##### 



Exhibit
    13
  
   2007 Annual
    Report




---



##### 



Glossary
    AB
    
    Assembly BillACC
    
    Arizona Corporation CommissionAFUDC
    
    allowance for funds used during constructionAPS
    
    Arizona Public Service CompanyARO(s)
    
    asset retirement obligation(s)CAA
    
    Clean Air ActCAIR
    
    Clean Air Interstate RuleCAMR
    
    Clean Air Mercury RuleCARB
    
    Clean Air Resources BoardCDWR
    
    California Department of Water ResourcesCEC
    
    California Energy CommissionCEMA
    
    catastrophic event memorandum accountCPSD
    
    Consumer Protection and Safety DivisionCPUC
    
    California Public Utilities CommissionDistrict Court
    
    U.S. District Court for the District of ColumbiaDOE
    
    United States Department of EnergyDPV2
    
    Devers-Palo Verde IIDuke
    
    Duke Energy Trading and Marketing, LLCDWP
    
    Los Angeles Department of Water & PowerEITF
    
    Emerging Issues Task ForceEITF
    No. 01-8
    
    EITF Issue
    No. 01-8,
    Determining Whether an Arrangement Contains a LeaseEME
    
    Edison Mission EnergyERRA
    
    energy resource recovery accountFASB
    
    Financial Accounting Standards BoardFERC
    
    Federal Energy Regulatory CommissionFIN 39-1
    
    Financial Accounting Standards Interpretation
    No. 39-1,
    Amendment of FASB Interpretation No. 39FIN 46(R)-6
    
    Financial Accounting Standards Interpretation No. 46(R)-6,
    Determining Variability to be Considered in Applying
    FIN 46(R)FIN 46(R)
    
    Financial Accounting Standards Interpretation No. 46,
    Consolidation of Variable Interest EntitiesFIN 47
    
    Financial Accounting Standards Interpretation No. 47,
    Accounting for Conditional Asset Retirement Obligations 1




---



##### 



Glossary
    (Continued)
   FIN 48
    
    Financial Accounting Standards Interpretation No. 48,
    Accounting for Uncertainty in Income Taxes  an
    interpretation of FAS 109FSP
    
    FASB Staff PositionFTRs
    
    firm transmission rightsGHG
    
    greenhouse gasGRC
    
    General Rate CaseIRS
    
    Internal Revenue ServiceISO
    
    California Independent System OperatorkWh(s)
    
    kilowatt-hour(s)MD&A
    
    Managements Discussion and Analysis of Financial Condition
    and Results of OperationsMidway-Sunset
    
    Midway-Sunset Cogeneration CompanyMohave
    
    Mohave Generating StationMRTU
    
    Market Redesign Technical UpgradeMW
    
    megawattsMWh
    
    megawatt-hoursNinth Circuit
    
    United States Court of Appeals for the Ninth CircuitNRC
    
    Nuclear Regulatory CommissionPalo Verde
    
    Palo Verde Nuclear Generating StationPBOP(s)
    
    postretirement benefits other than pension(s)PBR
    
    performance-based ratemakingPG&E
    
    Pacific Gas & Electric CompanyPOD
    
    Presiding Officers DecisionPX
    
    California Power ExchangeQF(s)
    
    qualifying facility(ies)RICO
    
    Racketeer Influenced and Corrupt OrganizationROE
    
    return on equityS&P
    
    Standard & PoorsSAB
    
    Staff Accounting BulletinSan Onofre
    
    San Onofre Nuclear Generating StationSCE
    
    Southern California Edison CompanySDG&E
    
    San Diego Gas & ElectricSFAS
    
    Statement of Financial Accounting Standards issued by the FASBSFAS No. 71
    
    Statement of Financial Accounting Standards No. 71,
    Accounting for the Effects of Certain Types of Regulation 2




---



##### 



Glossary
    (Continued)
   SFAS No. 123(R)
    
    Statement of Financial Accounting Standards No. 123(R),
    Share-Based Payment (revised 2004)SFAS No. 133
    
    Statement of Financial Accounting Standards No. 133,
    Accounting for Derivative Instruments and hedging ActivitiesSFAS No. 143
    
    Statement of Financial Accounting Standards No. 143,
    Accounting for Asset Retirement ObligationsSFAS No. 157
    
    Statement of Financial Accounting Standards No. 157, Fair
    Value MeasurementsSFAS No. 158
    
    Statement of Financial Accounting Standards No. 158,
    Employers Accounting for Defined Benefit Pension and Other
    Post-Retirement PlansSFAS No. 159
    
    Statement of Financial Accounting Standards No. 159,
    The Fair Value Option for Financial Assets and Financial
    LiabilitiesSFAS No. 160
    
    Statement of Financial Accounting Standards No. 160,
    Noncontrolling Interests in Consolidated Financial StatementsSRP
    
    Salt River Project Agricultural Improvement and Power DistrictSO2
    
    sulfur dioxideUSEPA
    
    United States Environmental Protection AgencyThe Tribes
    
    Navajo Nation and Hopi TribeVIE(s)
    
    variable interest entity(ies) 3




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
  INTRODUCTION
    
    the 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;
    market risks affecting SCEs energy procurement activities;
    access to capital markets and the cost of capital;
    changes in interest rates, rates of inflation beyond those rates
    which may be adjusted from year to year 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;
    environmental laws and regulations, both at the state and
    federal levels, that could require additional expenditures or
    otherwise affect the cost and manner of doing business;
    risks associated with operating nuclear and other power
    generating facilities, including operating risks, nuclear fuel
    storage, equipment failure, availability, heat rate, output, and
    availability and cost of spare parts and repairs;
    the cost and availability of labor, equipment and materials;
    the ability to obtain sufficient insurance, including insurance
    relating to SCEs nuclear facilities;
    effects of legal proceedings, changes in or interpretations of
    tax laws, rates or policies, and changes in accounting standards;
    the outcome of disputes with the IRS and other tax authorities
    regarding tax positions taken by SCE;
    the cost and availability of coal, natural gas, fuel oil,
    nuclear fuel, and associated transportation to the extent not
    recovered through regulated rate cost escalation provisions or
    balancing accounts;
    the ability to provide sufficient collateral in support of
    hedging activities and purchased power and fuel;
    the risk of counterparty default in hedging transactions or
    power-purchase and fuel contracts;
    general political, economic and business conditions;
    weather conditions, natural disasters and other unforeseen
    events;
    changes in the fair value of investments and other assets; and
    the risks inherent in the development of generation projects as
    well as transmission and distribution infrastructure replacement
    and expansion including those related to siting, financing,
    construction, permitting, and governmental approvals. 4




---



##### 



Southern
    California Edison Company
   Form 10-K.
    MANAGEMENT
    OVERVIEW
      
    System Reliability and Growth   
    Achieve 2008 licensing and construction milestones for
    SCEs 2008  2012 capital investment plan.  tm
  
    Operational Excellence   
    Improve operational efficiency by implementing automated systems
    Achieve key implementation milestones for SCEs Enterprise
    Resource Planning, advance deployment of the
    EdisonSmartConnecttm
    programs and execute the San Onofre Nuclear Generating Station
    business plan.  state-of-the-art tm
  
    Energy Resources   
    Procure sufficient power resources consistent with the CPUC
    approved Procurement Plan; advocate the development of efficient
    and new energy supply markets; and execute vital
    demand-side
    management programs to achieve established targets. 5




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
  SCE will continue to procure least-cost, best-fit power
    resources and execute effective hedging strategies consistent
    with the CPUC approved procurement plan (see Regulatory
    Matters  Current Regulatory Developments 
    Energy Resource Recovery Account Proceedings,
     Resource Adequacy Requirements, and
     Procurement of Renewable Resources).  
    Develop and promote rules to successfully implement AB 32 GHG
    reduction legislation, and advocate balanced plans across
    renewables and other GHG mitigation options. Advance potential
    near-zero GHG emitting power generation technology projects and
    explore the potential for developing additional nuclear
    generation. Implement corporate environmental strategies and
    programs.  2 x
  
    Financial   
    Achieve a successful and timely resolution of the 2009 General
    Rate Case and an acceptable decision for the 2009 Cost of
    Capital Proceeding.      2007
    System
    Reliability and Growth
  
    Achieve milestones for SCEs capital investment
    plan  In 2007, SCE invested more than
    $2.2 billion in its continued progress to replace and
    expand distribution and transmission infrastructure, construct
    and replace major components of generation assets,
    including the construction of four combustion turbine peaker
    plants to meet summer load demand, continued development of
    the advanced meter project,
    EdisonSmartConnecttm,
    and replacement of the steam generators at San Onofre which is
    moving forward on schedule. SCE did receive a setback in the
    approval process of the Devers-Palo Verde II transmission line,
    which will be delayed for at least two years. See
    Liquidity  Capital Expenditures and
    Regulatory Matters  Current Regulatory
    Developments  Peaker Plant Generation Projects
    and  EdisonSmartConnecttm
    and  FERC Transmission Incentives for
    further discussion of these matters. 6




---



##### 



Southern
    California Edison Company
   Operational
    Excellence
  
    Achieve significant milestones for the Enterprise Resource
    Planning program  SCE has continued progress its ERP
    project. SCEs progress continued on preparation for the
    implementation of SAP financial, supply chain, human resource
    and certain work management modules, expected to be implemented
    in 2008. See Other Developments 
    Enterprise-Wide Software System Project for further
    discussion of this matter.
    SCE has continued to procure least-cost, best-fit power
    resources and execute effective hedging strategies consistent
    with the CPUC approved procurement plan  In 2007, SCE
    entered into contracts with new generation projects and reported
    full compliance with the Renewable Portfolio Standard goals for
    2004, 2005, and 2006 and projects it will meet its renewable
    goals for 2007 and 2008 (see Regulatory
    Matters  Current Regulatory Developments 
    Procurement of Renewable Resources). The CPUC also found
    SCEs recorded fuel and energy expenses reasonable and
    SCEs contract administration, dispatch of generation
    resources and related spot market transactions compliant with
    SCEs CPUC-approved procurement plan from January 1,
    2006 through December 31, 2006 and approved SCEs
    long-term procurement plan. In 2007, SCE took a leadership role
    in the development of near and long-term strategies to promote
    policies where SCEs bundled customers do not incur costs
    different than those of other load-serving entities.
    Environmental  In 2007, SCE supported state-specific
    measures and participated in regional legislative initiatives to
    reduce GHG emissions and other environmental issues. We are
    advancing our leading environmental work in many areas,
    including energy efficiency and renewables. See Other
    Developments  Environmental Matters for further
    discussion.    
    A CPUC decision that adopted an Energy Efficiency Risk/Reward
    Incentive mechanism covering at least two three-year periods
    (2006  2008 and 2009  2011). The intent of
    the mechanism is to elevate the importance of customer energy
    efficiency programs by allowing utility shareholders to
    participate in the benefits produced by the programs, ensuring
    that energy efficiency is viewed as a core part of the
    utilities operations. See Regulatory
    Matters  Energy Efficiency Incentives for
    further discussion.
    A FERC order which granted incentives for three of SCEs
    largest proposed transmission projects. The order grants a
    higher return on equity on SCEs transmission rate base in
    its next FERC transmission rate case and an additional increase
    for the Tehachapi, DPV2, and Rancho Vista projects, permits SCE
    to include in rate base 100% of prudently-incurred capital
    expenditures during the construction of all three projects and
    100% recovery of prudently-incurred abandoned plant costs for
    DPV2 and Tehachapi, if either or both of these projects are
    cancelled due to factors beyond SCEs control. See
    Regulatory Matters  FERC Transmission
    Incentives for further discussion.
    SCE continued to strengthen its safety and ethics programs.
    Almost 98% of non-management employees completed ethics and
    compliance training in 2006 and 2007.  LIQUIDITY
  Overview
  long-term
 7




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
     
    Projected capital expenditures of $2.8 billion primarily to
    replace and expand distribution and transmission infrastructure
    and construct and replace major components of generation assets
    (see  Capital Expenditures below);
    Dividend payments to SCEs parent company. The Board of
    Directors of SCE declared a $25 million dividend to Edison
    International which was paid in January 2008;
    Fuel and procurement-related costs (see Regulatory
    Matters  Current Regulatory Developments 
    Energy Resource Recovery Account Proceedings); and
    General operating expenses.              Capital
    Expenditures
   8




---



##### 



Southern
    California Edison Company
  project-by-project
      
    $1.9 billion related to transmission and distribution
    projects;
    $313 million related to generation projects;
    $298 million related to information technology projects,
    including the implementation of the Enterprise Resource Planning
    project; and
    $277 million related to other customer service and shared
    services projects, including
    EdisonSmartConnecttm.  Credit
    Ratings
    Moodys Rating

S&P Rating

Fitch RatingLong-term senior secured debt


A2



A



A+Short-term (commercial paper)


P-2



A-2



F-1     Dividend
    Restrictions and Debt Covenants
  13-month 13-month
    Margin
    and Collateral Deposits
   9




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
        In millions

December 31, 2007S&P Credit RatingA or higher

$
71A−


30BBB+


15BBB


BBB−


Below investment grade


258Total

$
374        10




---



##### 



Southern
    California Edison Company
      Rate
    Reduction Notes
    REGULATORY
    MATTERS
  Overview
    of Ratemaking Mechanisms
    Base
    Rates
     11




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
           Cost-Recovery
    Rates
    Energy
    Efficiency Shareholder Risk/Reward Incentive
    Mechanism
   12




---



##### 



Southern
    California Edison Company
   CDWR-Related
    Rates
    Impact
    of Regulatory Matters on Customer Rates
      13.7¢ per-kWh
  Current
    Regulatory Developments
    2009
    General Rate Case Proceeding
   13




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
    2008
    Cost of Capital Proceeding
    Energy
    Efficiency Shareholder Risk/Reward Incentive
    Mechanism
  true-up
 14




---



##### 



Southern
    California Edison Company
    FERC
    Transmission Incentives
    
    A 125 basis point ROE adder on SCEs future proposed base
    ROE (ROE Adder) for Devers-Palo Verde II
    (DPV2), which is a high voltage (500 kV)
    transmission line from the Valley substation to the Devers
    substation near Palm Springs, California to a new substation
    near Palo Verde, west of Phoenix, Arizona;
    A 125 basis point ROE Adder for the Tehachapi Transmission
    Project (Tehachapi), which is an eleven segment
    project consisting of newly-constructed and upgraded
    transmission lines and associated substations to interconnect
    renewable generation projects near the Tehachapi and Big Creek
    area; and
    A 75 basis point ROE Adder for the Rancho Vista Substation
    Project (Rancho Vista), which is a new 500 kV
    substation in the City of Rancho Cucamonga.  prudently-incurred
    FERC
    Construction Work in Progress Mechanism
   15




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
    Energy
    Resource Recovery Account Proceedings
  mark-up
    Resource
    Adequacy Requirements
       16




---



##### 



Southern
    California Edison Company
     Peaker
    Plant Generation Projects
    Procurement
    of Renewable Resources
         17




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
    Mohave
    Generating Station and Related Proceedings
  post-2005
      out-of-service
  ISO
    Disputed Charges
   18




---



##### 



Southern
    California Edison Company
    Scheduling
    Coordinator Tariff Dispute
    FERC-approval
  FERC
    Refund Proceedings
   19




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
   .
          Investigations
    Regarding Performance Incentives Rewards
    Customer
    Satisfaction
   20




---



##### 



Southern
    California Edison Company
       Employee
    Injury and Illness Reporting
          System
    Reliability
    CPUC Investigation
   21




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
            Market
    Redesign Technical Upgrade
    
    An integrated forward market for energy, ancillary services and
    congestion management that operates on a day-ahead basis;
    Congestion management that represents all network transmission
    constraints; 22




---



##### 



Southern
    California Edison Company
   
    CRRs to allow market participants to manage their costs of
    transmission congestion (see Market Risk
    Exposures  Commodity Price Risk for further
    discussion);
    Local energy prices by price nodes (approximately 3,000 nodes in
    total), also known as locational marginal pricing; and
    New market rules and penalties to prevent gaming and illegal
    manipulation of the market as well as modifications to certain
    existing market rules.    OTHER
    DEVELOPMENTS
  Environmental
    Matters
    2 x
    Climate
    Change
  Federal
    Legislative Initiatives
     23




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
   Litigation
    Developments
    Responses
    to Energy Demands and Future GHG Emission Constraints
      State
    Specific Legislative Initiatives
  cap-and-trade cap-and-trade
 24




---



##### 



Southern
    California Edison Company
  cap-and-trade
    Water
    Quality Regulation
  Clean
    Water Act  Cooling Water Intake Structures
    Environmental
    Remediation
         25




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
            EdisonSmartConnecttm
  tm state-of-the-art tm tm
  tm
 26




---



##### 



Southern
    California Edison Company
   Enterprise-Wide
    Software System Project
    Federal
    and State Income Taxes
  Tax
    Positions being addressed as part of active examinations and
    administrative appeals processes
        Balancing
    Account Over-Collections
    Contingent
    Liability Company
   27




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
   California
    Apportionment
    Resolution
    of Federal and State Income Tax Issues Being Addressed in
    Ongoing Examinations and Administrative Appeals
    Midway-Sunset
    Cogeneration Company
    Midway-Sunset
      Navajo
    Nation Litigation
   28




---



##### 



Southern
    California Edison Company
        Nuclear
    Insurance
  5-year
   29




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
   Palo
    Verde Nuclear Generating Station Inspection
  follow-up
  Spent
    Nuclear Fuel
      on-site
 30




---



##### 



Southern
    California Edison Company
   Subprime
    U.S. Credit Market
        MARKET
    RISK EXPOSURES
    Interest
    Rate Risk
       31




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
   Commodity
    Price Risk
               32




---



##### 



Southern
    California Edison Company
          December 31, 2007


December 31, 2006In millions

Assets


Liabilities


Assets


LiabilitiesEnergy options

$



$
43


$



$
10FTRs


22











Forward physicals (power) and tolling arrangements






1







1Gas options, swaps and forward arrangements


24











101Total

$
46


$
44


$



$
112        33




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
     Credit
    Risk
    RESULTS
    OF OPERATIONS AND HISTORICAL CASH FLOW ANALYSIS
    Results
    of Operations
  Net
    Income Available for Common Stock
  2007 vs.
    2006
    2006 vs.
    2005
   34




---



##### 



Southern
    California Edison Company
   Operating
    Revenue
    In millions

2007 vs. 2006


2006 vs. 2005Operating revenueRate changes and impact of tiered rate
    structure (including unbilled)

$
(545
)

$
1,441Sales volume changes (including unbilled)


119



311Balancing account over/under collections


405



(422
)Sales for resale


120



(463
)SCEs VIEs


(6
)


(75
)Other (including inter company transactions)


73



20Total

$
166


$
812       
    Operating revenue from rate changes decreased mainly from the
    redesign of SCEs tiered rate structure which resulted in a
    decrease of residential rates in the higher tiers. Effective
    February 14, 2007, SCEs system average rate decreased
    to 13.9¢ per-kWh (including 3.0¢ per-kWh related to
    CDWR) mainly as the result of projected lower natural gas prices
    in 2007, as well as the refund of overcollections in the ERRA
    balancing account that occurred in 2006 from lower than expected
    natural gas prices and higher than expected summer 2006 sales
    volume (see Regulatory Matters  Current
    Regulatory Developments  Impact of Regulatory Matters
    on Customer Rates, and  Energy Resource
    Recovery Account Proceedings for further discussion of
    these rate changes).
    Operating revenue resulting from sales volume changes was mainly
    due to customer growth as well as an increase in customer usage.
    SCE recognizes revenue, subject to balancing account treatment,
    equal to the amount of the actual costs incurred and up to its
    authorized revenue requirement. Any revenue collected in excess
    of actual power procurement-related costs incurred or above the
    authorized revenue requirement is not recognized as revenue and
    is deferred and recorded as regulatory liabilities to be
    refunded in future customer rates. Revenue collected below the
    authorized revenue requirement is recognized as revenue and
    recorded as a regulatory asset for future recovery. Power
    procurement-related costs incurred in excess of revenue billed
    are deferred in a balancing account and recorded as regulatory
    assets for recovery in future customer rates. In 2007, SCE
    deferred approximately $95 million compared to a deferral
    of approximately $515 million in 2006. The decrease in
    deferred revenue was mainly due to lower net overcollections
    (lower deferred costs partially offset by lower revenue
    collections of SCEs authorized revenue requirement)
    resulting from lower gas prices as compared to forecast and
    lower revenue in 2007 resulting from warmer weather in 2006.
    Operating revenue from sales for resale represents the sale of
    excess energy. Excess energy from SCE sources which may exist at
    certain times is resold in the energy markets. Sales for resale
    revenue increased due to higher excess energy in 2007, compared
    to 2006. Revenue from sales for resale is refunded to customers
    through the ERRA balancing account and does not impact earnings. 35




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
   
    The increase in other revenue was primarily due to higher net
    investment earnings from SCEs nuclear decommissioning
    trusts. Due to regulatory treatment, the nuclear decommissioning
    trust investment earnings are offset in depreciation,
    decommissioning and amortization expense and as a result, have
    no impact on net income.    
    Operating revenue from rate changes was mainly due to rate
    increases implemented throughout 2006, primarily relating to the
    implementation of SCEs 2006 ERRA forecast, implementation
    of the 2006 GRC decision and modification of the FERC
    transmission-related rates.
    Operating revenue resulting from sales volume changes was mainly
    due to an increase in kWhs sold resulting from record heat
    conditions experienced in the third quarter of 2006, SCE
    providing a greater amount of energy to its customers from its
    own sources in 2006, as compared to 2005, and customer growth.
    In 2006, SCE collected revenue in excess of actual costs
    incurred and as a result deferred approximately
    $515 million compared to a deferral of approximately
    $93 million in 2005, due to warmer weather and timing
    differences from sales and purchases of power subject to
    balancing account mechanisms.
    Operating revenue from sales for resale represents the sale of
    excess energy. Excess energy from SCE sources which may exist at
    certain times is resold in the energy markets. Sales for resale
    revenue decreased due to a lesser amount of excess energy in
    2006, as compared to 2005, due to higher demand in 2006
    resulting from record heat conditions and lower availability of
    energy from SCEs own sources resulting from the Mohave
    shutdown and the San Onofre outages. Revenue from sales for
    resale is refunded to customers through the ERRA balancing
    account and does not impact earnings.
    SCEs VIE revenue represents the recognition of revenue
    resulting from the consolidation of four gas-fired power plants
    where SCE is considered the primary beneficiary. These VIEs
    affect SCEs revenue, but do not affect earnings; the
    decrease in revenue from SCEs VIEs is primarily due to
    lower natural gas prices in 2006, compared to 2005.
    The increase in other revenue was primarily due to higher net
    investment earnings from SCEs nuclear decommissioning
    trusts. Due to regulatory treatment, the nuclear decommissioning
    trust investment earnings are offset in depreciation,
    decommissioning and amortization expense and as a result, have
    no impact on net income.    Operating
    Expenses
  Fuel
    Expense
   36




---



##### 



Southern
    California Edison Company
    Purchased-Power
    Expense
    In
    millions               For
    the Year Ended December 31,

2007


2006


2005Purchased power

$
3,117


$
3,013


$
3,113Unrealized (gains) losses on economic hedging
    activities  net


(91
)


237



(90
)Realized (gains) losses on economic hedging
    activities  net


132



339



(115
)Energy settlements and refunds


(34
)


(180
)


(286
)Total purchased-power expense

$
3,124


$
3,409


$
2,622     No. 01-8
        Provisions
    for Regulatory Adjustment Clauses  Net
   37




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
  No. 01-8
    Other
    Operation and Maintenance Expense
    Depreciation,
    Decommissioning and Amortization Expense
  other-than-temporary
 38




---



##### 



Southern
    California Edison Company
   Other
    Income and Deductions
  Interest
    income
    Other
    Nonoperating Income
    Interest
    Expense  Net of Amounts Capitalized
    Other
    Nonoperating Deductions
    Income
    Tax Expense (Benefit)  Continuing
    Operations
  1991-1993
    Historical
    Cash Flow Analysis
   39




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
   Cash
    Flows from Operating Activities
      Cash
    Flows from Financing Activities
      
    During 2007, SCEs net issuance of short-term debt was
    $500 million;
    During the fourth quarter of 2007, SCE repaid the remaining
    outstanding balance of its rate reduction bonds in the amount of
    $246 million; and
    Financing activities in 2007 include dividend payments of
    $135 million paid to Edison International.    
    In January 2006, SCE issued $500 million of first and
    refunding mortgage bonds which consisted of $350 million of
    5.625% bonds due in 2036 and $150 million of floating rate
    bonds due in 2009. The proceeds from this issuance were used in
    part to redeem $150 million of variable rate first and
    refunding mortgage bonds due in January 2006 and
    $200 million of its 6.375% first and refunding mortgage
    bonds due in January 2006;
    In January 2006, SCE issued 2,000,000 shares of 6%
    Series C preference stock (noncumulative, $100 liquidation
    value) and received net proceeds of approximately
    $197 million;
    In April 2006, SCE issued $331 million of tax-exempt bonds
    which consisted of $196 million of 4.10% bonds which are
    subject to remarketing in April 2013 and $135 million of
    4.25% bonds which are subject to remarketing in November 2016.
    The proceeds from this issuance were used to call and redeem
    $196 million of tax-exempt bonds due February 2008 and
    $135 million of tax-exempt bonds due March 2008. This
    transaction was treated as a noncash financing activity;
    In December 2006, SCE issued $400 million of 5.55% first
    and refunding mortgage bonds due in 2037. The proceeds from this
    issuance were used for general corporate purposes; and 40




---



##### 



Southern
    California Edison Company
   
    Financing activities in 2006 also included dividend payments of
    $251 million paid to Edison International.    
    In January 2005, SCE issued $650 million of first and
    refunding mortgage bonds which consisted of $400 million of
    5% bonds due in 2016 and $250 million of 5.55% bonds due in
    2036. The proceeds from this issuance were used to redeem the
    remaining $50,000 of its 8% first and refunding mortgage bonds
    due February 2007 (Series 2003A) and $650 million of
    the $966 million 8% first and refunding mortgage bonds due
    February 2007 (Series 2003B);
    In March 2005, SCE issued $203 million of 3.55% pollution
    control bonds due in 2029. The proceeds from this issuance were
    used to redeem $49 million of 7.20% pollution control bonds
    due in 2021 and $155 million of 5.875% pollution control
    bonds due in 2023. This transaction was treated as a noncash
    financing activity;
    In April 2005, SCE issued 4,000,000 shares of Series A
    preference stock (noncumulative, 100% liquidation value) and
    received net proceeds of approximately $394 million.
    Approximately $81 million of the proceeds was used to
    redeem all the outstanding shares of its 7.23% Series $100
    cumulative preferred stock, and approximately $64 million
    of the proceeds was used to redeem all the outstanding shares of
    its 6.05% Series $100 cumulative preferred stock;
    In June 2005, SCE issued $350 million of 5.35% first and
    refunding mortgage bonds due in 2035 (Series 2005E). A
    portion of the proceeds from this issuance were used to redeem
    $316 million of its 8% first and refunding mortgage bonds
    due in 2007 (Series 2003B);
    In August 2005, SCE issued $249 million of variable rate
    pollution control bonds due in 2035. The proceeds from this
    issuance were used to redeem $29 million of 6.90% pollution
    control bonds due in 2017, $30 million of 6.0% pollution
    control bonds due in 2027 and $190 million of 6.40%
    pollution control bonds due in 2024. This transaction was
    treated as a noncash financing activity;
    In September 2005, SCE issued 2,000,000 shares of
    Series B preference stock (noncumulative, $100 liquidation
    value) and received net proceeds of approximately
    $197 million; and
    Financing activities in 2005 also include dividend payments of
    $234 million paid to Edison International.  Cash
    Flows from Investing Activities
        CRITICAL
    ACCOUNTING ESTIMATES AND POLICIES
   41




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
   Rate
    Regulated Enterprises
    Derivative
    Financial Instruments and Hedging Activities
        No. 01-8.
 42




---



##### 



Southern
    California Edison Company
     Income
    Taxes
          Asset
    Impairment
     43




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
    Nuclear
    Decommissioning
        available-for-sale. other-than-temporary other-than-temporary
    Pensions
    and Postretirement Benefits Other than Pensions
   44




---



##### 



Southern
    California Edison Company
               45




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
   NEW
    ACCOUNTING PRONOUNCEMENTS
  Accounting
    Pronouncements Adopted
    Accounting
    Pronouncements Not Yet Adopted
  FIN 39-1. FIN 39-1 FIN 39-1 FIN 39-1
       46




---



##### 



Southern
    California Edison Company
   COMMITMENTS
    AND INDEMNITIES
    In millions

2008


2009


2010


2011


2012


ThereafterLong-term debt maturities and interest

$
269


$
413


$
495


$
244


$
244


$
8,886Fuel supply contract payments


101



79



71



68



64



241Purchased-power capacity payments


410



324



294



290



339



1,152Operating lease obligations


617



697



655



436



270



1,515Capital lease obligations


4



3



4



1



1



7Other commitments


5



5



6



6



6



25Employee benefit plans
    contributions(1)


84



















Total(2)

$
1,490


$
1,521


$
1,525


$
1,045


$
924


$
11,826  
 (1)
    Amount includes estimated contributions to the pension and PBOP
    plans. The estimated contributions for SCE are not available
    beyond 2008.(2)
    At December 31, 2007, SCE had a total net liability
    recorded for uncertain tax positions of $257 million, which
    is excluded from the table. Edison International cannot make
    reliable estimates of the cash flows by period due to
    uncertainty surrounding the timing of resolving these open tax
    issues with the IRS.  Fuel
    Supply Contracts
    Power-Purchase
    Contracts
    Operating
    and Capital Leases
  No. 01-8, No. 01-8 No. 01-8 mark-to-market
 47




---



##### 



Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
      Other
    Commitments
    Indemnities
  Indemnity
    Provided as Part of the Acquisition of Mountainview
    Mountainview
    Filter Cake Indemnity
  on-site
  Other
    Indemnities
   48




---



##### 



Managements
    Responsibility for Financial Reporting
          Managements
    Report on Internal Control over Financial Reporting
  Rule 13a-15(f) Internal Control 
    Integrated Framework
  Disclosure
    Controls and Procedures
  Form 10-K.
 49




---



##### 



Report of Independent
    Registered Public Accounting Firm
  To the Board
    of Directors and
    Shareholder of Southern California Edison Company
       
 50




---



##### 



Consolidated
    Statements of Income
    Southern California Edison Company  In millions

Year ended December
    31,

2007


2006


2005Operating revenue

$
10,478


$
10,312


$
9,500Fuel


1,191



1,112



1,193Purchased power


3,124



3,409



2,622Provisions for regulatory adjustment clauses  net


271



25



435Other operation and maintenance


2,840



2,678



2,523Depreciation, decommissioning and amortization


1,094



1,026



915Property and other taxes


217



206



193Net gain on sale of utility property and plant






(1
)


(10
)Total operating expenses


8,737



8,455



7,871Operating income


1,741



1,857



1,629Interest income


44



58



44Other nonoperating income


89



85



127Interest expense  net of amounts capitalized


(429
)


(400
)


(360
)Other nonoperating deductions


(45
)


(60
)


(65
)Income before tax and minority interest


1,400



1,540



1,375Income tax expense


337



438



292Minority interest


305



275



334Net income


758



827



749Dividends on preferred and preference stock not subject to
    mandatory redemption


51



51



24Net income available for common stock

$
707


$
776


$
725   Consolidated
    Statements of Comprehensive Income
  In millions

Year ended
    December 31,

2007


2006


2005Net income

$
758


$
827


$
749Other comprehensive income (loss), net of tax:Termination and amortization of cash flow hedges  net
    of income tax expense of $3 and $2 for 2006 and 2005






5



2Pension and postretirement benefits other than pensions:Net loss arising during period  net of income tax
    benefit of $2
    for 2007


(3
)






Amortization of net loss included in expense  net of
    income tax expense of $1 for 2007


2







Minimum pension liability adjustment  net of income
    tax expense (benefit) of $5 and $(1) for 2006 and 2005






7



(1
)Comprehensive income

$
757


$
839


$
750    51




---



##### 



Consolidated Balance
    Sheets
  In millions

December 31,

2007


2006ASSETSCash and equivalents

$
252


$
83Restricted cash






56Margin and collateral deposits


37



55Receivables, less allowances of $34 and $29 for uncollectible
    accounts at
    respective dates


725



939Accrued unbilled revenue


370



303Inventory


283



232Accumulated deferred income taxes  net


146



250Derivative assets


54



56Regulatory assets


197



554Other current assets


188



54Total current assets


2,252



2,582Nonutility property  less accumulated provision for
    depreciation of $701 and $633 at respective dates


1,000



1,046Nuclear decommissioning trusts


3,378



3,184Other investments


69



62Total investments and other assets


4,447



4,292Utility plant, at original cost:Transmission and distribution


18,940



17,606Generation


1,767



1,465Accumulated provision for depreciation


(5,174
)


(4,821
)Construction work in progress


1,693



1,486Nuclear fuel, at amortized cost


177



177Total utility plant


17,403



15,913Regulatory assets


2,721



2,818Derivative assets


28



17Other long-term assets


629



488Total long-term assets


3,378



3,323Total assets

$
27,480


$
26,110    52




---



##### 



Consolidated
    Balances Sheets
    Southern California Edison Company  In millions, except share amounts

December 31,

2007


2006LIABILITIES AND SHAREHOLDERS EQUITYShort-term debt

$
500


$
Long-term debt due within one year






396Accounts payable


914



856Accrued taxes


42



193Accrued interest


126



114Counterparty collateral


42



36Customer deposits


218



198Book overdrafts


204



140Derivative liabilities


100



99Regulatory liabilities


1,019



1,000Other current liabilities


548



624Total current liabilities


3,713



3,656Long-term debt


5,081



5,171Accumulated deferred income taxes  net


2,556



2,675Accumulated deferred investment tax credits


105



112Customer advances


155



160Derivative liabilities


13



77Power-purchase contracts


22



32Accumulated provision for pensions and benefits


786



809Asset retirement obligations


2,877



2,749Regulatory liabilities


3,433



3,140Other deferred credits and other long-term liabilities


1,136



802Total deferred credits and other liabilities


11,083



10,556Total liabilities


19,877



19,383Commitments and contingencies (Note 6)Minority interest


446



351Common stock, no par value (434,888,104 shares outstanding
    at each date)


2,168



2,168Additional paid-in capital


507



383Accumulated other comprehensive loss


(15
)


(14
)Retained earnings


3,568



2,910Total common shareholders equity


6,228



5,447Preferred and preference stock not subject to mandatory
    redemption


929



929Total shareholders equity


7,157



6,376Total liabilities and shareholders equity

$
27,480


$
26,110      53




---



##### 



Consolidated Statements of Cash
    Flows
  In millions

Year ended December
    31,

2007


2006


2005Cash flows from operating activities:Net income

$
758


$
827


$
749Adjustments to reconcile to net cash provided by operating
    activities:Depreciation, decommissioning and amortization


1,094



1,026



915Loss on impairment of nuclear decommissioning trusts


58



54



Other amortization


95



79



96Stock-based compensation


18



27



21Minority interest


305



275



334Deferred income taxes and investment tax credits


(111
)


(358
)


34Regulatory assets  long-term


148



92



387Regulatory liabilities  long-term


157



18



(168
)Derivative assets  long-term


(11
)


25



(42
)Derivative liabilities  long-term


(64
)


(24
)


97Other assets


(156
)


(119
)


88Other liabilities


195



325



(46
)Margin and collateral deposits  net of collateral
    received


24



(24
)


70Receivables and accrued unbilled revenue


147



51



(202
)Derivative assets  short-term


2



181



(211
)Derivative liabilities  short-term


(32
)


12



74Inventory and other current assets


(185
)


(7
)


(42
)Regulatory assets  short-term


357



(18
)


17Regulatory liabilities  short-term


19



318



192Book overdrafts


64







Accrued interest and taxes


74



(41
)


(126
)Accounts payable and other current liabilities


17



(138
)


184Net cash provided by operating activities


2,973



2,581



2,421Cash flows from financing activities:Long-term debt issued






900



1,000Long-term debt issuance costs


(1
)


(24
)


(20
)Long-term debt repaid


(207
)


(352
)


(1,040
)Bonds repurchased


(37
)






Issuance of preference stock






196



591Redemption of preferred stock










(148
)Rate reduction notes repaid


(246
)


(246
)


(246
)Short-term debt financing  net


500







(88
)Book overdrafts






(118
)


25Shares purchased for stock-based compensation


(135
)


(107
)


(122
)Proceeds from stock option exercises


56



45



53Excess tax benefits related to stock option exercises


28



17



Minority interest


(210
)


(322
)


(345
)Dividends paid


(186
)


(300
)


(234
)Net cash used by financing activities


(438
)


(311
)


(574
)Cash flows from investing activities:Capital expenditures


(2,286
)


(2,226
)


(1,808
)Proceeds from nuclear decommissioning trust sales


3,697



3,010



2,067Purchases of nuclear decommissioning trust investments and other


(3,830
)


(3,150
)


(2,159
)Sales of short-term investments


7,069



6,446



2,748Purchases of short-term investments


(7,069
)


(6,418
)


(2,776
)Restricted cash


56



1



4Customer advances for construction and other investments


(3
)


7



98Net cash used by investing activities


(2,366
)


(2,330
)


(1,826
)Net increase (decrease) in cash and equivalents


169



(60
)


21Cash and equivalents, beginning of year


83



143



122Cash and equivalents, end of year

$
252


$
83


$
143    54




---



##### 



Consolidated
    Statements of Changes in Common
    Southern California Edison Company Shareholders
    Equity
 Accumulated





TotalAdditional


Other





CommonCommon


Paid-in


Comprehensive


Retained


ShareholdersIn millions

Stock


Capital


Income (Loss)


Earnings


EquityBalance at December 31, 2004

$
2,168


$
350


$
(17
)

$
2,020


$
4,521Net income














749



749Other comprehensive income










1







1Dividends declared on common stock














(285
)


(285
)Dividends declared on preferred and preference stock not subject
    to mandatory redemption














(24
)


(24
)Shares purchased for stock-based compensation






(19
)






(95
)


(114
)Proceeds from stock option exercises














53



53Noncash stock-based compensation
    and other






11











11Excess tax benefits related to stock option exercises






29











29Capital stock expense and other






(10
)






(1
)


(11
)Balance at December 31, 2005

$
2,168


$
361


$
(16
)

$
2,417


$
4,930Net income














827



827Other comprehensive income










12







12SFAS No. 158  Pension and other
    postretirement benefits










(17
)






(17
)Tax effect










7







7Dividends declared on common stock














(240
)


(240
)Dividends declared on preferred and preference stock not subject
    to mandatory redemption














(51
)


(51
)Shares purchased for stock-based compensation






(15
)






(88
)


(103
)Proceeds from stock option exercises














45



45Noncash stock-based compensation
    and other






23











23Excess tax benefits related to stock option exercises






17











17Capital stock expense and other






(3
)










(3
)Balance at December 31, 2006

$
2,168


$
383


$
(14
)

$
2,910


$
5,447Net income














758



758FIN 48 adoption














213



213Other comprehensive loss










(1
)






(1
)Dividends declared on common stock














(100
)


(100
)Dividends declared on preferred and preference stock not subject
    to mandatory redemption














(51
)


(51
)Shares purchased for stock-based compensation














(135
)


(135
)Proceeds from stock option exercises














56



56Noncash stock-based compensation
    and other






18







(5
)


13Excess tax benefits related to stock option exercises






28











28Change in classification of shares purchased to settle
    performance shares






78







(78
)


Balance at December 31, 2007

$
2,168


$
507


$
(15
)

$
3,568


$
6,228      55




---



##### 



Notes to
    Consolidated Financial Statements
    Note 1.
    Summary
    of Significant Accounting Policies  square-mile
  Basis
    of Presentation
            Book
    Overdrafts
    Cash
    and Equivalents
    Deferred
    Financing Costs
   56




---



##### 



Southern
    California Edison Company
    Derivative
    Instruments and Hedging Activities
            No. 01-8.
 57




---



##### 



Notes to
    Consolidated Financial Statements
       Dividend
    Restrictions
  13-month 13-month
  Impairment
    of Long-Lived Assets
    Income
    Taxes
          Inventory
  first-in,
 58




---



##### 



Southern
    California Edison Company
   Leases
        Margin
    and Collateral Deposits
    New
    Accounting Pronouncements
  Accounting
    Pronouncements Adopted
    Accounting
    Pronouncements Not Yet Adopted
  FIN 39-1. FIN 39-1 FIN 39-1 FIN 39-1
       59




---



##### 



Notes to
    Consolidated Financial Statements
    Nuclear
    Decommissioning
          available-for-sale. other-than-temporary other-than-temporary
  Planned
    Major Maintenance
   60




---



##### 



Southern
    California Edison Company
   Property
    and Plant
  Utility
    Plant
          cost-of-service cost-of-service cost-of-service cost-of-service
    Estimated


Weighted-AverageUseful Lives


Useful LivesGeneration plant


38 years to 69 years



40 yearsDistribution plant


30 years to 60 years



40 yearsTransmission plant


35 years to 65 years



45 yearsOther plant


5 years to 60 years



25 years     Nonutility
    Property
     61




---



##### 



Notes to
    Consolidated Financial Statements
     Furniture and equipment

3 years to 20 yearsBuilding, plant and equipment

5 years to 30 yearsLand easements

60 years   Asset
    Retirement Obligation
    Purchased
    Power
    Receivables
    Regulatory
    Assets and Liabilities
    Related
    Party Transactions
   62




---



##### 



Southern
    California Edison Company
   Restricted
    Cash
    Revenue
    Recognition
      Sales
    and Use Taxes
    Short-term
    Investments
  short-term available-for-sale
 63




---



##### 



Notes to
    Consolidated Financial Statements
   Stock-Based
    Compensation
      short-cut
   64




---



##### 



Southern
    California Edison Company
      fair-value
  Year endedDecember 31,In millions

2005Net income available for common stock, as reported

$
725Add: stock-based compensation expense using the intrinsic value
    accounting method  net of tax


26Less: stock-based compensation expense using the fair-value
    accounting method  net of tax


24Pro forma net income available for common stock

$
727   Note 2.
    Derivative
    Instruments and Hedging Activities    In
    millions                    Year
    ended December 31,

2007


2006


2005Purchased power

$
3,117


$
3,013


$
3,113Unrealized (gains) losses on economic hedging
    activities  net


(91
)


237



(90
)Realized losses on economic hedging activities  net


132



339



(115
)Energy settlements and refunds


(34
)


(180
)


(286
)Total purchased-power expense

$
3,124


$
3,409


$
2,622    65




---



##### 



Notes to
    Consolidated Financial Statements
   Note 3.
    Liabilities
    and Lines of Credit  Long-Term
    Debt
        In
    millions                                            December
    31,

2007


2006First and refunding mortgage bonds:2009  2037 (4.65% to 6.00% and variable)

$
3,375


$
3,525Rate reduction notes:2007 (6.42%)






246Pollution-control bonds:2015  2035 (2.9% to 5.55% and variable)


1,196



1,196Bonds repurchased


(37
)


Debentures and notes:2010  2053 (5.06% to 7.625%)


557



611Long-term debt due within one year






(396
)Unamortized debt discount  net


(10
)


(11
)Total

$
5,081


$
5,171        66




---



##### 



Southern
    California Edison Company
     Short-Term
    Debt
    Lines
    of Credit
    Note 4.
    Income
    Taxes    In
    millions                  Year
    ended December 31,

2007


2006


2005Current:Federal

$
295


$
681


$
255State


94



159



84389



840



339Deferred:Federal


(31
)


(312
)


(18
)State


(21
)


(90
)


(29
)(52
)


(402
)


(47
)Total

$
337


$
438


$
292  67




---



##### 



Notes to
    Consolidated Financial Statements
    In millions December
    31,

2007


2006Deferred tax assets:Accrued charges

$
69


$
59Investment tax credits


62



67Property-related


396



408Regulatory balancing accounts


519



496Unrealized gains and losses


393



367Decommissioning


182



167Pensions and PBOPs


177



215Other


421



358Total

$
2,219


$
2,137Deferred tax liabilities:Property-related

$
3,155


$
3,166Capitalized software costs


128



147Regulatory balancing accounts


521



393Unrealized gains and losses


394



367Decommissioning


158



140Other


273



349Total

$
4,629


$
4,562Accumulated deferred income taxes  net

$
2,410


$
2,425Classification of accumulated deferred income
    taxes  net:Included in deferred credits and other liabilities

$
2,556


$
2,675Included in total current assets


146



250     Year ended December
    31,

2007


2006


2005Federal statutory rate


35.0
%


35.0
%


35.0
%Tax reserve adjustments


(4.8
)


3.1



(2.1
)Resolution of state audit issue






(3.9
)


Resolution of
    1991-1993
    audit cycle










(5.8
)Property-related


(1.0
)


(0.3
)


(0.5
)ESOP dividend payment


(0.8
)


(0.9
)


(1.0
)State tax  net of federal deduction


4.4



3.6



3.2Other


(2.0
)


(2.0
)


(0.7
)Effective tax rate


30.8
%


34.6
%


28.1
%   1991-1993
 68




---



##### 



Southern
    California Edison Company
    Accounting
    for Uncertainty in Income Taxes
    Unrecognized
    Tax Benefits Tabular Disclosure
    In millionsBalance at January 1, 2007

$
1,985Tax positions taken during the current yearIncreases


63Decreases


Tax positions taken during a prior yearIncreases


124Decreases


(222
)Decreases for settlements during the period


Reductions for lapses of applicable statute of limitations


Balance at December 31, 2007

$
1,950           Tax
    Positions being addressed as part of active examinations and
    administrative appeals processes
   69




---



##### 



Notes to
    Consolidated Financial Statements
        Balancing
    Account Over-Collections
    Contingent
    Liability Company
    California
    Apportionment
    Resolution
    of Federal and State Income Tax Issues Being Addressed in
    Ongoing Examinations and Administrative Appeals
   70




---



##### 



Southern
    California Edison Company
   Note 5.
    Compensation
    and Benefit Plans  Employee
    Savings Plan
    Pension
    Plans and Postretirement Benefits Other Than
    Pensions
    Pension
    Plans
       71




---



##### 



Notes to
    Consolidated Financial Statements
     In
    millions                         Year
    ended December 31,

2007


2006Change in projected benefit obligationProjected benefit obligation at beginning of year

$
3,176


$
3,222Service cost


100



102Interest cost


171



169Amendments


(5
)


12Actuarial gain


(90
)


(66
)Special termination benefits


2



8Benefits paid


(248
)


(271
)Projected benefit obligation at end of year

$
3,106


$
3,176Change in plan assetsFair value of plan assets at beginning of year

$
3,340


$
3,103Actual return on plan assets


284



473Employer contributions


83



35Benefits paid


(248
)


(271
)Fair value of plan assets at end of year

$
3,459


$
3,340Funded status at end of year

$
353


$
164Amounts recognized in the consolidated balance sheets consist
    of:Long-term assets

$
445


$
247Current liabilities


(5
)


(5
)Long-term liabilities


(87
)


(78
)$
353


$
164Amounts recognized in accumulated other comprehensive loss
    consist of:Prior service cost

$
1


$
2Net loss


24



22$
25


$
24Additional detail of amounts recognized as a regulatory
    liability:Prior service cost

$
49


$
71Net gain

$
(357
)

$
(215
)Accumulated benefit obligation at end of year

$
2,773


$
2,782Pension plans with an accumulated benefit obligation in
    excess of plan assets:Projected benefit obligation

$
92


$
82Accumulated benefit obligation

$
75


$
67Fair value of plan assets






Weighted-average assumptions used to determine obligations at
    end of year:Discount rate


6.25
%


5.75
%Rate of compensation increase


5.0
%


5.0
%  72




---



##### 



Southern
    California Edison Company
      In
    millions                    Year
    ended December 31,

2007


2006


2005Service cost

$
100


$
102


$
99Interest cost


171



169



166Expected return on plan assets


(237
)


(225
)


(215
)Special termination benefits


2



8



Amortization of transition obligation










1Amortization of prior service cost


17



16



16Amortization of net loss


3



3



4Expense under accounting standards

$
56


$
73


$
71Regulatory adjustment  deferred


(3
)


(10
)


(26
)Total expense recognized

$
53


$
63


$
45     In
    millionsYear
    ended December 31,

2007Net loss

$
5Prior service cost


Amortization of prior service cost


Amortization of net gain


(3
)Total recognized in other comprehensive income

$
2Total recognized in expense and other comprehensive income

$
55         Year
    ended December 31,

2007


2006


2005Weighted-average assumptions:Discount rate


5.75
%


5.5
%


5.5
%Rate of compensation increase


5.0
%


5.0
%


5.0
%Expected return on plan assets


7.5
%


7.5
%


7.5
%  73




---



##### 



Notes to
    Consolidated Financial Statements
    In
    millionsYear
    ending December 31,2008

$
2642009

$
2712010

$
2792011

$
2922012

$
2982013  2017

$
1,484     Target for


December 31,2008


2007


2006United States equities


45
%


47
%


47
%Non-United
    States equities


25
%


25
%


26
%Private equities


4
%


2
%


2
%Fixed income


26
%


26
%


25
%   Postretirement
    Benefits Other Than Pensions
       74




---



##### 



Southern
    California Edison Company
     In
    millionsYear
    ended December 31,

2007

2006Change in benefit obligationBenefit obligation at beginning of year

$
2,178


$
2,275Service cost


43



43Interest cost


125



116Amendments


6



Actuarial gain


(77
)


(159
)Special termination benefits


1



4Plan participants contributions


8



7Medicare Part D subsidy received


4



3Benefits paid


(106
)


(111
)Benefit obligation at end of year

$
2,182


$
2,178Change in plan assetsFair value of plan assets at beginning of year

$
1,743


$
1,573Actual return on assets


117



203Employer contributions


49



68Plan participants contributions


8



7Medicare Part D subsidy received


4



3Benefits paid


(106
)


(111
)Fair value of plan assets at end of year

$
1,815


$
1,743Fund status at end of year

$
(367
)

$
(435
)Amounts recognized in the consolidated balance sheets consist
    of:Current liabilities

$
(18
)

$
(19
)Long-term liabilities


(349
)


(416
)$
(367
)

$
(435
)Amounts recognized in accumulated other comprehensive loss
    (income) consist of:Prior service cost

$



$
Net loss






$



$
Additional detail of amounts recognized as a regulatory
    asset:Prior service cost (credit)

$
(206
)

$
(242
)Net actuarial loss

$
437


$
545Weighted-average assumptions used to determine obligations at
    end of year:Discount rate


6.25
%


5.75
%Assumed health care cost trend rates:Rate assumed for following year


9.25
%


9.25
%Ultimate rate


5.0
%


5.0
%Year ultimate rate reached


2015



2011  75




---



##### 



Notes to
    Consolidated Financial Statements
      In
    millionsYear
    ended December 31,

2007

2006

2005Service cost

$
43


$
43


$
44Interest cost


125



116



118Expected return on plan assets


(119
)


(106
)


(101
)Special termination benefits


1



4



Amortization of prior service cost (credit)


(29
)


(29
)


(28
)Amortization of net loss


28



41



45Total expense

$
49


$
69


$
78     In
    millionsYear
    ended December 31,

2007Net loss (gain)

$
Prior service cost


Amortization of prior service cost (credit)


Amortization of net loss


Total recognized in other comprehensive income

$
Total recognized in expense and other comprehensive income

$
49         Year
    ended December 31,

2007

2006

2005Discount rate


5.75
%


5.5
%


5.75
%Expected return on plan assets


7.0
%


7.0
%


7.1
%Assumed health care cost trend rates:Current year


9.25
%


10.25
%


10.0
%Ultimate rate


5.0
%


5.0
%


5.0
%Year ultimate rate reached


2015



2011



2010    76




---



##### 



Southern
    California Edison Company
     BeforeIn
    millionsYear
    ending December 31,

Subsidy*

Net2008

$
102


$
972009


110



1042010


118



1112011


128



1212012


137



1292013  2017


803



747   *
    
    Medicare Part D prescription drug benefits      Target for

December 31,2008

2007

2006United States equities


64
%


62
%


64
%Non-United
    States equities


16
%


14
%


13
%Fixed income


20
%


24
%


23
%   Description
    of Pension and Postretirement Benefits Other Than Pensions
    Investment Strategies
      United States Equities:
  Non-United
    States Equities: non-United
  Private Equity:
  Fixed Income: non-United
   77




---



##### 



Notes to
    Consolidated Financial Statements
   Determination
    of the Expected Long-Term Rate of Return on Assets for United
    States Plans
    Capital
    Markets Return Forecasts
    Stock-Based
    Compensation
  Stock
    Options
        Year
    ended December 31,

2007

2006

2005Expected terms (in years)

7.5

9 to 10

9 to 10Risk-free interest rate

4.6%  4.8%

4.3%  4.7%

4.1%  4.3%Expected dividend yield

2.1%  2.4%

2.3%  2.8%

2.1%  3.1%Weighted-average expected dividend yield

2.4%

2.4%

3.1%Expected volatility

16%  17%

16%  17%

15%  20%Weighted-average volatility

16.5%

16.3%

19.5%  78




---



##### 



Southern
    California Edison Company
  10-year
    Weighted-AverageRemainingContractual


AggregateStock


Exercise


Term


IntrinsicOptions


Price


(Years)


ValueOutstanding at December 31, 2006


7,761,336


$
26.78Granted


935,218


$
47.77Expired






Forfeited


(40,191
)

$
41.20Exercised


(2,395,979
)

$
23.21Outstanding at December 31, 2007


6,260,384


$
31.21



6.49Vested and expected to vest at December 31, 2007


5,983,218


$
30.86



6.43


$
129,191,430Exercisable at December 31, 2007


2,978,568


$
23.66



5.20


$
85,759,823       12-month
  Performance
    Shares
   79




---



##### 



Notes to
    Consolidated Financial Statements
         80




---



##### 



Southern
    California Edison Company
     Weighted-AveragePerformance

Grant DateShares

Fair ValueNonvested at December 31, 2006


108,604


$
48.96Granted


39,032


$
57.70Forfeited


(741
)

$
56.77Paid out


(61,652
)

$
46.09Nonvested at December 31, 2007


85,243


$
55.01       Performance

Weighted-AverageShares

Fair ValueNonvested at December 31, 2006


108,727Granted


39,116Forfeited


(745
)Paid out


(61,711
)Nonvested at December 31, 2007


85,387


$
44.50   Note 6.
    Commitments
    and Contingencies  Lease
    Commitments
  No. 01-8, No. 01-8 No. 01-8 mark-to-market
 81




---



##### 



Notes to
    Consolidated Financial Statements
        PowerContracts

OtherOperating

OperatingIn
    millionsYear
    ending December 31,

Leases

Leases2008

$
566


$
522009


647



502010


610



452011


400



362012


240



29Thereafter


1,414



101Total

$
3,877


$
313     Nuclear
    Decommissioning Commitment
       82




---



##### 



Southern
    California Edison Company
          December 31,In millions

Maturity Dates

2007


2006Municipal bonds

2008  2044

$
561


$
692Stocks




1,968



1,611United States government issues

2008  2049


552



729Corporate bonds

2008  2047


241



104Short-term

2008


56



48Total



$
3,378


$
3,184     other-than-temporary
  Other
    Commitments
        In millions

2008


2009


2010


2011


2012Fuel supply

$
101


$
79


$
71


$
68


$
64Purchased power

$
410


$
324


$
294


$
290


$
339    83




---



##### 



Notes to
    Consolidated Financial Statements
    Indemnities
  Indemnity
    Provided as Part of the Acquisition of Mountainview
    Mountainview
    Filter Cake Indemnity
  on-site
  Other
    Indemnities
    Contingencies
    Environmental
    Remediation
     84




---



##### 



Southern
    California Edison Company
                Federal
    and State Income Taxes
   85




---



##### 



Notes to
    Consolidated Financial Statements
   FERC
    Refund Proceedings
    .
          Investigations
    Regarding Performance Incentives Rewards
    Customer
    Satisfaction
   86




---



##### 



Southern
    California Edison Company
        Employee
    Injury and Illness Reporting
          System
    Reliability
   87




---



##### 



Notes to
    Consolidated Financial Statements
   CPUC
    Investigation
            ISO
    Disputed Charges
   88




---



##### 



Southern
    California Edison Company
    Midway-Sunset
    Cogeneration Company
         89




---



##### 



Notes to
    Consolidated Financial Statements
   Navajo
    Nation Litigation
      Nuclear
    Insurance
  5-year
   90




---



##### 



Southern
    California Edison Company
    Palo
    Verde Nuclear Generating Station Outage and Inspection
  follow-up
  Procurement
    of Renewable Resources
         91




---



##### 



Notes to
    Consolidated Financial Statements
   Scheduling
    Coordinator Tariff Dispute
      Spent
    Nuclear Fuel
     92




---



##### 



Southern
    California Edison Company
   on-site
  Note 7.
    Accumulated
    Other Comprehensive Loss Information    PensionUnrealized


Minimum


Pension


and


AccumulatedGain (Loss)


Pension


and


PBOP 


Otheron Cash


Liability


PBOP 


Prior


ComprehensiveFlow Hedges


Adjustment


Net Loss


Service Cost


Income (Loss)Balance at December 31, 2005

$
(5
)

$
(11
)

$



$



$
(16
)Change for 2006


5















5SFAS No. 158 adjustments






11



(13
)


(1
)


(3
)Balance at December 31, 2006










(13
)


(1
)


(14
)Change for 2007










(1
)






(1
)Balance at December 31, 2007

$



$



$
(14
)

$
(1
)

$
(15
)     Note 8.
    Property
    and Plant  Nonutility
    Property
    In
    millionsDecember
    31,

2007


2006Furniture and equipment

$
4


$
4Building, plant and equipment


1,657



1,639Land (including easements)


35



34Construction in progress


5



21,701



1,679Accumulated provision for depreciation


(701
)


(633
)Nonutility property  net

$
1,000


$
1,046   Asset
    Retirement Obligations
   93




---



##### 



Notes to
    Consolidated Financial Statements
     In millions

2007


2006


2005Beginning balance

$
2,749


$
2,621


$
2,183Accretion expense


168



160



366Revisions


3



(3
)


117Liabilities added






41



14Liabilities settled


(43
)


(70
)


(59
)Ending balance

$
2,877


$
2,749


$
2,621       Note 9.
    Supplemental
    Cash Flows Information    In
    millionsYear
    ended December 31,

2007


2006


2005Cash payments for interest and taxes:Interest  net of amounts capitalized

$
292


$
321


$
330Tax payments  net

$
299


$
832


$
410Noncash investing and financing activities:Details of debt exchange:Pollution-control bonds redeemed

$



$
(331
)

$
(452
)Pollution-control bonds issued

$



$
331


$
452Details of obligation under capital leases:Capital lease purchased

$
(10
)

$



$
(15
)Capital lease obligation issued

$
10


$



$
15Dividends declared but not paid:Common stock

$
25


$
60


$
71Preferred and preference stock not subject to mandatory
    redemption

$
13


$
9


$
10  94




---



##### 



Southern
    California Edison Company
  Note 10.
    Fair
    Values of Financial Instruments    December 31,2007


2006Carrying


Fair


Carrying


FairIn millions

Amount


Value


Amount


ValueDerivatives:Interest rate hedges

$
(33
)

$
(33
)

$



$
Commodity price assets


82



82



50



50Commodity price liabilities


(77
)


(77
)


(160
)


(160
)Other:Decommissioning trusts


3,378



3,378



3,184



3,184QF power contracts liabilities


(3
)


(3
)


(2
)


(2
)Long-term debt


(5,081
)


(5,100
)


(5,171
)


(5,206
)Long-term debt due within one year










(396
)


(398
)         Note 11.
    Regulatory
    Assets and Liabilities       95




---



##### 



Notes to
    Consolidated Financial Statements
   Regulatory
    Assets
    In
    millionsDecember
    31,

2007


2006Current:Regulatory balancing accounts

$
99


$
128Rate reduction notes  transition cost deferral






219Direct access procurement charges






63Energy derivatives


71



88Purchased-power settlements


8



31Deferred FTR proceeds


15



14Other


4



11$
197


$
554Long-term:Regulatory balancing accounts


15



Flow-through taxes  net


1,110



1,023Unamortized nuclear investment  net


405



435Nuclear-related ARO investment  net


297



317Unamortized coal plant investment  net


94



102Unamortized loss on reacquired debt


331



318SFAS No. 158 pensions and other postretirement benefits


231



303Energy derivatives


70



145Environmental remediation


64



77Other


104



98$
2,721


$
2,818Total Regulatory Assets

$
2,918


$
3,372    96




---



##### 



Southern
    California Edison Company
     Regulatory
    Liabilities
    In
    millionsDecember
    31,

2007


2006Current:Regulatory balancing accounts

$
967


$
912Rate reduction notes  transition cost overcollection


20



Direct access procurement charges






63Energy derivatives


10



7Deferred FTR costs


19



11Other


3



7$
1,019


$
1,000Long-term:ARO


793



732Costs of removal


2,230



2,158SFAS No. 158 pensions and other postretirement benefits


308



145Energy derivatives


27



27Employee benefit plans


75



78$
3,433


$
3,140Total Regulatory Liabilities

$
4,452


$
4,140    97




---



##### 



Notes to
    Consolidated Financial Statements
   Note 12.
    Other
    Nonoperating Income and Deductions    In
    millions                      Year
    ended December 31,

2007


2006


2005AFUDC

$
46


$
32


$
25Increase in cash surrender value of life insurance policies


23



21



18Performance-based incentive awards


4



19



33Demand-side management and energy efficiency performance
    incentives










45Other


16



13



6Total other nonoperating income

$
89


$
85


$
127Various penalties

$
5


$
23


$
27Other


40



37



38Total other nonoperating deductions

$
45


$
60


$
65   Note 13.
    Jointly
    Owned Utility Projects      Investment


Accumulatedin


Depreciation and


OwnershipIn millions

Facility


Amortization


InterestTransmission systems:Eldorado

$
71


$
12



60
%Pacific Intertie


308



96



50Generating stations:Four Corners Units 4 and 5 (coal)


529



435



48Mohave (coal)


344



283



56Palo Verde (nuclear)


1,800



1,490



16San Onofre (nuclear)


4,722



4,001



78Total

$
7,774


$
6,317     Note 14.
    Variable
    Interest Entities  20-year
  98




---



##### 



Southern
    California Edison Company
  Project

Capacity


Termination
    Date(1)

EME OwnershipKern River


295 MW


June 2011


50
%Midway-Sunset


225 MW


May 2009


50
%Sycamore


300 MW


December 2007


50
%Watson


385 MW


December 2007


49
%   (1)
    
    SCEs power purchase agreements with Sycamore and Watson
    expired on December 31, 2007. Discussions on extending the
    power purchase and steam agreements are underway, but no
    assurance can be given that such discussions will lead to
    extensions of these agreements. As of January 1, 2008,
    these projects sell power to SCE under agreements with pricing
    set by the CPUC.      Note 15.
    Preferred
    and Preference Stock Not Subject to Mandatory
    Redemption     99




---



##### 



Notes to
    Consolidated Financial Statements
     Dollars in millions, except per-share amounts

December 31,

2007

2006December 31, 2007Shares

RedemptionOutstanding

PriceCumulative preferred stock:$25 par value:4.08% Series


1,000,000


$
25.50


$
25


$
254.24% Series


1,200,000


$
25.80



30



304.32% Series


1,653,429


$
28.75



41



414.78% Series


1,296,769


$
25.80



33



33Preference stock:No par value:5.349% Series A


4,000,000


$
100.00



400



4006.125% Series B


2,000,000


$
100.00



200



2006.00% Series C


2,000,000


$
100.00



200



200Total









$
929


$
929     Note 16.
    Business
    Segments   100




---



##### 



Southern
    California Edison Company
     ElectricIn millions

Utility

VIEs

Eliminations

SCEBalance Sheet Items as of December 31, 2007:Cash and equivalents

$
142


$
110


$



$
252Accounts receivable  net


684



110



(69
)


725Inventory


265



18







283Other current assets


184



4







188Nonutility property  net of depreciation


700



300







1,000Other long-term assets


627



2







629Total assets

$
27,005


$
544


$
(69
)

$
27,480Accounts payable


902



81



(69
)


914Other current liabilities


545



3







548Asset retirement obligations


2,862



15







2,877Minority interest


1



445







446Total liabilities and shareholders equity

$
27,005


$
544


$
(69
)

$
27,480Balance Sheet Items as of December 31, 2006:Cash and equivalents

$
5


$
78


$



$
83Accounts receivable  net


893



141



(95
)


939Inventory


218



14







232Other current assets


50



4







54Nonutility property  net of depreciation


727



319







1,046Other long-term assets


481



7







488Total assets

$
25,642


$
563


$
(95
)

$
26,110Accounts payable


809



142



(95
)


856Other current liabilities


622



2







624Long-term debt


5,117



54







5,171Asset retirement obligations


2,735



14







2,749Minority interest






351







351Total liabilities and shareholders equity

$
25,642


$
563


$
(95
)

$
26,110  101




---



##### 



Notes to
    Consolidated Financial Statements
    ElectricIn millions

Utility


VIEs


Eliminations(1)


SCEIncome Statement Items for the Year-Ended December 31,
    2007:Operating revenue

$
10,099


$
1,129


$
(750
)

$
10,478Fuel


482



709







1,191Purchased power


3,874







(750
)


3,124Provisions for regulatory adjustment clauses  net


271











271Other operation and maintenance


2,744



96







2,840Depreciation, decommissioning and amortization


1,058



36







1,094Property and other taxes


217











217Total operating expenses


8,646



841



(750
)


8,737Operating income


1,453



288







1,741Interest income


41



3







44Other nonoperating income


75



14







89Interest expense  net of amounts capitalized


(429
)










(429
)Other nonoperating deductions


(45
)










(45
)Income tax expense


(337
)










(337
)Minority interest






(305
)






(305
)Net income

$
758










$
758Income Statement Items for the Year-Ended December 31,
    2006:Operating revenue

$
9,926


$
1,137


$
(751
)

$
10,312Fuel


389



723







1,112Purchased power


4,160







(751
)


3,409Provisions for regulatory adjustment clauses  net


25











25Other operation and maintenance


2,575



103







2,678Depreciation, decommissioning and amortization


990



36







1,026Property and other taxes


206











206Net gain on sale of utility property and plant


(1
)










(1
)Total operating expenses


8,344



862



(751
)


8,455Operating income


1,582



275







1,857Interest income


58











58Other nonoperating income


85











85Interest expense  net of amounts capitalized


(400
)










(400
)Other nonoperating deductions


(60
)










(60
)Income tax expense


(438
)










(438
)Minority interest






(275
)






(275
)Net income

$
827










$
827Income Statement Items for the Year-Ended December 31,
    2005:Operating revenue

$
9,038


$
1,397


$
(935
)

$
9,500Fuel


269



924







1,193Purchased power


3,557







(935
)


2,622Provisions for regulatory adjustment clauses  net


435











435Other operation and maintenance


2,421



102







2,523Depreciation, decommissioning and amortization


878



37







915Property and other taxes


193











193Net gain on sale of utility property and plant


(10
)










(10
)Total operating expenses


7,743



1,063



(935
)


7,871Operating income


1,295



334







1,629Interest income


44











44Other nonoperating income


127











127Interest expense  net of amounts capitalized


(360
)










(360
)Other nonoperating deductions


(65
)










(65
)Income tax expense


(292
)










(292
)Minority interest






(334
)






(334
)Net income

$
749










$
749   (1)
    VIE segment revenue includes sales to the electric utility
    segment, which is eliminated in revenue and purchased power in
    the consolidated statements of income. 102




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##### 



Southern
    California Edison Company
   Note 17. Quarterly
    Financial Data (Unaudited)
  2007In millions

Total(1)

Fourth

Third

Second

FirstOperating revenue

$
10,478


$
2,582


$
3,214


$
2,460


$
2,222Operating income


1,741



335



639



392



374Net income


758



134



275



157



193Net income available for common stock


707



120



262



144



180Common dividends declared


100



25



25



25



25   2006In millions

Total(1)

Fourth

Third

Second

FirstOperating revenue

$
10,312


$
2,494


$
3,079


$
2,521


$
2,217Operating income


1,857



315



673



536



332Net income


827



171



276



247



133Net income available for common stock


776



158



263



234



121Common dividends declared


240



60



60



60



60   (1)
    As a result of rounding, the total of the four quarters does not
    always equal the amount for the year. 103




---



##### 



Selected Financial Data:
    2003  2007


Southern California Edison
    CompanyDollars in millions

2007


2006


2005


2004


2003Income statement data:Operating revenue

$
10,478


$
10,312


$
9,500


$
8,448


$
8,854Operating expenses


8,737



8,455



7,871



6,435



7,276Purchased-power expenses


3,124



3,409



2,622



2,332



2,786Income tax expense


337



438



292



438



388Provisions for regulatory adjustment clauses  net


271



25



435



(201
)


1,138Interest expense  net of amounts capitalized


429



400



360



409



457Net income from continuing operations


758



827



749



921



882Net income


758



827



749



921



932Net income available for common stock


707



776



725



915



922Ratio of earnings to fixed charges


3.35



3.97



3.79



4.40



3.80Balance sheet data:Assets

$
27,480


$
26,110


$
24,703


$
23,290


$
21,771Gross utility plant


22,577



20,734



19,232



17,981



16,991Accumulated provision for depreciation and decommissioning


5,174



4,821



4,763



4,506



4,386Short-term debt


500











88



200Common shareholders equity


6,228



5,447



4,930



4,521



4,355Preferred and preference stock:Not subject to mandatory redemption


929



929



729



129



129Subject to mandatory redemption














139



141Long-term debt


5,081



5,171



4,669



5,225



4,121Capital structure:Common shareholders equity


50.9
%


47.2
%


47.7
%


45.1
%


49.8
%Preferred stock:Not subject to mandatory redemption


7.6
%


8.0
%


7.1
%


1.3
%


1.5
%Subject to mandatory redemption














1.4
%


1.6
%Long-term debt


41.5
%


44.8
%


45.2
%


52.2
%


47.1
%    104




---



#####