Fitch Ratings on March 11 downgraded San Diego Gas & Electric Co.'s long-term issuer default rating to BBB+ from A- and maintained its negative outlook.
"Fitch believes SDG&E's risk profile is no longer consistent with an 'A-' IDR due to heightened catastrophic wildfire risk in California and an uncertain path to recovery of related liabilities," the rating agency said in an investor note.
The Sempra Energy subsidiary could see further downgrades due to future large wildfires in its service territory and the lack of timely legislative action to recover potential third-party liabilities, Fitch added.
Former Gov. Jerry Brown on Sept. 21, 2018, signed into law a wildfire bill to help limit the financial impact on utilities. However, the bill did not address the state's "inverse condemnation" doctrine, under which courts hold utilities strictly liable for wildfire damages regardless of preventive measures.
Fitch also lowered SDG&E's senior secured and senior secured pollution control and industrial revenue bonds ratings to A from A+, and the senior unsecured rating to A- from A. The short-term issuer default rating and commercial paper rating were affirmed at F2. About $5 billion of debt is affected by the rating actions.
On March 5, Moody's also lowered the ratings of SDG&E on wildfire liability-related risks.