92103--2/28/2007--SOUTHERN_CALIFORNIA_EDISON

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{cost, regulation, environmental}

{condition, economic, financial}

{financial, litigation, operation}

{debt, indebtedness, cash}

{regulation, change, law}

{operation, natural, condition}

{competitive, industry, competition}

SCE s financial viability depends upon its ability to recover its costs in a timely manner from its customers through regulated rates. SCE s energy procurement activities are subject to regulatory and market risks that could adversely affect its financial condition, liquidity, and earnings. SCE relies on access to the capital markets. If SCE were unable to access capital markets or the cost of capital were to substantially increase, its liquidity and operations could be adversely affected. SCE is subject to numerous environmental laws and regulations with respect to operation of its facilities. New laws and regulations could adversely affect SCE. SCE is subject to extensive regulation and the risk of adverse regulatory decisions and changes in applicable regulations or legislation. There are inherent risks associated with operating nuclear power generating facilities. Spent fuel storage capacity could be insufficient to permit long-term operation of SCE s nuclear plants. Existing insurance and ratemaking arrangements may not protect SCE fully against losses from a nuclear incident. SCE s financial condition and results of operations could be materially adversely affected if it is unable to successfully manage the risks inherent in operating its facilities. SCE s insurance coverage may not be sufficient under all circumstances and SCE may not be able to obtain sufficient insurance.

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92103--2/28/2007--SOUTHERN_CALIFORNIA_EDISON_CO