Moody's Assessment: Potential Liability Risks for LADWP in Palisades Fire

The credit rating agency Moody's has highlighted potential liability risks for the Los Angeles Department of Water and Power (LADWP) in connection with the devastating Palisades Fire in its latest report. The key factor will be whether the utility's power lines or other facilities contributed to the outbreak of the flames. The fire, raging since January 7, has devastated nearly 24,000 acres of land. The actual origin of the blaze is currently the subject of ongoing investigations. To date, LADWP, the largest municipal utility in the United States, has not released an incident report on the flames. Moody's emphasized that potential damage to distribution lines and other infrastructure is not expected to have significant impacts on LADWP's finances and creditworthiness. Much of the electrical infrastructure in the affected region is underground, which protected it from the flames. Nevertheless, the conversion of remaining above-ground power lines to underground installations in regions with high wildfire risk may be included in LADWP's strategic considerations. "We expect that the damage to the power system's assets and the associated repair and reconstruction costs will remain manageable," the agency emphasized. However, if it is found that LADWP equipment triggered the Palisades Fire, significantly more serious risks in the form of costly litigation could arise for the company.