Nov. 6 (Bloomberg) -- Edison International, the owner of California’s largest electric utility, said third-quarter profit declined less than analysts estimated on increased rates in the state and lower costs.

Net income fell 8.2 percent to $403 million, or $1.23 a share, from $439 million, or $1.33, a year earlier, the Rosemead, California-based company said today in a statement. Excluding one-time items, profit was $1.09 a share, beating by 5 cents the average of 9 analyst estimates compiled by Bloomberg.

Sales dropped 15 percent to $3.7 billion as the recession and cooler-than-normal weather reduced electricity demand in the company’s generation unit’s service area in the Midwest. Power prices in PJM Interconnection LLC, the biggest U.S. wholesale power market, dropped 58 percent to a third-quarter average of $40.25 per megawatt-hour, according to data compiled by Bloomberg.

“Earnings came above consensus and our expectations despite weakness in generation results at Edison Mission,” said Angie Storozynski, an analyst at Macquarie Capital USA Inc. in New York who rates Edison’s stock “outperform” and doesn’t own any. “The utility performed better-than-expected.”

The company narrowed its 2009 adjusted profit forecast to $2.95 to $3.15 a share from a previous range of $2.90 to $3.20.

Edison rose $1.01, or 3.1 percent, to $33.19 in New York Stock Exchange composite trading. The shares have risen 3.3 percent this year.

Edison Mission

Profit at the Edison Mission power generation unit plunged 71 percent to $61 million as lower energy prices depressed income at its coal and gas-fired plants and trading profits fell. Profit at Southern California Edison climbed 47 percent to $346 million on higher rates and lower expenses.

The company’s Southern California Edison utility won approval in March from the California Public Utilities Commission to increase its rate-base revenue this year by $495 million, or about 11 percent, to pay for investments in its power-distribution system.

The utility supplies electricity to 4.9 million homes and businesses in Southern California. Edison had the most revenue from electricity sales in the state last year, according to filings.

Edison Mission can generate about 10,000 megawatts of electricity, with about 73 percent of its capacity at coal- fueled plants in Illinois and Pennsylvania.

(Edison will hold an earnings conference call for investors and analysts starting at 11 a.m. New York time, accessible on the company’s Web site at http://www.edison.com.)

To contact the reporter on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net.

Last Updated: November 6, 2009 16:20 EST