California’s investor-owned utilities could see credit rating downgrades if state lawmakers fail to act before the end of the legislative session on Aug. 31, Edison International President and CEO Pedro Pizarro told analysts on Thursday's second-quarter earnings call.
He warned that the utility company hasn’t seen any draft legislation that would address the state's soaring wildfire costs.
“That could be a significant cost impact to the cost of debt that gets passed through to SCE customers if we don't have a framework in the next four weeks that is credit-supportive for our utility,” he said. “If you look at just the S&P ratings, it's BBB- for [SCE]. So there's nowhere to go in investment grade, right? The next step is non-investment grade.”
A decreased credit rating would not immediately impact SCE's capital plan, because the company doesn't expect to raise new equity before 2030, Pizarro said. He declined to answer analysts' questions about how the company would react if the state does not pass wildfire reforms.
SCE faces significant wildfire-related liabilities, including mounting losses associated with the 2025 Eaton Fire. According to the company's quarterly filings, SCE has committed some $1.6 billion to fire victims via two settlements with insurance companies and through its Wildfire Recovery Compensation Program.
That program has so far extended $750 million to more than 5,400 claimants, according to the company's latest press release. It has received claims from more than 12,000 individuals, trusts and legal entities, but Pizarro said this represents a fraction of what the company could ultimately pay. As of July 23, SCE was named in more than 2,000 lawsuits, with 32,000 individual plaintiffs, related to the Eaton Fire. A jury trial in the first of those lawsuits has been set for January.
Investigations into the cause of the fire — including the company's internal investigation — remain incomplete, but Edison International updated its quarterly disclosures on Thursday to indicate that the utility “believes that it is likely that its equipment was associated with the ignition of the Eaton Fire.”
Pizarro declined to estimate the company's total potential Eaton Fire-related liability, saying the company still lacks sufficient information to calculate an accurate figure. SCE has applied for reimbursement from the California Wildfire Fund and, according to company filings, was informed that the fund could provide up to $21 billion to cover Eaton Fire claims. Any costs beyond that will be securitized in accordance with California state law, according to a company slide deck.
In April, the California Public Utilities Commission granted a request by SCE to collect an additional $274 million to $650 million from customers this year to cover Eaton Fire costs.
SCE also faces unresolved lawsuits related to multiple 2017-2018 wildfires, the 2019 Saddle Ridge Fire, and the 2022 Coastal and Fairview fires. As of June 30, the utility had paid more than $10.5 billion in settlements related to these fires, according to SEC filings. Edison International has not provided estimates for its total potential liability in connection with these fires.
Edison International also surprised analysts on Thursday by disclosing the sale of clean energy consulting firm Trio at a loss of $23 million, including transaction costs.
Pizarro told an analyst who asked about the rationale for the sale that the parent company felt Trio might be better served by another owner, given the firm's ongoing needs and the “laser focus on Edison International.”
Pizarro said SCE remains committed to the clean energy transition and touted the company's recent sustainability achievements, including delivery of 60% carbon-free electricity to customers and its purchase of 900 MW of energy storage in 2025.
Shares of Edison International were down about 5% in morning trading.
