S&P changes Sempra Energy to negative

S&P said it affirmed its ratings on Sempra Energy and its subsidiaries, including the BBB+ issuer credit rating on Sempra, the A issuer credit rating on San Diego Gas & Electric Co. and the A issuer credit rating on Southern California Gas Co.

The outlooks were revised to negative from stable.

The negative outlooks reflect the one in three possibility that the California legislature will not pass a bill before it concludes its session on Aug. 31 that clarifies the standard for utilities to recover wildfire-related costs and limits the risks borne by the state's electric utilities, the agency explained.

If the legislature does not pass such a bill, California's electric utilities will effectively remain the insurer of last resort for wildfires to the extent that the utilities' equipment is involved, which will significantly increase their business risk, S&P said.

This lack of predictability in the California regulatory compact for electric utilities to consistently recover wildfire-related costs from ratepayers creates substantial risks and vulnerability on the state's electric utilities unlike any other regulatory jurisdiction in North America, the agency added.

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