June 11, 2018 Advice Letter 3803-E. SUBJECT: Qualified Nuclear Trust Investment Management Agreement with NISA Investment Advisors, LLC

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1 STATE OF CALIFORNIA Edmund G. Brown Jr., Governor PUBLIC UTILITIES COMMISSION 505 VAN NESS AVENUE SAN FRANCISCO, CA June 11, 2018 Advice Letter 3803-E Russell G. Worden Director, State Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, CA SUBJECT: Qualified Nuclear Trust Investment Management Agreement with NISA Investment Advisors, LLC Dear Mr. Worden: Advice Letter 3803-E is effective as of June 14, Sincerely, Edward Randolph Director, Energy Division

2 Gary A. Stern, Ph.D. Managing Director, State Regulatory Operations May 15, 2018 ADVICE 3803-E (U 338-E) PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ENERGY DIVISION SUBJECT: Qualified Nuclear Trust Investment Management Agreement with NISA Investment Advisors, LLC In compliance with Decision (D.) , Southern California Edison Company (SCE) hereby submits for approval a qualified investment management agreement (NISA Management Agreement) 1 appointing NISA Investment Advisors, LLC (NISA) as a fixed income manager of certain funds under SCE s Qualified Nuclear Decommissioning Trust (Qualified Trust) established pursuant to D and Resolution E PURPOSE SCE is requesting California Public Utilities Commission (Commission) approval of the proposed NISA Management Agreement. The NISA Management Agreement would add NISA as a fixed income manager for the Qualified Trust (as defined below). NISA will assume investment management responsibility for a portion of the Qualified Trust currently managed by BlackRock. Additional information supporting SCE s request is summarized in Appendix A. BACKGROUND In response to D , SCE developed trust agreements for its nuclear decommissioning costs in accordance with the guidelines set forth in that Decision. Two trusts were required, one for the decommissioning contributions that qualify for an income tax deduction under Section 468A of the Internal Revenue Code (Qualified Trust), and one for the remaining contributions (Non-qualified Trust). The two trusts are collectively referred to herein as the "Trusts." On November 25, 1987, SCE's trust agreements were approved by the Commission, and executed shortly thereafter by the Commission, SCE, and the Trustee. The Trusts were initially funded on 1 Exhibit 1 of Appendix A. P.O. Box Rush Street Rosemead, California (626) Fax (626)

3 ADVICE 3803-E (U 338-E) May 15, 2018 February 2, 1988 and the trust agreements have been amended and restated from time to time thereafter with Commission approval. The Nuclear Facilities Decommissioning Master Trust Committee (Committee) composed of five members, three of whom are not affiliated with SCE, was established pursuant to the Trusts. Both Trusts authorize, subject to Commission approval of the investment management agreements, the Committee to appoint on or more investment managers to direct the investments of all or a part of the trust assets. By this advice filing, SCE is requesting Commission approval of the NISA Management Agreement to add NISA as a fixed income manager for the Qualified Trust. The selection process began with a request for proposals that was sent out to 15 investment managers. After an extensive review of the proposals submitted, it was concluded that it was in the best interest of the Qualified Trust to remove the management of fixed income funds from BlackRock due to poor performance and to hire NISA to manage that portion of the fixed income funds in the Qualified Trust. The Committee approved the retention of NISA by a unanimous vote at its meeting on December 12, The NISA Management Agreement was executed on May 9, Commission approval of the NISA Management Agreement is now requested pursuant to D , Ordering Paragraph (OP) 11. The issues in this filing are limited to the approval of the Investment Manager. This filing will not increase any rate or charge, cause the withdrawal of service, or conflict with any other schedule or rule. TIER DESIGNATION Pursuant to OP 11 of D , this advice letter is submitted with a Tier 2 designation. EFFECTIVE DATE This advice filing will become effective on June 14, 2018, the 30th calendar day after the date filed. NOTICE Anyone wishing to protest this advice filing may do so by letter via U.S. Mail, facsimile, or electronically, any of which must be received no later than 20 days after the date of this advice filing. Protests should be submitted to: 2 See Committee minutes included as Exhibit 2 of Appendix A.

4 ADVICE 3803-E (U 338-E) May 15, 2018 CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Avenue San Francisco, California EDTariffUnit@cpuc.ca.gov Copies should also be mailed to the attention of the Director, Energy Division, Room 4004 (same address above). In addition, protests and all other correspondence regarding this advice letter should also be sent by letter and transmitted via facsimile or electronically to the attention of: Gary A. Stern, Ph.D. Managing Director, State Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, California Telephone: (626) Facsimile: (626) AdviceTariffManager@sce.com Laura Genao Managing Director, State Regulatory Affairs c/o Karyn Gansecki Southern California Edison Company 601 Van Ness Avenue, Suite 2030 San Francisco, California Facsimile: (415) Karyn.Gansecki@sce.com There are no restrictions on who may submit a protest, but the protest shall set forth specifically the grounds upon which it is based and must be received by the deadline shown above. In accordance with General Rule 4 of General Order (GO) 96-B, SCE is serving copies of this advice filing to the interested parties shown on the attached GO 96-B and A et al. service lists. Address change requests to the GO 96-B service list should be directed by electronic mail to AdviceTariffManager@sce.com or at (626) For changes to all other service lists, please contact the Commission s Process Office at (415) or by electronic mail at Process_Office@cpuc.ca.gov. Further, in accordance with Public Utilities Code Section 491, notice to the public is hereby given by submittal and keeping the advice letter at SCE s corporate headquarters. To view other SCE advice letters submitted with the Commission, log on to SCE s web site at

5 ADVICE 3803-E (U 338-E) May 15, 2018 For questions, please contact Gregory Henry at (626) or by electronic mail at Gregory.Henry@sce.com. Southern California Edison Company GAS:gh:jm Enclosures /s/ Gary A. Stern, Ph.D. /s/ Gary A. Stern, Ph.D. Gary A. Stern, Ph.D.

6 CALIFORNIA PUBLIC UTILITIES COMMISSION ADVICE LETTER FILING SUMMARY ENERGY UTILITY MUST BE COMPLETED BY UTILITY (Attach additional pages as needed) Company name/cpuc Utility No.: Southern California Edison Company (U 338-E) Utility type: Contact Person: Darrah Morgan ELC GAS Phone #: (626) PLC HEAT WATER Disposition Notice to: EXPLANATION OF UTILITY TYPE ELC = Electric GAS = Gas PLC = Pipeline HEAT = Heat WATER = Water (Date Filed/ Received Stamp by CPUC) Advice Letter (AL) #: 3803-E Tier Designation: 2 Subject of AL: Qualified Nuclear Trust Investment Management Agreement with NISA Investment Advisors, LLC Keywords (choose from CPUC listing): Compliance AL filing type: Monthly Quarterly Annual One-Time Other If AL filed in compliance with a Commission order, indicate relevant Decision/Resolution #: Decisions and ; and Resolution E-3057 Does AL replace a withdrawn or rejected AL? If so, identify the prior AL: Summarize differences between the AL and the prior withdrawn or rejected AL: Confidential treatment requested? Yes No If yes, specification of confidential information: Confidential information will be made available to appropriate parties who execute a nondisclosure agreement. Name and contact information to request nondisclosure agreement/access to confidential information: Resolution Required? Yes No Requested effective date: 6/14/18 No. of tariff sheets: -0- Estimated system annual revenue effect: (%): Estimated system average rate effect (%): When rates are affected by AL, include attachment in AL showing average rate effects on customer classes (residential, small commercial, large C/I, agricultural, lighting). Tariff schedules affected: None Service affected and changes proposed 1 : Pending advice letters that revise the same tariff sheets: None 1 Discuss in AL if more space is needed.

7 Protests and all other correspondence regarding this AL are due no later 20 days after the date of this filing, unless otherwise authorized by the Commission, and shall be sent to: CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Avenue San Francisco, California Gary A. Stern, Ph.D. Managing Director, State Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, California Telephone: (626) Facsimile: (626) Laura Genao Managing Director, State Regulatory Affairs c/o Karyn Gansecki Southern California Edison Company 601 Van Ness Avenue, Suite 2030 San Francisco, California Facsimile: (415)

8 Appendix A

9 Appendix A Southern California Edison Company (SCE) Summary Request for Approval of Agreement Appointing NISA Investment Advisors, LLC (NISA) as An Investment Manager of the Nuclear Decommissioning Qualified Trust (Qualified Trust) Background Section 5.01 of SCE s Nuclear Facilities Qualified CPUC Decommissioning Master Trust Agreement (Trust Agreement) provides, in part, that the Nuclear Facilities Decommissioning Master Trust Committee (Committee) may appoint one or more Investment Managers to direct the investment of all or part of the Master Trust. Section 1.01(18) of the Trust Agreement defines Investment Managers as the fiduciaries retained by the Committee to manage, acquire, or dispose of any assets belonging to the Master Trust. All investment management agreements must be approved by the Commission through the advice letter process as provided in D , Ordering Paragraph No. 11. SCE s showing in support of this filing includes the following exhibits, all of which are attached hereto and, by this reference, are incorporated herein: Exhibit 1 Management Agreement with NISA Investment Advisors, LLC, dated May 9, 2018 Exhibit 2 Committee minutes of meeting held on December 12, 2017, evidencing the approval of the NISA Management Agreement Explanation for the Change NISA has been selected by the Committee to assume a portion of the Qualified Trust s Fixed Income portfolio that is currently managed by BlackRock and benchmarked to the Treasury Index plus 25bps. BlackRock has consistently underperformed its benchmark for this portfolio over 1-, 3-, 5-, and 10- year horizons as well as since inception. The Committee believes NISA offers better ability to meet the Qualified Trust s investment objectives. Selection Process The search process included requests for proposals sent out to 15 managers with 3 managers selected as finalists after an initial screening. Investment staff performed in-depth diligence on the 3 finalists including on-site visits to examine the philosophy, process, people, portfolios and performance of the managers in greater detail. The evaluation resulted in the recommendation of NISA as the most suitable manager for the Qualified Trust. At its meeting of December 12, 2017, the Committee approved the appointment of NISA as an investment manager of the Qualified Trust by a 5-0 vote.

10 NISA s Experience and Qualifications The addition of NISA adds a highly-experienced manager of nuclear decommissioning trust/taxable accounts. NISA manages approximately $14 billion in nuclear decommissioning trust/taxable assets for 23 clients with the large majority of those funds in nuclear decommissioning trust accounts. The firm is based in St. Louis and manages assets for about 190 clients totaling around $150 billion including assets for Pacific Gas & Electric Company. NISA follows a conservative, predictable, risk-controlled approach to asset management focused on optimal tax management and consistent returns over time with low tracking error. Over the past 5 years, a representative NISA portfolio with a high state tax that was benchmarked to the Barclays Full Treasury Index generated 0.12% of excess after-tax returns as shown in the table below. Taxable Full Treasury Portfolio 1 Portfolio Benchmark Difference 5 year returns (ending 3/31/18) 0.66% 0.54% 0.12% NISA manages to approximately 100 different custom benchmarks on behalf of its clients. Our reference checks suggested the firm is highly regarded by existing clients and they were also recommended by our consultant Callan. NISA s Mandate and Fees The mandate is expected to be around $300M or 7% of total Qualified Trust assets and benchmarked to the Barclays Treasury Index + 25bps after fees and taxes. The portfolio will consist of investment grade fixed income securities including Treasury bonds, agency bonds, taxexempt municipal bonds, taxable municipal bonds, investment grade corporate bonds and cash. NISA s conservative approach to portfolio management avoids large macro bets while taking advantage of many smaller pricing inefficiencies in the market. This is intended to minimize tracking error to the benchmark. NISA s fees are 20bps on the first $100 million, 15bps on the next $100 million and 10bps thereafter. For a $300 million mandate, fees on the total amount would be 15bps. Due to the tiered nature of the fee schedule, our fees go down as the amount of assets goes up. The 15bps fee is calculated as: ( ($100M*20bps) + ($100M*15bps) + ($100M*10bps) )/ $300M = 15bps. Prayer For Relief In accordance with the terms of the Qualified Trust and applicable Commission decision, SCE hereby requests that the Commission approve the NISA Management Agreement attached hereto as Exhibit 1. 1 Sample portfolio performance. SCE s mandate will use a benchmark of the Barclays Full Treasury Index plus 25bps.

11 Exhibit 1 of Appendix A

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38 Exhibit 2 of Appendix A

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