Edison International’s Bold Bet on Grid Resilience Fuels Growth Amid Wildfire Risks

Edison International (NYSE: EIX) has staked its future on a dual strategy: aggressive infrastructure investments to mitigate wildfire risks and regulatory acrobatics to secure ratepayer-backed funding. The utility giant reaffirmed its 5%–7% annual earnings per share (EPS) growth target through 2028, despite a near-term stumble in Q1 2025 results. But beneath the earnings miss lies a broader story of strategic bets—on grid hardening, wildfire liability management, and regulatory tailwinds—that could define its financial health for years to come.

The Growth Engine: Infrastructure and Regulation

Edison’s Q1 2025 core EPS rose 21% year-over-year to $1.37, driven by the TKM Settlement Agreement, which reduced interest expenses and contributed $0.30 to earnings. Yet the company narrowly missed Wall Street’s $1.41 EPS estimate, with revenue falling short at $3.81 billion versus a $4.4 billion forecast. Management attributed the gap to delayed decisions on its pending 2025 General Rate Case (GRC), which could unlock billions in capital expenditures and rate base growth.

The GRC’s resolution—expected by mid-2025—is pivotal. A favorable outcome would allow Edison to recover costs for its $1.4 billion annual wildfire mitigation programs, including hardening 1,800 miles of overhead distribution lines and undergrounding 150 circuit miles in fire-prone zones. These projects align with California’s stringent wildfire safety mandates, such as the 2019 AB 1054 law, which created a $21 billion wildfire liability fund.

Wildfire Mitigation: Costly, but Critical

Edison’s wildfire investments are not just about compliance—they’re existential. The Eaton Canyon fire, where its equipment is a probable ignition source, underscores the risks. While a “probable material loss” was disclosed, the company insists the state’s $21 billion fund and $1 billion customer-funded self-insurance layer will absorb liabilities without requiring debt issuance. This contrasts sharply with past wildfires like the Woolsey fire, which nearly collapsed Pacific Gas & Electric (PG&E) before federal bankruptcy protection.

The utility’s 2026 Wildfire Mitigation Plan (WMP), submitted in May 2025, emphasizes “grid hardening” through covered conductors, vegetation management, and advanced weather monitoring. These measures aim to reduce fire risks by up to 40% in high-threat zones by year-end—a goal that, if achieved, could bolster investor confidence.

Risks on the Horizon

Despite the optimism, hurdles loom. The Eaton fire litigation remains unresolved, and while the AB 1054 fund shields Edison from direct financial ruin, prolonged legal battles could strain operational focus. Regulators could also delay GRC approvals, leaving capital projects in limbo.

Moreover, Edison’s reliance on rate hikes—such as a recently approved 9% increase—to fund its investments creates a precarious balance. If regulators grow wary of excessive rate burdens on customers, growth could stall.

The Bottom Line: A Risky, but Calculated Gamble

Edison International’s 5%–7% EPS growth target through 2028 hinges on executing its infrastructure and regulatory strategy flawlessly. The $1.4 billion annual wildfire spending and $2 billion in FERC-approved transmission projects are ambitious, but they align with California’s urgent grid modernization needs.

Crucially, the company’s 22-year streak of dividend increases—backed by a 5.67% yield—reflects financial discipline. Even after the Q1 miss, Edison’s stock trades within its 52-week range, suggesting investors remain patient.

Conclusion: A Utility in Transition

Edison International is betting its future on becoming the poster child for wildfire-resilient utilities—a role that could pay dividends if regulators and markets reward its investments. With $1.1 billion allocated to a next-gen ERP system and smart meter upgrades, the utility is not just hardening its grid but modernizing its operations for efficiency.

However, the Eaton fire and regulatory uncertainties remind investors that Edison’s success is far from assured. For now, the stock’s valuation—trading at 13x its 2025 EPS guidance midpoint of $6.14—appears reasonable. But shareholders must ask: Can Edison turn its $21 billion wildfire fund into a moat, or will liabilities erode its growth story? The answer lies in the next six months, as regulators decide the fate of the GRC—and with it, Edison’s path to 7% EPS growth.

In a sector where one wildfire can upend balance sheets, Edison’s strategy is both audacious and necessary. The question remains: Will its investments in infrastructure and regulation pay off, or will they become the very wires that spark a new crisis?