Edison International (EI) and electric utility Southern California Edison Co. (SCE) last week said they face more than $4 billion in liabilities from the extensive 2017 and 2018 wildfires in California after taking a $1.8 billion charge during the fourth quarter.
Without a statewide solution through legislation and/or regulatory reforms, SCE and the other major investor-owned electric utilities in California are facing further credit rating downgrades below investment grade, EI CEO Pedro Pizarro said during a quarterly earnings conference call. He lauded Gov. Gavin Newsom for quickly assembling a wildfire strike team, as well as a newly established wildfire commission.
"It seems like there is an understanding certainly on the part of the governor and the administration that this is a substantial issue not just for the utilities but for the California economy," Pizarro said. "But it is still unclear how this all translates into specific recommendations -- particularly in regard to utility cost recoveries."
Pizarro and CFO Maria Rigatti emphasized that a $1.8 billion charge in 4Q2018 may be at the low end of ultimate net uncovered liabilities facing SCE.
"Devastating wildfires have become a regular occurrence in California, and mitigating this threat continues to be our top priority," Pizarro said. Edison is working with government at all levels and the state's business community to find solutions, he said.
State Senate Bill 901 enacted last year does not eliminate the state's reliance on inverse condemnation that has been a major thorn in the sides of SCE and other investor-owned utilities, and so far Edison has not been able to make any headway in several court cases involving fires from the past two years, Pizarro said.
"You have heard a consistent level of confidence from us that over time this issue will be resolved because the state needs financially healthy utilities to keep the lights on and support the economy, so we continue to see that as the ultimate through point and the ultimate confidence that there will be reforms," he said.
California’s wildfire commission “will be an important vehicle, and it will ultimately make recommendations, but then the legislature has to pick up the mantle, and the governor needs to supply leadership for all of this to frame everything up for the lawmakers. There is a good indication that this administration is taking the problem seriously."
Edison reported a net loss of $1.4 billion (minus $4.39/share) in 4Q2018, compared with year-ago losses of $545 million (minus $1.67). The net loss in 2018 was $423 million (minus $1.30/share), compared with 2017 net income of $565 million ($1.73).