California investor-owned utilities could face credit rating downgrades unless the state legislature passes wildfire-related reforms before its August 31 session deadline. Edison International President and CEO Pedro Pizarro made these remarks to analysts during Thursday's second-quarter earnings call.

He warned that the company has not yet seen any legislative draft that would address California's soaring wildfire costs. Pizarro said: "If there is no framework supportive of utility credit within the next four weeks, that could have a significant impact on debt costs, and those costs would be passed on to SCE customers. Looking at S&P ratings, SCE is currently at BBB-. There is no room left to downgrade within investment grade; the next step is non-investment grade."

Key data at a glance

Based on Edison International's second-quarter earnings and related disclosures:

  • $1.6 billion: Settlement costs related to the 2025 Eaton Fire as of June 30.
  • $38 billion to $41 billion: SCE's five-year capital plan size.
  • 60%: Share of carbon-free energy delivered by SCE to customers.
  • $534 million: Second-quarter net income, up from $343 million in the same period last year.

Pizarro said a credit rating downgrade would not immediately impact SCE's capital plan, as the company does not expect to raise new equity capital before 2030. He declined to answer analysts' questions about how the company would respond if the state does not pass wildfire reforms.

Eaton Fire-related liabilities continue to accumulate

SCE faces significant wildfire-related liabilities, including mounting losses from the 2025 Eaton Fire. According to the company's quarterly filing, SCE has committed approximately $1.6 billion to fire victims through two settlement agreements with insurers and its Wildfire Recovery Compensation Program.

According to the company's latest press release, the program has paid $750 million to more than 5,400 claimants to date. The company has received claims from more than 12,000 individuals, trusts, and legal entities, but Pizarro said this is only a fraction of what the company may ultimately pay. As of July 23, SCE is named as a defendant in over 2,000 lawsuits related to the Eaton Fire, involving 32,000 individual plaintiffs. The first jury trial among these lawsuits is scheduled for January.

Investigations into the fire's cause—including the company's internal investigation—have not been completed, but Edison International updated its quarterly disclosure on Thursday, indicating that the utility "believes it is probable that its equipment was associated with the ignition of the Eaton Fire."

Pizarro declined to estimate the potential total liability the company may face from the Eaton Fire, saying the company still lacks sufficient information to calculate an accurate figure. SCE has applied for reimbursement from the California Wildfire Fund, which according to company filings can provide up to $21 billion to cover Eaton Fire claims. According to the company's slide presentation, any costs exceeding that amount would be securitized under California state law.

In April of this year, the California Public Utilities Commission approved SCE's request to charge customers an additional $274 million to $650 million this year to cover Eaton Fire-related costs.

Other pending litigation and business developments

SCE also faces pending litigation related to multiple wildfires in 2017-2018, the 2019 Saddle Ridge Fire, and the 2022 Coastal and Fairview Fires. As of June 30, according to SEC filings, the utility has paid over $10.5 billion in settlements related to these fires. Edison International has not provided an estimate of the potential total liability related to these fires.

Edison International also unexpectedly disclosed on Thursday that it sold clean energy consulting firm Trio at a loss of $23 million, including transaction costs. In response to analysts' questions about the reason for the sale, Pizarro said that given the company's ongoing needs and Edison International's "focused priorities," the parent company believed Trio might be better operated under other ownership.

Pizarro said SCE remains committed to the clean energy transition and highlighted the company's recent sustainability achievements, including delivering 60% carbon-free electricity to customers and procuring 900 megawatts of energy storage in 2025.

Edison International shares fell about 5% in early trading Thursday.