Home / Business and Economy / PG&E, Edison Fall as CA Lawmakers Omit Key Protection
PG&E, Edison Fall as CA Lawmakers Omit Key Protection
8 Sep
Summary
- California lawmakers introduced a bill without shifting wildfire liability.
- Investors feared insurers suing utilities for wildfire losses.
- PG&E plans to cut capital investment by $2 billion by 2027.
On August 31, California lawmakers introduced a bill updating wildfire response measures. Crucially, the legislation does not shield publicly traded utilities from liability. This omission led to significant stock drops for PG&E and Edison International, as investors had anticipated protections against insurers seeking wildfire-related losses.
This development follows a period where both companies saw stock gains, fueled by anticipated AI data center demand and hopes for favorable legislation. However, the failure of wildfire liability negotiations and subsequent downgrades by Wall Street analysts have impacted their outlook. Mizuho, BofA, and JP Morgan have all lowered ratings or price targets on PG&E and Edison International.
In response to the uncertainty, PG&E announced on September 2 a strategic review, including a $2 billion reduction in its 2027 capital investment plan. The company stated this aims to "reduce the need for higher-cost borrowing while maintaining critical safety investments." PG&E did reaffirm its FY 2026 adjusted core earnings guidance and initiated FY 2027 guidance.
The current legislation leaves utilities exposed to substantial claims. PG&E, which previously filed for bankruptcy in 2019 due to wildfire liabilities, faces a significant risk. If the state's wildfire liability fund is exhausted, PG&E could be responsible for nearly 48% of the fund without recourse to ratepayers.
