EDISON INTERNATIONAL

AND

SOUTHERN CALIFORNIA EDISON COMPANY

NOTICE OF ANNUAL MEETING

AND

JOINT PROXY STATEMENT

ANNUAL MEETING OF SHAREHOLDERS

April 26, 2012

The EIX and SCE Boards of Directors are soliciting proxies from you for use at the Annual Meeting, or at any adjournment or postponement of the meeting. Proxies allow designated individuals to vote on your behalf at the Annual Meeting. The proxy materials are being mailed or made available to you via the Internet beginning on March 16, 2012.

In this Joint Proxy Statement:

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to Be Held on April 26, 2012:

The Joint Proxy Statement and the Company’s 2011 Annual Report are available at www.edison.com/annualmeeting.

What is included in the proxy materials?

The proxy materials include:

Why did the Company mail a Notice of Internet Availability of proxy materials instead of a printed copy of the materials?

Making the proxy materials available to shareholders via the Internet will save us the cost of printing and mailing documents and will reduce the impact of the Annual Meeting on the environment.

If you received only a Notice of Internet Availability, you will not receive a printed copy of the proxy materials unless you request it. The Notice includes instructions on how to:

Why did some shareholders receive printed or email copies of the proxy materials?

We are distributing printed copies of the proxy materials to shareholders who have previously requested printed copies. We are providing shareholders who have previously requested electronic delivery of proxy materials with an email containing a link to the website where the materials are available via the Internet.

Who can vote?

All owners of voting stock at the close of business on March 2, 2012 (the record date) are entitled to vote.

On each Item of EIX business, holders of EIX Common Stock are entitled to one vote per share. On each Item of SCE business, holders of SCE Cumulative Preferred Stock are entitled to six votes

per share and EIX, as the holder of SCE Common Stock, is entitled to one vote per share. All shares of SCE Common and Cumulative Preferred Stock vote together as one class.

Who can attend the Annual Meeting?

All shareholders on the record date, or their duly appointed proxies, may attend the meeting. All shareholders will be required to pass through a security inspection area and check in at the registration desk at the meeting. The registration desk will open at 8:00 a.m. and meeting room doors will open at 8:30 a.m., Pacific Time. For the privacy of other attendees and to avoid distraction, shareholders will not be permitted to use cameras or recording devices at the meeting.

If you are a registered shareholder or a 401(k) Plan shareholder, we will be able to verify your share ownership from the share register with proper identification. No admission pass is required.

If your shares are held in street name, you will need to bring proper identification and a letter or an account statement from your broker or other nominee reflecting your stock ownership as of the record date.

Individual shareholders may bring one guest to the Annual Meeting. A shareholder that is a corporation, partnership, association or other entity is limited to three authorized representatives at the Annual Meeting.

How do I vote?

Your vote is important. You can save us the expense of additional solicitations by voting promptly. Please follow the instructions described below:

By Internet – Shareholders who received a Notice of Internet Availability may vote via the Internet by following the instructions on the Notice. Shareholders who received a proxy card by mail may vote via the Internet by following the instructions on the proxy card. When voting via the Internet, all shareholders must have available the control number included on their Notice of Internet Availability or proxy card. Under California law, you may transmit a proxy via the Internet.

By Telephone – Registered or 401(k) Plan shareholders may vote by telephone by calling 1-800-560-1965 and following the recorded instructions. Most shareholders who hold their shares in street name may vote by phone by calling the number provided by their broker. When voting by telephone, all shareholders must have available the control number included on their Notice of Internet Availability or proxy card.

By Mail – Shareholders who received a printed copy of these proxy materials may vote by mail by completing, signing, dating and returning their proxy card as indicated.

In Person – Registered shareholders may vote in person by attending the Annual Meeting and completing a ballot distributed at the meeting. Shareholders who hold their shares in street name may vote in person by attending the Annual Meeting only if they have requested and received a legal proxy from their broker or other nominee, and deliver the proxy to the inspector of election before or at the meeting. 401(k) Plan shareholders may not cast votes in person at the Annual Meeting.

What is the deadline to vote and how do I change my vote?

If you are a registered shareholder, the inspector of election will accept your proxy by telephone or via the Internet until 9:00 p.m., Pacific Time, on April 25, 2012, and by mail if it is received by the inspector of election before the polls close at the Annual Meeting. Registered shareholders may change their vote prior to the deadline by writing to the Corporate Secretary at the address above (so that it is received prior to the deadline), voting again by mail, telephone or the Internet, or voting in person at the Annual Meeting.

If you hold shares in street name, most brokers will accept your proxy by telephone or the Internet until 9:00 p.m., Pacific Time, on April 25, 2012, and by mail if it is received by your broker’s designated agent by 9:00 a.m., Pacific Time, on April 26, 2012. Contact your broker or other nominee before the Annual Meeting to determine the actual deadline and whether and how you can change your vote.

If you are a 401(k) Plan shareholder, your proxy must be received by 9:00 p.m., Pacific Time, on April 24,

2012 for the 401(k) Plan trustee to vote your shares. 401(k) Plan shareholders may change their vote at any time prior to this deadline by voting again. The last vote received within this timeframe will be the vote that is counted.

What does it mean if I get more than one Notice of Internet Availability or proxy card?

It indicates that your shares are held in more than one account, such as two brokerage accounts, or you hold both registered and street name shares. You should use the specific control numbers provided on each Notice of Internet Availability or proxy card and vote each Notice or proxy card to ensure that all of your shares are voted.

What shares are covered by the proxy card?

This depends on how you hold your shares, and whether you hold shares in EIX, SCE, or both EIX and SCE.

Registered and 401(k) Plan Shareholders – For EIX registered and 401(k) Plan shareholders, you will receive or have Internet access to a single proxy card that covers all shares of EIX Common Stock in your registered and 401(k) Plan accounts, including fractional shares held in the 401(k) Plan but excluding fractional shares held in the Dividend Reinvestment and Direct Stock Purchase Plan.

For SCE registered shareholders, you will receive or have Internet access to separate proxy cards for each series of preferred stock registered in your name.

If you hold registered shares in both EIX and SCE, you will receive or have Internet access to separate proxy cards for each Company.

Street Name Shareholders – If you hold shares of EIX and/or SCE in street name, you will receive or have Internet access to separate proxy cards from each broker or other nominee.

What happens if I submit my proxy card but do not indicate my voting preference?

The proxies and 401(k) Plan trustee will vote “FOR” election of all nominees for Director (Item 1), “FOR” ratification of the appointment of the independent registered public accounting firm (Item 2), “FOR”

approval of executive compensation (Item 3) and “AGAINST” the shareholder proposal regarding an independent Board Chairman (Item 4, EIX only).

What happens if I submit my proxy card but do not sign or date my card?

Those shares will be treated as unvoted shares on all matters and will not be considered as present and part of the quorum.

What happens if I do not vote?

If you are a registered shareholder, your shares will not be voted.

If you hold your shares in street name, most brokers or other nominees will only have authority to vote your shares on ratification of the appointment of the independent registered public accounting firm (Item 2). With respect to each of the other Items, most brokers or other nominees will not have authority to vote your shares, and the shares will instead be treated as “broker non-votes.”

If you are a 401(k) Plan shareholder, the 401(k) Plan trustee will vote your shares in the same proportion to the 401(k) Plan shares voted by other 401(k) Plan shareholders, unless contrary to ERISA.

How many votes do you need to hold the meeting?

A quorum is required for the Company to conduct business at the Annual Meeting. The presence at the Annual Meeting, in person or by proxy, of shareholders entitled to cast a majority of the votes that all shareholders are entitled to cast constitutes a quorum. All shares represented by a properly signed proxy will be considered as present and part of the quorum, even if you or your broker or other nominee doesn’t vote or abstains on any or all matters.

As of the record date, EIX had 325,811,206 shares of EIX Common Stock outstanding, 325,798,305 of which are entitled to cast a total of 325,798,305 votes. Therefore, a quorum for EIX is 162,899,153 shares. SCE had 4,800,198 shares of Cumulative Preferred Stock outstanding and entitled to cast a total of 28,801,188 votes, and 434,888,104 shares of SCE Common Stock outstanding and entitled to cast a total of 434,888,104 votes. Voting together as a

class, the SCE shareholders have the right to cast a total of 463,689,292 votes. Therefore, a quorum for SCE is 231,844,647 shares.

What vote is required to adopt each Item at the meeting?

A Director nominee will be elected, and a proposal will be approved, if the following two votes are obtained:

Who will count the votes?

Wells Fargo Bank, N.A., will tabulate the votes and is expected to act as the inspector of election. To protect the confidentiality of votes cast under the 401(k) Plan, 401(k) Plan shareholders’ voting instructions are given directly to Wells Fargo. Wells Fargo will tabulate those votes and provide aggregate voting results directly to the 401(k) Plan trustee. EIX will not have access to any of the 401(k) Plan shareholders’ voting instructions, and 401(k) Plan voting results are only reported to EIX in the aggregate.

Whom may I call with any questions?

You may call Wells Fargo at 1-800-347-8625 or visit their Internet website at www.shareowneronline.com.

What happens if additional matters are presented at the Annual Meeting?

The Board is not aware of, and does not intend to present, any business to be acted upon at the Annual Meeting other than the Items described in this Joint Proxy Statement. If you submit a proxy and any other matters should properly come before the Annual Meeting, including matters incident to the conduct of the Annual Meeting, the persons named as proxy holders will have the discretionary authority to vote

your shares in accordance with their best judgment. Should any of the nominees for election to the Board

become unavailable to stand for election as a Director, the proxies will also have the authority to vote for substitute nominees chosen by the Board.

How much will this proxy solicitation cost?

We have retained Georgeson Inc. to assist us with the solicitation of proxies and will pay an aggregate fee of $20,000 (EIX $18,000 and SCE $2,000) plus expenses. This fee does not include the costs of printing and mailing the proxy materials. Some of the Directors, officers and other employees of the Company also may solicit proxies personally, by mail, by telephone or by other electronic means for no additional compensation. We will also reimburse brokers and other nominees for their reasonable out-of-pocket expenses for forwarding proxy materials to beneficial owners and obtaining voting instructions.

What is the deadline to submit shareholder proposals or other business to be included in the proxy materials for next year’s Annual Meeting?

To be considered for inclusion in the 2013 Joint Proxy Statement, shareholder proposals for the Company’s 2013 Annual Meeting must be received by November 19, 2012.

Shareholders intending to bring any other business before an Annual Meeting, including Director nominations, must give written notice to the Corporate Secretary of the business to be presented. The notice must be received at our office within the periods, and with the information and documents, specified in the Bylaws.

Assuming that the 2013 Annual Meeting is held on April 25, 2013, as currently specified by the Bylaws, the period for the receipt by the Corporate Secretary of written notice of other business to be brought by shareholders before the 2013 Annual Meeting, including Director nominations, will begin on September 20, 2012 and end on November 19, 2012.

How are potential Director nominees identified and selected by the Board to become nominees?

The Nominating/Corporate Governance Committee, comprised solely of independent directors under New York Stock Exchange (“NYSE”) rules and our Corporate Governance Guidelines, is responsible for recommending Director candidates to the Board.

The Committee will consider candidates recommended by shareholders if they are submitted in writing to the Corporate Secretary and include all of the information required by Article II, Section 4 of our Bylaws plus a written description, together with any supporting materials, of the following:

The Committee also considers candidates recommended by our Directors, senior management, and any director search firm retained by the Committee. Mr. Taylor, our newest Director, was recommended by one of our non-management Directors and considered as part of a search process conducted using a director search firm retained by the Committee. The director search firm supports the process of identifying candidates, coordinating the interview process and conducting reference checks. There are no differences in the manner in which the Committee evaluates a candidate based on the source of the recommendation.

If, based on an evaluation of the candidate’s qualifications, qualities and skills, the Committee determines to continue its consideration of a candidate, one or more Committee members and other Directors as determined by the Committee, interview the candidate. The Committee conducts any further research on the candidate that it deems appropriate. The Committee then determines whether to recommend that the candidate be nominated as a

Director. The Board considers the recommendation and determines whether to nominate the candidate for election.

What information does the Nominating/Corporate Governance Committee consider when recommending a Director nominee?

For the Committee to recommend a Director nominee, the candidate must at a minimum possess the qualifications, qualities and skills in our Corporate Governance Guidelines, including:

The Committee also considers other factors and information, including the Board’s current need for additional members, the candidate’s potential for increasing the Board’s range of experience, skills and diversity, the candidate’s independence, and specific skills and experience that are relevant to our business strategy.

In nominating candidates for re-election to the Board, the Committee also considers the nature and time invested in a Director’s service on other boards, the Director’s Board, Board committee and annual meeting attendance, and the vote received at the prior annual meeting.

How does the Nominating/Corporate Governance Committee consider diversity in identifying director candidates?

Our Corporate Governance Guidelines state the Board’s policy that the value of diversity on the Board should be considered. The Committee considers ethnic and gender diversity, as well as diversity of skills, backgrounds and qualifications represented on the Board, in recommending nominees for election. In 2011, the Committee discussed the value of diversity on the Board at two

Committee meetings. In 2008 and 2011, the Committee retained a director search firm and instructed it to identify and coordinate interviews with candidates reflecting ethnic and gender diversity.

The Committee evaluates its effectiveness in achieving diversity on the Board through its annual review of Board composition, which identifies ethnicity, gender and industry experience, prior to recommending nominees for election.

How does the Board determine which Directors are considered independent?

Our Corporate Governance Guidelines require that the Board consist of at least a majority of independent Directors. The Company uses the NYSE listing standards to determine independence.

Additionally, the Audit, Compensation and Executive Personnel, and Nominating/Corporate Governance Committees are required to be comprised solely of independent Directors. The Audit and Compensation Committee charters contain additional independence requirements for committee membership.

No Director will be considered independent if he or she would not qualify as independent under NYSE rules. Directors who qualify as independent are determined to be independent unless the Director has a material relationship with the Company or its subsidiaries.

The Board has determined that the types of relationships described in Section B of Exhibit A-1 to our Corporate Governance Guidelines are not material for purposes of determining Directors’ independence. As a result, the Board does not consider these relationships in making Director independence determinations.

For relationships not prohibited by NYSE rules and not covered under the categories of immaterial relationships in our Guidelines, the determination of whether a relationship is material or not, and therefore whether a Director is independent or not, is made in good faith by the Directors. The Director whose relationship is under consideration abstains from the vote regarding his or her independence.

Which Directors has the Board determined are independent?

The Board has determined that Directors Bindra, Chang, Córdova, Curtis, Freeman, Nogales, Rosser, Schlosberg, Sutton, Taylor and White are each independent.

The Board reviews the independence of our Directors at least annually, and periodically as needed. In February 2012, prior to recommending Director nominees for election, the Board confirmed that the independent Directors had no relationships or transactions that disqualified them as independent.

Who is the Lead Director and what are the Lead Director’s duties and responsibilities?

The Lead Director is designated annually by the independent Directors, must be independent, and is expected to devote a greater amount of time to Board service than the other Directors. The current Lead Director is Richard T. Schlosberg, III, who has served in that role since April 2010.

The Lead Director’s duties and responsibilities are described in our Corporate Governance Guidelines and include all of the following:

The Lead Director’s term is one year, consistent with annual elections of Directors; in practice, however, our Lead Directors have served for two years since 2008.

Why does the Board believe that its Board leadership structure is appropriate?

The Board has determined that the combined role of Chairman and CEO, together with an independent Lead Director having the duties described above, is currently in the best interest of our shareholders because it provides the appropriate balance between effective leadership of the Company and independent oversight of management. We have the following corporate governance practices that provide for strong independent leadership on the Board and effective oversight of management and CEO performance:

The EIX Board also believes that having Mr. Craver serve in the combined role of EIX Chairman and CEO is in the best interests of our shareholders because:

The Board continues to monitor trends in this area and could, under different circumstances, reach a different conclusion.

What is the Board’s role in CEO succession planning?

The Board believes that CEO succession planning is one of its most important responsibilities. Our Corporate Governance Guidelines provide that the Board will annually review and evaluate succession planning and management development for the Company’s senior officers, including the CEO.

At least annually, the Board meets in executive session with the EIX CEO to discuss succession planning. The discussion includes CEO succession in the ordinary course, CEO succession in the event of an emergency, and succession for other key senior management positions. The frequency of the Board’s succession planning discussions depends in part on the period until the CEO’s expected retirement. For example, the Board discussed succession planning more frequently in the year prior to the announcement that Mr. Craver would succeed the prior EIX CEO upon his retirement.

In the succession planning process, internal CEO succession candidates are identified and evaluated based on criteria considered predictive of success at the CEO level, taking into account the Company’s business strategy. The Board uses a common talent assessment format for each individual. The assessment includes a development plan for each individual.

Our Corporate Governance Guidelines provide that the Board will have opportunities to become acquainted with the senior officers of the Company and others who may have the potential to handle significant management positions. This is carried out through opportunities for officers to make presentations to the Board and Board committees,

director education sessions, other business interactions, and social events intended for this purpose.

In addition to the succession planning process, the Compensation and Executive Personnel Committee annually reviews the performance of the CEO and other senior officers. The performance review process is discussed under “Role of Compensation Committee and Executive Officers” in Part III of the Compensation Discussion and Analysis below. The Committee reports on the results to the Board.

What is the Board’s role in risk oversight?

Our Corporate Governance Guidelines provide that one of the Board’s primary functions is to review the Company’s enterprise risk management process and monitor strategic and emerging risks. The Board annually reviews key enterprise risks identified by management, such as financial, reputational, safety and security, and compliance risks, and periodically monitors key risks through reports and discussions regarding key risk areas at Board meetings. The Board also focuses on specific strategic and emerging risks in periodic strategy reviews. The Board annually reviews corporate goals and approves capital budgets.

Board committees have responsibility for risk oversight in specific areas as follows:

The Audit Committee is responsible for oversight of (i) risk assessment and risk management policies, (ii) major financial risk exposures, and (iii) the steps management has taken to monitor and control these exposures. In carrying out these responsibilities, the Committee semi-annually reviews the Company’s risk management processes and key enterprise risks, reviews the EIX risk management committee charter, and receives regular reports on litigation, internal audits and compliance. The Committee also annually reviews and approves the internal audit plan.

The Compensation Committee assesses and monitors risks in the Company’s compensation program. The Committee’s risk assessment process and factors considered in assessing risk are discussed under “Risk Considerations” in Part III of the Compensation Discussion and Analysis below.

The Finance Committee monitors risk in the Company’s capital investment activities. The Committee regularly monitors the level of capital investment relative to approved capital budgets and must approve significant capital spending variances and projects that are not included in approved capital budgets.

The Nominating/Corporate Governance Committee advises the Board with respect to Board size and composition, Board committee composition and responsibilities, Lead Director selection and corporate governance practices that help position the Board to effectively carry out its risk oversight responsibility.

The Board believes that its leadership structure supports the Board’s risk oversight function. Independent directors chair the Board committees responsible for risk oversight, the Company has an independent Lead Director who facilitates communication between management and directors, and all directors are involved in the review of key enterprise risks.

How many times did the Board meet in 2011?

The Board met seven times in 2011. Each Director attended 75% or more of all Board and Board committee meetings he or she was eligible to attend. The Board held five executive sessions of the non-employee Directors and one executive session of the independent Directors.

Does the Company have a policy on attendance of Director nominees at Annual Meetings?

Director nominees are expected to attend Annual Meetings. All of the EIX and SCE Directors attended the 2011 Annual Meeting.

Are Directors required to hold EIX Common Stock?

Yes. Within five years from the date of their initial election to the Board, Directors are required to beneficially own an aggregate number of shares of EIX Common Stock or derivative securities convertible into EIX Common Stock, excluding stock options, having a value equivalent to five times the amount of the annual Board retainer.

All Directors comply with these stock ownership guidelines.

Does EIX have a policy on shareholder rights plans?

The EIX Board has a policy to seek prior shareholder approval of the adoption of any shareholder rights plan unless, due to time constraints or other reasons consistent with the EIX Board’s fiduciary duties, a committee consisting solely of independent Directors determines that it would be in the best interests of EIX shareholders to adopt the plan prior to shareholder approval. Any rights plan adopted by the EIX Board without prior shareholder approval will automatically terminate one year after adoption of the plan unless the plan is approved by EIX shareholders prior to such termination.

Is SCE subject to the same corporate governance stock exchange rules as EIX?

No. SCE is subject to the NYSE Amex rules, which exempts SCE from designated corporate governance rules for Board and Board committee composition, including director independence, the director nominations process, and the process to determine executive compensation. SCE is exempt from these rules because (i) it is a “controlled company” with

over 50% of the voting power held by its parent company, EIX, and (ii) it has listed only preferred stock on the exchange.

How may I communicate with the Board?

Shareholders and other interested parties may communicate with the Board or individual Directors by following the procedures described on our website at www.edison.com/corpgov.

Where can I find the Company’s corporate governance documents?

The EIX Bylaws, Corporate Governance Guidelines, and Board committee charters, the Director Ethics and Compliance Code applicable to all Directors, and the Employee Ethics and Compliance Code applicable to all officers and employees of the EIX companies, are posted on our website at www.edison.com/corpgov.

The SCE Bylaws, Corporate Governance Guidelines and Board committee charters are posted on our website at www.sce.com/corpgov.

It is the Company’s policy that the Nominating/Corporate Governance Committee review at least annually, and periodically as needed, any transaction in the prior calendar year or any proposed transaction between the EIX companies and a related person in which the amount involved exceeds $120,000 and the related person has a material interest. A related person is generally a Director, a Director nominee, an executive officer, or a greater than 5% beneficial owner of any class of voting securities of EIX or SCE, and their immediate family members. This policy is stated in writing in the Nominating/Corporate Governance Committee charter.

The Committee’s regular procedure is to obtain from management annually, and periodically as needed, a list of the transactions with related persons described above, and to review these transactions at a meeting held in advance of recommending Director nominations to the Board. The list is based on

information from questionnaires completed by our Directors, Director nominees, and executive officers, together with information obtained from our accounts payable and receivable records. The Committee’s procedure is evidenced in the minutes and records for the Committee meeting at which the review occurred.

Director Olson is a partner of the law firm of Munger, Tolles & Olson LLP, which provided legal services to the EIX companies in 2011. Such services are expected to continue in the future. The amount paid to Munger, Tolles & Olson LLP for legal services during 2011 was $6,879,858. Mr. Olson personally provided approximately 13 hours of legal services to the EIX companies in 2011.

The terms and conditions of the Company’s relationship with Munger, Tolles & Olson LLP are comparable to the terms and conditions of the Company’s relationships with other law firms.

Audit Committee

The Audit Committee’s duties and powers, which are described in its charter, include the following:

Compensation and Executive Personnel Committee

The Compensation and Executive Personnel Committee’s duties and powers, which are described in its charter, include the following:

Nominating/Corporate Governance Committee

The Nominating/Corporate Governance Committee’s duties and powers, which are described in its charter, include the following:

Finance Committee

The EIX and SCE Finance Committee’s duties and powers, which are described in its charter, include the following:

The EIX Finance Committee also has the following duties and powers described in its charter:

AUDIT COMMITTEE REPORT

Management is responsible for the Company’s internal controls and the financial reporting process, including the integrity and objectivity of the financial statements. The independent registered public accounting firm is responsible for performing an independent audit of the Company’s financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and to issue a report thereon. The Audit Committee monitors and oversees these processes. The Committee members are not accountants or auditors by profession and, therefore, have relied on certain representations from management and the independent registered public accounting firm about carrying out its responsibilities.

In connection with the December 31, 2011 financial statements, the Audit Committee:

Based upon these reviews and discussions, the Audit Committee recommended to the Board that the audited financial statements be included in the Company’s 2011 Annual Report on Form 10-K to be filed with the SEC.

Thomas C. Sutton, Chair

Jagjeet S. Bindra

Vanessa C.L. Chang

France A. Córdova

Luis G. Nogales

Peter J. Taylor

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES

The following table sets forth the aggregate fees billed to EIX (consolidated total including EIX and its subsidiaries) and SCE, respectively, for the fiscal years ended December 31, 2011 and December 31, 2010, by PricewaterhouseCoopers:

The Audit Committee is required to review with management and pre-approve all audit services to be performed by the independent registered public accounting firm and all non-audit services that are not prohibited and that require pre-approval under the Exchange Act. The Committee’s pre-approval responsibilities may be delegated to one or more Committee members, provided that such delegates present any pre-approval decisions to the Committee at its next meeting. The Committee has delegated such pre-approval responsibilities to the Committee Chair. The independent registered public accounting firm must assure that all audit and non-audit services provided to the Company have been approved by the Audit Committee.

During the fiscal year ended December 31, 2011, all services performed by PricewaterhouseCoopers were pre-approved by the Audit Committee, irrespective of whether the services required pre-approval under the Exchange Act.

Twelve Directors will be elected to the EIX Board and 13 Directors will be elected to the SCE Board, each to hold office until the next Annual Meeting. A current Director, James M. Rosser, was not nominated for re-election under our Corporate Governance Guidelines because he is age 72. The Director nominees of EIX and SCE are the same, except that Mr. Litzinger is a nominee for the SCE Board only.

A biography of each nominee describing his or her age, business experience during the past five years, and other prior relevant business experience is presented below. The biography includes the specific experience, qualifications, attributes, and skills that led the Board to conclude that the nominee should serve as a Director. While each nominee’s entire range of experience and skills is considered important, particular experience that contributes to the diversity and effectiveness of the Board is identified below. An overview of certain information considered by our Nominating/Corporate Governance Committee when nominating our non-management Directors for re-election is presented in the table following the Director biographies.

JAGJEET S. BINDRA

Mr. Bindra, age 64, has been a Director of EIX and SCE since 2010. He served as president of Chevron Global Manufacturing, responsible for Chevron Corporation’s worldwide refining operations, from 2004 until his retirement in 2009. During his 32-year career at Chevron, Mr. Bindra also served as managing director and chief executive officer of Caltex Australia Limited (2002 to 2003), president of Chevron Pipeline Co. (1997 to 2002), and senior vice president, pipelines, Chevron Overseas Petroleum, Inc. (1995 to 1997). He is a director of LyondellBasell Industries N.V., Transocean Ltd., and Larsen & Toubro Limited (India), and deputy chairman of the board of Transfield Services Limited (Australia). Mr. Bindra is a graduate of the Indian Institute of Technology in Kanpur, India, and holds a Master of Science degree in Chemical Engineering from the University of Washington and an MBA degree from Saint Mary’s College of California.

Mr. Bindra brings to the Board global experience in a capital intensive industry in the energy sector, which is particularly relevant to the Company’s capital investment program and infrastructure growth strategy. He has expertise in energy value chain and asset management. His experience as a director of other public companies also brings value to the Board. As he is retired from active employment, Mr. Bindra’s other board service has not affected the time or attention he has devoted to the Board. He has attended 100% of Board and his assigned Board committee meetings since he joined the Board. He also brings strategic management and operations experience, and the perspective of a new Director, to Board deliberations.

VANESSA C.L. CHANG

Ms. Chang, age 59, has been a Director of EIX and SCE since 2007. She is a director of EL & EL Investments, a private real estate investment business (since 1999). Ms. Chang has served as chief executive officer and president of ResolveItNow.com, an online dispute resolution service (2000 to 2002) and senior vice president of Secured Capital Corporation, a real estate investment bank (1998). She was a partner of the accounting firm KPMG Peat Marwick LLP for 11 years. Ms. Chang is a director or trustee of six funds in the American Funds family, advised by Capital Research and Management Company, and a director of Blue Shield of California. She is a graduate of the University of British Columbia and a Certified Public Accountant (inactive).

Ms. Chang brings to the Board experience in accounting and financial reporting and oversight matters. She has spent most of her career in the Southern California area and brings knowledge of the community served by SCE. She also brings experience as a director of public, private, and nonprofit organizations, securities regulation and corporate governance knowledge, and independent guidance as an important contributor to Board deliberations.

FRANCE A. CÓRDOVA

Dr. Córdova, age 64, has been a Director of EIX and SCE since 2004. She is the president of Purdue University (since 2007). Dr. Córdova has announced plans to retire as President of Purdue University in July 2012, and in January 2012, she became Chair of the Board of Regents of the Smithsonian Institution. Dr. Córdova previously served as chancellor of the University of California, Riverside (2002 to 2007) and vice chancellor for research and a professor of physics for the University of California, Santa Barbara (1996 to 2002). From 1993 to 1996, she served as NASA Chief Scientist. Dr. Córdova is a director of SAIC, Inc. and served as a director of Belo Corporation from 2003 to 2007. She is a member of the National Science Board and the Board of Trustees of the Mayo Clinic. Dr. Córdova is a graduate of Stanford University and holds a Ph.D in Physics from the California Institute of Technology.

Dr. Córdova brings to the Board public institution leadership experience and expertise in science and technology matters. Her expertise in technology is particularly valuable in connection with advanced technology developments in the utility industry and renewable energy. She also brings the perspective and insight of a director of other public and private companies and governmental and civic organizations.

THEODORE F. CRAVER, JR.

Mr. Craver, age 60, has been the Chairman of the Board, President, and Chief Executive Officer of EIX since 2008. He has been a Director of EIX since 2007 and of SCE since 2008. Mr. Craver has served as Chairman of the Board, President and Chief Executive Officer of EMG (2005 to 2008), and Executive Vice President (2002 to 2004), Chief Financial Officer (2000 to 2004) and Treasurer (1996 to 2004) of EIX. Before joining the Company as Vice President and Treasurer in 1996, Mr. Craver served as executive vice president and corporate treasurer of First Interstate Bancorp (1991 to 1996) and executive vice president and chief financial officer of First Interstate’s wholesale banking subsidiary (1986 to 1991). He is a director of Health Net, Inc. Mr. Craver is a graduate of the University of Southern California, where he also received his MBA degree.

Mr. Craver brings to the Board in-depth knowledge of the Company’s business, industry and strategy, experienced leadership and a finance background. He has had experience dealing with difficult challenges faced by the Company, including the California energy crisis. He is a leader in the electric utility industry, serving on the board and executive committee of the Edison Electric Institute, an association of U.S. shareholder-owned electric companies, and chairman of the Electric Power Research Institute, which provides independent, public-benefit research and development relating to the generation, delivery and use of electricity.

CHARLES B. CURTIS

Mr. Curtis, age 71, has been a Director of EIX and SCE since 2006. He served as president and chief operating officer of the Nuclear Threat Initiative, a private foundation dealing with national security issues (2001 to 2009). Mr. Curtis is currently a senior advisor to the Center for Strategic and International Studies, a public policy research institution (since 2009). He has served as executive director of the United Nations Foundation (2000) and a partner of the law firm of Hogan & Hartson (1997 to 2000). Mr. Curtis also served as deputy secretary of the U.S. Department of Energy (1995 to 1997), undersecretary of the U.S. Department of Energy (1994 to 1995), and chairman of the Federal Energy Regulatory Commission (1977 to 1981). He is a trustee of the Putnam Funds, a family of over 100 equity and fixed income mutual funds. Mr. Curtis is a graduate of the University of Massachusetts, Amherst, and Boston University Law School.

Mr. Curtis brings to the Board experience in energy policy and regulation, which is highly relevant to the Company’s business. His expertise in security and nuclear power issues, his public policy experience, and his background in legal and compliance matters are also particularly relevant to the Company’s business. His experience in leadership and oversight of public and private organizations has provided strong corporate governance knowledge that is valuable in his role as Chair of the Company’s Nominating/Corporate Governance Committee.

BRADFORD M. FREEMAN

Mr. Freeman, age 70, has been a Director of EIX and SCE since 2002. He is a founding partner of Freeman Spogli & Co., a private investment company (since 1983). Mr. Freeman has served as managing director of the investment banking firm Dean Witter Reynolds, Inc. (1976 to 1983). He is a director of CBRE Group, Inc. Mr. Freeman is a graduate of Stanford University and holds an MBA degree from Harvard Business School.

Mr. Freeman brings to the Board knowledge and experience in the capital markets and securities business, which is particularly valuable in the Company’s capital intensive business and in the context of its capital investment and growth strategy. He also brings the perspective of managing an investment portfolio and an understanding of shareholder concerns. This experience is valuable in Mr. Freeman’s role as Chair of the Company’s Finance Committee. As a result of his career in the Southern California area, he brings knowledge of the community served by SCE.

RONALD L. LITZINGER

Mr. Litzinger, age 52, has been the President and a Director of SCE since 2011. He has held a wide range of executive positions at the EIX companies since joining SCE as an engineer in 1986, including President and Chief Executive Officer of EMG (2008 through 2010), Senior Vice President of SCE responsible for transmission and distribution operations (2005 to 2008), Vice President of EIX responsible for strategic planning (2004 to 2005), Senior Vice President and Chief Technical Officer of EME (2002 to 2004), and Senior Vice President of EME’s worldwide operations (1999 to 2002). Mr. Litzinger is a graduate of the University of Washington with a chemical engineering degree and received a Master of Arts degree from the University of Redlands.

Mr. Litzinger brings to the SCE Board in-depth knowledge of the Company’s business, experienced leadership and an engineering background. He also brings senior executive, operations and strategic planning experience developed during his 25 years of service with the Company.

LUIS G. NOGALES

Mr. Nogales, age 68, has been a Director of EIX and SCE since 1993. He is managing partner of Nogales Investors, LLC, a private equity investment company (since 2001). Mr. Nogales has served as president of Nogales Partners, a private equity investment company (1990 to 2001), president of Univision, a Spanish language television network (1986 to 1988), and chairman of the board and chief executive officer of United Press International, a communications company (1983 to 1986). He is a director of Arbitron Inc. and KB Home. Mr. Nogales is a member of the Board of Trustees of the J. Paul Getty Trust. He is a graduate of San Diego State University and Stanford Law School.

Mr. Nogales brings to the Board business, management and chief executive leadership experience in media and marketing enterprises and the Spanish language market, which is particularly relevant in the communities served by SCE. He also brings the perspective and insight of a director of other public companies and a private equity investor who understands shareholder concerns. He brings broad knowledge of the Company’s business and corporate history developed through 19 years of service on the Board.

RONALD L. OLSON

Mr. Olson, age 70, has been a Director of EIX and SCE since 1995. He is a partner of the law firm of Munger, Tolles & Olson LLP (since 1970). Mr. Olson is a director of Berkshire Hathaway, Inc., City National Corporation and The Washington Post Company, and a director or trustee for three funds in the Western Asset Funds complex. He is a trustee of the RAND Corporation and the California Institute of Technology. Mr. Olson is a graduate of Drake University and University of Michigan Law School, and holds a Diploma in Law from Oxford University.

Mr. Olson brings to the Board legal experience in complex litigation, regulatory and transactional matters and corporate counseling for large corporations. He also has experience in a wide range of governance and public policy matters as a director of various public and private companies and non-profit organizations, and leadership in the community developed through his business and civic affiliations. His experience as a director of four other public companies brings value to the Board, and has not affected the time or attention he has devoted to our Board. He attended 91% of Board and his assigned Board committee meetings in 2011. Mr. Olson brings considerable knowledge of the Company’s business and corporate history developed through 17 years of service on the Board.

RICHARD T. SCHLOSBERG, III

Mr. Schlosberg, age 67, has been a Director of EIX and SCE since 2002. He has served as president and chief executive officer of The David and Lucile Packard Foundation, a private family foundation (1999 to 2004), publisher and chief executive officer of The Los Angeles Times (1994 to 1997), and executive vice president and director of The Times Mirror Company, a media communications company (1994 to 1997). Mr. Schlosberg is a director of eBay Inc. and served as a director of BEA Systems, Inc. from 2005 to 2008. He is chairman of the board of the Kaiser Family Foundation. Mr. Schlosberg is a graduate of the United States Air Force Academy, and holds an MBA degree from Harvard Business School.

Mr. Schlosberg brings to the Board business, management and chief executive leadership experience in the communications industry, including in the local markets served by SCE. He also brings executive compensation expertise from his business experience and his experience as Chair of the Company’s Compensation and Executive Personnel Committee. He has exercised additional independent leadership as the Company’s Lead Director, devoting significant time and attention to the Company. He brings the perspective and insight of a director at other public and private companies.

THOMAS C. SUTTON

Mr. Sutton, age 69, has been a Director of EIX and SCE since 1995. He served as chairman of the board and chief executive officer of Pacific Life Insurance Company (1990 to 2007) and as a trustee of the Pacific Funds (2001 to 2007). Mr. Sutton is a director of Pacific Mutual Holding Company and Pacific LifeCorp and the Public Policy Institute of California. He is a graduate of the University of Toronto.

Mr. Sutton brings to the Board business and chief executive leadership experience in an industry which, like the electric utility industry, is highly regulated. He also brings extensive knowledge of finance and accounting matters to his role as the Company’s Audit Committee Chair and financial expert. He brings significant knowledge of the Company’s business and corporate history developed through 17 years of service on the Board.

PETER J. TAYLOR

Mr. Taylor, age 53, has been a Director of EIX and SCE since December 2011. He is the executive vice president and chief financial officer of the University of California (since 2009). Mr. Taylor has served as managing director of public finance of Lehman Brothers and Barclays Capital (2002 to 2009). He is chairman of the board of the James Irvine Foundation and a member of the board of directors of the J. Paul Getty Trust, serving as chair of the audit committee. Previously, Mr. Taylor was chair of the UCLA African American Admissions Task Force (2006-2008) and commissioner on the California Performance Review Commission (2004). He is a graduate of the University of California Los Angeles and holds a Master’s degree in public policy analysis from Claremont Graduate University.

Mr. Taylor brings to the Board finance and public policy experience, which is particularly relevant to the Company’s infrastructure development strategy. He also brings experience in risk management, accounting and financial reporting, and a fresh perspective to Board deliberations as our newest Director.

BRETT WHITE

Mr. White, age 52, has been a Director of EIX and SCE since 2007. He is the chief executive officer of CBRE Group, Inc., a commercial real estate services firm (since 2005). Mr. White has served as president and chief executive officer (2005 to 2010), and as president (2001 to 2005) of CBRE, Inc., and chairman of the Americas of CB Richard Ellis Services, Inc. (1999 to 2001). He is a Director of CBRE Group, Inc. and a Trustee of the University of San Francisco. Mr. White is a graduate of the University of California, Santa Barbara.

Mr. White brings to the Board the experience, strategic perspective, critical judgment and analytical skills of an active chief executive officer of a public company. CBRE is engaged in commercial real estate services, including property management and development, which is relevant to the Company’s infrastructure growth strategy. He also brings the perspective of a business customer headquartered and doing business in the local markets served by SCE.

The Audit Committee has selected PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for calendar year 2012. The Company is asking shareholders to ratify this appointment.

PricewaterhouseCoopers is an international accounting firm which provides leadership in public utility accounting matters. Representatives of PricewaterhouseCoopers are expected to attend the Annual Meeting to respond to appropriate questions and to make a statement if they wish.

The Company is not required to submit this appointment to a shareholder vote. Ratification would be advisory only. However, if the shareholders of either EIX or SCE do not ratify the appointment, the appropriate Audit Committee will investigate the reasons for rejection by the shareholders and will reconsider the appointment.

The Board recommends that you vote “FOR” Item 2.

The advisory vote to approve the Company’s executive compensation, commonly known as “Say-on-Pay,” gives shareholders the opportunity to endorse or not endorse our executive compensation. This advisory vote is required by SEC rules to be provided at least once every three years. However, at last year’s Annual Meeting our shareholders voted to hold the advisory vote every year, and the Board determined that it would be held annually. In 2011, the advisory vote to approve EIX’s executive compensation received support from approximately 81% of the votes cast.

Our executive compensation is described under “Compensation Discussion and Analysis” below. We encourage you to read it carefully. Our executive compensation program is reviewed and approved by the Compensation and Executive Personnel Committee. The Board believes our competitive compensation structure aligns executive compensation with shareholder value and serves shareholders well.

EIX and SCE request shareholder approval of the compensation paid to their named executive officers, as disclosed in this Joint Proxy Statement pursuant to the SEC’s compensation disclosure rules, including the Compensation Discussion and Analysis, the compensation tables and the narrative discussion that accompanies the compensation tables.

The Company values constructive dialogue with shareholders on compensation and other important governance matters. Because your vote is advisory, it will not be binding upon the Board or the Company. However, the Compensation and Executive Personnel Committee will consider the outcome of the vote and any constructive feedback from shareholders when making future executive compensation decisions as it deems appropriate. See “Shareholder Communication and Compensation Changes for 2012” in Part I of the Compensation Discussion and Analysis below.

The Board recommends that you vote “FOR” Item 3.

John Chevedden, whose address is 2215 Nelson Ave., No. 205, Redondo Beach, CA 90278, has notified EIX that he beneficially owns at least 200 shares of EIX and intends to present Item 4 for action at the Annual Meeting. The text of the shareholder proposal is included below as submitted by the proponent, and has not been endorsed or verified by EIX. The EIX Board response to the shareholder proposal follows under “EIX Board Recommendation ‘Against’ Item 4.”

4 – Independent Board Chairman

RESOLVED: Shareholders request that our board of directors adopt a policy that, whenever possible, the chairman of our board of directors shall be an independent director (by the standard of the New York Stock Exchange), who has not previously served as an executive officer of our Company. This policy should be implemented so as not to violate any contractual obligations in effect when this resolution is adopted. The policy should also specify how to select a new independent chairman if a current chairman ceases to be independent between annual shareholder meetings.

To foster flexibility, this proposal gives the option of being phased in and implemented when our next CEO is chosen.

When a CEO serves as our board chairman, this arrangement may hinder our board’s ability to monitor our CEO’s performance. Many companies have independent Chairs. An independent Chair is the prevailing practice in the United Kingdom and many international markets.

An independent Chair can enhance investor confidence in our Company and strengthen the integrity of our Board. This proposal topic won majority support at four companies in 2011.

The merit of this Independent Board Chairman proposal should also be considered in the context of

the need for improvement in our company’s 2011 reported corporate governance status:

The Corporate Library (TCL) www.thecorporatelibrary.com, an independent investment research firm, downgrading our rating due to increased board concerns and ongoing executive pay concerns. Four board members had 16 to 23 years tenure – independence concern.

Our CEO Theodore Craver was paid $9 million. Certain equity executive pay lacked performance-vesting features. Our executive pay market-priced stock options can give rewards for a rising stock market alone, regardless of executive performance. Only 33% of our CEO’s pay was incentive based. These facts suggest that our executive pay practices were not aligned with shareholder interests.

Directors Bradford Freeman and Brett White were together on the board of CB Richard Ellis. Intra-board relationships of this sort can compromise director ability to act independently. Freeman and White were also together on our Executive Pay Committee.

Ronald Olson received our highest negative votes – a whopping 24% – ten-times higher than some of our directors. Director Olson was a partner in the law firm of Munger, Tolles & Olson, which billed our company $6 million.

Our board was the only significant directorship for four of our directors – two of which were beyond age 70. This could indicate a significant lack of current transferable director experience for 33% of our directors.

An independent Chairman policy can further enhance investor confidence in our Company and strengthen the integrity of our Board. Please encourage our board to respond positively to this proposal for an Independent Board Chairman – Yes on 4.

EIX Board Recommendation “Against” Item 4

The EIX Board of Directors has considered the shareholder proposal requesting the Board to adopt a policy that the Chairman of the Board be an independent director (Item 4 on your proxy/voting instruction card) and recommends that you vote “Against” the proposal for the following reasons.

The Board believes it is in the Company’s best interests to have flexibility in determining whether to separate or combine the roles of Chairman and CEO.

We have given, and will continue to give, serious consideration to the merits of separating the positions of Chairman and CEO and electing an independent Chairman. However, we believe that it is best for the Company and its shareholders that the Board have the flexibility to determine the best leadership structure for the Company based on the circumstances, rather than adopt a rigid standard requiring an independent Chairman in all cases. An inflexible policy could deprive the Board of the ability to select the most qualified and appropriate individual to lead the Board as Chairman or to recruit the best individual to serve as CEO. Altering the leadership structure could send a negative signal about the Board’s confidence in the CEO. The Company may benefit from the clarity and accountability provided by having one person serve as Chairman and CEO, particularly in challenging circumstances. We have reviewed current practices in our industry and trends in this area. We have not found persuasive evidence that separating the positions results in better Company performance or Board effectiveness.

We have a strong Lead Director role.

Our Corporate Governance Guidelines provide for a strong independent Lead Director role. The independent directors annually elect an independent director to serve as Lead Director. Richard T. Schlosberg has served as our Lead Director since April 2010. Our Lead Director:

We have an effective process in place to oversee the CEO’s performance.

Our Corporate Governance Guidelines provide that the Compensation and Executive Personnel Committee, which consists entirely of independent directors, will annually evaluate the performance of the CEO. The Chair of the Committee annually solicits input on the CEO’s performance from each of the non-employee directors and reports to the Committee on the input received. The Committee discusses the report in executive session without the CEO present and determines the CEO’s compensation. The Committee Chair then reports to the Board on the input received, and the Board reviews the performance of the CEO in executive session without the CEO present. The Committee Chair provides feedback to the CEO.

Our process provides effective, independent oversight of the performance of the CEO. Separating the positions of Chairman and CEO is not necessary for this purpose.

We have corporate governance practices in place to provide effective oversight.

Our existing corporate governance practices provide for strong independent leadership on the Board, with effective oversight of management. Our Bylaws require that our Directors be elected by a majority vote and permit shareholders holding 10% of our shares to call a special meeting. The Board currently has 12 non-employee directors, 11 of whom are independent under NYSE rules. Other than Mr. Craver, none of our directors is a current or former employee of EIX or any of its subsidiaries. Three key committees of the Board – the Audit Committee, the Nominating/Corporate Governance Committee, and the Compensation and Executive Personnel Committee – are comprised entirely of independent directors who meet regularly. In

addition, the Board meets regularly in executive session without the CEO present. In 2011, the Board held five executive sessions of the non-employee directors.

These existing corporate governance practices ensure that the Board maintains strong independent leadership to oversee management and best serve our shareholders. Given the role of our Lead Director, the Board believes that adopting a policy that the Chairman of the Board must be an independent director is not necessary for effective independent Board leadership. A more flexible policy better serves the interests of the Company and its shareholders.

For the foregoing reasons, the EIX Board recommends that you vote “AGAINST” Item 4.

Introduction

This Compensation Discussion and Analysis (“CD&A”) describes the principles of our executive compensation program, how we applied those principles in compensating our named executive officers (“NEOs”) for 2011, and how we use our compensation program to drive performance. We also discuss the role and responsibilities of our Compensation and Executive Personnel Committee (the “Committee”) in determining executive compensation. The CD&A is organized to address the following:

The CD&A contains information that is relevant to your decision regarding the advisory vote to approve our executive compensation (Item 3 on your proxy card). When voting on Item 3, EIX shareholders will vote on EIX executive compensation, while SCE shareholders will vote on SCE executive compensation.

The EIX and SCE NEOs for 2011 are:

In this CD&A, the term “CEO” means the Chief Executive Officer of EIX.

I. Executive Summary

To facilitate review and understanding of our executive compensation program, certain key information is highlighted in this Executive Summary.

Our Business and Strategy

EIX conducts operations through its subsidiaries. Its principal subsidiaries are SCE, a rate-regulated electric utility that supplies electric energy to an approximately 50,000 square-mile area of southern California; and EMG, a competitive power generation company with a portfolio of coal and natural gas-fired and renewable energy generating plants in 12 states. Our strategy is to deliver shareholder value through the dual platform of a regulated utility and a competitive power generator, which provides strategic flexibility to pursue business opportunities in the changing electric industry. At SCE, our strategy is to balance the key objectives of safety, reliability and affordability with public policy requirements to achieve long-term sustainable growth. We are focused on transmission and distribution infrastructure investment and pursuing advanced technologies, including the smart grid and electric transportation. At EMG, our strategy is focused on safe, reliable and profitable operations at our coal plants and natural gas-fired and wind generation projects, and preserving and enhancing liquidity to weather current energy market conditions.

2011 Financial Highlights

Significant results for EIX in 2011 include:

For 2011, our core EPS performance compared to the goal was the primary factor that resulted in corporate performance factors for annual incentive awards that were above target for EIX and at target for SCE. In both cases, the corporate performance factors were below 2010 levels. The determination of corporate performance factors and the impact on annual incentive awards is described under “Annual Incentives” in Part II below.

2011 NEO Pay

The following table shows our EIX NEOs’ total direct compensation for 2011 compared to 2010. Total direct compensation consists of base salary, annual incentive awards and long-term incentive awards (columns (c), (e), (f) and (g) of the Summary Compensation Table), but excludes other elements of pay reported in the Summary Compensation Table below.

The increases in total direct compensation for Messrs. Craver and Scilacci were attributable to increases in base salary and increases in long-term incentive awards as a percentage of salary to bring these elements of compensation closer to market median. The increase in Mr. Adler’s total direct compensation was due to an increase in his long-term incentive award to bring his award closer to market median.

The increases in total direct compensation for Messrs. Pizarro and Litzinger were primarily due to their promotions to President of EMG and President of SCE, respectively, on January 1, 2011. They also received above-target long-term incentive awards in connection with their promotions.

For all EIX NEOs, the increases were offset by annual incentive awards in 2011 that were lower than 2010 due to lower corporate performance factors in 2011.

For a detailed discussion of these increases, see “What We Pay and Why: Elements of Direct Compensation” in Part II below.

SCE NEO total direct compensation is shown in the Summary Compensation Table and discussed under “What We Pay and Why: Elements of Direct Compensation” in Part II below.

How Our CEO Pay is Tied to Performance

The link between pay and performance is highlighted by trends in our CEO’s compensation. The following table shows the alignment of our CEO’s total direct compensation over the past three years with our indexed TSR, which represents the value of an initial investment of $100 in EIX common stock at the beginning of the three-year period, and assumes that dividends are reinvested. The three-year period is most relevant because 2009 was Mr. Craver’s first full year of service as CEO.

The data used in the table reflects grant date fair value of stock and option awards. It does not reflect the realized value of equity awards. For example, it does not reflect the actual payout of performance shares, which was $0 in 2009, $0 in 2010, and 63% of target in 2011, as discussed below under “How Our Long Term Incentives are Tied to Shareholder Value.”

How Our CEO Pay Compares to Peer Group Median

As in prior years, our peer group for purposes of benchmarking 2011 compensation was the Philadelphia Utility Index, substituting Sempra Energy for AES Corporation. The target value of total direct compensation for the CEO was set at approximately the median level for the peer group.

Upon his initial election as CEO, Mr. Craver’s total direct compensation was low relative to the peer group and has increased to bring his compensation closer to the peer group median. The following chart shows Mr. Craver’s total direct compensation as

reported in the Summary Compensation Table relative to the peer group median. For this purpose, because 2011 proxy data is largely unavailable for our peer group, the peer group median total direct compensation for 2011 has been determined using 2010 proxy statement data.

The following chart shows the percentile ranking of Mr. Craver’s aggregate total direct compensation relative to the peer group median for the last three years compared to the percentile ranking of EIX’s TSR relative to the peer group over the same period. The chart uses Summary Compensation Table data for Mr. Craver and peer group companies. We believe comparison to the three-year period is more meaningful than shorter periods because special factors can affect TSR results in any one year.

How Our Short-Term Incentive Plan is Tied to Shareholder Value

Our annual incentive program is designed to enhance long-term shareholder value by encouraging our NEOs to focus on the financial, strategic and operational objectives that support our business strategy discussed above under “Our Business and Strategy.” At least half of the value of annual incentive payouts for 2011 was dependent on financial performance, as measured by core EPS, or, for EMG, core adjusted EBITDA. The strategic and operational goals are focused on factors identified as key to the success of our overall business strategy. By focusing on performance and achievement of our overall business strategy, we tie our short-term incentive plan to shareholder value.

How Our Long-Term Incentive Plan is Tied to Shareholder Value

We tie our NEOs’ long-term interests to those of shareholders by making equity a substantial portion of our executive compensation. A decline in stock price results in a decrease in value of the equity compensation. This link is demonstrated in part by the recent payout history of our performance shares. Performance share grants are designed to provide for 17% of CEO and 12% of other NEO total target compensation. However, relative TSR as compared to our peer group for the 2008-2010, 2007-2009, and 2006-2008 performance periods was below the threshold required for payout of the performance shares, resulting in no payouts.

The following chart shows the target value of performance share awards granted between 2005 and 2009 compared to the value realized upon vesting of those awards following the related three-year performance period based on our relative TSR percentile ranking in our peer group. The value realized upon vesting reflects the TSR ranking and the change in the stock price between the grant date and the vesting date.

Likewise, NEOs realize value in the stock option portion of their long-term award only if the EIX stock price appreciates after the grant date. NEOs realize an increase or decrease in value compared to the target value of the restricted stock unit portion of their long-term award commensurate with the increase or decrease in value realized by shareholders

from changes in the stock price and dividends over the three-year vesting period.

Shareholder Communication and Compensation Changes for 2012

Approximately 81% of EIX shareholders voted in favor of our executive compensation in 2011. The Committee reviewed the results of our shareholder vote, including feedback from major shareholders who were willing to share the reasons for voting “against” our executive pay, as well as feedback from those who voted in favor of it. Taking the vote results and shareholder feedback into account, and considering trends in executive compensation and the best interests of shareholders, the Committee approved the following changes to our executive compensation program effective for 2012.

Change in Performance Share Metrics

The Committee added a second metric for measuring performance share payouts. Beginning with performance shares granted in 2012, performance

will be measured using (i) the existing relative TSR metric, with the threshold performance level for payout reduced from the 40^th percentile to the 25^th percentile; and (ii) a new EPS metric that measures EIX’s three-year average core EPS against pre-determined threshold, target and maximum EPS levels. Each metric will be weighted 50%.

The Committee’s independent compensation consultant, Frederic W. Cook & Company (“F.W. Cook”), has advised the Committee that the reduction in TSR threshold performance level is in line with peer group companies using this metric. The Committee believes the addition of an EPS metric alleviates shareholder concern regarding reliance on a single metric and reduces the volatility of payouts, while continuing to reinforce alignment with shareholder value and a strong focus on company-specific objectives.

Minor Change in Peer Group

The Committee adopted the Philadelphia Utility Index as the Company’s peer group, without adjustment, both for purposes of evaluating the relative TSR metric of the performance shares and for our compensation benchmarking. Previously, we adjusted the Index by substituting Sempra Energy for

AES Corporation. The Committee believes that adjusting the Index diminished the value of utilizing a market index, which it believes is a best practice.

Elimination of Executive Perquisites

The Committee eliminated all NEO perquisites effective January 1, 2012. The perquisites consisted of estate and financial planning services, executive preventive health care benefits, and a car allowance or car service. Additionally, club memberships were eliminated for executives effective January 1, 2012.

Increase in CEO Stock Ownership Guideline

The Committee increased our CEO’s stock ownership guideline from five to six times his annual base salary.

Consideration of Clawback Policy

The SEC is expected to propose rules in 2012 that will require public companies to adopt a clawback policy to recover incentive-based compensation from executives under certain conditions. The Committee has decided to postpone the adoption of a clawback policy until the SEC issues its rules, but the clawback policy, at a minimum, will comply with the final rules when issued by the SEC.

Our executive compensation program seeks to achieve three fundamental objectives:

This section of the CD&A discusses the elements of direct compensation offered under our program, which include base salaries, annual cash incentives, and long-term equity-based incentives.

The target value of total direct compensation for each NEO is set at approximately the median level for that position among the peer group companies. The reasons for the Committee’s decision to use the median level include:

A significant portion of our total direct compensation is performance-based, and therefore not guaranteed. The following charts that our CEO and other NEOs, on average, had approximately 85% and 68%, respectively, of their 2011 total direct compensation contingent upon performance outcomes, with the largest percentage comprising long-term incentive compensation.

This pay mix provides an opportunity for NEO compensation to reflect the upside and downside potential of company performance and helps to focus their attention on our strategic and operating objectives.

Base Salary

We pay our NEOs a fixed base salary to attract talented executives. For 2011, each NEO was assigned to an executive band based on his or her position. Each band had a base salary range consisting of a minimum, median and maximum. The median of the base salary range is the average of market median salaries for comparable positions in that band. F.W. Cook provides the Committee with peer group salary data based on proxy statements and pay surveys. None of our NEOs has a contractual right to receive a fixed base salary.

The salary increases between 2010 and 2011 shown in the Summary Compensation Table for Messrs. Craver and Scilacci were attributable to bringing their salaries closer to market median. The salary increases for Messrs. Litzinger, Pizarro and Pickett reflect the fact that these officers were promoted to their current positions on January 1, 2011. The salary increase for Mr. Dietrich reflects the fact that he was employed for all of 2011 compared to two months in 2010.

Annual Incentives

Executive Incentive Compensation Plan

NEOs are eligible for annual incentive awards under the EIX Executive Incentive Compensation Plan for achieving specific financial, strategic and operational goals pre-established at the beginning of each year. The target value is stated as a percentage of base salary and is based on the median of target annual incentive awards for comparable positions. The minimum award is $0. The maximum award is 200% of target, which F.W. Cook has advised the Committee is the most prevalent practice among the peer group companies.

The Committee determines annual incentive awards based on corporate and individual performance. The corporate performance factor is based on performance relative to the pre-established goals. For each goal category, the Committee assigned a target score equal to the relative weight given that goal category and a potential score range. In February 2012, the Committee determined the score achieved for each goal category, depending on the extent to which the goals were unmet, met or exceeded.

Goals were established for each of EIX, SCE and EMG. Annual incentive awards for the EIX NEOs, except Messrs. Litzinger and Pizarro, were based on EIX performance. Annual incentive awards for the SCE NEOs, including Mr. Litzinger, were based on SCE performance. Mr. Pizarro’s annual incentive award was based on EMG performance.

EIX Performance

Performance on the 2011 financial goal for EIX, measured by core EPS and weighted 60%, is shown below. The threshold level, below which no incentive would be paid, was $2.05. The maximum score of two times target would be earned if core EPS of $3.25 was achieved.

Performance on the 2011 strategic and operational goals for EIX, each weighted 10%, is shown below.

Key factors contributing to above and below target scores were:

SCE Performance

Performance on the 2011 financial goal for SCE, measured by core EPS and weighted 60%, is shown below. The threshold level was $2.78. The maximum score was the same as target. For SCE, above-target financial performance does not increase the score. The score is capped in order to mitigate a potential perception that SCE executives may be motivated to achieve short-term earnings over the interests of other regulated utility stakeholders.

Performance on the 2011 strategic and operational goals for SCE, weighted a total of 40%, is shown below.

Key factors contributing to above and below target scores were:

EMG Performance

Performance on the 2011 financial goal for EMG, measured by core adjusted EBITDA and weighted 50%, is shown below. The threshold level was $300 million. The maximum score of two times target would be earned if core adjusted EBITDA of $590 million was achieved.

Performance on the 2011 strategic and operational goals for EMG, weighted a total of 50%, is shown below.

Key factors contributing to above and below target scores were:

Based on 2011 performance, the corporate performance factors for EIX, SCE and EMG were 120%, 100%, 118% of target, respectively. The Committee has discretion to increase or decrease the corporate performance factor from the amount determined by application of the scoring matrix if it determines that events have occurred which have a significant impact on the Company that were not reflected in the pre-established goals.

The Committee exercised discretion to reduce the EIX corporate performance factor from 139%, as determined by application of the matrix, to 120%. As noted above, SCE’s above-target core EPS performance did not increase SCE’s corporate performance factor. For parity, the Committee reduced EIX’s corporate performance factor by the amount attributable to SCE’s above-target core EPS performance.

2011 Annual Incentive Results

The Committee determines the annual incentive award for each NEO by multiplying the target percentage by the corporate performance factor and an individual performance factor based on the Committee’s assessment of individual performance. The maximum award is two times the target percentage. The resulting annual incentive awards to our EIX NEOs were as follows:

Target and actual annual incentive award results for all NEOs are shown in the “Grants of Plan-Based Awards” table and the Summary Compensation Table, respectively.

Impact of Other Plans

Mr. Dietrich also participated in a retention plan for executives employed at SONGS. The SONGS plan provides that a portion of Mr. Dietrich’s target annual incentive otherwise payable under the EIX Executive Incentive Compensation Plan for 2010 through 2012 is aggregated as an award under the SONGS plan and payable subject to goals specific to SONGS performance over that time. The maximum award under the SONGS plan is three times the three-year aggregate target incentive. The 2011 target and maximum annual incentive award amounts for Mr. Dietrich under the SONGS plan are in the “Grants of Plan-Based Awards” table below, and the

amount of his award for 2011 is reflected in column (g) of the “Summary Compensation Table.”

To qualify annual incentive awards as deductible performance-based compensation under Section 162(m) of the Internal Revenue Code, the EIX Committee adopted the EIX 2011 Executive Annual Incentive Program (“162(m) Program”). Under this Program, an overall maximum annual incentive award for 2011 was established for each participating EIX NEO as a specified percentage of an annual incentive award pool. The aggregate award pool had a maximum value equal to 1.5% of EIX’s 2011 consolidated earnings from continuing operations, subject to adjustment for the effects of any special charges to earnings. The actual annual incentive awarded to each participating EIX NEO under the Executive Incentive Compensation Plan for 2011 was less than the applicable maximum under the 162(m) Program. Thus, all such compensation was tax-deductible.

Long-Term Incentives

We provide our NEOs with long-term incentives that are directly linked to the value provided to EIX shareholders. All of our long-term incentives are awarded as equity instruments reflecting, or valued by reference to, EIX Common Stock. Long-term incentive awards are made under the EIX 2007 Performance Incentive Plan.

Long-Term Equity Mix

In 2011, each NEO’s long-term incentive award value was in the form of 50% non-qualified stock options, 25% performance shares, and 25% restricted stock units as shown in the chart below.

The Committee believes the long-term incentive award allocations strike an appropriate balance among equity awards that reward:

More than 50% of our long-term equity mix is performance-based. In addition to the performance shares, we believe stock options are performance-based because NEOs will realize value only if the market value of the EIX Common Stock appreciates over time.

Value of Long-Term Equity

In December 2010, the Committee approved the target long-term incentive award value for each executive band for the upcoming year. The target value is stated as a percentage of base salary and is based on the median level of target long-term incentive award values for comparable positions in that band.

For 2011, the Committee increased the target long-term incentive award value for two bands that include NEOs. In each instance, the increase partially closed the gap between projected 2011 market median levels and 2010 target award values. The target value for Mr. Craver was increased by approximately 16%. The target value for Messrs. Scilacci, Adler and Litzinger was increased by approximately 11%.

The Committee approved grants of stock options, performance shares, and restricted stock units to the NEOs on February 23, 2011, with a grant date of March 3, 2011. The grant date value of each award is listed in the “Grants of Plan-Based Awards” table below. The Committee approved long-term incentive awards valued at 110% of target for Messrs. Litzinger and Pickett in connection with their promotions to President of SCE and Executive Vice

President of SCE, respectively, and 115% of target for Mr. Pizarro in connection with his promotion to President of EMG.

The Committee approved the award values and methodology for converting those values into the number of options, performance shares, and restricted stock units at the time of each long-term incentive grant. The aggregate grant date values of NEOs’ 2011 long-term incentive awards are reflected in columns (e) and (f) of the “Summary Compensation Table.”

Stock Options

Each stock option granted may be exercised to purchase one share of EIX Common Stock at an exercise price equal to the closing price of a share of EIX Common Stock on the applicable grant date. Options vest over a four-year period, subject to continued employment, with one-fourth of each award generally vesting and becoming exercisable at the beginning of each year.

Performance Shares

Performance shares reward performance over three years against a pre-established metric. Each performance share awarded is a contractual right to receive one share of EIX Common Stock or its cash equivalent if performance and continued service

vesting requirements are satisfied. The amount realized in the performance share portion of an NEO’s long-term award is formulaic so that neither management nor the Committee has authority to increase or decrease the award payment. The performance share awards provide for reinvested dividend equivalents. For each dividend declared for which the ex-dividend date falls within the performance period, each NEO will be credited with an additional number of target performance shares subject to the same terms and conditions as the original performance shares.

The performance measure is based on the percentile ranking of EIX’s TSR for the three-year performance period compared to the TSR of each stock in EIX’s

peer group for the same period. The following chart provides the percentile ranking and corresponding payout levels:

If EIX achieves a TSR ranking between any of the percentiles specified above, the number of shares paid will be interpolated on a straight-line basis. For purposes of determining performance share payouts, TSR is calculated using the difference between (i) the average closing stock price for the relevant stock for the 20 trading days ending with the last NYSE trading day preceding the first day of the performance period and (ii) the average closing stock price for the relevant stock for the 20 trading days ending with the measurement date, and assumes all dividends are reinvested on the ex-dividend date. See “Shareholder Communications and Compensation Changes for 2012” in Part I above for a discussion of the Committee’s adoption of a second metric for performance share payouts beginning in 2012.

The performance shares generally are paid half in EIX Common Stock and half in cash having a value equal to the EIX Common Stock that otherwise would have been delivered. EIX converts awards to cash to the extent necessary to satisfy minimum tax withholding or any governmental levies. NEOs may elect to defer payment of the portion of performance shares payable in cash under the Executive Deferred Compensation Plan.

EIX stock performance from 2009-2011 resulted in a payout of the 2009 performance share awards at 63% of target because our stock performance ranked in the 45^th percentile of our peer group. For payout values of performance share awards granted over the last five years, see the “Value of CEO Performance Shares” chart under “How Our Long-Term Incentives are Tied to Shareholder Value” in the Executive Summary above.

Restricted Stock Units

Each restricted stock unit awarded is a contractual right to receive one share of EIX Common Stock if continued service vesting requirements are satisfied.

The restricted stock units for NEOs provide for reinvested dividend equivalents. For each dividend declared for which the ex-dividend date falls within the vesting period, the NEO will be credited with an additional number of restricted stock units subject to the same terms and conditions as the original restricted stock units.

The restricted stock units are paid in EIX Common Stock, except EIX converts awards to cash having a value equal to the stock that otherwise would have been delivered to satisfy minimum tax withholding and governmental levies. The EIX Committee may elect to pay any restricted stock units in cash rather than shares of EIX Common Stock if and to the extent that payment in shares would exceed the applicable share limits of the EIX 2007 Performance Incentive Plan.

Acceleration of Long-Term Equity

If an NEO terminates employment after reaching age 65, or age 61 with five years of service, (i) stock options will vest and continue to become exercisable as scheduled, (ii) performance shares will be retained, and (iii) restricted stock units will vest and become payable as scheduled; in each instance, subject to a pro-rated reduction if the NEO retires within the year of grant. If an NEO dies or becomes disabled while employed, stock options and restricted stock units will immediately vest and become exercisable and payable, respectively, and performance shares will be retained.

Role of Compensation Committee and Executive Officers

The Committee is responsible for reviewing and determining the compensation paid to Company officers, including the NEOs. The Committee annually reviews all components of compensation for our CEO and other NEOs. This review encompasses all forms of compensation, including base salary, annual and long-term incentives, and other benefits, as well as amounts pursuant to retirement and non-qualified deferred compensation plans.

In December 2010, the Committee approved the base salary range, and the target and maximum potential annual and long-term incentive award values for each executive band for 2011. The annual and long-term

incentive target awards are stated as percentages of base salary and are based on the median level of target annual and long-term incentive award values for comparable positions in that band. Each February, after performance results for the prior year are finalized, the Committee determines annual incentive awards for the prior year and performance share payouts for the prior performance period. At that time, the Committee also approves base salary changes and long-term incentive grants for the current year. Base salary changes are effective in March of each year.

The CEO provides the Committee with recommendations regarding the compensation of the NEOs (other than his own). Other NEOs participate in developing and reviewing executive compensation recommendations, but do not participate in recommendations regarding their own compensation.

In determining the compensation of the CEO, the Committee Chair solicits input on his performance from the non-employee Directors. The Chair reports to the Committee on the input received. The Committee discusses the report and determines the compensation of the CEO in executive session without the CEO present. The Chair also reports to the Board in a non-management executive session on the input received and the Committee’s compensation determination.

For officers who are not EIX executive officers, the Committee has authorized the CEO and the EIX Senior Vice President for Human Resources to jointly approve special relocation, recruitment and retention awards within specific limits pre-approved by the Committee. Mid-year compensation determinations for newly hired and promoted officers who are not EIX executive officers that are within guidelines previously approved by the Committee do not require Committee approval.

Tally Sheets

The Committee reviewed tally sheets for the EIX NEOs. Tally sheets provide the Committee with information about the following components of compensation paid over the three-year period ending December 31, 2011:

The tally sheets also provide the amounts payable in the event of voluntary or involuntary separation from service, death or disability, or a change in control resulting in termination.

The Committee also reviews other information for the EIX NEOs’ compensation, including stock program statistics on share usage, analysis of current exercise values of prior option grants, and a summary of current and past performance share results.

Role of the Committee’s Independent Compensation Consultant

The Committee has retained F.W. Cook to assist in the evaluation of officer compensation, including the NEOs; however, the Committee makes all decisions regarding our executives’ compensation. Generally, this assistance includes helping the Committee identify industry trends and norms for executive compensation; reviewing and identifying the appropriate peer group companies; and evaluating relevant executive compensation data for these companies.

During 2011, F.W. Cook performed the following specific services:

In addition, an F.W. Cook representative attended Committee meetings and communicated directly with the Committee as needed. F.W. Cook did not perform

any services for the Company unrelated to the Committee’s responsibilities for our compensation programs, and all interactions with management were incidental to its work for the Committee.

The Committee retains sole authority to hire F.W. Cook, approve its compensation, determine the nature and scope of its services, evaluate its performance, and terminate its engagement.

Use of Competitive Data

The Committee relies on various sources of compensation information to determine the competitive market for our executive officers, including the NEOs. The Committee uses data from pay surveys by Towers Watson and AonHewitt, along with other specialty surveys for industry-specific jobs, to compile source data for its compensation evaluation.

Peer Group

All elements of executive compensation are regularly benchmarked against executive compensation in peer companies. Base salary, target annual incentives, and long-term incentive grant values are benchmarked annually. Other executive benefits and perquisites are benchmarked at least every three years. In connection with its 2011 benchmarking review of executive benefits, the Committee eliminated all perquisites for our executives, including the NEOs, beginning in January 2012, as discussed under “Shareholder Communication and Compensation Changes for 2012” in Part I above.

The Committee selected the following companies as the 2011 peer group, which includes the companies in the Philadelphia Utility Index as of February 2011 but substitutes Sempra Energy for AES Corporation. The same peer group has been used by the Committee since 2005. Use of an established market index for peer group purposes is consistent with the way in which investors evaluate performance across companies, such as review of relative TSR within an industry.

AES Corporation was excluded from the group because its mix of business revenues differs significantly from EIX and the other companies in the group, and Sempra Energy was included due to its California nexus. The companies in our peer group are similar to EIX in revenue and market capitalization, with EIX ranking at the 47^th and 42^nd percentile, respectively, based on data reported for the most recent four quarters ending on or before December 2011.

As noted in the CD&A, the Committee has adopted the unadjusted Philadelphia Utility Index beginning in 2012 so that the peer group will track the market index.

Risk Considerations

Our executive compensation policy directs that our total compensation structure should not encourage inappropriate or excessive risk-taking. The Committee takes risk into consideration when reviewing and approving executive compensation.

As specified in its charter, and with the assistance of F.W. Cook and Company management, the Committee reviewed the Company’s compensation programs for executives and for employees generally and has concluded that these programs do not create risks that are reasonably likely to have a material adverse effect on the Company.

In particular, in concluding that the current executive compensation program does not encourage inappropriate or excessive risk-taking, the Committee noted the following characteristics which limit risk:

Post-Employment Benefits

The NEOs receive retirement benefits under qualified and non-qualified defined-benefit and defined-contribution retirement plans. The SCE Retirement Plan and the Edison 401(k) Savings Plan are both qualified retirement plans in which the NEOs participate on substantially the same terms as other participating employees.

Due to limitations imposed by ERISA and the Internal Revenue Code, the benefits payable to the NEOs under the SCE Retirement Plan and the Edison

401(k) Savings Plan are limited. Because we do not believe that it is appropriate for retirement benefits to be reduced because of limits under ERISA and the Internal Revenue Code, we have established the Executive Retirement Plan and the Executive Deferred Compensation Plan that permit our NEOs to receive the full amount of benefits that would be paid under the qualified plans but for such limitations, and certain additional benefits.

For descriptions of the tax-qualified and non-qualified defined benefit pension plans and the Executive Deferred Compensation Plan, see the narrative below to the “Pension Benefits” and “Non-Qualified Deferred Compensation” tables, respectively.

The Company also sponsors survivor and disability benefit plans in which the NEOs are eligible to participate.

Severance and Change in Control Benefits

Our policy regarding severance protection for NEOs stems from its importance in recruiting and retaining executives. Executives are recruited from well-compensated positions in other companies or have attractive opportunities with other companies. We believe offering one year’s worth of compensation and benefits if any officer is involuntarily severed without cause offers financial security to offset the risk of leaving another company or foregoing an opportunity with another company. Severance benefits are not offered for resignation for “good reason,” except in the event of a change in control. The Company also provides severance protection for non-executive employees whose positions are eliminated.

The current executive compensation plans offer additional benefits in the event of a change in control of EIX. We believe that the occurrence, or expected occurrence, of a change-in-control transaction would create uncertainty regarding continued employment for NEOs. This uncertainty would result from the fact that many change-in-control transactions result in significant organizational changes, particularly at the senior executive level.

To encourage the NEOs to remain employed with the Company during a time when their prospects for continued employment following the transaction

would be uncertain, and to permit them to remain focused on the Company’s interests during the change in control, the NEOs would be provided with enhanced severance benefits if their employment were actually or constructively terminated without cause within a defined period of a change in control. Constructive termination would include occurrences such as a material diminution in duties or salary, or a substantial relocation.

Given that none of the NEOs has an employment agreement that provides for fixed positions or duties, or for a fixed base salary or annual incentive award, we believe that a constructive termination severance trigger is needed to prevent potential acquirors from having an incentive to constructively terminate an NEO’s employment to avoid paying any severance benefits at all. We do not provide excise tax gross-ups on change-in-control severance benefits for any of our executives. We do not believe that NEOs should be entitled to receive their cash severance benefits merely because a change-in-control transaction occurs. Therefore, the payment of cash severance benefits is subject to a double-trigger where an actual or constructive termination of employment would also have to occur before payment.

However, if a change in control occurs where EIX is not the surviving corporation, and following the transaction, outstanding equity awards would not be continued or assumed, then NEOs would receive immediate vesting of their outstanding equity awards as described under “Potential Payments Upon Termination or Change in Control” below.

We believe it is appropriate to fully vest equity awards in change-in-control situations where EIX is not the surviving corporation and the equity awards are not assumed, whether or not employment is terminated, because such a transaction effectively ends the NEOs’ ability to realize any further value with respect to the equity awards. However, restricted stock units will continue, in connection with a change in control, to vest and be paid on the original schedule unless the award is terminated in connection with the change in control in accordance with special rules under Code Section 409A, or the officer’s employment is terminated involuntarily not for cause or constructively terminated within a specified period around the change in control.

For detailed information on the estimated potential payments and benefits payable to NEOs in the event of their termination of employment, including following a change in control of the Company, see “Potential Payments Upon Termination or Change in Control” below.

Perquisites

For 2011, the NEOs received the following perquisites:

For 2011, no tax gross-up payments were made on taxable perquisites. All perquisites were eliminated for our NEOs effective January 2012.

The values of perquisites provided to each NEO in 2011 are reported in column (i) of the “Summary Compensation Table” below, and are further described in footnote (5) to that table.

Tax-Deductibility

Section 162(m) generally disallows a tax deduction by public companies for compensation over $1,000,000 paid to their chief executive officers and their other most highly compensated executive officers unless certain tests are met. While EIX’s first priority is to achieve its executive compensation objectives, it will generally attempt to design and administer its executive compensation program to preserve the deductibility of compensation payments to the EIX NEOs to the extent possible.

Under the EIX 2007 Performance Incentive Plan, non-qualified stock options, performance shares and annual incentive awards awarded to the EIX NEOs are structured to constitute performance-based compensation within the meaning of Section 162(m). However, restricted stock units are not deductible performance-based compensation within the meaning of Section 162(m). This is consistent with EIX’s philosophy that its goal of preserving the deductibility of compensation is secondary in importance to achievement of its compensation objectives.

Stock Ownership Guidelines

To underscore the importance of linking executive and shareholder interests, the Company has adopted stock ownership guidelines that require the NEOs to own EIX Common Stock or equivalents in an amount ranging from two to six times their annual base salary. The stock ownership guidelines for the NEOs are as follows:

The NEOs are expected to achieve their ownership targets within five years from the date they became subject to the guidelines. EIX Common Stock owned outright, shares held in the 401(k) Plan, and vested and unvested restricted stock units which do not depend on performance measures are included in determining compliance with the guidelines. Shares that NEOs have the right to acquire through the exercise or payout of stock options and performance shares are not included in determining compliance until such time as the options or performance shares are actually exercised, or paid, as the case may be, and the shares are acquired. All of the NEOs currently meet their stock ownership requirements under these guidelines.

Hedging Policy

Under the Company’s Insider Trading Policy, hedging related to Company securities, including EIX shares, is prohibited for all employees, including NEOs. In addition, EIX executive officers may not pledge Company securities as collateral for loans.

COMPENSATION COMMITTEE REPORT

The Committee has reviewed and discussed with management the Compensation Discussion and Analysis section of this Joint Proxy Statement. Based upon this review and the discussions, the Committee recommended to the Board that the Compensation Discussion and Analysis section be included in the Company’s 2011 Annual Report on Form 10-K and this Joint Proxy Statement.

Richard T. Schlosberg, III, Chair

Bradford M. Freeman

Luis G. Nogales

James M. Rosser

Brett White

COMPENSATION COMMITTEE INTERLOCKS

AND INSIDER PARTICIPATION

Mr. Nogales became a Committee member when the Committees were reappointed on April 28, 2011, and Mr. Sutton ceased to be a Committee member on that date. The other Committee members whose names appear on the Compensation Committee Report above were Committee members during all of 2011. Under applicable SEC rules, there were no interlocks or insider participation on the Committee.