KEY RATING DRIVERS
--The effect of unrecoverable costs and fines related to the
--Management's ability to regain the confidence of its core constituencies in the wake of the
--Future regulatory proceedings including PG&E's 2014 general rate case (GRC) and 2015 gas transmission and storage (GT&
--Effective execution of PG&E's large capital program.
PG&E's ratings and Stable Outlook reflect Fitch's expectation that the financial impact of future
In this scenario, Fitch estimates that PG&E's financial measures will bottom in 2013-2014 and begin to improve in 2015. Fitch assumes continued equity issuance and reasonable outcomes in pending rate cases before the CPUC and the
Notwithstanding financial pressure in the wake of the disaster, PG&E's credit metrics are expected to improve meaningfully in 2015 - 2016 supporting its 'BBB+' IDR. However, unexpectedly adverse regulatory developments at the utility could trigger credit rating downgrades. Future downgrades could occur if projected PG&E EBITDA leverage were to weaken meaningfully below 3.75x, on a sustained basis.
Fitch's ratings for PG&E and the Stable Outlook reflect the adverse effects of ongoing, significantly higher costs being absorbed by the utility primarily to enhance pipeline safety in the aftermath of the
These adverse financial effects have been partially offset by substantial equity infusions from its corporate parent to maintain PG&E's statutory 52% equity ratio and CPUC authorized rate increases.
Going forward, Fitch anticipates reasonable outcomes in PG&E's pending 2014 GRC and 2015 GT&
An administrative law judge's proposed decision in PG&E's pending 2014 GRC and the CPUC's final decision are expected to be issued later this year, with rates retroactive to
Fitch calculates that PG&E's ultimate corporate parent, PCG, has issued approximately
PG&E filed its GT&
Neither the administrative law judges (ALJ) in the OII proceedings or the CPUC are bound by the CPSD recommendation. The ALJs are expected to issue proposed decision in the San Bruno OII by mid-year and a final CPUC decision could be forthcoming during the summer of 2014.
The three pending OIIs examine: 1) PG&E's safety and recordkeeping for its natural gas transmission systems; 2) operation of the utility's gas transmission pipeline near locations of higher population density; and 3) general operational practices, events and conduct by the utility that may have contributed to the
The CPUC approved PG&E's PSEP to modernize and upgrade its natural gas transmission system in
The CPUC's final
Fitch believes the political/regulatory environment in
Revenue decoupling, regulatory balancing accounts, forward-looking test years and pre-approval of planned capital expenditures greatly reduce PG&E's exposure to regulatory lag, and operating cash flow attrition, in Fitch's opinion, and mitigate concern regarding PG&E's large capex program. Capex is expected to approximate
Liquidity at PG&E is solid with approximately
PCG's credit metrics are consistent with the 'BBB+' rating category, based on Fitch's estimates, but may weaken if regulatory decisions are more punitive than expected. Adverse outcomes in pending San Bruno OIIs, GRC and/or GT&
In addition, ineffective execution of PG&E's large capex program could lead to future credit rating downgrades.
Fitch believes future downgrades would likely occur if projected leverage ratios were to weaken to 3.75x or lower on a sustained basis.
The criminal indictment of the utility as a result of its role in the
Within the next 12 months, an upgrade is unlikely in light of the uncertainty related to the pending financial exposure anticipated in the wake of the
Additional information is available at 'www.fitchratings.com'.
--'Corporate Rating Methodology: Including short-Term Ratings and Parent Subsidiary Linkage'
--'Recovery Ratings and Notching Criteria for Utilities'
--'Rating U.S. Utilities, Power, and Gas Companies' (
Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage
Recovery Ratings and Notching Criteria for Utilities
Rating U.S. Utilities, Power and Gas Companies (Sector Credit Factors)
Source: Fitch Ratings
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