(The Center Square) – S&P Global warned that public credit risks associated with wildfires are increasing due to fire-related liability claims for utilities and the impact on municipal revenue.
The report comes as the California Public Utilities Commission’s Public Advocates Office says the No. 1 driver of the state’s energy costs — which are double the national average — is wildfire mitigation.
“For California local governments with component retail electric or water utilities, we believe they could face contagion risks should financial and litigation risks arise,” wrote S&P Global analysts. “Local governments could also face direct risks from wildfires, including infrastructure damage and depressed economic activity.”
S&P said nonprofit electric utilities, such as the city-owned Los Angeles Department of Water and Power, “are exposed to the greatest financial risk from wildfires.” S&P downgraded LADWP’s power system bonds from AA- to A and its water system bonds from AA+ to AA- on Jan. 14, increasing its borrowing costs to reflect higher risk.
According to the CPUC, wildfire-related spending is the No. 1 driver of California’s energy rates, and rate hikes are expected for customers of Southern California Edison, whose systems are being investigated for their possible role in the Eaton Fire.
The CPUC notes energy rates for Southern California Edison customers have increased 85% in the last 10 years and are projected to reach 37 cents per kilowatt hour by the end of the year. That’s getting closer to the 49 cent per kilowatt hour electricity rate at which it becomes cheaper to drive a gasoline-powered car than charge an electric vehicle.
