S&P Global Ratings on May 12 raised the issuer credit rating on PG&E Corp. and subsidiary Pacific Gas and Electric Co. to A- from BBB+, with a stable outlook.

The upgrade was spurred by the recent California Public Utilities Commission approval of a settlement between Pacific Gas and Electric and 14 customers and other interest groups, allowing the utility to implement annual step rate increases over the next three years.

The commission approved for the PG&E subsidiary a 1.1% rate increase starting this year to collect a net $88 million more than its previously authorized level of $7.91 billion for electric and gas distribution services and electric generation. The decision also allows PG&E a 5.5% rate increase starting in 2018 to collect an additional $444 million in annual revenue and a third annual increase of 4.3% in 2019 to collect $361 million more.

"The higher ratings are based on reduced business risk stemming from the company's long-term efforts to regain the confidence of its regulators and manage the financial fallout from a high-profile gas pipeline incident. We now categorize the business risk profiles of both companies as excellent, up from strong," the rating agency said in a report.

S&P also raised the issue-level rating on PG&E's senior unsecured debt to BBB+ from BBB, the issue-level rating on Pacific Gas & Electric's senior unsecured debt to A- from BBB+. The stable outlook reflects S&P's expectation that PG&E will keep the regulatory risk consistent with its California peers, and will implement measures to support its financial risk profile despite brisk capital spending.