Edison International (EIX) bagged an approval from the California Public Utilities Commission (CPUC) to construction the Devers Palo Verde2 Transmission Line project in California. The project is being built by its subsidiary Southern California Edison (SCE). The $537 million, 150-mile long transmission line project, once completed, will be able transmit 1.2 GW of electricity from renewable sources to customers in Southern California.

The transmission line will connect SCE’s Devers Substation near Palm Springs to the company’s proposed Midpoint switchyard near Blythe, California. Additionally, SCE will build a 42-mile, 500-kilovolt transmission line between the Devers substation and its Valley substation in Riverside County as part of the project.

The transmission line project will provide the capability to meet generation developers’ request for interconnecting new renewable and conventional generation projects in the solar energy rich areas of Southeastern California. By providing these developers with the means to access markets in California, Arizona and other states in the Western region, the project will support these states’ efforts to meet their respective renewable portfolio targets.

The addition of transmission lines will enhance the distribution network of Edison International. In recent times, the company witnessed 14.7% lower revenue year-over-year to $3.7 billion from $4.3 billion.

Also, to reduce greenhouse gas emission and adhere to California’s renewable portfolio standard utilities operating in California are spending big money. California’s renewable portfolio standard requires utilities to generate 33% of power from renewable sources by fiscal 2020. PG&E Corporation (PCG) plans to invest around $13 billion in 2009 – 2011, while Sempra Energy (SRE) will invest $2.5 billion. Edison International’s subsidiary Southern California Edison is projecting capital expenditures for the period 2009 – 2013 in the range of $16.8 billion to $19.8 billion.

Edison International’s consistent performance through its solid base of stable utility operations, SCE rate hike, ongoing alternative energy projects, balance sheet strength, and a relatively cheap earnings-based valuation, partially offset by a stagnant economy, volatile gas prices, low-hedged power output and coal positions, as well as the recovery of capital expansion costs, support our modestly bullish outlook. Thus we reiterate our Neutral recommendation on the stock.

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