Utilities made a few appearances in this week’s Barron’s. Page M2 had a chart with EIX’s stock price and mentioned the impact that the latest California wildfires have had on the stock, which was down almost $9/share last week. There is a Los Angeles Time article (see here) that has some good background on the issues. Fellow California utilities PG&E and SDG&E have also been in the news recently for wildfires. There was a ruling against SDG&E by the California Public Utilities Commission (CPUC) disallowing recovery of almost $400M of expenses related to wildfires in 2007. In that decision the CPUC said SDG&E had not properly maintained some equipment, and that failure was justification to disallow recovery of the costs. As we find out more about the cause of the fires in PG&E and EIX’s territories we’ll get a better feel for how much investors will be on the hook for the costs.
Utilities also were mentioned throughout the 2018 Outlook article. Eight of the ten analysts surveyed listed utilities as a sector to avoid in 2018. The analysts expect interest rates to rise in 2018. As a result, utility stocks with their “bond substitute” characteristics will be hurt.