Mizuho Securities downgraded Sempra Energy to Neutral from Outperform and slashed its price target to $84 from $104, citing the California legislature’s failure to pass meaningful wildfire liability reforms.
The downgrade follows the legislature’s passage of SB 492 on the final day for bill introductions, a measure that did not include provisions to replenish the state’s wildfire fund or break the linkage between fund solvency and liability caps. Governor Gavin Newsom’s proposals to cap liabilities at $6 billion per incident and eliminate subrogation rights for insurers were also blocked by lawmakers.
Sempra Energy’s stock fell 0.52% to close at $84.31 on August 28, while Pacific Gas & Electric (PG&E) dropped 7.52% to $21.00. BMO Capital adjusted PG&E’s price target to $21 from $28, citing revised assumptions on wildfire liabilities, while Wells Fargo downgraded the utility to Equal Weight from Overweight without changing earnings estimates. UBS maintained a Buy rating on PG&E with a $22 price target, highlighting progress in wildfire liability cap legislation as a key positive for valuation.
The California Public Utilities Commission currently caps utility liabilities at 20% of their transmission and distribution rate base. Analysts expect state utilities to renew legislative efforts in 2027, coinciding with a new administration taking office in January.
