determines that the fund will be terminated, it is expected to reimburse eligible claims on a first come, first served basis, subject to the fund administrator's review.

A utility that has received reimbursement of eligible claims from the Wildfire Insurance Fund would file an application with the CPUC for review of its costs and expenses after it has resolved all or, if authorized by the CPUC, substantially all third-party damage claims related to a wildfire, or upon earlier request of the fund administrator. A utility that held a valid safety certification at the time of the relevant wildfire, like SCE did at the time of the Eaton Fire, will be presumed to have acted prudently unless a party in the proceeding creates "serious doubt" asto the reasonableness of the utility's conduct, in which case the utility will have the burden of dispelling that doubt and proving its conduct was prudent. The prudency standard does not necessitate perfect conduct and AB 1054 requires that the CPUC find that a utility is prudent if it determines that the utility's conduct related to the relevant ignition was consistent with actions of a reasonable utility. SCE believes that the CPUC's determination regarding the reasonableness of a utility's ignition-related conduct should be based on an evaluation of the reasonableness of the utility’s overall policies, systems, and practices. The CPUC has not applied the AB 1054 prudency framework to a wildfire cost-recovery proceeding.

SCE believes that it is a reasonable operator of its electric system. Neither SCE nor any fire agency has determined the cause of the Eaton Fire, including whether SCE’s transmission equipment was associated with its ignition. If it is determined that SCE’s transmission equipment was associated with the ignition of the Eaton Fire, based on the information it has reviewed as of February 27, 2025, SCE believes that it would be able to make a good faith showing that its conduct with respect to its transmission facilities in the preliminary area of origin was consistent with the actions of a reasonable utility.

The CPUC will determine the prudency of a utility’s ignition-related conduct in a formal proceeding. If the CPUC finds that a utility’s conduct was not prudent, it may nevertheless allow cost recovery in full or in part taking into account factors both within and beyond the utility's control that may have exacerbated the costs and expenses, including humidity, temperature and winds. A utility that held a safety certification at the time of the ignition will be required to reimburse the fund only for amounts disallowed by the CPUC up to the AB 1054 Liability Cap in the year that the disallowance occurs, unless the fund administrator finds that the utility's actions or inactions relative to the ignition of the fire constitute conscious or willful disregard of the rights and safety of others, in which case the utility will be required to reimburse the fund for all amounts withdrawn. The AB 1054 Liability Cap is a cap on the aggregate requirement to reimburse the Wildfire Insurance Fund over a trailing three calendar year period and is equal to 20% of the equity portion of the utility's transmission and distribution rate base, excluding general plant and intangibles, in the year of the applicable prudency determination. Utilities will be able to seek recovery of prudently incurred uninsured wildfire costs not covered by the Wildfire Insurance Fund, assessed under the prudency standard clarified under AB 1054, through electric rates.

Multiple lawsuits and investigations related to the 2017/2018 Wildfire/Mudslide Events have been initiated against SCE and Edison International. SCE has previously entered into settlements with a number of local public entities, subrogation and individual plaintiffs in the TKM and Woolsey Fire litigations and under the SED Agreement. As of February 20, 2025, in addition to the outstanding claims of approximately 290 of the approximately 15,000 initial individual plaintiffs, there were alleged and potential claims of certain public entity plaintiffs, including CAL OES, outstanding.

In 2024, SCE recorded estimated losses of $490 million for remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events. As a result, SCE also recorded expected recoveries through FERC electric rates of $27 million against the charge, and the resulting net charge to earnings was $463 million ($333 million after-tax).

Through December 31,2024, SCE has recorded estimated losses of $9.9 billion, recoveries from insurance of $2.0 billion, all of which have been collected, and expected recoveries through FERC electric rates of $440 million, $376 million of which has been collected subject to refund, related to the 2017/2018 Wildfire/Mudslide Events claims. The cumulative after-tax net charges to earnings recorded through December 31,2024, have been $5.4 billion.

As of December 31, 2024, SCE had paid $9.5 billion under executed settlements and had $86 million to be paid under executed settlements, including $57 million to be paid under the SED Agreement, related to the 2017/2018 Wildfire/Mudslide Events. After giving effect to all payment obligations under settlements entered into through December 31, 2024, Edison International's and SCE's best estimate of expected losses for remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events was $340 million.

Estimated losses for the 2017/2018 Wildfire/Mudslide Events litigation are based on a number of assumptions and are subject to change as additional information becomes available. Actual losses incurred may be higher or lower than estimated based on several factors, including the uncertainty in estimating damages that have been or may be alleged. Edison International and SCE may incur a material loss in excess of amounts accrued in connection with the remaining alleged and potential claims related to the 2017/2018 Wildfire/Mudslide Events.

CPUC-Jurisdictional Rate Recovery

In August 2023, SCE filed an application to seek CPUC-jurisdictional rate recovery of prudently incurred losses related to the Thomas Fire, the Koenigstein Fire and the Montecito Mudslides. SCE also sought recovery of approximately $65 million in restoration costs in the proceeding. In January 2025, the CPUC approved the TKM Settlement Agreement and closed the proceeding. Parties to the proceeding may file an application for rehearing through March 10, 2025. Under the TKM Settlement Agreement, SCE is authorized to recover 60%, or approximately $1.6 billion, of approximately $2.7 billion of losses, consisting of approximately $1.3 billion of uninsured claims paid as of May 31, 2024, and $0.3 billion of associated costs, composed of legal and financing costs incurred as of May 31, 2024, and estimated ongoing financing costs. SCE is also authorized to recover 60% of claims paid and related costs incurred after May 31, 2024, other than for $125 million of uninsured claims and related financing costs which SCE waived its right to seek recovery of under the SED Agreement. SCE will record a regulatory asset for recoveries permitted under the TKM Settlement Agreement in the first quarter of 2025 and will request approval from the CPUC to finance the amounts authorized under the TKM Settlement Agreement through the issuance of securitized bonds.

Under the TKM Settlement Agreement, SCE is also authorized to recover approximately $55 million of approximately $65 million in restoration costs incurred. Further, SCE will use shareholder funds to offset $50 million of wildfire mitigation expenses recorded in memorandum accounts between 2024 and 2028. Under the TKM Settlement Agreement, SCE is allowed to permanently exclude from SCE's CPUC regulatory capital structure any after-tax charges to equity associated with the costs disallowed or funded by shareholders in the TKM Settlement Agreement and the debt issued to finance those costs (For further details about SCE's CPUC authorized capital structure, see "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—SCE Dividends"). In October 2024, SCE filed an application to seek CPUC-jurisdictional rate recovery of $5.4 billion of prudently incurred losses related to the Woolsey Fire, consisting of approximately $4.4 billion of uninsured claims paid as of August 31, 2024, and $1.0 billion of associated costs, composed of legal and financing costs incurred as of August 31, 2024, and estimated ongoing financing costs. SCE is also seeking recovery of approximately $84 million in restoration costs in the proceeding. SCE will not record a regulatory asset for recoveries related to the Woolsey Fire in connection with the approval of the TKM Settlement Agreement. SCE will continue to evaluate the facts and circumstances of the Woolsey Fire cost recovery proceeding in determining if and when a regulatory asset may be recorded.

Other Wildfire Events

In addition to the 2017/2018 Wildfire/Mudslide Events, several other wildfires significantly impacted portions of SCE's service area prior to 2025, including the 2017 Creek Fire, the 2019 Saddle Ridge Fire, the 2020 Bobcat Fire, the 2020 Silverado Fire, the 2022 Coastal Fire and the 2022 Fairview Fire.

In 2024, SCE recorded estimated losses of $253 million for claims related to the Other Wildfire Events. As a result, SCE also recorded expected recoveries from insurance of $96 million and expected recoveries through electric rates of $9 million against the charge, and the resulting net charge to earnings was $148 million ($106 million after-tax).

Through December 31, 2024, SCE has recorded total estimated losses of $1.1 billion, expected recoveries from insurance and third parties of $718 million and expected recoveries through electric rates of $177 million related to the Other Wildfire Events claims. The cumulative after-tax net charges to earnings recorded through December 31, 2024, have been $175 million.

As of December 31, 2024, SCE had paid or is obligated to pay approximately $576 million under executed settlements related to the Other Wildfire Events and Edison International's and SCE's estimated losses for remaining alleged and potential claims (established at the low end of the estimated range of reasonably possible losses) related to the Other Wildfire Events was $563 million. As of the same date, SCE had assets for expected recoveries through insurance and third parties of $434 million and through electric rates of $149 million on its consolidated balance sheets related to the Other Wildfire Events.

Edison International and SCE may incur material losses in excess of the amounts accrued for certain of the Other Wildfire Events. Edison International and SCE expect that additional losses incurred in connection with any such fire, other than for the Creek Fire, will be covered by insurance, subject to self-insured retentions and co-insurance, and expect that any such additional losses after expected recoveries from insurance and through electric rates will not be material. For information on the Creek Fire, see "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides" in this report.

In light of the prudency standard the CPUC is required to apply under AB 1054 to utilities holding a safety certification at the time a wildfire ignited after July 12, 2019, SCE has concluded, at this time, that both uninsured CPUC-jurisdictional and uninsured FERC-jurisdictional wildfire-related costs related to the Other Wildfire Events that ignited after July 2019 for which it has deferred as regulatory assets are probable of recovery through electric rates. SCE will continue to evaluate the probability of recovery based on available evidence, including regulatory decisions, including any CPUC decisions illustrating the interpretation and/or application of the prudency standard under AB 1054, and, for each applicable fire, evidence that could cast serious doubt as to the reasonableness of SCE's conduct relative to that fire.

For further information on Southern California Wildfires and Mudslides, see "Risk Factors," "Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—Initial and annual contributions to the wildfire insurance fund established pursuant to California Assembly Bill 1054," "Business—Southern California Wildfires" and "Notes to Consolidated Financial Statements—Note 12. Commitments and Contingencies—Contingencies—Southern California Wildfires and Mudslides" in this report.