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Fitch downgrades Edison International, SoCalEd by 2 notches

Fitch Ratings on March 11 downgraded the long-term issuer default ratings of Edison International and Southern California Edison Co. by two notches to BBB- from BBB+, and placed them on Rating Watch Negative.

"The downgrade and [rating watch negative] reflect the risk of large incremental catastrophic wildfires in 2019 and beyond, and associated outsized third party liabilities, given an uncertain path to full recovery of wildfire-related liabilities on a timely basis under Senate Bill 901," the rating agency said in a note to investors.

"In Fitch's view, there continues to be a timing mismatch between net costs incurred by [SoCalEd] and authorization of recovery in rates by the California Public Utilities Commission," the agency said.

In September 2018, Senate Bill 901 was signed by then-Gov. Jerry Brown. It called for "reasonableness" by the state commission when costs and expenses arising from wildfires are considered, but it did not address the inverse condemnation law, which holds utilities liable for wildfire damages if their equipment is found to have caused a fire, regardless of fault.

On March 5, Moody's also downgraded the senior unsecured ratings of Edison and SoCalEd, citing exposure to potential liabilities in connection with California wildfires.