Transition Finance Weekly - 10/9/2025
Edison Downgraded; FAIR Plans Failing; VPP Progress Blocked
Exploring the policy, politics, and economics of the clean energy transition
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1. Edison Sees a Downgrade, as Wildfire Risks Become Credit Risks
California’s climate crisis is burning through balance sheets.
S&P Global Ratings has downgraded Edison International and its utility subsidiary, Southern California Edison (SCE), citing rising wildfire risks and a shrinking financial safety net. The agency expects the $21 billion wildfire fund to be significantly depleted by 2025 Eaton Fire and 2018 Camp Fire liabilities, leaving only about $14–$16 billion — less than the $20 billion S&P deems prudent.
Even under SB 254, which extends contributions to the fund through 2045 and increases Edison’s portion to nearly 48% of the total, timing matters: much of the commitment won’t be funded for decades. Per S&P, a single catastrophic event could trigger a further multi-notch downgrade.
This is a stark reminder that wildfires are no longer just a safety and operational risk but financial risk, too, and California’s utilities may need continuous, multi-billion-dollar buffers to remain investment-grade.
2. “Insurers of Last Resort” Aren’t Doing the Job
Rife with governance problems, industry-controlled insurance backstops aren’t working.
A new report from Climate Cabinet Education and the Climate and Community Institute (CCI) reveals the structural weaknesses of state-mandated “insurers of last resort,” often called FAIR Plans, that homeowners rely upon when private insurers reduce their coverage.
Of the 35 states with insurer-of-last resort programs nationwide, at least 86% have boards with governing majorities controlled by industry representatives. Most end up concentrating, rather than distributing, risk. Minimal coverage, rising premiums, and opaque governance mean the system isn’t addressing the problems it’s meant to, even as enrollment in FAIR Plans skyrockets.
The report puts forward recommendations for overhauling the model: improve transparency, use public climate risk models for reinsurance, retain surpluses for community resilience investments, expand coverage, and coordinate insurance, housing, land use, and disaster response policy. Without these reforms, FAIR Plans can’t do the job, and vulnerable communities will be left without the real coverage they need.
3. Newsom Kills Cost-Saving, Reliability-Enhancing VPPs
The move may satisfy investor-owned utilities, but it’s a major missed opportunity.
Governor Gavin Newsom vetoed AB 740, a bill that would require the California Energy Commission to adopt a virtual power plant (VPP) strategy, citing affordability concerns. Supporters of the bill had emphasized in a coalition letter that a statewide VPP strategy would unlock the potential of distributed energy resources like rooftop solar, batteries, and EVs, and save Californians billions of dollars in energy costs.
This would improve grid reliability, cut costs, reduce emissions, and structurally accelerate California’s clean energy transition by providing a whole new avenue of progress. A recent Gridlab/Kevala study showed VPPs could provide more than 15% of California’s peak grid demand by 2035, delivering $550 million in annual utility customer savings.
Newsom also vetoed AB 44, a companion measure allowing load-serving entities to reduce or modify forecasted electricity demand. Newsom argued that both of these bills were “too costly,” but both could lower rates, reduce reliance on fossil gas, and improve grid resilience, at a time when wildfire risks are driving utility costs higher.
“These distributed energy resources are already deployed, connected to customers, and connected to the internet,” said clean energy advocate Edson Perez. “The longer we wait to tap into this potential, the longer we waste away the savings.”
4. Minnesota Regulators Approve Controversial Utility Sale
Canada Pension Plan and BlackRock team up for $6.2 billion deal.
The Minnesota Public Utilities Commission approved the $6.2 billion sale of Allete, parent of Minnesota Power, to the Canada Pension Plan Investment Board and BlackRock’s Global Infrastructure Partners.
Despite a judge’s recommendation to reject the sale as “not in the public interest” and opposition from consumer and environmental groups, regulators approved the deal after modest concessions, including a one-year rate freeze, capped return on equity, $50 million in customer credits, and investments in clean energy and low-income programs.
Critics warn the deal puts a public utility under private investor control, potentially prioritizing profits over ratepayer protections. Proponents say that private capital can help Allete meet Minnesota’s 100% clean energy requirements faster. BlackRock’s involvement also raises concerns about conflicts with other holdings, as the firm has actively promoted their fossil fuel investments following anti-ESG attacks in Texas .
Going forward, regulatory oversight and consumer protections will matter for Minnesotans: “The nonpublic evidence reveals the Partners’ (CPP and GIP) intent to do what private equity is expected to do — pursue profit in excess of public markets through company control,” said Judge Megan McKenzie. “The Partners themselves have carefully committed to do very little, instead largely making commitments through expected holding companies or Minnesota Power itself.”
5. First Coal Lease Auction in a Decade: Only One Bidder, Pennies on the Dollar
Trump is trying to make coal happen again, and it just isn’t.
As part of the Trump administration’s push to revive coal production, the Office of Surface Mining Reclamation and Enforcement (OSMRE) held its first major federal coal lease auction in ten years. The only bidder? A company offering rights to mine 167 million tons in Montana’s Powder River Basin.
The result was telling: only one bidder showed up — Navajo Transitional Energy Co. — and they offered just one-tenth of a cent per ton of coal for the rights to mine 167 million tons in Montana’s Powder River Basin. For comparison, the last major lease sale in the region brought in roughly 1,000 times more per ton. This is a clear market signal that, no matter what pro-fossil-fuel policymakers would like to believe, coal is now nearly worthless.
Accepting such a rock-bottom bid would hardly qualify as a deal in the public interest. If mining commenced, states would likely inherit enormous cleanup liabilities, a costly reminder of coal’s economic decline and the risks of keeping unprofitable plants online past their useful life.
“Stop trying to make fetch happen,” Regina George.