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


                                    FORM 10-Q

(Mark One)

/X/    Quarterly report pursuant to Section 13 or 15(d) of the Securities 
       Exchange Act of 1934

For the quarterly period ended                    March 31, 1999 
                               ---------------------------------------------
                                       OR

/ /    Transition report pursuant to Section 13 or 15(d) of the Securities 
       Exchange Act of 1934

For the transition period from ______________ to ____________________________  

                          Commission File Number 1-2313

                       SOUTHERN CALIFORNIA EDISON COMPANY
             (Exact name of registrant as specified in its charter)

           CALIFORNIA                                     95-1240335
 (State or other jurisdiction of                       (I.R.S. Employer
 incorporation or organization)                       Identification No.)

    2244 Walnut Grove Avenue
         (P.O. Box 800)
      Rosemead, California
      (Address of principal                                  91770
       executive offices)                                 (Zip Code)

                                 (626) 302-1212
              (Registrant's telephone number, including area code)

       Indicate by check mark whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the preceding 12 months (for such shorter period that the registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

Yes   X          No ___

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

              Class                              Outstanding at May 11, 1999
---------------------------------------      ----------------------------------
     Common Stock, no par value                          434,888,104

<PAGE>






SOUTHERN CALIFORNIA EDISON COMPANY

INDEX


                                                                        Page
                                                                         No.
                                                                        ----
Part I.  Financial Information:

   Item 1.  Consolidated Financial Statements:

            Report of Independent Public Accountants                      1

            Consolidated Statements of Income -- Three and
               Twelve Months Ended March 31, 1999, and 1998               2

            Consolidated Statements of Comprehensive Income --
               Three and Twelve Months Ended March 31, 1999,
               and 1998                                                   2

            Consolidated Balance Sheets -- March 31, 1999,
               December 31, 1998, and March 31, 1998                      3

            Consolidated Statements of Cash Flows --
               Three and Twelve Months Ended
               March 31, 1999, and 1998                                   5

            Notes to Consolidated Financial Statements                    6

   Item 2.  Management's Discussion and Analysis of Results
               of Operations and Financial Condition                     26

Part II. Other Information:

   Item 1.  Legal Proceedings                                            37

   Item 4.  Submission of Matters to a Vote of Security Holders          40

   Item 6.  Exhibits and Reports on Form 8-K                             40




<PAGE>


PART I   FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Southern California Edison Company:

We have  audited  the  accompanying  consolidated  balance  sheets  of  Southern
California  Edison  Company  (SCE) and its  subsidiaries  as of March 31,  1999,
December 31, 1998, and March 31, 1998, and the related  consolidated  statements
of  income,  comprehensive  income  and cash  flows for each of the  three-  and
twelve-month  periods ended March 31, 1999, and 1998. These financial statements
are the responsibility of SCE's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of SCE and its subsidiaries as of
March 31, 1999,  December 31, 1998, and March 31, 1998, and the results of their
operations and their cash flows for each of the three- and twelve-month  periods
ended March 31, 1999, and 1998, in conformity with generally accepted accounting
principles.



                                                           ARTHUR ANDERSEN LLP
                                                           ARTHUR ANDERSEN LLP



Los Angeles, California
May 6, 1999


                                       1
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

CONSOLIDATED STATEMENTS OF INCOME
In thousands
<TABLE>
<CAPTION>

                                                                   3 Months Ended             12 Months Ended
                                                                     March 31,                   March 31,
----------------------------------------------------------- ----------------------------- -------------------------
                                                                 1999           1998         1999          1998
----------------------------------------------------------- ----------------------------- -------------------------
<S>                                                         <C>            <C>           <C>          <C>       
Operating revenue                                           $1,676,705     $1,622,691    $7,553,532   $7,880,638
-------------------------------------------------------------------------------------------------------------------

Fuel                                                            60,308        118,684       265,339      855,539
Purchased power-- contracts                                    609,906        576,506     2,659,300    2,801,834
Purchased power-- power exchange-- net                         116,956             --       753,299           --
Provisions for regulatory adjustment clauses-- net            (279,030)      (303,813)     (447,736)    (626,575)
Other operating expenses                                       404,280        287,579     1,597,349    1,263,170
Maintenance                                                     88,868        101,870       397,565      411,537
Depreciation, decommissioning and amortization                 386,277        382,974     1,549,032    1,317,270
Income taxes                                                    80,541        125,604       400,580      612,339
Property and other taxes                                        38,285         39,518       127,169      129,680
Net loss (gain) on sale of utility plant                        (2,200)        65,801      (610,609)      61,722
-------------------------------------------------------------------------------------------------------------------

Total operating expenses                                     1,504,191      1,394,723     6,691,288    6,826,516
-------------------------------------------------------------------------------------------------------------------

Operating income                                               172,514        227,968       862,244    1,054,122
-------------------------------------------------------------------------------------------------------------------

Provision for rate phase-in plan                                    --             --            --      (37,177)
Allowance for equity funds
   used during construction                                      2,836          2,781        11,880        8,429
Interest and dividend income                                    14,146         18,312        62,559       56,092
Other nonoperating income (deductions)-- net                    12,720         (3,591)       11,927      (31,273)
-------------------------------------------------------------------------------------------------------------------

Total other income (deductions)-- net                           29,702         17,502        86,366       (3,929)
-------------------------------------------------------------------------------------------------------------------

Income before interest expense                                 202,216        245,470       948,610    1,050,193
-------------------------------------------------------------------------------------------------------------------

Interest and amortization on long-term debt                     98,643        124,354       396,147      378,758
Other interest expense                                          24,136         18,020        70,340       91,607
Allowance for borrowed funds used
   during construction                                          (2,461)        (1,892)       (8,615)      (8,693)
Capitalized interest                                              (796)          (158)       (1,933)      (1,236)
-------------------------------------------------------------------------------------------------------------------

Total interest expense-- net                                   119,522        140,324       455,939      460,436
-------------------------------------------------------------------------------------------------------------------

Net income                                                      82,694        105,146       492,671      589,757
Dividends on preferred stock                                     6,199          6,759        24,072       27,648
-------------------------------------------------------------------------------------------------------------------

Earnings available for common stock                        $    76,495     $   98,387   $   468,599  $   562,109
-------------------------------------------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
In thousands

                                                                   3 Months Ended             12 Months Ended
                                                                     March 31,                   March 31,
----------------------------------------------------------- ----------------------------- -------------------------
                                                                 1999           1998          1999         1998
----------------------------------------------------------- ----------------------------- -------------------------

Net income                                                 $    82,694     $  105,146   $   492,671   $  589,757
Unrealized gain (loss) on securities--  net                     (6,215)        11,110        (8,050)      18,508
Reclassification adjustment for gains included in net income   (17,371)            --       (35,207)          --
-------------------------------------------------------------------------------------------------------------------

Comprehensive income                                       $    59,108     $  116,256   $   449,414   $  608,265
-------------------------------------------------------------------------------------------------------------------
</TABLE>


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



                                       2
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

CONSOLIDATED BALANCE SHEETS
In thousands
<TABLE>
<CAPTION>

                                                                 March 31,         December 31,         March 31,
                                                                   1999                1998               1998
------------------------------------------------------------------------------------------------------------------

ASSETS

Transmission and distribution:
   Utility plant, at original cost, subject to
<S>                                                            <C>                <C>               <C>        
      cost-based rate regulation                               $11,901,873        $11,771,678       $11,333,083
   Accumulated provision for depreciation                       (6,280,719)        (6,062,562)       (5,690,973)
   Construction work in progress                                   554,209            455,233           482,386
------------------------------------------------------------------------------------------------------------------

                                                                 6,175,363          6,164,349         6,124,496
------------------------------------------------------------------------------------------------------------------

Generation:
   Utility plant, at original cost,
      not subject to cost-based rate regulation                  1,692,358          1,689,469         9,367,923
   Accumulated provision for depreciation, decommissioning
      and amortization                                            (848,315)          (833,917)       (5,241,980)
   Construction work in progress                                    74,993             61,431           101,759
   Nuclear fuel, at amortized cost                                 164,489            172,250           145,607
------------------------------------------------------------------------------------------------------------------

                                                                 1,083,525          1,089,233         4,373,309
------------------------------------------------------------------------------------------------------------------

Total utility plant                                              7,258,888          7,253,582        10,497,805
------------------------------------------------------------------------------------------------------------------

Nonutility property -- less accumulated
   provision for depreciation of $7,865, $25,682
   and $25,195 at respective dates                                  75,303             56,681            67,495
Nuclear decommissioning trusts                                   2,311,082          2,239,929         2,001,906
Other investments                                                  140,324            179,480           221,148
------------------------------------------------------------------------------------------------------------------

Total other property and investments                             2,526,709          2,476,090         2,290,549
------------------------------------------------------------------------------------------------------------------

Cash and equivalents                                               122,310             81,500           613,475
Receivables, including unbilled revenue, less
   allowances of $24,638, $22,230 and $23,849
   for uncollectible accounts at respective dates                1,048,104          1,112,630           751,319
Fuel inventory                                                      53,674             51,299            53,464
Materials and supplies, at average cost                            118,136            116,259           131,278
Accumulated deferred income taxes-- net                             89,832            274,833                --
Regulatory balancing accounts-- net                                974,190            648,781           495,078
Prepayments and other current assets                                54,865             91,992            54,439
------------------------------------------------------------------------------------------------------------------

Total current assets                                             2,461,111          2,377,294         2,099,053
------------------------------------------------------------------------------------------------------------------

Unamortized nuclear investment-- net                             1,962,973          2,161,998                --
Income tax-related deferred charges                              1,502,897          1,463,256         1,549,631
Unamortized debt issuance and reacquisition expense                341,702            348,816           369,163
Other deferred charges                                           1,063,279            865,892           841,519
------------------------------------------------------------------------------------------------------------------

Total deferred charges                                           4,870,851          4,839,962         2,760,313
------------------------------------------------------------------------------------------------------------------

Total assets                                                   $17,117,559        $16,946,928       $17,647,720
------------------------------------------------------------------------------------------------------------------
</TABLE>


    The accompanying notes are an integral part ofthese financial statements.


                                       3
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

CONSOLIDATED BALANCE SHEETS
In thousands, except share amounts
<TABLE>
<CAPTION>

                                                                 March 31,         December 31,       March 31,
                                                                   1999                1998             1998
------------------------------------------------------------------------------------------------------------------

CAPITALIZATION AND LIABILITIES

Common shareholder's equity:
   Common stock (434,888,104 shares
<S>                                                            <C>                <C>              <C>        
      outstanding at each date)                                $2,168,054         $ 2,168,054      $ 2,168,054
   Additional paid-in capital                                     334,031             334,031          334,031
   Accumulated other comprehensive income                          15,876              39,462           59,133
   Retained earnings                                              700,146             793,625        1,408,330
------------------------------------------------------------------------------------------------------------------

                                                                3,218,107           3,335,172        3,969,548
------------------------------------------------------------------------------------------------------------------

Preferred stock:
   Not subject to mandatory redemption                            128,755             128,755          183,755
   Subject to mandatory redemption                                255,700             255,700          275,000
Long-term debt                                                  5,052,393           5,446,638        5,807,485
------------------------------------------------------------------------------------------------------------------

Total capitalization                                            8,654,955           9,166,265       10,235,788
------------------------------------------------------------------------------------------------------------------

Other long-term liabilities                                       713,510             467,109          494,370
------------------------------------------------------------------------------------------------------------------

Current portion of long-term debt                                 716,231             400,810          567,875
Short-term debt                                                   629,197             469,565          345,241
Accounts payable                                                  381,167             447,484          400,592
Accrued taxes                                                     681,366             678,955          566,292
Accrued interest                                                   92,504              89,828           75,337
Dividends payable                                                  94,343              91,742           99,999
Accumulated deferred income taxes-- net                                --                  --           94,577
Deferred unbilled revenue and other current liabilities         1,169,271           1,096,332          818,324
------------------------------------------------------------------------------------------------------------------

Total current liabilities                                       3,764,079           3,274,716        2,968,237
------------------------------------------------------------------------------------------------------------------

Accumulated deferred income taxes-- net                         2,941,112           2,993,142        2,836,703
Accumulated deferred investment tax credits                       239,351             250,116          319,916
Customer advances and other deferred credits                      804,233             795,266          791,865
------------------------------------------------------------------------------------------------------------------

Total deferred credits                                          3,984,696           4,038,524        3,948,484
------------------------------------------------------------------------------------------------------------------

Minority interest                                                     319                 314              841
------------------------------------------------------------------------------------------------------------------

Commitments and contingencies
   (Notes 2, 8, 9 and 10)








Total capitalization and liabilities                          $17,117,559         $16,946,928      $17,647,720
------------------------------------------------------------------------------------------------------------------
</TABLE>


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


                                       4
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands
<TABLE>
<CAPTION>

                                                                    3 Months Ended               12 Months Ended
                                                                       March 31,                    March 31,
------------------------------------------------------------ ------------------------------ --------------------------
                                                                 1999           1998           1999           1998
------------------------------------------------------------ ------------------------------ --------------------------

Cash flows from operating activities:
<S>                                                     <C>             <C>            <C>            <C>         
Net income                                                   $ 82,694   $    105,146   $    492,671   $    589,757
Adjustments for non-cash items:
   Depreciation, decommissioning and amortization             386,277        382,974      1,549,032      1,317,270
   Other amortization                                          20,618         13,156         96,785         82,355
   Rate phase-in plan                                              --          3,777             --         40,013
   Deferred income taxes and investment
      tax credits                                              82,565        101,892       (113,831)       121,717
   Other long-term liabilities                                 52,523         14,733         25,262         42,322
   Regulatory asset related to sale of oil and gas plant          241        (98,041)      (121,950)       (98,041)
   Net loss (gain) on sale of oil and gas plant                (1,124)        62,633       (628,380)        62,633
   Other-- net                                                (24,319)        (5,117)       (15,375)      (192,698)
Changes in working capital:
   Receivables                                                 64,526        155,069       (296,785)        80,804
   Regulatory balancing accounts                             (325,409)      (301,767)      (479,112)      (601,583)
   Fuel inventory, materials and supplies                      (4,252)         6,297         12,932         27,342
   Prepayments and other current assets                        37,127         38,659           (426)         5,355
   Accrued interest and taxes                                   5,087         46,953        132,241        (23,814)
   Accounts payable and other current liabilities               6,622       (119,644)       331,522        103,906
--------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                     383,176        406,720        984,586      1,557,338
--------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Long-term debt repaid                                              --       (454,441)      (321,589)    (1,170,581)
Rate reduction notes issued                                        --             --             --      2,444,532
Rate reduction notes repaid                                   (70,531)       (17,111)      (305,011)       (12,354)
Preferred stock redeemed                                           --             --        (74,300)      (100,000)
Nuclear fuel financing-- net                                   (8,836)        (8,623)        16,031        (34,794)
Short-term debt financing-- net                               159,632         23,213        283,956        210,415
Capital transferred                                                --             --             --        153,000
Dividends paid                                               (172,125)      (101,084)    (1,200,852)    (1,787,412)
--------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities                         (91,860)      (558,046)    (1,601,765)      (297,194)
--------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property and plant                              (230,844)      (167,978)      (923,703)      (701,891)
Proceeds from sale of oil and gas plant                            --         29,801      1,173,238         29,801
Funding of nuclear decommissioning trusts                     (37,126)       (39,683)      (160,367)      (165,550)
Unrealized gain (loss) on securities-- net                    (23,586)        11,110        (43,257)        18,508
Other-- net                                                    41,050        (30,721)        80,103        (50,820)
--------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities             (250,506)      (197,471)       126,014       (869,952)
--------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents                40,810       (348,797)      (491,165)       390,192
Cash and equivalents, beginning of period                      81,500        962,272        613,475        223,283
--------------------------------------------------------------------------------------------------------------------
Cash and equivalents, end of period                         $ 122,310   $    613,475   $    122,310   $    613,475
--------------------------------------------------------------------------------------------------------------------

Cash payments for interest and taxes:
Interest-- net of amounts capitalized                        $ 67,618    $    74,808    $   256,554   $    337,317
Taxes                                                              12             10        404,832        437,758

</TABLE>


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


                                       5
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.    Summary of Significant Accounting Policies

Southern  California Edison Company (SCE) is a public utility which produces and
supplies electric energy for its 4.3 million  customers in central,  coastal and
Southern  California.  The  regulatory  environment  in which  SCE  operates  is
changing as a result of a 1995 California  Public  Utilities  Commission  (CPUC)
decision  on  electric  utility  industry  restructuring  and state  legislation
enacted in 1996.

Basis of Presentation

SCE's accounting policies conform with generally accepted accounting principles,
including the accounting principles for rate-regulated enterprises which reflect
the  rate-making  policies  of  the  CPUC  and  the  Federal  Energy  Regulatory
Commission (FERC). As a result of industry restructuring  legislation enacted by
the State of California  and a related  change in the  application of accounting
principles for rate-regulated  enterprises  adopted by the Financial  Accounting
Standards  Board's Emerging Issues Task Force, in 1997, SCE began accounting for
its investment in generation facilities in accordance with accounting principles
applicable to enterprises in general.  Application of such accounting principles
to SCE's  generation  assets did not result in any  adjustment of their carrying
value;  however,  SCE's nuclear  investments  were  reclassified as a regulatory
asset in second quarter 1998.

The  consolidated   financial  statements  include  SCE  and  its  wholly  owned
subsidiaries.   Intercompany   transactions   have  been   eliminated.   Certain
prior-period  amounts  were  reclassified  to  conform  to the March  31,  1999,
financial statement presentation.

Since April 1, 1998, when the new market  structure  began, SCE has been selling
all of its generation through the power exchange (PX), as mandated by the CPUC's
1995 restructuring  decision.  Through the PX, SCE satisfies the electric energy
needs of customers  who did not choose an  alternative  energy  provider.  These
transactions with the PX are reported as Purchased power - power exchange - net.
Generation sales through the PX were $282 million and $1.7 billion for the three
and twelve months ended March 31, 1999, respectively. Purchases from the PX were
$399  million and $2.4  billion for the three and twelve  months ended March 31,
1999, respectively.

SCE's outstanding  common stock is owned entirely by its parent company,  Edison
International.

Estimates

Financial  statements  prepared in compliance with generally accepted accounting
principles  require management to make estimates and assumptions that affect the
amounts  reported in the financial  statements and disclosure of  contingencies.
Actual results could differ from those estimates.  Certain significant estimates
related to electric utility restructuring, decommissioning and contingencies are
further discussed in Notes 2, 9 and 10 to the Consolidated Financial Statements,
respectively.

Fuel Inventory

Fuel  inventory is valued under the last-in,  first-out  method for fuel oil and
natural gas, and under the first-in, first-out method for coal.

Nuclear

CPUC-authorized  rate phase-in plans,  which deferred  collection of revenue for
each unit at the Palo Verde  Nuclear  Generating  Station  during the first four
years of operation,  ended in February 1996, September 1996 and January 1998 for
Units 1, 2 and 3, respectively.


                                       6
<PAGE>
SOUTHERN CALIFORNIA EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SCE is recovering its investment in San Onofre Nuclear  Generating Station Units
2 and 3 and Palo Verde on an accelerated  basis,  as authorized by the CPUC. The
accelerated  recovery will continue through December 2001, earning a 7.35% fixed
rate of return. San Onofre's operating costs, including nuclear fuel and nuclear
fuel  financing  costs,  and  incremental  capital  expenditures,  are recovered
through an incentive  pricing plan which allows SCE to receive about 4(cent) per
kilowatt-hour  through  2003.  Any  differences  between  these  costs  and  the
incentive price will flow through to the shareholders.  Palo Verde's accelerated
plant recovery,  as well as operating costs,  including nuclear fuel and nuclear
fuel financing  costs,  and  incremental  capital  expenditures,  are subject to
balancing account treatment through 2001.

Beginning  January 1, 1998, San Onofre's  incentive pricing plan and accelerated
plant  recovery  and  the  Palo  Verde  balancing  account  became  part  of the
transition  cost balancing  account.  SCE will be required to share equally with
ratepayers the net benefits received from operation of Palo Verde,  beginning in
2002,  and from the  operation  of the San Onofre  units in 2004.  Palo  Verde's
existing  nuclear unit  incentive  procedure  will continue only for purposes of
calculating a reward for  performance  of any unit above an 80% capacity  factor
for a fuel cycle.

Regulation of Utility Business

SCE, subject to rate-regulation  by the CPUC and the FERC,  operates in a highly
regulated  environment in which it has an obligation to deliver electric service
to customers in return for an exclusive franchise within its service territory.

Effective  January 1, 1998, SCE's rates were unbundled into separate charges for
energy,  transmission,  distribution,  the non-bypassable competition transition
charge  (CTC),  public  benefit  programs  and  nuclear   decommissioning.   The
transmission  component is being collected through  FERC-approved rates, subject
to  refund.  SCE's  costs  associated  with its  hydroelectric  plants are being
recovered  through  a  performance-based  mechanism.  This  mechanism  sets  the
hydroelectric  revenue  requirement  and  establishes a formula for extending it
through the duration of the electric  industry  restructuring  transition period
(March 31, 2002),  or until market  valuation of the  hydroelectric  facilities,
whichever occurs first.  Revenue from hydroelectric  facilities in excess of the
hydroelectric revenue requirement is credited against the costs to transition to
a competitive market.

Beginning  January 1, 1998, the CTC is being billed to all SCE customers,  which
provides SCE the opportunity to recover its costs to transition to a competitive
market  (approximately  $10.6 billion 1998 net present value).  Transition costs
related to  power-purchase  contracts are being  recovered  through the terms of
their contracts while most of the remaining  transition  costs will be recovered
through  2001.  A portion  of the  stranded  costs  that  residential  and small
commercial customers would have paid between 1998 and 2001, has been financed by
the issuance of rate reduction  notes,  allowing SCE to reduce rates by at least
10% to these customers,  effective January 1, 1998. The notes allow for the rate
reduction by lowering the carrying cost on a portion of the transition costs and
by  deferring  recovery of a portion of these  transition  costs until after the
transition period. Additionally,  the state legislation contained provisions for
the recovery  (through 2006) of reasonable  employee-related  transition  costs,
incurred  and  projected,   for   retraining,   severance,   early   retirement,
outplacement and related expenses.

Regulatory Assets and Liabilities

In accordance with accounting  principles for  rate-regulated  enterprises,  SCE
records  regulatory  assets,  which represent probable future revenue associated
with certain costs that will be recovered from customers through the rate-making
process, and regulatory liabilities,  which represent probable future reductions
in revenue  associated with amounts that are to be credited to customers through
the rate-making process.

                                       7
<PAGE>
SOUTHERN CALIFORNIA EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Regulatory  assets and liabilities  included in the consolidated  balance sheets
are:
<TABLE>
<CAPTION>

                                                            March 31,           December 31,          March 31,
     In millions                                              1999                  1998                1998
----------------------------------------------------------------------------------------------------------------
     Generation-related:
<S>                                                        <C>                   <C>                 <C>    
     Unamortized nuclear investment-- net                  $ 1,963               $ 2,162             $    --
     Flow-through taxes                                        466                   614                 410
     Rate reduction notes-- transition cost deferral           433                   315                  87
     Unamortized loss on sale of plant                         167                   183                  98
     Purchased-power settlements                               318                   130                 142
     Environmental remediation                                  16                    16                  16
     Regulatory balancing accounts and other                   604                   354                 554
----------------------------------------------------------------------------------------------------------------
         Subtotal                                            3,967                 3,774               1,307
----------------------------------------------------------------------------------------------------------------
     Non-generation related:
     Flow-through taxes                                      1,037                   849               1,140
     Unamortized loss of reacquired debt                       308                   308                 326
     Environmental                                             121                   125                 134
     Regulatory balancing accounts and other                    60                   110                  15
----------------------------------------------------------------------------------------------------------------

         Subtotal                                            1,526                 1,392               1,615
----------------------------------------------------------------------------------------------------------------

     Total                                                 $ 5,493               $ 5,166             $ 2,922
----------------------------------------------------------------------------------------------------------------
</TABLE>

Generation-related regulatory assets and liabilities are being recovered through
the CTC through March 31, 2002,  except for the rate reduction notes  regulatory
asset which will be recovered  over the terms of the rate reduction  notes.  The
non-generation  related  regulatory  assets and  liabilities are being recovered
through other components of the unbundled rates.

During the second  quarter of 1998,  SCE reduced  its  remaining  nuclear  plant
investment by $2.6 billion (as of June 30, 1998) and recorded a regulatory asset
on its balance  sheet for the same amount in  accordance  with asset  impairment
accounting  standards.  For this  impairment  assessment,  the fair value of the
investment was calculated by discounting  expected  future net cash flows.  This
reclassification had no effect on SCE's results of operations.

If during the  transition  period events were to occur that made the recovery of
these  generation-related  regulatory  assets no longer  probable,  SCE would be
required to write off the remaining balance of such assets  (approximately  $2.7
billion,  after tax, at March 31, 1999) as a one-time,  non-cash  charge against
earnings.

Regulatory Balancing Accounts

Prior to January 1, 1998, the  differences  between  CPUC-authorized  and actual
base-rate revenue from kilowatt-hour sales and CPUC-authorized and actual energy
costs were  accumulated  in balancing  accounts  until they were refunded to, or
recovered from,  utility  customers  through  authorized rate adjustments  (with
interest).  On January 1, 1998,  the balances in these  balancing  accounts were
transferred to the transition cost balancing account. Also, beginning January 1,
1998, the difference between  generation-related  revenue and generation-related
costs is being accumulated in the transition cost balancing account, effectively
eliminating  all other  balancing  accounts  except  those used to assist in the
administration of public purpose funds.  Additionally,  gains resulting from the
sale of the gas- and oil-fueled  generation  plants during 1998 were credited to
the transition cost balancing  account;  the losses are being amortized over the
remaining  transition  period and  accumulated in the transition  cost balancing
account. These transition costs are being recovered from utility customers (with
interest) through the CTC mechanism.

Income tax effects on all balancing account changes are deferred.

                                       8
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Research, Development and Demonstration (RD&D)

SCE capitalizes RD&D costs that are expected to result in plant construction. If
construction does not occur, these costs are charged to expense.

Revenue

Operating revenue includes amounts for services rendered but unbilled at the end
of each period.

Utility Plant

Plant additions,  including replacements and betterments, are capitalized.  Such
costs for utility  property  include  direct  material  and labor,  construction
overhead  and an allowance  for funds used during  construction  (AFUDC).  AFUDC
represents   the   estimated   cost  of  debt  and  equity  funds  that  finance
utility-plant  construction.  AFUDC is capitalized during plant construction and
reported in current earnings.  AFUDC is recovered in rates through  depreciation
expense over the useful life of the related asset. Depreciation of utility plant
is computed on a straight-line, remaining-life basis.

Replaced or retired  property and removal  costs less salvage are charged to the
accumulated provision for depreciation. Depreciation expense stated as a percent
of average original cost of depreciable  utility plant was 3.8% and 2.3% for the
three and twelve  months ended March 31, 1999,  respectively,  and 6.6% and 5.6%
for the three and twelve months ended March 31, 1998, respectively.

Note 2.    Regulatory Matters

Recovery of Restructuring Implementation Costs

The  independent  system  operator  (ISO)  assumed  operational  control  of the
transmission  system after the ISO and PX had begun accepting bids and schedules
for electricity  purchases on March 31, 1998. The  restructuring  implementation
costs related to the start-up and  development of the PX, which were paid by the
utilities,  were to be recovered  from all retail  customers  over the four-year
transition period.  SCE's share of the charge is $45 million,  plus interest and
fees. SCE's share of the ISO's start-up and development costs (approximately $16
million per year) will be paid over a 10-year period.  In May 1998, SCE filed an
application  with the CPUC to identify the  categories of such costs  (including
costs  related to the  implementation  of direct  access),  and to establish the
reasonableness  of those costs incurred in 1997. The CPUC split the  application
into two phases.

Two  proposed  decisions  on Phase 1, which  addressed  the  eligibility  of the
implementation  costs,  were issued on March 11, 1999.  Both proposed  decisions
reject  SCE's  request for a  determination  of  eligibility  for several  major
categories of such costs.  These proposed  decisions further state that even for
the cost  categories  they  approve  for  eligibility,  costs  incurred in those
categories  after  December 31,  1998,  would not be  eligible.  Instead,  these
proposed  decisions  would have SCE recover many of the costs  identified in its
application  from market  revenue,  although the decisions  fail to identify the
market and no specific  mechanism  or  authority  to recover such costs from any
market has yet been  established.  SCE  disagrees  with many of the  conclusions
reached in these  proposed  decisions and has filed comments to that effect with
the CPUC. A final CPUC decision is expected  later this year.  Under both of the
proposed  decisions,  the  reasonableness  of 1997  and  1998  expenditures  for
eligible  restructuring costs would be addressed in a separate application later
this year.

                                       9
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3.    Financial Instruments

Cash Equivalents

Cash and equivalents  include  tax-exempt  investments ($51 million at March 31,
1999, $78 million at December 31, 1998, and $392 million at March 31, 1998), and
time deposits and other  investments  ($71 million at March 31, 1999, $4 million
at December 31, 1998,  and $221  million at March 31, 1998) with  maturities  of
three months or less.

Derivative Financial Instruments

SCE's risk management policy allows the use of derivative financial  instruments
to manage  financial  exposure on its investments  and  fluctuations in interest
rates,  but prohibits the use of these  instruments  for  speculative or trading
purposes.

SCE  uses the  hedge  accounting  method  to  record  its  derivative  financial
instruments,   except  for  gas  call  options.  Hedge  accounting  requires  an
assessment that the transaction  reduces risk, that the derivative be designated
as a hedge at the inception of the derivative contract,  and that the changes in
the  market  value of a hedge  move in an  inverse  direction  to the item being
hedged.  Under hedge accounting,  the derivative itself is not recorded on SCE's
balance sheet.  Mark-to-market  accounting would be used if the hedge accounting
criteria were not met. Interest rate  differentials and amortization of premiums
for interest rate caps are recorded as adjustments to interest  expense.  If the
derivatives  were  terminated  before the  maturity  of the  corresponding  debt
issuance,  the realized gain or loss on the transaction  would be amortized over
the remaining term of the debt.

SCE has gas call options that  mitigate  SCE's  exposure to increases in natural
gas  prices.  Increases  in natural  gas prices  tend to  increase  the price of
electricity  purchased from the PX. The options cover various  periods from 1999
through 2001.

SCE uses the  mark-to-market  accounting method for its gas call options.  Gains
and losses  from  monthly  changes in market  prices are  recorded  as income or
expense.  However,  the costs of the  options and the market  price  changes are
included  in  the  transition  cost  balancing   account.   As  a  result,   the
mark-to-market gains or losses have no effect on earnings.

Interest  rate swaps are used to reduce the  potential  impact of interest  rate
fluctuations on  floating-rate  long-term debt. At March 31, 1999,  December 31,
1998, and March 31, 1998,  SCE had an interest rate swap  agreement  which fixed
the  interest  rate at 5.585%  for $196  million  of debt due 2008;  it  expires
February 28,  2008.  The interest  rate swap  agreement  requires the parties to
pledge collateral  according to bond rating and market interest rate changes. At
March 31, 1999,  SCE had pledged $26 million as  collateral  due to a decline in
market  interest  rates.  SCE  is  exposed  to  credit  loss  in  the  event  of
nonperformance  by the  counterparty  to the agreement,  but does not expect the
counterparty to fail to meet its obligation.


                                       10
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value of Financial Instruments

Fair values of financial instruments were:
<TABLE>
<CAPTION>

                                        March 31,                December 31,             March 31,
     In millions                          1999                       1998                   1998
--------------------------------------------------------------------------------------------------------
                                   Cost           Fair        Cost         Fair       Cost        Fair
     Instrument                    Basis          Value       Basis        Value      Basis       Value
--------------------------------------------------------------------------------------------------------

     Financial assets:
<S>                                <C>          <C>         <C>           <C>        <C>        <C>   
     Decommissioning trusts        $ 1,571      $2,311      $ 1,534        $2,240     $1,411     $2,002
     Equity investments                  2          29            7            72          9        109
     Gas call options                   37          23           39            31         47         51

     Financial liabilities:
     DOE decommissioning and
       decontamination fees        $    45      $   40      $    45       $  40      $   50     $   42
     Interest rate swap                 --          21           --          28          --         20
     Long-term debt                  5,052       5,201        5,447       5,699       5,807      6,006
     Preferred stock subject to
       mandatory redemption            256         272          256         274         275        295
--------------------------------------------------------------------------------------------------------
</TABLE>

Financial  assets are carried at their fair value based on quoted  market prices
for  decommissioning  trusts and equity  investments and on financial models for
gas call options and electricity rate swaps.  Financial liabilities are recorded
at cost. Financial  liabilities' fair values are based on: termination costs for
the interest rate swap;  brokers' quotes for long-term debt and preferred stock;
and  discounted   future  cash  flows  for  U.S.   Department  of  Energy  (DOE)
decommissioning and decontamination fees. Due to their short maturities, amounts
reported for cash equivalents and short-term debt approximate fair value.

Gross unrealized holding gains (losses) on financial assets were:
<TABLE>
<CAPTION>

                                                     March 31,        December 31,         March 31,
     In millions                                        1999              1998               1998
------------------------------------------------------------------------------------------------------
     Decommissioning trusts:
<S>                                                     <C>               <C>               <C>  
     Municipal bonds                                    $208              $196              $ 158
     Stocks                                              383               365                315
     U.S. government issues                              128               115                109
     Short-term and other                                 21                30                  9
------------------------------------------------------------------------------------------------------
                                                         740               706                591
     Equity investments                                   27                65                100
     Gas call options                                    (14)               (8)                 4
------------------------------------------------------------------------------------------------------
     Total                                              $753              $763               $695
------------------------------------------------------------------------------------------------------
</TABLE>

There were no  unrealized  holding  losses on  financial  assets for the periods
presented,  other than the unrealized  holding losses on the gas call options at
March 31, 1999, and December 31, 1998.

In June 1998, a new accounting  standard for derivative  instruments and hedging
activities  was issued.  The new  standard,  which will be effective  January 1,
2000,  requires all  derivatives  to be  recognized on the balance sheet at fair
value.  Gains or losses  from  changes  in fair  value  would be  recognized  in
earnings  in the  period of change  unless the  derivative  is  designated  as a
hedging instrument.  Gains or losses from hedges of a forecasted  transaction or
foreign  currency  exposure  would be reflected in other  comprehensive  income.
Gains or  losses  from  hedges  of a  recognized  asset or  liability  or a firm
commitment  would be reflected in earnings  for the  ineffective  portion of the
hedge. SCE anticipates that most of its derivatives under the new standard would
qualify for hedge  accounting.  SCE expects to recover in rates any market price
changes from its derivatives that could potentially affect earnings.

                                       11
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Investments

Net unrealized  gains (losses) in equity  investments are recorded as a separate
component  of  shareholders'   equity  under  the  caption:   Accumulated  other
comprehensive income. Unrealized gains and losses on decommissioning trust funds
are recorded in the accumulated provision for decommissioning.

All investments are classified as available-for-sale.

Long-Term Debt

California  law  prohibits  SCE  from  incurring  or  guaranteeing  debt for its
nonutility affiliates.

Almost all SCE properties are subject to a trust indenture lien. SCE has pledged
first and refunding  mortgage bonds as security for borrowed funds obtained from
pollution-control  bonds issued by government agencies.  SCE uses these proceeds
to  finance  construction  of  pollution-control  facilities.  Bondholders  have
limited  discretion in redeeming  certain  pollution-control  bonds, and SCE has
arranged with securities dealers to remarket or purchase them if necessary.

Debt premium, discount and issuance expenses are amortized over the life of each
issue.  Under CPUC  rate-making  procedures,  debt  reacquisition  expenses  are
amortized over the remaining life of the reacquired debt or, if refinanced,  the
life of the new debt.

Commercial  paper intended to be refinanced for a period  exceeding one year and
used to finance  nuclear fuel  scheduled to be used more than one year after the
balance sheet date is classified as long-term debt.

Long-term  debt   maturities  and   sinking-fund   requirements   for  the  five
twelve-month   periods  following  March  31,  1999,  are:  2000--$716  million;
2001--$448  million;  2002--$446  million;  2003--$446  million;  and 2004--$371
million.

In December 1997, SCE Funding LLC, a special purpose entity, of which SCE is the
sole  member,  issued  approximately  $2.5  billion of rate  reduction  notes to
Bankers Trust Company of California,  as certificate  trustee for the California
Infrastructure  and  Economic  Development  Bank  Special  Purpose  Trust  SCE-1
(Trust),  which  is a  special  purpose  entity  established  by  the  State  of
California.  The terms of the rate reduction notes generally mirror the terms of
the  pass-through  certificates  issued  by the  Trust,  which are known as rate
reduction  certificates.  The proceeds of the rate reduction  notes were used by
SCE Funding LLC to purchase  from SCE an  enforceable  right known as transition
property.  Transition  property is a current  property right created pursuant to
the  restructuring  legislation  and a financing  order of the CPUC and consists
generally of the right to be paid a specified amount from a non-bypassable  rate
charged to residential  and small  commercial  customers.  In spite of the legal
sale of the transition property by SCE to SCE Funding LLC, the amounts reflected
as assets on SCE's  balance  sheet  have not been  reduced  by the amount of the
transition  property sold,  and the  liabilities of SCE Funding LLC for the rate
reduction notes are for accounting  purposes reflected as long-term  liabilities
on the  consolidated  balance sheets of SCE. SCE used the proceeds from the sale
of the  transition  property  to retire  debt and  equity  securities.  The rate
reduction notes are secured solely by the transition  property and certain other
assets  of  SCE  Funding  LLC,  and  there  is no  recourse  to  SCE  or  Edison
International.

Although SCE Funding LLC is consolidated  with SCE in the financial  statements,
as required by  generally  accepted  accounting  principles,  SCE Funding LLC is
legally  separate from SCE, and its assets are not available to creditors of SCE
or Edison International,  and the transition property is legally not an asset of
SCE or Edison International.



                                       12
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Long-term debt consisted of:
<TABLE>
<CAPTION>

                                                        March 31,         December 31,        March 31,
     In millions                                          1999                1998              1998
---------------------------------------------------------------------------------------------------------

     First and refunding mortgage bonds:
<S>                                                    <C>                 <C>                <C>   
        1999 - 2026 (5.625% to 7.5%)                    $1,550              $1,550             $1,700
     Rate reduction notes:
        1999 - 2007 (6.14% to 6.42%)                     2,146               2,217              2,451
     Pollution-control bonds:
        1999 - 2027 (5.4% to 7.2% and variable)          1,201               1,201              1,202
     Funds held by trustees                                 (2)                 (2)                (2)
     Debentures and notes:
        2000 - 2006 (5.875% to 8.25%)                      700                 700                870
     Subordinated debentures:
        2044 (8.375%)                                      100                 100                100
     Commercial paper for nuclear fuel                      99                 108                 83
     Long-term debt due within one year                   (716)               (401)              (568)
     Unamortized debt discount-- net                       (26)                (26)               (29)
---------------------------------------------------------------------------------------------------------
     Total                                              $5,052              $5,447             $5,807
---------------------------------------------------------------------------------------------------------
</TABLE>

On April 6, 1999, SCE issued $300 million of 6.65% notes, due 2029. On April 29,
1999, SCE issued $56 million of 5.125% pollution-control bonds, due 2029.

Short-Term Debt

SCE has lines of credit it can use at negotiated  or bank index rates.  At March
31, 1999, available lines totaled $1.3 billion, with $800 million for short-term
debt and  $500  million  available  for the  long-term  refinancing  of  certain
variable-rate pollution-control debt.

Short-term debt consisted of commercial paper used to finance fuel  inventories,
balancing account  undercollections  and general cash  requirements.  Commercial
paper outstanding at March 31, 1999,  December 31, 1998, and March 31, 1998, was
$732 million,  $581 million and $428  million,  respectively.  Commercial  paper
intended to finance  nuclear fuel  scheduled to be used more than one year after
the balance  sheet date is  classified  as  long-term  debt in  connection  with
refinancing  terms under five-year term lines of credit with  commercial  banks.
Weighted-average  interest  rates  were 4.9%,  6.0% and 5.8% at March 31,  1999,
December 31, 1998, and March 31, 1998, respectively.

Note 4.    Equity

The CPUC regulates  SCE's capital  structure,  limiting the dividends it may pay
Edison  International.  At March  31,  1999,  SCE had the  capacity  to pay $700
million in additional  dividends and continue to maintain its authorized capital
structure.

In 1998, SCE  implemented a recently  issued  accounting  standard that requires
companies to report comprehensive income. Implementation of the new standard had
no effect on SCE's results of operations or financial position.


                                       13
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Changes in SCE's common  shareholder's  equity for the three-month periods ended
March 31, 1998, and 1999, were as follows:
<TABLE>
<CAPTION>

                                                                         Accumulated                       Total
                                                         Additional         Other                         Common
                                             Common        Paid-in      Comprehensive     Retained     Shareholder's
In millions                                   Stock        Capital         Income         Earnings        Equity
---------------------------------------------------------------------------------------------------------------------
<S>                                          <C>          <C>             <C>            <C>             <C>   
Balance at December 31, 1997                 $2,168       $  334          $   48         $1,408          $3,958
---------------------------------------------------------------------------------------------------------------------
Net income                                                                                  105             105
Unrealized gain on securities                                                 19                             19
     Tax effect                                                               (8)                            (8)
Dividends declared on common stock                                                          (96)            (96)
Dividends declared on preferred stock                                                        (7)             (7)
Stock option appreciation                                                                    (2)             (2)
---------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1998                    $2,168       $  334          $   59         $1,408          $3,969
---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998                 $2,168       $  334          $   39           $794          $3,335
---------------------------------------------------------------------------------------------------------------------
Net income                                                                                   83              83
Unrealized gain on securities                                                 (8)                            (8)
     Tax effect                                                                2                              2
Reclassified adjustment for gains
     included in net income                                                  (29)                           (29)
     Tax effect                                                               12                             12
Dividends declared on common stock                                                         (170)           (170)
Dividends declared on preferred stock                                                        (6)             (6)
Stock option appreciation                                                                    (1)             (1)
---------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1999                    $2,168       $  334          $   16        $   700          $3,218
---------------------------------------------------------------------------------------------------------------------

Changes in SCE's common  shareholder's equity for the twelve-month periods ended
March 31, 1998, and 1999, were as follows:

---------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1997                    $2,168       $  178          $   40         $2,603          $4,989
---------------------------------------------------------------------------------------------------------------------
Net income                                                                                  590             590
Unrealized gain on securities                                                 36                             36
     Tax effect                                                              (17)                           (17)
Dividends declared on common stock                                                       (1,750)         (1,750)
Dividends declared on preferred stock                                                       (28)            (28)
Stock option appreciation                                                                    (2)             (2)
Required capital stock expense and other                                                     (5)             (5)
Additional investment from parent company                    156                                            156
---------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1998                    $2,168       $  334          $   59         $1,408          $3,969
---------------------------------------------------------------------------------------------------------------------
Net income                                                                                  493             493
Unrealized gain on securities                                                (14)                           (14)
     Tax effect                                                                6                              6
Reclassified adjustment for gains included
     in net income                                                           (59)                           (59)
     Tax effect                                                               24                             24
Dividends declared on common stock                                                       (1,174)         (1,174)
Dividends declared on preferred stock                                                       (24)            (24)
Stock option appreciation                                                                    (3)             (3)
---------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1999                    $2,168       $  334          $   16           $700          $3,218
---------------------------------------------------------------------------------------------------------------------
</TABLE>

Authorized  common  stock is 560 million  shares  with no par value.  Authorized
shares of preferred and  preference  stock are: $25  cumulative  preferred -- 24
million;  $100 cumulative preferred -- 12 million; and 

                                       14
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

preference  -- 50  million.  All  cumulative  preferred  stocks are  redeemable.
Mandatorily redeemable preferred stocks are subject to sinking-fund  provisions.
When  preferred  shares are  redeemed,  the premiums  paid are charged to common
equity.

Preferred  stock  redemption  requirements  for the  five  twelve-month  periods
following March 31, 1999, are: 2000 through 2002-- zero; 2003--$109 million; and
2004-- $9 million.

Cumulative preferred stock consisted of:
<TABLE>
<CAPTION>

                                                               March 31,         December 31,          March 31,
     Dollars in millions, except per-share amounts               1999                1998                1998
-----------------------------------------------------------------------------------------------------------------
                                        March 31, 1999
                                 ---------------------------        
                                   Shares         Redemption
                                 Outstanding         Price  
                                 ---------------------------  

     Not subject to mandatory redemption:
     $25 par value:
<S>                              <C>              <C>             <C>                 <C>               <C>  
     4.08% Series                1,000,000        $  25.50        $  25               $ 25              $  25
     4.24                        1,200,000           25.80           30                 30                 30
     4.32                        1,653,429           28.75           41                 41                 41
     4.78                        1,296,769           25.80           33                 33                 33
     5.80                               --           --              --                 --                 55
-----------------------------------------------------------------------------------------------------------------
     Total                                                        $ 129               $129              $184
-----------------------------------------------------------------------------------------------------------------

     Subject to mandatory redemption:
     $100 par value:
     6.05%                         750,000        $ 100.00        $   75              $ 75              $ 75
     6.45                        1,000,000          100.00           100               100               100
     7.23                          807,000          100.00            81                81               100
----------------------------------------------------------------------------------------------------------------
     Total                                                        $  256              $256              $275
----------------------------------------------------------------------------------------------------------------
</TABLE>

In the third quarter of 1998, 10,000 shares of Series 7.23% preferred stock were
redeemed.  In the second  quarter of 1998,  2.2  million  shares of Series  5.8%
preferred stock and 183,000 shares of Series 7.23% were redeemed.  In the second
quarter of 1997, 4 million shares of Series 7.36% preferred stock were redeemed.
There were no preferred stock issuances for the periods presented.

Note 5.  Income Taxes

SCE and its subsidiaries will be included in its consolidated federal income tax
and  combined  state   franchise  tax  returns.   Under  income  tax  allocation
agreements, each subsidiary calculates its own tax liability.

Income tax expense  includes the current tax liability  from  operations and the
change in deferred  income  taxes  during the year.  Investment  tax credits are
amortized over the lives of the related properties.


                                       15
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of the net accumulated deferred income tax liability were:
<TABLE>
<CAPTION>

                                                            March 31,           December 31,        March 31,
In millions                                                   1999                  1998              1998
--------------------------------------------------------------------------------------------------------------
Deferred tax assets:
<S>                                                        <C>                      <C>                <C> 
Property-related                                           $   191                  $197               $199
Unrealized gains or losses                                     386                   387                326
Investment tax credits                                         148                   152                157
Regulatory balancing accounts                                  107                    96                 78
Decommissioning-related                                        126                   126                117
Other                                                          380                   473                333
--------------------------------------------------------------------------------------------------------------
Total                                                       $1,338                $1,431             $1,210
--------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Property-related                                            $2,927                $3,005             $3,139
Capitalized software costs                                     206                   196                144
Other                                                        1,056                   948                859
--------------------------------------------------------------------------------------------------------------
Total                                                       $4,189                $4,149             $4,142
--------------------------------------------------------------------------------------------------------------
Accumulated deferred income taxes-- net                     $2,851                $2,718             $2,932
--------------------------------------------------------------------------------------------------------------
Classification of accumulated deferred income taxes:
Included in deferred credits                                $2,941                $2,993             $2,837
Included in current assets                                      90                   275                (95)
</TABLE>


The current and deferred components of income tax expense were:
<TABLE>
<CAPTION>

                                                       3 Months Ended                     12 Months Ended
                                                          March 31,                          March 31,
---------------------------------------------------------------------------------------------------------------
In millions                                        1999              1998             1999              1998
---------------------------------------------------------------------------------------------------------------
Current:
<S>                                               <C>                <C>              <C>               <C> 
Federal                                           $  (6)             $ 24             $420              $374
State                                                (3)                4               94                85
---------------------------------------------------------------------------------------------------------------
                                                     (9)               28              514               459
---------------------------------------------------------------------------------------------------------------
Deferred -- federal and state:
Accrued charges                                      50               (30)              37               (61)
Ad valorem lien date adjustment                       5                 8               (5)                8
Amortization of regulatory assets                     3                28               39                28
Contributions in aid of construction                  4                 6               (8)               (2)
Depreciation                                        (46)              (73)            (142)             (107)
Investment and energy tax credits-- net             (11)               (4)             (81)              (20)
Rate phase-in plan                                   --                --               --               (15)
Regulatory balancing accounts                        45               109              112               225
State tax-- privilege year                           35                32                3                 5
Unbilled revenue                                     13                14              (68)               11
Other                                                (1)                2                7                22
---------------------------------------------------------------------------------------------------------------
                                                     97                92             (106)               94
---------------------------------------------------------------------------------------------------------------
Total income tax expense                          $  88              $120             $408              $553
---------------------------------------------------------------------------------------------------------------
Classification of income taxes:
Included in operating income                      $  81              $126             $401              $612
Included in other income                              7                (6)               7               (59)
</TABLE>

The composite  federal and state  statutory  income tax rate was 40.551% for the
three- and twelve-month periods ended March 31, 1999, and 1998.

                                       16
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The federal  statutory  income tax rate is  reconciled to the effective tax rate
below:
<TABLE>
<CAPTION>

                                                         3 Months Ended                   12 Months Ended
                                                            March 31,                        March 31,
---------------------------------------------------------------------------------------------------------------
                                                     1999              1998           1999              1998
---------------------------------------------------------------------------------------------------------------
<S>                                                  <C>               <C>            <C>               <C>  
     Federal statutory rate                          35.0%             35.0%          35.0%             35.0%
     Ad valorem lien date adjustment                  2.2               0.7           (0.5)              0.1
     Amortization of regulatory assets                1.9              12.3            4.3               2.4
     Capitalized software                            (0.8)             (2.7)           0.1              (1.3)
     Property-related and other                      12.5               3.8            6.9               7.3
     Investment and energy tax credits               (6.1)             (1.9)          (7.9)             (1.7)
     State tax-- net of federal deduction             6.3               5.3            7.2               6.4
---------------------------------------------------------------------------------------------------------------
     Effective tax rate                              51.0%             52.5%          45.1%             48.2%
---------------------------------------------------------------------------------------------------------------
</TABLE>

Note 6.   Employee Compensation and Benefit Plans

Employee Savings Plan

SCE has a 401(k)  defined  contribution  savings  plan  designed  to  supplement
employees'  retirement  income.  The plan received employer  contributions of $6
million and $19 million for the three and twelve  months  ended March 31,  1999,
respectively;  and $4 million and $15  million  for the three and twelve  months
ended March 31, 1998, respectively.

Pension Plan

SCE has a  noncontributory,  defined benefit pension plan that covers  employees
meeting minimum service requirements.  In April 1999, SCE adopted a cash balance
feature for its  non-represented  employees.  SCE recognizes  pension expense as
calculated by the actuarial  method used for ratemaking.  In 1998, SCE adopted a
new  accounting  standard that revises the disclosure  requirements  for pension
plans. Prior periods have been restated.

                                       17
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Information on plan assets and benefit obligations is shown below:
<TABLE>
<CAPTION>

                                                         3 Months Ended         Year Ended         3 Months Ended
                                                            March 31,          December 31,           March 31,
In millions                                                   1999                 1998                 1998
-------------------------------------------------------------------------------------------------------------------

Change in benefit obligation
<S>                                                          <C>                 <C>                   <C>    
Benefit obligation at beginning of period                    $  2,251            $ 2,094               $ 2,094
Service cost                                                       18                 59                    14
Interest cost                                                      38                141                    35
Actuarial loss                                                     --                 90                    --
Benefits paid                                                     (33)              (133)                  (35)
-------------------------------------------------------------------------------------------------------------------
Benefit obligation at end of period                          $  2,274            $ 2,251               $ 2,108
-------------------------------------------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at beginning of period               $2,552            $ 2,298               $ 2,298
Actual return on plan assets                                       57                334                   266
Employer contributions                                             21                 53                    17
Benefits paid                                                     (33)              (133)                  (35)
-------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of period                   $  2,597            $ 2,552               $ 2,546
-------------------------------------------------------------------------------------------------------------------
Funded status                                                $    323            $   301               $   438
Unrecognized net loss (gain)                                     (379)              (372)                 (524)
Unrecognized transition obligation (17-year amortization)          32                 33                    37
Unrecognized prior service cost                                   164                168                   179
------------------------------------------------------------------------------------------------------------------
Recorded asset (liability)                                   $    140            $   130               $   130
-------------------------------------------------------------------------------------------------------------------
Discount rate                                                   6.75%               6.75%                  7.0%
Rate of compensation increase                                   5.0%                5.0%                   5.0%
Expected return on plan assets                                  7.5%                7.5%                   8.0%
</TABLE>

The components of pension expense were:
<TABLE>
<CAPTION>

                                                              3 Months Ended              12 Months Ended
                                                                 March 31,                   March 31,
-------------------------------------------------------------------------------------------------------------------

In millions                                               1999           1998          1999             1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>            <C>            <C>              <C>  
Service cost                                             $  18          $  14          $  63            $  47
Interest cost                                               38             35            144              139
Expected return on plan assets                             (48)           (45)          (173)            (165)
Net amortization and deferral                                3              4             13               13
-------------------------------------------------------------------------------------------------------------------
Pension expense under accounting standards                  11              8             47               34
Regulatory adjustment-- deferred                             2              5              8               18
-------------------------------------------------------------------------------------------------------------------
Net pension expense recognized                           $  13          $  13          $  55            $  52
-------------------------------------------------------------------------------------------------------------------
</TABLE>



                                       18
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Postretirement Benefits Other Than Pensions

Employees  retiring  at or after  age 55 with at least 10 years of  service  (or
those  eligible under a 1996 special  voluntary  early  retirement  program) are
eligible for  postretirement  health and dental care,  life  insurance and other
benefits.  In 1998,  SCE  adopted a new  accounting  standard  that  revises the
disclosure  requirements for  postretirement  benefit plans.  Prior periods have
been restated.

Information on plan assets and benefit obligations is shown below:
<TABLE>
<CAPTION>

                                                       3 Months Ended        Year Ended         3 Months Ended
                                                          March 31,         December 31,           March 31,
     In millions                                            1999                1998                 1998
----------------------------------------------------------------------------------------------------------------
     Change in benefit obligation
<S>                                                       <C>                <C>                   <C>     
     Benefit obligation at beginning of period            $  1,545           $  1,533              $  1,533
     Service cost                                               11                 41                     9
     Interest cost                                              26                 99                    26
     Actuarial loss (gain)                                      --                (74)                   --
     Benefits paid                                             (15)               (54)                  (16)
----------------------------------------------------------------------------------------------------------------
     Benefit obligation at end of period                  $  1,567           $  1,545              $  1,552
----------------------------------------------------------------------------------------------------------------
     Change in plan assets
     Fair value of plan assets at beginning of period     $  1,029           $    815              $    815
     Actual return on plan assets                               19                147                    16
     Employer contributions                                     25                121                    27
     Benefits paid                                             (15)               (54)                  (16)
----------------------------------------------------------------------------------------------------------------
     Fair value of plan assets at end of period           $  1,058           $  1,029              $    842
---------------------------------------------------------------------------------------------------------------
     Funded status                                        $   (509)          $   (516)             $   (710)
     Unrecognized net loss                                      84                 84                   243
     Unrecognized transition obligation (20-year
        amortization)                                          369                376                   396
----------------------------------------------------------------------------------------------------------------
     Recorded asset (liability)                           $    (56)          $    (56)             $    (71)
----------------------------------------------------------------------------------------------------------------
     Discount rate                                             6.75%             6.75%                  7.0%
     Expected return on plan assets                            7.5%              7.5%                   8.0%
</TABLE>

The components of postretirement benefits other than pensions expense were:
<TABLE>
<CAPTION>

                                                           3 Months Ended                   12 Months Ended
                                                              March 31,                        March 31,
------------------------------------------------------------------------------------------------------------------
     In millions                                        1999             1998           1999              1998
------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>               <C>            <C>               <C> 
     Service cost                                      $  11             $  9           $  43             $ 32
     Interest cost                                        26               26              99              100
     Expected return on plan assets                      (19)             (16)            (65)             (53)
     Amortization of loss                                 --                1              --                3
     Amortization of transition obligation                 7                7              27               27
------------------------------------------------------------------------------------------------------------------
     Total expense                                     $  25             $ 27            $104             $109
------------------------------------------------------------------------------------------------------------------
</TABLE>

The  assumed  rate of future  increase  in the  per-capita  cost of health  care
benefits is 8.25% for 1999,  gradually  decreasing  to 5.0% for 2009 and beyond.
Increasing  the  health  care cost  trend  rate by one  percentage  point  would
increase the  accumulated  obligation  as of March 31, 1999, by $268 million and
annual  aggregate  service and  interest  costs by $33 million.  Decreasing  the
health  care  cost  trend  rate  by one  percentage  point  would  decrease  the
accumulated  obligation  as of  March  31,  1999,  by $214  million  and  annual
aggregate service and interest costs by $25 million.

                                       19
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Option Plans

In  April  1998,   Edison   International   shareholders   approved  the  Edison
International   Equity  Compensation  Plan.  The  plan  replaces  the  Long-Term
Incentive Compensation Program,  consisting of officer, director, and management
plans,  which was adopted by Edison  International  shareholders in 1992. No new
awards will be made under the prior program;  however,  it will remain in effect
as long as any awards remain outstanding under the prior program.

The prior program  participated in the use of 8.2 million shares of common stock
reserved for potential  issuance  under various stock  compensation  programs to
directors,  officers  and  senior  managers  of  Edison  International  and  its
affiliates.  Under  these  programs,  options  on 2.9  million  shares of Edison
International  common  stock are  currently  outstanding  to officers and senior
managers.

The new plan  authorizes  the annual  issuance of shares equal to one percent of
the issued and  outstanding  shares of Edison  International  common stock as of
December 31 of the prior year. This  authorization  is cumulative so that to the
extent  shares are not  needed to meet new plan  requirements  in any year,  the
excess  authorized  shares  will  carry  over to  subsequent  years  until  plan
termination.  One  percent of the issued and  outstanding  Edison  International
common stock on December 31,  1998,  and December 31, 1997,  was 3.5 million and
3.8 million  shares,  respectively.  Under the new plan,  options on 4.0 million
shares  of  Edison  International  common  stock are  currently  outstanding  to
officers and senior managers of SCE.

Each  option may be  exercised  to  purchase  one share of Edison  International
common stock,  and is exercisable at a price equivalent to the fair market value
of the underlying  stock at the date of grant.  All Edison  International  stock
options granted prior to 1999 include a dividend equivalent feature.  Generally,
for options issued before 1994, amounts equal to dividends accrue on the options
at the same  time and at the same  rate as would be  payable  on the  number  of
shares of Edison  International common stock covered by the options. The amounts
accumulate without interest. For Edison International stock options issued after
1993,  dividend  equivalents are subject to reduction unless certain shareholder
return   performance   criteria  are  met.   Beginning   with  the  1999  Edison
International  stock  option  awards,  some  stock  options  include a  dividend
equivalent feature,  and some stock options do not include a dividend equivalent
feature.

The new plan's stock  options have a 10-year term with  one-fourth  of the total
award  vesting  after each of the first four years of the award term.  The prior
program's  stock  options have a 10-year term with  one-third of the total award
vesting  after each of the first three  years of the award term.  If an optionee
retires,  dies or is permanently and totally disabled during the vesting period,
the unvested  options will vest and be  exercisable to the extent of 1/36 (prior
program)  or 1/48 (the new plan) of the  grant  for each full  month of  service
during the vesting period.

Unvested  options  of any  person  who has  served  in the  past  on the  Edison
International  or SCE  Management  Committee  (which was dissolved in 1993) will
vest and be  exercisable  upon the member's  retirement,  death or permanent and
total disability. Upon retirement,  death or permanent and total disability, the
vested  options may continue to be exercised  within their original terms by the
recipient or beneficiary. If an optionee is terminated other than by retirement,
death or  permanent  and total  disability,  options  which had vested as of the
prior  anniversary  date of the grant are forfeited  unless exercised within 180
days of the date of termination.  All unvested options are forfeited on the date
of termination.

SCE measures  compensation  expense  related to stock-based  compensation by the
intrinsic   value   method.    Compensation    expense    recorded   under   the
stock-compensation  program  was $2  million  and $7  million  for the three and
twelve months ended March 31, 1999, respectively,  and $1 million and $5 million
for the three and twelve months ended March 31, 1998, respectively.

                                       20
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-based compensation expense under the fair-value method of accounting would
have  resulted in pro forma  earnings  of $83  million and $493  million for the
three and twelve months ended March 31, 1999, respectively; and $105 million and
$591 million for the three and twelve months ended March 31, 1998, respectively.

The fair value for each option  granted,  reflecting the basis for the above pro
forma  disclosures,  was determined on the date of grant using the Black-Scholes
option-pricing  model.  The following  assumptions were used in determining fair
value through the model:

                                                  12 Months Ended
                                                     March 31,
-------------------------------------------------------------------------------
                                      1999                             1998
-------------------------------------------------------------------------------

 Expected life                       7 years                          7 years
 Risk-free interest rate           4.7% - 5.6%                         5.6%
 Expected volatility                17% - 18%                           17%
-------------------------------------------------------------------------------

The application of fair-value  accounting to calculate the pro forma disclosures
above is not an  indication of future income  statement  effects.  The pro forma
disclosures  do not reflect the effect of fair-value  accounting on  stock-based
compensation awards granted prior to 1995.

Note 7.    Jointly Owned Utility Projects

SCE owns interests in several generating  stations and transmission  systems for
which each participant  provides its own financing.  SCE's share of expenses for
each project is included in the consolidated statements of income.

The investment in each project, as included in the consolidated balance sheet as
of March 31, 1999, was:
<TABLE>
<CAPTION>

                                                 Original           Accumulated
                                                  Cost of        Depreciation and       Under        Ownership
     In millions                                 Facility          Amortization     Construction     Interest
---------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------
     Transmission systems:
<S>                                               <C>                  <C>              <C>             <C>
       Eldorado                                   $   30               $    6           $    4          60%
       Pacific Intertie                              238                   79                5          50
     Generating stations:
       Four Corners Units 4 and 5 (coal)             459                  299                2          48
       Mohave (coal)                                 314                  190                8          56
       Palo Verde (nuclear)(1)                     1,606                  970               14          16
       San Onofre (nuclear)(1)                     4,221                2,890               66          75
---------------------------------------------------------------------------------------------------------------
     Total                                        $6,868               $4,434           $   99
---------------------------------------------------------------------------------------------------------------
</TABLE>

     (1)Reported as "Unamortized nuclear investment -- net."

                                       21
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8.    Leases

SCE has operating leases,  primarily for vehicles with varying terms, provisions
and expiration dates.  Estimated remaining  commitments for noncancelable leases
at March 31, 1999, were:

         Year Ended December 31,                          In millions
-------------------------------------------------------------------------------
         1999                                                 $ 10
         2000                                                   11
         2001                                                    8
         2002                                                    5
         2003                                                    3
         Thereafter                                              6
-------------------------------------------------------------------------------
         Total future commitments                             $ 43
-------------------------------------------------------------------------------

Note 9.    Commitments

Nuclear Decommissioning

Decommissioning is estimated to cost $1.9 billion in current-year dollars, based
on  site-specific  studies  performed  in 1998 for San  Onofre  and Palo  Verde.
Changes in the estimated costs,  timing of  decommissioning,  or the assumptions
underlying these estimates could cause material revisions to the estimated total
cost to  decommission  in the  near  term.  SCE  estimates  that  it will  spend
approximately $8.6 billion through 2060 to decommission its nuclear  facilities.
This estimate is based on SCE's current dollar  decommissioning costs, escalated
at rates ranging from 0.3% to 10.0%  (depending  on the cost element)  annually.
These costs are expected to be funded from independent  decommissioning  trusts,
which currently  receive  contributions of approximately  $100 million per year.
SCE estimates annual after-tax earnings on the decommissioning  funds of 3.9% to
4.9%.

SCE plans to decommission its nuclear generating  facilities by a prompt removal
method  authorized  by the Nuclear  Regulatory  Commission.  Decommissioning  is
scheduled to begin in 2013 for San Onofre Units 2 and 3, and 2025 at Palo Verde.
In  December  1998,  SCE  requested  the CPUC's  approval  to access its nuclear
decommissioning  trust  funds to commence  decommissioning  of San Onofre Unit 1
(shut down in 1992 pursuant to a CPUC agreement) in 2000.

Decommissioning  costs,  which are accrued and recovered through  non-bypassable
customer rates over the term of each nuclear facility's  operating license,  are
recorded as a component of depreciation expense.

Decommissioning  expense  was $39  million  and $164  million  for the three and
twelve  months  ended  March 31,  1999,  respectively,  and $40 million and $158
million for the three and twelve months ended March 31, 1998, respectively.  The
accumulated provision for decommissioning, excluding San Onofre Unit 1, was $1.3
billion at March 31, 1999,  $1.2 billion at December 31, 1998,  and $1.1 billion
at March 31, 1998. The estimated costs to  decommission  San Onofre Unit 1 ($368
million) are recorded as a liability.

Decommissioning  funds  collected  in rates are  placed in  independent  trusts,
which,  together  with  accumulated  earnings,   will  be  utilized  solely  for
decommissioning.

Trust investments (cost basis) include:
<TABLE>
<CAPTION>

                                             Maturity              March 31,      December 31,        March 31,
     In millions                               Dates                 1999             1998              1998
----------------------------------------------------------------------------------------------------------------
<S>                                         <C>                    <C>              <C>                <C>   
     Municipal bonds                        2000 - 2033            $   581          $  547             $  470
     Stocks                                     --                     538             550                563
     U.S. government issues                 1999 - 2029                396             355                363
     Short-term and other                   1999 - 2030                 56              82                 15
----------------------------------------------------------------------------------------------------------------
     Total                                                         $ 1,571          $1,534             $1,411
----------------------------------------------------------------------------------------------------------------
</TABLE>

                                       22
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Trust fund earnings (based on specific  identification)  increase the trust fund
balance and the accumulated provision for decommissioning. Net earnings were $14
million and $61 million for the three and twelve  months  ended March 31,  1999,
respectively;  and $15 million  and $58 million for the three and twelve  months
ended March 31, 1998, respectively. Proceeds from sales of securities (which are
reinvested)  were $379 million and $1.4 billion for the three and twelve  months
ended March 31,  1999,  respectively;  and $208 million and $656 million for the
three and twelve months ended March 31, 1998, respectively. Approximately 90% of
the trust fund contributions were tax-deductible.

Other Commitments

SCE has fuel supply  contracts  which  require  payment only if the fuel is made
available for purchase.

SCE  has   power-purchase   contracts   with   certain   qualifying   facilities
(cogenerators  and small power producers) and other  utilities.  These contracts
provide  for  capacity   payments  if  a  facility  meets  certain   performance
obligations and energy payments based on actual power supplied to SCE. There are
no requirements to make debt-service payments.

SCE  has  unconditional  purchase  obligations  for  part  of  a  power  plant's
generating  output, as well as firm  transmission  service from another utility.
Minimum  payments are based,  in part, on the  debt-service  requirements of the
provider,  whether  or not the  plant  or  transmission  line is  operable.  The
purchased-power  contract is expected to provide  approximately  5.5% of current
and estimated future  operating  capacity.  SCE's minimum  commitment under both
contracts is approximately $172 million through 2017.

Certain commitments for the years 1999 through 2003 are estimated below:
<TABLE>
<CAPTION>

     In millions                                  1999          2000          2001           2002         2003
----------------------------------------------------------------------------------------------------------------
<S>                                               <C>            <C>          <C>            <C>          <C> 
     Projected construction expenditures          $916           $808         $709           $671         $623
     Fuel supply contracts                         161            137          124            141          124
     Purchased-power capacity payments             758            787          797            703          689
     Unconditional purchase obligations              6              7            7              6            7
----------------------------------------------------------------------------------------------------------------
</TABLE>

Note 10.   Contingencies

In addition to the matters  disclosed in these  notes,  SCE is involved in other
legal,  tax and regulatory  proceedings  before various courts and  governmental
agencies  regarding  matters  arising in the ordinary  course of  business.  SCE
believes the outcome of these proceedings will not materially affect its results
of operations or liquidity.

Environmental Protection

SCE is subject to numerous environmental laws and regulations,  which require it
to incur substantial costs to operate existing facilities, construct and operate
new  facilities,  and  mitigate or remove the effect of past  operations  on the
environment.

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


                                       23
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SCE's recorded  estimated minimum liability to remediate its 49 identified sites
is $169 million.  The ultimate costs to clean up SCE's identified sites may vary
from its  recorded  liability  due to  numerous  uncertainties  inherent  in the
estimation  process,  such as:  the  extent  and  nature of  contamination;  the
scarcity of reliable data for identified sites; the varying costs of alternative
cleanup  methods;   developments   resulting  from  investigatory  studies;  the
possibility of  identifying  additional  sites;  and the time periods over which
site  remediation  is  expected  to  occur.  SCE  believes  that,  due to  these
uncertainties,  it is  reasonably  possible  that cleanup costs could exceed its
recorded liability by up to $285 million. The upper limit of this range of costs
was  estimated  using  assumptions  least  favorable  to SCE  among a  range  of
reasonably  possible  outcomes.  SCE has sold  all of its  gas-  and  oil-fueled
generation  plants and has retained some liability  associated with the divested
properties.

The CPUC allows SCE to recover  environmental-cleanup  costs at 41 of its sites,
representing  $87  million  of its  recorded  liability,  through  an  incentive
mechanism (SCE may request to include additional  sites).  Under this mechanism,
SCE will recover 90% of cleanup costs through customer rates;  shareholders fund
the remaining  10%, with the  opportunity  to recover these costs from insurance
carriers and other third parties.  SCE has successfully settled insurance claims
with all  responsible  carriers.  Costs  incurred at SCE's  remaining  sites are
expected to be recovered  through  customer rates. SCE has recorded a regulatory
asset of $137  million for its  estimated  minimum  environmental-cleanup  costs
expected to be recovered through customer rates.

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

SCE  expects to clean up its  identified  sites over a period of up to 30 years.
Remediation  costs in each of the next several  years are expected to range from
$4 million to $10  million.  Recorded  costs for the  twelve-month  period ended
March 31, 1999, were $9 million.

Based on currently  available  information,  SCE believes it is unlikely that it
will incur  amounts  in excess of the upper  limit of the  estimated  range and,
based upon the CPUC's regulatory treatment of  environmental-cleanup  costs, SCE
believes that costs ultimately  recorded will not materially  affect its results
of operations or financial position.  There can be no assurance,  however,  that
future developments,  including  additional  information about existing sites or
the  identification  of new sites,  will not require material  revisions to such
estimates.

Nuclear Insurance

Federal  law limits  public  liability  claims  from a nuclear  incident to $9.8
billion.  SCE and other owners of the San Onofre and Palo Verde  nuclear  plants
have purchased the maximum private primary  insurance  available ($200 million).
The  balance is covered by the  industry's  retrospective  rating plan that uses
deferred  premium charges to every reactor licensee if a nuclear incident at any
licensed  reactor in the U.S.  results in claims  and/or  costs which exceed the
primary insurance at that plant site. Federal regulations require this secondary
level of financial  protection.  The Nuclear Regulatory  Commission exempted San
Onofre  Unit 1 from this  secondary  level,  effective  June 1994.  The  maximum
deferred premium for each nuclear  incident is $88 million per reactor,  but not
more  than $10  million  per  reactor  may be  charged  in any one year for each
incident.  Based on its  ownership  interests,  SCE could be  required  to pay a
maximum of $175 million per nuclear incident.  However,  it would have to pay no
more than $20 million per incident in any one year.  Such  amounts  include a 5%
surcharge if additional  funds are needed to satisfy public liability claims and
are subject to adjustment for inflation.  If the public liability limit above is
insufficient, federal regulations may impose further revenue-raising measures to
pay claims,  including a possible additional  assessment on all licensed reactor
operators.

                                       24
<PAGE>

SOUTHERN CALIFORNIA EDISON COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property  damage  insurance   covers  losses  up  to  $500  million,   including
decontamination costs, at San Onofre and Palo Verde.  Decontamination  liability
and property  damage  coverage  exceeding the primary $500 million also has been
purchased in amounts  greater than federal  requirements.  Additional  insurance
covers part of replacement  power expenses  during an  accident-related  nuclear
unit outage.  These policies are issued primarily by mutual insurance  companies
owned by utilities with nuclear  facilities.  If losses at any nuclear  facility
covered  by the  arrangement  were to  exceed  the  accumulated  funds for these
insurance programs,  SCE could be assessed  retrospective premium adjustments of
up to $22 million per year. Insurance premiums are charged to operating expense.

Spent Nuclear Fuel

Federal law requires the DOE to select and develop repositories for, and oversee
disposal  of, spent  nuclear  fuel and  high-level  radioactive  waste.  The law
requires  the  DOE to  provide  for the  disposal  of  spent  nuclear  fuel  and
high-level  radioactive waste from nuclear generation stations beginning January
31, 1998. However,  the DOE did not meet its obligation.  It is not certain when
the DOE will begin  accepting  spent  nuclear fuel from San Onofre or from other
nuclear power plants.

SCE has paid the DOE the required one-time fee applicable to nuclear  generation
at San Onofre through April 6, 1983, (approximately $24 million, plus interest).
SCE  is  also  paying  the  required   quarterly  fee  equal  to  one  mill  per
kilowatt-hour of nuclear-generated electricity sold after April 6, 1983.

SCE has primary responsibility for the interim storage of its spent nuclear fuel
at San  Onofre.  Current  capability  to store  spent  fuel is  estimated  to be
adequate  through 2005.  Meeting  spent-fuel  storage  requirements  beyond that
period could require new and separate interim storage facilities,  the costs for
which  have  not been  determined.  Extended  delays  by the DOE  could  lead to
consideration of costly alternatives involving siting and environmental issues.

Palo Verde on-site spent fuel storage capacity will accommodate needs until 2002
for Units 1 and 2, and until 2003 for Unit 3. Arizona  Public  Service  Company,
operating agent for Palo Verde, is constructing an interim fuel storage facility
that is expected to be completed in 2002.

SCE and other  owners of nuclear  power  plants  may be able to recover  interim
storage costs arising from DOE delays in the acceptance of utility spent nuclear
fuel by pursuing  relief  under the terms of the  contracts,  as directed by the
courts, or through other court actions.



                                       25
<PAGE>

Item 2.   Management's Discussion and Analysis of Results of Operations and
          Financial Condition

Results of Operations

Earnings

Southern  California  Edison  Company's  (SCE) earnings for the three and twelve
months ended March 31, 1999,  were $76 million and $469  million,  respectively,
compared with $98 million and $562 million for the same periods in 1998. The $22
million quarterly  decrease was primarily due to the scheduled  refueling outage
at  San   Onofre   Nuclear   Generating   Station   Unit  2.  The  $93   million
twelve-months-ended  decrease was mainly due to lower authorized revenue,  which
resulted  from  reduced  authorized  returns  on  generation  assets and a lower
earning asset base resulting from the  accelerated  recovery of investments  and
divestiture of gas- and oil-fueled  generation plants, as well as the San Onofre
Unit 2 refueling outage.

Operating Revenue

Operating revenue  increased 3% during the first quarter of 1999,  compared with
the same  period in 1998,  due to a 3% increase  in the retail  sales  volume of
commercial  customers.  For the twelve  months ended March 31,  1999,  operating
revenue  decreased 4%. The decrease  reflects lower average  residential  retail
rates (mandated by legislation  enacted in September 1996),  partially offset by
an increase in other revenue  resulting from  maintenance  work SCE is providing
for the new  owners of the  divested  gas- and  oil-fueled  plants.  Over 99% of
operating  revenue was from retail  sales.  Retail  rates are  regulated  by the
California Public Utilities  Commission (CPUC) and wholesale rates are regulated
by the Federal Energy Regulatory Commission (FERC).

Due to warmer  weather during the summer  months,  operating  revenue during the
third quarter of each year is significantly higher than other quarters.

Legislation  enacted in September 1996 provided for,  among other things,  a 10%
rate  reduction  (financed  through the  issuance of rate  reduction  notes) for
residential  and small  commercial  customers  in 1998 and other rates to remain
frozen at June 1996 levels (system average of 10.1(cent) per kilowatt-hour). See
discussion in Regulatory Environment below.

Operating Expenses

Fuel  expense  decreased  49% and 69%,  respectively,  for the three and  twelve
months ended March 31, 1999,  compared with the same periods in 1998,  primarily
due to the sale of the gas- and oil-fueled generation plants in 1998.

Since April 1, 1998,  SCE has been required to sell all of its  generated  power
through  the power  exchange  (PX) and  acquire  all of its power from the PX to
distribute to its retail customers.  These transactions with the PX are reported
as Purchased  power - power  exchange - net. SCE is continuing to purchase power
from certain  nonutility  generators (known as qualifying  facilities) and under
existing  contracts with other  utilities.  This purchased power is sold through
the PX. Excluding  transactions with the PX,  purchased-power  expense increased
for the three  months  ended  March 31,  1999,  compared to the same period last
year, due to higher prices for required  purchases from  qualifying  facilities.
Purchased-power  expense  decreased  for the twelve months ended March 31, 1999,
compared to the prior-year  period, due to a decrease in contract purchases as a
result of electric utility  restructuring.  SCE is required under federal law to
purchase  power from certain  qualifying  facilities  even though  energy prices
under these  contracts are generally  higher than other sources.  For the twelve
months ended March 31, 1999, SCE paid about $1.5 billion  (including  energy and
capacity  payments)  more  for  these  power  purchases  than  the cost of power
available  from  other  sources.  The CPUC has  mandated  the  prices  for these
contracts.

                                       26
<PAGE>

Provisions for regulatory  adjustment  clauses  increased for both the three and
twelve months ended March 31, 1999,  compared to the year-earlier  periods.  The
quarterly increase primarily reflects  overcollections related to the difference
between   generation-related   revenue  and   generation-related   costs.  These
overcollections were almost completely offset by undercollections related to the
rate-making  treatment of the rate  reduction  notes and the  administration  of
public-purpose funds. This rate-making treatment has allowed for the deferral of
the  recovery  of a portion of the  transition-related  costs,  from a four-year
period  to  a  10-year  period.   The   twelve-months-ended   increase  reflects
overcollections  resulting  from the  gain on  sales of the gas- and  oil-fueled
generation   plants  during  1998  and  other  transition   costs,  as  well  as
overcollections  related to the  administration  of  public-purpose  funds. This
increase was partially offset by the rate-making treatment of the rate reduction
notes, discussed above.

Other operating expenses increased 41% and 26%, respectively,  for the three and
twelve  months  ended March 31,  1999,  primarily  due to  must-run  reliability
services, direct access activities, and PX and independent system operator (ISO)
costs  incurred by SCE. The  twelve-months-ended  increase also  reflects  storm
damage expense resulting from the harsh winter in 1998.

Maintenance  expense  decreased  13% for the three  months ended March 31, 1999,
compared to the same period in 1998,  mainly due to lower  expenses  incurred at
distribution facilities.

Depreciation,  decommissioning  and amortization  expense  increased 18% for the
twelve months ended March 31, 1999, compared to the prior-year period, primarily
due to the further  acceleration of recovery of San Onofre Units 2 and 3 and the
Palo Verde Nuclear  Generating Station units,  accelerated  recovery of the gas-
and  oil-fueled  generation  plants  (before  their sale during  1998),  and the
amortization of the loss on plant sales.  The  amortization of the loss on plant
sales, as well as the accelerated recoveries implemented in 1998 are part of the
competition transition charge (CTC) mechanism.

Income  taxes  decreased  for both the three and twelve  months  ended March 31,
1999,  compared  to the same  periods in 1998,  primarily  due to lower  pre-tax
income, as well as additional amortization related to the CTC mechanism.

Net loss (gain) on sale of utility plant increased for both the three and twelve
months ended March 31, 1999, compared to the year-earlier periods. The quarterly
increase  is mainly due to the loss on sale of one plant  during  first  quarter
1998. The twelve-months-ended  increase is primarily due to the gain on sales of
the  remaining  gas- and  oil-fueled  plants in 1998.  Gains were used to reduce
stranded  costs.  Losses will be recovered  from  customers  over the transition
period.

Other Income and Deductions

The provision for rate phase-in plan reflected a  CPUC-authorized,  10-year rate
phase-in  plan,  which  deferred the collection of revenue during the first four
years of operation  for the Palo Verde units.  The deferred  revenue  (including
interest) was collected evenly over the final six years of each unit's plan. The
plan ended in February 1996,  September 1996 and January 1998 for Units 1, 2 and
3,  respectively.  The  provision  was a non-cash  offset to the  collection  of
deferred revenue.

Interest and dividend income  decreased 23% for the three months ended March 31,
1999,  reflecting lower investment balances during the first quarter of 1999, as
well as slightly lower interest rates.  Interest and dividend  income  increased
12% for the twelve months ended March 31, 1999, as a result of higher investment
balances during the period and increases in interest earned on higher  balancing
account undercollections.

Other  nonoperating  income increased for both the three and twelve months ended
March 31, 1999,  when compared to the prior-year  periods,  primarily due to the
gains on sales of equity investments.  The  twelve-month-ended  increase is also
due to 1997 accruals for regulatory matters.



                                       27
<PAGE>

Interest Expense

Interest and  amortization on long-term debt decreased 21% for the quarter ended
March 31, 1999, compared to the same period in 1998, mainly due to an adjustment
of accrued  interest  in 1998  related  to the rate  reduction  notes  issued in
December  1997,  and the  maturity of $320 million of debt in the second half of
1998.  Interest on the rate  reduction  notes was $35 million and $146  million,
respectively,  for the three and twelve months ended March 31, 1999, compared to
$38 million and $47 million for the same periods in 1998.

Other  interest  expense  increased  for the three  months ended March 31, 1999,
compared  to the same  periods  in 1998,  mostly due to higher  short-term  debt
levels  arising  from an  additional  dividend  payment to Edison  International
during the first  quarter of 1999.  Other  interest  expense  decreased  for the
twelve  months  ended  March 31,  1999,  compared  to the  year-earlier  period,
primarily due to lower overall short-term debt balances, particularly short-term
debt used to finance  fuel  inventories.  These fuel  inventories  are no longer
needed because of the divestiture of the gas- and oil-fueled plants in 1998.

Financial Condition

SCE's liquidity is primarily affected by debt maturities,  dividend payments and
capital  expenditures.  Capital  resources  include  cash  from  operations  and
external financings.

Edison International's board of directors has authorized the repurchase of up to
$2.8  billion  (increased  from $2.3  billion in July  1998) of its  outstanding
shares of common  stock.  Edison  International  repurchased  approximately  101
million shares ($2.4 billion) between January 1995 and March 31, 1999, funded by
dividends from its subsidiaries and the issuance of rate reduction notes.

For the first quarter of 1999,  SCE's cash flow coverage of dividends  decreased
to 2.2 times from 4.0 times for the year-earlier  period. The quarterly decrease
is  primarily  due  to a  $75  million  special  dividend  SCE  paid  to  Edison
International  in January  1999 for  common  stock  repurchases.  For the twelve
months ended March 31, 1999,  the cash flow  coverage of dividends  decreased to
0.8 times from 0.9 times for the same period in 1998.

Cash Flows from Operating Activities

Net cash provided by operating activities totaled $383 million and $985 million,
respectively,  for the three and twelve  months ended March 31,  1999,  compared
with $407  million  and $1.6  billion  for the same  periods in 1998.  Cash from
operations exceed capital requirements for all periods presented.

Cash Flows from Financing Activities

At March 31, 1999,  SCE had available  lines of $1.3 billion,  with $800 million
for  general  purpose,  short-term  debt  and  $500  million  for the  long-term
refinancing of its variable-rate  pollution-control bonds. These unsecured lines
of credit are at negotiated or bank index rates and expire in 2002.

Short-term   debt  is  used  to  finance  fuel   inventories  and  general  cash
requirements.  Long-term  debt is used mainly to finance  capital  expenditures.
External  financings  are  influenced by market  conditions  and other  factors,
including  limitations  imposed by SCE's  articles  of  incorporation  and trust
indenture.  As of March 31, 1999, SCE could issue approximately $12.6 billion of
additional  first and  refunding  mortgage  bonds and $3.8  billion of preferred
stock at current interest and dividend rates.

California  law  prohibits  SCE  from  incurring  or  guaranteeing  debt for its
nonutility affiliates. Additionally, the CPUC regulates SCE's capital structure,
limiting the dividends it may pay Edison  International.  At March 31, 1999, SCE
had the capacity to pay $700  million in  additional  dividends  and continue to
maintain its authorized capital structure.


                                       28
<PAGE>

In December 1997, SCE Funding LLC, a special purpose entity, of which SCE is the
sole  member,  issued  approximately  $2.5  billion of rate  reduction  notes to
Bankers Trust Company of California,  as certificate  trustee for the California
Infrastructure  and  Economic  Development  Bank  Special  Purpose  Trust  SCE-1
(Trust),  which  is a  special  purpose  entity  established  by  the  State  of
California.  The terms of the rate reduction notes generally mirror the terms of
the  pass-through  certificates  issued  by the  Trust,  which are known as rate
reduction  certificates.  The proceeds of the rate reduction  notes were used by
SCE Funding LLC to purchase  from SCE an  enforceable  right known as transition
property.  Transition  property is a current  property right created pursuant to
the  restructuring  legislation  and a financing order of the CPUC, and consists
generally  of the  right to be paid a  specified  amount  from a  non-bypassable
tariff levied on residential  and small  commercial  customers.  In spite of the
legal sale of the  transition  property by SCE to SCE Funding  LLC,  the amounts
reflected as assets on SCE's  balance  sheet have not been reduced by the amount
of the transition  property sold to SCE Funding LLC, and the  liabilities of SCE
Funding LLC for the rate reduction notes are for accounting  purposes  reflected
as long-term  liabilities on the consolidated balance sheet of SCE. SCE used the
proceeds  from the sale of the  transition  property  to retire  debt and equity
securities.

The outstanding  rate reduction  notes have maturities  ranging from one to nine
years,  and bear  interest  at rates  ranging  from  6.14%  to  6.42%.  The rate
reduction notes are secured solely by the transition  property and certain other
assets  of  SCE  Funding  LLC,  and  there  is no  recourse  to  SCE  or  Edison
International.

Although SCE Funding LLC is consolidated  with SCE in the financial  statements,
as required by  generally  accepted  accounting  principles,  SCE Funding LLC is
legally  separate  from SCE, the assets of the SCE Funding LLC are not available
to  creditors of SCE or Edison  International,  and the  transition  property is
legally not an asset of SCE or Edison International.

Cash Flows from Investing Activities

Cash flows from  investing  activities are affected by additions to property and
plant, proceeds from the sale of plant (see discussion in Regulatory Environment
below) and funding of nuclear decommissioning trusts.  Decommissioning costs are
accrued  and  recovered  in  rates  over  the  term of each  nuclear  generating
facility's  operating  license  through  charges to  depreciation  expense.  SCE
estimates  that  it  will  spend  approximately  $8.6  billion  through  2060 to
decommission   its  nuclear   facilities.   This  estimate  is  based  on  SCE's
current-dollar  decommissioning costs ($1.9 billion), escalated at rates ranging
from 0.3% to 10.0%  (depending  on the cost element)  annually.  These costs are
expected to be funded from independent  decommissioning  trusts, which currently
receive SCE contributions of approximately $100 million per year.  However,  SCE
has requested the CPUC to authorize a reduction in the annual  contributions  to
the decommissioning  trusts beginning in 2000. The plan to begin decommissioning
San Onofre Unit 1 in 2000,  which is pending CPUC  approval,  is not expected to
affect SCE's annual contributions to the decommissioning trusts.

Market Risk Exposures

SCE's primary market risk exposures arise from fluctuations in energy prices and
interest  rates.  SCE's risk  management  policy  allows  the use of  derivative
financial  instruments to manage its financial exposures,  but prohibits the use
of these instruments for speculative or trading purposes.

As a result of the rate freeze  established  in the  restructuring  legislation,
SCE's transition costs are recovered as the residual component of rates once the
costs  for  distribution,   transmission,   public  purpose  programs,   nuclear
decommissioning  and the cost of supplying power to its customers through the PX
and ISO have already been recovered. Accordingly, more revenue will be available
to cover transition costs when market prices in the PX and ISO are low than when
PX and ISO prices are high.  The PX and ISO market prices to date have generally
been reasonable, although some irregular price spikes have occurred. The ISO has
responded to price spikes in the market for reliability services (referred to as
ancillary  services)  by  imposing a price cap of $250/MW on the market for such
services until certain actions have been completed to improve the functioning of
those markets. Similarly, the ISO currently maintains

                                       29
<PAGE>

a cap of $250/MWh on its market for imbalance energy until adequate  measures to
improve the efficient operation of the market have been implemented. The caps in
these  markets  mitigate  the risk of costly  price spikes that would reduce the
revenue available to SCE to pay transition costs.  During the upcoming year, the
ISO will be considering  raising these price caps, which could increase the risk
of high market  prices.  SCE has entered  into hedges  against  high natural gas
prices,  since  increases  in  natural  gas  prices  tend to raise  the price of
electricity purchased from the PX. SCE has also applied to the CPUC for approval
to participate in forward  purchases  through a PX forward market.  Furthermore,
SCE  has   requested   permission   from  the  CPUC  to  begin  a  pilot  demand
responsiveness  program that would allow  customers to be paid to curtail  their
load during  times of very high prices.  SCE is seeking  approval for these high
price mitigation measures prior to mid-1999.

A 10% increase in market interest rates would result in a $7 million increase in
the fair value of SCE's interest rate hedge agreements. A 10% decrease in market
interest rates would result in a $7 million  decline in the fair market value of
interest  rate hedge  agreements.  A 10%  increase in natural  gas prices  would
result in a $16 million increase in the fair market value of gas call options. A
10% decrease in natural gas prices would result in an $11 million decline in the
fair market value of gas call options.  A 10% change in market rates is expected
to have an immaterial effect on SCE's other financial instruments.

Projected Capital Requirements

SCE's projected  construction  expenditures  for the next five years are: 1999--
$916 million; 2000-- $808 million; 2001-- $709 million; 2002-- $671 million; and
2003-- $623 million.

Long-term  debt   maturities  and  sinking  fund   requirements   for  the  five
twelve-month  periods following March 31, 1999, are: 2000 -- $716 million;  2001
-- $448 million;  2002 -- $446 million;  2003 -- $446 million;  and 2004 -- $371
million.

Preferred  stock  redemption  requirements  for the  five  twelve-month  periods
following  March 31, 1999,  are: 2000 through 2002-- zero;  2003-- $109 million;
and 2004-- $9 million.

Regulatory Environment

SCE  currently  operates in a highly  regulated  environment  in which it has an
obligation to deliver  electric  service to customers in return for an exclusive
franchise within its service territory.  This regulatory environment is changing
as a result of a 1995  CPUC  decision  on  restructuring  and state  legislation
enacted in 1996.  The Statute  substantially  adopted  the CPUC's  restructuring
decision by  addressing  stranded-cost  recovery for  utilities  and providing a
certain  cost-recovery  time period for the  transition  costs  associated  with
utility-owned generation-related assets. The Statute also included provisions to
finance a portion of the stranded costs that  residential  and small  commercial
customers  would have paid  between 1998 and 2001,  which  allowed SCE to reduce
rates by at least 10% to these customers, effective January 1, 1998. The Statute
mandated  other rates to remain  frozen at June 1996 levels  (system  average of
10.1(cent)  per  kilowatt-hour),   including  those  for  large  commercial  and
industrial  customers,  and included provisions for continued funding for energy
conservation,  low-income  programs and  renewable  resources.  Despite the rate
freeze,  SCE expects to be able to recover its  revenue  requirement  during the
1998--2001   transition   period.   In  addition,   the  Statute   mandated  the
implementation  of  the  CTC  (see  detailed  discussion  below)  that  provides
utilities the opportunity to recover costs made  uneconomic by electric  utility
restructuring. The new market structure began on April 1, 1998.

Revenue and Cost-Recovery Mechanisms

In 1999,  revenue is being  determined  by various  mechanisms  depending on the
utility  operation.   Revenue  related  to  distribution   operations  is  being
determined  through  a  performance-based  rate-making  mechanism  (PBR) and the
distribution assets have the opportunity to earn a CPUC-authorized 9.49% return.
The  distribution-only  PBR will  extend  through  December  2001.  Transmission
revenue is being

                                       30
<PAGE>

determined through  FERC-authorized  rates and transmission  assets earn a 9.43%
return.  These  rates are  subject  to  refund.  Key  elements  of PBR  include:
transmission  and  distribution  (T&D) rates indexed for inflation  based on the
Consumer Price Index less a productivity  factor;  adjustments  for cost changes
that are not within SCE's control; a cost-of-capital  trigger mechanism based on
changes in a bond index; standards for service reliability and safety; and a net
revenue-sharing  mechanism that determines how customers and  shareholders  will
share gains and losses from T&D operations.

SCE's  transition costs are being recovered  through a non-bypassable  CTC. This
charge  applies to all customers who were using or began using utility  services
on or after the  CPUC's  December  1995  restructuring  decision  date.  SCE has
estimated  its  transition  costs to be  approximately  $10.6  billion (1998 net
present  value) from 1998  through  2030.  This  estimate  was based on incurred
costs, forecasts of future costs and assumed market prices. However,  changes in
the assumed market prices could materially  affect these  estimates.  Transition
costs related to power-purchase  contracts are being recovered through the terms
of  their  contracts  while  most  of the  remaining  transition  costs  will be
recovered  through 2001.  The potential  transition  costs are comprised of $6.4
billion from SCE's qualifying facilities contracts,  which are the direct result
of prior legislative and regulatory  mandates,  and $4.2 billion (which reflects
the 1998  sale of SCE's  gas-  and  oil-fueled  generation  plants)  from  costs
pertaining to certain generating assets and regulatory commitments consisting of
costs incurred (whose recovery has been deferred by the CPUC) to provide service
to  customers.  Such  commitments  include the  recovery of income tax  benefits
previously flowed through to customers, postretirement benefit transition costs,
accelerated  recovery of San Onofre Units 2 and 3 and the Palo Verde units , and
certain  other  costs.  During  1998,  SCE sold  all of its gas- and  oil-fueled
generation  plants for $1.2  billion,  over $500  million more than the combined
book value. Net proceeds of the sales were used to reduce stranded costs,  which
otherwise  were expected to be collected  through the CTC  mechanism.  If events
occur  during the  restructuring  process that result in all or a portion of the
transition  costs  being  improbable  of  recovery,  SCE could  have  write-offs
associated with these costs if they are not recovered through another regulatory
mechanism.

Revenue  from  generation-related  operations  is being  determined  through the
competitive  market  and the CTC  mechanism,  which  now  includes  the  nuclear
rate-making agreements.  Revenue related to fossil and hydroelectric  generation
operations is recovered from two sources. The portion that is made uneconomic by
electric  industry  restructuring  is recovered  through the CTC mechanism.  The
portion that is economic is recovered through the market. SCE's costs associated
with its hydroelectric  plants are being recovered  through a  performance-based
mechanism.   The  mechanism  sets  the  hydroelectric  revenue  requirement  and
establishes  a formula for  extending  it through the  duration of the  electric
industry  restructuring  transition  period,  or until  market  valuation of the
hydroelectric  facilities,  whichever occurs first. The mechanism  provides that
power sales revenue from hydroelectric facilities in excess of the hydroelectric
revenue requirement be credited against the costs to transition to a competitive
market. In 1999,  fossil and  hydroelectric  generation assets will earn a 7.22%
return.

The CPUC has authorized revised  rate-making plans for SCE's nuclear facilities,
which call for the accelerated  recovery of the nuclear  investments in exchange
for a lower  authorized  rate of return.  SCE's  nuclear  assets are  earning an
annual rate of return of 7.35%.  In addition,  the San Onofre plan  authorizes a
fixed rate of approximately  4(cent) per  kilowatt-hour  generated for operating
costs  including  incremental  capital costs,  and nuclear fuel and nuclear fuel
financing  costs.  The San Onofre  plan  commenced  in April  1996,  and ends in
December 2001 for the accelerated  recovery portion and in December 2003 for the
incentive-pricing  portion. Palo Verde's operating costs,  including incremental
capital costs, and nuclear fuel and nuclear fuel financing costs, are subject to
balancing account  treatment.  The Palo Verde plan commenced in January 1997 and
ends in December 2001.  Beginning  January 1, 1998, both the San Onofre and Palo
Verde rate-making plans became part of the CTC mechanism.

The changes in revenue from the regulatory mechanisms discussed above, excluding
the effects of other rate  actions,  are expected to have an  approximately  $20
million negative impact on 1999 earnings.

                                       31
<PAGE>

The CPUC is considering unbundling SCE's cost of capital by authorizing separate
rates of return for generation,  transmission,  and distribution operations.  In
May 1998,  SCE filed an application on this issue and hearings were completed in
October 1998. On April 22, 1999, a proposed  decision,  which would reduce SCE's
return  on  common  equity  to 10.6%  from its  current  rate of  11.6%,  and an
alternate  decision,  which would keep the rate at 11.6%,  were  issued.  If the
10.6% rate is  adopted,  it would have an  approximately  $25  million  negative
impact on 1999 earnings. A final CPUC decision is expected in May.

Restructuring Implementation Costs

The ISO assumed operational control of the transmission system after the ISO and
PX had begun accepting bids and schedules for electricity purchases on March 31,
1998.  The  restructuring  implementation  costs  related  to the  start-up  and
development  of the PX,  which are paid by the  utilities,  were to be recovered
from all retail customers over the four-year  transition period.  SCE's share of
the charge is $45  million,  plus  interest  and fees.  SCE's share of the ISO's
start-up and development costs (approximately $16 million per year) will be paid
over a 10-year  period.  In May 1998, SCE filed an application  with the CPUC to
identify  the  categories  of  such  costs   (including  costs  related  to  the
implementation  of direct access) and to establish the  reasonableness  of those
costs incurred in 1997. The CPUC split the application into two phases.

Two  proposed  decisions  on Phase 1, which  addressed  the  eligibility  of the
implementation  costs,  were issued on March 11,  1999.  Both of these  proposed
decisions  reject SCE's request for a  determination  of eligibility for several
major categories of such costs. These proposed decisions further state that even
for the cost  categories they approve for  eligibility,  costs incurred in those
categories  after  December 31,  1998,  would not be  eligible.  Instead,  these
proposed  decisions  would have SCE recover many of the costs  identified in its
application  from market  revenue,  although the decisions  fail to identify the
market and no specific  mechanism  or  authority  to recover such costs from any
market has yet been  established.  SCE  disagrees  with much of the  conclusions
reached in these  proposed  decisions and has filed comments to that effect with
the CPUC. A final CPUC decision is expected  later this year.  Under both of the
proposed  decisions,  the  reasonableness  of 1997  and  1998  expenditures  for
eligible  restructuring costs would be addressed in a separate application later
this year.

Accounting for Generation-Related Assets

If the CPUC's electric industry restructuring plan continues as described above,
SCE would be allowed to recover  its  transition  costs  through  non-bypassable
charges  to its  distribution  customers  (although  its  investment  in certain
generation  assets would be subject to a lower  authorized  rate of return).  In
1997, SCE discontinued  application of accounting  principles for rate-regulated
enterprises for its investment in generation  facilities based on new accounting
guidance. The financial reporting effect of this discontinuance was to segregate
these assets on the balance sheet; the new guidance did not require SCE to write
off any of its generation-related  assets,  including related regulatory assets.
However,  the new guidance did not specifically address the application of asset
impairment  standards  to these  assets.  SCE has  retained  these assets on its
balance sheet because the Statute and restructuring  plan referred to above make
probable their recovery through a non-bypassable CTC to distribution  customers.
The regulatory assets relate primarily to the recovery of accelerated income tax
benefits  previously  flowed  through to  customers,  purchased  power  contract
termination  payments  and  unamortized  losses  on  reacquired  debt.  The  new
accounting  guidance  also  permits  the  recording  of  new  generation-related
regulatory  assets  during the  transition  period that are probable of recovery
through the CTC mechanism.

During the second quarter of 1998,  additional guidance was developed related to
the  application  of asset  impairment  standards  to these  assets.  Using this
guidance resulted in SCE reducing its remaining nuclear plant investment by $2.6
billion (as of June 30, 1998) and  recording a  regulatory  asset on its balance
sheet for the same amount. For this impairment assessment, the fair value of the
investment  was  calculated  by   discounting   future  net  cash  flows.   This
reclassification had no effect on SCE's results of operations.


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<PAGE>

If during the  transition  period events were to occur that made the recovery of
these  generation-related  regulatory  assets no longer  probable,  SCE would be
required to write off the remaining balance of such assets  (approximately  $2.7
billion,  after tax, at March 31, 1999) as a one-time,  non-cash  charge against
earnings.  At this time, SCE cannot predict what other revisions will ultimately
be made  during the  restructuring  process  in  subsequent  proceedings  or the
effect,  after the transition period,  that competition will have on its results
of operations or financial position.

Environmental Protection

SCE is subject to numerous environmental laws and regulations,  which require it
to incur substantial costs to operate existing facilities, construct and operate
new  facilities,  and  mitigate or remove the effect of past  operations  on the
environment.

As further discussed in Note 10 to the Consolidated  Financial  Statements,  SCE
records its  environmental  liabilities  when site  assessments  and/or remedial
actions are  probable  and a range of  reasonably  likely  cleanup  costs can be
estimated.  SCE reviews  its sites and  measures  the  liability  quarterly,  by
assessing a range of reasonably  likely costs for each identified  site.  Unless
there is a probable  amount,  SCE records the lower end of this likely  range of
costs.

SCE's recorded  estimated minimum liability to remediate its 49 identified sites
is $169  million.  One of SCE's  sites,  a  former  pole-treating  facility,  is
considered  a  federal  Superfund  site  and  represents  41%  of  its  recorded
liability.  The ultimate costs to clean up SCE's  identified sites may vary from
its recorded liability due to numerous  uncertainties inherent in the estimation
process.  SCE  believes  that,  due to  these  uncertainties,  it is  reasonably
possible  that cleanup  costs could exceed its recorded  liability by up to $285
million.  The upper limit of this range of costs was estimated using assumptions
least favorable to SCE among a range of reasonably  possible  outcomes.  SCE has
sold all of its gas- and oil-fueled power plants and has retained some liability
associated with the divested properties.

The CPUC allows SCE to recover  environmental-cleanup  costs at 41 of its sites,
representing  $87  million  of its  recorded  liability,  through  an  incentive
mechanism.  Under this mechanism,  SCE will recover 90% of cleanup costs through
customer  rates;  shareholders  fund the remaining 10%, with the  opportunity to
recover these costs from  insurance  carriers and other third  parties.  SCE has
successfully  settled  insurance  claims with all  responsible  carriers.  Costs
incurred at SCE's remaining sites are expected to be recovered  through customer
rates.  SCE has  recorded a regulatory  asset of $137 million for its  estimated
minimum  environmental-cleanup  costs expected to be recovered  through customer
rates.

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

SCE  expects to clean up its  identified  sites over a period of up to 30 years.
Remediation  costs in each of the next several  years are expected to range from
$4 million to $10  million.  Recorded  costs for the  twelve-month  period ended
March 31, 1999, were $9 million.

Based on currently  available  information,  SCE believes it is unlikely that it
will incur  amounts  in excess of the upper  limit of the  estimated  range and,
based upon the CPUC's regulatory treatment of  environmental-cleanup  costs, SCE
believes that costs ultimately  recorded will not materially  affect its results
of operations or financial position.  There can be no assurance,  however,  that
future developments,  including  additional  information about existing sites or
the  identification  of new sites,  will not require material  revisions to such
estimates.

The 1990  federal  Clean Air Act  requires  power  producers  to have  emissions
allowances to emit sulfur dioxide.  Power companies receive emissions allowances
from the federal government and may bank or sell excess allowances.  SCE expects
to have excess  allowances under Phase II of the Clean Air Act (2000 and later).
The act also calls for a study to determine if additional regulations are needed
to reduce

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<PAGE>

regional haze in the southwestern U.S. In addition, another study is in progress
to determine the specific  impact of air  contaminant  emissions from the Mohave
Coal  Generating  Station on  visibility  in Grand  Canyon  National  Park.  The
potential  effect of these studies on sulfur dioxide  emissions  regulations for
Mohave is unknown.

SCE's  projected  environmental  capital  expenditures  are $900 million for the
1999--2003 period,  mainly for aesthetics  treatment,  including  undergrounding
certain transmission and distribution lines.

The  possibility  that exposure to electric and magnetic  fields (EMF) emanating
from power lines,  household appliances and other electric sources may result in
adverse health effects has been the subject of scientific  research.  After many
years of research, scientists have not found that exposure to EMF causes disease
in humans. Research on this topic is continuing.  However, the CPUC has issued a
decision,  which provides for a  rate-recoverable  research and public education
program  conducted  by  California  electric  utilities,  and  authorizes  these
utilities  to take  no-cost  or  low-cost  steps to reduce  EMF in new  electric
facilities. SCE is unable to predict when or if the scientific community will be
able to reach a consensus on any health  effects of EMF, or the effect that such
a consensus, if reached, could have on future electric operations.

San Onofre Steam Generator Tubes

The San Onofre Units 2 and 3 steam  generators  have performed  relatively  well
through  the  first 15 years of  operation,  with  low  rates of  ongoing  steam
generator tube degradation.  However,  during the Unit 2 scheduled refueling and
inspection outage in 1997, an increased rate of tube degradation was identified,
which resulted in the removal of more tubes from service than had been expected.
The steam  generator  design  allows  for the  removal of up to 10% of the tubes
before  the  rated  capacity  of the unit  must be  reduced.  As a result of the
increased degradation, a mid-cycle inspection outage was conducted in early 1998
for Unit 2. Continued degradation was found during this inspection.  A favorable
or  decreasing  trend in  degradation  was  observed  during  inspection  in the
scheduled  refueling  outage in January  1999.  The results of the January  1999
inspection  are being  analyzed to  determine if there is a need for a mid-cycle
inspection  outage in early 2000. With the results from the January 1999 outage,
7.5% of the tubes have now been removed from  service.  In September  1998,  San
Onofre Unit 2 experienced a small amount of leakage from a steam  generator tube
plug, which required an 11-day outage to repair.

During Unit 3's refueling outage, which was completed in July 1997,  inspections
of structural  supports for steam generator tubes identified several areas where
the  thickness of the supports had been reduced,  apparently  by erosion  during
normal plant  operation.  A follow-up  mid-cycle  inspection  indicated that the
erosion had been stabilized.  Additional  monitoring  inspections were performed
during the scheduled  refueling  outage in April 1999.  These  inspections  also
indicated  the  erosion  has  stabilized.  A  complete  inspection  of the steam
generator tubes was conducted.  Results  obtained were within  expectations.  To
date, 5.4% of Unit 3's tubes have been removed from service.

During Unit 2's February 1998 mid-cycle outage,  similar tube supports showed no
significant levels of such erosion.

New Accounting Rules

In  June  1997,  a new  accounting  standard  for  reporting  operating  segment
information was issued.  The new standard,  which became effective for financial
reports  issued  after  December  15,  1998,  requires  that  operating  segment
information be disclosed in the Notes to the Consolidated  Financial Statements.
Since,  in  management's  view,  SCE  currently  operates as one  segment,  this
standard  did not to affect  SCE's  consolidated  financial  statements  and the
accompanying notes to the consolidated financial statements.

In June 1998, a new accounting  standard for derivative  instruments and hedging
activities  was issued.  The new  standard,  which will be effective  January 1,
2000,  requires all  derivatives  to be  recognized on the balance sheet at fair
value.  Gains or losses  from  changes  in fair  value  would be  recognized  in
earnings

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<PAGE>

in the  period  of change  unless  the  derivative  is  designated  as a hedging
instrument.  Gains or losses from hedges of a forecasted  transaction or foreign
currency  exposure would be reflected in other  comprehensive  income.  Gains or
losses from hedges of a recognized asset or liability or a firm commitment would
be  reflected  in  earnings  for  the  ineffective  portion  of the  hedge.  SCE
anticipates  that most of its  derivatives  under the new standard would qualify
for hedge  accounting.  SCE expects to recover in rates any market price changes
from its  derivatives  that  could  potentially  affect  earnings.  Accordingly,
implementation of this new standard is not expected to affect earnings.

Year 2000 Issue

Many of SCE's existing computer systems were originally  programmed to represent
any date by using six digits  (e.g.,  12/31/99)  rather than eight digits (e.g.,
12/31/1999).  Accordingly,  such programs, if not appropriately addressed, could
fail  or  create  erroneous  results  when  attempting  to  process  information
containing  dates after  December 31, 1999.  This situation has been referred to
generally as the Year 2000 Issue.

SCE has a comprehensive program in place to address potential Year 2000 impacts.
Edison International  provides overall coordination of this effort, working with
SCE and its  departments.  SCE divides  Year 2000  activities  into five phases:
inventory,  impact assessment,  remediation,  testing and implementation.  SCE's
objective for the Year 2000 readiness of critical systems is to be 100% complete
by July 1999. A critical  system is defined as those  applications  and systems,
including embedded processor technology,  which if not appropriately remediated,
may have a significant impact on customers,  the health and safety of the public
and/or  personnel,  the revenue stream,  or regulatory  compliance.  SCE was 80%
complete at  year-end  1998 (the goal was 75%) and is on track to meets its July
1999  goal.  A  system,  application  or  physical  asset is  deemed  to be Year
2000-ready  if it is  determined by SCE to be suitable for continued use through
2028 (or through the last year of the anticipated  life of the asset,  whichever
occurs first),  even though it may not be fully Year  2000-compliant.  A system,
application, or physical asset is Year 2000-compliant if it accurately processes
date/time data.

SCE has  structured  the  scope of the  program  to  focus  on  three  principal
categories: mainframe computing, distributed computing and physical assets (also
known as embedded  processors).  The mainframe and distributed  computing assets
consist of computer  application  systems  (software).  Physical  assets include
information technology infrastructure (hardware,  operating system software) and
embedded processor  technology in generation,  transmission,  distribution,  and
facilities components.

Year  2000-readiness  preparations  for SCE's mainframe  financial  systems were
completed in the fourth  quarter of 1997,  and  preparations  for SCE's material
management  system were completed in the second quarter of 1998.  SCE's customer
information  and  billing  system is being  replaced by a new  Customer  Service
System  designed  and  constructed  to be  Year  2000-ready.  SCE's  distributed
computing  assets include  operations and business  information  systems.  SCE's
critical  operations  information  systems  include  outage  management,   power
management,  and plant monitoring and access retrieval  systems.  SCE's critical
business  information systems include a data acquisition system for billing, the
computer call center support system, credit support and maintenance management.

Ongoing   efforts  in  1999  will   continue  to  focus  on   guarding   against
reintroduction  of components  that are not Year 2000-ready into Year 2000-ready
systems.

The other essential component of the Year 2000 program is to identify and assess
vendor products and business partners for Year 2000 readiness, as these external
parties may have the  potential  to impact  SCE's Year 2000  readiness.  SCE has
implemented a process to identify and contact  vendors and business  partners to
determine  their Year 2000 status.  Evaluation of responses and other  follow-up
activities  are  continuing.  SCE's  general  policy  requires  that  all  newly
purchased  products and  services be Year  2000-ready  or otherwise  designed to
allow SCE to  determine  whether such  products  and services  present Year 2000
issues.  SCE is also working to address Year 2000 issues  related to all ISO and
PX  interfaces,  as well as  joint  ownership  facilities.  SCE  exchanges  Year
2000-readiness  information  (including,  but not limited  to, test  results and
related data) with certain of its affiliates and other external  parties as part
of its Year 2000-readiness efforts.

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<PAGE>

SCE's current estimate of the cost of these modifications, including the cost of
new hardware and software application modification, is $72 million, about 40% of
which is expected to be capital costs.  SCE's Year 2000 costs  expended  through
March 31, 1999, were $44 million.  SCE expects current rate levels for providing
electric  service  to be  sufficient  to  provide  funding  for  utility-related
modifications.

Although  SCE  expects  that  its  critical  facilities,   systems,  information
technology  infrastructure  and  physical  assets will be fully Year  2000-ready
prior to year-end 1999, there can be no assurance that the facilities,  systems,
infrastructure  and physical  assets of other companies on which the systems and
operations  of SCE rely will be converted on a timely  basis.  SCE believes that
prudent  business  practices call for  development of contingency  plans.  These
plans include  provisions for monitoring,  validating and managing the continued
performance  of SCE Year  2000-sensitive  systems  and  assets  during  critical
transition  periods,  development of work-arounds  and expedited  fix-on-failure
strategies.  Where  appropriate,  contingency  plans  include  scheduling of key
personnel,  identification of alternate suppliers, and securing adequate on-site
supplies of critical materials.

SCE has implemented a Year 2000  contingency  planning  process as a part of its
Year 2000  Remediation  Program.  Each SCE  department is required to assess the
Year 2000 risks,  including both internal and external  risks and  dependencies,
associated  with  critical  systems  and  assets,  that are  date  aware or date
sensitive.  This includes assessment of Year 2000 risks for all indispensable or
critical business processes and key facilities.

Where  appropriate,  the plans  utilize or  supplement  the  existing  Corporate
Emergency  Response and  Recovery  Plan,  and  Information  Technology  disaster
recovery  plan,  for  identified  Year  2000-related  events.  The SCE Year 2000
contingency  plans are being  developed to  coordinate  and  interface  with the
California  ISO and the PX and to satisfy  Western System  Coordinating  Council
(WSCC) and North America Electric Reliability Council (NERC) recommendations and
Nuclear Energy Institute guidelines.  SCE is working with these industry groups,
as  well  as the  Electric  Power  Research  Institute,  in the  development  of
contingency  plans.  These plans are in the final stages of  completion  and are
expected to be ready by June 30, 1999. SCE will be reporting on its  contingency
plans to the CPUC by July 1, 1999.  Contingency plans will be used in conducting
SCE and electric  industry drills  throughout the rest of 1999.  However,  it is
expected that contingency plans will continue to be revised and enhanced as 2000
approaches.

Although  the  SCE  Year  2000  contingency  plans  are  being  developed  using
risk-based  methods,  the  plans  are  being  evaluated  against  the  NERC/WSCC
suggested "More Probable" and "Credible Worst Case Scenarios." SCE believes that
the most likely worst case scenario would be small,  localized  interruptions of
service  which would be restored in a timeframe  that is within  normal  service
levels.

SCE does not expect the Year 2000 Issue to have a material adverse effect on its
results  of  operation  or  financial  position;  however,  if  not  effectively
remediated, and despite the adoption of contingency plans, negative effects from
Year 2000 issues, including those related to internal systems, vendors, business
partners, the ISO, the PX or customers, could cause results to differ.

Forward-looking Information

In the preceding  Management's  Discussion and Analysis of Results of Operations
and  Financial  Condition  and  elsewhere in this  quarterly  report,  the words
estimates,  expects,  anticipates,  believes,  and other similar expressions are
intended  to  identify  forward-looking  information  that  involves  risks  and
uncertainties. Actual results or outcomes could differ materially as a result of
such important factors as further actions by state and federal regulatory bodies
setting  rates  and  implementing  the  restructuring  of the  electric  utility
industry;  the effects of new laws and regulations relating to restructuring and
other  matters;  the effects of increased  competition  in the electric  utility
business,  including  direct customer access to retail energy  suppliers and the
unbundling  of revenue cycle  services such as metering and billing;  changes in
prices of electricity and fuel costs;  changes in market interest rates;  new or
increased  environmental  liabilities;  the effects of the Year 2000 Issue;  and
other unforeseen events.



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<PAGE>

PART II  OTHER INFORMATION

Item 1.  Legal Proceedings

                        Geothermal Generators' Litigation

On June 9, 1997,  SCE filed a complaint  in Los Angeles  County  Superior  Court
against an independent  power  producer of geothermal  generation and six of its
affiliated  entities  (Coso  parties).  SCE alleges that in order to avoid power
production  plant  shutdowns  caused  by  excessive  noncondensable  gas  in the
geothermal field brine, the Coso parties  routinely vented highly toxic hydrogen
sulfide gas from  unmonitored  release  points  beginning in 1990 and continuing
through at least 1994,  in violation of  applicable  federal,  state,  and local
environmental  law.  According to SCE,  these  violations  constituted  material
breaches by the Coso parties of their obligations under their contracts with SCE
and  applicable  law. The  complaint  sought  termination  of the  contracts and
damages for excess power  purchase  payments made to the Coso parties.  The Coso
parties'  motion to transfer venue to Inyo County  Superior Court was granted on
August 31, 1997. On June 1, 1998, the court struck SCE's request for termination
of the  contracts,  leaving SCE with its claim for damages and other relief.  On
February 16, 1999, the court denied the Coso parties' motion for judgment on the
pleadings directed to SCE's first amended complaint.

The Coso  parties have also  asserted  various  claims  against SCE, The Mission
Group,  and  Mission  Power  Engineering  Company  (Mission  parties) in a cross
complaint  filed in the action  commenced by SCE as well as in a separate action
filed against SCE by three of the Coso parties in Inyo County Superior Court. In
November  1997,  the court  struck all but two causes of action  asserted in the
separate  action on the grounds that they should have been raised as part of the
Coso  parties'  cross-complaint,  and ordered the remaining two causes of action
consolidated for all purposes with the action filed by SCE.

The Coso parties  subsequently filed second and third amended  cross-complaints.
The third  amended  cross-complaint  names SCE,  the Mission  parties and Edison
International.  As against SCE, the third  amended  cross-complaint  purports to
state causes of action for  declaratory  relief,  breach of the covenant of good
faith and fair dealing;  inducing breach of agreements  between the Coso parties
and their former employees;  breach of an earlier  settlement  agreement between
the Mission parties and the Coso parties; slander and disparagement,  injunctive
relief and restitution for unfair business practices; anticipatory breach of the
contracts;  and violations of Public Utilities Code ss.ss. 453, 702 and 2106. As
against the Mission parties, the third amended cross-complaint seeks damages for
breach of warranty of authority  with respect to the settlement  agreement,  and
for  equitable  indemnity.   The  Coso  parties  voluntarily   dismissed  Edison
International  from the third  amended  cross-complaint  on December 4, 1998. As
against SCE, the third amended  cross-complaint seeks restitution,  compensatory
damages in excess of $115 million,  punitive  damages in an amount not less than
$400 million,  interest,  attorney's fees,  declaratory  relief,  and injunctive
relief.

On September 21, 1998, SCE filed an answer to the third amended  cross-complaint
generally denying the allegations  contained  therein and asserting  affirmative
defenses.  In  addition,  SCE filed a  cross-complaint  for  reformation  of the
contracts  alleging that if they are not  susceptible  to SCE's  interpretation,
they should be reformed to reflect the parties' true intention. SCE subsequently
voluntarily filed a first amended cross-complaint.  The Coso defendants demurred
to SCE's first amended  cross-complaint and, in January 1999, their demurrer was
sustained with leave to amend.  On February 26, 1999, SCE filed a second amended
cross-complaint for reformation.

Following  various  pre-trial  motions  filed by the Mission  parties and Edison
International,   the  Coso   Parties   purported   to  file  a  fourth   amended
cross-complaint  on December 23, 1998,  against the Mission  Parties  only.  The
Mission Parties' demurrer to and motion to strike directed to the fourth amended
cross-complaint was heard and taken under submission on March 10, 1999.

On December 15, 1998,  the Court granted the Coso parties leave to file a second
amended complaint in the separately filed (now consolidated)  action. The second
amended complaint,  which names SCE and Edison  International,  alleges that SCE
engaged in anti-competitive  conduct, false advertising,  and conduct proscribed
by Public Utilities Code ss. 2106, and seeks injunctive relief, restitution, and
punitive damages. On January 20, 1999, SCE filed three motions to strike several
portions of the second amended complaint on 

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<PAGE>


the  grounds,  among  others,  that the CPUC or FERC have  either  exclusive  or
primary  jurisdiction over the matters asserted therein,  and that SCE's alleged
conduct was in furtherance of  constitutionally  protected rights of free speech
and petition and therefore not actionable.  These matters were heard on February
22, 1999, and taken under  submission at that time.  Edison  International  also
filed a demurrer and motion to strike the second  amended  complaint.  The Court
denied the motion to strike and overruled the demurrer on March 22, 1999.

On April 1, 1999,  the Court  signed a  stipulation  and order  submitted by the
parties  staying all  proceedings  to allow the parties to engage in  settlement
discussions. The stay is in effect for a period of 60 days through and including
May 30,  1999,  subject  to the right of any party to  terminate  the stay on or
after April 29, 1999. As a result of the stay, all discovery has been suspended.
Furthermore,  during the period of the stay,  the Court will not issue orders or
rulings on matters taken under submission.

The  Court  has set a trial  date of March 1,  2000,  but,  in light of the stay
currently  in effect,  has reserved  jurisdiction  to advance or to continue the
trial date. The materiality of net final judgments  against SCE in these actions
would be  largely  dependent  on the extent to which any  damages or  additional
payments which might result therefrom are recoverable through rates.

                      San Onofre Personal Injury Litigation

SCE is actively involved in three lawsuits claiming personal injuries  allegedly
resulting from exposure to radiation at San Onofre. On August 31, 1995, the wife
and daughter of a former San Onofre  security  supervisor  sued SCE and SDG&E in
the U.S. District Court for the Southern District of California. Plaintiffs also
named  Combustion  Engineering and the Institute of Nuclear Power  Operations as
defendants.  All trial court proceedings were stayed pending ruling of the Ninth
Circuit Court of Appeal,  on an appeal of a lower  court's  judgment in favor of
SCE in two earlier cases raising similar allegations. On May 28, 1998, the Court
of Appeal affirmed these  judgments.  Pursuant to an agreement of the parties as
described below, all proceedings in this matter have been stayed.

On November 17, 1995, an SCE employee and his wife sued SCE in the U.S. District
Court for the Southern District of California.  Plaintiffs also named Combustion
Engineering.  The  trial  in this  case  resulted  in a jury  verdict  for  both
defendants.  The plaintiffs' motion for a new trial was denied. Plaintiffs filed
an appeal of the trial  court's  judgment to the Ninth  Circuit Court of Appeal.
Briefing  on the  appeal  was  completed  in January  1999 and the  parties  are
awaiting  a date for oral  argument  to be set by the court.  A decision  is not
expected until early 2000.

On November 28, 1995, a former contract worker at San Onofre,  her husband,  and
her son,  sued SCE in the U.S.  District  Court  for the  Southern  District  of
California.  Plaintiffs also named Combustion  Engineering.  On August 12, 1996,
the Court  dismissed  the  claims of the  former  worker  and her  husband  with
prejudice,  leaving only the son as  plaintiff.  Pursuant to an agreement of the
parties as described below, all proceedings in this matter have been stayed.

On November 20, 1997, a former  contract  worker at San Onofre and his wife sued
SCE in the  Superior  Court of  California,  County of San  Diego.  The case was
removed to the U.S. District Court for the Southern  District of California.  On
May 11, 1998, the plaintiffs filed a first amended  complaint.  On May 22, 1998,
SCE  filed an answer  denying  the  material  allegations  of the first  amended
complaint.  Pursuant to a stipulation of the parties,  the court,  on January 4,
1999, dismissed the plaintiffs' complaint in this matter with prejudice.

In March of 1999,  SCE reached an agreement  with the  plaintiffs in both of the
above  cases  currently  pending at the U.S.  District  Court  level to stay all
proceedings  including  trial,  pending the results of the case currently before
the  Ninth   Circuit   Court  of  Appeal.   The  parties   agreed  that  if  the
plaintiffs/petitioners  do not receive a favorable  determination on appeal then
the two cases at the District Court level will be dismissed.  If,  however,  the
plaintiffs/petitioners receive a favorable determination on appeal, then the two
District  Court cases will be set for trial.  On March 23,  1999,  the  District
Court approved the parties' stay agreement in both these cases.

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<PAGE>

SCE was previously involved,  along with other defendants,  in two earlier cases
raising  allegations  similar to those  described  above.  Although as indicated
above SCE was successful in removing itself from those actions, and is no longer
actively  involved in them, the impact on SCE, if any, from further  proceedings
in these cases  against the remaining  defendants  can not be determined at this
time.

               Mohave Generating Station Environmental Litigation

On February 19,  1997,  the Sierra Club and the Grand Canyon Trust filed suit in
the U.S.  District Court of Nevada against SCE and the other three  co-owners of
Mohave  Generating  Station.  The lawsuit alleges that Mohave has been violating
various  provisions of the Clean Air Act (CAA), the Nevada state  implementation
plan, certain EPA orders,  and applicable  pollution permits relating to opacity
and sulfur dioxide emission limits over the last five years. The plaintiffs seek
declaratory and injunctive relief as well as civil penalties. Under the CAA, the
maximum civil penalty  obtainable is $25,000 per day per violation.  SCE and the
co-owners  obtained an extension to respond to the complaint pending the court's
ruling on a motion to dismiss filed by the defendants.  The plaintiffs  filed an
opposition to the defendants' motion to dismiss as well as a separate motion for
partial summary  judgment on May 8, 1998. The initial ruling by the court on the
motions was (prior to the stay of proceedings described below) expected in early
1999.

On June 4,  1998,  the  plaintiffs  served SCE and its  co-owners  with a 60-day
supplemental  notice of  intent  to sue.  This  supplemental  notice  identified
additional causes of action as well as an additional  plaintiff  (National Parks
and Conservation  Association) to be added to the  proceedings.  On November 12,
1998, the court bifurcated the liability and damage phases of the case.

On December 8, 1998,  defendants  filed a supplemental  memorandum in support of
defendants'  opposition to plaintiffs'  motion for partial summary judgment.  On
February 4, 1999,  plaintiffs  filed their first  amended  complaint  to add the
National Parks and  Conservation  Association  as a plaintiff in the action.  On
March 10, 1999, defendants filed a motion for partial summary judgment. On March
11, 1999,  plaintiffs  filed a motion for partial summary  judgment to establish
emission limit violations as alleged in certain of the causes of action in their
first amended complaint.

On March 8, 1999, the parties filed a stipulated request for a 60-day stay which
was granted and ordered, by the court on March 9, 1999.  Settlement  discussions
are ongoing.

                                       39
<PAGE>

Item 4.  Submission of Matters to a Vote of Security Holders

Bylaw Amendment to Reduce Maximum and Minimum Board Size

At SCE's Annual Meeting of  Shareholders  on April 15, 1999 ("Annual  Meeting"),
shareholders  approved a Bylaw Amendment to reduce the maximum and minimum Board
size.  The number of  affirmative  and negative  votes,  abstentions  and broker
non-votes with respect to the Bylaw Amendment were as follows:
<TABLE>
<CAPTION>

                                                                                                      Broker
                                           Affirmative          Negative          Abstentions        Non-votes
                                           -----------          --------          -----------        ---------

<S>                                         <C>                         <C>                 <C>          <C>
Common Stock                                434,888,104                 0                   0            0
Cum. Preferred Stock                          6,349,314           109,650             142,398            0
$100 Cum. Pref. Stock                           244,600                 0                   0            0
</TABLE>

Election of Directors

At SCE's Annual  Meeting,  shareholders  also elected  fourteen  nominees to the
Board of  Directors.  The number of broker  non-votes for each nominee was zero.
The number of votes cast for and  withheld  from each  Director-nominee  were as
follows:

                                                   Number of Votes
-------------------------------------------------------------------------------
             Name                          For                      Withheld
----------------------------------------------------------------------------

      John E. Bryson                   441,633,062                   101,004
      Winston H. Chen                  441,644,330                    89,736
`     Warren Christopher               441,579,224                   154,842
      Stephen E. Frank                 441,651,530                    82,536
      Joan C. Hanley                   441,634,826                    99,240
      Carl F. Huntsinger               441,644,126                    89,940
      Charles D. Miller                441,643,910                    90,156
      Luis G. Nogales                  441,631,580                   102,486
      Ronald L. Olson                  441,646,130                    87,936
      James M. Rosser                  441,636,098                    97,968
      Robert H. Smith                  441,647,186                    86,880
      Thomas C. Sutton                 441,647,636                    86,430
      Daniel M. Tellep                 441,644,432                    89,634
      Edward Zapanta                   441,639,260                    94,806

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

     3.1  Certificate of Amendment and Restated Articles of Incorporation of SCE
          effective June 1, 1993 (File No. 1-2313,  Form 10-K for the year ended
          December 31, 1993)*

     3.2  Certificate of Correction of Restated Articles of Incorporation of SCE
          dated June 23, 1997 (File No. 1-2313,  Form 10-Q for the quarter ended
          September 30, 1997)*

     3.3  Amended Bylaws of Southern California Edison Company as adopted by the
          Board of Directors on April 15, 1999

     10.  Form  of  Agreement  for  1999   Employee   Awards  under  the  Equity
          Compensation Plan

     23.  Consent of Independent Public Accountants

     27.  Financial Data Schedule

                                       40
<PAGE>

(b)      Reports on Form 8-K:

         March 31, 1999    Item 5: Other Events:   $300 million note financing*

---------------------

* Incorporated by reference pursuant to Rule 12b-32.


                                       41
<PAGE>

                                   SIGNATURES

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



                       SOUTHERN CALIFORNIA EDISON COMPANY
                                  (Registrant)



                       By       THOMAS M. NOONAN
                           ----------------------------------
                                THOMAS M. NOONAN
                                Vice President and Controller



                      By       KENNETH S. STEWART
                          -----------------------------------
                               KENNETH S. STEWART
                               Assistant General Counsel and
                               Assistant Secretary

May 13, 1999