EDISON INTERNATIONAL
AMENDED AND RESTATED
AGREEMENT FOR THE ALLOCATION OF
INCOME TAX LIABILITIES AND BENEFITS
This amendment is entered into as of September 10, 1996 for the purpose of amending and
restating the Agreement for the Allocation of Income Tax Liabilities and Benefits dated July 1, 1988 and restated
May 1, 1995 (as so amended and restated, being herein referred to as this "Agreement"), by and among Edison
International, a California corporation ("Parent"), and its wholly-owned subsidiaries, Southern California Edison
Company ("SCE") and The Mission Group ("Mission Group"), acting on their own behalf and on behalf of their
Subsidiaries (SCE and Mission Group being herein referred to together as the "Companies," and each separately as
a "Company").
RECITALS
A. Parent and/or the Companies have previously filed and intend to continue to file consolidated federal
income tax returns and combined state franchise or income tax returns.
B. In Decision 00-00-000 (OII 24) the California Public Utilities Commission ("CPUC") found the "separate
return method" to be "the more reasonable basis for calculating test-year income tax expense" for
utility ratemaking purposes.
C. The Companies previously entered into an agreement for the allocation of income tax liabilities and
benefits, which agreement was replaced by this Agreement as a result of a corporate reorganization
wherein Parent became the common parent of the Companies.
D. The parties desire that the income tax liabilities and benefits of the Companies and their respective
Subsidiaries as reflected in or resulting from the filing of consolidated or combined tax returns
continue to be allocated and apportioned using the "separate return method" as set forth in this
Agreement.
E. The parties desire that the "separate return method" continue to be used to further their desire that no
cross-subsidizations arise between the utility and nonutility activities of the Consolidated Group.
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AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained
and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree
that this Agreement is amended in its entirety to read as provided in the heading and recitals hereto, as
provided in this paragraph, and as follows:
1. Definitions. The following terms as used herein shall have the meanings set forth below:
1.1 "Consolidated Group" means the affiliated group of corporations of which Parent is the common
parent (and of which SCE was the common parent prior to July 1, 1988) and which duly elects to
file a Consolidated Return.
1.2 "Consolidated Return" means a federal income tax return filed with respect to the Consolidated
Group pursuant to Section 1501 of the Internal Revenue Code and/or a state franchise or income
tax return or report filed with respect to the Consolidated Group pursuant to applicable
sections of any state tax code.
1.3 "Net Losses" has the meaning assigned to that term pursuant to Section 3 below.
1.4 "Separate Return" means a separate federal income tax return that is computed with the
modifications listed in Treasury Regulation
1.1552-1(a)(2)(ii) or a state franchise or income tax return that is computed with similar
modifications corresponding to applicable state law.
1.5 "Separate Tax Benefit" has the meaning assigned to that term pursuant to Section 3 below.
1.6 "Separate Tax Liability" has the meaning assigned to that term pursuant to Section 2 below.
1.7 "Subsidiary" and "Subsidiaries" mean, respectively, a corporation or corporations, the majority
of whose voting stock or other controlling ownership interest is owned, directly or indirectly,
by SCE or Mission Group, as the case may be, and which is included in a Consolidated Return
filed by the Consolidated Group.
2. Separate Tax Liability. For each taxable period ending on or after December 31, 1986, with respect
to which Parent files, or reasonably anticipates that it will file, a Consolidated Return with the
Companies, Parent shall determine the amount
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of federal income tax and state franchise or income tax that each of the Companies and each of their respective
Subsidiaries would have paid (if any) if each of the Companies and each of their respective Subsidiaries
had filed Separate Returns for such taxable period (such amount being called herein, with respect to any
person, a "Separate Tax Liability"). Each of the Companies shall pay to Parent the amount by which (a)
the aggregate of the Separate Tax Liability of such Company, if it has a Separate Tax Liability, and the
Separate Tax Liability of each of its Subsidiaries which has a Separate Tax Liability exceeds (b) the
aggregate of the Separate Tax Benefit of such Company, if it has a Separate Tax Benefit, and the
Separate Tax Benefit of each of its Subsidiaries which has a Separate Tax Benefit. Such payment shall
be made in the manner provided in Section 4 below.
3. Separate Tax Benefits. For each taxable period ending on or after December 31, 1986 with respect to
which Parent files, or reasonably anticipates that it will file, a Consolidated Return with the
Companies, Parent shall determine the amount of net operating losses, net capital losses or credits
against tax in excess of the amounts of such losses or credits that may be utilized to reduce the
Separate Tax Liability (such amounts being called herein, with respect to any person, "Net Losses") with
respect to each of the Companies and each of their respective Subsidiaries. With respect to each of the
Companies which has Net Losses for any taxable period and each Subsidiary which has Net Losses for any
taxable period, Parent shall calculate the increase in the tax liability of the Consolidated Group which
would arise if the Net Losses of each such member of the Consolidated Group were excluded from the
Consolidated Return for such taxable period (such amount being called herein, with respect to each such
person, a "Separate Tax Benefit"). If, for any such taxable period, (a) the aggregate of the Separate
Tax Benefit of a Company, if it has a Separate Tax Benefit, and the Separate Tax Benefit of each of its
Subsidiaries which has a Separate Tax Benefit exceeds (b) the aggregate of the Separate Tax Liability
of such Company, if it has a Separate Tax Liability, and the Separate Tax Liability of each of its
Subsidiaries which has a Separate Tax Liability, Parent shall pay to such Company an amount equal to
such excess. Such payment shall be made in the manner provided in Section 4 below. If more than one
member of the Consolidated Group has a Net Loss and any portion of the aggregate Net Losses of the
Companies and their Subsidiaries is not used to reduce the income tax liability of the Consolidated
Group for the taxable period, the amount of the payments to be made to Mission Group shall be determined
after the Net Losses of SCE and each of its Subsidiaries that is subject to regulation by the CPUC have
been fully utilized, but before any utilization of or credit for the Net Losses of any other subsidiary
of Parent other than SCE and its such regulated Subsidiaries and Mission Group and its Subsidiaries.
4. Payments. The Companies shall provide Parent monthly, or upon demand as necessary, with all relevant
information necessary for Parent to, and Parent shall, calculate the periodic estimated tax installments
on a Consolidated Return
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basis. Each Company's share, if any, of each such installment, or of the amounts payable to it with respect to
the Separate Tax Benefits, if any, of such Company and its Subsidiaries, shall be calculated in
accordance with Sections 2 and 3, above. Such calculations shall be made by Parent in its sole
discretion but shall be consistent with elections made by Parent under the Internal Revenue Code and
applicable state tax codes and this Agreement.
Parent shall invoice each Company for its share of federal and state quarterly estimated tax
installments as soon as it is practically possible prior to the date of any installment payment. Each
Company shall pay Parent such quarterly tax liability or receive payment for any amount due such Company
on the date Parent remits any installment payment to the appropriate taxing authority.
5. Reconciliation of Tax Liability. Parent shall reconcile the federal and state quarterly estimated tax
installments against the Separate Tax Liabilities and the Separate Tax Benefits attributable to each
Company and its Subsidiaries resulting from the filing of the Consolidated Returns. Parent shall
invoice each Company and each Company shall pay to Parent any additional tax liability due, or receive
payment from Parent for any overpayment, based upon such reconciliation within 90 days after the
Consolidated Returns are filed.
6. Adjustments to Tax Liability. If any adjustments are made to the income, gains, losses, deductions, or
credits pertaining to the Companies or their respective Subsidiaries, as reported in a Consolidated
Return, by reason of the filing of any amended return or claim for refund, or arising out of an audit of
such Consolidated Return by the Internal Revenue Service or applicable state agency, then the aggregate
Separate Tax Liabilities or aggregate Separate Tax Benefits, as the case may be, of each Company and its
Subsidiaries shall be redetermined to give effect to any such adjustment as if it had been made as part
of the filed Consolidated Return. If any interest or penalty is to be paid or interest received as a
result of a tax deficiency or refund, such interest or penalty shall be allocated in accordance with the
item(s) giving rise to such interest or penalty. Either Parent or the Company affected may contest or
cause to be contested any adjustments to income, gains, losses, deductions, credits or interest or
penalty assessments and the reasonable costs incurred in contesting such adjustments or assessments
shall be allocated upon such basis as is mutually agreed to by Parent and the Company affected in
advance of such contest. If, as a result of such redetermination, any amounts due to Parent or either
of the Companies under this Agreement, as the case may be, shall exceed the amounts previously paid to
such party, then payment of such excess shall be made by the appropriate party, as the case may be, on
the earliest date on which (i) Parent shall pay, or be deemed to have paid, any additional taxes
resulting from any such adjustment, (ii) Parent shall receive, or be deemed to have received, a refund
of taxes resulting from any such adjustment or (iii) such adjustment shall become final; any payment
between Parent and a Company pursuant to (i) or (ii) above, however, shall not become final until the
adjustment
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with respect to which the redetermination was made becomes final. For purposes of this Section 6, an adjustment
shall become final at the time of the expiration of the applicable statute of limitations with respect
to the taxable period to which such adjustment relates, or, if such adjustment was made pursuant to a
decision of a court, at the time such decision shall become final.
7. Carryovers and Carryback. If, for any taxable period ending on or after December 31, 1986, a Company
and its Subsidiaries have aggregate Net Losses which, under the applicable tax codes may be carried over
or carried back to any taxable period in which Parent or SCE filed, or Parent reasonably anticipates
that it will file, a Consolidated Return which includes such Company, and such aggregate Net Losses give
rise to a reduction in the tax liability of the Consolidated Group that would not have arisen if such
Company and its Subsidiaries were excluded from the Consolidated Group for any such taxable period,
Parent shall pay to such Company an amount equal to the actual reduction in the tax liability of the
Consolidated Group for the taxable period to which such aggregate Net Losses may be carried, which is
attributable to such carryover or carryback. Payment of such amount shall be made by Parent (i) in the
case of a carryover, on or before the later of (a) the 15th day of the third month after the end of the
taxable period with respect to which the tax liability of the Consolidated Group was reduced and (b) the
date on which such reduction in tax liability is finally determined, which shall be not later than 90
days after the Consolidated Return for such taxable period is filed, and (ii) in the case of a
carryback, when the Consolidated Group shall receive, or be deemed to receive, the refund attributable
to such carryback. If more than one member of the Consolidated Group has a carryover or carryback of a
Net Loss to a taxable period and any portion of the carryovers or carrybacks is not used to reduce the
tax liability of the Consolidated Group for that taxable period, the amount of the payments to be made
to Mission Group pursuant to this Section 7 shall be determined after the Net Losses of SCE and each of
its Subsidiaries that is subject to regulation by the CPUC have been fully utilized, but before any
utilization of or credit for the Net Losses of any other subsidiary of Parent other than SCE and its
such regulated Subsidiaries and Mission Group and its Subsidiaries.
8. Miscellaneous.
8.1 Consents, Waiver, etc. Parent, SCE and Mission Group each agree to execute and file such
consents, waivers and other documents as may be necessary to effect the provisions of this
Agreement.
8.2 Verification of Computation. Parent, Mission Group and SCE shall each provide promptly to the
other parties copies of the computations of all amounts payable under this Agreement and access
to all records, work papers, or other documents necessary to verify such computations.
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8.3 Tax Allocation Method Elected Under Treasury Regulations or Imposed by State Statutes,
Regulations or Policies. The respective obligations of the parties hereunder in respect of any
period for which Parent files a federal Consolidated Return and/or state Consolidated Return
shall be determined in accordance with the provisions of this Agreement regardless of the
actual method for allocation of federal income tax liabilities specified in Treasury
Regulations Section 1.1552-1(a) and Section 1.1502-33(d)(2) elected, or deemed to have been
elected, by the Consolidated Group, and/or the allocation of state income/franchise tax
liabilities imposed by state statutes, regulations or policies, respectively, for such period.
8.4 Successors and Beneficiaries. This Agreement may not be assigned, pledged, transferred or
hypothecated by any party without the express written consent of the other parties; provided,
that, without obtaining such consent, this Agreement may be assigned, pledged, transferred or
hypothecated by either party as security for its obligations to any third party.
8.5 Termination. This Agreement shall be applicable to all taxable periods ended on or after
December 31, 1986 and prior to termination of this Agreement by written agreement of the
parties. Notwithstanding termination of this Agreement, its provisions will remain in effect
with respect to any period of time during the taxable year in which the termination occurs for
which the income or loss of the Companies and their Subsidiaries must be included in the
Consolidated Return of Parent. In addition, such termination shall not relieve any party of
any obligation arising hereunder with respect to taxable periods covered by this Agreement.
8.6 Effect on Prior Agreement. This Agreement replaces and supersedes the Agreement for the
Allocation of Income Tax Liabilities and Benefits dated November 1, 1987, between SCE and
Mission Group (the "Prior Agreement") in the following manner, effective July 1, 1988: (a)
Parent assumes all of SCE's obligations to Mission Group under the Prior Agreement, (b) Mission
Group shall pay to Parent all amounts which Mission Group was or would have been required to
pay to SCE under the Prior Agreement and which remain unpaid on, or arise after, the date of
this Agreement, and (c) SCE shall pay to Parent, or Parent shall pay to SCE, as the case may
be, any amounts arising from reconciliations or adjustments under Sections 5 and 6 of the Prior
Agreement and this Agreement.
8.7 Governing Law. This Agreement shall be governed by and construed in accordance with the laws
of the State of California.
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8.8 Additional Companies. Any other wholly-owned first tier Edison International subsidiary may be
added to this Agreement as an additional Company at any time by addendum executed by Edison
International and the subsidiary. The addendum must provide such subsidiary will be bound by
the terms of the Agreement. Edison International shall provide a copy of the addendum to the
Companies.
IN WITNESS WHEREOF, the parties have executed this Agreement by their respective officers
thereunto duly authorized as of the date first above written.
EDISON INTERNATIONAL
By /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Executive Vice President, Treasurer and
Chief Financial Officer
SOUTHERN CALIFORNIA EDISON COMPANY
By /s/ X. X. Xxxxxx
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X. X. Xxxxxx
Vice President and Controller
THE MISSION GROUP
By /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Office of the President
