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Edison International chief says SoCalEd in great shape for rate base expansion

subsidiarySouthern California Edison well-positioned to expand its nearly $4 billion in annual capitalexpenditure program because of transmission and distribution systemmodernization, replacement and expansion projects, electric vehicleinfrastructure, and California's 50% renewable energy generation goal,according to Edison International Chairman, President and CEO Ted Craver.

Speakingon the company's May 2 first-quarter earnings call, Craver said SoCalEd'slong-term growth potential will be reflected in the utility's next general ratecase in September. The company is looking at a rate base growth ofat least $2 billion a year, he said. "Our strategy is verymuch aligned with California's goals for a low-carbon economy and energytechnology choices for customers," Craver said.

Thecompany is steadily improving its ability to control overhead, fuel andpurchased power costs to keep customer rates low even as it continues higherlevels of capital expenditures, Craver said.

Publicpolicy initiatives support these investments as California desires a vibrant,low-carbon economy, he said. These policies are rooted in broad public supportacross income and ethnic divides, he said, adding that critical infrastructureinvestment is needed to reduce greenhouse gas emissions and other pollutants.

Inaddition, the company must spend substantial capital on routine replacement ofpower poles, underground cables and transformers, Craver said. Each year, thecompany replaces 24,000 distribution power poles, 4,000 transmission poles and500 miles of underground lines.

Theneed to adapt the power grid to changing technologies and customer preferenceswas outlined in a distribution resources plan that the company filed in thesummer of 2015. The California Public Utilities Commission is reviewing theplan as part of the early stage of its distributed generation resourceproceedings, Craver said.

Inaddition to the known capital expenditure needs, Craver said additionalinvestments in the future power grid look promising. The PUC has approved anelectric vehicle charging station pilot for the first 1,500 charging stations,but SoCalEd has plans for 30,000 charging systems to provide a third of thecharging infrastructure needed in its service territory for cars and light-dutyvehicles.

Itis possible the PUC will consider higher levels of capital expenditures forelectric vehicle charging in future years as a bill that passed the legislaturein 2015 for the 50% renewable portfolio standard also included goals fortransportation electrification, Craver said.

Whilethe electric generation sector has reduced its carbon emissions to less than20% of the state's sources, the transportation sector is responsible for nearly40% of the state's greenhouse gas emissions, he said.

ThePUC has ordered investor-owned utilities to propose higher levels oftransportation electrification that could include concepts for electrificationof trucks, buses and other heavy duty vehicles, he said.

Anotherpotential for capital expenditure growth is the PUC's energy storage initiativefor which SoCalEd has an opportunity to build facilities and put them into itsrate base. A mandated program for energy storage may include more storage inthe utility's distribution system, he said.

TheCalifornia ISO is inthe early stages of planning more transmission infrastructure to meet expandedrenewables and to integrate these renewables with adjacent power companies inother states, he said.

Whetherthe future will favor distributed generation over utility-scale generationremains to be seen, but either way SoCalEd sees opportunities for growth, andCraver said his personal view is that there will be a mix of the two models.

Whilenatural gas prices are expected to stay low, at least for the near future,California's mandate for increased renewable energy makes higher gas pricesincreasingly less problematic, he said. Also, new-build renewable energyprojects are increasingly of "equal to or better" value than naturalgas generation, so customer rates are less exposed to price spikes.

Craverconcluded that keeping rate increases below increases in the consumer priceindex will allow the company to continue investments in building an advancedsystem while contributing to an expansion in earnings and cash flow andproviding investors with interest and dividends that are higher than industryaverage.