Edison International's shares and bonds declined as a wildfire intensified near the service areas of its utility unit in the Los Angeles region. The company's stock was the worst performer in the S&P 500, marking its largest drop since March 2020.
California's investor-owned utilities, including Edison International, are facing potential credit rating downgrades if state lawmakers do not enact reforms to address soaring wildfire costs before the legislative session concludes on August 31. Edison International's President and CEO, Pedro Pizarro, noted that the company has not seen any draft legislation to tackle these significant costs, which could lead to a substantial increase in debt costs passed to Southern California Edison (SCE) customers.
SCE's credit rating of BBB- from S&P means it has no further room within investment grade, with the next step being non-investment grade. Pizarro stated that a decreased credit rating would not immediately affect SCE's capital plan, as the company doesn't anticipate raising new equity before 2030. The company has paid over $10.5 billion in settlements for various wildfires from 2017-2018, the 2019 Saddle Ridge Fire, and the 2022 Coastal and Fairview fires.
Edison faces significant liabilities from the 2025 Eaton Fire, with $1.6 billion already committed to victims through settlements and its Wildfire Recovery Compensation Program. This program has extended $750 million to over 5,400 claimants. Investigations indicate it is likely that SCE's equipment was associated with the ignition of the Eaton Fire. While Pizarro declined to estimate the total potential liability for the Eaton Fire, SCE has applied for reimbursement from the California Wildfire Fund, which could provide up to $21 billion to cover claims. The California Public Utilities Commission has also granted SCE permission to collect an additional $274 million to $650 million from customers this year to cover Eaton Fire costs.
Governor Gavin Newsom initially pushed for legislation that would have shifted more wildfire costs to property insurers and reduced victim payouts, drawing criticism from wildfire victims and others who called it a "corporate bailout." However, in a late-night deal with lawmakers, Newsom agreed to drop these proposals. The revised bill includes some measures aimed at reducing the costs of future utility-sparked wildfires, including limiting certain attorney fees for insurance claims.
