Dive Brief:
- Executives from Edison International, parent company of Southern California Edison, sought to reassure investors during a fourth quarter earnings call on Thursday that last month's 14,000-acre Eaton Fire would not impact the company's financial performance.
- The cause of the fire remains under investigation, but company officials acknowledged in a statement released earlier this month that evidence gathered so far suggest a possible link to idle power lines owned by SCE.
- Edison International would be able to seek reimbursement for any claims against the company from California's state-run wildfire fund, and this should insulate investors from the fire's potential financial impacts, Pedro Pizarro, president and CEO of Edison International, said.
Dive Insight:
Southern California Edison has access to a billion dollar self-insurance fund and plans to fall back on the California Wildfire Fund, if needed, to pay claims related to last month's Eaton Fire, company leaders said during Thursday's quarterly earnings call.
Pizarro noted that the company had engaged in extensive grid hardening and executed a public safety power shutoff prior to the fire's ignition, and that he believes state regulators will find it took reasonable steps to prevent the fire. That determination would allow SCE to tap the state wildfire fund to pay any claims against the company that arise from the fire, though Edison International Executive Vice President and Chief Financial Officer Maria Rigatti said the company would draw from its self-insurance fund before turning to the state fund.
“The wildfire fund is there, obviously, for claims payments so that people who suffered from the fire can get paid quickly. But it's also there to support the balance sheet of the utilities,” Rigatti said, adding that the fund meant this fire would look very different than the wildfires of 2017-2018, which forced the company to go into debt.
The Eaton fire, which destroyed more than 9,000 structures in a northeast Los Angeles suburb, killed 17 people, according to the California Department of Forestry and Fire Protection. But Pizarro said it was still too early to estimate potential liabilities tied to the fire, given that it could take 12-18 months for SCE and local authorities to reach a conclusion about the fire's cause. The investigation's next steps, he said, entail testing the idle transmission lines near the fire's suspected point of ignition and looking for missing metal or arc marks. But the company already faces several lawsuits related to the fire, and is currently engaged in negotiations with litigants about the methodology for these tests, he said.
“There are ... multiple plaintiff’s attorneys. And they have an interest in making sure they and other stakeholders, making sure that any movement of the lines, anything that's done regarding SCE's equipment is done a way that will preserve the age of the materials, not somehow spoil it or make it difficult to examine it in some way,” Pizarro said, explaining that this process alone could take weeks. “I'm very confident that the SCE team would go there tomorrow and move things and do it in a way that would preserve the ability for parties to have confidence that it was done right. But in this case, we really have to have full agreement among all of the parties on the specific steps and precautions.”
Pizzaro also acknowledged that the magnitude of the recent fires has raised questions about the long-term durability of the California Wildfire Fund, and said Edison is talking with lawmakers and stakeholders about potential revisions of the statute that created the fund. He said it was too early to say what changes might best shore up the fund, but that state lawmakers seemed motivated to ensure it remained viable.
“There is a real sense of urgency here,” he said. “And part of the message that we'll be providing is that the market has responded very quickly, and we believe it will be in California's best interest to demonstrate the commitment to extending the framework or making changes.”
