California wildfire bill rejection sends PG&E and Edison shares tumbling

Pacific Gas & Electric (PCG) and Edison International (EIX) shares plunged Monday after California lawmakers passed a wildfire bill, SB 492, that omitted Governor Newsom's proposal to shield utilities from insurer subrogation lawsuits tied to wildfire damages. PG&E shares dropped 19.6%, trading near a 52-week low, while Edison International tumbled 24.2% on the same legislative outcome .

The omitted liability shield would have shifted the financial burden of wildfire claims from the utilities to insurance companies, a move insurers opposed on the grounds that it could force higher premiums or reduce coverage in high-risk areas. Without that protection, both utilities face renewed exposure to costly liability claims, reviving investor fears about the long-term financial impact of California's recurring wildfires .

SB 492 does include some provisions utilities wanted, including faster payments to wildfire victims and expanded wildfire data sharing, along with limits on attorneys' fees in wildfire suits and a ban on CEO bonuses in years a utility causes a fire . But it left out a proposed $6 billion per-incident liability cap and a mechanism to replenish the state's wildfire fund, which is why the selloff was so sharp: without a cap, a utility's worst-case liability from a future catastrophic fire stays open-ended.

In response, Bank of America downgraded both companies from "buy" to "neutral," setting new price targets of $13 for PG&E and $51 for Edison International . Other analysts moved similarly: Mizuho cut Edison to neutral with a $70 target, down from $86 , and also cut PG&E to neutral with a $16 target, down from $21; BMO Capital lowered PG&E to Market Perform with a $21 target; and Wells Fargo moved PG&E to Equal Weight with a $24 target.

Analysts warn the outcome could push utilities toward other risk-transfer strategies, such as higher insurance premiums or larger reserve allocations, which may pressure earnings and dividend prospects. PG&E said the bill "does not adequately address the financing risks" it faces, while Edison International management flagged "a strong likelihood" of credit-rating downgrades for California's investor-owned utilities if the liability gap isn't addressed. Investors should watch for further legislative efforts, insurance-market reactions, and updated financial disclosures for signs of how wildfire liability will be managed going forward.

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