Derivative Instruments

3 Months Ended

Mar. 31, 2025

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Note 6.  Derivative Instruments

Derivative financial instruments are used to manage exposure to commodity price risk resulting from SCE's electricity and natural gas procurement activities. The risks of fluctuating commodity prices are managed in part by entering into forward commodity transactions, including options, swaps, and futures. To mitigate credit risk from counterparties in the event of nonperformance, master netting agreements are used whenever possible, and counterparties may be required to pledge collateral depending on the creditworthiness of each counterparty and the risk associated with the transaction.

Certain power and gas contracts contain a provision that requires SCE to maintain an investment grade rating from the major credit rating agencies, referred to as a credit-risk-related contingent feature. If SCE's credit rating were to fall below investment grade, SCE may be required to post additional collateral to cover derivative liabilities and the related

outstanding payables. The fair value of these derivative contracts and any related collateral were immaterial as of March 31, 2025 and December 31, 2024.

SCE presents its derivative assets and liabilities, recorded at fair value, on a net basis on its condensed consolidated balance sheets when subject to master netting agreements or similar agreements. Derivative positions are also offset against margin and cash collateral deposits. See Note 4 for a discussion of fair value of derivative instruments.

The following table summarizes the gross and net fair values of SCE's commodity derivative instruments:

	March 31, 2025
(in millions)	Derivative Assets Short-Term1		Derivative Liabilities Short-Term2
Commodity derivative contracts
Gross amounts recognized	$	164	$	22
Gross amounts offset in the condensed consolidated balance sheets	(9)		(9)
Cash collateral posted	—		(13)
Net amounts presented in the condensed consolidated balance sheets	$	155	$	—

	December 31, 2024
(in millions)	Derivative Assets Short-Term1		Derivative Liabilities Short-Term2
Commodity derivative contracts
Gross amounts recognized	$	213	$	47
Gross amounts offset in the condensed consolidated balance sheets	(1)		(1)
Cash collateral posted	—		(46)
Net amounts presented in the condensed consolidated balance sheets	$	212	$	—

1Included in "Other current assets" on SCE's condensed consolidated balance sheets.

2Included in "Other current liabilities" on SCE's condensed consolidated balance sheets.

At March 31, 2025, SCE posted $43 million of cash collateral, of which $13 million was offset against derivative liabilities and $30 million was reflected in "Other current assets" on SCE's condensed consolidated balance sheets. At December 31, 2024, SCE posted $74 million of cash collateral, of which $46 million was offset against derivative liabilities and $28 million was reflected in "Other current assets" on the condensed consolidated balance sheets.

Financial Statement Impact of Derivative Instruments

SCE recognizes realized gains and losses on derivative instruments as purchased power expense and unrealized gains and losses as regulatory assets or liabilities. Both realized and unrealized gains and losses are expected to be refunded to or recovered from customers and therefore do not affect earnings. Cash flows from derivative activities, including cash collateral, are reported in cash flows from operating activities in SCE's condensed consolidated statements of cash flows.

The following table summarizes the gains/(losses) of SCE's economic hedging activity:

	Three months ended March 31,
(in millions)	2025		2024
Realized	$	(40)	$	(71)
Unrealized	(23)		(28)

Notional Volumes of Derivative Instruments

The following table summarizes the notional volumes of derivatives used for SCE's economic hedging activities:

Commodity	Unit of Measure	Economic Hedges
		March 31, 2025	December 31, 2024
Electricity options, swaps and forwards	Gigawatt hours	4,571	3,295
Natural gas options, swaps and forwards	Billion cubic feet	8	4
Congestion revenue rights	Gigawatt hours	5,751	8,141