High LeverageSustained debt loads typical of utilities nonetheless reduce financial headroom. High leverage increases interest expense sensitivity, constrains ability to absorb regulatory setbacks or higher capex, and leaves less flexibility for unexpected liabilities without raising rates or external funding.
Persistently Negative Free Cash FlowChronic negative FCF reflects large, ongoing capex and imperfect cash conversion of earnings. That reliance on external financing increases refinancing and interest rate risk, limits capacity to self‑fund dividends or debt reduction, and elevates sensitivity to funding market conditions.
Uncertain Wildfire Liabilities & Legislative RiskLarge, indeterminate Eaton claims and pending wildfire reform (SB 254) create structural uncertainty. Material adverse outcomes could require outsized payouts or change cost recovery frameworks, pressuring credit metrics and forcing higher future rates or fresh financing.