PG&E and Edison ratings tumble as California wildfire reforms spark investor sell‑off

Analysts across major brokerages cut ratings on California utility stocks on August 31, 2026, after the legislature's SB 492 fell short of the wildfire liability reform utilities had lobbied for. Wells Fargo downgraded PG&E to equal-weight from overweight, trimming its target to $24 from $25, while BMO Capital moved PG&E to market-perform from outperform, cutting its target to $21 from $28. Mizuho also downgraded PG&E to neutral, reducing its target to $16 from $21.

The reaction was immediate: Investing.com reported PG&E shares plunging 13.4% in pre-market trading after lawmakers rejected a proposal to end insurer subrogation against utilities, with a separate Investing.com brief later citing a 19.55% intraday decline as the sell-off deepened. BMO now values PG&E at roughly 8 times earnings even after its downgrade, a discount it attributes to the unresolved liability framework, not any change in operating outlook.

Edison International faced a parallel downgrade. Mizuho cut it to neutral from outperform, lowering its target to $70 from $86 on the same rationale. The cut wasn't isolated to Mizuho: Argus moved Edison to hold from buy and Barclays shifted it to equal-weight with a $75 target the same session, underscoring how broadly the sell side re-rated the sector.

Sempra Energy was swept into the same Mizuho note, moved to neutral with its target cut to $84 from $104 despite a recent EPS beat .

The downgrade cluster shows how unresolved wildfire liability legislation keeps risk premiums elevated for utilities in high-fire-danger zones. With Mizuho expecting another legislative push in 2027, investors will watch for any interim funding fix that could ease the overhang.

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