Edison International

The negative outlooks on Edison and SCE largely reflect the increased probability for a downgrade incorporating the accelerated rate of adverse wildfire activity as demonstrated by the 2020 record-setting season of California's wildfires. In our view, the lack of sufficient rainfall, the dry environment, and the apparent ease that relatively routine wildfires can develop into a catastrophic wildfires, increases the likelihood that a California investor-owned electric utility could potentially be the cause of a catastrophic wildfire. We could lower the rating on Edison and SCE within the next 12 months if California's investor-owned electric utilities participating in the insurance fund are found to be the cause of catastrophic wildfires, which would incrementally deplete the insurance fund. We believe that as

...We expect Edison International (Edison) will benefit from the credit-supportive measures within California's State Assembly Bill (AB) 1054 in the near to medium term; however, longer-term risks exist. The bill provides enhanced liquidity through the creation of a $21 billion wildfire fund for participating investor-owned California electric utilities, a liability cap even if the utility is found to be imprudent, and revised standards of a utility's reasonable conduct. However, the fund does not have an automatic replenishing mechanism. As such, every wildfire caused by an investor-owned electric utility, and where damages paid exceed either $1 billion or the utility's insurance coverage (whichever is higher) reduces the size of the fund. Thus far, there has been no draw from the wildfire fund. California for the second consecutive year has so far received below-average rainfall, indicative of drier-than-normal conditions. These dry conditions increase the susceptibility that a smaller wildfire...

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