PG&E loses 20% as wildfire risk spooks investors.
The utility was hammered on Wall Street Monday — and the reason goes straight to California’s growing wildfire problem.
PG&E shares plunged about 20-percent Monday, wiping out the stock’s gains for the year. Edison International was hit even harder — falling roughly 23-percent.
The selloff came after California lawmakers unveiled Senate Bill 492, a major overhaul of the state’s wildfire system, dropping the liability shield for the utility.
Governor Gavin Newsom had pushed for protections that would prevent insurance companies from recovering certain wildfire payouts from utilities.
Lawmakers left that provision out.
That matters because California has an unusually tough liability system known as “inverse condemnation.”
If utility equipment causes property damage, a utility can potentially face liability even without a traditional finding of negligence.
And investors know exactly where that road can lead.
PG&E filed for bankruptcy protection in 2019 while facing tens of billions of dollars in wildfire liabilities. The company later pleaded guilty to 84 counts of involuntary manslaughter connected to the devastating Camp Fire.
California responded by creating a wildfire fund with roughly 21-billion dollars in claims-paying capacity — funded by both utility shareholders and ratepayers.
But the new legislation doesn’t establish a permanent mechanism to replenish that fund if catastrophic fires drain it.
Wall Street noticed.
Financial Group Mizuho downgraded PG&E, Edison and Sempra. BMO Bank also downgraded PG&E, warning investors remain exposed to potentially “open-ended” wildfire risk.
And there’s another California angle: somebody ultimately has to pay.
If utilities absorb more wildfire losses, shareholders take the hit and utilities argue financing becomes more expensive. If costs are shifted to ratepayers, already-high electric bills can climb. Shift them toward insurers, and insurance costs become part of the equation.
PG&E says the legislation simply doesn’t provide the long-term financial stability needed to attract affordable investment into California’s electric grid.
Investors apparently agree — and Monday they voted with their money
This story was compiled with the aid of AI.
