NEW YORK (Reuters) – The Eaton (NYSE:ETN) Fire in central Los Angeles County poses a potential credit risk to power provider Southern California Edison, which operates electrical lines in the area where the destructive blaze first started, Moody’s (NYSE:MCO) Ratings said in a report on Thursday.
WHY IT’S IMPORTANT
Fire investigators have not released a cause for the deadly Eaton Blaze, which has burned more than 14,000 acres since starting on Jan. 7. Despite the uncertainty over what caused the disaster, several lawsuits filed against SCE this week accuse equipment owned by the largest Southern California electric utility of sparking the initial flames.
SCE, which is the main subsidiary of Edison International (NYSE:EIX), has said it has not found evidence that its equipment is to blame for the fire.
WHAT’S NEXT
Moody’s said it believes a state wildfire fund and California utilities’ ability to recover fire-related costs will be supportive of SCE’s credit. That could change if there is enough evidence to prove SCE’s infrastructure caused the fire, which would make the company more vulnerable to lawsuits, Moody’s said. Other factors that could harm SCE financially include a depleted wildfire fund, which provides reimbursements for some wild-fire related damage claims, or if the regulatory and political support for California utilities area begins to wane, Moody’s said.
KEY QUOTES
“We could also change our view based on an expectation of more frequent and more severe catastrophic wildfires that create greater risks to the company’s credit profile,” Moody’s said.