Shareholder speech for Pedro J. Pizarro 2017 Edison International annual meeting April 27, 2017, San Gabriel Hilton It s truly a privilege for me to address you today for the first time as president and CEO of Edison International. This company has a proud 131- year history as one of the builders of the Southern California region and a recognized innovator in the electric power industry. I feel really fortunate to be part of this history, and to have the opportunity to lead the outstanding teams at both our Southern California Edison utility and our Edison Energy Group of competitive businesses. In the coming years, our teams will be asked to respond to new and greater challenges and opportunities. Our company, our industry, and our global economy all are in the midst of a profound transformation. New technologies are rapidly changing the electric power landscape, giving customers and utilities alike greater choices, and creating new ways to work more efficiently in every industry. 1
It is hard to overstate the speed and scope of this transformation. For example, just a few years ago, energy companies and state regulators were concerned about having enough power to meet peak demand. Today, the reality is that we have seen so many new sources of electricity come online, mostly renewable resources like wind and especially solar, that now the concern is about having too much power at certain times of the day. In fact, we are now exploring new electric loads to use this surplus clean energy for uses like electric vehicle charging and energy storage. Meanwhile, technology continues to advance at exponential rates. The potential to combine smart and wireless digital devices with the cloud and with big data creates remarkable opportunities. Think of things like smart homes. Driverless cars. All of these developments will no doubt have major impacts on how electricity is sourced and used across the economy. This is a very different world for power companies to operate in. 2
It all sounds a little daunting, and a little uncertain, but frankly, too, it s also very exciting. We believe Edison International will lead our industry s transformation. We are the only all-electric, wires-focused, major power company operating primarily in California. And this is one of the most technologically and environmentally advanced places in the world. That puts us smack in the middle of the revolution. Our leadership means that we will better serve our customers, our state, and the environment, while creating growth and adding value for our shareholders. ` In terms of value, in 2016, we generated strong returns for shareholders. Edison International s stock closed up 22 percent. Our stock outperformed our primary benchmark, the Philadelphia Utilities Index, and the broader S&P 500 market index. Including the dividend, our total return for our shareholders in 2016 was 25 percent, again far outperforming our two main benchmarks. 3
I am happy to report that our stock price, I checked it this morning, is above $80, near an all-time high. The overall market is up, too, but we are outperforming our industry peers. In December, we increased our dividend for the thirteenth consecutive year to an annual rate of $2.17 per share a 13 percent increase. This was the third consecutive year we announced a double-digit increase. Dividend growth remains an important element of Edison International s value proposition for investors as we target dividend growth at a faster pace than SCE s earnings growth. Now I want to take a few minutes to review the strategic priorities for 2017 at each of our operating companies. Our Edison International business strategy has four key elements, three of those at SCE and one for Edison Energy Group. Starting with SCE: First we must maintain a safe and reliable wires network by investing in it. Second, we will continue our operational excellence journey to achieve top quartile performance in safety, reliability, 4
customer satisfaction and costs. And third, we want to be a key enabler of California s commitment to the substantial reduction of greenhouse gases. For our fourth strategy, at Edison Energy Group, we are pursuing new opportunities across the country, to advise commercial and industrial customers as they chart their way through this dynamic transformation of the industry. I want to talk in more detail about each of these four areas, and share a few examples of how we are executing these strategies on the ground. Number one, at SCE, we have an important job to do in owning and managing the wires network. But we are also modernizing a grid that has been around for more than 100 years and is in need of reinvestment. This grid investment will enhance safety and reliability as it enables customer choice and the use of more distributed energy resources. The trend towards distributed energy is significant. Power supply is no longer focused solely on large, central station plants. It s increasingly about distributed resources like rooftop solar and batteries, and operating the grid 5
in a safe and reliable manner, while interconnecting thousands of new devices to the system. Let me give you an example of how we are applying our long history of innovation to upgrade and modernize the grid. When there s a power outage in SCE s service territory, many customers who are on the same power line, the same circuit, are affected, and restoring service takes time. Now, our grid modernization team is moving to some of the latest technologies that can help restore service to our customers more quickly sometimes within five minutes after an outage occurs. One technology, called the Remote Integrated Switch, allows us to segment the power line to help us isolate the outage. This results in fewer customers who may be taken out of service while repairs on other portions of the line continue. The switches also provide information on the status of the line, and this can help SCE safely and reliably operate power lines and restore power much 6
more quickly. We are installing these switches in a pilot project in Santa Ana, and hope to deploy them more widely across the system in 2018. Our second big thrust is this: we not only have to invest to maintain and modernize the grid, we have to run it well. That means operational and service excellence, starting with safety, that s number one, but also looking at the other metrics: reliability, customer satisfaction, and affordability, which means managing costs. Our customers depend on that, and we are delivering results with system average costs per kilowatt hour being more than 20 percent lower than the other investor-owned utilities in California. Safety is going to continue to be our primary area of focus for SCE in 2017 and always. Although we have made progress on our journey to injury-free in recent years, we are not far enough yet, and we must further intensify our efforts in employee and public safety. To that end, we have elevated safety to the first of our company s six core values. We must eliminate serious injuries and fatalities and protect our colleagues and customers and our public from all types of injuries. 7
Now I want to give you an example of how we are applying the principles of operational and service excellence for the benefit of our customers. A couple of years ago, it took SCE about 75 days or more, on average, to process customer applications to connect their solar panels to the grid. We receive more than 50,000 of these applications each year that s one every 10 or 11 minutes -- so you can see why it might be a bit of a heavy workload with a lot of backlog. That backlog was creating significant customer dissatisfaction with SCE service. We recognized that our customers frankly deserve better service. So, our teams in Transmission & Distribution and Customer Service worked very hard together to streamline the entire approval process. By early last year, SCE was connecting customers to the grid in a little less than three days -- not 75 days, three days -- a 90 percent improvement, and we d love to get it down to a single day, so we are still working on it. These are the types of steps that we must take to meet customer expectations and deliver on our vision of the grid of the future. 8
In terms of the environment, the state of California has made a major commitment to addressing climate change, and our company will be a key player in this effort. The electric grid is a critical enabler of carbon reduction across the entire economy, not just in the power sector. Our state policymakers and our customers demand action. A poll taken recently by The Public Policy Institute of California found that 68 percent of Californians support the law passed last year that called for reducing greenhouse gas emissions to 40 percent below 1990 levels by 2030. In order to meet this ambitious mandate, and it s only 13 years away, California will have to move much more aggressively than it has in the past -- and sooner rather than later. Many of California s policies have focused on electric power generation, but that represents only 20 percent of current statewide greenhouse gas emissions. The largest source is the transportation sector, with an estimated 36 percent of current emissions. We see the efficient electrification of transportation and other industries as a key component of carbon reduction. In January, we filed our latest 9
application at the Public Utilities Commission to increase transportation electrification to help meet the state s greenhouse gas reduction goals. As we reduce carbon emissions by fueling vehicles with clean electricity rather than gasoline or diesel, we also reduce other harmful pollutants. This will improve the health and environment for many communities located near major transportation corridors, and encourage investment in disadvantaged communities. That all adds up to a strong growth opportunity at SCE -- cleaning up our air to make Southern California an even more desirable place for an increased population as we invest in electric grid improvements. Turning to our competitive businesses at Edison Energy Group: These are small today, but show promise. We re seeing that many business customers across the country want to take a different approach to energy. Some of it is driven by pure economics. Some of it is driven by sustainability objectives. 10
EEG is helping large commercial and industrial customers meet these goals by offering energy advisory services and solutions. These include commercial and community solar, energy procurement advisory, arranging contracts for renewable energy, and energy efficiency and energy management capabilities. We have had some good feedback from the marketplace, and it has been very encouraging. Our customers include a number of Fortune 1000 companies, and a dozen of the Fortune 50. General Motors, for example, is a major client. GM wants to meet its global electricity needs with 100 percent renewable energy by 2050, and Edison Energy is going to help them get there. Let me tell you about one of our recent initiatives at EEG, which I think illustrates the kind of creative thinking that our people are applying to meet customer needs. A few months ago, Altenex, one of our companies, unveiled a new service called PowerBloks. It s a financing mechanism that makes it easier for smaller companies to take advantage of renewable energy opportunities. These companies have had a hard time getting 11
access to new renewables projects due to the very large scale required, larger than they could afford. Our team at Altenex recognized the need. They partnered with a large financial company which will enter into power purchase agreements for large renewable energy projects. Our customers can then purchase smaller chunks of the renewable power to fit their needs while taking advantage of economies of scale from larger projects. That s the kind of dedication to serving customers that we re really all about. We still have work to do at Edison Energy Group to grow this into a profitable business with meaningful scale. We will complete a detailed business plan by the fall with near-term milestones that our board, management, and our investors can use to measure our progress. We are committed to implementing our competitive business strategies at a pace that creates opportunities for growth, yet is disciplined and takes a capital-light approach that does not detract from Edison International s opportunity to deliver above industry average earnings and dividend growth and resulting value for you, our investors. 12
We ve had significant changes in the past year since Ted Craver and Jim Scilacci s retirements, and all of us thank them again for their leadership. I want to end by saying how confident I am in our wonderful board and the management teams we now have in place. Bill talked about our new board governance model, and I think it is working very well. We have executives in new roles, like Maria Rigatti, and Kevin Payne and Ron Nichols at SCE. We have a talented and committed group of executives and employees across all of our companies. I m truly excited about the journey ahead with them and with you. Thank you. 13