Edison International Earnings Call Nuggets: Closure Decision Parameters and License Amendment

Edison International (NYSE:EIX) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.

Closure Decision Parameters

Daniel Eggers – Credit Suisse: Listen just on SONGS and I’m sure we’ll have a litany of questions on this today. But the idea of kind of more publically stating a willingness to close the plant if you can get Unit 2 going. What do you think are the major parameters for making a decision of go, no-go while you are waiting for an NRC decision. Is it a certain level of cost incurred before you get there is it a slowness in movement by the staff or will it be some sort of CPUC involvement to maybe shape that decision?

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Theodore F. Craver Jr. – Chairman, President and CEO: I’ll take a crack at your question. I think principally the thing to understand is effectively we’re underwriting the cost here until we have certainty around the rate-making treatment. That isn’t going to get resolved for some period of time. So there is just I’ll say a general limit of how much we can continue to rack up these costs without certainty of cost recovery. So I think of it as more of a time issue than anything else, but it certainly is a combination of time and just dollars that effectively we’re underwriting with uncertainty about cost recovery.

Daniel Eggers – Credit Suisse: Then I guess in that vein is there way to lower costs while you’re waiting for a decision on units or do you have to keep them fully staffed at these levels for until there is a decision.

Theodore F. Craver Jr. – Chairman, President and CEO: It gets complicated, but there is a limit to how much you can pair down costs if you’re waiting for a decision on restart, because you can’t knock down the costs lay-off workers that type of thing and expect to bring it back on. Quickly in order to get the unit restarted. So essentially you have to run with a level of cost to keep all of the systems at the plant ready to go. So that if we get the decision to restart we can do so quickly, again, a large part of what drives us here is SONGS plays a unique role in the reliability of the grid here in Southern California and its location as well as its voltage support, and to some degree, the energy produced from it all of those things are important to reliability. We’re about to ready enter our summer periods, that’s where we have our peak demand, so we want to make sure we’re ready to go when the decision comes forward…

Jim Scilacci – EVP, CFO and Treasurer: This is Jim. I’ll just add to what Ted’s already provided you is that we had already planned as part of the 2012 general rate case to reduce our staffing at SONGS, we’ve done benchmarking and determined that it was appropriate to reduce the numbers to more competitive levels. And because of the ongoing problem with San Onofre we are very carefully watching our expenditures both capital and O&M to make sure that we don’t create the potential for future stranded costs, and so the capital was very, very – we’re watching it very carefully and only those things that we must do for safety or reliability we are undertaking.

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Daniel Eggers – Credit Suisse: Just the decision thought Ted just why you are not giving a number is to the cost exposure. A decision will be resolved this year, is that fair?

Theodore F. Craver Jr. – Chairman, President and CEO: Well, that’s what we’re trying to signal is that there’s a limit on timing and everything else. So, where I think it’s the first time we’ve kind of said it that way, but essentially we’re down to months here in terms of being able to have clarity on the NRC decision as well as clarity on some of the rate making treatment.

License Amendment

Greg Gordon – ISI Group: So, in terms of timelines for these issues I’m looking at Page 5 of your deck, you filed with the NRC the license amendment several weeks ago. Is it correct that there was sort of a specific timeframe in which they are expected to respond and then what are the series of things that would have to happen to get you to the point where they either say yes you can restart or no you can’t?

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Ronald L. Litzinger – President, Southern California Edison: On the license amendment request, Greg this is Ron. There are 30 days for public comment and 60 days for parties to provide a notice to intervene. The Commission can make a decision on the license amendment request if there’s no significant hazards consideration following the public comment period. We’re not really speculating on when they would make the call. The important thing to remember here though is it’s the confirmatory action letter response that they have to approve that will give us the permission we need to go forward with the restart…

Greg Gordon – ISI Group: But if they were to say that there was – that after 30 days hypothetically if they come back on the end of day 30 and say okay you could go ahead and restart, you still have to then subsequent to that get an approval of your specific plan before you can actually restart is that correct?

Ronald L. Litzinger – President, Southern California Edison: After the 30 days they could approve our license amendment request as a potential that’s just one component of the overall review of our confirmatory action letter response. They have to approve our confirmatory action letter response, which includes the restart plan that’s the pinching item.

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Greg Gordon – ISI Group: Then with regard to cost recovery I’m seeing here that the SONGS OII. Your proposed decisions expected Q3 2013. Ted just to circle back to the comment the answer you made to Dan’s question. You are basically proposing that there is a practical limit to how much shareholders can underwrite here and if for some reason the Commission were unable or unwilling to give you sort of financial parameters by the end of this year that would cause significant problem for you.

Theodore F. Craver Jr. – Chairman, President and CEO: I think I’m just going to end up restating the words I used before that I think what we are trying to signal. It’s difficult for us to see kind of continuing to underwrite the costs without clarity on the rate-making treatment without clarity on what the NRC decision is going to be, so there is a practical limit to how much we can absorb of that risk. I think the (pacing) here at the moment is the NRC decision, but it’s really both components that are important to us.

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