Why It Ranks
Large regulated utility with improving wildfire risk profile. Grid hardening investments and AB 1054 protections have significantly reduced the tail risk that previously plagued California utility preferreds.
Full Analysis
Southern California Edison, a subsidiary of Edison International, serves 15 million people across Southern California. SCE-PH offers utility-grade preferred income from one of the largest electric utilities in the western United States.
SCE's regulated rate base provides predictable earnings, and the utility has made significant investments in grid hardening and wildfire mitigation following the devastating fires of 2017-2018. These investments expand the rate base (increasing future earnings) while reducing the wildfire risk that has plagued California utilities.
The wildfire risk is the primary differentiator for SCE preferreds compared to utilities in less fire-prone regions. California's inverse condemnation doctrine holds utilities liable for fire damage regardless of negligence, creating tail risk that the yield premium partially compensates. AB 1054, passed in 2019, established a wildfire fund and safety certification process that significantly reduced this risk.
Key Details
Income Investing
Preferred stocks are the foundation of income portfolios — offering yields above bonds, priority over common stock, and the stability of a par value anchor. This is not speculation. This is the capital structure working as designed.
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