...Fitch Ratings affirmed San Diego Gas & Electric Co.'s (SDG&E) Long-Term Issuer Default Rating (IDR) at `BBB+' and revised the Rating Outlook to Stable from Negative on July 16, 2019. The enactment of A.B.1054 is credit supportive for SDG&E, providing protection against future catastrophic wildfires at a reasonable cost, in Fitch's view. The legislation establishes an option for either a $10.5 billion liquidity fund or a larger, $21 billion insurance fund. In addition, A.B. 1054 shifts the burden of proof to a more reasonable standard and limits utility liability for imprudence. The continuation of inverse condemnation remains a long-term credit issue for SDG&E as an electric utility in California. Other credit constraints include contagion risks associated with comingling of funds in the wildfire fund, given its materially different service territory and safety culture, and the lack of a track record of implementing the new legislation, especially the new prudence standard, which is subject...
