Nowhere to Go But Down

Edison International’s CEO said something on an earnings call this week that I keep turning over. SCE’s credit rating is BBB-, “so there’s nowhere to go” before non-investment grade, he said, and if Sacramento doesn’t pass a wildfire-cost framework by August 31, that’s exactly where it lands. Read plainly, this is a company telling its legislature: give us cover for these costs, or we spiral into junk status, and either way it’s your constituents who pay for the more expensive debt.

I don’t say that as an accusation. It might genuinely be true. California wildfire liability has been rewriting who bears catastrophic risk for close to a decade now, ever since utilities got treated as strictly liable for fires their equipment starts, negligence or not. PG&E just settled for $22 million over the Mosquito Fire a few weeks back. The costs are real, and a rating agency doesn’t care whose fault the framework’s absence is. It just marks down the paper.

What’s odd is the timing sits right next to another number out of the same state this week: cap-and-invest, California’s carbon-pricing program, has generated $36.2 billion for climate initiatives since inception. Two completely different machines, one raising money off carbon, one bleeding it out through fire liability, running inside the same state government, apparently without much conversation between them.

And elsewhere in utility land, a quieter comedy: Entergy’s CEO called the $1.8 billion gas plant it just bought “not the shiniest new plant out there,” and the deal is now “increasingly in doubt.” Buyer’s remorse, in the middle of a nationwide scramble to grab whatever generation is still for sale.