On Thursday, Moody’s Ratings announced an upgrade for the credit ratings of PG&E Corp. and its subsidiary, Pacific Gas & Electric. This decision is based on the companies’ reduced financial risks related to wildfires.
Jeff Cassella, a vice president and senior credit officer at Moody’s, stated that the upgrade is a result of PG&E’s ongoing efforts to improve wildfire risk management and its financial standing. He emphasized that the company has also been working diligently to build stronger relationships with important stakeholders.
The upgrade is positively influenced by California’s wildfire legislation, which allocates $21 billion for wildfire management. This law allows PG&E access to the state’s wildfire insurance fund and provides significant benefits such as a liability cap for shareholders and cost recovery options.
Cassella mentioned, “Considering the ongoing wildfire risks in Los Angeles, any future legislative measures will likely continue to support utilities by shielding them from excessive liabilities.”
Since PG&E’s exit from bankruptcy due to wildfire issues in 2020, the utility has invested over $20 billion to protect against wildfire threats. Moody’s pointed out that the company has not faced any major wildfire-related financial impacts since then.
Additionally, PG&E’s financial challenges are lessened by its consistent approval for a wildfire safety certificate, which suggests the company’s prudent management. This certificate provides a liability cap for reimbursements to the wildfire fund in case of imprudence.
Currently, PG&E’s liability cap stands at approximately $4.1 billion. While damages from January’s fires in Southern California may utilize this fund, Moody’s believes that the remaining resources will still support PG&E’s credit ratings.
Looking ahead, Moody’s indicated that any further improvements in PG&E’s ratings will depend on increases to the available funds and the implementation of a replenishment system following recent wildfires.
Moreover, Moody’s acknowledged PG&E’s enhanced relationship with its customers through proactive wildfire risk reduction, including more precise and limited public safety power shut-offs. The agency also raised the company’s management credibility score, reflecting its improved operational performance and stakeholder engagement.
In its assessment, Moody’s raised PG&E Corp.’s senior secured debt ratings to Ba2 from Ba3. Notably, Ba ratings are at the top of Moody’s non-investment grade tier.
Furthermore, PG&E’s senior secured first mortgage bonds rating was increased to Baa1 from Baa2, which classifies them as investment-grade with moderate credit risk.
In a related development, California Governor Gavin Newsom announced on Thursday that he has suspended several permitting requirements. This change aims to facilitate Southern California Edison and the Los Angeles Department of Water and Power in the reconstruction of electric infrastructure and the underground placement of power lines.
According to Governor Newsom, January’s wildfires devastated about 47,900 acres and damaged or destroyed approximately 16,250 structures in the Los Angeles region.