EDISON INTERNATIONAL (Form: 10-Q, Received: 10/29/2010 09:03:23)

The Bank of New York Mellon Trust Company, N.A. , As Trustee

As Authenticating Agent

Authorized Signatory

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TABLE OF CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended September 30, 2010
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to
Commission File Number 1-9936

EDISON INTERNATIONAL
(Exact name of registrant as specified in its charter)


California		95-4137452
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
2244 Walnut Grove Avenue (P. O. Box 976) Rosemead, California		91770
(Address of principal executive offices)		(Zip Code)
(626) 302-2222 (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.


Large accelerated filer ý		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

Class		Outstanding at October 26, 2010

Common Stock, no par value		325,811,206

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TABLE OF CONTENTS


GLOSSARY			i
PART I. FINANCIAL INFORMATION			1
ITEM 1. FINANCIAL STATEMENTS			1
	Consolidated Statements of Income		1
	Consolidated Statements of Comprehensive Income		2
	Consolidated Balance Sheets		3
	Consolidated Statements of Cash Flows		5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			7
	Note 1. Summary of Significant Accounting Policies		7
	Note 2. Derivative Instruments and Hedging Activities		10
	Note 3. Liabilities and Lines of Credit		17
	Note 4. Income Taxes		18
	Note 5. Compensation and Benefit Plans		20
	Note 6. Commitments and Contingencies		23
	Note 7. Consolidated Statements of Changes in Equity		35
	Note 8. Accumulated Other Comprehensive Income		36
	Note 9. Supplemental Cash Flows Information		37
	Note 10. Fair Value Measurements		37
	Note 11. Regulatory Assets and Liabilities		43
	Note 12. Other Income and Expenses		44
	Note 13. Variable Interest Entities		44
	Note 14. Business Segments		48
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			50
	FORWARD-LOOKING STATEMENTS		50
EDISON INTERNATIONAL OVERVIEW
	Introduction		52
	Highlights of Operating Results		52
	SCE Capital Program		54
	SCE 2012 General Rate Case		55
	Environmental Developments		55
		Midwest Generation Environmental Compliance Plans and Costs	55
		Environmental Regulation Developments	56
	EMG Renewables Program		56
		Mitsubishi Lawsuit	56
	Parent Company Liquidity		57

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SOUTHERN CALIFORNIA EDISON COMPANY
	RESULTS OF OPERATIONS				58
	Electric Utility Results of Operations				58
		Three Months Ended September 30, 2010 versus September 30, 2009			59
			Utility Earning Activities		60
			Utility Cost-Recovery Activities		60
		Nine Months Ended September 30, 2010 versus September 30, 2009			61
			Utility Earning Activities		61
			Utility Cost-Recovery Activities		63
		Supplemental Operating Revenue Information			63
		Income Taxes			64
	LIQUIDITY AND CAPITAL RESOURCES				64
	Available Liquidity				64
		Debt Covenant			65
	Regulatory Proceedings				65
		Energy Efficiency Risk/Reward Incentive Mechanism			65
		2010 FERC Rate Case			65
	Dividend Restrictions				65
	Income Tax Matters				65
	Margin and Collateral Deposits				65
	Historical Consolidated Cash Flows				66
		Condensed Consolidated Statement of Cash Flows			66
			Cash Flows Provided by Operating Activities		66
			Cash Flows Provided (Used) by Financing Activities		66
			Cash Flows Used by Investing Activities		67
	Contractual Obligations and Contingencies				67
		Contractual Obligations			67
		Contingencies			67
			Environmental Remediation		67
	MARKET RISK EXPOSURES				68
	Interest Rate Risk				68
	Commodity Price Risk				68
		Natural Gas and Electricity Price Risk			68
	Credit Risk				69
EDISON MISSION GROUP
	RESULTS OF OPERATIONS				70
	Results of Continuing Operations				70
		Adjusted Operating Income (Loss) ("AOI") – Overview			71
		Adjusted Operating Income from Consolidated Operations			73
			Midwest Generation Plants		73
			Homer City Facilities		74
			Non-GAAP Disclosures—Fossil-Fueled Facilities		75
				Adjusted Operating Income	75
			Seasonal Disclosure—Fossil-Fueled Facilities		75
			Renewable Energy Projects		76

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		Energy Trading	77
	Adjusted Operating Income from Leveraged Lease Activities		77
	Adjusted Operating Income from Lease Terminations and Other		77
	Adjusted Operating Income from Unconsolidated Affiliates		77
		Doga	77
		March Point	77
		Seasonal Disclosure	77
	Interest Related Income (Expense)		78
	Income Taxes		78
Results of Discontinued Operations			78
Derivative Instruments			78
	Unrealized Gains and Losses		78
	Fair Value Disclosures		79
LIQUIDITY AND CAPITAL RESOURCES			79
Available Liquidity			79
	Small Business Jobs Act of 2010		80
Capital Investment Plan			81
Historical Consolidated Cash Flows			82
	Condensed Consolidated Statement of Cash Flows		82
		Consolidated Cash Flows Provided (Used) by Operating Activities	82
		Consolidated Cash Flows Provided (Used) by Financing Activities	82
		Consolidated Cash Flows Provided (Used) by Investing Activities	82
Credit Ratings			83
	Overview		83
	Credit Rating of EMMT		83
	Margin, Collateral Deposits and Other Credit Support for Energy Contracts		83
Debt Covenants and Dividend Restrictions			84
	Credit Facility and Financial Ratios		84
	Dividend Restrictions in Major Financings		84
	EME's Senior Notes and Guaranty of Powerton-Joliet Leases		85
Contractual Obligations and Contingencies			85
	Fuel Supply and Transportation Contracts		85
	Midwest Generation New Source Review Lawsuit		85
	Homer City New Source Review Notice of Violation		85
Off-Balance Sheet Transactions			85
Environmental Matters and Regulations			85
MARKET RISK EXPOSURES			86
Commodity Price Risk			86
	Energy Price Risk Affecting Sales from the Fossil-Fueled Facilities		86
	Capacity Price Risk		88
	Basis Risk		88
	Coal and Transportation Price Risk		89
	Emission Allowances Price Risk		89
Credit Risk			90
Interest Rate Risk			91

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EDISON INTERNATIONAL PARENT AND OTHER
	RESULTS OF OPERATIONS		92
	LIQUIDITY AND CAPITAL RESOURCES		92
	Historical Cash Flow		92
		Condensed Statement of Cash Flows	92
		Cash Flows Used by Operating Activities	92
		Cash Flows Provided (Used) by Financing Activities	92
EDISON INTERNATIONAL (CONSOLIDATED)
	CONTRACTUAL OBLIGATIONS		94
	CRITICAL ACCOUNTING ESTIMATES AND POLICIES		94
	NEW ACCOUNTING GUIDANCE		94
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			94
ITEM 4. CONTROLS AND PROCEDURES			94
	Disclosure Controls and Procedures		94
	Changes in Internal Control Over Financial Reporting		94
PART II. OTHER INFORMATION			95
ITEM 1. LEGAL PROCEEDINGS			95
	Homer City New Source Review Notice of Violation		95
	Midwest Generation New Source Review Lawsuit		95
	Mitsubishi Lawsuit		95
	Navajo Nation Litigation		95
	California Coastal Commission Potential Environmental Proceeding		95
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			96
	Purchases of Equity Securities by the Issuer and Affiliated Purchasers		96
ITEM 6. EXHIBITS			96
SIGNATURE			97

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GLOSSARY

When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below.


2009 Form 10-K		Edison International's Annual Report on Form 10-K for the year ended December 31, 2009
AB		Assembly Bill
AFUDC		allowance for funds used during construction
Ambit project		American Bituminous Power Partners, L.P.
AOI		Adjusted Operating Income (Loss)
APS		Arizona Public Service Company
ARO(s)		asset retirement obligation(s)
BACT		best available control technology
BART		best available retrofit technology
Bcf		billion cubic feet
Big 4		Kern River, Midway-Sunset, Sycamore and Watson natural gas power projects
Btu		British thermal units
CAA		Clean Air Act
CAIR		Clean Air Interstate Rule
CAISO		California Independent System Operator
CAMR		Clean Air Mercury Rule
CARB		California Air Resources Board
Commonwealth Edison		Commonwealth Edison Company
CDWR		California Department of Water Resources
CEC		California Energy Commission
CONE		cost of new entry
CPS		Combined Pollutant Standard
CPUC		California Public Utilities Commission
CRRs		congestion revenue rights
DCR		Devers-Colorado River
DOE		U.S. Department of Energy
DOJ		U.S. Department of Justice
DRA		Division of Ratepayer Advocates
DWP		Los Angeles Department of Water & Power
EME		Edison Mission Energy
EMG		Edison Mission Group Inc.
EMMT		Edison Mission Marketing & Trading, Inc.
EPS		earnings per share
ERRA		energy resource recovery account
EWG		Exempt Wholesale Generator
Exelon Generation		Exelon Generation Company LLC
FASB		Financial Accounting Standards Board
FERC		Federal Energy Regulatory Commission
FGD		flue gas desulfurization
FGIC		Financial Guarantee Insurance Company
FTRs		firm transmission rights
Four Corners		coal fueled electric generating facility located in Farmington, New Mexico in which Edison International holds a 48% ownership interest
GAAP		generally accepted accounting principles

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Global Settlement		A settlement between Edison International and the IRS that resolved federal tax disputes related to Edison Capital's cross-border, leveraged leases through 2009, and all other outstanding federal tax disputes and affirmative claims for tax years 1986 through 2002 and related matters with state tax authorities.
GRC		General Rate Case
GWh		Gigawatt-hours
Homer City		EME Homer City Generation L.P.
Illinois EPA		Illinois Environmental Protection Agency
Illinois PCB		Illinois Pollution Control Board
Investor-Owned Utilities		SCE, SDG&E and PG&E
IRS		Internal Revenue Service
ISO		Independent System Operator
kWh(s)		kilowatt-hour(s)
LIBOR		London Interbank Offered Rate
MD&A		Management's Discussion and Analysis of Financial Condition and Results of Operations in this report
MEHC		Mission Energy Holding Company
Midwest Generation		Midwest Generation, LLC
Midwest Generation Plants		EME's power plants (fossil fuel) located in Illinois
MMBtu		million British thermal units
Mohave		two coal fueled electric generating facilities that no longer operate located in Clark County, Nevada in which SCE holds a 56% ownership interest
Moody's		Moody's Investors Service
MRTU		Market Redesign and Technology Upgrade
MW		megawatts
MWh		megawatt-hours
NAAQS		national ambient air quality standards
NAPP		Northern Appalachian
NERC		North American Electric Reliability Corporation
Ninth Circuit		U.S. Court of Appeals for the Ninth Circuit
NOV		notice of violation
NO _x		nitrogen oxide
NRC		Nuclear Regulatory Commission
NSR		New Source Review
PADEP		Pennsylvania Department of Environmental Protection
Palo Verde		large pressurized water nuclear electric generating facility located near Phoenix, Arizona in which SCE holds a 15.8% ownership interest
PBOP(s)		Postretirement benefits other than pension(s)
PBR		performance-based ratemaking
PG&E		Pacific Gas & Electric Company
PJM		PJM Interconnection, LLC
POD		Presiding Officer's Decision
PRB		Powder River Basin
PSD		Prevention of Significant Deterioration
PUHCA 2005		Public Utility Holding Company Act of 2005
PX		California Power Exchange
QF(s)		qualifying facility(ies)
RGGI		Regional Greenhouse Gas Initiative
RICO		Racketeer Influenced and Corrupt Organization

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ROE		return on equity
RPM		reliability pricing model
RTO		Regional Transmission Organization
S&P		Standard & Poor's Ratings Services
San Onofre		large pressurized water nuclear electric generating facility located in south San Clemente, California in which SCE holds a 78.21% ownership interest
SB		Senate Bill
SCAQMD		South Coast Air Quality Management District
SCE		Southern California Edison Company
SCR		selective catalytic reduction
SNCR		selective non-catalytic reduction
SDG&E		San Diego Gas & Electric
SEC		U.S. Securities and Exchange Commission
SIP(s)		State Implementation Plan(s)
SO ₂		sulfur dioxide
SRP		Salt River Project Agricultural Improvement and Power District
TURN		The Utility Reform Network
US EPA		U.S. Environmental Protection Agency
VIE(s)		variable interest entity(ies)

iii

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS



Consolidated Statements of Income	Edison International
	Three Months Ended September 30,						Nine Months Ended September 30,

(in millions, except per-share amounts)	2010			2009			2010			2009

	(Unaudited)
Electric utility	$	3,097		$	3,068		$	7,502		$	7,529
Competitive power generation		691			596			1,838			1,781

Total operating revenue		3,788			3,664			9,340			9,310

Fuel		328			406			877			1,120
Purchased power		1,118			1,032			2,337			2,155
Operation and maintenance		1,102			1,093			3,285			3,136
Depreciation, decommissioning and amortization		378			365			1,127			1,053
Lease terminations and other		—			—			2			888

Total operating expenses		2,926			2,896			7,628			8,352

Operating income		862			768			1,712			958
Interest and dividend income		4			2			27			29
Equity in income from partnerships and unconsolidated subsidiaries – net		62			35			101			34
Other income		33			74			103			131
Interest expense – net of amounts capitalized		(175	)		(187	)		(518	)		(556	)
Other expenses		(12	)		(16	)		(39	)		(41	)

Income from continuing operations before income taxes		774			676			1,386			555
Income tax expense (benefit)		247			232			261			(169	)

Income from continuing operations		527			444			1,125			724
Income (loss) from discontinued operations – net of tax		(4	)		(1	)		4			(5	)

Net income		523			443			1,129			719
Less: Net income attributable to noncontrolling interests		13			40			39			82

Net income attributable to Edison International common shareholders	$	510		$	403		$	1,090		$	637

Amounts attributable to Edison International common shareholders:
Income from continuing operations, net of tax	$	514		$	404		$	1,086		$	642
Income (loss) from discontinued operations, net of tax		(4	)		(1	)		4			(5	)

Net income attributable to Edison International common shareholders	$	510		$	403		$	1,090		$	637

Basic earnings per common share attributable to Edison International common shareholders:
Weighted-average shares of common stock outstanding		326			326			326			326
Continuing operations	$	1.57		$	1.23		$	3.32		$	1.95
Discontinued operations		(0.01	)		—			0.01			(0.01	)

Total	$	1.56		$	1.23		$	3.33		$	1.94

Diluted earnings per common share attributable to Edison International common shareholders:
Weighted-average shares of common stock outstanding, including effect of dilutive securities		328			329			328			328
Continuing operations	$	1.57		$	1.22		$	3.30		$	1.95
Discontinued operations		(0.01	)		—			0.01			(0.01	)

Total	$	1.56		$	1.22		$	3.31		$	1.94

Dividends declared per common share	$	0.315		$	0.310		$	0.945		$	0.930

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Statements of Comprehensive Income			Edison International
			Three Months Ended September 30,						Nine Months Ended September 30,

(in millions)			2010			2009			2010			2009

			(Unaudited)
Net Income			$	523		$	443		$	1,129		$	719
Other comprehensive income (loss), net of tax:
	Foreign currency translation adjustments – net			—			—			—			4
	Pension and postretirement benefits other than pensions:
		Net gain arising during the period		1			—			13			1
		Amortization of net (gain) loss included in net income		1			1			(5	)		4
		Prior service adjustment arising during the period		—			—			2			—
		Amortization of prior service adjustment		—			—			(2	)		—
	Unrealized gain (loss) on derivatives qualified as cash flow hedges:
		Unrealized holding gain (loss) arising during the period, net of income tax expense (benefit) of $29 and $(4) for the three months and $41 and $44 for the nine months ended September 30, 2010 and 2009, respectively		43			(5	)		61			56
		Reclassification adjustments included in net income, net of income tax benefit of $5 and $52 for the three months and $54 and $75 for the nine months ended September 30, 2010 and 2009, respectively		(7	)		(72	)		(80	)		(104	)

Other comprehensive income (loss)				38			(76	)		(11	)		(39	)

Comprehensive income				561			367			1,118			680
Less: Comprehensive income attributable to noncontrolling interests				13			40			39			82

Comprehensive income attributable to Edison International			$	548		$	327		$	1,079		$	598

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Balance Sheets		Edison International
(in millions)		September 30, 2010			December 31, 2009

		(Unaudited)
ASSETS
Cash and equivalents		$	2,009		$	1,673
Short-term investments			4			10
Receivables, less allowances of $59 and $53 for uncollectible accounts at respective dates			1,075			1,017
Accrued unbilled revenue			612			347
Inventory			547			533
Derivative assets			174			357
Restricted cash			15			69
Margin and collateral deposits			91			125
Regulatory assets			404			120
Other current assets			110			179

Total current assets			5,041			4,430

Competitive power generation and other property – less accumulated depreciation of $1,794 and $2,231 at respective dates			5,265			5,147
Nuclear decommissioning trusts			3,347			3,140
Investments in partnerships and unconsolidated subsidiaries			581			216
Other investments			251			251

Total investments and other assets			9,444			8,754

Utility plant, at original cost:
	Transmission and distribution		23,747			22,214
	Generation		2,731			2,667
Accumulated depreciation			(6,097	)		(5,921	)
Construction work in progress			3,020			2,701
Nuclear fuel, at amortized cost			340			305

Total utility plant			23,741			21,966

Derivative assets			266			268
Restricted deposits			44			43
Rent payments in excess of levelized rent expense under plant operating leases			1,186			1,038
Regulatory assets			5,227			4,139
Other long-term assets			617			806

Total long-term assets			7,340			6,294

Total assets		$	45,566		$	41,444

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Balance Sheets	Edison International
(in millions, except share amounts)	September 30, 2010		December 31, 2009

	(Unaudited)
LIABILITIES AND EQUITY
Short-term debt	$	98	$	85
Current portion of long-term debt		43		377
Accounts payable		1,228		1,347
Accrued taxes		163		186
Accrued interest		200		196
Customer deposits		224		238
Derivative liabilities		231		107
Regulatory liabilities		804		367
Other current liabilities		896		884

Total current liabilities		3,887		3,787

Long-term debt		12,117		10,437

Deferred income taxes		4,896		4,334
Deferred investment tax credits		103		102
Customer advances		114		119
Derivative liabilities		1,330		529
Pensions and benefits		2,143		2,061
Asset retirement obligations		3,372		3,241
Regulatory liabilities		3,663		3,328
Other deferred credits and other long-term liabilities		2,395		2,500

Total deferred credits and other liabilities		18,016		16,214

Total liabilities		34,020		30,438

Commitments and contingencies (Note 6)
Common stock, no par value (800,000,000 shares authorized; 325,811,206 shares issued and outstanding at each date)		2,325		2,304
Accumulated other comprehensive income		26		37
Retained earnings		8,283		7,500

Total Edison International's common shareholders' equity		10,634		9,841
Noncontrolling interests		5		258
Preferred and preference stock of utility not subject to mandatory redemption		907		907

Total equity		11,546		11,006

Total liabilities and equity	$	45,566	$	41,444

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Statements of Cash Flows		Edison International
		Nine Months Ended September 30,
(in millions)		2010			2009

		(Unaudited)
Cash flows from operating activities:
Net income		$	1,129		$	719
Less: Income (loss) from discontinued operations			4			(5	)

Income from continuing operations			1,125			724
Adjustments to reconcile to net cash provided by operating activities:
	Depreciation, decommissioning and amortization		1,127			1,053
	Regulatory impacts of net nuclear decommissioning trust earnings (reflected in accumulated depreciation)		106			133
	Other amortization		90			95
	Lease terminations and other		2			888
	Stock-based compensation		20			17
	Equity in income from partnerships and unconsolidated subsidiaries – net		(101	)		(34	)
	Distributions and dividends from unconsolidated entities		76			5
	Deferred income taxes and investment tax credits		414			(1,322	)
	Income from leveraged leases		(3	)		(13	)
Changes in operating assets and liabilities:
	Receivables		(184	)		(154	)
	Inventory		(27	)		4
	Restricted cash		53			(148	)
	Margin and collateral deposits – net of collateral received		32			(99	)
	Other current assets		(244	)		(65	)
	Rent payments in excess of levelized rent expense		(148	)		(161	)
	Accounts payable		28			267
	Accrued taxes		(23	)		(318	)
	Other current liabilities		(129	)		9
	Derivative assets and liabilities – net		1,079			(414	)
	Regulatory assets and liabilities – net		(530	)		951
	Proceeds from U.S. Treasury grants		92			—
	Other assets		(42	)		(136	)
	Other liabilities		(67	)		835
Operating cash flows from discontinued operations			4			(5	)

Net cash provided by operating activities			2,750			2,112

Cash flows from financing activities:
Long-term debt issued			1,652			939
Long-term debt issuance costs			(35	)		(25	)
Long-term debt repaid			(371	)		(566	)
Bonds repurchased			—			(219	)
Short-term debt financing – net			13			(2,058	)
Settlements of stock-based compensation – net			(7	)		4
Cash contributions from noncontrolling interests			—			2
Dividends and distributions to noncontrolling interests			(39	)		(88	)
Dividends paid			(308	)		(303	)

Net cash provided (used) by financing activities		$	905		$	(2,314	)

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Statements of Cash Flows	Edison International
	Nine Months Ended September 30,
(in millions)	2010			2009

	(Unaudited)
Cash flows from investing activities:
Capital expenditures	$	(3,129	)	$	(2,287	)
Purchase of interest in acquired companies		(4	)		(7	)
Proceeds from termination of leases		—			1,420
Proceeds from sale of nuclear decommissioning trust investments		903			1,814
Purchases of nuclear decommissioning trust investments and other		(1,036	)		(1,977	)
Proceeds from partnerships and unconsolidated subsidiaries, net of investment		35			10
Maturities and sale of short-term investments		7			3
Purchases of short-term investments		(1	)		(1	)
Investments in other assets		(3	)		(278	)
Effect of consolidation and deconsolidation of variable interest entities		(91	)		—

Net cash used by investing activities		(3,319	)		(1,303	)

Net increase (decrease) in cash and equivalents		336			(1,505	)
Cash and equivalents, beginning of period		1,673			3,916

Cash and equivalents, end of period	$	2,009		$	2,411

The accompanying notes are an integral part of these consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

Edison International's principal wholly owned subsidiaries are SCE, a rate-regulated electric utility that supplies electric energy to a 50,000 square-mile area of central, coastal and southern California; and EMG, a wholly owned competitive power generation subsidiary. EMG is a holding company whose subsidiaries and affiliates are engaged in the business of developing, acquiring, owning or leasing, operating and selling energy and capacity from independent power production facilities. EMG's subsidiaries also conduct hedging and energy trading activities in competitive power markets.

Basis of Presentation

Edison International's significant accounting policies were described in Note 1 of "Edison International Notes to Consolidated Financial Statements" included in the 2009 Form 10-K. Edison International follows the same accounting policies for interim reporting purposes, with the exception of accounting principles adopted as of January 1, 2010 as discussed below in "—New Accounting Guidance." This quarterly report should be read in conjunction with such financial statements.

In the opinion of management, all adjustments, including recurring accruals, have been made that are necessary to fairly state the consolidated financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States of America for the periods covered by this quarterly report on Form 10-Q. The results of operations for the three- and nine-month periods ended September 30, 2010 are not necessarily indicative of the operating results for the full year.

The December 31, 2009 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. Except as indicated, amounts presented in the Notes to the Consolidated Financial Statements relate to continuing operations.

Cash and Equivalents

Cash equivalents included money market funds totaling $1.71 billion and $1.46 billion at September 30, 2010 and December 31, 2009, respectively. The carrying value of cash equivalents approximates the fair value, as all investments have maturities of three months or less. For further discussion of money market funds, see Note 10.

Edison International temporarily invests the ending daily cash balance in its primary disbursement accounts until required for check clearing. Edison International reclassified $320 million and $224 million of checks issued against these accounts, but not yet paid by the financial institution, from cash to accounts payable at September 30, 2010 and December 31, 2009, respectively.

Earnings Per Share

Edison International computes EPS using the two-class method, which is an earnings allocation formula that determines EPS for each class of common stock and participating security. Edison International's participating securities are stock-based compensation awards payable in common shares, including stock options, performance shares and restricted stock units, which earn dividend equivalents on an equal basis with common shares. Stock options awarded during the period 2003 through 2006 received dividend equivalents. Stock options awarded prior to 2003 and after 2006 were granted without a

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dividend equivalent feature. EPS attributable to Edison International common shareholders was computed as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,


(in millions, except per share amounts)	2010			2009			2010			2009

	(Unaudited)
Basic earnings per share – continuing operations:
Income from continuing operations attributable to common shareholders, net of tax	$	514		$	404		$	1,086		$	642
Participating securities dividends		(3	)		(4	)		(5	)		(5	)

Income from continuing operations available to common shareholders	$	511		$	400		$	1,081		$	637

Weighted average common shares outstanding		326			326			326			326

Basic earnings per share – continuing operations	$	1.57		$	1.23		$	3.32		$	1.95

Diluted earnings per share – continuing operations:
Income from continuing operations available to common shareholders	$	511		$	400		$	1,081		$	637
Income impact of assumed conversions		2			2			3			2

Income from continuing operations and assumed conversions available to common shareholders	$	513		$	402		$	1,084		$	639

Weighted average common shares outstanding		326			326			326			326
Incremental shares from assumed conversions		2			3			2			2

Adjusted weighted average shares – diluted		328			329			328			328

Diluted earnings per share – continuing operations	$	1.57		$	1.22		$	3.30		$	1.95

Stock-based compensation awards to purchase 9,700,218 and 6,279,410 shares of common stock for the three months ended September 30, 2010 and 2009, respectively, and 6,154,826 and 8,645,549 shares of common stock for the nine months ended September 30, 2010 and 2009, respectively, were outstanding, but were not included in the computation of diluted earnings per share because the exercise price of the awards was greater than the average market price of the common shares; and therefore, the effect would have been antidilutive.

Inventory

Inventory is stated at the lower of cost or market, cost being determined by the weighted-average cost method for fuel, and the average cost method for materials and supplies. Inventory at September 30, 2010 and December 31, 2009 consisted of the following:

(in millions)	September 30, 2010		December 31, 2009


	(Unaudited)
Coal, gas, fuel oil and raw materials	$	171	$	158
Spare parts, materials and supplies		376		375

Total	$	547	$	533

Margin and Collateral Deposits

Margin and collateral deposits include cash deposited with counterparties and brokers and cash received from counterparties and brokers as credit support under energy contracts. The amount of margin and collateral deposits generally varies based on changes in the value of the positions. Edison

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International nets margin and cash collateral deposits subject to a master netting arrangement with its derivative positions on its consolidated balance sheets. The following table summarizes margin and collateral deposits provided to and received from counterparties:

(in millions)		September 30, 2010		December 31, 2009


		(Unaudited)
Collateral provided to counterparties:
	Offset against derivative liabilities	$	9	$	49
	Reflected in margin and collateral deposits		91		125
Collateral received from counterparties:
	Offset against derivative assets		118		124
	Reflected in other current liabilities		56		59

New Accounting Guidance

Accounting Guidance Adopted in 2010

Consolidation – Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities

The FASB issued an accounting standards update that changes how a company determines when an entity, that is insufficiently capitalized or is not controlled through voting (or similar rights), should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an ability to direct the activities of the entity that most significantly impact the entity's economic performance and whether the entity has an obligation to absorb losses or the right to receive expected returns of the entity. This guidance requires a company to provide additional disclosures about its involvement with variable interest entities and any significant changes in risk exposure due to that involvement. Edison International adopted this guidance prospectively effective January 1, 2010. The impact of adopting this guidance resulted in the deconsolidation of assets totaling $683 million and the consolidation of assets totaling $99 million at January 1, 2010, and resulted in a cumulative effect adjustment which increased retained earnings by $15 million. For further discussion, see Note 13.

Fair Value Measurements and Disclosures

The FASB issued an accounting standards update that provides for new disclosure requirements related to fair value measurements. The requirements, which Edison International adopted effective January 1, 2010, include separate disclosure of significant transfers in and out of Levels 1 and 2 and the reasons for the transfers. The update also clarified existing disclosure requirements for the level of disaggregation, inputs and valuation techniques. In addition, effective January 1, 2011, the Level 3 reconciliation of fair value measurements using significant unobservable inputs should include gross rather than net information about purchases, sales, issuances and settlements. The guidance impacts disclosures only. For further discussion, see Note 10.

Accounting Guidance Not Yet Adopted

In October 2009, the FASB issued amended guidance for identifying separate deliverables in a revenue-generating transaction where multiple deliverables exist, and provides guidance for allocating and recognizing revenue based on those separate deliverables. This update also requires additional

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disclosure related to the significant assumptions used to determine the revenue recognition of the separate deliverables. This guidance is effective beginning January 1, 2011 and is required to be applied prospectively to new or significantly modified revenue arrangements. Edison International is currently assessing the effects this guidance may have on its consolidated financial statements.

Note 2. Derivative Instruments and Hedging Activities

Electric Utility

Commodity Price Risk

SCE is exposed to commodity price risk, which represents the potential impact that can be caused by a change in the market value of a particular commodity. SCE's hedging program reduces ratepayer exposure to variability in market prices related to SCE's power and gas activities. As part of this program, SCE enters into energy options, swaps, forward arrangements, tolling arrangements and congestion revenue rights ("CRRs"). These transactions are pre-approved by the CPUC or executed in compliance with CPUC-approved procurement plans. SCE recovers its related hedging costs through the ERRA balancing account and as a result, exposure to commodity price risk is not expected to impact earnings, but may impact cash flows.

SCE's electricity price exposure arises from energy produced and sold in the MRTU market as a result of differences between SCE's load requirements versus the amount of energy delivered from its generating facilities, existing bilateral contracts and CDWR contracts allocated to SCE.

A portion of SCE's purchased power supply is subject to natural gas price volatility. SCE's natural gas price exposure arises from purchasing natural gas for generation at the Mountainview power plant and peaker plants, from bilateral contracts where pricing is based on natural gas prices (this includes contract energy prices for some renewable QFs which are based on the monthly index price of natural gas delivered at the southern California border), and power contracts in which SCE has agreed to provide the natural gas needed for generation, referred to as tolling arrangements.

Notional Volumes of Derivative Instruments

The following table summarizes the notional volumes of derivatives used for hedging activities:

		Economic Hedges

Commodity	Unit of Measure	September 30, 2010		December 31, 2009

		(Unaudited)
Electricity options, swaps and forward arrangements	GWh		12,721		14,868
Natural gas options, swaps and forward arrangements	Bcf		272		266
Congestion revenue rights	GWh		146,538		195,367
Tolling arrangements ¹	GWh		115,681		116,398

¹: In compliance with a CPUC mandate, SCE held an open, competitive solicitation that produced agreements with different project developers who have agreed to construct new southern California generating resources. SCE has entered into a number of contracts which are recorded as derivative instruments. The contracts provide for fixed capacity payments as well as pricing for energy delivered based on a heat rate and contractual operation and maintenance prices. However, due to uncertainty regarding the availability of required emission credits, some of the new generating resources may not be constructed and the contracts associated with these resources could therefore terminate, at which time SCE would no longer account for these contracts as derivatives.

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Fair Value of Derivative Instruments

The following table summarizes the gross and net fair values of commodity derivative instruments at September 30, 2010:

		Derivative Assets						Derivative Liabilities


(in millions)		Short- Term		Long- Term		Subtotal		Short- Term			Long- Term		Subtotal			Net Liability

		(Unaudited)
Non-trading activities:
	Economic hedges	$	69	$	192	$	261	$	230		$	1,298	$	1,528		$	1,267
	Netting and collateral		—		—		—		(5	)		—		(5	)		(5	)

Total		$	69	$	192	$	261	$	225		$	1,298	$	1,523		$	1,262

The following table summarizes the gross and net fair values of commodity derivative instruments at December 31, 2009:

		Derivative Assets						Derivative Liabilities


(in millions)		Short- Term		Long- Term		Subtotal		Short- Term		Long- Term		Subtotal		Net Liability

		(Unaudited)
Non-trading activities:
	Economic hedges	$	160	$	187	$	347	$	102	$	496	$	598	$	251

Income Statement Impact of Derivative Instruments

SCE recognizes realized gains and losses on derivative instruments as purchased-power expense and recovers these costs, subject to reasonableness review, from ratepayers. As a result, realized gains and losses are not reflected in earnings, but may temporarily affect cash flows. Due to expected future recovery from ratepayers, unrealized gains and losses are recorded as regulatory assets or liabilities and therefore are also not reflected in earnings. The results of derivative activities and related regulatory offsets are recorded in cash flows from operating activities in the consolidated statements of cash flows.

The following table summarizes the components of economic hedging activity:

	Three Months Ended September 30,						Nine Months Ended September 30,


(in millions)	2010			2009			2010			2009

	(Unaudited)
Realized loss	$	(53	)	$	(113	)	$	(116	)	$	(307	)
Unrealized gain (loss)		(165	)		(198	)		(1,022	)		428

Contingent Features/Credit-Related Exposure

Certain derivative instruments and power procurement contracts under SCE's power and natural gas hedging activities contain collateral requirements. SCE has historically provided collateral in the form of cash and/or letters of credit for the benefit of counterparties. These requirements can vary depending upon the level of unsecured credit extended by counterparties, changes in market prices relative to contractual commitments, and other factors.

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Certain of these power contracts contain a provision that requires SCE to maintain an investment grade credit rating from each of 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 pay the derivative liability or post additional collateral. The aggregate fair value of all derivative liabilities with these credit-risk-related contingent features was $240 million and $91 million, as of September 30, 2010 and December 31, 2009, respectively, for which SCE has posted no collateral to its counterparties. If the credit-risk-related contingent features underlying these agreements were triggered on September 30, 2010, SCE would be required to post $16 million of additional collateral based on the contractual terms.

Competitive Power Generation

EMG uses derivative instruments to reduce its exposure to market risks that arise from fluctuations in prices of electricity, capacity, fuel, emission allowances, and transmission rights. Additionally, EMG's financial results can be affected by fluctuations in interest rates. To the extent that EMG does not use derivative instruments to hedge these market risks, the unhedged portions will be subject to the risks and benefits of spot market price movements.

Risk management positions may be designated as cash flow hedges or economic hedges, which are derivatives that are not designated as cash flow hedges. Economic hedges are accounted for at fair value on EMG's consolidated balance sheets with offsetting changes recorded in the consolidated statements of income. For transactions that qualify for accounting hedge treatment, the fair value is recognized, to the extent effective, on EMG's consolidated balance sheets with offsetting changes in fair value recognized in accumulated other comprehensive income until the related forecasted transaction occurs.

Derivative instruments that are utilized for trading purposes are measured at fair value and included in the balance sheet as derivative assets or liabilities. Changes in fair value are recognized in the consolidated statements of income.

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Notional Volumes of Derivative Instruments

The following table summarizes the notional volumes of derivatives used for hedging and trading activities:

September 30, 2010

				Hedging Activities
Commodity	Instrument	Classification	Unit of Measure	Cash Flow Hedges			Economic Hedges			Trading Activities

				(Unaudited)
Electricity	Forwards/Futures	Sales	GWh		26,322	¹		15,995	³		33,485
Electricity	Forwards/Futures	Purchases	GWh		408	¹		16,529	³		35,741
Electricity	Capacity	Sales	MW-Day (in thousands)		195	²		—			150	²
Electricity	Capacity	Purchases	MW-Day (in thousands)		12	²		—			461	²
Electricity	Congestion	Sales	GWh		—			136	⁴		10,977	⁴
Electricity	Congestion	Purchases	GWh		—			1,016	⁴		210,974	⁴
Natural gas	Forwards/Futures	Sales	bcf		—			0.6			37.3
Natural gas	Forwards/Futures	Purchases	bcf		—			—			36.4
Fuel oil	Forwards/Futures	Sales	barrels		—			150,000			319,000
Fuel oil	Forwards/Futures	Purchases	barrels		—			495,000			329,000
Coal	Forwards/Futures	Sales	tons		—			—			1,794,750
Coal	Forwards/Futures	Purchases	tons		—			—			1,748,250

(in millions)

Instrument	Purpose	Type of Hedge	Notional Amount		Expiration Date

			(Unaudited)
Amortizing interest rate swap	Convert floating rate (6-month LIBOR) debt to fixed rate (3.175%) debt	Cash flow	$	145	June 2016
Amortizing forward starting interest rate swap	Convert floating rate (3-month LIBOR) debt to fixed rate (4.29%) debt	Cash flow		122	December 2025
Amortizing forward starting interest rate swap	Convert floating rate (3-month LIBOR) debt to fixed rate (3.46%) debt	Cash flow		68	March 2026

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December 31, 2009


				Hedging Activities

Commodity	Instrument	Classification	Unit of Measure	Cash Flow Hedges			Economic Hedges			Trading Activities

				(Unaudited)
Electricity	Forwards/Futures	Sales	GWh		24,355	¹		26,838	³		23,306
Electricity	Forwards/Futures	Purchases	GWh		106	¹		25,971	³		23,404
Electricity	Capacity	Sales	MW-Day (in thousands)		254	²		1	²		597	²
Electricity	Capacity	Purchases	MW-Day (in thousands)		11	²		2	²		736	²
Electricity	Congestion	Sales	GWh		—			136	⁴		10,212	⁴
Electricity	Congestion	Purchases	GWh		—			1,576	⁴		181,930	⁴
Natural gas	Forwards/Futures	Sales	bcf		—			3.3			30.8
Natural gas	Forwards/Futures	Purchases	bcf		—			—			30.6
Fuel oil	Forwards/Futures	Sales	barrels		—			250,000			120,000
Fuel oil	Forwards/Futures	Purchases	barrels		—			625,000			120,000

(in millions)

Instrument	Purpose	Type of Hedge	Notional Amount		Expiration Date

			(Unaudited)
Amortizing interest rate swap	Convert floating rate (6-month LIBOR) debt to fixed rate (3.175%) debt	Cash flow	$	160	June 2016

¹: EMG's hedge products include forward and futures contracts that qualify for hedge accounting. This category excludes power contracts for the fossil-fueled facilities which meet the normal sales and purchase exception and are accounted for on the accrual method.
²: EMG's hedge transactions for capacity result from bilateral trades. Capacity sold in the PJM RPM auction is not accounted for as a derivative.
³: EMG also entered into transactions that adjust financial and physical positions, or day-ahead and real-time positions to reduce costs or increase gross margin. These positions largely offset each other. The net sales positions of these categories are primarily related to hedge transactions that are not designated as cash flow hedges.
⁴: Congestion contracts include financial transmission rights, transmission congestion contracts or congestion revenue rights. These positions are similar to a swap, where the buyer is entitled to receive a stream of revenues (or charges) based on the hourly day-ahead price differences between two locations.

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Fair Value of Derivative Instruments

The following table summarizes the fair value of derivative instruments reflected on EMG's consolidated balance sheets:

September 30, 2010

		Derivative Assets									Derivative Liabilities

(in millions)		Short-term			Long-term			Subtotal			Short-term			Long-term			Subtotal			Net Assets

		(Unaudited)
Non-trading activities
	Cash flow hedges	$	151		$	33		$	184		$	4		$	36		$	40		$	144
	Economic hedges		108			7			115			101			7			108			7
Trading activities			246			137			383			209			70			279			104

			505			177			682			314			113			427			255
Netting and collateral received ¹			(400	)		(103	)		(503	)		(308	)		(81	)		(389	)		(114	)

Total		$	105		$	74		$	179		$	6		$	32		$	38		$	141

December 31, 2009

		Derivative Assets									Derivative Liabilities

(in millions)		Short-term			Long-term			Subtotal			Short-term			Long-term			Subtotal			Net Assets

		(Unaudited)
Non-trading activities
	Cash flow hedges	$	240		$	17		$	257		$	69		$	6		$	75		$	182
	Economic hedges		202			8			210			180			—			180			30
Trading activities			234			111			345			182			41			223			122

			676			136			812			431			47			478			334
Netting and collateral received ¹			(479	)		(55	)		(534	)		(426	)		(32	)		(458	)		(76	)

Total		$	197		$	81		$	278		$	5		$	15		$	20		$	258

¹: Netting of derivative receivables and derivative payables and the related cash collateral received and paid is permitted when a legally enforceable master netting agreement exists with a derivative counterparty.

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Income Statement Impact of Derivative Instruments

The following table provides the activity of accumulated other comprehensive income, containing the information about the changes in the fair value of cash flow hedges and reclassification from accumulated other comprehensive income into results of operations:

	Cash Flow Hedge Activity ¹ Nine Months Ended September 30,

(in millions)	2010			2009			Income Statement Location

	(Unaudited)
Accumulated other comprehensive income derivative gain at January 1	$	175		$	398
Effective portion of changes in fair value		102			100
Reclassification from accumulated other comprehensive income to net income		(134	)		(179	)	Competitive power generation revenue

Accumulated other comprehensive income derivative gain at September 30	$	143		$	319

¹: Unrealized derivative gains are before income taxes. The after-tax amounts recorded in accumulated other comprehensive income at September 30, 2010 and 2009 were $86 million and $192 million, respectively.

The portion of a cash flow hedge that does not offset the change in the value of the transaction being hedged, which is commonly referred to as the ineffective portion, is immediately recognized in earnings.

EMG recorded a net gain of $4 million and $11 million during the third quarters of 2010 and 2009, respectively, and $5 million and $16 million during the nine months ended September 30, 2010 and 2009, respectively, representing the amount of cash flow hedge ineffectiveness and are reflected in "Competitive power generation" revenue on the consolidated statements of income.

The effect of realized and unrealized gains (losses) from derivative instruments used for economic hedging and trading purposes on the consolidated statements of income is presented below:

		Three Months Ended September 30,					Nine Months Ended September 30,


(in millions)	Income Statement Location	2010		2009			2010		2009

		(Unaudited)
Economic hedges	Competitive power generation revenue	$	7	$	19		$	—	$	35
	Fuel costs		2		(2	)		—		12
Trading activities	Competitive power generation revenue		28		16			108		43

Contingent Features/Credit Related Exposure

Certain derivative instruments contain margin and collateral deposit requirements. Since EME's credit ratings are below investment grade, EME has provided collateral in the form of cash and letters of credit for the benefit of counterparties related to the net of accounts payable, accounts receivable, unrealized losses and unrealized gains in connection with derivative activities. Certain derivative contracts do not require margin, but contain provisions that require EME or Midwest Generation to comply with the terms and conditions of their respective credit facilities. The credit facilities each contain financial covenants. Some hedge contracts include provisions related to a change in control or material adverse effect resulting from amendments or modifications to the related credit facility. Failure

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by EME or Midwest Generation to comply with these provisions may result in a termination event under the hedge contracts, enabling the counterparties to terminate and liquidate all outstanding transactions and demand immediate payment of amounts owed to them. EMMT has hedge contracts that do not require margin, but provide that each party can request additional credit support in the form of adequate assurance of performance in the case of an adverse development affecting the other party. The aggregate fair value of all derivative instruments with credit-risk-related contingent features is in an asset position at September 30, 2010 and, accordingly, the contingent features described above do not currently have a liquidity exposure. Future increases in power prices could expose EME, Midwest Generation or EMMT to termination payments or additional collateral postings under the contingent features described above.

Note 3. Liabilities and Lines of Credit

Long-Term Debt

In March 2010, SCE issued $500 million of 5.5% first and refunding mortgage bonds due in 2040. In May 2010, SCE reissued $144 million of 5.0% tax-exempt pollution control bonds due in 2035. In August 2010, SCE issued $500 million of 4.5% first and refunding mortgage bonds due in 2040. These issuances are part of long-term financing plans to fund SCE's capital program.

In July 2010, EMG completed through its subsidiary, Laredo Ridge Wind, LLC, a non-recourse financing of its interests in the Laredo Ridge wind project. The financing included a $53 million bridge loan, secured by the expected U.S. Treasury grant, immediately due to be fully repaid upon receipt of the U.S. Treasury grant and no later than December 31, 2011. As of September 30, 2010, there was $50 million outstanding under the bridge loan at a weighted average interest rate of 2.76% classified as long-term obligations.

EMG consolidated the Ambit project on January 1, 2010. At September 30, 2010, this project had $71 million of bonds payable, which are supported by a letter of credit. Principal payments are due annually through October 1, 2017. Interest rates are reset weekly based on current bond yields for similar securities. The average interest rate for the nine months ended September 30, 2010 was 0.27%. Annual maturities of this debt at September 30, 2010 for the next five years are summarized as follows: $8 million in 2010, $8 million in 2011, $9 million in 2012, $10 million in 2013, and $10 million in 2014. In January 2010, Edison Capital repaid in full its medium-term loans. The balance of these loans was $89 million at December 31, 2009.

In September 2010, Edison International (parent) issued $400 million of 3.75% senior notes due in 2017. The proceeds from these bonds were used to repay short-term borrowings under the revolving credit facility and the remainder for corporate liquidity purposes.

Credit Agreements and Short-Term Debt

In March 2010, SCE replaced its $500 million 364-day revolving credit facility with a new $500 million three-year credit facility that terminates in March 2013.

In March 2010, EMG completed through its subsidiary, Cedro Hill Wind, LLC, a non-recourse financing of its interests in the Cedro Hill wind project. The financing included a $135 million construction loan that is required to be converted to a 15-year amortizing term loan by May 31, 2011, subject to meeting specified conditions. As of September 30, 2010, there was $78 million outstanding under the construction loan at a weighted average interest rate of 3.26%.

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In July 2010, EMG completed through its subsidiary, Laredo Ridge Wind, LLC, a non-recourse financing of its interests in the Laredo Ridge wind project. The financing included a $75 million construction loan required to be converted to a 15-year amortizing term loan by August 31, 2011, subject to meeting specified conditions. As of September 30, 2010, there was $20 million outstanding under the construction loan at a weighted average interest rate of 3.01% classified as a construction loan.

Letters of Credit

Letters of credit issued under SCE's credit facilities aggregated $11 million and are scheduled to expire in twelve months or less. As of September 30, 2010, letters of credit issued under EME and its subsidiaries' credit facilities aggregated $133 million and are scheduled to expire as follows: $8 million in 2010 and $125 million in 2011.

Note 4. Income Taxes

Effective Tax Rate

The table below contains a reconciliation of income tax expense computed at the federal statutory income tax rate to the income tax provision from continuing operations attributable to common shareholders:

			Three Months Ended September 30,						Nine Months Ended September 30,


(in millions)			2010			2009			2010			2009

			(Unaudited)
Provision for income tax at federal statutory rate of 35%			$	266		$	223		$	471		$	166
Increase (decrease) in income tax from:
	Items presented with related state income tax, net
		Global Settlement related		(37	)		—			(175	)		(298	)
		Change in tax accounting method for asset removal costs		—			—			(40	)		—
	State tax – net of federal benefit			34			5			57			1
	Health care legislation			—			—			39			—
	Production and housing credits			(14	)		(12	)		(48	)		(46	)
	Property-related and other			(2	)		16			(43	)		8

Total income tax expense from continuing operations			$	247		$	232		$	261		$	(169	)

Pre-tax income from continuing operations			$	761		$	636		$	1,347		$	473

Effective tax rate				32%			36%			19%			(36%	)

The CPUC requires flow-through rate-making treatment for the current tax benefit arising from certain property-related and other temporary differences which reverse over time. The accounting treatment for these temporary differences results in recording regulatory assets and liabilities for amounts that would otherwise be recorded to deferred income tax expense.

Global Settlement

During 2010, Edison International recognized a $175 million earnings benefit relating to the Global Settlement, including $138 million in the second quarter resulting from acceptance by the California Franchise Tax Board of the tax positions finalized with the IRS in 2009 and revision to interest recorded on the federal Global Settlement, and $37 million in the third quarter resulting from receipt of the final interest determination from the California Franchise Tax Board.

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During the nine months ended September 30, 2009, Edison International recorded a consolidated after-tax earnings charge of $274 million related to the Global Settlement finalized with the IRS and termination of Edison Capital's cross-border leases ($920 million pre-tax loss). (See discussion of Global Settlement in "Item 8. Edison International Notes to Consolidated Financial Statements—Note 4. Income Taxes" of the 2009 Form 10-K.)

Change in Tax Accounting Method for Asset Removal Costs

During the second quarter of 2010, the IRS approved Edison International's request to change its tax accounting method for asset removal costs primarily related to SCE's infrastructure replacement program. As a result, Edison International recognized a $40 million earnings benefit ($28 million of which relates to asset removal costs incurred prior to 2010) from deducting asset removal costs earlier in the construction cycle. These deductions are recorded on a flow-through basis.

Health Care Legislation

During the first quarter of 2010, Edison International recognized a $39 million non-cash charge to reverse previously recognized federal tax benefits eliminated by the federal health care legislation enacted in March 2010. The Patient Protection and Affordable Care Act, as modified by the Health Care and Education Reconciliation Act, includes a provision that eliminates the federal tax deduction of retiree health care costs to the extent those costs are eligible for federal Medicare Part D subsidies. Although this change does not take effect until January 1, 2013, Edison International is required to recognize the full accounting impact of the legislation in its financial statements in the period of enactment.

Accounting for Uncertainty in Income Taxes

Unrecognized Tax Benefits

The following table provides a reconciliation of unrecognized tax benefits from January 1 to September 30 for 2010 and 2009:

(in millions)		2010			2009


		(Unaudited)
Balance at January 1		$	664		$	2,237
Tax positions taken during the current year:
	Increases		60			134
Tax positions taken during a prior year:
	Increases		251			135
	Decreases		(86	)		(30	)
Decreases for settlements during the period			(82	)		(1,807	)

Balance at September 30		$	807		$	669

As of September 30, 2010 and December 31, 2009, respectively, if recognized, $363 million and $374 million of unrecognized tax benefits would impact the effective tax rate.

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Accrued Interest and Penalties

The total amount of accrued interest and penalties related to Edison International's income tax liabilities was $255 million and $380 million as of September 30, 2010 and December 31, 2009, respectively.

The net after-tax interest and penalties recognized in income tax expense was a benefit of $7 million for the three months ended September 30, 2010, compared to an expense of $7 million for the same period in 2009. Net after-tax interest and penalties recognized in income tax expense was a benefit of $95 million and $92 million for the nine months ended September 30, 2010 and 2009, respectively.

The Internal Revenue Service examination phase of Edison International's federal income tax returns for tax years 2003 through 2006 is anticipated to be completed by the end of 2010. During the third quarter, Edison International received a proposed adjustment increasing the taxable gain on the 2004 sale of EME's international assets, which, if sustained, would result in federal and state tax payments of approximately $152 million, including interest. The Internal Revenue Service examination team is considering whether to assess penalties in addition to this proposed tax adjustment. Edison International does not agree with the proposed adjustment and expects to file an appeal with the Internal Revenue Service after the examination phase is completed. Finally, the Internal Revenue Service examination team, during the third quarter, has informed Edison International that it has completed its review of certain other tax positions and will not be proposing adjustments. The IRS examination team may propose additional adjustments prior to completing the 2003 – 2006 examination.

Note 5. Compensation and Benefit Plans

Pension Plans and Postretirement Benefits Other Than Pensions

Pension Plans

During the nine months ended September 30, 2010, Edison International made 2009 plan year contributions of $13 million, 2010 plan year contributions of $82 million and expects to make $30 million of additional 2010 plan year contributions during the remainder of 2010. Annual contributions made to most of SCE's pension plans are recovered through CPUC-approved regulatory mechanisms. Annual contributions to these plans are expected to be, at a minimum, equal to the related annual expense.

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Expense components are:

	Three Months Ended September 30,						Nine Months Ended September 30,


(in millions)	2010			2009			2010			2009

	(Unaudited)
Service cost	$	34		$	32		$	102		$	96
Interest cost		54			52			162			155
Expected return on plan assets		(52	)		(42	)		(156	)		(125	)
Amortization of prior service cost		2			4			6			12
Amortization of net loss		7			14			21			42

Expense under accounting standards		45			60			135			180
Regulatory adjustment – deferred		(14	)		(24	)		(42	)		(72	)

Total expense recognized	$	31		$	36		$	93		$	108

Postretirement Benefits Other Than Pensions

During the nine months ended September 30, 2010, Edison International made 2010 plan year contributions of $22 million and expects to make $33 million of additional 2010 plan year contributions during the remainder of 2010. Annual contributions made to SCE plans are recovered through CPUC-approved regulatory mechanisms and are expected to be, at a minimum, equal to the total annual expense for these plans.

Expense components are:

	Three Months Ended September 30,						Nine Months Ended September 30,


(in millions)	2010			2009			2010			2009

	(Unaudited)
Service cost	$	8		$	8		$	24		$	24
Interest cost		31			31			93			93
Expected return on plan assets		(25	)		(20	)		(75	)		(60	)
Amortization of prior service cost (credit)		(9	)		(8	)		(27	)		(24	)
Amortization of net loss		8			11			24			33

Total expense	$	13		$	22		$	39		$	66

Stock-Based Compensation

During the first quarter of 2010, Edison International granted its 2010 stock-based compensation awards, which included stock options, performance shares and restricted stock units. Total stock-based compensation expense (reflected in the caption "Operation and maintenance" on the consolidated statements of income) was $9 million for both the three months ended September 30, 2010 and 2009, and $26 million and $25 million for the nine months ended September 30, 2010 and 2009, respectively. The income tax benefit recognized in the consolidated statements of income was $3 million and $4 million for the three months ended September 30, 2010 and 2009, respectively, and $10 million for both the nine months ended September 30, 2010 and 2009. Excess tax benefits included in "Settlements of stock-based compensation – net" in the financing section of the consolidated statements of cash

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flows were $5 million and $6 million for the nine months ended September 30, 2010 and 2009, respectively.

Stock Options

The following is a summary of the status of Edison International stock options:

				Weighted-Average


	Stock options			Exercise Price		Remaining Contractual Term (Years)		Aggregate Intrinsic Value

	(Unaudited)
Outstanding at December 31, 2009		17,368,032		$	32.15
Granted		3,804,916			33.28
Expired		(29,975	)		47.06
Forfeited		(184,324	)		30.76
Exercised		(928,242	)		21.18

Outstanding at September 30, 2010		20,030,407			32.86		6.41

Vested and expected to vest at September 30, 2010		19,524,599			32.88		6.36	$	101,533,965

Exercisable at September 30, 2010		11,310,570			33.13		4.83	$	67,096,297

Cash outflows to purchase Edison International shares in the open market to settle stock option exercises were $17 million and $2 million for the three months ended September 30, 2010 and 2009, respectively, and were $30 million and $8 million for the nine months ended September 30, 2010 and 2009, respectively. Cash inflows from participants to exercise stock options were $10 million and $1 million for the three months ended September 30, 2010 and 2009, respectively, and were $19 million and $5 million for the nine months ended September 30, 2010 and 2009, respectively. The tax benefit realized from options exercised was $3 million and less than $1 million for the three months ended September 30, 2010 and 2009, respectively, and $5 million and $1 million for the nine months ended September 30, 2010 and 2009, respectively.

Performance Shares

The following is a summary of the status of Edison International nonvested performance shares:

	Equity Awards					Liability Awards


	Shares			Weighted-Average Grant Date Fair Value		Shares			Weighted-Average Fair Value ¹

	(Unaudited)
Nonvested at December 31, 2009		343,452		$	35.41		343,452
Granted		144,518			32.12		144,518
Forfeited		(70,203	)		55.18		(70,203	)

Nonvested at September 30, 2010		417,767			30.95		417,767		$	15.22

¹: The current portion of nonvested performance shares classified as liability awards is reflected in the caption "Other current liabilities" and the long-term portion is reflected in "Pensions and benefits" on the consolidated balance sheets.

There were no performance shares paid in 2009 or 2010.

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Note 6. Commitments and Contingencies

Lease Commitments

SCE entered into two 20-year power purchase contracts which are classified as capital leases and are expected to be recorded on the consolidated balance sheets upon commencement of the contracts in 2012 and 2013. SCE's commitments upon commencement are estimated to be: $38 million in 2012, $98 million in 2013, $120 million in 2014, and $2.1 billion for the period remaining thereafter (amounts representing executory costs and interest are $490 million and $911 million, respectively).

Other Commitments

At September 30, 2010, SCE had power purchase contracts with additional commitments estimated to be: $30 million for the remainder of 2010, $94 million in 2011, $77 million in 2012, $53 million in 2013, $49 million in 2014, and $1 billion for the period remaining thereafter.

In October 2010, SCE completed its 2010 annual request for offers and entered into new power purchase contracts with commitments estimated to be: $35 million in 2011, $122 million in 2012, $163 million in 2013, and $69 million in 2014.

At September 30, 2010, EMG's subsidiaries had firm commitments to spend approximately $199 million during the remainder of 2010 and $79 million in 2011 on capital and construction expenditures. These expenditures primarily relate to the construction of wind projects. EMG intends to fund these expenditures through project-level and turbine vendor financing, U.S. Treasury grants, cash on hand and cash generated from operations.

EME has entered into various turbine supply agreements with vendors to support its wind development efforts. As of September 30, 2010, EME had commitments, excluding turbines subject to the legal dispute described below, to purchase 46 wind turbines (69 MW) and had 2 wind turbines (6 MW) in storage to be used for future wind projects. EME has payment commitments related to wind turbines of $82 million due in 2011.

Excluded from the turbine commitments referred to above are commitments under a turbine supply agreement between Mitsubishi Power Systems Americas, Inc. and EME, which was subject to a legal dispute as of September 30, 2010. On October 8, 2010, EME and the Mitsubishi entities entered into a settlement agreement with respect to the dispute. As a result of the settlement agreement, EME's $68 million deposit previously paid under the original contract will be applied to the purchase price for 23 wind turbines (55 MW). Within the next three years, EME may elect to deploy 60 additional wind turbines (144 MW). EME may be obligated to make a payment of up to $30 million following the end of the three-year period if it has not elected to deploy the additional turbines and if certain other criteria apply. EME further agreed to payments of up to $40 million for settlement of remaining disputes on turbines purchased.

At September 30, 2010, Midwest Generation and Homer City had fuel purchase commitments with various third-party suppliers for the purchase of coal. Based on the contract provisions, which consist of fixed prices, subject to adjustment clauses, these minimum commitments are estimated to aggregate $883 million, summarized as follows: $136 million for the remainder of 2010, $461 million in 2011, $253 million in 2012, and $33 million in 2013.

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At September 30, 2010, Midwest Generation and Homer City each had contractual agreements for the transport of coal to their respective facilities. The commitments under these contracts are based on either actual coal purchases or minimum quantities. Accordingly, contractual obligations for transportation based on actual coal purchases are derived from committed coal volumes set forth in fuel supply contracts. The minimum commitments under these contracts are estimated to aggregate $300 million, summarized as follows: $75 million for the remainder of 2010, and $225 million in 2011.

SCE and EME have letters of credit outstanding under their credit facilities. For further discussion, see Note 3.

Guarantees and Indemnities

Edison International's subsidiaries have various financial and performance guarantees and indemnifications which are issued in the normal course of business. As discussed below, these contracts include performance guarantees, guarantees of debt and indemnifications.

Environmental Indemnities Related to the Midwest Generation Plants

In connection with the acquisition of the Midwest Generation plants, EME agreed to indemnify Commonwealth Edison with respect to specified environmental liabilities before and after December 15, 1999, the date of sale. The indemnification claims are reduced by any insurance proceeds and tax benefits related to such claims and are subject to a requirement that Commonwealth Edison takes all reasonable steps to mitigate losses related to any such indemnification claim. This indemnification for environmental liabilities is not limited in term and would be triggered by a valid claim from Commonwealth Edison. Also, in connection with the sale-leaseback transaction related to the Powerton and Joliet Stations in Illinois, EME agreed to indemnify the lessors for specified environmental liabilities. Due to the nature of the obligations under these indemnities, a maximum potential liability cannot be determined. Commonwealth Edison has advised EME that Commonwealth Edison believes it is entitled to indemnification for all liabilities, costs, and expenses that it may be required to bear as a result of the litigation discussed below under "—Contingencies—Midwest Generation New Source Review Lawsuit." The sale-leaseback participants have requested similar indemnification. Except as discussed below, EME has not recorded a liability related to these environmental indemnities.

Midwest Generation entered into a supplemental agreement with Commonwealth Edison and Exelon Generation Company LLC on February 20, 2003 to resolve a dispute regarding interpretation of its reimbursement obligation for asbestos claims under the environmental indemnities set forth in the Asset Sale Agreement. Under this supplemental agreement, Midwest Generation agreed to reimburse Commonwealth Edison and Exelon Generation for 50% of specific asbestos claims pending as of February 2003 and related expenses less recovery of insurance costs, and agreed to a sharing arrangement for liabilities and expenses associated with future asbestos-related claims as specified in the agreement. As a general matter, Commonwealth Edison and Midwest Generation apportion responsibility for future asbestos-related claims based upon the number of exposure sites that are Commonwealth Edison locations or Midwest Generation locations. The obligations under this agreement are not subject to a maximum liability. The supplemental agreement had an initial five-year term with an automatic renewal provision for subsequent one-year terms (subject to the right of either party to terminate); pursuant to the automatic renewal provision, it has been extended until February 2011. There were approximately 220 cases for which Midwest Generation was potentially liable and that had not been settled and dismissed at September 30, 2010. Midwest Generation had recorded a $57 million liability at September 30, 2010 for previous, pending and future claims.

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The amounts recorded by Midwest Generation for the asbestos-related liability are based upon a number of assumptions. Future events, such as the number of new claims to be filed each year, the average cost of disposing of claims, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the actual costs to be higher or lower than projected.

Environmental Indemnity Related to the Homer City Facilities

In connection with the acquisition of the Homer City facilities, Homer City agreed to indemnify the sellers with respect to specified environmental liabilities before and after the date of sale. Payments would be triggered under this indemnity by a valid claim from the sellers. EME guaranteed this obligation of Homer City. Also, in connection with the sale-leaseback transaction related to the Homer City facilities, Homer City agreed to indemnify the lessors for specified environmental liabilities. Due to the nature of the obligation under this indemnity provision, it is not subject to a maximum potential liability and does not have an expiration date. For discussion of the NOV received by Homer City and associated indemnity claims, see "—Contingencies—Homer City New Source Review Notice of Violation." EME has not recorded a liability related to this indemnity.

Indemnities Provided under Asset Sale and Sale-Leaseback Agreements

The asset sale agreements for the sale of EME's international assets contain indemnities from EME to the purchasers, including indemnification for taxes imposed with respect to operations of the assets prior to the sale and for pre-closing environmental liabilities. Not all indemnities under the asset sale agreements have specific expiration dates. Payments would be triggered under these indemnities by valid claims from the sellers or purchasers, as the case may be. At September 30, 2010, EME had recorded a liability of $42 million related to these matters.

In connection with the sale of various domestic assets, EME has from time to time provided indemnities to the purchasers for taxes imposed with respect to operations of the asset prior to the sale. EME has also provided indemnities to purchasers for items specified in each agreement (for example, specific pre-existing litigation matters and/or environmental conditions). Due to the nature of the obligations under these indemnity agreements, a maximum potential liability cannot be determined.

Not all indemnities under the asset sale agreements have specific expiration dates. Payments would be triggered under these indemnities by valid claims from the sellers or purchasers, as the case may be. No significant amounts are recorded as a liability for these matters.

In connection with the sale-leaseback transactions related to the Homer City facilities in Pennsylvania, the Powerton and Joliet Stations in Illinois and, previously, the Collins Station in Illinois, EME and several of its subsidiaries entered into tax indemnity agreements. Although the Collins Station lease terminated in April 2004, Midwest Generation's tax indemnity agreement with the former lease equity investor is still in effect. Under these tax indemnity agreements, these entities agreed to indemnify the lessors in the sale-leaseback transactions for specified adverse tax consequences that could result in certain situations set forth in each tax indemnity agreement, including specified defaults under the respective leases. The potential indemnity obligations under these tax indemnity agreements could be significant. Due to the nature of these potential obligations, EME cannot determine a maximum potential liability which would be triggered by a valid claim from the lessors. No significant amounts are recorded as a liability for these matters.

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Indemnity Provided as Part of the Acquisition of Mountainview

In connection with the acquisition of the Mountainview power plant, SCE agreed to indemnify the seller with respect to specific environmental claims related to SCE's previously owned San Bernardino Generating Station, divested by SCE in 1998 and reacquired as part of the Mountainview acquisition. SCE retained certain responsibilities with respect to environmental claims as part of the original divestiture of the station. The aggregate liability for either party to the purchase agreement for damages and other amounts is a maximum of $60 million. This indemnification for environmental liabilities expires on or before March 12, 2033. SCE has not recorded a liability related to this indemnity.

Mountainview Filter Cake Indemnity

The Mountainview power plant utilizes water from on-site groundwater wells and City of Redlands ("City") recycled water for cooling purposes. Unrelated to the operation of the plant, the groundwater contains perchlorate. The pumping of the water removes perchlorate from the aquifer beneath the plant and concentrates it in the plant's wastewater treatment "filter cake." Use of this impacted groundwater for cooling purposes was mandated by Mountainview's California Energy Commission permit. SCE has indemnified the City for cleanup or associated actions related to groundwater contaminated by perchlorate due to the disposal of filter cake at the City's solid waste landfill. The obligations under this agreement are not limited to a specific time period or subject to a maximum liability. SCE has not recorded a liability related to this indemnity.

Other Edison International Indemnities

SCE provides other indemnifications through contracts entered into in the normal course of business. These are primarily indemnifications against adverse litigation outcomes in connection with underwriting agreements, and specified environmental indemnities and income taxes with respect to assets sold. SCE's obligations under these agreements may be limited in terms of time and/or amount, and in some instances SCE may have recourse against third parties for certain indemnities. The obligated amounts of these indemnifications often are not explicitly stated, and the overall maximum amount of the obligation under these indemnifications cannot be reasonably estimated. SCE has not recorded a liability related to these indemnities.

Contingencies

In addition to the matters disclosed in these Notes, Edison International is involved in other legal, tax and regulatory proceedings before various courts and governmental agencies regarding matters arising in the ordinary course of business.

Environmental Developments

Edison International is subject to numerous environmental laws and regulations, which typically require a lengthy and complex process for obtaining licenses, permits and approvals and require it to incur substantial costs to operate existing facilities, construct and operate new facilities, and mitigate or remove the effect of past operations on the environment.

Possible developments, such as the enactment of more stringent environmental laws and regulations, proceedings that may be initiated by environmental and other regulatory authorities, cases in which new theories of liability are recognized, and settlements agreed to by other companies that establish precedent or expectations for the power industry, could affect the costs and the manner in which

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business is conducted, and could cause substantial additional capital expenditures or operational expenditures or the ceasing of operations at certain facilities. There is no assurance that any additional costs arising from such developments would be recovered from customers or that Edison International's financial position, results of operations and cash flows would not be materially affected by these developments.

Midwest Generation Environmental Compliance Plans and Costs

During the third quarter of 2010, Midwest Generation continued its permitting and planning activities for NO _x and SO ₂ controls to meet the requirements of the CPS. Midwest Generation has received all necessary permits from the Illinois EPA allowing the installation of selective non-catalytic reduction (SNCR) technology on multiple units to meet the NO _x portion of the CPS, and is engaged with the Illinois EPA with respect to permitting the installation of equipment to meet required reductions for SO ₂ .

Work continued on the possible use of flue gas desulfurization (FGD) technology using dry scrubbing with sodium-based sorbents as a method to comply with the SO ₂ portion of the CPS. Testing of this technology demonstrated significant reductions in SO ₂ emissions when using the type of coal used by Midwest Generation. Use of this technology in combination with the type of coal employed by Midwest Generation is expected to require substantially less capital and installation time than the spray dryer absorber technology originally contemplated, but would likely result in higher ongoing operating costs and may consequently result in lower dispatch rates and competitiveness of Midwest Generation's plants, depending on competitors' costs. Also, the use of dry scrubbing with sodium-based sorbents to meet environmental regulations will likely require Midwest Generation to incur the costs of upgrading its particulate removal systems.

Based on the work to date, Midwest Generation estimates the cost of retrofitting all units, using dry scrubbing with sodium-based sorbents to comply with CPS requirements for SO ₂ emissions, and associated upgrading of particulate removal systems, would be approximately $1.2 billion in 2010 dollars. If completed, these expenditures would be incurred over multiple years.

Decisions regarding whether or not to proceed with the above projects or other approaches to compliance remain subject to a number of factors, such as market conditions, regulatory and legislative developments, and forecasted commodity prices and capital and operating costs applicable at the time decisions are required or made. Midwest Generation could also elect to shut down units, instead of installing controls, to be in compliance with the CPS. Therefore, decisions about any particular combination of retrofits and shutdowns it may ultimately employ also remain subject to conditions applicable at the time decisions are required or made. Due to existing uncertainties about these factors, Midwest Generation may defer final decisions about particular units for the maximum time available. Accordingly, final decisions on whether to install controls, to install particular kinds of controls, and to actually expend capital that is budgeted may not occur until 2012 for some of the units and potentially later for others.

Homer City Environmental Issues and Capital Resource Limitations

Homer City operates selective catalytic reduction equipment on all three units to reduce NO _x emissions, operates FGD equipment on Unit 3 to reduce SO ₂ emissions, and uses coal-cleaning equipment on site to reduce the ash and sulfur content of raw coal to meet both combustion and environmental requirements. Homer City may be required to install additional environmental equipment on Unit 1 and Unit 2 to comply with environmental regulations for future operations. For further information, see "—Transport Rule" and "—Homer City New Source Review Notice of

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Violation." Restrictions under the agreements entered into as part of Homer City's 2001 sale-leaseback transaction could affect, and in some cases significantly limit or prohibit, Homer City's ability to incur indebtedness or make capital expenditures. Homer City will have limited ability to obtain additional outside capital for such projects without amending its lease and related agreements. EME is under no contractual obligation to provide funding to Homer City.

Greenhouse Gas Regulation

In June 2010, the US EPA finalized the Prevention of Significant Deterioration ("PSD") and Title V GHG tailoring rule. The effective date of the final rule is August 2, 2010. The emissions thresholds for CO ₂ equivalents in the final rule are as follows:



January – June 2011		75,000 tons per year for new and modified sources already subject to PSD for pollutants other than GHGs
July 2011 – June 2013		100,000 tons per year for new sources, and 75,000 tons per year for modified sources

Numerous legal challenges to the greenhouse gas tailoring rule have been filed. As written, the rule applies to all sources meeting the thresholds that are built or modified after January 1, 2011. If controls are required to be installed at the facilities of Edison International subsidiaries in the future in order to reduce greenhouse gas emissions pursuant to regulations issued by the US EPA or others, the potential impact will depend on the nature of the controls applied, which remains uncertain.

Transport Rule

In July 2010, the US EPA issued a Notice of Proposed Rulemaking for a proposed rule, known as the Transport Rule, which would require 31 eastern states (including Pennsylvania and Illinois) and the District of Columbia to reduce power plant emissions of NO _x and SO ₂ substantially, starting in 2012, with additional reductions in 2014. The Transport Rule would replace the Clean Air Interstate Rule, which had been remanded to the US EPA in 2008 for revision.

The US EPA has proposed three possible approaches to emissions allowance trading. Under its preferred approach, a pollution limit would be set for each state, intrastate trading would be permitted among power plants, and limited interstate trading would also be permitted consistent with the requirement that each state meet its own pollution control obligations. Under the first alternative, a pollution limit would be set for each state, and only intrastate trading of allowances would be permitted. Under the second alternative, a pollution limit would be set for each state, an emissions limit would be set for each power plant, and limited emissions averaging would be permitted among affected units.

Under the Transport Rule, each covered state would initially be subject to a federal implementation plan designed to reduce pollution that significantly contributed to nonattainment of, or interferes with the maintenance of, NAAQS in other states. States would be able to choose to develop state implementation plans to replace the federal implementation plans.

The Transport Rule is scheduled to be finalized in 2011. The Clean Air Interstate Rule will remain in place until that time. EME believes that the US EPA's preferred approach to emissions allowance trading would provide allowance allocations which are adequate for the Midwest Generation plants based on projected emissions using the Illinois CPS allowable emission rates. If adopted as proposed,

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the Transport Rule may require the installation of additional environmental equipment to reduce SO ₂ emissions at Units 1 and 2 of the Homer City facilities.

National Ambient Air Quality Standard for Sulfur Dioxide

In June 2010, the US EPA finalized the primary NAAQS for SO ₂ by establishing a new one-hour standard at a level of 75 parts per billion. The final standard is in line with EME's expectations and is being taken into account in EME's environmental compliance strategy. Revisions to state implementation plans to achieve compliance with the new standard are due to be submitted to the US EPA by February 2014. The US EPA anticipates that the deadline for attainment with the SO ₂ NAAQS will be August 2017 (five years after the US EPA intends to finalize initial determinations as to the areas of the country that are and are not in attainment with the primary SO ₂ NAAQS).

Hazardous Substances and Hazardous Waste Laws

In June 2010, the US EPA published proposed regulations relating to coal combustion wastes. Two different proposed approaches are under consideration. The first approach, under which the US EPA would list these wastes as special wastes subject to regulation under Subtitle C of the Resource Conservation and Recovery Act (the section for hazardous wastes), could require EME to incur additional capital and operating costs. The second approach, under which the US EPA would regulate these wastes under Subtitle D of the Resource Conservation and Recovery Act (the section for nonhazardous wastes), is substantially similar to the requirements of existing regulations. Comments on the proposed regulations are due November 19, 2010.

California Renewable Energy Developments

In September 2010, CARB voted to adopt a Renewable Electricity Standard regulation, which would require most retail sellers of electricity in California to procure 33% of their electricity from eligible renewable energy resources by 2020. The potential impact of the Standard will depend on provisions, which have not yet been finalized, and therefore remains uncertain. SCE believes that achieving a 33% renewables portfolio standard in this timeframe will be highly ambitious, given the magnitude of the infrastructure build-out required and the slow pace of transmission permitting and approvals.

Once-Through Cooling

In May 2010, the California State Water Resources Board issued a final policy, which establishes closed-cycle wet cooling as required technology for retrofitting existing once-through cooled plants like San Onofre and many of the existing fossil-fueled power plants along the California coast. The final policy requires an independent engineering study to be completed prior to the fourth quarter of 2013 regarding the feasibility of compliance by California's two coastal nuclear power plants. Depending on the results of the study, the required compliance may result in significant capital expenditures at San Onofre and may affect its operations. The policy may also significantly impact SCE's ability to procure generating capacity from fossil-fueled plants that use ocean water in once-through cooling systems, system reliability and the cost of electricity to the extent other coastal power plants in California are forced to shut down or limit operations. The policy has the potential to adversely affect California's nineteen once-through cooled power plants, which provide over 21,000 MW of combined, in-state generation capacity, including over 9,100 MW of capacity interconnected within SCE's service territory.

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Environmental Remediation

Edison International records its environmental remediation liabilities when site assessments and/or remedial actions are probable and a range of reasonably likely cleanup costs can be estimated. Edison International reviews its sites and measures the liability quarterly, by assessing a range of reasonably likely costs for each identified site using currently available information, including existing technology, presently enacted laws and regulations, experience gained at similar sites, and the probable level of involvement and financial condition of other potentially responsible parties. These estimates include costs for site investigations, remediation, operations and maintenance, monitoring and site closure. Unless there is a probable amount, Edison International records the lower end of this reasonably likely range of costs (reflected in "Other long-term liabilities") at undiscounted amounts.

As of September 30, 2010, Edison International's recorded estimated minimum liability to remediate its 29 identified sites at SCE (23 sites) and EME (6 sites primarily related to Midwest Generation) was $42 million, of which $38 million was related to SCE. Edison International's other subsidiaries have no identified remediation sites. The ultimate costs to clean up Edison International's identified sites may vary from its recorded liability due to numerous uncertainties inherent in the estimation process, such as: the extent and nature of contamination; the scarcity of reliable data for identified sites; the varying costs of alternative cleanup methods; developments resulting from investigatory studies; the possibility of identifying additional sites; and the time periods over which site remediation is expected to occur. Edison International believes that, due to these uncertainties, it is reasonably possible that cleanup costs at these identified sites could exceed its recorded liability by up to $228 million, all of which is related to SCE. The upper limit of this range of costs was estimated using assumptions least favorable to Edison International among a range of reasonably possible outcomes. In addition to its identified sites (sites in which the upper end of the range of costs is at least $1 million), SCE also has 34 immaterial sites for which total liability ranges from $5 million (the recorded minimum liability) to $10 million.

The CPUC allows SCE to recover 90% of its environmental remediation costs at certain sites, representing $34 million of its recorded liability, through an incentive mechanism (SCE may request to include additional sites). Under this mechanism, SCE will recover 90% of cleanup costs through customer rates; shareholders fund the remaining 10%, with the opportunity to recover these costs from insurance carriers and other third parties. SCE has successfully settled insurance claims with all responsible carriers. SCE expects to recover costs incurred at its remaining sites through customer rates. SCE has recorded a regulatory asset of $39 million for its estimated minimum environmental cleanup costs expected to be recovered through customer rates.

Edison International's identified sites include several sites for which there is a lack of currently available information, including the nature and magnitude of contamination, and the extent, if any, that Edison International may be held responsible for contributing to any costs incurred for remediating these sites. Thus, no reasonable estimate of cleanup costs can be made for these sites.

SCE expects to clean up its identified sites over a period of up to 30 years. Remediation costs in each of the next several years are expected to range from $3 million to $18 million. Recorded costs were $3 million and $2 million for the three months ended September 30, 2010 and 2009, respectively, and were $7 million for both the nine months ended September 30, 2010 and 2009.

Based on currently available information, Edison International believes it is unlikely that it will incur amounts in excess of the upper limit of the estimated range for its identified sites and, based upon the CPUC's regulatory treatment of environmental remediation costs incurred at SCE, Edison International believes that costs ultimately recorded will not materially affect its results of operations, financial

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position or cash flows. There can be no assurance, however, that future developments, including additional information about existing sites or the identification of new sites, will not require material revisions to such estimates.

Federal and State Income Taxes

Edison International's federal income tax returns are currently under examination by the IRS for tax years 2003 through 2006 and are subject to examination through tax year 2009. Edison International's combined California state franchise tax returns are subject to examination for tax years 1991 through 2009. For further discussion, see Note 4.

2010 FERC Rate Case

In September 2009, the FERC issued an order allowing SCE to implement its proposed 2010 rates effective March 1, 2010, subject to refund. The proposed rates would increase SCE's FERC revenue requirement by $107 million, or 24%, over the 2009 FERC revenue requirement primarily due to an increase in transmission rate base, and would result in an approximate 1% increase to SCE's overall system average rate. SCE has terminated settlement negotiations and begun the litigation process for the proposed 2010 rates. A final decision is expected in the second half of 2011.

FERC Transmission Incentives and CWIP Proceedings

In November 2007, the FERC issued an order granting ROE incentive adders, recovery of the ROE and incentive adders in the CWIP proceedings, and 100% recovery of abandoned plant costs (if any) for three of SCE's transmission projects. The current ROE incentive adders are: 100 basis point adder for DCR, 125 basis point adder for Tehachapi, and 75 basis point adder for Rancho Vista. The CPUC filed an appeal of the November order, which had been stayed pending final resolution by the FERC of the 2008 CWIP proceeding. In April 2010, the FERC issued an order on SCE's 2008 CWIP proceeding. The order sets SCE's 2008 base ROE (before incentives) at 9.54% and establishes a methodology for determining the base ROE for 2009 and 2010 CWIP incentives. In May 2010, SCE filed an application for rehearing with the FERC. The order did not have a material impact on SCE's earnings or cash flows. The collected 2008 through 2010 CWIP revenue requirements are subject to refund, pending a final FERC order on these matters.

Homer City New Source Review Notice of Violation

Recent Developments

In May 2010, Homer City received an NOV from the US EPA. The new NOV alleges claims similar to those in the 2008 NOV, but it adds nonattainment New Source Review requirements to the alleged PSD violations. It also adds two prior owners of the Homer City facilities as parties.

In July 2010, Homer City received a 60-day Notice of Intent to Sue signed by the State of New York and the Pennsylvania Department of Environmental Protection (PADEP), stating their intent to file a citizen suit based on the same or similar theories advanced by the US EPA in the NOV. The Notice of Intent to Sue also named the sale-leaseback owner participants of the Homer City facilities, Homer City's general partner and limited partner, and two prior owners of the Homer City facilities.

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Background

In June 2008, Homer City received an NOV from the US EPA alleging that, beginning in 1988, Homer City (or former owners of the Homer City facilities) performed repair or replacement projects at Homer City Units 1 and 2 without first obtaining construction permits as required by the PSD requirements of the CAA. The US EPA also alleges that Homer City has failed to file timely and complete Title V permits. The NOV does not specify the penalties or other relief that the US EPA seeks for the alleged violations. On June 30, 2009 and January 2, 2010, the US EPA issued requests for information to Homer City under Section 114 of the CAA. Homer City is working on a response to the requests. Homer City has met with the US EPA and has expressed its intent to explore the possibility of a settlement. If no settlement is reached and the U.S. Department of Justice files suit, litigation could take many years to resolve the issues alleged in the NOV. EME cannot predict the outcome of this matter or estimate the impact on its facilities, its results of operations, financial position or cash flows.

Homer City has sought indemnification for liability and defense costs associated with the NOV from the sellers under the asset purchase agreement pursuant to which Homer City acquired the Homer City facilities. The sellers responded by denying the indemnity obligation, but accepting a portion of defense costs related to the claims.

Homer City notified the sale-leaseback owner participants of the Homer City facilities of the NOV under the operative indemnity provisions of the sale-leaseback documents. The owner participants of the Homer City facilities, in turn, sought indemnification and defense from Homer City for costs and liabilities associated with the Homer City NOV. Homer City responded by recognizing its indemnity obligation and defense of the claims on terms consistent with its contractual obligations.

Midwest Generation New Source Review Lawsuit

Recent Developments

In March 2010, the Federal District Court for the Northern District of Illinois dismissed nine of the ten counts related to PSD requirements in the complaint filed by the US EPA and the State of Illinois against Midwest Generation, holding that, as a subsequent owner, Midwest Generation could not be held liable under the PSD provisions for modifications allegedly made by Commonwealth Edison, the prior owner of the Midwest Generation plants. The Court also dismissed the tenth count to the extent it sought civil penalties under the CAA, as barred by the applicable statute of limitations. The decision did not address (i) other counts in the complaint that allege violations of opacity and particulate matter limitations under the Illinois State Implementation Plan and Title V of the CAA, or (ii) the complaint in intervention filed by a group of Chicago-based environmental action groups, which also alleges opacity and particulate matter violations.

In April 2010, the US EPA formally issued to EME the same NOV that was issued to Midwest Generation in 2007. The transmittal letter stated that the action was based on a review of the asset purchase agreement for the Midwest Generation plants and that the NOV was being issued to EME as a successor in interest to Commonwealth Edison.

In June 2010, the US EPA, the State of Illinois, and several environmental groups filed amended complaints in the New Source Review litigation. The amended complaints are similar to the prior complaints, but seek to add Commonwealth Edison and EME as defendants and introduce new legal theories to impose liability on Midwest Generation and EME. Midwest Generation and EME have

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filed a motion to dismiss the amended complaints, and a status hearing has been scheduled for February 2011.

Background

In August 2007, Midwest Generation received an NOV from the US EPA alleging that, beginning in the early 1990s and into 2003, Midwest Generation or Commonwealth Edison performed repair or replacement projects at six Illinois coal-fired electric generating stations in violation of the PSD requirements and of the New Source Performance Standards of the CAA, including alleged requirements to obtain a construction permit and to install controls sufficient to meet best available control technology (BACT) emissions rates. The US EPA also alleged that Midwest Generation and Commonwealth Edison violated certain operating permit requirements under Title V of the CAA. Finally, the US EPA alleged violations of certain opacity and particulate matter standards at the Midwest Generation plants. At approximately the same time, Commonwealth Edison received an NOV substantially similar to the Midwest Generation NOV. Midwest Generation, Commonwealth Edison, the US EPA, and the U.S. Department of Justice, along with several Chicago-based environmental action groups, had discussions designed to explore the possibility of a settlement but no settlement resulted.

In August 2009, the US EPA and the State of Illinois filed a complaint in the Northern District of Illinois against Midwest Generation, but not Commonwealth Edison, alleging claims substantially similar to those in the NOV. In addition to seeking penalties ranging from $25,000 to $37,500 per violation, per day, the complaint calls for an injunction ordering Midwest Generation to install controls sufficient to meet BACT emissions rates at all units subject to the complaint; to obtain new PSD or New Source Review permits for those units; to amend its applications under Title V of the CAA; to conduct audits of its operations to determine whether any additional modifications have occurred; and to offset and mitigate the harm to public health and the environment caused by the alleged CAA violations. The remedies sought by the plaintiffs in the lawsuit could go well beyond those required under the CPS. By order dated January 19, 2010, the Court allowed a group of Chicago-based environmental action groups to intervene in the case.

The owner participants of the Powerton and Joliet Stations have sought indemnification and defense from Midwest Generation and/or EME for costs and liabilities associated with these matters. EME responded by recognizing its indemnity obligation and defense of the claims on terms consistent with its contractual obligations.

An adverse decision could involve penalties and remedial actions that could have a material adverse impact on the financial condition and results of operations of EME at such time. EME cannot predict the outcome of these matters or estimate the impact on its facilities, its results of operations, financial position or cash flows.

Navajo Nation Litigation

The Navajo Nation filed a complaint in June 1999 against SCE, among other defendants, arising out of the coal supply agreement for Mohave. Subsequently, the Hopi Tribe was added as an additional plaintiff. As amended in April 2010, the Navajo Nation's complaint asserts claims for, among other things, interference with fiduciary duties and contractual relations, fraudulent misrepresentations by nondisclosure, and various contract-related claims. The complaint claims that the defendants' actions prevented the Navajo Nation from obtaining the full value in royalty rates for the coal supplied to Mohave. The complaint seeks damages of not less than $600 million, plus interest thereon, and punitive damages of not less than $1 billion. No trial date has been set for this litigation. In April 2009, in a related case filed in December 1993 against the U.S. Government, the U.S. Supreme Court found that

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the Navajo Nation did not have a claim for compensation. In September 2010, the Hopi Tribe settled all of its claims and the remaining parties agreed to engage in mediation. SCE cannot predict the outcome of the Navajo Nation's complaint against SCE.

Nuclear Insurance

Federal law limits public liability claims from a nuclear incident to the amount of available financial protection, which is currently approximately $12.6 billion. SCE and other owners of San Onofre and Palo Verde have purchased the maximum private primary insurance available ($375 million). The balance is covered by a loss sharing program among nuclear reactor licensees. If a nuclear incident at any licensed reactor in the United States results in claims and/or costs which exceed the primary insurance at that plant site, all nuclear reactor licensees could be required to contribute their share of the liability in the form of a deferred premium.

Based on its ownership interests, SCE could be required to pay a maximum of approximately $235 million per nuclear incident. However, it would have to pay no more than approximately $35 million per incident in any one year. If the public liability limit above is insufficient, federal law contemplates that additional funds may be appropriated by Congress. This could include an additional assessment on all licensed reactor operators as a measure for raising further federal revenue.

Property damage insurance covers losses up to $500 million, including decontamination costs, at San Onofre and Palo Verde. Decontamination liability and property damage coverage exceeding the primary $500 million also has been purchased in amounts greater than federal requirements. Additional insurance covers part of replacement power expenses during an accident-related nuclear unit outage. A mutual insurance company owned by entities with nuclear facilities issues these policies. If losses at any nuclear facility covered by the arrangement were to exceed the accumulated funds for these insurance programs, SCE could be assessed retrospective premium adjustments of up to approximately $43 million per year. Insurance premiums are charged to operating expense.

Spent Nuclear Fuel

Under federal law, the DOE is responsible for the selection and construction of a facility for the permanent disposal of spent nuclear fuel and high-level radioactive waste. The DOE did not meet its contractual obligation to begin acceptance of spent nuclear fuel by January 31, 1998. Extended delays by the DOE have led to the construction of costly alternatives and associated siting and environmental issues. Currently, both San Onofre and Palo Verde have interim storage for spent nuclear fuel on site sufficient for the current license period.

In January 2004, SCE, as operating agent of San Onofre, filed a complaint against the DOE in the United States Court of Federal Claims seeking damages for the DOE's failure to meet its obligation to begin accepting spent nuclear fuel from San Onofre. In June 2010, the United States Court of Federal Claims issued a decision granting SCE damages of approximately $142 million to recover costs incurred through December 31, 2005, which has been appealed by the DOE. Additional legal action would be necessary to recover damages incurred after that date. Any damages recovered would be returned to SCE ratepayers or used to offset past or future fuel decommissioning or storage costs for the benefit of the ratepayer.

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Note 7. Consolidated Statements of Changes in Equity

The following table provides the changes in equity for the nine months ended September 30, 2010:

	Equity Attributable to Edison International											Noncontrolling Interests


(in millions)	Common Stock		Accumulated Other Comprehensive Income			Retained Earnings			Subtotal			Other			Preferred and Preference Stock			Total Equity

	(Unaudited)
Balance at December 31, 2009	$	2,304	$	37		$	7,500		$	9,841		$	258		$	907		$	11,006
Net income		—		—			1,090			1,090			—			39			1,129
Other comprehensive loss		—		(11	)		—			(11	)		—			—			(11	)
Deconsolidation of variable interest entities		—		—			—			—			(249	)		—			(249	)
Cumulative effect of a change in accounting principle, net of tax		—		—			15			15			—			—			15
Common stock dividends declared ($0.945 per share)		—		—			(308	)		(308	)		—			—			(308	)
Dividends, distributions to noncontrolling interests and other		—		—			—			—			(4	)		(39	)		(43	)
Stock-based compensation – net		5		—			(12	)		(7	)		—			—			(7	)
Noncash stock-based compensation and other		16		—			(2	)		14			—			—			14

Balance at September 30, 2010	$	2,325	$	26		$	8,283		$	10,634		$	5		$	907		$	11,546

The following table provides the changes in equity for the nine months ended September 30, 2009:

	Equity Attributable to Edison International											Noncontrolling Interests


(in millions)	Common Stock		Accumulated Other Comprehensive Income			Retained Earnings			Subtotal			Other			Preferred and Preference Stock			Total Equity

	(Unaudited)
Balance at December 31, 2008	$	2,272	$	167		$	7,078		$	9,517		$	285		$	907		$	10,709
Net income		—		—			637			637			44			38			719
Other comprehensive loss		—		(39	)		—			(39	)		—			—			(39	)
Common stock dividends declared ($0.93 per share)		—		—			(303	)		(303	)		—			—			(303	)
Dividends, distributions to noncontrolling interests and other		—		—			—			—			(54	)		(38	)		(92	)
Stock-based compensation – net		6		—			(3	)		3			—			—			3
Noncash stock-based compensation and other		16		—			(8	)		8			—			—			8

Balance at September 30, 2009	$	2,294	$	128		$	7,401		$	9,823		$	275		$	907		$	11,005

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Note 8. Accumulated Other Comprehensive Income

Edison International's accumulated other comprehensive income consists of:

(in millions)	Cash Flow Hedges – Net Unrealized Gain (Loss)			Pension and PBOP – Net Gain (Loss)			Pension and PBOP – Prior Service Cost		Accumulated Other Comprehensive Income (Loss)


	(Unaudited)
Balance at December 31, 2009	$	105		$	(70	)	$	2	$	37
Current period change		(19	)		8			—		(11	)

Balance at September 30, 2010	$	86		$	(62	)	$	2	$	26

Included in accumulated other comprehensive income at September 30, 2010 was $104 million, net of tax, in unrealized gains on EMG's commodity-based cash flow hedges; and an $18 million, net of tax, unrealized loss related to interest rate hedges. The maximum period over which a cash flow hedge is designated is through March 31, 2026.

EMG's unrealized gains on commodity hedges consist of futures and forward electricity contracts that qualify for hedge accounting. These gains arise because current forecasts of future electricity prices in these markets are lower than the contract prices. Approximately $89 million of unrealized gains on cash flow hedges, net of tax, are expected to be reclassified into earnings during the next 12 months. Management expects that reclassification of net unrealized gains will increase energy revenues recognized at market prices. Actual amounts ultimately reclassified into earnings over the next 12 months could vary materially from this estimated amount as a result of changes in market conditions. The maximum period over which a commodity cash flow hedge is designated is through May 31, 2014.

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Note 9. Supplemental Cash Flows Information

Edison International's supplemental cash flows information is:

			Nine Months Ended September 30,

(in millions)			2010			2009

			(Unaudited)
Cash payments for interest and taxes
	Interest – net of amounts capitalized		$	486		$	485
	Tax payments			44			393
Noncash investing and financing activities
	Details of debt exchange:
		Pollution-control bonds redeemed	$	(303	)	$	—
		Pollution-control bonds issued		303			—
	Consolidation of variable interest entities:
		Assets other than cash	$	94		$	—
		Liabilities and non-controlling interests		99			—
	Deconsolidation of variable interest entities:
		Assets other than cash	$	380		$	—
		Liabilities and non-controlling interests		476			—
Dividends declared but not paid
	Common stock		$	103		$	101
	Preferred and preference stock of utility not subject to mandatory redemption			9			8

Note 10. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (referred to as an "exit price"). Fair value for a liability should reflect the entity's nonperformance risk. Fair value is determined using a hierarchy to prioritize the inputs to valuation models. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are:

Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities;

Level 2—Pricing inputs that include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the derivative instrument; and

Level 3—Prices or valuations that require inputs that are both significant to the fair value measurements and unobservable.

Edison International's assets and liabilities carried at fair value primarily consist of derivative contracts, SCE nuclear decommissioning trust investments and money market funds. Derivative contracts are primarily commodity contracts for the purchase and sale of power and gas and include contracts for

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forward physical sales and purchases, options and forward price swaps which settle only on a financial basis (including futures contracts). Derivative contracts can be exchange or over-the-counter traded.

The fair value of derivative contracts takes into account quoted market prices, time value of money, volatility of the underlying commodities and other factors. Derivatives that are exchange traded in active markets for identical assets or liabilities are classified as Level 1. Investments in money market funds are generally classified as Level 1, as fair value is determined by observable market prices in active markets.

EMG's derivative contracts, valued based on forward market prices in active markets (PJM West Hub, Northern Illinois Hub peak and AEP/Dayton) adjusted for nonperformance risks, are classified as Level 2. EMG obtains forward market prices from traded exchanges (Intercontinental Exchange Futures U.S. or New York Mercantile Exchange) and available broker quotes. Then, EMG selects a primary source that best represents traded activity for each market to develop observable forward market prices in determining the fair value of these positions. Broker quotes or prices from exchanges are used to validate and corroborate the primary source. These price quotations reflect mid-market prices (average of bid and ask) and are obtained from sources that EMG believes to provide the most liquid market for the commodity. EMG considers broker quotes to be observable when corroborated with other information which may include a combination of prices from exchanges, other brokers and comparison to executed trades.

SCE's Level 2 derivatives primarily consist of natural gas financial swaps and natural gas physical trades for which SCE obtains the applicable Henry Hub, basis, index, or forward market prices from the New York Mercantile Exchange and Intercontinental Exchange.

Level 3 includes the majority of SCE's derivatives, including over-the-counter options, bilateral contracts, capacity contracts, and QF contracts. The fair value of these derivatives is determined using uncorroborated non-binding broker quotes and models which may require SCE to extrapolate short-term observable inputs in order to calculate fair value. Broker quotes are obtained from several brokers and compared against each other for reasonableness.

Level 3 also includes derivatives that trade infrequently (such as firm transmission rights and CRRs in the California market, financial transmission rights traded in markets outside California and over-the-counter derivatives at illiquid locations) and long-term power agreements. For illiquid financial transmission rights and CRRs, objective criteria are reviewed, including system congestion and other underlying drivers, and fair value is adjusted when it is concluded that a change in objective criteria would result in a new valuation that better reflects fair value.

Changes in fair values are based on the hypothetical sale of illiquid positions. For illiquid long-term power agreements, fair value is based upon a discounting of future electricity and natural gas prices derived from a proprietary model using the risk free discount rate for a similar duration contract, adjusted for credit risk and market liquidity. Changes in fair value are based on changes to forward market prices, including forecasted prices for illiquid forward periods. In circumstances where Edison International cannot verify fair value with observable market transactions, it is possible that a different valuation model could produce a materially different estimate of fair value. As markets continue to develop and more pricing information becomes available, Edison International continues to assess valuation methodologies used to determine fair value. Derivative contracts with counterparties that have significant nonperformance risks are classified as Level 3.

The fair value of the derivative assets and liabilities are adjusted for nonperformance risk. To assess nonperformance risk, SCE considers default risk and the loss incurred if a counterparty defaults. EME

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reviews credit ratings of counterparties (and related default rates based on such credit ratings) and prices of credit default swaps. The market price (or premium) for credit default swaps represents the price that a counterparty would pay to transfer the risk of default, typically bankruptcy, to another party. A credit default swap is not directly comparable to the credit risks of derivative contracts, but provides market information of the related risk of nonperformance. The fair value of derivative assets and derivative liabilities nonperformance risk was $3 million and $9 million, respectively, at September 30, 2010 and was $4 million and $7 million, respectively, at December 31, 2009.

The SCE nuclear decommissioning trust investments include equity securities, U.S. treasury securities and other fixed-income securities. Equity and treasury securities are classified as Level 1 as fair value is determined by observable market prices in active or highly liquid and transparent markets. The remaining fixed-income securities are classified as Level 2. The fair value of these financial instruments is based on evaluated prices that reflect significant observable market information such as reported trades, actual trade information of similar securities, benchmark yields, broker/dealer quotes, issuer spreads, bids, offers and relevant credit information.

The following tables set forth assets and liabilities that were accounted for at fair value by level within the fair value hierarchy:

			As of September 30, 2010

(in millions)			Level 1		Level 2			Level 3			Netting and collateral ¹			Total

			(Unaudited)
Assets at Fair Value
	Money market funds ²		$	1,724	$	—		$	—		$	—		$	1,724

	Derivative contracts
		Electricity		—		195			312			(148	)		359
		Natural gas		3		65			16			(3	)		81
		Fuel oil		10		—			—			(10	)		—

		Subtotal of commodity contracts		13		260			328			(161	)		440

	Long-term disability plan			9		—			—			—			9

	Nuclear decommissioning trusts
		Stocks ³		1,840		—			—			—			1,840
		Municipal bonds		—		733			—			—			733
		Corporate bonds ⁴		—		418			—			—			418
		U.S. government and agency securities		260		60			—			—			320
		Short-term investments, primarily cash equivalents ⁵		3		13			—			—			16

		Subtotal of nuclear decommissioning trusts		2,103		1,224			—			—			3,327

Total assets ⁶			$	3,849	$	1,484		$	328		$	(161	)	$	5,500

Liabilities at Fair Value
	Derivative contracts:
		Electricity	$	—	$	(37	)	$	(1,203	)	$	44		$	(1,196	)
		Natural gas		—		(323	)		(18	)		5			(336	)
		Coal		—		(3	)		—			3			—

		Subtotal of commodity contracts		—		(363	)		(1,221	)		52			(1,532	)

		Interest rate contracts		—		(29	)		—			—			(29	)

Net assets (liabilities)			$	3,849	$	1,092		$	(893	)	$	(109	)	$	3,939

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			As of December 31, 2009

(in millions)			Level 1			Level 2			Level 3			Netting and Collateral ¹			Total

			(Unaudited)
Assets at Fair Value
	Money market funds ²		$	1,526		$	—		$	—		$	—		$	1,526

	Derivative contracts
		Electricity		—			235			440			(136	)		539
		Natural gas		2			10			76			(2	)		86
		Fuel oil		15			—			—			(15	)		—

		Subtotal of commodity contracts		17			245			516			(153	)		625

	Long-term disability plan			8			—			—			—			8

	Nuclear decommissioning trusts
		Stocks ³		1,772			—			—			—			1,772
		Municipal bonds		—			634			—			—			634
		Corporate bonds ⁴		—			393			—			—			393
		U.S. government and agency securities		240			68			—			—			308
		Short-term investments, primarily cash equivalents ⁵		1			14			—			—			15

		Subtotal of nuclear decommissioning trusts		2,013			1,109			—			—			3,122

Total assets ⁶			$	3,564		$	1,354		$	516		$	(153	)	$	5,281

Liabilities at Fair Value
	Derivative contracts:
		Electricity	$	—		$	(85	)	$	(433	)	$	73		$	(445	)
		Natural gas		(3	)		(150	)		(21	)		4			(170	)

		Subtotal of commodity contracts		(3	)		(235	)		(454	)		77			(615	)

		Foreign currency and interest rate contracts		—			(21	)		—			—			(21	)

Net assets (liabilities)			$	3,561		$	1,098		$	62		$	(76	)	$	4,645

¹: Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level.
²: At September 30, 2010 and December 31, 2009, included in cash and cash equivalents and restricted cash and at December 31, 2009, also included in prepaid expenses and other on Edison International's consolidated balance sheets.
³: At September 30, 2010 and December 31, 2009, approximately 67% of the equity investments were located in the United States.
⁴: Corporate bonds are diversified. This category included $38 million and $50 million at September 30, 2010 and December 31, 2009, respectively, for collateralized mortgage obligations and other asset backed securities.
⁵: Excludes net assets of $20 million and $18 million of interest and dividend receivables and receivables related to pending securities sales and payables related to pending securities purchases at September 30, 2010 and December 31, 2009, respectively.
⁶: Excludes $31 million and $32 million of cash surrender value of life insurance investments for deferred compensation at September 30, 2010 and December 31, 2009, respectively.

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The following table sets forth a summary of changes in the fair value of Level 3 assets and liabilities:

		Three Months Ended September 30,						Nine Months Ended September 30,


(in millions)		2010			2009			2010			2009

		(Unaudited)
Fair value, net asset (liability) at beginning of period		$	(703	)	$	357		$	62		$	(302	)
Total realized/unrealized gains (losses):
	Included in earnings ¹		24			30			51			127
	Included in regulatory assets and liabilities ²		(142	)		(322	)		(924	)		270
	Included in accumulated other comprehensive income		1			—			5			—
Purchases and settlements, net			(61	)		(49	)		(80	)		(67	)
Transfers into or out of Level 3			(12	)		26			(7	)		14

Fair value, net asset (liability) at end of period		$	(893	)	$	42		$	(893	)	$	42

Change during the period in unrealized gains (losses) related to assets and liabilities held at the end of the period ³		$	(163	)	$	(281	)	$	(882	)	$	377

¹: Reported in "Competitive power generation" revenue on Edison International's consolidated statements of income.
²: Due to regulatory mechanisms, SCE's realized and unrealized gains and losses are recorded as regulatory assets and liabilities.
³: Amounts reported in "Competitive power generation" revenue on Edison International's consolidated statements of income were $(3) million and $38 million for the three months ended September 30, 2010 and 2009, respectively, and were $1 million and $75 million for the nine months ended September 30, 2010 and 2009, respectively. The remainder of the unrealized gains and losses relate to SCE. See (2) above.

Edison International determines the fair value for transfers in and transfers out of each level at the end of each reporting period. There were no significant transfers between levels during 2010 and 2009.

Nuclear Decommissioning Trusts

SCE is collecting in rates amounts for the future costs of removal of its nuclear assets, and has placed those amounts in independent decommissioning trusts. Contributions are approximately $31 million per year. Funds collected, together with accumulated earnings, will be utilized solely for decommissioning. The CPUC has set certain restrictions related to the investments of these trusts.

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The following table sets forth amortized cost and fair value of the trust investments:

			Amortized Cost				Fair Value


(in millions)	Maturity Dates ¹		September 30, 2010		December 31, 2009		September 30, 2010		December 31, 2009

			(Unaudited)
Stocks		–	$	848	$	822	$	1,840	$	1,772
Municipal bonds		2010 – 2049		618		545		733		634
Corporate bonds		2010 – 2044		327		309		418		393
U.S. government and agency securities		2010 – 2040		284		287		320		308
Short-term investments and receivables/payables		2010		34		33		36		33

Total			$	2,111	$	1,996	$	3,347	$	3,140

¹: Maturity dates as of September 30, 2010.

Trust fund earnings (based on specific identification) increase the trust fund balance and the ARO regulatory liability. Proceeds from sales of securities (which are reinvested) were $302 million and $503 million for the three months ended September 30, 2010 and 2009, respectively, and $902 million and $1.8 billion for the nine months ended September 30, 2010 and 2009, respectively. Unrealized holding gains, net of losses, were $1.2 billion and $1.1 billion at September 30, 2010 and December 31, 2009, respectively. Approximately 92% of the cumulative trust fund contributions were tax-deductible.

The following table sets forth a summary of changes in the fair value of the trust:

		Three Months Ended September 30,						Nine Months Ended September 30,


(in millions)		2010			2009			2010			2009

		(Unaudited)
Balance at beginning of period		$	3,083		$	2,673		$	3,140		$	2,524
	Realized gains		14			35			52			223
	Realized losses		—			(3	)		(4	)		(142	)
	Unrealized gains (losses) – net		233			296			90			444
	Other-than-temporary impairment		(5	)		(2	)		(16	)		(105	)
	Interest, dividends, contributions and other		22			26			85			81

Balance at end of period		$	3,347		$	3,025		$	3,347		$	3,025

Due to regulatory mechanisms, earnings and realized gains and losses (including other-than-temporary impairments) have no impact on operating revenue or earnings.

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Long-term Debt

The carrying amounts and fair values of long-term debt are:

	September 30, 2010				December 31, 2009


(in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value

	(Unaudited)
Long-term debt, including current portion	$	12,160	$	12,334	$	10,814	$	10,452

Fair values of long-term debt are based on evaluated prices that reflect significant observable market information such as reported trades, actual trade information of similar securities, benchmark yields, broker/dealer quotes of new issue prices and relevant credit information.

The carrying value of trade receivables, payables and short-term debt approximate fair value and therefore are not included in the table above.

Note 11. Regulatory Assets and Liabilities

Regulatory assets included on the consolidated balance sheets are:

(in millions)		September 30, 2010		December 31, 2009


		(Unaudited)
Current:
	Regulatory balancing accounts	$	207	$	94
	Energy derivatives		197		25
	Other		—		1

			404		120

Long-term:
	Regulatory balancing accounts		52		43
	Deferred income taxes – net		1,838		1,561
	Unamortized nuclear investment – net		301		340
	Nuclear-related ARO investment – net		243		258
	Unamortized coal plant investment – net		70		73
	Unamortized loss on reacquired debt		273		287
	Pensions and other postretirement benefits		999		1,014
	Energy derivatives		1,201		357
	Environmental remediation		39		36
	Other		211		170

			5,227		4,139

Total regulatory assets		$	5,631	$	4,259

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Regulatory liabilities included on the consolidated balance sheets are:

(in millions)		September 30, 2010		December 31, 2009


		(Unaudited)
Current:
	Regulatory balancing accounts	$	798	$	363
	Other		6		4

			804		367

Long-term:
	Regulatory balancing accounts		846		642
	ARO		220		171
	Costs of removal		2,597		2,515

			3,663		3,328

Total regulatory liabilities		$	4,467	$	3,695

Note 12. Other Income and Expenses

Other income and expenses are as follows:

		Three Months Ended September 30,				Nine Months Ended September 30,


(in millions)		2010		2009		2010		2009

		(Unaudited)
Other Income:
	Equity AFUDC	$	24	$	60	$	76	$	95
	Increase in cash surrender value of life insurance policies		7		4		19		17
	Other		2		5		8		14

Total utility other income			33		69		103		126

Competitive power generation and parent			—		5		—		5

Total other income		$	33	$	74	$	103	$	131

Other Expenses:
	Civic, political and related activities and donations	$	7	$	11	$	21	$	19
	Marketing services		2		1		5		6
	Other		1		1		13		8

Total utility other expenses			10		13		39		33

Competitive power generation and parent			2		3		—		8

Total other expenses		$	12	$	16	$	39	$	41

In July 2009, the Mountainview power plant was transferred to utility rate base pursuant to CPUC and FERC approvals which resulted in recognition of $50 million in Equity AFUDC during the three- and nine-month periods ended September 30, 2009.

Note 13. Variable Interest Entities

Effective January 1, 2010, Edison International adopted the FASB's new guidance regarding variable interest entities ("VIEs"). A VIE is defined as a legal entity whose equity owners do not have sufficient

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equity at risk, or, as a group, the holders of the equity investment at risk lack any of the following three characteristics: decision-making rights, the obligation to absorb losses, or the right to receive the expected residual returns of the entity. The new guidance replaces the predominantly quantitative model for determining which reporting entity, if any, has a controlling financial interest in a VIE with a qualitative approach. Under this new qualitative model, the primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most significantly impact the entity's economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. The primary beneficiary is required to consolidate the VIE unless specific exceptions or exclusions are met. Commercial and operating activities are generally the factors that most significantly impact the economic performance of VIEs in which Edison International has a variable interest. Commercial and operating activities include construction, operation and maintenance, fuel procurement, dispatch and compliance with regulatory and contractual requirements.

Projects or Entities that are Consolidated

At September 30, 2010 and December 31, 2009, EMG had majority interests in 15 wind projects with a total generating capacity of 700 MW that have minority interests held by others. The projects are located in Iowa, Minnesota, New Mexico, Nebraska and Texas. As of December 31, 2009, all of these projects were consolidated by EMG. Upon the application of the new guidance effective January 1, 2010, EMG deconsolidated two of these projects. See further discussion in "—Variable Interests in VIEs that are not Consolidated—Equity Interests." In determining that EMG was the primary beneficiary of the 13 projects consolidated at September 30, 2010, the key factors considered were EMG's ability to direct commercial and operating activities and EMG's obligation to absorb losses and right to receive benefits that could potentially be significant to the variable interest entities.

The following table presents summarized financial information of the wind projects that had minority interests held by others and were consolidated by Edison International:

(in millions)		September 30, 2010		December 31, 2009


		(Unaudited)
Current assets		$	22	$	73
Net property, plant and equipment ¹			669		944
Other long-term assets			2		2

	Total assets ¹	$	693	$	1,019

Current liabilities		$	15	$	17
Long-term obligations net of current maturities			17		20
Deferred revenues			57		58
Other long-term liabilities			19		21

	Total liabilities	$	108	$	116

Noncontrolling interests		$	4	$	76

¹: Amounts included assets of $253 million ($247 million of net property, plant and equipment) that were deconsolidated on January 1, 2010.

Assets serving as collateral for the debt obligations had a carrying value of $75 million and $81 million at September 30, 2010 and December 31, 2009, respectively, and primarily consist of property, plant and equipment.

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EMG has a 50% partnership interest in the Ambit project. EMG has the power to direct the commercial and operating activities of the project pursuant to the existing contracts and has the obligation to absorb losses and right to receive benefits from the project. Therefore, under the new guidance, EMG is the primary beneficiary which resulted in the consolidation of the Ambit project by Edison International. Total assets consolidated at September 30, 2010 and January 1, 2010 were $99 million at both dates. Substantially all of the assets of the Ambit project are pledged as collateral for the partnership's debt obligations.

Variable Interests in VIEs that are not Consolidated

Power Purchase Contracts

SCE has power purchase agreements ("PPAs") in which it has a variable interest in 17 VIEs, including 6 tolling agreements where SCE provides the natural gas to operate the plants and 11 contracts with QFs (including the Big 4 projects) that contain variable pricing provisions based on the price of natural gas. SCE has concluded that it is not the primary beneficiary of these VIEs since it does not control the commercial and operating activities of these entities. In general, because payments for capacity are the primary source of income, the most significant economic activity for SCE's VIEs is the operation and maintenance of the power plants. SCE does not have control over the operation and maintenance of the facilities considered VIEs and it does not bear operational risk of the facilities. See further discussion of the Big 4 projects below.

As of the balance sheet date, the carrying amount of assets and liabilities in SCE's consolidated balance sheet that relate to its involvement with VIEs result from amounts due under the PPAs or the fair value of those derivative contracts, which are accounted for at fair value. See Note 10 for a discussion on nonperformance risk. Further, SCE has no residual interest in the entities and has not provided or guaranteed any debt or equity support, liquidity arrangements, performance guarantees or other commitments associated with these contracts other than the purchase commitments described in Note 6. The aggregate capacity dedicated to SCE for these VIE projects was 4,045 MW at September 30, 2010 and the amounts that SCE paid to these projects were $205 million and $184 million for the three months ended September 30, 2010 and 2009, respectively, and $447 million and $414 million for the nine months ended September 30, 2010 and 2009, respectively. These amounts are recoverable in customer rates.

The following table summarizes as of September 30, 2010, SCE's assets and liabilities and exposure to loss associated with SCE's variable interests in the VIEs described above:

	Assets				Liabilities


(in millions)	Short- Term		Long- Term		Short- Term		Long- Term		Maximum Exposure

	(Unaudited)
Derivatives	$	—	$	—	$	50	$	1,064	$	—
Accounts payable		—		—		63		—		—

Total	$	—	$	—	$	113	$	1,064	$	—

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The following table summarizes as of December 31, 2009, SCE's assets and liabilities and exposure to loss associated with SCE's variable interests in the VIEs described above:

	Assets				Liabilities


(in millions)	Short- Term		Long- Term		Short- Term		Long- Term		Maximum Exposure

	(Unaudited)
Derivatives	$	—	$	43	$	17	$	385	$	43
Accounts payable		—		—		39		—		—

Total	$	—	$	43	$	56	$	385	$	43

Realized and unrealized losses are recovered or expected to be recovered from ratepayers in rates, subject to reasonableness review, and therefore are not reflected in earnings.

Equity Interests

EMG accounts for domestic energy projects in which it has a 50% or less ownership interest, and cannot exercise unilateral control, under the equity method. As of September 30, 2010 and December 31, 2009, EMG had significant variable interests in projects that are not consolidated consisting of the Big 4 projects and the Sunrise project. A subsidiary of EMG operates the Big 4 projects and EMG's partner provides the fuel management services. In addition, the executive director of these projects is provided by EMG's partner. Commercial and operating activities are jointly controlled by a management committee of each VIE. Accordingly, EMG continues to account for its variable interests under the equity method.

As noted previously in "—Projects or Entities that are Consolidated," EMG deconsolidated two renewable wind energy generating facilities, the Elkhorn Ridge wind project and San Juan Mesa wind project, on January 1, 2010. The commercial and operating activities of these entities are directed by a management committee comprised of representatives of each partner. Thus, EMG is not the primary beneficiary of these projects. Accordingly, effective January 1, 2010, EMG accounts for its interests in these projects under the equity method.

The following table presents the carrying amount of EMG's investments in unconsolidated variable interest entities and the maximum exposure to loss for each investment:

	As of September 30, 2010

(in millions)	Investment		Maximum Exposure

	(Unaudited)
Natural gas-fired projects	$	360	$	360
Wind projects		218		218

EMG's maximum exposure to loss in its variable interest entities accounted for under the equity method is generally limited to its investment in these entities. Two of EMG's domestic energy projects have long-term debt that is secured by a pledge of assets of the project entity, but does not provide for recourse to EMG. Accordingly, a default on a long-term financing of a project could result in foreclosure on the assets of the project entity resulting in a loss of some or all of EMG's investment, but would not require EMG to contribute additional capital. At September 30, 2010, entities which EMG has accounted for under the equity method had indebtedness of $141 million, of which $53 million is proportionate to EMG's ownership interest in these projects.

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Big 4 Projects Consolidated Prior to 2010

Edison International has variable interests in the Big 4 Projects through equity interests held by EMG and power contracts between SCE and the Big 4 Projects that contain variable contract pricing provisions based on the price of natural gas. Prior to 2010, Edison International had determined that SCE was the primary beneficiary of these four VIEs and, therefore, consolidated these projects. Edison International deconsolidated the Big 4 Projects at January 1, 2010 since it did not control the commercial and operating activities of these projects through EMG and SCE. Commercial and operating activities are jointly controlled by a management committee of each VIE. Therefore, neither EMG, SCE nor Edison International on a consolidated basis has control of the entities. In addition, EMG's partner provides the executive director and fuel management services and the steam supply is based on the needs of EMG's partner. The deconsolidation did not result in a gain or loss.

The following table presents the carrying amounts of VIEs consolidated by Edison International at December 31, 2009 (these balances were deconsolidated at January 1, 2010):

(in millions)		December 31, 2009


		(Unaudited)
Cash		$	92
Other current assets			81
Competitive power generation and other property, plant and equipment – net			253
Other long-term assets			4

	Total assets	$	430

Current liabilities		$	64
Asset retirement obligations			17
Noncontrolling interest			349

	Total liabilities and equity	$	430

Note 14. Business Segments

Edison International's reportable business segments include its electric utility operation segment (SCE) and a competitive power generation segment (EMG). Prior to January 1, 2010, Edison International reported three business segments: electric utility operations segment, competitive power generation segment and financial services segment. As a result of termination of the cross-border leases during 2009 and the continued decline of the remaining portfolio of the financial services segment, the remaining business activity is no longer significant enough to report separately. Accordingly, the financial services segment has been combined into the competitive power generation segment for all periods presented. The combination of these business activities is consistent with the management structure of EMG and evaluation of performance by Edison International. The significant accounting policies of the segments are the same as those described in Note 1.

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Segment income statement information was:

	Three Months Ended September 30,						Nine Months Ended September 30,


(in millions)	2010			2009			2010			2009

	(Unaudited)
Operating Revenue (Loss):
Electric utility	$	3,098		$	3,069		$	7,504		$	7,531
Competitive power generation		691			596			1,838			1,782
Parent and other ²		(1	)		(1	)		(2	)		(3	)

Consolidated Edison International	$	3,788		$	3,664		$	9,340		$	9,310

Net Income (Loss) attributable to Edison International:
Electric utility ³	$	394		$	346		$	858		$	1,053
Competitive power generation ^1,4		110			60			214			(450	)
Parent and other ^2,5		6			(3	)		18			34

Consolidated Edison International	$	510		$	403		$	1,090		$	637

Segment balance sheet information was:

(in millions)	September 30, 2010			December 31, 2009


	(Unaudited)
Total Assets:
Electric utility	$	36,227		$	32,474
Competitive power generation		9,407			9,543
Parent and other ²		(68	)		(573	)

Consolidated Edison International	$	45,566		$	41,444

¹: Includes earnings (losses) from discontinued operations of $(4) million and $(1) million for the three months ended September 30, 2010 and 2009, respectively, and $4 million and $(5) million for the nine months ended September 30, 2010 and 2009, respectively.
²: Includes amounts from Edison International (parent) and other Edison International subsidiaries that are not significant as a reportable segment, as well as intercompany eliminations.
³: Includes earnings of $42 million and $95 million for the three and nine months ended September 30, 2010, and $300 million for the nine months ended September 30, 2009, related to the federal and state impacts of the Global Settlement. See Note 4.
⁴: Includes earnings (losses) of $(6) million and $52 million for the three and nine months ended September 30, 2010, and $(624) million for the nine months ended September 30, 2009, related to termination of Edison Capital's cross-border leases and the federal and state impacts of the Global Settlement on EMG. See Note 4.
⁵: Includes earnings of $1 million and $28 million for the three and nine months ended September 30, 2010, and $50 million for the nine months ended September 30, 2009, related to the federal and state impacts of the Global Settlement. See Note 4.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This MD&A contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect Edison International's current expectations and projections about future events based on Edison International's knowledge of present facts and circumstances and assumptions about future events and include any statement that does not directly relate to a historical or current fact. Other information distributed by Edison International that is incorporated in this report, or that refers to or incorporates this report, may also contain forward-looking statements. In this report and elsewhere, the words "expects," "believes," "anticipates," "estimates," "projects," "intends," "plans," "probable," "may," "will," "could," "would," "should," and variations of such words and similar expressions, or discussions of strategy or of plans, are intended to identify forward-looking statements. Such statements necessarily involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Some of the risks, uncertainties and other important factors that could cause results to differ from those currently expected, or that otherwise could impact Edison International, include, but are not limited to:

•: environmental laws and regulations, at both state and federal levels, or changes in the application of those laws, that could require additional expenditures or otherwise affect the cost and manner of doing business;
•: cost of capital and the ability to borrow funds and access the capital markets on reasonable terms;
•: cost and availability of electricity, including the ability to procure sufficient resources to meet expected customer needs in the event of significant counterparty defaults under power-purchase agreements;
•: changes in the fair value of investments and other assets;
•: ability of SCE to recover its costs in a timely manner from its customers through regulated rates;
•: decisions and other actions by the CPUC, the FERC and other regulatory authorities and delays in regulatory actions;
•: changes in interest rates and rates of inflation, including those rates which may be adjusted by public utility regulators;
•: governmental, statutory, regulatory or administrative changes or initiatives affecting the electricity industry, including the market structure rules applicable to each market and price mitigation strategies adopted by Independent System Operators and Regional Transmission Organizations;
•: risks associated with operating nuclear and other power generating facilities, including operating risks; nuclear fuel storage issues; failure, availability, efficiency, output, cost of repairs and retrofits of equipment; and availability and cost of spare parts;
•: availability and creditworthiness of counterparties and the resulting effects on liquidity in the power and fuel markets and/or the ability of counterparties to pay amounts owed in excess of collateral provided in support of their obligations;
•: cost and availability of labor, equipment and materials;

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•: ability to obtain sufficient insurance, including insurance relating to SCE's nuclear facilities and wildfire-related liability, and to recover the costs of such insurance;
•: ability to recover uninsured losses in connection with wildfire-related liability;
•: effects of legal proceedings, changes in or interpretations of tax laws, rates or policies, and changes in accounting standards;
•: potential for penalties or disallowances caused by non-compliance with applicable laws and regulations;
•: outcome of disputes with state tax authorities regarding tax positions taken by Edison International;
•: cost and availability of coal, natural gas, fuel oil, and nuclear fuel, and related transportation to the extent not recovered through regulated rate cost escalation provisions or balancing accounts;
•: cost and availability of emission credits or allowances for emission credits;
•: transmission congestion in and to each market area and the resulting differences in prices between delivery points;
•: ability to provide sufficient collateral in support of hedging activities and power and fuel purchased;
•: weather conditions and natural disasters;
•: risks inherent in the development of generation projects and transmission and distribution infrastructure replacement and expansion projects, including those related to project site identification, construction, permitting, and governmental approvals; and
•: risks that competing transmission systems will be built by merchant transmission providers in SCE's territory.

Additional information about risks and uncertainties, including more detail about the factors described above, are discussed throughout this MD&A and in the "Risk Factors" section included in Part I, Item 1A of the 2009 Form 10-K. Readers are urged to read this entire report, including the information incorporated by reference, and carefully consider the risks, uncertainties and other factors that affect Edison International's business. Forward-looking statements speak only as of the date they are made and Edison International is not obligated to publicly update or revise forward-looking statements. Readers should review future reports filed by Edison International with the Securities and Exchange Commission.

This MD&A for the three- and nine-month periods ended September 30, 2010 discusses material changes in the consolidated financial condition, results of operations and other developments of Edison International since December 31, 2009, and as compared to the three- and nine-month periods ended September 30, 2009. This discussion presumes that the reader has read or has access to Edison International's MD&A for the calendar year 2009 (the "year-ended 2009 MD&A"), which was included in the 2009 Form 10-K.

Except when otherwise stated, references to each of Edison International, SCE and EMG mean each such company with its subsidiaries on a consolidated basis. References to "Edison International (parent)" or "parent company" mean Edison International on a stand-alone basis, not consolidated with its subsidiaries.

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EDISON INTERNATIONAL OVERVIEW

Introduction

This overview is presented in six sections:

•: Highlights of operating results,
•: SCE capital program,
•: SCE 2012 General Rate Case,
•: Environmental developments,
•: EMG renewables program, and
•: Parent company liquidity.

The overview is presented as an update to the overview presented in the 2009 Form 10-K. See pages 62 to 69 of the 2009 Form 10-K for additional information on these topics.

Highlights of Operating Results

			Three Months Ended September 30,									Nine Months Ended September 30,

			2010			2009			Change			2010			2009			Change

Net Income (Loss) attributable to Edison International
	SCE		$	394		$	346		$	48		$	858		$	1,053		$	(195	)
	EMG			110			60			50			214			(450	)		664
	Edison International Parent and Other			6			(3	)		9			18			34			(16	)

	Edison International Consolidated			510			403			107			1,090			637			453

Non-Core Earnings (Loss)
	Global Settlement ¹ :
		SCE		42			—			42			95			300			(205	)
		EMG ²		(6	)		—			(6	)		52			(624	)		676
		Edison International Parent and Other		1			—			1			28			50			(22	)
	SCE – tax impact of health care legislation			—			—			—			(39	)		—			(39	)
	SCE – regulatory items			—			46			(46	)		—			46			(46	)
	EMG discontinued operations			(4	)		(1	)		(3	)		4			(5	)		9

	Edison International Consolidated			33			45			(12	)		140			(233	)		373

Core Earnings (Loss)
	SCE			352			300			52			802			707			95
	EMG			120			61			59			158			179			(21	)
	Edison International Parent and Other			5			(3	)		8			(10	)		(16	)		6

	Edison International Consolidated		$	477		$	358		$	119		$	950		$	870		$	80

¹: Includes the impact of state taxes related to issues resolved as part of the Global Settlement.
²: Includes termination of Edison Capital's cross-border leases.

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Edison International's earnings are prepared in accordance with generally accepted accounting principles used in the United States. Management uses core earnings by principal operating subsidiary internally for financial planning and for analysis of performance. Core earnings by principal operating subsidiary are also used when communicating with analysts and investors regarding Edison International's earnings results to facilitate comparisons of the performance from period to period. Core earnings are a non-GAAP financial measure and may not be comparable to those of other companies. Core earnings are defined as earnings attributable to Edison International shareholders excluding income or loss from discontinued operations and income or loss from significant discrete items that management does not consider representative of ongoing earnings, such as: settlement of prior year tax liabilities and changes in tax law; exit activities, including lease terminations, asset impairments, sale of certain assets, early debt extinguishment costs and other activities that are no longer continuing; and non-recurring regulatory or legal proceedings.

SCE's 2010 core earnings increased $52 million and $95 million for the quarter and year-to-date, respectively. The quarter increase was primarily due to higher authorized revenue to support rate base growth and higher capitalized financing costs (AFUDC). The year-to-date increase was due to higher authorized revenue to support rate base growth, lower income tax expense and higher capitalized financing costs (AFUDC). The year-to-date increase was partially offset by higher operating expenses that continue to reflect the impact of curtailed spending last year due to the timing of the 2009 CPUC GRC decision. The year-to-date lower tax expense includes a change in method of tax accounting for asset removal costs primarily related to SCE's infrastructure replacement program.

EMG's 2010 core earnings increased $59 million and decreased $21 million for the quarter and year-to-date, respectively. EMG's third quarter 2010 core earnings were higher than third quarter 2009 core earnings primarily due to higher operating revenues from Midwest Generation and Homer City mostly from higher average realized energy prices, higher capacity revenues, and a gain from the sale of bankruptcy claims. EMG's core earnings for the nine months ended September 30, 2010 were lower than core earnings for the nine months ended September 30, 2009 primarily as a result of higher plant maintenance costs in 2010 due to scheduled plant outages, partially offset by higher energy trading revenues. Energy and fuel related unrealized losses during the nine months ended September 30, 2010 were $30 million compared to unrealized gains of $45 million during the same period last year.

Edison International Parent and Other 2010 core earnings included consolidated state income tax benefits of $14 million during the third quarter. Taxes are provided by SCE and EMG based on tax allocation agreements. Any remaining difference from the consolidated income tax provision and the separate tax provisions of SCE and EMG are reflected in Edison International Parent and Other.

Consolidated non-core items for Edison International included:

•: An earnings benefit of $175 million recorded in 2010 relating to the California impact of the federal Global Settlement, including $138 million in the second quarter resulting from acceptance by the California Franchise Tax Board of the tax positions finalized with the IRS in 2009 and revision to interest recorded on the federal Global Settlement, and $37 million in the third quarter resulting from receipt of the final interest determination from the California Franchise Tax Board. During the nine months ended September 30, 2009, Edison International recorded a consolidated after-tax earnings charge of $274 million related to the Global Settlement finalized with the IRS and termination of Edison Capital's cross-border leases ($920 million pre-tax loss). For further discussion of Global Settlement, see "Item 8. Edison International Notes to Consolidated Financial Statements—Note 4. Income Taxes" of the 2009 Form 10-K.

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•: A non-cash charge of $39 million in the first quarter of 2010 to reverse previously recognized federal tax benefits eliminated by the federal health care legislation. The Patient Protection and Affordable Care Act, as modified by the Health Care and Education Reconciliation Act, was enacted in March 2010. The new health care legislation includes a provision that eliminates the federal tax deduction of retiree health care costs to the extent those costs are eligible for federal Medicare Part D subsidies.
•: An after-tax benefit of $46 million recorded in the third quarter of 2009 resulting from the transfer of the Mountainview power plant to utility rate base pursuant to CPUC and FERC approvals.

SCE Capital Program

SCE's capital program continues to be focused primarily in five areas:

•: Upgrading and constructing new transmission lines to strengthen system reliability and increase access to renewable energy, including the Tehachapi, Devers-Colorado River and Eldorado-Ivanpah projects.
•: Maintaining reliability and expanding capability of SCE's transmission and distribution system.
•: Developing and installing up to 250 MW of utility-owned solar photovoltaic generating facilities (generally ranging in size from 1 to 2 MW each) on commercial and industrial rooftops and other space in SCE's service territory.
•: Replacing steam generators at San Onofre intended to enable operations until at least the end of its initial license period in 2022. During the first quarter of 2010, SCE completed the replacement of the steam generators at San Onofre Unit 2, which was subsequently returned to service on April 11, 2010. In October 2010, SCE began the process of installing the final two steam generators at San Onofre Unit 3 which are expected to be placed in service in early 2011. See "SCE: Results of Operations—Electric Utility Results of Operations—Utility Earning Activities" for discussion of the extended outage at San Onofre Unit 2.
•: Installing "smart" meters in approximately 5.3 million households and small businesses, which is referred to as EdisonSmartConnect™. During the first nine months of 2010, SCE installed approximately 1.4 million smart meters, with cumulative installations totaling over 1.5 million.

SCE plans to utilize cash generated from its operations and issuance of additional debt and preferred equity for its capital program. During the nine months ended September 30, 2010, SCE issued long-term debt of $1.1 billion to fund its capital program (see "SCE: Liquidity and Capital Resources—Historical Consolidated Cash Flows—Condensed Consolidated Statement of Cash Flows—Cash Flows Provided (Used) by Financing Activities" for further information).

SCE's capital investments (including accruals) during the nine months ended September 30, 2010 totaled $2.4 billion. SCE projects that capital investments will be in the range of $3.3 billion to $4.0 billion in 2010 and in the range of $18 billion to $21.5 billion for 2010 – 2014. The rate of actual capital spending will be affected by permitting, regulatory, market and other factors as discussed further under "SCE: Liquidity and Capital Resources—Capital Investment Plan" in the 2009 Form 10-K.

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SCE 2012 General Rate Case

On July 19, 2010, SCE submitted to the CPUC's Division of Ratepayer Advocates its notice of intent ("NOI") to file a 2012 GRC. The NOI indicates that SCE's GRC application, expected to be filed by year-end 2010, will request a 2012 base rate revenue requirement of $6.3 billion. After considering the effects of sales growth, SCE's request would be a $903 million increase over projected 2011 base rate revenue. If the CPUC approves the requested rate increase and allocates the increase to ratepayer groups on a system average percentage change basis, the percentage increases over current base rates and total rates are estimated to be 16.9% and 7.9%, respectively. The requested revenue requirement increase is driven by the need to maintain system reliability, accommodate customer load growth, and increase operation and maintenance expenses primarily for capital-related projects, information technology, insurance and pension contributions. The NOI also indicates that SCE's application will propose a post-test year ratemaking mechanism which would result in 2013 and 2014 incremental base revenue requirement increases, net of sales growth, of $305 million and $542 million, respectively, for the same reasons. The current schedule anticipates a final decision on SCE's 2012 GRC by the end of 2011. SCE cannot predict the revenue requirement the CPUC will ultimately authorize or precisely when a final decision will be adopted.

Environmental Developments

Midwest Generation Environmental Compliance Plans and Costs

During the third quarter of 2010, Midwest Generation continued its permitting and planning activities for NO _x and SO ₂ controls to meet the requirements of the Combined Pollutant Standard ("CPS"). Midwest Generation has received all necessary permits from the Illinois EPA allowing the installation of selective non-catalytic reduction ("SNCR") technology on multiple units to meet the NO _x portion of the CPS, and is engaged with the Illinois EPA with respect to permitting the installation of equipment to meet required reductions for SO ₂ .

Work continued on the possible use of flue gas desulfurization ("FGD") technology using dry scrubbing with sodium-based sorbents as a method to comply with the SO ₂ portion of the CPS. Testing of this technology demonstrated significant reductions in SO ₂ emissions when using the type of coal used by Midwest Generation. Use of this technology in combination with the type of coal employed by Midwest Generation is expected to require substantially less capital and installation time than the spray dryer absorber technology originally contemplated, but would likely result in higher ongoing operating costs and may consequently result in lower dispatch rates and competitiveness of Midwest Generation's plants, depending on competitors' costs. Also, the use of dry scrubbing with sodium-based sorbents to meet environmental regulations will likely require Midwest Generation to incur the costs of upgrading its particulate removal systems.

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applicable at the time decisions are required or made. Due to existing uncertainties about these factors, Midwest Generation may defer final decisions about particular units for the maximum time available. Accordingly, final decisions on whether to install controls, to install particular kinds of controls, and to actually expend capital that is budgeted may not occur until 2012 for some of the units and potentially later for others.

Environmental Regulation Developments

For a discussion of environmental regulation developments regarding Greenhouse Gas Regulation, the Transport Rule, Coal Combustion Waste Regulation, California Renewable Electricity Standard, and California Once-Through Cooling Policy, see "Edison International Notes to Consolidated Financial Statements—Note 6. Commitments and Contingencies—Contingencies—Environmental Developments."

EMG Renewables Program

EMG has five projects totaling 630 MW under construction. In the third quarter, the Community Wind North project, which EME refers to as the CWN project, was moved into construction. The CWN project, a 30 MW wind project in Minnesota, utilizes 28 MW of turbines previously in storage and one turbine on order. In addition to the projects in construction mentioned above, EMG anticipates that construction will begin in 2011 on the Pinnacle project, a 55 MW wind project in West Virginia.

EMG had a development pipeline of potential wind projects with projected installed capacity of approximately 3,700 MW at September 30, 2010. EMG has entered into various turbine supply agreements with vendors to support its wind development efforts. Adjusted for the turbines which EMG may elect to deploy related to the Mitsubishi agreement described below, EMG has commitments to purchase 46 wind turbines (69 MW) to be used for future wind projects. During the second quarter of 2010, EMG deferred the delivery and $82 million in payments for 69 MW of turbines to January 2011. If EMG is unable to develop new projects on acceptable terms and conditions, EMG may terminate the turbine order for these 69 MW, which would result in a material charge related to deposits previously made with the vendor.

The pace of additional growth in EMG's renewables program will be subject to the availability of projects that meet EMG's requirements and the capital needed for development, which will be affected by the extent of internally generated cash flow and future decisions about capital expenditures for environmental compliance by its coal fleet. Consequently, pending substantial progress on or financing of the environmental retrofits, growth of the renewables program may depend upon the availability of third-party capital.

Mitsubishi Lawsuit

On October 8, 2010, an agreement was reached to settle disputes included in the complaint filed by EME against Mitsubishi Power Systems Americas, Inc. and Mitsubishi Heavy Industries, Ltd. with respect to a wind turbine generator supply agreement. As a result of this agreement, EME committed to purchase on amended terms 23 wind turbines (55 MW), agreed to certain price adjustments on the turbines purchased under the original contract, may elect to deploy 60 additional wind turbines (144 MW) that were part of the original contract, and may be obligated to make a payment of up to $30 million following the end of the three-year period if it has not elected to deploy the additional turbines and if certain other criteria apply. For additional information regarding the settlement, see "Legal Proceedings" in Part II of this quarterly report.

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Parent Company Liquidity

The parent company's liquidity and its ability to pay operating expenses and dividends to common shareholders have historically been dependent on dividends from SCE, tax-allocation payments under its tax-allocation agreements with its subsidiaries, and access to bank and capital markets. Given its subsidiaries' plans to use their cash flows for their respective capital needs, Edison International (parent) may incur additional borrowings to fund its dividends to common shareholders and operating expenses. In the third quarter of 2010, Edison International issued $400 million of long-term debt with the proceeds used to repay short-term borrowings under its credit facility, and the remainder for corporate liquidity purposes.

At September 30, 2010, Edison International (parent) had approximately $17 million of cash and equivalents. The following table summarizes the status of the Edison International (parent) credit facility at September 30, 2010:

(in millions)	Edison International (parent)


Commitment	$	1,426
Outstanding borrowings		—
Outstanding letters of credit		—

Amount available	$	1,426

Edison International has a debt covenant in its credit facility that requires a consolidated debt to total capitalization ratio of less than or equal to 0.65 to 1. At September 30, 2010, Edison International's consolidated debt to total capitalization ratio was 0.53 to 1.

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SOUTHERN CALIFORNIA EDISON COMPANY

RESULTS OF OPERATIONS

SCE's results of operations are derived mainly through two sources:

•: Utility earning activities, which mainly represent CPUC- and FERC-authorized base rates, which allow a reasonable return, and CPUC-authorized incentive mechanisms; and
•: Utility cost-recovery activities, which mainly represent CPUC-authorized balancing accounts, which allow recovery of costs incurred (including carrying costs) or provide mechanisms to track and recover or refund differences in forecasted and actual amounts. Balancing accounts (except for certain capital-related projects) do not allow for a return.

Utility earning activities include base rates that are designed to recover forecasted operation and maintenance costs, certain capital-related carrying costs, interest, taxes and a return, including the return and taxes on capital projects recovered through balancing account mechanisms. Differences between authorized and actual results impact earnings. Also included in utility earning activities are revenues or penalties related to incentive mechanisms, other operating revenue, and regulatory charges or disallowances, if any.

Utility cost-recovery activities include rates which provide for recovery, subject to reasonableness review, of fuel costs, purchased power costs, certain operation and maintenance expenses (including public purpose related program costs), and depreciation expense related to certain projects. There is no return earned on cost-recovery expenses.

Electric Utility Results of Operations

The following table is a summary of SCE's results of operations for the periods indicated. The presentation below separately identifies utility earning activities and utility cost-recovery activities.

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Three Months Ended September 30, 2010 versus September 30, 2009

		Three Months Ended September 30, 2010								Three Months Ended September 30, 2009


(in millions)		Utility Earning Activities			Utility Cost- Recovery Activities ^1,2		Total Consolidated			Utility Earning Activities			Utility Cost- Recovery Activities ^1,2		Total Consolidated

Operating revenue		$	1,601		$	1,497	$	3,098		$	1,494		$	1,575	$	3,069

Fuel and purchased power			—			1,218		1,218			—			1,209		1,209
Operation and maintenance			541			262		803			506			296		802
Depreciation, decommissioning and amortization			300			16		316			288			14		302
Property and other taxes			64			1		65			60			—		60

Total operating expenses			905			1,497		2,402			854			1,519		2,373

Operating income			696			—		696			640			56		696
Net interest expense and other			(84	)		—		(84	)		(45	)		—		(45	)

Income before income taxes			612			—		612			595			56		651
Income tax expense			205			—		205			236			—		236

Net income			407			—		407			359			56		415
Net income attributable to noncontrolling interests			—			—		—			—			56		56
Dividends on preferred and preference stock not subject to mandatory redemption			13			—		13			13			—		13

Net income available for common stock		$	394		$	—	$	394		$	346		$	—	$	346

Core Earnings ³							$	352							$	300
Non-Core Earnings:
	Global Settlement							42								—
	Regulatory items ⁴							—								46

Total SCE GAAP Earnings							$	394							$	346

¹: Effective January 1, 2010, SCE deconsolidated the Big 4 projects which affects comparability of cost-recovery activities (see "Edison International Notes to Consolidated Financial Statements Note 13. Variable Interest Entities" for further discussion). Included in the three- and nine-month periods ended September 30, 2009, respectively, were the following amounts (including elimination entries) related to the Big 4 projects:

(in millions)	Three Months Ended September 30, 2009			Nine Months Ended September 30, 2009


Operating revenue	$	48		$	154

Fuel		80			257
Purchased power		(118	)		(286	)
Operation and maintenance		22			68
Depreciation		8			25

Total operating expenses		(8	)		64

Net income	$	56		$	90

²: Effective July 1, 2009, SCE transferred Mountainview Power Company, LLC to SCE (see "Note 8. Property and Plant" in the 2009 Form 10-K for further discussion). As a result of the transfer and for comparability purposes, Mountainview's 2009 activities (zero for both operating revenue and total expenses for the three months ended September 30, 2009 and $49 million for both operating revenue and total expenses for the nine months ended September 30, 2009) were reclassified from cost-recovery activities to utility earning activities consistent with the 2010 regulatory recovery mechanism.
³: See use of Non-GAAP financial measures in "Edison International Overview—Highlights of Operating Results."
⁴: The $46 million non-core earnings benefit related to the transfer of the Mountainview power plant to utility rate base in the third quarter of 2009 is reflected in the following captions: operating revenue of $(13) million; operation and maintenance of $(14) million; depreciation expense of $7 million; net interest expense and other of $50 million; and an income tax benefit of $2 million.

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Utility Earning Activities

Utility earning activities were primarily affected by the following:

•: Higher operating revenue of $107 million primarily due to an increase related to implementation of the 2009 GRC (effective January 1, 2009), which authorized a 4.25% increase in 2010 authorized revenue and an increase related to revenue requirements for capital projects recovered through CPUC-authorized balancing accounts primarily related to the steam generator replacement project and the EdisonSmartConnect ^TM project.
•: Higher operation and maintenance expense of $35 million primarily resulting from higher transmission and distribution expenses primarily related to higher costs to support system reliability and infrastructure replacement and an increase in right of way costs.
•: Higher net interest expense and other of $39 million primarily related to a decrease in AFUDC – equity earnings due to the transfer of the Mountainview power plant to utility rate base in the third quarter of 2009, partially offset by a higher capitalized cost of equity (AFUDC) resulting from a higher capitalization rate and level of construction in progress. See "Edison International Notes to Consolidated Financial Statements Note 12. Other Income and Expenses" for further detail of other income and expenses.

See "—Income Taxes" below for discussion of lower income taxes during the three months ended September 30, 2010 compared to the same period in 2009.

Utility Cost-Recovery Activities

Excluding the impact of deconsolidation of the Big 4 projects (see "Edison International Notes to Consolidated Financial Statements Note 13. Variable Interest Entities"), utility cost-recovery activities were affected by lower purchased power expense of $32 million related to: lower realized losses of $60 million reflecting the impact of higher natural gas prices and changes in SCE's hedge portfolio mix; and lower ISO-related and other energy costs of $45 million. These decreases were partially offset by: higher QF purchased power expense of $35 million primarily due to higher kWh purchases and higher natural gas prices; and higher bilateral energy purchase expense of $25 million, primarily resulting from a new contract.

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Nine Months Ended September 30, 2010 versus September 30, 2009

		Nine Months Ended September 30, 2010									Nine Months Ended September 30, 2009


(in millions)		Utility Earning Activities			Utility Cost- Recovery Activities ^1,2			Total Consolidated			Utility Earning Activities			Utility Cost- Recovery Activities ^1,2			Total Consolidated

Operating revenue		$	4,175		$	3,329		$	7,504		$	3,951		$	3,580		$	7,531

Fuel and purchased power			—			2,612			2,612			—			2,688			2,688
Operation and maintenance			1,598			674			2,272			1,464			758			2,222
Depreciation, decommissioning and amortization			905			40			945			836			41			877
Property and other taxes			193			2			195			187			—			187
Gain on sale of assets			—			(1	)		(1	)		—			(1	)		(1	)

Total operating expenses			2,696			3,327			6,023			2,487			3,486			5,973

Operating income			1,479			2			1,481			1,464			94			1,558
Net interest expense and other			(244	)		(2	)		(246	)		(214	)		(4	)		(218	)

Income before income taxes			1,235			—			1,235			1,250			90			1,340
Income tax expense			338			—			338			159			—			159

Net income			897			—			897			1,091			90			1,181
Net income attributable to noncontrolling interests			—			—			—			—			90			90
Dividends on preferred and preference stock not subject to mandatory redemption			39			—			39			38			—			38

Net income available for common stock		$	858		$	—		$	858		$	1,053		$	—		$	1,053

Core Earnings ³								$	802								$	707
Non-Core Earnings:
	Global Settlement								95									300
	Tax impact of health care legislation								(39	)								—
	Regulatory items ⁴								—									46

Total SCE GAAP Earnings								$	858								$	1,053

¹: See footnote 1 under "—Three Months Ended September 30, 2010 versus September 30, 2009" table above.
²: See footnote 2 under "—Three Months Ended September 30, 2010 versus September 30, 2009" table above.
³: See use of Non-GAAP financial measures in "Edison International Overview—Highlights of Operating Results."
⁴: See footnote 4 under "—Three Months Ended September 30, 2010 versus September 30, 2009" table above.

Utility Earning Activities

Utility earning activities were primarily affected by the following:

•

Higher operating revenue of $224 million primarily due to the following:

•: $140 million increase related to implementation of the 2009 GRC (effective January 1, 2009), which authorized a 4.25% increase in 2010 authorized revenue.
•: $35 million increase related to the 2009 and 2010 FERC rate cases effective March 1, 2009 and March 1, 2010, respectively (see "SCE: Liquidity and Capital Resources—Regulatory Proceedings—2010 FERC Rate Case" for further discussion).

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•: $30 million increase related to revenue requirements for capital projects recovered through CPUC-authorized balancing accounts primarily related to the steam generator replacement project and the EdisonSmartConnect ^TM project.

•

Higher operation and maintenance expense of $134 million including the impact of curtailed spending last year due to the timing of the 2009 GRC decision. The increase in operation and maintenance expense was primarily in the following areas:

•

$60 million of higher transmission and distribution expenses. In addition to the impact of curtailed spending, the 2010 increase reflects higher costs to support system reliability and infrastructure replacement, increase in right of way costs, increases in preventive maintenance work costs, and line clearing costs.

•

$40 million of higher expenses related to higher general liability insurance, higher information technology costs, a nuclear insurance refund received in 2009, and higher injury and damage claims.

•

$15 million of higher generation expenses primarily resulting from a $10 million increase at San Onofre mostly due to additional work identified during the Unit 2 scheduled outage and a $10 million increase primarily due to overhaul and outage costs at Four Corners. These increases were partially offset by a $15 million hydrogen energy project payment made in the second quarter of 2009, which was subsequently approved for recovery through customer rates in December 2009. During the San Onofre Unit 2 scheduled outage, SCE identified and completed additional work unrelated to the steam generator replacement that resulted in increased operation and maintenance expense and extended the outage beyond SCE's initial estimated timeframe. San Onofre Unit 2 was subsequently returned to service on April 11, 2010.

The first two of the four replacement steam generators were installed in San Onofre Unit 2 in the first quarter of 2010. In October 2010, SCE began the process of installing the final two steam generators at San Onofre Unit 3 which are expected to be placed in service in early 2011. The CPUC has previously adopted a mechanism establishing thresholds for recovery of SCE's incurred costs for the steam generator replacements. Costs above an established threshold will require a reasonableness review. No cost recovery will be allowed for costs incurred that exceed an authorized cap. The determination of whether a reasonableness review of costs is necessary will be made after the steam generator replacement project is completed.

As discussed in the 2009 Form 10-K, the NRC has continued to affirm that San Onofre is being operated safely. However, SCE has had to address a number of regulatory and performance issues for which further corrective action is required to mitigate exposure to events that could have safety significance. In its 2010 mid-cycle performance review letter on September 1 ^st , the NRC noted that although San Onofre had developed corrective actions to resolve previously noted human performance and problem identification and resolution problems, the corrective actions that had been implemented had not been fully effective. The NRC is conducting additional inspections over its baseline program, including inspections to evaluate progress on these matters, and to assess actions taken to improve the working environment for employees to feel free to raise safety concerns. The NRC is also conducting additional public meetings to discuss these issues. SCE continues to implement plans to address the identified issues; however, a number of these issues remain outstanding, and additional issues continue to be identified. To address these regulatory and performance issues, SCE has applied increased management focus and other resources to San Onofre, with an associated

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impact on operations and maintenance costs, as described in the 2009 Form 10-K. On September 2, 2010, SCE appointed a new Chief Nuclear Officer on an interim basis, pending the search for a permanent replacement. SCE anticipates that its corrective actions, and related additional management focus and operations and maintenance costs, will continue beyond 2010. If issues identified by the NRC remain uncorrected, these matters could have a material adverse effect on SCE.

•: Higher depreciation expense of $69 million primarily related to increased capital investments, including capitalized software costs.
•: Higher net interest expense and other of $30 million primarily related to a decrease in AFUDC – equity earnings due to the transfer of the Mountainview power plant to utility rate base in the third quarter of 2009, partially offset by a higher capitalized cost of equity (AFUDC) resulting from a higher capitalization rate and level of construction in progress.

See "—Income Taxes" below for discussion of higher income taxes during the nine-months ended September 30, 2010 compared to the same period in 2009.

Utility Cost-Recovery Activities

•: Lower purchased power expense of $104 million related to: lower realized losses of $191 million reflecting the impact of higher natural gas prices and changes in SCE's hedge portfolio mix; and lower bilateral energy purchase expense of $70 million primarily due to decreased kWh purchases. These decreases were partially offset by: higher QF purchased power expense of $115 million primarily due to higher kWh purchases and higher natural gas prices; and higher ISO-related and other energy costs of $30 million, including replacement power costs related to the San Onofre Unit 2 scheduled outage.
•: Fuel expense reflects lower costs at Four Corners (coal) of $20 million primarily resulting from the planned outage and higher costs at Mountainview of $25 million resulting from higher natural gas prices.

Supplemental Operating Revenue Information

SCE's retail billed and unbilled revenue (excluding wholesale sales and balancing account (over)/undercollections) was $3.4 billion and $7.8 billion for the three- and nine-month periods ended September 30, 2010, respectively, compared to $3.3 billion and $7.5 billion for the respective periods in 2009. The quarter and year-to-date increases reflect a rate increase of $312 million and $591 million, respectively, and a sales volume decrease of $226 million and $314 million, respectively. The rate increase was due to higher system average rates for 2010 compared to the same periods in 2009 mainly due to the implementation of the CPUC 2009 GRC decision and approved FERC transmission rate changes. The sales volume decrease was due to milder weather experienced during 2010 compared to the same period in 2009 and economic conditions. As a result of the CPUC-authorized decoupling mechanism, SCE does not bear the volumetric risk related to electricity sales (see "Overview of Ratemaking Mechanisms" in the 2009 Form 10-K).

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Due to warmer weather during the summer months and SCE's rate design, operating revenue during the third quarter of each year is generally higher than other quarters.

Amounts SCE bills and collects from its customers for electric power purchased and sold by the CDWR to SCE's customers, CDWR bond-related costs and a portion of direct access exit fees are remitted to the CDWR and are not recognized as revenue by SCE. The amounts collected and remitted to CDWR were $315 million and $896 million for the three- and nine-month periods ended September 30, 2010, respectively, and $493 million and $1.4 billion for the three- and nine-month periods ended September 30, 2009, respectively. Effective January 1, 2010, the CDWR-related rates were decreased to reflect lower power procurement expenses and to refund CDWR overcollections to customers.

Income Taxes

SCE's income tax expense from continuing operations decreased $31 million and increased $179 million during the three- and nine-month periods ended September 30, 2010, respectively. The 2010 income tax expense reflects: a $95 million earnings benefit relating to the California impact of the federal Global Settlement, including $53 million in the second quarter resulting from the acceptance by the Franchise Tax Board of the tax positions finalized with the IRS in 2009 and $42 million in the third quarter resulting from receipt of the final interest determination from the Franchise Tax Board; $39 million non-cash charge recorded in the first quarter related to the federal health care legislation enacted in March 2010; and a $40 million earnings benefit due to a change in method of tax accounting for asset removal costs primarily related to SCE's infrastructure replacement program. During the nine months ended September 30, 2009, SCE recognized a $300 million earnings benefit related to the federal Global Settlement finalized with the IRS. See "Edison International Notes to Consolidated Financial Statements Note 4. Income Taxes" for further discussion.

LIQUIDITY AND CAPITAL RESOURCES

SCE expects to fund its continuing obligations and projected capital investments for 2010 through cash and equivalents on hand, operating cash flows and incremental capital market financings of debt and preferred equity. SCE also has availability under its credit facilities if additional funding and liquidity are necessary to meet operating and capital requirements.

Available Liquidity

As of September 30, 2010, SCE had approximately $861 million of cash and equivalents and short-term investments. As of September 30, 2010, SCE's long-term debt, including current maturities of long-term debt, was $7.6 billion.

The following table summarizes the status of SCE's credit facilities at September 30, 2010:

(in millions)	Credit Facilities ¹


Commitment	$	2,894
Outstanding borrowings		—
Outstanding letters of credit		(11	)

Amount available	$	2,883

¹: SCE has two revolving credit facilities with various banks; a $2.4 billion five-year credit facility that terminates in February 2013, with four one-year options to extend by mutual consent, and a $500 million three-year credit facility that terminates in March 2013.

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Debt Covenant

SCE has a debt covenant in its credit facilities that limits its debt to total capitalization ratio to less than or equal to 0.65 to 1. At September 30, 2010, SCE's debt to total capitalization ratio was 0.46 to 1.

Regulatory Proceedings

Energy Efficiency Risk/Reward Incentive Mechanism

As discussed in the year-ended 2009 MD&A, the CPUC adopted an Energy Efficiency Risk/Reward Incentive Mechanism applicable to the 2006 - 2008 performance period. In September 2010, the CPUC issued a proposed decision and an alternate proposed decision for the final payment. The proposed decision, if adopted, would result in no final payment, whereas, the alternate proposed decision, if adopted, would result in SCE receiving the previously projected $27 million final payment. SCE expects a CPUC decision on the final payment, if any, in late 2010. There is no assurance that SCE will receive a final payment.

2010 FERC Rate Case

Dividend Restrictions

The CPUC regulates SCE's capital structure and limits the dividends it may pay Edison International. In SCE's most recent cost of capital proceeding, the CPUC set an authorized capital structure for SCE which included a common equity component of 48%. SCE may make distributions to Edison International as long as the common equity component of SCE's capital structure remains at or above the 48% authorized level on a 13-month weighted-average basis. At September 30, 2010, SCE's 13-month weighted-average common equity component of total capitalization was 51.1% resulting in the capacity to pay $502 million in additional dividends.

SCE paid dividends to its parent, Edison International, of $100 million in both January 2010 and in September 2010. Future dividend amounts and timing of distributions are dependent upon several factors, including the actual level of capital investments, operating cash flows and earnings.

Income Tax Matters

In September 2010, President Obama signed the Small Business Jobs Act of 2010, which extended the 50% bonus depreciation provision for an additional year to include property purchased and placed into service by December 31, 2010. SCE expects that certain capital expenditures incurred during 2010 will qualify for the accelerated bonus depreciation, which would provide additional cash flow benefits in 2010, estimated to be in the range of approximately $250 million to $300 million.

Margin and Collateral Deposits

Certain derivative instruments and power procurement contracts under SCE's power and natural gas hedging activities contain collateral requirements. The table below illustrates the amount of collateral

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posted by SCE to its counterparties, as well as the potential collateral that would be required if SCE's credit rating fell below investment grade.

(in millions)	September 30, 2010


Collateral posted as of September 30, 2010 ¹	$	18
Incremental collateral requirements if SCE's credit rating was downgraded below investment grade		201

Total posted and potential collateral requirements ²	$	219

¹: Collateral posted consisted of $5 million which was offset against net derivative liabilities and $13 million provided to counterparties and other brokers (consisting of $2 million in cash reflected in "Other current assets" on the consolidated balance sheets and $11 million in letters of credit).
²: Total posted and potential collateral requirements may increase by an additional $11 million, based on SCE's forward position as of September 30, 2010, due to adverse market price movements over the remaining life of the existing contracts using a 95% confidence level.

Historical Consolidated Cash Flows

This section discusses consolidated cash flows from operating, financing and investing activities.

Condensed Consolidated Statement of Cash Flows

	Nine Months Ended September 30,

(in millions)	2010			2009

Cash flows provided by operating activities	$	2,656		$	3,281
Cash flows provided (used) by financing activities		622			(1,854	)
Cash flows used by investing activities		(2,883	)		(2,284	)

Net increase (decrease) in cash and equivalents	$	395		$	(857	)

Cash Flows Provided by Operating Activities

Cash provided by operating activities decreased $625 million for the nine months ended 2010, compared to the same period in 2009 reflects lower net tax receipts in 2010 primarily resulting from the impacts of the Global Settlement. As a result of the Global Settlement, SCE received net tax allocation payments from Edison International of approximately $295 million and $875 million in 2010 and 2009, respectively. The 2010 change was also due to the timing of cash receipts and disbursements related to working capital items.

Cash Flows Provided (Used) by Financing Activities

Financing activities for the first nine months of 2010 were as follows:

•: Issued $1 billion of first refunding mortgage bonds due in 2040 to fund SCE's capital program.
•: Reissued $144 million of tax-exempt pollution control bonds due in 2035 to fund SCE's capital program.
•: Repaid $250 million of senior unsecured notes.

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•: Paid $200 million in dividends to Edison International.

Financing activities for the first nine months of 2009 were as follows:

•: Issued $500 million of first refunding mortgage bonds due in 2039 and $250 million of first and refunding mortgage bonds due in 2014. The bond proceeds were used for general corporate purposes and to finance fuel inventories.
•: Repaid a net $1.9 billion of short-term debt.
•: Repaid $150 million of first and refunding mortgage bonds.
•: Purchased $219 million of two issues of tax-exempt pollution control bonds and converted the issues to a variable rate structure. As discussed above, SCE reissued $144 million of these bonds during the first nine months of 2010. SCE continues to hold the remaining $75 million of these bonds which are outstanding and have not been retired or cancelled.
•: Paid $200 million in dividends to Edison International.

Cash Flows Used by Investing Activities

Cash flows from investing activities are driven primarily by capital expenditures and funding of nuclear decommissioning trusts. Cash paid for capital expenditures was $2.7 billion and $2.1 billion for the nine months ended September 30, 2010 and 2009, respectively, primarily related to transmission and distribution investments. Net purchases of nuclear decommissioning trust investments and other were $133 million and $163 million for the nine months ended September 30, 2010 and 2009, respectively.

Contractual Obligations and Contingencies

Contractual Obligations

SCE's long-term principal debt maturities plus interest payments as of September 30, 2010 are estimated to be: $102 million for the remainder of 2010, $408 million in 2011, $408 million in 2012, $408 million in 2013, $1.4 billion in 2014, and $13 billion for the period remaining thereafter. These amounts have been updated to reflect SCE's financing activities completed during 2010. For a discussion of issuances of long-term debt, see "Edison International Notes to Consolidated Financial Statements Note 3. Liabilities and Lines of Credit—Long-Term Debt."

For a discussion of purchase obligations and capital lease obligations, see "Edison International Notes to Consolidated Financial Statements Note 6. Commitments and Contingencies—Lease Commitments and—Other Commitments."

Contingencies

Developments related to SCE's 2010 FERC Rate Case, FERC Transmission Incentives and CWIP Proceedings, Navajo Nation Litigation and Spent Nuclear Fuel are discussed in "Edison International Notes to Consolidated Financial Statements Note 6. Commitments and Contingencies—Contingencies."

Environmental Remediation

As of September 30, 2010, SCE identified 23 sites for remediation and recorded an estimated minimum liability of $38 million. SCE expects to recover 90% of its remediation costs at certain sites. SCE expects to clean up its identified sites over a period of up to 30 years. Remediation costs in each of the

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next several years are expected to range from $3 million to $18 million. See "Edison International Notes to Consolidated Financial Statements Note 6. Commitments and Contingencies—Contingencies" for further discussion.

MARKET RISK EXPOSURES

For a detailed discussion of SCE's market risk exposures, including commodity price risk, credit risk and interest rate risk, see "SCE: Market Risk Exposures—Commodity Price Risk" in the year-ended 2009 MD&A.

Interest Rate Risk

At September 30, 2010, the fair market value of SCE's long-term debt (including current portion of long-term debt) was $8.7 billion, compared to a carrying value of $7.6 billion. At September 30, 2010, SCE did not believe that its short-term debt was subject to interest rate risk due to the fair value being approximately equal to the carrying value.

Commodity Price Risk

Natural Gas and Electricity Price Risk

The following table summarizes the fair values of outstanding derivative instruments used at SCE to mitigate its exposure to spot market prices. For further discussion on fair value measurements, see "Edison International Notes to Consolidated Financial Statements Note 10. Fair Value Measurements."

	September 30, 2010					December 31, 2009


(in millions)	Assets		Liabilities			Assets		Liabilities

Electricity options, swaps and forward arrangements	$	3	$	75		$	1	$	25
Natural gas options, swaps and forward arrangements		81		338			86		171
Congestion revenue rights		177		—			217		—
Tolling arrangements ¹		—		1,115			43		402
Netting and collateral		—		(5	)		—		—

Total	$	261	$	1,523		$	347	$	598

¹: In compliance with a CPUC mandate, SCE held an open, competitive solicitation that produced agreements with different project developers who have agreed to construct new southern California generating resources. The contracts provide for fixed capacity payments as well as pricing for energy delivered based on a heat rate and contractual operation and maintenance prices. However, due to uncertainty regarding the availability of required emission credits, some of the generating resources may not be constructed and the contracts associated with these resources could therefore terminate, at which time SCE would no longer account for these contracts as derivatives.

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The change in the fair value of derivative contracts for the nine months ended September 30, 2010 was as follows:

(in millions)


Fair value of derivative contracts, net liability at January 1, 2010		$	(251	)
Total realized/unrealized net losses:
	Included in regulatory assets and liabilities ¹		(1,138	)
Purchases and settlements, net			122
Netting and collateral			5

Fair value of derivative contracts, net liability at September 30, 2010		$	(1,262	)

¹: Due to regulatory mechanisms, SCE's realized and unrealized gains and losses are recorded as regulatory assets and liabilities.

SCE recognizes realized gains and losses on derivative instruments as purchased power expense and recovers these costs, subject to reasonableness review, from ratepayers. As a result, realized gains and losses are not reflected in earnings, but may temporarily affect cash flows. Due to expected future recovery from ratepayers, unrealized gains and losses are recorded as regulatory assets or liabilities and therefore are not reflected in earnings. Realized losses on economic hedging activities were primarily due to settled natural gas prices being lower than contract prices. Unrealized losses on economic hedging activities were primarily due to the declining gas and power prices related to SCE's new generation contracts and the decreasing forward natural gas prices related to financial natural gas contracts.

Credit Risk

Credit risk exposure from counterparties for power and gas trading activities is measured as the sum of net accounts receivable (accounts receivable less accounts payable) and the current fair value of net derivative assets (derivative assets less derivative liabilities) reflected on the consolidated balance sheets. SCE enters into master agreements which typically provide for a right of setoff. Accordingly, SCE's credit risk exposure from counterparties is based on a net exposure under these arrangements. As of September 30, 2010, the amount of balance sheet exposure as described above broken down by the credit ratings of SCE's counterparties, was as follows:

	September 30, 2010

(in millions)	Exposure ²		Collateral		Net Exposure

S&P Credit Rating ¹
A or higher	$	187	$	—	$	187
A-		—		—		—
BBB+		—		—		—
BBB		—		—		—
BBB-		—		—		—
Below investment grade and not rated		—		—		—

Total	$	187	$	—	$	187

¹: SCE assigns a credit rating based on the lower of a counterparty's S&P or Moody's rating. For ease of reference, the above table uses the S&P classifications to summarize risk, but reflects the lower of the two credit ratings.
²: Exposure excludes amounts related to contracts classified as normal purchases and sales and non-derivative contractual commitments that are not recorded on the consolidated balance sheets, except for any related net accounts receivable.

The credit risk exposure set forth in the above table is composed of less than $1 million of net account receivables and $187 million representing the fair value, adjusted for counterparty credit reserves, of derivative contracts.

The CAISO comprises 94% of the total net exposure above and is mainly related to the CRRs' fair value (see "—Commodity Price Risk" for further information).

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EDISON MISSION GROUP

RESULTS OF OPERATIONS

The following table is a summary of EMG's results of operations. Effective January 1, 2010, Edison International combined the competitive power generation and financial services segments into one business segment. The change resulted from termination of cross-border leases during 2009 and the continued decline of the remaining portfolio of the financial services segment. Accordingly, the financial services segment has been combined retroactively for all periods presented into one business segment. The combination of these business activities is consistent with the management structure of EMG and evaluation of performance by Edison International.

Results of Continuing Operations

This section discusses operating results for the three- and nine-month periods ended September 30, 2010 and 2009. EMG's continuing operations include the fossil-fueled facilities, renewable energy and gas-fired projects, energy trading, and gas-fired projects under contract, corporate interest expense and general and administrative expenses. EMG's discontinued operations include all international operations, except the Doga project.

The following table is a summary of competitive power generation results of operations for the periods indicated.

		Three Months Ended September 30,						Nine Months Ended September 30,


(in millions)		2010			2009			2010			2009

Competitive power generation operating revenue		$	691		$	596		$	1,838		$	1,782

Fuel			228			228			602			587
Other operation and maintenance			224			227			794			710
Depreciation, decommissioning and amortization			62			62			182			176
Lease terminations and other			—			(1	)		3			888

Total operating expenses			514			516			1,581			2,361

Operating income (loss)			177			80			257			(579	)
Interest and dividend income			4			5			28			26
Equity in income from partnerships and unconsolidated subsidiaries – net			62			63			101			78
Other income			—			4			—			6
Interest expense – net of amounts capitalized			(65	)		(80	)		(198	)		(232	)
Other expenses			—			(5	)		—			(9	)

Income (loss) from continuing operations before income taxes			178			67			188			(710	)
Income tax expense (benefit)			64			7			(22	)		(263	)

Income (loss) from continuing operations			114			60			210			(447	)
Income (loss) from discontinued operations – net of tax			(4	)		(1	)		4			(5	)

Net income (loss)			110			59			214			(452	)
Less: Net loss attributable to noncontrolling interests			—			(1	)		—			(2	)

Net income (loss) available for common stock		$	110		$	60		$	214		$	(450	)

Core Earnings ¹		$	120		$	61		$	158		$	179
Non-Core Earnings (Loss):
	Global Settlement ²		(6	)		—			52			(624	)
	Discontinued Operations		(4	)		(1	)		4			(5	)

Total EMG GAAP Earnings (Loss)		$	110		$	60		$	214		$	(450	)

¹: See use of Non-GAAP financial measures in "Edison International Overview—Highlights of Operating Results."
²: Includes termination of Edison Capital's cross-border leases.

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EMG's third quarter 2010 core earnings were higher than third quarter 2009 core earnings primarily due to the following:

•: $77 million increased pre-tax income from Midwest Generation and Homer City mostly from higher average realized energy prices, higher capacity revenues and a gain from the sale of bankruptcy claims against Lehman Brothers Commodity Services, Inc. and Lehman Brothers Holdings Inc., collectively referred to as Lehman. Energy and fuel related unrealized losses during the third quarter of 2010 were $13 million compared to unrealized gains of $6 million during the same period last year.

EMG's core earnings for the nine months ended September 30, 2010 were lower than core earnings for the nine months ended September 30, 2009 primarily due to the following pre-tax items:

•: $109 million decreased income from Midwest Generation and Homer City primarily as a result of higher plant maintenance costs during the first half of 2010. In addition, operating revenues were lower due to lower realized energy prices and unrealized losses in 2010 compared to unrealized gains in 2009, partially offset by higher capacity revenues and the sale of the bankruptcy claims discussed above. Plant maintenance and overhaul related expenses were higher in 2010 due to the deferral of plant outages in 2009. Energy and fuel related unrealized losses during the nine months ended September 30, 2010 were $30 million compared to unrealized gains of $45 million during the same period last year. Results for the nine months ended September 30, 2010 included the benefit of power hedge contracts entered into during earlier periods at higher prices than current energy prices. For additional information about market conditions, see "EMG: Market Risk Exposures."
•: $33 million gain in the second quarter of 2009 from the sale of an interest in a leverage lease (Midlands Cogeneration Ventures) and lower lease income from termination of cross-border leveraged leases in 2009.

The decreases were partially offset by the following pre-tax items:

•: $65 million increased energy trading revenues due to congestion and basis trading.
•: $34 million decreased interest expense primarily due to the increase in the capitalization of interest on projects under construction.
•: $17 million increased income from distributions received from the March Point and Doga projects.
•: $17 million decreased corporate expenses due primarily to lower renewable energy development expenses.

Consolidated non-core items for EMG included:.

•: An earnings benefit of $52 million recorded in the nine months ended September 30, 2010 resulting from acceptance by the California Franchise Tax Board of the tax positions finalized with the IRS in 2009 as part of the Global Settlement for tax years 1986 through 2002 and revision to interest on federal disputed tax items.

Adjusted Operating Income (Loss) ("AOI") – Overview

The following section and table provide a summary of results of EMG's operating projects and corporate expenses for the third quarters of 2010 and 2009 and nine months ended September 30, 2010

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and 2009, together with discussions of the contributions by specific projects and of other significant factors affecting these results.

The following table shows the adjusted operating income (loss) of EMG's projects:

	Three Months Ended September 30,						Nine Months Ended September 30,


(in millions)	2010			2009			2010			2009

Midwest Generation plants	$	150		$	69		$	198		$	257
Homer City facilities		48			52			85			135
Renewable energy projects		8			—			37			37
Energy trading		27			13			105			40
Big 4 projects		33			27			49			44
Sunrise		27			30			30			31
Doga		—			—			15			8
March Point		—			4			17			7
Westside projects		—			(1	)		1			2
Leveraged lease income		2			1			4			13
Lease terminations and other		—			1			(3	)		(888	)
Other projects		—			(1	)		6			3
Other operating income (expense)		(3	)		7			1			(3	)

		292			202			545			(314	)
Corporate administrative and general		(37	)		(44	)		(111	)		(128	)
Corporate depreciation and amortization		(5	)		(4	)		(13	)		(10	)

AOI ¹	$	250		$	154		$	421		$	(452	)

¹: AOI is equal to operating income (loss) under GAAP, plus equity in earnings (losses) of unconsolidated affiliates, dividend income from projects, production tax credits, other income and expenses, and net (income) loss attributable to noncontrolling interests. Production tax credits are recognized as wind energy is generated based on a per-kilowatt-hour rate prescribed in applicable federal and state statutes. AOI is a non-GAAP performance measure and may not be comparable to those of other companies. Management believes that inclusion of earnings of unconsolidated affiliates, dividend income from projects, production tax credits, other income and expenses, and net (income) loss attributable to noncontrolling interests in AOI is meaningful for investors as these components are integral to the operating results of EMG.

The following table reconciles AOI to operating income as reflected on EMG's consolidated statements of income:

		Three Months Ended September 30,					Nine Months Ended September 30,


(in millions)		2010		2009			2010		2009

AOI		$	250	$	154		$	421	$	(452	)
Less:
	Equity in earnings of unconsolidated affiliates		61		63			100		78
	Dividend income from projects		—		1			18		11
	Production tax credits		12		10			45		40
	Other income (expense), net		—		(2	)		1		(4	)
	Net loss attributable to noncontrolling interests		—		2			—		2

Operating Income		$	177	$	80		$	257	$	(579	)

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Adjusted Operating Income from Consolidated Operations

Midwest Generation Plants

The following table presents additional data for the Midwest Generation plants:

			Three Months Ended September 30,				Nine Months Ended September 30,


(in millions)			2010		2009		2010		2009

Operating Revenues			$	444	$	372	$	1,104	$	1,096
Operating Expenses
	Fuel ¹			151		164		390		397
	Plant operations			93		89		361		291
	Plant operating leases			19		18		56		56
	Depreciation and amortization			28		27		84		81
	Administrative and general			3		5		15		15

	Total operating expenses			294		303		906		840

Operating Income				150		69		198		256

Other Income				—		—		—		1

AOI			$	150	$	69	$	198	$	257

Statistics
	Generation (in GWh)
		Energy contracts		8,449		8,272		22,091		20,389
		Load requirements services contract		—		—		—		1,333

	Total			8,449		8,272		22,091		21,722

¹: Included in fuel costs were $5 million and $19 million during the third quarters of 2010 and 2009, respectively, and $10 million and $52 million during the nine months ended September 30, 2010 and 2009, respectively, related to the net cost of emission allowances. Transfers of emission allowances between Midwest Generation and Homer City are made at fair market value. Transfers of NO _x emission allowances to Midwest Generation were $0.4 million and $1 million during the nine months ended September 30, 2010 and 2009, respectively. Transfers of SO ₂ emission allowances from Midwest Generation were $5 million during the first nine months of 2010. For more information regarding the price of emission allowances, see "EMG: Market Risk Exposures—Commodity Price Risk—Emission Allowances Price Risk."

AOI from the Midwest Generation plants increased $81 million for the third quarter ended September 30, 2010, compared to the corresponding period of 2009. The third quarter increase in AOI was primarily attributable to an increase in realized energy prices, a gain from the sale of the bankruptcy claims against Lehman, and higher capacity revenues, partially offset by unrealized losses in 2010 compared to unrealized gains in 2009. Average realized fuel costs were lower due to lower emission allowance costs.

During the third quarter of 2010, EMG sold its claims against Lehman and recorded a gain of $24 million. The claims originated from power contracts that were terminated in 2008 due to the bankruptcy of Lehman. During 2008, EMG dedesignated the contracts as cash flow hedges due to nonperformance risks and recorded unrealized losses of $24 million.

AOI from the Midwest Generation plants decreased $59 million for the nine months ended September 30, 2010, compared to the corresponding period of 2009. The 2010 decrease in AOI was primarily attributable to an increase in plant maintenance costs during the first half of 2010, lower

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realized energy prices and unrealized losses in 2010 compared to unrealized gains in 2009, partially offset by higher capacity revenues, a gain from the sale of the bankruptcy claims discussed above, and lower emission allowance costs. Plant maintenance and overhaul related expenses were higher in 2010 due to the deferral of plant outages in 2009. Average realized fuel costs were lower in the nine months ended September 30, 2010 as compared to the same period in 2009 due to lower emission allowance costs partially offset by higher costs related to activated carbon, which is used to reduce mercury emissions.

Included in operating revenues were unrealized gains (losses) of $(16) million and $2 million for the third quarters of 2010 and 2009, respectively, and $(12) million and $22 million for the nine months ended September 30, 2010 and 2009, respectively. Unrealized gains (losses) in 2010 and 2009 were primarily due to economic hedge contracts that are accounted for on a mark-to-market basis.

Included in fuel costs were unrealized gains (losses) of $2 million and $(2) million for the third quarters of 2010 and 2009, respectively, and $(5) million and $12 million for the nine months ended September 30, 2010 and 2009, respectively. Unrealized gains (losses) were due to oil futures contracts which were accounted for as economic hedges related to a fuel adjustment mechanism of a rail transportation contract.

For more information regarding forward market prices and unrealized gains (losses), see "EMG: Market Risk Exposures—Commodity Price Risk" and "—Derivative Instruments," respectively.

Homer City Facilities

The following table presents additional data for the Homer City facilities:

		Three Months Ended September 30,				Nine Months Ended September 30,


(in millions)		2010		2009		2010		2009

Operating Revenues		$	173	$	170	$	477	$	496
Operating Expenses
	Fuel ¹		74		65		201		192
	Plant operations		20		22		96		78
	Plant operating leases		25		26		77		76
	Depreciation and amortization		5		4		14		12
	Administrative and general		1		1		4		3

	Total operating expenses		125		118		392		361

Operating Income			48		52		85		135

AOI		$	48	$	52	$	85	$	135

Statistics
	Generation (in GWh)		2,984		2,994		8,227		8,677

¹: Included in fuel costs were $1 million and $5 million during the third quarters of 2010 and 2009, and $6 million and $13 million during the nine months ended September 30, 2010 and 2009, respectively, related to the net cost of emission allowances. Transfers of emission allowances between Midwest Generation and Homer City are made at fair market value. Transfers of SO ₂ emission allowances to Homer City were $5 million during the nine months ended September 30, 2010. Transfers of NO _x emission allowances from Homer City were $0.4 million and $1 million during the nine months ended September 30, 2010 and 2009, respectively. For more information regarding the price of emission allowances, see "EMG: Market Risk Exposures—Commodity Price Risk—Emission Allowances Price Risk."

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AOI from the Homer City facilities decreased $4 million for the third quarter ended September 30, 2010, compared to the corresponding period of 2009. The third quarter decrease in AOI was primarily attributable to lower unrealized gains and higher coal costs, partially offset by higher average realized energy prices. Forced outages were higher in the third quarter of 2010 due to opacity-related deratings and unscheduled outages. Higher average fuel costs compared to 2009 were attributable to higher coal costs, partially offset by lower emission allowance costs.

AOI from the Homer City facilities decreased $50 million for the nine months ended September 30, 2010, compared to the corresponding period of 2009. The 2010 decrease in AOI was primarily attributable to unrealized losses in 2010 compared to unrealized gains in 2009, an increase in plant operations costs related to scheduled plant outages, and lower realized energy revenues, partially offset by higher capacity revenues. The Homer City facilities experienced increased forced outages in 2010 compared to 2009 due to opacity-related deratings and unscheduled outages. Plant maintenance and overhaul related expenses were higher in 2010 due to the deferral of plant outages in 2009. Higher average fuel costs compared to 2009 were attributable to higher coal costs.

Included in operating revenues were unrealized gains (losses) from hedge activities of $1 million and $6 million for the third quarters of 2010 and 2009, respectively, and $(13) million and $11 million for the nine months ended September 30, 2010 and 2009, respectively. Unrealized gains (losses) in 2010 and 2009 were primarily attributable to the ineffective portion of forward and futures contracts which are derivatives that qualify as cash flow hedges. The ineffective portion of hedge contracts at Homer City was attributable to changes in the difference between energy prices at the PJM West Hub (the settlement point under forward contracts) and the energy prices at the Homer City busbar (the delivery point where power generated by the Homer City facilities is delivered into the transmission system). For more information regarding forward market prices and unrealized gains (losses), see "EMG: Market Risk Exposures—Commodity Price Risk" and "—Derivative Instruments."

Non-GAAP Disclosures—Fossil-Fueled Facilities

Adjusted Operating Income

AOI is equal to operating income (loss) plus other income (expense) for the fossil-fueled facilities. AOI is a non-GAAP performance measure and may not be comparable to those of other companies. Management believes that inclusion of other income (expense) is meaningful for investors as the components of other income (expense) are integral to the operating results of the fossil-fueled facilities.

Seasonal Disclosure—Fossil-Fueled Facilities

Due to fluctuations in electric demand resulting from warmer weather during the summer months and cold weather during the winter months, electric revenues from the fossil-fueled facilities normally vary substantially on a seasonal basis. In addition, maintenance outages generally are scheduled during periods of lower projected electric demand (spring and fall), further reducing generation and increasing major maintenance costs which are recorded as an expense when incurred. Accordingly, AOI from the fossil-fueled facilities is seasonal and has significant variability from quarter to quarter. Seasonal fluctuations may also be affected by changes in market prices. For further discussion regarding market prices, see "EMG: Market Risk Exposures—Commodity Price Risk—Energy Price Risk Affecting Sales from the Fossil-Fueled Facilities."

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Renewable Energy Projects

The following table presents additional data for EMG's renewable energy projects:

		Three Months Ended September 30,				Nine Months Ended September 30,


(in millions)		2010		2009		2010		2009

Operating Revenues		$	29	$	26	$	93	$	101
Production Tax Credits			12		10		45		40

			41		36		138		141

Operating Expenses
	Plant operations		11		12		35		38
	Depreciation and amortization		21		24		64		65
	Administrative and general		1		1		2		3

	Total operating expenses		33		37		101		106

Net Loss Attributable to Noncontrolling Interest			—		1		—		2

AOI ¹		$	8	$	—	$	37	$	37

Statistics
	Generation (in GWh) ²		764		635		2,599		2,173

¹: AOI is equal to operating income (loss) plus equity in earnings (losses) of unconsolidated affiliates, production tax credits, other income and expense, and net (income) loss attributable to noncontrolling interests. Production tax credits are recognized as wind energy is generated based upon a per-kilowatt-hour rate prescribed in applicable federal and state statutes. Under GAAP, production tax credits generated by wind projects are recorded as a reduction in income taxes. Accordingly, AOI represents a non-GAAP performance measure which may not be comparable to those of other companies. Management believes that inclusion of production tax credits in AOI for wind projects is meaningful for investors as federal and state subsidies are an integral part of the economics of these projects. The following table reconciles AOI as shown above to operating income (loss) under GAAP:

		Three Months Ended September 30,						Nine Months Ended September 30,


(in millions)		2010			2009			2010			2009

AOI		$	8		$	—		$	37		$	37
Less:
	Production tax credits		12			10			45			40
	Net loss attributable to noncontrolling interest		—			1			—			2

Operating Loss		$	(4	)	$	(11	)	$	(8	)	$	(5	)

²: Includes renewable energy projects that are unconsolidated at EMG. Generation excluding unconsolidated projects was 643 GWh and 2,156 GWh for the three months and nine months ended September 30, 2010, respectively.

AOI from renewable energy projects increased $8 million for the third quarter ended September 30, 2010, compared to the corresponding periods of 2009. The third quarter increase in AOI was primarily attributable to higher generation resulting from an increase in projects in operation. AOI in the third quarter and nine months ended September 30, 2009 included $1 million and $17 million, respectively, of liquidated damages from availability guarantees provided by a wind turbine supplier, which compensated EMG for lower generation (none recorded in 2010). During the nine months ended September 30, 2010, EMG received $92 million in U.S. Treasury grants, which was recorded as deferred revenue and is recognized as revenue over the life of the project.

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Energy Trading

EMG seeks to generate profit by utilizing its subsidiary, EMMT, to engage in trading activities in those markets in which it is active as a result of its management of the merchant power plants of Midwest Generation and Homer City. EMMT trades power, fuel, coal, and transmission congestion primarily in the eastern U.S. power grid using products available over the counter, through exchanges, and from independent system operators.

AOI from energy trading activities increased $14 million and $65 million for the third quarter and nine months ended September 30, 2010, respectively, compared to the corresponding periods of 2009. The 2010 increases in AOI from energy trading activities were attributable to increased revenues in congestion and basis trading.

Adjusted Operating Income from Leveraged Lease Activities

AOI from leveraged lease income increased $1 million and decreased $9 million for the third quarter and nine months ended September 30, 2010, respectively, compared to the corresponding periods of 2009 due to the termination of the cross-border leases and the sale of a lease investment during the first half of 2009.

Adjusted Operating Income from Lease Terminations and Other

AOI from lease terminations and other included gains of $1 million and losses of $888 million for the third quarter and nine months ended September 30, 2009, respectively, due to the termination of the cross-border leases (see "Edison International Notes to Consolidated Financial Statements Note 4. Income Taxes" of the 2009 Form 10-K for further information).

Adjusted Operating Income from Unconsolidated Affiliates

Doga

AOI from the Doga project increased $7 million for the nine months ended September 30, 2010, compared to the corresponding period of 2009 due to the timing of distributions. AOI is recognized when cash is distributed from the project since the Doga project is accounted for on the cost method.

March Point

AOI from the March Point project decreased $4 million and increased $10 million for the third quarter and nine months ended September 30, 2010, respectively, compared to the corresponding periods of 2009. The 2010 year-to-date increase was primarily due to equity distributions received from the project. EMG subsequently sold its ownership interest in the March Point project to its partner at book value.

Seasonal Disclosure

EMG's third quarter equity in income from its unconsolidated energy projects is normally higher than equity in income related to other quarters of the year due to seasonal fluctuations and higher energy contract prices during the summer months.

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Interest Related Income (Expense)

		Three Months Ended September 30,						Nine Months Ended September 30,


(in millions)		2010			2009			2010			2009

Interest income		$	3		$	4		$	9		$	15

Interest expense
	EME debt	$	(56	)	$	(68	)	$	(174	)	$	(204	)
	Non-recourse debt		(9	)		(12	)		(24	)		(28	)

		$	(65	)	$	(80	)	$	(198	)	$	(232	)

The 2010 decrease in interest expense was primarily due to higher capitalized interest and lower debt balances under EME's and Midwest Generation's credit facilities, partially offset by higher wind project financing. Capitalized interest for projects under construction increased $14 million and $27 million for the third quarter and nine months ended September 30, 2010, respectively, compared to the corresponding periods of 2009.

Income Taxes

EMG's income taxes from continuing operations for the nine months ended September 30, 2010 included a $52 million income tax benefit resulting from acceptance by the California Franchise Tax Board's of the tax positions finalized with the IRS as part of the Global Settlement for tax years 1986 through 2002. In addition, income taxes for the nine months ended September 30, 2010 and 2009, included tax benefits of production and housing tax credits of $50 million during each period.

For further discussion, see "Edison International Notes to Consolidated Financial Statements Note 4. Income Taxes."

Results of Discontinued Operations

Income from discontinued operations, net of tax, decreased $3 million and increased $9 million for the third quarter and nine months ended September 30, 2010, respectively, compared to the corresponding periods of 2009. The third quarter decrease was due to higher foreign exchange rates. The year-to-date increase was due to lower foreign exchange rates, adjustments to unrecognized tax benefits, and a reduction in EMG's estimated liability due primarily to expiration of a contract indemnity during the first quarter of 2010. EMG increased its estimated liability for a tax indemnity by $6 million in the nine months ended September 30, 2009.

Derivative Instruments

Unrealized Gains and Losses

EMG classifies unrealized gains and losses from derivative instruments (other than the effective portion of derivatives that qualify for hedge accounting) as part of operating revenues or fuel costs. The results of derivative activities are recorded as part of cash flows from operating activities on the consolidated

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statements of cash flows. The following table summarizes unrealized gains (losses) from non-trading activities:

		Three Months Ended September 30,						Nine Months Ended September 30,


(in millions)		2010			2009			2010			2009

Midwest Generation plants
	Non-qualifying hedges	$	(12	)	$	(4	)	$	(18	)	$	30
	Ineffective portion of cash flow hedges		(2	)		4			1			4
Homer City facilities
	Non-qualifying hedges		—			—			—			—
	Ineffective portion of cash flow hedges		1			6			(13	)		11

Total unrealized gains (losses)		$	(13	)	$	6		$	(30	)	$	45

At September 30, 2010, cumulative unrealized gains of $12 million were recognized from non-qualifying hedge contracts or the ineffective portion of cash flow hedges related to subsequent periods ($4 million for the remainder of 2010, $7 million for 2011, and $1 million for 2012).

Fair Value Disclosures

In determining the fair value of EMG's derivative positions, EMG uses third-party market pricing where available. For further explanation of the fair value hierarchy and a discussion of EMG's derivative instruments, see "Edison International Notes to Consolidated Financial Statements Note 10. Fair Value Measurements" and "Note 2. Derivative Instruments and Hedging Activities," respectively, and refer to "EMG: Results of Operations—Fair Value of Derivative Instruments" in the year-ended 2009 MD&A.

LIQUIDITY AND CAPITAL RESOURCES

Available Liquidity

At September 30, 2010, EMG and its subsidiaries had consolidated cash and equivalents of $1.1 billion and a total of $960 million of capacity under its credit facilities. EMG's consolidated debt (including short-term debt) at September 30, 2010 was $4.2 billion, of which $141 million was current. In addition, EMG's subsidiaries had $3.0 billion of long-term lease obligations related to their sale-leaseback transactions that are due over periods ranging up to 24 years.

The following table summarizes the status of the EME and Midwest Generation credit facilities at September 30, 2010:

(in millions)	EME			Midwest Generation


Commitment	$	600		$	500
Less: Commitment from Lehman Commercial Paper Inc.		(36	)		—

		564			500
Outstanding letters of credit		(101	)		(3	)

Amount available	$	463		$	497

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As a result of credit ratings actions in 2010, the margins applicable to Midwest Generation's $500 million working capital facility increased 27.5 basis points. Borrowings made under this credit facility currently bear interest at LIBOR plus 1.15%, unless average utilized commitments during a period exceed $250 million, in which case the margin increases to 1.275%.

Expenditures for NO _x and SO ₂ controls through 2012 (estimated at $315 million), are anticipated to be funded through operating cash flow and available credit facilities. EMG has not yet committed to the completion of environmental compliance activities for all the Midwest Generation plants. Depending upon the facilities selected to be retrofit and the timing of funding requirements beyond the near term, EMG may utilize operating cash flow or seek debt financing to fund capital expenditures.

Capital expenditures to complete renewable-related projects through 2011 are projected to be $511 million at September 30, 2010. EMG anticipates that renewable project capital investment will be funded using construction financing, U.S. Treasury grants and existing EMG liquidity. The following table summarizes the projected funding sources:

(in millions)


Secured project financings
	Big Sky ¹	$	138
	Cedro Hill ¹		57
	Laredo Ridge ¹		59
Anticipated U.S. Treasury grants ²			340

		$	594

¹: Remaining available balance at September 30, 2010.
²: Anticipated U.S. Treasury grants are based on estimated costs at completion of construction for renewable projects scheduled to be completed in 2011. The anticipated grants have been reduced by a bridge loan on the Laredo Ridge project that is due when the related grants funds are received. Funding sources in excess of the forecast capital expenditures are planned to be used for general corporate purposes.

EMG may from time to time seek to retire or purchase its outstanding debt through cash purchases and/or exchange offers, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, EMG's liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Small Business Jobs Act of 2010

In September 2010, the Small Business Jobs Act of 2010 extended the 50% bonus depreciation provision for an additional year to include property purchased and placed into service by December 31, 2010. EMG expects that certain capital expenditures incurred during 2010 will qualify for the accelerated bonus depreciation, which would provide additional cash flow benefits, primarily in 2011, estimated to be in the range of approximately $70 million to $100 million.

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Capital Investment Plan

At September 30, 2010, forecasted capital expenditures through 2012 by EMG's subsidiaries for existing projects, corporate activities and turbine commitments were as follows:

(in millions)		October through December 2010		2011		2012


Midwest Generation Plants
	Plant capital expenditures	$	18	$	38	$	22
	Environmental expenditures ¹		32		151		132
Homer City Facilities
	Plant capital expenditures		4		18		25
	Environmental expenditures ²		—		—		—
Renewable Projects
	Capital and construction expenditures ³		217		212		—
	Turbine commitments ⁴		—		82		—
Other capital expenditures			6		18		19

Total		$	277	$	519	$	198

¹: Environmental expenditures include primarily expenditures related to selective non-catalytic reduction (SNCR) equipment and $174 million for expenditures during the remainder of 2010 to 2012 to begin to retrofit initial units using dry scrubbing with sodium-based sorbents to comply with CPS requirements for SO ₂ emissions. Midwest Generation could elect to shut down units instead of installing controls to be in compliance with the CPS, and, therefore, decisions about any particular combination of retrofits and shutdowns it may ultimately employ to comply remain subject to conditions applicable at the time decisions are required or made. For additional discussion, see "Edison International Overview—Environmental Developments," and refer to "Environmental Regulation of Edison International and Subsidiaries" in the Form 2009 10-K.
²: Excludes amounts that may become required under environmental regulations for future operations. For further information, see "Edison International Notes to Consolidated Financial Statements Note 6. Commitments and Contingencies—Contingencies—Environmental Developments—Transport Rule" and "—Contingencies—Homer City New Source Review Notice of Violation."
³: Amounts include an unconsolidated project in which construction expenditures will be substantially funded by EMG. Amounts also include projects under construction where project financing has been secured. The available balance under secured financing arrangements was $254 million as of September 30, 2010. For further discussion, see "Edison International Notes to Consolidated Financial Statements Note 3. Liabilities and Lines of Credit," and refer to "EMG: Liquidity and Capital Resources Project-Level Financing" in the year-ended 2009 MD&A.
⁴: Amounts exclude balance of project costs for the 75 MW available for new projects, which EMG estimates to be an additional $50 million to $90 million based on typical project costs. Turbine commitment figures include the impact of the October 8, 2010 Mitsubishi settlement agreement. For additional discussion, see "Legal Proceedings" in Part II of this quarterly report.

Plant capital expenditures relate to non-environmental projects such as upgrades to boiler and turbine controls, replacement of major boiler components, generator stator rewinds, 4Kv switchgear and main power transformer replacement.

Midwest Generation is subject to various commitments with respect to environmental compliance. Expenditures, in addition to those included on the preceding table, are anticipated and could be material; however, the amounts and timing have not been determined. For more information on the current status of environmental improvements in Illinois, see "Edison International

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Overview—Environmental Developments." For further discussion of environmental regulations, refer to "Environmental Regulation of Edison International and Subsidiaries" in the Form 2009 10-K.

Historical Consolidated Cash Flows

This section discusses EMG's consolidated cash flows from operating, financing and investing activities.

Condensed Consolidated Statement of Cash Flows

	Nine Months Ended September 30,

(in millions)	2010			2009

Operating cash flow provided (used) by continuing operations	$	289		$	(1,142	)
Operating cash flow provided (used) by discontinued operations		4			(5	)

Net cash provided (used) by operating activities		293			(1,147	)
Net cash provided (used) by financing activities		83			(193	)
Net cash provided (used) by investing activities		(443	)		974

Net decrease in cash and cash equivalents	$	(67	)	$	(366	)

Consolidated Cash Flows Provided (Used) by Operating Activities

Cash provided by operating activities from continuing operations increased $1.4 billion in the first nine months of 2010, compared to the first nine months of 2009. The 2010 increase was primarily due to the impacts of the Global Settlement and derivative-related activities. In April 2010, Edison Capital funded a $253 million deposit to the IRS related to the Global Settlement. In 2009, Edison Capital made a net tax allocation payment to Edison International of $1.1 billion related to the termination of Edison Capital's interest in cross-border leases (see "Item 8. Edison International Notes to Consolidated Financial Statements Note 4. Income Taxes" of the 2009 Form 10-K for further discussion).

Consolidated Cash Flows Provided (Used) by Financing Activities

Cash provided by financing activities from continuing operations increased $276 million in the first nine months of 2010, compared to the first nine months of 2009. In 2010, financing activities included project-level wind financing. Financing activities in 2009 included wind project financings and the repayment of $188 million and $200 million under EME's corporate credit facility and Midwest Generation's working capital facility, respectively. For further project financing details, see "Edison International Notes to Consolidated Financial Statements Note 3. Liabilities and Lines of Credit." In addition, in January 2010, Edison Capital redeemed in full its $89 million medium-term loans.

Consolidated Cash Flows Provided (Used) by Investing Activities

Cash used in investing activities from continuing operations decreased $1.4 billion in the first nine months of 2010, compared to the first nine months of 2009. The 2010 decrease was primarily due to $1.385 billion of net proceeds from termination of the cross-border leases at Edison Capital in 2009. The change was also due to capital expenditures for the construction of wind projects. In 2009, investments in other assets include wind turbine deposits.

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Credit Ratings

Overview

Credit ratings for EME, Midwest Generation and EMMT as of September 30, 2010 are as follows:

	Moody's Rating		Fitch Rating


EME ¹	B3	B-	B-
Midwest Generation ²	Ba2	B+	BB
EMMT	Not Rated	B-	Not Rated

¹: Senior unsecured rating.
²: First priority senior secured rating.

EMG cannot provide assurance that its current credit ratings or the credit ratings of its subsidiaries will remain in effect for any given period of time or that one or more of these ratings will not be lowered. EMG notes that these credit ratings are not recommendations to buy, sell or hold its securities and may be revised at any time by a rating agency.

EMG does not have any "rating triggers" contained in subsidiary financings that would result in it being required to make equity contributions or provide additional financial support to its subsidiaries, including EMMT. However, coal contracts at Midwest Generation include provisions that provide the right to request additional collateral to support payment obligations for delivered coal and may vary based on Midwest Generation's credit ratings. Furthermore, EMMT also has hedge contracts that do not require margin, but contain the right of each party to request additional credit support in the form of adequate assurance of performance in the case of an adverse development affecting the other party. For discussions of contingent features related to energy contracts, see "—Margin, Collateral Deposits and Other Credit Support for Energy Contracts."

Credit Rating of EMMT

For a discussion of the effect of EMMT's credit rating on EMG's ability to sell forward the output of the Homer City facilities through EMMT, refer to "EMG: Liquidity and Capital Resources—Credit Ratings—Credit Rating of EMMT" in the year-ended 2009 MD&A.

Margin, Collateral Deposits and Other Credit Support for Energy Contracts

Future cash collateral requirements may be higher than the margin and collateral requirements were at September 30, 2010, if wholesale energy prices change or if EMMT enters into additional transactions. EMG estimates that margin and collateral requirements for energy and congestion contracts outstanding as of September 30, 2010 could increase by approximately $129 million over the remaining life of the contracts using a 95% confidence level. This increase may not be offset by similar changes in the cash flows of the underlying hedged items in the same periods. Certain EMMT hedge contracts do not require margin, but contain provisions that require EME or Midwest Generation to comply with the terms and conditions of their credit facilities. The credit facilities contain financial covenants which are described further in "—Debt Covenants and Dividend Restrictions."

Hedge contracts include provisions relating to a change in control or material adverse effect resulting from amendments or modifications to the related credit facility. EMMT has hedge contracts that do not require margin, but contain the right of each party to request additional credit support in the form

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of adequate assurance of performance in the case of an adverse development affecting the other party. The aggregate fair value of all derivative instruments with credit-risk-related contingent features is in an asset position at September 30, 2010 and, accordingly, the contingent features described above do not currently have a liquidity exposure. Future increases in power prices could expose EME or Midwest Generation to termination payments or additional collateral postings under the contingent features described above.

Midwest Generation has cash on hand and a credit facility to support margin requirements specifically related to contracts entered into by EMMT related to the Midwest Generation plants. In addition, EME has cash on hand and a credit facility to provide credit support to subsidiaries. For a discussion on available borrowing capacity under Midwest Generation and EME credit facilities, see "—Available Liquidity."

Debt Covenants and Dividend Restrictions

Credit Facility and Financial Ratios

EME's credit facility contains financial covenants which require EME to maintain a minimum interest coverage ratio and a maximum corporate-debt-to-capital ratio as such terms are defined in the credit facility. The following table sets forth the interest coverage ratio:

	12 Months Ended

(in millions)	September 30, 2010		December 31, 2009

Ratio		1.71		1.72
Covenant threshold (not less than)		1.20		1.20

The following table sets forth the corporate-debt-to-capital ratio:

(in millions)


Corporate-debt-to-capital ratio	0.52	0.54
Covenant threshold (not more than)	0.75	0.75

Dividend Restrictions in Major Financings

Set forth below are key ratios of EME's principal subsidiaries required by financing arrangements at September 30, 2010 or for the 12 months ended September 30, 2010:

Subsidiary	Financial Ratio	Covenant	Actual


Midwest Generation (Midwest Generation plants)	Debt to Capitalization Ratio	Less than or equal to 0.60 to 1	0.15 to 1
Homer City (Homer City facilities)	Senior Rent Service Coverage Ratio	Greater than 1.7 to 1	2.81 to 1

For a more detailed description of the covenants binding EME's principal subsidiaries that may restrict the ability of those entities to make distributions to EME directly or indirectly through the other holding companies owned by EME, refer to "EMG: Liquidity and Capital Resources—Debt Covenants and Dividend Restrictions in Major Financings" in the year-ended 2009 MD&A.

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EME's Senior Notes and Guaranty of Powerton-Joliet Leases

EME is restricted under applicable agreements from the sale or disposition of assets, which includes distributions, if the aggregate net book value of all such sales and dispositions during the most recent 12-month period would exceed 10% of consolidated net tangible assets as defined in such agreements computed as of the end of the most recent fiscal quarter preceding the sale or disposition in question. At September 30, 2010, the maximum permissible sale or disposition of EME assets was $834 million.

Contractual Obligations and Contingencies

Fuel Supply and Transportation Contracts

For a discussion of fuel supply contracts and coal transportation agreements, see "Edison International Notes to Consolidated Financial Statements Note 6. Commitments and Contingencies—Other Commitments."

Midwest Generation New Source Review Lawsuit

For a discussion of the Midwest Generation New Source Review Lawsuit, see "Edison International Notes to Consolidated Financial Statements Note 6. Commitments and Contingencies—Contingencies—Midwest Generation New Source Review Lawsuit."

Homer City New Source Review Notice of Violation

For a discussion of the Homer City New Source Review Notice of Violation, see "Edison International Notes to Consolidated Financial Statements Note 6. Commitments and Contingencies—Contingencies—Homer City New Source Review Notice of Violation."

Off-Balance Sheet Transactions

For a discussion of EMG's off-balance sheet transactions, refer to "EMG: Liquidity and Capital Resources—Off-Balance Sheet Transactions" in the year-ended 2009 MD&A. There have been no significant developments with respect to EMG's off-balance sheet transactions that affect disclosures presented in Edison International's 2009 Form 10-K.

Environmental Matters and Regulations

For a discussion of EMG's environmental matters, refer to "Environmental Matters and Regulations" in Item 1 in the year-ended 2009 Form 10-K. There have been no significant developments with respect to environmental matters specifically affecting EMG since the filing of the 2009 Form 10-K, except as set forth in "Edison International Notes to Consolidated Financial Statements Note 6. Commitments and Contingencies—Contingencies—Environmental Developments."

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MARKET RISK EXPOSURES

For a detailed discussion of EMG's market risk exposures, including commodity price risk, credit risk and interest rate risk, refer to "EMG: Market Risk Exposures" in the year-ended 2009 MD&A.

Commodity Price Risk

Energy Price Risk Affecting Sales from the Fossil-Fueled Facilities

Energy and capacity from the fossil-fueled facilities are sold under terms, including price, duration and quantity, arranged by EMMT with customers through a combination of bilateral agreements (resulting from negotiations or from auctions), forward energy sales and spot market sales. Power is sold into PJM at spot prices based upon locational marginal pricing. Hedging transactions related to generation are generally entered into at the Northern Illinois Hub or the AEP/Dayton Hub, both in PJM, for the Midwest Generation plants and generally at the PJM West Hub for the Homer City facilities. These trading hubs have been the most liquid locations for hedging purposes.

The following table depicts the average historical market prices for energy per megawatt-hour at the locations indicated for the first nine months of 2010 and 2009:

		24-Hour Average Historical Market Prices ¹

		2010		2009

Midwest Generation plants
	Northern Illinois Hub	$	35.02	$	28.62
Homer City facilities
	PJM West Hub	$	46.65	$	38.65
	Homer City Busbar		39.80		35.16

¹: Energy prices were calculated at the respective delivery points using historical hourly real-time prices as published by PJM or provided on the PJM web site.

The following table sets forth the forward market prices for energy per megawatt-hour as quoted for sales into the Northern Illinois Hub and PJM West Hub at September 30, 2010:

		24-Hour Forward Energy Prices ¹

		Northern Illinois Hub		PJM West Hub

2010
	October	$	23.93	$	36.81
	November		25.76		36.36
	December		28.84		39.70
2011 calendar "strip" ²		$	29.86	$	41.06
2012 calendar "strip" ²		$	31.89	$	43.10

¹: Energy prices were determined by obtaining broker quotes and information from other public sources relating to the Northern Illinois Hub and PJM West Hub delivery points.
²: Market price for energy purchases for the entire calendar year.

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Forward prices for the 2011 calendar strip indicated on the preceding table have decreased from December 31, 2009 prices of $34.73 and $49.43 for the Northern Illinois Hub and the PJM West Hub, respectively.

Forward market prices at the Northern Illinois Hub and PJM West Hub fluctuate as a result of a number of factors, including natural gas prices, transmission congestion, changes in market rules, electricity demand (which in turn is affected by weather, economic growth, and other factors), plant outages in the region, and the amount of existing and planned power plant capacity. The actual spot prices for electricity delivered by the fossil-fueled facilities into these markets may vary materially from the forward market prices set forth in the preceding table.

EMMT engages in hedging activities for the fossil-fueled facilities to hedge the risk of future change in the price of electricity. The following table summarizes the hedge positions (including load requirements services contracts and forward contracts accounted for on the accrual basis) as of September 30, 2010 for electricity expected to be generated during the remainder of 2010 and in 2011 and 2012:

		2010				2011				2012


		MWh (in thousands)		Average price/ MWh ¹		MWh (in thousands)		Average price/ MWh ¹		MWh (in thousands)		Average price/ MWh ¹

Midwest Generation plants
	Northern Illinois and AEP/Dayton Hubs		5,341	$	41.94		13,318	$	37.66		2,746	$	37.29
Homer City facilities ^2, ³
	PJM West Hub		1,536		65.21		3,475		51.05		1,182		51.81

Total			6,877				16,793				3,928

¹: The above hedge positions include forward contracts for the sale of power and futures contracts during different periods of the year and the day. Market prices tend to be higher during on-peak periods and during summer months, although there is significant variability of power prices during different periods of time. Accordingly, the above hedge positions are not directly comparable to the 24-hour Northern Illinois Hub or PJM West Hub prices set forth above.
²: Includes hedging transactions primarily at the PJM West Hub and to a lesser extent at other trading locations. Years 2010, 2011 and 2012 include hedging activities entered into by EMMT for the Homer City facilities that are not designated under the intercompany agreements with Homer City due to limitations under the sale leaseback transaction documents.
³: The average price/MWh includes 25 to 84 MW for periods ranging from October 1, 2010 to May 31, 2012 at Homer City sold in conjunction with load requirements services contracts.

In addition, as of September 30, 2010, EMMT had entered into 0.6 bcf of natural gas futures contracts (equivalent to approximately 102 GWh of energy contracts using a ratio of 6 MMBtu to 1 MWh) for the Midwest Generation plants to economically hedge energy price risks during 2010 at an equivalent average energy price of approximately $38.40/MWh.

The decline in 2010 market prices will impact realized energy and hedge prices in 2011 and 2012 and could have a material impact on 2011 and 2012 results.

Through October 25, 2010, offsetting positions were entered into to reduce the hedge position of EMG's merchant operations. The reduction in the hedge position was:

•: Midwest Generation: 2,448 MWh (in thousands) with an average price of $37.12/MWh, and
•: Homer City: 2,244 MWh (in thousands) with an average price of $47.30/MWh.

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Capacity Price Risk

The following table summarizes the status of capacity sales for Midwest Generation and Homer City at September 30, 2010:

									RPM Capacity Sold in Base Residual Auction				Other Capacity Sales, Net of Purchases ³


		Installed Capacity MW		Unsold Capacity ¹ MW			Capacity Sold ² MW		MW		Price per MW-day		MW			Average Price per MW-day		Aggregate Average Price per MW-day

October 1, 2010 to May 31, 2011
	Midwest Generation		5,477		(548	)		4,929		4,929	$	174.29		—			—	$	174.29
	Homer City		1,884		(261	)		1,623		1,813		174.29		(190	)	$	53.95		188.38
June 1, 2011 to May 31, 2012
	Midwest Generation		5,477		(495	)		4,982		4,582		110.00		400			85.00		107.99
	Homer City		1,884		(113	)		1,771		1,771		110.00		—			—		110.00
June 1, 2012 to May 31, 2013
	Midwest Generation		5,477		(773	)		4,704		4,704		16.46		—			—		16.46
	Homer City		1,884		(232	)		1,652		1,736		133.37		(84	)		16.46		139.31
June 1, 2013 to May 31, 2014
	Midwest Generation		5,477		(827	)		4,650		4,650		27.73		—			—		27.73
	Homer City		1,884		(104	)		1,780		1,780		226.15		—			—		221.03	⁴

¹: Capacity not sold arises from: (i) capacity retained to meet forced outages under the RPM auction guidelines, and (ii) capacity that PJM does not purchase at the clearing price resulting from the RPM auction.
²: Excludes 25 to 84 MW of capacity for periods ranging from October 1, 2010 to May 31, 2012 at Homer City sold in conjunction with load requirements services contracts.
³: Other capacity sales and purchases, net includes contracts executed in advance of the RPM base residual auction to hedge the price risk related to such auction, participation in RPM incremental auctions and other capacity transactions entered into to manage capacity risks.
⁴: Includes the impact of a 100 MW capacity swap transaction executed prior to the base residual auction at $135 MW-day.

The RPM auction capacity prices for the delivery periods of June 1, 2012 to May 31, 2013 and June 1, 2013 to May 31, 2014 varied between different areas of PJM. In the western portion of PJM, affecting Midwest Generation, the prices of $16.46 and $27.73 per MW-day were substantially lower than other areas' capacity prices. The impact of lower capacity prices for these periods compared to previous years will have an adverse effect on Midwest Generation's revenues unless such lower capacity prices are offset by an unavailability of competing resources and increased energy prices, which is uncertain.

Basis Risk

During the nine months ended September 30, 2010, transmission congestion in PJM has resulted in prices at the individual busbars of the Midwest Generation plants being lower than those at the AEP/Dayton Hub and Northern Illinois Hub by an average of 10% and 1%, respectively, compared to 15% and less than 1%, respectively, during the nine months ended September 30, 2009. During the nine months ended September 30, 2010 and 2009, transmission congestion in PJM has resulted in prices at the Homer City busbar being lower than those at the PJM West Hub by an average of 15% and 9%, respectively.

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Coal and Transportation Price Risk

The Midwest Generation plants and Homer City facilities purchase coal primarily from the Southern PRB of Wyoming and from mines located near the facilities in Pennsylvania, respectively. Coal purchases are made under a variety of supply agreements. The following table summarizes the amount of coal under contract at September 30, 2010 for the remainder of 2010 and the following three years:

	Amount of Coal Under Contract in Millions of Equivalent Tons ¹

	October through December 2010		2011		2012		2013

Midwest Generation plants		5.4		15.6		9.8		—
Homer City facilities		1.4		4.4		1.9		0.5

¹: The amount of coal under contract in tons is calculated based on contracted tons and applying an 8,800 Btu equivalent for the Midwest Generation plants and 13,000 Btu equivalent for the Homer City facilities.

EMG is subject to price risk for purchases of coal that are not under contract. Prices of Northern Appalachian (NAPP) coal, which are related to the price of coal purchased for the Homer City facilities, increased during 2010 from 2009 year-end prices. The market price of NAPP coal (with 13,000 Btu per pound heat content and <3.0 pounds of SO ₂ per MMBtu sulfur content) increased to a price of $69.50 per ton at October 1, 2010, compared to a price of $52.50 per ton at December 31, 2009, as reported by the Energy Information Administration.

Prices of PRB coal (with 8,800 Btu per pound heat content and 0.8 pounds of SO ₂ per MMBtu sulfur content) purchased for the Midwest Generation plants increased during 2010 from 2009 year-end prices. The market price of PRB coal increased to a price of $14.75 per ton at October 1, 2010, compared to a price of $9.25 per ton at December 31, 2009, as reported by the Energy Information Administration.

EMG has contracts for the transport of coal to its facilities. The primary contract is with Union Pacific Railroad (and various short-haul carriers), which extends through 2011. EMG is exposed to price risk related to transportation rates after the expiration of its existing transportation contracts. Current market transportation rates for PRB coal are higher than the existing rates under contract. Transportation costs are approximately half of the delivered cost of PRB coal to the Midwest Generation plants.

Emission Allowances Price Risk

EMG purchases (or sells) emission allowances for the fossil-fueled facilities based on the amounts required for actual generation in excess of (or less than) the amounts allocated to these facilities under applicable programs. In the event that actual emission allowances required are greater than allowances held, EMG is subject to price risk for purchases of emission allowances. The market price for emission allowances may vary significantly. The average purchase price of SO ₂ allowances decreased to $49 per ton during the nine months ended September 30, 2010 from $65 per ton in 2009. The average purchase price of annual NO _x allowances decreased to $936 per ton during the nine months ended September 30, 2010 from $1,431 per ton in 2009. Based on broker's quotes and information from public sources, the spot price for SO ₂ allowances and annual NO _x allowances was $10.50 per ton and $335 per ton, respectively, at September 30, 2010.

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For a discussion of environmental regulations related to emissions, refer to "Environmental Regulation of Edison International and Subsidiaries" in the 2009 Form 10-K.

Credit Risk

The credit risk exposure from counterparties of merchant energy hedging and trading activities is measured as the sum of net receivables (accounts receivable less accounts payable) and the current fair value of net derivative assets. EMG's subsidiaries enter into master agreements and other arrangements in conducting such activities which typically provide for a right of setoff in the event of bankruptcy or default by the counterparty. At September 30, 2010, the balance sheet exposure as described above, broken down by the credit ratings of EMG's counterparties, was as follows:

		September 30, 2010

(in millions)		Exposure ²		Collateral			Net Exposure

Credit Rating ¹
	A or higher	$	176	$	(18	)	$	158
	A-		21		—			21
	BBB+		5		—			5
	BBB		24		—			24
	BBB-		27		7			34
	Below investment grade		99		(97	)		2

Total		$	352	$	(108	)	$	244

¹: EMG assigns a credit rating based on the lower of a counterparty's S&P or Moody's rating. For ease of reference, the above table uses the S&P classifications to summarize risk, but reflects the lower of the two credit ratings.
²: Exposure excludes amounts related to contracts classified as normal purchase and sales and non-derivative contractual commitments that are not recorded on the consolidated balance sheet, except for any related accounts receivable.

The credit risk exposure set forth in the above table is comprised of $128 million of net accounts receivable and payables and $224 million representing the fair value of derivative contracts. The exposure is based on master netting agreements with the related counterparties. Due to developments in the financial markets, credit ratings may not be reflective of the actual related credit risks. In addition to the amounts set forth in the above table, EMG's subsidiaries have posted an $89 million cash margin in the aggregate with PJM, New York Independent System Operator (NYISO), Midwest Independent Transmission System Operator (MISO), clearing brokers and other counterparties to support hedging and trading activities. The margin posted to support these activities also exposes EMG to credit risk of the related entities.

The fossil-fueled facilities sell electric power generally into the PJM market by participating in PJM's capacity and energy markets or transact in capacity and energy on a bilateral basis. Sales into PJM accounted for approximately 68% of EMG's consolidated operating revenues for the nine months ended September 30, 2010. Moody's rates PJM's debt Aa3. PJM, a regional transmission organization (RTO) with over 300 member companies, maintains its own credit risk policies and does not extend unsecured credit to non-investment grade companies. Losses resulting from a PJM member default are shared by all other members using a predetermined formula. At September 30, 2010, EMG's account receivable due from PJM was $52 million.

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The terms of EMG's wind turbine supply agreements contain significant obligations of the suppliers in the form of manufacturing and delivery of turbines, and payments for delays in delivery and for failure to meet performance obligations and warranty agreements. EMG's reliance on these contractual provisions is subject to credit risks. Generally, these are unsecured obligations of the turbine manufacturer. A material adverse development with respect to EMG's turbine suppliers may have a material impact on EMG's wind projects and development efforts.

Interest Rate Risk

Interest rate changes can affect earnings and the cost of capital for capital improvements or new investments in power projects. EMG mitigates the risk of interest rate fluctuations by arranging for fixed rate financing or variable rate financing with interest rate swaps, interest rate options or other hedging mechanisms for a number of its project financings. For details, see "Edison International Notes to Consolidated Financial Statements Note 3. Liabilities and Lines of Credit." The fair market values of fixed interest rate obligations are subject to interest rate risk. The fair market value of EMG's consolidated construction loan and long-term obligations (including current portion) was $3.3 billion at September 30, 2010, compared to the carrying value of $4.2 billion.

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EDISON INTERNATIONAL PARENT AND OTHER

RESULTS OF OPERATIONS

Results of operations for Edison International parent and other includes amounts from other Edison International subsidiaries that are not significant as a reportable segment, as well as intercompany eliminations.

Edison International parent and other income (loss) from continuing operations were $6 million and $(3) million for the three months ended September 30, 2010 and 2009, respectively, and $18 million and $34 million for the nine months ended September 30, 2010 and 2009, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Historical Cash Flow

This section discusses Edison International (parent) and other cash flows from operating, financing and investing activities.

Condensed Statement of Cash Flows

	Nine Months Ended September 30,

(in millions)	2010			2009

Cash flows used by operating activities	$	(200	)	$	(23	)
Cash flows provided (used) by financing activities		200			(267	)
Cash flows provided by investing activities		7			7

Net increase (decrease) in cash and equivalents	$	7		$	(283	)

Cash Flows Used by Operating Activities

Cash flows used by operating activities decreased $177 million primarily due to Global Settlement. During the nine months ended September 30, 2010, Edison International received $134 million in taxes related to Global Settlement and made tax allocation payments to SCE of $295 million. Also during this period, Edison International and Edison Capital agreed to offset tax obligations due by Edison Capital with intercompany loans due from Edison International (such intercompany loans have been settled in full). During the nine months ended September 2009, Edison International made tax payments of $343 million related to Global Settlement. During this period, Edison International received $1.2 billion in tax allocation payments, principally from Edison Capital (funded by the proceeds of termination of the cross-border leases), and made tax allocation payments to SCE of $875 million.

Cash Flows Provided (Used) by Financing Activities

Financing activities for the first nine months of 2010 were as follows:

•: Issued $400 million of senior notes due in 2017. The proceeds from these bonds were used to repay short-term borrowings under the revolving credit facility and the remainder for corporate liquidity purposes.

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•: Paid $308 million of (or $0.315 per share quarterly) dividends to Edison International common shareholders. These quarterly dividends represent an increase of $0.005 per share over quarterly dividends paid in 2009.
•: Received $200 million of dividend payments from SCE.
•: Repaid $85 million under Edison International's line of credit.

Financing activities for the first nine months of 2009 were as follows:

•: Paid $303 million of (or $0.31 per share quarterly) dividends to Edison International common shareholders. These quarterly dividends represent an increase of $0.005 per share over quarterly dividends paid in 2008.
•: Repaid a net $165 million of short-term debt.
•: Received $200 million of dividend payments from SCE.

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EDISON INTERNATIONAL (CONSOLIDATED)

CONTRACTUAL OBLIGATIONS

Edison International's long-term principal debt maturities plus interest payments as of September 30, 2010 are estimated to be: $197 million for the remainder of 2010, $803 million in 2011, $753 million in 2012, $1.2 billion in 2013, $1.8 billion in 2014, and $17.9 billion for the period remaining thereafter. These amounts have been updated primarily to reflect SCE's and Edison International (parent) financing activities completed during 2010. For a discussion of issuances of long-term debt, see "Edison International Notes to Consolidated Financial Statements Note 3. Liabilities and Lines of Credit—Long-Term Debt."

For a discussion of Edison International (Consolidated) contractual obligations, refer to "Edison International (Consolidated)—Contractual Obligations" in the year-ended 2009 MD&A. There have been no other significant changes with respect to Edison International (Consolidated) contractual obligations since the filing of the 2009 Form 10-K, except as discussed in "EMG: Liquidity and Capital Resources—Contractual Obligations and Contingencies" and "SCE: Liquidity and Capital Resources—Contractual Obligations and Contingencies."

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

For a discussion of Edison International's critical accounting policies, refer to "Edison International (Consolidated)—Critical Accounting Policies and Estimates" in the year-ended 2009 MD&A.

NEW ACCOUNTING GUIDANCE

New accounting guidance is discussed in "Edison International Notes to Consolidated Financial Statements Note 1. Summary of Significant Accounting Policies—New Accounting Guidance."

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information responding to this item is included in the MD&A under the headings "SCE: Market Risk Exposures" and "EMG: Market Risk Exposures" and is incorporated herein by reference.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Edison International's management, under the supervision and with the participation of the company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of Edison International's disclosure controls and procedures (as that term is defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period, Edison International's disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There were no changes in Edison International's internal control over financial reporting (as that term is defined in Rules 13(a)-15(f) or 15(d)-15(f) under the Exchange Act) during the quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, Edison International's internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Homer City New Source Review Notice of Violation

Developments related to the Homer City New Source Review Notice of Violation are discussed in "Edison International Notes to Consolidated Financial Statements Note 6. Commitments and Contingencies—Contingencies—Homer City New Source Review Notice of Violation—Recent Developments."

Midwest Generation New Source Review Lawsuit

Developments related to the Midwest Generation New Source Review Lawsuit are discussed in "Edison International Notes to Consolidated Financial Statements Note 6. Commitments and Contingencies—Contingencies—Midwest Generation New Source Review Lawsuit—Recent Developments."

Mitsubishi Lawsuit

EME and Mitsubishi Power Systems Americas, Inc. are parties to a wind turbine generator supply agreement executed in March 2007 with respect to the purchase of 166 wind turbines and related services and warranties. Mitsubishi has delivered 83 wind turbines under the agreement. As a result of a dispute between the parties, EME filed a complaint on March 19, 2010, and an amended complaint on April 1, 2010, in the Superior Court of the State of California against Mitsubishi Power Systems Americas, Inc. and Mitsubishi Heavy Industries, Ltd with respect to the agreement. The Mitsubishi entities filed counterclaims, including claims for the unpaid purchase price for the remaining turbines.

On October 8, 2010, EME and the Mitsubishi entities entered into a settlement agreement with respect to the dispute. As a result of the settlement agreement, EME's $68 million deposit previously paid under the original contract will be applied to the purchase price for 23 wind turbines (55 MW). Within the next three years, EME may elect to deploy 60 additional wind turbines (144 MW). EME may be obligated to make a payment of up to $30 million following the end of the three-year period if it has not elected to deploy the additional turbines and if certain other criteria apply. EME further agreed to payments up to $40 million for settlement of remaining disputes on turbines purchased.

Navajo Nation Litigation

Developments related to the Navajo Nation Litigation are discussed in "Edison International Notes to Consolidated Financial Statements Note 6. Commitments and Contingencies—Contingencies—Navajo Nation Litigation."

California Coastal Commission Potential Environmental Proceeding

In May 2010, the California Coastal Commission issued a NOV to SCE, its contractor, and property owners related to activity on a property that was used for equipment storage related to a nearby SCE electricity line undergrounding construction project. The NOV alleged that SCE, through its contractor, violated the California Coastal Act by removing without the appropriate permits approximately one acre of vegetation from the property, which was located in a protected coastal zone within and adjacent to the City of Newport Beach, California. In the NOV, the Coastal Commission indicated an interest in negotiating a settlement of the alleged violations but no specific settlement terms have been proposed nor has a settlement been reached. The Coastal Act provides for penalties of up to $30,000 per

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violation, which may be increased by up to $15,000 per day per violation for knowing and intentional violations. SCE has sought indemnification from its contractor for liability associated with the NOV.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Period		(b) Average Price Paid per Share (or Unit) ¹


July 1, 2010 to July 31, 2010	605,155	$	32.08	—	—
August 1, 2010 to August 31, 2010	491,935	$	33.69	—	—
September 1, 2010 to September 30, 2010	1,111,107	$	34.30	—	—

Total	2,208,197	$	33.56	—	—

¹: The shares were purchased by agents acting on Edison International's behalf for delivery to plan participants to fulfill requirements in connection with Edison International's: (i) 401(k) Savings Plan; (ii) Dividend Reinvestment and Direct Stock Purchase Plan; and (iii) long-term incentive compensation plans. The shares were purchased in open-market transactions pursuant to plan terms or participant elections. The shares were never registered in Edison International's name and none of the shares purchased were retired as a result of the transactions.

ITEM 6. EXHIBITS


	4.1		Senior Indenture, dated September 10, 2010
	31.1		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
	31.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
	32		Statement Pursuant to 18 U.S.C. Section 1350
	101		Financial statements from the quarterly report on Form 10-Q of Edison International for the quarter ended September 30, 2010, filed on October 29, 2010, formatted in XBRL: (i) the Consolidated Statements of Income; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to the Consolidated Financial Statements

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		EDISON INTERNATIONAL
		(Registrant)
		By:		/s/ MARK C. CLARKE Mark C. Clarke Vice President and Controller (Duly Authorized Officer and Principal Accounting Officer)

Date: October 29, 2010

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Exhibit 4.1

Execution Version

EDISON INTERNATIONAL

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.

Trustee

Senior Indenture

Dated as of September 10, 2010

CERTAIN SECTIONS OF THIS INDENTURE RELATING TO SECTIONS 310
THROUGH 318, INCLUSIVE, OF THE TRUST INDENTURE ACT OF 1939:

TRUST INDENTURE ACT SECTION				INDENTURE SECTION

Section 310(a)(1)				609
(a)(2)				609
(a)(3)				Not Applicable
(a)(4)				Not Applicable
(b)				608
				610
Section 311(a)				613
(b)				613
Section 312(a)				701
				702
(b)				702
(c)				702
Section 313(a)				703
(b)				703
(c)				703
(d)				703
Section 314(a)				704
(a)(4)				101
				1005
(b)				Not Applicable
(c)(1)				102
(c)(2)				102
(c)(3)				Not Applicable
(d)				Not Applicable
(e)				102
Section 315(a)				601
(b)				602
(c)				601
(d)				601
(e)				514
Section 316(a)				101
(a)(1)(A)				502
				512
(a)(1)(B)				513
(a)(2)				Not Applicable
(b)				508
(c)				104
Section 317(a)(1)				503
(a)(2)				504
(b)				1003
Section 318(a)				107

Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture.

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			Page

Parties			1
Recitals of the Corporation			1
ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION			1
	Section 101.	Definitions	1
	Section 102.	Compliance Certificates and Opinions	5
	Section 103.	Form of Documents Delivered to Trustee	6
	Section 104.	Acts of Holders; Record Dates	6
	Section 105.	Notices, Etc., to Trustee and Corporation	8
	Section 106.	Notice to Holders; Waiver	9
	Section 107.	Conflict with Trust Indenture Act	9
	Section 108.	Effect of Headings and Table of Contents	9
	Section 109.	Successors and Assigns	9
	Section 110.	Separability Clause	9
	Section 111.	Benefits of Indenture	9
	Section 112.	Governing Law	9
	Section 113.	Legal Holidays	10
	Section 114.	No Security Interest Created	10
	Section 115.	Waiver of Jury Trial	10
	Section 116.	Force Majeure	10
ARTICLE II. SECURITY FORMS			10
	Section 201.	Forms Generally	10
	Section 202.	Form of Face of Security	11
	Section 203.	Form of Reverse of Security	13
	Section 204.	Form of Legend for Global Securities	16
	Section 205.	Form of Trustee's Certificate of Authentication	17
ARTICLE III. THE SECURITIES			18
	Section 301.	Amount Unlimited; Issuable in Series	18
	Section 302.	Denominations	20
	Section 303.	Execution, Authentication, Delivery and Dating	20
	Section 304.	Temporary Securities	21
	Section 305.	Registration, Registration of Transfer and Exchange	21
	Section 306.	Mutilated, Destroyed, Lost and Stolen Securities	23
	Section 307.	Payment of Interest; Interest Rights Preserved	23
	Section 308.	Persons Deemed Owners	24
	Section 309.	Cancellation	25
	Section 310.	Computation of Interest	25
	Section 311.	CUSIP Numbers	25
ARTICLE IV. SATISFACTION AND DISCHARGE			26
	Section 401.	Satisfaction and Discharge of Indenture	26
	Section 402.	Application of Trust Money	27
ARTICLE V. REMEDIES			27
	Section 501.	Events of Default	27
	Section 502.	Acceleration of Maturity; Rescission and Annulment	28
	Section 503.	Collection of Indebtedness and Suits for Enforcement by Trustee	29
	Section 504.	Trustee May File Proofs of Claim	29


	Section 505.	Trustee May Enforce Claims Without Possession of Securities	30
	Section 506.	Application of Money Collected	30
	Section 507.	Limitation on Suits	30
	Section 508.	Unconditional Right of Holders to Receive Principal, Premium and Interest	31
	Section 509.	Restoration of Rights and Remedies	31
	Section 510.	Rights and Remedies Cumulative	31
	Section 511.	Delay or Omission Not Waiver	31
	Section 512.	Control By Holders	31
	Section 513.	Waiver of Past Defaults	32
	Section 514.	Undertaking for Costs	32
	Section 515.	Waiver of Stay or Extension Laws	32
ARTICLE VI. THE TRUSTEE			33
	Section 601.	Certain Duties and Responsibilities	33
	Section 602.	Notice of Defaults	33
	Section 603.	Certain Rights of Trustee	34
	Section 604.	Not Responsible for Recitals or Issuance of Securities	35
	Section 605.	May Hold Securities	35
	Section 606.	Money Held in Trust	35
	Section 607.	Compensation and Reimbursement	35
	Section 608.	Conflicting Interests	36
	Section 609.	Corporate Trustee Required; Eligibility	36
	Section 610.	Resignation and Removal; Appointment of Successor	36
	Section 611.	Acceptance of Appointment by Successor	37
	Section 612.	Merger, Conversion, Consolidation or Succession to Business	38
	Section 613.	Preferential Collection of Claims Against Corporation	38
	Section 614.	Appointment of Authenticating Agent	39
	Section 615.	Trustee's Application for Instructions from the Corporation	41
ARTICLE VII. HOLDERS' LISTS AND REPORTS BY TRUSTEE AND CORPORATION			41
	Section 701.	Corporation to Furnish Trustee Names and Addresses of Holders	41
	Section 702.	Preservation of Information; Communications to Holders	41
	Section 703.	Reports by Trustee	41
	Section 704.	Reports by Corporation	42
ARTICLE VIII. CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER			42
	Section 801.	Corporation May Consolidate, Etc., Only on Certain Terms	42
	Section 802.	Successor Substituted	43
ARTICLE IX. SUPPLEMENTAL INDENTURES			43
	Section 901.	Supplemental Indentures Without Consent of Holders	43
	Section 902.	Supplemental Indentures With Consent of Holders	44
	Section 903.	Execution of Supplemental Indentures	45
	Section 904.	Effect of Supplemental Indentures	45
	Section 905.	Conformity with Trust Indenture Act	46
	Section 906.	Reference in Securities to Supplemental Indentures	46
ARTICLE X. COVENANTS			46
	Section 1001.	Payment of Principal, Premium and Interest	46
	Section 1002.	Maintenance of Office or Agency	46
	Section 1003.	Money for Securities Payments to Be Held in Trust	46
	Section 1004.	Corporate Existence	47

iii


	Section 1005.	Statement by Officers as to Default	47
	Section 1006.	Waiver of Certain Covenants	48
	Section 1007.	Calculation of Original Issue Discount	48
ARTICLE XI. REDEMPTION OF SECURITIES			48
	Section 1101.	Applicability of Article	48
	Section 1102.	Election to Redeem; Notice to Trustee	48
	Section 1103.	Selection by Trustee of Securities to Be Redeemed	48
	Section 1104.	Notice of Redemption	49
	Section 1105.	Deposit of Redemption Price	50
	Section 1106.	Securities Payable on Redemption Date	51
	Section 1107.	Securities Redeemed in Part	51
ARTICLE XII. SINKING FUNDS			51
	Section 1201.	Applicability of Article	51
	Section 1202.	Satisfaction of Sinking Fund Payments with Securities	51
	Section 1203.	Redemption of Securities for Sinking Fund	52
ARTICLE XIII. DEFEASANCE AND COVENANT DEFEASANCE			52
	Section 1301.	Applicability of Article	52
	Section 1302.	Defeasance and Discharge	52
	Section 1303.	Covenant Defeasance	53
	Section 1304.	Conditions to Defeasance or Covenant Defeasance	53
	Section 1305.	Deposited Money and Government Obligations to Be Held in Trust; Miscellaneous Provisions	54
ARTICLE XIV. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS			54
	Section 1401.	Indenture and Securities Solely Corporate Obligations	54
Signatures			56

INDENTURE, dated as of September 10, 2010, between Edison International, a corporation duly organized and existing under the laws of the State of California (herein called the " Corporation "), having its principal office at 2244 Walnut Grove Avenue, Rosemead, California 91770, and The Bank of New York Mellon Trust Company, N.A., as Trustee (herein called the " Trustee ").

RECITALS OF THE CORPORATION

The Corporation has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured senior debentures, notes or other evidences of indebtedness (herein called the " Securities "), to be issued in one or more series as in this Indenture provided. All things necessary to make this Indenture a legal, valid and binding agreement of the Corporation, in accordance with its terms, have been done.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities or of series thereof, as follows:

ARTICLE I.

DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION

Section 101. Definitions.

For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:

(1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;

(2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein;

(3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States of America;

(4) unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Indenture; and

(5) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.

" Act ," when used with respect to any Holder, has the meaning specified in Section 104.

" Affiliate " of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

" Authenticating Agent " means any Person authorized by the Trustee pursuant to Section 614 to act on behalf of the Trustee to authenticate Securities of one or more series.

" Board of Directors " means either the board of directors of the Corporation or any duly authorized committee of that board.

" Board Resolution " means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Corporation to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee.

" Business Day ," when used with respect to any Place of Payment, means a day other than (i) a Saturday or a Sunday, (ii) a day on which banking institutions in that Place of Payment or Los Angeles, California, are authorized or obligated by law or executive order to remain closed or (iii) a day on which the Corporate Trust Office of the Trustee is closed for business.

" Commission " means the Securities and Exchange Commission, from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time.

" Corporate Trust Office " means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date hereof is located at 2 N. LaSalle Street, Suite 1020, Chicago, IL 60602, Attention: Corporate Trust Administration.

" Corporation " means the Person named as the "Corporation" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Corporation" shall mean such successor Person.

" corporation " means a corporation, association, company, joint-stock company or business trust.

" Corporation Request " or " Corporation Order " means a written request or order signed in the name of the Corporation by any one of its Chairman of the Board, its President, its Chief Financial Officer, any Vice President, its Treasurer or any Assistant Treasurer, and delivered to the Trustee.

" Covenant Defeasance " has the meaning specified in Section 1303.

" Defaulted Interest " has the meaning specified in Section 307.

" Defeasance " has the meaning specified in Section 1302.

" Depositary " means, with respect to the Securities of any series issuable in whole or in part in the form of one or more Global Securities, a clearing agency registered under the Exchange Act that is designated to act as Depositary for such Securities as contemplated by Section 301.

" Event of Default " has the meaning specified in Section 501.

" Exchange Act " means the Securities Exchange Act of 1934 and any statute successor thereto, in each case as amended from time to time.

" Expiration Date " has the meaning specified in Section 104.

" Global Security " means a Security that evidences all or part of the Securities of any series which is issued to a Depositary or a nominee thereof for such series in accordance with Section 301(17).

" Government Obligation " has the meaning specified in Section 1304.

" Holder " means a Person in whose name a Security is registered in the Security Register.

" Indenture " means this instrument as originally executed and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. The term "Indenture" shall also include the terms of particular series of Securities established as contemplated by Section 301.

" interest ," when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity.

" Interest Payment Date ," when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security.

" Investment Company Act " means the Investment Company Act of 1940 and any statute successor thereto, in each case as amended from time to time.

" Maturity ," when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.

" Notice of Default " means a written notice of the kind specified in Section 501(4).

" Officer's Certificate " means a certificate signed by any one of the Chairman of the Board, the Chief Executive Officer, the President, the Chief Financial Officer, any Vice President, the Treasurer, any Assistant Treasurer, the Controller, an Assistant Controller, the Secretary or any Assistant Secretary, of the Corporation, in each case, in such officer's capacity as an officer of the Corporation and not in such officer's individual capacity, and delivered to the Trustee. One of the officers signing an Officer's Certificate given pursuant to Section 1005 shall be the principal executive, financial or accounting officer of the Corporation.

" Opinion of Counsel " means a written opinion of counsel, who may be counsel for the Corporation, or other counsel.

" Original Issue Discount Security " means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502.

" Outstanding ," when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:

(1) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation;

(2) Securities for whose payment or redemption the necessary amount of money or money's worth has been theretofore deposited with the Trustee or any Paying Agent (other than the Corporation) in trust or set aside and segregated in trust by the Corporation (if the Corporation shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made;

(3) Securities as to which Defeasance has been effected pursuant to Section 1302; and

(4) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Corporation;

provided , however , that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given, made or taken any request, demand, authorization, direction, notice, consent, waiver or other action hereunder as of any date, (A) the principal amount of an Original Issue Discount Security which shall be deemed to be Outstanding shall be the amount of the principal thereof which would be due and payable as of such date upon acceleration of the Maturity thereof to such date pursuant to Section 502, (B) if, as of such date, the principal amount payable at the Stated Maturity of a Security is not determinable, the principal amount of such Security which shall be

deemed to be Outstanding shall be the amount as specified or determined as contemplated by Section 301, (C) the principal amount of a Security denominated in one or more foreign currencies or currency units which shall be deemed to be Outstanding shall be the U.S. dollar equivalent, determined as of such date in the manner provided as contemplated by Section 301, of the principal amount of such Security (or, in the case of a Security described in Clause (A) or (B) above, of the amount determined as provided in such Clause), and (D) Securities owned by the Corporation or any other obligor upon the Securities, whether of record or beneficially, shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent, waiver or other action, only Securities which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Corporation or any other obligor upon the Securities.

" Paying Agent " means any Person authorized by the Corporation to pay the principal of or any premium or interest on any Securities on behalf of the Corporation.

" Periodic Offering " means an offering of Securities of a series from time to time the specific terms of which Securities, including without limitation the rate or rates of interest or formula for determining the rate or rates of interest thereon, if any, the Stated Maturity or Maturities thereof and the redemption provisions, if any, with respect thereto, are to be determined by the Corporation upon the issuance of such Securities.

" Person " means any individual, corporation, partnership, limited liability company or corporation, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof.

" Place of Payment ," when used with respect to the Securities of any series, means the place or places where the principal of and any premium and interest on the Securities of that series are payable as specified as contemplated by Section 301.

" Predecessor Security " of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security.

" Redemption Date ," when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture.

" Redemption Price ," when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture.

" Regular Record Date " for the interest payable on any Interest Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 301.

" Responsible Officer ," when used with respect to the Trustee, means any vice president, any assistant vice president, any senior trust officer or assistant trust officer, any trust officer, or any other officer associated with the corporate trust department of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of such person's knowledge of and familiarity with the particular subject.

" Securities " has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture.

" Securities Act " means the Securities Act of 1933 and any statute successor thereto, in each case as amended from time to time.

" Security Register " and " Security Registrar " have the respective meanings specified in Section 305.

" Special Record Date " for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307.

" Stated Maturity ," when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security as the date on which the principal of such Security or such installment of principal or interest is due and payable, in the case of such principal, as such date may be advanced or extended as provided pursuant to the terms of such Security and this Indenture.

" Trust Indenture Act " means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided , however , that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" shall mean, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended.

" Trustee " means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series.

" Vice President ," when used with respect to the Corporation or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president."

Section 102. Compliance Certificates and Opinions.

Upon any application or request by the Corporation to the Trustee to take any action under any provision of this Indenture, the Corporation shall furnish to the Trustee such certificates and opinions as may be required under the Trust Indenture Act. Each such certificate or opinion shall be given in the form of an Officer's Certificate, if to be given by an officer of the Corporation, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements of the Trust Indenture Act and any other requirements set forth in this Indenture.

Except as otherwise expressly provided herein, every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include

(1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;

(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(3) a statement that, in the opinion of each such individual, he or she has made such examination or investigation as is necessary to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.

Section 103. Form of Documents Delivered to Trustee.

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

Any certificate or opinion of an officer of the Corporation may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which such Officer's Certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Corporation stating that the information with respect to such factual matters is in the possession of the Corporation, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

Whenever, subsequent to the receipt by the Trustee of any Board Resolution, Officer's Certificate, Opinion of Counsel or other document or instrument, a clerical, typographical or other inadvertent or unintentional error or omission shall be discovered therein, a new document or instrument may be substituted therefor in corrected form with the same force and effect as if originally filed in the corrected form and, irrespective of the date or dates of the actual execution and/or delivery thereof, such substitute document or instrument shall be deemed to have been executed and/or delivered as of the date or dates required with respect to the document or instrument for which it is substituted. Anything in this Indenture to the contrary notwithstanding, if any such corrective document or instrument indicates that action has been taken by or at the request of the Corporation which could not have been taken had the original document or instrument not contained such error or omission, the action so taken shall not be invalidated or otherwise rendered ineffective but shall be and remain in full force and effect, except to the extent that such action was a result of willful misconduct or bad faith. Without limiting the generality of the foregoing, any Securities issued under the authority of such defective document or instrument shall nevertheless be the valid obligations of the Corporation entitled to the benefits of this Indenture equally and ratably with all other Outstanding Securities, except as aforesaid.

Section 104. Acts of Holders; Record Dates.

Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Corporation. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the " Act " of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Corporation, if made in the manner provided in this Section.

The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than the signer's individual capacity, such certificate or affidavit shall also constitute sufficient proof of the signer's authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient; and the Trustee may in any instance require further proof to any of the matters referred to in this Section.

The ownership of Securities shall be proved by the Security Register.

Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Corporation in reliance thereon, whether or not notation of such action is made upon such Security.

The Corporation may set any day as a record date for the purpose of determining the Holders of the Outstanding Securities of any series entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders of Securities of such series; provided that the Corporation may not set a record date for, and the provisions of this paragraph shall not apply with respect to, the giving or making of any notice, declaration, request or direction referred to in the next paragraph. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities of the relevant series on such record date, and no other Holders, shall be entitled to take or revoke the relevant action, whether or not such Holders remain Holders after such record date; provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Securities of such series on such record date. Nothing in this paragraph shall be construed to prevent the Corporation from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Securities of the relevant series on the date such action is taken. Promptly after any record date is set pursuant to this paragraph, the Corporation, at its own expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Trustee in writing and to each Holder of Securities of the relevant series in the manner set forth in Section 106.

The Trustee may set any day as a record date for the purpose of determining the Holders of the Outstanding Securities of any series entitled to join in the giving or making of (i) any Notice of Default, (ii) any declaration of acceleration referred to in Section 502, (iii) any request to institute proceedings referred to in Section 507(2) or (iv) any direction referred to in Section 512, in each case with respect to Securities of such series. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities of such series on such record date, and no other Holders, shall be entitled to join in such notice, declaration, request or direction or to revoke the same, whether or not such Holders remain Holders after such record date; provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Securities of such series on such record date. Nothing in this paragraph shall be construed to prevent the Trustee from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the

requisite principal amount of Outstanding Securities of the relevant series on the date such action is taken. Promptly after any record date is set pursuant to this paragraph, the Trustee, at the Corporation's expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be sent to the Corporation in writing and to each Holder of Securities of the relevant series in the manner set forth in Section 106.

With respect to any record date set pursuant to this Section, the party hereto which sets such record date may designate any day as the " Expiration Date " and from time to time may change the Expiration Date to any earlier or later day; provided that no such change shall be effective unless notice of the proposed new Expiration Date is given to the other party hereto in writing, and to each Holder of Securities of the relevant series in the manner set forth in Section 106, on or prior to the existing Expiration Date. If an Expiration Date is not designated with respect to any record date set pursuant to this Section, the party hereto which set such record date shall be deemed to have initially designated the 180th day after such record date as the Expiration Date with respect thereto, subject to its right to change the Expiration Date as provided in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than the 180th day after the applicable record date.

Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount.

Section 105. Notices, Etc., to Trustee and Corporation.

Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with,

(1) the Trustee by any Holder or by the Corporation shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing (which may be made via facsimile) to or with the Trustee at its Corporate Trust Office, or

(2) the Corporation by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Corporation addressed to it at the address of its principal office specified in the first paragraph of this instrument, Attention: Treasurer, or at any other address previously furnished in writing to the Trustee by the Corporation.

The Trustee agrees to accept and act upon instructions or directions from the Corporation pursuant to this Indenture sent by unsecured e-mail, pdf, facsimile transmission or other similar unsecured electronic methods, provided , however , that the Trustee shall have received an incumbency certificate listing persons designated to give such instructions or directions on behalf of the Corporation and containing specimen signatures of such designated persons on which such incumbency certificate the Trustee may conclusively rely until such incumbency certificate shall be amended and replaced by the Corporation. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee's reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The Corporation agrees to assume all risks arising from its use of such unsecured electronic methods to submit instructions and directions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk of interception and misuse of information by third parties.

Section 106. Notice to Holders; Waiver.

Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder.

Section 107. Conflict with Trust Indenture Act.

If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act which is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be.

Section 108. Effect of Headings and Table of Contents.

The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

Section 109. Successors and Assigns.

All covenants and agreements in this Indenture by the Corporation shall bind its successors and assigns, whether so expressed or not.

Section 110. Separability Clause.

In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 111. Benefits of Indenture.

Unless otherwise specified pursuant to Section 301 with respect to the Securities of any series, nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto, their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture.

Section 112. Governing Law.

This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws principles thereof.

Section 113. Legal Holidays.

Unless otherwise specified pursuant to Section 301 with respect to the Securities of any series, in any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities (other than a provision of any Security which specifically states that such provision shall apply in lieu of this Section)) payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next succeeding Business Day, unless that Business Day is in a different calendar year, in which case the payment will be made on the preceding Business Day, in each case, with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity.

Section 114. No Security Interest Created.

Nothing in this Indenture or in the Securities expressed or implied, shall be construed to constitute a security interest under the Uniform Commercial Code or similar legislation, as now or hereafter enacted and in effect in any jurisdiction where property of the Corporation or its subsidiaries is located.

Section 115. Waiver of Jury Trial.

EACH OF THE CORPORATION AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BETWEEN THEM ARISING OUT OF OR RELATING TO THIS INDENTURE, THE SECURITIES OR THE TRANSACTION CONTEMPLATED HEREBY.

Section 116. Force Majeure.

In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services affecting the banking industry generally; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

ARTICLE II.

SECURITY FORMS

Section 201. Forms Generally.

The Securities of each series shall be in substantially the form set forth in this Article, or in such other form as shall be established by or pursuant to one or more Board Resolutions or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or Depositary therefor or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution thereof. If the form of the Securities of any series is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Corporation or an Officer's Certificate pursuant to Section 301 and

delivered to the Trustee at or prior to the delivery of the Corporation Order contemplated by Section 303 for the authentication and delivery of such Securities.

The definitive Securities shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities.

Section 202. Form of Face of Security.

[Insert any legend required by the Internal Revenue Code and the regulations thereunder.]

EDISON INTERNATIONAL


No.		$
		CUSIP No.

Edison International, a corporation duly organized and existing under the laws of the State of California (herein called the " Corporation ," which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to , or registered assigns, the principal sum of Dollars on [if the Security is to bear interest prior to Maturity and interest payment periods are not extendable, insert - , and to pay interest thereon from or from the most recent Interest Payment Date to which interest has been paid or duly provided for, [insert - semi-annually, quarterly, monthly or other description of the relevant payment period] on [ , ,] and in each year, commencing , at the rate of % per annum, until the principal hereof is paid or made available for payment [if applicable, insert - , provided that any principal and premium, and any such installment of interest, which is overdue shall bear interest at the rate of % per annum (to the extent that the payment of such interest shall be legally enforceable), from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand]. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the [ ] (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture].

[If the Security is not to bear interest prior to Maturity, insert - The principal of this Security shall not bear interest except in the case of a default in payment of principal upon acceleration, upon redemption or at Stated Maturity and in such case the overdue principal and any overdue premium shall bear interest at the rate of % per annum (to the extent that the payment of such interest shall be legally enforceable), from the dates such amounts are due until they are paid or made available for payment. Interest on any overdue principal or premium shall be payable on demand. Any such interest on overdue principal or premium which is not paid on demand shall bear interest at the rate of % per annum (to the extent that the payment of such interest on interest shall be legally enforceable), from the date of such demand until the amount so demanded is paid or made available for payment. Interest on any overdue interest shall be payable on demand.]

Payment of the principal of (and premium, if any) and [if applicable, insert - any such] interest on this Security will be made at the office or agency of the Corporation maintained for that purpose in , in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts [if applicable, insert - ; provided , however , that at the option of the Corporation payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Trustee at least sixteen (16) days prior to the date for payment by the Person entitled thereto].

Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Corporation has caused this instrument to be duly executed under its corporate seal.


Dated as of Date of Authentication:		EDISON INTERNATIONAL
		By
Attest:

Section 203. Form of Reverse of Security.

This Security is one of a duly authorized issue of securities of the Corporation (herein called the " Securities "), issued and to be issued in one or more series under a Senior Indenture, dated as of , (herein called the " Indenture ," which term shall have the meaning assigned to it in such instrument), between the Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee (herein called the " Trustee ," which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture for a statement of the respective rights, limitation of rights, duties and immunities thereunder of the Corporation, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof [if applicable, insert - , limited in aggregate principal amount to $ ].

If applicable, insert - The Securities of this series are subject to redemption upon not less than 30 days' notice by mail, [if applicable, insert - (1) on in any year commencing with the year and ending with the year through operation of the sinking fund for this series at a Redemption Price equal to 100% of the principal amount, and (2)] at any time [if applicable, insert - on or after , ], as a whole or in part, at the election of the Corporation, at the following Redemption Prices (expressed as percentages of the principal amount): If redeemed [if applicable, insert - on or before , %, and if redeemed] during the 12-month period beginning of the years indicated,

Year		Redemption Price			Year			Redemption Price

and thereafter at a Redemption Price equal to % of the principal amount, together in the case of any such redemption [if applicable, insert - (whether through operation of the sinking fund or

otherwise)] with accrued interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.]

[If applicable, insert - The Securities of this series are subject to redemption upon not less than 30 days' notice by mail, (1) on in any year commencing with the year and ending with the year through operation of the sinking fund for this series at the Redemption Prices for redemption through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below, and (2) at any time [if applicable, insert - on or after ] , as a whole or in part, at the election of the Corporation, at the Redemption Prices for redemption otherwise than through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below: If redeemed during the 12- month period beginning of the years indicated,

Year		Redemption Price for Redemption Through Operation of the Sinking Fund			Redemption Price for Redemption Otherwise Than Through Operation of the Sinking Fund

and thereafter at a Redemption Price equal to % of the principal amount, together in the case of any such redemption (whether through operation of the sinking fund or otherwise) with accrued interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.]

[If applicable, insert - Notwithstanding the foregoing, the Corporation may not, prior to , redeem any Securities of this series as contemplated by [if applicable, insert - Clause (2) of] the preceding paragraph as a part of, or in anticipation of, any refunding operation by the application, directly or indirectly, of moneys borrowed having an interest cost to the Corporation (calculated in accordance with generally accepted financial practice) of less than % per annum.]

[If applicable, insert - The sinking fund for this series provides for the redemption on in each year beginning with the year and ending with the year of [if applicable, insert -not less than $ (" mandatory sinking fund ") and not more than] $ aggregate principal amount of Securities of this series. Securities of this series acquired or redeemed by the Corporation otherwise than through [if applicable, insert - mandatory] sinking fund payments may be credited against subsequent [if applicable, insert -mandatory] sinking fund payments otherwise required to be made [if applicable, insert - , in the inverse order in which they become due].]

[If the Security is subject to redemption of any kind, insert - In the event of redemption of this Security in part only, a new Security or Securities of this series and of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof.]

[If applicable, insert - The Indenture contains provisions for defeasance at any time of [the entire indebtedness of this Security] [or] [certain restrictive covenants and Events of Default with respect to this Security] [, in each case] upon compliance with certain conditions set forth in the Indenture.]

[If the Security is not an Original Issue Discount Security, insert - If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture.]

[If the Security is an Original Issue Discount Security, insert - If an Event of Default with respect to Securities of this series shall occur and be continuing, an amount of principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. Such amount shall be equal to [insert formula for determining the amount]. Upon payment (i) of the amount of principal so declared due and payable and (ii) of interest on any overdue principal, premium and interest (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Corporation's obligations in respect of the payment of the principal of and premium and interest, if any, on the Securities of this series shall terminate.]

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Corporation and the rights of the Holders of the Securities of all series affected under the Indenture at any time by the Corporation and the Trustee with the consent of the Holders of a majority in principal amount of the Securities of all series at the time Outstanding affected thereby (voting as one class). The Indenture contains provisions permitting the Holders of not less than a majority in principal amount of the Securities of all series at the time Outstanding with respect to which a default under the Indenture shall have occurred and be continuing (voting as one class), on behalf of the Holders of the Securities of all such series, to waive, with certain exceptions, such past default with respect to all such series and its consequences. The Indenture also permits the Holders of not less than a majority in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Corporation with certain provisions of the Indenture. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 33% in principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee indemnity satisfactory to it, and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein.

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Corporation, which is absolute and unconditional, to pay the

principal of and any premium and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Corporation in any place where the principal of and any premium and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Corporation and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

The Securities of this series are issuable only in registered form without coupons in denominations of [$1,000 and any integral multiple thereof]. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.

No service charge shall be made for any such registration of transfer or exchange, but the Corporation may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

Prior to due presentment of this Security for registration of transfer, the Corporation, the Trustee and any agent of the Corporation or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Corporation, the Trustee nor any such agent shall be affected by notice to the contrary.

All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

The Indenture and the Securities issued thereby shall be governed by and construed in accordance with the laws of the State of California.

Section 204. Form of Legend for Global Securities.

Unless otherwise specified as contemplated by Section 301 for the Securities evidenced thereby, every Global Security authenticated and delivered hereunder shall bear a legend in substantially the following form:

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

Section 205. Form of Trustee's Certificate of Authentication.

The Trustee's certificate of authentication shall be in substantially the following form:

This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.


		The Bank of New York Mellon Trust Company, N.A.,
		As Trustee
		By:
		Authorized Signatory
Dated:

ARTICLE III.

THE SECURITIES

Section 301. Amount Unlimited; Issuable in Series.

The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited.

The Securities may be issued in one or more series. There shall be established in or pursuant to a Board Resolution and, subject to Section 303, set forth, or determined in the manner provided, in an Officer's Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of the Securities of any series,

(1) the title of the Securities of the series (which shall distinguish the Securities of the series from Securities of any other series);

(2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 304, 305, 306, 906 or 1106 and except for any Securities which, pursuant to Section 303, are deemed never to have been authenticated and delivered hereunder);

(3) the Person to whom any interest on a Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest;

(4) the date or dates on which the principal of any Securities of the series is payable or the method by which such date shall be determined and the right, if any, to shorten or extend the date on which the principal of any Securities of the series is payable and the conditions to any such change;

(5) the rate or rates at which any Securities of the series shall bear interest, if any, or the method by which such rate or rates shall be determined; the date or dates from which any such interest shall accrue; the Interest Payment Dates on which any such interest shall be payable; the manner, if any, of determination of such Interest Payment Dates; and the Regular Record Date, if any, for any such interest payable on any Interest Payment Date;

(6) the right, if any, to extend the interest payment periods and the terms of such extension or extensions;

(7) the place or places where the principal of and any premium and interest on any Securities of the series shall be payable and whether, if acceptable to the Trustee, any principal of such Securities shall be payable without presentation or surrender thereof;

(8) the period or periods within which, or the date or dates on which, the price or prices at which and the terms and conditions upon which any Securities of the series may be redeemed, in whole or in part, at the option of the Corporation and, if other than by a Board Resolution, the manner in which any election by the Corporation to redeem the Securities shall be evidenced;

(9) the obligation, if any, of the Corporation to redeem or purchase any Securities of the series pursuant to any sinking fund, purchase fund or analogous provisions or at the option of the Holder thereof and the period or periods within which, the price or prices at which and the terms and conditions upon which any Securities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation;

(10) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which any Securities of the series shall be issuable;

(11) if the amount of principal of or any premium or interest on any Securities of the series may be determined with reference to an index or pursuant to a formula, the manner in which such amounts shall be determined;

(12) if other than the currency of the United States of America, the currency, currencies or currency units in which the principal of or any premium or interest on any Securities of the series shall be payable and the manner of determining the equivalent thereof in the currency of the United States of America for any purpose, including for purposes of the definition of "Outstanding" in Section 101;

(13) if the principal of or any premium or interest on any Securities of the series is to be payable, at the election of the Corporation or the Holder thereof, in one or more currencies or currency units other than that or those in which such Securities are stated to be payable, the currency, currencies or currency units in which the principal of or any premium or interest on such Securities as to which such election is made shall be payable, the periods within which and the terms and conditions upon which such election is to be made and the amount so payable (or the manner in which such amount shall be determined);

(14) if other than the entire principal amount thereof, the portion of the principal amount of any Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502;

(15) if the principal amount payable at the Stated Maturity of any Securities of the series will not be determinable as of any one or more dates prior to the Stated Maturity, the amount which shall be deemed to be the principal amount of such Securities as of any such date for any purpose thereunder or hereunder, including the principal amount thereof which shall be due and payable upon any Maturity other than the Stated Maturity or which shall be deemed to be Outstanding as of any date prior to the Stated Maturity (or, in any such case, the manner in which such amount deemed to be the principal amount shall be determined);

(16) if either or both of Sections 1302 and 1303 do not apply to any Securities of the series;

(17) if applicable, that any Securities of the series shall be issuable in whole or in part in the form of one or more Global Securities and, in such case, the respective Depositary or Depositaries for such Global Securities, the form of any legend or legends which shall be borne by any such Global Security in addition to or in lieu of that set forth in Section 204 and any circumstances in addition to or in lieu of those set forth in Clause (2) of the last paragraph of Section 305 in which any such Global Security may be exchanged in whole or in part for Securities registered, and any transfer of such Global Security in whole or in part may be registered, in the name or names of Persons other than the Depositary for such Global Security or a nominee thereof;

(18) any addition, modification or deletion of any Events of Default or covenants provided with respect to any Securities of the series and any change in the right of the Trustee or the requisite Holders of such Securities to declare the principal amount thereof due and payable pursuant to Section 502;

(19) any addition to or change in the covenants set forth in Article Ten which applies to Securities of the series; and

(20) any other terms of the series.

All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to the Board Resolution referred to above and (subject to Section 303) set forth, or determined in the manner provided, in the Officer's Certificate referred to above or in any such indenture supplemental hereto.

If any of the terms of the series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Corporation and delivered to the Trustee at or prior to the delivery of the Officer's Certificate setting forth the terms or the manner of determining the terms of the series.

With respect to Securities of a series offered in a Periodic Offering, the Board Resolution (or action taken pursuant thereto), Officer's Certificate or supplemental indenture referred to above may provide general terms or parameters for Securities of such series and provide either that the specific terms of particular Securities of such series shall be specified in a Corporation Order or that such terms shall be determined by the Corporation in accordance with other procedures specified in a Corporation Order as contemplated by the third paragraph of Section 303.

Notwithstanding Section 301(2) herein and unless otherwise expressly provided with respect to a series of Securities, the aggregate principal amount of a series of Securities may be increased and additional Securities of such series may be issued up to the maximum aggregate principal amount authorized with respect to such series as increased.

Section 302. Denominations.

The Securities of each series shall be issuable only in fully registered form without coupons and only in such denominations as shall be specified as contemplated by Section 301. In the absence of any such specified denomination with respect to the Securities of any series, the Securities of such series shall be issuable in denominations of $1,000 and any integral multiple thereof.

Section 303. Execution, Authentication, Delivery and Dating.

The Securities shall be executed on behalf of the Corporation by its Chairman of the Board, its Chief Executive Officer, its President, a Vice President or the Treasurer, under its corporate seal reproduced thereon (which may be by facsimile) attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile.

Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Corporation shall bind the Corporation, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities.

At any time and from time to time after the execution and delivery of this Indenture, the Corporation may deliver the Securities of any series executed by the Corporation to the Trustee for authentication, together with a Corporation Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Corporation Order shall authenticate and deliver such Securities. If the form or terms of the Securities of the series have been established by or pursuant to one or more Board Resolutions as permitted by Sections 201 and 301, in authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating,

(1) if the form of such Securities has been established by or pursuant to Board Resolution as permitted by Section 201, that such form has been established in conformity with the provisions of this Indenture;

(2) if the terms of such Securities have been, or in the case of Securities of a series offered in a Periodic Offering, will be, established by or pursuant to Board Resolution as permitted by Section 301, that such terms have been, or in the case of Securities of a series offered in a Periodic Offering, will be, established in conformity with the provisions of this Indenture, subject, in the

case of Securities of a series offered in a Periodic Offering, to any conditions specified in such Opinion of Counsel; and

(3) that such Securities, when issued and executed by the Corporation and when authenticated and delivered by the Trustee in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Corporation enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles.

If such form or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee.

Each Security shall be dated the date of its authentication.

No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature of an authorized officer, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Corporation, and the Corporation shall deliver such Security to the Trustee for cancellation as provided in Section 309, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture.

Section 304. Temporary Securities.

Pending the preparation of definitive Securities of any series, the Corporation may execute, and upon Corporation Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities.

If temporary Securities of any series are issued, the Corporation will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Corporation in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series, the Corporation shall execute and the Trustee shall authenticate and deliver in exchange therefor one or more definitive Securities of the same series, of any authorized denominations and of like tenor and aggregate principal amount. Until so exchanged, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series and tenor.

Section 305. Registration, Registration of Transfer and Exchange.

The Corporation shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office or in any other office or agency of the Corporation in a Place of Payment being herein sometimes referred to as the " Security Register ") in which, subject to such reasonable regulations as it may prescribe, the Corporation shall provide for the registration of

Securities and of transfers of Securities. The Trustee is hereby appointed " Security Registrar " for the purpose of registering Securities and transfers of Securities as herein provided.

Upon surrender for registration of transfer of any Security of a series at the office or agency of the Corporation in a Place of Payment for that series, the Corporation shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same series, of any authorized denominations and of like tenor and aggregate principal amount.

At the option of the Holder, the Securities of any series may be exchanged for other Securities of the same series, of any authorized denominations and of like tenor and aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Corporation shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive.

All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Corporation, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange.

Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Corporation or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Corporation and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing.

No service charge shall be made for any registration of transfer or exchange of Securities, but the Corporation may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906 or 1106 not involving any transfer.

If the Securities of any series (or of any series and specified tenor) are to be redeemed, the Corporation shall not be required (A) to issue, register the transfer of or exchange any Securities of that series (or of that series and specified tenor, as the case may be) during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of any such Securities selected for redemption and ending at the close of business on the day of such mailing, or (B) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part.

The provisions of Clauses (1), (2), (3) and (4) below shall apply only to Global Securities:

(1) Each Global Security authenticated under this Indenture shall be registered in the name of the Depositary designated for such Global Security or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Security shall constitute a single Security for all purposes of this Indenture.

(2) Notwithstanding any other provision in this Indenture, no Global Security may be exchanged in whole or in part for Securities registered, and no transfer of a Global Security in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Security or a nominee thereof unless (A) such Depositary has notified the Corporation that it is unwilling or unable to continue as Depositary for such Global Security and a successor Depositary has not been appointed by the Corporation within 90 days of receipt by the Corporation of such notification, (B) if at any time the Depositary ceases to be a clearing agency registered under the Exchange Act at a time when the Depositary is required to be so registered to act as such Depositary and no successor Depositary shall have been appointed by the Corporation within 90 days after it became aware of such cessation, or (C) there shall exist such circumstances, if any, in addition to or in lieu of the foregoing as have been specified for this

purpose as contemplated by Section 301. Notwithstanding the foregoing, the Corporation may at any time in its sole discretion determine that Securities issued in the form of a Global Security shall no longer be represented in whole or in part by such Global Security, and the Trustee, upon receipt of a Corporation Order therefor, shall authenticate and deliver definitive Securities in exchange in whole or in part for such Global Security.

(3) Subject to Clause (2) above, any exchange or transfer of a Global Security for other Securities may be made in whole or in part, and all Securities issued in exchange for or upon transfer of a Global Security or any portion thereof shall be registered in such names as the Depositary for such Global Security shall direct.

(4) Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security or any portion thereof, whether pursuant to this Section, Section 304, 306, 906 or 1106 or otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Security, unless such Security is registered in the name of a Person other than the Depositary for such Global Security or a nominee thereof.

Section 306. Mutilated, Destroyed, Lost and Stolen Securities.

If any mutilated Security is surrendered to the Trustee, the Corporation shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding.

If there shall be delivered to the Corporation and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Corporation or the Trustee that such Security has been acquired by a bona fide purchaser, the Corporation shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding.

In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Corporation in its discretion may, instead of issuing a new Security, pay such Security.

Upon the issuance of any new Security under this Section, the Corporation may require the payment of a sum sufficient to cover any tax, fee, assessment or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee and its agents and counsel) connected therewith.

Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Corporation, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder.

The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.

Section 307. Payment of Interest; Interest Rights Preserved.

Except as otherwise provided as contemplated by Section 301 with respect to any series of Securities, interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more

Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest.

Except as otherwise provided as contemplated by Section 301 with respect to any series of Securities, any interest on any Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called " Defaulted Interest ") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Corporation, at its election in each case, as provided in Clause (1) or (2) below:

(1) The Corporation may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Corporation shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security of such series and the date of the proposed payment, and at the same time the Corporation shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Corporation of such Special Record Date and, in the name and at the expense of the Corporation, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be given to each Holder of Securities of such series in the manner set forth in Section 106, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2).

(2) The Corporation may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange, if any, on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Corporation to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee.

Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security.

Section 308. Persons Deemed Owners.

Prior to due presentment of a Security for registration of transfer, the Corporation, the Trustee and any agent of the Corporation or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and any premium and (subject to Section 307) any interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Corporation, the Trustee nor any agent of the Corporation or the Trustee shall be affected by notice to the contrary.

None of the Corporation, the Trustee, any Paying Agent or the Security Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of

beneficial ownership interest of a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

Notwithstanding the foregoing, with respect to any Global Security, nothing herein shall prevent the Corporation, the Trustee, or any Agent of the Corporation or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by any depositary, as a Holder, with respect to such Global Security or impair, as between such depositary and owners of beneficial interests in such Global Security, the operation of customary practices governing the exercise of the rights of such depositary as Holder of such Global Security.

Section 309. Cancellation.

All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Corporation may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Corporation may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Corporation has not issued and sold, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be disposed of in its customary manner or as directed by a Corporation Order; provided , however , that the Trustee shall not be required to destroy such canceled Securities.

Section 310. Computation of Interest.

Except as otherwise specified as contemplated by Section 301 for the Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months.

Section 311. CUSIP Numbers.

The Corporation in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers.

ARTICLE IV.

SATISFACTION AND DISCHARGE

Section 401. Satisfaction and Discharge of Indenture.

This Indenture shall upon Corporation Request cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, at the expense of the Corporation, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when

(1) either

(A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Corporation and thereafter repaid to the Corporation or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or

(B) all such Securities not theretofore delivered to the Trustee for cancellation

(i) have become due and payable, or

(ii) will become due and payable at their Stated Maturity within one year, or

(iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Corporation,

and the Corporation, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose (i) money in an amount, (ii) Government Obligations (as defined in Section 1304) which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than the due date of any payment, money in an amount, or (iii) a combination thereof, sufficient, in the case of (ii) or (iii), in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee to pay and discharge, the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and any premium and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be;

(2) the Corporation has paid or caused to be paid all other sums payable hereunder by the Corporation; and

(3) the Corporation has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Corporation to the Trustee under Section 607, the obligations of the Corporation to any Authenticating Agent under Section 614 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive such satisfaction and discharge.

Section 402. Application of Trust Money.

Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Corporation acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and any premium and interest for whose payment such money has been deposited with the Trustee.

ARTICLE V.

REMEDIES

Section 501. Events of Default.

" Event of Default ," wherever used herein with respect to the Securities of any series, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body), unless it is inapplicable to a particular series or is specifically deleted or modified in the Board Resolution (or action taken pursuant thereto), Officer's Certificate or supplemental indenture under which such series of Securities is issued or has been deleted or modified in an indenture supplemental hereto:

(1) default in the payment of any interest upon any Security of that series when it becomes due and payable, and continuance of such default for a period of 30 days; provided , however , that if the Corporation is permitted by the terms of the Securities of such series to defer the payment in question, the date on which such payment is due and payable shall be the date on which the Corporation is required to make payment following such deferral, if such deferral has been elected pursuant to the terms of the Securities; or

(2) default in the payment of the principal of or any premium on any Security of that series at its Maturity; or

(3) default in the making of any sinking fund payment, when and as due by the terms of a Security of that series, and continuance of such default for a period of 60 days; or

(4) default in the performance, or breach, of any covenant of the Corporation in this Indenture (other than a covenant a default in whose performance or whose breach is elsewhere in this Section specifically dealt with or which has expressly been included in this Indenture solely for the benefit of series of Securities other than that series), and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Corporation by the Trustee or to the Corporation and the Trustee by the Holders of at least 33% in principal amount of the Outstanding Securities of that series a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a " Notice of Default " hereunder, unless the Trustee, or the Trustee and the Holders of a principal amount of Securities of such series not less than the principal amount of Securities the Holders of which gave such notice, as the case may be, shall agree in writing to an extension of such period prior to its expiration; provided , however , that the Trustee, or the Trustee and the Holders of such principal amount of Securities of such series, as the case may be, shall be deemed to have agreed to an extension of such period if corrective action is initiated by the Corporation within such period and is being diligently pursued; or

(5) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Corporation in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging

the Corporation a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Corporation under any applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Corporation or of any substantial part of its property, or ordering the winding-up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 90 consecutive days; or

(6) the commencement by the Corporation of a voluntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Corporation in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal or state law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Corporation or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due; or

(7) any other Event of Default provided with respect to Securities of that series.

Section 502. Acceleration of Maturity; Rescission and Annulment.

If an Event of Default with respect to the Securities of any series at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 33% in principal amount of the Outstanding Securities of that series may declare the principal amount of all the Securities of that series (or, if any Securities of that series are Original Issue Discount Securities, such portion of the principal amount of such Securities as may be specified by the terms thereof) to be due and payable immediately, by a notice in writing to the Corporation (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable.

At any time after such a declaration of acceleration with respect to the Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities of such series, by written notice to the Corporation and the Trustee, may rescind and annul such declaration and its consequences if

(1) the Corporation has paid or deposited with the Trustee a sum sufficient to pay

(A) all overdue interest on all Securities of that series,

(B) the principal of (and premium, if any, on) any Securities of that series which have become due otherwise than by such declaration of acceleration and any interest thereon at the rate or rates prescribed therefor in such Securities,

(C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities, and

(D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel;

and

(2) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513.

No such rescission shall affect any subsequent default or impair any right consequent thereon.

Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee.

The Corporation covenants that if

(1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or

(2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof,

the Corporation will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and any premium and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and premium and on any overdue interest, at the rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

If the Corporation fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Corporation or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Corporation or any other obligor upon such Securities, wherever situated.

If an Event of Default with respect to the Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.

Section 504. Trustee May File Proofs of Claim.

In case of any judicial proceeding relative to the Corporation (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607.

No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to

vote in respect of the claim of any Holder in any such proceeding; provided , however , that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee.

Section 505. Trustee May Enforce Claims Without Possession of Securities.

All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered.

Section 506. Application of Money Collected.

Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or any premium or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:

First: To the payment of all amounts due the Trustee under Section 607;

Second: To the payment of the amounts then due and unpaid for principal of and any premium and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and any premium and interest, respectively; and

Third: To the payment of the balance, if any, to the Corporation.

Section 507. Limitation on Suits.

No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless

(1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series;

(2) the Holders of not less than 33% in principal amount of the Outstanding Securities of all affected series, considered as one class, or, in the case of an Event of Default of the character specified above in Section 501(1), (2) or (3), that series, shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;

(3) such Holder or Holders have offered to the Trustee indemnity satisfactory to it against the costs, expenses and liabilities to be incurred in compliance with such request;

(4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and

(5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of all affected series, considered as one class, or, in the case of an Event of Default of the character specified above in Section 501(1), (2) or (3), that series,

it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders.

Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest.

Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and any premium and (subject to Section 307) interest on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.

Section 509. Restoration of Rights and Remedies.

If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Corporation, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted.

Section 510. Rights and Remedies Cumulative.

Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

Section 511. Delay or Omission Not Waiver.

No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein.

Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.

Section 512. Control By Holders.

The Holders of a majority in principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series; provided that

(1) such direction shall not be in conflict with any rule of law or with this Indenture,

(2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and

(3) subject to the provisions of Section 601, the Trustee shall have the right to decline to follow any such direction if the Trustee in good faith shall, by a Responsible Officer or Officers of the Trustee, determine that the proceeding so directed would involve the Trustee in personal liability.

If an Event of Default is continuing with respect to all Outstanding Securities, the Holders of a majority in principal amount of all the Outstanding Securities, considered as one class, shall have the right to make such direction, and not the Holders of Securities of any one series.

Section 513. Waiver of Past Defaults.

The Holders of not less than a majority in principal amount of the Outstanding Securities of all series with respect to which any default under the Indenture shall have occurred and be continuing (voting as one class) may, on behalf of the Holders of all Securities of all such series, waive such past default under the Indenture and its consequences, except a default

(1) in the payment of the principal of or any premium or interest on any Security of such series, or

(2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of the series affected.

Upon any such waiver, such default shall cease to exist and be deemed not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

Section 514. Undertaking for Costs.

In any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs, including legal fees and expenses of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in (i) any suit instituted by the Trustee, (ii) any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities of any series, or (iii) any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the respective Stated Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date).

Section 515. Waiver of Stay or Extension Laws.

The Corporation covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Corporation (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

ARTICLE VI.

THE TRUSTEE

Section 601. Certain Duties and Responsibilities.

(1) The duties and responsibilities of the Trustee shall be as provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section.

(2) Except during the continuance of an Event of Default,

(A) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(B) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

(3) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

(4) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that

(A) this Section 601(4) shall not be construed to limit the effect of Section 601(2); and

(B) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Securities of any series, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Securities of such series.

Section 602. Notice of Defaults.

If a default occurs hereunder with respect to the Securities of any series, the Trustee shall give the Holders of Securities of such series notice of such default as and to the extent provided by the Trust Indenture Act; provided , however , that in the case of any default of the character specified in Section 501(4) with respect to Securities of such series, no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term " default " means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series.

Section 603. Certain Rights of Trustee.

Subject to the provisions of Section 601:

(1) the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(2) any request or direction of the Corporation mentioned herein shall be sufficiently evidenced by a Corporation Request or Corporation Order or as otherwise expressly provided herein, and any resolution of the Board of Directors shall be sufficiently evidenced by a Board Resolution;

(3) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate;

(4) the Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

(5) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;

(6) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, at reasonable times previously notified to the Corporation, to examine the relevant books, records and premises of the Corporation, personally or by agent or attorney at the sole cost of the Corporation and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation;

(7) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder;

(8) in no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action;

(9) the Trustee shall not be deemed to have notice of any default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Securities and this Indenture;

(10) the Trustee may request, at the time action is being taken by the Corporation, that the Corporation deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture;

(11) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder; and

(12) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture.

Section 604. Not Responsible for Recitals or Issuance of Securities.

The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Corporation, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Corporation of Securities or the proceeds thereof.

Section 605. May Hold Securities.

The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Corporation, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Corporation with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent.

Section 606. Money Held in Trust.

Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Corporation.

Section 607. Compensation and Reimbursement.

The Corporation agrees

(1) to pay to the Trustee from time to time such compensation as shall be agreed to in writing between the Corporation and the Trustee for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);

(2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or willful misconduct; and

(3) to indemnify the Trustee for, and to hold it harmless against, any and all loss, liability, damage, claim or expense, including taxes (other than taxes based on the income of the Trustee) incurred without negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses

of defending itself against any claim whether asserted by the Corporation, a Holder or any other Person or liability in connection with the exercise or performance of any of its powers or duties hereunder.

The Trustee shall have a lien prior to the Securities upon all property and funds held by it hereunder for any amount owing it or any predecessor Trustee pursuant to this Section 607, except with respect to funds held in trust for the benefit of the Holders of particular Securities.

Without limiting any rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 501(5) or Section 501(6), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law.

The provisions of this Section shall survive the termination of this Indenture.

Section 608. Conflicting Interests.

If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. To the extent permitted by such Act, the Trustee shall not be deemed to have a conflicting interest by virtue of being a trustee under this Indenture with respect to Securities of more than one series.

Section 609. Corporate Trustee Required; Eligibility.

There shall at all times be a Trustee hereunder with respect to the Securities of each series, which may be Trustee hereunder for Securities of one or more other series. Each Trustee shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000. If any such Person publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section and to the extent permitted by the Trust Indenture Act, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee with respect to the Securities of any series shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.

Section 610. Resignation and Removal; Appointment of Successor.

No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611.

The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Corporation. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition, at the expense of the Corporation, any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series.

The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Corporation. Upon such removal, the Corporation or the removed Trustee may petition, at the expense of the Corporation, any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series.

If at any time:

(1) the Trustee shall fail to comply with Section 608 after written request therefor by the Corporation or by any Holder who has been a bona fide Holder of a Security for at least six months, or

(2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Corporation or by any such Holder, or

(3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case, (A) the Corporation by a Board Resolution may remove the Trustee with respect to all Securities, or (B) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees.

If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of one or more series, the Corporation, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 611. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Corporation and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Corporation. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Corporation or the Holders and accepted appointment in the manner required by Section 611, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series.

The Corporation shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series to all Holders of Securities of such series in the manner provided in Section 106. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office.

Section 611. Acceptance of Appointment by Successor.

In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Corporation and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Corporation or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor

Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder.

In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Corporation, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Corporation or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates.

Upon request of any such successor Trustee, the Corporation shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in the first or second preceding paragraph, as the case may be.

No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article.

Section 612. Merger, Conversion, Consolidation or Succession to Business.

Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided that such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities.

Section 613. Preferential Collection of Claims Against Corporation.

If and when the Trustee shall be or become a creditor of the Corporation (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Corporation (or any such other obligor).

Section 614. Appointment of Authenticating Agent.

The Trustee may appoint an Authenticating Agent or Agents acceptable to the Corporation with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 306, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Corporation and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by federal or state authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section.

Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided that such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent.

An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Corporation. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Corporation. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Corporation and shall give notice of such appointment in the manner provided in Section 106 to all Holders of Securities of the series with respect to which such Authenticating Agent will serve. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.

The Corporation agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section.

If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form:

This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

Section 615. Trustee's Application for Instructions from the Corporation.

Any application by the Trustee for written instructions from the Corporation may, at the option of the Trustee, set forth in writing any action proposed to be taken or omitted by the Trustee under this Indenture and the date on and/or after which such action shall be taken or such omission shall be effective. The Trustee shall not be liable to the Corporation for any action taken by, or omission of, the Trustee in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than three Business Days after the date any officer of the Corporation actually receives such application, unless any such officer shall have consented in writing to any earlier date) unless prior to taking any such action (or the effective date in the case of an omission), the Trustee shall have received written instructions in response to such application specifying the action to be taken or omitted.

ARTICLE VII.

HOLDERS' LISTS AND REPORTS BY TRUSTEE AND CORPORATION

Section 701. Corporation to Furnish Trustee Names and Addresses of Holders.

The Corporation will furnish or cause to be furnished to the Trustee

(1) 15 days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Securities of each series as of such Regular Record Date, and

(2) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Corporation of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished;

excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar.

Section 702. Preservation of Information; Communications to Holders.

The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished.

The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided by the Trust Indenture Act.

Every Holder of Securities, by receiving and holding the same, agrees with the Corporation and the Trustee that neither the Corporation nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act.

Section 703. Reports by Trustee.

The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. If required by Section 313(a) of the Trust Indenture Act, the Trustee shall, within 60 days after each May 15 following the date of this Indenture, deliver to Holders a brief report, dated as of such May 15, which complies with the provisions of such Section 313(a).

A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee, with each stock exchange upon which any Securities are listed, with the Commission and with the Corporation. The Corporation will promptly notify the Trustee when any Securities are listed on any stock exchange or any delisting thereof.

Section 704. Reports by Corporation.

The Corporation shall file with the Trustee, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to Section 314(a) of the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is filed with the Commission. All required information, documents and other reports referred to in this Section 704 shall be deemed filed with the Trustee and transmitted to the Holders at the time such information, documents or other reports are publicly filed with the Commission via the Commission's Electronic-Data Gathering, Analysis and Retrieval system (or any successor system, including the Commission's Interactive Data Electronic Application system). Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Corporation's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer's Certificates).

ARTICLE VIII.

CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER

Section 801. Corporation May Consolidate, Etc., Only on Certain Terms.

The Corporation shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and no Person shall consolidate with or merge into the Corporation or convey, transfer or lease its properties and assets substantially as an entirety to the Corporation, unless:

(1) in case the Corporation shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the Person formed by such consolidation or into which the Corporation is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Corporation substantially as an entirety shall be a corporation, partnership, limited liability company or trust organized and existing under the laws of the United States of America or any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest on all the Securities and the performance of every covenant of this Indenture on the part of the Corporation to be performed or observed;

(2) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice of lapse of time, or both, would become an Event of Default, shall have occurred and be continuing;

(3) such other conditions as may be specified pursuant to Section 301 with respect to the Securities of any series shall have been satisfied; and

(4) the Corporation shall deliver to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance or transfer and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to

such transaction have been complied with; and the Trustee, subject to Section 601, may rely upon such Officer's Certificate and Opinion of Counsel as conclusive evidence that such transaction complies with this Section 801.

Notwithstanding the foregoing, the Corporation may merge or consolidate with or transfer all or substantially all of its assets to an Affiliate that has no significant assets or liabilities and was formed solely for the purpose of changing the jurisdiction of organization of the Corporation or the form of organization of the Corporation; provided that the amount of indebtedness of the Corporation is not increased thereby; and provided, further that the successor assumes all obligations of the Corporation under this Indenture.

Section 802. Successor Substituted.

Upon any consolidation of the Corporation with, or merger of the Corporation into, any other Person or any conveyance or transfer of the properties and assets of the Corporation as an entirety or substantially as an entirety in accordance with Section 801, the successor Person formed by such consolidation or into which the Corporation is merged or to which such conveyance or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Corporation under this Indenture with the same effect as if such successor Person had been named as the Corporation herein, and thereafter the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities.

Such successor Person may cause to be signed, and may issue either in its own name or in the name of the Corporation, any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Corporation and delivered to the Trustee; and, upon the order of such successor Person instead of the Corporation, and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Corporation to the Trustee for authentication pursuant to such provisions and any Securities which such successor Person thereafter shall cause to be signed and delivered to the Trustee on its behalf for the purpose pursuant to such provisions. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof.

In case of any such consolidation, merger, sale, conveyance or lease, such changes in phraseology and form may be made in the Securities thereafter to be issued as may be appropriate.

ARTICLE IX.

SUPPLEMENTAL INDENTURES

Section 901. Supplemental Indentures Without Consent of Holders.

Without the consent of any Holders, the Corporation, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form reasonably satisfactory to the Trustee, for any of the following purposes:

(1) to evidence the succession of another Person to the Corporation and the assumption by any such successor of the covenants of the Corporation herein and in the Securities; or

(2) to add to the covenants of the Corporation for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Corporation; or

(3) to add any additional Events of Default for the benefit of the Holders of all or any series of Securities (and if such additional Events of Default are to be for the benefit of less than all series of Securities, stating that such additional Events of Default are expressly being included solely for the benefit of such series); or

(4) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of Securities in bearer form, registrable or not registrable as to principal, and with or without interest coupons, or to facilitate the issuance of Securities in uncertificated form; or

(5) to add to, change or eliminate any of the provisions of this Indenture in respect of one or more series of Securities; provided that any such addition, change or elimination (A) shall neither (i) apply to any Security of any series created prior to the execution of such supplemental indenture and entitled to the benefit of such provision nor (ii) modify the rights of the Holder of any such Security with respect to such provision, (B) shall become effective only when there is no such Security Outstanding or (C) shall not adversely affect the interests of the Holders of the Securities or any series in any material respect; or

(6) to secure the Securities; or

(7) to add guarantors with respect to the Securities of one or more series; or

(8) to establish the form or terms of the Securities of any series as permitted by Sections 201 and 301; or

(9) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 611; or

(10) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture; provided that such action pursuant to this Clause (10) shall not adversely affect the interests of the Holders of the Securities or any series in any material respect; or

(11) to comply with the rules or regulations of any securities exchange or automated quotation system on which any of the Securities may be listed or traded; or

(12) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualification of this Indenture under the Trust Indenture Act or under any similar federal statute hereafter enacted, and to add to this Indenture such other provisions as may be expressly required by the Trust Indenture Act; or

(13) to conform the Indenture or the Securities to the description thereof in the related prospectus or disclosure document; provided that any such changes shall not adversely affect the interests of the Holders of the Securities or any series in any material respect.

Section 902. Supplemental Indentures With Consent of Holders.

With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities of all series affected by such supplemental indenture (voting as one class), by Act of said Holders delivered to the Corporation and the Trustee, the Corporation, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture, or modifying in any manner the rights of the Holders

of Securities under this Indenture; provided , however , that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby,

(1) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Security (other than pursuant to the terms of such Security), or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or reduce the amount of the principal of an Original Issue Discount Security or any other Security which would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502 or change the coin or currency in which any Security or any premium or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or

(2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or

(3) modify any of the provisions of this Section, Section 513 or Section 1006, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; provided , however , that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section and Section 1006, or the deletion of this proviso, in accordance with the requirements of Sections 611 and 901(9).

A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series.

It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.

Section 903. Execution of Supplemental Indentures.

In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel and Officer's Certificate stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise.

Section 904. Effect of Supplemental Indentures.

Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

Section 905. Conformity with Trust Indenture Act.

Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act.

Section 906. Reference in Securities to Supplemental Indentures.

The Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Corporation shall so determine, the new Securities of any series so modified as to conform, in the opinion of the Trustee and the Corporation, to any such supplemental indenture may be prepared and executed by the Corporation and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series.

ARTICLE X.

COVENANTS

Section 1001. Payment of Principal, Premium and Interest.

The Corporation covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay the principal of and any premium and interest on the Securities of that series in accordance with the terms of the Securities and this Indenture.

Section 1002. Maintenance of Office or Agency.

The Corporation will maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Corporation in respect of the Securities of that series and this Indenture may be served. The Corporation will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Corporation shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Corporation hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands.

The Corporation may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided , however , that no such designation or rescission shall in any manner relieve the Corporation of its obligation to maintain an office or agency in each Place of Payment for the Securities of any series for such purposes. The Corporation will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

Section 1003. Money for Securities Payments to Be Held in Trust.

If the Corporation shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of or any premium or interest on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and any premium and interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act.

Whenever the Corporation shall have one or more Paying Agents for any series of Securities, it will, on or prior to each due date of the principal of or any premium or interest on any Securities of that series, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided by the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the Corporation will promptly notify the Trustee of its action or failure so to act.

The Corporation will cause each Paying Agent for any series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will (1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided, (2) give the Trustee notice of any default by the Corporation (or any other obligor upon the Securities) in the making of any payment of principal (and premium, if any) or interest, (3) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent and (4) during the continuance of any default by the Corporation (or any other obligor upon the Securities of that series) in the making of any payment in respect of the Securities of that series, upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such- Paying Agent for payment in respect of the Securities of that series.

The Corporation may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Corporation Order direct any Paying Agent to pay, to the Trustee all sums held in trust hereunder by the Corporation or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Corporation or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.

Any money deposited with the Trustee or any Paying Agent, or then held by the Corporation, in trust for the payment of the principal of or any premium or interest on any Security of any series and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the Corporation on Corporation Request, or (if then held by the Corporation) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Corporation for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Corporation as trustee thereof, shall thereupon cease; provided , however , that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Corporation cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Corporation.

Section 1004. Corporate Existence.

Subject to Article Eight, the Corporation will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence.

Section 1005. Statement by Officers as to Default.

The Corporation will deliver to the Trustee, on or before October 15 of each calendar year or, on or before such other day in each calendar year as the Corporation may specify in a notice to the Trustee, an Officer's Certificate, which need not comply with Section 102, stating whether or not to the knowledge of the signers thereof the Corporation is in default in the performance and observance of any of the terms of this Indenture.

Section 1006. Waiver of Certain Covenants.

Except as otherwise specified as contemplated by Section 301 for Securities of such series, the Corporation may, with respect to the Securities of any series, omit in any particular instance to comply with any term, provision or condition set forth in any covenant provided pursuant to Section 301(19), 901(2) or 901(8) for the benefit of the Holders of such series if before the time for such compliance the Holders of not less than a majority in principal amount of the Outstanding Securities of such series shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Corporation and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect.

Section 1007. Calculation of Original Issue Discount.

The Corporation shall file with the Trustee promptly at the end of each calendar year (i) a written notice specifying the amount of original issue discount (including daily rates and accrual periods) accrued on Outstanding Securities as of the end of such year and (ii) such other specific information relating to such original issue discount as may then be relevant under the Internal Revenue Code of 1986, as amended from time to time.

ARTICLE XI.

REDEMPTION OF SECURITIES

Section 1101. Applicability of Article.

The Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for such Securities) in accordance with this Article.

Section 1102. Election to Redeem; Notice to Trustee.

The election of the Corporation to redeem any Securities shall be evidenced by a Board Resolution or in another manner specified as contemplated by Section 301 for such Securities. In case of any redemption at the election of the Corporation, the Corporation shall, at least 45 days prior to the Redemption Date fixed by the Corporation (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date, of the principal amount of Securities of such series to be redeemed and, if applicable, of the tenor of the Securities to be redeemed. In the case of any redemption of Securities (A) prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, or (B) pursuant to an election of the Corporation which is subject to a condition specified in the terms of such Securities or elsewhere in this Indenture, the Corporation shall furnish the Trustee with an Officer's Certificate evidencing compliance with such restriction or condition.

Section 1103. Selection by Trustee of Securities to Be Redeemed.

If less than all the Securities of any series are to be redeemed (unless all the Securities of such series and of a specified tenor are to be redeemed or unless such redemption affects only a single Security), the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of a portion of the principal amount of any Security of such series; provided that the unredeemed portion of the principal amount of any Security shall be in an authorized

denomination (which shall not be less than the minimum authorized denomination) for such Security. If less than all the Securities of such series and of a specified tenor are to be redeemed (unless such redemption affects only a single Security), the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series and specified tenor not previously called for redemption in accordance with the preceding sentence.

The Trustee shall promptly notify the Corporation in writing of the Securities selected for redemption as aforesaid and, in the case of any Securities selected for partial redemption as aforesaid, the principal amount thereof to be redeemed.

The provisions of the two preceding paragraphs shall not apply with respect to any redemption affecting only a single Security, whether such Security is to be redeemed in whole or in part. In the case of any such redemption in part, the unredeemed portion of the principal amount of the Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security.

For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed.

Section 1104. Notice of Redemption.

Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register.

All notices of redemption shall identify the Securities to be redeemed (including CUSIP number(s)) and shall state:

(1) the Redemption Date;

(2) the Redemption Price;

(3) if less than all the Outstanding Securities of any series and of a specified tenor consisting of more than a single Security are to be redeemed, the identification (and, in the case of partial redemption of any such Securities, the principal amounts) of the particular Securities to be redeemed and, if less than all the Outstanding Securities of any series and of a specified tenor consisting of a single Security are to be redeemed, the principal amount of the particular Security to be redeemed;

(4) that on the Redemption Date the Redemption Price, together with accrued interest, if any, to the Redemption Date, will become due and payable upon each such Security to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date;

(5) the place or places where each such Security is to be surrendered for payment of the Redemption Price and accrued interest, if any, unless it shall have been specified as contemplated by Section 301 with respect to such Securities that such surrender shall not be required;

(6) that the redemption is for a sinking fund, if such is the case; and

(7) such other matters as the Corporation shall deem desirable or appropriate.

Unless otherwise specified with respect to any Securities in accordance with Section 301, with respect to any redemption of Securities at the election of the Corporation, unless, upon the giving of notice of such redemption, Defeasance shall have been effected with respect to such Securities

pursuant to Section 1302, such notice may state that such redemption shall be conditional upon the receipt by the Trustee or the Paying Agent(s) for such Securities, on or prior to the date fixed for such redemption, of money sufficient to pay the principal of and any premium and interest on such Securities and that if such money shall not have been so received such notice shall be of no force or effect and the Corporation shall not be required to redeem such Securities. In the event that such notice of redemption contains such a condition and such money is not so received, the redemption shall not be made and within a reasonable time thereafter notice shall be given, in the manner in which the notice of redemption was given, that such money was not so received and such redemption was not required to be made, and the Trustee or Paying Agent(s) for the Securities otherwise to have been redeemed shall promptly return to the Holders thereof any of such Securities which had been surrendered for payment upon such redemption.

Notice of redemption of Securities to be redeemed at the election of the Corporation, and any notice of non-satisfaction of redemption as aforesaid, shall be given by the Corporation or, at the Corporation's request and provision of such notice information as set forth in this Section 1104 at least 5 Business Days prior to the requested date for the giving of such notice, by the Trustee in the name and at the expense of the Corporation. Subject to the preceding paragraph, any such notice of redemption shall be irrevocable.

Section 1105. Deposit of Redemption Price.

On or prior to the Redemption Date specified in the notice of redemption given as provided in Section 1104, the Corporation will deposit with the Trustee or with one or more Paying Agents (or if the Corporation is acting as its own Paying Agent, the Corporation will segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of; and any accrued interest on, all the Securities which are to be redeemed on that date.

Section 1106. Securities Payable on Redemption Date.

Notice of redemption having been given as aforesaid, and the conditions, if any, set forth in such notice having been satisfied, the Securities or portions thereof so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless, in the case of an unconditional notice of redemption, the Corporation shall default in the payment of the Redemption Price and accrued interest, if any) such Securities or portions thereof, if interest-bearing, shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security or portion thereof shall be paid by the Corporation at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided , however , that no such surrender shall be a condition to such payment if so specified as contemplated by Section 301 with respect to such Security, and provided further that, unless otherwise specified as contemplated by Section 301, installments of interest whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307.

If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and any premium shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security.

Section 1107. Securities Redeemed in Part.

Any Security which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Corporation or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Corporation and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Corporation shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of the same series and of like tenor, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered.

ARTICLE XII.

SINKING FUNDS

Section 1201. Applicability of Article.

The provisions of this Article shall be applicable to any sinking fund for the retirement of the Securities of any series except as otherwise specified as contemplated by Section 301 for such Securities.

The minimum amount of any sinking fund payment provided for by the terms of any Securities is herein referred to as a " mandatory sinking fund payment ," and any payment in excess of such minimum amount provided for by the terms of such Securities is herein referred to as an " optional sinking fund payment ." If provided for by the terms of any Securities, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities as provided for by the terms of such Securities.

Section 1202. Satisfaction of Sinking Fund Payments with Securities.

The Corporation (1) may deliver Outstanding Securities of a series (other than any previously called for redemption) and (2) may apply as a credit Securities of a series which have been redeemed either at the election of the Corporation pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in

each case in satisfaction of all or any part of any sinking fund payment with respect to any Securities of such series required to be made pursuant to the terms of such Securities as and to the extent provided for by the terms of such Securities; provided that the Securities to be so credited have not been previously so credited. The Securities to be so credited shall be received and credited for such purpose by the Trustee at the Redemption Price, as specified in the Securities so to be redeemed, for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly.

Section 1203. Redemption of Securities for Sinking Fund.

Not less than 45 days prior to each sinking fund payment date for any Securities, the Corporation will deliver to the Trustee an Officer's Certificate specifying the amount of the next ensuing sinking fund payment for such Securities pursuant to the terms of such Securities, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities pursuant to Section 1202 and stating the basis for such credit and that such Securities have not been previously so credited and will also deliver to the Trustee any Securities to be so delivered. Not less than 30 days prior to each such sinking fund payment date, the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Corporation in the manner provided in Section 1104. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1105 and 1106.

ARTICLE XIII.

DEFEASANCE AND COVENANT DEFEASANCE

Section 1301. Applicability of Article.

Unless, pursuant to Section 301, provision is made that either or both of (A) defeasance of any Securities or any series of Securities under Section 1302 and (B) covenant defeasance of any Securities or any series of Securities under Section 1303 shall not apply to such Securities of a series, then the provisions of either or both of Sections 1302 and 1303, as the case may be, together with Sections 1304 and 1305, shall be applicable to the Outstanding Securities of such series upon compliance with the conditions set forth below in this Article.

Section 1302. Defeasance and Discharge.

The Corporation may cause itself to be discharged from its obligations with respect to any Securities or any series of Securities on and after the date the conditions set forth in Section 1304 are satisfied (hereinafter called " Defeasance "). For this purpose, such Defeasance means that the Corporation shall be deemed to have paid and discharged the entire indebtedness represented by such Securities and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Corporation, shall execute proper instruments acknowledging the same), subject to the following which shall survive until otherwise terminated or discharged hereunder: (1) the rights of Holders of such Securities to receive, solely from the trust fund described in Section 1304 and as more fully set forth in such Section, payments in respect of the principal of and any premium and interest on such Securities when payments are due, (2) the Corporation's obligations with respect to such Securities under Sections 304, 305, 306, 1002 and 1003 and with respect to the Trustee under Section 607, (3) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (4) this Article. Subject to compliance with this Article, Defeasance with respect to any Securities or any series of Securities by the Corporation is permitted under this Section 1302 notwithstanding the prior exercise by the Corporation of its rights

under Section 1303 with respect to such Securities. Following a Defeasance, payment of such Securities may not be accelerated because of an Event of Default.

Section 1303. Covenant Defeasance.

The Corporation may cause itself to be released from its obligations under any covenants provided pursuant to Section 301(19), 901(2), 901(6) or 901(8) with respect to any Securities or any series of Securities for the benefit of the Holders of such Securities and the occurrence of any event specified in Sections 501(4) (with respect to any such covenants provided pursuant to Section 301(19), 901(2), 901(6) or 901(8)) or 501(7) shall be deemed not to be or result in an Event of Default with respect to such Securities as provided in this Section, in each case on and after the date the conditions set forth in Section 1304 are satisfied (hereinafter called " Covenant Defeasance "). For this purpose, such Covenant Defeasance means that, with respect to such Securities, the Corporation may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such specified Section (to the extent so specified in the case of Section 501(4)), whether directly or indirectly by reason of any reference elsewhere herein to any such Section or by reason of any reference in any such Section to any other provision herein or in any other document, but the remainder of this Indenture and such Securities shall be unaffected thereby.

Section 1304. Conditions to Defeasance or Covenant Defeasance.

The following shall be the conditions to the application of Section 1302 or Section 1303 to any Securities or any series of Securities, as the case may be:

(1) The Corporation shall irrevocably have deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities, (A) money in an amount, or (B) Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than the due date of any payment, money in an amount, or (C) a combination thereof, sufficient, in the case of (B) or (C), in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee to pay and discharge, the principal of and any premium and interest on such Securities on the respective Stated Maturities or on any Redemption Date established pursuant to Clause (3) below, in accordance with the terms of this Indenture and such Securities. As used herein, " Government Obligation " means (x) any security which is (i) a direct obligation of the United States of America or the government which issued the foreign currency in which such Securities are payable, for the payment of which its full faith and credit is pledged or (ii) an obligation of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America or such government which issued the foreign currency in which such Securities are payable, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America or such other government, which, in either case (i) or (ii), is not callable or redeemable at the option of the issuer thereof, and (y) any depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any Government Obligation which is specified in clause (x) above and held by such bank for the account of the holder of such depositary receipt, or with respect to any specific payment of principal of or interest on any Government Obligation which is so specified and held, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of principal or interest evidenced by such depositary receipt.

(2) No event which is, or after notice or lapse of time or both would become, an Event of Default with respect to such Securities or any other Securities shall have occurred and be continuing at the time of such deposit.

(3) If the Securities are to be redeemed prior to Stated Maturity (other than from mandatory sinking fund payments or analogous payments), notice of such redemption shall have been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee shall have been made.

(4) The Corporation shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent with respect to such Defeasance or Covenant Defeasance have been complied with.

Section 1305. Deposited Money and Government Obligations to Be Held in Trust; Miscellaneous Provisions.

Subject to the provisions of the last paragraph of Section 1003, all money and Government Obligations (including the proceeds thereof) deposited with the Trustee pursuant to Section 1304 in respect of any Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any such Paying Agent (including the Corporation acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities, of all sums due and to become due thereon in respect of principal and any premium and interest, but money so held in trust need not be segregated from other funds except to the extent required by law.

The Corporation shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the Government Obligations deposited pursuant to Section 1304 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of Outstanding Securities.

Anything in this Article to the contrary notwithstanding, the Trustee shall deliver or pay to the Corporation from time to time upon Corporation Request any money or Government Obligations held by it as provided in Section 1304 with respect to any Securities which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect the Defeasance or Covenant Defeasance, as the case may be, with respect to such Securities.

ARTICLE XIV.

IMMUNITY OF INCORPORATORS,
STOCKHOLDERS, OFFICERS AND DIRECTORS

Section 1401. Indenture and Securities Solely Corporate Obligations.

No recourse for the payment of the principal of or any premium or interest on any Security, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Corporation in this Indenture or in any supplemental indenture, or in any Security, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, officer or director, as such, past, present or future, of the Corporation or of any successor corporation, either directly or through the Corporation or any successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Securities.

This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

In witness whereof, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written.


		EDISON INTERNATIONAL
		By		/s/ GEORGE T. TABATA GEORGE T. TABATA Assistant Treasurer
		THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee
		By		/s/ D. G. DONOVAN D. G. DONOVAN Vice President

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Exhibit 4.1

Execution Version

EDISON INTERNATIONAL
TO
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.
Trustee
Senior Indenture
Dated as of September 10, 2010
CERTAIN SECTIONS OF THIS INDENTURE RELATING TO SECTIONS 310 THROUGH 318, INCLUSIVE, OF THE TRUST INDENTURE ACT OF 1939
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
ARTICLE II. SECURITY FORMS
ARTICLE III. THE SECURITIES
ARTICLE IV. SATISFACTION AND DISCHARGE
ARTICLE V. REMEDIES
ARTICLE VI. THE TRUSTEE
ARTICLE VII. HOLDERS' LISTS AND REPORTS BY TRUSTEE AND CORPORATION
ARTICLE VIII. CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
ARTICLE IX. SUPPLEMENTAL INDENTURES
ARTICLE X. COVENANTS
ARTICLE XI. REDEMPTION OF SECURITIES
ARTICLE XII. SINKING FUNDS
ARTICLE XIII. DEFEASANCE AND COVENANT DEFEASANCE
ARTICLE XIV. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

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Exhibit 31.1

CERTIFICATION

I, THEODORE F. CRAVER, JR., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, of Edison International;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: October 29, 2010


		/s/ THEODORE F. CRAVER, JR. THEODORE F. CRAVER, JR. Chief Executive Officer

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Exhibit 31.1

CERTIFICATION

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Exhibit 31.2

CERTIFICATION

I, W. JAMES SCILACCI, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, of Edison International;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: October 29, 2010


		/s/ W. JAMES SCILACCI W. JAMES SCILACCI Chief Financial Officer

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Exhibit 31.2

CERTIFICATION

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Exhibit 32

STATEMENT PURSUANT TO 18 U.S.C. SECTION 1350, AS
ENACTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 (the "Quarterly Report"), of Edison International (the "Company"), and pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned certifies, to the best of his knowledge, that:

1.: The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and
2.: The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: October 29, 2010


		/s/ THEODORE F. CRAVER, JR. THEODORE F. CRAVER, JR. Chief Executive Officer Edison International
		/s/ W. JAMES SCILACCI W. JAMES SCILACCI Chief Financial Officer Edison International

This statement accompanies the Quarterly Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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Exhibit 32